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2012 (4) TMI 763
Issues Involved:
1. Validity of the order passed by the AO.
2. Addition of unexplained cash.
3. Addition of unexplained investments in diamond jewellery.
4. Levy of interest u/s 234A, 234B, and 234C.
Summary:
1. Validity of the Order Passed by the AO:
- Ground No.1 and Ground No.2: The Ld. Counsel for the assessee did not press these grounds, and they were rejected as not pressed.
2. Addition of Unexplained Cash:
- Ground No.3: The AO observed that during the search, cash of Rs. 5,83,350/- was found, with Rs. 3,88,500/- found in the bedroom of the assessee. The assessee claimed it was combined family cash and provided details of cash balances belonging to various family members. The AO did not accept this explanation, treating Rs. 3,88,500/- as unexplained cash. The Ld.CIT(A) confirmed this addition. However, the Tribunal found that the explanation provided by the assessee, supported by books of account, was believable. The addition of Rs. 3,88,500/- was deleted.
3. Addition of Unexplained Investments in Diamond Jewellery:
- Ground No.4: The AO found diamond jewellery valued at Rs. 4,20,374/- and accepted only Rs. 40,000/- as explained, treating the balance Rs. 3,80,374/- as unexplained. The Ld.CIT(A) upheld this addition. The Tribunal, however, found that the jewellery was disclosed under VDIS and in wealth tax returns, and the AO had accepted the gold jewellery in toto. The addition of Rs. 3,80,374/- was deleted.
- Ground No.3 (By Mr. Bharat Hemraj Jethani): The AO found diamond jewellery valued at Rs. 4,86,865/- and accepted only Rs. 30,000/- as explained, treating the balance Rs. 4,56,865/- as unexplained. The Ld.CIT(A) upheld this addition. The Tribunal found that the jewellery was received by the assessee's wife during marriage and other occasions, and the addition was deleted.
- Ground No.3 (By Mrs. Darshna K. Jethani): The AO found diamond jewellery valued at Rs. 4,38,377/- and gold jewellery valued at Rs. 1,22,580/- as unexplained. The Ld.CIT(A) upheld this addition. The Tribunal found that the jewellery was received by way of a will and gifts, and the addition was deleted.
4. Levy of Interest u/s 234A, 234B, and 234C:
- Ground No.5: The Tribunal directed the AO to allow consequential relief in respect of the levy of interest charged u/s 234A, 234B, and 234C of the Act.
Conclusion:
- All the appeals were partly allowed, with significant deletions of additions made by the AO and sustained by the Ld.CIT(A). The Tribunal provided relief to the assessees by accepting their explanations and supporting documents.
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2012 (4) TMI 762
Issues Involved:
1. Disallowance of Payment to Kinetic Finance Ltd.
2. Disallowance of Realignment Expenses
3. Capitalization of Advertisement Expenses
4. Capitalization of Leasehold Improvement Expenses
5. Disallowance of Direct Selling Agent (DSA) Commission
6. Disallowance of Loss on Sale of Repossessed Assets
7. Disallowance of Extra Depreciation on Computer Peripherals
8. Disallowance of Expenditure on Non-Convertible Debentures (NCD) and Commercial Paper
9. Disallowance of Loan Acquisition Costs
Summary:
1. Disallowance of Payment to Kinetic Finance Ltd.
The assessee paid Rs. 5 crores to Kinetic Finance Ltd. (KFL) for access to their database and infrastructure. The AO disallowed this amount, treating it as capital expenditure providing enduring benefit. The CIT(A) upheld this view, citing that the expenditure resulted in an enduring advantage. However, the Tribunal set aside the order and remanded the matter back to the CIT(A) for a fresh decision, emphasizing the need to analyze the terms of the agreement and the actual benefits derived.
2. Disallowance of Realignment Expenses
The AO disallowed Rs. 29,76,461 for AY 2003-04, Rs. 1,05,94,000 for AY 2004-05, and Rs. 1,04,03,761 for AY 2005-06, treating them as capital expenditure. The CIT(A) upheld these disallowances, considering the expenses provided enduring benefits. The Tribunal, however, allowed these expenses as revenue expenditure, citing various judicial precedents that such expenses are necessary for business operations and do not create a capital asset.
3. Capitalization of Advertisement Expenses
The AO disallowed a portion of advertisement expenses, treating them as capital expenditure with enduring benefits. The CIT(A) allowed the entire expenditure as revenue, following the ITAT's decision in the assessee's own case for previous years. The Tribunal upheld the CIT(A)'s decision, referring to the jurisdictional High Court's ruling that such expenses are to be allowed in full in the year incurred.
4. Capitalization of Leasehold Improvement Expenses
The AO treated leasehold improvement expenses as capital expenditure. The CIT(A) allowed these expenses as revenue, following the ITAT's decision in the assessee's own case for previous years. The Tribunal upheld the CIT(A)'s decision, referring to the jurisdictional High Court's ruling that such expenses are revenue in nature.
5. Disallowance of Direct Selling Agent (DSA) Commission
The AO disallowed a portion of DSA commission, amortizing it over three years. The CIT(A) allowed the entire expenditure as revenue, following the ITAT's decision in the assessee's own case for previous years. The Tribunal upheld the CIT(A)'s decision, referring to the jurisdictional High Court's ruling that such expenses are to be allowed in full in the year incurred.
6. Disallowance of Loss on Sale of Repossessed Assets
The AO disallowed the loss on sale of repossessed assets, treating it as capital loss. The CIT(A) allowed the loss as revenue expenditure, following the ITAT's decision in the assessee's own case for previous years. The Tribunal upheld the CIT(A)'s decision, referring to the jurisdictional High Court's ruling that such losses are allowable as revenue expenditure.
7. Disallowance of Extra Depreciation on Computer Peripherals
The AO allowed depreciation on computer peripherals at 25% instead of 60%. The CIT(A) allowed depreciation at 60%, following various judicial precedents. The Tribunal upheld the CIT(A)'s decision, referring to the jurisdictional High Court's ruling that computer peripherals are eligible for 60% depreciation.
8. Disallowance of Expenditure on Non-Convertible Debentures (NCD) and Commercial Paper
The AO treated NCD and commercial paper issue expenses as deferred revenue expenditure, allowing only 1/5th of the expenditure. The CIT(A) allowed the entire expenditure as revenue, following the Supreme Court's decision in India Cements Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the concept of deferred revenue expenditure is alien to the Act.
9. Disallowance of Loan Acquisition Costs
The AO amortized loan acquisition costs over three years, allowing only 1/3rd of the expenditure. The CIT(A) allowed the entire expenditure as revenue, stating that the AO cannot take a different stand on income and expenditure on the same issue. The Tribunal upheld the CIT(A)'s decision, emphasizing that revenue expenditure must be allowed in the year incurred.
Conclusion:
The Tribunal largely upheld the CIT(A)'s decisions, allowing various expenditures as revenue in nature and dismissing the Revenue's appeals. The matter regarding the payment to Kinetic Finance Ltd. was remanded back to the CIT(A) for a fresh decision. The appeals of the assessee for the AYs 2004-05 and 2005-06 were allowed, while the appeal for AY 2003-04 was partly allowed for statistical purposes.
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2012 (4) TMI 761
Expenditure on Lease premium - Capital or Revenue Expenditure - Assessee entered in agreements with different authorities for obtaining land on long term lease thereon and lease period varies from 10 years to 95 years - Claimed proportionate amount of lease premium paid as advance payable and claimed the expenditure as revenue expenditure u/s. 37 - Allowed by CIT(A) as revenue expenditure following assessee's own case - Thus, Revenue Appeal
HELD THAT:- In the issue before Special Bench in the case of JOINT COMMISSIONER OF INCOME-TAX, SPECIAL RANGE 25, MUMBAI VERSUS MUKUND LTD. [2007 (2) TMI 358 - ITAT MUMBAI], the assessee company entered into exactly similar agreement with MIDC as in the present case before us. It was held that "Assessee terminated the lease agreement prior to the expiry of lease period of 99 years. There was also no material on record to show that the assessee had made the advance payment of rent for future years to secure any reduction in the rent payable for the future years or for any other business consideration. Hence, the consideration of amount paid by the assessee for obtaining the leasehold rights from the MIDC in its favour for a period of 99 years was capital in nature and, therefore, not allowable as deduction to the assesse"
In assessee’s own case for AY 2003-04, the decision of Special Bench in the case of Mukund Ltd was never cited even though it was available at that time. In such circumstances, we are of the view that now we have alternative except to follow the ratio laid down by Special Bench of this Tribunal in the case of Mukund Ltd.
Respectfully following Special Bench in the case of Mukund Ltd we reverse the order of CIT(A) and restore that of the A.O - Decision against Assessee
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2012 (4) TMI 760
Issues Involved:
1. Investigation and Misfeasance Application
2. Interim Directions/Orders u/s 542(2) of the Companies Act
3. Attachment and Possession of Properties
4. Loans and Advances
5. Attachment of Bank Accounts and Personal Assets
6. Sale of Property without Court Sanction
7. Purchase of Jewellery and Silver Articles
8. Status Quo on Assets and Accounts
Summary:
1. Investigation and Misfeasance Application:
On 05th June 1998, the Court appointed a Provisional Liquidator for M/s. JVG Finance Limited and other related companies. The Central Government ordered an investigation into JVG Finance Limited u/s 235 of the Companies Act, 1956, based on a report from the Registrar of Companies. The SFIO submitted its report on 11th February 2010, leading to the Official Liquidator filing an application.
2. Interim Directions/Orders u/s 542(2) of the Companies Act:
The Court considered the SFIO report and found sufficient prima facie evidence to proceed u/s 542 of the Act against the ex-Director, Mr. Vijay Kumar Sharma, and others. The Court invoked Section 542 to attach personal properties of the ex-Director and his associates to protect the creditors and investors.
3. Attachment and Possession of Properties:
The SFIO reported that large tracts of land in Gurgaon were purchased using funds from JVG Finance Limited but registered under other JVG Group Companies. The Court directed the attachment and possession of these lands, except for land in possession of M/s. Tirupati Cylinders. The Official Liquidator was instructed to file winding-up petitions against the JVG Group Companies.
4. Loans and Advances:
The SFIO found that loans and advances of Rs. 9.73 crores were outstanding against Mr. Vijay Kumar Sharma and his family members. These were fraudulently squared off through a dubious property transfer. The Court held that the loans and advances were still due and payable, directing the attachment of bank accounts and personal assets of the involved individuals.
5. Attachment of Bank Accounts and Personal Assets:
The Court directed the attachment of bank accounts and personal assets of individuals named in the SFIO report, including Mr. Vijay Kumar Sharma and his family members. They were also instructed to file affidavits disclosing their bank accounts and personal assets.
6. Sale of Property without Court Sanction:
The SFIO reported that property bearing No. A-24, Okhla Industrial Area, Phase-I, New Delhi, was purchased using funds from JVG Finance Limited. Despite a previous Court judgment confirming its sale, the Official Liquidator was directed to take steps to protect the company's interest in the property.
7. Purchase of Jewellery and Silver Articles:
The SFIO reported that jewellery and silver articles were purchased using siphoned funds from JVG Finance Limited. The Court directed the attachment of these items and instructed the Official Liquidator to take possession with police aid if necessary.
8. Status Quo on Assets and Accounts:
The Court directed all parties against whom interim orders were passed to maintain the status quo regarding the attached assets and accounts. The matter was listed for further hearing on 18th May 2012.
Order dasti under signatures of the Court Master.
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2012 (4) TMI 759
Issues involved: Mandamus for revival of financial facility for housing loan and withdrawal of cancellation of flat allotment.
The petitioner sought a mandamus directing respondents no. 3 and 4 to revive the financial facility provided for a housing loan to purchase a flat and to withdraw the letter of cancellation of the flat allotment. The petitioner's grievance was based on the Housing Development Corporation's instruction to cancel the flat allotment after receiving a letter from the Tax Recovery Officer. The Court had previously quashed the notice issued by the Tax Recovery Officer in a related case. The Court directed the petitioner to submit a detailed representation to respondent no. 4 for appropriate action in accordance with the law. The writ petition was disposed of finally.
The petitioner's main contention was the cancellation of the flat allotment due to a letter from the Tax Recovery Officer, prompting the petitioner to seek a mandamus for revival of the financial facility and withdrawal of the cancellation. The Court intervened based on a previous case where the notice by the Tax Recovery Officer was quashed. The petitioner was directed to submit a detailed representation to respondent no. 4 for further action in line with the law. The writ petition was ultimately disposed of.
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2012 (4) TMI 758
Issues involved:
The issues involved in this judgment include income escaping assessments u/s 143(3) read with sec.147, validity of reopening assessments based on statements obtained during a survey u/s 133A, legal grounds challenging the reopening of assessments, and the evidentiary value of statements obtained during a survey.
Income Escaping Assessments:
The appeals were filed by a husband and wife, both regularly assessed to income tax. The husband, a surgeon running a hospital, filed appeals for six assessment years, including appeals arising from income escaping assessments u/s 143(3) read with sec.147 and assessments from revision orders. The wife, running a pharmacy business, filed appeals for seven consecutive assessment years related to income escaping assessments u/s 143(3) read with sec.147.
Validity of Reopening Assessments:
The assessees challenged the validity of reopening assessments based on statements obtained during a survey u/s 133A. The assessees contended that statements obtained during a survey do not have evidentiary value and cannot be the sole basis for reopening assessments. They argued that the assessments were ab initio void in law due to the reliance on such statements.
Evidentiary Value of Survey Statements:
The assessees argued that statements obtained during a survey u/s 133A, later retracted by the assessees, do not hold evidentiary value. They cited legal precedents to support their contention that no reliance can be placed on such statements for making additions in assessments. The Tribunal held that reopening assessments based on retracted survey statements is impermissible in law, as it lacks a valid reason to believe income has escaped assessment.
Decision and Outcome:
The Tribunal found that the substratum to believe income had escaped assessment was vitiated in these cases due to reliance on survey statements without evidentiary value. Consequently, the reassessments and revision orders were set aside as not sustainable in law. The appeals filed by the assessees were allowed, and the orders were pronounced on April 23, 2012, at Chennai.
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2012 (4) TMI 757
Issues involved: Whether activities of the assessee can be considered as manufacture or production for claiming additional depreciation u/s. 32(1)(iia) of the Act.
Summary:
The appeal before the Appellate Tribunal ITAT COCHIN concerned the assessment year 2006-07, where the Revenue challenged the Order of the Ld. CIT(A)-IV, Kochi. The main issue was whether the activities of the assessee, involved in processing and exporting marine products, qualified as manufacture or production for claiming additional depreciation u/s. 32(1)(iia) of the Act.
The assessee procured raw marine products like shrimp, squid, and fish, processed them through various activities like grading, cleaning, peeling, cutting, freezing, and packing, and claimed additional depreciation under section 32(1)(iia). The Assessing Officer rejected the claim stating that the processed products remained the same and did not result in the emergence of a new product. The Ld. CIT(A) allowed the claim, leading to the Revenue's appeal.
The Revenue argued that the processes undertaken by the assessee only involved cleaning the marine products for export, without creating a new product. On the other hand, the assessee's counsel referred to the National Industrial Classification manual, stating that processing and preservation of fish is classified as a manufacturing activity. It was contended that the processed products were distinct commercially and fit for human consumption after the processes.
The Tribunal referred to a Supreme Court case where it was held that processing of shrimps did not amount to production. Citing the judgment, the Tribunal concluded that the processing of marine products by the assessee did not qualify as production, thus denying the additional depreciation claim u/s. 32(1)(iia) of the Act.
Therefore, the Tribunal allowed the appeal of the Revenue, setting aside the order of the Ld. CIT(A) on the issue of claiming additional depreciation for manufacturing or production activities.
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2012 (4) TMI 756
Issues Involved:1. Determination of total income. 2. Disallowance of Rs. 9 lakhs for purchase of wood and making door frames. 3. Disallowance of Rs. 6,10,355 out of Rs. 10,20,355 incurred for labor charges and materials. 4. Other grounds not pressed or argued. Summary:Issue 1: Determination of Total IncomeThe Assessing Officer (AO) determined the total income at Rs. 54,94,225 against Rs. 25,73,876 declared in the return. The CIT(A) revised the income to Rs. 41,10,892, and the assessee appealed further. Issue 2: Disallowance of Rs. 9 Lakhs for Purchase of Wood and Making Door FramesThe assessee contended that the CIT(A) erred in confirming the disallowance made by the AO of Rs. 9 lakhs received through Shri D. Shivakumar for purchase of wood and making door frames and other wooden materials required for the construction of the new residential house. The AO disallowed the claim based on Shri D. Shivakumar's statement that the amount was for making furniture, not construction materials. The CIT(A) concurred with the AO, noting no documentary proof or bills were provided, and the payments were made before the purchase of the residential site. The Tribunal upheld the disallowance, finding the AO's decision well-reasoned and supported by evidence. Issue 3: Disallowance of Rs. 6,10,355 out of Rs. 10,20,355 Incurred for Labor Charges and MaterialsThe assessee challenged the CIT(A)'s action in allowing only Rs. 4,10,000 out of Rs. 10,20,355 incurred for labor charges and materials. The CIT(A) allowed partial relief based on the reasonableness of the explanation but sustained the disallowance of Rs. 6,10,355. The Tribunal found merit in the assessee's argument that if the CIT(A) found the documentary evidence convincing, the entire expenditure should have been allowed. However, recognizing the potential for excessive claims in construction activities, the Tribunal decided to sustain the disallowance to the extent of Rs. 4,00,000, granting the assessee further partial relief of Rs. 2,10,315. Other Grounds:The ground of appeal at S.No.1 was general and required no adjudication. The ground at S.No.6 was not pressed as the assessee intended to file a rectification application before the CIT(A). Grounds at S.Nos.7 to 10 were not argued and hence not adjudicated upon. Conclusion:The appeal of the assessee was partly allowed, with the Tribunal providing partial relief on the disallowed expenditures. Order Pronounced:Order pronounced in the open court on 27th April, 2012.
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2012 (4) TMI 755
Issues involved: Challenge against ex-parte assessment order u/s 144 of the I.T. Act, 1961 and addition of Rs. 26,48,346.
Ex-parte Assessment Order u/s 144:
The assessee failed to attend multiple hearings despite opportunities given, leading to the ex-parte assessment order. The CIT(A) confirmed the order, stating that the Assessing Officer had no choice due to the assessee's non-compliance. The CIT(A) upheld the additions made under various heads, noting the absence of necessary details and evidence from the assessee during assessment proceedings.
Confirmation of Addition:
The assessee challenged the confirmation of addition of Rs. 26,48,346. The appeal was found defective due to a delay of 23 days in filing. The assessee sought condonation of delay, citing medical reasons for the delay. The Tribunal accepted the condonation petition and admitted the appeal for hearing. Despite the assessee's absence during the appeal hearing, the Tribunal proceeded to decide the appeal ex-parte. The Ld.DR supported the CIT(A)'s order, arguing that the assessee had a history of default. However, the Tribunal found that the CIT(A) had merely confirmed the Assessing Officer's order without proper discussion on merits. Therefore, the Tribunal set aside the CIT(A)'s order and directed a fresh decision after providing opportunities to both the assessee and the Assessing Officer.
Stay Application:
The assessee had also filed a stay application, which became irrelevant after the main appeal decision. The Tribunal dismissed the stay application as in fructuous. Consequently, the appeal of the assessee was accepted for statistical purposes, and the stay application was dismissed.
Conclusion:
The Tribunal set aside the CIT(A)'s order and directed a fresh decision on the appeal. The stay application was dismissed as in fructuous.
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2012 (4) TMI 754
Issues Involved:
1. Can cognizance of an offence punishable u/s 138 of the Negotiable Instruments Act, 1881 be taken on the basis of a complaint filed before the expiry of the 15-day period stipulated in the notice required to be served upon the drawer of the cheque u/s 138(c) of the Act?
2. If the answer to the first question is negative, can the complainant be permitted to present the complaint again notwithstanding the expiry of the one-month period stipulated u/s 142(b) for filing such a complaint?
Summary:
Issue 1: Cognizance of Offence u/s 138 Before Expiry of 15-Day Notice Period
The Supreme Court examined whether a complaint filed before the expiry of the 15-day notice period stipulated u/s 138(c) of the Negotiable Instruments Act, 1881, could be a basis for taking cognizance of an offence. The factual backdrop involved the appellant filing a complaint u/s 138 against the respondent for dishonoured cheques. The complaint was filed before the expiry of the 15-day notice period, but the Magistrate took cognizance after the period had expired. The High Court quashed the complaint as premature.
The Court emphasized that u/s 138, three conditions must be satisfied before the dishonour of a cheque constitutes an offence: (1) the cheque must be presented within six months, (2) a demand for payment must be made within 30 days of receiving information about the dishonour, and (3) the drawer must fail to pay within 15 days of receiving the notice. A complaint filed before the expiry of the 15-day period is premature and not maintainable. The Court noted that the Magistrate took cognizance after the 15-day period had expired, but the complaint was still premature when filed.
Issue 2: Re-Presentation of Complaint After Expiry of One-Month Period u/s 142(b)
The Court addressed whether a premature complaint could be re-presented after the expiry of the one-month period stipulated u/s 142(b). The Court referred to conflicting judicial opinions on this matter. In Narsingh Das Tapadia v. Goverdhan Das Partani, the Court held that a complaint filed before the expiry of the 15-day period could be the basis for cognizance if taken after the period expired. However, in Sarav Investment & Financial Consultancy Private Limited v. Llyod Register of Shipping Indian Office Staff Provident Fund, the Court held that strict compliance with the notice period is required.
The Court noted the split in judicial opinion among various High Courts, with some holding that a premature complaint is invalid and others allowing cognizance if taken after the expiry of the notice period. The Court highlighted the need for authoritative resolution of this conflict.
Conclusion:
The Supreme Court referred the two questions to a three-Judge Bench for authoritative resolution, emphasizing the need to address whether a premature complaint can be the basis for cognizance and whether such a complaint can be re-presented after the expiry of the one-month period u/s 142(b). The Registry was directed to place the file before the Chief Justice for the constitution of an appropriate Bench.
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2012 (4) TMI 753
Issues involved:
The issues involved in this judgment are the appeal against the order passed by the Securities and Exchange Board of India (SEBI) regarding alleged fraud by a company in issuing preferential warrants and underlying shares, and the maintainability of the appeal under Section 15T of the Securities and Exchange Board of India Act, 1992.
Issue 1 - Alleged Fraud by the Company:
The appellant alleged that the company, along with its promoters and directors, committed fraud by issuing preferential warrants and underlying shares, contravening regulatory provisions. SEBI informed the appellant that no violation of regulations had occurred. The appellant appealed to the Securities Appellate Tribunal, which disposed of the appeal, prompting the appellant to file the present appeal against SEBI's detailed order.
Issue 2 - Maintainability of the Appeal:
The appellant, holding a significant share in the company, argued that SEBI's order adversely affected its rights, making it appealable. SEBI and other respondents contended that the order did not directly impact the appellant's rights and was not appealable under Section 15T of the Act. The Tribunal analyzed the definition of "an order" and previous decisions, ultimately upholding the respondents' objection and dismissing the appeal without delving into the case's merits.
In conclusion, the Tribunal found that the impugned order from SEBI did not adversely affect the appellant's rights, making it not appealable under Section 15T of the Act. The appellant had alternative avenues to address its grievances, such as pursuing the matter before the Company Law Board and the Delhi High Court. Therefore, the appeal was dismissed, and no costs were awarded.
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2012 (4) TMI 752
Expenditure on Advertisements - Revenue or Capital Expenditure? - The AO stated that the advertisement expenditure resulted in creating benefit of enduring nature, thus is capital in nature where as CIT(A) treated it as revenue expenditure - HELD THAT:- In the case of CIT VERSUS M/S. GEOFFREY MANNERS & CO. LTD. (NOW KNOWN AS WYETH LIMITED) [2009 (2) TMI 13 - BOMBAY HIGH COURT], it was held that the expenditure was incurred in respect of promoting ongoing products of the assessee and, therefore, the expenditure is for promotion of the products of the assessee which is revenue in nature.
In the present case, the expenditure has been incurred by the assessee for production of ‘ad-films’, advertisement in electronic and print media, in respect of promotion of its ‘on-going products’. Hence, we hold that the said expenditure has rightly been treated as revenue in nature by CIT(A), which was incurred by the assessee wholly and exclusively for the purpose of its business - Decision in favour of Assessee.
TP Adjustment - Computation of Arms Length Price in respect of Business Activities - TNMM or RPM? - Assessee is a 100% subsidiary company of L’Oreal SA France and is engaged in the business of manufacturing and distribution of products. In respect of business of distribution, the TPO while rejecting the Resale Price Method (RPM) as adopted by assessee, has suggested some adjustment by applying Transactional Net Margin Method (TNMM) - HELD THAT:- We agree with ld CIT(A) that there is no order of priority of methods to determine ALP. RPM is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method. Accordingly, the appellant’s international transaction in respect of imports of finished goods can be said to be at arm’s length. Therefore, RPM method is accepted - Decision in favour of Assessee.
Receipt of services and benefit from AEs in lieu of the marketing fee payments - Assessee has paid to its overseas AEs some amount as cost contribution, wherein certain common marketing services were rendered by group entities. TPO stated that in the absence of any direct evidence to indicate the benefit to the assessee, it is concluded that the assessee has not benefited at all from the cost sharing arrangement and has considered the cost sharing arrangement at ALP for the same at Nil.
HELD THAT:- We consider it prudent to set aside the orders of authorities and restore the matter to the file of the AO with a direction that he will get it examined from TPO as to whether the assessee has received any benefit under cost sharing arrangement for which assessee made the payment. In case assessee is able to produce requisite documents to the satisfaction of the TPO that the assessee received benefit under cost sharing arrangement, he will decide the claim of the assessee accordingly - Matter Restored back.
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2012 (4) TMI 751
Issues involved: Appeal against deletion of addition of Rs. 14,40,936 made by Assessing Officer on account of bogus purchases for assessment year 2007-08.
Assessment of Bogus Purchases:
- The assessee, a sole proprietor of M/s Jaipur Beads, faced a reassessment based on information about fictitious transactions with Shri Anshu Gems, Jaipur.
- Despite providing bank statements and denials of bogus purchases, the Assessing Officer added Rs. 14,38,060 to the assessee's income, citing lack of individual item-wise stock register and absence of evidence for goods delivery.
- The CIT(A) found merit in the assessee's submissions, noting payments made by cheque based on bills received, and deleted the addition due to insufficient evidence of bogus purchases by the Assessing Officer.
Appellate Tribunal Decision:
- The Department contended that the addition was justified as M/s Anshu Gems admitted to supplying bogus bills during a survey.
- The Department argued that the CIT(A) erred in disregarding the alleged bogus purchases.
- The Tribunal held that without specific evidence, purchases cannot be labeled as bogus, emphasizing that the Assessing Officer's decision relied solely on the DIT report without disproving the monthly purchase bills or cheque payments.
- Consequently, the Tribunal confirmed the CIT(A)'s decision to delete the addition, dismissing the revenue's appeal.
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2012 (4) TMI 750
Rejection of Books of Accounts u/s 145(3) - Estimation of Net Profit - Fair Estimation u/s 44AD - AO opined that the books of account of the assessee are not reliable, accordingly, rejected the same and calculated the income of the assessee at 8% of the total receipts. CIT(A) upheld the action of AO on the issue of rejection of books of accounts. Further, on the basis of income assessed in previous assessment year estimated the net profit rate of 5% - HELD THAT:- AO has not given any reasonable explanation while applying 8% net profit rate on the assessee’s gross receipts for the assessment year. The income assessed in the previous year in assessee’s case was apparently 3.6% of its net receipts. But in the present assessment year, the AO has pointed out various defects in the assessment order. The Ld. CIT(A) considering all the defects pointed out by the AO and finally, validly and reasonably determined the net profit rate at 5% after allowing depreciation and interest to the partners on the assessee’s turnover. CIT(A)'s order upheld - Revenue Appeal Dismissed.
Carry Forward of Losses - Assessee has filed original return on due date but has filed revised return of loss after due date. Thus, loss was not carry forward u/s 139(1) - HELD THAT:- Revised return was filed by the assessee after due date, thus he is not entitled for any carried forward losses - Decision against Assessee.
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2012 (4) TMI 749
Issues Involved:
1. Rejection of deduction claimed u/s 80IB(10).
2. Approval of the housing project in the name of a partner.
3. Development activities undertaken by the assessee.
4. Agreement with house purchasers.
5. Composite nature of activities.
6. Completion certificate.
7. Applicability of section 17(IA) of the Registration Act.
8. Consideration of written submissions by CIT(A).
Summary:
1. Rejection of Deduction Claimed u/s 80IB(10):
The assessee, a partnership firm engaged in civil construction, claimed a deduction of Rs. 1,11,55,537 u/s 80IB(10) for the assessment year 2007-08. The AO rejected this claim, stating the assessee was merely a contractor and not a developer, and the CIT(A) confirmed this decision. The Tribunal noted that the assessee had undertaken a housing project named Vardhman Green Park and had applied for a completion certificate, which was issued later.
2. Approval of the Housing Project in the Name of a Partner:
The Tribunal held that the approval of the housing project in the name of a partner does not disqualify the assessee from claiming the deduction u/s 80IB(10), provided other conditions are met.
3. Development Activities Undertaken by the Assessee:
The AO contended that the assessee only sold plots and constructed houses as per buyers' requirements, acting as a works contractor. The Tribunal emphasized that the deduction u/s 80IB(10) is available to developers who undertake infrastructure development. The case was remanded to the AO to verify the infrastructure facilities developed by the assessee.
4. Agreement with House Purchasers:
The assessee entered into agreements with purchasers, stipulating that possession of the plots would remain with the assessee until full payment. The Tribunal found this arrangement did not hinder the claim for deduction u/s 80IB(10).
5. Composite Nature of Activities:
The Tribunal noted that the assessee's activities should be viewed as composite in nature, involving both development and construction, qualifying them as a developer rather than a contractor.
6. Completion Certificate:
The assessee applied for a completion certificate on 29.11.2007, which was issued on 6.6.2009. The Tribunal referred to a previous decision, stating that the crucial factor is the date mentioned in the completion certificate, not the date of issuance. The matter was remanded to the AO to verify the completion date.
7. Applicability of Section 17(IA) of the Registration Act:
The Tribunal dismissed the CIT DR's argument that the assessee was not the owner of the land after registration, stating that the modus operandi adopted by the assessee did not affect the claim for deduction u/s 80IB(10).
8. Consideration of Written Submissions by CIT(A):
The Tribunal did not find merit in the CIT(A)'s observation that the written submissions were not considered judiciously and objectively.
Conclusion:
The Tribunal restored the matter to the AO for fresh consideration, directing the AO to verify the infrastructure facilities developed and the completion date of the housing project. The appeal was partly allowed for statistical purposes.
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2012 (4) TMI 748
Issues Involved:
1. Whether the CIT(A) erred in directing the AO to delete the addition of Rs. 98,56,827/- related to the alleged gift of IMD.
2. Applicability of Section 56(2)(v) of the Act to the gift of IMDs.
3. Genuineness of the gift and applicability of Section 68 of the Act.
Summary:
1. Deletion of Addition by CIT(A):
The Revenue challenged the CIT(A)'s decision to direct the AO to delete the addition of Rs. 98,56,827/- related to the alleged gift of IMD. The AO had added this amount to the assessee's income, treating the gift as in-genuine and invoking the provisions of Section 68 of the Act. The CIT(A) found that the assessee had provided sufficient documentary evidence to establish the genuineness of the gift, which the AO did not dispute. The CIT(A) noted that no evidence was found during the search proceedings to prove the gift was not genuine.
2. Applicability of Section 56(2)(v):
The AO equated the IMDs to bank fixed deposits and treated them as money, invoking Section 56(2)(v) of the Act. The CIT(A) disagreed, stating that IMDs, due to their restrictions on transferability, cannot be treated as money but at best as something convertible into money. The CIT(A) referenced the Finance Act 2009, which brought gifts in kind within the tax purview prospectively from 01-10-2009, and cited the Tribunal's decision in the case of Shri Anuj Agarwal, which held that gifts of IMDs are outside the purview of Section 56(2)(v).
3. Genuineness of the Gift and Section 68:
The CIT(A) observed that the assessee had provided documentary evidence and the donor's husband's statement corroborated the genuineness of the gift. The AO did not invoke Section 68, and no material evidence was found during the search to dispute the genuineness of the gift. The Tribunal upheld the CIT(A)'s decision, noting that similar cases had been decided in favor of the assessee, and the AO had not disputed the documentary evidence provided.
Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 98,56,827/- on account of the gift of IMDs, as the gift was found genuine and outside the purview of Section 56(2)(v) of the Act. The Tribunal also noted that the AO did not make any addition u/s 68, further supporting the CIT(A)'s decision.
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2012 (4) TMI 747
Issues involved: Appeal u/s 260A of the Income Tax Act against deletion of penalty u/s 271(1)(c) for claiming expenditure under section 37 overlooking section 14A.
Summary:
The Gujarat High Court dismissed the appeal filed by the Revenue against the deletion of penalty imposed on the assessee for claiming certain expenditure under section 37 of the Income Tax Act without considering the newly inserted provisions of section 14A. The Tribunal, following the decision in CIT vs. RELIANCE PETROPRODUCTS (P) LTD, held that since there was no incorrect information or concealment, the penalty was not justified. The main issue was whether an assessee making an untenable claim due to a new provision, without incorrect statements or concealment, should be liable for penalty u/s 271(1)(c). The Court held that if there is no incorrect information or suppression of material, and the claim is only untenable due to a prohibition in the Act, penalty cannot be imposed. Imposing penalty for an untenable claim would discourage assessees from raising new questions, fearing penalty if the claim is deemed untenable. The appeal was dismissed as it lacked merit.
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2012 (4) TMI 746
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Challenging the summon order passed by Magistrate - the present cases pertain to a property dispute regarding distribution of the assets left behind (of T- Series fame), a handwritten note was executed between the appellants and Respondent No. 2 wherein distribution of certain assets and shares in different companies was provided for. Subsequently, a fresh agreement was entered into between the appellants and the Respondent No. 2 which superseded the handwritten note. disputes arose soon after the second agreement, giving rise to multifarious litigations at the behest of Respondent No. 2 which are presently pending adjudication before the High Court. after 4 years, due to non-materialization of the agreement, the Respondent No. 2 got registered the present FIR u/s 420 IPC against all the other signatories to the said agreement wherein only one of the signatory was a party to it. For quashing the said FIR. the Magistrate summoned the appellants herein. Hence, this appeal.
HELD THAT:- There is no such legal requirement imposed on a Magistrate for passing detailed order while issuing summons. The process issued to accused cannot be quashed merely on the ground that the Magistrate had not passed a speaking order. Time and again it has been stated by this Court that the summoning order u/s 204 of the Code requires no explicit reasons to be stated because it is imperative that the Magistrate must have taken notice of the accusations and applied his mind to the allegations made in the police report and the materials filed therewith.
In the light of the above discussion, we conclude that the petition filed before the High Court u/s 482 of the Code was maintainable. However, on merits, the impugned order dated 30.07.2010 passed by the High Court of Delhi is confirmed, consequently, the appeals fail and the same are dismissed.
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2012 (4) TMI 745
Issues involved: The judgment involves the assessment of income u/s other sources and computation of Long Term Capital Gain on the sale of land and building.
Assessment of Income u/s Other Sources:
The Assessing Officer treated a receipt of Rs. 40 lakhs as income from other sources based on the Transfer of Property Act, 1882. The assessee contended that the Rs. 40 lakhs was part of the consideration received for the property and should not be separately assessed. The CIT(A) combined both issues and concluded that the entire consideration received was Rs. 65 lakhs, directing the Assessing Officer to consider the value determined by the DVO. The addition of Rs. 40 lakhs was deleted, and set off of brought forward long term loss was allowed against Long Term Capital Gain.
Computation of Long Term Capital Gain:
The Assessing Officer computed Long Term Capital Gain on the sale of land at Rs. 5,56,376/- based on valuation by the assessee from a Government Approved Valuer. The CIT(A) directed the Assessing Officer to consider the value determined by the DVO and allowed set off of brought forward long term loss against Long Term Capital Gain. The Revenue challenged these findings, arguing that the addition should not have been deleted.
Additional Aspect of Depreciation:
During the appeal hearing, it was revealed that the assessee had claimed depreciation on the building. The AR argued that the gain from the sale of the building should be assessed as Short Term Capital Gain u/s 50 of the IT Act. Both valuers accepted the value of land at Rs. 15 lakhs, and the building at Rs. 40 lakhs. The matter was restored to the Assessing Officer to correctly compute the gains from the sale of assets comprising land and building, considering the provisions of section 50 for Short Term Capital Gain on the building.
Conclusion:
The appeal filed by the Revenue was allowed for statistical purposes, and the entire issue was restored back to the Assessing Officer to accurately compute the gains arising from the sale of assets including land and building, considering the provisions of section 50 for Short Term Capital Gain on the building.
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2012 (4) TMI 744
Issues Involved:
1. Deletion of addition made u/s 68 regarding unexplained cash credits.
2. Disallowance of interest on loans considered unexplained u/s 68.
3. Entitlement to depreciation on assets.
4. Carry forward of excess application of income.
Summary:
1. Deletion of Addition Made u/s 68:
The Revenue contended that the CIT(A) erred in deleting additions made u/s 68 for unexplained cash credits. The Tribunal noted that the assessee provided confirmation letters, PAN cards, and bank statements to substantiate the identity and genuineness of the creditors, including Rakesh Singhvi and entities from the Lunkad Group. The CIT(A) observed that the Lunkad Group had confirmed the loans, and no cash deposits were made before issuing cheques to the assessee. The Tribunal upheld the CIT(A)'s decision, emphasizing that the identity and genuineness of the creditors were established, and the loans were genuine.
2. Disallowance of Interest on Loans:
The Revenue challenged the deletion of disallowance of interest on loans considered unexplained u/s 68. The Tribunal found that the CIT(A) correctly deleted the disallowance, noting that the assessee provided sufficient evidence, including interest payments and TDS deductions, to substantiate the genuineness of the loans and the interest thereon.
3. Entitlement to Depreciation on Assets:
The Revenue argued that allowing depreciation on assets resulted in double deduction since the cost of assets was already treated as application u/s 11. The Tribunal referred to the decision of the Jurisdictional High Court in the case of Shri Gujarati Samaj and the Punjab and Haryana High Court in Desh Bhagat Memorial Trust, which held that depreciation is allowable to determine the percentage of funds applied for charitable purposes. The Tribunal upheld the CIT(A)'s decision to allow depreciation, distinguishing it from the Supreme Court ruling in Escorts Ltd.
4. Carry Forward of Excess Application of Income:
The Revenue contended that no provision existed for carrying forward excess application of income. The Tribunal referred to the I.T.A.T. Indore Bench's decision in the case of Gujarati Samaj and the Bombay High Court's ruling in Institute of Banking Personnel Selection, which allowed the carry forward of excess expenditure incurred towards the objects of the trust. The Tribunal upheld the CIT(A)'s decision, allowing the carry forward of excess expenditure for application against future income.
Conclusion:
The Tribunal upheld the CIT(A)'s decisions on all issues, affirming the deletion of additions made u/s 68, disallowance of interest on loans, entitlement to depreciation on assets, and carry forward of excess application of income. The appeals of the Revenue were allowed in part, with directions to the Assessing Officer for fresh consideration in line with the Tribunal's observations.
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