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2013 (5) TMI 999
Issues Involved: Appeal against levy of penalty u/s 271B of the IT Act for failure to file audit report u/s 44AB.
Issue 1: Levy of Penalty u/s 271B
The AO imposed a penalty of &8377; 37,080 on the assessee for not filing the audit report u/s 44AB along with the income tax return, as required due to the assessee's income exceeding &8377; 10 lakhs. The ld. CIT(A) confirmed this penalty, citing a previous Tribunal order. The Tribunal noted that the assessee, a partner in a Chartered Accountant firm, received income assessable under section 28(v) as profits from business or profession. As the receipts exceeded &8377; 10 lakhs, audit report submission was mandatory u/s 44AB, which the assessee failed to comply with. Referring to a similar case, the Tribunal upheld the penalty, emphasizing the professional nature of the income and the requirement for audit under section 44AB.
Conclusion:
The Tribunal upheld the penalty imposed u/s 271B, as the assessee's professional receipts required audit under section 44AB, which was not done. The appeal was dismissed, affirming the decision of the ld. CIT(A) and emphasizing the necessity of compliance with audit requirements for professional income exceeding the specified threshold.
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2013 (5) TMI 998
Issues Involved:
1. Validity of the expression "with immediate effect" in the notification dated 18.06.2009.
2. Assessment of 2% C.S.T. on inter-State sales for the period 01.04.2009 to 17.06.2009.
3. Retrospective application of the Cabinet decision dated 20.05.2009.
Summary:
1. Validity of the expression "with immediate effect" in the notification dated 18.06.2009:
The petitioner challenged the expression "with immediate effect" in the notification dated 18.06.2009, arguing that it should be disregarded in favor of the Cabinet decision dated 20.05.2009, which extended the concessional rate of CST @ 1% beyond 31.03.2009. The court held that the notification issued by the Excise and Taxation Department on 18.06.2009, which was issued in exercise of statutory powers u/s 8(5)(b) of the Central Sales Tax Act, 1956, would prevail. The plain language of the notification indicated prospective application, and the expression "with immediate effect" confirmed this intent.
2. Assessment of 2% C.S.T. on inter-State sales for the period 01.04.2009 to 17.06.2009:
The petitioner was assessed for payment of 2% C.S.T. on inter-State sales for the period 01.04.2009 to 17.06.2009. The court found no merit in the petitioner's argument that the Cabinet decision should have retrospective effect from 01.04.2009. The court emphasized that the right under the 2004 industrial policy ended by efflux of time on 31.03.2009, and there was no pre-existing right when the notification dated 18.06.2009 was issued. Thus, the assessment of 2% C.S.T. for the specified period was upheld.
3. Retrospective application of the Cabinet decision dated 20.05.2009:
The petitioner argued that the Cabinet decision dated 20.05.2009 should have retrospective effect from 01.04.2009. The court rejected this argument, stating that the notification dated 18.06.2009 introduced the concession with immediate effect and did not impact any pre-existing right. The court also noted that the notification was a new dispensation, not an extension of the old regime, and thus could not be assumed to have retrospective effect. The court cited various precedents, including State of Bihar vs. Suprabhat Steel Ltd., to support its conclusion that no pre-existing right was affected by the notification.
Conclusion:
The petition was dismissed, and the court upheld the prospective application of the notification dated 18.06.2009, the assessment of 2% C.S.T. for the period 01.04.2009 to 17.06.2009, and rejected the argument for retrospective application of the Cabinet decision dated 20.05.2009.
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2013 (5) TMI 996
Issues Involved:
1. Disallowance of interest and other administrative and indirect expenses u/s 14A of the Act.
2. Admission of additional evidence by the Tribunal.
3. Rectification of the Tribunal's order u/s 254(2) of the Act.
Summary:
1. Disallowance of Interest and Other Administrative and Indirect Expenses u/s 14A of the Act:
The assessee, engaged in printing currency notes, invested Rs. 20 Crores in mutual funds. The AO disallowed interest and other expenses proportionately under Sec. 14A, despite the assessee's claim of no income or expenditure incurred for these investments. The AO referred to the ITAT Delhi Special Bench decision in Cheminvest Ltd. v. ITO, which held that Sec. 14A applies even if no income is earned. The AO applied Rule 8D(2) of the IT Rules, disallowing Rs. 13,25,315/-. The CIT(A) confirmed this disallowance. However, the Tribunal, considering the investment was made on the last day of the previous year, concluded no interest disallowance could be made for AY 2008-09 and directed the deletion of the disallowance.
2. Admission of Additional Evidence by the Tribunal:
The Tribunal admitted additional evidence, including bank statements and documents showing the investment in mutual funds was made from an overdraft account and the funds were received from RBI. The Tribunal found these documents necessary for proper appreciation of the case and admitted them despite opposition from the DR. The Tribunal held that the additional evidence confirmed facts not disputed by the Revenue and did not remand the matter to the AO.
3. Rectification of the Tribunal's Order u/s 254(2) of the Act:
The Revenue filed a miscellaneous petition arguing the Tribunal should have remanded the issue to the AO for examining the additional evidence. The Tribunal held that its discretion to admit additional evidence and not remand the matter was within the parameters of Rule 29 of the ITAT Rules. The Tribunal found no apparent error in its order and dismissed the Revenue's petition.
4. Disallowance of Indirect Expenses under Rule 8D(2)(iii):
The Tribunal noted that it had not adjudicated on the disallowance of Rs. 6,15,000 under Rule 8D(2)(iii) for indirect expenses. The Tribunal remanded the issue to the AO for fresh consideration, directing the AO to objectively examine the assessee's claim that no indirect expenses were incurred and make a disallowance only if the claim was found incorrect.
Conclusion:
The Tribunal's order was modified to delete the disallowance of Rs. 7,10,315 under Rule 8D(2)(ii) and remand the disallowance of Rs. 6,15,000 under Rule 8D(2)(iii) to the AO for fresh consideration. The Revenue's miscellaneous petition was dismissed, and the assessee's petition was allowed to the extent indicated.
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2013 (5) TMI 995
Issues involved: Determination of whether the assessee's income from letting of warehouses should be assessed under the head 'income from business' or 'income from house property'.
Summary:
Issue 1: Classification of income
The Revenue appealed against the classification of the assessee's income from letting of warehouses as 'income from business' instead of 'income from house property'. The Tribunal noted that the main objects of the company were related to earning business profits through warehousing activities. The profit and loss account indicated that the primary source of income for the assessee was storage charges and maintenance/user charges. The Tribunal observed that the income from letting out warehouses and godowns was rightly classified as 'Business Income' based on the company's objectives and financial activities.
Issue 2: Legal precedents
The Revenue's argument, citing judgments of the Madras High Court, emphasized that rental income from leased buildings should be assessed as 'Income from House Property'. However, the Tribunal differentiated the present case from the cases relied upon by the Revenue. It referenced a judgment of the Bombay High Court, which highlighted that the primary intention of the assessee in exploiting the property determines the classification of income. In this case, the Tribunal found that the dominant aspect of the transaction was the business of warehousing, leading to the conclusion that the income should be treated as 'Business Income'.
Conclusion:
Considering the previous Tribunal decision in the assessee's favor and the alignment of facts in the current case, the Tribunal upheld the classification of the assessee's income from letting of warehouses as 'Business Income'. Consequently, the Revenue's appeal was dismissed, affirming the findings of the CIT(A).
This judgment highlights the importance of assessing the primary intention behind income generation to determine its appropriate classification under the Income Tax Act.
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2013 (5) TMI 994
Issues Involved:
1. Disallowance of claim u/s 10B of the Income Tax Act, 1961.
2. Deletion of addition made by invoking the provisions of section 40(a)(ia) of the Act.
3. Deletion of disallowance made on account of Trade Fair expenses.
4. Deletion of disallowance of loss relating to the trading unit.
Summary:
1. Disallowance of claim u/s 10B of the Income Tax Act, 1961:
The assessee claimed exemption u/s 10B for income from a 100% Export Oriented Unit (EOU). The Assessing Officer (AO) rejected the claim, stating that the activity did not qualify as manufacturing/production. The CIT(A) allowed the claim, referencing previous decisions and legal precedents, including the Supreme Court's ruling in ITO vs. Arihant Tiles and Marbles P. Ltd., which established that converting marble blocks into slabs and tiles constitutes manufacturing. The Tribunal upheld the CIT(A)'s decision, confirming the assessee's entitlement to the exemption.
2. Deletion of addition made by invoking the provisions of section 40(a)(ia) of the Act:
The AO disallowed Rs. 13,43,208/- for non-deduction of TDS on clearing and forwarding expenses. The CIT(A) deleted the addition, noting that payments to non-resident shipping companies and the Railways were reimbursements and not subject to TDS. The Tribunal agreed, citing that the payments were reimbursements and no TDS was required as per various judicial precedents and CBDT Circular No. 723.
3. Deletion of disallowance made on account of Trade Fair expenses:
The AO apportioned trade fair expenses between the trading division and the 100% EOU division based on turnover, disallowing Rs. 28,59,649/-. The CIT(A) deleted the disallowance, stating that the expenses were related solely to the trading division, which participated in the trade fairs. The Tribunal upheld the CIT(A)'s decision, noting that the AO had no evidence to support the apportionment and that the trading division incurred the expenses to establish its market presence.
4. Deletion of disallowance of loss relating to the trading unit:
The AO disallowed a loss of Rs. 2 lakhs claimed under administrative expenses due to theft. The CIT(A) allowed the claim, accepting the assessee's explanation and the FIR filed. The Tribunal remanded the issue back to the AO for fresh adjudication and proper verification, as the AO had not previously verified the explanation or the FIR.
Conclusion:
The Tribunal dismissed the Department's appeals for assessment years 2005-06, 2006-07, and 2007-08, and the Cross Objections filed by the assessee for assessment years 2005-06 and 2006-07. The appeal for the assessment year 2008-09 was partly allowed for statistical purposes, with the issue of the disallowed loss remanded for fresh adjudication.
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2013 (5) TMI 993
Issues Involved:
1. Legality of the CCI's order and procedural defects.
2. Standard of proof required for quasi-criminal proceedings.
3. Selective investigation of cement manufacturers.
4. Denial of natural justice and cross-examination.
5. Role and function of the Competition Commission of India (CCI).
Summary:
1. Legality of the CCI's Order and Procedural Defects:
The appellants argued that the CCI's order was non-est as it was signed by the Chairman who had not attended the meetings during which oral arguments were made. This breached the principle of "he who hears decides," amounting to denial of natural justice. The CCI countered that the business was transacted in meetings as per Section 22, and the Chairman's participation in the final meeting where written submissions were considered validated his signature.
2. Standard of Proof Required for Quasi-Criminal Proceedings:
The appellants contended that since the CCI was inflicting penalties, it was acting as a quasi-criminal court and thus, the standard of proof required was "beyond reasonable doubt." However, the CCI adopted the civil standard of "preponderance of probability," which the appellants argued was incorrect.
3. Selective Investigation of Cement Manufacturers:
Several appellants argued that the CCI selectively investigated only a few cement manufacturers out of more than 40 in the country, without any justifiable reason. They claimed this selective approach was flawed and questioned the methodology used by the CCI.
4. Denial of Natural Justice and Cross-Examination:
The appellants claimed they were denied the opportunity to cross-examine witnesses and access necessary documents, which they argued resulted in grave injustice. The CCI responded that the refusal to allow cross-examination might at most amount to an irregularity in procedure, which did not affect the merits of the case.
5. Role and Function of the Competition Commission of India (CCI):
A significant issue raised was the exact role of the CCI post-amendment. The appellants argued that the CCI should adhere to judicial norms as it performs adjudicatory functions. The CCI, however, maintained that it transacts business in meetings and its decisions are based on a majority vote, per the amended Section 22.
Conclusion:
The Tribunal found a prima-facie case for granting a stay on the penalties, which were substantial, amounting to around Rs. 6000 crores. The appellants were ordered to deposit 10% of the penalties within one month, failing which the appeals would be dismissed. The order of 'cease' and 'desist' was not stayed. All stay applications were disposed of accordingly, and the matter was posted for further hearing.
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2013 (5) TMI 992
Issues involved: Application u/s 391/394 and Section 100 of the Companies Act, 1956 for sanction of scheme of arrangement and reducing share capital.
Scheme of Arrangement: The scheme involves amalgamation of companies no. 2 and 3 with the petitioner company, with the petitioner taking over all assets, liabilities, and employees without break in service. Additionally, it includes reducing the paid-up share capital of the petitioner company to Rs. 38,05,900 divided into equal number of equity shares of Re. 1/- each.
Convening Meetings: Court dispensed with meeting of secured and unsecured creditors as petitioner had no creditors. Shareholders' meeting held on 27th January 2013 in Kanpur, with notices issued by post and published in newspapers. Quorum was complete, and majority of shareholders approved the scheme.
Opposition and Objections: No appearance or objections opposing the scheme. Petitioner company received no objections from any person in India. Regional Director had no objection to the scheme, mentioning defaults in payment of funds and taxes, which are separate issues.
Approval and Resolutions: Board of Directors of all companies involved passed resolutions accepting the scheme. Special resolution for reduction of share capital not required as per precedents when entire assets and liabilities are transferred in amalgamation.
Sanction of Scheme: Court found no impediment in sanctioning the scheme of arrangement. Scheme sanctioned, with order to be placed before Registrar of Companies for registration within 30 days.
Conclusion: Petition allowed, Company Application No. 17 of 2012 stands disposed of.
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2013 (5) TMI 990
Issues involved:
The issue in this case is whether the income from derivatives transactions should be treated as "business income" or as "short term capital gain."
Issue 1: Classification of income from derivatives transactions
The appellant contended that the income from derivatives should be taxed as "short term capital gains" based on the nature of the transactions. The Assessing Officer (AO) treated the profit as income from business, stating that the derivatives were non-delivery-based and speculative in nature. The AO relied on the proviso 'd' to section 43(5) of the Act, inserted by the Finance Act 2005, which clarified that trading in derivatives is not speculative. The AO concluded that the profit from trading in derivatives should be considered as business income. The CIT(A) upheld the AO's decision, citing section 43(5)(d) of the Act, which states that non-delivery-based transactions involving derivatives are non-speculative business. The appellant argued that the derivatives transactions did not involve delivery-based transactions and should be treated as capital gains. The Tribunal found that the transactions were eligible transactions as defined under the proviso to section 43(5), and therefore not speculative. As such, the income from derivatives transactions was correctly classified as business income.
Conclusion:
The Tribunal dismissed the appeal, upholding the classification of income from derivatives transactions as business income based on the provisions of section 43(5)(d) of the Income Tax Act.
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2013 (5) TMI 989
Issues involved:
The issues involved in this case are related to the contravention of Central Excise Rules with intent to evade payment of duty, imposition of penalty under Rule 15 of the Cenvat Credit Rules, and the applicability of penalty under section 11AC of the Central Excise Act.
Contravention of Central Excise Rules and Penalty Imposition:
The case involved a visit by Central Excise Officers to the factory premises of the respondent, where shortages in Cenvat Credit availed raw materials and finished goods were found. The respondent admitted the shortages, attributing them to recording mistakes by workers. The Jurisdictional Additional Commissioner confirmed the Cenvat Credit and duty shortages, imposed penalties under Rule 15 of the Cenvat Credit Rules, and appropriated the deposited amount. On appeal, the Commissioner (Appeals) upheld the demand but reduced the penalties. The Revenue appealed, arguing that once contravention was established, penalty under section 11AC should be applied without discretion to reduce it.
Appellate Tribunal's Decision:
The Tribunal noted that while the Commissioner (Appeals) found contravention with intent to evade duty, there was a lack of supporting facts or documents for clandestine removal allegations. As a result, the Tribunal held that penalty under section 11AC was not automatically attracted. The Tribunal set aside the impugned order, remanding the case for a fresh decision. The Commissioner (Appeals) was directed to analyze the evidence thoroughly and determine if allegations of clandestine removal were substantiated. Only if such allegations were upheld, penalty under section 11AC equal to the duty demand would be applicable without discretion to impose a lower penalty. The Revenue's appeal was allowed in this regard.
This judgment highlights the importance of substantiating allegations with evidence and ensuring a clear analysis of facts before imposing penalties under relevant sections of the Central Excise Rules.
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2013 (5) TMI 988
The appeal was against a duty demand of Rs. 1,17,64,695 confirmed by the Commissioner. The Tribunal remanded the matter for denovo decision on penalty. The Revenue's appeal was also remanded for deciding the penalty question. The appeal and the misc application for early hearing were both dismissed.
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2013 (5) TMI 987
Issues involved:
The judgment involves the issue of denial of claim of exemption under section 10(38) of the Income Tax Act, 1961, and addition of undisclosed income on account of long-term capital gains.
Summary:
Issue 1: Denial of claim of exemption under section 10(38) of the Act
The appeal was against the order of the CIT(A) regarding the denial of exemption under section 10(38) of the Act. The AO observed that the assessee claimed long-term capital gains to be exempt under section 10(38) but had suspicions regarding the genuineness of the transactions. The AO required detailed information and evidence from the assessee to justify the claim, including broker-client agreement, ledger details, D-mat account, purchase and sales contract notes, bank account transactions, proof of STT payment, and proof of transactions on a recognized stock exchange. The AO found discrepancies and suspicions related to the transactions, leading to the rejection of the claim of exemption under section 10(38).
Issue 2: Addition of undisclosed income on account of long-term capital gains
The AO added the amount of long-term capital gains to the total income of the assessee as income from other sources, based on suspicions and lack of convincing evidence provided by the assessee. The CIT(A) confirmed this addition, leading to the filing of the appeal. During the appellate proceedings, the assessee argued for the genuineness of the share transactions and provided detailed submissions. The Tribunal considered the evidence presented by both parties, including proof of purchase and sale of shares, and found that the transactions were genuine. The Tribunal noted that the AO had acted on suspicion alone and allowed the appeal of the assessee on merits, partly allowing the appeal.
In conclusion, the Tribunal allowed the appeal of the assessee on the grounds of genuine transactions and lack of concrete evidence supporting the addition of undisclosed income on account of long-term capital gains.
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2013 (5) TMI 986
Issues Involved: Addition of cash sales under section 68 of the Income Tax Act and charging of interest under section 234B of the I.T. Act.
Addition of Cash Sales under Section 68:
The appeal was filed against the order of the CIT(A) for the assessment year 2009-10, specifically challenging the addition of Rs. 4,75,43,168 under the head cash sales deposited in the bank under section 68 of the Income Tax Act. The Assessing Officer rejected the books of accounts due to various reasons and made the addition under section 68. The CIT(A) confirmed this addition. However, the ITAT noted that the Assessing Officer had accepted the sales shown by the assessee in its books of accounts except for the net profit. The ITAT emphasized that once the income is estimated under section 144, no further addition can be made. Citing a relevant case law, the ITAT deleted the addition of Rs. 4,75,43,168, thereby allowing ground nos. 1 to 7 of the appeal.
Charging of Interest under Section 234B:
Ground no. 8 of the appeal related to the charging of interest under section 234B of the I.T. Act. The ITAT observed that this issue was covered by a decision of the Jurisdictional High Court, where it was held that interest could only be levied on the total income declared in the returns and not on the income assessed and determined by the Assessing Officer. Following this decision, the ITAT directed the Assessing Officer to re-compute the interest under section 234B based on the total income declared by the assessee in the return filed.
In conclusion, the ITAT allowed the appeal filed by the assessee, thereby overturning the addition of cash sales under section 68 and directing the re-computation of interest under section 234B.
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2013 (5) TMI 985
Issues Involved:
1. Rejection of Books of Account u/s 145(3)
2. Estimation of Sales and Net Profit Rate
3. Assessment of Interest Income
4. Disallowance of Partners' Remuneration
Summary:
1. Rejection of Books of Account u/s 145(3):
The Assessing Officer (AO) rejected the books of account of the assessee firm, engaged in the retail sale of liquor, on the grounds that cash memos were not maintained, making sales unverifiable. The AO invoked provisions of Section 145(3) and estimated sales at two times the license fee, applying a net profit rate of 3%. The CIT(A) did not address the rejection of books but directed the AO to apply a net profit rate of 1.77% as disclosed by the assessee, following the ITAT's decisions for earlier assessment years. The Tribunal noted that the CIT(A) had not dealt with the issue of rejection of books for the current year and modified the orders, directing the AO to apply a net profit rate of 2%.
2. Estimation of Sales and Net Profit Rate:
The AO estimated the sales at Rs. 44,37,62,734/- and applied a net profit rate of 3%, resulting in an assessed income of Rs. 1,33,12,882/-. The CIT(A) directed the AO to apply a net profit rate of 1.77% on the disclosed turnover, following the ITAT's decisions for earlier years. The Tribunal found that the CIT(A) had reduced the net profit rate to 1.77% without justification and directed the AO to apply a net profit rate of 2% instead of the 1.89% shown by the assessee.
3. Assessment of Interest Income:
The CIT(A) directed the AO to assess the interest income of Rs. 1,76,507/- separately as "income from other sources" u/s 56, rather than as "business income" u/s 28. The Tribunal upheld this direction, stating that interest income earned on bank deposits is assessable as "income from other sources" and not as "business income."
4. Disallowance of Partners' Remuneration:
The assessee claimed a disallowance of partners' remuneration of Rs. 5 lakhs. The Tribunal noted that once the business profit is determined by estimating the net profit rate on sales, no further deduction can be allowed on account of any expenditure, including remuneration to partners.
Conclusion:
The appeal filed by the Revenue is allowed in part, with the Tribunal directing the AO to apply a net profit rate of 2%. The cross objection filed by the assessee is dismissed. The order was pronounced in the open court on 17th May, 2013.
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2013 (5) TMI 984
Issues Involved:
The issue involved in this case is the right of the Appellant to obtain information from the CPIO u/s RTI Act, specifically regarding queries related to a case filed by SEBI against him.
Summary:
In this judgment by the Central Information Commission, the Appellant had raised queries seeking the opinion of the CPIO on the legality of SEBI's actions in a case filed against him. The CPIO had responded that since the matter was sub judice and all records were with the court, the Appellant should obtain information from the court. The Appellant appealed this decision, but the Appellate Authority upheld the CPIO's stand.
The Appellant argued for his right to the information sought, while the respondent reiterated that the court should decide on disclosure due to the pending nature of the case and the records already submitted. The Commission noted that the queries were more about seeking opinions rather than factual information. It emphasized that the CPIO can only provide existing records, not create new ones to address specific queries. The Commission stated that legal counsel would be better suited to address the Appellant's queries seeking opinions.
Consequently, the Commission ruled that the CPIO was not required to disclose any information in this case, despite disagreeing with the reasons given by the CPIO for non-disclosure based on the matter being sub judice. The case was disposed of accordingly, with copies of the order provided to the parties free of cost.
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2013 (5) TMI 983
Issues Involved:1. Adjustment on account of additional cost for development of new product. 2. Lower valuation of inventory of imported purchases. 3. Capacity utilization adjustment. 4. Exceptional replacement cost. 5. Overall correctness of the CIT(A) order. Summary:Issue 1: Adjustment on account of additional cost for development of new productThe revenue contested that the CIT(A) erred in allowing an adjustment of Rs. 10.73 crores for the development of a new product. The assessee argued that the additional cost was due to the import of components for a new type of shock absorber. The CIT(A) accepted this as an abnormal expenditure. However, the ITAT found that this was a normal business transaction and reversed the CIT(A) decision, restoring the TPO's original order, stating that the increased cost of production is a normal business risk. The appeal of the revenue on this ground was allowed. Issue 2: Lower valuation of inventory of imported purchasesThe CIT(A) allowed a reduction of Rs. 2.56 crores on account of the valuation of inventory for "Unicorn" products. The ITAT noted that the valuation method followed by the assessee was standard practice and inherent in any business. The ITAT set aside this issue to the TPO/AO for fresh consideration, as the complete facts and identification of each product's valuation were not clear. The appeal on this ground was allowed for statistical purposes. Issue 3: Capacity utilization adjustmentThe TPO had increased the operating profit margin of the comparable company, Gabriel India Ltd., from 4.71% to 6.69% due to differences in capacity utilization. The CIT(A) allowed the adjustment only concerning depreciation. The ITAT found no infirmity in the CIT(A)'s decision and dismissed the revenue's appeal on this ground. Issue 4: Exceptional replacement costThe revenue challenged the CIT(A)'s decision to allow an exceptional replacement cost of Rs. 10.72 crores, whereas the MOU with Honda Seil Cars Limited provided for Rs. 6.11 crores. The ITAT upheld the CIT(A)'s decision, recognizing the entire expenditure as an abnormal cost. The revenue's appeal on this ground was dismissed. Issue 5: Overall correctness of the CIT(A) orderThe ITAT addressed the overall correctness of the CIT(A) order, specifically regarding the inclusion of Renowned Auto Products Manufacturing Ltd. as a comparable company. The ITAT allowed the assessee's application under Rule 27 of the ITAT Rules, 1963, and set aside the issue to the AO/TPO for fresh consideration, directing to decide the comparability of this company afresh. The appeal of the revenue was partly allowed for statistical purposes. Conclusion:The ITAT partly allowed the revenue's appeal, reversing the CIT(A)'s decision on the additional cost for new product development and setting aside the inventory valuation issue for fresh consideration. The ITAT upheld the CIT(A)'s decisions on capacity utilization and exceptional replacement costs and allowed the inclusion of Renowned Auto Products Manufacturing Ltd. as a comparable company.
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2013 (5) TMI 982
Issues involved: Appeal against order of CIT(A) for assessment year 2007-08. Grounds raised include applicability of section 41(1) for trade creditors, disallowance of traveling expenses, and disallowance of 1/5th expenses for Telephone, Car depreciation & Car expenses.
Section 41(1) Applicability - Trade Creditors:
The AO invoked section 41(1) due to outstanding trade creditors for more than three years. The CIT(A) confirmed the addition. Assessee argued no benefit was obtained from the liability, hence section 41(1) not applicable. Tribunal referred to a High Court decision supporting assessee's stance. Consequently, additions under section 41(1) were directed to be deleted.
Disallowance of Traveling Expenses:
Assessee's foreign traveling expenses of &8377; 1,62,087 were disallowed as business-related proof was lacking. Assessee provided details and explained the expenses were for business purposes, resulting in earnings of &8377; 3,56,900. Tribunal found the explanation convincing and directed 75% of the claimed expenditure to be allowed, with the rest disallowed.
Disallowance of 1/5th Expenses - Telephone, Car Depreciation & Car Expenses:
AO disallowed 1/5th of expenses for personal and non-business elements. The CIT(A) upheld the disallowance due to lack of evidence for business purposes. Tribunal found no evidence supporting full business use, thus confirming the 1/5th disallowance.
In conclusion, the appeal was partly allowed with the deletion of additions under section 41(1) for trade creditors, partial allowance of foreign traveling expenses, and dismissal of the 1/5th disallowance for certain expenses.
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2013 (5) TMI 981
Issues involved: Assessment of excise duty on stock of finished goods for valuation purposes u/s 145A of the Income Tax Act, 1961.
Summary:
Issue 1: Assessment of excise duty on stock of finished goods by Assessing Officer (AO)
The AO found that the assessee did not provide for excise duty on the stock of finished goods. The assessee argued that the closing stock is valued at cost or market value, whichever is lower, and that the excise duty payable was not debited to the Profit & Loss Account. The AO held that the principles of certain cases were not applicable due to the introduction of section 145A. The AO stated that excise duty cannot be debited to the P&L Account as the liability is not ascertained by the year-end.
Issue 2: Appeal before CIT(A) and interpretation of section 145A
The assessee contended before the CIT(A) that excise duty is only liable when finished goods are moved outside the factory premises, and since the stock was within the factory, no excise duty was payable. The CIT(A) observed that as the finished goods had not been moved out of the factory premises, the liability for excise duty did not arise. The CIT(A) relied on court decisions to support the view that excise duty liability crystallizes upon the clearance of goods, not at the date of manufacture.
Issue 3: Decision by Appellate Tribunal ITAT HYDERABAD
The Appellate Tribunal upheld the CIT(A)'s decision, stating that since the liability for excise duty did not crystallize as the goods were not cleared from the factory, the provisions of section 145A were not applicable. The Tribunal dismissed the revenue's appeal, affirming the deletion of the addition made towards the valuation of closing stock.
This judgment addresses the assessment of excise duty on stock of finished goods for valuation purposes under section 145A of the Income Tax Act, 1961. The Assessing Officer initially raised concerns regarding the non-inclusion of excise duty in the valuation of closing stock by the assessee. However, both the CIT(A) and the Appellate Tribunal concluded that as the finished goods had not been moved out of the factory premises, the liability for excise duty did not arise, and therefore, the provisions of section 145A were deemed inapplicable in this case. The Tribunal dismissed the revenue's appeal, upholding the deletion of the addition made towards the valuation of closing stock.
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2013 (5) TMI 979
Charges on Bribe against Revenue officer under Prevention of Corruption Act, 1947 - Sanction granted by the competent authority was defective and illegal - HELD THAT:- The learned trial Judge has referred to the sanction order Ext.13 and the forwarding letter Ext. 14 and, thereafter, proceeded to observe that the order of sanction is completely bereft of elementary details; that though the date is not mentioned in the FIR, the authority has mentioned the date in the sanction order; that the order of sanction is delightfully vague; that the amount of bribe that finds place in the sanction order was told to him and he had no personal knowledge about it; that the minimum discussion is absent in the order of sanction; that grant of sanction being not an idle formality it was incumbent on the competent authority to ascribe proper reasons on perusal of the materials; that there is no material to show the existence of objective material to formulate the subjective satisfaction; that the authority has granted sanction in an absolute mechanical manner; and that the order of sanction does not reflect sincerity of approach. The High Court, while dealing with the said reason, has really not discussed anything except stating that a possible view has been taken by the learned trial Judge and in appeal it cannot substitute the findings merely because any other contrary opinion can be rendered in the facts of the case.
Consequently, the appeal is allowed, the judgment of the High Court and the conclusion of the learned trial Judge pertaining to the validity of sanction are set aside and the matter is remitted to the High Court. Court have not dealt with any other finding recorded by the learned trial Judge, it has to be construed that there has been no expression of opinion on the merits of the case on those counts. The High Court shall be well advised to consider all the aspects barring what has been dealt with in this appeal while dealing with the application for grant of leave.
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2013 (5) TMI 978
Issues involved: Petitioner seeking direction for disposal of appeal u/s 80P(2)(a)(i) by second respondent.
Issue 1: Exemption under section 80P(2)(a)(i) rejected by assessing authority despite order by Income Tax Appellate Tribunal.
The petitioner, a cooperative credit society, sought direction for the disposal of an appeal filed on 30.01.2013, Annexure-E, in line with the order passed by the Income Tax Appellate Tribunal in ITA No.1455/Bang/2012 dated 15.02.2013, Annexure-F. The contention raised by Sri. Mahesh Uppin was that the exemption available to the petitioner under section 80P(2)(a)(i) had been rejected by the assessing authority, despite there being a binding order from the Income Tax Appellate Tribunal. An appeal was filed, but the second respondent had not disposed of it, prompting the petitioner to seek a direction for its disposal within a specified time frame.
Decision:
Sri.K.V.Aravind, representing the respondents, acknowledged that with sufficient time, the appeal could be disposed of on merits. Consequently, a direction was issued to the second respondent to dispose of the appeal (Annexure-E) within a maximum period of six weeks from the date of receiving a certified copy of the order. It was noted that all contentions of the parties were left open, and no view was expressed on the merits of the case.
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2013 (5) TMI 977
The Calcutta High Court ordered the company to pay a consolidated amount of Rs. 30 lakh in ten monthly instalments starting from June 1, 2013, to settle the petitioner's claim. The petition will be permanently stayed if the company pays as agreed, but if any instalment is missed, the petition will be advertised in newspapers for court appearance after four weeks.
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