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• 2009 (9) TMI 1012
  
  Legal Judgment Summary:
  - Court: Supreme Court
  - Citation: 2009 (9) TMI 1012 - SC
  - Judges: S.H. Kapadia and Mr. Aftab Alam
  - Decision: Delay condoned, civil appeal dismissed.

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• 2009 (9) TMI 1011
  
  The Appellate Tribunal CESTAT Chennai allowed the appeal in favor of the assessee regarding disallowance of credit of service tax on GTA services. The Tribunal cited previous decisions supporting the admissibility of the credit based on TR-6 challan. The impugned order was set aside, and the appeal was allowed.

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• 2009 (9) TMI 1010
  
  Issues involved: Appeal against penalty u/s 11AC of Central Excise Act, 1944 for under-valuation of physician samples.
  
  Summary:
  The appeal was filed by the Revenue challenging the order that held penalty u/s 11AC cannot be levied on the respondent for under-valuation of physician samples. The respondent, engaged in manufacturing medicaments, availed Cenvat credit on inputs and cleared physician samples for free distribution. The issue arose when the respondent paid duty on physician samples based on cost of production, contrary to Circulars mandating valuation under Rule 4 of Valuation Rules, 2000. The Revenue contended willful suppression by the respondent, leading to under-valuation and duty evasion.
  
  The Department found discrepancies in duty payment by the respondent on physician samples, leading to a duty demand for the period 25.04.2005 to 31.08.2006. The respondent was accused of not paying duty as per Circulars, intending to under-value products and pay less duty. The Commissioner (A) confirmed the demand but waived the penalty, prompting the Revenue's appeal. The main contention was the mandatory imposition of penalty u/s 11AC when duty demand is confirmed.
  
  The learned JDR argued for penalty imposition citing relevant case laws. On the other hand, the respondent's counsel emphasized lack of mens rea to evade duty, attributing the issue to interpretation of statutes and Circulars. The respondent promptly deposited the duty post the High Court's judgment challenging the Circular. The Tribunal noted the absence of mens rea against the respondent, aligning with precedent where Section 11AC was deemed inapplicable without mens rea.
  
  Ultimately, the Tribunal dismissed the appeal, citing the lack of established mens rea against the respondent, similar to previous rulings. The decision was pronounced in court by Member (Judicial) Shri Ashok Jindal.

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• 2009 (9) TMI 1009
  
  Issues involved: Amendment of Duty Free Import Authorizations, interpretation of policy regarding imported goods.
  
  Amendment of Duty Free Import Authorizations: The petitioners, holders of 30 Duty Free Import Authorizations, had submitted one authorization for amendment to import dry fruits and packing material. They also hold twelve similar licenses purchased from Parle Products Private Limited and applied for amending them to include dry fruits and packing materials. Despite the applications, they had not received any communication from the respondents. The Court directed the respondents to decide on the license amendments within eight weeks, leaving other issues open for future consideration if the petitioners remain aggrieved.
  
  Interpretation of policy regarding imported goods: The petitioners' counsel argued that the imported items could be brought in even if not used in the exported material, citing licenses issued between specific dates. On the other hand, the respondents' counsel contended that the goods sought for amendment could only be used by actual exporters. The Court declined to delve into the controversy, deferring the decision to the respondents as the matter was still pending before them. The Court emphasized that the ends of justice would be met by directing the respondents to make a decision on the license amendments within the specified timeframe.

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• 2009 (9) TMI 1008
  

  Valuation of closing stock u/s 145A - Deduction for excise duty MODVAT - additional ground deduction for excise duty paid on closing stock before the due date of filing the return of income u/s 43B - HELD THAT:- In the present case, It is contended that as per the guidelines issued by institute of Chartered Accountant’s of India, an assessee can have either “inclusive method” for accounting entries with regard to MODVAT or “exclusive method”. It is explained that in the “inclusive method”, the purchase of raw material debited in the books of accounts is inclusive of the corresponding MODVAT element. It is submitted that if an assessee is following this method then the closing stock has to be valued inclusive of MODVAT element.

  In the exclusive method the balancing figure is taken to the balance sheet only and it is not taken to the profit & Loss Account. Therefore, as could be seen the Gross profit in the “Inclusive Method” is higher on account of the increase in the value of the closing stock by corresponding MODVAT element. The total increase in the value of closing stock and therefore, the increase in the Gross Profit in the “inclusive method” can be worked as under.

  Total MODVAT Credit corresponding to the raw material or finished goods, etc. in the closing stock –Excess of MODVAT Credit over the Excise payable on the sales made during the relevant precious year. Therefore, in the assessee’s case also the income would be affected by any adjustment to the closing stock and opening stock. With regard to the adjustment to the closing stock as made by the Learned Assessing Officer the same appears to be in the fully justified in view of the specific provisions of section 145A.

  Therefore, as discussed while explaining the example above, the net addition required to be made to the closing stock and therefore, to the Gross profit would come to ₹ 26,95,884(Rs.26,23,036 Rs.1,27,152). However, as the Learned AO is going to carry out the adjustment on account of value of the opening stock for this assessment year after completing the reopened assessment for Assessment Year 1999-2000, he may keep the above position in mind and work out the final figure of addition on this account considering the total increase in the value of closing stock for the Assessment Year under consideration at ₹ 26,95,884/- only. This Ground of appeal is disposed off accordingly.

  In the instant case, the lower authorities were not justified in revaluing only closing stock so as to include the amount of excise duty paid on purchase without revaluing the corresponding purchases. We have gone through the guidelines explained by the ICAI and find ourselves in agreement therewith that there will not be any effect on the profit of loss arrived at either by following inclusive method of accounting or exclusive method of accounting for excise duty. The only effect will be that the excise duty payable on closing stock of finished goods will be to the extent not deposited with the government before the due date of furnishing of return will be added to the income of the assessee in view of provision of Section 43B.

  In view of the discussion made hereinabove, in our considered opinion, there will be no effect in the taxable profit of the assessee by including the amount of excise duty paid on purchases in the value of closing stock of raw material, whether as raw material or as forming part of work-in progress or finished goods. We therefore, set aside the orders of the lower authorities on this issue in both the year under appeal and allow the grounds of appeal of the assessee.

  Deduction u/s 80HHC - after excluding deduction claimed u/s 80IA from the gross total income - At the time of the hearing, both the parties agreed before us that this ground of appeal is covered against the assessee by decision of the Tribunal in the case of Assistant CIT vs. Rogini Garments & Ors.[2007 (4) TMI 122 - ITAT, CHENNAI], wherein it was held that in view of the specific restriction provided u/s. 80-IA(9), relief u/s. 80-IA should be deducted from profits and gains of business before computing relief u/s 80HHC. Therefore, this ground of the appeal of the assessee is dismissed.

  Reducing interest income from the profits - deduction u/s 80HHC - At the time of the hearing, Ld. Counsel for the assessee submitted that his only prayer in the above ground of appeal is that netting off of interest should be allowed to the assessee in view of the decision of the Hon’ble Delhi High Court in the case of CIT vs. Shri Ram Honda Power Equip & Ors.[2007 (1) TMI 86 - HIGH COURT, DELHI], wherein it was held that where surplus funds are parked with the bank and interest is earned thereon, it can only be categorised as income from other sources and not as "profits and gains of business or profession"; interest earned on fixed deposits made for the purposes of availing credit facilities from the bank also does not have an immediate nexus with the export business and does not qualify for deduction u/s. 80HHC.

  However, where interest income is treated as business income, the amount of interest to be reduced in terms of cl. (baa) of Explanation to s. 80HHC is the net interest, i.e. gross interest less expenditure incurred for the purpose of earning such interest. The Learned Departmental Representative also agreed with the submissions of the Learned Authorised Representative of the Assessee.

  We therefore, set aside the orders of the lower authorities restore this matter back to the file of Learned AO to decide issue afresh in the light of the observation made hereinabove after allowing proper opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purposes.

  In the result, both the appeals of the assessee are partly allowed.

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• 2009 (9) TMI 1007
  
  ... ...
  ... ... ..... R Delay condoned. Civil Appeal is dismissed.

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• 2009 (9) TMI 1006
  
  Issues involved: Appeal against CIT(A) order for AY 2005-06 regarding deletion of additions u/s 55A based on fair market value discrepancy.
  
  Summary:
  1. The Revenue appealed against the CIT(A) order deleting additions of Rs. 27,51,870 made by the AO due to a variance in fair market value and sale consideration of a flat.
  
  2. During scrutiny assessment, it was found that the assessee sold a flat for Rs. 27,00,000, while admitting the sale for Rs. 9,00,000. The DVO estimated the fair market value at Rs. 36,77,000. The AO completed the assessment at a total income of Rs. 44,22,520, adding Rs. 27,51,870 as income from capital gain due to the unexplained difference in sale consideration.
  
  3. The CIT(A) deleted the addition citing precedents like the ITAT Delhi Bench in the case of Tej Pratap Singh and the Hon'ble Jurisdictional High Court in the case of Smt. Nilofer I. Singh.
  
  4. The Hon'ble Delhi High Court clarified that a reference to a Valuation Officer u/s 55A is to ascertain the fair market value of a capital asset. Capital gain is computed by deducting from the "full value" of consideration, not the market value. The ITAT Delhi Bench also emphasized that capital gain tax cannot be based on fair market value determined by a valuation report.
  
  5. Consequently, the Tribunal found no fault in the CIT(A) order and dismissed the Revenue's appeal.

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• 2009 (9) TMI 1005
  
  Issues Involved:
  1. Whether the CIT(A) erred in cancelling the penalty u/s 271D for contravention of section 269SS.
  2. Whether the assessee could justify the contravention of section 269SS.
  
  Summary:
  
  Issue 1: Cancellation of Penalty u/s 271D for Contravention of Section 269SS

  During the assessment proceedings for AY 2005-06, the Assessing Officer (AO) noticed that the assessee accepted loans in cash, contravening section 269SS of the Income-tax Act, 1961. The Additional CIT imposed a penalty of Rs. 7,47,408 u/s 271D. The assessee contended that the transactions were with relatives who were agriculturists from a village without banking facilities, and thus, the transactions were not loans or deposits but bona fide and genuine. The CIT(A) accepted the assessee's explanation, noting that the transactions were between family members, who were agriculturists, and banking facilities were not available. The CIT(A) concluded that the transactions could not be termed as loans or deposits and thus did not contravene section 269SS, directing the deletion of the penalty.

  Issue 2: Justification for Contravention of Section 269SS

  The Revenue appealed against the CIT(A)'s decision. The Tribunal examined the provisions of section 269SS and the nature of the transactions. It was noted that the transactions lacked conditions typical of loans or deposits, such as repayment terms or interest rates. The Tribunal found no evidence to rebut the CIT(A)'s findings that the transactions were not loans or deposits. Additionally, the Tribunal referenced the distinction between loans and deposits, emphasizing that the transactions were not for the benefit of the borrower but were family transactions without tax evasion intent. The Tribunal also cited precedents where bona fide transactions between family members were not penalized under similar circumstances. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

  Conclusion:

  The Tribunal concluded that the transactions in question were bona fide and genuine, involving family members without any intent of tax evasion. Therefore, the provisions of section 269SS were not attracted, and the penalty u/s 271D was rightly cancelled by the CIT(A). The appeal by the Revenue was dismissed.

  Order Pronounced in Open Court on 11th September, 2009.

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• 2009 (9) TMI 1004
  
  Issues involved: Appeal against deletion of penalty u/s 271(1)(c) of the IT Act for AY 2003-04.
  
  Summary:
  1. The appeal was filed by the Revenue against the deletion of penalty imposed u/s 271(1)(c) of the IT Act for the AY 2003-04.
  2. The assessee, engaged in third party insurance administrative services, recognized TPA fees as income based on a specific apportionment method. The AO disagreed with this method, adding the entire TPA fee as income for the year. The CIT(A) upheld the AO's decision, but the Tribunal ruled in favor of the assessee, directing the AO to consider corresponding expenses in the following year.
  3. Subsequently, the AO levied a penalty u/s 271(1)(c) related to the income addition. The CIT(A) deleted the penalty, stating that the assessee had not furnished inaccurate particulars or concealed income, as expenses were to be incurred over a year. The Revenue appealed this decision.
  4. The Tribunal noted that the assessee followed the matching concept of income and expenses, apportioning TPA fees over quarters based on services rendered. The AO believed the entire fee should be recognized in the quarter received, contrary to the matching concept.
  5. The Tribunal found that the assessee had fully disclosed the income recognition method, with clear details in the financial statements. The Tribunal had previously directed the AO to allow the assessee's claim and rework the income accordingly. The Tribunal deemed the income recognition method bona fide, with no concealment or inaccurate particulars.
  6. Consequently, the appeal by the Revenue was dismissed, upholding the deletion of the penalty. The decision was pronounced on 25th September 2009.

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• 2009 (9) TMI 1003
  
  Issues involved:
  The issues involved in this case are the entitlement of exemption u/s 11 of the I.T. Act for the assessee trust, the consideration of income vs. application for charities (earthquake relief), and the violation of section 11(5) of the I.T. Act.
  
  Entitlement of Exemption u/s 11:
  The assessee trust initially submitted a return showing a loss, claiming specific donations for Earthquake Relief and Building Fund as capital receipts. The Assessing Officer observed that the assessee had accumulated 25% of gross receipts u/s 11(1) and made additional expenditures for Earthquake Relief. The Assessing Officer also noted violations of section 13(1)(c), 13(1)(d), and 13(2)(4), concluding a violation of section 11(5). The plea to exclude donations under section 11(1)(d) was not considered. The Tribunal set aside the assessment order, directing a fresh assessment to determine if donations could be considered income of the trust.
  
  Consideration of Income vs. Application for Charities:
  Upon appeal, the CIT(A) acknowledged the trust's registration and entitlement to exemption u/s 80G. The CIT(A) emphasized that the donations received were genuine and applied for the trust's objectives. The Assessing Officer was directed to grant exemption u/s 11, considering the trust's utilization of donations for charitable purposes. The CIT(A) highlighted discrepancies in the original assessment and the acceptance of certain expenditures, leading to the conclusion that the trust had indeed applied its income appropriately.
  
  Violation of Section 11(5) of the I.T. Act:
  The Assessing Officer, in a subsequent order, again denied exemption u/s 11 to the assessee trust. However, the CIT(A) overturned this decision, emphasizing the trust's compliance with registration and utilization of donations for charitable activities. The Tribunal upheld the CIT(A)'s decision, stating that no new evidence warranted a different conclusion. The appeal filed by the Revenue was ultimately dismissed, affirming the grant of exemption u/s 11 to the assessee trust.
  

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• 2009 (9) TMI 1002
  
  The Bombay High Court admitted the case to consider whether services provided on a vessel at Mazgaon Docks Ltd fall under the definition of Port Services as per the Finance Act, 1994. The respondent waived service and the case was to be heard along with another Customs Appeal.

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• 2009 (9) TMI 1001
  
  Issues involved: Appeal against deletion of addition of income from undisclosed source u/s 153-C for assessment year 2005-06.
  
  Summary:
  
  Issue 1: Addition of income from undisclosed source
  
  The revenue appealed against the deletion of an addition of Rs. 20,98,550 made by the Assessing Officer on account of income from an undisclosed source. The case involved a search and seizure operation where a diary was seized containing coded entries related to financial transactions. The Assessing Officer concluded that the amount mentioned in the diary was advanced by the assessee to another person. However, the assessee denied advancing any money and contended that the entries were for borrowing, not lending. The Assessing Officer made the addition based on the diary entries and statements of individuals involved in the transactions.
  
  Issue 1 Details:
  
  The learned CIT(Appeals) deleted the addition citing a Supreme Court judgment and lack of evidence connecting the assessee to the alleged transactions. The CIT(Appeals) emphasized that the Assessing Officer failed to establish a case against the assessee and should have conducted further investigation. It was noted that the Assessing Officer did not provide copies of statements or allow cross-examination of witnesses. The relationship between the parties involved was not conclusively proven, and the seized diary entry was considered insufficient evidence to support the addition. The CIT(Appeals) highlighted that no unexplained investment was made by the assessee, as evidenced by the loan taken from one individual but not given to another. The tribunal upheld the CIT(Appeals)' decision, stating that no connection was established between the assessee and the seized material, and no addition was warranted.
  
  Decision: The appeal of the revenue was dismissed, and the tribunal upheld the deletion of the addition of income from an undisclosed source for the assessment year 2005-06.

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• 2009 (9) TMI 1000
  
  Issues involved: Determination of service tax liability, waiver of pre-deposit, abatement on finishing services, discretionary order by CESTAT, early disposal of appeals by Tribunal
  
  Determination of service tax liability:
  The Commissioner's Order-in-Original found the petitioner liable to pay service tax amounting to Rs. 9,83,70,107, along with Education Cess and HSEC, totaling Rs. 10,06,32,565, in addition to penalty and interest. The petitioner filed an appeal against this order, accompanied by a stay application seeking waiver of pre-deposit. The Tribunal passed an order directing the petitioner to deposit Rs. 2 crores, on top of Rs. 1,03,25,000 already paid.
  
  Waiver of pre-deposit and abatement on finishing services:
  The petitioner contended that they were entitled to a 67% abatement on completion of finishing services, which was not accepted by the Commissioner. The High Court noted that by paying the specified amount, the petitioner would be covering less than 30% of the demand, specifically regarding service tax, without being required to pay penalty and interest at that stage.
  
  Discretionary order by CESTAT:
  After reviewing the Order-in-Original and the Tribunal's stay application order, the High Court declined to interfere with the discretionary decision made by the CESTAT, considering all pertinent facts. The Court dismissed the writ petition based on this assessment.
  
  Early disposal of appeals by Tribunal:
  The High Court observed that numerous appeals with similar issues were being presented before the CESTAT. It suggested that the Tribunal should promptly decide on the main appeal if the petitioner fulfills the payment condition, indicating a need for efficient resolution of such cases.
  
  This comprehensive analysis of the judgment highlights the key issues addressed by the High Court regarding service tax liability determination, waiver of pre-deposit, abatement on finishing services, the discretion of the CESTAT, and the importance of expeditious resolution of appeals by the Tribunal.

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• 2009 (9) TMI 999
  

  Agricultural expenses - Expenses incurred on forest, supervision of growing trees by farmers, conveyance, salary of the staff engaged - Valuation of stock taken in the books - loss claimed in the Book Profit Computation u/s 115JB - Investments in units of Mutual funds - Applicability of provisions of sec.14A - Whether loss and expenditure connote the same meaning and therefore the word “expenditure” used in sec.14A covers within its compass word “loss” - dividend income - interest and administrative expenses -

  HELD THAT:- In our considered view growing saplings in the pots/polythene bags after plucking them from ground and planting them in such pots is an integrated activity which is in conjunction with and in continuation of growing saplings on the land and therefore, expenditure incurred there upon would be treated as agricultural expenses and therefore has to be disallowed.

  Accordingly, only the expenses to the extent on ₹ 53.59 lacs would be considered as agricultural expenses out of total claim of expanses at ₹ 316.12 Lacs. and would not be allowed. Against this the assessee has shown sale of agriculture produce (relatable to growing of saplings through land) at ₹ 36.42 lacs and sale of saplings not relatable to agricultural operations at ₹ 9.10 lacs. Therefore agricultural loss would be only ₹ 53.59 – 36.42 = 17.17 lacs. The sale of saplings at ₹ 9.10 lacs would be non-agricultural receipts and therefore cannot be allowed to be adjusted against agriculture expenses. So far as the depreciation of ₹ 7.69 lacs is concerned the same has been claimed on mist chambers and other assets used in growing saplings through clonal routes which has been treated as non-agricultural operation in our discussion made above. Thus the disallowance is restricted to ₹ 17.17 lacs and accordingly assessee gets relief of Rs.(278.29 – 17.17) = 261.12 lacs

  Valuation of stock taken in the books - It is not known on what basis the Assessing Officer and the ld. CIT(A) have given a finding that there is a difference in terms of quantity in the stock statement submitted to the bank and what is recorded in the books. We however, restore the mater to the file of the Assessing Officer to verify the statements J-1,J-4 & J-7 and any other statement which is in possession of the A.O. pointing out difference in stock in terms of quantity. If there is no such statement depicting difference in terms of quantities, no addition is called for but where there is any document in possession of the A.O. showing stock in quantity on a particular date and on comparison with the books it results in unfavorable difference against the assessee, the same will be shown to the assessee and after confronting him the difference in quantities will be worked out. Stock in terms of quantity will be compared as on the same date. There after, the difference if any will be valued at cost or market price whichever is low as per accounting policy followed by the assessee for valuation of stock. With these remarks, we set aside this ground to the file of the A.O.

  Disallowance of loss claimed in the Book Profit Computation u/s 115JB - it is very clear that the appellant has deliberately entered into transaction which is colourable device to defraud revenue from the very inception of the transaction. The appellant knew very well that the dividend income received would not be taxed and further it may be possible that the loss incurred can be claimed as not disallowable u/s 115JB.From the very beginning in view of the insertion of section 94(7) the appellant was aware that both the dividend income and loss incurred on the dividend stripping transaction have been viewed as a composite transaction by the legislature which has though it fit to link both of them by the logic that if dividend is not taxed then the loss incurred in the same transaction should also not give any benefit and it should be removed from the calculation of taxes.

  Clearly, this transaction falls within the purview of the decision of Supreme Court in the case of Mc dowell & Co.[1985 (4) TMI 64 - SUPREME COURT] where in the Hon’ble Supreme Court has stated that the department can lift the corporate veil for going into the truth of the transaction. Therefore, the loss incurred on these transactions is expenditure in relation to the earning of dividend and hence the same has to be removed from the P&L A/c. for computing the book profit in view of the provisions of clause (f) of section 115JB.In view of these reasons the disallowance made by the AO is correct and this ground of appeal is dismissed.

  In our considered view lowered authorities were not justified in making the addition in the book profit by the sum. The entire issues are divided in 3 segments given below -

  Investments in units of Mutual funds - Applicability of provisions of sec.14A - Whether loss and expenditure connote the same meaning and therefore the word “expenditure” used in sec.14A covers within its compass word “loss” - dividend income - exemption u/s 10(33) - We are of the considered view that loss and expenditure do not connote same meaning and therefore they are not replaceable. Now comes the question whether the loss incurred by the assessee in the above referred dividend stripping transactions can be disallowed u/s 14A. In our considered view firstly sec.14A does not use the word loss and it cannot be said that assessee has incurred loss for the purposes of earning dividend income. Secondly if such dividend stripping transactions and loss resulted there from could be covered by sec.14A, it would not have been necessary for the legislature to enact sec. 94(7) which specifically deals with such type of transactions. Therefore sec.14A cannot be invoked to cover such transactions.

  The distinction of the terms used in sec.94(7) and 14A are noticeable.Sec.94(7) uses the term “loss” whereas sec.14A uses the term “expenditure”. The distinctions clearly is made with understanding that sec.14A only covers disallowance of expenditure incurred for earning exempted income whereas sec.94(7) covers loss resulting from earning exempted income such as dividend. Finally sec.14A cannot be invoked while computing book profit u/s 115JB as computation of book profit under that section is confined to the mechanism mentioned in that section only. We have held while disposing of ground No.6(c) in the appeal for the assessment year 2002-03 that provisions of sec.14A cannot be invoked, while computing book profit u/s 115JB, to disallow any expenditure which is otherwise hit by this sec. in computation of income under normal provisions of the Act.

  The reasons mentioned therein would be applicable here also. In other words firstly sec.14A is not applicable for disallowing loss even in computation of income under normal provisions of the Act and even otherwise sec.14A cannot be invoked for disallowing any item of expenditure or say loss while computing book profit u/s 115JB.

  Whether provisions of sec. 94(7) can be invoked, as done by the ld. CIT(A) for disallowing such loss while computing book profit u/s 115JB - In our considered view sec.115JB is a complete code in itself so far as computation of book profit is concerned. As we have discussed while disposing of ground No.6(c) in the Asstt. Year 2002-03 sub-sec.5 of sec. 115JB can be invoked only for borrowing provisions in those areas of the Act which are not provided in sec.115JB.The mechanism for computation of profit is completely laid down in sec.115JB.It starts with profit as computed and certified by the Auditors as per Schedule VI of the Companies Act. To this the adjustments as provided in that sec. alone are made and the net result is treated as total income for the purposes of comparing with total income computed under normal provisions of the Act and for levy of taxes. No other adjustments while computing book profit is permissible, as held by Hon’ble Supreme Court and other courts (supra).The effect of subsection 5 of sec.115JB of the Act is that provisions relating to collection and recovery, appeal and penalty as provided in other chapter of the Act can be invoked as they are not provided in sec.115JB. Sec.94(7) on which ld. DR has repeatedly emphasized relates to computation of income only and therefore it is at par in effect with other provisions of the Act which affect computation of income.

  Therefore in our considered view sec.94(7) also cannot be drawn to affect computation of book profit which have to be necessarily and exclusively done within the parameter laid down us/ 115JB.In other words sec.94(7) has no role to play in computing book profit u/s 115JB .

  As a result this ground of the assessee is allowed.

  Disallowance of interest and administrative expenses - No addition can be made in the book profit u/s 14A. We have held while disposing of ground No.6(c) in the assessment year 2002-03 and also while disposing of ground 7(b) for assessment year 2003-04 and Ground No.9(c) in the present assessment year that provisions of sec.14A cannot be invoked for disallowing any expenditure relatable to any exempted income if otherwise such expenditure has been debited in the profit and loss account prepared according to Schedule VI of the Companies Act and certified by the auditors. It has also been held therein that even if any disallowance is called for u/s 14A while computing income under normal provisions of the Act, no disallowance of any claim can be done beyond the adjustments provided u/s 115JB. Following the same reasoning we hold that no disallowance of any interest expenses or administrative expenses can be made u/s 115JB even if they are hit by sec.14A. As a result this ground of assessee is allowed.

  The appeals of the assessee for the assessment years 2002-03, 2003-04, and 2004-05 are partly allowed and partly allowed for statistical purposes. The appeal of the revenue for the assessment years 2002-03 and 2004-05 are partly allowed for statistical purposes, whereas the appeal for the assessment year 2003-04 is dismissed.

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• 2009 (9) TMI 998
  
  Issues Involved:
  1. Deletion of addition of Rs. 51,37,565/- on account of receipt of commission.
  2. Sustaining addition of Rs. 3,38,145/- out of the total addition of Rs. 54,75,710/-.
  3. Validity of notice issued u/s 158BD of the Income Tax Act, 1961.
  
  Summary:
  
  Issue 1: Deletion of Addition of Rs. 51,37,565/- on Account of Receipt of Commission
  The Revenue contended that the CIT(A) erred in law and on facts by directing the deletion of Rs. 51,37,565/- on account of receipt of commission. The Revenue prayed for the order of the CIT(A) to be set aside and the order of the Assessing Officer (AO) to be restored.
  
  Issue 2: Sustaining Addition of Rs. 3,38,145/- out of the Total Addition of Rs. 54,75,710/-
  The assessee argued that the CIT(A) erred in law and facts by sustaining the addition of Rs. 3,38,145/- out of the total addition of Rs. 54,75,710/- made by the AO. The assessee contended that the entire addition was based on presumption and assumption, which is not permissible in block assessment. The assessee cited various judicial authorities to support the claim that no addition can be made in block assessment on assumption and presumption. The assessee requested the deletion of the sustained addition of Rs. 3,38,145/-.
  
  Issue 3: Validity of Notice Issued u/s 158BD of the Income Tax Act, 1961
  The assessee raised an additional ground challenging the validity of the notice issued u/s 158BD of the Act, arguing that it did not state the requisite satisfaction and was vague. The Tribunal admitted the additional ground, citing the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Vs CIT (1998) 229 ITR 383 (SC), which allows the Tribunal to consider questions of law arising from facts on record in the assessment proceedings.
  
  The Tribunal found that the notice issued u/s 158BD did not record any satisfaction on the part of the AO, showing non-application of mind. The Tribunal referred to the decision of the ITAT Delhi Bench in the case of Dy. CIT Vs. C. S. L. Securities (P) Ltd. (2008) 15 DTR (Del) (Tribunal) 318, which quashed the assessment order passed u/s 158BD due to similar deficiencies in the notice. The Tribunal held that the notice dated 10-11-2003 issued u/s 158BD was not valid as it did not meet the legal requirements, and quashed the assessment order.
  
  Conclusion:
  The Tribunal allowed the assessee's appeal, quashing the assessment order due to the invalidity of the notice issued u/s 158BD. Consequently, the grounds raised by the assessee on merits were not decided. The Revenue's appeal was dismissed as infructuous. The order was pronounced in the open court on 18-09-2009.

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• 2009 (9) TMI 997
  
  The High Court of Bombay dismissed the appeal regarding import duty entitlement of Rs. 388.58 lacs. The Tribunal's decision was based on a previous judgment and the appeal was found to be without substance. The appeal was dismissed with no order as to costs.

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• 2009 (9) TMI 996
  
  The Supreme Court of India in 2009 (9) TMI 996 - SC Order, heard both sides and suggested resorting to Alternate Dispute Resolution Mechanism under section 144C of the Income-tax Act, 1961. The competent authority will not reject the application based on the cut-off date and will decide the matter despite the pending appeal before the CIT(A). Special Leave Petitions are disposed of.

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• 2009 (9) TMI 995
  
  The Delhi High Court confirmed that gifts and donations received by the assessee from known individuals in the U.S.A. and U.K. were genuine, as their identity and creditworthiness were established through affidavits and income tax returns. The court found no substantial question of law and dismissed the case.

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• 2009 (9) TMI 994
  
  Issues involved:
  The issue involves the High Court's interference in the revisional jurisdiction with the concurrent findings of fact by the lower Courts regarding the eviction of a tenant based on the landlady's bonafide requirement and willful default in rent payment.
  
  Summary:
  
  Bonafide requirement of premises:
  The landlady filed for eviction of the tenant under Section 10(3)(a)(i)(a) u/s 10(2)(i) of the Act, claiming bonafide requirement of the premises. The Rent Controller and the Appellate Authority rejected the eviction petition, stating the landlady failed to prove the tenant was a defaulter in rent payment and that her bonafide need was not established. The High Court set aside these findings based on the landlady's age and desire to settle in Vijayawada, despite having two houses in Hyderabad. The Supreme Court held that the High Court's interference was unjustified as the landlady's desire alone did not prove genuine requirement, reinstating the lower Courts' decision.
  
  Willful default in rent payment:
  Both the Rent Controller and the Appellate Authority found no willful default in rent payment by the tenant for specific months. The High Court affirmed this finding and did not consider this ground for eviction. The Supreme Court agreed with this aspect and emphasized that the High Court should have upheld the lower Courts' decisions on this matter.
  
  Conclusion:
  The Supreme Court set aside the High Court's order and restored the decisions of the Rent Controller and the Appellate Authority, rejecting the application for eviction. The appeal was allowed with no order as to costs.

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• 2009 (9) TMI 993
  
  Issues involved: Disallowance of expenses for personal use and claim for deduction u/s 80-HHC of the Act.
  
  Disallowed expenses for personal use:
  The appellant, a firm, challenged the disallowance of 1/8th of telephone and vehicle expenses for A.Y. 2004-05, which was reduced to 1/10th by the CIT(A). The department's reasoning for disallowance was the absence of log books and call registers as evidence. The Tribunal found the 1/10th disallowance reasonable due to lack of records to prove all expenses were solely for business purposes. The appeal was dismissed as the disallowance was deemed justified.
  
  Claim for deduction u/s 80-HHC:
  The dispute centered on the assessee's claim for deduction u/s 80-HHC in relation to transfer of DEPBS credits. The appellant's turnover exceeded 10 crores, and the counsel agreed to the matter being sent back to the AO for computation based on a Special Bench decision not available during the earlier proceedings. The Tribunal, upon review, directed the matter to be restored to the AO for computation of the deduction in line with the Special Bench decision. The revenue's appeal was partly allowed for statistical purposes.
  
  Separate Judgement:
  No separate judgement was delivered by the judges in this case.

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