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Income Tax - Case Laws
Showing 141 to 160 of 236 Records
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2010 (5) TMI 657
Brought forward and set off of losses - Rectification of order u/s 154 - held that:- When original assessment is completed without reference to the statutory provision and in clear violation of the same, such assessment happens to be a mistake, that could be rectified under section 154 of the Act.
when business loss carried forward is set off against profit for the year 1995-96, the asses- see is not entitled to limit set off of loss brought forward up to 1993-94. It is pertinent to note that even if profit was set off only against brought forward depreciation, then under the head of unabsorbed depreciation, there would have been nothing left entitling the assessee for deduction in terms of clause (b) of Explanation (iii) of section 115JA(2) of the Act. Since nothing is left after setting off brought forward business loss up to 1994-95 against profit, the assessee is not entitled to any relief under clause (b) of Explanation (iii) to section 115JA of the Act. - Decided in favor of revenue.
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2010 (5) TMI 656
Whether Commissioner of Income-tax (Appeals) has erred in law in holding that the interest paid by the appellant is capital expenditure and erred in law in holding that the legal expenses are capital expenditure – Held that:- interest on borrowed funds and legal and professional charges are incurred in relation to a project which is yet to be completed and other expenditure are being grouped under work-in-progress. these two expenses incurred by the assessee on account of interest on borrowed funds and legal and professional charges, should also be grouped under work-in-progress. As a result, the value of the closing stock of work-in-progress will go up. The assessee will not get any deduction on account of these two expenses in the present year. order of the learned Commissioner of Income-tax (Appeals) is modified. appeal of the assessee is partly allowed for statistical purposes
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2010 (5) TMI 653
TDS - penalty under section 271(1)(c) on the disallowance - assessee had made payment of royalty, advertisement and publicity, audit fee and recruitment expenses on which tax at source has not been deducted - auditors of the assessee had itself quantified these payments as inadmissible under section 40(a)(ia) of the Income-tax Act - books of account were finalised on October 29, 2005 and these liabilities were provided for, tax has been deducted in October, 2005 and paid in November, 2005. These should have been added to this year's taxable income and allowed in the next year's taxable income - Assessing Officer disallowed the payment for the current year and remarked that the amount will be allowed in the next assessment year – Held that:- if the contention of the Revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee, will invite the penalty under section 271(1)(c). This is clearly not the intendment of the Legislature, orders set aside and delete the levy of penalty, appeal filed by the assessee is allowed.
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2010 (5) TMI 651
Rebate under the provisions of s. 88E in respect of Securities Transaction Tax – assessee contended that once the AO noted that the STT was paid on share trading operations of the appellant and income from these transactions was assessed under the head 'Profits and gains of business' and the appellant furnished evidence in prescribed Form 10DB, then the AO should not have disallowed the claim for rebate which was statutorily granted under s. 88E - Held that:- in the case Berger Paints (India) Ltd. (2002 -TMI - 12957 - CALCUTTA High Court) , ratio laid down in the decision is squarely applicable to the Present case as well, Since in the present case the appellant had furnished evidence in support of payment of STT in prescribed Form 10DB in the course of assessment, there was sufficient compliance to provisions of s. 88E, AO is directed to allow the rebate as Prescribed in s. 88E in respect of STT paid in respect of the share trading income, which has been assessed under the head 'Profits and gains of business', no infirmity in the aforesaid order of the learned CIT(A) and the same is hereby upheld, appeal of the Revenue is dismissed
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2010 (5) TMI 649
Disallowance of business expenditure - Held that:- Western India Vegetable Products Ltd. v. CIT [1954 (3) TMI 59 - BOMBAY HIGH COURT] wherein observed that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be interregnum, there may be a interval between a business which is set up and a business which is commenced and all expenses incurred after the setup of the business and before commencement of the business all expenses during the interregnum would be permissible deduction under section 10(2) of the Income-tax Act - assessee in the present case entered into agreements of sale of the gases with other parties in the assessment year in question or before. Since the assessee has been able to satisfy that it started securing orders for sale of gases, therefore, the assessee had commenced its business accordingly - no infirmity in the order of the CIT(Appeals) in allowing deduction of the expenditure in this case, the Departmental appeal stands dismissed.
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2010 (5) TMI 648
Block assessment - undisclosed income - Held that:- No evidence found as a result of search - undisclosed income has been computed merely on the basis of the surrender made by the assessee in the course of the block assessment proceedings. De hors the surrender, there is no evidence which could have been said to have been found as a result of the search and, therefore, the 'computation' of undisclosed income by the Assessing Officer in the block assessment proceedings cannot be construed as a 'determination' of undisclosed income contemplated under section 158BC(c) or 158BB, addition is not made on the basis of any evidence found in the course of search, the penalty imposed by the Assessing Officer under section 158BFA(2) is not sustainable - appeal of the assessee is allowed.
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2010 (5) TMI 645
Validity of reassessment proceedings initiated by issue of notice u/s 148 - assessment reopened on ground that expenses incurred for development of initial computer software technology known as "Vision Software" is a capital in nature, the same cannot be allowed as revenue expenditure as claimed by assessee - assessee challenged reopening of the assessment on the ground that no new facts had been brought on record and therefore, assessment could not be reopened merely on the basis of change of opinion - Held that:- When AO had enquired into a point or an issue while completing the assessment proceedings u/s 143(3), he is presumed to have applied his mind to the same and formed an opinion about its allowability even though no specific reference to the point or the enquiry made by him is made in the assessment order and even if no reasons were given in the assessment order as to how he formed the opinion about the allowability of the assessee's claim.
In the absence of any tangible material which could persuade the AO to form the belief that income chargeable to tax had escaped assessment by reason of the allowance of the expenses, he cannot issue notice u/s 148, even though the notice has been issued on 7-10-2002, which is within the period of four years from the end of the AY 1998-99. Therefore, initiation of reassessment proceedings u/s 147 was void ab initio - Decided in favor of assessee.
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2010 (5) TMI 643
Revision u/s 263 - AO dropped the penalty proposed to be imposed u/s 271(1)(c) - Assessee contended that Commissioner has no jurisdiction to initiate a proceeding under section 263 of the Act as the Assessing Officer had only dropped the penalty proceeding whereas section 263 of the Act covers in its ambit only those orders which pertain to the orders of assessment which are erroneous and prejudicial to the interests of the Revenue. - held that:- The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax - the dropping of the penalty proceeding, as is manifest from the impugned order, is definitely erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax has passed a detailed order holding, inter-alia, that loss of revenue has been caused as it is an erroneous order. Against assessee.
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2010 (5) TMI 641
Exemption under section 10B - jurisdiction income escaped assessment - notice u/s 147/148- Deduction under section 10B - exemption had also been granted, Section 10B was thereafter amended - claimed exemption under section 10B contending that the same was not in respect of the same unit but in respect of a new unit - held that:- neither annexure A, nor enclosure I disclosed the fact that admittedly the exemption claimed by the ferromet concentrates division under section 10B had been granted and availed of by the petitioner. It is a moot point as to whether in view of the failure to mention the same, the disclosure can be said to be a true disclosure even assuming that all the facts pertaining to the setting up of the alleged new unit were disclosed. - Writ petition dismissed.
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2010 (5) TMI 639
Exemption under section 54F of the Income-tax Act - assessee claimed deduction for purchasing two residential units - Held that:- in the case of Narendra Mohan Uniyal assessee had sold a piece of land and had earned capital gains. Thereafter, the assessee purchased a piece of land for Rs. 30 lakhs. Later yet, the assessee purchased a plot of land contiguous to the land purchased earlier. A residential house was constructed only on one piece of land purchased. The other piece was kept vacant. On denial of benefit under section 54F of the Act to the assessee, when the matter reached the Tribunal, it was held that section 54F of the Act contains no rider that no deduction will be allowed in respect of investment of capital gains made in acquisition of land appurtenant to a building or an investment in land on which the building is to be constructed. Reliance by the learned Commissioner of Income-tax (Appeals) on [ITO v. Ms. Sushila M. Jhaveri (2007 -TMI - 59614 - ITAT BOMBAY-I)] is by holding and, rightly so, that the assessee's case was still better, since the assessee had purchased the two floors of the same building within a short span of two days, no error whatsoever in the order passed by the learned Commissioner of Income-tax (Appeals), the same is hereby confirmed, appeal filed by the Department is dismissed.
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2010 (5) TMI 638
Business income - receipts treated as business income as against the treatment given by the Assessing Officer as salary income - distinction between a servant or an agent - Assessing Officer is trying to treat these contractual receipts as salary only for his endeavour to sit in judgment as to how much expenses the assessee should incur for the receipts in this regard - Held that:- assessee's receipts are contractual business receipts and in disallowing the part of the expenditure incurred to earn the said income by holding that the assessee is in receipt of the salary, the Assessing Officer has only tried to sit in the shoes of the businessman, which is not sustainable. Accordingly, no illegality or infirmity in the order of the learned Commissioner of Income-tax (Appeals), hence, upheld, Revenue's appeal is dismissed.
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2010 (5) TMI 622
Technical advisory services and assistance for the designing and development of the software product- Annual Contract and lump-sum consideration - Capital or Revenue Expense? - Held That:-
The assessee-company is throughout the year engaged in the business of rendering software services to its clients. Since no capital asset was acquired nor any benefit of enduring nature so as to treat the expenditure as of capital in nature has been acquired by the assessee, and since the assessee has availed of the services of M/s. Derpol Investment Ltd. in the course of carrying on its business of software development and deployment we are of the considered view that the expenditure incurred by the assessee is to be allowed as revenue expenditure irrespective of the fact whether any revenue has been generated from those services or not.
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2010 (5) TMI 614
Source of share capital - Introduction of share capital - creditworthiness of the companies and the genuineness of the transaction. - AO made the addition whereas CIT(A) deleted such additions - Held That:- When companies had issued confirmation letters regarding purchase of shares from the assessee-company. They had also quote their PAN. Furthermore, these companies had also furnished memorandum of association and articles of association, certificate of incorporation issued by the Asstt. RoC and certificate issued by the Asstt. RoC regarding commencement of business. The assessee had also submitted resolution of board of directors of each company regarding investment in purchase of equity shares of M/s Hitkarni Prakashan Ltd. and copy of their bank accounts indicating availability of funds for purchase of shares. Thus, the assessee had proved the identity of the four companies, genuineness of transactions and also creditworthiness of the companies. We also find that each company is income-tax assessee and disclosed share application money in their accounts which were duly reflected in their IT returns. In our considered view, the learned CIT (A) was fully justified in deleting the addition. Recently, in the case of Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. Thus the appeal of revenue is dismissed.
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2010 (5) TMI 613
Change in method of accounting to reduce tax liability - Allowability of Deferred revenue expenditure as per the AS-26 issued by the ICAI, New Delhi. - held that:- The accounts of this year and earlier years have been considered by both the lower authorities, but the accounts for subsequent years have not been considered by any one of them for coming to a conclusion whether the change has been made with a view to reduce the tax liability of this year. - In view of Nonsuch Tea Estate Ltd. v. CIT (1974 - TMI - 6434 - SUPREME Court) matter requires to go back to the file of the Assessing Officer for deciding the issue afresh after giving the assessee a reasonable opportunity of being heard. While framing the fresh assessment, he shall consider the accounts of this year, earlier years and subsequent year; AS-26 in the light of entries of intangible assets made therein ; and the cases cited before us as aforesaid.
Slow moving item- write off - accepted accounting policy followed from year to year - inventory had no market value on account old and obsolete -was allowed by Tribunal
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2010 (5) TMI 612
Addition - unexplained gifts - . That the majority of the donors have been produced before the Assessing Officer during the remand proceedings and they have confirmed having given gifts to the assessee - It is a settled law that onus to prove the gift claimed to have been received by the assessee is upon the assessee - In this case, the identity of the donors is not in dispute but the creditworthiness of the donor as well as the genuineness of the gift is seriously disputed by the Assessing Officer which is sustained by the CIT(A) - the assessee and his family members claimed to have received gifts year after year on seventy one occasions and sum total of the gifts was amounting to Rs. 34,74,571 - It is against all human probabilities that the relatives who are much poorer than the assessee are giving gifts to the assessee and his family members number of times without any reciprocal gifts from the assessee's side - it is evident that none of them are assessed to tax and their only source of income claimed to be is agriculture income - Held that: assessee has not been able to establish the creditworthiness of the donors as well as genuineness of transaction in respect of gifts from viz. S/Shri Devrajbhai Jevrajbhai, Manubhai Chaganbhai Savani, Chhaganbhai Diyalbhai, Ashokbhai Chhaganbhai and Nareshbhai H. Lakhani - the addition made by the Assessing Officer is reduced by Rs. 23,720 and the remaining addition of Rs. 4,45,000 (Rs. 4,68,720 minus Rs. 23,720) is sustained - Appeals are partly allowed
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2010 (5) TMI 606
Set-off of loss against transaction in derivatives segment Held that:- By Finance Act, 2005 -the transactions of futures segment w.e.f. 01/4/2006 would not be treated as speculation transactions. Therefore, for Assessment Year 2006-07, the loss incurred under derivates segment was business loss which was to be set off against the profit earned against cash segment - Since we have held that the transactions in derivatives will be treated as business income, no expenditure can be allocated towards speculative business.
Supermacy of Parliament over CBDT Notifications - Held that:- where recognition to stock Exchange was given from 25.01.2006 and transaction in future segment as normal business income from A/Y 2006-07, it was concluded that income from all transaction during P/Y 2005-2006 shall be deemed to be non speculative.
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2010 (5) TMI 605
Deductions under 80IA - What is deemed generation - Held that:- Where plant was set up for generating and selling electricity, the electricity was sold to HPGCL and in case HPGCL is not in a position to buy the electricity from the assessee, the generation of electricity had to be stopped in such a situation, HPGCL pays certain charges in order to compensate for the fixed costs, which are incurred even when there is no generation and are required to be incurred for keeping the plant in ready condition therefore, the generated income has a direct nexus with the business of industrial undertaking. Thus is eligible for deduction under 80IA,
Treatment of Provision for Bad Debt while computation of Book Profit under 115J - Held that:- As per amendment made by the Finance (No. 2) Act, 2009 in section 115JB whereby clause (i) reading as "the amount or amounts set aside as provision for diminution in the value of any asset" has been inserted in Explanation 1 to section 115JB of the Act meaning thereby that the amount or amounts set aside as provision for diminution in value of assets shall be added back to the net profit if the same is debited to the profit and loss account, for the purpose of determining the book profit under section 115JB of the Act. It is now well settled that the provision for bad debt is amounted to a provision for diminution in the value of any asset. The same shall be added back to the net profit for determining book profit. The ground raised by the assessee is rejected.
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2010 (5) TMI 602
Whether the amount paid by petitioner No. 1 to petitioner No. 2 outside India as consideration in terms of the basic engineering and training agreement dated October 22,1989 is liable to Indian income-tax as income deemed to have accrued to petitioner No. 2 in India in view of section 9(1)(vii) - No PE - Payment under protest - income received by the non-resident (such person) by way of a payment from a resident Indian for technical services rendered to him would be subject to the Indian income-tax only if it satisfies the twin test namely that the income was received in respect of services (i) rendered in India, and (ii) utilized in India or has such a live link with India that it can be treated as accrued or arisen in India - Examined on this test, the income received by petitioner No. 2 cannot be deemed to have arisen or accrued in India because the services under the BEAT agreement were not rendered within India though the drawings, designs received from petitioner No. 2 may have been utilized by petitioner No. 1 in India - Held that: the income by way of fees for technical services by the petitioner is not liable to the Indian income-tax under the Act - Decided in favor of the assessee
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2010 (5) TMI 600
Reassessment proceedings - addition on account of unexplained gift - Guinness of gift - requirement of issue of notice u/s 143(2) where return filed in pursuance of notice u/s 148 - held that:- in absence of any notice issued under sub-section (2) of Section 143 after receipt of fresh return, submitted by the assessee in response to notice under Section 148, the entire procedure adopted for escaped assessment, shall not be valid. - the requirement of notice under s. 143 (2) cannot be dispensed with. - Decided in favor of assessee.
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2010 (5) TMI 598
Imposition and demand of "interest" under section 158BFA(1). - Held that:- The case that has been moulded in exhibit P6 petition filed before the second respondent and also in this writ petition is that, the direction/permission to realise "interest" as given in the "post script" is subject to the terms as specified in the order and since exhibit P4 order specified payment of tax alone within the specified time (lest it should attract interest u/s 245D(6A)), no such liability to satisfy "interest" u/s 158BFA is there. - Decided against Assessee.
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