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Income Tax - Case Laws
Showing 221 to 236 of 236 Records
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2010 (5) TMI 64
Deemed Dividend Accumulated profit - The assessee is a share-holder in Jyoti Theatres Pvt. Ltd. The assessee holds 35% of shareholding in that company. In the year in question, the assessee obtained a loan of Rs 15 lakhs from Jyoti Theatres Pvt. Ltd. The Assessing Officer treated the said amount as deemed dividend to the extent of accumulated profit of Rs 13,33,493.85 shown in the balance sheet of the said company as on 31.03.2001. CIT(A) deleted the said addition after taking note of the fact that Jyoti Theatres Pvt. Ltd had a liability of Rs 57,81,997/- towards house tax payable by the said company to the Municipal Corporation of Delhi (MCD). Consequently, if the said sum of Rs 57,81,997/- is deducted from the accumulated profit of Rs 13,33,493.85 as shown in the balance sheet by the said Jyoti Theatres Pvt. Ltd, then the company would have accumulated losses rather than profit. As a result, the said loan of Rs 15 lakhs or any part thereof could not be treated as deemed dividend within the meaning of Section 2(22)(e) of the Income-tax Act, 1961 ITAT confirmed the order of CIT(A). Held that: that the books of accounts as prepared by any assessee are not decisive. The provisions of the Income-tax Act, 1961 would have to be gone into and the liability has to be determined on the basis of the provisions of the said Act. Furthermore, the treatment given by Jyoti Theatres Pvt. Ltd would not bind the present assessee where the present assessee is able to show that he is not otherwise liable to pay any tax on a particular item as per the provisions of the said Act. In fact, the present assessee cannot be precluded from showing that the said amount of house tax payable was an ascertained liability irrespective of the fact that Jyoti Theatres Pvt. Ltd had treated the same as a contingent liability. Decided in favor of assessee
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2010 (5) TMI 63
During the year in question, the assessee incurred expenses, amounting to Rs 20.42 lakhs for participating in the exhibition IMTEX-1998. The vouchers in respect of the aforesaid expenditure were produced before the Assessing Officer, who noticed that the expenditure incurred on the exhibition during the Assessment Year 1997-98 being only Rs 2,67,162/- there was an eight fold increase in the expenditure, though the commission income earned from the sale had decreased to Rs 2.15 crore in the Assessment Year 1998-99, as against Rs 2.43 crores earned in the Assessment Year 1997-98. The Assessing Officer, therefore, added back Rs. 18 lakhs out of the aforesaid expenditure, to the income of the assessee-company. CIT(A) confirmed the disallowance only to the extent of Rs 9 lakhs in first round in the second round (remand back from ITAT) CIT(A) deleted the addition made by AO and allowed the full expenditure. Held that: Section 37(1) of the Income Tax Act, to the extent it is relevant, provides that any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly or exclusively for the purpose of the business or profession would be allowed in computing the income chargeable under the head Profit and Gains of the Business or Profession. - It is not permissible for the Assessing Officer to place himself in the position of the management of the assessee and take it upon himself to decide how much would be a reasonable expenditure for a particular business purpose. The matter has to be seen purely from the viewpoint of the management of the assessee, taking its commercial interests into consideration. Order of ITAT confirming the order of CIT(A) upheld decided in favor of assessee
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2010 (5) TMI 62
Share application money - undisclosed income - During the course of assessment, it was noticed by the Assessing Officer that the assessee had received Share Application Money, amounting to Rs.27 lakhs from four private limited companies. On being called upon to prove the genuineness of the receipts, the assessee furnished documents such as Share Application Money, copies of resolution by the Board of Directors of the applicant companies, as well as the bank statements, Memorandums & Articles of Association and Income Tax Return of these companies. The applicant could not produce the parties before the Assessing Officer. He accordingly added the Share Application Money as unexplained cash credit under Section 68 of the Act. CIT(A) and ITAT decided in favor of assessee and deleted the addition Held that: in the context of Section 68 of the Income Tax Act, the assessee has to prima facie establish (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; and (3) the creditworthiness or financial strength of the creditor/subscriber. It was observed that (a) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee; (b) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (c) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without anything more, against the assessee and the Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. - the Commissioner of Income Tax(Appeals) and the Income Tax Appellate Tribunal, in our view were justified in holding that the identity of share applicants and the genuineness of the transactions had been established by the assessee.
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2010 (5) TMI 61
Penalty u/s 271(1)(c) furnishing inaccurate particulars of income - Assessing Officer imposed penalty of Rs 4,61,913/- on the assessee for allegedly furnishing inaccurate particulars of income. - The assessee had received interest of Rs 18,62,538/- on Fixed Deposits and had also received certain other receipts totaling Rs 21,91,820/-.These were included in the business income of the assessee and were treated by the Assessing Officer as the assessees income from other sources. The eligible profits for computation of relief under Section 80HHD of the said Act were thereby reduced. The Assessing Officer computed the relief under Section 80HHD at Rs 42,90,282/- against the amount of Rs 53,92,895/- as claimed by the assessee. This resulted in excess amount of deduction on the part of the assessee under Section 80HHD at Rs 11,02,613/-. It was on the basis of this excess claim that the penalty of Rs 4,61,913/- was imposed on the assessee. Held that: The Tribunal took the view that the assessee did not furnish any inaccurate particulars of income nor did the assessee conceal any part of its income. The question with regard to the claim of deduction under Section 80HHD was, at that point of time, debatable. Consequently, the Tribunal held that this was not a case where imposition of penalty under Section 271(1)(c) of the said Act could be justified. Order of ITAT confirmed.
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2010 (5) TMI 59
Deduction under section 30 / 37(1) - The assessee had paid certain settlement expenses. The Assessing Officer had disallowed an amount of Rs 29,05,678/- on account of rent. CIT(A) had also confirmed the disallowance both under Section 30 as well as 37 (1) of the Income Tax Act, 1961 - ITAT came to the conclusion that though the amount was not allowable under Section 30 of the said Act, the same could be allowed under Section 37(1) as it had been incurred for a business purpose Held that: an expense would be allowed under Section 37(1) of the said Act if it is shown to have been commercially expedient and that commercial expediency must be viewed from the perspective of a prudent businessman and not from the point of view of the revenue. - Tribunal came to the conclusion that the settlement in the present case was also by way of commercial expediency and the amount was paid in terms thereof. The Tribunal particularly noted that, in fact, the assessee in the present case was in a better footing than in the case of Microsoft Corporation (2008 -TMI - 30427 - HIGH COURT DELHI) because the liability to pay the rent for a minimum period of nine months was a contractual liability and the amount finally settled was actually less than the amount which would have been payable by it as per the agreement. Deduction u/s 37(1) allowed.
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2010 (5) TMI 58
Foreign traveling expenditure claim of provision made for warranty - The Assessing Officer had disallowed 25% of the foreign travel expense and had also made disallowance with regard to the claim in respect of the provision for warranty made by the Assessing Officer. The disallowance of 25 % was reduced to 10% by the Commissioner of Income Tax (Appeals) in respect of foreign travel expenditure. Ultimately, the Income Tax Appellate Tribunal deleted the entire disallowance. Held that: It is clear that the field engineers, who were sent abroad, were actually earning revenue for the company in the form of service charges and the company was earning as much as US $ 600 per day. The Commissioner of Income Tax (Appeals) thought this to be a ground for reducing the disallowance from 25 % to 10 % which, in the view of the Income Tax Appellate Tribunal, was ground enough for deleting the entire disallowance. Once the assessee company was receiving charges in respect of the field engineers, who had gone abroad, the travel expenses in respect of such field engineers could not have been disallowed. claim of provision made for warranty allowed
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2010 (5) TMI 57
Decline in gross profit ratio - When asked to explain, the assessee submitted that after drawing wire, the process goes on to put the wire for enameling, as a result of which the weight of the wire increased by 2-3%. The Assessing Officer felt that in the absence of adequate supporting evidence, the explanation given by the assessee could not be accepted. He, therefore, rejected the account books of the assessee under Section 145(3) of Income Tax Act and held that it would be fair and reasonable to take the gross profit rate at 5.59%, which was also the rate for the preceding assessment year. CIT(A) and ITAT decided in favor of assessee. Held that: even if no such register (stock register) was being maintained by the assessee as is contended by the learned counsel for the appellant (revenue), that by itself does not lead to inference that it was not possible to deduce the true income of the assessee from the accounts maintained by her, nor the accounts can be said to be defective or incomplete for this reason alone. If stock register is not maintained by the assessee that may put the Assessing Officer on guard against the falsity of the return made by the assessee and persuade him to carefully scrutinize the account books of the assessee. But the absence of one register alone does not amount to such a material as would lead to the conclusion that the account books were incomplete or inaccurate. Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him, to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of gross profit, in the absence of any material pointing towards falsehood of the accounts books, cannot by itself be a ground to reject the account books under Section 145(3) of the Act.
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2010 (5) TMI 55
Deduction u/s 10B - The Assessing Officer had deleted the deduction under Section 10B by holding that cutting and processing of stone, marble, granite etc. did not amount to manufacture or production. However, the Commissioner of Income Tax (Appeals) deleted the said disallowance and the same was confirmed by the Income Tax Appellate Tribunal. - The Tribunal held that these multiple uses of the tiles produced by the assessee could not have been done by solely using the main raw material which was nothing but solid blocks of sandstone, marble or granite. It was also noticed as a fact that the end product of the assessee was a product which was commercially distinct from the primary raw material and was the result of the activity conducted by the assessee. The Tribunal also noted that the term "production" was wider than "manufacture" and even if it were to be assumed that the assessee was not engaged in a manufacturing activity, it was certainly engaged in the activity of production. The processes employed by the assessee were carried out by highly skilled and specialized workmen on the raw material and the price of the end product was many times more than that of the raw material. Consequently, it was found as a fact that the assessee was engaged in the process of production of the said tiles. Held that: Income Tax Appellate Tribunal followed its earlier decision of the assessment years 2003-2004 and 2004-2005. We are also informed that appeals preferred against the order passed in respect of the earlier assessment years have also been dismissed by this Court. - Revenue appeal dismissed.
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2010 (5) TMI 54
Book profit - Minimum alternate tax - MAT - power of the commissioner to revise assessment u/s 263 - The provisions of Section 263 had been invoked by the Commissioner on the ground that the assessment order was erroneous and was prejudicial to the interest of the revenue. According to the Commissioner of Income Tax (Appeals), while calculating the book profits under Section 115JB of the said Act, sales commission of Rs 241.90 lacs claimed in the profit and loss account was not added back, even though this claim had been disallowed in calculating the total income under the normal provisions of the Act. The Commissioner of Income Tax (Appeals) was of the opinion that the mistake had resulted in under assessment of income under Section 115JB to the said extent. It was also observed by the said Commissioner that the assessment was made by the Assessing Officer without an adequate enquiry or investigation. Held that: that insofar as the computation of income under Section 115JB is concerned, the powers of the Assessing Officer are very limited. This is clear from the decision of the Supreme Court in the case of Apollo Tyres Ltd v. CIT: (2008 -TMI - 6081 - SUPREME Court) which, though it related to Section 115J, would be equally applicable to computation under Section 115JB - Once the profit and loss account was audited and duly certified by the statutory auditors to be in accordance with the Companies Act, 1956, it was not open to the Assessing Officer to go beyond the profits so declared except to the extent of making increases or decreases as per the Explanation to the said Section. It is not the case of the revenue that the Assessing Officer or the Commissioner of Income Tax was purporting to make any adjustments as provided under the Explanation. Consequently, the Tribunal was absolutely right in concluding that the provisions of Section 263 of the said Act could not be attracted because there was nothing erroneous in the original order passed by the Assessing Officer
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2010 (5) TMI 53
Disallowance of interest - diversion of the funds borrowed by the assessee - AO disallowed the interest paid by the assessee firm to the extent of ₹ 30,92,266/-, taking the rate of interest at 14.45% per annum, which was the rate at which interest was being paid by the assessee firm to the bank in CC 40 account - CIT(A) held that interest free advances were given out of the cash from account with the bank, which had debit balance, on which the assessee firm was required to pay interest and, therefore, there was a direct nexus between the interest bearing funds borrowed by the assessee and interest free advances given by it to its sister concern. He rejected the explanation that interest free advances were made out of interest free funds available with the assessee firm, as he found that the advances were made out of the overdraft bank account maintained with Punjab & Sind Bank. He, accordingly, upheld the disallowance made by the Assessing Officer. - The Tribunal did not find any commercial expediency in making interest free advances to the sister concern. It was noted by the ITAT that no material had been brought to its notice to show that the interest free advances had been given for the purpose of business or that by giving interest free advance, the business of the assessee would be served better. The Tribunal rejected the argument of the assessee that there was business connection.
Held that: . The commercial expediency, in our view, would include such purpose as is expected by the assessee to advance its business interest and may include measures taken for preservation, protection or advancement of its business interests. The business interest of the assessee has to be distinguished from the personal interest of its directors or partners, as the case may be. In other words, there has to be a nexus between the advancing of funds and business interest of the assessee firm - Some business objective should be sought to have been achieved by extending such interest free advance when the assessee firm/company itself is borrowing funds for running its business. It may not be relevant as to whether the advances have been extended out of the borrowed funds or out of mixed funds which included borrowed funds. - Assessee fails to pass the test - decided in favor of revenue.
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2010 (5) TMI 38
Exemption u/s 11(5) Exemption u/s 10(23C(iv) - Investment - the petitioner had complied with the direction given in the earlier order of the high court of withdrawing the amount lying invested in India Exposition Mart Limited and in placing the said amount in a scheduled bank in accordance with Section 11(5) of the said Act. However, despite this having been done, the Director General of Income Tax (Exemption) did not grant exemption to the petitioner under Section 10(23C)(iv) for all the assessment years 2008-2009 to 2010-2011 but limited the exemption to the assessment years 2009-2010 and 2010-2011. In other words, he denied exemption for the assessment year 2008-2009. Held that: it was not open to the Director General of Income Tax (Exemption) to have refused exemption for the assessment year 2008-2009, when the petitioner had withdrawn the investment in India Exposition Mart Limited and placed the same in a scheduled bank in compliance with the provisions of Section 11(5) of the said Act. It was made clear in the order passed by this Court that the second application that would be moved by the petitioner pursuant to the order of the High Court, would be treated as having been filed on 22.05.2007 and was to be an entire substitute of the original application. decided in favor of assessee
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2010 (5) TMI 34
Penalty u/s 271(1)(c) Bonafide mistake - During penalty proceedings, the assessee claimed that it had committed a bona fide mistake and all the facts material to the computation were disclosed. The Assessing Officer was of the view that there was no difference of opinion as regards disallowance of these expenses and the incorrect computation given by the assessee was an act of paying less tax than what was due from it. He was of the view that the assessee was a big company, assisted by a team of Tax Auditors and, therefore, it was a case of concealment of income as well as of furnishing wrong particulars for computation of income. CIT(A) confirmed the penalty but ITAT deleted the penalty Held that: It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide. If the claim besides being incorrect in law is malafide, Explanation 1 to Section 271(1) would come into play and work to the disadvantage of the assessee. - The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act. - The explanation offered by the assessee company was not accepted either by the Assessing Officer or by the Commissioner of Income Tax(Appeals). The view of Income Tax Appellate Tribunal regarding admissibility of the deduction on account of written off of certain assets, under Section 32(1)(iii) of the Act is wholly erroneous Penalty confirmed ITAT order is not correct decided in favor of revenue.
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2010 (5) TMI 16
Search and Seizure - AO found that the evidence seized during the search established that the salary paid to the assessee had not been fully and truly disclosed by the employer company. Based upon the material sized during search, the settlement application filed by the employer company and the order of CIT (A) in respect of earlier orders, the Assessing Officer made certain additions to the salary disclosed by the assessee. The additions comprised Rs 76,738/- on account of overtime, Rs 3, 36,809/- on account of overheads being 45% of the salary and Rs. 28,704/- on account of perquisites. He also made addition of Rs. 13,55,167/- on account of tax perquisites. - While dismissing the application filed by the Revenue, the ITAT noted that during the course of hearing before it, the Departmental Representative had conceded the fact that while allowing the appeal filed by the assessee, the CIT(A) had followed the order of his predecessor in case of identically placed assessees. The Tribunal was of the view that the Departmental Representative having conceded that the issue was covered by the order passed in favour of identically placed assessees and the Reference Applications against its order having been rejected, there was no ground for reviewing the order passed by it on 03rd August, 2001. Held that: , it was fairly conceded by the learned counsel for the Revenue that the plea of difference in facts was not raised by the Revenue before the Tribunal. In these circumstances, it is difficult for us to say that the Tribunal was not correct in holding that there was no error apparent from the record, in the order passed by it on 03rd August, 2001 revenue appeal dismissed
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2010 (5) TMI 15
Deduction u/s 80HHB - The Revenue was of the view that the assessee had failed to attribute any head office expenses to the foreign branches of the assessee company and that the Assessing Officer has correctly estimated an amount of Rs 1.5 crores relating to the Assessment Year 2003-04 and Rs 1 crore relating to the Assessment Year 2004-05 as being the expenditure attributable to the foreign projects and consequently made an addition of Rs 30 lakhs in respect of the Assessment Year 2003-04 and a sum of Rs 20 lakhs relating to the Assessment Year 2004-05. - The second issue relates to the addition of Rs 10 lakhs made by the Assessing Officer on account of the expenditure allegedly incurred by the assessee on behalf of other companies alleged to have been in occupation of the building taken on lease by the assessee. Held that: The manner in which the Assessing Officer has come to the computation of Rs 1.5 crores and Rs 1 crore as being attributable to the foreign projects is not at all based on facts or any logic. But, at the same time, as pointed out above, it is undeniable that some part of the head office expenses are to be attributed to the foreign projects matter remanded back regarding second issue: we are of the view that the finding of the Tribunal that no evidence had been brought or found to show that the assessee had incurred any expenditure in relation to any other companies is contrary to the record and requires re-consideration tribunal order set aside matter remanded back
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2010 (5) TMI 12
Delay in filing of an appeal condonation of delay - delay of 224days AO forget to proceed the file. Held that: When the Assessing Officer was transferred on 17.06.2009 and he handed over the charge to the new officer, he was expected to bring it to the notice of his successor that the appeal in terms of the approval dated 23.02.2009 was required to be filed in this case. In any case, he must have handed over all the files to his successor, while relinquishing charge of the office held by him. The new incumbent was required to examine atleast urgent and time bound files, received by him from his predecessor. Had he done so, he would have come to know that the appeal required to be filed in this case had already been delayed and, therefore, he should immediately send the file to the office of the Senior Standing Counsel for the purpose of drafting the appeal. We, therefore, find it difficult to condone so much delay in filing of this appeal. Violation of conditions of section 13: There was absolutely no material before the Assessing Officer to show that the funds given to these NGOs/institutions were used for personal benefit of HCL Perot System or any of its Directors. Therefore, it cannot be said that the finding of fact recorded by Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal upholding genuineness of the donations is perverse, calling for intervention by this Court. No contravention of Section 13 of Income Tax Act having been made out and the genuineness of the donations having been accepted by Commissioner of Income Tax(Appeals) as well as by the Income Tax Appellate Tribunal, there is no ground for interference by this Court under Section 260A of Income Tax Act
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2010 (5) TMI 9
Penalty u/s 271(1)(C) - Whether, on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that where assessed income is loss, penalty cannot be levied under section 271 (1) (c) of the Income Tax Act in spite of the fact that Explanation 4 (a) was added in the Income Tax Act with effect from 1.4.1976 and subsequently, further clause (a) was replaced by another clause (a) which is in clarificatory nature, with effect from 1.4.2003? Held that: When the word "income" is read to include losses as held in Harprasad's case it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period April 1, 1976 to April1, 2003. Even in the Circular dated July 24, 1976, referred to above, the position was clarified by the Central Board of direct Taxes (in short "the CBDT"). It is stated that in a case where on setting off the concealed income against any loss incurred by the Assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case 'the tax sought to be evaded" will be tax chargeable on concealed income as if it is "total income". Decision in the matter of CIT Vs. Gold Coin Health (P) Ltd. , 2008 -TMI - 30245 - SUPREME COURT] confirmed. SC further observed that: This Court (SC), time and again, reminded the courts performing judicial functions, the manner in which judgments/orders are to be written but, it is, indeed, unfortunate that those guidelines issued from time - to time are not being adhered to. - No doubt, it is true that brevity is an art but brevity without clarity likely to enter into the realm of absurdity, which is impermissible. This is what has been reflected in the impugned order which we would reproduce hereinafter. Supreme Court has reiterate the guidelines (a to g) for the Courts, while writing orders and judgments to follow the same.
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