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Income Tax - Case Laws
Showing 301 to 320 of 320 Records
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2010 (7) TMI 74
Survey u/s 133A - Surrender of income during survey - 08th March, 2002 a survey operation was conducted on the assessee’s business premises under Section 133A of the Act, 1961. During the course of survey, stock inventory, trading account and inventory of cash was prepared and the statement of assessee was recorded. On the basis of assessee’s admission, the assessing officer made addition of Rs.10,83,540/- to the income declared. The addition consisted of Rs.7,03,540/- on account of excess stock, Rs.2,75,000/- on account of showroom renovation and Rs.1,05,000/- on account of excess cash found. - immediately thereafter, on 13th March, 2002 assessee withdrew the admission and stated that there was neither excess cash nor stock or expense incurred on renovation. – Held that: - assessee had filed books of accounts along with necessary supporting evidence like sale/purchase bills, cash books and ledger etc. - books result have been rejected by the assessing officer on the sole reason that the purchase bills had not been produced; even though as per letters dated 13th March, 2002 and 22nd January, 2003, the purchase bills had been filed - In the present case, the assessee has duly supported his retraction with the book results by filing necessary evidence. – no addition to be made
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2010 (7) TMI 73
Exemption u/s 11 & 12 – Donation – Exemption to NGOs/institutions - The Assessing Officer was of the view that the donations must have been made as per directions of the directors or specified persons of a profit making company to the person of their choice. He concluded that the assessee was a tool in the hands of the parent company, that is, HCL Perot System. Accordingly, he denied benefit of exemption under Section 11 and 12 of the Income Tax Act, 1961 to the assessee and determined its taxable income at Rs.70,98,120/- and expense of Rs.10,00,820/- inclusive of depreciation. – Held that: - CIT(A) and ITAT both have found that the organizations to which donations were given by the assessee during assessment year in question were genuine charity organizations. There was no evidence before the Assessing Officer to show that these were not genuine organizations or were not engaged in social and charitable activities. The Assessing Officer attributed personal elements to these donations without even indicating any circumstance which could give rise to such an inference. - 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 – decided in favor of assessee
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2010 (7) TMI 70
Revenue expenditure versus capital expenditure – nature of payment of royalty - the assessee had obtained a licence from Nike company for sourcing, marketing and sale of footwear and apparel of Nike brand in India. In accordance with the licence agreement, which had been approved by RBI, royalty @ 5% of domestic sale was paid for use of trademark Nike – Held that: - It is settled law that if expenditure brings into existence a capital asset or gives any advantage of enduring nature to an assessee, it can be treated as capital expenditure. - both the CIT(A) and ITAT have concluded that royalty payable was related to the sales made during a particular year and accordingly the expenditure was of revenue nature. - as the assessee ceased to have any right to use technical information and/or trademark upon termination of agreement, there was no advantage of enduring nature derived by the assessee from the said agreement - royalty fee is a revenue and not a capital expenditure.
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2010 (7) TMI 69
Erroneous assessment – power u/s 263 – power of the CIT to revise the assessment – Held that: - It is settled law that two conditions have to be fulfilled before the Commissioner can invoke his power under Section 263 of the Act, 1961 namely, the order should be erroneous and further the assessing officer’s order should be prejudicial to the interest of Revenue [Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, 2008 TMI - 5786 - SUPREME Court] - that in the order the CIT(A) has neither found the order passed by the assessing officer to be erroneous or prejudicial to the interest of the revenue – order passed u/s 263 has been set aside by the ITAT correctly.
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2010 (7) TMI 58
Special Reserve - Section 36(1)(viii) - Tripartite Agreement - a public financial institution (corporation) and state electricity board and state government - deduction upto 20% u/s 36(1)(viii) - whether issuance of bonds and accrual of interest be held as income from Long Term Finance for the purpose of Deduction u/s 36(1)(viii)? - department contended that the direct nexus is lacking in the instant case because the income has been earned by the applicant on bonds issued by the Government of M.P. which has never taken any loan. It is pointed out that there is no real connection between the interest earned on bonds and the business of the assessee i.e. financing Power Projects - Held that: - The direct link is not in any way snapped and the interest income accruing from the issue of bonds by the State Government is, in our view, directly and inextricably related to the long term loan provided by applicant to MP SEB to which the M.P. Government stood as a guarantor. The execution of bonds is a part of the same transaction. The guarantor assumed the position of principal debtor, pursuant to the tripartite agreement. - applicant is eligible for deduction upto 20% u/s 36(1)(viii) - pre-payment premium to repay the long term loan before its maturity received by the applicant is income from long term finance for the purpose of deduction under section 36(1)(viii) - Instead of receiving interest over a long period a time as per the original loan agreement, a lump sum amount has been received by the applicant in full satisfaction of its claim. - the fact that the entries were made in the accounts showing the same as "other income" is not really material to determine the true character of the receipt. The pre-payment premium with which we are concerned in the present application is no different from the 'swapping premium' - answered in favor of assessee
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2010 (7) TMI 57
Accrual or arising of income in India - Applicability of Section 44BB - Royalty u/s 9(1)(vi) - the applicant has entered into "Bareboat charter" agreements" ('BBC agreement') with various vessel providing companies ('VPC') for provision of requisite seismic survey vessels on global usage basis. BBC agreement is one where the lessor provides only the vessel (without provision of services associated with the vessel) on hire to the lessee. It is also referred to as 'dry lease arrangement' - Held that: - where the agreement was executed outside India and the delivery of the vessel also took place outside India, by reason of the mere presence of the vessel in India without the volition of VPC, the source of income cannot be said to be located in India. To this extent, the hire charges paid by the applicant are liable to be excluded from the taxable profits of the VPC - hire charges realized by VPC during the certain periods are liable to be taxed under the Income-tax, 1961 and the rest of them ought to be excluded - the seismic activities are inseparable part of prospecting of mineral oil and the seismic survey vessel plays a crucial role in such operations undertaken by the applicant. - as the applicant engaged in the business of providing services or facilities in connection with prospecting for or extraction of mineral oil or supplying of plant (including ships) on hire used or to be used in the prospecting or extraction of mineral oil, Section 44BB is squarely attracted - Having regard to the fact that Section 44BB comes into play as held earlier, the receipts cannot be brought within the section 9(1)(vi) of the Act - the consideration received by VPC cannot be held to be 'royalty' income within the meaning of Sectio 9(1)(vi) of the Act.
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2010 (7) TMI 51
Transfer of shares - Taxability - applicability of section 115JB - withholding tax u/s 195 - Application of provisions of Transfer pricing (TP) u/s 92 to 92F - The applicant also holds 74% of the equity shares capital in Jindal Praxair Oxygen Company Private Limited (Jindal Praxair) and the balance 26% is held by JSW Steel Limited. The applicant is proposing to transfer 74% of the equity share capital in Jindal Praxair to its wholly owned subsidiary company, Praxair India - It is the contention of the applicant that the shares of Jindal Praxair held by it are capital assets and the proposed transfer of these to Praxair India would not be 'transfer' for the purpose of computing capital gains under section 45 read with section 47 (iv) of the Act - Held that: - as the applicant is tax resident of Mauritius and has been issued Tax Residency Certificate by the Mauritius Revenue Authority, it would not be subjected to tax in India on the capital gains arising from the proposed transaction in India - under section 115JB, there is no provision to include or exclude or to increase or decrease such income in the Act while determining the book profit. - the view that the provision of section 115JB of the Act is not attracted in the case of the applicant in view of decision in "The Timken Company - 2010 TMI - 77013 - AUTHORITY FOR ADVANCE RULINGS" - the proposed transfer of equity shares by the applicant to Praxair India would not attract the transfer pricing provisions of section 92 to 92F of the Act
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2010 (7) TMI 50
MAT - Minimum Alternate Tax - Whether MAT is applicable only to Domestic Companies - Whether MAT is applicable to foreign companies that have a physical business presence in India - Whether MAT is applicable on sale of shares of a listed company on which STT is applicable - If the provisions of MAT are applicable, whether TDS is required to be deducted u/s 195 - Held that: - The income, which does not have a source in India, cannot be made part of the book profits. The annual accounts, including the P&L Account, can not be prepared as per the first proviso to section 115JB(2) in respect of the world income and laid before the company at its AGM in accordance with the provision of Section 210 of the Companies Act. The speech of Finance Minister and the memorandum explaining the provision also become out of sync if the meaning of "company" appearing in section 115JB is adopted as 'foreign company' - as the applicant did not have a place of business in India it was not required to prepare its accounts under section 594 read with section 591 of the Companies Act, 1956. - That being so the applicant could not have prepared its accounts in accordance with the provisions of Part II and III of Schedule VI of the companies Act, 1956 - Section 115JB is not designed to be applicable to the case of the applicant, a foreign company, who has no presence or PE in India. - section 115JB of the Act are not applicable on the sale of shares of a listed company Timken India Limited, by the applicant, which has suffered securities transaction tax and accordingly, tax exempt under section 10(38) of the Act.
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2010 (7) TMI 41
Assessment u/s 158BC – Block assessment – notice u/s 143(2) issued after the expiry of period of limitation – necessity to issue of notice u/s 143(2) for the purpose of block assessment – calculation of period of limitation and exclusion of certain period u/s 153 - Held that: - the filing of an application under Section 245C before the Settlement Commission does not create any bar on the Assessing Officer in proceeding with the assessment in the normal course. Therefore, there is no question of any exclusion of time when there was no impediment in proceeding with the assessment by issuing and serving upon the assessee a notice under Section 143(2) etc. In fact, there was no impediment in even passing an assessment order. - no exclusion of time having been provided for issuance / service of notice under Section 143(2) of the said Act in the Explanation 1 to Section 158BE, the notice under Section 143(2), which was issued on 05.07.2004, was clearly beyond time. - since the notice under Section 143(2) was issued beyond the prescribed period of limitation, the block assessment order under Section 158BC(c) of the said Act made in pursuance of such a notice was bad in law – decided in favor of assessee
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2010 (7) TMI 40
Assessment u/s 158BC – Block assessment – notice u/s 143(2) issued after the expiry of period of limitation – necessity to issue of notice u/s 143(2) for the purpose of block assessment – calculation of period of limitation and exclusion of certain period u/s 153 - Held that: - the filing of an application under Section 245C before the Settlement Commission does not create any bar on the Assessing Officer in proceeding with the assessment in the normal course. Therefore, there is no question of any exclusion of time when there was no impediment in proceeding with the assessment by issuing and serving upon the assessee a notice under Section 143(2) etc. In fact, there was no impediment in even passing an assessment order. - no exclusion of time having been provided for issuance / service of notice under Section 143(2) of the said Act in the Explanation 1 to Section 158BE, the notice under Section 143(2), which was issued on 05.07.2004, was clearly beyond time. - since the notice under Section 143(2) was issued beyond the prescribed period of limitation, the block assessment order under Section 158BC(c) of the said Act made in pursuance of such a notice was bad in law – decided in favor of assessee
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2010 (7) TMI 39
Share application money – credit worthiness – identity of creditors - Revenue submits that just by filing income tax return or confirmation of creditors does not prove the creditworthiness and identity of a creditor specially when the creditor’s bank accounts revealed credit by way of cash deposit or by “clearing” just before issuing cheques of almost equivalent amount. – Held that: - since the identity of the share applicants has been established and it has been found that the said applicants are corporate assessees who were assessed to tax with the Income Tax Department, we are of the view that in the present case no substantial question of law arises – revenue appeal dismissed – decision of SC in the matter of Commissioner of Income Tax Vs. Lovely Exports (P) Ltd [2010 TMI - 76942 - SUPREME COURT OF INDIA] followed
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2010 (7) TMI 38
Revision by the Commissioner of Income Tax (CIT) – Power of revision u/s 263 – ITAT cancelled the order passed by CIT under Section 263 by holding that the Assessing Officer had taken a possible view at the relevant point of time – claim of deduction u/s 80HHC and 80IB – Held that: - there is no material to indicate that the Assessing Officer had not applied his mind to the provisions of Section 80IB(13) read with Section 80IA(9). – AO had allowed the deduction under Section 80HHC without reducing the amount of deduction allowed under Section 80IB from the profits and gains. He did not say so in so many words, but that was the end result of his assessment order. - Since he was holding in favour of the assessee, as has been observed in Hari Iron Trading Company (2008 -TMI - 11724 - PUNJAB AND HARYANA High Court) and Eicher Limited (2007 -TMI - 2063 - HIGH COURT , DELHI), generally, the issues which are accepted by the Assessing Officer, do not find mention in the assessment order, it cannot be said that the Assessing Officer had not applied his mind. It cannot also be said that the Assessing Officer had failed to make any enquiry because no further enquiry was necessary and all the facts were before the Assessing Officer
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2010 (7) TMI 37
Search and seizure – evidence collected during search – ITAT held that no documentary proof was found at the time of search to show pledging of jewellery by 41 persons – ITAT also observed that statement given by 4 persons in favour of the appellant is not supported by any evidence. – Held that: - Tribunal has given cogent reasons for its conclusion and that the appellant has, in the present proceedings essentially challenged findings of fact - a question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between conclusion of fact and the primary fact upon which that conclusion is based - But, it is not possible to turn a mere question of fact into question of law by seeking whether as a matter of law the authority came to a correct conclusion upon a matter of fact. – appeal dismissed
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2010 (7) TMI 36
Gift – genuineness of gifts – Held that: - we find that not only was the genuineness of the two gifts established inasmuch as registered gift deeds were produced but also the statements of two donors along with the assessee were recorded. In fact, the tribunal in the impugned order has concluded on facts that the identity and creditworthiness of the donors was proved beyond doubt. - as gifts were made by way of registered gift deeds as well as payments were made by way of account payee cheques and both the donors are income tax assesses, it cannot be said that the gifts are not genuine
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2010 (7) TMI 26
Adjustment in book profit – MAT – Minimum alternate tax - Explanation (iv) to section 115JB(2) – deduction towards profit exempt u/s 80HHC - CBDT Circulars of 4 May 1990 and 21 February 1994 – ITAT observed that the deduction admissible vide Explanation (iv) to section 115JB(2) of the Income Tax Act towards profit exempt u/s. 80HHC has to be quantified with reference to the profits as per accounts duly adjusted under various clauses to the Explanation of Section 115JB and not with reference to the normal computation under the chapter ‘Profits and Gains of Business or Profession’ – Held that: While the Assessing Officer does not have the jurisdiction to scrutinize once again or to go behind the net profit shown in the profit and loss account, he is well within his jurisdiction in effecting the increases and reductions as warranted by Explanation 1 to Section 115JB. As a matter of fact, the Assessing Officer is duty bound to carry out the legislative intent by effecting the increases on the one hand and the reductions on the other as provided in Explanation 1. For the purposes of clause (iv) of Explanation 1, the extent of the reduction in respect of the deduction available under Section 80HHC has to be computed strictly in accordance with the provisions of Section 80HHC - Tribunal was not justified – decided in favor of revenue
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2010 (7) TMI 25
Interest u/s 234B – order of settlement commission u/s 254D – power u/s 254 - Section 234B(4) provides, among other things, that where as a result of an order of the Settlement Commission under Section 245D(4) “the amount on which interest was payable under subsection (1) or subsection (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly.” - The contention of the assessee is that unless initially, interest was chargeable under the original assessment order, the question of an increase or reduction would not arise and that a prior levy of interest in the original assessment order is a precondition for the levy of interest under Section 234B(4). – Held that: The amount by which the advance tax paid by the assessee falls short of the assessed tax has been increased as a result of the order passed by the Settlement Commission. This is the amount on which interest was payable under Subsection (1) for if the assessee were to make a correct disclosure of his income in the first instance, the assessee would have been liable to pay interest under Subsection (1) on the short fall. The words, “the interest shall be increased”, would contemplate both a situation where interest had been levied on the assessee in the first instance, and a situation where no interest has been levied on the assessee in the original order of assessment. - the Settlement Commission justified in exercising the power under Section 254 and in allowing the miscellaneous application. – decided against the assessee
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2010 (7) TMI 24
Sale of DEPB - Taxable under section 28(iid) of the Income Tax Act, 1961 - interpolation of artificial cost - computation of profit for the purpose of section 80HHC - freight and insurance charges - Held that: the fact that the seller of the goods stands reimbursed in respect of certain expenses is not a consideration which would indicate that those expenses do not form part of the costs incurred by the seller. Costs do not cease to be costs because they are reimbursed to the seller as part of the sale consideration. the fact that the seller of the goods stands reimbursed in respect of certain expenses is not a consideration which would indicate that those expenses do not form part of the costs incurred by the seller. Costs do not cease to be costs because they are reimbursed to the seller as part of the sale consideration. - while computing direct cost attributable to export the freight and insurance amounting to Rs.1,71,87,614/ should be excluded for arriving at export profits while computing the deductions u/s.80HHC - decided in favor of assessee - the issue related to DEPB was also decided in favour of the Revenue and against the assessee
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2010 (7) TMI 15
Dividend Stripping Transaction - Loss arising in the course of Dividend Stripping Transaction - Business Transaction - Setoff - AO disallowed the loss of ₹ 2,09,44,793 claimed by the assessee inter alia on the ground that a dividend stripping transaction was not a business transaction and since such a transaction was primarily for the purpose of tax avoidance, the loss so called was an artificial loss created by a pre-designed set of transaction - ITAT and HC allowed the loss to be deducted - Held that: - Section 14A deals with disallowance of expenditure per se and not with a disallowance of a loss which arises at a point of time subsequent to the purchase of units and the receipt of exempt income and occurring only when there is a sale of the purchased units. - Under Section 94(7) the dividend goes to reduce the loss. It applies to cases where the loss is more than the dividend - Section 14A comes in when there is claim for deduction of an expenditure whereas Section 94(7) comes in when there is claim for allowance for the business loss. We may reiterate that one must keep in mind the conceptual difference between loss, expenditure, cost of acquisition, etc. while interpreting the scheme of the Act. - Para 12 of Accounting Standard AS-13 has no application to the facts of the present cases where units are bought at the ruling NAV with a right to receive dividend as and when declared in future and did not carry any vested right to claim dividends which had already accrued prior to the purchase. - Decided in favor of assessee - revenue appeal dismissed
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2010 (7) TMI 11
Liquidated damages – revenue receipt versus capital receipt – capital employed for the purpose of section 80J – delay in delivery of machinery - As per the agreement, in the event of delay caused in delivery of the machinery, the assessee was to be compensated at the rate of 0.5% of the price of the respective portion of the machinery for delay of each month by way of liquidated damages by the supplier, without proof of actual loss. - The supplier defaulted and failed to supply the plant and machinery on the scheduled time and, therefore, as per the terms of contract, the assessee received an amount of Rs.8,50,000/- from the supplier by way of liquidated damages. – AO and CIT(A) included Rs. 8,50,000 in the total income as revenue receipt– According to the Tribunal, the payment of liquidated damages to the assessee by the supplier was intimately linked with the supply of machinery i.e. a fixed asset on capital account, which could be said to be connected with the source of income or profit making apparatus rather than a receipt in course of profit earning process and, therefore, it could not be treated as part of receipt relating to a normal business activity of the assessee. The Tribunal also observed that the said receipt had no connection with loss or profit because the very source of income viz., the machinery was yet to be installed – HC confirmed the view of the ITAT – Held that: The afore-stated amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the assessee. We are, therefore, in agreement with the opinion recorded by the High Court and hold that the amount of Rs.8,50,000/- received by the assessee from the suppliers of the plant was in the nature of a capital receipt.
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2010 (7) TMI 3
TDS - payment made to non-resident - section 195 - assessee in default u/s 201 - chartering of fishing vessels - AO observed that, "the income earned by the non-resident company was chargeable to tax u/s. 5(2) of the Income Tax Act. The assessee made payment to the foreign-company, the sums representing hire charges, without deducting taxes at source, thereby committed default under the provisions of Section 195. - He assessed the assessee as assessee in default - CIT(A) and ITAT confirmed the order of AO - appellant-assessee submits that there was no income chargeable which resulted to the non-resident company as no payment of any sum by the assessee to the non-resident company took place in India and therefore, the liability to deduct tax at source under Section 195 of the Income Tax Act or the liability under Section 201 of the Act did not arise. - Held that: it is obvious that the assessee was liable to deduct tax under Section 195 of the Income Tax Act on the payment made to the non-resident company and admittedly it having not deducted and deposited was rightly held to be in default under Section 201 of the Income Tax Act.
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