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Income Tax - Case Laws
Showing 281 to 300 of 662 Records
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2012 (12) TMI 698
Transactions as principal to principal - direction to get his books of accounts audited under section 44AB - kachha arahtia or pacca arahtia - the assessee being only a commission agent (buying agent) - Held that:- As in a case of agent whose position is similar to that of a kachha arahtia, the turnover is only the commission. However, in the case of pacca arahtia, the commission as well as other turnover shall be taken into account for applicability of provisions of section 44AB. The prescribed rate of commission a 2.5% for kachha arahtia and rate of 1% (variable) for pacca arahtia
There is no dispute to the fact that the appellant is registered as pacca arahtia with the market committee, Palwal & has charged commission at the rate of 1% only on the sales. The appellant has sold good to the constituents after purchasing them from kachha arahtias after paying commission of 2.5%. Also the appellant has made payments to the kachha arahtias on his own account and received payment from the buyers on his own account. The transactions of purchases and sales as well as payments are duly recorded and routed through the books of accounts of the appellant. The appellant has nowhere been able to demonstrate that the goods sold to outside parties were in fact belonged to or owned by the principals or farmers. Rather, the appellant has sold the goods to outside parties after purchasing them on his own account from the kachha arahtia and the domain over the goods sold was that of appellant. Thus once the status of appellant is established to be so, the entire receipts including commission are to be considered for the purpose of applicability of section 44AB. Admittedly, the receipts of the appellant far exceed the limits prescribed u/s 44AB and the appellant was liable to get his books of accounts audited u/s 44AB. The turnover of Rs.1,46,27,433/- as shown in the sales tax return has to be considered as turnover of the appellant and not the commission of Rs.1,33,270/- only - against assessee.
Invoking the provisions of section 194H making him liable for TDS from commission payments and invoking the provisions of section 40 (a)(ia) - Held that:- As concluded by the Hon’ble High Court, there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. Since in the preceding year, no such facts ,as have been revealed in the year under consideration, emerge from the records, considering the totality of facts and circumstances of the case, especially when the assessee on behalf of the assessee did not place any material before us that the assessee was only a kutcha arahtia even while being registered and acting as pucca arahtia, there is no basis to interfere with the findings of the CIT(A). Moreover, the CIT(A) upheld the findings of the AO that the commission exceeding Rs.2,500/- in each case aggregated to Rs.3,04,511/ - and the provisions of sec. 194H are applicable in the case - against assessee.
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2012 (12) TMI 697
Withdrawal of revision petition - rejecting of request as the petitioner had filed a Revision Petition waiving his right to file a first appeal before the CIT (A) - Held that:- As decided in CIT Versus D. Lakshminarayanapathi [1998 (12) TMI 12 - MADRAS HIGH COURT] filing of a Revision Petition cannot be a bar for the filing of an Appeal, by the assessee, before the appropriate authority, as per the relevant provisions of law. In such circumstances, this Court finds it appropriate to set aside the impugned order of the first respondent, dated 24.7.2012. Accordingly, the writ petition stands allowed.
It is made clear that it would be open to the petitioner to file an appeal, before the CIT (A), challenging the order of the assessing officer, relating to the assessment year 2009-2010, if so advised, in the manner known to law.
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2012 (12) TMI 696
Unaccounted Cash Credit - the assessee is a HUF which claims that Rs.2.15 lakhs was given as loan by the wife of the Kartha to the HUF. She claimed that she was given Rs.1.00 lakh each by her father and mother, that her father has Ac.3.30 cts. of agricultural land and her mother Ac.2.20 cts. of agricultural land which had allegedly been converted into fish ponds and granted on lease and therefore she was in a position to give a loan of Rs.2.00 lakhs to the HUF
Held that:- Admittedly she was a government servant and under the applicable Conduct Rules, receipt of any gifts beyond a particular limit have to be intimated to the State Government and can be received only after obtaining permission from the State Government. There is no evidence that the wife of the Kartha of the HUF had sought permission or intimated to the State Government about the alleged gifts.
Although the assessee was able to prove the identity of the creditor i.e the wife of the Kartha, it cannot be said that the assessee was able to prove the creditworthiness of the creditor or the genuineness of the transaction of loan. - Addition confirmed - Decided against the assessee.
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2012 (12) TMI 695
Reopening of assessment - beyond the period of 4 years - no mention of inclusion/ exclusion of excise duty paid on raw materials purchased and consumed - Held that:- Persuing the return filed by the petitioner he had disclosed sales (including Sales Tax and Excise Duty) of Rs.15.46 crores (rounded off) & Schedule H mentioning that there are certain loans and advances, one of which was of Rs.84.58 lakhs pertaining to balance lying with the Excise Authorities. Such balance, it is a common ground, pertains to MODVAT Credit.
Thus as the petitioner had made necessary disclosure and had excluded such amount from the computation of income. Even in the reasons recorded, Assessing Officer has stated that “ on verification of the case records, it is noticed that ....” Thus, the material which the Assessing Officer relied in the reasons recorded, emanates from the record itself - no reason to reopen the assessment - in favour of assessee.
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2012 (12) TMI 694
Denying liability to deduct tax at source - appeals u/s 248 - Held that:- The assessee has entered into contracts of repairs for its imported machinery with the foreign suppliers i.e. in Germany of the machinery. From the copy of the purchase order and the invoices it is found that the Germany Company is required to carry out the services through which the machinery has to be repaired and not to be modified or 'improved'.
As decided in the case of Lufthansa Air Cargo (2004 (6) TMI 273 - ITAT DELHI-B) it was considered whether repair work carried out in the normal course of its business in Germany without any involvement or participation of the assessee's personnel can be said to be of any managerial or technical or consultancy services and it was held that the payments made by the assessee to the non-resident workshops outside India do not constitute payment of fees for managerial, consultancy or technical services as defined in Explanation 2 to sec. 9(1)(vii). As in the present case facts are very much similar to the facts of the case of Lufthansa Air Cargo (cited Supra) the payments to the recipients in Germany do not come within the purview of fees for technical services. This, therefore, cannot be treated as FTS but is business income of the nonresident company.
As per the law in force, business income of a nonresident recipient is chargeable to tax in India only if it is arising or accruing or deemed to arise or accrue in India provided that they have permanent establishment in India. As it is not disputed that the non-resident recipients of the remittances have no PE in India, their business income is not chargeable to tax in India. Since the very nature of income has been decided to be business income and not fees for technical services, the payments do not require withholding of tax at source u/s 195. In the result, the assessee is not under an obligation to withhold tax leave alone @ 20% u/s 206AA and the issue of grossing up would not arise.
Assistance in analyzing and solving technical problem and disfunctions - providing telephonic advice analysis and assistance to the operator - Held that:- The services are not mere repairs but are towards preventive maintenance which clearly show that the recipients are providing technical assistance and services to the assessee in India. Therefore the assessee is liable to withhold tax from the payment of fees for technical services - the assessee's are non-residents and admittedly the income exceeds the taxable limit prescribed by the relevant Finance Act. In the circumstances, the recipients are bound and are under an obligation to obtain the PAN No. and furnish the same to the assessee. For failure to do so, the assessee is liable to withhold tax at the higher of rates prescribed u/s 206AA i.e. 20% and the CIT(A) has rightly held that the provision of sec. 206AA are applicable to the assessee.
Grossing up u/s 195A - financial year in which such income is payable OR 20% as specified u/s 206AA - Held that:- Considering the provisions of Sec 195A & GE India Technology (2010 (9) TMI 7 - SUPREME COURT OF INDIA) the income shall be increased to such amount as would after deduction of tax thereto at the rate in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. Thus the grossing up of the amount is to be done at the rates in force for the financial year in which such income is payable and not at 20% as specified u/s 206AA of the Act.
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2012 (12) TMI 693
Jurisdiction power u/s 263 by CIT(A) - non preparation of accounts on the basis of clause 7 of the AOP agreement dated 29.04.2003 - deduction under Section 801B(10) - Held that:- According to clause-7 of the agreement SPPL is entitled to 35% share of the gross sale proceeds of the units inclusive of the value of the land. According to distribution in the account of the assessee SPPL has received Rs.15.11 crore which is 35% of gross sale proceeds of the unit amounting to Rs.43.17 crores. A sum of Rs.11.62 crore is credited to the account of SPPL on account of land etc. and Rs.3.49 crore is considered as profit share of SPPL. Out of balance 65%, after including the MSEB and incidental charges and reducing the developmental charges a sum of Rs. 10.76 crore has been considered as profit share of RRKC. Therefore, the distribution of profit made by the assessee between its members is in accordance with clause 7 of the agreement. The interpretation of clause-7 sought to be adopted by CIT will be against the very intent and purpose for which the assessee AOP has been formed and if such interpretation is adopted it will tantamount to denial of existence of AOP which is not even the case of CIT.
The assessee AOP in the present case has been assessed as AOP and found to have fulfilled the condition laid down in section 80 IB(10) and has been held to be eligible for such deduction. The quantum of deduction under section 80 IB (10) will depend on the income earned from eligible project. The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate. Therefore, manner in which the AOP distribute its project has no bearing over eligible quantum of deduction under section u/s. 80IB (10) as the eligible quantum will be gross receipts from the project reduced by expenses incurred on the project.
Distribution of revenue in the account of the assessee is inappropriate and has been benefited by larger deduction - Held that:- Such observations of CIT are incorrect, firstly, on the ground that even distribution of revenue in the books of account of the assessee cannot be said to be contrary to the purpose and intent described in clause-7 of the agreement. Secondly, the allowability or otherwise of deduction under section 80 IB(10) is not dependent upon the manner in which the profit has been distributed among the members of AOP but it depend upon the fulfillment of the conditions laid down in that section and also the deduction is available to an undertaking and not to the individual constituent of an undertaking - the impugned assessment order is neither erroneous nor prejudicial to the interest of revenue on account of allocation of profit between members as per accounts of the assessee as allocation of profit in the accounts of the assessee is in accordance with clause-7 of the agreement and manner of allocation of profit in the account cannot alter the quantum of deduction available to AOP under section 80 IB(10).
Doctrine of merger - held that:- As per Oil India Ltd. vs. CIT [1981 (9) TMI 64 - CALCUTTA HIGH COURT] if an assessment is subject matter of appeal then any ground which was held in favour of asssee can also be held against him though the appeal was preferred by the assessee. Such jurisdiction of AAC is undisputable and once the appeal has been preferred before the AAC on any aspect of the quantum, the Ld. CIT cannot assume jurisdiction otherwise an anomalous position would arise - Thus as in the present case once deduction under section 80 IB(10) was subject matter of appeal before Ld. CIT(A), it covered all aspects of the matter relating to deduction under section 80 IB(10) and the order of AO on that issue had merged with the order of CIT(A). Therefore, according to clause (c) of Explanation to section263(1), Ld. CIT was debarred from exercising jurisdiction u/s.263 as the subject matter of the appeal was deduction under section 80 IB (10) - in favour of assessee.
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2012 (12) TMI 692
Payment of fee to the counsels appointed by CBDT - department representatives - Member explained that the admitted fee is being paid and the arrears towards the admitted fee arc expected to be cleared in the next two months. However, there appears to be some dispute of parameters which the Member says will be sorted out with the counsels themselves.
The Member states that a quietus may be given to the issue as he has assured this court that there would be no laxity in the assistance rendered to the court in future. The matter already stands disposed of and hence need not be listed.
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2012 (12) TMI 691
TDS on commission paid to foreign agents - disallowance u/s 40(a)(i) - commission payments were deemed to have been received in India only because the telegraphic transfer of the remittances towards commission was made from a bank in India. - held that:- The provisions contained u/s 195 were not meant that the moment there is a remittance, the obligation to deduct TDS automatically arise. Considering the fact that the AO has not brought any material on record to show that the foreign agents have rendered any part of the services in India or have a permanent establishment and business connection in India, it cannot be said that any part of the commission payment made to them accrued or arisen in India requiring deduction of tax u/s 195(1) of the Act. - Deduction allowed - Decided in favor of assessee.
Deduction u/s 80HHC - setting off of interest receipt against interest payment having nexus - held that:- 90% of the net interest and not the gross interest which has been included in the profits of the business of the assessee as computed under the head profits and gains of business or profession is to be deducted under clause (i) of Explanation (baa) to section 80HHC for determining the profits of business. - Decision of CIT(A) sustained - Decided in favor of assessee.
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2012 (12) TMI 690
Reassessment - valuation of closing stock u/s 145A - held that:- The whole raison 'de 'tre for reopening assessment is the escapement of income. From the above facts, it was established that in either method of accounting, the total income would not have changed and the final figure would have remained the same. There was, therefore, no question of any underassemment and consequently there was no escapement of income. The Assessing Officer did not apply his mind and overlooked the simple accounting principle. The centripetal condition that there has to be an escapement of income is not fulfilled. The justification for reopening therefore falls to the ground.
Notice issued u/s 148 held as illegal and quashed. - Decided in favor of assessee.
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2012 (12) TMI 689
Exemption u/s 54F - investment in residential house - period of limitation of 3 years - Long term capital gain - held that:- It is the say of the assessee that the delay in the construction is attributable to the builder and the assessee cannot be penalized for something which is not in his hand. - We do not agree with this contention because as per the entries in the certificate of commencement, the approval was given on 7.9.2010 for 'C' Wing whereas the assessee has filed return on 22.2.2007 claiming full exemption u/s. 54F of the Act, when on that date neither the agreement for sale was entered nor the 'C' wing's 9th floor was approved by the local authority. The assessee has relied upon various judicial decisions claiming that the contiguous units are to be treated as one residential unit. - Exemption denied - Decided against assessee.
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2012 (12) TMI 688
Reassessment of an assessment within four years - Notice u/s 148 - capital assets u/s 2(14) - change of opinion - held that:- It is true that the impugned notice has been issued within a period of four years from the end of relevant assessment year. Therefore, the requirement that the income chargeable to tax should have escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts need not be established. However, as held by the Apex Court in case of Commissioner of Income-Tax Vs. (1) Kelvinator of India Ltd. (2) Eicher Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) reopening even within four years would not be permissible on a mere change of opinion.
Similarly in a recent decision Full Bench of Delhi High Court by a majority opinion in case of Commissioner of Income Tax Vs. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] held that Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the AO does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the AO did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the AO had formed an opinion in the original assessment, though he had not recorded his reasons.
Notice quashed - Decided in favor of assessee.
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2012 (12) TMI 687
Re-opening of Assessment – reworked out the deduction u/s 80HHC and book profit u/s 115JB - Held that:- Considering the excessive claim of the assessee u/s. 80HHC while computing the Book Profit u/s 115JB AO initiated the reopening of assessment to bring the income to tax which is escaped from assessment. Being so, the reopening of assessment is valid - against the assessee.
Deduction u/s.80HHC by adopting the book profit in place of the profits of the business while computing the chargeable book profit u/s. 115JB - Held that:- As decided in Ajanta Pharma Ltd v CIT [2010 (9) TMI 8 - SUPREME COURT] export profits computed under the provisions of sec. 80HHC based on 'profits of business or profession' cannot be substituted into the computation scheme as prescribed in sec. 115JB which is an alternative computation to the normal computation of income. The deduction under clause (iv) of Explanation for the export profits should not be phased out as provided in sub-section (1B) of sec. 80HHC because, 115JB is an independent code and it covers full export profits as the eligible profits for the purposes of book profits tax and no phasing is required to be carried out - in favour of assessee.
Deferred tax provision pursuant to AS 22 - unascertained liability hence warrants adjustments by way of addition to the book profits - Held that:- After insertion of clause (h) in the Explanation-1 to section 115JB with retrospective effect vide Finance Act, 2008 with effect from 1.4.2001, this issue has to be decided against the assessee as in view this clause the book profit shown in the Profit and Loss Account in the relevant previous year prepared under subsection (2) of section 115JB to be increased, inter alia by the amount of deferred tax and the provisions therefor - against assessee.
Reopening of assessment - excess grant of deduction u/s 80HHC - Held that:- Though the original assessments have been completed u/s 143(3) of the Act. The assessing officer has considered all the materials available on the record at the time of completing the original assessment and granted deduction u/s 80HHC. The AO is precluded to reconsider the same after four years from the expiry of the original assessment year to consider the same to bring the escaped income into taxation. Had it been within four years, the assessing officer could have reopened the assessment under clause (b) to explanation 2 to proviso 2 of Section 147 of the I.T. Act. In these assessment years, the assessment was reopened after four years, in our opinion, the reassessment is bad in law - in favour of assessee.
Brought forward loss/ Unabsorbed Depreciation allowance of amalgamating companies - whether eligible for set off under sec. 72A while computing relief u/s 80HHC - Held that:- This ground doesn’t required adjudication as already held that the reopening is bad in law in these assessment years. Being so, we refrain ourselves from adjudicating this issue.
Interest income - whether a part of business profits assessable u/s 28 to 44 - Held that:- The deposit made by the assessee in the bank and interest earned on it cannot be considered as income from business much less income from export earning, it cannot be considered as income from export earnings, as there is no nexus between export business and interest income. Interest income was earned from the deposits made by the assessee with the bank and not from export business - in favour of revenue.
Conversion charges - whether eligible profits for computing deduction u/s 80HHC r.w. clause (iv) of Explanation to sec. 115JB - Held that:- As decided in CIT Versus K. RAVINDRANATHAN NAIR [2007 (11) TMI 10 - SUPREME COURT OF INDIA] 90% of conversion charges has to be reduced from the gross total income to arrive at the business profit and it has to be included in the total turnover in the formula of arriving at the business profit in terms of clause (baa) of the Explanation to section 80HHC(3) of the Act. Accordingly, the Assessing Officer is directed to recompute the deduction u/s. 80HHC - partly in favour of revenue.
Sales tax and excise duty - whether deleted from total turnover for computing deduction u/s. 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] just as interest, commission, etc., do not emanate from the “turnover” so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover such taxes had to be excluded - against revenue.
Interest relatable to an acquisition of capital asset - whether permissible deduction u/s 36(1)(iii)? Held that:- As decuided in DCIT vs. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] Section 36(1)(iii)it is a code by itself. It makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business - in favour of assessee.
Provisions for unascertained liabilities - Held that:- In view of the retrospective amendment vide Finance Act, 2009 wherein there is an insertion of clause (i) with retrospective amendment from 1.4.2001 wherein the amount or amounts set aside as provision for diminution in the value of revenue assets has to be added to the book profit. In view of this, this issue is decided against the assessee.
DEPB benefits accrued - whether deducted for computing export profits both u/s 80HHC and clause (iv) of Explanation to sec. 115JB - Held that:- As decided in Topman Exports v CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] the face value would be assessable under 28(iiib) and the profit under 28(iiid) and in case the exporter (having export turnover in excess of Rs. 10 crores) is unable to fulfil the conditions specified in Third Proviso it is only the profits earned on the sale of DEPB benefits to the extent of face value should be allowed to the assessee in terms of First proviso under subsection (3) without applying the conditions stipulated in Third Proviso - in favour of the assessee.
Depreciation on demolished assets - Held that:- As decided in Natco Exports vs. DCIT [2002 (6) TMI 168 - ITAT HYDERABAD-A] as for discarded assets the adjustment required to be made under the concept of "block of assets" for the purposes of allowing depreciation is to reduce the monies receivable consequent to such discarding from the block. In the case of the assessee, as no money whatsoever was payable to him on handing over the ponds constructed on leased land to the owners of land, there can be no amount whatsoever that can be reduced from the block of assets. Hence, the block continues at its written down value - in favour of assessee.
Addition of imported entitlements - Held that:- Agreeing with the findings of the CIT(A) that the import entitlements are contingent in nature and accrue only in the year of actual import of raw materials and real income to be taxed even though in book keeping, an entry is made about hypothetical income which doesn’t materialize - against revenue.
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2012 (12) TMI 686
Transfer of Asset – whether covered by the word “otherwise” contained in section 45(4) - Held that:- The assessee after getting the valuation done from the Registered Valuer had distributed the assets equally though on WDV equally amongst all the four partners by crediting the current capital account. Once the assets have been removed from the capital account of the partners and have been credited to the current account, the partners are free to withdraw the said amount as and when they require. Therefore, it is a clear cut case of transfer of capital assets by way of distribution which is covered by the word “otherwise” contained in section 45(4).
Value in respect of residential house - value pertains to the building OR land - Held that:- The residential house can not be separate between land & building . The assessee had never objected to the value taken by the AO during assessment proceedings even after show cause was given to the assessee. The assessee did not exercise option for the fair market value as on 01.04.1981 or the cost of residential house as on 01.04.1981 during assessment proceedings inspite of the fact option given vide show cause letter dated 26.12.2008. Therefore, the value taken by the AO at Rs.18,00,000/- is correct.
Value of showroom at Gulmarg Bagh taken by the AO as on 01.04.1981 was duly communicated to the assessee vide show cause dated 26.12.2008 and sufficient opportunity was given to opt either for book value or fair market value. But the same option was never exercised by the assessee during the assessment proceedings.
Transfer with regard to the land at Gulmarg was a lease property and the land cannot be transferred without the prior approval of the authority - It was correctly observed by the AO that the lease of land was more than a period of 12 years and therefore, assessee is the deemed owner. The arguments of the assessee, therefore, cannot help the assessee. Regarding boundary wall, the same is also a capital asset, has rightly been observed by the A.O.
Gulmarg Hut - same had been dismantled and construction of the hotel was going on when asset was transferred in the name of the partners - Held that:- As in this regard, it was submitted that the construction of hotel was being carried out through M/s. Manzoor Construction through whom an amount of Rs.19 lacs was advanced.As regards the order of the CIT(A), the same is not a speaking order and he has ignored the findings of the AO who has rightly taken the fair market value and after taking into consideration the indexed cost and has rightly computed the long term capital gain vide paras 12(a) to 12(d) of his order. Therefore,no infirmity in the order of the A.O. in this regard. Thus, all the grounds of the Revenue are allowed - appeal of the Revenue allowed.
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2012 (12) TMI 685
Bad debt claim - disallowance on no description as to why the debts had gone bad - Held that:- As decided in T.R.F. LTD. Versus CIT [2010 (2) TMI 211 - SUPREME COURT] after the amendment of section 36(1)(vii) w.e.f. 01.04.1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee - thus bad debts claim of the assessee as written off as bad in its books of account as irrecoverable is upheld - in favour of assessee.
Leave Encashment – disallowance as not paid before the due date for filing of the return - Held that:- Following the decision in case of M/s Bharat Earth Movers Ltd. vs CIT [2000 (8) TMI 4 - SUPREME COURT] provision made for leave encashment cannot be taken as a contingent liability and hence it is an ascertained liability. However, the legislature by way of amendment restricts such deduction in the case of leave encashment unless it is actually paid in that particular financial year - order of the CIT(A) is set aside and restore the issue to the file of the AO to verify whether the amount has been paid before filing of the return or not - in favour of assessee for statistical purposes.
LIC Group Gratuity Scheme payments – disallowance as payments not made to an irrecoverable trust for the exclusive benefit of the employees - Held that:- Following the decision of court in case of [Metal Box Company of India Ltd. Vs. Their Workmen 1968 (8) TMI 53 - SUPREME COURT an amount paid towards an unapproved gratuity fund can be deducted u/s 37 though not u/s 36(1)(v) - order of CIT(A) set aside and claim of deduction being the amount paid to the LIC towards LIC Group Gratuity Scheme is allowed - in favour of assessee.
Remission of loan – Held that:- Provisions of sec. 41(1) do not apply to the facts of the case - CIT(A) ought to have held that the said sum does not represent the income of the appellant - restore this issue to the file of the CIT(A) for adjudication de-novo - appeal of the assessee allowed for statistical purposes.
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2012 (12) TMI 684
Revision u/s 263 – Deferment of sale consideration – Held that:- As per terms of the agreement consideration for sale of shares was agreed to be paid in two stages i.e. Rs.2.70 crores to be paid at the time of agreement whereas the deferred consideration to be paid in the subsequent years depending on the financial position of Unisol Infraservices Pvt. Ltd. in the subsequent four years upto 31st March, 2010 as per the formula given in the agreement. The amount of deferred consideration thus was uncertain and it was not possible to quantify the same.
The aggregate consideration including initial and deferred consideration, however, was capped at Rs.20 crores less debt plus cash as per clause 3.2 of the agreement and thus maximum amount of consideration, in our opinion, was erroneously taken by the CIT as only the initial consideration of Rs.2.70 crores was certainly payable as consideration for sale of shares and that alone, could be taken into consideration and not the deferred consideration the receipt of which was neither certain nor the quantum thereof was ascertainable with any reasonable certainty - there was no error in the said assessments by AO as alleged by the CIT calling for revision u/s 263 - assessment orders made by the AO u/s 143(3) are restored - in favour of assessee.
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2012 (12) TMI 683
Computation of eligible income u/s 10A – Whether interest income on FD is eligible for deduction u/s 10A - interest income derived on account of temporary parking of business funds – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) held that the income by way of interest on fixed deposits is not eligible for special deduction u/s 10A. In favour of revenue
Deduction u/s 10A - Whether export by HO to branch office is eligible for deduction u/s 10A – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) that the transfers between the HO and the Branch Office and vice versa with the approval of the STPI clubbed with satisfaction of other conditions like realization of proceeds in foreign exchange, constitutes exports for the purpose of the deduction under S.10A of the Act. Thus, without going into the other arguments raised by the learned counsel for the assessee, we find that the assessee must be given relief on this issue. In favour of assessee
Disallowance u/s 40(a)(ia) - Whether remittance by HO on account of sub-contracted to its branch office abroad subject to TDS - Assessee had paid to its US Branch on account of work sub-contracted to them - AO was of the opinion that the said sub contract payments attracted TDS u/s 194C/section 195, as the US branch is a non-resident – Held that:- The status of the branch office of the assessee abroad is not ‘non-resident’. Therefore, the provisions of Sec 195 are inapplicable. Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) issue decides in favour of assessee
TDS u/s 194C on leased line charges paid to BSNL - Disallowance u/s 40(a)(ia) – Held that:- Following the decision in case of USHODAYA ENTERPRISES PVT LTD (2012 (7) TMI 120 - ITAT HYDERABAD) held that payment made are akin to telephone lines and hence the provisions of section 194J is not attracted since BSNL is only providing the line and not any professional or technical services to the assessee. In favour of assessee
Disallowance on non-deduction of TDS u/s 195 – Payment to Non-resident for due diligence services in USA – Assessee argued that expenditure provision was reversed and the expenditure never really incurred, the disallowance if upheld in the current year, a similar amount reversed in the next year, is liable to be deleted from the computation of total income - Held that:- As the payment having been made to a foreign entity was liable for disallowance if tax was deducted is not made. Therefore view taken by the CIT(A) is justified. In favour of revenue
Computation of eligible income u/s 10A – Whether credit balance written back and notice period salary are part of eligible income u/s 10A – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) as the amount represents recovery of the business expenses earlier incurred by the assessee, therefore the income arising on account of such recovery also represents the business income of the assessee. In favour of assessee
Deduction u/s 10A – Whether disallowed amount are eligible for calculation of deduction u/s 10A – Held that:- As the issue is squarely covered by the decision of the Tribunal in assessee’s own case Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) for AY 2006-07 in favour of the assessee.
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2012 (12) TMI 682
Rural development expenses - disallowance - Held that:- Expenses incurred by the assessee on rural development in the villages near the assessee’s factory are disallowed as these expenses have no nexus with the business carried on by the assessee - in favour of Revenue.
Provision for contractual liability towards 3rd party manufacturers/ convertors in relation to excise duty - disallowance - Held that:- Assessee was following mercantile system of accounting as per which contractual liability accrued on the date of its ascertainment and was allowable in the year of ascertainment. In this case, the liability was pending in dispute and therefore, the same had not been incurred during the year. Facts this year are identical and, therefore, respectfully following the decision of the Tribunal in the year 1994-95, order of CIT(A)disallowing the claim is confirmed - in favour of Revenue.
Unexplained sale of milk fat - Held that:- There was nothing on record found during the survey to show that the assessee had made sale outside the books of account. The milk fat was subject to excise duty and it was recorded in the excise register. The assessee had given detailed breakup of the cans. Even if the weight of each can was taken as same i.e. 50Kg. the total weight of fat on basis of production log sheet was 417476 Kg and as per excise register the same was at 470674 Kg - as on the days the discrepancy was noted, there was no mention of milk fat cans produced in the production log sheet. Order of CIT(A)set aside and addition made is deleted - in favour of assessee.
Interest paid to the Income tax department - disallowance - Held that:- Assessee had adjusted the interest paid against the interest received on refund. The interest paid to Income tax department is not allowable as deduction the view supported in the case of Dy. CIT vs. Sandvik Asia Ltd. [2011 (6) TMI 563 - ITAT, PUNE].
Inclusion of Miscellaneous income sales tax and excise duty refund in the total turnover - Held that:- Miscellaneous income which included trade discounts, miscellaneous sales, sales tax, excise duty etc. had to be included in the total turnover except the sales tax and excise duty which did not contain an element of turnover as decide in the case of CIT vs. Lakshmi Machine Works [2007 (11) TMI 29 - CESTAT, CHENNAI]- order of CIT(A) is confirmed except in relation to sales tax and excise duty which will be excluded from the total turnover.
Reduction of 90% of interest from profit of business while computing deduction u/s 80HHC - Held that:- 90% of net interest income is required to be reduced after deducting expenses incurred having nexus with earning of interest income as held in M/s ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - issue restored to AO for working out 90% of net interest income after allowing opportunity of hearing to the assessee.
Computation of Capital Gain - sale of land and building - Held that:- Land and building has to be bifurcated for the purpose of computation of capital gain and since depreciation in some years has been allowed in respect of building portion, the capital gain in respect of building portion has to be computed as short term capital gain under section 50. The gain in respect of land portion has to be computed as long term capital gain as per method prescribed in the Act. Since assessee has invested the long term capital gain in NABARD Bonds, assessee would be entitled to deduction under section 54 EC even in respect of short term capital gain computed under section 50 in respect of building portion, if the same was held for more than three years - issue is thus restored to the file of AO.
Disallowance of payment to consultants, gifts etc - Held that:- Expenditure incurred wholly and exclusively in connection with the business or on commercial expediency. The assessee has included Rs.1.50 lacs for deduction u/s 35DDA which means the deduction has been claimed over a period of time whereas the same could have been claimed and allowed under section 37 wholly in the relevant year. Therefore, making the claim in respect of payment to consultant under section 35 DDA does not adversely impact the revenue - in favour of assessee.
Disallowance of repairs/renovation to the building - Held that:- Assessee has incurred an expenditure on redevelopment of Cadbury House and considering the smallness of the amount involved this could not be considered as expenditure on total renovation of the building therefore has to be allowed as expenditure on repair of the building. As regards canteen building, assessee had spent substantial amount of Rs.12,63,378/- on renovation of the building in assessment year 2001-02, thus considering the nature of building and substantial expenditure incurred it has to be considered as expenditure on total renovation and thus capital in nature & allowing depreciation of the same.
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2012 (12) TMI 671
Disallowance u/s 43-B - amounts deposited in the Excise Personal Ledger Account (PLA) - Held that:- In the present case, the assessee had no option, but to keep the account, in respect of each excisable product (evident from the mandate in Rule 173G that it "shall keep an account current"). The latter part of the main rule makes it clear beyond any doubt that the assessee has no choice in the obligation, and cannot remove the goods manufactured by it, unless sufficient amounts are kept in credit.
As decided in CIT And Another Versus C. L. Gupta And Sons.[2002 (11) TMI 82 - ALLAHABAD HIGH COURT] section 43B in clear terms provides that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which it was actually paid, irrespective of the previous year in which the liability was incurred for the payment of such sum as per the method of accounting regularly employed by the assessee. For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account - in favour of assessee.
Disallowance of provision for warranties - Held that:- As decided in M/s. Rotork Controls India (P) Ltd. Versus CIT, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] a provision is recognized when an enterprise has a present obligation as a result of a past event & it is probable that an outflow of resources will be required to settle the obligation with a reliable estimate can be made of the amount of the obligation - The principle is that if the historical trend indicates that a large number of sophisticated good were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 - in favour of assessee.
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2012 (12) TMI 670
Deduction u/s 80IA - whether the assessee is entitled to deduction u/s 80IA of the Act on the net interest income on employees loans & advances, interest on margin money and interest income on dues towards income tax refund adjustment from Essar Project Ltd. - held that:- the issue is covered by the decision of Apex Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] - assessee is not entitled to the deduction u/s 80IA of the Act on the interest - Decided against the assessee.
Addition on account of provision for Income Tax Recoverable - reimbursement of income-tax - held that:- the amount paid by the power purchasers by way of tax on the amount of tariff charges received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the payments received by the assessee. By virtue of the obligation undertaken by the power purchasers to reimburse the tax to the assessee does not mean that it is not the income in the hands of the assessee. - payment of tax received by the assessee is a part of tariff charges as per agreements and, hence, it is an income in the hands of the assessee and, therefore, the said amount without allowing any deduction is liable to be included in the income of the assessee. - Decided against the assessee.
Minimum alternate tax - Addition to book profit - Section 115JB - held that:- There is no dispute that under clause (i) of Explanation 1 to section 115JB of the Act there is a retrospective amendment made by Finance (2) Act, 2009 w.e.f. 1-4-2001, therefore, the book profit has to be recomputed in accordance with the above clause (i) of Explanation 1 to section 115Jb of the Act. - matter remanded back on this issue.
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2012 (12) TMI 669
Penalty u/s 271(1)(c) or 271(1)(c) - unaccounted NRE account - Held that:- Shiv Prasad Jagat Ram Kala is the holder of the subject NRE account, wherefrom the money came to the assessee, and the same is evidenced by the Deed of Gift and the affidavit, both executed by the said Shiv Prasad Jagat Ram Kala.
Shiv Prasad Jagat Ram Kala, or his family, could not be located at the address, which was furnished to the bank while the bank account was opened & in course of inquiry one family of Shiv Prasad Jagat Ram Kala located in a village who represented that Shiv Prasad Jagat Ram Kala, who is a member of their family, has no relationship with the assessee and held out that finance of Shiv Prasad Jagat Ram Kala could not permit him to make such a gift. Thus in the event, Shiv Prasad Jagat Ram Kala, whose address was given to the bank, and whose family was located at a village are different people, then, there is total failure on the part of the assessee to prove that Shiv Prasad Jagat Ram Kala, whose address was given to the bank, made the gift as the Deed of Gift and the affidavit alleged to have been signed by Shiv Prasad Jagat Ram Kala was not substantiated. The matter, therefore, squarely comes within the Explanation 1(B) to the Section and, accordingly, there is deemed concealment of the income by the assessee - set aside the order of the Commissioner and the Tribunal and restore the order of the AO - against assessee.
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