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Income Tax - Case Laws
Showing 321 to 340 of 662 Records
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2012 (12) TMI 638
Inadequate Drawings - Held that:- In the absence of any finding of fact that the appellant had infact “incurred” the estimated expenditure on drawings, during the relevant financial years, the addition made towards drawings u/s 69C is bad in law - thus pursuing the materials available on record there is no evidence on record for making these additions. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are unreasonable - no evidence brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings - against revenue.
Unexplained Income - CIT(A) directing the AO to assess income under the head ‘other sources’ as against u/s 69B - Held that:- The order of the CIT (A) needs no interfere as he has recorded the finding of fact that the AO had only assessed whatever was offered by the assessee and such sum was not detected by the AO. As no material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources and not be assessed as unexplained investment under section 69B is confirmed - against revenue.
Unexplained Cash - Held that:- The cash seized in the course of search at the residence of the assessee is out of cash balance available in the books of account of M/s. Everbright Exports, which is the proprietory concern of the assessee. The Everbright Export had been regularly assessed before the Assessing Officer at Vellore. It is located at Satyamangalam on the Chennai-Bangalore Highway and in the premises of this concern, books were maintained and were also subjected to audit under section 44AB. This concern exists right from 2004 and it is not an afterthought of the assessee later to the date of search. Therefore, CIT (A) deleted the addition made u/s 69 - against revenue.
De novo assessment made under section 153(A) - Held that:- As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search
Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee.
Deduction under section 10B - Delay in filing returns - Held that:- When the assessee is making a claim for the first time before the CIT(A) it is not proper and correct in rejecting the assessee’s claim on the ground that there is no claim made in the return of income when such claim is otherwise allowable - CIT(A) should have entertained the claim of the assessee on merits without rejecting the additional ground stating that no claim is made in the returns.
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2012 (12) TMI 637
Violation of sec. 13(1)(c) - non application of Funds of Trust for Charitable purposes - diversion of funds - CIT(A) allowed the claim - Held that:- The claim of purchase of computers and equipments by the assessee could not have been accepted on its face value when it was not reflected in the books of accounts. Even the balance sheet forming part of the final accounts audited by a Chartered Accountant does not show the computers and other equipments as asset. A lapse of such magnitude cannot be wished away light heartedly as an oversight of the accountant.
More so, when the assessee claims itself to be a trust promoted by the Government. The invoices raised by M/s Silicon Graphics (India) Pvt. Ltd., towards sale of computers and equipments were also in the name of Govt., of AP, Disaster Management Unit, Planning Deptt., and not in the name of assessee. These facts have not at all been examined by the CIT (A) while deciding the appeal. As decided in CIT vs. Durga Prasad More (1971 (8) TMI 17 - SUPREME COURT) that though apparent must be considered to be real until it is proved to be otherwise, a party who relies on a recital in a deed has to establish the trust of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals made in the document. As the assessee has failed to prove that application of fund by the trust was for charitable purpose appeal of revenue allowed.
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2012 (12) TMI 636
Rejection of books of account - income estimation @ 8% on gross receipts - Sub-contract work - Held that:- AO did not have any incriminating material before him which was found as a result of search on the basis of which he could have come to a conclusion that the books of accounts maintained by the assessee were not correct. In the absence of any incriminating material, the AO is not justified in rejecting the books of account and estimate income in proceedings initiated u/s 153A, when regular assessment has been completed accepting the books of accounts.
Unexplained Investment - Held that:- On perusal of materials available on record, it is seen that the assessee has explained that the amount of Rs.55 lakhs given as advance to the prospective seller of the land was pooled together from different persons by his father and the entire amount was paid by his father i.e. Rs. 25 lakhs by cheque from the joint account held with the assessee and balance amount of Rs.30 lakhs by way of cash by his father to the prospective seller Sri Saibabaiah. It is also a fact available on record that the receipt was executed by Sri Saibabaiah in the name of the assessee’s father, Sri N. Ramanaa Reddy. However, the source of this amount of Rs.55 lakhs stated to have been pooled together from different persons, have not been properly enquired into. No material has been brought on record with regard to the fact that the persons who stated to have advanced the amounts were having sufficient source of income or not as this fact has neither been examined by the AO nor the CIT (A) it is proper to restore the matter back to the file of AO who shall make proper enquiry to find out the source of Rs.55 lakhs given as advance for purchase of the land.
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2012 (12) TMI 635
Cost of generator and transformer - miscellaneous structures v/s electrical equipment – CIT(A) deleted the addition - Held that:- The CBDT vide Instruction No. 3 of 2011 dated 9.2.2011 has revised the monitory limit for filing the appeals by the Department before the ITAT as raised to Rs. 3 lakhs & tax effect in the impugned present appeal is less than Rs. 3 lakhs the appeal filed by the revenue is not maintainable - as decided in Madhukar K. Inamdar HUF (2009 (7) TMI 145 - BOMBAY HIGH COURT) Circular issued by the CBDT revising the monitory limit would be applicable to the pending cases - against revenue.
Error in Valuation Report – rejecting the actual cost of construction of the club building - Held that:- Since the CIT(A) has not adjudicated upon the alternate submissions made by the assessee and also since the assessee has correctly raised the objection that in case of error in the valuation report it is for the valuation cell to rectify the error after giving due notice to the assessee instead of the Assessing Officer stating that it is a typographical error - set aside the issue to the file of the AO to adjudicate upon the alternate ground and also call for a corrected report from the valuation cell
Discount for rate difference of 15% from the CPWD rates allowed.
Disallowance of irrecoverable advances/investments written off from the books of account – Held that:- The assessee is in the real estate/construction and in the hotel business & the amount towards inter-corporate deposits/investments made with the group company M/s Prajay Financial Services are in the nature of capital investments made by the assessee also confirmed in the case Hasimara Industries Ltd. Vs. CIT [1998 (5) TMI 7 - SUPREME COURT] and the decision of Greaves Ltd. Vs. CIT and another (2001 (3) TMI 33 - BOMBAY HIGH COURT) - thus the deposits pertains to capital asset and non-recovery of any amount therefrom constitutes capital loss and the same cannot be allowed as deduction of bad debts - against assessee
Disallowance of claim of deduction u/s 80IB – Held that:- Following the decision of court in case of Dr. Mrs. Renuka Datla Vs. CIT [1999 (8) TMI 46 - ANDHRA PRADESH HIGH COURT] assessee was not independently engaged in developing and constructing housing project within the meaning of sub-section (10) of 80IB – Nowhere in the first approval dated 01/09/1999 and final approval dated 22/03/2002 there is any reference to any housing project developed by the assessee company - Order of CIT(A) in disallowance confirmed - appeal of the assessee dismissed.
Irrecoverable advances written off from the books of account – Disallowance - Held that:- As the principle amount was never offered to tax and the assessee did not satisfy the preconditions of section 36(2) disallowance of claim warranted - as the investments made by the assessee in inter corporate deposits out of its surplus share capital were fully in the nature of capital investments writing off of such investments do constitute a capital loss and hence, is not deductible u/s 28 – against assessee.
Levy of interest u/s 234B - Held that:- Since charging of interest u/s 234B is consequential in nature AO is directed accordingly - appeal of the assessee is dismissed.
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2012 (12) TMI 634
Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Considering the judgment of ACIT v. Inautix Technologies India (P) Ltd [2012 (12) TMI 615 - ITAT CHENNAI] Fluctuation is part of export turnover for the purpose of computation of deduction under section 10A.
Engineering and design charges - Held that:- As per CBDT notification No. 890(E) dated 26.09.2000 specifying that engineering and design services are information technology enabled products entitled to be treated as software and when transmitted to foreign countries, they have to be treated as exports for the purpose of deduction under section 10A – in favour of assessee.
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2012 (12) TMI 633
Trade advance written off - CIT(A) deleted the addition - Held that:- Trade advance in question was given during the course of business and the assessee has written-off the same in its books of account during the year. Since the assessee has filed evidence before the Revenue authorities to demonstrated the fact that these advances have, in fact, become bad,consequently, it was decided not to interfere with the findings of the Commissioner (Appeals) and hereby uphold the same - against revenue.
As decided in CIT v. CIT v. WoodWard Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] the expression “any expenditure” used in section 37 is to cover both “expenses incurred”as well as an amount,which is really a “loss”,even though such amount has not gone out from the pocket of the assessee the advance written off by the assessee as irrecoverable is allowable as business loss under section 28 of the Act - Order of the Commissioner of Income Tax (Appeals)in allowing the claim of the assessee is sustained - against revenue
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2012 (12) TMI 632
Jurisdiction power u/s 263 by CIT(A) - interest on electricity duties, water charges and electricity duty for the AY 2006-07 & for the AY 2007-08 also considered the issue with respect to amounts charged to accounts pending finalization of the payment of salary/wages - Held that:- The issue being subjudice the assessee being governed by the Accounting Standard under the Companies Act was burdened to provide for the accrued liability when the assessee has pointed out that there was no contingent liability provided in the impugned AYs.
Provision for the pay revision is provided on the basis of labourers executing the work and labour Union in the Industrial Sectors. The enhanced pay bill which will be assigned to them later can be provided for by the assessee in view of it not being contingent but accrued on the basis of services rendered by the recipients. The change or credit arisen out of a contingency which at the time of occurrence could not be estimated correctly shall not construe the correction or error and change of asset and as such, such item shall not be treated as disallowable u/s.37. The Revenue cannot take both the stands for declining to allow the prior period expenses in the impugned AYs nor consider crystallization of the liabilities provided in the impugned AYs for the AYs just because pay revision occurs every five years applicable to the respective years in accordance with the price index. Therefore, the considered view that the issues raised by the CIT have either dealt with by us in assessee’s own case or the AO in the impugned AYs against which no loss to the revenue has been pointed out on a view of the CIT alone can be considered for assuming jurisdiction u/s.263. Mere change of opinion by the CIT has to have basis of an error having been committed coupled with the fact that it was prejudicial to the interest of revenue - the orders of the CIT passed u/s.263 quashed for the impugned AYs under consideration - in favour of assessee.
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2012 (12) TMI 631
Denial of deduction u/s 80IB – Held that:- Claim of deduction u/s.80IB would be available only on the basis of obtaining the completion certificate from the local authorities in view of the fact when the housing project is approved by the local authorities on or after 1.4.2004 was to be completed within four years irrespective of the claim of deduction either on the basis of project completion method or on the basis of percentage completion method - as assessee has agreed to the proposition above AO is directed to allow the deduction as and when the certificate from the local authority for the project completion has been obtained by assessee - appeal allowed for statistical purposes.
Application of AS-7 vs. AS-9 - Held that:- The projects, which completed as and when approval is sought has to be rendered income claiming deduction u/s.80IB which computation cannot be faulted. This indicates that the work-in-progress held as an asset by the assessee has already reduced the income for that year on account of project remaining incomplete. AO sought to tax @6.84% on Rs.3.82 Crores does not bear any correctness to the fact that the income as arisen to the impugned Assessment Year on incomplete projects when the majority of the projects were sold for more than the very turnover for the impugned Assessment Year. CIT(A) also confined himself to adoption of AS-7 as noted by AO without actually addressing the issue in the practical aspects of the business conducted, advance received, income on percentage on the advance to be considered and loss but not the least that the work-in-progress is a closing stock when the expenses have been allowed cannot be reduced on a percentage basis to find profit therein - Finding no merit in the bringing to tax the percentage of work-in-progress,thus direct deletion of the addition.
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2012 (12) TMI 630
Interest and Service charges incurred for acquisition of share - Capital or Revenue – Held that:- The assessee is a limited Company claiming income from capital gains of ₹ 8,40,047 when the AO tried to bring down the cost of acquisition @ ₹ 67 per share to ₹ 62 per share was to be deriving income of ₹ 11,71,834 under the head “capital gains” when the difference being ₹ 3,31,787 was brought to tax by the AO was purely an imaginary figure having no basis whatsoever either in the books of account for the purpose of computation of capital gains nor for the purpose of disallowance of expenditure on the purported earning of dividend income under the provisions of Section 14A r.w.r. 8DD of the I.T.Rules - the expenditure incurred through the Portfolio Manager to acquire share, is a capital expenditure and attributable to cost of acquisition of share. In view of the matter, at no point of time can it be said that the assessee was to make an extra income of ₹ 3,31,787 which was a total imaginary figure brought to tax by the AO.
When two imaginary figures could overlap for disallowance to taxation and it was only the case of the AO to disallow expenditure which has been legitimately claimed capitalised by the assessee which stands otherwise disclosed in the P & L account could not become a hypothetical figure on assumption and presumption when computation of Capital Gains has to necessarily include cost of acquisition also. This makes the addition fit for deletion - appeal of the assessee is allowed.
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2012 (12) TMI 629
Penalty u/s 271AAA - Undisclosed Income – Enhancement in value of House Constructed and Trucks purchased - Held that:- No definition could be given to the “specified manner” insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. As assessee has made disclosure for the respective amounts but failed to specify the manner in which such income had been derived a there is no prescribed method to indicate the manner in which income was generated when the definition of “undisclosed income” has been defined in the Act itself when no income of the specified previous year represented “either wholly or partly” which onus lay upon the assessee stood discharged -
As decided in DCIT Versus Pioneer Marbles & Interiors Pvt Ltd [2012 (2) TMI 261 - ITAT, KOLKATA] wherein entire tax and interest has been duly paid well within the time limit for payment of notice of demand u/s 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - Levy of penalty u/s.271AAA in the instant cases are not justified - penalty so levied cancelled - in favour of assessee.
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2012 (12) TMI 628
Jurisdiction power u/s 263 by CIT(A) - Stock Shortages - Held that:- The assessee before us demonstrated that the purchases have been accepted by the AO and the amount was shown in the closing stock being held by the Government authorities on the basis of billing by the assessee when the sale price remains determined by them only - Thus assessee on demonstrating that the issues were dealt with by the AO in his order u/s.143(3) when he took note of the survey proceedings on 17.1.2008 for the impugned AY when the financial year closed on 31.3.2008. The gross profit is estimated at the time of survey which gross profit was on the basis of sales up to 31.3.2008. Moreover, it has been submitted that the valuation becomes erroneous to the extent that the purchases having been accepted, sales having been accepted and closing stock having been accepted, by no stretch of imagination can the amount be brought to tax being the stock difference in the middle of the year can be re-verified on assuming jurisdiction u/s.263 would be an exercise in futility. CIT(A) has again directed to verify the assuming of estimating of gross profit rate which could neither be an error or loss to the Revenue being prejudicial to the interest of Revenue, thus this issue could not be dealt with by the CIT u/s.263.
Unexplained investment in construction of factory building - Held that:- Valuation here again on assumption or presumption was predominantly in the mind of the learned CIT. After verifying or observing the error, the learned CIT deleted the issue for reconsideration rightly noted that the revisionary power cannot be extended to the issue - no direction to the Assessing Officer by holding a different view alone on which revisionary power can be extended to.
Disallowance of expenses - Held that:- Unable to satisfy with the contention of the CIT-DR that details of various accounts were to be called for when the details of unsecured loans, sundry debtors, purchases etc., which are grossly interconnected to the extent that the CIT himself does not know as to what would be done on calling the details thereof. The CIT was to assume jurisdiction u/s.263 when on the basis of assessment record he has found errors committed by the Assessing Officer prejudicial to the interest of Revenue. He cannot ask the Assessing Officer for roving enquiry based on a view which has also not been specified by him in his order.
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2012 (12) TMI 627
Development fees and Corpus fund - Whether a part of the admission fees - Held that:- It was part of the admission fee and needed no separate treatment. Hence it is added to the income expenditure statement as income. The development fees received later on was from students was to be identified by the assessee over and above the corpus funds when the students were made aware that they are contributing the amount apart from development fees, tuition fees, bus fees and other annual charges. The assessee has submitted that the development fees was received to contribute to the building when the committee seeking such funds made it voluntary was therefore directly held as a liability to identify with the general fund when the major portion was from the students and the remaining was contributed by the managing committee - in favour of assessee.
Corpus fund – whether Gift of land made by the Mg. trustee to the trust itself would not be assessable as unexplained investment - Corpus fund is the property of the Trust. The donors contributed the donations therefore could not form part of the income & expenditure account as prescribed by law. Assessing Officer misdirected himself to hold a view that Vidya Jyoti Trust was not the school which was seeking corpus funds or voluntary contribution in the form of building or general fund when all the property of the Trust has been created for the purpose it was registered u/s.12AA. Therefore, the contention of the CIT-DR is on the effort to identify the trust Vidya Jyoti Trust as different from the educational institution it runs for which purpose the CIT granted registration. The assessee has stated that the two donors corrected themselves to submit that it was school to which they applied for the corpus fund therefore negates the CIT(A) finding that the amounts be confirmed u/s.68, was declared as fund by the Trust who runs the School - Cross objection by the assessee-Respondent is bound to be allowed and appeal of the Revenue is dismissed.
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2012 (12) TMI 626
Disallowance on account of bogus trade creditors - Assessee submit computer generated ledger copy, copy of bank statement of the assessee in which payments made and copy of sales tax assessment order of creditor by Assistant Commissioner (CT) FAC, for A.Y. 2006-07 – Held that:- As the AO has accepted the purchases effected from this party and the trading results have not been disturbed and addition has been made on the closing balance as on 31.3.2007. The AO has not found these transactions to be non-genuine with the help of evidence. The assessee produced the copies of bills, bank statement and the sales tax order. Therefore, respectfully following the order of the Tribunal in assessee’s own case and deleting the addition. Appeal decides in favour of assessee
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2012 (12) TMI 625
Exemption u/s 10A & 10B - Development of Software - disallowance as said product was not manufactured at the premises of the assessee - CIT(A) allowed the claim - Held that:- Outsourcing is part and parcel of the manufacturing activity and helpful in producing product or article or thing. Assessee company is considered to have actually carried on the business of IT enable services being maintenance of website of the foreign client Technics, INC, USA through certain consultants on contract basis under the direct supervision and control of the assessee company in India land also in coordination with the personnel of the foreign client. The direct contract of the consultants engaged by the Indian company with foreign clients could not lead to the conclusion that such clients engaged by the Indian company are hired by the foreign company or they were under the contractual obligation to perform specified works directed by the foreign client.
For all practical purposes the Indian company was under contractual obligation to the foreign client. And it was at freedom to get the export order executed by its own employees or by outsourcing the work to certain consultants or third parties. Hence the actual export of computer software programme of the maintenance of the website for the foreign clients cannot be considered to be bogus or fictitious, if the Assessing officer had any doubt regarding the possible collusion between the foreign client and India company for any over estimation of export proceeds or understating of Indian expenses necessary incriminating evidence should have been brought on record to prove such points. On the contrary a reference made by the AO to the transfer pricing authority at Hyderabad u/s. 92 of the Income Tax Act, 1961, it has been officially held by the concerned authority that the export proceeds shown by the assessee company for IT enabled services rendered comprising of wave maintenance for the foreign client could be taken as a correct reflection of the exports proceeds - appeal by revenue is dismissed.
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2012 (12) TMI 624
Disallowance of traveling and conveyance expenditure – Held that:- Even though the assessee has explained before the CIT(A) that the expenses are meant for the purpose of business and are properly vouched and properly spent, accounted and paid by the company, the reasons elaborating the deficiencies in the vouchers and bills produced by the assessee, pointed out by the AO in the impugned assessment orders cannot be totally ignored - the disallowance worked out applying a straight rate 25% is excessive and unreasonable, thus a token disallowance of Rs.1.5 lakhs as against disallowance of Rs.12,28,516 made by the AO for AY 2004-05 and Rs.50,000 as against Rs.3,85,150 for AY 2005-06, would meet the ends of justice. Revenue’s grounds partly allowed.
Professional services rendered outside India - Non deduction of TDS - Held that:- It is not the case of the Revenue that the payments were made form any office situated in India & also not on record that the foreign agents have any permanent establishment in India in that situation, the payments made by the branch office or the assessee situated outside India to agents outside the country may not fall within the provisions of sec.195(1) - against revenue.
Subsidy receipt - revenue v/s capital - Held that:- Going through the STPI Scheme the issue whether the subsidy received by the assessee in the form of duty waiver on the import of capital goods, casting export obligations on the assessee, has to be re-examined in the light of the STPI Scheme as a whole, a copy of which is now filed before us. AO needs to conduct purpose test of the said subsidy on the one hand, in the light of the cited judgments, and the details of actual capital asset, in respect of which the assessee enjoyed the waiver of the duty on the other, before arriving at proper and legally sustainable decision in the matter. AO should also examine the applicability of the provisions of S.43(1) with its relevant Explanations before reaching any conclusions on the issue by passing a speaking order - thus restore the matter to the file AO for fresh consideration - in favour of assessee by way of remand.
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2012 (12) TMI 623
Estimation of profit of manufacturing division - Held that:- Action of the CIT(A) in enhancing percentage of profit from civil contract works at 8% as against 5% estimated by the assessing officer and accepted by the assessee without giving any opportunity to the assessee is against the provisions of law and has to be rectified - store the matter to his file for readjudicating on this issue.
Disallowance of expenditure - Non deduction of TDS - Held that:- Issue restored to file of CIT(A) to re-examine in accordance with law and after giving reasonable opportunity of hearing to the assessee whether expenditure is payable as on 31st March of every year have already been paid during the previous year without deducting tax at source and accordingly redetermine the amount of expenditure - appeal decided in favour of assessee by way of remand.
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2012 (12) TMI 615
Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Held that:- Section 10A prescribes a formula for the arithmetic computation of deduction provides for the deduction in respect of profits derived by the undertaking from the export of articles or things or computer software - the Explanation to section 10A has defined the term export turnover refers to amount of sale proceeds received in foreign exchange. It also defines what are the items that are to be excluded from such definition. It is important to highlight that section 10A does not provide for exclusion of any item, including foreign exchange gain for the purpose of computing the eligible profits
The Statement of Work & Invoice as submitted by assessee are such pieces of evidence which support her contention that the assessee-company is engaged in the development of software. To crown this fact, the evidence in the form of Transfer Pricing Order for assessment year 2002-03 dated 14.12.2005, in which the assessee-company has been treated as doing ‘software development’ cannot be ignored. Therefore, the exclusion of these expenses from export turnover is not correct. The decision of ITAT Chennai Special Bench in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] also supports the contention - in favour of assessee.
If the expenses are excluded from the export turnover these should also be excluded from the total turnover as decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] - there has to be parity between the export turnover and total turnover.
Interest u/s 234B - Held that:- Direct the Assessing Officer to recalculate the interest consequent upon the sustained addition.
Inclusion of refunds from Central Sales Tax(CST) in eligible profits for deduction u/s 10A - Held that:- The assessee is entitled to a refund of the CST from the STPI Authorities on the basis of a ‘periodic statement’ detailing the indigenous purchases made. Thus, such a refund so generated has a direct nexus and connectivity with the eligible undertaking making it entitled for the deduction u/s 10A. In this regard, the decision rendered in the case of Dy. CIT vs Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C] also supports the above view - in favour of the assessee
Provision of workstations - assessee has treated as loss from other sources - Held that:- Income from leasing activity cannot be considered as part of total turnover because this activity by itself cannot be considered as part of assessee’s business activity in the regular course. Therefore, no adjustment to the profits of eligible undertaking or to the total turnover is necessitated for the purpose of computing deduction u/s 10A - in favour of the assessee.
Exclusion of expenditure incurred in foreign currency from export turnover for computing deduction u/s 10A - Held that:- The exclusion effected by the AO is not in accordance with the provisions of the Statute. The definition of ‘export turnover’ requires expenses included in export turnover to be excluded. Going through assessee’s paper book it can be concluded that the assessee is engaged in the business of ‘software development’ and not in providing ‘technical services’. The decision of ITAT, Special Bench, Chennai, in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] is directly on the issue and supports the claim of the assessee.
Unyielding of revenue from export turnover - Held that:- The assessee has been consistently following Accounting Standard 9 issued by the ICAI and in case the action of the AO is endorsed the figure of total turnover will get reduced to a figure lower that the export turnover. Therefore, the ingredients that go to make up the export turnover should also be the same for the total turnover.
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2012 (12) TMI 611
Reassessment - Can the assessing officer, to reopen an assessment, entertain a “reason to believe” which is contrary to the statute? - Exemption u/s 10(21) - Accumulation of income u/s 11(2) - - held that:- Two important conditions for the applicability of section 147 are (a) income chargeable to tax must have escaped assessment and (b) assessing officer must have reason to believe so. When section 11(3) treats the accumulated income of the past year of the petitioner as income of the assessment year 2001-02, there can be no question of any income escaping assessment in the past assessment years i.e. the assessment years 1998-99 to 2000-01. It follows that the assessing officer cannot entertain any reason to believe that income chargeable to tax for those years had escaped assessment.
Even assuming that there was breach of any statutory conditions under which the exemption was granted to the petitioner under section 10(21), the entire accumulated income of the earlier years cannot be taxed in those years by reopening the assessments for those years. Section 11(3), which is made applicable to section 10(21), itself provides that the entire accumulated income shall be deemed to be the income of the assessee of the previous year in which the breach of the conditions or the contingency occurs. The statute having thus fixed the assessment year in which the entire past accumulated income falls to be taxed, it is impermissible in law for the assessing officer to entertain a reason to believe that income chargeable to tax for the assessment years 1998-99 to 2000-01 had escaped assessment.
Notice issued u/s 148 quashed. - Decided in favor of assessee.
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2012 (12) TMI 610
Sale of land - whether a land is agricultural land or not - CIT(A) assumed that once the land fall within the limits of the Hyderabad Airport Development Authority (HADA) constituted under A.P. Urban Areas (Development) Act it is a 'municipality' under section 2(14)(iii) of the Income Tax Act, 1961. - the land in question is classified in the Revenue records as agricultural land - assessee has not applied for conversion of this agricultural land for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes.
Held that:- HADA was formed by the notification under Urban Area (Development) Act, 1975 with a view to promoting and securing planned development of the area in and around the proposed international Airport at Shamshabad. - HADA is basically and essentially a creation of the Act of State Legislature consisting of persons appointed by the State Government on salary basis. The Board Members are not elected by the people and there is no element of people choice being represented in any manner in the constitution of the Board. The Board functions strictly under the supervision and control of the State Government and does not hold or possess a "local fund". Being so, HADA cannot be called as a local authority. - HADA cannot be treated as a 'Municipality' and as such the agricultural lands situated within the jurisdiction of HADA do not constitute capital asset. - Decision in the case of Commissioner of Income-tax v. Murali Lodge [1991 (6) TMI 38 - KERALA HIGH COURT] followed.
Mere inclusion of land in the special zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into non-agricultural land at the relevant point of time when the land was sold by the assessee.
The agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee.
When the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset.
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2012 (12) TMI 609
Reassessment - "fees for technical services" within the meaning of Section 9(1)(vii) - interest-free loan - interest under Section 9(1)(b) of the Act as well as under Article 11 of the Agreement for the Avoidance of Double Taxation entered into between India and USA. - business connection - held that:- where the existence of a business connection was held to depend on the facts of each case, we are of the view that there was prima facie material in the possession of the Assessing Officer to form a tentative belief that Section 9(1)(i) was attracted. This reason by itself constituted a relevant ground to reopen the petitioner's assessments.
The assessing officer was justified in taking the prima facie view that CISPL constituted the petitioner's permanent establishment in India. - So far as the assessability of the interest under Section 9(1)(v) is concerned it would appear that clause (b) of Section 9(1)(v) is applicable.
Writ petition against the issuance of notice u/s 148 dismissed with a cost of Rs. 75,000 - Decided against the assessee.
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