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Income Tax - Case Laws
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2012 (9) TMI 934 - ITAT CHENNAI
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... ... ..... m of depreciation allowed thereafter. However, after granting such depreciation, if the income goes below the returned income, then the A.O. shall assess the income at the returned level itself. With these directions, the appeals are disposed of. 8. Though the learned A.R. placed reliance on a decision of co-ordinate Bench of this Tribunal in the case of ACIT v. M/s Standard Roads in I.T.A. No. 564/Mds/09, which was later confirmed by the jurisdictional High Court on Revenue’s appeal, we are of the opinion that this decision will have no application on facts here for the reason that there the assessee was a sub-contractor and a finding was given by the Tribunal considering the fact that assessee was a sub-contractor whose profit rates were generally lower than the principal contractor. 9. In the result, both the appeals filed by the Revenue are allowed for statistical purposes. The order was pronounced in the Court on Thursday, the sixth of September, 2012, at Chennai.
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2012 (9) TMI 929 - ITAT PUNE
Income derived from the letting out of premises of the 'Cyber City' - whether to be assessed as business income or House Property - Held that:- assessee has provided various complex integrated services as mentioned in Schedule-II to the lease agreement with the I.T. Company. The services are vast and the amenities provided were in the nature of plant and machinery as contended by the assessee and it has been established by the clauses of the agreements that the cost of providing these services was also included in the lease rent of ₹ 14.30 per sq.ft. The assessee also clarified that cost involved in the services provided to the particular company i.e., exl Services.com was ₹ 2.83 crores which was almost 40% of the land and building cost of that tower. By no stretch of imagination such extensive and specialized services which could only be utilised by the IT/Software/BPOs businesses to be located in the I.T. Park could be treated as forming part of income from house property. It is certainly a constitution of organised structure for carrying out business activities. Section 22 provides only for rental income out of building or land appurtenant thereto, whereas in the case before us, complex and varied services provided and the huge investment therein were in the nature of plant and machinery which could be included within the expression building or land appurtenant thereto. Thus, the assessee has conducted systematic activity to earn profit and accordingly income was to be assessed as income from business. In view of the submissions made on behalf of the assessee, and analysis of various clauses and Schedule-II of the agreement entered with the I.T. company, CIT(A) was justified in holding that in assessee’s case the said income was to be assessed as business income. This reasoned factual finding need no interference from our side. - Decided against revenue.
Claim of deduction u/s.80IB(10) in respect of disallowance made u/s. 40(a)(ia)/43B - CIT(A) allowed claim - Held that:- We are not inclined to interfere in the finding of the CIT(A) on the issue. The CIT(A) observed that turnover was from the same source in respect of the claim u/s.80IB(10). Therefore, it was entitled for deduction after including the statutory disallowance i.e., on correspondingly enhanced income. Assessee was held entitled for deduction u/s.80IB(10) in case there was enhanced income on account of statutory disallowance u/s.43B, 40(a)(ia) and 36(1)(va), etc. In the instant case nature of receipts on credit side of Profit and Loss Account for eligible housing projects u/s.80IB(10) was the same and disallowance of expenditure on the debit side would only result into enhancement of net profit. Accordingly, the assessee’s claim was liable to be allowed in view of the ratio of the decisions cited (supra). As stated above, assessee is not eligible for deduction u/s.80IB(10) pertaining to its Cosmos project. The Assessing Officer has held in assessment order that sum of claim u/s. 80IB(10) was allowable to assessee for its Heliconia project. Thus, if any disallowance u/s.43B, 40(a)(ia) or 36(10(va) etc., relate to Heliconia project that only can be considered for claim u/s.80IB(10) and corresponding enhanced income. This reasoned finding of the CIT(A) on the issue needs no interference from our side. - Decided against revenue.
Deduction u/s.80IB(10) in respect of the Cosmos Project - AO denied the deduction on the ground that the built up area of the units in building Prime included in the said project exceeded 1500 sq.ft. - Held that:- CIT(A) was not justified in holding that flats in building Prime had built up area exceeding 1500 sq.ft., the entire Cosmos Project did not qualify for deduction u/s.80IB(10) in respect of its profits. There is nothing on record to suggest that assessee has claimed deduction in respect of building Prime wherein built up area of its units is exceeding 1500 sq.ft. In fact there were 25 buildings in Cosmos Project out of which except building Prime, all other buildings satisfy the conditions of built up area limit of 1500 sq.ft. Therefore, deduction u/s.80IB(10) should be allowed in respect of profit from such buildings. This view is fortified by the decisions in Vandana Properties (supra) and Aditya Developers (supra) discussed above. As regards two flats combined together, the allegation is that some units were combined into one, so deduction u/s.80IB(10) should not be allowed. In this regard, assessee’s stand has been that assessee conceived the flats as independent units and these were constructed as independent units. There is nothing on record to suggest that assessee himself has joined the adjacent flats. In this situation, assessee should not suffer for its no fault if purchaser join the adjoining flats. Thus we hold that assessee is entitled for deduction u/s.80IB(10) in respect of entire profits computed after making additions/disallowances in respect of Cosmos Project consisting of 24 buildings excluding Prime building. See Haware Constructions Pvt. Ltd. (2011 (8) TMI 1080 - ITAT MUMBAI), Emgeen Holdings P. Ltd. (2011 (7) TMI 199 - ITAT MUMBAI) and Arcade Bhoomi Enterprises [2013 (7) TMI 210 - ITAT MUMBAI]. Decided in favour of assessee.
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2012 (9) TMI 924 - ITAT BANGALORE
Extension of stay on collection of outstanding demand - Held that:- We are of the opinion that the stay on collection of outstanding demand be extended for a further period of 180 days from 7.9.2012 or till the disposal of appeal whichever is earlier. The appeal is posted for hearing on 29th October, 2012.
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2012 (9) TMI 922 - DELHI HIGH COURT
Addition being accrued interest on advances - ITAT deleted the addition - Held that:- The Tribunal endorsed the finding of the CIT (Appeals) relying upon its decision for the assessment year 2004-2005. The Tribunal’s finding would show that it had also relied upon the decision of the Supreme Court in Fuerst Day Lawson ltd. Vs. Jindal Exports Ltd., (2001 (5) TMI 881 - SUPREME COURT OF INDIA).
This Court also noticed that having regard to the terms of the repealed Arbitration Act, 1940, an award could not be enforceable. The same was the case with the foreign award; the Court had to first adjudicate as to the enforceability.
In these circumstances, the assessee’s right to interest was a mere claim, till the date of the judgment of the Court dated 4th December, 2006. In other words, the right to interest crystallized after the judgment of the Court. Till then, it was inchoate. For this reason, the Tribunal’s finding cannot be faulted with. Decided against revenue.
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2012 (9) TMI 914 - SUPREME COURT
Entitlement to deducted under Section 43-B - Held that:- There is not dispute that the assessee has paid tax which was calculated on estimation under the Karnataka Sales Tax Act, 1957. In the circumstances, Section 43B of the Income Tax Act, 1961, squarely applies. - Decided in favour of assessee.
Club membership fee for employees - disallowance u/s 37 - Held that:- A series of judgements have been passed by High Courts holding that club membership fees for employees incurred by the assessee is business expense under Section 37 of the Income Tax Act, 1961. We also find that none of the decisions have been challenged in this Court. Even otherwise, we are of the view that it is a pure business expense.- Decided in favour of assessee.
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2012 (9) TMI 913 - ITAT MUMBAI
Disallowance u/s 40(a)(ia) - VSAT, leaseline and transaction charges - Held that:- there is no bifurcation of the amounts of VSAT, lease line and transaction charges. In the case of CIT vs. Angel Broking Ltd (2014 (5) TMI 584 - BOMBAY HIGH COURT), the Hon'ble High Court held that VSAT and lease line charges paid to the Stock Exchange are not paid in consideration of technical services. Therefore, there is no need for deducting tax. The same principles were reiterated by the Hon'ble Bombay High Court in the case of CIT vs. Stock and Bond Trading Company in [2011 (10) TMI 172 - BOMBAY HIGH COURT] wherein VSAT charges, NSE lease line charges and transaction charges were considered and held against the Revenue following the decision in the case of DCIT vs. Angel Broking Ltd (2009 (12) TMI 498 - ITAT MUMBAI). The same principles were reiterated in the case of CIT vs. Kotak Securities Ltd [2011 (10) TMI 24 - Bombay High Court]. To the extent of VSAT, lease line charges the Revenue did not even contest. Even though the Hon'ble Court held that the transaction charges paid to the Stock Exchange constitute fees for technical services on bonafide belief it was considered that the disallowance cannot be made in that year as the Revenue did not proceed on the footing that assessee is not liable to deduct the tax at source after introduction of the provisions. Since the CIT (A) has only given partial relief of Rs..2,50,000/-, after considering the ITAT orders in the cases of Kotak Securities ltd [2008 (8) TMI 592 - ITAT MUMBAI] and Angel Broking Ltd [2009 (12) TMI 498 - ITAT MUMBAI], we are of the opinion that there is no need to disturb the order of the CIT (A). - Decided against Revenue.
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2012 (9) TMI 848 - SUPREME COURT
Valuation of closing stock of incentive sugar (free sugar) - levy price v/s cost price - Held that:- As it is the case of the assessee, that following the judgment of this Court in Ponni Sugars & Chemicals Ltd.(2008 (9) TMI 14 - SUPREME COURT ) the closing stock of incentive sugar should be allowed to be valued at levy price, which on facts, is found to be less than the cost of manufacture of sugar (cost price). We find merit in this contention. In Ponni Sugars & Chemicals Ltd. (supra), this Court, on examination of the Scheme, held that, the excess realization was a capital receipt, not liable to be taxed and in view of the said judgment, thus the assessee is right in valuing the closing stock at levy price.
The stock valuation of incentive sugar has a direct impact on the manufacturer's revenue or business profits. If to accept the case of the Department that the excess amount realized by the manufacturer(s) over the levy price was a revenue receipt taxable under the Act then the very purpose of the Incentive Scheme formulated by Sampat Committee would have been defeated. One cannot have a stock valuation which converts a capital receipt into revenue income - in favour of assessee.
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2012 (9) TMI 847 - SUPREME COURT
Entitlement to benefit of Section 80P(2)(a)(iii) - marketing of sugar - Held that:- As decided in CIT vs. Oracle Software India Limited [2010 (1) TMI 9 - SUPREME COURT OF INDIA] if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word `manufacture'.
As the above test has to be applied and adjudicated on case to case basis. It depends on the type of product which ultimately emerges from a given operation. As this aspect has not been examined by the Courts the case is to be remitted back to the CIT(A) to re-examine the matter.
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2012 (9) TMI 846 - DELHI HIGH COURT
Penalty u/s 271D - Disallowance of share application amounts in cash - ITAT deleted the levy - Held that:- As decided in CIT, West Bengal I Versus Vegetable Products Limited [1973 (1) TMI 1 - SUPREME COURT] where two High Courts had confirmed a view acceptable to the assessee where as two other High Courts had taken a diametrically opposite view, interpretation which is favourable to the assessee, that cannot be considered as an unacceptable or untenable one, at least for purposes of penalty.
Thus it is held that there is no infirmity in the order of the Tribunal since there were two possible views – one directly in favour of the assessee is need to be taken as per COMMISSIONER OF INCOME-TAX Versus RUGMINI RAM RAGAV SPINNERS P. LTD [2007 (7) TMI 237 - MADRAS HIGH COURT] that the share application money was not deposit or loan under the provisions of Section 269T and therefore, the penalty u/s 271D was liable to be deleted as Tribunal rightly held that cash payments pertains to refund of share application money and not repayment of deposit or loan - in favour of assessee.
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2012 (9) TMI 845 - DELHI HIGH COURT
Penalty u/s 271D - non comply with the provisions of Section 269SS - ITAT deleted the levy - Held that:- The Revenue is not correct in his contention that the basis of the decision of the Tribunal is untenable. The Tribunal has not rested its decision on the only circumstance that it is the business of the assessee to collect deposits and, therefore, it was entitled to collect them in cash even if it involves violation of Section 269SS, that is not the substratum of the decision.
The circumstances which were taken note of were that the depositors came predominantly from rural areas where there was either no proper banking facilities or such facilities were inadequate, that the deposits were basically saving schemes involving small amounts of daily or weekly savings, that there were logistical problems and fear of cumbersome procedure involved in the opening of the bank accounts and that contribution of small amounts were made as savings, that there was evidence in the shape of correspondence to show that some banks were reluctant to allow the agents of the assessee to open bank accounts for various reasons and so on and so forth - As the violation of Section 269SS ranged from just 1.1% to 6.14% for the years under appeal which was very low considering the total amounts of deposits collected. As no penalty proceedings were initiated for the intervening assessment years namely 1994-95 to 1998-99 and for the assessment years subsequent to the assessment year 2001-02.Thus it was not correct to state that the Tribunal based its decision on the only ground that Section 269SS cannot be applied to the assessee whose business itself was the collection of deposits - in favour of assessee.
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2012 (9) TMI 844 - DELHI HIGH COURT
Remand matter to CIT(A) by Tribunal - assessment of fringe benefit - Held that:- As at this stage it would be essential to notice that the assessee claims that it was unaware of the order passed by the CIT(A) dismissing its Appeal No.157/2008-09, since it was disposed of ex-parte. It would be in the fitness of things that if the assessee approaches the Tribunal with an appeal against the said order the same would be considered having regard to the totality of the facts and if any application for condonation of delay is made the same shall be considered and the appeal will be heard.
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2012 (9) TMI 843 - DELHI HIGH COURT
Capital expenditure incurred out of anonymous donation - ITAT grant the benefit of exemption to undisclosed income to the assessee - Held that:- The donations received by the assessee are not anonymous donations. The details in respect of the name and address are available in possession of the AO in the form of the name and address are available in possession of the AO in the form of donation receipts, which were impounded in the course of survey - The discrepancy in respect of the amount of Rs.2,49,000/- has occurred on account of computer malfunctioning, but the details as above are available in the donation receipts. Therefore, no donation can be said to be anonymous.
The income tax authorities were not right in holding that the amount received by the assessee as donations was not “anonymous donations” within the meaning of Section 11(3) because the receipts issued by the assessee trust were still in the custody of the department as the receipt books were impounded in the course of the survey and no confirmations were required to be filed by the assessee. In these circumstances the Tribunal held that Section 68 cannot be applied as the amount has already been shown by the assessee as income - no substantial question of law arises out of the order of the Tribunal - in favour of assessee.
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2012 (9) TMI 842 - DELHI HIGH COURT
Deduction paid as upfront fee and bank charges - disallowance u/s 40 (a) (ii) - ITAT allowed the claim - Held that:- As per section 35AB that deduction is permissible in respect of any lump sum consideration for acquiring any know-how for use for the purposes of the assessee’s business. “Consideration” in section 35AB is to be understood in the sense in which it has been used in the Indian Contract Act. Therefore the word “consideration” would include the entire obligation of the assessee, without which the assessee would not be able to acquire the know-how.
Having no reason to disagree with, and the language of Section-40 (a) (ii) - which in our opinion is expansive enough to cover payments of the kind as the Court has now to deal with – we feel that no substantial question of law arises for consideration - in favour of assessee.
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2012 (9) TMI 841 - SUPREME COURT
Investment allowance u/s 32A(2)(b)(iii) - Refrigerator, Cooking Range and Fans installed in its Factory Canteen - Held that:- The Canteen may be a part of production Unit or Factory, however, it cannot fall under sub-clause (iii) which refers to any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article specified in the Eleventh Schedule.
The Canteen cannot be said to be an `industrial undertaking' as it does not manufacture or produce any article or thing, as required under clause (iii). disallowance u/s 32A(2)(b)(iii) warranted - in favour of revenue.
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2012 (9) TMI 840 - GUJARAT HIGH COURT
Pendency of assessment proceedings - Application before Settlement Commission accepted - assessment years 2005-06 to 2008-09 - revenue petition challenging the order of Settlement Commission - Held that:- As with effect from 1.6.2007, significant changes were made in the definition of the term "case" defined under section 245A(b) defining the term "case" would cover only those situations where an assessment is pending before the AO or it is still possible for him to pass any order of assessment.
Accepting the proposition that even where by efflux of time, it is not open for the Assessing Officer to pass an order of assessment, merely because the return was accepted under section 143(1), the case of the assessee should be deemed to be pending for assessment only because the final order of assessment under section 143(3) was not passed, would run counter to the statutory amendments made in section 245A(b) - In the present case, the facts are not in dispute at all. For the assessment years 2005-06 to 2008-09, assessments had become time barred without any notice under section 143(2). Even final time limit for passing the orders even if such notices were issued had expired by the time the assessee filed his application for settlement before the Commission. The assessee's application qua these years, therefore, was not maintainable, ought not to have been accepted. Thus, the Settlement Commission erred in holding to the contrary in the impugned order. The impugned order to such an extent is, therefore, set aside - Request of the assessee that the material disclosed along with the settlement application should not be used in the normal assessments, cannot be accepted without full examination of such a request - petition allowed - in favour of revenue.
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2012 (9) TMI 839 - SUPREME COURT
Rectification - Deduction u/s 80IA - notice u/s 154 as claim of deduction allowed inadvertently before setting off the earlier years losses from the profits and gains of the industrial undertaking - Held that:- Section 154 is not applicable in this case as that the provisions of Chapter VIA dealing with quantification of deductions have been amended at least eleven times. Moreover, even Section 80IA, was earlier preceded by Sections 80HH and 80I, which has resulted in plethora of cases. In fact, some of the amendments have been enacted even after the judgment of this Court in the case of Kotagiri Industrial Co-operative Tea Factory Ltd. (1997 (3) TMI 1 - SUPREME COURT) delivered on 5.3.1997 relying on which claim was dismissed.
In the circumstances the view that one cannot say that this is a case of a patent mistake. The assessee followed the judgment of the Madhya Pradesh High Court in K. N. Oil Industries (1996 (7) TMI 101 - MADHYA PRADESH HIGH COURT)wherein the High Court held that losses of earlier years were not deductible from the total income for purposes of computation of special deduction under Sections 80HH and 80I. Hence, the assessee is right in submitting that the issue involved a moot question of law, particularly at the relevant time (assessment year 1997-98) - in favour of assessee.
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2012 (9) TMI 838 - DELHI HIGH COURT
Non remanding the matter to AO for providing opportunity to the assessee to furnish relevant documents - Held that:- The assessment order is bereft of any discussion as to what were the materials adverse to the assessee and what was the inference that could be drawn in the light of those materials and documents. Resultantly these matters have to be remitted for fresh consideration by the AO who shall proceed to make available the necessary documents, adverse to the assessee, and proceed in accordance with Section 69A.
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2012 (9) TMI 837 - ITAT MUMBAI
Re-opening of assessment u/s 147/148 - Held that:- As during the course of assessment proceedings for A.Y 2004-05 AO noticed that there were certain discrepancies in the bank account leading to a belief that certain income had escaped assessment in the hands of the assessee which was not denied by the assessee - as all these assessments were framed under section 143(1) there is no infirmity in the order passed by CIT(A) vide which validity of reassessment proceedings has been upheld - against assessee.
Estimation of 5% agency income in the hands of the assessee - Treating appellant as Permanent Establishment of a Foreign Company - Held that:- As the existence of the foreign party and its genuineness has not been doubted by the AO as the assessee apart from receiving separate funds has also imported goods from the said party for its own trade no material placed on record by the revenue to establish the same - As right from the beginning it is the case of the assessee that the said amount was placed with it in "Trust" and assessee has been submitting the accounts of the same to the said party which did not have any objection upon such spending. In the account also no commission has been charged by the assessee. Therefore, the addition is made simply on the basis of presumption, which is not sustainable. Therefore, the addition in respect of assessment years 2000-01 to 2002-03 is deleted - in favour of assessee.
Disallowance of 20% of expenses - "telephone, postage, courier, sales promotions and conveyance" - Held that:- There is no dispute to the fact that the assessee has not been able to produce all documentary evidences to establish that the entire expenditure has been incurred by the assessee under the above heads for its business purposes. It is a fact that the assessee has also undertaken promotional activities to promote brand products of M/s. Miraj PTE Ltd in India and the receipt as well as expenditure have not been routed through P&L account of the assessee. Substance in the observations of CIT(A) that a part of expenditure claimed by the assessee under the above heads could be for the purpose of promotional activities for the purposes of promotional activities. As decided in CIT v. Calcutta Agency Ltd.(1950 (12) TMI 4 - SUPREME COURT) that if the assessee fails to establish the fact of necessary documents to claim for deduction under section 37(1), the claim is not admissible. Thus disallowance of 20% as confirmed by CIT(A) out of the expenses claimed by the assessee is reasonable - against assessee.
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2012 (9) TMI 836 - ITAT DELHI
Addition on account of alleged excess cash as per cash flow statement, alleged bogus advance liability, unsecured loans, unexplained investment and dis-allowance of long term capital loss - Held that:- It is found that initially the case was built by AO on the basis of statement of affairs filed by assessee on the basis of which AO prepared cash flow statement and added back the shortage of cash as his income. Similarly on this basis only the AO had added back amount claimed as advance from Tawri Colonizers. Instead during investigations u/s 133(6) M/s Tawri Colonizers had claimed to carry liability. These amounts were also added by AO. These additions were deleted/reduced by CIT(A) on the basis that these represented amounts received from M/s Tawri Colonizers being part of sale consideration. If that be the case then these should have been shown as credits in the statement of affairs of assessee for calculation of short cash in hand and consequent addition should have been upheld by CIT(A).
Similarly, calculation of long term capital gain has been done on the basis of rate adopted u/s 50C whereas from the facts of the case it emerges that assessee along with his brothers had sold whole land to the company, then how assessee had shown in his return a single piece of land measuring 100.64 sq. yds. The findings of AO and CIT(A) are contradictory in nature. Therefore, we are of the view that the whole issue should be examined by AO afresh -Appeals filed by the assessee as well as by revenue are allowed for statistical purposes.
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2012 (9) TMI 835 - ITAT DELHI
One time Commission income - Business income or unexplained income u/s 68 taxable under the head income from other sources - assessee engaged in business of share trading for last 25 years had suffered losses heavy losses during last few years - Held that:- It is observed that assessee had been suffering heavy losses during last few years in this regular trade and suddenly, during the year under consideration, the assessee received huge commission. Assessing Officer has elaborately dealt with his apprehension in the assessment order and has treated the same as unexplained income. CIT(A) in his order has not addressed the observations made by the AO and instead had allowed the claim of the assessee simply on the basis of facts that assessee had been filing income tax returns for a long period and commission income has been credited in the books of accounts and books of accounts are subject to the audit u/s 44AB. Since, before CIT(A), assessee had not been able to rebut any of the observations made by AO. Moreover, the order of CIT(A) is not a speaking order therefore, case is set aside to the CIT(A) for fresh adjudication - Decided in favor of Revenue for statistical purposes
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