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Income Tax - Case Laws
Showing 461 to 480 of 503 Records
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2013 (1) TMI 105 - ITAT BANGALORE
Broken period interest paid to the sellers of the securities - revenue v/s capital - order u/s 263 of CIT(A) directing AO not to treat the broken period interest as revenue expenditure but as a part of cost of purchase of securities and to consider it for valuation of stock - Held that:- In the instant case, the assessee-bank, since its inception, has been offering the broken period interest income earned from the sale of securities (AFS category) as business income under section 28 and not as interest income under the head “Income from other sources”. Accordingly, the broken period interest paid to the sellers of securities was claimed as an allowable deduction from its business income, under the Act. Applying the principles laid down in the case of CIT v Citibank N.A.[2008 (8) TMI 766 - SUPREME COURT OF INDIA] the Bank is entitled to claim the broken period interest expenditure as revenue expenditure from its business income, since the broken period interest income is also offered to tax as business income.
Also following judicial precedents supported the claim of the assessee that the broken period interest payments are in the nature of revenue expenditure American Express International Banking Corporation v CIT (2002 (9) TMI 96 - BOMBAY HIGH COURT)wherein held that when the BPI received was taxable as business income, the Department ought to have allowed deduction for the BPI paid on purchase of securities. CIT v Citibank N.A.(2003 (4) TMI 36 - BOMBAY HIGH COURT) & CIT v Nedungadi Bank Limited (2002 (11) TMI 29 - KERALA HIGH COURT) stating that the interest paid for the broken period would constitute allowable outgo in the hands of the assessee and is an admissible deduction in the computation of total income of the Bank under the head “profits and gains of business or profession & State Bank of Hyderabad v Joint CIT (2005 (3) TMI 403 - ITAT HYDERABAD-B) stating that if the securities were held by the banking company as stock-in-trade of the business, interest paid for the broken period would constitute allowable outgo in the hands of the assessee bank.
Disallowance of broken period interest paid to sellers of securities in earlier years - Held that:- The amount is to be disallowed when the same should have been claimed as a deduction by debiting to the P&L account. The broken period interest payment made in the earlier year account cannot form part of the disallowance for the current assessment year since the same was not debited to the P&L account and hence, no disallowance is called for - appeal decided in favour of the assessee
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2013 (1) TMI 97 - GUJARAT HIGH COURT
Penalty u/s 271(1)(c) - Concealment of income - Evasion of Tax - Whether penalty u/s 271(1)(c) can be levied even when after disallowing certain sum while computing income as per the P&L account, the same had no impact on the tax liability of the assessee - Held that:- It was held that even after such disallowance, tax finally required to be paid, as per Section 115 JB of the Act, would remain the same. It cannot be stated that the assessee evaded tax. In favour of assessee
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2013 (1) TMI 90 - PUNJAB AND HARYANA HIGH COURT
Revision of orders prejudicial to revenue by CIT(A) - relief granted u/s 80 IA was not deducted from the profits and gains of the business before computing relief u/s 80 HHC - ITAT quashed the orders of CIT(A) passed u/s 263 - Held that:- As decided in Asstt. CIT Vs. Rogni Garments & Ors [2007 (4) TMI 122 - ITAT, CHENNAI] Section 80HHC is part of Chapter VI-A. CIT v. Sharon Vancers P. Ltd.(2007 (2) TMI 121 - HIGH COURT , MADRAS) has made it clear that it is not correct to say that Section 80HHC is a self contained provision. The deduction cannot be allowed ignoring the restrictive clause contained in Section 80-IA(9). The restrictive clause in Section 80-IA makes it abundantly clear that wherever deduction under any other section of Chapter VI-A(C) is claimed, the computation will be subject to the restrictions laid down in Section 80-IA (9). It precludes 'pro tanto', all the deductions of such profits and gains claimed under Chapter VI-A(C). Section 80HHC is part of Chapter VI-A(C).
The respondent-assessee, in the present case, had in its return of income tax, claimed deduction under Section 80IA at Rs. 12.01 crores and Section 80HHC at Rs. 5.75 crores and declared the total income of Rs. 82.47 lacs. The AO allowed the deduction under Section 80IA to the tune of Rs. 14.04 crores and deduction under Section 80HHC to the tune of Rs. 2.42 crores. The CIT on perusal of the assessment order found the assessment order to be both erroneous and prejudicial to the interest of Revenue and rightly so as deduction under Section 80HHC was allowed on eligible profits of business without reducing the profits of business on which deduction under Section 80IA had been allowed. There was, thus, contravention of Section 80IA(9), which clearly indicates the extent of restriction to which the deduction under other provision of Chapter VI-A of IT Act can be allowed in cases where relief has been given on the profits and gains under Section 80IA.
As decided in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME COURT] an incorrect assumption of facts or an application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. Thus set aside the order of ITAT and restore that of CIT-I - against assessee.
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2013 (1) TMI 89 - BOMBAY HIGH COURT
Waiver or remission of the liability of the loan - Capital or Revenue receipt - Held that:- The amount which was advanced as a loan to the respondent-assessee was for the purposes of relocating its office premises. The loan taken was utilised for the purposes of acquiring a office at Godrej Soap Complex, Vikroli, Mumbai. Therefore, the loan in the present fact was taken for acquisition of capital asset and not for the purposes of trading activity as in the case of Solid Containers Ltd (2008 (8) TMI 156 - BOMBAY HIGH COURT). The present case is therefore covered in favour of the respondent-assessee by the decision of this court in the matter of Mahindra & Mahindra Ltd (2003 (1) TMI 71 - BOMBAY HIGH COURT) - in favour of assessee.
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2013 (1) TMI 88 - BOMBAY HIGH COURT
Bogus purchases - suppliers were nonexistent and one of the parties had denied having any business dealings with the Assessee Company - ITAT deleted the addition made by AO - Held that:- From the order of the Tribunal it can be concluded that it has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts.
Books of Accounts of the assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. Merely because the suppliers have not appeared before the AO or the CIT(A), one cannot conclude that the purchases were not made by the assessee. Disallowance merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them is not warranted- thus the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of ₹ 1.33 crores was not bogus - in favour of assessee.
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2013 (1) TMI 87 - BOMBAY HIGH COURT
Unexplained cash credit - ITAT deleted the addition - Held that:- CIT(A) as well as the Tribunal have arrived at concurrent finding of fact that the credit aggregating to Rs.43.75 has been explained by the assessee and the same cannot be added to the income of the assessee. This finding was reached after detailed examination of each of the cash credits. The revenue has not been able to show that a concurrent finding of fact arrived by the authorities below is either perverse or arbitrary. The CIT(A) has made a distinction between monies advanced by a creditor all by himself and monies advanced by him after collecting funds from his close relatives - in favour of assessee.
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2013 (1) TMI 86 - ITAT BANGALORE
Transfer Pricing Adjustment - assessee-company is an Indian company engaged in the manufacture and trading of automobiles - operating expense adjustment - assessee contested against violation of natural justice - Held that:- No evidence has been brought on record by the assessee to establish the violation of the principles of natural justice by the AO as claimed and therefore rejecting this ground raised by the assessee as infructuous.
Reference to TPO - Held that:- As decided in Tally Solutions Pvt. Ltd. (2011 (9) TMI 196 - ITAT BANGALORE) there is nothing in section 92CA to suggest that the AO should hear the assessee or record reasons before making a reference to the TPO and therefore in the instant case there is no infirmity in the action of the Assessing Officer in referring this case to the TPO.
The Explanation to section 92(1) clarifies that the allowance for any expense or interest arising from an international transaction shall also be determined having regard to the ALP. As these are anti-avoidance provisions of the Act, and also special provisions to protect the tax base of the country from being eroded, they will over-ride all other provisions of the Act. Therefore, see no merit in this ground raised by the assessee that the definition of 'income' under the Act is not amended to include the T.P. adjustments as income and accordingly dismiss this ground
TP adjustment without demonstration - Held that:- As in Coca Cola India Inc. v. Asstt. CIT [2008 (12) TMI 67 - PUNJAB AND HARYANA HIGH COURT] it is not necessary for the AO/TPO to demonstrate that profits are shifted out of India in order to determine the arm's length nature of any international transaction - thus no merit in the ground raised that no T.P. adjustment could be made in the assessee's case without there being any material against assessee.
Use Of Multiple Year Data - Held that:- TPO is both empowered and also duty bound to determine the ALP using such contemporaneous data for this purpose even if it is not available to the assessee in the public data bases at the time of preparation of its report on the T.P. study - as mandated by rule 10B(4) of IT Rules, 1962, the TPO used data pertaining to the current year i.e. FY 2002-03 rightly rejecting the assessee use of multiple year data as the assessee failed to demonstrate as how such data pertaining to the prior years had an influence or bearing on prices in the current financial year.
Methodology and process in arriving at ALP - segregation of trading and manufacturing segments - Held that:- The sale of spare parts is triggered as a result of the manufacturing activities, including warranty commitments. Therefore, it would not be in the fitness of things for the sale of spare parts and components to be considered in isolation from the sale of manufactured vehicles. This view is supported by the OECD T.P. Guidelines, 2010. As the comparable companies are also trading in spare parts and components it can be concluded that trading in spare parts is closely inter-linked with the manufacturing segment of the assessee. No meaningful purpose would be served in segregating the trading and manufacturing segments when the assessee and the comparable companies are at par with regard to the nature and scale of combined activities - direct the AO/TPO to compute the ALP at the entity/enterprise level by combining the trading and manufacturing segments.
Operating Efficiency Adjustment - bringing the operating expenditure of the comparables at par with that of the assessee - Held that:- TPO has concluded that the assessee is very efficient as its operating expenses are lesser when compared to that of the comparable companies. Briefly, the TPO has equated operating efficiency to operating expenditure. Before the CIT (Appeals) detailed submissions were made on this issue and a remand report was called for thereon, CIT (Appeals) however was of the view that since these submissions were not filed before the TPO during the assessment proceedings they could not be entertained at the appellate stage. Before us apart from the submissions made, expert opinion has been filed on this issue by the assessee which was not available before the TPO. In these circumstances, this matter of operating efficiency adjustment be remanded back to the file of the TPO for re-examination.
Admission of Additional Evidence - Held that:- As decided in CIT v. Salig Ram Prem Nath [1989 (2) TMI 51 - PUNJAB AND HARYANA HIGH COURT] that in order to do substantial justice, the ITAT is vested with the requisite authority to admit additional evidence. As found that the assessee had made submissions on the said matter on which the experts opinion is now filed the experts opinion for being considered in the disposal of this ground of appeal admitted.
Excise Duty Adjustment - Held that:- Assessee's ground on excise duty adjustment needs to be allowed as assessee collects excise duty as levied by the Central Government and there is no profit element involved in collecting the same and remitting it to the Government. TP regulations are based on the actual margins and 'pass through' items like excise duty are not to be considered while computing margins as is also the case with the comparable companies. DR too did not appear to have serious objections to the exclusion of excise duty in arriving at the margins.
Customs duty adjustment - Held that:- Remand the matter, of examining the necessity of whether customs duty adjustment is to be allowed, as claimed by the assessee, to the file of the TPO. The TPO directed to examine the contentions keeping in mind the observations made in the light of the decision in the case of Skoda Auto (P.) Ltd.'s case (2009 (3) TMI 249 - ITAT PUNE-A) relied on by the assessee and the case of Sony India Pvt. Ltd.'s case (2008 (9) TMI 420 - ITAT DELHI-H) relied on by revenue.
Cash PLI (Profit Level Indicator) or PBDIT (Profit Before Depreciation, Interest and Tax) to sales - profit margin for determining ALP - Held that:- The assessee is in the asset intensive automobile industry thus cash PLI or PBDIT to sales is not the appropriate PLI and also note that the TPO has given depreciation adjustment for differences in relative level of depreciation cost with reference to sales.
Commission Income - Held that:- In agreement with the TPO's action in excluding commission income for the reason that the commission income earned by the assessee is not derived from out of the assessee's business operations of manufacture and sale of passenger vehicles or the sale of spare parts and components.
Provision for Warranty Costs - Held that:- The one time special warranty provision, arising out of an extra-ordinary viz. manufacturing defect in exhaust of passenger vehicle in the relevant period should be considered as non-operating expenditure.
Marketing Expenses - Held that:- Marketing expenses incurred for launch of a new passenger vehicle in the relevant period, is incurred in the normal course of its business operations and forms part of its operating expenditure, hence disallowed.
Benefit +/- 5% Safe Harbour - Held that:- +/- 5% variation is allowed only to justify the price charged in the international transactions and not for adjustment purposes. The amendment to 92C(2A) has settled the issue, thus the 5% benefit is not allowable in the assessee's case.
CIT(A)exceeded his jurisdiction u/s 251 - Held that:- ALP adjustment is to be restricted to the extent of purchase of components from its AE's & CIT(A) has only directed the TPO to compute the ALP adjustment, in accordance with his finding and for this purpose to make necessary verification. No reason to hold that the CIT(A)in directing the TPO to recompute the ALP adjustment has exceeded his jurisdiction u/s 251.
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2013 (1) TMI 85 - ALLAHABAD HIGH COURT
Exemption u/s 80-P (2) (a) (i) - Interest earned on deposits of non-SLR funds - assessee is a Co-operative Bank - Held that:- Ratio of the judgments, which are applicable to SLR funds would also be equally applied to non-SLR funds as it cannot be said on the basis of the judgment of the Supreme Court in Bihar State Co-operative Bank Ltd. (1960 (2) TMI 8 - SUPREME COURT). Short-term deposits by the Bank was income from normal banking business and was, therefore, exempt from the liability to pay Income Tax. It was further specifically held in that case that since the society in that case was engaged in banking activity, its normal business was to deal in money and credit and, therefore, the money laid out in the form of short-term deposit did not cease to be a circulating capital and interest earned thereon, could not be other than income generated from the business of banking, and, was therefore exempt from tax
The question as to whether the business is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P(2)(a)(i) as the deposits of surplus idle money available from working capital, including reserves, excess collection of interest tax and other incomes are all attributable to the business of banking. The interest from such deposits cannot be said to be beyond the legitimate business activities of the bank - thus ITAT committed no error in arriving at findings that the interest are not deposits of non-SLR funds and the cooperative bank will qualify for exemption under Section 80P(2)(a)(i) - in favour of the assessee.
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2013 (1) TMI 84 - ITAT HYDERABAD
Additional income toward additional value of WIP - Revised return - AO stated that there was no provision in the Act for allowing deduction for additional income offered for earlier years(s) to cover up the deficiencies in the books of account - Held that:- There is no question in the said Statement of Shri C.Sivarama Prasad, Director, either in relation to any discrepancy in accounts, including WIP or its valuation, or inadequacy of profits disclosed, or share application money, or the question also alluding to land purchased by the assessee company, in the said Statement. In fact, even the assessee referred only to this part of the Statement. There is no whisper of the WIP or its valuation, much less of any discrepancy therein, in the said Statement. As such, the CIT(A) is correct in stating so, holding that the disclosure during survey - implying thus to be for both the years - was not made on account of difference in WIP or stock.
The assessee’s claim of the said aspect having attained finality in view of its revised return for AY 2005-06, offering additional income (of Rs.75 lakhs) toward additional value of WIP is without merit. This is as the same (revised return) is only based on, or in terms of (or ought to be so), the declaration made during the Survey, and which is de hors and without reference to any material or evidence as to WIP. The revised return, thus, to the extent it is inconsistent with the same cannot be considered as in pursuance thereto or arising therefrom. The same would therefore require a finding by the AO, accepting the increased value of the closing WIP for that year, to claim for its inclusion as a part of the WIP for the current year. No evidence to substantiate its said claim stood adduced by the assessee either in the assessment proceedings or before the first appellate authority - The increase in the closing stock, is only on account of admission of the corresponding expenditure thereon, which, where not adjusted against the income for the year, gets carried forward in the form of unbilled expenditure. However, as the expenditure is not admissible, there is no question of it being adjusted either against the income for the current or any subsequent year, i.e., by being carried over as unbilled expenditure, so that it would result in a net increase in the income for the year of expenditure, with no implication for any other year.
The appellate order by the CIT(A), holding that the disclosure of Rs.50 lakhs for the current year as toward reconciling all differences, while rejecting an attempt by the AO to disturb the assessee’s valuation method, thus, has to be viewed as correcting this anomaly. No infirmity therein.
Method of valuation - Held that:- Nothing on record to hold it as inadequate. Further, there is also nothing on record to show that the changed/enhanced allocation has been insisted upon and applied by the Revenue for the succeeding years as well, as any change has necessarily to be regularly followed, or else would lead to a distortion in profits across different years. As such, confirm the assessee’s valuation method for the current year, so that no interference therewith, as made by the AO, is called for.
Disallowance for Rs. 2 lakhs qua ‘Entry Tax’ - CIT(A) deleted the addition - Held that:- While the AO presumes that entry tax is only for fresh purchase, the CIT(A) admits and accepts assessee’s explanation at face value, i.e., de hors any material. The question is not if the machinery is old or new, as the assessee could well have purchased some old machinery, but whether it is a purchase or acquisition of a capital asset or not, from where to where, and for what purpose, is the machinery being moved - the matter is restored back to the AO for proper examination and a decision in accordance with law, consistent with the facts of the case
Disallowance of fees paid to the Registrar of Companies - same is paid toward increase in share capital - Held that:- As clarified by the assessee, with reference to the various forms for which the filing fees stands paid, and to which reference was also made by the during hearing, it is only in respect of registration of charges, appointments of Directors, etc. No case for disallowance, under the circumstances, is made out, and the same stands rightly deleted by the ld. CIT(A).
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2013 (1) TMI 83 - ITAT DELHI
Royalty payment - AO disallowed 25% of payment treating it as an intangible asset following the decision of Southern Switch Gear [1997 (12) TMI 105 - SUPREME COURT] - CIT(A) deleted the addition - Held that:- The assessee company was granted only a non-exclusive and non-transferable right to use the intangibles. The ownership remained with the licensor and are continued during the currency of the agreement. The basis for payment of the amount was of net sales. No lump-sum payment was made for the right to use the intangibles. The licence acquired during the agreement was not to establish manufacturing base. Assessee is engaged in service industry. It was only in providing staffing and recruitment services which is a service industry. Thus the assessee had not acquired any enduring benefit. The agreement was also for a limited period. In view of these facts, no fault in the order of CIT (A) - the facts of the Southern Switchgear Ltd. are distinguishable from the facts of assessee’s company as the right of the assessee in the case of Southern Switchgear Ltd. was granted exclusive licence to manufacture, use and sell the scheduled products within India. While in assessee’s case, the assessee was granted non-transferable intangibles acquiring no ownership or proprietary right in the intangibles - in favour of assessee.
Addition towards stale cheques issued to ex-employees - CIT(A) deleted the addition - Held that:- The original cheques of ₹ 31,74,343/- issued to the ex-employees and the same were pertaining to the financial year 2006-07 and 2007-08. Out of these, only cheques of ₹ 1,85,519/- were encashed. All other cheques became outdated on account of not claiming the same from the bank of the assessee. CIT (A) entertained the statement of stale cheques filed before him and observed that ₹ 4,62,883/- were encashed after the close of financial year. CIT (A) has also granted the relief relying on the audited accounts of the assessee. Such approach of CIT (A) is not as per law. The cheques issued are barred by limitation and became not payable by operation of law. CIT (A)’s observation that as soon as assessee reaches it conclusion that the liability of stale cheques have come to end the necessary right back to take place in the year of such conclusion is not based on any evidence. On what basis this finding has been recorded by CIT (A) is not clear. How these cheques remained uncashed for almost two years is not clear. CIT (A) was not justified in granting the relief to the assessee, thus remit the issue to the file of the AO for deciding afresh - in favour of revenue for statistical purposes.
Disallowance of loss arising on account of non-receipt of TDS certificates - CIT(A) deleted addition - Held that:- As decided in Shreyans Industries case [2006 (11) TMI 187 - PUNJAB AND HARYANA HIGH COURT] the assessee had offered gross amount of interest including TDS to tax in the assessment year 1992-93. It is also a fact that the assessee was not allowed credit for the TDS for want of TDS Certificates & in spite of best efforts, the assessee could not obtain TDS certificates. Thus, it was a case of loss which has arisen to the assessee during the course of its business. In the case of Sutlej Cotton Mills Ltd. v. CIT (1978 (9) TMI 1 - SUPREME COURT), Hon'ble Supreme Court has held that what is material is the factors or the circumstances which cause loss & if the loss occurred during the course of carrying on the business, it is incidental to it and, hence, allowable. Admittedly, in this case, the assessee suffered loss during the course of carrying on its business therefore, same is allowable - as the issue involved is having the similar facts as involved in the case of CIT vs. Shreyans Industries Limited, the order of the CIT (A) on this issue sustained - in favour of assessee.
Disallowance of professional tax not paid before the due date of filing the return of income - CIT(A) deleted of addition made by AO u/s 43B - Held that:- Certain facts are not clear which are necessary to decide the issue. What is the salary debited by the assessee in the profit & loss account whether it was net of professional tax or it was the gross amount including the professional tax. This fact has not been brought on record. In absence of this, it cannot be said that the amount of professional tax has not been debited in profit & loss account while computing the total income of the assessee. Secondly, under the Professional Tax Act, whether the assessee was liable to deduct the tax from the salary or it was deducted on the instruction of the employees to meet their obligation. This aspect also requires examination to decide whether it is covered u/s 43B or not - remit the issue to the file of the AO to bring correct facts on record.
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2013 (1) TMI 82 - ITAT AGRA
Non granting benefit u/s. 11 - assessee contested as the income is exempt u/s. 10(23C)(iiiad) - Held that:- As decided in U.P. Forest Corpn v. Dy. CIT (2007 (11) TMI 303 - SUPREME COURT) that registration u/s. 12A is a condition precedent for availing of benefit of section 11 & 12 of the IT Act. The assessee in this case has admitted before the AO at the assessment stage that the assessee society is not registered u/s. 12AA therefore, the assessee would not be entitled for any deduction u/s. 11. Even during the course of arguments, the assessee admitted that the assessee is not registered u/s. 12AA
Since the assessee applied for registration before the CIT on 06.09.2005 he has neither refused to grant registration nor granted registration, therefore, it would amount to deemed registration granting benefit of deduction provided u/s. 11 - Held that: - Whether the CIT has granted registration or did not refuse to grant registration is an independent and distinct matter from the computation of income on the basis of regular assessment passed by the AO. In section 246A several provisions have been mentioned in which if any order is passed by the Assessing Authority, it would be appealable order before the Commissioner (appeals). No remedy is provided if the CIT did not pass any order u/s. 12AA for filing the appeal before the CIT(A). According to section 253(1)(c), the order passed by the Commissioner u/s. 12AA is appealable before the Appellate Tribunal if the assessee was aggrieved against the order of the CIT u/s. 12AA. It would mean that no remedy lies for grant of registration or refusal to grant registration before the CIT(A).
As from the 'Smriti Patra' of the assessee that the assessee did not exist solely for educational purpose and it has other objects also. When the annual receipts exceed Rs. one crore, the approval of prescribed authority is required in the above provisions. In the case of assessee, aggregate annual receipts of the assessee were found exceeding Rs.1,00,00,000/-. As noted above, in the case of assessee, there is neither any registration u/s. 12AA nor is there any evidence to support the case of the assessee that the donations were received with specific direction that it will form part of corpus of the assessee Institution. Therefore, such a benefit could also not be given to the assessee. The CIT(A) on proper appreciation of facts and applying correct law rightly held that the donations were part of the annual receipts of the assessee and shall be treated as income of the assessee finding support from the provisions of section 12(1) - CIT(A) rightly declined benefit of exemption u/s. 10(23C)(iiiad) - against assessee.
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2013 (1) TMI 81 - DELHI HIGH COURT
Unexplained investment in immoveable properties - ITAT deleted the addition - order passed by the AO adopting the Fair Market Value - assessee is a Hindu Undivided Family - Held that:- Following the decision in the case of Shri Dinesh Jain Versus DCIT, Central Circle-21, NEW DELHI [2009 (9) TMI 676 - ITAT DELHI] It is undisputed fact that department has not referred any incriminating material having been found during the course of search and investigation made thereafter which indicate that assessee had paid anything more than what has been stated in the sale deeds. It was also not the allegation of the Department that there was any difference in the value of the property as accepted by the Sub Registrar for the purpose of stamp duty valuation.
As decided in K P Verghese Vs. ITO [1981 (9) TMI 1 - SUPREME COURT] onus lies on the department to prove that some consideration over and above the consideration stated in the sale deed have been invested, no addition can be made on presumptions and suspicions. As decided in CIT Vs. Ashok Khetrpal [2007 (7) TMI 36 - HIGH COURT , DELHI] by referring to the report of valuation officer in the absence of any incriminating documents found in the course of a search no addition could be made by treating investment as undisclosed on the basis of any DYC’s report - thus CIT(A) in the present case was not justified in estimating the value of the investments in the properties contrary to the amount mentioned in the conveyance deeds. Accordingly, set aside the order of the CIT(Appeals) and direct the AO to accept the value of the properties as declared in sale deeds - in favour of assessee.
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2013 (1) TMI 67 - DELHI HIGH COURT
Method adopted in reporting the discounted value of raw material, components and consumable stores - “cost or net realizable value, whichever is less" - Tribunal disapproved method as adopted by assessee - Held that:- There is no dispute that the principle “cost or net realizable value, whichever is lower” is an accepted method of valuation of inventory. There is also no dispute that AS-2 issued by the ICAI are binding on both the assessee as well as the tax authorities under Section 145.
Write off factor of 8.5% has not been proved by the assessee - Held that:- The figures which are set out by the assessee in Annexure G show how the assessee arrived at the write off factor. These figures have to be verified by the AO. While therefore holding that the Tribunal was not right in accepting the revenue’s contention in principle, AO is directed to verify the figures furnished by the assessee in support of the write off factor of 8.50% and complete the assessment afresh on this limited issue - in favour of assessee subject to the remit order passed.
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2013 (1) TMI 66 - PUNJAB AND HARYANA HIGH COURT
Penalty u/s 271(1)(C) - undisclosed income - advance of Rs. 2,50,000/- shown against the land in his capital account - assessee claimed that this was on account of forfeiture of the earnest money for sale of his plot - Held that:- Assessee's claim of Rs. 2,50,000/- in the capital account based on a similar transaction was accepted by ITAT vide order dated 27.03.2008. That pertained to an agreement entered with one Harish Aggarwal for sale of plot No. 85/104 Khasra No. 16, Village Jandi, Ambala, which transaction did not materialize and the amount of the earnest money received by the appellant-assessee was forfeited. The appellant-assessee had set up an agreement dated 04.07.2002 for that assessment year. That transaction has no relevance to the assessment year 2002-03. The controversy raised on this point is held against the appellant.
Though copy of agreement produced by the appellant assessee was entered with Leela Dhar Gupta son of Chandgi Ram, yet the draft of Rs. 2,50,000/- received by the appellant-assessee was prepared from the account of one Deepak Gupta and issued by the Bank. There was of course account of one Leela Dhar in the said Bank, who was contacted by the Department in the enquiry but that Leela Dhar stated that he never entered into such a transaction with the appellant-assessee. The authorities below also took serious note of the fact that there were transactions running into more than 40 crores in the account of said Deepak Gupta. Seriousness of such transaction was under investigation of the Department of Income Tax and ultimately it was found that the Bank has been closed by the Reserve Bank of India because of the shady deals in which the said Bank was indulging.
There is no illegality committed by the authorities below in holding that the assessee routed undisclosed income in his capital account as forfeited amount, and thus added the amount in his income for the assessment year in question.
The assessee is giving different addresses in the returns and Ward/Circles etc. shown are different and incomplete, there is no evidence of filing these returns as from the photocopy, stamp of the Department is not legible. Further enquiry had revealed that B-29, Som Dutt Chamber, Bhikaji Cama Place, New Delhi, is an incomplete address. The assessee, therefore, cannot say that he had proved the identity of Sh. Leela Dhar Gupta. There was no agreement with Deepak Gupta nor the appellant assessee claimed any direct link with Deepak Gutpa, whose account was under investigation in a separate case. This point is also found against the appellant - When the transaction has not been accepted as genuine, there is no question of taking recourse of Section 51 - against assessee.
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2013 (1) TMI 65 - BOMBAY HIGH COURT
Revision of orders prejudicial to revenue u/s 263 - CIT(A)s revision orders quashed by ITAT - nature of expenses incurred in foreign exchange for the purpose of determining the deduction under Section 10A - Held that:- Before jurisdiction u/s 263 can be exercised, CIT must be satisfied that the order of the AO is prejudicial to the interest of revenue and also erroneous.
In the present case, the order of the CIT holds that the order is erroneous as further inquiries were not made. However, no further inquiries were warranted as there was no occasion for the AO to doubt the particulars to examine the same further. Besides, it is undisputed position that the nature of service are such that the services are being provided in India and thereafter merely transmitted to Standard and Poor. Therefore, the foreign exchange expenses relating to travel, professional fees and other matters are not incurred in providing technical services outside India. Further the expenses in foreign exchange have been reimbursed and therefore were not originally included in export turnover by the respondent assessee so as to rework the same. Thus no fault can be found in the order of the Tribunal - no substantial questions of law.
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2013 (1) TMI 64 - BOMBAY HIGH COURT
License fees paid to holding company - whether an allowable expenditure u/s. 37(1)? - the assessee company had itself amortized the said license fee for a period of ten years and further Section 35ABB was applicable to such payment as license fee - Held that:- Operating license fee paid to holding company for the year under consideration, consequently, no enduring benefit is received by the assessee so as to spread the expenditure beyond the period of one year in which the expenditure is incurred. In such a case, there can be no amortization of the expenditure over a period of 10 years. Section 35ABB would have no application in the present case but would apply in respect of the license fee paid by M/s. J.T. Mobiles Ltd. The fact that the respondent-assessee had in its books of accounts spread the expenditure of Rs.115 crores over a period of 10 years and only debited amount of Rs.47.46 crores as expenditure during the year under consideration would not change the nature of the expenditure for the purpose of determining to allow ability of the expenditure for income tax purpose. The Tribunal in the present case has merely followed its earlier order for the assessment year 1997-98 that the entire amount paid as operating license fee was allowed as an expenditure under Section 37(1) which appears to have been accepted by the department as no appeal there from has been preferred by the revenue. In view of the above, no substantial question of law arises.
Prior period expenses towards PSTN charges and dealers commission - Revenue v/s Capital - - Held that:- The order of the Tribunal dated 29/3/2007 for the assessment year 1997-98 stated that the aforesaid expenses are not pre-operating expenses as the appellant had set up its business much before the commercial launch on 12/1/1998 as evident from the fact that it had started marketing its services, appointing dealers, accepting deposits from subscribers much before the commercial launch. The aforesaid expenses were incurred after setting up of business and allowable as permissible deductions u/s 37 - This order of the Tribunal for assessment year 1997-98 was accepted by the revenue as no appeal there from is filed by the revenue - no substantial question of law arises.
Expenditure on foreign travel - Revenue v/s Capital - Held that:- CIT(A) and the Tribunal on examination of the facts concluded that the expenses incurred do not give rise to any enduring benefits but only enables the respondent-assessee to efficiently run its business so as to achieve higher profits hence allowable as a revenue expenditure - no substantial question of law arises
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2013 (1) TMI 63 - ANDHRA PRADESH HIGH COURT
Approval u/s 10(23)(C) - rejection of application as the activities of the agency were not in the nature of advancement of any objects of general public utility - do not indicate any charitable activity - Held that:- The petitioner was registered under the Andhra Pradesh (Telangana Area) Public Societies Registration Act, 1350 Fasli by Food and Agriculture (EP-II) Department dated 01-06- 1977, the State Government approved the proposal of the Director of Agriculture and directed that the petitioner shall carry on the functions of the certification agency under the Seeds Act, 1966 in the Andhra Pradesh State with effect from 01-06-1977.
The objects of the petitioner have already been set out. The petitioner thus certifies the Seeds which meet the minimum seeds certification standards as per Indian Minimum Seed Certification Standards, 1988. Seed growers enter into contract with a society/agent, who approaches the petitioner for certification of the seeds and after securing certification, they sell the certified seeds to the farmers at a market price determined by them. The petitioner collects a fee for providing certification as the process of certification involves technical and scientific evaluation of the seeds although the fee collected by it would be enough to enable it to sustain its activities and may not result in much profit. The term "advancement of any other object of general public utility" used in Section 2 (15) includes all objects to promote the welfare of the public particularly when the object is to promote or protect the interest of a particular trade or industry.
The activity of the petitioner which facilitates sale of certified seeds to farmers therefore falls within "advancement of any other object of general public utility" included in the definition of the term "charitable purpose" as defined in Section 2 (15) of the Act but in view of the fact that certification of seeds by the petitioner facilitates trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to the said section would come into operation. Thus the petitioner's activity assists the sale of certified seeds and is "in relation to any trade, commerce or business" and therefore its activity cannot be held to be a "charitable purpose". In this view of the matter the 1st respondent rightly rejected the application of the petitioner for approval under Section 10 (23C) (iv) - the petitioner has not rendered its services directly to the farmers but is rendering its services directly to its clients/agents who are engaged in trading of the certified seeds with profit motive and therefore its activities are not for the "advancement of any other object of general public utility" and hence not for "charitable purpose" in view of second limb of the first proviso to Section 2 (15) - aginst assessee.
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2013 (1) TMI 62 - KARNATAKA HIGH COURT
Deduction u/s 80-I - disallowance as per prohibition contained in sub-section 2 of Section 801 - M/s AA Alloys Ltd. a limited company, got amalgamated with the assessee company - Held that:- Both the revenue and the assessee have placed reliance on the decision in the case of SARASWATI INDUSTRIAL SYNDICATE [1990 (9) TMI 1 - SUPREME COURT] which only supports the view canvassed by the assessee and not as canvassed by the revenue. Moreover, in the present case, the income is only of the very assessee and not of the other company namely M/s AA Alloys Ltd., as the said company ceased to be in existence as on 1-4-1994 and there is no income attributable to this company after this date, but industrial dealing part of the assessee company and its profits and gains are to be examined and brought to tax only in the hands of the respondent-assessee company and therefore the assessee while can claim benefit of Section 80-1 , if otherwise eligible, unless it is hit by non-fulfilment of any of the requirement in terms of sub-section (2) of Section 80-I.
The amalgamation does not come within the scope of 'transfer' as defined in Section 2(47) and such being the view taken not only by this court, but Madras High Court and also the Supreme Court, there is no question of holding that the assessee dis entitles the benefit of Section 80-I - in favour of assessee.
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2013 (1) TMI 61 - ITAT CHANDIGARH
Exemption u/s 54F - to be assessed in the year the claim is made OR in the year when the time for completion of house expires - Held that:- Plain reading of section 54F clearly shows that deduction under this section is allowable only in case where the assessee within a period of one year before or two years after the date on which the transfer took place purchases, or has within a period of three years after that date constructed the residential house. No doubt the proviso to sub-section provides that in case the amount of capital gain has been deposited in the specified account as provided in sub-section (4) and the same could not be used for construction then such capital gain would be charged in the previous year in which the period of three years expires from the date of transfer of original asset.
The proviso carves out an exception only in those cases where the amount had been deposited in the specified account and could not be used for the purpose of construction. As the money has not been deposited in the specified account, therefore, there is no question of application of the proviso. Not only construction never commenced but the assessee could not show any evidence that the assessee wanted to start the construction. If the tax is allowed to be postponed merely on the basis of purchase of plot then no assessee would pay correct taxes during the year and postpone the payment of taxes by merely purchasing the plot and that cannot be intention of the provisions of section 54F. Therefore, CIT(A) is right in denying the deduction u/s 54F to the assessee.
Double taxation of income - Held that:- No doubt as decided in Murlidhar Bhagwandas case (1964 (1) TMI 5 - SUPREME COURT) has held that the Tribunal has no power to give direction in respect of any other year which is not before the Tribunal. However, at the same time there is cardinal principle of taxation particularly in view of the Article 265 of the Constitution that the taxes can be collected only by process of law and therefore, no income can be taxed twice. As in the present case the assessee has voluntarily filed return declaring capital gain in AY 2011-12, therefore, the tax paid in that year would amount to double taxation if the capital gain is also taxed in AY 2008-09. Agreeing with the submissions that the taxes paid in 2011-12 needs to be adjusted against the capital gain liability during AY 2008-09, thus direct the AO to adjust the taxes already paid by the assessee in AY 2011-012 regarding the same capital gain after verification during the current year against the capital gain liability - appeal of the assessee partly allowed
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2013 (1) TMI 60 - ITAT MUMBAI
Arms length price - provision of research and development support services - upward adjustment of Rs. 68,47,532/- to the income - assessee contested against inclusion of the two comparable companies viz. Celestial Labs Ltd. and Biocon Ltd. - Held that:- Celestial Labs Ltd. is engaged in the business of supporting pharmaceutical and biotechnology companies with customised information technology solution. It is mainly engaged in the software development in drug designing tool, bio informatic service and data warehousing. More than 96% of its revenue is from this service which are mostly in the nature of drug designing tools and Sap services. The profile of the company, as highlighted shows that its functions are entirely different from that of the assessee company which is mainly into testing and analytical service in R&D., therefore, it cannot be included for comparability analysis in the set of comparables taken by the TPO.
Inclusion of Biocon Ltd - two subsidiary of Biocon Ltd. i.e., Clinigene International Ltd. and Syngene International Ltd. The former company cannot be included at all for the preliminary reason that its related party transaction is approximately 38% of its sales, therefore, it cannot be held to be a fit case for comparison of a controlled transaction with an uncontrolled transaction. Insofar as Syngene International Ltd., this company is again 99% subsidiary of Biocon Ltd. and is engaged as a custom research service provider in the drug development process from discovery to supply of development compounds. From annual report, it is seen that the company has two sets of income - one from contract research fees and sale of compounds. However, in the absence of segmental information regarding contract research and manufacturing activities, it is difficult to analyse its main revenue and profit margin from the contract research work. Thus its functional profile is different with that of the assessee company, hence this company is directed to be excluded from the set of comparables.
Various diagnostic companies excluded by the TPO viz. Dolphin Medical Services Ltd., Transgene Biotek Ltd. and N.G. Industries Ltd., that not only the functional profile of these companies are different but the characteristic of the services rendered are also different. Dolphin Medical Services Ltd. is engaged in diagnostic services like CT scan, MRI, colour Doppler, etc., which is entirely different from R&D, testing and analytical services performed by the assessee. Transgene Biotech is engaged in the business of pre-clinical and clinical research service for biopharma involved in developing human vaccines and has patent rights of various products and vaccines developed by it. & as is the case of N.G. Industries Ltd. which is also purely a diagnostic and medical company and its services are entirely different from that of assessee.
Risk adjustment on account of difference between the risk profile of the comparables - Held that:- As neither the TPO nor the DRP has dealt with the assessee's contentions, thus in the interest of justice the matter needs to be restored back to the file of the TPO, who will examine the assessee's contentions on this score and decide the issue afresh in accordance with the law.
Notional addition towards interest on the amount receivable from the A.E. - Held that:- As assessee has no interest liability and it does not have any external borrowings. Even if the payments have been made by the A.E. beyond the normal credit period, there is no interest cost to the assessee. Moreover, there is no such agreement whereby interest is to be charged on such a delayed payment. From the summary of payment submitted by the assessee it is seen that the billing is done on quarterly basis and, accordingly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, addition an account of notional interest relating to alleged delayed payment in collection of receivables from the A.Es, is uncalled for on the facts of the present case and is, accordingly, deleted.
Network access charges - revenue v/s capital - Held that:- The assessee has made the payment for availing e-mail infrastructure like lotus notes accounts for the employees, usage of VPN, network infrastructure excess service which are owned by the parent company and not by the assessee. The assessee is making the payment for using this e-mail infrastructure facilities for communication between employees of the assessee and outside business partners. Such facilities of secured internet facilities, facilitates the day-to-day business operation of the assessee and does not bring into an existence any enduring benefit or creation of a new asset to the assessee. It is not a capital software expenditure as held by the Assessing Officer even though the same has been classified under the head "software expenditure". Thus,such an expenditure is purely revenue in nature and is allowable under section 37(1)
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