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Income Tax - Case Laws
Showing 481 to 500 of 503 Records
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2013 (1) TMI 59 - ALLAHABAD HIGH COURT
Claim of depreciation on the revalued assets set off against revaluation reserve and credited to the profit & loss account - whether permissible for computation of income under Section 115J? - Held that:- As per Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets issued by ICAI depreciation is required to be provided with reference to the total value of the fixed assets as appearing in the account after revaluation. However, for certain statutory purposes e.g., dividends, managerial remuneration etc., only depreciation relatable to the historical cost of the fixed assets is to be provided out of the current profits of the company. In the circumstance, the additional depreciation relatable to revaluation may be adjusted against "Revaluation Reserve" by transfer to Profit and Loss Account.
Part II of Schedule VI to the Companies Act allows the company to provide the depreciation on the total book value of the fixed assets (including the increased amount as a result of revaluation) in the P/L Account of the relevant period, and thereafter can transfer an amount equivalent to the additional depreciation from the Revaluation Reserve. Such transfer should be shown in the P/L Account separately and an appropriate note by way of disclosure would be desirable. Such a disclosure would appear to be in consonance with the requirement of Part I of Schedule VI to the Companies Act, prescribing disclosure of write- up in the value of fixed asset for the first five years after revaluation.
If a company has transferred the difference between the revalued figure and the book value of fixed assets to the "Revaluation Reserve" and has charged the additional depreciation related thereto to its Profit and Loss Account, it is possible to transfer an amount equivalent to accumulated additional depreciation from the revaluation reserve to the Profit and Loss Account or to the General Reserve as the circumstances may permit, provided suitable disclosure is made in the accounts as recommended in this guidance note - The accounting standards prescribed by the ICAI are applicable by virtue of Section 211(3)(c) of the Companies Act, until such time the accounting standards prescribed by the Central Government in consultation with the National Advisory Committee, on Accounting Standards established u/s 210A(1) which are not yet prescribed so far - Thus the Tribunal did not commit any error in law in allowing the depreciation on the revaluation reserve, which is a prescribed and statutory method of accounting, and by which the book profits do not get reduced, giving any added benefit to the companies including Minimum Alternate Tax (MAT) companies - in favour of assessee.
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2013 (1) TMI 46 - ALLAHABAD HIGH COURT
Scope of Section 154 - Mistake apparent from the record – Whether decision on debatable point of law is mistake apparent on the record - Difference between change of opinion and the rectification of mistake - Rectifiable mistake – Advertisement in newspapers & articles given to the stockiest and dealers claim as business expenditure u/s 37(3A) – After completion of assessment - AO passes order u/s 154 on the ground that advertisement was not made in small newspapers - and the presentation articles were given under the scheme to the stockiest and not to the consumers, was a debatable issue - Held that:- As concluding from the fact of the case that during the course of assessment the claims were duly scrutinized, considered and allowed in respect of expenses claimed both under the head. Following the decision in case of
In Mepco Industries Ltd., (2009 (11) TMI 24 - SUPREME COURT), Apex Court has drawn the difference between change of opinion and the rectification of mistake - a rectifiable mistake is mistake, which is obvious and not something, which needs to be established by a long drawn process of reasoning, or where two opinions are possible. It must be a patent mistake, which is obvious. Its discovery should not depend on elaborate arguments. - Therefore, the order u/s 154 was not made on any mistake apparent from the record, which was a rectifiable mistake, but was change of opinion by which the department had to adopt the reasoning on which two opinions should be possible. In favour of assessee
Interest u/s.139 (8) – Rectification of order u/s 154 – Mistake in calculation of month for charging interest u/s 139(8) - Due date of filing return was 31.7.1979 – Return was filed on 31.12.1979 - Held that:- In case Laxmi Rattan Cotton Mills (1973 (4) TMI 29 - ALLAHABAD HIGH COURT) that a month, must be taken to mean a period of 30 days - the word ''month' is to be taken to mean a period of 30 days and thus the delay for charging interest was of five months and not of four months. The mistake, therefore, was obvious and apparent to on the record and was rectifiable mistake for which proceedings under Section 154 could be taken. - In favour of revenue
Advance tax – Whether the amount deposited prior to 31st March, 1979, as advance-tax but after the due date can be considered for the purposes of the computation of interest - The assessee had paid Rs.38,700/- on 21.10.1978 - The advance tax was due by 15.9.1978 - The AO felt that the belated payment could not be treated as advance tax - Held that:- The amount deposited prior to 31st March, 1979 could be treated as advance tax. After the due date it could not be treated as advance tax for the purposes of computation of interest. It was admitted that amount was deposited after the due date and thus A.O. could not have deducted it to arrive on an amount on which interest is to be charged. It was a mistake apparent from the record and which was rectifiable and which could be corrected u/s 154. In favour of revenue
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2013 (1) TMI 45 - ITAT BANGALORE
International transactions entered with A.Es (USA) - assessee an Indian Company providing call centre services exclusively to A.E.- case referred to TPO - upward Transfer Pricing adjustment - Applicability of Multiple Year Data - Held that:- The use of the word "shall" in the main provision of the Rule makes it abundantly clear that the use of data of the current financial year (i.e. of the financial year in which the international transaction was actually entered into) is a mandatory requirement of law in the comparability analysis to be undertaken as as per Indian T.P. Regulations - thus the TPO rightly rejected the use of earlier year's data by the assessee, as the assessee failed to establish before the TPO, CIT (Appeals) or the Tribunal how such earlier year's data had an influence on the prices of the current financial years.
Use of data by the TPO after the cut off date - Held that:- Rule 10B(4) provides that the information and documents as specified under Rule 10B(1) and 10B(2) should as far as possible be contemporaneous and should exist latest by the "specified date" referred to in section 92F(4) which has the same meaning as 'due date' in Explanation 2 to section 139(1). In the assessee's case, this would be '30th day of September' as it is a company. It is clear, that the Act has not provided for any cutoff date up to which only the information in the public domain has to be taken into consideration by the TPO while arriving at the ALP - no infirmity in the action of the TPO in using contemporaneous data at the time of transfer pricing audit, though the same may not have been available to the assessee at the time of preparation of statutory transfer pricing study/documentation.
Safe Harbour - sought the benefit of +/- 5% - Held that:- The new section 92C(2A) mandates that if the arithmetical mean price falls beyond + / - 5% from the price charged in the international transactions, then the assessee does not have any option referred to in section 92C(2). Thus the + / - 5% variation is allowed only to justify the price charged in the international transactions and not for adjustment purposes accordingly the 5% benefit is not allowable in the assessee's case.
Rejection of T.P. Study - Held that:- The use of current year data is mandated by the relevant IT Rules, 1962 and by not adhering thereto, the assessee has rendered into T.P. Study unreliable. In this view of the matter, the opinion that the TPO was right in rejecting the T.P. Study submitted by the assessee.
Related Party Transactions - Held that:- Respectfully following the decision in the case of Sony India (P) Ltd. v. Dy. CIT [2008 (9) TMI 420 - ITAT DELHI-H] AO/TPO are directed to exclude after due verification those comparables from the list with related party transactions or controlled transactions in excess of 15% of total revenues for the financial year 2003-04.
Economies of Scale - Held that:- As decided in Genisys Integrating Systems (India) (P.) Ltd. [2011 (8) TMI 952 - ITAT BANGALORE] only companies within the turnover range of ₹ 1 Crore to ₹ 200 Crores should be taken into consideration for the T.P. Study. The cited case squarely applies to the assessee's case as the turnover of the assessee being approximately ₹ 66 Crores falls within the range of ₹ 1 Crore to ₹ 200 Crores. Direct the AO/TPO to consider only those companies having a turnover of ₹ 1 Crore to ₹ 200 Crores as comparables.
Comparable Companies Owning Intangiables - Held that:- It is a well accepted principle that only those companies which are on similar standards need to be considered for comparability. Therefore, companies which possess their own unique software intangibles cannot be compared with the assessee, as the former would derive significant advantage from unique software compared with the assessee, which is performing call centre services for it's A.E. in the USA.
Parent Company Losses - Held that:- As per a plain reading of the language of the provisions of section 92 it is clear that the income arising from an international transaction shall be computed having regard to the arms length price. Similar transactions carried on between unrelated parties were to be seen to come to a conclusion whether the profits earned by the assessee is justified. Thus, the arguments that the profits earned by the assessee is justified because the parent company is under losses is against the principle of arms length price. To sum up, the assessee's arguments that it has not shifted profits outside India based on the loss incurred by the parent company is not acceptable.
the assessee mainly states that the T.P. regulations being anti avoidance legislation, the TPO has to prove that tax avoidances had in fact taken place before making any T.P. adjustment - Held that: - As decided in case of Aztec Software Technology Services Ltd v. Asstt. CIT [2007 (7) TMI 329 - ITAT BANGALORE] that it is not necessary to prove that profits are shifted out of India for making a transfer pricing adjustment. Thus it is not necessary for the TPO to demonstrate tax avoidance and diversion of tax/income before invoking the provisions of section 92C and 92CA of the Act.
Individual Companies for Comparability - Vishal Information Technologies Ltd. (VIT) - Held that:- An in the case of this comparable the Mumbai Tribunal in the case of Asstt. CIT v. Maersk Global Service Center (India) (P.) Ltd. [2011 (11) TMI 465 - ITAT MUMBAI] has held that since Vishal Information Technologies Ltd is outsourcing most of its work it has to be excluded from the list whereas the assessee in the cited case was carrying out the work by itself. In the instant case of the assessee also the assessee was carrying out its work by itself exclusion of Vishal Information Technologies Ltd. from the list of comparables warranted.
Wipro BPO Ltd. - Held that:- the turnover/Revenue of Wipro BPO Ltd. in the period relevant to Assessment Year 2004-05 is ₹ 322 Crores. Further, this company having the influence of "Wipro" brand may be seen as having its unique intangibles.
Tricom India Ltd. & Fortune Infotech Ltd. - Held that: - Has registered an abnormal growth of 33% increase in PAT in the relevant period due to the fact that it has developed its unique software to provide BPO services to its customers.
Spanco Telesystems & Solutions Ltd. - Held that:- this company has a clearly demarcated call centre segment and segmental results are available in the audited financial statements of the company and therefore see no reason why this company should not be considered as a comparable - grounds seeking its exclusion is rejected.
M/s. Ultra Marine Pigments Ltd. - Held that:- The assessee has not been able to demonstrate with any evidence to support that the profit of the comparable company was abnormally high. It must not be overlooked that high profits reflect better business sense and practices also - grounds seeking its exclusion is rejected.
Apollo Health Street Ltd. - Held that:- Perusal of its annual report for F.Y. 2003-04 though it does not appear to have any related party transactions, it is seen that out of its total revenues of ₹ 12.2 Crores, only ₹ 6.50 Crores i.e. about 54% of its revenue was received from ITES. This shows that significant Revenue earning of about 46% is not from IT enabled services which will render it functionally different and not comparable.
MCS Ltd & Tata Share Registry - Held that:- The assessee caters to the export market, whereas these two companies cater to the domestic market - rejection warranted.
Depreciation adjustment - Additional ground of appeal - Held that:- Mere claim for an adjustment will serve no purpose unless it is backed by proper details - remit the issue to the file of the AO/TPO to consider it.
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2013 (1) TMI 44 - JHARKHAND HIGH COURT
Loss on written down value of fixed assets - assets got vested in Nigerian company due to certain restrictions imposed by the Government of Nigeria - a capital loss or trading loss? - Held that:- The impugned order passed by the Tribunal allowing the claim of bad debt does not speaks about the core issue that how there exists an element of bad debt in whole of the transaction. Tribunal has not decided as to for what reasons, the reasons given by the appellate authority ware found to be wrong and virtually it is a nonspeaking order, deciding nothing.
This appeal is allowed on this ground as Tribunal has not applied its mind to the question referred which should be answered by the Tribunal. Therefore the matter is remanded to the Tribunal back to decide the appeal in accordance with law after considering the reasons given by the appellate authority as well as submissions made by both the parties by giving reasons.
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2013 (1) TMI 43 - KERALA HIGH COURT
Deduction u/s 80HHC - Assessee is an exporter of cashew kernels - Profit on sale of Duty Entitlement Pass Book (DEPB) - Issue raised by the assessee and considered by the Tribunal only with respect to the reopening of the assessment u/s 147 – Assessee file appeal u/s 260A with High Court challenging retrospective amendment made by the Finance Act 2005 in Section 80HHC – Held that:- The validity of a provision cannot be considered or adjudicated upon by the Tribunal constituted under the Act. Section 260A provides for an appeal from every order passed by the Appellate Tribunal; if it involves a substantial question of law.
Such question of law should arise from the order of the Tribunal. If the Tribunal cannot consider the validity of a retrospective amendment, no doubt such question does not arise from its order and the jurisdiction conferred on the High Court under Section 260A cannot also enable the High Court to consider such validity or otherwise. Decides against assessee
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2013 (1) TMI 42 - ITAT CHANDIGARH
Deemed dividend u/s 2(22)(e) - CIT(A) deleted the addition - Held that:- There is no doubt that M/s Radhe Sham Jain Diamond Jewellers (P) Ltd is a company the assessee i.e. Shri Radhe Sham Jain is holding more than 10% shares was incorporated by way of conversion of proprietorship business of Jain Diamond Jewellers on 9.2.2008. Perusal of the balance sheet of the proprietorship concern on 9.2.2008 clearly shows that there was a capital balance of ₹ 12,34,430/-. There was also a liability on account of cheque issued - OBC to the extent of ₹ 1.50 crores. Perusal of the capital account of the assessee in the proprietary concern also shows that there was opening capital balance of ₹ 1,64,34,402/-. There are various transactions done in the capital account till 8.2.2008 and there was a credit balance of ₹ 1,59,39,810/- on that date. Against which payment of ₹ 1.50 crores was made by the proprietorship concern to the assessee i.e. Shri Radhe Sham Jain on 8.2.2008. This cheque was not encashed and shown as liability in the balance sheet. Because of the conversion of proprietary concern into a Private Limited company the cheque could not be encashed later on and the same was returned to the Private Limited Company which has been credited by the company to the assessee's account on 15.3.2008. Thus it is clear that this amount belonged to the assessee on account of capital in the proprietorship concern and because the cheque could not be encashed, therefore, the money belonged to the assessee which has credited by the company.
The so called cheque on account of loan or advance which have been issued by the Company have been issued only after 15.3.2008. The AO has failed to appreciate that because of the conversion of the proprietorship concern, the cheque could only be encashed by the assessee. Since all the assets have been taken over by the Private Limited company, the said company owned assessee this amount of ₹ 1.50 crores which was credited to his account on 15.3.2008. Because of non-encashment of the cheque the same is not reflected in the bank statement. This fact has been correctly appreciated by the ld. CIT(A).
CIT(A) has also correctly noted that there was definitely a debit balance amounting to ₹ 11,75,569/- on 29.3.2008 in the name of the assessee in the books of the Private Limited company. However, he has correctly restricted the addition to ₹ 34,858/- i.e. to the extent of accumulated profits. As decided in P.K. Badiani v. CIT [1976 (9) TMI 3 - SUPREME COURT] that accumulated profits would mean profit in the commercial sense and not assessable taxable profits - share premium account would not partake the nature of commercial profits and therefore, by no stretch of imagination, this can be called accumulated profits - appeal of the Revenue dismissed.
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2013 (1) TMI 41 - ITAT MUMBAI
Disallowance of expenses u/s 14A – Rule 8D - Expenditure incurred in relation of exempt income - Whether any income has been earned or not, expenses incurred in relation to the said investment which is not going to result into any taxable income has to be disallowed u/s 14A - Assessee had made investment in the units of mutual fund – Held that:- Following the decision in case of GODREJ AND BOYCE MFG. CO. LTD. (2010 (8) TMI 77 - BOMBAY HIGH COURT) that Rule 8D which is applicable only from assessment year 2008-09 and in respect of prior years, disallowance of expenses relating to exempt income both direct and indirect expenses has to be made on a reasonable basis after allowing opportunity of hearing to the assessee. Issue restore back to decide in light of said judgement AO.
Disallowance of interest u/s 36(1)(iii) – Nexus between borrowing with the business activity - Assessee engaged in the business of syndication activities and insurance business - AO argued that syndication activities were of the nature of liaison activity resulting into commission income - Nexus between huge borrowings made by the assessee to the tune of Rs.4.59 crores with the business – Given interest free advances of Rs.1.13 crores – Held that:- In the immediate preceding year i.e. 2006-07, assessee had the same activities and interest on borrowings of Rs.3.70 crores had been allowed by the AO which means that AO accepted the nexus of borrowings with the business activities. Therefore, in the current year, no disallowance of expenses can be made in relation to opening balance of Rs.3.70 crores. The disallowance can only be made in relation to interest free advances given by the assessee. Therefore, disallowance has to be made only in relation to such interest free advances @ 14.5% as done in earlier year. Partly allowed in favour of assessee
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2013 (1) TMI 40 - MADRAS HIGH COURT
Exemption u/s 10B - Tax holiday in respect of profits and gains - 100% E.O.U – Calculation of turnover - Whether job work chargers are included in total turnover to calculate profit for the purpose of giving exemption u/s 10B - Assessee is engage in business of purchase of textile material, stitching and exporting garments - Export turnover in respect of articles or things in proportion to total turnover – Held that:- The Section 10B defines the "export turnover". The total turnover carried on by the assessee need not necessarily be confined to export sales or local sales, but would also include the job work done by the assessee. Therefore, sub contract receipts and stitching charges as amounting to local sales for the purpose of granting 100% exemption to the assessee. In favour of revenue
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2013 (1) TMI 39 - KARNATAKA HIGH COURT
Depreciation - Capital subsidy – Commissioning of Power Plant – Explanation 10 to Section 43(1) – Whether subsidy received by assessee directly or indirectly from Central Government or a State Government, is reduced from actual cost of asset for the purpose of calculation of depreciation - Treatment of subsidy from cost of assets for calculating depreciation - Assessee is engaged in manufacturing sugar, ethanol, rectified spirit and co-generation of power - Assessee has received the subsidy from the Government of Karnataka for commissioning co-generation plant – Held that:- Yes, According to Explanation 10 and proviso to sub-section (1) of Section 43, the subsidy amount shall be deducted in the actual cost of the asset of the assessee. The contention of the assessee that the subsidy received towards the Generation Plant shall not be reduced from the actual cost of the assets is not correct. In favour of revenue
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2013 (1) TMI 38 - ITAT MUMBAI
Search u/s 132(1) - Assessee firm carried on the business of diamond – During search found stock of nearly 70,000 carats of cut and polished diamonds and Indian currency of over Rs. 27 lakhs
Additional evidence – Rule 46A - Assessee had retracted from the original statements - Filing of additional evidence after 30 months of the date of seizure – AO argued that it was an afterthought - able to build a concocted story to avoid tax incidence – Held that:- CIT(A) admitted the additional evidence only after coming to a conclusion that the interpretation of the seized document goes to the root of the issue and from the remand report. In the remand proceedings, it was the AO, who was satisfied that the stock of diamonds found from the assessee was actually the “jangad stock” and not the trading stock and belonging to Shree Meena International and the conclusion of the three layered investigation conducted by the AO was, “nothing adverse is noticed”. Hence admit additional evidence
Interpretation of a noting in document - Initially the interpretation was given that this represented own trade of diamonds - later on it was retracted that it was the jhangad stock - Shown the impugned amount as liability - Jhangad stock, till the stock is approved, this stock remains with the adahtia till, either it is sold or returned - Held that:- The assessee was an adatiya and the notings found on the seized document, relied upon by the department, clearly indicate that they pertained to janghads given to an adahtiya (assessee herein), and does not, pertain to independent diamond trading of the assessee. Therefore, endorse and agree with the findings arrived at by the CIT(A). In favour of assessee
Unaccounted sale – Whether addition can be made on presumption basis in case search & seizure - AO picked up the accounted figure of sale in each of the concerned year - Applied the 75% proportion thereon - Arrived at the figure of unaccounted sale figure – Held that:- The addition is on presumptions and really not based on facts. Since it is a case pertaining to search and seizure operation, the addition should have been made on material found and not on “inferential presumption”. In favour of assessee
Addition on the basis of initial capital in the undisclosed business – Held that:- There is no other business of the assessee except for adahtiya business and if we go in accordance with the statement of Mr. Bharat Kakadiya taken on 26-05-2005, that he had become the partner in the assessee firm in 1994-95. Therefore, question of initial capital in assessment year 2000-01 cannot be accepted. In favour of assessee
Disallowance of labour charges – AO called for confirmation - Notice u/s 131 - Excessive payments of labour charges - Assessee had paid Rs. 200 per carat whereas the market is Rs. 25 or Rs. 30 per carat – Labour did not respond query – Held that:- Assessee submits complete details in the form of confirmations and copies of account of all four job workers, to whom payments were made through banking channels and even TAS has been deducted. We have noted that the addition made and sustained are not on sound footing, because either the entire amount should have been sustained or none at all, but once, the entire job work charges paid to one person out of four is accepted, then both the issues of excessiveness and non-genuineness fail. In favour of assessee
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2013 (1) TMI 37 - ITAT MUMBAI
Deduction u/s 10A – Export proceeds not received within six month – Draft misplace by bank - Assessee was engaged in the business of manufacturing and export of processed food products – Assessee contended that foreign remittances had been sent by the foreign buyer to the banker who misplaced the same and, therefore, since remittances were received in India, claim of deduction should be allowed – Held that:- Unless the foreign remittances are credited in the account of assessee or at least credited in the account of the bank, it cannot be said that the export proceeds have been received in or brought into India. It is not clear whether these remittances have been included in the total turnover in the P&L account. We, therefore, direct the AO to re-compute deduction under section 10A by including the said remittances in the total turnover and by excluding the same from export turnover and excess claim if any will be disallowed. The profit of business will be computed excluding the remittances in the total turnover. In favour of revenue
Disallowance of depreciation on plant and machinery - Treatment of subsidy received from the Government in the computation of depreciation on p&m – Held that:- There is nothing on record to show that subsidy had been granted by the govt. towards any specific asset or p&m. Therefore, merely because amount received had been utilized for acquisition of p&m, it cannot be said that subsidy was to meet cost of any asset. It is a settled legal position that only subsidy granted specifically towards a particular asset has to be reduced from cost of that asset while computing depreciation. There is no material to show that the subsidy in this case had been granted to meet cost of p&m the disallowance of depreciation corresponding to subsidy cannot be upheld. In favour of assessee
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2013 (1) TMI 36 - ITAT DELHI
Addition on account of foreign exchange fluctuation loss – Loss on restating the exchange rate of all foreign transaction outstanding as on balance sheet date – AS 11 - AO argued that loss claimed was notional in nature and not actual loss - Following the decision in case of Woodward Governor India P. Ltd. (2009 (4) TMI 4 - SUPREME COURT) loss suffered by the assessee on account of fluctuation in the rate of foreign exchange, as on the date of the balance sheet, is an item of expenditure u/s 37(1). In favour of assessee
Disallowance u/s 40A(2)(b) - Payment of management consultancy fees to related party – CIT(A) confirmed the findings of AO that the payment was hit by section 2(22)(e) - Held that:- AO had required the assessee to substantiate its claim that the payments were made for business purposes and were not collusive in nature because payments were made to parties falling within the categories of section 40A(2)(b). However, after considering the assessee’s reply he, inter-alia, concluded that the payment was hit by section 2(22)(e). The AO had not given any notice in this regard to assessee. Hence issue remand back to AO
Disallowance u/s 14A – Rule 8D – Whether AO can apply Rule 8D without verifying the correctness of the claim of the assessee in respect of such expenditure in relation to income which did not form part of the total income of assessee - 5% of average value of investment towards deemed expenses relating to tax free income – Held that:- The mandate of section 14A(2) clearly requires the AO to first consider the assessee’s claim and after rejecting the same should resort to Rule 8D. We, therefore, consider it in the interest of justice that the matter should be restored back to the file of AO
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2013 (1) TMI 35 - ITAT NEW DELHI
Difference between the income appearing in TDS certificate and income offered for taxation - TDS claim on advance against running contracts - Credit for TDS in the Income tax return amounting to Rs. 6.18 crores - Corresponding amount reflected in the said TDS certificates is to the tune of Rs. 259.42 crores - Assessee has shown contract sales of Rs. 306.73 crores after reducing advance of Rs. 29.08 crores - The said advance of Rs. 29.08 crores has not been considered as income but considered as liability in the balance sheet - Accounting Standard 7 – Held that:- A.O. has not pointed out any specific defect or discrepancy in the books of accounts. No doubt it is not only the right but also the duty of the A.O. to consider whether or not the books disclosed the true state of accounts and the correct income can be deduced therefrom. The procedure of the A.O. is of judicial nature and in making the assessment he should proceed on judicial principles. If evidence is produced by the assessee in support of its return it should be accepted unless it is rebutted by admissible evidence and not by mere hearsay. In favour of assessee
Disallowance u/s 40(a)(ia) – TDS deducted but paid after due date - Payment of expenditure made before last month of A.Y. on which TDS was deducted but paid after 31st March – Held that:- Amendment to the provisions of Sec. 40(a)ia), by the Finance Act, 2010 is applicable retrospectively from 1.4.2005. Undisputedly the payment of TDS has been made before due date of filing of the return. Return has been filed u/s 139(1), therefore, no disallowance can be made on account of non-payment of TDS u/s 40(a)(ia) on these facts. Therefore, the order of CIT(A) remained uncontroverted. In favour of assessee
Addition on account of non-inclusion of excise duty in the closing stock of finished goods – Adjustment of excise duty in valuation of closing stock of finished goods - A.O. argued that these amounts have not been included in the valuation of closing stock of finished goods in terms of provisions of sec. 145 – Held that:- The excise duty relating to closing stock of finished goods was Rs. 63,61,688/- out of which Rs. 51,68,020/- has been shown to be paid in view of the provisions of sec. 43B in respect of clearance up to 31st July 2008 and balance amount of Rs. 11,93,668/- has already been added in the computation as disallowance u/s 43B, therefore, if the contention of the department is accepted, then this would amount to double addition because of the reason that assessee has added itself and as the same was paid before the due date of filing of the return and therefore to this extent the amount was claimed as deduction on account of excise duty paid. In favour of assessee
Addition on account of non-inclusion of excise duty in the closing stock of raw material – Adjustment of excise duty in valuation of closing stock of finished goods - A.O. argued that these amounts have not been included in the valuation of closing stock of finished goods in terms of provisions of sec. 145 - Assessee has maintained exclusive method – Held that:- The opening balance on account of excise duty is also adjusted and thereafter closing amount of excise duty is also adjusted and if both these amounts are taken into consideration then there is no effect of computation of income. Restore this issue to the file of A.O. to examine the issue afresh in view of our observations above and after affording opportunity to the assessee of being heard. Remand back to AO
Addition on account of Bad debt – Held that:- Following the decision in case of T.R.F. LTD. (2010 (2) TMI 211 - SUPREME COURT) that there is no dispute that these amounts were written off in the books of a/c on account of irrecoverable. In favour of assessee
Disallowance u/s 14A – Rule 8D – Expenditure incurred on earning exempt income – Held that:- Issue needs fresh consideration in accordance with the decision in case of Minda Investments Ltd., (2010 (10) TMI 126 - ITAT, NEWDELHI). Remand back to AO
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2013 (1) TMI 20 - ITAT MUMBAI
Deduction u/s 80IB – Computation of income - Assessee engaged in the business of manufacturing and sale of abrasive and refractory products - Expenditure related to electricity for working out deduction u/s 80IA – Assessee has filed the working relating to allocation of electricity charges attributable to Dry Vibration Cement (DVC) Plant Rs. 7,94,075/- as against the allocation of power consumption expenses worked out by the A.O. Rs. 8,15,360/ - Held that:- A.O. after considering the assessee’s submission, without pointing out any defect in the working given by the assessee to show that power cost computed by the assessee Rs. 3600/- in round figure is less than the actual cost of electricity pertaining to DVC plant. Disallowance made by the A.O. in this regard and partly sustained by the CIT(A) is not sustainable in law and accordingly we direct the A.O. to consider cost of power Rs. 3600/- only pertaining to DVC plant and work out the deduction u/s 80IA. In favour of assessee
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2013 (1) TMI 19 - GUJARAT HIGH COURT
Escaped assessment – Re opening of assessment – Search u/s 132 – Statement on oath u/s 132(4) -
Whether filing the ROI before the wrong A.O. amounts to non-filing of return – Held that:- The said ground for reopening the assessment is, therefore, not a valid ground. On the basis of such return the concerned A.O. has already framed assessment u/s 143(3) in respect of which the respondent in the affidavit-in-reply has stated that the assessment order does not lack jurisdiction. Thus, for this reason also, the said ground is rendered unsustainable
Whether there was any failure on the part of the petitioner to disclose fully and truly all material facts for his assessment – Held that:- Assessee had not disclosed to the AO that he had made such disclosure which he had subsequently retracted as according to him, there is no duty cast upon him to make such disclosure while filing his return of income. It is true that the petitioner had subsequently retracted the said statement. However, the petitioner in his statement recorded during the course of search having stated that the said income would be disclosed while filing the return for A.Y. 1995-96 ought to have brought such fact to the notice of the Assessing Officer. The contention that there was no obligation cast upon the petitioner to make such disclosure while filing the return of income, does not merit acceptance.
Assessing Officer had made some efforts and examined the record of the previous assessment year, he may have come to know that this was a search and could have taken consequent action thereon. However, that by itself would not absolve the petitioner from the duty to disclose all primary facts before the Assessing Officer
Merely because the format in which the return is required to be filed does not provide for any column wherein the assessee is required to state that this is a search case and that he had made certain disclosures during the course of search, does not mean that an assessee is not required to disclose other facts that are material for his assessment
At the cost of repetition it may be stated that the fact regarding the petitioner having made a disclosure, though subsequently retracted, was material for the assessment of the petitioner for the assessment year under consideration. Thus, by not disclosing such material fact, evidently, the petitioner has failed to disclose fully and truly all material facts necessary for his assessment
Decision - Appeal decides in favour of revenue
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2013 (1) TMI 18 - ITAT DELHI
Computation of Income from House property - Vacancy allowance - applicability of Sec. 23(1)(c) or Sec. 23(4)(b) - CIT(A) applied the standard rate of MCD in determining the annual letting value - Held that:- A perusal of section 23(1)(c) clearly shows the unambiguous requirements of the said section that where the property was vacant during the year and due to such vacancy, the actual rent received or receivable in respect thereof is less than the sum for which the property might reasonably be expected to be let from year to year, the amount so received or receivable shall be deemed to be the annual value of such property. On the other hand, as per section 23(4), where the property consists of more than one house, the annual value thereof shall be determined as if such house had been let.
As per Section 23(1)(c), if any part of the property was let out and was vacant during the year or any part thereof, and due to such vacancy, the annual rent received or receivable was less than the sum for which the property might reasonably be expected to let from year to year, the lesser of the two amounts, i.e., the amount received or receivable, is to be the annual value of the property. Section 23(4), on the other hand, refers to property where it consists of more than one house, as in the present case. As per this Section, the annual value of such property shall be determined as if the property has been let. Now, the provisions of Section 23(4)(b) are very clear that where the property consists of more than one house, the annual value thereof shall be determined u/s 23(1), as if such property had been let. This re-directs us to Section 23(1).
Applying Section 23(1) to the facts of the present case, it is Section 23(1)(c) which shall again come into play inasmuch as it remains undisputed, as observed hereinabove, that the property was let, but was vacant during the year, due to which vacancy, the actual rent received or receivable by the assessee in respect of such property was nil. Nil rent, then, it cannot be gainsaid, is evidently less than the sum for which the property might reasonably be expected to let from year to year. On this score itself, the grievance of the department loses whatever force it could have had, if any.
Reverting back to Section 23(4), it makes reference to "property referred to in sub-section (2)" of Section 23. Section 23(2) talks of "the property" and the only difference is that whereas Section 23(2) talks of a house or a part of a house and Section 23(4) considers property consisting of more than one house. As per Section 23(4)(a), the concession will be available to the assessee only with regard to one of the houses constituting the property and the ALV of the remaining houses shall have to be determined, in case, all the houses are in the occupation of the assessee. In the present facts, this is not the case and the two houses, as discussed, were let earlier, but were lying vacant during the year. As such, Section 23(4)(a) is not applicable.
Section 23(4)(b) is applicable, as considered, and it leads back to Section 23(1). So the situation is back to square one. Undoubtedly, it was to cure the inequity of taxing vacant properties under a notional charge, that Section 23(1)(c) was brought on the statute book by virtue of the Finance Act of 2001 w.e.f. 01.04.2002, as rightly contended on behalf of the assessee, in order to provide simplified determination of annual value of property on allowing deductions in computing the ALV itself on account of vacancy and unrealized rent. Thus, looked at from any angle, it is the provisions of Section 23(1)(c) which are applicable hereto and none other. Accordingly, CIT(A) was correct in applying the said Section to the present case - against revenue.
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2013 (1) TMI 17 - MADRAS HIGH COURT
Undisclosed income – Block assessment – Search & Seizure – Income accrue or arise outside India - Money received from abroad - Gift from relative abroad - Income earn by N.O.R. outside India - Assessee's status is of a person "Not Ordinarily Resident" in India - AO argued that amount received by assessee represented gifts from her relatives abroad – Assessee contended that the money was received from out of rental income - Provision of Section 5(1)(c) – Held that:- If the claim that it was a rental income which had accrued or arisen outside India, is true, then, the theory of gift made by her brothers and mother could not stand.
If the assessee contends that that the benefits of proviso to Section 5(1)(c) enures to the advantage of the assessee, then, the assesee has to prove what is required under the provisions of the Act viz., that she had not derived any income outside India from the business controlled or a profession set up in India. A mere claim that the assessee is "Not Ordinarily Resident" in India does not take the assessee automatically away from the purview of Section 5.
In the absence of any material placed before the authorities concerned that such income had accrued or arisen outside India, decides in favour of revenue
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2013 (1) TMI 16 - ITAT CHENNAI
Difference in arm's length price - CIT(A) deleted an addition as AO had not made such an addition based on Section 92(3) but had applied Section 10B r.w.s. 80-IA(10) for such addition - AO referred case to TPO - Held that:- A reading of the above reproduced order of the TPO will clearly show that the prices at which assessee sold its products to its Associate Enterprise were much higher than the arm's length price fixed by the TPO. Sales, as per the books, effected by the assessee to its Associate Enterprise came to Rs. 24,26,80,083/- , whereas, the arm's length price was Rs. 18,79,25,631/- only. There is nothing whatsoever in the order of TPO which required or recommended any adjustment to the value of the international transactions. TPO did not deem it necessary to effect any revision of the sales price as shown by the assessee in its books. Such a recommendation was not made since substituting the sale price shown by the assessee with arm's length price determined, would have resulted in the income getting reduced - There being no recommendation by the TPO for any revision in the arm's length price A.O. was not at all required to make any adjustment in the arm's length price.
AO invoking the provisions of s. 80-IA(10) r/w s. 10B(7) - Held that:- Considering the case decided in Tweezerman (India) (P.) Ltd. v. Addl. CIT [2010 (4) TMI 892 - ITAT CHENNAI] the provisions of s. 80-IA(10) do not give an arbitrary power to the AO to fix the profits of the assessee. The AO has to specify as to why he feels that the profits of the assessee are being shown at a higher figure. He has further to show as to how he has computed the ordinary profits which he deems to be the ordinary profits which the assessee might be expected to generate. The fact that the AO has also not shown any calculation on the basis of which he has determined the excess profit received by the assessee cannot stand in view of the fact that he has not shown as to what he feels is the actual ordinary profit which the assessee could have generated nor has he shown any particulars he has used for arriving at such a figure especially when the assessee himself has filed the calculation showing the error in the difference between the profits and the ALP as filed before the TPO. Under these circumstances the reduction of the eligible profits of the assessee as done by the AO by invoking the provisions of s. 80-IA(10) r/w s. 10B(7) is unsustainable and consequently the same is deleted - no reason to interfere with the order of CIT(Appeals).
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2013 (1) TMI 15 - MADRAS HIGH COURT
Period of limitation – Block assessment – Chapter XIV-B - Time limit for completion of block assessment - The assessee was also subjected to search on 19.1.1996 - Notice of assessment issued on 20.9.1996 - The assessment was made on 22.9.1997 - Revenue took the plea that the case of the assessee fell u/s 158BD - Assessee contended that case will be covered u/s 158BC – Held that:- When the limitation for completion of the assessment u/s 158BC is one year from the end of the month in which the last of the authorisation for search was executed and it having already expired. Decides in favour of assessee
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2013 (1) TMI 14 - ITAT LUCKNOW
Computation of income – Deduction u/s 80IB(10) - Revenue recognition - No construction activity was carried out at all during the year - CIT(A) accordingly directed the A.O. to recompute the income of the assessee – Held that:- CIT(A) is only empowered either to confirm, reduce, enhance or annul the assessment. He has no power to set aside the matter to the AO for either framing assessment de novo or to compute the income in a particular manner. As far as findings on merit are concerned, none of the parties have any objection. Therefore, CIT(A) to compute the income himself in a manner prescribed by him in his order without interfering the findings on merit. Remand back to CIT(A)
Disallowance of expenditure – Section 14A read with rule 8D – Expenditure in relation to earn exempt income - Restriction of administrative expenses – Applicability of Rule 8D - Assessment year involved in the issue is 2007-08 – Held that:- Rule 8D would not be applicable in the case of the assessee as it would be applicable from assessment year 2008-09. Since the Revenue has not placed any judgment contrary to the judgment relied upon by the assessee. Therefore confirm the same. In favour of assessee
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