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The Commissioner of Income Tax, The Deputy Commissioner of Income Tax And Others Versus M/s HMA Data Systems Pvt Ltd And Others

Sale of equity shares - Capital gain vs Income from business - Disallowing the expenditure relating to Travel by the executive for the purpose of business - Disallowance of technical support charges - Disallowance of technical support charges - Disallowance of professional charges - Held that:- The CIT(A) has noticed that the balance sheet along with its enclosures of the earlier 2-3 years, assessee has been showing the value of the shares of Diebold HMA Private Limited at ₹ 50,00,000/- an .....

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f travel expenditure - The assessee had not discharged the burden cast on it by furnishing the details like the business visa, at whose invitation the business trip was held, proof of any meetings abroad and the details alike. In that view of the matter, the order of assessing Officer as affirmed by the lower appellate authorities cannot be found fault with. - Decided against the assessee.

Disallowance of technical support charges - Undisputedly, assessee did not place any material to .....

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ctivity in the year under consideration, the burden was on the assessee to prove the business expediency to claim expenditure. - Decided against the assessee.

Disallowance of professional charges - The Tribunal has rightly noticed that the exercise undertaken by the assessee in the book is to transfer the same from pre-paid professional charges to professional charges account and held that in the year under consideration, expenditure took place and accounted for in the books. Hence, t .....

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llant : Shri K V Aravind, Standing Counsel For the Respondents : Sri A Shankar And Sri M Lava, Advs JUDGMENT These two appeals have been preferred by the Revenue and the assessee respectively being aggrieved by the order passed by Income Tax Appellate Tribunal, Bangalore Bench in ITA No.1154/Bang/2009 dated 29.05.2009 whereunder the Tribunal has held: (i) income earned on the sale of 50,000 equity shares of M/s. Diebold HMA Pvt. Ltd., was liable to be brought to tax under the head "Capital .....

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r the Appellate Authorities were correct in holding that the income of ₹ 21,55,47,800/- earned on the sale of 50,000 equity shares of M/s.Diebold HMA P. Ltd., was liable to be brought to tax under the head "capital gains" and not "income from business" as held by the Assessing Officer despite the assessee increasing the profit and loss account in respect of the value of the shares for each assessment year from the date of purchase i.e., assessment year 1992-93? (ii) Whe .....

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e deducted from the sale value when computing capital gains tax when the actual payment accrued and was paid in the earlier assessment year 2003-04 and allowing the claim during the current assessment year would distort the profits of the current year?" 2. ITA 684/2009: (i) "Whether the Tribunal was justified in law in holding that the appellant is not entitled to the deduction on account of technical support charges on the facts and circumstance of the case? (ii) Whether the Tribunal .....

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nd sale of equipments and maintenance. For the assessment year 2004-05 return of income came to be filed declaring its total income at ₹ 3,70,66,590/-. The assessing officer after issuing notice under section 143(2) after selecting the return for scrutiny has proceeded to frame the assessment order under Section 143(3) by order dated 22.12.2006, whereunder disallowances to the tune of ₹ 2,67,85,610/- was made. During the previous year relevant to the assessment year, assessee sold 50 .....

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e treated as Rs.income from business . It was also noticed by the assessing officer that professional charges of ₹ 1,19,09,768/- debited to profit and loss account is to be disallowed to an extent of ₹ 24,93,800/- on the ground that such professional charges related to sale of shares and the payment relating to this expenditure had been made in the year 2002-03 but accounted to in the assessment year 2004-05. Hence, assessing officer came to a conclusion that payment was made outside .....

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e and his finding came to be affirmed by Tribunal. Further, assessing officer also disallowed a sum of ₹ 18,55,756/- claimed by the assessee as expenditure relating to abroad travel by the company s Managing Director and his wife on the ground that there was no business activity justifying their foreign travel for business purposes. A sum of ₹ 94,74,184/- claimed by the appellant as Rs.technical support charges paid towards promotion of products and services in North America was also .....

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ed by the assessee which finding has been affirmed by the Tribunal has been questioned by the revenue in ITA No.700/2009. The assessee being aggrieved by the finding of the assessing officer who disallowed the expenditure relating to foreign travel by the Managing Director and his wife and disallowing the amount paid by the assessee as 'technical support charges to professionals on the ground that such activity had not been put into practice came to be affirmed both by the CIT (A) as well as .....

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ome from Business" though assessee had increased the profit and loss account in respect of the value of shares for each assessment year from the date of purchase of shares namely, from 1992-93. He would also contend that the amount paid towards legal charges was liable to be deducted from the sale value when computing capital gains tax when the actual payment accrued and was paid in the earlier assessment year 2003-04 and allowing the claim during current assessment year would distort the p .....

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red by the assessee and merely because there was no business activity, per se would not indicate that there was no business activity by the assessee. He would also elaborate his submission by contending that professional charges paid to H.M.A.S., an American based company was on the basis of contract entered into by the assessee with the said Firm to render professional services in the form of market input and other issues as detailed in the contract and accordingly, as per the contractual term, .....

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etition, it is noticed that assessee had purchased 50,000/- shares of M/s.Diebold HMA Private Limited during the year 1992-93 and sold the same during the previous year relevant to the assessment year 2004-05 for a total consideration of ₹ 21,55,47,800/- and declared a long term capital gain of ₹ 20,51,66,634/- in its return of income. The assessing Officer denied the benefit of long term capital gains and held that it should be treated as 'income from business . The CIT(A) has n .....

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ssessee has been in the business of purchase and sale of investments year after year and has been debiting the P & L A/c with increase or decrease in the value of investments under the head 'revaluation of investments , is far from the facts. In that view of the matter, we are not inclined to accept the contention of the revenue and we are of the considered view that the finding recorded by the CIT (A) which has since been affirmed is a question of fact. Hence, substantial question of la .....

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d no explanation was forthcoming to establish the nexus of travel to that of business purpose. Undisputedly, before the assessing Officer as well as before the CIT(A), assessee could not substantiate the claim by producing cogent evidence with regard to expenditure incurred towards the Director s foreign travel to the extent of disallowance made by the assessing Officer. The assessee had not discharged the burden cast on it by furnishing the details like the business visa, at whose invitation th .....

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10. The assessing Officer disallowed a sum of ₹ 94,74,184/- claimed by the assessee as technical support charges towards promotion of products and services in North America on the ground that there was no business activities and the agreement on which the assessee based its claim was an agreement which was not put into practice. This finding of the assessing Officer came to be affirmed by CIT(A) as well as by the Tribunal. The assessee made payment of $1,00,000 on 14.07.2003 and $1,06,000 .....

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nce of any commercial expediency of incurring such expenditure, the disallowance was sustained by both the appellate authorities. It cannot be gainsaid by the assessee that even in the absence of any evidence, the claim ought to have been allowed. The mere existence of a technical agreement with HMAS was not sufficient and there being no business activity in the year under consideration, the burden was on the assessee to prove the business expediency to claim expenditure. Hence, all the authorit .....

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