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Showing 41 to 60 of 1066 Records
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2014 (10) TMI 1036 - ANDHRA PRADESH HIGH COURT
Provisional attachment of the properties - mis-declaration of net worth for allotment of coal blocks - proceeds of crime - HELD THAT:- Once a complaint is received by the Enforcement Directorate that a person is involved in money laundering, the Enforcement Directorate sets in motion the investigation on the allegations of money laundering against the person. Chapter-II of the Act prescribes offence of money laundering and the punishment thereof. Chapter-III prescribes procedure for attachment, adjudication and confiscation of property - Prosecuting for offence of money Laundering requires a full fledged trial and takes considerable time. In the meantime, unless the property is attached, the person is entitled to deal with the property. It is possible for the person to completely dispose of the properties which are acquired by committing crime of money laundering, and also can conceal or deal with such property, which would ultimately frustrate the proceedings for confiscation under the Act. The scheme of the Act would bring out that if the Enforcement Directorate has reason to believe that the property in possession of a person against whom crime is already registered is acquired as a result of proceeds of crime and he has reason to believe that there is possibility to conceal or transfer or deal with in any manner which may result in frustrating the proceedings relating to confiscation of such proceeds of crime, he can provisionally attach the property.
Wide amplitude of powers are vested in the adjudicating authority in dealing with the matter concerning the attachment of properties. A bare look at the provisions of Sections 5 and 8, it cannot be said that Adjudicating Authority is not competent to go into the manner of exercise of power by Enforcement Directorate under Section 5(1). The Adjudicating Authority shall afford due opportunity of hearing to the person concerned. He is mandated to consider all aspects and on duly considering the submissions of the aggrieved person shall record a finding that all or any of the properties shown in the notice issued under Section 8(1) are involved in money-laundering.
The petitioners have effective and efficacious statutory remedies to prove the nature of acquisition of assets and to ventilate their grievances. Furthermore, at the stage of provisional attachment the person concerned is not dispossessed of the property, but is only prevented from dealing with the property till orders are passed by the adjudicating authority under Section 8(2). Against order of the adjudicating authority under Section 8(2), appeal shall lie to the Appellate Tribunal under Section 26 and further appeal to the High Court under Section 42 - The Joint Director is competent to pass orders of attachment. It is not a case of lack of jurisdiction to Enforcement Directorate. Violation of principles of natural justice at the provisional attachment stage does not arise as statute has not made provision of opportunity of hearing prior to provisional attachment. Decision to attach is based on the assessment by Enforcement Directorate as per material in its possession. It is a tentative decision. Such decision is to be placed before the Adjudicating Authority.
Petition dismissed.
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2014 (10) TMI 1035 - MADRAS HIGH COURT
Revision of assessment order - opportunity of being heard not provided - violation of principles of natural justice - HELD THAT:- While issuing the notice dated 30.12.2013 the respondent had stated that the petitioner/ dealer are given an opportunity of hearing and file their objections if any, within 15 days of the receipt of the notice. Further, the notices indicate that apart from the petitioner's right to file their objection, opportunity of being heard would also be afforded. Under normal circumstances, the first requirement is to file an objection/reply to show cause notice - Though there would have been an intention for giving personal hearing in the show cause notice, the personal hearing ought to be fixed by the respondent and not that the petitioner should seek for a personal hearing to produce the records, since it is a proposal to revise an assessment already made. Since there is violation of principles of natural justice this Court has to interfere with the revision order.
The matter is remanded back to the respondent for fresh consideration - Petition allowed by way of remand.
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2014 (10) TMI 1034 - ITAT CHENNAI
Exemption u/s 11 - refusal of registration u/s 12AA - Proof of charitable activities as prescribed u/s 2(15) - non-approval of the state government for running educational institutions - HELD THAT:- We find that the Directorate of Tamil Nadu Matriculation Schools, Chennai has already accorded approval on 4.3.2014 permitting the assessee to open a school for LKG to VIIIth class from academic year 2014-15. Therefore, the first objection does not survive.
Assessee has not commenced its charitable activities and its activity as a commercial organization - The assessee has already enrolled students in the school. The hon'ble jurisdictional high court in DIT(E) vs M/s Seervi Samaj Tambaram Trust - [2014 (2) TMI 32 - MADRAS HIGH COURT] has held that registration u/s 12AA of the Act ought not be refused on the ground of non-commencement of charitable activities.
Lack of genuineness in the assessee’s activities as well - We accept the assessee’s contentions and hold it entitled for registration u/s 12AA of the Act. Needless to say, the issue of commercial activities and lack of genuineness abovesaid are left to be examined in the course of assessment as per law. - Assessee’s appeal is allowed.
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2014 (10) TMI 1033 - ITAT, CHANDIGARH
Exemption u/s 11 - Corpus donation - whether is taxable as income or not even in the cases in which the trust is not registered under section 12AA ? HELD THAT:- As decided in M/S. GAUDIYA GRANTH ANUVED TRUST [2013 (8) TMI 875 - ITAT AGRA] corpus donation is in the nature of a capital receipt and are not taxable, irrespective of the fact whether the trust is registered under section 12AA or not. CIT (Appeals) considering the material on record gave a specific finding of fact that the assessee society was meant for charitable and religious purposes and was totally devoted to the Buddhist temple/monastery in the year under consideration. The assessee was thus at the stage of construction of the temple and has not carried out any other profession or occupation for earning the income. Therefore, no income accrues to the assessee. The assessee has also specifically pleaded that the donations were received as corpus towards the construction of the temple. Therefore, the learned CIT (Appeals) was justified in holding that there is no receipts in the hands of the assessee in the nature of income - Decided against revenue.
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2014 (10) TMI 1032 - ITAT CHANDIGARH
Ex-parte order of CIT-A - non appearance by assessee - as submitted reason for non appearance before the Ld. CIT(A) and the Assessing officer is beyond the control of the assessee as assessee had gone abroad and he was not aware about the fixation of the case - HELD THAT:- Three adjournments were sought by the Ld. Counsel for the assessee from the office of the Ld. CIT(A) which were granted. On the last date none appeared. In these circumstances, no doubt the Ld. CIT(A) had the right to proceed on exparte basis but when he is supposed to adjudicate the case after considering the material on record and record his findings. Instead of doing so the Ld. CIT(A) has dismissed the appeal in limine. Therefore in the interest of justice we set aside his order and restore the matter back to his file with a direction to adjudicate the issues after providing adequate opportunity to the assessee. The assessee is also directed to cooperate in the appeal proceedings. Appeal of the assessee is allowed for statistical purposes.
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2014 (10) TMI 1031 - SUPREME COURT
Principles of estoppel - Payment of maturity amount of National Savings Certificate - purchase of NSC illegally - Rule 17 of the Post Office Savings Bank General Rules, 1981 - HELD THAT:- It is not possible for us to accept the applicability of the principle of estoppel in the facts and circumstances of this case. No representation is ever shown to have been made to the Appellant. It was the Appellant's individual decision to purchase the NSC. It is not shown, that a fraudulent representation was made to the Appellant. It is also not shown, that a false statement was negligently made to the Appellant. The rule of estoppel, in the present case, could have only been premised on some conduct of the Respondent, which had willfully induced the Appellant to invest in the NSC. Unfortunately, for the Appellant, no such willful conduct has been brought to our notice.
This case would be governed by the proposition evolved in Moorgate Mercantile Company Ltd. v. Twitchings, namely, where two people with the same source of information assert the same truth or agree to assert the same falsehood at the same time, neither can be estoppel against the other. Therefore, whilst it cannot be disputed, that the authorities issuing the NSC were required to ensure, that the same was issued to only such persons who were eligible in law to purchase the same, yet in terms of the mandate of Rule 17 extracted hereinabove, the vires whereof is not subject matter of challenge, it is not possible for us to accept, that the rule of estoppel could be relied upon at the behest of the Appellant, for any fruitful benefit.
It is indeed true, that the NSC was purchased in the name of M/s. Bhagwati Vanaspati Traders. It is also equally true, that M/s. Bhagwati Vanaspati Traders is a sole proprietorship concern of B.K. Garg, and as such, the irregularity committed while issuing the NSC in the name of M/s. Bhagwati Vanaspati Traders, could have easily been corrected by substituting the name of M/s. Bhagwati Vanaspati Traders with that of B.K. Garg. For, in a sole proprietorship concern an individual uses a fictional trade name, in place of his own name. The rigidity adopted by the authorities is clearly ununderstandable. The postal authorities having permitted M/s. Bhagwati Vanaspati Traders to purchase the NSC in the year 1995, could not have legitimately raised a challenge of irregularity after the maturity thereof in the year 2001, specially when the irregularity was curable - Legally, Rule 17 of the Post Office Savings Bank General Rules, 1981, would apply only when an applicant is irregularly allowed something more, than what is contemplated under a scheme.
There was seriously no difficulty at all in the facts and circumstances of the present case, to regularize the defect pointed out, because M/s. Bhagwati Vanaspati Traders, is admittedly the sole proprietorship concern of B.K. Garg. The postal authorities should have solicited the change of the name in the NSC, through a representation by B.K. Garg himself. On receipt of such a representation, the alleged irregularity would have been cured, and the beneficiary of the deposit, would have legitimately reaped the fruits thereof. Rather than adopting the above simple course, the postal authorities chose to strictly and rigidly interpret the terms of the scheme. This resulted in the denial of the legitimate claims of the sole proprietor of the Appellant concern, i.e., B.K. Garg, of the investment made by him. In the above view of the matter, we consider it just and appropriate, in exercise of our jurisdiction Under Article 142 of the Constitution of India, to direct the Senior Superintendent of Post Offices, Meerut, to correct the NSC issued in the name of M/s. Bhagwati Vanaspati Traders, by substituting the Appellant's name, with that of B.K. Garg - The irregularity having been cured, we hope that B.K. Garg will now be released all the payments due to him, in terms of the order passed by the District Forum.
Appeal allowed - decided in favor of appellant.
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2014 (10) TMI 1030 - MADRAS HIGH COURT
Money Laundering - Validity of notice of eviction - right of appeal - case of petitioner is that limitation for filing an appeal is 45 days and it has not expired. However, the first respondent issued a notice of eviction on 10.10.2014 - HELD THAT:- The petitioner has even taken a demand draft on 10.10.2014 for a sum of ₹ 10,000/- in favour of the Registrar, Appellate Tribunal for moving an appeal. The time limit for filing an appeal has not so far expired. What is provided by Section 26(3) is a statutory right of appeal. Therefore, such a right cannot be defeated by dispossessing the petitioner even before the expiry of the period of limitation.
The petitioner shall file the statutory appeal within the period of limitation before the Appellate Tribunal, along with an application for stay - Petition disposed off.
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2014 (10) TMI 1029 - ITAT COCHIN
Admission of fresh/new evidences filed by the assessee before the CIT(A) without satisfying the conditions laid down in Rule 46A(1) of the I T Rules 1962 - Assessment u/s 153A - HELD THAT:- In the instant case the entire additional evidence has come on the record of the first appellate authority because the first appellate authority decided to examine the facts of the case in depth and adjudicate upon the matter on the basis of evidence and material thus gathered. The learned CIT(A) was empowered to do so under the provisions of Section 250(4). The results of enquiry conducted by him could either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A).
CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer to have his say in the matter vide remand report dated 29.4.2013 and being done so this dispute have no merits. No requirement in law that the first appellate authority should invariably consult or confront the assessing officer every time an additional evidence that was not filed before the assessing officer comes on the record of the first appellate authority. Where the additional evidence is obtained by the first appellate authority on its own motion, there is no requirement in law to consult / confront the assessing officer with such additional evidence.
In such cases Sub-rule (2) of rule 46A requires the first appellate authority to allow the assessing officer a further opportunity to rebut the fresh evidence filed by the assessee. Even that requirement cannot be said to be a rule of universal application. If the additional evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose served on performing the ritual of forwarding the evidence / material to the assessing officer and obtain his report. In such exceptional circumstances the requirement of Sub-rule (3) may be dispensed with. No merit in the grounds raised by the Revenue and accordingly, the grounds raised by the Revenue in all these appeals are dismissed.
Profit from own chity investment - AO arrived at the investment in own chits by taking the percentage growth of such investment from the AYs 2003-04 to 2004-05 as the basis of projection - AO further estimated the profit earned from own chits @ 10% - HELD THAT:- According to the CIT(A), the AO has also worked out the year-wise investments and estimated income solely on the basis of the seized material A-21. The working of the assessee was also on the basis of the same seized material A-21 and on its verification, the AO has not pinpointed any deviation of the assessee from the seized material. Accordingly, he observed that the view of the AO that the assessee has to adduce further evidences to prove the loss in respect of own chitty investments was not in order. Accordingly, the CIT(A) was of the view that there was no discrepancy in the working furnished by the assessee. He also found that the assessee has admitted more investments in own chits than the figure worked out by the AO. Accordingly, he observed that the addition made by the AO on estimate basis towards profit from own chity investment was not justifiable. Being so, the CIT(A) observed that the addition of ₹ 1,39,264/- for the AY 2004-05 and to the extent of ₹ 74,329/- for the AY 2007-08 are to be made and deleted the balance addition of other AYs.
Addition of the income from Kuri late fee - CIT(A) observed that no incriminating materials relating to the income from kuri late fee were found/seized during the course of search - HELD THAT:- After considering the relevant material, the CIT(A) was of the opinion that there was no reason to disbelieve the submissions made by the assessee that other kuri income offered includes income from kuri late fee. The CIT(A) observed that the AO has made the addition only on pure guess work and not on the basis of any material found/seized during the course of search. Accordingly, the addition of ₹ 4,49,821/- made by the AO for the AY 2008-09 was deleted. We do not find any infirmity in the findings of the CIT(A) in deleting the addition; accordingly, the same is confirmed. The ground raised by the revenue is accordingly rejected.
Disallowance of interest paid on deposits - AO found that the assessee firm has advanced funds to its sister concerns without charging interest and accordingly, he made proportionate disallowance in respect of interest paid on deposits @ 12% p.a and made addition to the total income for AYs 2002-03 to 2005-06 and AYs 2006-07 to 2008-09, no addition was made on this account since the entire interest paid was disallowed u/s 40(a)(ia) - HELD THAT:- In this case, the addition was made by the AO without referring any seized material and the addition was only on presumption without any material to show that borrowed funds have been advanced to sister concerns during the relevant assessment years. In the absence of any material to suggest that the advance made to sister concerns were out of borrowed funds, the deletion of addition by the CIT(A) for the assessment year under consideration is justified. Accordingly, this ground raised by the revenue is accordingly rejected.
Disallowance of interest claimed on housing loan - HELD THAT:- In this case, admittedly, the amount borrowed by the partners was credited to the assessee’s firm and the corresponding payment was also made by the assessee including interest payments. According to the AO, the interest was to be borne by the partners and it was wrongly claimed by the assessee firm. However, there is no material to suggest that the partners were derived any benefit out of the loans availed by the assessee firm. In the absence of any material to suggest the benefits derived by the partners in a personal capacity, we are not in a position to accept the claim of the revenue. Accordingly, this ground raised by the revenue is rejected.
Excess interest received from money lending business - AO rejected the books of account and estimated the interest income from money lending business by taking weighted average of interest rate charged by the assessee firm - HELD THAT:- AR is not able to controvert the findings of the CIT(A). The CIT(A) has considered the average opening and closing balances of the financial year so as to compute the interest income, which is an accepted method of assessment of income and advances when the day-to-day balances of loan is not available. Accordingly, he held that the addition on account of excess interest collected from customers has to be made only in respect of AYs 2002-03, 2004-05 and 2006-07 to 2008-09 and sustained the excess interest for AY 2002-02 - No reason to interfere with the findings of the CIT(A), which is confirmed.
Addition on account of income from chitty business of foreman’s commission - According to the AO, the assessee was not fully accounting the foreman’s commission received from conducting chits - HELD THAT:- On this issue, the assessee furnished reconciliation statement with regard to collection of the foreman commission before the CIT(A). The CIT(A), after going through the reconciliation statement observed that the foreman commission receivable for the AY 2002-03 was at ₹ 21,57,720 and for The AY 2008-09, it was ₹ 23,63,326/-. Accordingly, he sustained the addition towards undisclosed foreman commission at ₹ 8,800/- for the AY 2006-07 and ₹ 16,06,951/- for the AY 2008-09. The assessee could not controvert the above findings of the CIT(A).
Disallowance u/s 40(a)(ia) - assessee has paid canvassing commission without deducing tax at source - HELD THAT:- CIT(A) correctly observed that there was no dispute in respect of the disallowance u/s 40(a)(ia) and accordingly, the same was sustained. We do not find any infirmity in the order of the CIT(A) on this issue.
Disallowance of profit from terminated kuries - AO assumed that the auction discount due to the subscribers who have forfeited kuries was kept as a liability in the balance sheet of the assessee firm, even after the termination of the chitties and the assessee firm has neither returned the auction discount nor offered the same as income in the return of income - HELD THAT:- The assessee filed the detailed working of the profit from the terminated kuries. After going through the details furnished by the assessee regarding the outstanding of terminated kuries, he quantities it at ₹ 3,13,771/- and sustained the same and deleted the balance ₹ 31,11,054/ for the kuries which have not been terminated as on 31.3.2008. The CIT(A) given relief in respect of kuries which are not terminated . While doing so, the CIT(A) relied on the judgment of the Hon’ble jurisdictional High Court in the case of Guruvijaya Kuri Co Ltd, [2008 (1) TMI 267 - KERALA HIGH COURT]We do not find any reason to interfere with the findings of the CIT(A), which is confirmed.
Profit computed by AO from seized materials - On comparison of the books of account seized during the course of search with the results shown in the return of income, it was found that these two sets of accounts do not tally - HELD THAT:- According to the CIT(A) the seized books are not correct and complete and it do not reflect the true state of affairs of the assessee firm and hence he was of the view that a reasonable estimation to be done so as to compute the correct income of the assessee. Considering this, the CIT(A) taken the clue from section 44AF of the Act and estimated the net profit @ 5% of the turnover. We do not find any infirmity in the findings of the CIT(A), which is confirmed. Accordingly, the ground taken by the revenue for these three years is rejected.
Non deduction of TDS u/s 194A/194C - HELD THAT:- CIT(A) correctly observed that income of the assessee for the AYs 2006-07 to 2008-09 was estimated by the AO that there cannot be any further addition after estimating the income of the assessee as relying on TEJA CONSTRUCTIONS VERSUS ACIT [2009 (10) TMI 593 - ITAT HYDERABAD]
Agricultural income - CIT(A) concluded that it would be just and proper to disallow 25% of the declared agricultural income in the returns filed u/s. 153A - CIT(A) observed that the at the time of search, the assessee stated that he was getting Agrl. income from cultivated lands - HELD THAT:- Admittedly, owning agricultural land was not doubted by the Department. There were evidences produced by the assessee suggesting agricultural income generated by the assessee in his land. Being so, since the Department have no evidence contrary to the evidence furnished by the assessee; therefore, it is not proper to hold that the assessee has shown other income in the form of agricultural income. Since evidence brought on record suggest that the agricultural income earned by the assessee; therefore, we do not find any reason to interfere with the findings of the CIT(A), which is confirmed as the reasons advanced by the assessee also bonafide for variation in the agricultural income claimed in the original return filed after the search action. Accordingly, this ground in the above Revenue appeals is dismissed.
Disallowance of receipt from sale of trees - HELD THAT:- The assessee was having landed properties where the trees were grown. The reason for rejection of the assessee’s plea by the Assessing officer is that the certificate from the Revenue authorities was not produced before him. However, the AO has not doubted the certificate issued by the revenue authorities which suggest the availability of timber therein. Being so, it is natural to earn income from sale of trees. Accordingly, we do not find any reason to interfere with the order of the CIT(A) and the same is confirmed. This ground of the Revenue is rejected.
Addition towards investments in fixed deposits/Investment in SB A/c.- HELD THAT:- Considering the additional evidence and the remand report called for from the Assessing Officer and after receiving the comments from the Assessing Officer on the additional evidence given by the assessee, the CIT(A) was of the opinion that the explanation given by the assessee was proper since the assessee has properly substantiated the fixed deposit in the cash flow statement and therefore, the CIT(A) deleted the addition. The CIT(A) was satisfied with the explanation of the assessee regarding the source of fixed deposits. Being so, in the absence of any contrary evidence furnished by the Revenue, we are not in a position to reverse the findings of the CIT(A) and the same is confirmed. Accordingly, this ground in the above Revenue appeals is dismissed.
Investment in immovable properties - HELD THAT:- Assessees have furnished evidence before the CIT(A) and explained the investments in the properties in the cash flow statements. The CIT(A) had also called for remand report. After going through the remand report, the CIT(A) has observed that the unexplained investments in immovable properties were accounted for as fixed assets in the regular books of account of the firm in which the assesses were partners and the same cannot be considered as unexplained investment in immovable properties and it is to be excluded and the properties are owned by the assesses which are duly accounted for in the regular books of accounts. Being so, we have no hesitation in confirming the order of the CIT(A). This ground in all the Revenue appeals is rejected.
Addition towards personal drawings - HELD THAT:- AO estimated very huge drawings. Considering the drawings estimated by the Assessing Officer, the CIT(A) observed that for the assessment year 2005-06 to 2008-09, there is no necessity of any addition as the drawings admitted by the assesses is reasonable as there is drawings by other members of the family namely Lilly, Shju, Jaison, Sabu, Salu and Benny. For the assessment yea₹ 2002-03 and 2004-05, the CIT(A) modified drawings and sustained certain additions on this count. In our opinion, the drawings estimated by the CIT(A) is justified and accordingly, the same is confirmed. Being so, the ground in the above Cross Objections is dismissed.
Investment in residential house - HELD THAT:- According to the CIT(A), the assessee has not offered any explanation regarding the cost of furnishing at ₹ 1,93,410/- estimated by the Assessing Officer. The CIT(A) found that the submission of the assessee regarding pavement work and installation of gate was in order. Therefore, the cost of pavement work at ₹ 95,394/- and cost of gate at ₹ 11,825/- (Total ₹ 1,07,219) included in the valuation report of the Departmental Valuer shall not be treated as unexplained investment for the assessment year 2005-06. The CIT(A) further found that the other contentions such as own timber, procurement of bricks/tiles at reduced prices, cost of kennel, cost of horticultural work, cost of well, etc., were not proved by the assessee with sufficient evidences. Therefore, the CIT(A) deleted the additions accordingly.
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2014 (10) TMI 1028 - ITAT DELHI
Addition u/s 68 - AO made addition of opening balances without properly verifying the record - whether AO did not place any material on record or evidence to support that the appellant had in some way generated unaccounted funds and rotated its own unaccounted funds through these creditors? - HELD THAT:- AO did not point out any discrepancy while examining the creditors u/s 131 and gave a finding that an ‘X’ creditor was bogus - AO did not place any material on record or evidence to support that the appellant had in some way generated unaccounted funds and rotated its own unaccounted funds through these creditors. Observations of the AO in the remand are against the provisions laid down in section 68 as he did not bring any adverse finding with corroborative evidence that the sundry creditors were not genuine - There are no fresh credit during the year. Hence section 68 cannot be invoked during the year. Hence we uphold the order of the Ld. CIT(A) and dismiss this ground of the revenue.
Addition being notional interest on loans and advances - whether there is no provision of Income Tax Act which authorizes the AO to tax notional income? - HELD THAT:- The fact that the loans and advances that were given by the appellant in the course of its normal business activities for acquiring land is not in dispute which is also agreed by the Assessing Officer in his remand report. This fact has also been confirmed in writing by the concerned parties. It is also true that the Income Tax Act, does not envisage taxability of any notional income as such.
AO in his remand report has not doubted the nature of advances but has given a vague reasoning for upholding the addition made. As perused the definition of income in Section 2(24) and the various judicial decisions relied upon by the appellant.
Since AO did not establish with any supporting material or evidence that interest was earned or accrued to the appellant, “notional income or interest” cannot be taxed under the provisions of law. Accordingly, the addition made by the Assessing Officer on account of notional interest is here with deleted. Decided in favour of assessee.
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2014 (10) TMI 1027 - ITAT CHENNAI
Capital gain computation - treat fair market value (‘FMV’) of the assessee’s land acquired @ ₹ 5,16,200/- per ground as on 1.4.1981 OR ₹ 10,000/- per ground treated in re-assessment framed on 11.11.2011 - Revenue’s only grievance is that the CIT(A) ought to have taken ‘FMV’ of the property as on 1.4.1981 as per the Sub-Registrar’s correspondence - HELD THAT:- A co-ordinate bench of the 'tribunal' has already averaged the two values qua the same property in assessment year 2006-07. AO has re-opened the assessment on the basis of his findings in the said assessment year. Revenue fails to point out any distinction on facts. In these circumstances, we hold that the CIT(A) has rightly adopted average of the two valuations in partly accepting the assessee’s contentions. The CIT(A)’s findings under challenge are affirmed. The Revenue’s grounds stand rejected.
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2014 (10) TMI 1026 - KARNATAKA HIGH COURT
Valuation of closing stock - Method of valuation of inventory - change in method of valuation - Tribunal reversing the finding of AO that the assessee had valued the work in progress at material cost (closing stock) contrary to Accounting Standard-2 as opined by the assessee’s statutory Auditor that profit before tax and profit after tax are understated by the assessee - HELD THAT:- If the change is bonafide and is accepted by the revenue then the question of changing the opening stock would not arise. If such a change is not bonafide, it will be open to the Revenue not to accept such a change in valuation and assess without such valuation. Once the said change in the valuation is accepted by the Revenue, the consequence is the value of the closing stock in the previous year would become value of the opening stock in the succeeding year.
But if the assessing authority rejects the assessee’s valuation of the closing stock then to arrive at the correct figure of profit, the assessing authority should value the opening stock in a similar fashion. If the assessee’s method of valuation of the opening stock is accepted and at the same time his valuation of the closing stock is rejected then a highly distorted figure of profit will be arrived at. This will be the scope of charging section.
When the assessee changes the valuation of the closing stock, there is no necessity to change the opening stock. But when the assessing authority changes the closing stock it becomes obligatory that the opening stock valuation has to be correspondingly changed on the basis of which the valuation of the closing stock is changed in order to arrive at correct figure of tax which is chargeable as tax under Section 4 - order passed by the Tribunal holding that the opening stock should also be revalued cannot be found fault with. Accordingly, the substantial questions of law 1 and 2 framed are answered in favour of the assessee.
Nature of expenditure - expenditure towards professional charges, press announcements and statutory fees - revenue or capital expenditure - assessee formulated the proposal to buy back equity shares from existing share holders on aproportionate basis and through a tender - HELD THAT:- The increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit-making. The expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. Issue of bonus shares does not result in the expansion of capital base of the company. It does not lead to any inflow of fresh funds into the company. The capital structure is not expanded. On the contrary the consequence of such buy-back of shares is the capital base of the company gets reduced and the capital structure will go down. It is not of an enduring effect so as to bring the expenditure incurred in this regard as capital expenditure. Where there is no flow of funds or increase in the capital employed, the expenditure incurred would be revenue expenditure. Therefore, rightly the Tribunal held that it is in the nature of revenue expenditure and allowed the same. - Decided against revenue.
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2014 (10) TMI 1025 - ITAT DELHI
Nature of expenditure - replacement of software - revenue or capital expenditure - HELD THAT:- Uncontroverted position that the impugned payments were made for the purpose of upgrading the software that the assessee was using and that no new asset came into existence. It is also well settled legal position that the expenses incurred on upgrading the software are to be treated as revenue expenditure. DR did not bring on record any material to dislodge the findings of the CIT(A) or seriously dispute the same. - Decided against revenue.
Addition on account of software development charges paid to Partha Development Corporation - HELD THAT:- This ground is clearly ill conceived inasmuch as the amount of ₹ 2,00,000 for financial accounting software was paid to Partha Development Corporation in two instalments – one of ₹ 1,40,000 and the other of ₹ 60,000. While the Assessing Officer took the entire amount of ₹ 2,00,000 for disallowance, he also made a separate addition of ₹ 60,000. This aspect of the matter has been highlighted in the CIT(A)’s order and no defects are pointed out in the said finding. In view of this uncontroverted factual finding, revenue’s this ground of appeal is based on a simple misconception of facts. We need not deal with this matter in any more detail and dismiss the same as based on misconception of facts.
Addition on account of difference in arm’s length price - assessee used Resale Price Method for benchmarking its international transactions so far as purchase of books is concerned - as per TPO comparison of profit earned on imported books with profit earned on other books is incorrect because the latter is an entirely uncomparable activity on the facts of this case - CIT- deleted addition - HELD THAT:- All the details were before the TPO, yet has proceeded to compute the hypothetical sale price of the books in the hands of the distributor on the basis that it will be equivalent to 402.414869% (i.e. 100/ 24.85 X 100) of the purchases in the hands of the assessee. This approach, including the presumption underlying therein, is clearly erroneous. The computation of profit margins of the wholesale distributor, as computed by the AO, are, therefore, are also incorrect. TPO has not adopted the profit margin by the wholesale distributors on the basis of actual figures or the undisputed discount policies on cover prices but based on certain hypothesis which turns out to be based on misconception of facts and is, in any case, unsubstantiated by material on record. We are, therefore, of the view that the very foundation of impugned ALP adjustment is unsustainable in law. Our reasoning may have been different but our conclusion is the same as arrived at by the CIT(A).
TP study may be erroneous but it is not open to us to enlarge the scope of issue before us. In the present case, the TPO has disputed only the margin of the wholesaler on the basis of certain calculations which turned out to be erroneous. He, however, does not dispute the fact that the margins of the wholesale distributor can be compared with the margins of the assessee. It is a matter of record that the assessee’s margin from this segment are over 38% whereas going by the business model adopted by the assessee, maximum permissible margin for the wholesale distributor is 30%. In these circumstances, and within the limitations that we have, there is no good reason to disturb the relief given by the CIT(A). It is not for us to supplement the work done at the assessment level or to step into the shoes of the AO and TPO for deciding what more could have been done in a particular case. We have also noted that right from 2004-05 to 2012-13 the ALP benchmarking on this basis has been accepted by the revenue and even though a reference was made to TPO in the assessment year 2010-11, the TPO did not disturb this ALP determination either - we approve the conclusions arrived at by the CIT(A) on this issue - Decided against revenue.
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2014 (10) TMI 1024 - ITAT MUMBAI
Eligibility of deduction u/s. 80IA(4) - income derived by the assessee from undertaking contract work - claim for deduction was declined by the lower authorities on the plea that the contract awarded to the assessee, it contributed only part of the whole Krishna water supply project and therefore the work of the assessee was not regarding entire water supply project - as per CIT-A the assessee is a developer of infrastructure facilities and eligible for claiming deduction - HELD THAT:- Assessee is entitled for deduction u/s 80 IA(4) of the Act. We have already held that assessee is entitled for deduction under section 80 IA(4) in respect of A.Y. 2004-05 and 2005-06 as relying on ABG HEAVY INDUSTRIES LIMITED [2010 (2) TMI 108 - BOMBAY HIGH COURT] . That decision will be applicable for A.Y 2007-08 in case of both the assesees. Therefore, these appeals of the assessee are also allowed.
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2014 (10) TMI 1023 - KERALA HIGH COURT
Advances made to rural branches u/s 36(1)(viia) - Deduction of provision for bad debts in terms of Section 36(1)(viia) - basis of classifying Branches of the Bank as Rural Branches and other Branches - Deduction of 10 per cent of the aggregate average advances - Applicability of definition of rural branch in Explanation (ia) to section 36(1)(viia) to co-operative banks - HELD THAT:- Tribunal dismissed the appeal following the judgment of this Court in CIT v. Lord Krishna Bank [2010 (10) TMI 860 - KERALA HIGH COURT]. The appellant also does not have a case that the principles laid down in Lord Krishna Bank (supra) are inapplicable to this case and instead what is contended is that SLP filed against the judgment in Lord Krishna Bank is pending consideration of the Apex Court. The fact that the SLP is pending does not in any manner dilute the precedent value of the judgment in Lord Krishna Bank's case. Further, yet another Division Bench of this Court has also followed the judgment in Lord Krishna Bank case in Kannur District Co-operative Bank Limited v. Commissioner of Income Tax [2014 (8) TMI 635 - KERALA HIGH COURT]. Appeal dismissed.
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2014 (10) TMI 1022 - ITAT HYDERABAD
Revision u/s 263 - investment made by the assessee in the construction of the function hall - HELD THAT:- Survey u/s 133A was carried on in the case of the assessee, during the course of which the assessee was found to have made investment in the construction of a function hall. During the assessment proceedings, the issue relating to the said investment made by the assessee was examined by the AO and the explanation of the assessee in respect of source of the said investment with reference to the entries made in his two bank accounts maintained with IndusInd Bank and State Bank of Hyderabad was partly accepted and partly rejected by the AO.
Assessee has filed copies of the written submissions made by the assessee before the Assessing Officer during the course of assessment proceedings and it is worthwhile to reproduce the relevant portion thereof, as contained in letter dated 13.10.2011.
As during the course of assessment proceedings before the AO as well as relevant portion of the as order passed by the AO dealing with the said explanation/submission, entries in the bank account of the assessee maintained with IndusInd Bank were not only considered by the assessing officer, but the source of deposits found to be made in the said bank account as explained by the assessee as the money received by him from his son and daughter in law in USA through proper banking channel was accepted by the AO, after applying his mind.
Therefore, cannot be said that the source of deposits found to be made in the bank account of the assessee with IndusInd Bank was not verified by the AO and there was an error in the order of the AO, as alleged by the CIT in his impugned order u/s 263. If the learned Commissioner contemplates that the AO should have enquired into the source of funds in the hands of the son and daughter-in-law of the assessee, the same, in our opinion, would amount to verifying the source of source, which is not permissible. As such, considering all the facts of the case, we are of the view that there was no error in the assessment made by the AO as alleged by the learned Commissioner in his impugned order passed under S.263 - Appeal of the assessee is allowed.
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2014 (10) TMI 1021 - ITAT KOLKATA
Disallowance @ 5% on account of various general expenses - disallowance by restricting @ 5% on account of business expenditure can be made or not in the absence of any reasoning? - HELD THAT:- Disallowance purely by resorting to ad hoc method cannot be made. These are business expenditure, and in the absence of cogent reason, the disallowance should not have been made. We hold that disallowance made by AO is without any basis and hence deserves to be deleted. Accordingly, we delete the disallowance. This issue of assessee’s appeal is allowed.
Disallowance of employees’ contribution to ESI & P.F. - HELD THAT:- We find that in all the three AYs, the dates are noted by the AO and the payments are made within the due date of filing of return of income u/s.139(1) of the Act as is evident from the assessment order. Now, this issue stands covered in favour of assessee and against the Revenue by the decision of Hon’ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] - Decided in favour of assessee.
Assessment u/s 153A - HELD THAT:- there is no seized incriminating materials found during the course of search in this case, and without any evidence the AO has made addition of deemed dividend. The issue is squarely covered in favour of assessee and against the Revenue by the decision of Special Bench in the case of All Cargo Global Logistics Ltd., v. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)]as well as by the decision of Jai Steel (India) [2013 (6) TMI 161 - RAJASTHAN HIGH COURT]. As the issue is covered in favour of assessee, we confirm the order of CIT(A) deleting the addition. This common issue of Revenue’s appeals is dismissed.
Disallowance of loss incurred on account of expenses - HELD THAT:- As the issue is exactly identical and no incriminating materials were found during the course of search as noted by CIT(A), we confirm the order of CIT(A) in deleting the addition. This common issue of Revenue’s appeals is dismissed.
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2014 (10) TMI 1020 - ANDHRA PRADESH HIGH COURT
Classification of goods - Liquid Medical Oxygen IP - Medical Grade Oxygen - Nitrous Oxide IP - whether fall under Entry 88 of the IV Schedule to the A.P. VAT Act, 2005 or are they liable to tax as unclassified goods under Schedule-V to the Act? - HELD THAT:- Section 4(3) of the Act requires every VAT dealer to pay tax on every sale of goods taxable under the Act on the sale price at the rates specified in Schedules III, IV and V subject to the provisions of Section 13. Schedule IV is the list of goods taxable at 4% prior to 14.09.2011, and at 5% thereafter - Under Schedule V to the Act all goods, other than those specified in Schedules I, III, IV and VI, are taxable at the standard rate of 12.5% prior to 15.01.2010, and at 14.5% thereafter. If Medical Oxygen IP and Nitrous Oxygen IP fall under Entry 88 of Schedule IV, they are then liable to be taxed at 4% or 5%. If not, they are taxable, as unclassified goods, at 12.5% or 14.5% under Schedule V to the Act.
Going by the user test and the functional test, it is evident that medical oxygen and nitrous oxide serve as medicines. As medical oxygen IP and Nitrous Oxide IP are used in the treatment and mitigation of disorders in human beings, and as they are generally understood in the trade to be surgical aids, both these substances would fall under the definition of drug under Section 3(b)(i) of the Drugs Act and, consequently, fall under Entry 88 of Schedule IV to the Act liable to tax only at 4%/5%.
Entry 100 of the IV Schedule to the Act relate to goods when sold as industrial inputs. Under sub-entry (36) thereof, Hydrogen, rare gases and other non-metals, when sold as industrial inputs, fall within Entry 100 of Schedule IV and are liable to be taxed at 4%/5%. However, in view of its specific exclusion, medical grade oxygen, when it is sold as an industrial input, would not fall within the purview of Entry 100 of Schedule IV to the Act. Exclusion of medical oxygen from the ambit of Entry 100(36) does not mean that it is, automatically, excluded from all other Entries in Schedule IV for, if the Legislature had so intended, medical oxygen would then have been excluded from Entry 88 of Schedule IV also. Entry 88 specifically excludes (a) medicated goods; (b) products capable of being used as cosmetics and toilet preparations including Tooth Pastes, Tooth powders, cosmetics, Toilet articles and soaps; and (c) mosquito repellants in any form - Entry 88 not only includes drugs and medicines as defined in Section 3(b)(i), (ii), and (iii) of the Drugs Act, but also includes hypodermic syringes, hypodermic needles, perfusion sets, urine bags, catguts, sutures, surgical cotton, dressings, plasters, catheters, cannulae, bandages and similar articles. All articles, similar to the goods aforementioned, would also fall within the ambit of Entry 88. There is no reason why medical oxygen IP and Nitrous Oxide IP, which are admittedly surgical aids used for or in the treatment and mitigation of disorders in human beings, would not fall under similar articles in Entry 88 of Schedule IV to the Act.
Both medical oxygen IP and Nitrous Oxide IP fall under Entry 88 of Schedule IV, and are liable to tax only at 4%/5%, and not at 12.5%/14.5% - Petition allowed.
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2014 (10) TMI 1019 - SUPREME COURT
Compensation for acquisition of land - HELD THAT:- Consistent view taken by this Court is that one third deduction is made towards the area to be used for roads, drains, and other facilities, subject to certain variations depending upon its nature, location, extent and development around the area. Further, appropriate deduction needs to be made for development cost, laying roads, erection of electricity lines depending upon the location of the acquired land and the development that has taken place around the area.
We have referred to various decisions of this Court on deduction towards development to stress upon the point that deduction towards development depends upon the nature and location of the acquired land. The deduction includes components of land required to be set apart under the building rules for roads, sewage, electricity, parks and other common facilities and also deduction towards development charges like laying of roads, construction of sewerage.
In the instant case, having regard to the extent of the land acquired and the development in and around Vasant Kunj area, in our view, it is appropriate to make 35% deduction towards utilization of the land area in the layout for roads, drains, parks, playgrounds and civic amenities. So far as the expenditure for development of the large extent of land into a developed area by construction of proper roads, underground drainage, sewerage and erection of electricity lines, it is appropriate to make further deduction of 25%.
Interest - HELD THAT:- When the High Court enhanced the compensation, the High Court held that the appellants shall be paid interest in terms of Section 28 of the Act. On the enhanced compensation, High Court ordered payment of interest at the rate of 9% from 19.02.1997 to 18.2.1998 and thereafter at the rate of 15% per annum till the date of payment.
The language of Section 27(1) is clear and very wide and it gives power to the courts to order costs to be paid by what persons and in what proportions they are to be paid. In making order for costs under Section 27(1), the court may have regard to the provisions of Section 35 C.P.C. Analysing sub-section (2) of Section 27, it appears to consist of three parts, viz., (i) When the award of the Collector is not upheld, the costs shall ordinarily be paid by the collector as directed by the Court; (ii) the court is not bound to do so in every case. If the court forms opinion that the claim of the claimant is extravagant or that he was so negligent in putting his case before the Collector, then the court may make a different order as regards costs and (iii) the court may in such cases direct, that some deduction be made from the costs of the claimant or that he should pay a part of the Collector’s costs.
Appeal dismissed.
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2014 (10) TMI 1018 - ITAT MUMBAI
Exemption u/s 10(23G) - AO’s reasons for denying the claim that the assessee has not classified the loans as investments and further those companies have not invited funds by open offer from the public - HELD THAT:- As decided in RABO INDIA FINANCES LTD. [2012 (4) TMI 772 - BOMBAY HIGH COURT] allowed the claim of the assessee on noticing that the deduction u/s 10(23G) is being allowed consistently from the assessment year 2002-03 onwards.
AO’s reasons for denying the claim that the assessee has not classified the loans as investments and further those companies have not invited funds by open offer from the public are not material as classification of amounts in the books of accounts are not a criteria, for considering the long term finance given by the assessee and further there is no stipulation that there should be an open offer in inviting long term finance under the rules. The conditions considered by the AO are not supported by the provisions of the Act and therefore the AO’s action in denying the claim on infructuous reasons cannot be upheld.
Interest u/s 234D - Whether interest would not arise, if both the additions made by the AO are deleted?- HELD THAT:- In the earlier paragraphs, we have directed the AO to allow the exemption u/s 10(23G) of the Act and further disallowance of interest has since been rectified by the AO in the order passed u/s 144 of the Act. Hence, as agreed by both the parties, the question of charging interest u/s 234D would not arise. Accordingly, we reject the ground urged by the revenue.
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2014 (10) TMI 1017 - KARNATAKA HIGH COURT
Correct head of income - interest income earned by the assessee from fixed deposits - ‘Income from Business’ or ‘Income from Other Sources’ - claim of deduction under Section 10B - HELD THAT: This Court in the case M/S MOTOROLA INDIA ELECTRONICS PVT LTD [2014 (1) TMI 1235 - KARNATAKA HIGH COURT] where it was held the interest received or the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking, then there is a direct nexus between this income and the income of the business of the undertaking. Though it does not par take the character of a profit and gains from the sale of an article. In view of the definition of ‘Income from Profits and Gains’ incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated under Section 10B of the Act. Therefore, the interest derived from the said deposit is also exempted from payment of tax. - Decided in favour of assessee.
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