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Income Tax - Case Laws
Showing 1 to 20 of 27 Records
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2020 (4) TMI 28
Accrual of income - Addition on account of amount kept in Escrow Account - slump sale - whether sale of business is irrevocable and complete on the closing date mentioned in the agreement and capital gain is accrued on the date of sale - gain on transfer of business purchase agreement - HELD THAT:- Income for the year under consideration of ₹ 447.30 crore and further ₹ 17.89 crore was accrued to the assessee. The assessee offered the same under the head Capital Gain and no other income which is not accrued to the assessee is not liable to tax in the year under consideration. The remaining income was accrued only in subsequent Assessment Year i.e. A.Y. 2013-14 to 2016-17 that is an amount of ₹ 17.89 Crore each in four subsequent years, and the same has been offered for taxation under the head Capital Gain. Even this fact is not disputed by the revenue.
The objection of ld. DR for the revenue is that the assessee in subsequent year claim set off of Long Term Capital Loss on sale of mutual funds of ₹ 7.55 crore and ₹ 4.36 crore. In our view, the assessee is legally entitled to claim the set off of legitimate losses under the same head if it accrues to the assessee.
As noted above the Hon’ble Jurisdictional High Court in CIT vs. Nagri Mills Co. Ltd. [1957 (9) TMI 30 - BOMBAY HIGH COURT ] held that as to why the Income-tax authorities, in a matter such as where the deduction is obviously a permissible deduction under the Income-tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate. Applying the same analogy that the assessee being a corporate entity is taxed at the marginal rate, the revenue should not fritter away its energies in fighting matters.
The case law relied by the ld. DR for the revenue are not applicable on the facts of the present case as the same are based on different set of facts. In the present case, though the price was determined but was payable on fulfillment of certain condition as agreed in Escrow Agreement and the same were paid subsequently. In E.D Sasson & Co. Ltd. [1954 (5) TMI 2 - SUPREME COURT] (also relied by ld. AR) wherein it was held that income may accrue to an assessee without the actual receipt of the same.
If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. Thus, the ratio of this decision is more favourable to the assessee. The word “accruing” and arising are used to contradistinguish the word “receive”. Income is said to be received when it reaches to the assessee; when right to receive the income vested to the assessee, it is said to be accrue or arise. The dormant profit cannot be equated with charged to tax under section 3 & 4 of the Income Tax Act.
We are of the view that the accrued capital gain in the year under consideration was offered by the assessee to tax and the remaining of the capital gain which was accrued only in the subsequent years have been offered to tax in AY 2013-14 to 2016-17. The assessee has placed on record the copy of computation and return of income for AY 2013-14 to 2016-17 - Decided in favour of assessee
Defalcation loss disallowance - allowable busniss loss - HELD THAT:- We have noted that in assessee’s appeal for A.Y. 2006-07 to 2009-10 in [2018 (12) TMI 406 - ITAT MUMBAI] the claim of assessee with regard to defalcation loss has been restored to the file of AO. Therefore, to avoid the duplicity, the issue is restored to the file of AO to examine the claim and pass the order in accordance with law. In the result this ground of appeal is allowed for statistical purpose.
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2017 (9) TMI 1688
Addition on account of late deposit of PF, ESI and professional tax - due date - applicability of provisions of Section 36(l)(va) and Section 7(24)(x) ignored - Held that:- The payment by the Assessee employer towards the employees’ contribution of the Provident Fund was made before the date of filing of the return by the Assessee and thus, in terms of the decision of this court in Commissioner of Income Tax v. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] it was within the ‘due date’ for the purpose of Section 36 (1) (va) of the Income Tax Act, 1961 read with Section 43 (B) thereof.
The Court finds that the decision has consistently been followed in later decisions of this Court - No substantial question of law.
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2016 (7) TMI 1419
Non deduction of tds on payment made to the shipping companies - Held that:- Similar issue has already been covered by this co-ordinate Bench in assessee’s own case for AY 2007-08 wherein held where payments are made to agents of non-resident ship-owners or charters for carriage of passengers etc. shipped at a port in India, since the agent acts on behalf of the non-resident shipowner or charterer, he steps into the shoes of the principal. Accordingly, provisions of Section 172 of the Act shall apply and those of sections 194C and 195 of the Act will not apply.
Payment made to non-resident in respect of advertisement of products - non deduction of tds - Held that:- As decided in assessee’s own case for AY 2007-08 Section 7 & 9 of the Act provides the income deemed to be received AND income deemed to accrue or arise in India. As per the section 9 of the Act, the above expenses for advertisement in Russia and commission payment to foreign parties/ NRI are not the income deemed to accrue or arise in India, Hence not chargeable to tax.
Addition u/s 14A r.w.r. 8D - CIT-A restricting the disallowance to the extent of 1% of the exempted income - Held that:- AO has invoked the provision of Sec. 14A has made the disallowance under Rule 8D of the IT Rule without recording any satisfaction. We also find that assessee has sufficient fund in making investment in Indian companies. Therefore we can infer borrowed money has not been utilized in investment in Indian companies. AO has applied the formula given under Rule 8D of the IT Rules even on those investments which were made in foreign companies of the assessee without appreciating that the dividend income from foreign companies is not exempted to tax. Disallowance cannot be made for the investment made in foreign companies. We find that L’d CIT(A) has deleted the disallowance as per Rule 8D of IT Rules after taking into account the investment made in the Indian companies and for this reason, we find no reason to interfere in the order of Ld. CIT(A).
Addition on employees’ contribution of PF - delayed payment - Held that:- Before us both the parties relied on the orders of Authorities Below as favourable to them. Considering the above facts and circumstances and relied on the case law of Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (
2009 (11) TMI 27 - SUPREME COURT) in favour of assessee and against the Revenue.
Addition on account of expense u/s 14A to ascertain book profit u/s 115JB - Held that:- Provisions to Sec. 115JB are starred with a non obstante clause which has overriding effect on the other provisions of Act. Disallowance made under any other provision cannot be imported to the provision of Sec. 115JB of the Act. In this connection, we rely on the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (2002 (5) TMI 5 - SUPREME Court), we find that the issue is squarely covered in favour of the assessee and against the Revenue. Even otherwise, the assessee’s issue is also covered by the decision of Hon'ble Apex Court in the case of Apollo Tyres Ltd. (supra). We uphold the order of CIT(A) allowing the claim of the assessee
Revenue appeal dismissed.
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2016 (2) TMI 164
Accrual of income - AO was of the view that the income arising out of the contract should be taxed as income during the current A.Y - Held that:- A.O. was in error in his conclusions that, whenever Rule 9B is applied for claims of expenditure, the income should also be accounted for and offered to tax in the year of receipt. Rule 9B of the Income Tax Rules, 1962 is a special rule which provides for claims of deduction in respect of expenditure, in respect of distribution of films. The Income Tax Act or Rules have not provided for any special manner in which income in such cases have to be taxed. Thus the general law prevails.
Coming to the accrual of income, we find that the assessee has offered this income for the next subsequent six A.Ys i.e. A. Y. 2008–09 to 2012–13 at the rate of ₹ 9,21,428/- at prorate basis. The assessee has included in the paper book assessments for all these A.Ys. The income in question has been offered to tax and has been taxed by the department in all these A.Ys equally. The addition in this year amounts to double taxation. Distribution rights in the film is a property. This property has been licensed for a time period of seven years by the assessee to the third parties. The consideration received is for exploitation of certain rights in these films for a period of seven years. Thus we are of the considered opinion that the income arising out of such licensing of the right to exploit the film for seven years is to be taxed on time basis. We agree with the submissions made by the Ld.Counsel for the assessee that the income in question has to be taxed over the period of the contract. Hence the addition made is deleted and the appeal of the assessee is allowed.
Also the penalty levied u/s 271(1)(c ) on such addition cannot be sustained.
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2015 (2) TMI 291
Interest income from housing loans given by the assessee to the seven societies - whether be treated as income accrued or received to the assessee? - assessee was following mercantile system of accounting - Held that:- Chargeable interest is interest that accrued or arose in the previous year, irrespective of whether such interest was actually received. Thus, where any loan or advance is given for a certain term, for example, where a loan is given for 5 years and interest is to be computed periodically, but is actually realised in advance, at the time of disbursement of the loan/advance, there interest would become chargeable. Periodically and not at the time when it is actually realised. Similarly, if the interest is to be computed in monthly, quarterly, or yearly rests, chargeable interest would accrue at the end of the months, quarter or year, as the case may be, even though actual realization may take place at a later date. As already held that nonoperational sticky loans in respect of which mercantile actual of interest was shown in the suspense account and not the profit and loss account, would not, in law, be payable on mercantile accrual basis. Interest on such loans would have to be accounted for and paid as and when it is realised. See UCO BANK VS. CIT, WEST BENGAL-III, KOLKATA [2014 (1) TMI 86 - CALCUTTA HIGH COURT] - Decided in favour of the assessee.
Provisions of section 34 of the Code of Civil Procedure relied particularly in view of section 5 of the Income Tax Act, 1961 - Held that:- In this case, it was not any doubtful loan and the interest has not been kept, although, the Tribunal has held, as noted herein above. . The assessee in this case was and had never decided to waive off any loan or interest, but, has filed suits and bad debts can be written-off in terms of Section 37 of the Act.- Decided in favour of the assessee.
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2015 (1) TMI 1489
Admission of additional ground raised - disallowing credit for corporate taxes paid by MTPL Singapore, to the extent of dividends received by appellant from MTPL in India - As pointed out that in the present case factual foundation has not been laid down before the AO and relevant facts are not on record, thus this ground should not be admitted - HELD THAT:- It is well settled law that a legal claim can be advanced at any stage of proceeding - we are not inclined to accept the submission of the CIT(DR) to reject the ground taken by assessee on the ground of laches. There is no quarrel with the submissions of Ld. CIT(DR) that if the relevant facts are not there on record then the additional ground should not be admitted - if the basic facts are there on record and those facts have only to be supplemented by obtaining some further information in that respect then in order to determine the correct tax liability of assessee and to advance the cause of substantial justice, the additional ground raised by assessee should be admitted.
In the present case the basic facts necessary for adjudication of additional ground are already on record and at best the AO is to verify those facts and apply the correct provisions of DTAA to the facts. We, therefore, admit the ground raised by the assessee and restore the matter to the file of the AO for allowing the credit of taxes paid in Singapore on the dividend income as per the provisions of DTAA in accordance with law. Additional ground raised by the assessee is admitted and allowed for statistical purposes.
Disallowance u/s 14A r.w.r. 8D - Necessity of recording AO's satisfaction regarding expenditure being incurred for the earning of exempt income on reasonable basis - HELD THAT:- AO as well as Ld. CIT(A), both have confirmed the disallowance applying Rule 8D. Therefore, the order of Ld. CIT(A) cannot be sustained. The issue, therefore, is restored back to the file of the AO for deciding the issue denovo in accordance with the decision in the case of Maxopp Investment Ltd. [2011 (11) TMI 267 - DELHI HIGH COURT] and also after taking into consideration the decision in its own case for asstt. Year 1993-94.
Addition on account of non crediting of sum received as DEPB credit - HELD THAT:- AO in the body of order talks of addition of Rs. 2,73,56,574/- whereas in computation makes addition of Rs. 2,63,38,000/-. Both these additions have different import. Therefore, he needs to clarify the correct amount which he intends to add. We further notice that assessee has returned 3% profit in the year in which the DEPB is sold/auctioned and 97% of the profit is transferred to NINL as per agreement. This was rightly done in view of overriding title in favour of NINL over proceeds of sale/auction of DEPB.
Nature of expenses - expenditure towards annual fees of license issued by Central Electricity Regulatory Commission (CERC) for the period 1.4.2005 to 31.3. 2006 - AO treated this expenditure as capital expenditure on the ground that the same related to activity which was ready to become operational and pertained to an independent activity - CIT(A) deleted this disallowance taking into consideration the fact that the payment was towards annual license fee for trading in electricity - HELD THAT:- The facts as noted by Ld. CIT(A) have not been controverted by the department. It is not disputed that the activity carried out by the assessee resulted into generation and sale of electricity therefore the licence fee paid for trading in electricity was in revenue’s field. We, therefore, confirm the order of the Ld. CIT(A) on this issue.
Penalty u/s 273(2)(a) - CIT(A) noted that inadvertently the assessee company did not claim it as deduction in the computation of total income for the asstt. year under consideration - HELD THAT:- The department has not controverted the facts as recorded by the Ld. CIT(A) . There can be no quarrel with the observation of Ld. CIT(A) that while the payment of penalty, if debited to the profit and loss account is to be disallowed and added back to the computation of total income, the refund thereof, if credited to the profit and loss account, has to be allowed as a deduction in the computation. We, therefore, confirm the order of Ld. CIT(A).
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2014 (8) TMI 36
Interest income allotted to be taxed on proportionate basis - Whether the Tribunal is right in holding that the interest income in the hands of the assessee allotted in the three years IDBI capital bonds is required to be taxed only on proportionate basis and that the CIT(A) was not justified in sustaining the addition made in the year in which it was received – Held that:- The entire interest received on Bonds is required to be included in the income for the Assessment Year in which the entire amount of interest was received - the upfront onetime payment of interest immediately on allotment is deferred revenue expenditure and the assessee creating asset on basis of interest for five years being paid in advance in first year and, the assets written off over period of debentures for five years continuing benefit to business of the assessee over the entire period, the liability is to be spread over period of debentures and, the entire amount of interest received as upfront one-time payment of interest immediately on allotment is included in the income for the first year in which the amount of interest is received - Following the decision in Rakesh Shantilal Mardia, Ahmedabad Versus Deputy Commissioner of Income Tax [2012 (9) TMI 521 - SUPREME COURT] - Decided against Revenue.
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2013 (8) TMI 872
Revision u/s 263 - Assessing Officer did not examine the status of the assessee in the course of assessment proceedings - taxation of Indian salary along with U.S.A. salary - global income rectification of the order to exclude double addition as the global income of ₹ 7,18,15,365 taken as income from the U.S.A. in fact includes the Indian salary already brought to tax at ₹ 3,24,45,350 - Held that:- If the proceedings under section 263 are on assessment order dated December 29, 2008, obviously there cannot be any prejudice caused to the Revenue, as the Assessing Officer not only brought to tax the Indian component but also the entire global component of the salary. Therefore, the proceedings under section 263 can only be considered to be against the order dated February 24, 2009 under section 154 in which the Assessing Officer by mistake excluded ₹ 7,18,15,365 instead of ₹ 3,24,45,350 included in the above amount.Since the proceedings are initiated against the order under section 154 dated February 24, 2009, question of considering amount of ₹ 53,19,253 does not arise at all, as issue of perquisite was originally concluded by the order dated January 24, 2006 and subsequent proceedings under section 263 did not make it as an issue. Therefore, CIT(A) raising an issue of taxability of perquisite out of the entire tax deducted at source does not arise at all, as this is not an issue considered in the order under section 154. Therefore to that extent the direction of the Commissioner of Income-tax to bring the amount to tax is beyond jurisdiction.
Even on the merits, the assessee, from the beginning has submitted before the Assessing Officer that the tax refund if any does not belong to him and belongs to employer. Based on the above submissions, the issue of perquisite would not have been raised by the Assessing Officer. Be that as it may, the assessee placed evidence on record that already refund to the extent of ₹ 40,41,172 was returned to the employer and balance refund, if any arising to the assessee, would also be returned to the employer. Therefore, in our opinion, there is no error in the order and certainly no prejudice to the Revenue.
Whether there is any prejudice caused to the Revenue in the order under section 154 - Held that:- The amendment to section 6(6)(a) has come with effect from April 1, 2004, therefore, the same is not applicable to the assessment year under consideration. In view of the interpretation given in the case of Pradip J. Mehta v. CIT [2008 (4) TMI 6 - Supreme Court]to the then existing law, in a way the Assessing Officer excluded the income earned outside India and ultimately the assessee was taxed in the income earned in India. Therefore, to that extent there is no prejudice caused to the Revenue on the basis of interpretation of law relevant for the assessment year 2003-04. Therefore, in our opinion the order under section 263 by the Commissioner of Income-tax is bad in law even though there was a mistake committed in the order under section 154 as stated earlier. - Decided in favour of assesse.
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2013 (4) TMI 659
Proceedings initiated u/s 153A - search and seizure u/s 132 - Whether AO has all powers to go beyond the seized material during the search? - Addition in respect of share capital received - admission of additional evidence - whether on the basis of material furnished by the assessee and available on the record, the assessee has discharged its onus as cast by sec. 68 in terms of identity and creditworthiness of the shareholders and genuineness of the transaction - Accrual of income - Held that:- The availability of balance-sheet, certificate of incorporation, confirmations and certificates of good standing etc. filed by the assessee in respect of shareholders establish that they are non-resident entities, having independent and legal existence. The moneys have come to assessee through banking channels as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of the remitting bank. FIPB approval that too with a liberty to collect share capital up to 600 crores and ROC compliance etc. clearly indicate the stand of the assessee.
Merit in the contentions of assessee and reliance on the decisions of Finlay Corporation [2003 (1) TMI 266 - ITAT DELHI-D], Smt. Sushila Ramaswamy [2009 (4) TMI 554 - ITAT CHENNAI] and Saraswati Holding (2007 (7) TMI 345 - ITAT DELHI-F) and the import of CBDT Circular No. 5 in F. No. 73A/2(69)-IT (A-ll), dt. 20th Feb., 1969 that whenever remittances are made by the non- resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like FIRC etc are produced, it can safely be stated that the said money came in through banking channels.
In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identity is not in question through their bank accounts outside India have to be held as capital receipts not exigible to tax. It therefore naturally follows that if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under sections 68 or 69 of the Act. Thus the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee u/s 68 - In favour of assessee.
Disallowance of various expenses holding that no business activity was carried out - Held that:- For A.Y. 2002-03 & 2003-04 the assessee was not granted registration as vendor by the Ministry of Defence as suppliers. Besides, no supply had taken place. Thus the expenditure has been rightly disallowed as business of the assessee was not set up. Apropos A.Y. 2005-06, the assessee had obtained the registration and participated in the tenders invited by the Ministry of Defence for which necessary evidence has been referred in the form of correspondence demonstrating the negotiations at various stages. Thus, in A.Y. 2005-06, the assessee was in a state of readiness to obtain the orders if found successful for tendering/ bidding and the expenditure incurred by it is to be allowed as revenue expenditure for the defined period.
Addition on unsecured loans from M/s Claridges SEZ Pvt. Ltd. (CSEZ), as creditworthiness of M/s CSEZ was not established - Held that:- Merit in the arguments of assessee that CSEZ also being searched on the same date and the seized record being with the department, department could have verified the same from its record. The interest of justice will be served if the issue is remitted back to the file of AO to verify from the seized record about the bank statement of CSEZ and decide the issue after giving the assessee fair and reasonable opportunity of being heard. In favour of assessee for statistical purposes.
Disallowance of Interest - Held that:- In the absence of the details about disallowance of interest, it will not be possible to adjudicate this ground. Therefore, set aside the issue of interest back to the file of AO to decide the same afresh, considering our conclusion on applicability of sec. 68, commencement of business in 2007- 08, after giving the assessee reasonable opportunity of being heard.
Addition of US$ 3360 found at assessee's premises at the time of search - Held that:- The contention of the assessee that the confirmation and statement of Sri Govind Singh director of M/s Alpcord Network being on record, has not been denied by the department. The addition has been made on the basis that assessee could not produce necessary evidence & if the record is available with the department and assessee pointed out towards it, then as a principle of natural justice, lower authorities should verify that evidence and decide about the allowability. In favour of assessee for statistical purposes.
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2013 (4) TMI 316
Addition on account of interest on Non Performing Assets not recognized by the appellant - Assessee submitted that in view of the RBI guidelines, Accounting Standards and guidance notes of ICAI etc. following the principles of income recognition, the assessee had followed these directions and accordingly not recognized the interest on NPA for the year - Held that:- As decided in C.I.T. vs. M/s Vasisth Chay Vyapar Ltd. [2010 (11) TMI 88 - DELHI HIGH COURT] the assessee herein had advanced certain Inter Corporate Deposits (ICD) to M/s Shaw Wallace Company. The interest thereupon could not be received by the assessee for more than six months. The assessee is a Non-Banking Financial Company (NBFC) and, therefore, is bound by the directions given by the Reserve Bank of India. These directions, inter alia, mandate a NBFC to declare such advances as Non Performing Assets (NPA) when the accrued interest therein is not paid by the debtor continuously for six months.
The assessee company being NBFC is governed by the provisions of RBI Act. In such a case, interest income cannot be said to have accrued to the assessee having regard to the provisions of section 45Q of the RBI and Prudential Norms issued by the RBI in exercise of its statutory powers. As per these norms, the ICD had become NPA and on such NPA where the interest was not received and possibility of recovery was almost nil, it could not be treated to have been accrued in favour of the assessee.
As DR could not controvert the submissions of the assessee that this issue is squarely covered in favour of the assessee by the decision of Vasisth Chay Vyapar Ltd.(Supra) the issue in favour of the assessee decided.
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2012 (9) TMI 800
Addition on account of deemed rent - property was deemed to have been let out. - Held that:- On perusal of the agreement of sale dated 19th day of Septebmer-2007, it is evident from the schedule of payment that the same was agreed to be paid on the basis of the stage-wise completion of the construction. Due to this reason, the respondent-assessee has shown an outstanding current liability of Rs.11 lacs of Rajyog Enterprises as on 31.03.2008. The assessee has placed on record a possession letter through which it has also been established that the same was delivered in the following years on 15.12.2010. Under the totality of the circumstances, it is to be concluded that the addition made by the AO was merely on presumption, hence deserves to be reversed - in favour of assessee.
Addition on account of deemed rent of motor garage - Held that:- AO has presumed that the motor-car garage might have been let out by the assessee. In the absence of any evidence in his possession of letting out of the motor-car garage, thus AO has faulted in taxing an income merely on hypothesis - in favour of assessee.
Deemed dividend by invoking the provisions of section 2(22)(e) - assessee happened to be a beneficial holder of 50% share in company imparting loan - Held that:- As it was a trade transaction as evident from the copy of accounts placed on record and there are certain correspondences way back dated 8.2.2006, placed in the compilation, stated therein that the said deposit of Rs.5,00,000/- was towards supply of material on regular basis and that deposit was required to be adjusted against the pending dues, if any, thus the nature of deposit was not a “loan deposit” but in the nature of a “trade deposit” and out of purview of section 2(22)(e) - in favour of assessee.
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2012 (9) TMI 521
Interest income arising on the difference between purchase price of the debenture and redemption price after six years - Taxation on interest income on accrual basis in the year of allotment of debenture itself or to be taxed on spread-over basis - Held that:- The case of Taparia Tools Limited vs. JCIT [2003 (1) TMI 83 - BOMBAY HIGH COURT] refers to matching principle in order to arrive at the real income of the assessee wherein it is held that in this case as concerning with the ascertainment of true profits under the Income-tax Act and in order to ascertain such profits the true accounting principles need to be followed and to apply those principles in the light of the method of accounting followed by the assessee.
As find from the records that the assessee has computed his interest income arising on the difference between purchase price of the debenture and redemption price after six years and calculated the income on amortization basis - the civil appeals filed by the assessees allowed.
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2007 (9) TMI 188
When AO satisfied that annual rent of house property was much lower than expected rent & no standard rent has been fixed by rent controller then AO should determine annual value & expected rent by following guidelines of Rent control act not on basis of rent paid by other tenants in premises.
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2007 (5) TMI 181
If assessee has not maintained account books then question of audit does not arise – section 271B is for imposing penalty when accounts are not audited – section 271A is for imposing penalty when accounts are not maintained –hence imposition of penalty u/s 271A may arise but imposition of penalty u/s 271B does not arise– penalty provisions should be strictly construed – Revenue’s appeal allowed
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2006 (11) TMI 112
Book profit u/s 115J of the Act- HC held that once the management after due care made provision for the doubtful debts was not consider as provision for unascertained liability, hence the amount added back to Profit and loss account by the AO not sustained
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2002 (12) TMI 554
Issues:
1. Addition of Rs. 25,000 on account of CDS amount of the deceased.
2. Addition of Rs. 25 lacs being the value of jewelry, heirlooms, etc., disclaimed by the deceased.
Issue 1:
The first issue in this case pertains to the addition of Rs. 25,000 on account of the CDS amount of the deceased. The Revenue contended that the amount should be included in the deceased's estate, relying on legal commentary to support their argument. However, it was established that the CDS amount of Rs. 25,000 belonged to the estate of the deceased's late husband, and the deceased was merely a nominee in the bank account. The estate of the deceased's late husband had not been administered during her lifetime, leading to the conclusion that no amount could be included in her estate. The Tribunal upheld the decision of the CED(A) on this issue, dismissing the appeal by the Revenue.
Issue 2:
The second issue revolves around the addition of Rs. 25 lacs, representing the value of various items like jewelry and heirlooms, which were disclaimed by the deceased during her lifetime. The Revenue argued that the act of disclaimer, if any, should still be added to the deceased's estate. They also raised concerns about the valuation of assets and the lack of details provided by the accountable person. On the other hand, the counsel for the assessee contended that the deceased had relinquished her right to choose any assets, as evidenced by the contents of her will. The Tribunal analyzed the deceased's will, which clearly indicated her disclaimer of choosing any valuables from her late husband's estate. Since the assets remained unadministered and the right to choose was never exercised by the deceased, the Tribunal held that the disclaimer did not constitute a gift and therefore should not be added to the deceased's estate. Consequently, the Tribunal upheld the decision of the CED(A) on this issue, dismissing the appeal by the Revenue.
In conclusion, the Appellate Tribunal ITAT MUMBAI, in the case at hand, addressed the issues of adding amounts related to the deceased's late husband's estate and the disclaimer of valuables by the deceased during her lifetime. The Tribunal carefully analyzed the legal arguments presented by both parties and upheld the decision of the CED(A) on both issues, ultimately dismissing the appeal by the Revenue.
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1998 (5) TMI 35
Issues Involved:
1. Determination of the appropriate multiple for valuing rented properties.
2. Allowance of deductions from gross rental income to determine net rental value.
Detailed Analysis:
1. Determination of the Appropriate Multiple for Valuing Rented Properties:
The primary issue in these wealth-tax appeals was the appropriate multiple to be applied to the net rental income to determine the value of rented properties. The Revenue argued that the Appellate Assistant Commissioner (AAC) erred in reducing the multiple from 12.5 times (applied by the Wealth Tax Officer, WTO) to 10 times. The AAC's decision was based on the valuation report of an approved valuer and supported by various legal precedents.
The Revenue relied heavily on the Punjab and Haryana High Court decision in CIT v. Prem Nath Anand [1977] 108 ITR 549, where a multiple of 12 times was considered reasonable. The Department also cited previous Tribunal decisions supporting a higher multiple.
Conversely, the assessee's representative argued for the multiple of 10, citing the Supreme Court decision in Union of India v. Smt. Shanti Devi AIR 1983 SC 1190, which discussed the method of capitalizing net income based on the prevailing interest rates on safe investments. The representative also referenced expert opinions and other judicial decisions supporting a lower multiple.
The Tribunal, after considering various authorities and the prevailing interest rates on long-term deposits, concluded that a multiple of 10 times was reasonable. It noted that the principles of market value determination could be derived from different legal authorities and that the rate of return on investments was a significant factor.
2. Allowance of Deductions from Gross Rental Income:
The second issue was whether deductions from gross rental income should be allowed to determine the net rental value. The AAC allowed a deduction of 33 1/3 percent from the gross rental income, which was not disputed by the departmental representative.
The Tribunal upheld the deduction, finding it reasonable and consistent with the principles of determining net rental value for valuation purposes. The Tribunal emphasized that the determination of market value should consider the net income that the property could fairly be expected to produce.
Separate Judgments:
Accountant Member's Judgment:
The Accountant Member supported the AAC's decision to apply a multiple of 10 times and allow deductions of 33 1/3 percent from gross rental income. The judgment highlighted the importance of considering the prevailing interest rates on safe investments and referenced various legal precedents and expert opinions supporting the lower multiple.
Judicial Member's Judgment:
The Judicial Member disagreed with the Accountant Member, advocating for a multiple of 12 times based on the Punjab and Haryana High Court decision in Prem Nath Anand and the Tribunal's previous decisions. The Judicial Member emphasized the need for consistency in judicial decisions and argued that the Tribunal should not deviate from established precedents unless there were compelling reasons.
Third Member's Judgment:
Due to the difference of opinion between the Accountant Member and the Judicial Member, the matter was referred to a Third Member. The Third Member agreed with the Judicial Member that a multiple of 12 times should be applied but clarified that it should be applied to the net rental value, not the gross rental value. This approach aligned with the jurisdictional High Court's view and ensured consistency in applying the law.
Final Decision:
The matter was referred back to the Division Bench to pass appropriate orders in accordance with the majority decision, which supported applying a multiple of 12 times to the net rental value for determining the market value of the rented properties.
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1991 (2) TMI 45
The High Court of Allahabad addressed questions regarding the Wealth-tax Act, 1957. The court clarified that rule 1D does not override section 24(6) of the Act. The Department can rely on rule 1D even if not raised before the Tribunal. Valuers must follow rule 1D when valuing unquoted shares. The Tribunal's reliance on valuers' reports was deemed justified. The reference was answered accordingly with no costs.
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1991 (1) TMI 113
Issues Involved:
1. Valuation of the plot under the Wealth-tax Act.
2. Impact of restrictive clauses in the lease agreement on the valuation.
3. Determination of hypothetical market value.
Detailed Analysis:
Valuation of the Plot under the Wealth-tax Act:
The primary issue in this case is the determination of the value of a plot allotted to the assessee by a Government Servant's Co-operative Housing Society Ltd., under the provisions of the Wealth-tax Act. The assessee initially declared the value of the plot at Rs. 32,641 but later revised it to Rs. 2,08,000. The Wealth-tax Officer valued the plot at Rs. 250 per sq. yd., resulting in a value of Rs. 1,46,320 after allowing a 50% deduction for the unearned increase, as per the lease agreement. The Appellate Assistant Commissioner and the Appellate Tribunal had differing views on the valuation, leading to the reference to the High Court.
Impact of Restrictive Clauses in the Lease Agreement on the Valuation:
The lease agreement included several restrictive clauses, such as the requirement for the society's prior written consent for any sale or transfer of the plot, and the society's right to recover 50% of the unearned increase in value upon sale. The Appellate Assistant Commissioner considered these restrictions significant and determined a reasonable appreciation rate of 10% per year, valuing the property at Rs. 52,565. The Appellate Tribunal, however, viewed the restrictive clause as a "clog against alienation" and directed the Wealth-tax Officer to value the plot at Rs. 32,640, the amount initially paid by the assessee.
Determination of Hypothetical Market Value:
The High Court referenced several precedents to address the question of whether the restrictive clauses should be ignored for valuation purposes. According to the decisions cited, including those from the Bombay High Court and the Supreme Court, the value of an asset under section 7 of the Wealth-tax Act should be determined by imagining an open market sale, ignoring actual restrictions on alienation. The court emphasized that the hypothetical market value must consider the interest of the assessee in the asset, which includes the impact of any restrictions that could affect the price.
The court cited the Supreme Court's decision in CWT v. P. N. Sikand, which dealt with a similar issue of valuing a leasehold interest with restrictions on alienation. The Supreme Court held that the value should be reduced by 50% of the unearned increase in the value of the land, reflecting the burden or disadvantage of the restrictive clauses.
Conclusion:
The High Court concluded that the restriction against alienation should be ignored for the purpose of the hypothetical sale under section 7 of the Wealth-tax Act. However, the market value must be estimated with reference to the assessee's interest in the asset, considering the possibility of a reduced price due to the restrictions. The court answered the reference in the negative and in favor of the Revenue, indicating that the Appellate Tribunal's directive to value the plot at Rs. 32,640 was incorrect. The value should reflect the hypothetical market value, reduced by the 50% unearned increase as per the restrictive clauses.
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1987 (10) TMI 5
Issues Involved:
1. Validity of the return submitted without depositing the tax due.
2. Refund of the amount already deposited.
Detailed Analysis:
1. Validity of the Return Submitted Without Depositing the Tax Due:
The petitioner-company challenged the notices of demand issued by the Superintendent of Taxes, Jorhat, for taxes under the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954. The company had submitted a voluntary return for the period ending December 31, 1959, but did not accompany it with the required tax payment. The assessment was made under section 9(3) of the 1954 Act, and a notice of demand was issued. The company partially complied by depositing Rs. 3,439.86.
The court examined whether the return submitted without the tax payment was valid. It referred to the precedent set in Bormahjan Tea Company Ltd. v. Superintendent of Taxes [1974] ALR 115, which held that a return must be submitted within 30 days after the completion of the return quarter and must be accompanied by the tax payment. Failure to comply renders the return non est (invalid) for initiating assessment proceedings. The Supreme Court upheld this principle in Superintendent of Taxes v. Bormahjan Tea Co. Ltd. [1978] 1 SCC 513, emphasizing that the payment of tax before furnishing the return is mandatory.
In the present case, the court found that the return submitted by the petitioner-company was non est because it was not accompanied by the required tax payment. Consequently, the assessment order and the notices of demand based on this return were deemed invalid.
2. Refund of the Amount Already Deposited:
The petitioner-company sought a refund of the amount deposited pursuant to the invalid assessment order. The respondents argued that the liability to pay tax existed under the Act and that the assessment order, though initially invalid, had been validated by the Assam Taxation (on Goods Carried by Road or on Inland Waterways) Act, 1961.
The court considered the principle of unjust enrichment, which mandates that the State should not retain amounts not due to it. Section 23 of the 1961 Act provides for refunds of sums paid in excess of the due amount. The court held that this provision applies even when no tax is payable but some amount has been paid. It was determined that the petitioner-company was entitled to a refund of the Rs. 3,439.86 deposited.
The court also addressed the principle of restitution, which requires that a party who has paid money under an invalid law is entitled to a refund. This principle is supported by Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by authority of law. The court cited several precedents, including STO v. Kanhaiya Lal Makund Lal Saraf [1958] 9 STC 747 (SC) and Orient Paper Mills v. State of Orissa [1961] 12 STC 357 (SC), which support the right to a refund of taxes paid under an invalid law.
The court concluded that the assessment order and the notices of demand were invalid, and the petitioner-company was entitled to a refund of the amount deposited. The petition was allowed, and the rule was made absolute, directing the respondents to refund Rs. 3,439.86 to the petitioner-company. The parties were directed to bear their own costs.
Separate Judgments:
S. N. PHUKAN J. concurred with the judgment.
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