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2011 (1) TMI 1389
Issues Involved: 1. Validity of notice u/s 148. 2. Addition of Rs. 27,85,500/- u/s 68. 3. Addition of Rs. 41,782/- on account of commission. 4. Admission of additional evidence by CIT(A) in contravention of Rule 46A.
Summary:
1. Validity of notice u/s 148: The assessee challenged the validity of the notice issued u/s 148. However, this ground became infructuous as the case was decided on merits in favor of the assessee.
2. Addition of Rs. 27,85,500/- u/s 68: The AO added Rs. 27,85,500/- to the income of the assessee, alleging that the amount represented accommodation entries. The assessee provided details of share application money and sale proceeds of shares, including PAN, affidavits, and confirmations. The CIT(A) deleted the addition, holding that the assessee had discharged the onus of proving the identity, genuineness, and creditworthiness of the transactions. The Tribunal upheld this decision, noting that the AO did not conduct any independent enquiry and relied solely on the investigation wing's information.
3. Addition of Rs. 41,782/- on account of commission: The AO added Rs. 41,782/- as commission paid for obtaining accommodation entries. Since the main addition of Rs. 27,85,500/- was deleted, the CIT(A) also deleted the commission addition, which was upheld by the Tribunal.
4. Admission of additional evidence by CIT(A) in contravention of Rule 46A: The revenue argued that the CIT(A) admitted additional evidence without following Rule 46A. The Tribunal found that the evidence regarding the purchase of shares was requisitioned by the CIT(A) and was not additional evidence filed by the assessee. Therefore, the CIT(A) was within his rights to call for such evidence, and no contravention of Rule 46A occurred.
Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order, deleting the additions made by the AO. The cross-objection by the assessee regarding the validity of notice u/s 148 was dismissed as infructuous.
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2011 (1) TMI 1388
Issues Involved:
1. Deduction u/s 80IB(10) for non-owner developers. 2. Deduction u/s 80IB(10) on proceeds from the sale of unutilized FSI.
Summary:
Issue 1: Deduction u/s 80IB(10) for non-owner developers
The Revenue contended that the assessee was not entitled to deduction u/s 80IB(10) as the assessee was not the owner of the land and the approval for the housing project was not in the assessee's name but in the name of the original landowner. The CIT(A) allowed the deduction, referencing the ITAT Ahmedabad decision in the case of M/s. Radhe Developers & Others, which held that ownership of land is not a prerequisite for claiming deduction u/s 80IB(10). The ITAT affirmed this view, stating that the deduction is available to the entity developing and building the housing project, irrespective of land ownership.
Issue 2: Deduction u/s 80IB(10) on proceeds from the sale of unutilized FSI
The Revenue argued that the profit from the sale of unutilized FSI should not qualify for deduction u/s 80IB(10) as it is not derived from the development and construction of housing projects. The CIT(A) rejected this argument, again referencing the ITAT Ahmedabad decision in M/s. Radhe Developers & Others, which clarified that there is no mandatory requirement to fully utilize permissible FSI for claiming deduction u/s 80IB(10). The ITAT upheld this view, noting that the sale of unutilized FSI does not disqualify the profits from being considered as derived from the housing project.
Conclusion:
The ITAT confirmed the CIT(A)'s order allowing the deduction u/s 80IB(10) to the assessee, both for the development of the housing project and the proceeds from the sale of unutilized FSI. The appeal of the Revenue was dismissed.
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2011 (1) TMI 1387
Issues Involved: 1. Legality of the reassessment under Section 153A of the Income Tax Act. 2. Validity of the addition made as undisclosed investment under Section 69. 3. Justification of the reference made to the Valuation Officer. 4. Reliance on the Valuation Officer's report and objections raised by the assessee.
Detailed Analysis:
1. Legality of the Reassessment under Section 153A: The assessee challenged the reassessment framed under Section 153A, arguing that it was done without complying with the statutory requirements and procedures. However, no arguments were presented before the Tribunal on this ground, leading to its rejection.
2. Validity of the Addition Made as Undisclosed Investment under Section 69: The assessee contended that the addition of Rs. 3,89,409/- as undisclosed investment in the purchase of property was made without any material or evidence indicating any investment over the amount stated in the sale deed. The Tribunal noted that the Assessing Officer (AO) did not record any finding that the investment was not fully disclosed in the books of account, which is a prerequisite under Section 69. Therefore, the reference to the Valuation Officer and the subsequent addition based solely on the Valuation Officer's report were deemed unsustainable.
3. Justification of the Reference Made to the Valuation Officer: The Tribunal examined Section 142A, which allows the AO to refer to the Valuation Officer for an estimate of the value of any investment. However, this can only be done if there is evidence that the investment was not fully disclosed in the books of account. In this case, the AO did not have any such evidence. The Tribunal cited various precedents, including "M/s. Rajeshwar Nath Gupta, HUF" and "CIT v. Gulshan Kumar," to support its conclusion that the reference to the Valuation Officer was invalid.
4. Reliance on the Valuation Officer's Report and Objections Raised by the Assessee: The Tribunal found that the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] had not adequately addressed the objections raised by the assessee against the Valuation Officer's report. The objections included issues like the property being under adverse possession, discrepancies in the valuation date, and the use of inappropriate comparable properties. The Tribunal emphasized that the valuation report alone could not form the basis for the addition, especially when the primary condition of Section 69B was not met. The Tribunal also noted that the comparable case used by the Valuation Officer was not apt, as it involved a property sold by the Delhi Development Authority in an open auction, which was not comparable to the assessee's property.
Conclusion: The Tribunal concluded that the AO's reference to the Valuation Officer and the subsequent addition based on the valuation report were not justified. The Tribunal allowed the assessee's appeals in part, setting aside the additions made by the AO and upheld by the CIT(A). The department's appeal was dismissed. The Tribunal emphasized the importance of having concrete evidence before making additions based on valuation reports and reiterated that valuation discrepancies alone could not justify such additions.
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2011 (1) TMI 1386
The judgment by Appellate Tribunal CESTAT CHENNAI in 2011 dismissed the appeal of the assessee due to the absence of clearance from the Committee on Disputes. The assessee, a Government of Karnataka undertaking, was given the liberty to apply for restoration if the clearance is obtained.
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2011 (1) TMI 1385
Issues involved: Appeal against orders of CIT(A) for respective assessment years, disallowance under sec.36(1)(viia) for Asst. year 1993-94, bad debt write off and disallowance under sec. 14A for Asst. year 2006-07.
For Asst. year 1993-94: The only ground raised by the assessee was regarding disallowance made under sec.36(1)(viia). The Committee on Disputes had declined permission for the assessee to pursue this issue before the Tribunal, leading to the dismissal of the appeal.
For Asst. year 2006-07: The first issue was regarding bad debt write off, which the Committee on Disputes had also declined permission for the assessee to pursue. The second issue was the disallowance of `24,27,875/- under sec. 14A. The AO had relied on Rule 8D and the decision of a Special Bench, but the assessee argued against the application of Rule 8D for earlier years. Various judicial decisions were cited, leading to the Tribunal's decision that the matter needed to be revisited by the AO based on the principles discussed.
Summary of Judgement: The Tribunal dismissed the appeal for Asst. year 1993-94 due to lack of permission to pursue the issue. For Asst. year 2006-07, the Tribunal allowed the second ground of the assessee regarding the disallowance under sec. 14A for statistical purposes. The Tribunal emphasized the need for the AO to reconsider the matter based on various judicial decisions and evidence to be produced by the assessee, ensuring a fair assessment of the disallowance under sec. 14A.
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2011 (1) TMI 1384
Issues involved: The judgment involves issues related to the assessment order passed by the Ld Assessing Officer pursuant to the directions of the Ld DRP, jurisdictional error in the reference made by the Ld Assessing Officer u/s 92CA(1) of the Act, addition of income to the appellant, violation of principles of natural justice, initiation of penalty u/s 271(1)(c) of the Act, and the sustainability of the order of DRP.
Assessment Order and DRP Directions: The appeal was against the order of Dispute Resolution Panel (DRP), New Delhi dated 30.8.2010 passed u/s 144C of the Income Tax Act, 1961. The grounds raised by the assessee challenged the assessment order passed by the Ld Assessing Officer, jurisdictional errors in the reference made by the Ld Assessing Officer u/s 92CA(1) of the Act, and the addition of income to the appellant. The Ld DRP and Ld Assessing Officer were alleged to have erred in various aspects related to the arm's length principle, TP documentation, selection of comparables, working capital adjustment, and risk adjustment. The appellant contended that the principles of natural justice were violated, and judicial pronouncements were disregarded in undertaking the TP adjustment.
Sustainability of DRP Order: The assessee raised objections against the cryptic and non-speaking order of the DRP, which did not consider the arguments presented by the assessee in detail. The DRP's order was compared to previous tribunal decisions emphasizing the importance of providing cogent and germane reasons in quasi-judicial orders. The Tribunal found that the DRP had not adequately considered the assessee's arguments, leading to the decision to remit the matter back to the DRP for a proper, speaking, and reasoned order u/s 144C of the Income Tax Act, 1961. The judgment highlighted the necessity for quasi-judicial authorities to provide detailed reasons for their decisions to facilitate proper review.
Conclusion: The Tribunal allowed the appeal of the assessee for statistical purposes, remitting the matter back to the DRP for a fresh decision considering all arguments of the assessee. The judgment emphasized the importance of providing detailed and reasoned orders by quasi-judicial authorities to ensure fairness and proper review processes.
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2011 (1) TMI 1383
Estimation of the income from trucks plying business (as per Section 44AE) - Non-acceptance of revised return of income furnished by the appellant - Disallowance made out of diesel expenses - Disallowance made out of truck repairing expenses - Disallowance of made out of the tyre expenses - Addition in respect of so called vehicle rent received from Dashrathbhai K. Chaudhary - HELD THAT:- It is not in dispute that the assessee was plying the goods carriage which were four. Therefore, the number of goods carriages plied by the assessee was well within the ambit of the section 44AE. The AO has rejected the book result and has estimated the income by making various disallowance out of the expenses claimed by the assessee. He also enhanced the receipt shown by the assessee. The estimated disallowance made by the AO were partly reduced by the CIT(A). Therefore, undisputedly, in the assessee’s case, the actual dispute is only with regard to estimation of the income from trucks plying business.
When the Legislature has provided some formula for estimation of income in the case of a transporter, who owns less than ten goods carriages, there would not be any justification for not estimating the income of the assessee as per the formula prescribed in section 44AE. It is irrelevant whether the revised return furnished by the assessee is valid or not. When the question of estimation of the income of a transporter comes, Section 44AE is a good guideline in the case of transporter who owns less than ten goods carriage.
The AO is directed to determine the income of the assessee as per the section 44AE of the IT Act - appeal of assessee allowed.
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2011 (1) TMI 1380
Issues Involved: 1. Disallowance u/s 14A. 2. Disallowance of allocated regional overheads. 3. Disallowance of software expenses. 4. Disallowance of advertisement expenses. 5. Deletion of disallowance of rent paid towards sharing of garden space.
Summary:
1. Disallowance u/s 14A: The issue pertains to the disallowance of Rs. 13,45,013/- u/s 14A. The Assessing Officer (AO) disallowed 10% of the dividend income, citing necessary expenditure for managing investments. The CIT(A) directed the AO to verify the claim as per Rule 8D. The Tribunal, referencing the Hon'ble Jurisdictional High Court's judgment in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT, set aside the orders and remanded the matter to the AO for fresh determination following the High Court's directions.
2. Disallowance of Allocated Regional Overheads: The AO disallowed Rs. 23,39,857/- due to lack of supporting evidence for expenses debited as allocated regional overheads. The CIT(A) confirmed this disallowance. The Tribunal upheld the disallowance, referencing its earlier decision in the assessee's own case, allowing the assessee to take remedial action in the subsequent year if the same amount was offered for taxation.
3. Disallowance of Software Expenses: The AO disallowed Rs. 9,46,032/- on software expenses, treating them as capital in nature. Both parties agreed that the issue is covered by the Special Bench decision in Amway India Enterprises vs. Dy. CIT. The Tribunal set aside the orders and remanded the matter to the AO to decide afresh in light of the Special Bench's criteria, allowing due depreciation if deemed capital expenditure.
4. Disallowance of Advertisement Expenses: The AO disallowed Rs. 10,49,722/- out of Rs. 1,35,35,020/- claimed as advertisement expenses, citing non-business purposes. The CIT(A) confirmed the disallowance. The Tribunal, following its earlier decision in the assessee's case for AY 2003-04, set aside the issue to the AO for fresh verification and decision.
5. Deletion of Disallowance of Rent Paid Towards Sharing of Garden Space: The AO disallowed Rs. 38,56,963/- paid for garden space, considering it a diversion of income. The CIT(A) deleted the disallowance, following the Tribunal's earlier orders in the assessee's case. The Tribunal upheld the CIT(A)'s order, referencing consistent Tribunal decisions and the Special Bench's decision in JCIT vs. ITC Ltd.
Assessment Year 2005-06: The issues of disallowance of regional overhead expenses Rs. 24,17,890/-, software expenses Rs. 21,07,024/-, and advertisement expenses Rs. 5.00 lacs were similar to AY 2004-05. The Tribunal confirmed the disallowance of regional overhead expenses and remanded the software and advertisement expenses issues to the AO for fresh decision.
Conclusion: The assessee's appeals for AY 2004-05 and 2005-06 were partly allowed for statistical purposes, and the revenue's appeal for AY 2004-05 was dismissed.
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2011 (1) TMI 1379
Issues Involved: Appeal against order of ld. CIT(A) for A.Y. 2008-09 regarding exemption claim u/s 10(10C) of Income Tax Act, 1961 for ex-gratia payment received under voluntary retirement scheme.
Summary: The appellant, a Deputy Manager at State Bank of India, took voluntary retirement and received an ex-gratia payment. The AO disallowed the claim of exemption u/s 10(10C) of the Act, stating that the scheme did not comply with the rule. The ld. CIT(A) upheld the AO's decision, leading to the appeal.
The appellant argued that a similar case decided by ITAT Kolkata Bench favored the assessee's claim for exemption u/s 10(10C). In that case, an employee of Standard Chartered Bank received compensation under an Early Separation Plan and was allowed the exemption despite the employer's objection. The Tribunal held that the provisions of sec. 10(10C) should be interpreted in favor of the optee for Voluntary Retirement.
After considering the submissions, the Tribunal found no justification in rejecting the appellant's claim based on the employer's statement about non-compliance with the rule. Citing the Kolkata Bench decision, the Tribunal held that the ld. CIT(A) wrongly rejected the claim, and the addition made by the AO was deleted, allowing the appeal.
In conclusion, the appeal filed by the assessee was allowed, and the order was pronounced in the Open Court on 14.1.11.
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2011 (1) TMI 1378
Issues Involved: 1. Legality of the addition of Rs. 13,91,520/- as unexplained investment in jewellery. 2. Validity of the CIT(A)'s decision to delete the addition to the extent of 1255.700 grams of jewellery. 3. Justification for the CIT(A)'s restriction on the explained jewellery to 500 grams per lady. 4. Denial of benefit for jewellery claimed to belong to the assessee's aunt and minor children.
Summary:
Issue 1: Legality of the addition of Rs. 13,91,520/- as unexplained investment in jewellery. The Assessing Officer (AO) added Rs. 13,91,520/- to the income of the assessee as unexplained investment in jewellery found during a search and seizure action u/s 132(1). The jewellery was found in a locker held by the assessee, and the assessee initially admitted it as undisclosed income. However, the assessee later retracted the statement, claiming the jewellery belonged to multiple family members.
Issue 2: Validity of the CIT(A)'s decision to delete the addition to the extent of 1255.700 grams of jewellery. The CIT(A) deleted the addition to the extent of 1255.700 grams, noting that the AO relied solely on the initial statement of the assessee without considering the retraction and supporting affidavits. The CIT(A) held that no addition could be made merely on the basis of a retracted statement without corroborative evidence.
Issue 3: Justification for the CIT(A)'s restriction on the explained jewellery to 500 grams per lady. The CIT(A) allowed credit for 500 grams of jewellery per married lady and 255.700 grams for the elder sister, based on CBDT Instruction No. 1916. The CIT(A) found contradictions in the assessee's statements regarding the ownership of the jewellery but concluded that the jewellery could be considered to belong to the three ladies only.
Issue 4: Denial of benefit for jewellery claimed to belong to the assessee's aunt and minor children. The CIT(A) denied the benefit for jewellery claimed to belong to the assessee's aunt and minor children, considering it an afterthought as no such claim was made during the investigation. The Tribunal upheld this decision, finding no credible evidence to support the claim.
Conclusion: The Tribunal dismissed both the revenue's and the assessee's appeals, upholding the CIT(A)'s decision to delete the addition to the extent of 1255.700 grams of jewellery and denying the benefit for jewellery claimed to belong to the assessee's aunt and minor children. The Tribunal relied on CBDT Instruction No. 1916 and the lack of corroborative evidence for the retracted statement.
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2011 (1) TMI 1377
transactions of purchase and sale of shares - nature of trade - HELD THAT:- we are of the view that if the principles laid down by the Tribunal in the case of Sarnath Infrastructure Ltd.[2007 (12) TMI 261 - ITAT LUCKNOW-B] as well as the guidelines issued by the CBDT are applied to the facts of the present case, it clearly emerges that the transactions of purchase and sale of shares entered into by the assessee were in the nature of trade and the ld. CIT(A) was not justified in treating the said transactions as made by the assessee in the capacity of investor and trader merely on the basis of holding period. In that view of the matter, we set aside the impugned order of the ld. CIT(A) on this issue and restore that of the A.O. Ground No. (i) & (ii) of the Revenue’s appeal is accordingly allowed whereas ground No. 1 & 2 of the assessee’s appeal are dismissed.
claim for deduction on account of donations and rebate for STT - income from share transactions - business income - HELD THAT:- Since we have already held that the entire profit arising from transactions of shares is chargeable to tax in the hands of the assessee under the head ‘profits and gains of business/profession’, we direct the A.O. to allow consequential relief to the assessee on account of donations and STT paid after necessary verification. Ground No. 3 of the assessee’s appeal is accordingly treated as allowed.
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2011 (1) TMI 1376
The Delhi High Court dismissed the appeal regarding the allowance of depreciation at a higher rate of 60% on computer accessories and peripherals, citing a previous judgment in favor of the assessee.
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2011 (1) TMI 1375
Allowability of deduction u/s 80-IA - Carry forward of losses relating to the industrial undertaking which are already absorbed against other income - brought forward against the profit of the current year while allowing the deduction u/s 80-IA - HELD THAT:- The issue relating to computation of s. 80-IA deduction that it has to be computed after deduction of the notional brought forward losses and depreciation of business even though they have been allowed set off against other income in earlier years has been dealt by the Special Bench in the case of ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 4, AHMEDABAD. VERSUS GOLDMINE SHARES AND FINANCE (P.) LIMITED. [2008 (4) TMI 405 - ITAT AHMEDABAD] and decided the issue against the assessee. While delivering this order, the Special Bench considered all the arguments what the assessee has placed in the instant case - The Tribunal also considered the judgment in the case of COMMISSIONER OF INCOME-TAX VERSUS MEWAR OIL AND GENERAL MILLS LTD. [2003 (10) TMI 12 - RAJASTHAN HIGH COURT] and observed that this case has not noticed the non obstante provisions of s. 80-I(6)/80-IA(5) and, therefore, there is no discussion on this point in that decision. It would similarly, therefore, be not of any help to present case.
The judgment of Special Bench in the case of Goldmine Shares & Finance (P) Ltd. is squarely applicable to the facts of the present case and applying the ratio laid down by this order of the Special Bench of this Tribunal, the issue is decided against the assessee relating to allowability of deduction under s. 80-IA that in terms of provisions of under s. 80-IA(5) of the IT Act, the profit from the eligible business for the purpose of determination of the quantum of deduction under s. 80-IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years.
Revision u/s 263 - Jurisdiction/power of CIT to invoke the provisions of s. 263 when the original assessment was completed u/s 143(3) of the Act and all the relevant informations at the point of s. 80-IA are furnished before the AO - HELD THAT:- The prejudicial to the interest of Revenue appearing s. 263 is conjunction with the expression ‘erroneous’ and that every loss of revenue as a consequence of an order of the AO cannot prejudice to the interest of Revenue. In case, where the AO adopts one of the courses permissible in law where two views are plausible the CIT cannot exercise his power under s. 263 to defer with the AO even if there has been a loss of revenue. On the other hand, when the AO takes a view which is patently unsustainable, the CIT can exercise his powers where the loss of revenue results as a consequence of the view taken by the AO. It is also clear that while passing the order under s. 263, the CIT has to examine not only the assessment order but also the entire facts on the record. Further, when a regular assessment is made it has to be presumed that it has been passed upon proper application of mind when he has made proper enquiry before passing assessment order. The ITO is not only the adjudicator but also an investigator.
In the facts of the present case, the AO has not applied his mind to the provisions of s. 80-IA(5). No additional facts were necessary before the AO to come to the conclusion that deduction under s. 80-IA is wrongly computed. The AO not examined the facts before him. The order passed by the AO is very cryptic. There is no discussion or methodology of computation of deduction under s. 80-IA. It cannot be said that the AO is aware of any of the Tribunal orders on the issues involved. The order of the AO is erroneous for want of proper enquiry. He has not recorded reasons for accepting the return of the assessee as submitted by it on the impugned issue. The AO without making any enquiry accepted the claim of the assessee without recording any reasons at all. The assessment order is silent about the issue raised by the CIT - In this case, the failure of the AO to make an enquiry with regard to the claim of the assessee and to record such a reason, why he is taking particular view, makes the assessment order erroneous and prejudicial to the interest of the Revenue. As such, there is no merit in the arguments of the assessee’s counsel against observation made by CIT in his order under s. 263.
Appeal dismissed.
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2011 (1) TMI 1374
The Supreme Court dismissed the Special Leave Petition in 2011 (1) TMI 1374 - SC Order. The delay was condoned, and the court found no reason to interfere with the impugned judgment under Article 136 of the Constitution.
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2011 (1) TMI 1373
Issues involved: Challenge to CIT(A)'s order u/s.143(3) of the Income Tax Act, 1961 for the assessment year 2005-06 regarding bad debt, sundry balances, allocation of expenses for deduction u/s. 10B, and treatment of computer expenses.
Bad Debt and Sundry Balances: The Assessing Officer challenged the CIT(A)'s decision to allow bad debt of `.1,44,367 and sundry balances written off at `.27,892. The AO contended that the debts were not proven to be bad. However, the CIT(A) disagreed, citing precedents and directed the AO to delete the additions. The ITAT upheld the CIT(A)'s decision, stating that the issue was covered by a Supreme Court judgment and approved the order.
Allocation of Expenses for Deduction u/s. 10B: The AO disputed the CIT(A)'s ruling on the allocation of interest, finance charges, sales promotion expenses, and license fee for deduction u/s. 10B based on turnover. The AO believed the profits were overstated, leading to excessive deduction. The CIT(A) supported the appellant's argument that allocation should be based on capital employed, not turnover. The ITAT found no reason to interfere with the CIT(A)'s decision and approved the same.
Computer Expenses Treatment: The AO contested the CIT(A)'s treatment of computer expenses on developing software programmes as revenue expenditure, arguing it brought enduring benefit to the assessee. Citing relevant decisions, the AO sought a re-examination of the matter. The ITAT directed the AO to re-evaluate the issue in line with the legal position established by a Special Bench decision, allowing the ground for statistical purposes.
In conclusion, the ITAT upheld the CIT(A)'s decisions on bad debt, sundry balances, and allocation of expenses for deduction u/s. 10B. The matter of computer expenses treatment was directed for re-examination by the AO. The appeal was partly allowed for statistical purposes.
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2011 (1) TMI 1372
Issues: 1. Waiver of reversal of credit, interest, and penalty confirmed by the impugned order. 2. Whether the 'Wool Grease' is a final product or not. 3. Application for out-of-turn hearing of the appeal based on the amount involved.
Analysis: Issue 1: The appellant sought waiver of reversal of credit, interest, and penalty confirmed by the impugned order. The appellant, a manufacturer of various products, was issued a show cause notice for the reversal of credit on certain products cleared without payment of duty. The appellant argued that the by-product, 'grease,' exempt from duty, did not require credit reversal. The Tribunal, after hearing both sides, found merit in the appellant's contention that the final products were wool tops/fabrics, not grease. Consequently, the Tribunal waived the requirement of pre-deposit of the entire demand, interest, and penalty, staying the demand during the appeal.
Issue 2: The central question revolved around whether the 'Wool Grease' in question constituted a final product or not. The appellant contended that the grease was a by-product exempt from duty and cited legal precedents to support their argument. On the other hand, the Department argued that the demand against the appellant should be sustained as the grease was a result of the manufacturing process. The Tribunal, considering the manufacturing process and final products, sided with the appellant, acknowledging that the grease was not the final product but a necessary step in the manufacturing process of wool tops/fabrics.
Issue 3: The appellant also applied for an out-of-turn hearing of the appeal due to the significant amount involved. However, the Tribunal noted that the duty amount in question was relatively lower compared to other cases pending before the Tribunal. Consequently, the application for early hearing was rejected, and the matter was directed to be listed in its own course, emphasizing that the duty amount did not warrant prioritization for an out-of-turn hearing.
In conclusion, the Tribunal granted the appellant's request for waiver of credit reversal, interest, and penalty, recognizing the nature of the manufacturing process and the final products. The application for out-of-turn hearing was denied based on the duty amount involved, ensuring the matter would proceed in the regular course of proceedings.
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2011 (1) TMI 1371
Issues involved: The judgment involves issues related to disallowance of interest u/s.14A, disallowance of administrative expenses u/s.14A, disallowance of provisions in diminution in value of investments u/s.28/37(1), charging of interest u/s 234B, and charging of interest u/s.234D.
Disallowance of interest u/s.14A: The first issue in the appeal was regarding the disallowance of interest u/s.14A. The Commissioner of Income Tax (Appeals) confirmed the disallowance made by the Assessing Officer. The Tribunal referred to a previous decision in the assessee's own case and remitted the issue back to the Assessing Officer for reconsideration based on specific criteria related to interest paid on tax-free securities. The issue was allowed for statistical purposes.
Disallowance of administrative expenses u/s.14A: The next issue was the disallowance of administrative expenses u/s.14A. The assessee decided not to press this issue due to the small amount involved, and it was dismissed accordingly.
Disallowance of provisions in diminution in value of investments u/s.28/37(1): Another issue was the disallowance of provisions in diminution in value of investments as not allowable deduction u/s.28/37(1). The Tribunal held that this issue was covered by a previous decision and dismissed it accordingly.
Charging of interest u/s 234B: The issue of charging interest u/s 234B was raised, and the Tribunal referred to previous decisions and upheld the charging of interest under Section 234B based on the finally assessed income.
Charging of interest u/s.234D: The final issue was regarding the charging of interest u/s.234D. The Tribunal partially allowed this issue based on the applicability of Section 234D from a specific assessment year as per previous decisions.
Separate Judgment (Revenue's Appeal): In the Revenue's appeal, the issue was related to the disallowance of depreciation on assets of sale and lease-back transactions. The Commissioner of Income Tax (Appeals) had deleted the disallowance, and the Tribunal referred to a previous decision in the assessee's own case to dismiss the issue, citing the principle of consistency in accepting depreciation claims from previous years.
Overall, the assessee's appeal was partly allowed, and the Revenue's appeal was dismissed.
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2011 (1) TMI 1370
Reopening of assessments under section 147/148 - Deduction u/s 80IA - profits of Wind mill activity - non-maintenance of separate books of account for the Wind mill activity - Change of opinion - HELD THAT:- Regarding validity of the proceedings initiated under section 147/148 of the Act, it is found that assessee has to fail. No doubt, it is not permissible for the Assessing Officer to reopen an assessment under section 147/148 of the Act on a mere change of opinion. However, in the present case, the factual matrix does not support the plea of the assessee that notice under section 148 of the Act dated 30.3.2006 has been issued in this case on a “change of opinion”.
The plea of the assessee that the Assessing Officer formulated an opinion while processing the return under section 143(1) is untenable is based on the proceedings under section 143(3) for assessment year 2001-02, which were in progress at the relevant point of time. However, such proceedings culminated only on 29.2.2003, much after the processing under section 143(1) for the impugned assessment year. Therefore, acceptance of the claim in assessment year 2001-02 in a proceeding under section 143(3) on 29.4.2003 cannot be construed as formulation of an opinion by the Assessing Officer in relation to assessment year 2002-03 in the processing done under section 143(1) of the Act dated 28.3.2003.
Factually speaking, it is not case of a “change of opinion” and, therefore, initiation of proceedings under section 147/148 cannot be said to be vitiated on this count.
The assessee has to fail - appeal dismissed.
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2011 (1) TMI 1369
Issues Involved: 1. Disallowance u/s 40A(3) for payment by pay order. 2. Disallowance of salary expenses. 3. Ad hoc disallowance of various expenses. 4. Disallowance of Diwali incentives. 5. Disallowance of chit fund loss. 6. Disallowance of business promotion expenses.
Summary:
Issue 1: Disallowance u/s 40A(3) for payment by pay order The assessee challenged the disallowance of Rs. 27,674 u/s 40A(3) for payment made by pay order. The Tribunal accepted the assessee's contention that a pay order is a banker's cheque and thus account payee, making the provisions of Section 40A(3) inapplicable. Consequently, the disallowance was deleted.
Issue 2: Disallowance of salary expenses The AO disallowed Rs. 2,23,700 out of salary payments for 12 persons due to unverifiable payments and discrepancies in the number of employees. The CIT(A) partially upheld the disallowance, reducing it to Rs. 1,86,200. The Tribunal found that the assessee provided sufficient evidence, including salary registers and details of casual laborers, and noted that salary was never disallowed in the past. Thus, the Tribunal deleted the entire disallowance of Rs. 1,86,200.
Issue 3: Ad hoc disallowance of various expenses The AO disallowed 20% of travelling, conveyance, telephone, car running, and car depreciation expenses due to lack of supporting documents. The CIT(A) reduced the disallowance to 10%. The Tribunal further reduced the disallowance to 5%, noting that the assessee had produced relevant documents and the AO had not identified any specific non-business expenditure.
Issue 4: Disallowance of Diwali incentives The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed the ground as not pressed.
Issue 5: Disallowance of chit fund loss The AO disallowed Rs. 20,040 claimed as chit fund loss, which was confirmed by the CIT(A). The Tribunal, referencing the ITAT Delhi Bench decision in Dy.CIT vs. P.U.R. Polyurethene Products (P.) Ltd., allowed the chit fund loss, recognizing it as a business expense used for raising funds.
Issue 6: Disallowance of business promotion expenses The AO disallowed Rs. 1,26,000 incurred for sponsoring a Golf Tournament, which was confirmed by the CIT(A). The Tribunal allowed the expenditure, agreeing with the assessee that it was incurred for business promotion and provided significant publicity, thus qualifying as an allowable business expense.
Conclusion: The appeal was allowed partly, with the Tribunal providing relief on several disallowances while dismissing the ground related to Diwali incentives as not pressed. The order was pronounced in the open Court on 21.1.11.
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2011 (1) TMI 1368
Seeking stay of recovery of outstanding demands - reduction of outstanding demands - amounts of advance taxes, etc. already paid by the assessee to be adjusted against the gross outstanding demands - part outstanding amount relates to the issue of transfer price, for which it is prepared to furnish a bank guarantee.
HELD THAT:- The stay of recovery of the outstanding demand granted, subject to the condition that the assessee pays an amount of ₹ 50 lakhs out of the outstanding demand by 31st January, 2011. It has been brought to notice that the appeals of the assessee have already been posted for hearing on 7.2.2011, and as such no direction is required in that behalf.
The parties are directed to file the paperbooks, if any desired to be filed, by 31.1.2011.
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