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Showing 41 to 60 of 590 Records
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2011 (10) TMI 744
Issues Involved:
The judgment involves the determination of whether the payment made towards the purchase of 'shrink wrap' cassettes/CDs by the respondent from a non-resident company based in Singapore amounts to royalty and gives rise to taxable income in India, thus requiring the appellant to deduct tax at source.
Issue 1 - Payment for 'Shrink Wrap' Cassettes/CDs:
The High Court considered the appeal filed by the revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) which held that the payment made by the respondent to the non-resident company for 'shrink wrap' cassettes/CDs did not constitute royalty. The substantial question of law was whether the ITAT was justified in its decision regarding the tax liability on the amount paid to the foreign software suppliers.
The Court heard arguments from both the appellant and the respondent's counsels. It was noted that in a similar case involving payment for the supply of shrink wrap cassettes/CDs, the payment was considered royalty. Relying on this precedent, the Court held that the ITAT's order was incorrect, setting it aside in favor of the revenue and against the assessee.
Conclusion:
In conclusion, the High Court allowed the appeal, setting aside the ITAT's order and restoring the order passed by the appellate authority confirming the assessing officer's decision.
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2011 (10) TMI 743
Issues Involved:
1. Disallowance of Rs. 33,48,120/- as expenditure related to exempt dividend u/s 14A by applying Rule 8D.
2. Applicability of Rule 8D for Assessment Year 2006-07.
3. Directions given by CIT(A) to AO without providing an opportunity of hearing to the assessee.
Summary:
Issue 1: Disallowance of Rs. 33,48,120/- u/s 14A by applying Rule 8D
The assessee contested the disallowance of Rs. 33,48,120/- as expenditure incurred in relation to exempt dividend u/s 14A by applying Rule 8D. The AO disallowed the amount based on Rule 8D(2)(iii), which prescribes disallowance as 0.5% of the average value of investments. The CIT(A) upheld this disallowance. The Tribunal noted that the AO did not establish a direct nexus between borrowed funds and the investment in shares.
Issue 2: Applicability of Rule 8D for Assessment Year 2006-07
The assessee argued that Rule 8D, introduced w.e.f. 01.04.2007, is not applicable for AY 2006-07. The Tribunal referred to the decision in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT, where it was held that Rule 8D is applicable from AY 2008-09. The Tribunal concluded that the amended provisions u/s 14A and Rule 8D were not applicable for AY 2006-07. The Tribunal remanded the matter to the AO to determine if any expenditure was incurred in relation to exempt income on a reasonable basis, consistent with relevant facts and circumstances, after providing the assessee an opportunity to present relevant material.
Issue 3: Directions by CIT(A) without Opportunity of Hearing
The assessee raised an alternative ground that CIT(A) directed the AO to verify the interest expenditure without giving an opportunity of hearing. The Tribunal found that this grievance was addressed by remanding the matter to the AO for fresh determination, thus rejecting this ground.
Conclusion:
The appeal was partly allowed. The Tribunal deleted the disallowance of Rs. 33,48,120/- made by applying Rule 8D for AY 2006-07 and remanded the matter to the AO for fresh determination of any expenditure incurred in relation to exempt income, ensuring a reasonable opportunity for the assessee to present relevant material. Ground No. 4 was rejected as the remand addressed the grievance. The order was pronounced on 21st October 2011.
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2011 (10) TMI 742
Issues involved: Challenge to order of Income Tax Appellate Tribunal regarding addition of unexplained credits as share capital.
Summary:
1. The Revenue challenged the Tribunal's order regarding the addition of Rs. 12,00,000 as unexplained credits being share capital.
2. During assessment proceedings, the Assessing Officer noted new share capital of Rs. 12,00,000 received from six persons whose genuineness was doubted. The Assessing Officer added back the amount to the total income of the assessee as the source of credits remained unverifiable. The CIT(A) deleted the additions, which was then challenged before the Tribunal. The Tribunal dismissed the appeal based on the decision in CIT v. Lovely Exports(P) Ltd., stating that share application money could not be regarded as undisclosed income of the Company. The Revenue appealed this decision.
3. The High Court found no infirmity in the Tribunal's approach, citing the Apex Court's decision. The Court upheld the Tribunal's order, stating that the issue had been materially decided and required no further consideration. The Tax Appeal was dismissed.
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2011 (10) TMI 741
Arbitration award - Contract for earthwork in formation and miscellaneous works - HELD THAT:- The whole exercise undertaken by the arbitrator in determining the rate for the work at Serial No. 3 of Schedule A was beyond his competence and authority. It was not open to the arbitrator to rewrite the terms of the contract and award the contractor a higher rate for the work for which rate was already fixed in the contract. The arbitrator having exceeded his authority and power, the High Court cannot be said to have committed any error in upsetting the award passed by the arbitrator with regard to Claim 4.
We, thus, find that the High Court did not commit any error in upsetting the award of the arbitrator with regard to Claim 4 in the statement of claim.
Mr Tandale did not assail the judgment of the High Court with regard to other claims upset by the High Court, namely, Claims 8 and 11. With regard to Claim 6, the High Court has already directed the respondents to calculate the amount under this head at the time of settling the final bill and also directed the respondents to pay interest @ 12% p.a on the due amount, if not paid. Obviously, in view of the directions given by the High Court in para 26 of its judgment, the respondents will have to calculate the amount as regards the contractor's Claim 6 at the time of settling the final bill. If the final bill has not been settled so far, we direct the respondents to settle the final bill expeditiously and, in any case, not later than eight weeks from the date of receipt of copy of this order. The respondents shall have to pay interest as directed by the High Court on the due amount, if not paid so far.
Consequently, the appeal is dismissed with no order as to costs.
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2011 (10) TMI 740
Issues Involved:
1. Whether T. Thomas Educational Trust is a Minority Educational Trust.
2. Whether the Division Bench of the Madras High Court was justified in framing a scheme for the administration of the trust under Section 92 of the Code of Civil Procedure, 1908.
3. Whether the High Court had jurisdiction to interfere with the management and administration of the trust.
4. Whether the trust is a public charitable trust.
5. Whether the appointment of trustees and the framing of the scheme were appropriate.
Issue-wise Detailed Analysis:
1. Minority Educational Trust:
The primary issue was whether T. Thomas Educational Trust, Perambur, Chennai, qualifies as a Minority Educational Trust. The trust was established by T. Thomas, a Christian, who founded St. Mary's School and later executed a deed of declaration for the T. Thomas Educational Trust. The trust deed allowed for accepting donations from any person or institution and stated that the income should be used for the trust's purposes, including financial assistance to poor and deserving students irrespective of caste, creed, or religion. The learned single Judge and the Division Bench of the Madras High Court found that the trust was a public charitable trust and not a minority institution, a view confirmed by a bench of three judges of the Supreme Court. The Supreme Court noted that the trust's objectives and the founder's declaration did not indicate it was intended for the benefit of a minority community.
2. Framing of Scheme under Section 92 of the Code of Civil Procedure:
The Division Bench of the Madras High Court framed a scheme for the administration of the trust under Section 92 of the Code of Civil Procedure. The High Court found it necessary to frame an appropriate scheme due to allegations of financial mismanagement and the expansion of the trust's activities. The High Court's decision to frame a scheme was affirmed by the Supreme Court, which emphasized that the trust was a secular public charitable trust and not a minority institution. The Supreme Court upheld the High Court's scheme as being in the interest of the trust.
3. Jurisdiction of the High Court:
The High Court's jurisdiction to interfere with the management and administration of the trust was challenged. The learned single Judge and the Division Bench of the Madras High Court held that the trust was a public charitable trust, thereby falling within the purview of Section 92 of the Code of Civil Procedure. The Supreme Court affirmed this finding, noting that the High Court had the authority to frame a scheme for the trust's administration due to the allegations of mismanagement and the need for proper governance.
4. Public Charitable Trust:
The issue of whether the trust is a public charitable trust was central to the case. The learned single Judge, the Division Bench of the Madras High Court, and the Supreme Court all found that the trust was a public charitable trust. The trust deed's provisions, including the acceptance of donations from any source and the use of income for the benefit of students irrespective of caste, creed, or religion, supported this conclusion. The Supreme Court emphasized that the trust's secular and public nature was evident from its objectives and activities.
5. Appointment of Trustees and Framing of Scheme:
The appropriateness of the appointment of trustees and the framing of the scheme was another significant issue. The Division Bench of the Madras High Court appointed a Board of Trustees, including a retired Judge and a retired IAS officer, to ensure proper administration. The Supreme Court upheld these appointments, noting that the trust's administration must be secular and in line with its public charitable nature. The Court rejected the appellant's objections based on the religion of the appointed trustees, emphasizing that the trust's management should not be restricted to any particular religious community.
Conclusion:
The Supreme Court dismissed the appeals and upheld the High Court's judgment and order, affirming that T. Thomas Educational Trust is a secular public charitable trust and not a minority institution. The High Court's framing of a scheme for the trust's administration under Section 92 of the Code of Civil Procedure was deemed appropriate and necessary for the trust's proper governance. The Court also found no merit in the allegations of mismanagement against the appointed trustees.
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2011 (10) TMI 739
Issues involved: Appeal for quashing of criminal proceedings u/s 482 of CrPC, interpretation of Sections 155(2) and 156(3) of CrPC.
Judgment Summary:
Issue 1: Appeal for quashing of criminal proceedings u/s 482 of CrPC
The appeal was filed by a Company and its Chairman u/s 482 of CrPC seeking to quash criminal proceedings in connection with a case registered at a police station. The High Court dismissed the appeal, stating that the complaint disclosed a prima facie case. The appellants challenged this decision on various grounds. During the proceedings, the Company agreed to issue a publication clarifying a derogatory term used against the complainant, but the complainant did not accept this proposal. The Court proceeded to hear the matter on merits.
Issue 2: Interpretation of Sections 155(2) and 156(3) of CrPC
The appellants argued that no cognizable case was made out against them, citing a Supreme Court decision regarding the necessity of a Magistrate's order for police investigation in cases where no cognizable offence is disclosed. The Magistrate had forwarded the complaint for investigation under Section 156(3) of CrPC. However, the Court held that the order did not disclose cognizance being taken and that the complaint did not reveal a cognizable offence. Therefore, the Magistrate's order was quashed, emphasizing the importance of following statutory safeguards against frivolous investigations. The Court did not comment on the merits of the allegations but directed that the complaint be treated in accordance with the law.
Conclusion
The Court allowed the appeal, quashed the Magistrate's order, and directed that the complaint be handled in accordance with the law.
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2011 (10) TMI 738
Issues involved: Stay of demand for assessment years 2008-2009 and 2009-2010.
Summary:
The assessee requested stay of demand for &8377; 83,69,094/- and &8377; 2,41,93,478/- for A.Y.2008-2009 and 2009-2010 respectively. The counsel argued that the department had not given effect to the order of the CIT(A), and if done, there would be no outstanding demand against the assessee. The Departmental Representative contended that the assessee, being a cash-rich company, should pay the outstanding demand. The ITAT reviewed the tax payments made by the assessee and the outstanding demands for both assessment years. It was noted that a significant portion of the demands had already been paid by the assessee. The ITAT directed the Assessing Officer to stay any remaining demand after giving effect to the CIT(A) order. The stay was granted for 180 days or until the appeal disposal by the ITAT, whichever is earlier.
In conclusion, the assessee's Stay Petitions were allowed, and the appeals were scheduled to be heard on 14th December 2011.
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2011 (10) TMI 736
Issues Involved:
1. Conviction under Section 376 IPC
2. Acquittal under Sections 366/34 IPC
3. Determination of the prosecutrix's age
4. Credibility of the prosecutrix's testimony
5. Conduct of the Investigating Officer
Summary:
1. Conviction under Section 376 IPC:
The Supreme Court upheld the High Court's decision affirming the appellants' conviction u/s 376 IPC. The High Court had reduced the sentence from 7 years RI to 5 years RI with a fine of Rs. 10,000 each, and in default, further punishment for 3 months. The Trial Court had meticulously scrutinized and appreciated the evidence, concluding that the prosecutrix's testimony was credible and corroborated by medical evidence.
2. Acquittal under Sections 366/34 IPC:
The High Court acquitted the appellants of charges u/s 366/34 IPC. The Supreme Court noted that since the High Court had acquitted the appellants of kidnapping charges, this issue did not require further consideration.
3. Determination of the prosecutrix's age:
The courts labored to determine the prosecutrix's age due to conflicting birth certificates. The Birth Certificate issued u/s 17 of the Registration of Birth & Death Act, 1969, indicated she was born on 2.9.1974, making her less than 16 years old at the time of the incident. The medical report from Ram Manohar Lohia Hospital suggested her age was between 16 and 17 years. The Supreme Court concluded that the prosecutrix was less than 16 years old on the date of the incident, considering the margin of error in radiological age determination.
4. Credibility of the prosecutrix's testimony:
The Supreme Court emphasized that the prosecutrix's testimony, if found credible, requires no corroboration. The Trial Court found no reason to disbelieve her, as no self-respecting girl would falsely accuse someone of rape. The prosecutrix's evidence was fully corroborated by medical evidence, and the courts did not find any cogent reason to interfere with the findings.
5. Conduct of the Investigating Officer:
The Investigating Officer's conduct was questioned, as he made statements that appeared to help the appellants. However, the Supreme Court held that even if the investigation was suspicious, the rest of the evidence must be scrutinized independently. The court must have predominance in criminal trials over the actions of investigating officers.
Conclusion:
The appeals were dismissed, with the Supreme Court finding no merit in the arguments presented by the appellants. The conviction u/s 376 IPC was upheld, and the sentence reduction by the High Court was deemed appropriate given the circumstances.
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2011 (10) TMI 735
Issues involved: Jurisdiction of the Court for appointment of Arbitrator u/s 11 of the Arbitration & Conciliation Act, 1996.
Summary:
The case involved an Arbitration Application filed u/s 11 of the Arbitration & Conciliation Act, 1996 for the appointment of an Arbitrator regarding a dispute arising from a contract dated 1.10.2002 between the applicant-Company and a non-applicant Company, now merged with Indian Oil Corporation Ltd. The dispute arose due to the accumulation of unsold stock by the applicant-Company and disagreements over stock quantities and payments. The applicant-Company requested resolution or arbitration as per the agreement's Clause 17.0, but the non-applicant Company did not respond, leading to the current application.
Objections raised:
1. The non-applicant Company raised objections regarding the validity of the arbitration agreement u/s 7 of the Arbitration & Conciliation Act, 1996.
2. The non-applicant Company argued that the agreement specified Kolkata Courts' jurisdiction, implying exclusion of other Courts' jurisdiction.
Legal arguments:
The non-applicant Company cited a Supreme Court judgment regarding an Ouster clause, emphasizing the intention to exclude other Courts' jurisdiction when a specific jurisdiction is mentioned in a contract. The judgment discussed the application of the maxim 'expressio unius est exclusio alterius' in such cases.
Court's decision:
After considering the arguments and the agreement's Clause No. 18 specifying Kolkata Courts' jurisdiction, the Court inferred the intention to exclude other Courts' jurisdiction. Citing a Supreme Court judgment, the Court concluded that it lacked territorial jurisdiction to entertain the application and dismissed it, advising the applicant to file the Arbitration Application at Kolkata High Court.
This summary highlights the key issues, arguments, and the Court's decision regarding the jurisdiction for appointing an Arbitrator in the case.
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2011 (10) TMI 734
Issues Involved:
1. Whether the Optionally Fully Convertible Debentures (OFCDs) issued by the appellants are public issues required to be compulsorily listed on a stock exchange.
2. Whether OFCDs are "securities" as defined in the Securities Contracts (Regulation) Act, 1956 (SCRA).
3. Whether the Securities and Exchange Board of India (SEBI) has jurisdiction to regulate OFCDs.
4. The effect of Section 55A of the Companies Act, 1956 on SEBI's powers to regulate unlisted companies.
5. Whether the appellants made true and complete disclosures in the Red Herring Prospectus (RHP).
6. Whether SEBI's actions violated principles of natural justice.
7. Whether the appellants violated the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
8. Whether SEBI's order directing the appellants to refund the money collected from investors was valid.
Issue-wise Detailed Analysis:
1. Public Issue and Mandatory Listing:
The Tribunal held that the OFCDs issued by the company were public issues requiring mandatory listing. According to Section 67(3) of the Companies Act, any offer to fifty persons or more constitutes a public issue. The company had issued OFCDs to millions of investors, thus making it a public issue. The company was required to comply with Section 73(1) of the Companies Act, which mandates that a public issue must be listed on a recognized stock exchange. The company's claim of private placement was rejected based on the scale of the issue and the number of investors involved.
2. Definition of Securities:
OFCDs were determined to be "securities" within the meaning of the Sebi Act read with SCRA. The Tribunal noted that the term "securities" includes shares, scrips, stocks, bonds, debentures, debenture stock, and other marketable securities. The OFCDs issued by the company were a form of debentures, thus falling within the definition of securities. The argument that OFCDs were hybrids and not securities was rejected, as hybrids are also considered securities under the Companies Act.
3. SEBI's Jurisdiction:
The Tribunal affirmed that SEBI has jurisdiction to regulate OFCDs. Sections 11, 11A, and 11B of the Sebi Act empower SEBI to regulate all securities and companies, whether listed or unlisted, to protect investors' interests and regulate the securities market. The Tribunal emphasized that SEBI's powers are not limited to listed companies and that the Sebi Act is a standalone enactment for regulating the securities market.
4. Effect of Section 55A of the Companies Act:
Section 55A of the Companies Act, which delineates SEBI's regulatory powers over listed companies and companies intending to list, does not restrict SEBI's jurisdiction under the Sebi Act. The Tribunal held that the company intended to get its OFCDs listed, thus falling under SEBI's regulatory purview. The Tribunal clarified that SEBI's powers under the Sebi Act are not limited by Section 55A of the Companies Act.
5. Disclosures in the RHP:
The Tribunal found that the company had concealed significant facts in the RHP, misleading the Registrar of Companies (RoC) and investors. The company did not disclose that the information memorandum was issued to millions of investors, which would have indicated a public issue. The Tribunal held that the disclosures made in the RHP were not true and fair.
6. Principles of Natural Justice:
The Tribunal acknowledged that SEBI had violated principles of natural justice by relying on findings from an investigation that were not shared with the appellants. However, it held that this violation did not vitiate the impugned order, as there was sufficient independent evidence to conclude that the issue was a public issue.
7. Violation of Guidelines and Regulations:
The Tribunal upheld SEBI's finding that the company violated the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The company had not complied with the necessary investor protection norms and disclosure requirements.
8. Validity of SEBI's Refund Order:
The Tribunal validated SEBI's order directing the appellants to refund the money collected from investors. Section 73(2) of the Companies Act requires a company to refund money collected from the public if it fails to list the securities. SEBI's direction was deemed appropriate to protect investors' interests.
Conclusion:
The appeals were dismissed, and the impugned order was upheld, requiring the appellants to refund the money collected from investors within six weeks. The Tribunal confirmed SEBI's jurisdiction and the applicability of the regulations to both listed and unlisted companies.
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2011 (10) TMI 733
Issues Involved:
1. Validity of Rule 6(h) of the State Bar Council Rules.
2. Validity of Rule 32(g) of the State Bar Council Rules.
3. Powers of the State Bar Council vs. Bar Council of India.
Summary:
1. Validity of Rule 6(h) of the State Bar Council Rules:
The Supreme Court examined whether Rule 6(h) of the State Bar Council Rules, which mandates that an advocate must pay a subscription to be included in the Electoral Roll, was within the powers of the State Bar Council. The High Court had declared Rule 6(h) ultra vires Section 49(1)(a) of the Advocates Act, 1961, as it encroached upon the powers of the Bar Council of India. The Supreme Court upheld this view, stating that the Bar Council of India has the exclusive power to prescribe conditions for voting eligibility, including subscription payments, under Section 49(1)(a) of the Act. Consequently, Rule 6(h) was deemed ultra vires, although the same provision in the Bar Council of India Rules necessitated the deletion of non-paying advocates from the Electoral Roll.
2. Validity of Rule 32(g) of the State Bar Council Rules:
The Supreme Court analyzed Rule 32(g) of the State Bar Council Rules, which invalidates a voting paper if less than ten preferences are marked. The High Court had found this rule ultra vires, as it conflicted with Rule 1, Chapter I, Part III of the Bar Council of India Rules, which entitles every advocate on the Electoral Roll to vote. The Supreme Court agreed, stating that Rule 32(g) effectively disenfranchises advocates who do not mark ten preferences, thus infringing on their voting rights. The Court referenced its previous judgment in Shradha Devi v. Krishna Chandra Pant, which held that indicating preferences beyond the first is optional. Therefore, Rule 32(g) was beyond the State Bar Council's powers under Section 15(2)(a) of the Act and was declared ultra vires.
3. Powers of the State Bar Council vs. Bar Council of India:
The Supreme Court clarified the distinct powers of the State Bar Council and the Bar Council of India. Under Section 15 of the Advocates Act, the State Bar Council can make rules for the election of its members and the preparation and revision of Electoral Rolls, but it cannot prescribe conditions for voting eligibility, which is the prerogative of the Bar Council of India under Section 49(1)(a). The Court emphasized that approval by the Bar Council of India does not validate ultra vires rules made by the State Bar Council, as established in Bar Council of Delhi v. Surjeet Singh.
Conclusion:
The Supreme Court dismissed the Special Leave Petitions, upholding the High Court's judgment that Rules 6(h) and 32(g) of the State Bar Council Rules were ultra vires the Advocates Act, 1961. The Court reiterated that the Bar Council of India holds the exclusive authority to prescribe voting conditions, and any conflicting rules by the State Bar Council are invalid.
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2011 (10) TMI 732
Issues Involved:
1. Substantive and Protective Assessments
2. Search and Survey Actions
3. Seized Documents and Statements
4. Income Additions Based on Seized Documents
5. Assessment of Rental Income
6. Principle of Mutuality
7. Admissibility of Evidence and Cross-Examination
Detailed Analysis:
1. Substantive and Protective Assessments:
The appeals involved substantive assessment made against Neptune Infrastructure Pvt. Ltd. (Assessee Company) and protective assessment against Mahalaxmi Bhavan Co-operative Housing Society Ltd. (Society). The Tribunal decided to address the appeals of the Assessee Company first since substantive assessment was made in its case.
2. Search and Survey Actions:
A search action under section 132(1) of the IT Act was conducted on 01-11-2006 on the Assessee Company. Simultaneously, survey actions under section 133A of the IT Act were conducted in respect of few premises of Neptune Group of cases. During the search, certain documents were seized, and statements were recorded.
3. Seized Documents and Statements:
The seized documents included loose papers (Annexure - A-1) found from the office site of Ghantakarna Market. These papers contained detailed workings of the project, showing different blocks, floor under each block, shop numbers, total area, value per square foot, and total amounts. The AO concluded that the Assessee Company realized a total sum of Rs. 141,46,26,000 for the entire project and recorded only Rs. 50,89,29,741, thereby considering Rs. 90.57 Crores as suppressed income.
4. Income Additions Based on Seized Documents:
The AO apportioned the suppressed income of Rs. 90.57 Crores across the project years from 1997-98 to 2005-06. The AO also relied on statements from Shri Nikin Prabhudas Patel and Shri Bholabhai Patel, which suggested that the sale prices recorded in the books were understated. The AO made income additions based on these materials and statements.
5. Assessment of Rental Income:
The AO assessed rental income derived from letting out open plots under the head "income from other sources" instead of "rental income," thereby denying statutory deduction under section 24 of the IT Act. The learned CIT(A) upheld this decision, noting that the land was rented out while the building was not ready.
6. Principle of Mutuality:
The Assessee Society claimed that it was carrying out activities for its members only, as a mutual concern, and was working on a no-profit-no-loss basis. The learned CIT(A) dismissed this claim, stating that income earned from renting the property had no nexus with mutuality activities.
7. Admissibility of Evidence and Cross-Examination:
The Assessee Company argued that the statements of Shri Bholabhai Patel and Shri Nikin Prabhudas Patel were recorded without allowing cross-examination, thereby violating principles of natural justice. The Tribunal agreed, stating that evidence collected at the back of the assessee must be confronted to the assessee to provide an opportunity to rebut it.
Conclusion:
The Tribunal concluded that the Assessee Company had not earned any undisclosed income. The seized documents were deemed as future financial projections rather than evidence of actual receipts. The Tribunal set aside the orders of the authorities below and deleted the entire additions in all the assessment years. Consequently, no protective addition could be made in the case of the Society. The Tribunal also remanded the issue of rental income back to the AO for reconsideration, directing the AO to provide specific findings on the explanation of the Assessee Society.
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2011 (10) TMI 731
Issues Involved:
1. Whether the petitioner was a benami of K.M. Althaf and K.M. Ashfak and the validity of the penalty u/s 67 read with Section 26 of the Act.
2. Validity of the turnover estimate based on information from M/s. Best Gas Agencies without allowing cross-examination.
3. Fairness of estimating turnover based on data from Indian Coffee Workers Co-operative Society without cross-examination and whether the businesses are comparable.
4. Whether the penalty imposed was warranted and excessive.
Summary of Judgment:
Issue 1: Benami Ownership and Penalty Validity
The court found that the revision petitioner had obtained VAT registration as a proprietary concern, making him the sole proprietor. The Intelligence Officer relied on a statement by K.M. Althaf, written by the petitioner, indicating that the petitioner was a benami for Althaf and Ashfak. The petitioner failed to provide a satisfactory explanation for this statement or other evidence to claim ownership. The court concluded that the business was run by Althaf and Ashfak, with the petitioner as a name lender. The court upheld the findings of the Intelligence Officer, Deputy Commissioner (Appeals), and the Appellate Tribunal, stating that the conclusion was based on substantial evidence and did not warrant interference.
Issue 2: Turnover Estimate Based on Gas Agency Information
The petitioner argued that the turnover estimate based on gas consumption from Best Gas Agencies was invalid due to the denial of cross-examination. The court found this argument unconvincing, noting that the petitioner did not provide alternative evidence, such as business accounts or purchase documents, to support his claim of no business activity during 2007-2008. The court upheld the turnover estimate, stating that the petitioner failed to rebut the presumption of gas consumption for business purposes.
Issue 3: Turnover Estimate Based on Indian Coffee Workers Co-operative Society Data
The petitioner contended that the turnover estimate based on data from the Indian Coffee Workers Co-operative Society was unfair without cross-examination. The court held that the best judgment assessment was justified in the absence of business accounts. The court noted that the Co-operative Society's data, which operates under statutory audit requirements, was a reasonable basis for estimation. The court found no error in the Intelligence Officer's reliance on this data, as it was beneficial to the petitioner compared to other possible methods. The court concluded that the petitioner was not prejudiced by the lack of cross-examination and upheld the turnover estimate.
Issue 4: Penalty Imposition
The Appellate Tribunal reduced the penalty to an amount equal to the tax, showing leniency. The court found that the petitioner deliberately attempted to evade tax by not maintaining accounts or filing returns despite doing significant business. The court held that the penalty, as modified by the Appellate Tribunal, was justified and required no further leniency. The court dismissed the revision petitions, finding them devoid of merit.
Conclusion:
Both Revision Petitions were dismissed, upholding the findings and penalties imposed by the lower authorities.
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2011 (10) TMI 730
Issues Involved:
1. Addition u/s 68 of the Income Tax Act.
2. Disallowance u/s 40A(3) of the Income Tax Act.
3. Charging of interest u/s 234B.
Summary:
Issue 1: Addition u/s 68 of the Income Tax Act
The assessee, engaged in manufacturing essential oils, claimed deduction u/s 80IC. The Assessing Officer (AO) found discrepancies in cash sales of Rs. 3.12 crores, suspecting them as bogus sales introduced as money from undisclosed sources. The AO noted that the cash sales were made in September 2006 to untraceable parties with incomplete addresses. The CIT (Appeals) upheld the AO's decision, stating that the assessee failed to prove the genuineness of the cash sales. The Tribunal agreed with the CIT (Appeals), emphasizing that the assessee did not maintain proper production records and the cash collected was withdrawn by partners, indicating introduction of undisclosed money. Consequently, the addition of Rs. 3.12 crores u/s 68 was confirmed, and the deduction u/s 80IC was denied.
Issue 2: Disallowance u/s 40A(3) of the Income Tax Act
The AO disallowed Rs. 46,120/- u/s 40A(3) due to cash payments exceeding Rs. 20,000/-. The CIT (Appeals) upheld this disallowance. The Tribunal, however, directed that the disallowance should enhance the business income, making it eligible for deduction u/s 80IC. Thus, the AO was instructed to allow the deduction u/s 80IC on the enhanced income.
Issue 3: Charging of interest u/s 234B
The Tribunal did not specifically address the issue of charging interest u/s 234B, as it was not separately contested by the assessee.
Conclusion:
The appeal was partly allowed, confirming the addition u/s 68 and directing the AO to allow deduction u/s 80IC on the disallowed amount u/s 40A(3).
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2011 (10) TMI 729
Plot of land - reserved for a public purpose - primary school - development permission - cancel the commencement and occupation certificates - illegal development - a particular plot was initially reserved for a public purpose and subsequently for a primary school. The petitioners contended that only because of the instructions from the Urban Development Department (UDD), that in spite of the reservation for a primary school, the plot was permitted to be developed for private residences flouting all norms and mandatory legal provisions. They sought to challenge the building permission which was issued by the PMC under the instructions of the State Government, by submitting that these instructions amounted to interference into the lawful exercise of the powers of the Municipal Corporation, and the same was mala fide. After hearing all concerned, the petitions were allowed, and an order has been passed to cancel the Commencement (of construction) certificates, and Occupation Certificate, and to pull down the concerned building which has been constructed in the meanwhile. The State Government has been directed to initiate criminal investigation against Shri Manohar Joshi, Shri Ravindra Murlidhar Mane, the then Minister of State for UDD, and the then Pune Municipal Commissioner Shri Ram Nath Jha. Being aggrieved by this order, the present group of appeals have been filed. The tenants, however, contend that if the plot of land is taken over by PMC, they will remain mere tenants as against the ownership rights which were assured to them by the developer and the landlord, and are, therefore, continuing to maintain their appeals.
HELD THAT:- Present case is not one where permission was sought for the construction under erstwhile T.P. scheme, or u/s 50 of the MRTP Act. This is a case where the personal relationship of the developer with the Chief Minister was apparently used to obtain permission for construction without following any due process of law. This is a case of rules and procedures being circumvented to benefit a close relative of the Chief Minister. It is a clear case of mala fide exercise of the powers and, therefore, the High Court was perfectly justified in canceling the development permission which was granted by the State Government. The development permission could not be defended either under Rule 6.6.2.2 or u/s 50. The MRTP Act requires a valid development permission under chapter IV of the act, and in the instant case there is none. Consequently, the construction put up on the basis of such permission had to be held to be illegal. In the circumstances, we uphold the judgment of the Division Bench as fully justified in law and in the facts of the case.
As far as the building meant for the tenants is concerned, the developer as well as PMC have indicated that they have no objection to the building being retained. The illegal development carried out by the developer has resulted into a legitimate primary school not coming up on the disputed plot of land. Thousands of children would have attended the school on this plot during last 15 years. The loss suffered by the children and the cause of education is difficult to assess in terms of money, and in a way could be considered to be far more than the cost of construction of this building.
All the appeals stand disposed of
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2011 (10) TMI 728
Issues involved:
Revenue challenges deletion of deemed dividend income u/s 2(22)(e)
Assessee challenges treatment of short term capital gains as business income
Deemed dividend income u/s 2(22)(e):
The revenue challenged the deletion of deemed dividend income u/s 2(22)(e) by the Commissioner of Income Tax (Appeals). A survey u/s 133A revealed that the assessee held shares individually and as a beneficial owner through HUF. The Assessing Officer contended that the assessee, as a beneficial owner of more than 10% shares, fell u/s 2(22)(e). However, it was established that HUF shares cannot be clubbed with individual shares for this purpose. Legal precedents supported this distinction between individual and HUF shares. The Tribunal dismissed the revenue's appeal based on this interpretation.
Treatment of short term capital gains:
The assessee challenged the treatment of short term capital gains as business income. The Tribunal noted that the cross objection on this issue was not pressed by the assessee and thus dismissed it. Consequently, both the revenue's appeal and the assessee's cross objection were dismissed.
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2011 (10) TMI 727
The Supreme Court ordered to issue notice for remitting the matter to the Commissioner of Income Tax (Appeals) and for condonation of delay. Citation: 2011 (10) TMI 727 - SC Order. Judges: Hon'ble the Chief Justice, Hon'ble Mr. Justice K.S. Radhakrishnan, and Hon'ble Mr. Justice Swatanter Kumar. Petitioner represented by Mr. Gaurab Banerji, ASG, Mr. Shankar Divate, Adv., Mr. S.A. Haseeb, Adv., Mr. B.V. Balaram Das, Adv.
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2011 (10) TMI 726
The Bombay High Court rejected the appeal as there were concurrent findings that Section 194C of the Income Tax Act was applied for the period in question. No substantial question of law arose.
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2011 (10) TMI 725
Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of brokerage/commission expenses.
3. Disallowance of motor car expenses and depreciation.
4. Disallowance of telephone expenses.
5. Disallowance of proportionate expenses u/s 14A.
6. Disallowance of foreign traveling expenses.
7. Charging of interest u/s 234B.
Summary:
Condonation of Delay:
The assessee filed an appeal with a delay of 463 days for AY 2005-06. The delay was attributed to the illness of Mrs. Harsha Parmar, CA, who was handling the case. The Tribunal, considering the affidavits and medical certificates, found the delay to be neither willful nor deliberate. It was held that "a mistake on the part of the counsel may in certain circumstances be taken into account in condoning delay." The Tribunal condoned the delay and admitted the appeal for hearing on merits.
Disallowance of Brokerage/Commission Expenses:
The assessee claimed brokerage expenses for arranging third-party exports and sale of DEPB licenses. The Assessing Officer disallowed these expenses based on the denial of brokerage involvement by the other parties. The Tribunal noted that the payment of brokerage was not disputed by the recipients and was made after TDS deduction. It was held that "the payment of brokerage by the assessee is an independent transaction between the assessee and the broker." The Tribunal allowed the claim of the assessee, setting aside the order of the CIT(A).
Disallowance of Motor Car Expenses and Depreciation:
The AO disallowed 10% of motor car expenses and depreciation on the ground of personal use. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance, stating that "since the assessee is an individual and nothing has been brought on record that the assessee is using a separate car for its personal use, the personal use of the vehicle cannot be ruled out."
Disallowance of Telephone Expenses:
The AO disallowed 5% of telephone expenses for personal use, which was confirmed by the CIT(A). The Tribunal upheld the disallowance, noting that "since the assessee is an individual the personal use of telephone cannot be ruled out."
Disallowance of Proportionate Expenses u/s 14A:
The AO disallowed proportionate expenses related to exempt income. The CIT(A) concurred with this view. The Tribunal restored the issue to the AO for fresh adjudication in light of the decision in "Godrej & Boyce Mfg P Ltd vs DCIT," emphasizing that "the provisions of section 14A are not applicable as no expenditure directly or indirectly has been incurred in relation to the exempt income."
Disallowance of Foreign Traveling Expenses:
The AO disallowed 10% of foreign traveling expenses, suspecting personal use. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance, stating that "since the assessee is an individual and nothing has been brought on record to show that the entire expenditure has been incurred for the purpose of business of the assessee; therefore, element of personal expenditure cannot be ruled out."
Charging of Interest u/s 234B:
The issue of charging interest u/s 234B was deemed mandatory and consequential, requiring no specific adjudication.
Conclusion:
The appeals filed by the assessee were partly allowed for statistical purposes, with specific directions for fresh adjudication on certain issues. The order was pronounced on the 14th day of October 2011.
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2011 (10) TMI 724
Issues Involved:
1. Deletion of addition related to interest income on tax-free bonds under Section 14A.
2. Deletion of disallowance of prior period expenses.
3. Deletion of addition related to post-retirement medical expenses.
4. Addition of prior period expenses while computing book profits under Section 115JB.
5. Deletion of disallowance under Rule 8D of IT Rules.
Detailed Analysis:
1. Deletion of Addition Related to Interest Income on Tax-Free Bonds under Section 14A:
The Revenue's primary contention was that the CIT(A) erred in deleting the addition of Rs. 16.40 crores without appreciating that the said amount was earned as interest income on tax-free bonds and expenses related to that income were required to be disallowed under Section 14A. The CIT(A) relied on the decision in the assessee's case for previous years and did not independently verify the expenses for each assessment year. The AO disallowed expenses on a proportionate basis, but the CIT(A) deleted these disallowances, noting that the assessee did not use loan funds for investment in tax-free bonds and no administrative expenses were incurred for earning the exempt income. The ITAT upheld the CIT(A)'s decision, noting that the Revenue did not provide any material evidence to establish a nexus between administrative expenses and interest income from tax-free bonds.
2. Deletion of Disallowance of Prior Period Expenses:
The AO disallowed prior period expenses on the grounds that the assessee was following a mercantile system of accounting and such expenses should not be allowed in the current year. The CIT(A) deleted the disallowance, following the decision in the assessee's case for previous years. The ITAT observed that neither the AO nor the CIT(A) analyzed each item of expenditure to ascertain whether the liability for these expenses crystallized in the years under consideration. The ITAT set aside the order of the CIT(A) and restored the matter to the CIT(A) for fresh consideration, directing a detailed analysis to determine if the liability for each expense crystallized in the relevant year.
3. Deletion of Addition Related to Post-Retirement Medical Expenses:
The AO disallowed the provision for post-retirement medical benefits, considering it an unascertained liability. The CIT(A) allowed the claim, noting that the provision was based on actuarial valuation and was a real liability, not a contingent one. The ITAT upheld the CIT(A)'s decision, noting that similar provisions had been allowed in previous and subsequent years and there was no material evidence to suggest that the provision was not scientifically made.
4. Addition of Prior Period Expenses While Computing Book Profits under Section 115JB:
The AO added prior period expenses while computing book profits under Section 115JB. The CIT(A) deleted these additions, following the decision in the assessee's case for previous years. The ITAT restored the matter to the CIT(A) for fresh consideration, directing an analysis of whether the prior period expenses should be included in the determination of book profits, in light of judicial pronouncements including the decision of the Hon'ble jurisdictional High Court in CIT vs. Khaitan Chemicals And Fertilizers Limited.
5. Deletion of Disallowance under Rule 8D of IT Rules:
In assessment year 2007-08, the AO disallowed expenses under Rule 8D of the Income-tax Rules, 1962. The CIT(A) deleted the disallowance, following the decision in the assessee's case for previous years. The ITAT noted that Rule 8D, inserted w.e.f 24.3.2008, could not be regarded as retrospective and was applicable only from AY 2008-09. The ITAT upheld the CIT(A)'s decision, noting that there was no material evidence to suggest that the assessee incurred any expenditure for earning the exempt income and disallowance under Rule 8D was not justified for the years under consideration.
Conclusion:
The ITAT dismissed the appeals for the AY 2002-03 and 2007-08, while the appeals for the AYs 2003-04 and 2004-05 were partly allowed for statistical purposes. The matters were restored to the CIT(A) for fresh consideration on specific issues, directing a detailed analysis and speaking orders in accordance with law.
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