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2011 (7) TMI 1347
The Gujarat High Court admitted a Tax Appeal to consider the substantial question of law regarding the disallowance of accrued interest on OFCPNs amounting to Rs. 2,12,16,470. The Appellate Tribunal reversed the CIT(A)'s order and deleted the disallowance.
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2011 (7) TMI 1346
The Gujarat High Court admitted a Tax Appeal for consideration of the substantial question of law regarding the disallowance of interest on DDBs amounting to Rs. 6,54,33,173. The Appellate Tribunal reversed the order passed by CIT(A) and deleted the disallowance. The revised amount is Rs. 28,96,45,191. The case is to be heard with Tax Appeal No.226 of 2010.
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2011 (7) TMI 1345
Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Validity of reopening of assessments.
3. Applicability of Section 2(22)(e) of the Income Tax Act regarding deemed dividend.
4. Invocation of revisional power under Section 263 of the Income Tax Act.
Detailed Analysis:
1. Jurisdiction of the Assessing Officer:
The primary issue raised was whether the assessments completed by an officer who did not have jurisdiction over the assessee were valid. The assessee argued that the original notice was issued by ITO, Company Circle IV(2), but the assessments were completed by ITO, Company Circle V(2), who did not have jurisdiction. The Tribunal held that under Section 124(3) of the Act, the assessee should have objected to the jurisdiction within one month from the notice under Section 142(1). Since the objections were raised eleven months after the notice, they were not valid. Therefore, the grounds assailing the jurisdiction of the A.O. were dismissed.
2. Validity of Reopening of Assessments:
The assessee contended that the reopening of assessments was invalid as the objections to the reasons for reopening were not disposed of through a separate order. The Tribunal referred to the CIT(Appeals) decision, which stated that the returns were only processed and not assessed, and the reassessment proceedings were initiated within four years. The Tribunal found that the reasons for reopening were communicated and dealt with by the Assessing Officer, and the reopening was valid as per the decision in Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Private Ltd. Thus, the grounds assailing the reopening were dismissed.
3. Applicability of Section 2(22)(e) - Deemed Dividend:
The Revenue argued that advances received by the assessee from M/s Prakash Gold Palace (P) Ltd. should be treated as deemed dividends under Section 2(22)(e) since the assessee held substantial shares in the company. The assessee transferred shares to minor grandchildren, reducing her holding below 10%. The Tribunal held that for deemed dividend under Section 2(22)(e), the assessee must be both a registered and beneficial shareholder. Since the shares were transferred to minors, the assessee was not the beneficial owner. The Tribunal relied on the Special Bench decision in ACIT v. Bhaumik Colour (P) Ltd., which stated that both registered and beneficial ownership are required for Section 2(22)(e) to apply. Thus, the Tribunal upheld the CIT(Appeals) decision, deleting the additions made for deemed dividend.
4. Invocation of Revisional Power under Section 263:
The Commissioner of Income Tax (CIT) invoked revisional power under Section 263, citing errors in the assessment orders, such as verification of agricultural income, investment in ITCOT Ltd., and notional income from properties. The Tribunal found that the Assessing Officer had made proper inquiries regarding the investment in ITCOT Ltd. and considered it as deemed dividend. However, the Assessing Officer did not make proper inquiries regarding agricultural income and notional income from properties. Therefore, the Tribunal upheld the CIT's order under Section 263 for these aspects but quashed it regarding the investment in ITCOT Ltd.
Conclusion:
- Appeals of the Revenue were dismissed.
- Cross-objections of the assessees were dismissed.
- Appeals of the assessees were partly allowed, quashing the CIT's order under Section 263 regarding investment in ITCOT Ltd. but upholding it for other aspects.
Order Pronounced:
The consolidated order was pronounced in the Court on 29th July 2011.
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2011 (7) TMI 1344
Admission' in the minutes of the meeting - Order 12 Rule 6 of the Code provides admission of facts - whether there was in fact any admission, on the basis of which a judgment on admission could have been passed - HELD THAT:- The minutes of the meeting dated 9.12.2000 No. doubt starts by noting that the "As per Himani's records: credit TISCO ₹ 47,06,789.00" as on 31.3.1999. It also records that as per TISCO's records, as on 31.3.1999, the amount due by Himani(Appellant) was ₹ 61,49,449/30 and if three deductions (which were yet to be checked) were made, the amount due would be ₹ 47,06,775/70. Thereafter, in paragraphs 3, 4 and 5, there is a reference to both parties agreeing to provide particulars, agreeing to hold further discussions on 26.12.2000 and Respondent agreeing to check up its records to find out the correctness of certain entries. Thereafter the minutes conclude that the "final figure will be arrived at the meeting accordingly". When the minutes merely notes certain figures and states that they are tentative and both parties will verify the same and says that the final figure will be arrived at the next meeting, after discussions, we fail to understand how the same could be termed as an "admission" for the purpose of Order 12 Rule 6 of the Code.
Another aspect regarding the minutes dated 9.12.2000 requires to be noticed. The Minutes do not refer to any admission by HIMANI (Appellant) to pay any amount to TISCO (Respondent). If a buyer states on 9.12.2000 that his account as on 31.3.1999 shows a balance of amount 'X' to the credit of the supplier, it can not be treated as an admission that the said amount 'X' was due to the supplier on 9.12.2000. In a continuing account, it may be possible that between 31.3.1999 and 9.12.2000, there may be debits to the account, or 'reveral of credits' or 'settlement of the account'. We therefore hold that there was No. admission on 9.12.2000 which could result in a judgment under Order 12 Rule 6 of the Code.
Thus, we allow this appeal, set aside the orders of the learned Single Judge and the division bench of the High Court dated 22.2.2008 and 22.9.2008. We make it clear that we have not recorded any finding nor expressed any opinion in regard to the merits of the case or in regard to any part of the suit claim. It is possible that on evidence being led, the Respondent is able to establish that ₹ 47,06,775/70 was in fact due as on 31.3.1999 and that it continues to be due. We request the High Court to dispose of the suit expeditiously.
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2011 (7) TMI 1343
Issues involved: Appeal against Tribunal's judgment regarding taxation of subsidy received from Govt. of Gujarat.
Factual Background: The respondent, a statutory Corporation, received subsidy from the Government to repay loans taken from NABARD for water resource development projects. The Revenue contended that the subsidy should be taxed as a revenue receipt.
Tribunal's Decision: The Tribunal allowed the assessee's appeal after considering the tripartite agreement between NABARD, the assessee, and the State Government. It noted that the subsidy was specifically for loan repayment and that the funds were utilized for the intended purpose of water projects.
Legal Precedents: The Tribunal relied on the decisions in Sahney Steel and Press Works Ltd. and Ponni Sugars and Chemicals Ltd. cases, emphasizing that subsidies for specific purposes are of capital nature and not taxable as revenue receipts.
Apex Court's Interpretation: The Apex Court clarified that subsidies aimed at assisting business operations are considered revenue receipts, while those for specific capital purposes are not taxable as revenue. The purpose for which the subsidy is given determines its nature.
Conclusion: The High Court upheld the Tribunal's decision, stating that the subsidy was meant for loan repayment related to capital assets for water projects, not for enhancing business profitability. Therefore, the subsidy was rightly treated as a capital receipt and not taxable as revenue. The Tax Appeal was dismissed.
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2011 (7) TMI 1342
Issues involved:
The judgment addresses the taxation of revenues earned under a seismic data acquisition and processing contract in India u/s 44BB of the Income-tax Act, 1961. It also considers the taxability of mobilization/demobilization revenues attributable to vessel journeys outside India.
Taxation under section 44BB:
The applicant, a foreign company engaged in seismic data acquisition, sought clarification on the taxability of revenues earned in India under a contract with another foreign company. The applicant argued that only the portion of income attributable to operations in India should be taxed u/s 44BB, not as fees for technical services.
Interpretation of provisions:
The revenue contended that section 44BB applies specifically to certain activities in the oil and gas sector, excluding technical or managerial services. The judgment referenced relevant case law and clarifications to support the view that income in the nature of fees for technical services or royalties is excluded from section 44BB.
Contractual obligations:
The applicant was responsible for providing vessels and seismic crew for data acquisition, processing, and survey work in designated offshore blocks. The judgment highlighted the mining-related nature of the services provided, falling outside the scope of section 9(1)(vii) of the Act.
Decision on Question 1:
The Authority ruled in favor of the applicant, affirming that revenues from the seismic data acquisition and processing contract are taxable under section 44BB of the Income-tax Act, 1961.
Taxation of mobilization/demobilization revenues:
Regarding the second question, the judgment emphasized that income can only be taxed in India if it accrues or arises in India. It concluded that the entire mobilization/demobilization revenues related to seismic data activities should be taxable in India at a specified rate.
Application of section 44BB(3):
The judgment clarified that once an assessee opts for taxation under section 44BB(1), the provision deems profits at a specified percentage without scope for splitting amounts. If an applicant desires detailed computation, they must opt for section 44BB(3) but cannot apply both sub-sections simultaneously.
Final decision:
In summary, the judgment upheld the taxability of revenues under the seismic data contract u/s 44BB, excluding fees for technical services. It also determined that the entire mobilization/demobilization revenues should be taxed in India, emphasizing the specific provisions and options available under section 44BB for income computation.
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2011 (7) TMI 1341
Issues involved: The judgment involves the interpretation of deduction u/s 80P(2) for income from sale of crackers and PDS activities, and the classification of the appellant cooperative society as a "Consumers' Co-operative Society" u/s 80P(2)(a)(i).
The appellant's appeal was dismissed by the ITAT Chennai as the issues raised were previously decided against the assessee in a similar case for the assessment year 2005-06. The counsel for the assessee acknowledged this and submitted that the appeal can be dismissed based on the earlier decision, which was not objected to by the ld. DR.
After hearing both sides and reviewing the evidence, the ITAT Chennai found that the issues raised in the current appeal were already addressed in a previous decision for the assessment year 2005-06, where they were decided against the assessee. Consequently, the ITAT Chennai upheld the order of the ld. CIT(A) and dismissed the appeal of the assessee.
In conclusion, the appeal of the assessee was dismissed by the ITAT Chennai, following the precedent set in the earlier decision for the assessment year 2005-06.
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2011 (7) TMI 1339
Issues involved:
1. Whether the Petitioner is a 'government lessee' and therefore not liable to pay the non-agricultural assessment?
2. Whether the Appellant being a tenant of the Development Authority, the demand for non-agricultural assessment could be made only on the Development Authority and not against the tenant?
Issue-wise detailed analysis:
Re: Issue (i): Whether the Petitioner is a 'government lessee' and therefore not liable to pay the non-agricultural assessment?
The Appellant argued that it was a 'government lessee' and thus not liable to pay non-agricultural assessment. According to Section 2(11) read with Section 38 of the Maharashtra Land Revenue Code, 1966, a 'government lessee' is defined as a lessee under a lease granted by a Collector in regard to unalienated unoccupied land belonging to the government. The lands in question were leased by the Pimpri-Chinchwad New Town Development Authority (Development Authority) and not by the Collector. Therefore, the lands were not government lands, and the lessor was not the government. The Appellant's claim to be a 'government lessee' was rejected.
The Appellant relied on a state government Circular dated 29.3.1975, which stated that MIDC (Maharashtra Industrial Development Corporation) was the agent of the state government and thus its lessees were considered government lessees, exempt from non-agricultural assessment. However, the Development Authority, unlike MIDC, was not recognized as an agent of the state government. The Development Authority is a body corporate under the Maharashtra Regional and Town Planning Act, 1966 (MRTP Act), with the power to acquire, hold, manage, and dispose of property. There was no evidence to suggest that the Development Authority was acting as an agent of the state government in leasing the lands to the Appellant. Therefore, the Appellant could not be considered a government lessee.
Re: Issue (ii): Whether the Appellant being a tenant of the Development Authority, the demand for non-agricultural assessment could be made only on the Development Authority and not against the tenant?
The Appellant argued that as a tenant of the Development Authority, the primary liability to pay land revenue (including non-agricultural assessment) lay with the Development Authority, as per Section 39 and Section 168 of the Maharashtra Land Revenue Code. Section 39 makes the occupant liable to pay land revenue, and Section 168(1)(a) reiterates that the occupant (in this case, the Development Authority) is primarily liable. However, Section 168(2) allows for recovery from the person in possession (the tenant) in case of default by the occupant.
The Development Authority, with the previous approval of the state government, had made regulations under Section 159 of the MRTP Act, known as the "Pimpri-Chinchwad New Town Development Authority (Disposal of Land) Regulations, 1973." Regulation 10(iv) and 10(v) explicitly stated that the lessee (Appellant) shall pay all rates, taxes, and land revenue assessed on the demised land. Clause 2(c) of the lease deed between the Development Authority and the Appellant reiterated this obligation.
Thus, while the Development Authority is primarily liable under Section 39, the statutory regulations and lease terms passed this liability to the Appellant, making it responsible for paying the non-agricultural assessment directly to the state government. The court concluded that the state government could directly demand payment from the Appellant without first demanding it from the Development Authority.
Conclusion:
The Supreme Court upheld the High Court's decision, rejecting the Appellant's contention that it was a government lessee and therefore not liable for non-agricultural assessment. The court also affirmed that the Appellant, as a tenant, was liable to pay the non-agricultural assessment directly to the state government under the statutory regulations and lease terms. The appeal was dismissed, but the Appellant was given the liberty to file representations or objections regarding the quantum of the non-agricultural assessment. The Appellant was also ordered to pay interest on the arrears at the rate of 9% per annum from 26.2.2002.
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2011 (7) TMI 1338
Issues Involved:1. Legitimacy of penalties u/s 271(1)(c) for concealment of income. 2. Validity of revised computation versus revised return. 3. Applicability of Explanation 5 to Section 271(1)(c). Summary:Issue 1: Legitimacy of penalties u/s 271(1)(c) for concealment of incomeThe appeals were filed by the assessee against the CIT(A)'s orders confirming penalties u/s 271(1)(c) levied by the A.O. for the respective assessment years. A search and seizure action u/s 132 was carried out on the assessee's residence on 18.01.2007. The A.O. completed assessment proceedings u/s 143(3) r.w.s. 153A, determining total income at Rs. 34,41,447/- for A.Y. 2003-04 and Rs. 19,79,568/- for A.Y. 2005-06. The assessee filed a revised computation offering additional incomes, which the A.O. did not consider as income declared u/s 132(4) and initiated penalty proceedings u/s 271(1)(c). The CIT(A) confirmed the penalty, holding that the disclosure of incomes cannot form part of the disclosure made in the statement u/s 132(4). Issue 2: Validity of revised computation versus revised returnThe assessee argued that the revised computation was filed voluntarily due to a bonafide mistake and there was no provision to file a revised return in 153A proceedings. The A.O. and CIT(A) did not accept this explanation, stating that the income was disclosed only as a consequence of the search and seizure action. The Tribunal noted that the assessee neither admitted these incomes during the search proceedings nor at the time of filing returns in response to notices u/s 153A. The revised computation was filed after the A.O.'s enquiry, indicating that the assessee failed to furnish correct incomes initially. Issue 3: Applicability of Explanation 5 to Section 271(1)(c)The assessee contended that Explanation 5 to Section 271(1)(c) provided immunity from penalty. However, the Tribunal referred to the case of ACIT vs. Kirit Dahyabhai Patel 121 ITD 159 (Ahd) (TM), where it was held that immunity under Explanation 5 is not available when returns are filed consequent to search and seizure proceedings. The Tribunal also cited the Hon'ble Bombay High Court's decisions in Indus Engineering Co. vs. ACIT 323 ITR 302 and Sheraton Apparels vs. ACIT 256 ITR 20, which upheld the levy of penalty for concealment of income disclosed during search but not in the original or revised returns. Conclusion:The Tribunal concluded that the assessee's failure to disclose correct incomes at the time of filing original returns and in response to notices u/s 153A warranted the penalty u/s 271(1)(c). The orders of the A.O. and the CIT(A) were confirmed, and the appeals of the assessee were dismissed. Order pronounced in the open court on 15th July 2011.
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2011 (7) TMI 1337
Issues involved: Appeal against the order of Commissioner of Income-tax (Appeals) involving deletion of depreciation, addition of current repairs, disallowance of transportation charges, and loss on sale of mutual fund.
Deletion of Depreciation on Moulding Box and Pattern:
The Revenue appealed against the deletion of addition made on account of disallowance of depreciation on Moulding Box and Pattern. The assessee claimed 100% depreciation on moulding boxes used for casting due to their short life span. The AO allowed depreciation at 25%, but the CIT(A) accepted the assessee's contention. The ITAT referred to a previous case where it was held that the correct rate of depreciation must be applied each year, setting aside the order and directing the AO to re-examine the issue.
Addition of Current Repairs and Written Down Value:
The Revenue challenged the direction to allow addition of certain amounts to moulds as current repairs and to consider written down value claimed as revenue repairs. The CIT(A) directed the AO to allow depreciation on new additions to fixed assets without verifying their actual use. The ITAT set aside the order, instructing the AO to readjudicate the issue in accordance with law and previous observations.
Disallowance of Transportation Charges:
The Revenue contested the deletion of addition made on account of disallowance of transportation charges. The ITAT set aside the order and directed the AO to re-adjudicate the issue, providing the assessee with an opportunity to present all evidences.
Loss on Sale of Mutual Fund:
The Revenue objected to the direction to allow loss on sale of mutual fund. The ITAT found that additional evidences were admitted during appellate proceedings without allowing the AO to examine or rebut them, violating Rule 46A. The order was set aside, and the matter was restored back to the AO for re-adjudication in accordance with law.
In conclusion, the Revenue's appeal was deemed to be allowed for statistical purposes.
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2011 (7) TMI 1336
Issues Involved:
1. Legality of the assessment order.
2. Compliance with ITAT directions.
3. Violation of natural justice principles.
4. Additions on account of unexplained capital investment.
5. Additions on account of alleged unexplained capital.
6. Additions on account of alleged profit.
7. Initiation of penalty proceedings.
Detailed Analysis:
1. Legality of the Assessment Order:
The appellants contended that the assessment order was "bad in law" and not in accordance with the directions of the ITAT. The Tribunal observed that the Assessing Officer (AO) failed to carry out some of the specific directions given by the ITAT in the first round of litigation, particularly regarding the examination of bank transactions and individuals named in the seized papers. The Tribunal emphasized that the AO must ensure compliance with judicial directions and proper investigation.
2. Compliance with ITAT Directions:
The ITAT had directed the AO to conduct a thorough investigation, including examining bank transactions and individuals named in the seized documents. However, the AO admitted that due to time constraints, he could not fully comply with these directions. The Tribunal criticized the AO for not utilizing the powers under Sections 131 and 136A of the Income Tax Act to summon and examine relevant persons and documents.
3. Violation of Natural Justice Principles:
The appellants argued that the assessment order violated the principles of natural justice as they were not given a fair opportunity to present their case. The Tribunal noted that the AO did not provide adequate opportunities for cross-examination and failed to examine key individuals involved in the transactions. This lack of procedural fairness rendered the assessment order defective.
4. Additions on Account of Unexplained Capital Investment:
The AO made several additions based on seized documents, alleging unexplained capital investments. The Tribunal found that the AO did not adequately investigate the nature and source of these investments. For instance, the addition of Rs. 9,15,000 was deleted as the AO failed to establish its connection to the appellant or Ambica Realities Pvt. Ltd.
5. Additions on Account of Alleged Unexplained Capital:
The AO added Rs. 2,25,000 and Rs. 6,25,000 as unexplained capital. The Tribunal confirmed the addition of Rs. 6,25,000 as the appellant failed to provide sufficient evidence to explain the source. However, the addition of Rs. 2,25,000 was deleted due to lack of proper investigation by the AO.
6. Additions on Account of Alleged Profit:
The AO made several additions on account of alleged profits based on seized documents. The Tribunal confirmed the addition of Rs. 67,820 and Rs. 13,53,500 as the appellant admitted these amounts as his share of profit. However, the addition of Rs. 5,57,500 was deleted as the AO failed to establish that this amount was the appellant's share of profit.
7. Initiation of Penalty Proceedings:
The AO initiated penalty proceedings under Section 158FA(2) of the Income Tax Act. The Tribunal did not specifically address the penalty proceedings in its detailed analysis, focusing instead on the substantive issues of the assessment order.
Conclusion:
The Tribunal partially allowed the appeal of Shri M. N. Patel, confirming some additions while deleting others due to lack of proper investigation and compliance with ITAT directions. The appeal of Ambica Realities Pvt. Ltd. was allowed, with the Tribunal deleting the protective additions made in its hands. The Tribunal emphasized the importance of thorough investigation and adherence to judicial directions in assessment proceedings.
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2011 (7) TMI 1335
Issues Involved: The appeal concerns the deletion of disallowance made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS under section 194C of the Act.
Issue 1: Disallowance under section 40(a)(ia) of the Act
The appeal by the revenue challenges the order of the CIT(A) deleting the disallowance made under section 40(a)(ia) of the Act for non-deduction of TDS under section 194C. The Assessing Officer disallowed labor charges debited by the assessee on the grounds of non-deduction of TDS. The assessee contended that there was no specific contract or agreement, and the provision of section 194C would not apply as the laborers were casual in nature and not sub-contractors. The CIT(A) deleted the disallowance based on a previous Tribunal decision for the Assessment Year 2005-06, which held that there was no subcontract between the assessee and the labor Sardars. The Tribunal upheld the deletion of disallowance for the current year as well, as the facts remained the same. The revenue's appeal was dismissed as the facts were identical, and the revenue failed to distinguish the case.
Issue 2: Interpretation of Section 194C of the Income Tax Act
The Tribunal analyzed the provisions of section 194C of the Income Tax Act, which require the deduction of tax at source on payments to contractors or sub-contractors. It was emphasized that for the application of section 194C, there must be a contract between the payer and the contractor for carrying out work, and the consideration for the contract should exceed a specified amount. The Tribunal noted that in the present case, the labor Sardars were not considered labor contractors within the meaning of section 194C(2) as there was no contract between the assessee and the labor Sardars for the supply of labor. The Tribunal relied on previous judgments and held that the disallowance made by the Assessing Officer under section 40(a)(ia) was not applicable in this case, leading to the deletion of the disallowance.
Issue 3: Application of Legal Precedents
The Tribunal referred to legal precedents, including the decision of the Hon'ble Supreme Court and the Punjab & Haryana High Court, to interpret the provisions of section 194C and its application to the case at hand. It was highlighted that the absence of a contract between the assessee and the labor Sardars meant that the invocation of section 40(a)(ia) was outside the scope of the enactment. The Tribunal concluded that since section 194C(2) was not applicable in this case, the disallowance made by the Assessing Officer and sustained by the CIT(A) was unjustified and therefore deleted. The Tribunal's decision was based on the principle that the labor Sardars did not qualify as labor contractors, and without a contract, the provisions of section 194C could not be invoked.
In conclusion, the Tribunal dismissed the revenue's appeal, upholding the deletion of the disallowance made under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS under section 194C. The decision was based on the absence of a contract between the assessee and the labor Sardars, rendering the TDS provisions inapplicable in this particular case.
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2011 (7) TMI 1334
Title: Supreme Court Judgment 2011 (7) TMI 1334 - SC
Judges: Mr. D.K. Jain and Mr. Asok Kumar Ganguly
Decision: Delay condoned. Special Leave Petitions dismissed.
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2011 (7) TMI 1333
The Supreme Court dismissed the Special Leave Petition after condoning the delay. (Citation: 2011 (7) TMI 1333 - SC)
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2011 (7) TMI 1332
The Supreme Court dismissed the Special Leave Petition citing a previous court decision in SLP (Civil) 2011 (CC 7114/2011).
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2011 (7) TMI 1331
Issues Involved:
1. Rejection of method of accounting and estimation of income.
2. Disallowance of interest.
3. Gross profit addition on advances.
4. Deduction u/s 80IB(10) and allocation of expenses.
Summary:
1. Rejection of Method of Accounting and Estimation of Income:
The assessee's appeal challenged the rejection of the unit completion method of accounting by the Assessing Officer (AO), who instead adopted the percentage completion method. The AO's decision was based on the revised Accounting Standard-7 (AS7) effective from 01-04-2003. The assessee argued that the unit completion method was accepted by the Revenue in earlier and subsequent years, and was in accordance with AS-9 issued by ICAI. The Tribunal upheld the assessee's method, citing consistency and previous acceptance by the Revenue, and allowed the assessee's appeal on this ground.
2. Disallowance of Interest:
The AO disallowed Rs. 69,978/- as interest on certain advances, which was reduced to Rs. 34,800/- by the CIT(A). The assessee contended that these advances were business transactions and not loans, and that interest-free unsecured loans were available. The Tribunal found no direct nexus between interest-bearing funds and the advances, and deleted the disallowance of Rs. 34,800/-, allowing the assessee's appeal on this ground.
3. Gross Profit Addition on Advances:
The AO added Rs. 5,75,933/- as gross profit on advances received, using the percentage completion method. The assessee argued that revenue should be recognized upon unit completion, as per the unit completion method. The Tribunal, having upheld the unit completion method, deleted the addition made by the AO, allowing the assessee's appeal on this ground.
4. Deduction u/s 80IB(10) and Allocation of Expenses:
The Revenue's appeal challenged the CIT(A)'s direction to allow deduction u/s 80IB(10) subject to verification of expenses, and the deletion of addition for unutilized FSI. The CIT(A) followed the Tribunal's decision in the case of Radhe Developers. The Tribunal upheld the CIT(A)'s deletion of the addition for unutilized FSI and directed the AO to re-compute the expenses in light of the unit completion method upheld in the assessee's appeal. The Revenue's appeal was partly allowed for statistical purposes.
Conclusion:
The assessee's appeal was allowed, and the Revenue's appeal was partly allowed for statistical purposes. The Tribunal upheld the unit completion method of accounting, deleted the disallowance of interest and gross profit addition, and directed re-computation of expenses for deduction u/s 80IB(10).
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2011 (7) TMI 1330
The Bombay High Court upheld the decision of the Income Tax Appellate Tribunal regarding the exemption of transfer fee from incoming members of a Housing Society under the principles of mutuality. The appeals were dismissed with no costs.
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2011 (7) TMI 1329
"Reason to Believe" - Assessment/ Re-Assessment of Income u/s 147 - AO initiated proceedings u/s 147, as he believed that assessee did not co-operate with the department and not submitted any return in reply to notice u/s. 148 - CIT(A) held the reasons recorded for initiating proceedings u/s 147 are not valid
HELD THAT:- We noted that the apex court in the case of INCOME-TAX OFFICER VERSUS PURUSHOTTAM DAS BANGUR AND ANOTHER [1997 (1) TMI 477 - SUPREME COURT] has settled the law on the issue in question, that at the time of initiation of the proceedings u/s. 147, the AO should have the material relevant to the assessee. The information received from the Investigation Wing is also material if it contains the information regarding the assessee. The Assessing Officer at the time of recording of the reasons/formation of belief is not supposed to counter the evidence or material collected by him with the assessee. Even the source of the material cannot be asked by the assessee.
If the material or the information belongs to the assessee, in our opinion, the Assessing Officer has a bona fide belief to record the reasons. The court cannot look into the sufficiency of the material held by the Assessing Officer for the formation of the belief. Once the proceedings are initiated, the onus is on the Assessing Officer to prove that the assessee has escaped the income and for that he has to give the hearing to the assessee and give all the material and evidence collected by him so that the assessee may contradict the same. If the Assessing Officer does not have the material, the reasons cannot be regarded to be bona fide and the initiation of the proceedings can be quashed. If the initiation is valid and subsequently, the assessee proves that there is no escapement of income, the assessment so framed could be quashed/cancelled.
We noted that in the decisions relied on by the learned AR, the decision of the Hon’ble Supreme Court, which has settled the position of law has not been discussed. The law pronounced by the Supreme Court is the law of land and is binding on all the courts what to talk of this Bench of the Tribunal. We, therefore, set aside the order of the CIT(A) on this issue as, in our opinion, the Assessing Officer has bona fide reason to believe that the income has escaped in the case of the assessee - Decision against Assessee.
Unexplained Cash Credits u/s 68 - Assessee expressed his inability to produce the brokers - AO treated the amount received by the assessee from brokers credited in Saving Account as unexplained. - HELD THAT:- We noted that the issue on merits is covered in the case of BAIJNATH AGARWAL VERSUS ACIT [2010 (2) TMI 892 - ITAT, AGRA], where it was held that "The transaction was treated as non genuine as the assessee could not produce the broker. This in my opinion cannot be the ground to hold the transaction to be a non-genuine transaction. The assessee has given the address of the broker and proved the identity of the broker, even the bank account of the broker is also on record of the department".
Respectfully following the decision, we confirm the order of the CIT(A) i.e such amount does not come u/s Sec. 68 - Decision in favour of Assessee.
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2011 (7) TMI 1328
Issues Involved:
The issues involved in this case are:
1. Whether the income from sub-letting should be assessed under the head "income from house property" or "income from other sources" for the assessment year 2007-08.
2. Whether the addition made on disallowance u/s 40A(2)(b) should be upheld for the assessment year 2007-08.
Issue 1:
In the assessment year 2007-08, the question arose regarding the assessment of income from sub-letting under the head "income from house property" or "income from other sources." The Assessing Officer (AO) treated the income from sub-letting under "income from other sources" based on the stand taken in the previous assessment year 2005-06. However, the CIT(A) directed the AO to follow the decision of the Tribunal which held that the appellant was a deemed owner of the premises entitled to declare the rental income as Income from House Property. The Tribunal upheld the CIT(A)'s order, stating that the filing of an appeal before the High Court against the order of the Tribunal for A.Y 2005-06 would not be a bar in following the Tribunal's decision. Therefore, the order of the CIT(A) was upheld, and Ground No.1 raised by the revenue was dismissed.
Issue 2:
Regarding the addition made on disallowance u/s 40A(2)(b), the AO disallowed the excess rent paid compared to the rent received from Corporation Bank, invoking the provisions of Sec.40A(2)(b) of the Act. The Assessee contended that the rent increase was justified based on agreements and market rates. The CIT(A) found that the AO had not considered relevant facts and had committed factual errors. The CIT(A) deleted the addition, following the order of CIT(A) for A.Y 2005-06, where similar issues were discussed. The Tribunal upheld the CIT(A)'s decision, stating that the disallowance made by the AO ignoring vital factors could not be sustained. Therefore, the order of the CIT(A) was confirmed, and Ground No.2 raised by the revenue was dismissed.
In conclusion, the appeal of the revenue was dismissed by the Tribunal based on the above considerations.
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2011 (7) TMI 1327
Unconfimed Creditors u/s 69 - Assessee firm was having two old creditors - Notice send by AO to them were returned unserved - AO treated them as unconfirmed creditors, therefore made addition - CIT (A) deleted such additon on the ground that the creditors were old and did not pertain to the year under scrutiny - HELD THAT:- The fact that the creditors were old creditors brought forward from earlier years has not been disputed by the department. These creditors have not been introduced during the year under consideration. There is no evidence or material on record to establish that the asessee’s liability to pay the amount to the creditors have been ceased during the year under consideration.
We, therefore, hold that the ld. CIT(A) is justified in deleting the addition. The amount payable to these creditors can be added to the assessee’s total income in the year in which the assessee’s liability to pay the amount ceases or extinguished and not in the year under consideration where assessee has admittedly shown the liability in the balance sheet. Thus, the ground raised by the revenue is rejected - Revenue Appeal Dismissed.
Disallowance of salary and interest paid to partners - AO disallowed the assessee's claim by stating that in partnership deed there was no clause of quantum of salary paid and rate of interest payable to partners - CIT(A) upheld such disallowance - HELD THAT:- It is the assessee’s case that there was a stipulation in the supplementary deed of partnership regarding payment of salary and interest to the partners as so provided u/s 40(b)(v) applicable from the A.Y. 1993-94. which was not examined by CIT(A).
We, therefore, restore this matter back to the file of AO for his fresh consideration after ascertaining as to whether a supplementary deed of partnership was submitted by the assessee in A.Y. 1994-95 and whether the situation had remained the same till this assessment year. The AO shall also ascertain whether identical claim of payment and salary and interest has been allowed in earlier assessment years - Matter restored back.
Admission of Additional Grounds as CIT(A) didn't comment on such ground - AO’s action in disallowing 5% of the total expenses in the absence of books of account or bills or vouchers - HELD THAT:- Assessee should be allowed to raise this ground. We accordingly admit this ground and restore the same to the file of AO for his fresh adjudication after examining the books of account and after providing reasonable opportunity of being heard to the assessee - Decision in favour of Assessee.
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