TMI Tax Updates - e-Newsletter
July 26, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Wealth tax

Articles

1. “Manufacture or production of goods” – an exemption or a litigation in negative list

   By: Pradeep Jain

2. COURT CANNOT INTERFERE WITH THE TRANSFER OF EMPLOYEE UNLESS IT WAS MALA FIDE OR IN VIOLATION OF STATUTORY PROVISIONS.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. For the First Time A Commemorative Postage Stamp and Coffee Table Book on Customs to be Released Tomorrow to Mark 50 Years of Achievements under the Customs Act 1962.

2. Anand Sharma to Attend Global Investment Conference in London Tomorrow.

3. Foreign Investment Promotion Board Approves 14 FDI Proposals Worth Rs.1584.11 Crore.

4. Imposing Fees on Certain E-Forms Filed with ROC, RD OR MCA(HQ) under MCA-21 Where at Present No Fee is Prescribed.

5. Income Tax Department Starts Two More Taxpayer Friendly Initiatives : ‘Register for Home Visit’ and ‘Online Tax Help’.

Notifications

DGFT

1. 07 (RE – 2012)/2009-2014 - dated 23-7-2012 - FTP

Amendment in ITC (HS) 2012 Schedule 1 – Import Policy.

VAT - Delhi

2. F.7(450)/Policy/VAT/2012/361-371 - dated 23-7-2012 - DVAT

Security Waiver to Dealers in Registration.

Circulars / Instructions / Orders

VAT - Delhi

1. F 7 (420)Policy/VAT/2012/PF/372-374 - dated 23-7-2012

Agenda for discussion in the meeting held on 04.07.2012 at 3.30 P.M. with the Sales Tax Bar Association.

FEMA

2. 09 - dated 24-7-2012

Exim Bank's Line of Credit of USD 250 million to the Government of Nepal.

3. 10 - dated 24-7-2012

Exim Bank's Line of Credit of USD 47 million to the Government of the Federal Democratic Republic of Ethiopia.

Highlights / Catch Notes

Income Tax

• Section 40(a)(ia) Disallowance Not Applicable When TDS Deducted, Even with Short Deduction Allegations.

  Case-Laws - AT : Disallowance u/s 40(a)(ia) of the Act - disallowance cannot be made when there has been deduction of tax at source on the allegation that there is a short deduction of tax - AT
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• High Court Rules Casual and Contractual Workers Count Toward Section 80-IB Employment Requirement for Tax Deductions.

  Case-Laws - HC : Deduction u/s 80-IB - condition of employment of ten or more workers – Casual or contractual worker are workers. - HC
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• Capital Gains Tax Applied During Firm Dissolution or Asset Distribution u/s 45(4) of the Income Tax Act.

  Case-Laws - HC : Levy of capital gains tax - in the year in which the dissolution of the firm takes place or year in which consequent to such dissolution the distribution of assets takes place as per Section 45[4] - HC
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• High Court Clarifies Deductions u/ss 80C-80U and Disallowance u/s 14A of Income Tax Act.

  Case-Laws - HC : Disallowance u/s 14A and deductions under Sections 80C to 80U (Chapter VIA) - the income on which the deduction is allowed forms a part of the total income, though not included in the amount or quantum on which tax is paid - HC
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• Discrepancy in Accounting Methods: EMI for Tax, SOD for Financial Statements Sparks Legal Concerns on Tax Assessments.

  Case-Laws - HC : Difference in method of accounting adopted - EMI method to account the finance charges for the income tax purposes and SOD Method to arrive at balance sheet and profit and loss statements - HC
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• Software Development Costs: Classified as Revenue Expenditure, Fully Deductible in Year Incurred for Tax Purposes.

  Case-Laws - HC : Development of software - a revenue expenditure or capital expenditure? - only a revenue expenditure - HC
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• Court Examines Tax Deduction Eligibility for AMC Charges on Components u/ss 80IB and 80IC of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IB/80IC on AMC charges - on bought out components, used for the erection - AT
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• Capital Gains Reinvestment: Can Proceeds from Multiple Property Sales Fund One Home Purchase? Legal Clarity Needed.

  Case-Laws - AT : No rulings have been brought on record by the ld. DR to show that the capital gain arising from sale of more than one residential houses cannot be invested in one residential house - AT
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• Taxpayer's Deduction Claim u/s 54 Denied: Two Nearby Flats Not a Single Residential Property.

  Case-Laws - AT : Allowance of claim of deduction u/s 54 - the two flats cannot be treated as one residential property only on the ground that two buildings in which the flats were located were within the walking distance as claimed by assessee - - AT
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• Assessee Trust's Income Exempt from Maximum Marginal Tax Rate; Section 161(1A) Provisions Not Applicable.

  Case-Laws - AT : Taxability of Income as assessee trust - maximum marginal rate. - provisions of sec. 161(1A) are not applicable in the case of the assessee. - AT
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• Assessee Qualifies for Tax Deduction u/s 10A After STPI Approval Confirms Exemption Claim Validity.

  Case-Laws - AT : Eligibility for deduction u/s 1OA - the assessee has demonstrated that first invoice has been raised after it has obtained the approval of STPI. Thus claim of exemption u/s 10A is admissible. - AT
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• Are Share Sale Gains Long-Term or Short-Term? Determining Tax Implications Based on Dematerialization Date.

  Case-Laws - AT : Sale of shares - long term capital gains or short term - Whether purchase of the shares can be considered only on the date of dematerialization – AT
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DGFT

• DGFT Updates ITC (HS) 2012 Schedule 1: Import Policy Changes Affecting Goods Categorization and Compliance for Importers.

  Notifications : Amendment in ITC (HS) 2012 Schedule 1 – Import Policy. - Notification
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FEMA

• Exim Bank Grants USD 250 Million Credit Line to Nepal for Development Projects Under FEMA Guidelines.

  Circulars : Exim Bank's Line of Credit of USD 250 million to the Government of Nepal. - Circular
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• Exim Bank Grants USD 47M Credit Line to Ethiopia for Economic Development and Bilateral Cooperation Projects.

  Circulars : Exim Bank's Line of Credit of USD 47 million to the Government of the Federal Democratic Republic of Ethiopia. - Circular
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Indian Laws

• Indian Tax Law: Defining "Manufacture or Production of Goods" for Exemptions and Compliance in Business Activities.

  Articles : “Manufacture or production of goods” – an exemption or a litigation in negative list - Article
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Wealth-tax

• Assessee denied Wealth Tax exemption u/s 5(1)(vi); house deemed uninhabitable due to missing essential features.

  Case-Laws - AT : Wealth tax - the assessee is not entitled to exemption u/s. 5(1)(vi) of the Wealth Tax Act,1957, for the reasons that the house is not habitable in view of the fact that plastering, flooring, drainage and electricity is not done, doors and windows are not installed, the ceilings are in damaged condition. - AT
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VAT

• Sales Tax Bar Association Discusses VAT Circulars, Recent Changes, and Alerts for Practitioners at 2012 Meeting.

  Circulars : Agenda for discussion in the meeting held on 04.07.2012 at 3.30 P.M. with the Sales Tax Bar Association. - Circular
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• Dealers Granted Security Waiver for VAT and Sales Tax Registration to Simplify Processes and Boost Compliance Efforts.

  Notifications : Security Waiver to Dealers in Registration. - Notification
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Case Laws:

• Income Tax

• 2012 (7) TMI 628
  Addition u/s 69 B as additional purchase cost of his property - assessee had purchased the flat at Rs.62 lacs but Stamp Valuation Authority had valued the said flat for stamp duty purposes at Rs.63,40,500 - Held that:- AO has not brought on record any other evidence except the report of the DVO that the assessee has paid more than agreed consideration - assessee filed comparable cases of the same society or nearby area whereas the DVO has taken comparable cases of quite far away area. Therefore no addition could be made u/s 69 in the absence of any cogent evidence, thus the addition confirmed by the learned CIT(A)is deleted - in favour of assessee.

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• 2012 (7) TMI 627
  Disallowance of interest expenses - CIT(A) allowed it - Held that:- The assessee is continuing getting commission income from Pharma Agencies through sub-letting the agency. The loans were taken in earlier years for business purposes. Out of some of the loans given to sister concerns, part amount was outstanding due to debtors part has not been recovered during the year due to the financial position of the debtors. The assessee’s business is interconnected, interlacing, inter-dependent and there was one unit, thus warrants confirmation of the deletion made by the learned CIT(A) on old loans Excessive rate of interest in case of directors covered u/s 40A (2) (b) - Held that:- The rate of interest between 15% to 18% was allowed by the AO in the preceding assessment years which is also reasonable in view of prevailing market rate - As during the year the assessee has taken loan of Rs.12 lacs which was utilized for purchase of raw materials and same is not connected with the old business and also manufacturing has not been started during the year. Therefore, the AO is directed to re-calculate the disallowance of interest on Rs.12 lacs only on the basis of interest paid or provided in the loan account - against revenue.

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• 2012 (7) TMI 626
  Disallowance of interest expenses and Management expenses u/s 14A - CIT deleted the disallowance - re opening of assessment - Held that:- The A.O. did not establish any nexus between the borrowed funds and the investments. Nothing has been brought on record by the A.O. to rebut the assessee’s contentions that the investments have been made from own interest free funds and not borrowed funds. The assessee has submitted that he has not incurred any expenses for earning the income but the A.O. has not given any clear finding of incurring of expenses, and has not established nexus of expenses incurred with the earning of exempt income - invoking Rule 8D to disallowance is not warranted as AY under appeal is 1999-2000 and Rule 8D is to be applied prospectively from Assessment Year 2008-09 onwards - against revenue. Deletion of disallowance of software expenses by CIT(A) - Held that:- CIT (A) has given a finding to the effect that the issue of software expenses was disallowed by A.O. in the original assessment and CIT (A) had allowed the assessee’s appeal. In the second round, in reassessment proceedings, the A.O. has again raked up that very issue of disallowance of software expenses which had already reached to the finality in favour of the assessee by the order of ITAT - against revenue.

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• 2012 (7) TMI 625
  Addition on account of unexplained cash credit - CIT(A) deleted the addition - Held that:- The assessee has discharged the onus cast upon him by proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction. Nothing has been brought on record by the Revenue to controvert the submissions made by assessee - no need to interfere with the order of CIT (A) - against revenue. Addition on account of loss of goods - CIT(A) deleted the addition - Held that:- Goods were destroyed in floods for which the assessee lodged claim with the insurance company and the claim was settled for Rs.16,70,100 - The claim of loss has also been certified by the Assistant Commissioner, Food & Drug Department, thus the view of the CIT (A) that the loss of goods is nothing but deduction made by insurance company as per the policy conditions and therefore the same has to be considered as allowable deduction - against revenue Addition on account of low G.P - CIT(A) deleted the addition - Held that:- The business of assessee is governed by the regulation of Food and Drug Control Act and all records of purchase and sales are subject to verification by those authorities. No discrepancies have been noticed by them. The reasons for fall in GP have not been controverted by the Revenue nor have they brought on record any contrary facts. Though there has been fall in GP but there is increase in the rate of net profits. The Revenue has not pointed out any defects in the books of accounts of the assessee and has accepted its book results - no need to interfere with the order of CIT (A) - against revenue.

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• 2012 (7) TMI 624
  Addition on account of unaccounted income - the credit entries in the books of the assessee in the form of share application as unexplained - Held that:- As procedures has been prescribed for increasing the authorised capital of the company and there is nothing on record to prove that the Assessee has complied with the prescribed procedures especially with respect to the increase in authorised capital and for forfeiture of the share application money - thus the share application transaction is nothing but a design to bring in Assessee’s own unaccounted income into the books without payment of taxes. As AO had issued summons u/s 131 to the Managing Director but there was no compliance - the share application money received from the investors were forfeited by the Assessee and for which nothing is on record to prove that the notice was issued to investors to indicate the intention of the Assessee to forfeit the share application money - the assessee had received premium on the share to be allotted though it was a loss making company - A.O. has rightly added the amount to its income - against assessee.

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• 2012 (7) TMI 623
  Disallowance of short term capital loss on sale of mutual funds - invoking provisions of section 94(7) - Held that:- The Statute of 94(7) states that where any person buys any units within a period of three months prior to the “record date” and such person sells such unit within a period of nine months after such “record date”, then loss if any arising on account of such purchase and sale of unit to the extent of dividend received would be ignored for the purpose of computing the income chargeable to tax - units have been purchased within a period of three months prior to the record date, therefore one of the condition applies on such transaction. Then it is not in dispute that the sale was made on 06/02/2006, i.e. within the period of nine months from the record date, i.e. 20/01/2006, therefore within clause(b)(ii) of section 94(7) -as the relevant conditions have been cumulatively satisfied therefore stand of the Revenue is upheld - against assessee. Addition on account of deemed divided - declaration of trust claimed to be executed on 16/11/2005 by assessee - revenue stated it to be after thought - Held that:- After the search, Dy.Commissioner of Investigation submitted that the assessee has furnished the complete details of the said declaration and explained that in the absence of any other transaction or earning of NIL income, there was no necessity to open a bank account and further, about the registration of the shares, it was explained that as per section 153 of the Companies Act, 1956, a company is not permitted to include the name of the Trust in the register because trusts are not required to be entered in the register. Due to this reason, the name which was earlier noted as shareholders remained the same, however through a Board Meeting it was resolved to acknowledge the change in the vesting of the shares - that a deeming provision has to be applied strictly, so that a fiction so created by a Statute should not cover within its ambits more than what is subscribed - deemed dividend need not be taxed in the hands of the assessee on an un-established hypothecation - in favour of assessee. Addition on account of sale of Ampad land on the basis of seized papers - CIT(A) deleted the addition - Held that:- The actual execution of the sale deed and parting of the possession of land took place during AY 2009-10, the same has been treated as sales in AY 2009-10 and the gains arising therefrom were treated as income for AY 2009-10 - the transaction made with Mr.Kanubhai Patel clearly states the land was transferred to him for conversion from agricultural land into non-agricultural land and the transaction was cancelled and the amount received from him was returned back - As per law since the transaction did not materialize the same cannot be treated as income of the Appellant - no reason to reverse the findings of ld.CIT(A) as if the action of the AO is affirm then the natural consequences should be to adjust the income which has already been taxed against the addition made for the year under consideration. Since double taxation is not permitted - against revenue. Addition made on account of non-genuineness of the gifts - Held that:- AO has connected the impugned gift with the sale of Gotri land and that issue is yet to be decided in AY 2009-10, therefore the CIT(A) has rightly held that the gift being transferred “in kind” hence not to be taxed for the year under consideration - against revenue. Addition on account of sale of “Gotri Land” - Held that:- As the land was sold on the price near to one of said amount of the offer made by one of the buyer through a broker the document is also suggesting that certain options were available to the assessee and those options were not acceptable. The assessee has noted on those papers that variation in the price was expected. Since the said noting was found in existence when the paper was seized, such a noting cannot be ignored - That noting is rather a proof which supports the contentions of the assessee that the figures were nothing but certain offers which were made in respect of the Gotri land - Had it been a noting of a single transaction, the presumption could be in favour of the Revenue but by the very presence of three dates on the said paper gives an indication that out of the three offered price, one of them was materialized - as on one hand, the Revenue has picked-up the highest figure of the three and the assessee has picked-up the figure which was documented plus the difference of Rs.3 crores so as to match with one of the cited figures the Revenue Department should not have disputed the offer as made by the assessee.

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• 2012 (7) TMI 622
  Addition made on account of excess process loss - Consumption of gold casted - Held that:- Comparing to AY 2006-07, the consumption of gold casted items went down in assessment year 2007-08 and the percentage of process loss has gone up. In the present year even the percentage of consumption of gold casted items was almost at par with such percentage in assessment year 2006-07 but percentage of process loss in the present year is more than 1.5 times of the process loss in assessment year 2006- 07. This working goes to show that when the consumption of casted gold items is more in total consumption, the percentage of process loss goes down when we compare the same for assessment year 2006-07 and 2007- 08 but in the present year, even when consumption of gold casted items is at par with such consumption in assessment year 2006-07, the percentage of process loss is very high. For this reason the A.O. was justified in making disallowance of excess process loss declared by the assessee. Even if this addition is upheld then the assessee is eligible for exemption u/s 10A - Held that:- Section 10A (4) states that the claim to be allowed u/s 10A should be worked out on the basis of total profit to the extent of proportion of export turnover to total turnover of the assessee. In the present case, the export turnover of the assessee is Rs.4,68,34,166/- and domestic turnover has been worked out by the A.O. at Rs.7,52,740/- being the addition made by him on account of alleged sale outside the books. After inclusion of this amount of domestic sale, total turnover comes to Rs.4,75,86,906/-. Total profit from business assessed by the A.O. is Rs.12,24,878 - thus as per the provisions Section 10A(4) the exemption allowable u/s 10A comes to Rs.12,50,503/- and net taxable income stands at Rs.19,375 - direction to AO to recompute the liability - quantum appeal partly in favour of assessee Penalty u/s 271(1)(c) - Held that:- Penalty levy is not justified because the entire addition was made by the A.O. on the basis of assumption without bringing any concrete material on record in support of any outside books sale made by the assessee and hence, penalty is not justified even for this part addition upheld - in favour of assessee.

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• 2012 (7) TMI 621
  Assessment u/s 143(3) - assessee contented that there being no notice to the assessee - Held that:- No where in the assessment proceedings before the AO, the assessee appeared to have disputed about non-service of notice and the validity of the assessment order. However, the issue non-receipt of notice was agitated before the learned CIT(A), who called for a remand report from the AO in this behalf. The AO filed his remand report before the CIT(A) and confirmed that the notice under Section 143(2) was served on the assessee on 17.3.2004. Presence of the assessee’s representative and Committee official from time to time and also filing written submissions on different dates as mentioned in the assessment order, carry undisputable fact that the assessee is present and fully aware of the proceedings being taken place in the department, and therefore the assessee should be estopped from raising the issue that the assessment was framed without any statutory notice, and therefore not convinced that no notice under Section 143(2) of the Act was issued and served - in favour of assessee.

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• 2012 (7) TMI 620
  Challenge the search - Held that:- The order of the Tribunal stated that the contentions made by the assessee that the mother represented the minor child, who was the legal representative of the deceased. Thus the estate of the deceased was represented by the minor through the mother. In the circumstances no hesitation in holding that the assessment based on the search made in the premises of the deceased and the warrant in the name of the mother as a representative of the legal heir of the deceased, is proper. The purpose of search was to find out the undisclosed income of the deceased and on his demise, the estate was represented by the legal heirs, one of whom happened to be the minor son and the property represented by him - confirm the order of the Tribunal. Challenge the assessment as barred by limitation - Held that:- As going by the factual details as are available that the two year time limit commencing from 30.11.1997 the last of the panchnama evidencing the conclusion of search with reference to the authorization was issued ended on 30.11.1999, thus no hesitation in holding that the assessment made herein under Chapter XIV-B is well within the period of limitation, as provided for under Section 158BE (1)(b) - against assessee.

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• 2012 (7) TMI 619
  Addition on depreciation claimed in P&L account - assessee excluded the same entirely including the profits of SEZ unit while working out the profits in IT computation – Held that:- CIT (A) considered that there is no need for making any adjustment and allowed the ground - there is no merit in AO’s observation that assessee has claimed excess deduction. Claim of depreciation on motor car – Held that:- vehicles acquired by assessee eventhough had not been used in the business of running them on hire but for that reason depreciation @ 50% cannot be denied as entry in Dep Schedule covers the case of commercial vehicles acquired between the period 1.4.2001 to 31.3.2002 and put to use in this period for the purposes of any business or profession - no condition in this entry that the commercial vehicle shall be used in the business of running it on hire. Admittedly the vehicles are registered as commercial vehicles and falls within the entry for claim of depreciation at 50% – In favor of assessee Reopening under section 147 - reopening was made after four years from the end of relevant Assessment year – Held that:- Reopening per se is bad in law as there is no failure on the part of assessee in furnishing necessary details at the time of filing the return or completion of the assessment originally under section 143(3) - mere change of opinion on existing facts available on record by AO which cannot be upheld Foreign exchange realization - Assessee has claimed total turnover which include the exchange rate difference - CIT (A) excluded the amount and took the income from export realization and restricted the claim – Held that:- Foreign exchange realization is on the export proceeds which are to be included in the ‘total turnover’ and also in ‘export turnover’ which assessee had done - foreign exchange realization being part of export proceeds are to be included in the export turnover. Therefore, the CIT (A) to that extent is not correct - Revenue appeal is dismissed.

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• 2012 (7) TMI 618
  Addition on account of commission paid to Directors of the company – Held that:- Commission paid to both the directors was wholly and exclusively based on performance of assessee’s business and commercial expediency. There is no violation to sec. 36(1)(ii) of the Act - directors are assessed to tax at maximum rate and commission received has been shown in their returns as taxable income - no reduction of tax liability either by the assessee or by the directors – In favor of assessee Reopening of assessment u/s 147 - Since the commission paid to directors was not allowable under the provisions of Section 36(1)(ii), the assessment was reopened by invoking the powers under Section 147 – Held that:- Reopening was made after four years from the end of the relevant assessment year - notice under section 148 based on the recorded reasons supplied to the petitioner as well as the consequent order were without jurisdiction as no action under section 147 could be taken beyond the four year period – In favor of assessee

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• 2012 (7) TMI 617
  Addition under section 69 as unexplained investment - source for the construction amount - Assessing Officer made addition as per the valuation determined by the Department Valuation Officer - appellant has submitted a reason for the purchase of adjoining small piece of land. The land owned by him and on which Hotel Hill View was constructed an unapproved one – Held that:- Construction was done by Mrs. A.K. Singh and there is no evidence brought on record that the construction was done by the assessee. No material evidence was brought on record to prove that the assessee had source for the construction and therefore, no addition is warranted in the hands of the assessee towards cost of construction – addition deleted

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• 2012 (7) TMI 616
  Addition - unexplained cash credits under section 68 of the Income Tax Act - genuineness of the sundry creditors - Commissioner of Income Tax (Appeals) held that in his opinion addition could not have been made u/s. 68 of those amounts which appear as opening balances on 1.4.2006, which were as follows - examination of the earlier year’s accounts show regular business dealings – addition deleted Addition - unexplained cash credits under section 69 of Income Tax Act - assessee has furnished the confirmations – Held that:- Bank accounts have been produced to show that the amount have been received by cheque - considering that the amounts have been confirmed by the parties concerned, the additions deleted. Addition - unexplained cash credits under section 68 of Income Tax Act - assessee has received advances/ payments by cheque during the year - Commissioner of Income Tax (Appeals) held that the payments were received by cheque and the transactions appear to be in nature of regular business dealings – Held that:- Assessee was prevented by sufficient cause from submitting the evidences during the assessment proceedings - no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) in deleting the addition - appeal filed by the Revenue stands dismissed.

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• 2012 (7) TMI 615
  Condonation of delay - delay of 529 days - sole reason given for the delay in filing this cross objection is that assessee was adviced to file this cross objection, as the re-opening was a mere change of opinion – Held that:- Assessee was not able to properly explain the reasons for the delay in filing the cross objection - grounds raised by the assessee dismissed Denial of Deduction under section 80IA of the Income Tax Act – business of cold storage - Assessing Officer denied the deduction partially on the ground that – (i) the service charges credited was on account of pasteurisation and packing of milk and cold storage – Held that:- Quantum of service charges was being calculated on the basis of quantum of milk packed but was charged only for cold storage - Assessing Officer has not understood the fact clearly. Packing and pasteurisation are not done by the assessee but only a place is given to Dudh Sungh - functions of Dudh Sungh and the assessee are defined in clear terms vide these agreements - it is only the methodology devised for quantifying the charges and it does not indicate that the assessee is rendering services other than cold storage - ground raised by the Revenue dismissed. Income derived from redemption of units of mutual funds - simply observed in the order that such an income bears the character of interest and as such has to be brought to tax under the head ‘Income from Other Sources’ – Held that:- Assessing officer is therefore directed not to treat the income as interest taxable under the head ‘Income from other sources’. The income shall continue to be taxed as capital gains as claimed by the appellant.

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• 2012 (7) TMI 614
  Disallowance was made under section 40(a)(ia) of the Act - payments made to “field agents” for conducting market research surveys – Held that:- TDS was deducted at 2.24% under section 194C and whereas it is the Assessing Officer’s case that deduction should have been made @ 5.61% under section 194J and, hence, a proportionate disallowance was made - disallowance cannot be made when there has been deduction of tax at source on the allegation that there is a short deduction of tax – Matter remanded to AO - ground is allowed for statistical purpose. Reopening of assessment - reopening was made within a period of four years – assessee submitted that no notice was given under section 143(2) – Held that:- Appellant has treated letter as the notice u/s. 143(2) of the Act - assessee has appeared during reassessment proceedings in response to the notice/letter dated 16-11-10 and cooperated in the assessment proceedings. Therefore, it would be deemed that the notice under the provisions of l.T. Act has been duly served upon the assessee in time - appellant cannot take any objection in any proceedings or enquiry under this Act as the appellant has not raised such objection before the completion of said reassessment proceedings - ground of appellant dismissed

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• 2012 (7) TMI 613
  Addition made by AO on the ground of cessation of liability of sundry creditors – Held that:- Once the liability exists in the books of assessee and the creditor has right to claim over the same as per law, AO could not make addition on account of cessation of liability by invoking provision of section 41(1) of the Act – addition deleted Disallowance of salary by invoking the provision of section 40A(2) of the Act - salaries paid on account of employment of Shri Siddhartha Jalan who is doing consultancy work, accounts and used to visit customers for marketing of assessee – Held that:- No doubt the employee Shri Siddhartha Jalan is related to one of the directors but it is an admitted fact that Shri Siddhartha Jalan has actually worked for the assessee company - no disallowance can be made by invoking the provision of section 40A(2) of the Act Addition by applying net profit rate @8% on contract receipts - assessee company claimed receipt as Annual Maintenance Charge from one Tata Libert Limited - assessee paid the entire receipt received from Tata Libert Ltd. to OMPCL as the entire job work was assigned to OMCPL - assessee has not earned any penny from this sub-contract and the entire payment was debited to OMCPL – Held that:- Lower authorities erred in estimating the profit rate on the receipt which has never given any profit to assessee - addition deleted Depreciation allowance - assessee has purchased a new car on 22.03.2002 and it was used for six months, the admissible depreciation was only 50% of the WDV as on 31.03.2002 - According to AO the assessee’s calculations are not correct but he has not given any basis for the – matter remanded to AO - assessee is allowed for statistical purposes. Addition of profit on sale of old car – Held that:- Assessee has purchased a new car and also sold this car and the excess of WDV has been invested in purchase of new car - no gain will be charged to tax as Short Term Capital gain or profit of the business Addition of advances received from customers - assessee could not compute interest on the above advances from customers and could not obtain confirmations, the AO disallowed the liability holding the same as bogus – Held that:- Assessee has filed complete details before AO as well as before CIT(A) and this liability pertains to Assessment year 1998-99 and these advances received from customers are almost paid by account payee cheque in subsequent years - Once the payment is made by cheque and there is no outstanding liability standing as on the date of assessment, the sundry creditors are not in the control of the assessee but it is the duty of AO to issue notice u/s 133(6) and call for information and AO has miserably failed in doing his duty – addition deleted - appeal of assessee is allowed in part for statistical purposes.

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• 2012 (7) TMI 612
  Disallowance of claim under section 80IB of the Act - assessee has failed to establish beyond doubt that there is no other activity other than manufacturing activity - assessee had admitted trading activity and of undertaking job work apart from manufacturing activity - Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of the deduction under section 80-I / 80-IA / 80-IB of the Income-tax Act, 1961 - Profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial undertaking" under section 80-IB - profits and gains in question cannot be said to have been derived from the industrial undertaking and, hence, the assessee would not be eligible for relief under section 80IB of the Act - assessee’s appeal is dismissed.

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• 2012 (7) TMI 611
  Long term capital gain - Valuation - the assessee contended that where the AO proposes to adopt the stamp duty value as full value of consideration, he has a right to question such adoption by asking the AO to refer the matter of valuation to the valuation officer, which right was never given by the AO – Held that:- AO is directed to refer the matter of valuation to appropriate valuation officer after giving reasonable opportunity of being heard to the assessee - Revenue is allowed for statistical purposes

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• 2012 (7) TMI 610
  Additional evidence - Rule 46A - Addition under the head “advertisement and publicity” expenses - Disallowance of reimbursement of expenses to holding company – Held that:- From the index to paper book, it emerges that certain details and documents have been furnished/produced before CIT(A) in support of the appeal on this issue and CIT(A) has not only admitted such material, but also considered the same for granting relief to the assessee without associating the Assessing Officer with appeal proceedings or calling for remand report form the Assessing Officer. - there is a clear violation of Rule 46A of the I.T. Rules in this regard - set aside the orders of the authorities below - matter back on the file of the AO.

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• 2012 (7) TMI 609
  Denial of deduction under section 80-IB of the Act on the ground that the respondent-assessee had not employed ten or more workers – Held that:- Though the workers employed by the assessee directly were less than ten, it is not in dispute that the total number of workers employed by the assessee directly or hired through a contractor for carrying on the manufacturing activity exceeded ten and - workers including casual and contractual workers were working in the direct supervision and control of the respondent-assessee - assessee complied with the condition set out in section 80-IB(2)(iv) of the Act.

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• 2012 (7) TMI 599
  Reopen the assessment U/S 148 - Giving benefit of MAT credit before calculation of interest u/s 234 & benefit of Netting of Interest to the assessee while calculation of deduction u/s 80HHC - Held that:- Benefit of MAT credit before calculation of interest u/s 234B and Netting of Interest was not only discussed in the original assessment, the same was concluded in favour of the petitioner for the same assessment year by virtue of a decision of the Tribunal and CIT (A)respectively - Surely, when the Tribunal had already rendered its decision on a particular issue AO could not have taken a different view, unless of course such order of the Tribunal was reversed by the High Court - as in the reasons recorded it is not even an allegation that any income chargeable to tax escaped assessment on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for such assessment - in favour of assessee.

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• 2012 (7) TMI 598
  Deduction claimed for the expenditure on technical consultancy fees - Revenue contends that such expenditure should be treated as provided u/s 35AB - Held that:- Taking into account the relevant clauses of the agreement it can be concluded that such expenditure did not result into any enduring benefit but was only for improving the existing efficiency of the assessee company and was thus was purely revenue in nature - the nature of expenditure is found to be revenue in nature, then section 35AB may not apply - such provision would not apply to a revenue expenditure even if the same was incurred for acquisition of technical know-how - Deduction on such expenditure was available even before the introduction of section 35AB and such deduction cannot be curtailed or limited by applying section 35AB - thus taking such an expenditure out of section 37(1) would not arise - in favour of assessee.

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• 2012 (7) TMI 597
  Reopen the assessment u/s 147 - the petitioner has not fulfilled the conditions laid down by the amended provisions of section 80HHC - Held that:- On plain reading of the reasons recorded it is evident that there is not even a whisper to suggest that there is any failure on the part of the petitioner to disclose fully and truly all material facts - when the petitioner filed its return of income, the amended provisions of section 80HHC had not been brought on the statute book and the law requires the assessee to file returns in accordance with the existing laws, and does not and cannot expect the assessee to anticipate any future amendments made in the enactment and file its return accordingly - when the amended provisions of section 80HHC of the Act were not in existence at the relevant time when the return came to be filed, no such failure can be attributed to the assessee - in favour of assessee.

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• 2012 (7) TMI 596
  Penalty levied u/s. 271(1)(c) - CIT(A) deleted the penalty - Held that:- In respect of commission paid to party and ERP Software expenses incurred on ERP software, the assessee has filed along with the return of income audit report and other relevant statements in support of such claims and also during the course of assessment proceedings the assessee further submitted all the information and explanations as required by the A.O. - The explanation offered by the assessee in support of such claims were not found false by the A.O. Therefore, merely because assessee’s claim has been disallowed, it cannot be said that the assessee is also guilty of concealment of income or furnishing of inaccurate particulars of income - no material or evidence for arriving at a reasonable conclusion that amount of addition under consideration represent the income of the assessee. Penalty levied on salary & marketing expenses - Held that:- As on similar facts penalty imposed by the A.O. was deleted by ld. CIT(A) as upheld by the tribunal for the assessment year 1999-2000 thus respectfully following the same, the order passed by ld. CIT(A) deleting the penalty is hereby confirmed - decided in favour of assessee.

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• 2012 (7) TMI 595
  Penalty u/s 271(1)(C)- assessee contested that on same facts penalty was not even initiated during the A.Y. 2001-02 - Held that:- In the year under appeal assessee had not disclosed the sale of the plot during the year under appeal and it was only on enquiry made by the A.O. during assessment proceedings after finding some credit entries in the assessee’s bank account that the full facts were brought on record. Had there been no scrutiny assessment during the year under appeal, the full facts would not have come to light - the facts of both the years are not comparable as during the assessment year 2001-02 the assessee duly declared sale of half portion of plot as capital gain and also claimed deduction u/s 54EA. Therefore, there was complete disclosure of facts when assessee filed his return of income for that assessment year - pure case of concealment of income - against assessee.

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• 2012 (7) TMI 594
  Levy of capital gains tax - in the year in which the dissolution of the firm takes place or year in which consequent to such dissolution the distribution of assets takes place as per Section 45[4] - Tribunal concluded that the assets held by the assessee was treated as its stock in trade and therefore could not be brought to tax under the head capital gains - Held that:- Tribunal has basically proceeded on the premises that the seized material per se did not indicate any undisclosed income of the assessee i.e. the firm because the information which is sought to be used was not directly one relating to the assessee, but an indirect one, such as in the account books of some other person the name the firm figures in some capacity. The tribunal also did not agree with the finding that the firm had continued on and after 1-4-1987, based on the statement of Sri Ramachandra Raje was not a correct approach. Where a plausible view can be taken and more so in a matter where a finding is based on a reading of the contents of a couple of documents and its inference, which becomes a finding and if more plausible views or inferences can be drawn, such matters are not matters which are required to be examined as a pure question of law within the scope of Section 260A - it is not possible to make any conclusions unless there is a positive finding that the firm did exist after 25.03.1987 or after 01.04.1987. This factual position is not definite or clear, deserving a conclusion in law. In such circumstance an inference on the legal position is not warranted - no scope for interference with the order of the tribunal under Section 260A of the Act is very less

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• 2012 (7) TMI 593
  Reopen the assessment of the petitioner - beyond a period of four years - undisclosed the payment for scientific research made for the research done at the premises of the Mother Dairy, New Delhi & the payments made to Delhi University and Nagpur University for which the claim u/s 35(1)9(ii)claimed - Held that:- Claim of deduction was at large before the AO as he applied his mind and called upon the petitioner to supply necessary details to substantiate such claims. If thereafter no disallowances were made it cannot be stated that the petitioner failed to disclose all material facts - as along with the return and during the course of assessment proceedings, the assessee had made necessary disclosures to substantiate such claims. However, having dropped the inquiry at that stage and indirectly having accepted the claims, in facts of the case, it was thereafter not open to issue a notice for reopening of the entire assessment beyond a period of four years from the end of the relevant assessment year. With respect to payments made to Delhi University and Nagpur University they were duly approved under notification issued under Income Tax Act of 1922 held to be valid for the purpose of successor Act also. Merely because such notifications were not produced on record during the original assessment, can hardly be a ground for reopening the assessment beyond a period of four years - decided in favour of assessee.

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• 2012 (7) TMI 592
  Liability u/s 179 to pay the tax dues - a Revision Application under Section 264 filed by assessee - Held that:- As in the first round of the proceedings u/s 179 CIT set aside the order of ITO directing him that before any order u/s 179 is passed against the petitioner, AO must give a specific finding to the effect that efforts made to recover the tax dues from the said company had failed and that the petitioner should be heard before any order is passed u/s 179 - the petitioner was never informed of the efforts made by the department to recover the amounts from the said company - the reliance placed upon a report of the Tax Recovery Officer for conforming the liability, however, no copy of the said communication of the Tax Recovery Officer was ever made known to the petitioner and in spite of the petitioner seeking inspection of all the documents on record, no such inspection was ever given to the petitioner. In this circumstances, the order passed is not only on the basis of the material viz. Tax Recovery Officer's letter/report that was not disclosed to the petitioner, but also passed without a personal hearing, as directed by the order of the CIT as a breach of the principles of natural justice has occurred the order of ITO is liable to the quashed and set aside and the matter ought to be remanded to the Tax Officer for de novo adjudication - in favour of assessee by way of remand.

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• 2012 (7) TMI 591
  Disallowance u/s 14A - Revenue contented that once deduction stands allowed, the income in view of the deduction ceases to be a part of the total income - Section 14A applicable in respect of deduction allowed under chapter VI-A? - Held that:- Section 14A states that for the purpose of computing total income under Chapter IV, no deduction shall be allowed in respect of expenditure incurred in relation to the income which does not form part of the total income under this Act. It does not state that income which is entitled to deduction under Chapter VIA has to be excluded for the purpose of the said Section. The words do not form part of the total income under this Act is significant and important - Before allowing deduction under Chapter VIA we have to compute the income and include the same in the total income. In this manner, the income which qualifies for deductions under Sections 80C to 80U has to be first included in the total income of the assessee. It, therefore, becomes part of the income, which is subjected to tax. Thereafter, deduction is to be allowed in accordance with and subject to the fulfillment of the conditions of the respective provisions. This is also subject to Section 80AB and 80A(1) and (2). Chapter VIA does not postulate or state that the incomes which qualify for the said deduction will be excluded and not form part of the total income. They form part of the total income but are allowed as a deduction and reduced. Incomes in Chapter III are not chargeable to tax and, therefore, fall outside the ambit of Sections 4 and 5 but while computing the taxable income, deductions are allowed to the extent stipulated in Sections 80C to 80U. The distinction between the two, has been accepted and recognized by the Supreme Court in Second Income Tax Officer and Another v. Stumpp Schuele and Somappa Private Limited [1990 (9) TMI 69 - SUPREME COURT] - deduction if allowed does not mean that the said income ceases to be part of the total income - the income on which the deduction is allowed forms a part of the total income, though not included in the amount or quantum on which tax is paid - in favour of assessee.

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• 2012 (7) TMI 590
  Difference in method of accounting adopted - EMI method to account the finance charges for the income tax purposes and SOD Method to arrive at balance sheet and profit and loss statements - hire purchase agreement - Held that:- Method employed for arriving the monthly installment is an EMI method and the right of the assessee to receive the hire purchase charges on various due dates are as per the schedule mentioned in the agreement - considering the character of the transaction as the title to the property will pass on to the hirer, when all the installments are paid and when the hire purchaser exercises his option to purchase was pure and simple and that the transaction had not in any manner undergone any change ever since the assessee started its business in this field the Tribunal came to the conclusion that the AO had committed a serious error in ignoring the EMI method, to adopt SOD method - once the Revenue had accepted the character of the transaction as hire purchase transaction and when the Revenue had not disputed the fact that on all the earlier years there are no materials available as on record to show that following such method had really resulted in suppression of income - in favour of assessee.

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• 2012 (7) TMI 589
  Eligibility of amalgamated company for exemption u/s 10B - Held that:- As in the case the subsidiary company amalgamated with the holding company with effect from 1.1.93 and as a result of the merger, the business of the amalgamating company became the business of the assessee company. Given the fact that the assessee is a holding company of the subsidiary company, when the assets stood transferred to the amalgamated company, evidently, the export business done by the assessee is not a business formed by splitting up or reconstruction of a business already in existence. As far as sub clause (iii) of Section 10B(2) is concerned, the criteria for grant of the relief is that the undertaking is not formed by transfer to a new business of machinery or plant previously used for any purpose - Extending the said decision to sub clause (iii) of Section 10B(2) it is clear that as a result of the merger of the subsidiary company with the holding company, there is no new business formed by transfer of machinery or plant previously used for any business - the assessee s status as 100% EOU and after the deletion of Section 84 and insertion of 80J and thereafter benefit under Section 10B being attached to the undertaking no point of not extending the claim of exemption u/s 10B Development of software - a revenue expenditure or capital expenditure ? - Held that:- As decided in ALEMBIC CHEMICAL WORKS CO., LTD, [1989 (3) TMI 5 - SUPREME COURT] that upgradation of computers by changing certain parts, thereby enhancing the configuration of the computers for improving their efficiency, was only a revenue expenditure - in favour of assessee.

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• 2012 (7) TMI 588
  Reopening of the assessment u/s 147 - after expiry of four years - Held that:- As it is clear from the reasons recorded by the AO that the same does not disclose or state that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment - AO has examined the issue of total turnover and accepted the claim of the assessee while framing the assessment u/s 143(3) then even if it is found that the claim allowed in the original assessment should not have been allowed the same itself, is not a valid reason to reopen the assessment beyond the period of four years after the end of the relevant assessment years - in favour of assessee. Disallowance of bad debts written off - as the assessee failed to produce the complete details regarding the Debts written off and has failed to establish that the debt has actually become bad. Held that:- As far as the requirement of establishing that the debt has actually gone bad, the same is not essential for claiming the deduction of bad debts in view of the decision of Hon’ble Supreme Court in case of TRF LIMITED V. CIT (2010 (2) TMI 211 - SUPREME COURT ) - as assessee has filed the additional material before the CIT(A),which has not been properly examined, therefore this issue is remitted back to AO for verification and examination of the record filed by the assessee - in favour of assessee by way of remand. Disallowance of advances written off - Held that:- This issue is also similar to the disallowance of bad debts written off. Since the issue of disallowance of bad debts written off has been set aside to the record of the AO therefore, this issue is also remitted to the record of the AO - in favour of assessee by way of remand. Disallowance of software expenses being capital in nature - Held that:- The expenditure was incurred by the assessee for development of software to be used in the assessee's business of software as evident from the assessee's books of account that the assessee has shown the said expenditure as work-in-progress being capital in nature. Having regard to the facts and circumstances of the case that when the assessee has incurred the expenditure for bringing a new asset into existence to be used for the business of the assessee, then, the same cannot be allowed as revenue expenditure. Since the asset was not yet come into existence, therefore, there is no question of allowing any depreciation - against assessee. Justification on computation of deduction u/s 10A - Revenue held that loss on account of Exchange Fluctuation is the claim of expenditure but not an exclusion from total turnover - Held that:- There should be uniformity in the ingredients of both the numerator and the denominator of the formula as if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover - though there is no definition of the term ‘total turnover’ in Section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator - that the total turnover for the purpose of computation of 10A deduction has to be taken after excluding the foreign exchange loss from the total turnover shown in the profit and loss account - in favour of assessee.

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• 2012 (7) TMI 587
  Disallowance under section 14A - investment made by the assessee in the shares totaling 3.01 crores - Held that:- where a business strategy had been adopted by the assessee by way of investment in shares of sick company in order to take over the said company for widening its operation of business, cannot be held to be investment per se - as the assessee has no intention to earn any dividend from the said investment as the company in which the amount was invested was running into losses - Rule 8D are applicable from assessment year 2008-09 and are not retrospective and year under appeal is assessment year 2006-07 - in favour of assessee. Disallowance under section 36(1)(iii) of the interest expenditure - Held that:- In the case of the assessee where it has mixed funds available for its business activity, the plea of the assessee that it had interest free funds available for the purposes of advancing to its subsidiary cannot stand - transfer of funds in the range of 5 lacs from month to month also does not justify the plea of commercial expediency - against assessee. Disallowance on account of interest capitalized for the period prior to putting the assets to use - Held that:- Considering the facts and circumstances of the case where the assessee has failed to establish its case of availability of non-interest bearing funds and specially in view of the mixed pool of funds available with the assessee no merit in the present ground of appeal raised by the assessee - against assessee. Dis allowance of deduction u/s 80IB/80IC on AMC charges - Held that:- as AMC charges received by the assessee are directly relatable to the business carried on by the assessee of manufacturing, commissioning and erection of cooling system and consequently the assessee is eligible to the claim of deduction u/s 80IB/80IC - in favour of assessee. Dis allowance of deduction u/s 80IB/80IC on bad debts recovered - Held that:- The amount received on recovery of bad debts is income derived from industrial undertaking and as the outflow of bad debts written off is allowable as a deduction while computing the income of the industrial undertaking eligible for deduction under section 80IB/80IC consequently, the inflow of the amount of bad debts recovered is includible as profits of eligible unit, on which deduction under section 80IB/80IC is claimed - in favour of assessee. Dis allowance of deduction u/s 80IA - Held that:- assessee is entitled to the benefit of deduction under section 80-IA both on the manufactured items and the bought out components, used for the erection of cross flow (XE series) and counter flow (CM series) cooling tower and is not entitled to any deduction under section 80-IA on Round Bottle (RB) Cooling Towers and bought out components used for erection of Round Bottle Cooling Towers - partly in favour of assessee. Dis allowance of deduction u/s 80IB/80IC on bought out components - Held that:- Even after assembling the unit the assessee was also providing the services by the AMC of the said unit in entirety and we find no merit in the observation of the Assessing Officer to the contrary - in favour of assessee. Charging of interest u/s 234B and 234C being consequential is dismissed - in favour of assessee.

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• 2012 (7) TMI 586
  Allowance of claim of deduction u/s 54 - joint holders of property - Held that:- Capital gain arising from the transfer of a residential house is not admissible against the investment in second house as the only restriction is that the capital gain arising from the sale of one residential house must be invested in one residential house and not in two residential houses - Unable to agree with the view taken by the CIT(A) that the two flats constituted one residential house. The flats were located in two different buildings owned by the two different housing societies and were situated on two different roads. These flats were acquired in two different years. There was no common approach road to the buildings. Therefore the two flats cannot be treated as one residential property only on the ground that two buildings in which the flats were located were within the walking distance as claimed by assessee - Assessee sells more than one residential houses in the same year and the capital gain is invested in a new residential house, the claim of exemption cannot be denied if the other conditions of section 54 are fulfilled - No rulings have been brought on record by the ld. DR to show that the capital gain arising from sale of more than one residential houses cannot be invested in one residential house - The only requirement of section 54 is that income should be chargeable to tax under the head "house property income" and it is not necessary that income should have been actually charged - direct the AO to allow the capital gain exemption u/s 54 after verifying that the new residential house had been constructed within prescribed time limit - partly in favour of revenue.

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• 2012 (7) TMI 585
  Penalty u/s 271(1)(c) - Penalty levied on both Principal and Agent - shipping profits were claimed exempt from tax in India - DTAA between India and Mauritius - Held that:- Section 160(1)(i) provides that in respect of income of the non-resident, the agent of such non-resident is to be treated as representative assessee. Thus, the assessment should have been either made in the case of the representative assessee i.e. the agent or to non-resident itself. The department cannot make the assessment on both the persons on agent as well as principal. Similarly, the penalty under Section 271(1)(c) for the same income cannot be levied in the case of both the persons. In the return of income, the assessee had duly disclosed the freight receipts, the income from such freight receipts under presumptive provisions of Section 44B and also the tax payable on such income. Based on this, DIT relief certificate by the AO in India and tax residency certificate by the authorities of Mauritius, tax exemption has been sought in the return of income - as department itself on the one hand, gives certificate for 100% tax relief and on the other hand, treats the same to be provisional in nature, cannot frame the charge of concealment of income or furnishing of inaccurate particulars of income - nowhere it has been found that the assessee was not acting bonafidely - no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false as mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars - in favour of assessee.

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• 2012 (7) TMI 584
  Addition on account of unexplained investment in the wrist watches - A.O. has made this addition on the ground that the appellant has not produced any bills or other evidence in support of the contention that these watches were covered with the withdrawals made by the family members of the appellant – Held that:- There was sufficient withdrawals shown by the family members which could cover the purchase of the wrist watches - normally bills of such items like watches are not preserved for record - Assessing Officer has not made any specific or exact investigations or market enquiries which could establish the estimation of value of these watches - value of the wrist watches adopted by the Assessing Officer was arbitrary – In favor of asssessee Addition made u/s 69A of the Act - search and seizure - cash was found at the residence of the assessee - assessee has stated during the search itself that the cash found belongs to MR. Educational Institution - A.O. has made this addition on the ground that sources of this cash have not been explained by the appellant – Held that:- Cash books were duly produced before the A.O. Copies of the relevant pages of cash books were also filed by the appellant during the appeal proceedings as part of the paper book - If the A.O was not satisfied with the authenticity of the entries made in the cash books, some enquiries could have been made to prove so. However, in the absence of such enquiries or evidence, the A.O. cannot be said to be justified at all to make addition considering this cash to be unexplained – In favor of assessee Addition made on account of unexplained investment u/s 69 of the Income-tax Act, 1961 and undisclosed income – addition made on the basis of document seized during search - assessee has denied any relationship with the document at the time of search itself - The document is denied to be in handwriting of the assessee or handwriting of any family member – Held that:- Revenue has failed to collect any corroborative material which could explain the real character of the transaction - document is not clear it does not give any conclusive and meaningful conclusion in respect of the transactions. It also does not establish the correct nature of the transaction. The revenue has failed to collect corroborative evidence to establish the correctness of the transaction recorded in the loose paper - appeal of the revenue is dismissed.

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• 2012 (7) TMI 583
  Taxability of Income as assessee trust - maximum marginal rate. - CIT(A) held that the trust cannot be held as an association of a person as the constituent persons have not come together to earn income in question - DR asked for the applicability of sec 161(1A) in respect of the license fee received by the assessee trust in subletting out the property in question - Held that:- The provisions of sec. 161 (1A) are applicable only when the income of the trust is business income and the activity of subletting is a single isolated activity and there is no structured, systematic activity with frequency, therefore, the addition is not sustainable - the individual income has been already taxed in their hands as stated by the appellant, there can be no double taxation of the same amount - the assessee trust merely sub-let out the leased property and the income is held to be liable to tax as income from other sources and not income from house property or income from business - provisions of sec. 161(1A) are not applicable in the case of the assessee. - in favour of assessee.

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• 2012 (7) TMI 582
  Eligibility for deduction u/s 1OA - assessee company has five units registered under STPI - Held that:- To avail the facilities and privileges admissible under the STP scheme the unit has to be custom bonded. The assessee has obtained clarification from STPI as per letter dated 20th April, 2004 from Director, STP. It is mentioned that if the assessee intend to avail any duty concession, then the assessee is required to approach custom for custom bonding. Hence, it cannot be read in the provisions of the Act that for availing deduction s/u lOA, the assessee should first obtain the custom bonding and then should commence production - the assessee has demonstrated that first invoice has been raised after it has obtained the approval of STPI. Thus claim of exemption u/s 10A is admissible. For the purpose of computing deduction u/s 10A of the Income-tax Act, if any income is excluded from the export turnover, then the same has to be excluded from the total turnover also. Addition of an amount as foreign exchange gain for the purpose of computing deduction u/s 10A by assessee - Held that:- CIT Vs. Infosys Technologies Ltd. [2011 (11) TMI 443 - KARNATAKA HIGH COURT] wherein the Hon’ble Karnataka High Court confirmed that the fluctuation in the valuation of currency which has to be converted to foreign exchange currency has direct nexus to the export of software and can never be included as income from other sources - in favour of assessee. Inclusion of income in the nature of ‘interest income’ and ‘miscellaneous income’ in the profits of the undertaking as eligible for deduction u/s 10A - Held that:- The ‘interest income’ and ‘miscellaneous income’ for units 5 and 6 have been excluded from the profits and gains of the undertaking for computation u/s 10A and while making such adjustment in computation, inadvertently foreign exchange gain was also excluded from the profit of the business of the undertaking - thus to consider the actual bifurcation deem it fit and proper to remit the issue back to the file of the AO for reconsideration. Claim of assessee to include the income from recruitment fee as part of export turnover for the purpose of computing the deduction u/s 10A - assessee submitted the recruitment/human resource services rendered by the company squarely falls within the ambit of human resources services mentioned in the notification dated 26.9.2000 - Held that:- As both the parties have agreed for accepting the alternate plea that the assessee must prove with supporting evidence as to which expenses are allowable under the Act and should produce evidence for claiming the expenses relating to the business of ‘body shopping’ by the assessee,no reason to adjudicate on the issue as to whether the recruitment fee would form part of export turnover. Therefore, the issue is left open to the assessee to agitate in appropriate cases - direct the AO to consider only the net income from ‘manpower supply’ as ‘income from other sources’

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• 2012 (7) TMI 581
  TDS - Liability of the payer to make deduction of tax – Held that:- Payment made by the assessee is purely reimbursement of expenses which in no way fall within the ambit of the provisions of TDS - Appellant was not liable for deduction of tax as per the provisions of section 194J of the Act, the assessee should not be treated as ‘assessee in default under section 201(1) of the Act - Assessing Officer directed to delete the demand Regarding interest u/s. 201(IA) – Held that:- original payment was made by the sister concern of the assessee to Diamond Trading Company on behalf of the assessee and subsequently the assessee has reimbursed the amount to the sister concern - once the TDS was deducted by the sister concern and deposited to the government account, then no subsequent TDS is required to be deducted on the same amount - Since the payment was not subjected to TDS provisions, then the liability of interest also does not arise - there is no loss of revenue because the original payment was already subjected to tax and the amount in question is only reimbursement – In favor of assessee

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• 2012 (7) TMI 580
  Condonation of delay - delay of 243 days - reasons stated for the delay in filing the cross objections are that, on professional advice from the present Counsel, these cross objections were filed – Held that:- Assessee has not demonstrated that it had a reasonable cause for filing the cross objections with a delay of 243 days - cross objections preferred by the assessee are dismissed Computation of Arms Length price - international transactions - adjustment to the international transactions – TPO had rejected the methodology adopted by the assessee on the ground that there is no comparability as the set of skills that an employee requires vary from function to function – Held that:- Rates charged by the assessee company are identical to the rates charged by the third parties in the same line of business for the same job and the assessee has proved the same with evidence - TPO has not brought out any material on record to prove that the per hour rate charged by the assessee company is lower than that charged by the third parties in the same line of business - Assessing Officer has not given any reason that TNM is the best method and the CUP method is not appropriate - adjustment has been made by the Assessing Officer himself. No reference was made to the TPO - dismiss the adjustment made by the TPO / Assessing Officer – Revenue’s appeal dismissed.

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• 2012 (7) TMI 579
  Denial of exemption u/s.80P(2)(a)(vi) - A.O. found that some of the members of the society had no actual link with the actual business affairs of the society and there by the collective disposal of labour specialized/skilled or manual for all the 61 members of the society for this year never happened – Held that:- AO has also not even made out any material on record either by examining the President/Members of the assessee-society regarding the way in which the assessee has executed the contracts - issue in favour of the assessee basing on the remand report given by the predecessor of the Assessing Officer, the Assessing Officer in order to deviate from that finding has to necessarily examine this aspect by examining the aspect as to how the assessee was carrying out the contract with reference to the contractees or the President of the Society or the Members of the Society - only on assumption and presumptions of his choice, the Assessing Officer has inclined to disallow the claim of the assessee u/s.80P(2)(a)(vi) of the I.T.Act - finding of the AO without bringing any material on record is not sustainable for legal scrutiny - rejection of the claim of the assessee u/s.80P(2)(a)(vi) of the I.T.Act is not correct Disallowance u/s.40A(3) of the I.T.Act – Held that:- Assessing Officer has not made out on record as to whom the payments were made, whether they are members of the assessee society who are executing the contract works or not - He has not even examined the aspect as to who are the persons executing the contracts on behalf of the assessee, whether its members or else - The genuine and bonafide transactions are not to be disallowed under this Section - addition made u/s.40A(3) is not sustainable for legal scrutiny Addition on account of provision for Roller - assessee’s books of account are audited by competent authority as authorized by the Government of Orissa and it was not the case of the AO that the auditors who audited the accounts of the assessee has raised any objection for the financial activities of the assessee – Held that:- Assessee has not claimed any deduction of this provision though shown as provision for Roller - When the assessee has not claimed any deduction, addition of such amount to the total income of the assessee is not tenable under law – In favor of assessee

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• 2012 (7) TMI 578
  Addition on account of suppressed sales – sale of plots – valuation – Held that:- There are certain fixed norms for determining the market value of a particular plot, no such steps were taken either by the Assessing Officer or by the Inspector - assessee has sold the plot at a rate of Rs.1441 per sq. yd. The circle rate at that point of time was Rs.1338 per sq. yd. therefore, no addition is to be made for the sale of plots - appeals as well as cross objection of the assessee deserve to be allowed partly, whereas appeals of the revenue are de void of any merit - Assessing Officer directed to estimate the sale value of the plots for Rajinder Nagar Industrial Area only and he will adopt a rate of Rs.2500 per sq. yd. instead of Rs.1,000 per sq. yd. disclosed by the assessee, while quantifying the sale proceeds - assessee are partly allowed

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• 2012 (7) TMI 577
  Sale of shares - long term capital gains or short term - Whether purchase of the shares can be considered only on the date of dematerialization – Held that:- In view of the CBDT Circular No. 704 dtd. 28.4.1995 in case of securities the "date of purchase" has to be taken from the broker's note/contract note and the period of holding is also to be reckoned from the "date of purchase" and not from the "date of dematerialization" - Since the holding period of the shares as per the broker's note and its subsequent sale after dematerialization is more than 12 months, therefore, the shares become long term capital asset and the assessee's claim of long term capital gain is correct - order of CIT set aside and direct the A.O. to accept the long term capital gain declared by the assessee - appeal filed by the assessee is allowed.

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• 2012 (7) TMI 576
  Revisionary power of Commissioner under section 263 of the Act - addition was made in respect of profits from the unit at Gurgaon by disallowing some expenses - assessee during the course of the original assessment proceedings before the Assessing Officer had submitted, details of commission paid, purchase details, etc. – Held that:- Commissioner did not dispute or deny that the assessee had filed invoices, commission vouchers and details - Assessing Officer did not conduct any enquiry or verification whether the aforesaid commission of Rs. 3.33 crores was attributable to the orders placed and exports made by the Chennai unit - Failure to conduct the said enquiries, makes the assessment order erroneous and prejudicial to the interests of the Revenue - Commissioner rightly exercised his revisionary power under section 263 of the Act - required conditions for exercise of the said power are satisfied - in favour of the Revenue

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• Customs

• 2012 (7) TMI 575
  Penalty - Red Sander logs, prohibited for export under the Foreign Trade Policy, were being smuggled out of India – Held that:- Appellant had hatched a fraud against the department by creating a web of intermediaries to smuggle prohibited red sander logs under garb of granite cobble stones - mis-declaration of description of goods as well as consequent mis-declaration of value etc - appellant is liable to penal action under Section 114 of the Customs Act, 1962 - goods valued at Rs. 23 lakhs in the Indian market have been absolutely confiscated. In cases of absolute confiscation, where the entire value of the goods is lost to the importer/exporter, a lower penalty would meet the ends of justice - penalty imposed on the appellant is reduced

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• Service Tax

• 2012 (7) TMI 633
  Demand of Service tax, interest and penalty – site survey, designing, foundation, fabrication of steel structures, transportation, assembly and erection of structures on the foundation, roofing, installation of lighting, false ceiling, painting etc. - whether their activity was 'Commercial or Industrial construction service' taxable w.e.f. 10/9/04 or the same was "erection, installation and commissioning" service (erection of structures) which became taxable only from May 2006 – Held that:- plea of the appellant which has a bearing on the quantum of duty demand is that during period w.e.f. 1/5/06 they were paying service tax as the gross amount received by them after availing abatement, not just on the job charges. This plea of the appellant has not been considered by the Commissioner - matter remanded to the Commissioner for denovo adjudication

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• 2012 (7) TMI 632
  Refund of unutilized CENVAT credit on input services - partial refund to the claimant - Held that:- Commissioner (Appeals) passed order directing the original authority to refund CENVAT credit on the input services in question subject to production of Chartered Accountant's certificate as per the Board's Circular dated 19.1.2010 - the order passed by the Commissioner (Appeals) can hardly be said to be remand order.

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• 2012 (7) TMI 631
  Waiver of pre-deposit – Service Tax demand along with interest and various penalties - appellant was receiving income by way of incentives from media in form of volume discount – Held that:- Appellant cannot function as a business auxiliary service agent of the media who can promote the business of the media - incentive is received by way of discount, whether prompt payment discount or volume discount - discount is the reduction in the price given to the buyer/receiver of the goods/services - Merely because the transaction is routed through the advertising agency, should the treatment be different - definition of “business auxiliary service” given in the Finance Act, 1994 does not warrant such a view - service tax is not leviable on the iscounts/incentives received by the advertising agency from the media - waiver of pre-deposit of the entire dues has been granted to the applicants during the pendency of the appeal

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• 2012 (7) TMI 630
  Regarding demand for service tax under the category of ‘Intellectual Property Right Services' - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India - neither the show-cause notice nor orders-in-original gives a clear proposal or findings as to what is the intellectual property rights involved in the transactions – Held that:- No categorization or findings by the learned Commissioners in any of the orders and, therefore - appellants have made out a strong case in their favour against the demand of service tax under the category of ‘Intellectual Property Right Services'. Regarding Broadcasting Services - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India – Held that:- Duty demand is for the period 01.04.2007 to 31.03.2009, they will not be, prima facie, liable to service tax during this period and would come under the service tax net only from 2010 onwards. Regarding Business Support Services - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India – Held that:- Neither of services rendered by the race course to the book makers will come under the category of ‘Business Support Services” - unconditional waiver of dues granted

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• 2012 (7) TMI 629
  Manpower Supply Service - Appellant had undertaken the job of feeding of husk into the boiler in the factory of manufacturer and received consideration for the service provided - whether the appellants were undertaking the job of feeding husk into boiler or whether he was supplying man power – Held that:- There was confusion in understanding the scope of the levy – penalty and demand set aside – appeal allowed

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• 2012 (7) TMI 602
  Clearing & forwarding agent's services - assessee's contention that review order passed by the Commissioner is time barred confirming the service tax demand including the amount already confirmed and paid by the appellant - Held that:- Review power under Section 84 should be exercised correctly and properly within the prescribed limitation period prescribed which starts from the date on which the order sought to be reviewed was passed - since the Assistant Commissioner's order has been passed on 15/12/04, in view of the provisions of Section 84(5), the review order should have issued within a period of 2 years i.e. by 14/12/06, while in this case the order was signed on the note sheet of the review file on 8/12/06,the fair copy of the order for issue/distatch was signed only on 29/12/06 - though the endorsement regarding dispatch signed by the Superintendent (review) and enclosed with the order bears the date "8/12/06" below the signatures of the Superintendent, forwarding of the fair copy on 8/12/06 would be impossible when the fair copy itself was signed on 29/12/06 - the impugned order is not sustainable and, hence, has to be set aside - in favour of assessee.

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• 2012 (7) TMI 601
  Refund claim - Export of services - exemption notification for 'Medical Transcription Services' withdrawn effective from 01.03.2006 - respondents filed refund claims on 20.07.2006 under Rule 5 read with Notification 5/2006 CE (NT) dated 14.03.2006 which was rejected by the original authority on the ground that claim relating to earlier period cannot be entertained - claim related to the period from March 2006 to September 2006 - Commissioner (Appeals), holding that the ground on which the original authority rejected the refund claim was beyond the scope of the show-cause notice issued for proposing rejection for the refund claim – Held that:- denial of refund merely on the ground that the refund relates to period prior to registration not be justified. Therefore, there is no justification to interfere with the findings of the Commissioner in so far as the same related to the eligibility of the refund claim. Decided in favor of assessee.

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• 2012 (7) TMI 600
  Penalty under Sections 76,77 and 78 - assessee discharged the Service Tax liability on pointed out by the Department – the interest for the period in question is still outstanding - Held that:- As the assessee has paid entire amount of Service Tax, he also agreed to pay the said interest as due – waiver of penalty u/s 78 as though there was a delay in making the payment of the Service Tax same was not by way of suppression, misdeclaration etc., as the entire value of taxable services for the relevant period has been correctly shown in the Balance Sheet – as there was a delay in payment of Service Tax and the short payment was made good on being pointed out by the Department the Appellant are liable to penalty under Section 76 only.

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• 2012 (7) TMI 574
  CENVAT Credit of Service Tax paid on the Banking and financial services receive from City Bank has been denied on the ground that the invoices were issued in the name of another unit of the same company and not in the name of the appellant – Held that:- If another opportunity is given, they will submit the relevant details and also their books of accounts and satisfy the adjudicating authority that the services have actually been received by the appellant and not by the 100% EOU and the bills received by them cover the services provided - order is set aside and the matter is remanded to original adjudicating authority

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• 2012 (7) TMI 573
  Whether the appellant is eligible for credit of Service Tax paid on courier service in respect of goods issued by them to the customers and for sending samples – Held that:- In the case of Continental Foundation Jt.Venture (2007 (8) TMI 11 (SC) ) held that appellant is eligible for credit of Service Tax – In favor of assessee

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• Central Excise

• 2012 (7) TMI 607
  CENVAT Credit in respect of inputs manufactured and cleared from a 100% EOU - Interpretation of the formula and the manner in which the calculations to be made - Commissioner stated that the appellant cannot take the credit of cess relating to Customs duty - Held that:- What is required to be done for the purpose of calculating the duty payable by a 100% EOU is to calculate the Customs duty payable (by calculating 25% of the normal rate as per the exemption notification), add CVD and thereafter treat the amount as Excise duty and pay cess on the same, which would be the cess payable on Central Excise duty worked out as per the formula - - the amount of Rs.1,159/- and Rs.580/- being education cess and SHE cess, are the cess paid on Customs duty worked out for the purpose of calculating the total customs duty payable to arrive at the Excise duty payable by the assessee as per the formula, thus the appellant has not taken the credit of Rs.1,159/- and Rs.580/- being the education cess on customs duty - decided in favour of assessee.

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• 2012 (7) TMI 606
  Demand of CENVAT credit and penalty u/r 15 r.w.s 11AC - the appellant had availed CENVAT credit in excess of the permissible credit - Held that:- While the show cause notice says that wrong formula has been applied under Rule 3(7) of CENVAT Credit Rules, 2004 resulted in excess availment of credit it does not say what is the correct formula - a simple worksheet has been given without indicating any formula and the original adjudicating authority has also not indicated what was the formula has to be adopted that there was an excess availment CENVAT credit but no information about the fact that whether it was because of calculation mistake or because of application of wrong formula - as that appellants paid CENVAT credit under protest as soon as it was pointed and subsequently after going through the relevant provisions, made the calculations and submitted the calculation sheet to the department would show that appellant have acted in a bonafide manner, as there was no intention to evade duty or avail wrong credit and what was happened appears to be a bonafide mistake - thus, imposition of penalty under Section 11AC is not warranted - decided in favour of assessee.

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• 2012 (7) TMI 605
  Penalty - Clandestine removal of goods - shortage of input in comparison to the balance shown in the Cenvat Credit Register - appellant had paid the duty on the said shortage – Held that:- Admission of shortage cannot be straightway taken as admission of clandestine removal -charge of clandestine removal is a serious charge which is required to be proved by reliable evidence - stock found short could not be considered as a case of clandestine removal unless supported by any other corroborative evidence

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• 2012 (7) TMI 604
  Rejection of Application for waiver of pre-deposit in accordance with Section 35 F - Held that:- To consider the issue of waiver of pre-deposit, the appellate Tribunal is required to apply its mind and record a definite finding as to whether in the given set of facts the assessee would suffer "undue hardship" if waiver of pre-deposit is not allowed - in the present case the Tribunal has not considered and has not recorded any finding with regard to the issue as to whether the petitioner would suffer undue hardship if he is made liable to deposit amount of Rs.100 Lakhs - mater deserves to be remitted back to the appellate Tribunal for deciding the application afresh - in favour of assessee.

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• 2012 (7) TMI 603
  Cenvat credit paid on furnace oil - demand for the period involved is from April 2003 to February 2005 - reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice for the period April 2003 to June 2004 is issued on 26.07.2005 and for the period July 2004 to February 2005, is issued on 28.7.2005 – Held that:- Show Cause Notice dt.26.7.05 is belatedly time barred - Revenue was aware of the issue and the Show Cause Notices were issued to the appellant on 28.04.2004 by invoking extended period of limitation - Revenue could not have invoked extended period of limitation for the demand the duty - demand for the period April 2003 to Jun3 2004 set aside Cenvat credit paid on furnace oil – demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - For the period July 2004 to February 2005 - Show Cause Notice was issued on 28.7.2005 – Held that:- SCN is within the period of limitation and on merit – against assessee Cenvat credit paid on furnace oil - demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice is issued on 12.08.2005 for the period December 2001 to March 2003 – Held that:- Show Cause Notice dt.12.08.2005 is belatedly time barred, inasmuch as the very same issue was in question in the earlier Show Cause Notice dt.28.04.2004 and hence the Revenue could not have invoked the extended the period of limitation in this Show Cause Notice Cenvat credit paid on furnace oil – demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice was issued on 13.01.2006 for the period March 2005 to 15..05.2005 – Held that:- Entire period is within limitation and no extended period is involved – Against assessee Imposition of penalty on the appellant for the period wherein confirmation of demand within limitation – Held that:- Appellant has been under the bonafide belief that he need not reverse CENVAT Credit used for the purpose of manufacturing of steam which is supplied to their sister concern, till the issue was decided against them by the Tribunal – Penalty set aside

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• 2012 (7) TMI 572
  Assessable value – inclusion of value of bought out items and drawing and design charges collected from their clients – Held that:- Entire drawing and designing charges involved in the 8 contracts in the department s appeal and 5 contracts involved in the assessee-appellant s appeal can be apportioned in the ratio of 50 : 50 towards general drawing and designing charges in respect of the plant of the customers - matter remanded to the original authority for the limited purpose of determining the duty liability on the value of drawing and designing charges in respect of the manufactured components after allowing 50% abatement towards general drawing and designing charges

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• 2012 (7) TMI 571
  Treating the duty payable only in respect of one furnace out of two - Annual capacity of production is required to be determined taking the installed capacity of two Furnaces for calculating the duty payable - appeal filed u/s 35 ( G) - Held that:- Whether two furnaces installed by the appellant were functioning or out of two only one was functioning at the relevant time was essentially a question of fact and did not involve any question of law much less substantial question of law - when the Commissioner of Central Excise and then, the Tribunal had concurrently recorded a finding of fact that the appellant was at the relevant time not only opted for payment of the duty on the basis of their two furnaces and further, both were found in operation then such finding being pure finding of fact - appeal is found to be devoid of any merit - against assessee.

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• 2012 (7) TMI 570
  Demand of interest on the amount of differential duty - enhancement of price as per the price variation clause of the relevant contract - differential duty was paid - demand of interest on the amount of differential duty – Held that:- Payment of differential duty was under sub-section 2(B) of Section 11A of the Central Excise Act and, therefore, interest was leviable thereon under Section 11AB of the Act – Against assessee

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• 2012 (7) TMI 569
  Refund of Cenvat credit in terms of Rule 5 of Cenvat Credit Rules, read with Notification 11/2002 – Held that:- Assessees used the inputs and have exported the impugned goods and the refund is only in respect of input credit attributable to the inputs utilized in the exported goods - duty paid inputs are used in the manufacture of finished products which are exported - assessees have complied with Rule 5 of the Cenvat Credit Rules, 2004. Therefore, they are in law entitled to refund of the unutilized Cenvat Credit in their account – In favor of assessee

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• Wealth tax

• 2012 (7) TMI 634
  Liability to Wealth tax on land as an “asset” within the meaning of section 2(ea) of the Wealth tax Act,1957 - assessee contested that the land along with the superstructure can be considered as “residential house” and therefore can be considered to be an exempted asset u/s. 5(vi) - that the assessee had purchased land measuring 3059.50 sq. mts. from five different parties and consolidated into one single final plot for commencing construction of residential house - Held that:- On reading the provisions of Sec. 5(1)(vi), it becomes evident that exemption from wealth tax u/s. 5(1)(vi) is available in respect of one house or part of a house belonging to an individual or and Hindu Undivided Family. Exemption from wealth tax is also available to a plot of land comprising an area of 500 sq. mts or less as it is not considered as an “asset” within the meaning of section 2(ea). In the present case, the assessee is not entitled to exemption u/s. 5(1)(vi) of the Wealth Tax Act,1957, for the reasons that the house is not habitable in view of the fact that plastering, flooring, drainage and electricity is not done, doors and windows are not installed, the ceilings are in damaged condition. Even the English translated copy of the sales deed which has been signed by both, the sellers and the buyer, states that to use the house for residence, entire fresh construction will have to be put up. Thus present condition of the house in which it exists cannot be considered to be a habitable house. Since in the present case, the area of land is 3059.50 mts. which is in excess of the prescribed limit of 500 sq. mts and the house is incomplete, the assessee will not be entitled to deduction on the incomplete construction and accordingly the assessee would be liable to wealth tax on value of plot exceeding 500 sq.mts along with the cost of incomplete construction. The A.O. is directed to recompute the net wealth of the assessee accordingly. Thus this ground of the assessee is partly allowed. Challenge the authority of the A.O. to value the taxable asset - Held that:- That the assessee has not filed valuation report along with the return nor was it made available to the WTO during the course of assessment. In such a situation the W.T.O. was left with no other option but to estimate the net wealth based on the material on record, thus the estimate made by the WTO is reasonable - against assessee.

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