CIT had rightly made revision as assessee failed to explain reason for storage of physical cash found during survey
December 18, 2014[2014] 51 taxmann.com 201 (Allahabad)
IT : Where assessee had shown cash in books of account but same was never found and explanation given by it was also not found acceptable, revision proceeding could be initiated under section 263
Income tax - Whether even if there is no transfer of property rights to power agent, capital gains can be taxed in his hand - NO: HC
By TIOL News Service
CHENNAI, DEC 18, 2014: THE issue before the Bench is - Whether even if there is no transfer of property rights to power agent, capital gains can be taxed in his hand. NO is the answer.
Facts of the case
The assessee is an individual. He is a power agent of one Mr.M.Viswanathan, who is the actual owner and vendor of the property. The said Viswanathan entered into a registered power of attorney on in favour of the assessee without any consideration. After the execution of power of attorney, the property was registered in the name of the assessee's wife Dr.Meera Bai for a sum of Rs.25.00 lakhs by a sale deed. The AO took the view that it is the assessee who sold the plot to his wife Dr.Meera Bai for a sum of Rs.25.00 lakhs, whereas, the guideline value of the property was Rs.60.00 lakhs at that point of time by adopting the fair market value of the property at Rs.60.00 lakhs based on index cost at Rs.11.00 lakhs. The assessee contested the assessment of capital gains at his hands by pleading that he had acted only as a power of attorney holder of the actual owner Mr.Viswanathan, which plea was rejected by the AO and the total income was computed at Rs.61,25,290/- resulting in the demand of tax at Rs.16,94,560/-. On appeal, the CIT(A) rejected the plea of the assessee. On further appeal, the Tribunal, after considering the letter of the owner Mr.Viswanathan, who had stated in his letter that he had received a sum of Rs.25.00 lakhs from assessee, in the year 2006 itself, held that the recital contained in the registered power of attorney dated did not show that any consideration was paid to the actual owner and the assessee had acted merely as an agent. The letter of the owner that he had received only Rs.25.00 lakhs at the time of executing the power of attorney, which was a subsequent statement by the said owner did not inspire the confidence of the Tribunal to accept the Department's plea. The Tribunal laid emphasis on the registered document, namely, Power of Attorney, in letter and spirit holding that there was no consideration paid at the time of executing the power of attorney. The Tribunal was of the view that the assessee could not be treated as owner of the property sold, and therefore there was no question of computing capital gains in the hands of the assessee.
Having heard the parties, the High Court held that,
++ a careful reading of 2(47)(vi) reveals that any transaction by way of agreement or arrangement or in any manner whatsoever, which has the effect of transferring or enabling the enjoyment of any immovable property would get the character of transfer. It is seen that in the present case, there is no transfer to or enabling enjoyment of property in favour of the assessee in any manner and therefore, Section 2(47)(vi) does not get attracted. Clause 21 of the power of attorney, clearly reveals that no consideration was received from the power agent for appointing him as power of attorney. It also emphasised therein that the property right has not been handed over to the power agent. It is therefore, seems impossible to accept the plea of the Revenue that there was an element of transfer or enabling enjoyment in favour of the assessee. The letter of the land owner subsequently issued does not come to the aid of the Department. It is the duty of the power of attorney holder to deliver the amount received for the purpose of transfer of property. Therefore, no fault could be found on the part of the assessee. Assuming that he had delivered certain sum to the land owner, it is but the lawful duty of the power of attorney to deliver payment to the land owner. The sale to Dr.Meera Bai is also for the same value. Hence, nothing turns on the letter of the erstwhile owner, in favour of the Department;
++ section 2(47)(vi) make it clear that the transaction, which has the effect of transferring or enabling the enjoyment of immovable property alone would come within the ambit of transfer. The CBDT circular No.495 dated 22.9.1987 reads something more into the provision, which cannot be accepted. The circular also states that the legal ownership would continue with the transferor; but the property rights if it is transferred by way of power of attorney would come within the ambit of Section 2(47)(vi). Assuming the intention behind the circular is accepted, then there should be an element of transfer or enabling enjoyment of property right as stated in the circular by the power of attorney holder. However, no such recital in the power of attorney as extracted by the Tribunal has been referred to us. On the contrary, the terms of the power of attorney clearly show that property rights has not been transferred to the power of attorney holder and there is also no provision for enabling enjoyment. It is not the case of the Department that the power of attorney is sham. If they accept the power of attorney is valid, then the plea of capital gains at the hands of the assessee has no legs to stand.
Exp. incurred on interior decoration of office premises taken on lease is revenue exp.
December 18, 2014[2014] 52 taxmann.com 175 (Andhra Pradesh)
IT : Allowance of expenditure incurred for travelling of employees would be limited under rule 6D by taking each trip of an individual employee and not with reference to total trips made by him in previous year
IT : Expenditure incurred on wooden partitions, electric wiring, power connection, interior layout and carpeting, etc., in office premises taken on rent would be a revenue expenditure
IT : Amount allowed towards perquisites in respect of free supply of gas, electricity, water, etc., can be Rs. 500 per employee and not more than that
Reassessment quashed as it was made merely on basis of suspicion as per info provided by Enforcement Directorate
December 18, 2014[2014] 51 taxmann.com 349 (Delhi - Trib.)/[2014] 33 ITR(T) 526 (Delhi - Trib.)
IT: Where AO recorded that all cash collected against sales of tickets by agent of airlines were duly recorded, he could not reopen assessment merely on basis of information of Enforcement Directorate that source of cash was not substantiated
IT: In order to make a reasonable belief in terms of section 147, Assessing Officer should be in possession of some valid information which should have a live nexus with assessee's record of income
No sec. 69 addition on basis of DVO's report in absence of any evidence of unexplained investment
December 18, 2014[2014] 52 taxmann.com 70 (Patna-Trib)/[2014] 34 ITR(T) 717 (Patna-Trib)/[2014] 164 TTJ 786 (Patna-Trib)
IT : In absence of any evidence of unexplained investment, registered valuer's report, as submitted by assessee, cannot be rejected and addition cannot be made under section 69 on basis of DVO's report
IT : Where Commissioner (Appeals) himself has accepted that except ground floor of Block A, apartment was still under construction and property was incapable of being let out prior to its completion, he was not justified in estimating rent for all floors of Block-A on basis of rent received from Bank for ground floor and making addition as undisclosed income
IT : Where undisclosed professional receipts declared by assessee in cash flow statement covered huge cash deposit in bank, no separate addition was called for on account of such deposits
VAT - Whether mobile battery charger is integral part of cell phone and not an accessory and thus it is eligible of concessional rate of tax - NO: Supreme Court
By TIOL News Service
NEW DELHI, DEC 17, 2014: THE issues before the Bench are - Whether mobile battery charger is an integral part of cell phone and not an accessory and Whether if it is an accessory it would attract higher rate of tax. And the verdict goes against Nokia India.
Facts of the case
The assessee M/s. Nokia India Pvt. Ltd. is a dealer registered under the Punjab Value Added Tax Act, 2005 in the District Mohali and is doing business of sale of cell phones and their accessories. During the year 2005-06, the Company had made sales of 1,07,2679 pieces of cell phones with battery chargers and had paid tax at the rate of 4% on the sale value of battery chargers, the rate at which the tax on the sale of cell phone was paid. The value of the each of the battery charger if separately taken was to be Rs.120/- per piece as quoted by the assessee itself. It came to Rs.12,87,21,480/-. The scrutiny proceedings were initiated under Section 26 of the Act, 2005 read with Rules 36 and 43 of the Punjab Value Added Tax Rules, 2005 by issuing notice to the assessee. The Assessing Authority had held that the battery charger was an accessory chargeable to tax at the rate of 12.5%. The difference of 8.5% was calculated and it came to Rs.1,09,41,325/-. Interest under Section 32(1) was charged on the said amount amounting to Rs.21,25,491/-. Further penalty under Section 53 of the Act at the rate of 2% per month was imposed amounting to Rs.85,01,964/- The total demand for the assessment year 2005-06 was raised to Rs.2,15,68,780/-.
In its reply the assessee submitted that the product was being sold as mobile/cellular phone under a single solo pack unit and was covered under Entry No.60 of Schedule 'B' of the Act and that no separate amount for battery charger was being claimed from the customers, and that only amount charged was for handsets. It was also stated that for subsequent sale of the battery charger and the battery in the State of Punjab, Tax/VAT at the rate of 12.5% was being deposited. The assessee stated that the battery charger is an accessory to the main product that is mobile phone.
In appeal, the Tribunal held that the battery charger was not a part of the cell phone. The Tribunal further held that the penalty under Section 53 of the Act should not have been imposed and thus set aside the same viz. Rs.85,01,964/- for the year 2005-06 and Rs.1,00,96,750/- for the year 2006-07. On appeal, the Division Bench of the High Court held that the battery charger was a part of the composite package of cell phone.
Having heard the counsels, the SC Bench held that,
++ We have heard rival contentions made on behalf of the parties and perused the record;
++ the Assessing Authority, Appellate Authority and the Tribunal rightly held that the battery charger is not a part of the mobile/cell phone. If the charger was a part of cell phone, then cell phone could not have been operated without using the battery charger. But in reality, it is not required at the time of operation. Further, the battery in the cell phone can be charged directly from the other means also like laptop without employing the battery charger, implying thereby, that it is nothing but an accessory to the mobile phone. The Tribunal noticed that as per the information available on the website of Nokia, the Company has invariably put the mobile battery charger in the category of an accessory which means that in the common parlance also, the mobile battery charger is understood as an accessory. It has also been noticed by the Tribunal that a Nokia make battery charger is compatible to many models of Nokia mobile phones and also many models of Nokia make battery chargers which are compatible to a particular model of Nokia mobile phone, imparting various levels of effectiveness and convenience to the users;
++ the counsel for the assessee referred to General Rules for interpretation of the First Schedule of the Import Tariff under the Customs Tariff Act, 1975. The classification of the goods in the Schedule for the purpose of Rule 3(b) in the general rules for interpretation of import tariff reads as follows:
"3(b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material of component which gives them their essential character, insofar as this criterion is applicable."
It was contended that composite goods being used consisting of different materials and different components, and goods put up in sets for retail sale, cannot be classified by reference to clause (a). However, such submission cannot be accepted as it cannot be held that charger is an integral part of the mobile phone making it a composite good. Merely, making a composite package of cell phone charger will not make it composite good for the purpose of interpretation of the provisions. The word 'accessory' as defined in the Webster's Comprehensive Dictionary (International) Volume-I is defined as:
"a person or thing that aids subordinately; an adjunct; appurtenance; accompaniment (2) such items of apparel as complete an outfit, as gloves, a scarf, hat or handbag.(3) A person who, even if not present, is concerned, either before or after, in the perpetration of a felony below the crime of treason. Adj.(1) Aiding the principal design, or assisting subordinately the chief agent, as in the commission of a crime.(2) contributory; supplemental; additional: accessory nerves".
++ in view of the aforesaid facts, we find that the Assessing Authority, Appellate Authority and the Tribunal rightly held that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone. We further hold that the battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is a part of the cell phone.'
(See 2014-TIOL-100-SC-VAT)
Hon'ble Bench Of Agra ITAT has in the case of ITO v/s Rajeev Kumar Gupta has held that entire amount of deposit in the bank account can not be treated as unexplained when there are withdrawals also. The facts of the case are as under:- In the assessment order passed u/s.144 the income was at Rs.12,96,457/- as against the returned income of Rs.1,20,000/-. During the course of assessment proceeding, the AO found that there was a cash deposit of Rs.11,76,457/- in the bank account of the assessee maintained with ICICI Bank. The AO has mentioned in the assessment order that the assessee has shown a transportation code no.0712, but no income has been shown by him from running of trucks and any other vehicles in the return of income. In the assessment order, the AO had discussed that in the bank account of the assessee maintained with ICICI Bank, , he has deposited Rs.11,76,457/- in cash and there is a payment to ICICI Bank Ltd., HDFC, Mangalam, Citi Financial, Indiabull and Centurian etc. As per details discussed by the AO in the assessment order there are deposits as well as withdrawals in this bank account. However, in absence of any explanation filed by the assessee, he has considered the entire amount of deposit of Rs.11,76,457/- as unexplained cash deposit and made the addition for the entire amount of the cash deposits in the income of the assessee and thus, the total assessed income of the assessee has been determined at Rs.12,96,457/-. The assessee challenged the addition before the ld. CIT(A) wherein the assessee explained that the details could not be filed of source of cash deposited in the bank account on account of shifting of the residence. The assessee is carrying on the business of transportation and filed return of income declaring income of Rs.1,20,000/- and the source of the cash deposited in the bank account was out of receipts from transportation business. The cash deposit in the bank account was out of realization of transportation charges duly recorded in the cash book. The assessee, therefore, explained the cash deposited in the bank account from transport business. It was also pleaded that the AO has not brought any evidence on record to show any other source of income other than running of trucks/vehicles. Therefore, the cash deposit in the bank account is out of transport business and according to section 44AE, no books of account is required to be maintained for such business. The ld. CIT(A) considering the explanation of the assessee and going through the entries in the bank account, accepted the contention of the assessee that bank deposits are from transportation business. Therefore, substantial addition was deleted. However, its gross receipts were estimated and by applying higher profit rate, part addition was maintained. The Hon'ble Bench of ITAT confirmed the order of the ld. CIT(A) as on looking to the nature of entries of cash deposits and withdrawals found in the bank account of the assessee maintained with ICICI bank held that the entire amount of deposit made in the bank account cannot be said to be unexplained because after deposit of the cash amounts, there are withdrawals. Since the assessee is in the business of transportation, the explanation of the assessee could not be refused that such deposits have been made out of transport business income. ITO v/s Rajeev Kumar Gupta (ITAT Agra), ITA No. 273/Agra/2013,
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