Assessee has produced valuation report at the time of purchase as well as sale. In Remand, Assessing Officer has not pointed out any lacunae in the same. Moreover, the cost of land so bifurcated was being already reflected in the books of accounts and no depreciation was claimed on that account. In the case of C.I.T. vs. D.C. Ramachandra Rao 236 ITR 51, Hon’ble Madras High Court has held that it is possible to bifurcate the capital gain arising out of sell of land and building, even if, they are sold as one unit. Land is an independent and identifiable capital asset and it continues to remain so, even after construction of building thereon
Tribunal held that use of the expression ’may be taxed’ in the second sentence of Article 7 on business profits would permit both the state, in which the permanent establishment (PE) is situated (Source State or PE State), as well as the Residence State of the enterprise, the right to tax the business profits attributable to the PE.
Hon’ble Delhi High Court in the case of R.K. Jain (supra) has observed that in case of search material, the same is to be assessed by way of block assessment under Chapter XIV-B. Similar view is echoed by Hon’ble Bombay High Court in the case of Dr. M.K. E. Menon and by Hon’ble Gujarat High Court in N.R. Paper & Board Ltd. & others (supra). A similar view has been upheld by Hon’ble Supreme Court in the case of Manish Maheshwari (supra). In view of above, we are of the view that the impugned addition of Rs. 83 lacs cannot be made in the hands of the assessee on protective basis by taking recourse to sec. 143(3). Thus, the additional ground of the assessee is allowed.
Section 14A were introduced with prospective effect from the assessment year 2007-08 onwards. However, sub-section (2) of Section 14A remained an empty shell until the introduction of Rule 8D on 24.03.2008 which gave content to the expression “such method as may be prescribed” appearing in Section 14A(2) of the said Act.
Plain reading of above provisions makes it abundantly clear that for the purposes of section 10A, the eligible business (appellant’s branch office in this case) is to be considered as a separate entity and transfer of goods or services by eligible business to/from other business of the assessee are to be treated as if such transfer has been made to/from an unrelated third party. Therefore, supply of software by appellant’s branch office to appellant’s head office is to be considered as export to an unrelated third party and profits derived by appellant from such export are eligible for exemption u/s 10A of the Act.
Short fall in the market value of securities. – Rs.4,29,64,559.00 – we are of the view that the claim of the assessee could not be rejected merely on the ground that in the books of account the securities were being valued as per the notifications issued by the R.B.I. However, it is not clear from the orders of the lower authorities whether such securities were held by the assessee by way of stock in trade or by way of investment.
At the outset, it was pointed out by the learned AR that the tax effect in the present case is less than Rs. 3 lac. He has produced before us the demand notice according to which the total tax has been computed at Rs. 2,12,781/-. The learned DR could not controvert the quantum of tax effect.
According to well established law, learned CIT (A) is required to dispose of the appeal on merits instead of dismissing the same in limine. We also found that the assessee, due to change of her correspondence address, was not actually served with the notices issued by the learned CIT (A).
When the CBDT itself has clarified that the amended provisions of Section 194I relating to deduction of tax at source for the purpose of Section 40(a)(ia) would be applicable for AY 2007-08, the Assessing Officer was not justified in making the disallowance. We also find that similar issue came up before the learned CIT (A) in AY 2005-06 wherein he accepted the assessee’s contention.
As per sub-section (1) of Section 14A, no deduction is to be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income. Sub-section (2) of Section 14A provides the procedure for determination of such expenditure by the Assessing Officer. The Board has also prescribed Rule 8D for determining the expenditure incurred by the assessee for earning of exempt income. Thus, the disallowance can be made under sub-section (1) for the expenditure incurred for earning of exempt income.
