TaxTMI Updates e-Newsletter
Jul 27,2012

Unexplained investment addition under section 69B - reliance on District Valuation Officer report as basis for addition - weight of stamp duty valuation and registered valuer's report - obligation to examine books and supporting vouchers before rejecting assessee's recorded consideration

Reopening not pressed - Grounds No.1 and No.2 challenging validity of reopening under section 147 were not pressed by the assessee and were dismissed as not pressed. - HELD THAT: - The plea challenging the validity of reopening under section 147, based on reference to the DVO under section 148, was not pursued by the assessee at the hearing. The Tribunal records that these grounds were accordingly not pressed and disposes of them on that basis. [Paras 2]

Grounds No.1 and No.2 dismissed as not pressed.

Unexplained investment addition under section 69B - reliance on District Valuation Officer report as basis for addition - weight of stamp duty valuation and registered valuer's report - obligation to examine books and supporting vouchers before rejecting assessee's recorded consideration - Whether addition based on difference between DVO valuation and agreement value could be sustained as unexplained investment under section 69B. - HELD THAT: - The assessee purchased the flat for the recorded consideration and produced the stamped document (stamp authority valuation) and a registered valuer's report relying on comparable sales in the same society; the AO relied solely on the DVO's report which used comparables from distant areas and did not consider the stamp duty valuation or give cogent reasons for rejecting the assessee's materials. The Tribunal found that in the absence of cogent evidence and where the AO has not pointed out defects in the assessee's recorded position, the department cannot sustain an addition merely on the DVO's estimate. Given the reliance by the AO exclusively on the DVO and the availability of nearer comparables and stamp valuation that support the assessee, the addition could not be upheld. [Paras 3, 4, 6]

Addition made under section 69B deleted; appeal allowed.

Final Conclusion: The Tribunal dismissed the unpressed grounds challenging reopening and, on the merits, deleted the addition under section 69B that was founded solely on the DVO's valuation, allowing the assessee's appeal for Assessment Year 2004-05.

Allowability of interest under section 36(1)(iii) - excessive interest under section 40A(2)(b) - nexus between borrowed funds and business purpose - interconnected/composite business and consistency of departmental view

Allowability of interest under section 36(1)(iii) - nexus between borrowed funds and business purpose - interconnected/composite business and consistency of departmental view - Deletion of addition of interest of Rs.34,34,050/- made by AO on account of interest expenses relating to old loans - HELD THAT: - The Tribunal found that the assessee continued to derive commission income through sub-letting and that loans taken in earlier years were for business purposes; some amounts remained outstanding with related concerns but the business activities were interconnected and constituted one unit. In view of the prior acceptance of similar interest treatment in the scrutiny assessment for AY 2007-08 and the composite nature of the business, the Tribunal held that the AO could not reopen the settled factual opinion in the subsequent year and confirmed the CIT(A)'s deletion of the addition insofar as it related to the old loans. [Paras 6]

Deletion of the addition on account of interest relating to old loans is confirmed.

Allowability of interest under section 36(1)(iii) - nexus between borrowed funds and business purpose - Treatment of interest on Rs.12 lacs borrowed during the year and used for purchase of raw materials where manufacturing had not commenced - HELD THAT: - The Tribunal distinguished the Rs.12 lacs borrowed during the year from the old loans, noting that these funds were utilized for purchase of raw materials for a manufacturing activity which had not yet commenced and therefore were not connected with the assessee's old business activities. Consequently, the Tribunal directed the AO to recompute the disallowance only in respect of the Rs.12 lacs, on the basis of interest actually paid or provided in the loan account, leaving the quantification to be determined accordingly. [Paras 6]

AO directed to re calculate disallowance only in respect of the Rs.12 lacs based on interest paid or provided in the loan account.

Excessive interest under section 40A(2)(b) - consistency of departmental view and precedential allowance - Challenge to the interest rate of 15%-18% paid to directors and relatives as excessive under section 40A(2)(b) - HELD THAT: - The Tribunal observed that the rate of interest between 15% and 18% had been allowed by the AO in the preceding assessment years and, having regard to the prevailing market rate, found the rate to be reasonable. In light of the prior allowance and market considerations, the Tribunal upheld the allowance of the rate and rejected the revenue's contention that the rate was excessive. [Paras 6]

Interest charged at 15%-18% to directors and relatives held reasonable and allowable; AO's disallowance on this ground not sustained.

Final Conclusion: The revenue's appeal is dismissed: the Tribunal confirmed deletion of the disallowance in respect of old loans, held the 15%-18% interest rate reasonable and allowable, and directed the AO to recompute any disallowance only in respect of the Rs.12 lacs borrowed during the year based on interest actually paid or provided.

Disallowance under section 14A - nexus requirement for disallowance - prospective application of Rule 8D - burden to establish incurrence of expenditure - reassessment cannot re agitate finalised issues

Disallowance under section 14A - nexus requirement for disallowance - burden to establish incurrence of expenditure - prospective application of Rule 8D - Validity of disallowance under section 14A read with Rule 8D in assessment year 1999-00 - HELD THAT: - The Tribunal held that the Assessing Officer did not establish that any expenditure had been incurred specifically in relation to earning exempt dividend income, nor did he discharge the burden of rebutting the assessee's contention that investments were made from its interest free funds. Given the mixed nature of funds and absence of findings linking borrowed funds or identifiable expenses to the exempt income, the statutory power to determine expenditure under section 14A(2) could not be validly exercised. Further, relying on Godrej Boyce, Rule 8D is to be applied prospectively from A.Y. 2008-09; it could not be invoked for A.Y. 1999-00. For these reasons the CIT(A)'s deletion of the section 14A disallowance was sustained. [Paras 12]

Deletion of the disallowance made under section 14A r.w. Rule 8D for A.Y. 1999-00 upheld.

Reassessment cannot re agitate finalised issues - reopening of assessment - Validity of reassessment re opening to make disallowance of software expenses already finally decided in earlier proceedings - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the issue of software expenditure had been finally decided in the assessee's favour in earlier appellate orders (including an ITAT order). The Assessing Officer's re examination of that same issue in reassessment proceedings amounted to re agitating a matter which had reached finality; such action could not be sustained where reassessment was initiated for other specified reasons. Consequently the addition in respect of software expenses made in reassessment was correctly deleted by the CIT(A). [Paras 15, 19]

Deletion of the disallowance of software expenses in reassessment proceedings upheld; Revenue's contention dismissed.

Final Conclusion: Revenue's appeal dismissed: the section 14A disallowance for A.Y. 1999-00 was deleted because the AO failed to establish incurrence or nexus and Rule 8D is prospective from A.Y. 2008-09; the reassessment stage disallowance of software expenses was quashed as it re opened an issue already finally decided.

Unexplained cash credit under section 68 - proof of identity, capacity and genuineness of creditors - deductibility of loss of goods certified by insurer and statutory authority - addition based on decline in gross profit - reliance on books of account not rejected

Unexplained cash credit under section 68 - proof of identity, capacity and genuineness of creditors - Deletion of addition of Rs.7,50,000 made by the Assessing Officer as unexplained cash credits. - HELD THAT: - The assessee produced confirmations and statements regarding loans from three creditors and explained the source of funds. The Tribunal found that the assessee discharged the onus of proving identity of the creditors, their capacity and genuineness of the transactions. The Revenue did not bring material to controvert these explanations. On these facts the Assessing Officer's rejection of creditworthiness was held to be based on doubt alone and the appellate authority's deletion of the addition was upheld. [Paras 7]

Addition as unexplained cash credit deleted; order of CIT(A) upheld and Revenue's ground dismissed.

Deductibility of loss of goods certified by insurer and statutory authority - Disallowance of claimed loss of goods (difference between claim and insurance settlement) insofar as disallowed by the Assessing Officer. - HELD THAT: - The goods destroyed by floods were supported by certification from the Assistant Commissioner, Food & Drug Department and by surveyor certification relied upon by the insurance company. The insurance company settled the claim without disputing quantity, quality or rates. The Tribunal agreed with the CIT(A) that the net loss, as adjusted by the insurance settlement under policy conditions, was an allowable deduction. The Assessing Officer's disallowance was therefore not sustained. [Paras 11]

Addition on account of loss of goods deleted; order of CIT(A) upheld and Revenue's ground dismissed.

Addition based on decline in gross profit - reliance on books of account not rejected - Addition computed on alleged fall in gross profit (disallowance of low G.P. amount). - HELD THAT: - Although gross profit percentage declined compared to the preceding year, the assessee explained business reasons for the decline (change in credit/discount policy, humanitarian sales post-floods, cessation of certain sales) and demonstrated an increase in net profit rate. The books of account were accepted and not rejected, and no contrary material was placed by the Revenue. The Tribunal held that addition cannot be made merely because gross profit fell in comparison to another year when explanations are plausible and books stand unchallenged; therefore CIT(A)'s deletion of the addition was maintained. [Paras 15]

Addition on account of low gross profit deleted; order of CIT(A) upheld and Revenue's ground dismissed.

Final Conclusion: All three grounds of the Revenue's appeal were dismissed; the orders of the CIT(A) deleting the additions/disallowance were upheld and the Revenue's appeal is dismissed.

Unexplained share application money and burden under section 68 - Genuineness of share subscriptions and proof of identity, creditworthiness and payment route - Compliance with Companies Act formalities as material to tax genuineness of allotment and forfeiture - Forfeiture of share application money and evidentiary consequences - Obligation of the assessing officer to investigate and effect of non-cooperation with summons

Unexplained share application money and burden under section 68 - Genuineness of share subscriptions and proof of identity, creditworthiness and payment route - Compliance with Companies Act formalities as material to tax genuineness of allotment and forfeiture - Forfeiture of share application money and evidentiary consequences - Obligation of the assessing officer to investigate and effect of non-cooperation with summons - Addition of share application money of Rs.30 lacs to the assessee's income under the head of unexplained credits was sustained. - HELD THAT: - The Tribunal upheld the assessing officer's view that the share application receipts could not be accepted as genuine under the test applicable to section 68 because the assessee failed to discharge the evidentiary onus in the factual matrix. The Tribunal relied on multiple objective factors: summons issued to the managing director under statutory power remained uncomplied with; audited accounts and bank extracts of the alleged share applicants were not produced for verification; the share application monies were subsequently forfeited without any record of steps required by company law for allotment or forfeiture; the subscribers were closely connected parties described as friends and relatives and two subscribing companies shared a common address; the assessee was a loss-making entity which nevertheless purportedly received premium; and the assessing officer had material suggesting the transactions were a contrived device to introduce unaccounted funds into the books. In that factual setting the Tribunal distinguished decisions favourable to the assessee where the AO had not investigated despite adequate particulars being furnished, and concluded that the AO's adverse finding was justified. Accordingly the addition was sustained.

Addition of share application money sustained and appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the assessing officer's addition of the share application money to the assessee's income for Assessment Year 2007-08, finding that the assessee had not satisfactorily proved the genuineness of the subscriptions or complied with company-law formalities, and that the AO's adverse conclusion was supported by material and non-cooperation.

Deeming provisions of section 2(22)(e) - avoidance of tax on transactions in securities under section 94(7) - application of General Clauses Act to computation of periods - search and seizure presumptions under section 132(4A) - seized documents as evidential offers versus proof of undisclosed receipt - restrictive construction of statutory deeming provisions

Avoidance of tax on transactions in securities under section 94(7) - application of General Clauses Act to computation of periods - Disallowance of short-term capital loss under section 94(7) in respect of mutual fund units - HELD THAT: - The Tribunal upheld the cumulative application of clauses (a), (b) and (c) of section 94(7): a purchase within three months prior to the record date together with a sale within nine months after the record date and exemption of dividend must all be satisfied to attract disallowance. The contention that the record date should be included by application of the General Clauses Act (so as to exclude purchases made on the record-date-minus-three-months boundary) was rejected: the statutory phrase 'within a period of three months prior to the record date' was held to include the purchases in question when read with the record date, and the sale fell within nine months. Reliance on coordinate decisions was noted in support of cumulative satisfaction of conditions. Result: disallowance upheld. [Paras 6]

Disallowance under section 94(7) upheld in respect of the transaction in dispute.

Deeming provisions of section 2(22)(e) - restrictive construction of statutory deeming provisions - Whether loans/advances should be treated as deemed dividend under section 2(22)(e) where shareholding was alleged to be reduced by a family trust - HELD THAT: - The Tribunal examined the Trust deed, board minutes and related documents produced by the assessee and applied the principle that the legal fiction created by a deeming provision must be applied narrowly and not extended beyond what the statute prescribes. Noting absence of any cogent material to disprove the trust documents and minutes (which pre-dated the search) and that Revenue had not shown the documents to be forged, the Bench held that the fiction under section 2(22)(e) should not be applied to broaden the concept of 'shareholder' or to tax deemed dividend on an unestablished basis. On the facts the Tribunal found the trust to be credible and deleted the addition treated as deemed dividend. [Paras 11]

Addition on account of deemed dividend under section 2(22)(e) deleted.

Seized documents as evidential offers versus proof of undisclosed receipt - search and seizure presumptions under section 132(4A) - Taxation year and assessability of amounts noted on seized papers relating to sale of Ampad land - HELD THAT: - Seized papers indicated receipt and refund of amounts in earlier years, but the assessee had disclosed the entire sum as short-term capital gain in A.Y.2009-10 and records showed repayment and documentary disclosure in that year. The CIT(A)'s finding that taxing the same amount in earlier assessment years would result in double taxation was accepted. The Tribunal observed that where the admitted factual matrix and seized material demonstrate repayment and subsequent disclosure in the year of sale, the addition in earlier years could not be sustained and should be excluded to avoid double taxation. [Paras 15, 17]

Revenue addition in earlier assessment years dismissed; amount excluded for the year under consideration.

Seized documents as evidential offers versus proof of undisclosed receipt - search and seizure presumptions under section 132(4A) - Whether seized loose papers recording multiple proposed prices for Gotri land constituted conclusive proof of undisclosed total sale consideration - HELD THAT: - The Tribunal analysed the seized loose papers, noting they recorded multiple alternative figures and contained an internal handwritten note indicating options were not acceptable and variation in price was expected. The Bench held that, absent direct evidence of receipt of 'on-money', such papers were more consistent with offers/negotiations than with a concluded concealed receipt; corroborative material (including broker's affidavit and admissions in statements) supported the assessee's position. Consequently the Tribunal accepted the assessee's documented sale consideration together with the disclosed cash component offered to tax, and rejected the Revenue's claim based on the highest figure appearing on the loose papers. [Paras 31]

Assessee's position accepted; seized papers treated as offers/negotiations not conclusive proof of higher undisclosed consideration.

Seized documents as evidential offers versus proof of undisclosed receipt - Whether gifts of shares were part of undisclosed sale consideration of Gotri land - HELD THAT: - Having fixed the sale consideration (documented price plus the disclosed cash component), the Tribunal found no cogent evidence linking the gifts of shares to the sale consideration. The CIT(A)'s view that the gifts were connected with the sale was revisited in light of the accepted sale consideration; because the gifts were not shown to be part of the concluded sale consideration, the additions made treating the gifts as undisclosed consideration were not sustained for the year under consideration. [Paras 34]

Additions treating gifts as part of sale consideration deleted; gifts not taxed as part of undisclosed consideration for the year under appeal.

Final Conclusion: The Tribunal partly allowed the assessee appeals and dismissed the Revenue appeals across the stated assessment years: section 94(7) disallowance was upheld; additions as deemed dividend under section 2(22)(e) were deleted on facts; seized papers relating to land transactions were treated as offers/negotiations (not conclusive of undisclosed receipts) and consequential additions and double taxation were rejected, with the stated results recorded for A.Y.2006-07, A.Y.2007-08, A.Y.2008-09 and A.Y.2009-10.

Allowability of process loss in jewellery manufacturing - allowability of process loss in respect of pre-casted (casted) jewellery - re-computation of deduction under Section 10A on enhanced profit - imposition and deletion of penalty under section 271(1)(c) for alleged concealment/sale outside books

Allowability of process loss in jewellery manufacturing - allowability of process loss in respect of pre-casted (casted) jewellery - Addition on account of excess process loss claimed by the assessee was justified to the extent disallowed by the Assessing Officer. - HELD THAT: - Tribunal examined the assessee's claim that process loss should be allowed on combined consumption of raw gold and pre-casted jewellery. The Tribunal accepted the principle that process loss ordinarily occurs when gold is melted and fashioned into jewellery and that pre-casted items which only undergo studding with stones do not normally attract such loss. Comparative year-by-year analysis showed the claimed loss in the subject year was substantially higher than in adjacent years despite similar proportions of casted items, supporting the AO's conclusion of excess wastage. The fact that books were audited did not preclude the AO from making a specific addition where material supported disallowance; auditors' certification was not treated as conclusive proof. For these reasons the AO's disallowance of excess process loss was held justified. [Paras 7]

Addition for excess process loss was justified and sustained.

Re-computation of deduction under Section 10A on enhanced profit - allocation of export profit for Section 10A benefit - Even after sustaining the addition, the assessee was entitled to recomputation of exemption under Section 10A on the basis of the enhanced profit, resulting in a minimal taxable income. - HELD THAT: - The Tribunal applied sub-section (4) of Section 10A which requires the exemption to be proportionate to export turnover vis-a -vis total turnover. The AO had included the AO-made addition as domestic turnover but had not recomputed the Section 10A exemption. Using the assessed total profit and the adjusted turnover (including the addition), the Tribunal computed the allowable Section 10A exemption and found the net taxable income to be a nominal amount. The Tribunal directed the AO to reassess the exemption and income in accordance with this principle. [Paras 10]

Assessee entitled to deduction under Section 10A after recomputation; assessable income reduced to the stated nominal amount.

Imposition and deletion of penalty under section 271(1)(c) for alleged concealment/sale outside books - Penalty under section 271(1)(c) was deleted in full. - HELD THAT: - Penalty was levied on the AO's original addition. Since the Tribunal sustained only a minimal part of the addition and found that the AO's disallowance had been made on assumptions without concrete material evidencing any sale outside books, the Tribunal held that imposition of penalty was not justified even on the reduced addition. Applying the principle that penalty requires culpability or concealment established by material, the Tribunal deleted the penalty entirely. [Paras 15]

Penalty under section 271(1)(c) deleted in full.

Final Conclusion: The quantum appeal is partly allowed: the AO's disallowance of excess process loss is sustained but the assessee is entitled to recomputation of exemption under Section 10A resulting in a nominal taxable income; the penalty under section 271(1)(c) is deleted in entirety.

Service of notice under Section 143(2) - Validity of assessment framed under Section 143(3) in absence of statutory notice - Estoppel from raising non-service where assessee participated in proceedings

Service of notice under Section 143(2) - Validity of assessment framed under Section 143(3) in absence of statutory notice - Estoppel from raising non-service where assessee participated in proceedings - Whether the assessment framed under Section 143(3) is void for want of service of notice under Section 143(2). - HELD THAT: - The Tribunal examined the record and found that the Assessing Officer had recorded issuance of statutory notice under Section 143(2) (dated 17.3.2005) and subsequent notices (including notices dated 2.5.2006 and questionnaires under Section 142(1)), and that the assessee's authorised representative and a Committee official attended hearings and filed written submissions on multiple dates. The CIT(A) called for, and received, a remand report from the AO confirming service of the notice; the AO's assessment order also reproduced the assessee's written submissions and attendance. On these facts the Tribunal held that the assessee's plea of non-receipt was implausible and that, having actively participated in the proceedings and furnished submissions, the assessee was estopped from contending absence of statutory notice. The Tribunal found the cases relied upon by the assessee distinguishable on facts and concluded there was no perversity in the Revenue authorities' findings regarding service of notice; accordingly the assessment under Section 143(3) was not vitiated for want of notice. [Paras 6, 7]

The finding of service of notice under Section 143(2) is confirmed and the assessment under Section 143(3) is valid; the assessee's ground is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Revenue's finding that notices were issued/served and that the assessment under Section 143(3) is not void for want of statutory notice; the assessee is estopped from raising non-service after participation in proceedings.

Calculation of limitation for block assessment under Explanation 2 to Section 158BE(1) - conclusion of search as recorded in the last panchnama - execution of authorisation for search - lawful representation of estate by legal heirs and natural guardian - validity of assessment founded on search in premises of deceased

Calculation of limitation for block assessment under Explanation 2 to Section 158BE(1) - conclusion of search as recorded in the last panchnama - execution of authorisation for search - Whether the period of limitation for completing block assessment is to be computed from the date of the last panchnama evidencing conclusion of search under Explanation 2 to Section 158BE(1) and whether the assessment was within time. - HELD THAT: - The Court construed Section 158BE read with Explanation 2 and followed prior High Court decisions holding that, where multiple search authorisations exist, limitation runs from the conclusion of the search as recorded in the last panchnama and not from the date of issue of authorisation. Explanation 2 deeming the authorisation to have been executed on conclusion of search requires the last panchnama evidencing conclusion of search in respect of the relevant authorisation to be taken as the starting point. Applying the admitted factual chronology, the last panchnama was dated 03.11.1997; the two-year limitation under sub-clause (1)(b) therefore commenced from the end of November 1997 and expired on 30.11.1999. The impugned assessment dated 26.11.1999 was held to be within that limitation period. The Court expressly approved the reasoning of the Karnataka and Delhi High Courts and rejected the Revenue's contention that the prohibitory order date should be used to elongate the limitation period. [Paras 15, 16, 19, 20, 21]

Limitation is to be computed from the conclusion of the search as recorded in the last panchnama; the block assessment was within time and the Revenue's appeal on this question is allowed.

Lawful representation of estate by legal heirs and natural guardian - validity of assessment founded on search in premises of deceased - Whether the search and consequent assessment were invalid merely because the panchnama referred to the divorced wife and not specifically to the legal heirs or estate. - HELD THAT: - The Tribunal's finding - accepted by this Court - was that the contested items related to the deceased's estate and that the minor son, represented by his mother as natural guardian, was a legal representative of the estate. The mere non-mention of the legal heir in the panchnama did not render the search or assessment illegal where the search targeted the undisclosed income/assets of the deceased and the legal heirs (including the minor) represented the estate. On these facts, the assessment based on searches of the deceased's premises and related authorisations was proper. [Paras 5, 23]

The search and assessment are valid; the assessee's appeal on this ground is dismissed.

Final Conclusion: The Revenue's tax case on limitation is allowed: limitation is computed from the last panchnama (03.11.1997) and the assessment is within time; the assessee's challenge to the validity of the search is dismissed as the estate was properly represented and the assessment founded on those searches stands confirmed.

Validity of reassessment under section 147 first proviso - failure to disclose fully and truly all material facts - Characterisation of deduction under section 10B/10A - exclusion of undertaking profits prior to computation of total income and non availability of set off of unabsorbed losses and depreciation - Allowability of higher depreciation rate for commercially registered motor vehicles - Change of opinion doctrine as a bar to reopening assessments - Computation of export turnover - inclusion of foreign exchange realization

Validity of reassessment under section 147 first proviso - failure to disclose fully and truly all material facts - Change of opinion doctrine as a bar to reopening assessments - Reopening of assessment under section 147 was invalid as AO had no recorded satisfaction of failure to disclose fully and truly all material facts; reopening amounted to change of opinion and was bad in law. - HELD THAT: - The assessment for A.Y. 2002-03 had been completed under section 143(3). The Assessing Officer recorded reasons invoking section 147 but did not find any failure by the assessee to disclose fully and truly all material facts. The Tribunal applied the first proviso to section 147 and earlier precedents, and held that absent a finding of non disclosure the AO could not reopen after four years. The order treated AO's action as a mere change of opinion on matters already examined in the original assessment, which is impermissible. Consequently the reassessment was quashed. [Paras 12]

Reopening under section 147 quashed; Ground No.1 of assessee allowed.

Characterisation of deduction under section 10B/10A - exclusion of undertaking profits prior to computation of total income and non availability of set off of unabsorbed losses and depreciation - Deduction under section 10B must be given by excluding profits of the eligible undertaking before computing total income; unabsorbed business losses and depreciation of other undertakings cannot be set off against such deduction. - HELD THAT: - Relying on the reasoning in decisions on section 10A/10B, the Tribunal accepted that the relief in Chapter III operates as an exclusion of the undertaking's profits at an early stage and is not subject to set off by brought forward losses or unabsorbed depreciation of other businesses. The CIT(A)'s allowance of deduction in accordance with that principle was upheld as the correct legal position; AO's contrary computation constituted a view contrary to settled law. [Paras 7, 8, 9]

Assessee's claim under section 10B sustained on merits; Revenue's challenge dismissed (subject to turnover computation noted separately).

Computation of export turnover - inclusion of foreign exchange realization - Foreign exchange realization forms part of export proceeds and must be included in export turnover/total turnover for computing section 10B entitlement. - HELD THAT: - The CIT(A) had excluded an exchange rate difference from export turnover when recomputing the section 10B deduction. The Tribunal examined the computation and the annexure to the section 10B report and held that foreign exchange realization is part of export proceeds and should be included in both export turnover and total turnover for the purposes of section 10B calculation. The Tribunal observed this point but treated it as academic because reopening was set aside. [Paras 13]

CIT(A)'s exclusion of foreign exchange realization was incorrect in law, but the point became academic as assessment reopening was quashed.

Allowability of higher depreciation rate for commercially registered motor vehicles - Depreciation at the higher rate applicable to 'commercial vehicles' is allowable where vehicles are registered as commercial and satisfy the statutory entries, even if not run on hire. - HELD THAT: - The Tribunal considered precedents including Daleep S. Chandnani and LM Glasfiber which interpret the relevant proviso and entries to Appendix I to allow higher depreciation for commercially registered light motor vehicles used in the business. The AO had allowed the higher rate in the original assessment; the Tribunal found no merit in reopening this issue as the original allowance conformed to statutory entries and judicial decisions. [Paras 11]

No merit in AO's challenge to the assessee's claim of higher depreciation; reopening on this ground unjustified.

Addition for depreciation claimed in profit and loss account - correctness of CIT(A) deletion - Addition made by AO on account of alleged excess claim of depreciation in the P&L account was not sustained; CIT(A)'s deletion of the adjustment was correct. - HELD THAT: - AO had sought to add back depreciation on account of computation anomalies, but the CIT(A) examined the computation and the supporting statements and directed deletion. The Tribunal noted that AO subsequently persisted with the adjustment in reassessment but the CIT(A) directed its deletion on appeal; the Tribunal found no merit in AO's contention that excess deduction had been claimed and upheld the appellate deletion. [Paras 10]

Adjustment of depreciation in P&L deleted; AO's addition not sustained.

Final Conclusion: The reassessment under section 147 was quashed for lack of material showing failure to disclose fully and truly all material facts; on merits the assessee's positions on section 10B treatment, allowability of higher depreciation on commercially registered vehicles, and deletion of the depreciation addition were upheld, and the Revenue's cross appeal was dismissed.

Commission payable to directors as deduction under section 36(1)(ii) - commercial expediency and genuineness of managerial remuneration - reopening under section 147 after four years and proviso requiring failure to disclose fully and truly all material facts - fresh information versus contemporaneous assessment record

Commission payable to directors as deduction under section 36(1)(ii) - commercial expediency and genuineness of managerial remuneration - Deletion of addition disallowing commission paid to directors was upheld and Revenue's appeal on this ground dismissed. - HELD THAT: - The Tribunal noted that the question of allowability of commission to directors had been judicially considered in the assessee's own earlier proceedings for subsequent assessment years and those decisions were in favour of the assessee. The material facts for the year under appeal were identical: directors were full time, professionally qualified, commission was paid as remuneration linked to performance and commercial expediency, and the directors had disclosed the commission as taxable in their returns. There was no change of circumstance to warrant interference with the order of the first appellate authority which had deleted the disallowance. Following the earlier ITAT orders in the assessee's own case for the other years, the Tribunal found no reason to disturb the deletion.

Order of the CIT(A) deleting the disallowance of commission paid to directors is upheld and Revenue's appeal is dismissed.

Reopening under section 147 after four years and proviso requiring failure to disclose fully and truly all material facts - fresh information versus contemporaneous assessment record - Reopening of assessment issued after more than four years was held invalid because the reasons did not allege failure to disclose fully and truly all material facts; CIT(A)'s cancellation of reopening was upheld and Revenue's appeal dismissed. - HELD THAT: - The assessment had been completed under section 143(3) and the notice under section 148 was issued after the statutory four year period. The proviso to section 147 permits reopening after four years only where income has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The reasons recorded by the Assessing Officer merely referred to payment of commission (facts already on record) and earlier additions in another year; they did not allege any failure by the assessee to disclose material facts. The Tribunal distinguished the Phool Chand Bajrang Lal decision relied upon by Revenue as involving subsequent definite and specific information and observed that section 147 has since been re cast; it followed the ratio of the Jurisdictional High Court in Haryana Acrylic Manufacturing Co. in holding the reopening invalid.

Notice under section 148/reopening under section 147 quashed; order of the CIT(A) annulling the reassessment is affirmed and Revenue's appeal is dismissed.

Final Conclusion: Both Revenue appeals are dismissed: the deletion of the addition for commission paid to directors is sustained on the merits (following earlier ITAT decisions in the assessee's own case), and the reassessment initiated after more than four years is quashed because the proviso to section 147 was not satisfied; the assessee's cross objection is infructuous.

Validity of initiation of proceedings under section 153BC arising from seized materials - deletion of addition as unexplained investment where construction not attributable to assessee

Validity of initiation of proceedings under section 153BC arising from seized materials - Proceedings under section 153BC were validly initiated based on seized material indicating connection with the assessee. - HELD THAT: - The Tribunal examined whether the assessment proceedings could be validly initiated consequent to a search and seizure. The seized materials included bills bearing the assessee's name relating to building works, the assessee's pension account and other purchases. The Court accepted the Commissioner (Appeals)'s conclusion that sufficiency of seized material is not the test; what matters is whether the Assessing Officer recorded satisfaction and initiated proceedings accordingly. Having reviewed the record and the Commissioner (Appeals)'s remand clarifications, the Tribunal found that the Assessing Officer properly initiated proceedings under section 153BC and therefore rejected the assessee's objection to initiation of proceedings. [Paras 10]

The objection to initiation of proceedings under section 153BC is rejected and the proceedings are held valid.

Deletion of addition as unexplained investment where construction not attributable to assessee - Addition of unexplained investment towards cost of construction was deleted because construction was shown to have been effected by another person and no evidence established that the assessee constructed the building or had sources for the construction cost. - HELD THAT: - On merits the Tribunal upheld the Commissioner (Appeals)'s detailed findings that primary materials (builder's bills, sworn statement of the builder, evidence of resources of the actual constructor and related documents including will and settlement deeds) support the conclusion that Mrs. A.K. Singh constructed the hotel, that the property was later bequeathed/settled in favour of the donee, and that there was no material on record to show that the assessee had undertaken or financed the construction. The Tribunal noted the Assessing Officer did not displace or disprove the bills or the builder's admission and that the Commissioner (Appeals) had considered corroborative evidence (municipal certificate, sworn statements, documents showing resources and transfer instruments). In the absence of evidence attributing the construction expenditure to the assessee or showing his sources for the expenditure, an addition under the unexplained investment head could not be sustained against him. [Paras 11]

The addition towards unexplained investment is deleted; no interference with the Commissioner (Appeals)'s order.

Final Conclusion: The Revenue's appeal and the assessee's cross-objection are dismissed; the Tribunal holds the assessment proceedings validly initiated and upholds deletion of the addition made as unexplained investment.

Admission of additional evidence under Rule 46A - Unexplained cash credits under section 68 - Genuineness of opening balances as defence to additions - Third party confirmations and bank/cheque evidence as proof of transactions - Examination of earlier year accounts to determine regularity of dealings

Admission of additional evidence under Rule 46A - Whether the appellant could be permitted to file and rely on additional evidence under Rule 46A - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that the assessee was prevented by sufficient cause from producing evidences during assessment proceedings and that the additional evidences were therefore properly admitted and forwarded to the Assessing Officer for examination. The court noted the Assessing Officer's objections in the remand report but held that the Commissioner (Appeals) had exercised his discretion after consideration of the facts and that there was no infirmity in admitting the evidence. [Paras 4, 6]

Admission of the additional evidences under Rule 46A was upheld.

Unexplained cash credits under section 68 - Genuineness of opening balances as defence to additions - Examination of earlier year accounts to determine regularity of dealings - Whether additions as unexplained cash credits under section 68 could be sustained in respect of amounts appearing as opening balances on 1.4.2006 - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that additions could not be sustained under section 68 in respect of amounts that merely represented opening balances as on 1.4.2006. The appellate authority examined earlier years' accounts and found regular business dealings and that the questioned amounts had origins in prior years; on that basis the additions in respect of specified parties totaling the opening balances were deleted. The Tribunal also found the case law relied upon by the assessee supportive of the principle that when there are no fresh cash credits in the year and balances merely pertain to opening balances, additions under section 68 are not warranted. [Paras 4, 6]

Additions under section 68 in respect of amounts appearing as opening balances on 1.4.2006 were deleted.

Third party confirmations and bank/cheque evidence as proof of transactions - Unexplained cash credits under section 68 - Whether additions made as unexplained cash credits could be sustained where confirmations and bank evidence (cheque receipts) showing payments were produced - HELD THAT: - The Commissioner (Appeals) found, and the Tribunal concurred, that for a set of creditors the assessee had furnished confirmations and bank records showing receipt of amounts by cheque. The appellate authority assessed these evidences and treated the accounts as confirmed and the transactions as regular business dealings. In the case of Super Castings the pattern of payments by cheque and corresponding sales in consecutive years led the Commissioner (Appeals) to treat the outstanding credit balance as genuine. The Tribunal found no infirmity in these findings and upheld deletion of the additions where such evidentiary proof existed. [Paras 4, 6]

Additions were deleted insofar as confirmations and bank/cheque evidence established the genuineness of the transactions and outstanding balances.

Final Conclusion: The appeal filed by the Revenue is dismissed; the deletions made by the Commissioner (Appeals) in respect of the admitted additional evidence, the amounts appearing as opening balances, and those supported by confirmations and bank/cheque records are upheld.

Deduction under section 80IA for cold storage activity - Characterisation of income on redemption of mutual fund units as capital gains - Validity of issuance of a second notice under section 148 after re-opening - Re-opening after intimation under section 143(1) and change of opinion - Condonation of delay in filing cross objection (limitation)

Deduction under section 80IA for cold storage activity - Re-opening after intimation under section 143(1) and change of opinion - Allowability of deduction under section 80IA in respect of receipts from activities related to cold storage where agreements concern packing and pasteurisation handled by a third party; and correctness of similar disallowance for the subsequent year. - HELD THAT: - The Tribunal examined the written agreement and supplementary agreement between the assessee and Kolhapur Sahakari Dudh Udpadak Sungh Ltd. and found that the contractual obligations placed on the assessee were limited to providing cold storage and related storing facilities, while Dudh Sungh alone provided, installed and operated the packing and pasteurisation equipment and engaged labour for those operations. The formula for levying charges, based on quantity packed, was held to be a mere methodology of measurement and did not establish that the assessee rendered packing or pasteurisation services or derived income from those activities. On identical facts for the assessment year 2002-03 the Tribunal applied the same reasoning and upheld the Commissioner (Appeals) in deleting the disallowance. The Tribunal therefore dismissed Revenue's ground disallowing the section 80IA deduction for both years. [Paras 12, 13, 14, 19, 20]

Findings of the Commissioner (Appeals) upheld; deduction under section 80IA allowed in respect of the assessee's cold storage activity for AY 2001-02 and AY 2002-03 and Revenue's appeals on this point dismissed.

Validity of issuance of a second notice under section 148 after re-opening - Whether a second notice under section 148 can be issued after an assessment has already been re-opened. - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that once an assessment has been re-opened, a second notice of the kind challenged cannot be issued. Applying that principle to the facts, the Tribunal found the Assessing Officer's second notice impermissible and dismissed Revenue's ground which relied on that notice. [Paras 15]

Second notice held not valid in the circumstances; Revenue's ground dismissed.

Characterisation of income on redemption of mutual fund units as capital gains - Whether income on redemption of mutual fund units should be taxed under the head 'Income from Other Sources' or as capital gains. - HELD THAT: - The Commissioner (Appeals) concluded, and the Tribunal agreed, that the receipts arose from transfer of a capital asset and therefore attracted tax as capital gains rather than being taxable as interest under 'Income from Other Sources'. The Tribunal also noted that the issue arose in the context of a notice which it had held to be invalid (see the finding on the second notice) and therefore affirmed the Commissioner (Appeals) direction to treat the receipts as capital gains. [Paras 16, 17]

Income on redemption of mutual fund units to be treated as capital gains; Revenue's ground dismissed.

Condonation of delay in filing cross objection (limitation) - Whether the assessee's cross objection filed with delay of 529 days should be condoned. - HELD THAT: - The assessee's explanation for delay-that belated consultation with counsel led to late filing-was found unconvincing because the same counsel had represented the assessee before the Commissioner (Appeals). The Tribunal held that the assessee failed to satisfactorily explain the delay and therefore the cross objection was barred by limitation and could not be condoned. [Paras 2, 3, 4]

Cross objection no.167/Mum./2009 dismissed as barred by limitation.

Re-opening after intimation under section 143(1) and change of opinion - Whether the assessee's plea that the re-opening constituted merely a change of opinion in the case where return had been processed under section 143(1) could be sustained. - HELD THAT: - Relying on the Supreme Court decision in ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd., the Tribunal followed the principle that an Assessing Officer has jurisdiction to issue notice under section 148 even after processing under section 143(1) where income escaping assessment is indicated, and that the plea of mere change of opinion is not available to defeat such reopening. Applying that authority, the Tribunal rejected the assessee's cross objection which relied on change of opinion. [Paras 22, 23]

Assessee's cross objection no.185/Mum./2011 dismissed; plea of change of opinion not accepted in view of Rajesh Jhaveri.

Final Conclusion: The Tribunal dismissed the assessee's delayed cross objection for AY 2001 02; allowed the section 80IA deduction for AY 2001 02 and AY 2002 03 on the finding that the assessee only provided cold storage while packing and pasteurisation were performed by the Dudh Sungh; held the second notice issued after re opening to be invalid; confirmed that redemption of mutual fund units was taxable as capital gains; and dismissed the assessee's cross objection challenging re opening after processing under section 143(1) following the Supreme Court precedent.

Allowability of bad debts as commercial consideration / reversal of excess income - disallowance under section 40(a)(ia) for short deduction of tax at source - classification of payments between section 194C and section 194J for TDS purposes - reopening of assessment and change of opinion - notice under section 143(2) and deeming under section 292BB - application of Rule 8D for quantification of disallowance under section 14A - remand for fresh adjudication of taxation/deduction issues involving foreign payments

Allowability of bad debts as commercial consideration / reversal of excess income - TRF Ltd principle on reversal of booked income - Whether amounts written off as bad debts were allowable as bona fide commercial write-offs - HELD THAT: - The Tribunal found on the material on record that advances and bills were maintained job wise and that the amounts written off represented negotiated short payments accepted to preserve customer relations rather than debts rendered irrecoverable. The write offs were small relative to the billed amounts and constituted a commercial reversal of income booked in excess; the Tribunal applied the principle in TRF Ltd. and held the write offs to be bonafide and not arbitrary, irrational or mala fide. The Revenue's contrary conclusion, based on the existence of advances from the same clients, was rejected as insufficient to show that the amounts had become irrecoverable. [Paras 15, 20]

Bad debts/write offs allowed as bona fide commercial adjustments; Revenue's additions on this score deleted.

Disallowance under section 40(a)(ia) for short deduction of tax at source - classification of payments between section 194C and section 194J for TDS purposes - Whether disallowance under section 40(a)(ia) can be made where tax was in fact deducted albeit under a different provision (deduction under 194C while AO alleged liability under 194J) - HELD THAT: - The Tribunal followed earlier Tribunal decisions and held that where tax has been deducted at source (though under a different head alleged by the AO), a disallowance under section 40(a)(ia) cannot be sustained merely on the basis that tax should have been deducted under another provision. Applying those precedents, the Tribunal deleted the proportionate disallowance made by the Assessing Officer. [Paras 16, 21, 24]

Disallowance under section 40(a)(ia) deleted where tax was deducted (although under a different section); related Revenue grounds dismissed.

Remand for fresh adjudication of taxation/deduction issues involving foreign payments - application of treaty and section 195 issues - Whether payments to foreign agents for market research/services outside India required TDS and were taxable in India; whether related disallowance under section 40(a)(ia) should be sustained - HELD THAT: - The Tribunal did not decide the taxability or treaty applicability on merits but set aside/ restored these issues to the file of the Assessing Officer for fresh adjudication in light of the Special Bench decision in Merilyn Shipping & Transport and to apply the relevant law on FTS/section 195. The remand was ordered for de novo consideration of the nature of payments and the liability to deduct tax, and for verification of particulars where necessary. [Paras 17, 35, 43]

Issues restored/remanded to the Assessing Officer for fresh adjudication (statutory and treaty aspects to be decided afresh).

Reopening of assessment and change of opinion - notice under section 143(2) and deeming under section 292BB - Validity of reassessment proceedings: whether reopening was a mere change of opinion and whether the notice said to be issued under section 143(2) was duly served or saved by section 292BB - HELD THAT: - The Tribunal upheld the reassessment where the Assessing Officer had not earlier examined the relevant issue in the original section 143(3) assessment, finding that the question of change of opinion did not arise. On service of notice, the Tribunal agreed with the Commissioner (Appeals) that the letter served (dated 16-11-2010) constituted a notice under section 143(2) in substance and that the assessee had appeared and cooperated in proceedings; accordingly section 292BB applied to preclude objection to service or timing of the notice. [Paras 32, 33]

Reopening sustained; the notice was treated as properly served and section 292BB precluded objections not raised during proceedings.

Application of Rule 8D for quantification of disallowance under section 14A - Method of quantifying disallowance under section 14A - HELD THAT: - The Tribunal accepted the assessee's contention that Rule 8D should be applied for quantifying the disallowance under section 14A and directed the Assessing Officer to quantify the disallowance by applying Rule 8D. The matter was remitted to the Assessing Officer for computation in accordance with law. [Paras 39]

Disallowance under section 14A to be quantified by the Assessing Officer in accordance with Rule 8D (remitted).

Final Conclusion: The Tribunal partly allowed the assessee's appeals: bona fide commercial write offs were held allowable; disallowances under section 40(a)(ia) for alleged short TDS were deleted where tax was deducted under a different provision; several issues relating to foreign payments and treaty/section 195 applicability and quantification under Rule 8D/section 14A were remitted to the Assessing Officer for fresh adjudication; reassessment was upheld and notice was held to be effectively served with section 292BB applying.

Commercial or industrial construction service - erection, installation or commissioning service - work contract service - extended period of limitation under proviso to Section 73 (1) - wilful misdeclaration or suppression of facts - abatement under Notification 15/04-ST / 1/06-ST - taxable value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - compounded rate under Works Contract (Composition Scheme for payment of service tax) Rules, 2007

Commercial or industrial construction service - erection, installation or commissioning service - Classification of appellant's activity for service-tax purposes - HELD THAT: - The Tribunal examined the nature of the appellant's supply and installation of duty-paid structural steel canopies for petrol pumps. It held that the phrase "erection, installation or commissioning of structures, whether pre-fabricated or otherwise" in the definition of erection/installation service is intended to cover activities such as erecting supporting structures, ladders, platforms, chimneys etc. within a plant, and does not extend to construction of sheds/canopies forming commercial civil structures for petrol pumps. The appellant's activity is construction of a civil structure for commercial use and thus falls within the definition of "commercial or industrial construction service" which became taxable w.e.f. 10/9/04. [Paras 10]

Appellant's activity is classification as "commercial or industrial construction service" taxable w.e.f. 10/9/04.

Work contract service - taxable value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - compounded rate under Works Contract (Composition Scheme for payment of service tax) Rules, 2007 - Effect of introduction of work contract service from 1/6/07 on taxability - HELD THAT: - The Tribunal observed that with effect from 1/6/07, work contract service was introduced. If the appellant's contracts involve transfer of property in goods on which VAT/Sales Tax is leviable (thereby falling within the Explanation to the definition of "work contract"), the service tax liability for such contracts would be governed by the work contract regime. That regime requires determination of taxable value under Rule 2A or, at the appellant's option and subject to conditions, payment under the composition scheme at the compounded rate as provided in the Works Contract Rules. [Paras 11, 13]

If the appellant's contracts involve transfer of property in goods attracting VAT/Sales Tax, those contracts are taxable as "work contract service" from w.e.f. 1/6/07 with valuation and payment governed by Rule 2A or the composition scheme as applicable.

Extended period of limitation under proviso to Section 73 (1) - wilful misdeclaration or suppression of facts - Invocation of extended limitation period and consequence for penalty - HELD THAT: - The show cause notice invoked the extended limitation period under the proviso to Section 73(1) for the period 10/9/04 to 31/3/08. The Tribunal noted authorities require a positive finding of something beyond mere inaction-such as wilful misdeclaration or suppression-for invocation of the proviso. The Commissioner's order did not apply the criteria laid down by the Apex Court to demonstrate wilful suppression or misdeclaration. Because the conditions for invoking the extended period are identical to those required for imposing penalty under Section 78, the Tribunal directed that the matter be remitted to the Commissioner for de novo consideration of limitation and penalty, applying the legal tests from the cited Apex Court jurisprudence. [Paras 12]

Matter remanded to the Commissioner for de novo examination of whether the proviso to Section 73(1) is invokable (and consequentially whether penalty under Section 78 is sustainable) in light of the Apex Court criteria for wilful misdeclaration or suppression.

Abatement under Notification 15/04-ST / 1/06-ST - taxable value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Quantum of tax: valuation, abatement and denial/allowance of tax paid - HELD THAT: - The Tribunal recorded the appellant's contention that for the period from 1/5/06 they paid service tax on the gross amount after availing the statutory abatement (and not only on labour charges) and noted that the Commissioner did not examine this claim. It directed remand so that the Commissioner may determine, inter alia, whether during 10/9/04 to 30/5/07 the conditions for 67% abatement under the relevant notifications are satisfied and, for periods from 1/6/07, whether valuation should be determined under Rule 2A or the composition option applied under Rule 3, including the conditions in sub-rules (2), (2A), (3) and (4). [Paras 13]

Matter remanded to the Commissioner for fresh adjudication on valuation, applicability of abatement for 10/9/04 to 30/5/07 and on valuation or composition options for periods from 1/6/07.

Final Conclusion: Impugned order set aside. Classification held to be "commercial or industrial construction service" taxable w.e.f. 10/9/04; applicability of work-contract regime from w.e.f. 1/6/07 to be applied where contracts transfer property in goods; issues of extended limitation/penalty and of valuation/abatement remanded to the Commissioner for de novo adjudication in accordance with the directions in this order.

Refund of unutilised CENVAT credit on input services used for export - nexus between input services and output services - power of remand by Commissioner (Appeals) - re quantification of refund on the basis of Chartered Accountant's certificate under Board's Circular No.120/1/2010-S.T. dated 19.1.2010 - distinction between a remand and a direction for computation/re quantification

Refund of unutilised CENVAT credit on input services used for export - re quantification of refund on the basis of Chartered Accountant's certificate under Board's Circular No.120/1/2010-S.T. dated 19.1.2010 - Revenue's appeal ST/2554/2010 rendered infructuous as refund had already been received by the respondent pursuant to the appellate order. - HELD THAT: - The respondent (M/s Nuware Systems Pvt. Ltd.) informed the Tribunal that the refund directed by the Commissioner (Appeals) was collected from the original authority on 13.5.2011 pursuant to the appellate decision which had allowed the claim subject to production of the Chartered Accountant's certificate as per the Board's Circular. This factual concession was not contested by the Revenue and accordingly the appeal had become infructuous. [Paras 4]

Appeal ST/2554/2010 dismissed as infructuous; related stay application dismissed.

Nexus between input services and output services - power of remand by Commissioner (Appeals) - distinction between a remand and a direction for computation/re quantification - re quantification of refund on the basis of Chartered Accountant's certificate under Board's Circular No.120/1/2010-S.T. dated 19.1.2010 - Appellate order in appeal ST/2555/2010 was not a remand; Commissioner (Appeals) had finally decided the nexus issue and only directed re quantification by the original authority on production of a Chartered Accountant's certificate. - HELD THAT: - The Tribunal examined the Commissioner (Appeals)'s order and found that the substantive question of nexus between the input services and exported output services was finally determined by the appellate authority. The directive to the original authority related solely to quantifying the refund in accordance with the Board's Circular (i.e., based on a Chartered Accountant's certificate) and did not amount to remanding the substantive issue for fresh adjudication. Therefore the ground raised by the Revenue-invoking the Supreme Court's decision on limits of remand power-was held inapplicable to the facts and the appeal was untenable. [Paras 5]

Appeal ST/2555/2010 dismissed; stay application dismissed.

Nexus between input services and output services - power of remand by Commissioner (Appeals) - re quantification of refund on the basis of Chartered Accountant's certificate under Board's Circular No.120/1/2010-S.T. dated 19.1.2010 - distinction between a remand and a direction for computation/re quantification - Appellate order in appeal ST/2556/2010 was not a remand; Commissioner (Appeals) had decided the substantive nexus issue and directed re quantification by the original authority to be carried out pursuant to the Board's Circular. - HELD THAT: - As in the other matters, the Tribunal held that the Commissioner (Appeals) had taken a view on the substantive nexus issue and merely directed the lower authority to undertake the mechanical exercise of re quantifying the refund on the basis of the Chartered Accountant's certificate to be produced by the party. This direction did not convert the order into an impermissible remand and the department's objection was therefore overruled. [Paras 6]

Appeal ST/2556/2010 dismissed; stay application dismissed.

Final Conclusion: All department appeals are dismissed: one appeal treated as infructuous on account of refund already received; the remaining appeals dismissed on the ground that the Commissioner (Appeals) had decided the substantive nexus issues and only directed re quantification of refund in accordance with the Board's Circular, which does not amount to an impermissible remand.

Taxability of volume discounts and incentives - business auxiliary service - pre-deposit waiver / stay of recovery - extended period of limitation

Taxability of volume discounts and incentives - business auxiliary service - Whether the volume discounts/incentives received by the advertising agency from media houses prima facie amount to taxable consideration as a business auxiliary service - HELD THAT: - The majority on the Tribunal took a prima facie view that the discounts received by the appellant are not consideration for promoting the business of the media and thus do not attract service tax as business auxiliary service. The majority reasoning emphasises that the advertising agency's contract is with the advertiser (the client), the agency prepares media plans only after client approval and does not have unfettered freedom to choose media or duration; accordingly the agency cannot be treated as an agent promoting the media's business. The majority also noted absence of a written agreement between media and agency and relied on earlier decisions where discounts/incentives were held not to be taxable when not connected to services rendered to the client. The dissenting Member (Technical) took the opposite prima facie view, observing that discounts were declared as main income, were not passed on to advertisers, and that such incentives could prima facie be consideration for services to the media (business auxiliary service), relying on an earlier Grey Worldwide decision where a similar transaction was treated as taxable. The reference bench (Vice President) agreed with the majority and returned the matter to the referring bench, concurring that on the material produced (including purchase orders showing client-driven media choice) the appellant made out a strong prima facie case against taxability of the volume discounts as business auxiliary service. [Paras 5, 6]

On a prima facie assessment, the Tribunal (majority) found that the volume discounts/incentives are not liable to service tax as business auxiliary service.

Pre-deposit waiver / stay of recovery - Whether pre-deposit of the adjudged service tax, interest and penalties should be waived and recovery stayed during pendency of the appeal - HELD THAT: - Having formed a prima facie view in favour of the appellant on the taxability issue, the majority granted complete waiver of pre-deposit and stayed recovery of the adjudged amounts during the pendency of the appeal. The dissenting Member would have directed a 50% pre-deposit, but on reference the majority order prevailed and the applicants were allowed full waiver of pre-deposit. [Paras 6]

Waiver of pre-deposit of the entire adjudged dues and stay of recovery during the pendency of the appeal.

Extended period of limitation - Whether the extended period of limitation invoked by the department is invocable in the present case - HELD THAT: - The question of applicability of the extended period of limitation was noted in the course of submissions and in the proposed order, but the Tribunal deferred adjudication on the limitation point. Member (Judicial) recorded that the issue of limitation will be dealt with at the time of final hearing; it was therefore not finally decided at the stay stage. [Paras 6]

The extended period of limitation issue is left open for decision at the final hearing.

Final Conclusion: The Tribunal (by majority) granted complete waiver of pre-deposit and stayed recovery of the adjudged service tax, interest and penalties during the pendency of the appeal, having formed a prima facie view that the volume discounts/incentives received by the advertising agency are not taxable as business auxiliary service; the question of extended limitation was reserved for final adjudication.

Intellectual Property Right Services - Broadcasting Services - Business Support Services - classification of services - prima facie case - stay of recovery - pre-deposit - taxability from 2010 onwards

Intellectual Property Right Services - classification of services - prima facie case - Whether the amounts characterized as royalty/commission fall within Intellectual Property Right Services - HELD THAT: - The Tribunal found that neither the show-cause notices nor the orders-in-original identify the specific category of intellectual property (patent, copyright, trademark, design or other) said to be transferred or licensed. The Board's Circular dated 17.09.2004 requires that a demand under Intellectual Property Right Services must specify the particular intellectual property law and the right being transferred or licensed. Absent such categorisation or findings by the adjudicating authorities, the appellants established a strong prima facie case against demands framed under this head. [Paras 6]

Prima facie case made out against demands under Intellectual Property Right Services; demand not sustained at this stage.

Broadcasting Services - taxability from 2010 onwards - classification of services - Whether receipts from permitting telecast by other clubs constituted taxable Broadcasting Services for the periods in dispute - HELD THAT: - Relying on this Tribunal's earlier decision in the Board of Control for Cricket in India case, the Tribunal observed that commercial exploitation or permitting commercial use of events became specifically taxable only from the Budget 2010 via a new service description. The live telecast in the present matters was effected by a third party (M/s. Essel Shyam Communications Ltd.) and the period in dispute (including 01.04.2007 to 31.03.2009) predates the 2010 amendment; therefore, such receipts are not, prima facie, taxable as the newly described commercial-exploitation service for those periods. [Paras 6]

Prima facie, receipts relating to telecast/commercial exploitation are not taxable as Broadcasting Services for the periods prior to 2010.

Business Support Services - classification of services - prima facie case - Whether amounts charged to book makers and caterers fall within Business Support Services - HELD THAT: - The Tribunal noted the Madras Race Club decision which, for stay purposes, held that services rendered by a race club to book makers did not constitute Business Support Services. Having regard to the nature of infrastructural facilities and the CBEC clarifications distinguishing generic business-support activities from provision of physical infrastructure to third parties, the Tribunal found that the appellants have made out a prima facie case against classification of such receipts as Business Support Services for the limited purpose of considering the stay application. [Paras 6]

Prima facie case against demands under Business Support Services; classification not sustained at this interlocutory stage.

Stay of recovery - pre-deposit - prima facie case - Whether pre-deposit should be directed and recovery stayed pending appeals - HELD THAT: - Considering that the appellants established prima facie cases on the classification issues discussed above and that the applications before the Tribunal are stay petitions, the Tribunal accepted that recovery may be stayed. The adjudicating authorities' demands, interest and penalties were therefore stayed during the pendency of the appeals. The Tribunal treated the matter at the interlocutory stage and, applying its discretionary jurisdiction, granted an unconditional waiver of the dues adjudged and ordered stay of recovery. [Paras 1, 6]

Unconditional waiver of adjudged dues and stay of recovery of service tax, interest and penalties during pendency of these appeals; no pre-deposit directed at this stage.

Final Conclusion: The Tribunal, finding strong prima facie cases on classification under Intellectual Property Right Services, Broadcasting Services (for periods prior to 2010) and Business Support Services, granted an unconditional waiver and stayed recovery of the adjudged service tax, interest and penalties during the pendency of the appeals.

Liability for service tax as Manpower Supply Service - Penalties under Section 76 and Section 78 of the Finance Act, 1994 - Revisionary power under Section 84 of the Finance Act, 1994 - Effect of appellate order setting aside tax demand on consequential penalties

Effect of appellate order setting aside tax demand on consequential penalties - Penalties under Section 76 and Section 78 of the Finance Act, 1994 - Revisionary power under Section 84 of the Finance Act, 1994 - Whether the impugned order imposing penalties under Section 76 and Section 78 (passed on exercise of revisionary power under Section 84) is maintainable where the Commissioner (Appeals) has set aside the underlying demand. - HELD THAT: - The tribunal noted that the core controversy concerned whether the appellant performed a job (feeding husk into a boiler) or supplied manpower, a question on which the Commissioner (Appeals) reached a different conclusion by setting aside the demand. That divergence demonstrated confusion in the scope of levy. In these circumstances the tribunal held that imposing and sustaining penalties under the revisionary order was not justified while the correctness of the underlying demand had been disturbed by the appellate order. Given the possibility of the Revenue prosecuting an appeal against the Commissioner (Appeals) order, it would be inappropriate to uphold the penalties which are consequential on the tax demand. For these reasons the impugned order imposing penalties was set aside.

Impugned order imposing penalties under Section 76 and Section 78 (passed on exercise of Section 84) set aside; appeal allowed.

Final Conclusion: The appeal is allowed and the impugned order (penalties imposed under the revisionary order) is set aside in view of the Commissioner (Appeals) having set aside the underlying demand, the consequent uncertainty as to the scope of levy, and the unsustainability of the penalties under those circumstances.

CENVAT Credit entitlement on inputs from 100% EOU - Interpretation and application of formula X*(1+BCD/400)*(CVD/100) - Calculation methodology under sub rule 7 of Rule 3 of CENVAT Credit Rules, 2004 - Cess on customs duty versus cess on excise duty - creditability

CENVAT Credit entitlement on inputs from 100% EOU - Interpretation and application of formula X*(1+BCD/400)*(CVD/100) - Cess on customs duty versus cess on excise duty - creditability - Scope and manner of computing admissible CENVAT credit in respect of inputs cleared by a 100% EOU and whether education cesses charged as part of the customs invoice are admissible as CENVAT credit. - HELD THAT: - The Tribunal examined the formula prescribed by sub rule 7 of Rule 3 of the CENVAT Credit Rules, 2004 for inputs cleared from a 100% EOU and considered rival calculations based on a sample invoice. The correct method, as explained, is to compute the customs duty payable at the reduced (exemption) rate, add the countervailing duty (CVD) to that assessable value to arrive at the amount treated as excise duty, and thereafter compute education cess and SHE cess on the excise duty as determined by the formula. The Commissioner had disallowed certain cess amounts on the view that cesses charged as part of customs duty were not admissible, relying on Emcure Pharmaceuticals Ltd. vs. CCE Pune . The Tribunal agreed with the appellant's factual contention that the appellant had not claimed credit of the education cess amounts which related to customs duty, and observed that the remaining components calculated in accordance with the formula are admissible. The Tribunal referred to an earlier decision of this Bench in Ahmedabad Packaging Industries Ltd. reaching a similar conclusion and, applying the described computation methodology, held that except for the two items identified in the invoice as education cess on customs duty (Rs.1,159 and Rs.580 as shown in the invoice), the duty and cess components computed under the formula are allowable as CENVAT credit. [Paras 8, 9]

Allow CENVAT credit as computed under the formula X*(1+BCD/400)*(CVD/100); exclude the education cess components that represent cess on customs duty as identified in the invoice; dispose of appeals accordingly.

Final Conclusion: Appeals disposed by permitting CENVAT credit calculated in accordance with sub rule 7 of Rule 3 (using the stated formula) save for the two education cess items shown in the invoice which represent cess on customs duty and are not admitted as credit.

CENVAT credit - application of formula under Rule 3(7) of CENVAT Credit Rules, 2004 - penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - bonafide mistake - reversal/appropriation of CENVAT credit under protest - interest on confirmed demand

CENVAT credit - application of formula under Rule 3(7) of CENVAT Credit Rules, 2004 - interest on confirmed demand - Excess availment of CENVAT credit quantified at Rs.1,24,056/- was established and liability with interest remained. - HELD THAT: - The Tribunal found that the record and the show cause notice disclosed an excess availment of CENVAT credit in the sum determined by the adjudicating authorities. Although the show cause notice and worksheet did not set out, with precision, the particular formula applied by the department or the appellant under Rule 3(7), the admitted position and the orders below show an excess of Rs.1,24,056/-. The appellant had reversed and deposited the amount under protest and thereafter submitted its own calculations showing entitlement to education cess credit; the department accepted adjustments resulting in the reduced demand. There is no appellate finding disturbing the quantification of the residual excess; the Tribunal therefore proceeded on the basis that the excess credit of Rs.1,24,056/- stood established and has been dealt with along with interest as directed by the authorities below.

Demand for excess CENVAT credit quantified at Rs.1,24,056/- stands as established and subject to interest; the liability so determined is sustained.

Penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - bonafide mistake - reversal/appropriation of CENVAT credit under protest - Whether imposition of penalty under Section 11AC/Rule 15 was warranted. - HELD THAT: - The Tribunal examined conduct and surrounding circumstances and concluded there was no evidence of deliberate intention to evade duty or to wrongfully avail credit. The appellant promptly reversed and deposited the disputed credit when the department raised objections, accepted the department's appropriation without exploiting perceived departmental errors, and subsequently produced calculations showing a bona fide belief in entitlement to education cess credit. The show cause notice and orders did not establish that the excess credit resulted from fraudulent or deliberate misconduct; instead the matter arose from misapplication or calculation error in which both sides had made mistakes. In these circumstances the Tribunal held that the penal consequences under Section 11AC/Rule 15 were not justified.

Penalty imposed under Section 11AC/Rule 15 is set aside; consequential relief granted to the appellant.

Final Conclusion: The Tribunal upheld the residual demand for excess CENVAT credit as quantified but, on the facts showing prompt reversal, deposit under protest and bona fide error, quashed the penalty imposed under Section 11AC/Rule 15 and granted consequential relief to the appellant.

Penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules - Cenvat credit - shortage of inputs - Clandestine removal - Admission of shortage and its evidentiary value - Requirement of corroborative evidence for imposition of penalty - Verification of explanation based on contemporaneous records

Penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules - Cenvat credit - shortage of inputs - Clandestine removal - Requirement of corroborative evidence for imposition of penalty - Verification of explanation based on contemporaneous records - Whether penalty under Section 11AC read with Rule 15 could be sustained for a shortage of inputs discovered on stock verification in absence of corroborative evidence and without verification of the explanation based on records. - HELD THAT: - On the date of visitation a shortage of inputs (2612 Kgs.) was recorded and the Director admitted the shortage. The appellants paid duty on the shortage and subsequently furnished an explanation, supported by records, that the said quantity had been used in production; that explanation was not verified or challenged by the Department. The adjudicating authorities treated the admission as establishing clandestine removal and imposed penalty under Section 11AC read with Rule 15. The Tribunal held that admission of shortage alone cannot be equated with clandestine removal and that imposition of penalty is a serious consequence which requires supporting, corroborative evidence. Where an explanation rests on contemporaneous records, the department is obliged to verify those records before concluding clandestine removal or suppression. In absence of any independent or corroborative evidence of clandestine removal and without verification of the explanation, the penalty could not be sustained. The Tribunal relied on consistent precedent that mere shortage, uncorroborated by other material, does not merit penalty under Section 11AC.

Penalty imposed under Section 11AC read with Rule 15 is set aside; appeal is partly allowed.

Final Conclusion: The Tribunal upheld that, while duty involved was not disputed and was discharged by the appellants, the imposition of penalty for the shortage could not be sustained in absence of corroborative evidence or verification of the explanation supported by records; accordingly the penalty is quashed and the appeal is partly allowed.

Application for waiver of pre-deposit under Section 35-F - undue hardship - imposition of conditions to safeguard the interests of the Revenue - balance between hardship and revenue interest

Application for waiver of pre-deposit under Section 35-F - undue hardship - balance between hardship and revenue interest - Impugned Tribunal order did not record any finding on whether the assessee would suffer undue hardship if pre-deposit was not waived; the order was set aside and the matter remitted for fresh adjudication of the waiver application in accordance with settled law. - HELD THAT: - The Court examined the scope of the Tribunal's jurisdiction to entertain an application for waiver of pre-deposit and applied the principles stated in Benara Valves Ltd. (paras 11-16), namely that the Tribunal must consider both whether undue hardship to the applicant is established and what conditions are necessary to safeguard the Revenue. Undue hardship is a matter peculiarly within the knowledge of the applicant and must be established, not merely asserted; it requires a showing that the burden of compliance would be disproportionately onerous. The Tribunal must weigh any asserted undue hardship against the interests of the Revenue and, if granting waiver partially or wholly, may impose appropriate conditions. In the present case the Tribunal directed a deposit as condition for hearing the appeal but the impugned order contains no express finding or recorded application of mind on whether the petitioner would suffer undue hardship if required to make the deposit. For that reason the Court concluded the Tribunal failed to discharge the obligation to consider and record findings on undue hardship and the requisite balancing with the Revenue's interest, warranting setting aside of the order and remit for fresh decision. [Paras 6, 7]

Impugned order set aside; matter remitted to the Appellate Tribunal to decide the petitioner's application for waiver of pre-deposit afresh in accordance with the principles laid down in Benara Valves Ltd., including consideration of undue hardship and safeguard of Revenue's interests.

Final Conclusion: The High Court set aside the Tribunal's order for failure to consider and record findings on undue hardship and remitted the waiver-of-pre-deposit application to the Tribunal for fresh decision in accordance with the settled law requiring assessment of undue hardship and appropriate conditions to protect the Revenue.

Recovery of wrongly availed CENVAT Credit - CENVAT Credit reversal - limitation - extended period of limitation - interest on demand - penalty and bonafide belief

Recovery of wrongly availed CENVAT Credit - limitation - extended period of limitation - Show Cause Notice dated 26.7.2005 for the period Apr 03-Jun 04 is time-barred and the demand is not sustainable - HELD THAT: - The Tribunal found that Revenue had earlier invoked the extended period of limitation by issuing a Show Cause Notice dated 28.04.2004 covering the same subject-matter. Consequently, issuance of a later Show Cause Notice dated 26.07.2005 could not validly invoke the extended period for the same demand. Applying the ratio in ECE Industries Ltd. v. CCE New Delhi, the demand for reversal of CENVAT Credit in respect of the period April 2003 to June 2004 is barred by limitation and cannot be sustained. [Paras 7]

Demand for Apr 03-Jun 04 set aside as time-barred

CENVAT Credit reversal - interest on demand - recovery of wrongly availed CENVAT Credit - Show Cause Notice dated 28.7.2005 for the period Jly 04 -Feb 05 is within limitation and the demand for reversal of CENVAT Credit is sustainable - HELD THAT: - For the period July 2004 to February 2005 the Show Cause Notice dated 28.07.2005 was issued within the one-year limitation period applicable to recovery of wrongly availed CENVAT Credit. On merits, earlier authority and the Hon'ble High Court's view are adverse to the assessee. Therefore the demand for reversal of the CENVAT Credit in respect of this period must be confirmed and interest is payable. [Paras 7]

Demand for Jly 04 -Feb 05 upheld with interest

Recovery of wrongly availed CENVAT Credit - extended period of limitation - limitation - Show Cause Notice dated 12.08.2005 for the period Dec 01-Mar 03 is time-barred and the Revenue's appeal is rejected - HELD THAT: - The period December 2001 to March 2003 was already the subject-matter of an earlier Show Cause Notice dated 28.04.2004; Revenue could not validly invoke an extended period again by issuing the Show Cause Notice dated 12.08.2005 for the same period. Consequently the impugned order in this appeal is upheld and Revenue's appeal is rejected. [Paras 8]

Demand for Dec 01-Mar 03 set aside as time-barred; Revenue's appeal rejected

Recovery of wrongly availed CENVAT Credit - limitation - interest on demand - Show Cause Notice dated 13.01.2006 for the period Mar 05-15.5.05 is within limitation and the demand is sustainable - HELD THAT: - The Show Cause Notice issued on 13.01.2006 relates to the period March 2005 to 15.05.2005 and was issued within one year; no extended period is invoked. On merits the issue stands decided against the assessee. Therefore the demand for reversal of CENVAT Credit in respect of this period is to be upheld along with interest. [Paras 9]

Demand for Mar 05-15.5.05 upheld with interest

Penalty and bonafide belief - Penalty shall not be imposed despite confirmation of certain demands within limitation because the assessee entertained a bonafide belief - HELD THAT: - Although demands in respect of periods within limitation have been upheld, the Tribunal found that the assessee acted under a bonafide belief that reversal of CENVAT Credit for steam supplied to sister units was not required until the issue was finally decided against them by the Tribunal on 05.02.2009. In the peculiar facts and circumstances, imposition of penalty is not warranted. [Paras 10]

No penalty to be imposed on the assessee

Final Conclusion: The appeals are partly allowed: demands for the periods Apr 03-Jun 04 and Dec 01-Mar 03 are set aside as time-barred; demands for Jly 04 -Feb 05 and Mar 05-15.5.05 are upheld with interest; penalties are not imposed in view of the assessee's bonafide belief. All appeals and cross-objection disposed accordingly.

Exemption under section 5(vi) of the Wealth-tax Act - definition of urban land - habitability requirement for a 'house' - exclusion of plot up to 500 sq. metres from assets - valuation on the relevant valuation date - WTO's power to estimate net wealth under section 16(5)

Exemption under section 5(vi) of the Wealth-tax Act - habitability requirement for a 'house' - Whether the property qualifies as an exempt residential house under section 5(vi) of the Wealth-tax Act - HELD THAT: - The Tribunal examined the state of construction, documentary material and prior assessments and applied the common parlance meaning of 'house' as requiring habitability. The sales deed (English translation) and material on record record that plastering, flooring, drainage and electrical work were not done, doors and windows were not installed and the ceiling slab was damaged; the deed itself states that to make the property fit for residence an entire fresh construction would be required. Relying on High Court decisions holding that an incomplete or non habitable structure is not a 'house' for exemption purposes, the Tribunal held that the superstructure in its present condition does not qualify as a habitable house and therefore is not fully exempt under section 5(vi). [Paras 15, 16, 17, 18, 20]

The assessee is not entitled to full exemption under section 5(vi) because the building is not habitable in its existing incomplete/dilapidated condition.

Exclusion of plot up to 500 sq. metres from assets - Extent of exemption in case of an incomplete building on land exceeding 500 sq. metres - HELD THAT: - The Tribunal held that where a building is incomplete and the plot exceeds 500 sq. metres, the exemption under the Act applies only to the value of 500 sq. metres of land (the statutory exclusion). The cost of the excess land beyond 500 sq. metres together with the value of the incomplete construction thereon constitutes an asset within the meaning of section 2(ea) and is liable to wealth tax. The AO was directed to recompute net wealth accordingly. [Paras 14, 20]

Assessee entitled only to exemption on value of 500 sq. metres of land; excess land and incomplete construction are taxable and AO to recompute net wealth.

WTO's power to estimate net wealth under section 16(5) - valuation on the relevant valuation date - Validity of WTO estimating net wealth without a valuation report or DVO reference - HELD THAT: - The Tribunal noted that the valuation date is the last day of the previous year and valuation must follow Schedule III rules with details to be attached to the return. The assessee did not file a valuation report nor produce it during assessment. Under section 16(4)/(5) the WTO, having called for documents and received no valuation, may estimate net wealth to the best of his judgment using available material. On the facts the Tribunal found the WTO's estimate reasonable and declined the assessee's challenge to the valuation procedure. [Paras 21, 22]

WTO was entitled to estimate net wealth in absence of a valuation report; the estimate was reasonable and this ground is dismissed.

Valuation on the relevant valuation date - Treatment of the asset sold before the valuation date for A.Y. 2003-04 - HELD THAT: - The Tribunal recorded that the asset was sold on 14-10-2002 and therefore did not exist on the valuation date (31-3-2003) for assessment year 2003-04; the sale is not disputed. Consequently the addition of the asset value for AY 2003-04 cannot stand. The AO was, however, directed to examine whether proceeds from the sale on the valuation date fall within any exempt category and to treat them in accordance with law. [Paras 23]

Addition of the asset for A.Y. 2003-04 deleted; AO to examine tax treatment of sale proceeds on the valuation date.

Exclusion of plot up to 500 sq. metres from assets - WTO's power to estimate net wealth under section 16(5) - Remand for recomputation and verification - HELD THAT: - The Tribunal directed remand to the AO for two limited purposes: (a) recompute net wealth by allowing exemption only on 500 sq. metres of the plot and including the value of excess land and incomplete construction in the net wealth for the relevant assessment years; and (b) examine and determine, on the valuation date, whether proceeds of sale fall within any exempt category and treat them according to law. These are directions for computation and factual/valuation verification rather than fresh adjudication of legal principle. [Paras 20, 23]

Matter remanded to the AO for recomputation of net wealth and for examination of sale proceeds as directed.

Final Conclusion: Appeals partly allowed. The Tribunal held the superstructure to be non habitable and not fully exempt under section 5(vi), allowed exemption only for 500 sq. metres of the plot, upheld the WTO's power to estimate net wealth in absence of a valuation report, deleted the asset addition for A.Y. 2003 04 as the asset was sold before the valuation date, and remanded to the AO for recomputation of net wealth and examination of sale proceeds in accordance with law.