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2014 (10) TMI 994 - ITAT MUMBAI
Disallowance under section 43B - liabilities disallowed in earlier years which are paid/written back in the current year - Held that:- Tribunal in earlier years i.e assessment years 1993-94 to 1998-99 and 2000-01 in assessee’s own case, copy of which was placed on record. We find that similar issue was considered by the Tribunal in A.Y. 2000-01 vide order dated 9-10-2013 wherein the ground taken by the assessee was dismissed as the same has become infructuous. It was found by Tribunal that it is an alternative plea which relates to A.Y. 1993-94 decided by the Tribunal in assessee’s favour. The appeal filed by the Department has been dismissed by the Tribunal vide order dated 20-12-2001. As the facts and circumstances during the year under consideration are para materia wherein appeal of department in earlier year was dismissed by the Tribunal, therefore, ground taken by assessee for disallowance during the year has become infructuous
Exchange Fluctuation loss - Held that:- We find that the Tribunal has already rejected the Department’s appeal for 1996-97 to 2000-01. Accordingly this ground taken by the assessee becomes academic and accordingly rejected.
Notional interest accrued but not due on securities - Held that:- In assessee’s own case in its favour in A.Y. 1998-99 and also by the Hon’ble Bombay High Court in assessee’s own case for assessment years 1994-95, 1995-96 wherein it was held that such interest are taxable in subsequent year when securities are sold. Respectfully following the decision of the Tribunal as well as Hon’ble Bombay High Court in assessee’s own case as referred, we do not find any merit for taxing the interest accrued but not due on securities during the year under consideration.
As far as the taxability of interest the same is assessable in the year in which the refund has been granted alongwith interest. However, if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly we direct the A.O. to tax interest income in terms of the order of the tribunal for A.Y. 1993-94 as reproduced above, keeping in view our above observation.
Allowability of technical assistance fees as revenue expenditure - Held that:- The Hon’ble Bombay High Court in the case of Tata Engineering & Locomotive Co. Pvt. Ltd. [1979 (2) TMI 20 - BOMBAY HIGH COURT] held that expenditure incurred for acquiring technical know-how on training of personnel is revenue expenditure. No merit for disallowing the technical fees expenditure incurred by the assessee as revenue in nature.
Claim of deduction u/s 80HH - whether to be allowed on the profit of the company as a whole or separately for each unit? - Held that:- The issue has been decided against the assessee by the Tribunal in the A.Y. 1996-97 & 1997-98. As the facts and circumstances during the year under consideration are same, we do not find any infirmity in the order of the lower authorities for allowing the claim of deduction u/s 80HHC of the Act to be computed on the profit of the company as a whole, rather than unit-wise.
Deduction u/s 80HHC with respect to interest income - Held that:- The issue under consideration is squarely covered by the decision in the case of ACG Associated Capsules Pvt. Ltd.[2012 (2) TMI 101 - SUPREME COURT OF INDIA] wherein it was held that net interest income is to be excluded from the eligible profit for computing deduction u/s 80HHC rather than gross interest. Explanation to section 80 HHC to be applied on net interest and not on gross interest. Accordingly, we direct the AO to apply clause (baa) in respect of interest receipt. We accordingly direct the A.O. to exclude the excess of interest income over interest expenditure from the eligible profit of the company while computing deduction u/s 80HHC of the Act.
Deduction of inter-divisional transfer from the total turnover - Held that:- This issue has been settled by the Tribunal in assessee’s own case for the A.Ys. 1986-87 to 1989-90, 1994-95, 1995-96, 1996-97 & 1998-99 wherein it was held that interdivisional transfer is to be reduced from the total turnover for computing deduction u/.s 80HHC of the Act. Alter hearing both the sides, we find similar issue had come up before the Tribunal in assessee’s own case and the Tribunal in its consolidated order for A.Ys. 1986- 87 to 1989-90. Respectfully following the decisions of the Tribunal, the claim of the assessee is directed to be accepted.
Loss on export of traded goods and for not adjusting the same against profit on export of manufactured goods for computing deduction u/s 80HHC - Held that:- Assessee fairly conceded that this issue is now settled by the Hon’ble Supreme Court against the assessee in the case of Ipca Laboratories [2004 (3) TMI 9 - SUPREME COURT]. Respectfully following the proposition laid down by the Hon’ble Supreme Court in the case of Ipca Laboratories (supra), we do not find any infirmity in the order of the lower authorities adjusting the loss on export of traded goods against profit on export of manufactured goods for computing deduction u/s 80HHC.
Interest u/s 244A - Held that:- Tribunal in assessee’s own case for 1998-99 vide order dated 10th August, 2012 has restored similar matter to the file of the A.O. for considering the assessee’s claim of interest after taking into account the judicial pronouncements as referred above. Respectfully following the decision of the Tribunal, we restore the computation part of interest u/s 244A of the Act to the file of the A.O. for deciding as per the direction given by the Tribunal in its order dated 10th August, 2012.
Appropriation of HO expenses in computing deduction u/s 80-O - Held that:- there is no necessity for allocating the head office expenses to the units claiming deduction u/s. 8OHH, 801, 80M and 80-0. The order of the CIT(A) on this issue is accordingly set aside and the grounds raised by the assessee are allowed.
Sales tax exemption benefit being capital receipt not chargeable to tax - Held that:- A similar issue has been restored back by the Tribunal in A.Y. 2000-01 in assessee’s own case to the file of the A.O. to decide after considering the decision of Special Bench in the case of DCIT vs. Reliance Industries Ltd. [2003 (10) TMI 680 - ITAT MUMBAI]. Respectfully following the said decision of the Tribunal, we restore this issue back to the file of the A.O. for deciding the same in the light of the findings of the Tribunal in assessee’s own case for A.Y. 1999-2000 in ITA No. 5631/Bom/2002, wherein the Tribunal has restored the issue back to the file of the A.O.to decide the issue afresh - the issue is restored back to the file of the A.O. for deciding the same afresh.
Disallowance of royalty and interest on royalty u/s 43B of the Act treating it as tax to be allowed
Profits of the USA & UK branch - Held that:- CIT(A) deleted the addition by observing that the action of the A.O. in not excluding profit of foreign branch amounting to ₹ 2,63,29,807/- from the taxable profit was not justified. From the record we found that the issue has been decided by the Tribunal in assessee’s own case in its favour in assessment years 1996-97 to 2000-01. We also found that the Department is not in appeal on this ground in the Hon’ble High Court against the order of the Tribunal for the assessment years 1996-97, 1997-98 and 1998-99. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) directing the A.O. to exclude the profit of foreign branch from the taxable profit.
Disallowance of interest on estimated basis to earn tax free income - Held that:- We found that similar issue has been dealt with by the Tribunal in A.Y. 2000-01 wherein the disallowance was restricted to 1.5% of the exempt income. As the facts and circumstances during the year under consideration are same, we direct the A.O. to restrict the disallowance to 1.5% of the exempt income.
Exchange rate fluctuation loss on conversion of trading assets and liabilities - Held that:- The issue has been decided by the Tribunal in assessee’s own case in its favour in assessment years 1998-99 to 2000-01. Furthermore, the Department is not in appeal on this ground before the Hon’ble High Court against the Tribunal order. The Hon’ble Supreme Court in the case of Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] has decided this issue in favour of the assessee. Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A) deleting the disallowance
Crystallization of liability - Held that:- As found that after considering the decision of Hon’ble Supreme Court in the case of CIT vs. Swadeshi Cotton Flour Mills Pvt. Ltd. [1964 (4) TMI 8 - SUPREME COURT] on this issue, the ld. CIT(A) reached the conclusion that liability has been crystalised under consideration, the same is therefore allowable. We do not find any reason to interfere with the order of the ld. CIT(A)
Deduction against bad debts - Held that:- Actual write off was in A.Y. 2000-01 and the same was again allowed by the ld. CIT(A). Since the claim was pertaining to the A.Y. 1996-97 which have already been allowed by the A.O. when the matter was remanded back by the Tribunal, allowing of the claim by the ld. CIT(A) during the year under consideration amounts to double deduction of the same amount. Accordingly we set aside the order of the ld. CIT(A) on this ground and allow this ground in favour of the Revenue.
Expenses incurred in connection with the assessment of the loss and insurance claim reduced from insurance claim received. (Net insurance amount received is reduced from block of assets by the assessee) - addition was made by the A.O. holding that gross amount of insurance claim received on destruction of capital asset is to be reduced from block of asset - Held that:- CIT(A) held that the A.O. should have reduced from the block of assets the net amount i.e. the amount received from the insurance company, net of the expenses incurred of ₹ 62.30 lacs and allow depreciation thereon. We do not find any infirmity in the order of the ld. CIT(A) in directing the A.O. to recompute the depreciation on the above lines.
Disallowance of expenses incurred for making advertisement films - Held that:- We found that the issue has already been settled by the Tribunal in assessee’s own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon’ble High Court. Similar issue has been decided by the Hon’ble Supreme Court in the case of Empire Jute Co. Ltd. [1980 (5) TMI 1 - SUPREME COURT]. Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company.
Computation of deduction u/s 80HHC of the Act before setting off of the unabsorbed depreciation and business losses of earlier years - Held that:- This issue has already been decided by the Hon’ble Supreme Court in the case of CIT vs. Shirke Construction [2007 (5) TMI 194 - SUPREME COURT] in Revenue’s favour. Respectfully following the same, we do not find any merit in the order of the ld. CIT(A) for directing the A.O. to compute deduction u/s 80HHC of the Act before setting off of the unabsorbed business losses and unabsorbed depreciation of the earlier years against the current years income. Accordingly this ground of the Revenue is allowed.
Direct the A.O. to reduce the net amount of interest expenditure out of allowable income of the assessee for the purpose of computing deduction u/s 80HHC of the Act.
Excluding the amount of excise duty and sales tax from the total turnover for computing deduction u/s 80HHC - Held that:- This issue has been settled by the Hon’ble Supreme Court in the case of Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] - No infirmity in the order of the ld. CIT(A) in directing the A.O. to exclude the amount of excise duty and sales tax from the total turnover of the assessee while computing deduction u/s 80HHC of the Act.
Increase profits of the business by the loss of foreign branch and the loss on export of trading goods for the purpose of computation of deduction u/s 80HHC - Held that:- CIT(A)’s direction to the A.O. to increase profits of the business by the loss of foreign branch and the loss on export of trading goods for the purpose of computation of deduction u/s 80HHC of the Act. We found that this issue is covered against the assessee and in favour of Revenue by the decision of Hon’ble Supr4eme Court in the case of Ipca laboratories, [2004 (3) TMI 9 - SUPREME COURT]. Respectfully following the said decision of Hon’ble Supreme Court in the case of Ipca Laboratories (supra), we do not find any merit in the order of ld. CIT(A) for allowing the assessee’s claim.
Deduction u/s 80-IA of the Act in respect of Vikram Power Unit to be allowed.
Direction of the ld. CIT(A) to the A.O. to recompute the amount of deduction towards export profit for the limited purpose of computing book profit in accordance with the Circular No. 680 dated 21-02-1994 issued by the CBDT - No infirmity in this direction of the ld. CIT(A) to the A.O., hence allowed this ground of the assessee.
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2014 (10) TMI 993 - ITAT BANGALORE
Deduction u/s 36(1) (vii) - provision for bad and doubtful debts created by the assessee in relation to the advances of the rural branches - held that:- The provisions of clause (vii) deal with ‘bad debts’, whereas, provisions of clause (viia) deals with ‘provision for bad and doubtful debts’. The distinction which the assessee has tried to create by dividing the provisions of clause (viia) into two parts is merely self-drawn. Both the parts of clause (viia) are joined with conjunction “and”. Therefore, both the limbs of clause (viia) have to be read together and not as alternate. The Hon’ble Supreme Court of India in the case of Catholic Syrian Bank Ltd. vs. CIT ( [2012 (2) TMI 262 - SUPREME COURT OF INDIA] has categorically held that the provisions of section 36(1)(vii) deals with general deduction available to a bank and even non-banking business. The provisions of section 36(1)(vii) operate in their own field and are not restricted by the limitation of section 36(1)(viia) of the Act.
Depreciation on valuation of investment portfolio by treating the investments held by the bank as stock-in-trade - Held that:- AO in the order giving effect to the order of the CIT(A) has factually found that the bad debts claimed as deduction u/s.36(1)(vii) of the Act has actually been written off in the books of accounts of the Assessee. There is, therefore, no basis for the revenue to raise the aforesaid additional grounds before the Tribunal. The additional ground sought to be raised is therefore not admitted for adjudication. In this regard, we are also of the view that decision rendered by the Tribunal in assessee’s own case for the A.Y. 2010-11 on an identical additional ground, will also be applicable in the present case. The additional ground sought to be raised are therefore dismissed as not admitted for adjudication.
Addition u/s 14A - Held that:- Perusal of the financial statements of the Assessee for the relevant financial year shows that Investments of the assessee in tax free securities as on 31.3.2007 was ₹ 592.48 Crores and the same as on 31.3.2008 was ₹ 850.23 crores. Own interest free funds available with the Assessee 31.3.2007 was ₹ 10,542.77 Crores and the same as on 31.3.2008 was ₹ 14,734.64 Crores. Therefore, available of interest free funds for making the investments which yielded tax free income cannot be disputed by the revenue. It is clear from the statement of available own funds and balance sheet that the assessee had enough funds out of which investments yielding tax free income were made. Therefore, no disallowance of interest expenses can be made applying Rule 8D(2)(i) or (ii) of the Rules.
In the present assessment year, assessee has not made any disallowance on his own u/s. 14A of the Act. Under the circumstances, it would be just and proper to sustain disallowance of 5% of the tax free income. We hold and direct accordingly.
Not giving credit being additional income tax paid u/s 115(O) on the dividend received from a 100% subsidiary of the appellant - Held that:- It is the claim of assessee that it had received a sum of ₹ 84,97,160 from its 100% subsidiary and that the subsidiary has paid tax u/s. 115-O on such dividend distributed. The assessee has therefore prayed that assessee should be given credit for the aforesaid sum, which was, by mistake, paid by the assessee. The ground being a legal ground which can be decided on the basis of facts available on record, we deem it appropriate to consider the claim of the Assessee notwithstanding the fact that the said ground was withdrawn before CIT(A). In tax matters there cannot be any estoppel. Tax determination and collection has to be in accordance with law and not based on any concession of legal rights by an Assessee. We are of the view that it would be just and proper to direct the AO to examine the claim of assessee and if found correct, to allow the same.
Refund arising u/s 115WE(3) being the excess payment of fringe benefit tax - Held that:- It would be just and appropriate to direct the AO to consider the claim of assessee for credit of a sum of ₹ 1,20,08,840 being the refund arising u/s. 115WE(3) of the Act, which his claimed by the assessee as excess payment of fringe benefit tax. If the claim of the assessee is found to be correct, then assessee should be given appropriate credit in accordance with law. We hold and direct accordingly.
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2014 (10) TMI 992 - CESTAT NEW DELHI
Clandestine Removal - principles of natural justice - case of appellant is that they were not given an opportunity to cross examine the witnesses and the whole case of the department is based upon the unsigned store register - Held that:- When the CEO and the Works Manager themselves admitted to the fact of such clearances as recorded in their own store despatch register. Their contention that they were not given the opportunity to cross-examine the witnesses and that violated the principles of natural justice is devoid of merit, more so when their statements were inculpatory and were never retracted.
An admitted fact hardly needs to be proved - In the present case, apart from the inculpatory statements evidence in the form of the written record, the godown despatch register is also available.
Appeal dismissed.
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2014 (10) TMI 991 - PUNJAB & HARYANA HIGH COURT
Drawal of fresh samples and retest of imported “zinc skimming” - test report, received pursuant to test conducted on the representative sample already drawn, is seriously disputed - Held that:- As the petitioner not only disputes the test report but also the drawing of the remnants sample, the writ petition is disposed of by directing the respondents to draw a fresh homogenuous representative sample and thereafter forward it for analysis - petition disposed off.
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2014 (10) TMI 990 - CESTAT AHMEDABAD
Benefit of N/N. 21/2002-Cus. as amended by N/N. 61/2007 - difference of opinion - Held that:- The co-ordinate Bench of the Tribunal in the case of CC, New Delhi v. Sameer Gehlot [2010 (11) TMI 85 - CESTAT, NEW DELHI] has taken a view that the benefit of Notification No. 21/2002-Cus. is available to the assessee and another co-ordinate Bench of the Tribunal in the case of King Rotors & Air Charter Pvt. Ltd. [2011 (6) TMI 276 - CESTAT, MUMBAI], has taken a diagonically opposite view and denied the benefit of exemption notification to the assessee.
As the contradictory orders passed by benches comprises of same number of Members i.e. Division Bench, we are unable to come to conclusion as to which judgment should be followed as we find the issue involved is the same - we direct the Registry to refer this matter to Hon’ble President for constitution of Larger Bench to come to a conclusion as to which view is correct view.
Matter referred to Larger Bench.
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2014 (10) TMI 989 - GUJARAT HIGH COURT
Income of the appellant as assessable under the head “income from other sources” OR “profits and gains of business or professions” - Held that:- The facts of the case are that since the profit which was shown by the appellant as income from business, the appellate Tribunal has committed error to shift it to income from other sources. It should have been assessed under the head 'profits and gains of business or profession’ and not under the head 'income from other sources’. In that view of the matter, we are of the opinion that the income should have been assessed under the head 'profits and gains of business or profession’ and not under the head 'income from other sources’. The issue is answered in favour of the appellant.
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2014 (10) TMI 988 - ITAT CHANDIGARH
Royalty payment - capital expenditure - whether transaction between Shri Tarun Mohan, Prop of M/s Phoneytunes.com and the company whereby 2% of sale consideration has been paid as royalty, is a sham transaction? - Held that:- Phoneytunes.com had invented technology of creating ring tones and it can be down loaded by individual mobile user and for this invention the company has agreed to pay a royalty @ 2%. The Revenue has rejected this contention in the absence of any documentary evidence.
It has to be appreciated that in case of intellectual property, it is not necessary that there would be a documentary evidence because invention is a technology and stored in the computer. The last allegation of revenue is that this is a colourable device used by the assessee to reduce the profits. We have already seen that this is not a colorable device but a pure and simple transaction through which the business of phoneytunes.com have been sold to the assessee-company and the assessee-company has agreed further to give royalty @ 2%. Secondly it is very important that the assessee-company and Tarun Mohan have duly paid the taxes on full amounts received against royalty and have not been set off against any losses etc.
It is absolutely clear that the assessee-company has paid royalty for the particular invention which belonged to phoneytunes.com and therefore in our opinion, the claim for payment of royalty deserves to be allowed - Decided in favour of assessee.
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2014 (10) TMI 987 - ITAT AHMEDABAD
TDS u/s 194I - disallowance of Compensation expenses paid on the ground of non deduction of TDS u/s. 40(a)(ia) - assessee has filed additional evidence in the fact that recipient of the amount Shri Sureshchandra J. Shah has shown the amount received in his return of income and paid tax thereon - Held that:- In view of Second Proviso to 40(a)(ia) of the Act inserted by the Finance (No.2) Act, 2004, w.e.f. 01.04.2004, which has been held to be retrospective in effect by the Agra Bench of the tribunal in the case of Rajeev Kumar Agarwal vs. ACIT [2014 (6) TMI 79 - ITAT AGRA], no disallowance can be made in the hands of the assessee of the expenditure claimed by the assessee. Therefore, we accept the additional evidence filed by the assessee and restore the matter back to the file of Assessing Officer for readjudication of the issue afresh after taking into consideration the additional evidences filed by the assessee as per law. As a result, this ground of appeal as well as additional ground is allowed for statistical purpose.
Amount received on sale of sales tax entitlements excluded from the profit derived from eligible unit being wind mill - Held that:- As decided in assessee [2014 (9) TMI 131 - ITAT AHMEDABAD] as held that the main purpose of the resolution was to modernize industries, which ordinarily would come at a considerable cost, particularly when such industries were located in under-developed areas - The industries will find it difficult without Government's incentive to undertake large-scale modernization with the use of modern technology.the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable - The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry – the matter is remitted back for fresh adjudication – Decided in favour of assessee.
Disallowance of deduction claimed u/s. 80IA for profits derived from electricity generation from wind mill at Bhogat, Gujarat - Held that:- As decided in assessee [2014 (9) TMI 131 - ITAT AHMEDABAD] tribunal has not erred in holding that there was no rectification possible u/s 80-I for reasons somewhat different from those which prevailed with the Tribunal - There was no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year – re-computation of income for the purpose of computing permissible deduction u/s 80-I for the new industrial undertaking was not required in the present case - the assessee has not suffered any loss in the year - no brought forward loss or depreciation could be reduced for determining the amount in which the deduction is to be allowed u/s. 80IA of the Act – Decided in favour of assessee.
Treatment of the amount received on sales tax entitlement as capital receipt - Held that:- Set aside the order of lower authorities on the issue and remit this issue to the file of A.O. for re-adjudicating the issue as per direction of Tribunal given [2014 (9) TMI 131 - ITAT AHMEDABAD]
Disallowance of excessive expenditure claimed u/s.40A(2)(b) - Held that:- Similar issue arose in A.Y. 06-07 [2010 (3) TMI 1236 - ITAT AHEMDABAD] as held that it is nobody's case that the transactions of purchase from the sister concerns were not bona fide transactions nor is it the case of the Revenue that these were sham transactions or that the price paid in respect of each of these transactions by the assessee was other than the one set out in the books of account of the assessee. Under these circumstances it appears to us that the taxing authorities had no right to substitute the average price in place of the price or value agreed to between the parties to the transaction, since the transaction has not been shown to be a sham one nor has it been shown that the value was not the value in the books of account.In view of the foregoing, we are not inclined to agree with the reasons of the ld. CIT(A) and therefore, delete the disallowance made by the AO - Decided against revenue
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2014 (10) TMI 986 - BOMBAY HIGH COURT
Levy of Local Body Tax in lieu of Octroi - Legality and validity of Section 127(2)(aaa), Section 99 (partly) and Section 152T of the Bombay Provincial Municipal Corporations Act, 1949 - vires of Part IXA of the Constitution of India and particularly Articles 243W and 243X - position and status of the Municipalities under the Constitution of India.
Held that:- It is evident that subject to the provisions of the Constitution, it is the Legislature of a State and which may by law endow the Municipalities with such powers and authority as may be necessary to enable them to function as Institutions of self Government. That law may contain provisions for the devolution of powers and responsibilities upon the Municipalities and that is how various aspects of planning, economic development, social justice and functions and duties in relation thereto have to be performed by the Municipalities. They have been entrusted to them. There is force in the contentions of Ms.Karnik that the provisions of every law and by which the powers, authorities and responsibilities have been endowed on the Municipalities must be construed in such a way so as to make existence of the Municipalities meaningful and purposeful. That it is an institution of self Government is, therefore, abundantly clear. That such Institution must have certain freedom, autonomy and independence is also apparent.
It is the Legislature of the State and which makes the law by which Municipalities are authorized to levy, assess, collect and appropriate such taxes, dues, tolls and fees in accordance with such procedure and subject to such limits. There could be assignment of duties to the Municipalities. The State Government may assign to a Municipality such taxes, duties, tolls and fees levied and collected by the State Government for such purposes and subject to such conditions and limits. Therefore, when the Legislature of the State has to endow the Municipalities and by law with powers and authority so as to enable them to function as institutions of self Government effectively, then, that position is in no way affected merely because the law authorizes the State to impose the taxes.
Eventually, the Municipality derives it's power and authority to impose the tax from the law made by the Legislature. That such law obliges the Corporation to impose the property tax and tax on vehicles, boats and animals, therefore, cannot be said to be encroaching on it's independence and autonomy.
The prayers in the Writ Petition and if carefully perused are not that this proviso should be declared as unconstitutional, null or void nor is there any plea, elaborate or otherwise, to be found in the grounds in the Writ Petition, which would denote that prior to imposition of Local Body Tax the power conferred by the proviso can be termed as unconstitutional. What has been emphasized before us and during the course of argument is that when it comes to Section 127(2) (aaa), there is no such proviso. In other words, there is a contention raised that the proviso below clause (aa) confers discretion in the State Government to direct levy of cess on entry of the goods into the limits of the city for consumption, use or sale therein, in lieu of octroi whereas in comparison clause (aaa) does not contain any such proviso. That the absence of any proviso to clause (aaa) would show that once the State directs that Local Body Tax should be imposed, then, the Corporation has no choice or option, but to so impose it.
Merely because a power is conferred in the State Government to issue instructions or directions, does not mean that the State would exercise it frequently and indiscriminately or as per it's whims and fancies. The power in the State is coupled with a duty.
The provisions relating to levy, collection and recovery of cess in lieu of octroi, contained in Chapter XIA shall mutatis mutandis apply to levy and collection of Local Body Tax. There, the levy and incidence of cess, certain goods not liable or exempt from cess, liability of cess in certain cases, cess authorities, registration, memorandum of sales or purchases, liability to maintain and produce accounts, production and inspection of accounts and documents and search of premises, seizure of books of accounts and goods, etc. are some of the matters and all the provisions in relation thereto as are to be found in Chapter XIA are made applicable to Local Body Tax. The Local Body Tax regime is, therefore, not such as could be termed as destructive of the constitutional scheme.
Whenever the State calls upon the Municipal Corporation to levy the Local Body Tax it is not imposing it on the Municipal Corporation, but reminding it to levy, assess and collect the tax which is more friendly and serving all people including traders. That the Local Body Tax has to be then levied, assessed and collected by the Municipal Corporation does not mean that the State takes an unilateral decision in all matters connected with the levy. Though the State takes a decision the Municipal Corporation is not overlooked and as understood above. Therefore, the determination of the rate of levy, selection of articles and goods, manner of levy, assessment and recovery though controlled by the State, but the Municipal Corporation has definite role to play in the same. Its role is by no means diluted or diminished. It is eventually the Local Body Tax and to be levied, assessed and recovered by the local body. Therefore, the State Government being empowered by the various provisions noted above to direct levy, to regulate and control its assessment and recovery, does not mean that the autonomy and independence or status and position of the Municipal Corporation is in any manner threatened leave alone defeated or frustrated.
There is no hesitation in rejecting the submissions of the Petitioners to the contrary - the Constitutional Scheme is in no way affected by the amendments made to the said Act.
Petition dismissed - decided against petitioner.
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2014 (10) TMI 985 - GUJARAT HIGH COURT
Penalty under section 271(1)(c) - Addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation.
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2014 (10) TMI 984 - ITAT MUMBAI
Addition u/s 40A(2)(b) - payments to persons specified - payments made to MIs. Kukreja Services Pvt. Ltd. towards Business Centre Facility and Administration Charges - Held that:- As gone through the order of the Tribunal in assessee’s case and found that on identical facts and circumstances, the similar addition made in earlier years were deleted by the Tribunal. We also found that payments made for business centre facility and administrative charges were not in excess of fair market value of similar services available in the market. No merit in the addition so made by the AO under Section 40A(2)(b) of the Act. Accordingly, we direct to delete the same.
Addition of interest paid on account of alleged interest-free loans given to the sister concerns - addition as interest bearing funds have been diverted for non-business purpose - Held that:- As before the AO assessee has furnished full details of interest free funds available with it amounting to ₹ 10.22 crores out of which advance given to the sister concern was ₹ 6.99 crores. There is no dispute to the well settled proposition that if the interest bearing funds have been diverted for non-business purpose, disallowance is required to be made with respect to the interest expenditure attributable to such advances. Where interest free funds have been utilized for advancing non-business purpose, no disallowance can be made. In the instant case, assessee has demonstrated the interest free funds available which was alleged to be advanced to sister concern without charging interest which requires due consideration by the AO. In the interest of justice, we restore this ground back to the file of the AO for deciding afresh after considering the interest free funds available with the assessee firm with reference to the interest free advances given to the sister concern
Addition of interest expenditure and directed for capitalization for the same towards project cost - as per AO same should be capitalized towards projects/plots/premises by observing that assessee is in the business of construction activity for which assessee was purchasing plot and making investment for construction of building - Held that:- We are not in agreement with the contention of the lower authorities as well as the contention of the learned DR insofar as interest expenditure was indirect expenditure which is required to be debited to the profit and loss account in the year of incurring of such expenses while computing the business income of the assessee. The issue is also covered by the decision of K. Raheja (P) Ltd. [2005 (5) TMI 552 - ITAT MUMBAI] wherein it was observed that where the assessee was following completed contract method for recognizing its income/loss, but claimed finance cost in nature of interest as a period cost, the same is deductible in the year in which it was incurred or accrued. It was further observed that the Accounting Standard 7 issued by the ICAI, also suggested that in case where expenditure cannot be attributed to a particular activity carried on by the assessee, same is to be allowed as period cost. It was further observed that various benches of the Tribunal have also taken a consistent view that claim made by the assessee for deduction of finance cost by way of interest is in conformity with said Accounting Standard.
No merit in the action of the lower authorities for not allowing the claim of interest expenditure paid to the bank on the funds borrowed and debited to profit and loss account of the year under consideration. even after disallowing the said interest expenditure, the declared loss of ₹ 2.08 crores was assessed by AO at a loss of ₹ 40.18 lakhs. Thus, there was no intention of assessee to reduce its taxable income by claiming interest paid to bank as expenditure of the year under consideration. - Appeal decided partly in favor of assessee.
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2014 (10) TMI 983 - MADRAS HIGH COURT
Maintainability of case for adjudication before Arbitral Tribunal - it was pleaded that the dispute between the parties is one of accounting and the appellant should not be permitted to wriggle out of the mode of resolution of disputes by arbitration - Held that:- A plaint is not to be read like a statute. The plaint has to be read as a whole. The allegation is really against their employee and in accounting dispute inter se the parties, and by impleading the third defendant, the appellant cannot be permitted to defeat the arbitration clause. At request of learned Senior Counsel for the appellant, we do clarify that naturally what has been observed by the learned Single Judge is for purposes of deciding the application under Section 8 of the said Act and would not, in any case, affect the merits of controversy before the Arbitral Tribunal.
Mere allegation of fraud against the third respondent, with some splatterings of allegations against the first two defendants / respondents, would not result in the case being made unfit for adjudication before the agreed mode of Arbitral Tribunal. In fact, even the appellant understood it in the same way, till suddenly the 'U' turn arose.
Appeal do not have any merit and is dismissed.
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2014 (10) TMI 982 - KARNATAKA HIGH COURT
Registration of the assessee u/s 12A with effect from 1. 4.2003 - Held that:- The Tribunal has taken pains to set out the facts of the case, the relevant provisions, the amendment, the object with which the trust is established, the judgments on which reliance is placed and later has rightly come to the conclusion that the delay is a bonafide one and therefore, it requires to be condoned. It has also taken note of the parliamentary legislation which was passed by the Government Major Ports. the nature of work the assessee is carrying on, the way in which they are protecting the interest of the country, the lengthy coast line in the west and in the east and held that therefore, it is entitled to registration under Section 12A of the Act. The order passed by the Tribunal is flawless. We do not see any justification to interfere with the said order.
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2014 (10) TMI 981 - ITAT MUMBAI
Rebate u/s. 88E - Exclude short term capital gains for the purpose of calculating "average rage of tax" for determining rebate u/s. 88E - tax rate of business income - Held that:- The average rate of income tax is to be applied on the income which is computed under the head profits and gains of business or profession. Such income has to be referred only in the context of meaning given in sub–section (1). If the business income of the assessee company is taxed at maximum marginal rate, then rebate is to be allowed for the security transaction tax paid on such income only under section 88E.
The short term capital gain is taxed at lower rate under section 111A, but at the same time, no security transaction tax credit is allowed against the same. The tax rate of business income is governed by altogether different provisions of the Act which could not be imported or read into section 88E. The phrase “amount calculated by applying the average rate of income tax” as used in sub– section (2) has to be reckoned as average rate of income tax on business income only. No merit in the ground raised by the Department as the directions given by the learned Commissioner (Appeals) is in accordance with the provisions of the law. - Decided against revenue
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2014 (10) TMI 980 - KERALA HIGH COURT
Sale of pledged articles taken as a security - Dealer or not? - levy of tax on sale - imposition of penalty for non-payment of tax - Is the appellant is a dealer as defined under Section 2(xv) of the Kerala Value Added Tax Act? - Held that:- Reading of Rule 2(xv)(f) show that a bank or a financial institution selling pledged articles taken as a security whether in the course of business or not, is a dealer - In so far as this case is concerned, it is the admitted case of the bank that the properties of the company were mortgaged to it, for securing the loan availed and those properties were sold in public auction by the Bank. It was in the capacity of the mortgager that the bank became a party to the proceedings before the BIFR - the appellant bank satisfied the requirements of Section 2(xv)(f) of the Kerala Value Added Tax Act and is a dealer in so far as the sale conducted by it on 5.4.2007.
The respondents were fully justified in levying tax and also penalty - revision dismissed.
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2014 (10) TMI 979 - SC ORDER
Rectification of mistakes - Exemption u/s 10(10) - Voluntary Retirement Scheme (VRS) - Error apparent on record - Held that:- We find no reason to entertain these Special Leave Petitions, which are, accordingly, dismissed.
However, question of law is kept open.
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2014 (10) TMI 978 - ITAT MUMBAI
Treatment to rental income received by the assessee on letting out the unsold stock - “Income from house property” or “Business income” - allowing of deduction under section 24 - Held that:- On identical set of facts, it has been held consistently by the Tribunal that the rental income received by the assessee has to be assessed under the head “Income from house property”. Therefore, following the orders of the Tribunal in the preceding assessment years on the same issue, we confirm the order of the ld. CIT(A) on this issue and thus the appeal of the Revenue is hereby dismissed accordingly.
Income from the sale of the premises in question as sale of the stock in trade - busniss income - assessee submitted that property in question was converted from stock in trade to investment in the year 2005 - Held that:- Mere changing the head in the balance sheet is not sufficient to hold that the intention of the assessee to hold the property was as investment. From the record, we observe that since the assessee could not sell its property at appropriate time and therefore had exploited it for rental purposes. To get the benefit of indexation, the assessee made the accounting entry treating the same as investment, whereas, the real business intention and treatment of the property remained the same i.e. to sell it for the purpose of business of the assessee. The AO has discussed in detail, the nature, character and business of the assessee, the clauses of the partnership deed as well as the terms and conditions of the agreement entered into by the assessee while selling the property in question as promoter of the property.
The order of the AO as well as of the ld. CIT(A) is well reasoned and we do not find any infirmity in the same. Lower authorities have rightly treated the income from the sale of the premises in question as sale of the stock in trade and as such the income from the same has rightly been taxed under the head “Business income.”
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2014 (10) TMI 977 - ITAT MUMBAI
Capital gain computation - Value of tenancy right determination - deduction of cost of improvement of the residential premises inherited by the assessee against the long term capital gain - FMV determination - Claim towards the cost of new residential property purchased against long term capital gain arising on sale of an old house property - deduction u/s 54 denied - as per assessee he inherited tenancy rights from his father and hence the provisions of section 55(2)(b)(ii) shall apply - as per DR cost of tenancy right should be taken as NIL - Held that:- Since the assessee has transferred only his tenancy right, in our view, the assessee cannot consider the cost incurred on construction of the structures as the cost of acquisition of tenancy rights. In our view, the value of tenancy right has to be determined in accordance with the practice adopted in real estate market.
The assessee is entitled to adopt fair market value of the tenancy rights as on 1-4-1981 as the cost of acquisition of tenancy rights. However, from the records we notice that neither the assessee nor the A.O. has attempted to ascertain the fair market value of the tenancy rights as on 1-4-1981. Accordingly, we are of the view that the issue relating to the determination of fair market value of the tenancy rights as on 1-4-1981 should be decided afresh at the end of the A.O. Accordingly, we set aside the order of the ld. CIT(A) on this issue and restore the matter to the file of A.O. with a direction to determine the fair market value as on 1-4-1981
Deduction towards the expenditure incurred on construction of any authorized or any unauthorized structure - Held that:- From the computation of capital gain made by the assessee, we notice that the assessee has claimed to have spent ₹ 31 lacs for construction of certain structures on 15-12-1988 and claimed indexed cost thereof as deduction against capital gain. In this regard, we inclined to agree with the view taken by the ld. CIT(A) that the assessee has received compensation for surrendering the tenancy rights and not towards surrender or sale of any unauthorized or authorized structure - assessee is not entitled to claim any deduction towards the expenditure incurred on construction of any authorized or any unauthorized structure
Disallowance of part of expenditure incurred in connection with the acquisition of new asset - Held that:- The assessee is entitled to include the expenditure incurred on the new flat in the cost of the new flat, provided they were incurred within in the prescribed time. However, in the instant case, the details of expenditure relating to ₹ 2,23,830/- are not available on record. Hence, in our view, the claim made by the assessee with respect to the sum of ₹ 2,23,830/- needs to be examined afresh in the light of the decision rendered by the co-ordinate Bench of this Tribunal in the case of Saleem Fazelbhoy [2006 (6) TMI 139 - ITAT BOMBAY-G]
Disallowance of development charges, proportionate share of tax and other charges - Held that:- all these expenses have been incurred by the assessee for peaceful enjoyment of the property and not for acquisition of the property -Accordingly, we find merit in the decision taken by the ld. CIT(A) in confirming the decision taken by the A.O. Accordingly we hold that the assessee is not entitled to include this amount in the cost of acquisition of new flat.
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2014 (10) TMI 976 - SUPREME COURT
Oppression and mismanagement - Criminal proceedings in exercise of power Under Section 482 Code of Criminal Procedure - Embezzlement of crore of Rupees by affecting suitable change in the shareholding pattern - Held that:- Judicial process should not be an instrument of oppression or needless harassment. The court should be circumspect and judicious in exercising discretion and should take all the relevant facts and circumstances into consideration before issuing process lest it would be an instrument in the hands of private complainant as vendetta to harass the persons needlessly
Summoning of an accused in a criminal case is a serious matter and the order taking cognizance by the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. Section 482 of the Code of Criminal Procedure empowers the High Court to exercise its inherent powers to prevent abuse of the process of court and to quash the proceeding instituted on complaint but such power could be exercised only in cases where the complaint does not disclose any offence or is vexatious or oppressive. If the allegations set out in the complaint do not constitute the offence of which cognizance is taken by the Magistrate it is open to the High Court to quash the same in exercise of power Under Section 482.
The power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice.
The letter dated 14.12.2006 which is the basis of taking cognizance was allegedly sent from the office of Respondent No. 4 Company under the signature of one colleague of the Appellant without the knowledge or prior permission of the Appellant and the said letter was never signed by the present Appellant. In our view, if that is so, it is open to the Appellant to take a defense and prove their contention during trial. Needless to say that the trial court shall consider the said contention during trial and record its findings.
The High Court rightly refused to quash the criminal proceedings in exercise of power Under Section 482 Code of Criminal Procedure - appeal dismissed.
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2014 (10) TMI 975 - ITAT PANAJI
Addition u/s 69A - Cash in hand - peak credit for cash deposit - Held that:- No alternative except to accept the opening balance of the cash in hand of ₹ 24,49,500/- as on 1.4.2005. If the opening balance of ₹ 24,49,500/- stands accepted as no appeal has been filed by the Revenue for A.Y 2005-06, in our opinion, no interference is required in the order of CIT(A) as this amount will be sufficient to off set the cash deposit of ₹ 16,90,000/- as mentioned by the AO. We accordingly sustain the order of CIT(A) allowing relief to the Assessee to the extent of ₹ 16,51,112/-. Thus, ground taken by the Revenue stands dismissed. The AO is free, if he so desires, to take the action under the Wealth Tax Act as the closing balance of cash in hand as per the cash flow statement as on 30.3.2006 comes to ₹ 27,94,699/-. - Decided against revenue
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