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2014 (11) TMI 1243
Reopening of assessment u/s 147 - proceedings initiated against the appellants are the result of a survey - undisclosed transaction of purchase of an item of immovable property - appellants came forward with the plea that the statements were forcibly recorded, and even cheques were taken from them, under duress - HELD THAT:- In the instant case, the appellants' specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society. AO made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine.
AO does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force.
It is not as if the retraction from a statement by an assessee would put an end to the procedure that ensued on account of survey or search. AO can very well support his findings on the basis of other material. If he did not have any other material, in a way, it reflects upon the very perfunctory nature of the survey. We find that the appellate authority and the Tribunal did not apply the correct parameters, while adjudicating the appeals filed before them. On the undisputed facts of the case, there was absolutely no basis for the Assessing Officer to fasten the liability upon the appellants. Our conclusion find support from the Circular dated March 10, 2003, issued by the Central Board of Direct Taxes, which took exception to the initiation of the proceedings on the basis of retracted statements. Appeal allowed and the orders of assessment are set aside.
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2014 (11) TMI 1242
Termination of the contract - whether notice of termination of the contract in issue can operate as an order of termination? - HELD THAT:- The contract in issue is being executed through the Engineering Consultant i.e., RITES Ltd. (respondent no.2). Therefore, in view of the order that I propose to pass, both counsels say that the notice need not be issued to the other respondents including respondent no.2.
In view of what is stated by the learned ASG, whereby in effect he has accepted the offer of the petitioner, no further orders are called for in the petition filed under Section 9 of the Act. Parties will abide by the contents of paragraph 5(i) to (iv), which have fructified into a consent order - Since, counsels for parties are agreed that the procedure of DRE, as encapsulated in the contract in issue, has been rendered inefficacious, the parties will proceed to arbitration straightaway.
The captioned petition is disposed of.
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2014 (11) TMI 1241
Deemed dividend u/s 2(22)(e) - HELD THAT:- As decided in the case of Pradip Kumar Malhotra [2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein under similar circumstances, it was held that advances given for business purposes of the assessee cannot be treated as deemed dividend u/s 2(22)(e).
As decided in SMT. G. SREEVIDYA, [2012 (8) TMI 484 - ITAT, CHENNAI] in order to attract the provisions of section 2(22)(e), the important consideration is that there should be loan/advance by a company to its shareholder. Every amount paid must make the company a creditor of the shareholder of that amount - every payment by a company to its shareholders may not be loan/advance. In the present case, the amount was withdrawn by the assessee from the company only to meet her short term cash requirements.
By virtue of offering personal guarantee and collateral security for the benefit of the company, the liquidity position of the assessee had gone down. In the strict sense if it is to be construed the amount forwarded by the company to the assessee was not in the shape of advances or loans. The arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency. In the facts and circumstances of the case, it is not appropriate to hold that the amount withdrawn by the assessee partakes the character of deemed dividend under the provisions of section 2(22)(e) - Decided against revenue.
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2014 (11) TMI 1240
AS PER H.L. Dattu, C.J.I.
Award of interest on interest from the date of award - whether in light of the Three Circles case [2008 (9) TMI 935 - SUPREME COURT] and McDermott case [2006 (5) TMI 442 - SUPREME COURT] there exists any infirmity in the decision rendered by this Court in the S.L. Arora case [2010 (1) TMI 1261 - SUPREME COURT] - whether Sub-section (7) of Section 31 of the Act, 1996 could be interpreted to include interest pendente lite within the sum payable as per the arbitral award, for the purposes of awarding post-award interest?
HELD THAT:- From the above-quoted paragraphs of the McDermott case [2006 (5) TMI 442 - SUPREME COURT], it is abundantly clear that the decision neither makes any reference to awarding of compound interest nor does it allow post-award interest to be imposed on the aggregate of the principal claim and interest pendente lite. This Court had merely sought to clarify the position with respect to the rate of interest awarded and further the power of this Court to invoke Article 142 of the Constitution of India, 1950 to alter the said rate of interest in order to do complete justice. Thus, it is evident from paragraphs 154 to 156 of the McDermott case [2006 (5) TMI 442 - SUPREME COURT], that the proposition surrounding arbitral tribunal's authority to award of 'interest on interest' was not deliberated upon but merely argued by the Respondents therein. However, this argument was erroneously relied upon in the Three Circles case (supra) to decide upon the issue related to awarding of 'interest on interest' or compound interest.
This Court, therefore, in the S.L. Arora case [2010 (1) TMI 1261 - SUPREME COURT] has disagreed with the reasoning laid down in the McDermott case (supra) as well as the Three Circles case (supra). This Court, on perusal of the relevant paragraphs in the aforesaid decisions, held that the observations therein must be treated as per incuriam on the issue around awarding of 'interest on interest' or compound interest.
Since the position on the interpretation of Sub-section (7) of Section 31 of the Act, 1996 regarding award of interest upon interest has been correctly decided in the S.L. Arora case [2010 (1) TMI 1261 - SUPREME COURT], the present reference may not be required. The decision of this Court in the Three Circles case (supra) was rightly held to be passed on inadvertent erroneous assumption, as stated in the S.L. Arora case [2010 (1) TMI 1261 - SUPREME COURT]. The McDermott case [2006 (5) TMI 442 - SUPREME COURT] did not deal with the question pertaining to awarding of 'interest on interest' or compound interest.
It is a sound rule of construction whereby the same word appearing in the same section of the same statute must be given the same meaning, unless there is anything to indicate the contrary. The only exception to this rule of construction, whereby the said principle may be rebutted, is by making reference to the context in which the words are used. The word may be understood in a different sense, if the context so requires that to be done. The context herein, that is, under Clause (a) and under Clause (b) of Sub-section (7) of Section 31 of the Act, 1996, does not appear to be divergent from one another. The word "sum" has been used in both clauses in the context of what is to be paid as per the arbitral award.
Thus, the term "sum" as used in Clause (b) of Sub-section (7) of Section 31 of the Act, 1996 would have the same meaning as assigned to the word under Clause (a) of the same provision. It would refer to the money as adjudicated by the arbitral tribunal based on the claim of the parties to the arbitral proceedings.
The matters are remanded back to an appropriate two-Judge Bench of this Court for adjudication.
AS PER S.A. Bobde, J.
It is clear that the interest, the sum directed to be paid by the Arbitral Award under Clause (b) of Sub-section (7) of Section 31 of the Act is inclusive of interest pendent lite - It is settled law that where different language is used by Parliament, it is intended to have a different effect. In the Arbitration Act, the word "sum" has deliberately not been qualified by using the word "principal" before it. If it had been so used, there would have been no scope for the contention that the word "sum" may include "interest." In Section 31(7) of the Act, Parliament has deliberately used the word "sum" to refer to the aggregate of the amounts that may be directed to be paid by the Arbitral Tribunal and not merely the "principal" sum without interest - it is apparent that vide Clause (a) of Sub-section (7) of Section 31 of the Act, Parliament intended that an award for payment of money may be inclusive of interest, and the "sum" of the principal amount plus interest may be directed to be paid by the Arbitral Tribunal for the pre-award period. Thereupon, the Arbitral Tribunal may direct interest to be paid on such "sum" for the post-award period vide Clause (b) of Sub-section (7) of Section 31 of the Act, at which stage the amount would be the sum arrived at after the merging of interest with the principal; the two components having lost their separate identities.
S.L. Arora's case is wrongly decided in that it holds that a sum directed to be paid by an Arbitral Tribunal and the reference to the Award on the substantive claim does not refer to interest pendente lite awarded on the "sum directed to be paid upon Award" and that in the absence of any provision of interest upon interest in the contract, the Arbitral Tribunal does not have the power to award interest upon interest, or compound interest either for the pre-award period or for the post-award period. Parliament has the undoubted power to legislate on the subject and provide that the Arbitral Tribunal may award interest on the sum directed to be paid by the Award, meaning a sum inclusive of principal sum adjudged and the interest, and this has been done by Parliament in plain language.
AS PER Abhay Manohar Sapre, J.
In complete agreement with the reasoning and the eventual conclusion arrived at by brother Bobde J. Even though, the judgment delivered by brother Bobde J. encapsulates everything of what is required to be said, I, however, looking to the point involved and very ably argued by all learned senior Counsel, wish to record my own reasons, in addition to what has already been laid down.
For the purposes of an award, there is no distinction between a "sum" with interest, and a "sum" without interest. Once the interest is "included in the sum" for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other. The interest component then looses its character of an "interest" and takes the colour of "sum" for which the award is made - There may arise a situation where, the Arbitral Tribunal may not award any amount towards principal claim but award only "interest". This award of interest would itself then become the "sum" for which an award is made Under Section 31(7)(a) of the Act. Thus, in a pre-award stage, the legislation seeks to make no distinction between the sum award and the interest component in it - he amount award Under Section 31(7)(a) of the Act, whether with interest or without interest, constitutes a "sum" for which the award is made.
Post-award interest - HELD THAT:- The expression "grant of interest on interest" while exercising the power Under Section 31(7) of the Act does not arise and, therefore, the Arbitral Tribunal is well empowered to grant interest even in the absence of clause in the contract for grant of interest.
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2014 (11) TMI 1239
Revision u/s 263 - Compensation paid as afforestation charges claimed as deduction - nature of expenditure - HELD THAT:- Special leave petitions are dismissed.
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2014 (11) TMI 1238
Exemption u/s 11 - registration under section 12AA denied - Scope of amendment in Sec 2(15) w.e.f. 1.4.2009 - HELD THAT:- This issue is squarely covered against the assessee by the decision of Chandigarh Bench of the Tribunal in case of Improvement Trust, Malerkotla V CIT, [2014 (3) TMI 1178 - ITAT CHANDIGARH]wherein identical issue was considered and decided against the assessee.
The assessee Trust before us is the Improvement Trust, Malerkotla and the facts of the present case are identical to the facts of Improvement Trust, Bathinda which is also formulated under the Punjab Town Improvement Trust Act. It was fairly admitted by the ld. AR for the assessee during the course of hearing that the appeals in the case of various Improvement Trusts under the amended provisions of section 2(15) of the Act w.e.f. 01.04.2009 were pending before the Hon'ble Punjab & Haryana High Court. As the facts of the present case are identical to the facts before the Amritsar Bench of the Tribunal in Improvement Trust, Bathinda Vs CIT, Bathinda [2015 (9) TMI 1012 - ITAT AMRITSAR] and following the same parity of reasoning, we uphold the order of Commissioner of Income T ax in withdrawing the registration granted to the assessee under section 12AA - Appeal of the assessee is dismissed.
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2014 (11) TMI 1236
Disallowance made by the AO on monitoring and community development expenses - Disallowance made by the AO on meter replacement expenses - revenue or capital expenditure - Profits eligible for deduction u/s. 80IA - apportioning the head office expenses - MAT applicability as per section 115JB - HELD THAT:- As decided in own case [2013 (8) TMI 836 - ITAT MUMBAI] wherein following the decisions of the Tribunal in earlier years has deleted the addition. Respectfully following the decision of the Tribunal in earlier years grounds raised by the Revenue is dismissed.
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2014 (11) TMI 1235
Cenvat Credit - capital goods or not - being tower parts, green shelter, printers and office chairs - immovable property - tower would qualify as “part” or “component” or “accessory” of the capital goods i.e. antenna or not - it was held by High Court that subject items are neither capital goods under Rule 2(a) nor inputs under Rule 2(k) of the Credit Rules and hence CENVAT credit of the duty paid thereon was not admissible to the appellants.
HELD THAT:- Issue Notice.
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2014 (11) TMI 1234
Disallowance of loss incidental to business as allowable u/s. 28 - whether provision of section 37(1) of the Income-Tax Act, 1961 cannot override the provision of section 28? - HELD THAT:- As decided in BIPINCHANDRA K. BHATIA VERSUS DY. CIT. [2014 (10) TMI 793 - GUJARAT HIGH COURT] as relying on case of Dr. TA Quereshi [ 2006 (12) TMI 91 - Supreme Court] loss which was incurred during the course of business even if the same is illegal is required to be compensated and for the loss suffered by the assessee – Decided in favour of assessee.
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2014 (11) TMI 1233
Accrual of income - claim of deduction of the amounts retained by its clients as per the contracts - According to the assessee, as the amounts were not received, they cannot be considered as part of income for the impugned assessment year - HELD THAT:- The original authority, while considering the decision of this Court in Commissioner of Income Tax v. Ignifluid Boilers (P) Ltd.,. [2006 (1) TMI 76 - MADRAS HIGH COURT] was of the view that since the issue was pending before the Supreme Court and that such a claim is of recurring nature, declined to extend the benefit to the assessee. The Commissioner of Income Tax (Appeals), however, laying emphasis on the decision of this Court in Ignifluid Boilers (P) Ltd., case (supra), allowed the appeal of the assessee and the department's appeal before the Tribunal was dismissed holding that the decision of the jurisdictional High Court is binding on the Tribunal and therefore there was no reason to differ with the findings of the Commissioner of Income Tax (Appeals). The said order of the Tribunal is under challenge before us.
When the matter was taken up for admission, the learned counsel for the appellant fairly pointed out that the Special Leave Petition preferred by the department in Ignifluid Boilers (P) Ltd., case was dismissed by the Supreme Court [2006 (7) TMI 726 - SC ORDER]
Since the issue raised in this appeal had already been decided against the department as Commissioner of Income Tax v. M/s Ignified Boilers India Ltd.(Supra) and in Commissioner of Income Tax v. East Coast Constructions & Industries Limited [2006 (12) TMI 574 - SC ORDER] no question of law arises for consideration.
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2014 (11) TMI 1232
Deduction under Section 43B - interest amount paid from the Over Draft or Cash Credit Account towards the liability of term loan - Explanation 3C and 3D to Section 43B specifically deems that the interest paid from loan or borrowing and loan or advance as not to have been actually paid - HELD THAT:- The department declined to grant the benefit of deduction on interest paid primarily on the plea that the amount has not been actually paid and transfer of amount from one account to another account cannot be treated as paid. However, the Tribunal repelled the said plea by interpreting Section 43B of the Act and held that overdraft/cash credit accounts are not similar to loan accounts. The Tribunal further observed that the interest amount has been actually paid by the assessee through Overdraft/Cash Credit account and, therefore, set aside the disallowance made under Section 43B of the Act.
A bare reading of Explanations 3C and 3D to Section 43B of the Act provides an answer to the problem by making it clear that where interest amount has not been converted into loan or borrowing (or) loan or advance, as the case may be, there is no question of denying the benefit of deduction. In the case on hand, the interest amount has been actually paid by the assessee through Overdraft/Cash Credit account and the same has not been converted into loan or borrowing (or) loan or advance, as the case may be.
Decided in favour of the assessee.
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2014 (11) TMI 1231
Disallowance of deduction u/s 10B on miscellaneous income earned by the assessee from sale of scrap - Whether CIT(A) has erred in holding the miscellaneous income earned from sale of scrap as main business activity - HELD THAT:- It is not the case of AO that these incomes are assessable under some other head of income and not as income from business. Under these circumstances, we are of the considered opinion that the order of the first appellate authority has to be upheld by applying the decision of the special bench of the Tribunal in the case of Maral Overseas Ld. [2012 (4) TMI 345 - ITAT INDORE] where it is held that in the case of Liberty India 2009 (8) TMI 63 - SUPREME COURT the Hon’ble Supreme Court has dealt with the provisions of section 80IA/80IB of the Act and not section 10B where a formula has been prescribed u/s 10B(4), the application of which would result in arriving at the figure of profits and gains that are to be considered as derived by the 100% EOU, for the purpose of computing exemption u/s 10B (1) Thus a disallowance on the ground that a particular income is not derived from the business is bad in law as the same does not confirm to the formula prescribed under the Act.
CIT(A) admitting an additional claim of the assessee - assessee has made a claim u/s 10B in the return of income - HELD THAT:- It is only a case where the claim u/s 10B was sought to be recomputed. It is not a fresh claim and hence in our view the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] does not apply.
Be it as it may, this is a legal ground and all the facts relatable to this ground are on record. Thus in view of the decision of Hon’ble Supreme Court in the case of NTPC Ltd. [1996 (12) TMI 7 - SUPREME COURT] we do not find any infirmity in the action of the first appellate authority. As far as computation of relief u/s 10B is concerned the Ld. DR could not not controvert the factual finding of the Ld. CIT(A) and hence the same is upheld. Hence these two ground Nos. 3 & 4 are dismissed.
Disallowance of interest on interest free loan advanced to a subsidiary company - HELD THAT:- Factual position is that the assessee had purchased shares of a subsidiary company for the purpose of having control over it. The amount in question is investment made and not a loan advanced. As there is no interest free loan given we uphold the findings in para 5.2 of the CIT(A) order and dismiss ground No. 1 of the revenue.
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2014 (11) TMI 1230
Area Based Exemption - Northeastern/Backward region - substantial expansion or not - doctrine of promissory estoppel - benefit of N/N. 39/2001-CE dated 31-07-2001 - Irregular availment of CENVAT Credit - Bogus Sale - it is argued that in respect of North-eastern area, there is not even a single case of detection of fraudulent availment of benefit - HELD THAT:- The percentage of excise duty paid in the exempted areas is highest when compared to similar industries in the area where there is no exemption as per the PLA. The difference in percentage is shown so high that sometimes it is three times higher the duty is paid in the areas where exemption is granted. Such a collection of revenue was found to be on account of the reasons that bogus production, overvaluation, procurement of raw material without invoice etc. Keeping in view of the recommendations found in the report, the Cabinet found that grant of indiscriminate exemption will lead to misuse. In order to prevent such malpractice, the formula of value addition has been introduced in granting partial concessions to the industries, which enjoy exemptions under Section 5A of the Act of 1944.
The State does not dispute the Industrial Policies of 1997 and 2007 and also the grant of concession pursuant to the said notifications. However, the dispute revolves round the justification for issuing the modified notifications, in question. It is to be seen whether any superior public interest is evident, which prompted the Government to issue the modified notifications - The instances of misuse noticed in the inquiry are hardly consists of about 41 cases and most of the cases, as per Annexure-A, are still under adjudication, it is not finally decided whether the industries concerned in the Northeastern region are guilty of any misuse. The argument that because of the misuse, the concession had to be withdrawn does not ap pear to be tenable, on deeper scrutiny of the materials placed before the Court. It is not as if that the State and the Department does not have any mechanism or machinery for detecting malpractice of bogus production by diligent periodical inspection.
Where the goods do not carry MRP, with reference to the marginal cost and the prevalent market price of similar goods in comparison to the market price of similar goods, the malpractice of over valuation can be detected at the time of refund.
Import of goods from the sister unit s from some other area to the exempted area - HELD THAT:- The same could also be easily detected because, under the VAT Act, the transit permits have to be taken if false transit permit has been taken for transfer of consignment from one unit to the sister unit in the exempted area, in such cases, it could be easily detected as a case of malpractice. That apart, the transit of goods is well regulated under the VAT Act, and the transit passes, documents of title of goods consigned have to be taken and that at every check post, there would be a check. It is not that easy for an industrialist to flout the law and import the goods for the purpose of evading Central Excise duty as alleged.
The scheme of the policy and the notifications insist that there should be payment of the excise duty and thereafter, they should apply for refund. The Department, at the time of refund, can very well thoroughly scrutinize all these aspects regarding misuse and malpractice alleged. Therefore, the allegation that for the instances of malpractice stated above, there has to be a partial withdrawal of concessions, does not appear to be justifiable ground.
Application of the doctrine of promissory estoppel - HELD THAT:- It is almost a well settled principle of law that the State has failed to show any prejudice to the superior public interest and that there is also no contra legislation in this regard. The respondents and the petitioners have all set up industries allured by the promise of tax concessions and made substantially investments. The setting up of an industry and commencement of production requires a thorough compliance of formalities and check up by every Department. The industries, in question, have complied with all the requirements of law and have set up industries and all of them have started production. The allegation of misuse, if really a genuine ground, it would have come to the notice of the Department much earlier before the declaration of the second Industrial Policy in the year 2007, the modified notifications are brought into force within a short span of time. If really there is any infringement or misuse or malpractice, the State would have given serious attention and would not have issued the second Industrial Policy of 2007 in haste.
The industries, in question, have complied with all the requirements of law and have set up industries and all of them have started production. The allegation of misuse, if really a genuine ground, it would have come to the notice of the Department much earlier before the declaration of the second Industrial Policy in the year 2007, the modified notifications are brought into force within a short span of time. If really there is any infringement or misuse or malpractice, the State would have given serious attention and would not have issued the second Industrial Policy of 2007 in haste. Within a span of a year after the issuance of notification of Industrial Policy of 2007, the change in the stand to withdraw the concessions does not appear to be sound and prop er and the grounds made out are so feeble and fragile which do not offer a concrete objective material for this Court to believe that really superior public interest prompted the issuance of modified notifications.
There are no reason to interfere with the order of learned Single Judge - petition allowed.
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2014 (11) TMI 1229
Order-ex-parte passed by FAA - non-compliance to notices - AR submitted that the assessee was shifting its addresses very frequently and there was a possibility that the notice served to the old address of the assessee might have been refused to be accepted - HELD THAT:- In the appellate proceedings, we notice that the ld. CIT(A) has issued notices on six occasions. On three occasions, even though the notices were served, yet no one attended before CIT(A). On one occasion, notice was not accepted by the assessee. These facts show that the callous attitude and carelessness on the part of the assessee cannot be altogether ruled out. At the same time, we notice that the taxing authorities have passed the impugned orders without hearing the assessee. The ld. AR now assures that the assessee would extend full cooperation and furnish all the facts relating to the issue.
In the interest of justice, we find some justification in the plea put forth by the assessee - The said request of the assessee can be accepted on certain terms only. Accordingly, we impose a cost of ₹ 5,000/- (Rupees five thousand ) upon the assessee and direct it to pay the same to the account of Income Tax department in the same manner as the appeal fee is paid.
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2014 (11) TMI 1228
Penalty u/s 271(1)(c) - Disallowance of expenses - HELD THAT:- Addition has been made purely on estimate without reference to any clinching evidence/material being on record and therefore, the penalty is not sustainable. This finding of CIT(A) could not be controverted by Revenue. We also find that in the penalty order also, it is noted by the AO that 25% disallowance was made out of various expenses - in the penalty order that the CIT(A), Kanpur after considering the facts of the case has restricted the disallowance to 5% of direct expenses which was worked out at ₹ 16 lac. This goes to show that the penalty was imposed only on ad hoc disallowance.
This is by now a settled position of law that on ad hoc and estimated disallowance/addition, without bringing any clinching material on record suggesting concealment of income or furnishing of inaccurate particulars of income, imposition of penalty u/s 271(1)(c) is not justified. - Decided in favour of assessee.
Rejection of books of accounts - net profit @8.28% of the training fee received by the assessee - HELD THAT:- Rejection of books of account is not proper then he can examine the allowability of various expenses claimed by the assessee under various heads as noted by the AO the assessment order particularly in view of this fact that the amount of income and expenditure along with net profit as per return filed by the assessee and as per revised return filed by the assessee are different.
In the revised return, the assessee has declared extra income on account of training fees and similarly has claimed extra expenses under the head direct training expenses. This is also seen that in the original return of income filed by the assessee, deduction was claimed on account of depreciation and in the revised return, no deduction was claimed under the head depreciation.
It is also seen that in the assessment order, it is noted by the AO that as per the submission of the assessee, some bills and vouchers are not readily available and they are misplaced and cannot be produced. Hence, even if it is held that books of account are not rejected then also, the allowability of expenses has to be examined. CIT(A) should pass necessary order as per law as per above discussion after providing reasonable opportunity of being heard to both the sides.
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2014 (11) TMI 1227
Deduction u/s 80IA(4)(iii) in respect of income derived by it from the industrial park - specific condition in the notification pertaining to the assessee regarding the number of units was not fulfilled - Whether it is open to the Tribunal to rely upon rule 18C of the Rules and certain provisions from the Industrial Park Scheme, 2002 as laying down the condition construction of the minimum no. of units should be completed before deduction could be claimed under section 80IA(4)(iii) of the Act, when no such condition exists in the said section? - HELD THAT:- Allowability of deduction u/s. 80IA(4)(iii) of the I.T. Act has been decided against the assessee by the Tribunal in assessee’s own case for A.Y. 2003-04. In view of the order of the Tribunal in assessee’s own case, the grounds raised by the Revenue are allowed.
On further appeal by the assessee, the Hon’ble High Court has already admitted the 3 substantial questions of law which are already mentioned at para 5 above. Therefore, in view of the declaration u/s.158A(1) filed by the assessee in Form No.8, we direct the Assessing Officer to amend the order if the issue is decided in favour of the assessee by the order of the higher authorities at a later date.
Grounds raised by the Revenue are accordingly allowed.
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2014 (11) TMI 1226
Reopening of assessment - Disallowance u/s 10A - business of development of computer software and export - assessee was running the activities since 1993 under SSI unit and hence the undertaking is not newly established undertaking as registered by Section 10A - Claim accepted earlier but withdrawn in subsequent assessment years - HELD THAT:- We find the claim of deduction u/s.10A was also allowed by the Revenue in summary assessment for the A.Y. 2004-05 and there was no scrutiny assessment u/s.143(3). There is also no dispute to the fact that after completion of the assessment for the impugned assessment year on 21-02-2013 the AO had reopened the assessments for A.Yrs. 2006-07, 2007-08 & 2008-09 by issuing notice u/s.148 on 25-032013 for all the three years. From the reasons recorded for issue of notice u/s.148 we find the reasons for such re-opening was on the basis of the finding of the AO for A.Y. 2010-11. However, we find the AO vide order dated 28-03-2014 has dropped such 147 proceedings for the above 3 years.
Identical orders have been passed for A.Yrs. 2007-08 & 2008-09.
From the above chronology of events, it is crystal clear that the claim of deduction u/s.10A of the assessee from A.Yrs. 2004-05 to 2009-10 have been allowed.
Whether after allowing the deduction for 6 years can the AO deny the benefit of deduction u/s.10A in the 7th year, i.e. for the impugned assessment year? - We find an identical issue had come up before the Hon’ble Bombay High Court in the case of Western Outdoor Interactive Pvt. Ltd [2012 (8) TMI 709 - BOMBAY HIGH COURT] held that unless deduction allowed u/s.10A for the first assessment year is withdrawn, denial of exemption u/s.10A for subsequent years is impermissible.
Thus claim of deduction u/s.10A cannot be denied to the assessee for the A.Y. 2010-11 since such deduction has been allowed to the assessee from A.Yrs. 2004-05 to 2009-10 - Decided in favour of assessee.
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2014 (11) TMI 1225
Penalty 271(1)(c) - Defective notice - Difference of income declared in return under Section 153A and original return - HELD THAT:- As relying on case of Manjunatha Cotton and Ginning Factory and others [2013 (7) TMI 620 - KARNATAKA HIGH COURT] the defective notice resulted in principles of natural justice being suffered and based on such proceedings, no penalty could be imposed on the assessee. Therefore, the entire proceedings initiated would become without jurisdiction. Consequently, the order passed would become invalid and is liable to be set aside. Therefore, as the notice issued in the instant case initiating penalty proceedings is not in accordance with law, order passed in such proceedings is void - Decided in favour of assessee.
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2014 (11) TMI 1224
Refund of the tax paid in pursuance of the declaration filed u/s 158BC - entitled to claim the entire refund of taxes paid on the undisclosed income declared m the return of income filed by the assessee - Whether the Tribunal was correct in holding that the assessee would be entitled to claim the entire refund of taxes paid on the undisclosed income declared in the return of income filed by the assessee of ₹ 83 lakhs and the admitted tax paid along with the return of ₹ 14,50,000/- and the balance after assessment, since the assessment order was set aside by ignoring the principle that the amount admitted in the return of income cannot be refunded? - HELD THAT:- Proviso (b) to section 240 is also declaratory. It seeks to clarify the law so as to remove doubts leading to the courts giving conflicting decisions, and in several cases directing the revenue to refund the entire amount of income-tax paid by the assessee where the revenue was not in a position to frame a fresh assessment, Being clarificatory in nature it must be held to be retrospective, in the facts and circumstances of the case. It is well settled that the legislature may pass a declaratory Act to set aside what the legislature deems to have been a judicial error in the interpretation of statute. It only seeks to clear a meaning of a provision of the principal Act and make explicit that which was already implicit.
Where the assessment is annulled, the refund shall become due only In respect of the amount, if any, paid in excess of the tax chargeable on the total income return by the aesessee. Therefore, it necessarily follows that there should be return filed by the assessee showing his total income and paying tax. Thereafter, if the Assessing Officer were to make any addition and pass an assessment older and if that assessment is annulled, then, what is annulled is not the entire liability to pay tax. What is annulled is only additional tax foisted on the assessee by virtue of the assessment order in which event the tax refundable is only additional tax paid in pursuance of the assessment order and not the tax paid as per the returns. The returns filed was in pursuance of the notice issued under Section 158BC and it is not voluntary act.
Whether the assessee files a NIL return or files a return showing a particular undisclosed income and pays tax, if the entire proceedings initiated is found to be without jurisdiction, the return filed becomes without jurisdiction and the order passed thereon also becomes without jurisdiction, in which event there is no liability to pay tax at all. Merely because the return was filed in pursuance of the said notice, it cannot be said that the assessee has filed a return showing his total income. The effect of setting aside the assessment order passed under Chapter XIV B is that there is no liability to pay tax insofar as the assessee is concerned. If any tax is collected in pursuance of such Cider, the entire tax becomes liable to be refunded. That is what the Tribunal has exactly held. - Decided against revenue.
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2014 (11) TMI 1223
Disallowance of telephone expenses - assessee non furnishing telephone wise amount of claim and the places where telephones were installed - personal expenditure - HELD THAT:- We find that the assessee before the AO could not furnish any details of expenses, neither with regard to purpose for which the telephone was used and where such telephones were installed. In such a case, personal user by the partners cannot be ruled out.
There cannot be any precedence on factual matter, when in A.Y. 2004-05, the Ld.CIT(A) has deleted the disallowance on the ground that there was no basis of ad hoc disallowance by the AO. It was in this background the Tribunal had deleted the said addition. The learned counsel was unable to furnish the details or point out that on similar reasons disallowance was made in the earlier years. Thus looking to the facts of the case, we are of the opinion that this matter should go back to the file of the AO to examine this issue afresh - Decided in favour of assessee for statistical purpose.
Disallowance of business promotion expenses being 20% - AO disallowed said expenses on ad hoc basis on the ground that these expenses pertain to expenditure incurred on hotels and clubs and similar disallowance in the pased were made - Assessee submitted a very important fact and distinguishing feature in this year is that, assessee has paid Fringe Benefit Tax on payments relating to business promotion, therefore to the proportion of FBT paid, no disallowance should be made - HELD THAT:- We agree with the contention of the learned counsel that, if the assessee has paid FBT on the said amount then no disallowance is called for. However, in order to verify, this contention the matter is restored to the file to the AO, to see whether, any FBT has been paid on the amount debited for business promotion expenses. In case FBT has been paid then no disallowance should be made on such payment. Accordingly, ground no. 2 is partly allowed.
Disallowance u/s 14A read with rule 8D - HELD THAT:- So far as assessee’s contention that no interest should be disallowed as the investments have been made from surplus and were made prior to the loan taken from the bank, have not been examined either by the AO or by the Ld.CIT(A). This contention of the assessee should be examined by the AO. Further we agree with the contention of the learned counsel that, so far as investment in debentures and mutual funds which are debt oriented, the same should be excluded while taking the average investment for the purpose of disallowance under clause (iii) of rule 8D (2). Only average investment made in the shares should be taken into account. We direct the AO to compute the disallowance under clause (iii) of rule 8D (2) only on average investment made in shares. Thus the entire issue of disallowance u/s 14A is restored back to the file of the AO to examine the issue of interest and indirect expenses as per directions given above. - Decided partly in favour of assessee for statistical purposes.
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