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Showing 1 to 20 of 1478 Records
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2016 (6) TMI 1481 - ITAT DELHI
Nature of expenditure - Employee Stock Option Scheme Compensation - disallowance made treating it as capital in nature - HELD THAT:- Facts of the case for the present year being identical as in earlier years [2015 (8) TMI 319 - ITAT DELHI], for the same reasons and respectfully following the precedent, we set aside the impugned order of ld. CIT(A) and send the matter to the file of AO for deciding it in conformity with the decision taken in the case of Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE], wherein held that discount on issue of ESOP is allowable as deduction in computing income under the head 'Profits and gains of business or profession.' Since it is on account of an ascertained and not contingent liability, it cannot be treated as a short capital receipt. Thereafter, the Special Bench has laid down the mechanism for determining as to when and how much deduction should be allowed. It has been held that the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of ESOP by considering the period and percentage of vesting during such period. Deduction of the discounted premium during the years of vesting should be allowed on straight line basis. Department’s appeal stands allowed for statistical purposes.
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2016 (6) TMI 1480 - SC ORDER
Demand of Service tax along with interest and penalties - Online information and database access or retrieval service under reverse charge mechanism on the service provided by CRS/GDS - HELD THAT:- Delay condoned.
Issue notice.
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2016 (6) TMI 1479 - MADRAS HIGH COURT
Validity of assessment order - opportunity of personal hearing was not granted - violation of principles of natural justice (audi alterem partem) - HELD THAT:- In the impugned orders of assessment, the respondent proceeded to confirm the proposals of the Enforcement Wing officials. The manner, in which, the Assessing Officer proceeded to complete the assessment has been deprecated in several decisions pointing out that the Assessing Officer is an independent Authority and uninfluenced by any report or proposal, the Assessing Authority has to finalize the assessments after considering the objections and documents. Therefore, the respondent - Authority could not have stated that the proposals arrived by the officials of the Enforcement Wing have been confirmed.
Rather, he should have concluded as to why the restriction of exemption only to 50% is justifiable and this should have been done by proper reasons. Since this has not been done, the petitioner is entitled to succeed.
The impugned orders are set aside and the matters are remitted back to the respondent for fresh consideration - Petition allowed by way of remand.
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2016 (6) TMI 1478 - ITAT CHANDIGARH
Cash deposits in bank account - CIT(A) deleted the addition - HELD THAT:- On perusal of the order of the CIT (Appeals), we do not find any infirmity in the same as his decision is based on Remand Report filed by the Assessing Officer. In the remand proceedings, the Assessing Officer had called for information from the bank and verified the contention raised by the assessee. In this view, we do not intend to interfere with the order of the CIT (Appeals).
Deposits in bank account - CIT (Appeals) decided the issue against the assessee stating that the stance of the assessee linking up the withdrawals from one account to the other account is not plausible because of the time gap as well as involvement of different bank accounts - HELD THAT:- We do not find any infirmity as it is a fact on record that the assessee did not furnish any of the bank accounts before the AO even when he kept on asking for the same. The Assessing Officer had requisitioned these accounts under section 133(6) of the Act from the bank itself. At the time of assessment proceedings, the assessee did not come out with the explanation which he offered before the CIT (Appeals) and even the evidence in the form of bank account No.6678 being filed before the CIT (Appeals) for the first time was not available readily. In the said circumstances, we do not find any infirmity in the order of the CIT (Appeals)
Investment made by the assessee in jewellery - CIT (Appeals) dismissed the ground of the assessee stating that investments were found at the residence of the assessee and the presumption was against him, which he had not been able to rebut - HELD THAT:- No infirmity in the order of the CIT (Appeals) as there is no dispute to the fact that three retail invoices of M/s Tanishq were found during the course of search from the residence of the assessee. The presumption of the documents found during the course of search is against the assessee. It is presumed that the document belong to the assessee though the presumption is a rebuttable one but we observe that nowhere during the proceedings before the Assessing Officer as well as the CIT (Appeals) the assessee had been able to rebut the same with the cogent evidence. Therefore, we do not find ourselves inclined to interfere in the order of the CIT (Appeals). The ground of the assessee is dismissed.
Cash deposits in the bank account in the name of the assessee - CIT(A) sustained addition only to the extent of peak credit - HELD THAT:- When we observe that the bank account is having frequent deposits and withdrawals, there is no justification in making the addition of all the deposits as the benefit of withdrawal also may be given to the assessee. The theory of peak credit is to be applied. Therefore, we do not intend to interfere in order of the CIT (Appeals).
Addition of expenses incurred on construction only on the ground that since the same was surrendered and not declared while filing of return - HELD THAT:- No infirmity as the assessee himself during the course of search has disclosed both the amounts - The stand was changed at the time of assessment proceedings. Furthermore, the behavior of the assessee during the course of search and changing stances before the Assessing Officer also casts aspersions in the submissions made by the assessee. Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal is decided against the assessee.
Jewellery found at the time of search - HELD THAT:- No infirmity as the CIT (Appeals) was fair enough to give the assessee relief of Rs. 5 lacs considering the fact that he has been married for a long time and his parents are also living with him. The jewellery may also form part of istri dhan of his wife and his mother. However, it is a fact on record that the assessee has made very general explanation with regard to the source of jewellery and has not given any specific source of acquiring the said jewellery. Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
Cash found during the course of search - HELD THAT:- No infirmity since the assessee has given only bald submission to the effect that the cash was sourced out of the income generated by him as per the statement recorded at the time of search, while the fact is that the assessee has not been able to substantiate the source of cash before the AO even before the CIT (Appeals). Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
Addition on the basis of seized documents on account of purchase of jewellery from the residence of assessee - HELD THAT:- We do not find any infirmity since the assessee has not been able to substantiate the source of acquisition of jewellery and in view of the presumption under section 292C of the Act being against the assessee as the documents were found during the course of search from the premises of the assessee, the addition is to be sustained. We are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
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2016 (6) TMI 1477 - ITAT DELHI
Valuation of unquoted shares - deduction towards depreciation in the value of shares claimed - deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment - assessee submitted before the AO that the company had surplus funds which were used for purchasing 1,80,000 shares at par and company was about to come out with public issue, but, eventually, did not due to market conditions - Since the assessee invested all surplus funds as per the assessee’s own version, the AO treated the purchase of shares as 'Investment’ and, resultantly, disallowed the amount of loss on their valuation
HELD THAT:- It is evident from the assessee’s reply tendered before the AO that the company invested its surplus funds in purchase of unquoted shares. It can be seen that the assessee had never dealt with or traded in shares either in the past or in the future. Under these circumstances, it is difficult to accept the assessee’s contention of having held these shares as `stock-in-trade’. Once it is held that the shares were purchased as investment, there cannot be any deduction on account of decline in the value of `investment’ as at the year end. Therefore, approve the view taken by the authorities below.
Penalty u/s 271(1)(c) in respect of disallowance deduction towards depreciation in the value of shares - Facts narrated above evidently prove that the assessee claimed deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment. But, for that, all the necessary details were duly filed. Simply because the assessee’s contention of the shares having been purchased and held as stock-in-trade has not been accepted, it cannot be equated with concealment of income or furnishing of inaccurate particulars of income so as to attract the penalty. It is a case in which the assessee’s bona fide belief of these shares having been held as investment has not been accepted, which can be a good ground for making of disallowance, but, cannot lead to imposition of penalty. Therefore, order for the deletion of the penalty.
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2016 (6) TMI 1476 - MADRAS HIGH COURT
Rejection of bid - rejection on the ground that it has failed to meet the minimum eligibility criteria, as the overdraft facility of Rs. 98.01 Crores availed would come under "short term borrowing" as per Schedule III of the Companies Act, 2013 - HELD THAT:- Clause 7.4 of RFQ speaks about minimum eligibility criteria for financial capability. This has been fixed for the bidding company or any one of its promoters forming a separate category and a bidding Consortium and the lead Consortium member or any one of the promoters of a bidding Consortium. In other words, the criteria has to be complied with either by a bidding Company or any of its promoters or a lead Consortium Member or any one of the promoters of a bidding Consortium - This Court does not find any ambiguity in the above said clause qua a bidding Consortium. The criteria prescribed has to be satisfied either by a lead Consortium member or any one of the promoters of the bidding company or a lead Consortium Member, as the case may be. Now, in the case on hand, it is not concerned with the Lead Promoter of the petitioner. Here, the petitioner claims to be the Lead Consortium Member.
This Court also does not find any ground to declare clause 7.4.1.2 as unconstitutional. The petitioner has not demonstrated any arbitrariness or illegality involved. The said clause has been introduced to satisfy with the capability of a bidder. The methodology adopted in fixation of net tangible asset by deducting the current liability from the current asset cannot be found fault with. As per the communication of the petitioner itself, it is agreed to undertake and abide by all the terms and conditions of the RFQ. This Court does not find anything wrong in the definition clause 7.4.1.2 - The petitioner, after having failed to satisfy the minimum eligibility criteria for financial capability, made a belated attempt. Thus, the challenge made on the validity of clause 7.4.1.2 of RFQ is rejected.
The petitioner has shown the sum of Rs. 98.01 Crores as short term borrowings under the caption "current liabilities". The records also indicate the amount as "loan payable on demand from banks". Now, the petitioner wants to treat it as a long term borrowing based on the Certificate of his Chartered Accountant. This Court is afraid that as against the records produced by the petitioner itself, no sanctity can be given to the certification of the Chartered Accountant. As rightly submitted by the learned Senior Counsel appearing for respondent No. 2, the petitioner itself has shown its balance sheet the amount inclusive of Rs. 98.01 Crores as "short term borrowings". It is also shown that the sum of Rs. 1,26,88,28,403, which is inclusive of Rs. 98.01 Crores, is "loans repayable on demand". Admittedly, there are number of correspondence between the parties and thereafter only, a decision was made by the 1st respondent after due consideration with its own expert - The submission of the learned Senior Counsel for the petitioner that there is no statutory prescription also cannot be countenanced as we are more concerned with the nature of the borrowings. When once the borrowing would come under "short term and current liability" as indicated in the balance sheet of the petitioner itself, then it cannot make out a case in its favour.
On the question of transparency and fairness also, the petitioner has not made out a case. The various communications between the 1st respondent and the petitioner alone would be sufficient factors that ample opportunities have been given to the petitioner. It is not as if the petitioner is not unaware. The petitioner is not a novice. The decision was put up in the website and thereafter, a reasoned order was passed. Hence, this Court does not find any lack of fairness on the part of the 1st respondent.
The writ petition stands dismissed.
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2016 (6) TMI 1475 - ITAT JAIPUR
Levy of penalty u/s 271(1)(c) - deemed dividend addition u/s 2(22)(e) - Debatable issue - HELD THAT:- As decided in Trimurty Buildcon Pvt. Ltd. [2016 (4) TMI 71 - ITAT JAIPUR] assessee at the time of quantum addition as well as at the time of penalty proceedings has reiterated that these advances are in the course of regular business. It is a running account, said advances later on repaid.
This issue is debatable and various courts particularly in the case of Creative Dyeing & Printing (P) Ltd. [2009 (9) TMI 43 - DELHI HIGH COURT] wherein it has been held that business transaction is not covered u/s 2(22)(e) of the Act. Various other case laws cited by the assessee has also been made this issue debatable. The case relied on by the AO i.e Mak Data P. Ltd. [2013 (11) TMI 14 - SUPREME COURT] is not applicable as assessee at every stage had filed the explanation before the AO as well as CIT(A) i.e. these transactions were made for the purpose of business and commercial expediency is bonafide. Penalty imposed by the AO and confirmed by the CIT(A) are not justified. Accordingly we delete the penalty in all the cases.
Undisputedly the facts pattern in the impugned matters are similar to the facts before Co-ordinate Bench in respect of assessee’s group companies wherein the penalty on addition on account of deemed dividend u/s 2(22)(e) was deleted. Decided in favour of assessee.
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2016 (6) TMI 1474 - ITAT INDORE
Addition u/s 14A r.w.r. 8D - computation or disallowance made of expenses incurred in earning exempt income - mandation of recording satisfaction before making addition - HELD THAT:- As decided in Joint Investment Pvt. Ltd [2015 (3) TMI 155 - DELHI HIGH COURT] By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. For the above reasons, the impugned order of the ITAT is set aside. The question of law is answered in favour of the assessee.
Thus we set aside the orders of the authorities below with the direction to the Assessing Officer to consider the above High Court judgments cited above and decide the issue in view thereof.
Appeal is allowed for statistical purposes only.
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2016 (6) TMI 1473 - ITAT BANGALORE
TP Adjustment - TP analysis based on the segmental results given by the assessee - HELD THAT:- As expenditure having been allocated based on turnover, the operating profit to operating cost ratio in the AE segment will under go substantial change if there is a change in the revenues shown in the AE segment. It is therefore fundamentally important that correct revenue is adopted for the AE as well as the non-AE segments for the TP study.
TPO had proceeded to make the TP analysis based on the segmental results given by the assessee originally. This, in our opinion could lead to functionally wrong results.
The issue regarding Transfer pricing requires a fresh look by the lower authorities so that the revenue stream is correctly bifurcated between AE and non-AE segment. This being a threshold bifurcation before proceeding with the TP study, we are of the opinion that additional evidence has to be admitted. We therefore admit the additional evidence and remit the matter back to the file of TPO/ AO for consideration afresh. All the issues raised by the assessee in relation to TP pricing are kept open. AO / TPO is directed to redo the TP analysis after correctly working out the revenue streams for AE and non-AE segments with regard to the software development services and proceed in accordance with law.
Deduction u/s.10A - By virtue of the definition of the term ‘export turnover’, given in explanation (iv) to Section 10A of the Act, the contention of the assessee that communication expenditure and telecommunication expenditure have to be included in export turnover cannot be accepted. Nevertheless as mentioned by us whatever is reduced from total turnover should also be deducted from export turnover for working out the deduction u/s.10A of the Act. AO is directed to do so. Ground is partly allowed.
Loss brought forward from the earlier years, were not allowed to be set off - assessee submitted that loss for the earlier years after giving effect to the appellate decisions had to be set off against the current business income of the assessee - HELD THAT:- We are of the opinion that the matter can be verified by the AO. If the assessee had not claimed set-off of brought forward loss in its return of income, then there is no question of allowing such set off. However, if the assessee had claimed such losses and if the losses were to be reworked based on orders of higher judicial forums then the loss that remains would have to be allowed to be set off. We direct the AO to verify this aspect and proceed in accordance with law. Ground is allowed for statistical purpose.
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2016 (6) TMI 1472 - ITAT DELHI
Assessment u/s 153A - mandation of recording satisfaction - unaccounted cash receipts - Whether the seized document does not belong to the assessee? - As primarily argued mandatory satisfaction note, which is to be recorded by the A.O. of the searched party during the course of the assessment proceedings of the search party for assuming jurisdiction u/s 153C by the A.O. of the assessee, was not recorded - HELD THAT:- As DR could not controvert the factual submissions of the assessee. He could not produce proof to demonstrate that the satisfaction has been recorded by the A.O. of the searched party.
A.O. who is having the jurisdiction of the searched party, has admittedly not recorded satisfaction note, as mandated by law enabling the A.O. of the assessee to assume jurisdiction u/s 153C - we quash the assessment orders for AY 2007-08 and 2008-09 and dismiss all the appeals filed by the Revenue. Decided in favour of assessee.
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2016 (6) TMI 1471 - MADRAS HIGH COURT
Direction to respondent to register the petitioner's complaint and to investigate the same - Demand of Bribe - It is the grievance of the learned counsel for the petitioner that the police are not going beyond the low level officers in order to find out where the money trail ends - HELD THAT:- This Court is of the view that it is the duty of the police to probe beyond the lower level minions and find out as to where the huge sum of rupees two crores has gone.
This Court directs the Assistant Commissioner of Police, Central Crime Branch, (Job Racketing) to take over the investigation in X Cr.No.441 of 2015 and the Deputy Commissioner of Police, Central Crime Branch is directed to monitor the same. Since an FIR has already been registered, it is not necessary to have another FIR registered either on the complaint dated 04.04.2015 or the representation dated 07.03.2016 given by the petitioner.
This petition is closed.
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2016 (6) TMI 1470 - ITAT AHMEDABAD
Assessee not interested in persuing appeal - HELD THAT:- Notice of hearing was sent by Registered Post with Acknowledgement Due to the assessee on 20.05.2016 fixing the date of hearing on 02.06.2016, which was returned by the Postal Authorities unserved with the remarks “left”. No change of address has been provided by the assessee. This shows that the assessee is not interested in pursuing with his appeal.
Therefore, in view of the decision of Estate of Late Tukojirao Holkar [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] and Multiplan India (Pvt.) Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] dismiss the appeal of the assessee in limine.
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2016 (6) TMI 1469 - SC ORDER
100% EOU - Export of Imported goods ‘as such’ - Notification 52/2003-Cus., dated 31-3-2003 - violation of conditions of the notification for non use in manufacturing activity - HELD THAT:- The appeal is admitted.
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2016 (6) TMI 1468 - KARNATAKA HIGH COURT
Seeking clarification of certain conditions imposed by virtue of the impugned order - Bar on members of the petitioner’s club from playing even any games of skill - HELD THAT:- The petitioner shall install within a period of six weeks, CC TV cameras, at all the places of access to its members and also at all the places, wherein game(s) is / are played by the members. The CC TV footage of atleast prior 15 days’ period shall be made available by the petitioner, to the police, as and when called upon to do so - The petitioner shall issue identity card(s) to all its member(s), which shall be produced by the member(s), when called upon by the police, during the raid(s) and surveillance etc.
Appeal allowed in part.
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2016 (6) TMI 1467 - BOMBAY HIGH COURT
Contempt of Court - wilful breach and are in contempt of the order dated 8th September 2015 passed by this Court - execution of the foreign awards - permission of the BIFR under Section 22 of the SICA for seeking enforcement of the foreign awards and to file garnishee proceedings in respect of the properties of the petitioner judgment debtor situated outside India - genuine difference of opinion between the petitioner and the respondents on the issue whether prior permission of the BIFR was mandatory before taking any steps in execution of the foreign awards against the petitioner or not - difference of opinion on interpretation of the order passed by this Court, whether any action under the provisions of Contempt of Courts Act, 1971 can be initiated against the contemnors based on the alleged willful breach of the order passed by this Court or not - standard of proof required for initiating the action for contempt of the orders passed by this Court against the alleged contemnors under the provisions of the Contempt of Courts Act, 1971.
Whether the respondent no.1 was required to obtain any prior consent of the BIFR under Section 22 of the SICA for taking steps in execution of the said two foreign awards in respect of the properties of the petitioner situated outside India?
HELD THAT:- A conjoint reading of Section 1(2) and Section 21 of the SICA clearly indicates that the provisions of the SICA are extended only to the whole of India and not outside India. The expression “any of the properties of the Industrial Company” in Section 22 of the SICA will have to be read with Section 1(2) of the SICA which provides for territorial jurisdiction of the BIFR which is extended only to any part of this country and not outside India.
A reference to the judgment of this Court in the case of MURABLACK INDIA LTD. VERSUS UBS AG [2000 (9) TMI 927 - HIGH COURT OF BOMBAY]will be useful to deal with this issue raised by the learned senior counsel for the respondents. It is held by this Court in the said judgment that prima facie, provisions of Section 22 which have only territorial application would not be attracted to restrain a party from proceeding with the suit instituted outside India even before an application was moved by other party before the BIFR. It is held that the Courts would not injunct proceedings in a foreign Court unless this Court by itself would have jurisdiction to grant the relief and considering other factors.
The facts before this Court in the case of Murablack India Limited are identical to the facts of this case. Though this Court had made such observation prima facie to this effect in paragraph 7 of the said judgment, on interpretation of Section 1(2) read with Section 22 of the SICA, prior consent of the BIFR under Section 22 was not required to be obtained by the respondent no.1 to execute the said two foreign awards against the petitioner in any country other than India.
The steps taken by the respondent no.1 prior to the date of delivery of the judgment of this Court i.e. on 8th September 2015 in execution of the foreign awards against the petitioner in respect of the properties situated outside India cannot be considered as contemptuous conduct on the part of the respondents for which an action under the provisions of the Contempt of Courts Act, 1971 can be initiated against them - the petitioner though having alleged contempt against the respondents, has failed to discharge the burden of proof which cast upon them.
Contempt petition dismissed.
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2016 (6) TMI 1466 - SUPREME COURT
Frustration of contract - whether the project land is a part of the Ridge or not and whether the contract between the DDA and Kenneth Builders has been frustrated due to supervening factors or not?
HELD THAT:- What has been overlooked by learned Counsel is that the fresh view of the MoEF is that the project land needs to be considered as Ridge. Consequently, no construction activity is permissible on the project land. That apart, Kenneth Builders did apply to the DPCC for "consent to establish" for starting construction activity on the project land. For considering the request, the DPCC required a ridge demarcation report which was not given by the DDA to Kenneth Builders or to the DPCC. Therefore, the DPCC was not inclined to give its consent in the absence of the ridge demarcation report. Even after judgment was delivered by the High Court, Kenneth Builders applied to the DPCC for "consent to establish" but to no effect in the absence of a ridge demarcation report and forest clearance.
It does appear from the record that the exact boundaries of the Ridge had not been identified by anybody and this is apparent from a letter dated 13th June, 2008 sent by the Secretary (Environment) of the GNCTD to the DDA wherein it was pointed out that there is some discrepancy between the areas notified by the Ministry of Urban Development of the Government of India in the notifications dated 8th January, 2002 and 23rd February, 2006 and the boundaries of the Ridge. It was further pointed out that the process of identification had been initiated by the Department of Forests of the GNCTD but it appears that the demarcation was not completed by the time the writ petition was filed by Kenneth Builders.
The interpretation of Section 56 of the Contract Act came up for consideration in Satyabrata Ghose v. Mugneeram Bangur and Co. [1953 (11) TMI 19 - SUPREME COURT]. It was held by this Court that the word "impossible" used in Section 56 of the Contract Act has not been used in the sense of physical or literal impossibility. It ought to be interpreted as impracticable and useless from the point of view of the object and purpose that the parties had in view when they entered into the contract. This impracticability or uselessness could arise due to some intervening or supervening circumstance which the parties had not contemplated.
In so far as the present case is concerned, the DDA certainly did not contemplate a prohibition on construction activity on the project land which would fall within the Ridge or had morphological similarity to the Ridge. It is this circumstance that frustrated the performance of the contract in the sense of making it impracticable of performance.
Certain circumstances had intervened, making it impracticable for Kenneth Builders to commence the construction activity on the project land. Since arriving at some clarity on the issue had taken a couple of years and that clarity was eventually and unambiguously provided by the report of the CEC, it could certainly be said that the contract between the DDA and Kenneth Builders was impossible of performance within the meaning of that word in Section 56 of the Contract Act. Therefore, the contention of the DDA that the contract between the DDA and Kenneth Builders was not frustrated, is rejected.
The DDA should now refund the deposit made by Kenneth Builders with interest at 6% per annum calculated from 11th September, 2006 till realization. The question raised in the connected appeal filed by the GNCTD and the Department of Forests of the GNCTD is left open for consideration in an appropriate case.
Appeal dismissed.
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2016 (6) TMI 1465 - ITAT MUMBAI
‘Mark to market’ loss arising on re-valuation of creditors outstanding on the closing date of accounting year - allowable notional loss - CIT-A deleted the addition - HELD THAT:- CIT(A) has rightly relied upon the decision of Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] wherein, while dealing with the question as to whether the additional liability arising on account of fluctuation in the rate of exchange can be allowed to be adjusted pending actual payment of the varied, the Hon'ble Supreme Court has observed that "expenditure" as used in section 37 in Income Tax Act may in the circumstances of a particular case cover an amount which is a "loss" even though said amount has not been given from the pocket of the assessee.
CIT(A) has also rightly held that section 43A is not applicable to the trading assets. The issue is thus, squarely covered in favour of the assessee.
Revaluation of closing stock - Whether payment on account of foreign exchange ought to be added to the actual cost of purchase of diamonds and closing stock revalued accordingly? - CIT-A deleted the addition - HELD THAT:- As decided in “IBM Global Services India P. Ltd [2007 (5) TMI 554 - ITAT BANGALORE] held at the time of purchase of the inventory, if the item has been purchased from a foreign country and the amount is payable in foreign exchange and if, the payment is deferred and the liability increases in Indian Rupees, then such liability cannot be termed to have increased the cost of the material. The cost price would be the original cost price and it cannot be increased due to subsequent foreign exchange fluctuation and increased liability on that account. Also confirmed by HC [2014 (5) TMI 852 - KARNATAKA HIGH COURT]
Addition on account of sale of wastage and scrap value - Whether such scrap is valuable and used in various industries? - CIT-A deleted the addition - HELD THAT:- AO has made addition on certain assumptions that the scrap/wastage of the rough diamond must have fetched to the assessee an income. However, there is no evidence brought by him in this respect. He has just estimated the income at the rate of 5% of the purchase value of the rough diamonds. The Ld. CIT(A), however, has deleted the addition observing that there was no evidence of sale of scrap by the assessee. However, the Ld. CIT(A) has not given any finding as to what is done with the scrap and whether it has a nil value or it fetches some value to the assessee.
Contention of the Ld. A.R., before us, is that the value of the scrap is taken into consideration while settling the rates with the labour contractor. We find that these facts have not been thoroughly examined by the lower authorities. We accordingly restore this issue to the file of the AO to decide it afresh after considering the evidences and explanations that may be furnished by the assessee in this respect.
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2016 (6) TMI 1464 - KARNATAKA HIGH COURT
Appeal in case of acquittal - cognizable and non-bailable offence - Sections 323, 504, 326, 427 read with Section 34 of IPC - HELD THAT:- It is not open for the Public Prosecutor to present the appeal before the High Court against the order of acquittal passed by the Magistrate in respect of cognizable and non-bailable offence. There is categorical bar for presenting such an appeal before the High Court under Section 378(1)(a) of Cr.P.C. On the other hand, the said provision mandates that the appeal needs to be presented before the Sessions Court. In view of the same, this appeal filed by the Public prosecutor/State against the order of acquittal passed by the Magistrate in respect of cognizable and non-bailable offence is not maintainable.
In any criminal case involving various offences punishable under different sections of Indian Penal Code in respect of cognizable and non-bailable offences as well as non-cognizable and bailable offences, if the accused is acquitted of the offences, the appeal against the order of acquittal in such an event also needs to be filed by the State through Public Prosecutor before the Sessions Court, inasmuch as "the criminal case" is only one. Though such criminal case may involve various punishing sections, the criminal case cannot be bifurcated. So also, as against an order of acquittal passed by the Magistrate in any Criminal case, two appeals cannot be riled by the State, one against cognizable offences and another against non-cognizable offences. Hence, the appeal lies before the Sessions Court against the order of acquittal, in which the accused is acquitted of the offences, which are both cognizable as well as non-cognizable and bailable as well as non-bailable (as the matter on hand).
Hence, the appeal needs to be dismissed as not maintainable and accordingly, the same stands dismissed as not maintainable.
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2016 (6) TMI 1463 - KARNATAKA HIGH COURT
Recognition of provision - whether the stock has become obsolete or not? - only reason why the Assessing Officer has disallowed the claim of the assessee is on account that the provision is contingent liability, cannot be allowed, expenditure can be allowed only on payment basis - HELD THAT:- ITAT having considered the adequate material placed before it, thought it fit not to remit the matter to the AO. It is also noticed that the method of accounting followed by the assessee is mercantile wherein the income and expenditure is on accrual basis.
We have examined this issue in the light of the Judgment pronounced by the Apex Court in Rotork Controls Case [2009 (5) TMI 16 - SUPREME COURT] wherein the three tests are laid down to recognize a provision under the act. The ITAT being a last fact finding authority has held that all these ingredients which goes to the recognition of provision are satisfied and as such, there is no need to remit the matter back to the AO - No ground made out by the revenue to remand the matter back to the Assessing Officer. The claim of expenditure being consistent with the method of accounting followed and the provision has been made on concluded transactions, the order of the Assessing Officer is held to be incorrect. We do not see any reason to differ from this view, which is in accordance with Section 145 of the Act.
Deduction u/s 80HHE - HELD THAT:- When no claim for deduction under Sec. 80HHE of the Act was made by the assessee, the issue for consideration thereof was an academic exercise. CIT(A) as well as the Tribunal ought not to have made any further observations thereafter, for giving treatment for the computation of the deduction under Sec. 80HHE. The observations can be said on hypothesis and surmises.
CIT (A) as well as the Tribunal could observe for consideration of the claim of deduction u/s 80HHE in accordance with law. Under the circumstances, we find that the observations made by the CIT (A) as well as the Tribunal for the deduction under Sec. 80HHE deserves to be expunged by observing to the extent that the claim, if any, can be made by the assessee for deduction under Sec. 80HHE is to be considered in accordance with law. Hence, to that extent, the order of the Tribunal is set aside. Question is answered accordingly to that extent in favour of the Revenue against the assessee.
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2016 (6) TMI 1462 - ITAT MUMBAI
Income taxable in India - income earned from short-term capital gain - to be treated as capital gain so as to give benefit under Article 13(6) or as a ‘business income’ to be taxed under Article 7 - HELD THAT:- As pointed out by the assessee, the brokers, the employees and the activities are entirely different. There is no active part by the Branch in negotiating, concluding or fulfilling the contracts of purchase and sale of securities carried out by the PE. Thus, Mumbai Branch cannot be held to be involved directly or indirectly of the activities carried out by the assessee in India, therefore, the FII activities have to be segregated from the activities carried out by the Branch.
Accordingly, we hold that the income of the FII is separate and distinct from the Branch and accordingly, the income has to be separately considered in the hands of the assessee as FII. As regards taxability of income of FII as capital gains, we find that, first of all, the gain from the transaction of securities has always been assessed as capital gains in the earlier years and as pointed out by the Ld. Senior Counsel by the DRP in AY 2011-12 also.
CIT(A) has clearly brought out as to why such an activity has to be reckoned as taxable under the head “capital gain” specifically in light of his finding given at paragraph 3.6. Accordingly, we affirmed the order of the CIT (A) and hold that, assessee’s income is chargeable under the head ‘capital gain’ and not business income and consequently, under Article 13(6) such a capital gain is exempt from tax in India. Thus, ground No.1 as raised by the revenue stands dismissed.
Taxability of interest income earned in respect of debt securities - whether under Article 11 or under Article 7 as held by the AO by treating it as a business income? - HELD THAT:- The assessee had shown interest income on debt securities as ‘income from other sources’ and had offered to tax @ 10% in terms of Article 11 of Indo-Swiss DTAA. Since the AO has held that the entire income from transaction of securities and the activities as FII is to treated as income from business directly or indirectly attributable to the PE, therefore, he has taxed the same under Article 7 as business income.
CIT(A) held that, mere existence of Mumbai Branch of the assessee does not result in automatic establishing a effective connection of such interest received earned in the status of the FII to the banking operations of the PE. Such a finding of the CIT(A) has to be upheld, because, firstly, we have already held above that income from FII activities and debt securities do not form part of the business asset of the PE and secondly, the Mumbai Branch did not felicitate or participate in any manner in the earning of interest income from debt securities, which is earned by the assessee in the capacity of FII only. Accordingly, the order of the CIT(A) on this score is affirmed and the grounds raised by the revenue is dismissed.
Claim of the additional expenses as deduction while computing the business income - HELD THAT:- Head Office of the assessee company had granted various employees, stock compensation awards to some of the employees of the Mumbai Branch under various employee share plans, wherein the shares of the assessee company were allotted to the credits of employees. The claim of ESOP cost relatable to the Mumbai Branch was identified and such quantification has also been certified by the independent Accountant which has not been disputed. This being the nature of direct expenses, it has been rightly allowed by the CIT(A) under section 37(1).
There is no obligation on the Branch to deduct TDS on such ESOP costs, therefore, qua this expenditure, the finding of the AO is not relevant, however, with regard to other expenses it has been confirmed by the CIT(A) that same has to be computed as per section 44C in view of Article 7(3), the same is not in dispute before us. Accordingly, the order of the CIT(A) is confirmed on this point.
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