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2017 (4) TMI 1639 - KARNATAKA HIGH COURT
Doctrine of Repugnancy - Acquisition proceedings under the provisions of the KIAD Act - Section 3(1) and Sections 28 to 31 of the KIAD Act are repugnant to the provisions of the 2013 Act or not - applicability of Section 24 of the 2013 Act to an acquisition initiated under the provisions of the KIAD Act - deemed divesting of the acquired land in terms of Section 24(2) of the 2013 Act - decision in the case of The Special Land Acquisition Officer, KIADB, Mysore v. Anasuya Bai, [2017 (1) TMI 1828 - SUPREME COURT] would entail dismissal of these petitions?
Whether Section 3(1) and Sections 28 to 31 of the KIAD Act are repugnant to the provisions of the 2013 Act - HELD THAT:- The State Government cannot any longer exercise power under Section 3 of the KIAD Act without conforming to the pre-requisites as prescribed under the 2013 Act, nor work the other provisions of the Act without also adhering to other mandatory provisions of the 2013 Act and the Rules thereunder. The Scheme under the KIAD Act as it prevails is inconsistent with the provisions of the 2013 Act in terms of Article 254(2) of the Constitution of India and is hence no longer valid as an independent enactment.
Whether Section 24 of the 2013 Act is applicable to an acquisition initiated under the provisions of the KIAD Act? - HELD THAT:- Section 24(2) of the 2013 Act is applicable to an acquisition initiated under the provisions of the KIAD Act.
Whether there could be a deemed divesting of the acquired land in terms of Section 24(2) of the 2013 Act, which provides for a lapsing of the acquisition proceedings if the conditions specified therein are satisfied, notwithstanding the deemed vesting of the land in terms of Section 28(5) of the KIAD Act? - HELD THAT:- By virtue of Section 24(2) at whatever point of time the vesting of land may have taken place, there is a divesting, in terms thereof, as it provides for a 'lapsing' of the acquisition proceedings, if the conditions specified therein are satisfied.
Whether the decision of the Apex Court in The Special Land Acquisition Officer, KIADB, Mysore v. Anasuya Bai, [2017 (1) TMI 1828 - SUPREME COURT], would entail dismissal of these petitions. (Incidentally, after these petitions were heard and reserved for Orders, the Apex Court having rendered the above decision it is necessary to address this issue)? - HELD THAT:- The recent decision of the Apex Court in Civil Appeal No. 353/2017, the Special Land Acquisition Officer, KIADB, Mysore vs. Anasuya Bai did not involve a challenge to the constitutional validity of the provisions of the KIAD Act and hence does not advance the case of the respondents.
The petitions to be posted for hearing on facts and the merits of each case for final disposal.
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2017 (4) TMI 1638 - SUPREME COURT
Rejection of Bail application - Extortion of money and property - HELD THAT:- After investigation, final report Under Section 173 of the Code of Criminal Procedure has been filed against the Appellant and four other persons on 19th October, 2016. The case against the Appellant is almost similar to that of other co-accused who have been enlarged on bail. The Accused has been in custody for the past six and half months. No criminal antecedents have been reported against the Appellant.
It is just and proper to enlarge the Appellant on bail subject to the conditions imposed - bail application allowed.
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2017 (4) TMI 1637 - ITAT CUTTACK
Reopening of assessment u/s 147 - no notice u/s.143(2) was issued - mandatory or procedural irregularity - contracting decisions - HELD THAT:- It is a settled position of law that where there are contrary decisions of Hon’ble High Courts on an issue and none of which is Hon’ble Jurisdictional High court, then the decision in favour of the assessee should be followed in view of the decision in the case of CIT vs. Vegetable Products Ltd [1973 (1) TMI 1 - SUPREME COURT]
Therefore, respectfully following the decision of M/s. Travancore Diagnostics (P) Ltd [2016 (11) TMI 76 - KERALA HIGH COURT] and the decision of Sri Jai Shiv Shankar Trades Pvt Ltd [2015 (10) TMI 1765 - DELHI HIGH COURT] we hold that the impugned reassessment orders passed u/s.143(3)/147 without issuing notice u/s.143(2) is bad in law and, therefore, we quash the reassessment order for both the assessment years under consideration and allow the ground of appeal of the assessee.
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2017 (4) TMI 1636 - ITAT CHENNAI
Revision u/s 263 - as per CIT there is complete absence of enquiry by AO in passing the assessment orders - unexplained income u/s. 69/69A - HELD THAT:- No bills and vouchers stated to be accompanying non-existing books of account, were admittedly produced. It is also incomprehensible that the assessee is, as stated, not maintaining any books of account (in respect of the money lending business) and, in any case, that there is a complete absence of any record in respect of the advances made and recovered, as well as qua the interest/ commission earned in the process, and returned only on the basis of ‘memory’.
The cash deposits in the bank account/s need to be satisfactorily explained, else are liable to be added as unexplained income u/s. 69/69A of the Act. There is no explanation as to the source of the deposit/s. Merely stating that the same are a return of the loans given earlier, without in any manner substantiating the same, i.e., the loans given earlier and/or their return, would be of little consequence, both in law and in fact in-as-much as the law mandates the same to be satisfactorily explained, so that the same would require being reasonably established as a fact.
As already explained that a failure to make proper enquiry would make an order per se erroneous and prejudicial to the interest of the Revenue, liable for revision. This in fact represents trite law, and for which we may, apart from the decision in Gee Vee Enterprises [1974 (10) TMI 29 - DELHI HIGH COURT] - Decided against assessee.
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2017 (4) TMI 1635 - ITAT DELHI
Taxability of interest on income tax refund received - PE in India or not? - AO held that the assessee had derived interest income on refund of TDS made out of business receipts as also the interest from bank was on business funds, thus directly connected with the business receipts and was therefore assessable under Article VII of Indo Australia DTAA as business income to be subjected to normal rate of tax - HELD THAT:- Special Bench in own case [2011 (5) TMI 562 - ITAT, DELHI] decided the question as we do not venture to say that the interest income has to be necessarily business income in the nature for establishing the effective connection with the PE because that would render provision contained in paragraph 4 of Article XI redundant. Thus, there may be cases where interest may be taxable under the Act under the residuary head and yet be effectively connected with the PE. The bank interest in this case is an example of effective connection between the PE and the income as the indebtedness is closely connected with the funds of the PE. However, the same cannot be said in respect of interest on income tax refund. Such interest is not effectively connected with PE either on the basis of asset test or activity test. Accordingly, it is held that this part of interest is taxable under paragraph No. 2 of Article XI - Decided in favour of assessee.
Addition in respect of the Hazira project - HELD THAT:- It is a settled position that PE has to be reckoned project wise. As decided in Ishikama Heavy Industries Ltd [2007 (1) TMI 91 - SUPREME COURT] to attract the taxing provisions of I.T. Act, there has to be some activities conducted to permanent establishment (PE). There would be no tax liability with regard to overseas services even under the DTAA.
From the invoices, it is clear that engineering services were sub contracted to a Singapore-based company and services were performed in Singapore only. As the work in respect of Hazira project was performed outside India, the AO was not right in treating 2% of the receipts as income. Reliance is also placed on the decision of Supreme Court in the case of CIT versus Hyundai Industries Co Ltd [2007 (5) TMI 196 - SUPREME COURT] The AO is directed to delete the addition.
Cancellation of interest u/s 234B - HELD THAT:- As seen that the CIT (A) has observed correctly that since the entire income of the assessee was subject to deduction of tax at source, the assessee had no liability to pay advance tax. CIT (A) has placed reliance of the judgment of the Hon’ble Uttarakhand High Court in the case of CIT vs. Sedco Forex International Drilling Co. [2003 (10) TMI 40 - UTTARANCHAL HIGH COURT] and also on another judgment of the Uttarakhand High Court in the case of CIT vs. Haliburton Offshore Services [2004 (7) TMI 74 - UTTARANCHAL HIGH COURT] while directing the AO to delete the interest. We do not find any reason to interfere on this issue as the Department could not counter the stand of the Ld. CIT (A) with any judgment to the contrary or bring on record any fact which could prove that the finding of the Ld. CIT (A) was erroneous. Therefore, this ground also stands dismissed.
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2017 (4) TMI 1634 - BOMBAY HIGH COURT
Prerequisite for seeking statutory bail under Section 167(2) of the Cr.P.C. - whether the date on which the accused is produced before the Court and remanded to the Magisterial custody should be included or excluded in completing the period of 60 days or 90 days for statutory bail? - HELD THAT:- On going through the judgment of RAVI PRAKASH SINGH VERSUS STATE OF BIHAR [2015 (2) TMI 1371 - SUPREME COURT], one can see that the case CHAGANTI SATYANARAYAN VERSUS STATE OF AP. [1986 (5) TMI 265 - SUPREME COURT] has been considered by the Hon’ble Apex Court and in paragraph 12, the Apex Court has held In STATE OF M.P. VERSUS RUSTAM AND ORS [1995 (2) TMI 478 - SUPREME COURT], this Court has laid down the law that while computing period of ninety days, the day on which the accused was remanded to the judicial custody should be excluded and the day on which challan is filed in the court, should be included. That being so, in our opinion in the present case, date 5.7.2013 is to be excluded and, as such, the chargesheet was filed on the ninetieth day i.e. 3.10.2013. Therefore, there is no infringement of Section 167(2) of the Code.
Thus, it shall be no longer open for the petitioner to contend before this Court that the date on which the accused is produced before the Court should also be included while computing the period of 90 days under Section 167(1) of the Code of Criminal Procedure. Thus, there is no merit in the petition and it deserves to be dismissed - petition dismissed.
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2017 (4) TMI 1633 - ITAT AHMEDABAD
Nature of expenses - replacement expenses on plant and machinery - AO treated these expenses as capital expenditures on the ground that these expenses brought into existence an asset or advantage of enduring nature to the assessee and these modification of expenses have resulted into quality improvement and other advantages as mentioned at page four of the assessment order - HELD THAT:- After considering the detail findings of the CIT(A ), elaborating revenue nature of expenditure on replacement of parts etc, we do not find any reason to interfere in the finding of the Commissioner of income tax appeal.
Fees for use of technology - AO held that these expenditures was of capital nature as the assessee had acquired industrial information or technical assistance in the manufacturing - CIT correctly decided the appeal in favor of the assessee by stating that the said expenditure was of the Revenue nature after following the decision of his predecessor in the A.Y 2001-02 [2011 (9) TMI 1249 - ITAT AHMEDABAD].
Expenditure under the head repair and maintenance - Professional fees for renovation work,Renovation work in receiption area, Hardnest tester and SDLC Card - These expenditure are of the nature of the revenue expenditure. Because we find that hardness tester is a consumable item and it cannot be treated as revenue expenditure. Further we find that as SDLC card is often the nature of replacement of part and therefore revenue in nature. In view of the detail findings of the learned Commissioner of income tax appeal we disinclined to interfere in the order of the learned Commissioner of income tax appeal.
Amount written off as bad debts - We find that the assessee has submitted party -wise details along with the list of the bad debts like, complete correspondence, proposed legal action etc., information regarding the BIF for cases, winding up proceedings regarding bad debt cases before the assessing officer. We have also observed that the learned Commissioner of income tax appeal has given complete findings. After considering the facts and legal findings provided in the order of the Commissioner of income tax appeal we do not find any reason to interfere in the decision of learned Commissioner of income tax appeal deleting addition observing that the provision of the act for disallowance of bad debt had undergone qualitative change after the amendment came into force with effect from 01-041989 it is no longer a necessary to prove that the debts had become bad.
Depreciation claimed on data processing machines, had not been apportioned by the assessee between the DTA unit and EOU unit although these assets has been used by the people working in both the units - AO was not convinced with the explanation of the assessee and he had apportioned these expenses between the two units in the ratio of their turnover - CIT(A) deleted addition - HELD THAT:- We find that there is nothing on record to show that the DTA processing machines have actually been used for the EOU unit. We also find merit in the contention of the learned consul that the assessee was not required to market its product to the EOU unit as the entire production was sold to F AG Germany which was responsible for the marketing and selling of the product in foreign markets. In view of the above facts and after taking into consideration the detailed finding of the learned Commissioner of income tax appeal we do not find any reason to interfere in the finding of the learned Commissioner of income tax appeal.
Nature of expenses - license fees for SAP R3 - revenue or capital expenses - HELD THAT:- We have also noticed from the finding of CIT-A that assessee has made compliance with the TDS provision and this particular payment has also been considered as revenue expenditure in the past in the case of the assessee. We find that the identical issue has been decided by the coordinate bench of the ITAT in the case of the assessee for assessment year 2001-02 in favor of the assessee at para 26 to 27 of ITAT order. After going through the complete finding of the learned Commissioner of income tax appeal we are disinclined to interfere in the decision of the learned Commissioner of income tax appeal.
TP Adjustment - TPO has held that no payments for the royalty/know –how fees/ license fees was to be allowed - HELD THAT:- We find that learned Commissioner of income tax appeal has not elaborated the complete similarity of the fact of the case in the case of the assessee during the year under consideration with the facts prevailing in the case of the assessee pertaining to assessment year 2002 – 03. We considered it appropriate to set aside this issue to the file of learned Commissioner of income tax appeal to adjudicate it s a fresh after considering the particular facts prevailing during the year under consideration on this issue and any dissimilarity of facts prevailing during that assessment year 2003-03 adjudicated by his predecessor.
Computation of income - deduction under section 80HHC in respect of the profit of 100%EOU included or excluded - HELD THAT:- As perused the judicial pronouncement referred by the learned DR in the case of TATA BP SOLAR INDIA limited [2010 (9) TMI 1083 - ITAT MUMBAI] as held that export turnover of the EOU which was enjoying deduction under section 10B was to be included in the total turnover but not in the computation of deduction under section 80HHC(3)(a).
We also consider that the expression "such" before the expression export turnover only means that the export turnover referred to is the turnover of the goods manufactured whose profits are being computed under s. 80HHC(3)(a).Therefore, we find that while computing deduction under section 80HHC the profits of s. 10B unit will not enter the computation of total income at all. In view of above facts and legal findings, we reverse the decision of the CIT(A) and confirm the findings of the assessing officer and direct to compute the deduction u/s 80HHC accordingly as per the direction given in the judicial pronouncement of TATA BP SOLAR INDIA limited [supra]
Taxability of Interest on refund - as per AO assessee had not considered this amount as part of his taxable income - HELD THAT:- We find that learned Commissioner of income tax appeal is justified in upholding the addition made by the assessing officer by observing that the interest on income tax refund received by the assessee has been held to be taxable.
Repairing expenses to plant and machinery as capital expenditures on the ground that the nature of these expenditures has resulted in achieving better quality, reducing consumption, and provided benefit of enduring nature both quantitatively and qualitatively.
Replacement of electric wires /cable during the renovation work - AO has rightly treated these expenditures as capital expenditures and we don't find any reason to interfere in the findings of Ld. CIT(A).
Expenditure relating to professional fees for renovation work and expenditure toward renovation work in the reception area were incurred on a routine basis, therefore, we allow the appeal of the assessee by treating these expenditures of revenue in nature.
Architectural fees for designing work for renovation/modernization of the office - As this issue apparent to be connected to the issue of repair/renovation to the building as mentioned by the assessee. Similarly we considered it to be most appropriate to restore this issue also to the file of the assessing officer to decide it after taking into consideration the direction in point supra.
Disallowance u/s 40(a)(ia) - interest on foreign supply credit and the assessee had not made any TDS under section 195 - HELD THAT:- CIT(A) correctly applied provision of section 195 in this case for not deducting TDS on the payment made to non residents as relying on Vijay Shipbreaking Corpn [2003 (3) TMI 91 - GUJARAT HIGH COURT]
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2017 (4) TMI 1632 - RAJASTHAN HIGH COURT
Dismissal of the Appeal for not filing the paper book - Restoration Application has been filed with delay of 805 days - As argued appellant was not aware of the dismissal of the appeal - Income Tax Appeal was dismissed appeal on the ground that the paper book sets were not filed despite grant of time - HELD THAT:- It will not be appropriate to restore the matter. It was also contended that the subsequent paper book is dispensed with by Co-ordinate Bench. In our considered opinion, this contention ought to have been raised before the bench where the matter came up for restoration. Hence, it will not be appropriate to allow this review. However, paper book was submitted by the lawyer before the order was passed.
In that view of the matter, the review application deserves to be rejected and the same is dismissed.
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2017 (4) TMI 1631 - CESTAT, NEW DELHI
CENVAT Credit - input services - outward transportation of goods up to the place of customer - Place of Removal - HELD THAT:- This issue has been considered in the appellant’s own case viz. CCE & ST, Indore Vs. Gabriel India Ltd. by the Tribunal. The said decision has held that assessee is entitled to avail Cenvat credit on outward transportation service.
The impugned order is set aside and both the appeals are allowed.
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2017 (4) TMI 1630 - BOMBAY HIGH COURT
Whether the appellant had given her consent for exit from the respondent nos. 1 and 6 on the basis of the valuation report to be made by the valuers based on the balancesheet of respondent nos. 1 and 6 as of 31st March, 1998? - whether the order passed by the Company Law Board based on such alleged consent rendered by the appellant and her daughter is perverse or not?
HELD THAT:- Under Sections 397 and 398 of the Companies Act, 1956, the petitioner has two options available i.e. (i) to exit from the company in question on payment of fair valuation and (ii) to pursue the petition or an appropriate action alleging oppression and mismanagement and to take it to its logical conclusion. In my view, the appellant could not pursue both the options simultaneously, once having agreed to exit from the respondent nos.1 and 6 on the condition that the appellant is paid fair valuation of her share. The Company Law Board has ample powers under Section 402 of the Companies Act, 1956 to order the valuation in the event of the petitioner having agreed to exit. The orders passed by the Company Law Board under Section 402 of the Companies Act, 1956 for valuation of such shares for the purpose of exit of the appellant is enforceable as a decree of the Court.
Since the order passed by the Company Law Board and by this Court under Order XXXII Rule 7, Sub-rule (2) is voidable, appropriate proceedings had to be filed for repudiation of the contract as voidable. Since no steps are taken by the respondent no.7 after attaining the age of majority till date, those orders passed by the Company Law Board and also by this Court would continue to be binding on her. The order dated 22nd July 2011 is not challenged by any of the parties including the respondent no.7.
Whether the respondent no.1 could have issued any duplicate shares in favour of the respondent no.7 and that also without allegedly not following the requisite procedure under the provisions of the Companies Act, 1956 and other provisions of law? - HELD THAT:- It is not in dispute that neither the appellant and her daughter, nor the respondent no.7 could produce the original share certificates of the late Mr.Anthony Maynard before the respondent no.1 for transmission of those shares in their respective names in the ratio of 1/3rd of the total shareholding of the late Mr.Anthony Maynard in their favour each and to rectify the register of shares.
A perusal of the company petition along with the company application filed by the appellant and her daughter also clearly indicates that in her alternate prayers, the appellant herself had prayed for issuance of duplicate share certificates of the originals of those share certificates representing 2/3rd of the shareholding of the late Mr.Anthony Maynard if originals were not available with the respondent no.1 - the respondent no.1 has already made a submission before this Court that the duplicate share certificates in respect of 1/3rd share of the appellant and her daughter also would be issued by the respondent no.1 and can be deposited with the National Company Law Tribunal. The appellant is thus not affected in any manner whatsoever insofar as the duplicate share certificates are concerned.
No question of law arises in any of these company appeals and thus no interference with the impugned order passed by the Company Law Board is warranted in these appeals under section 10F of the Companies Act, 1956.
The Company Appeal are dismissed.
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2017 (4) TMI 1629 - ITAT BANGALORE
Assessment of trust - expenditure incurred for religious or charitable purposes - set off of expenditure on the objects of the society incurred in earlier years as claimed by the appellant society against the current year surplus - HELD THAT:- CIT(A) has decided the issue in favour of the assessee without examining this aspect as to whether the expenditure incurred in earlier years are on account of charitable or religious purposes or not.
As per the Tribunal order rendered in the case of DDIT Vs KFCS Ltd. [2016 (1) TMI 396 - ITAT BANGALORE] it was held that if the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust and the income out of which the said expenditure incurred would not be liable to tax and this is not relevant as to whether the expenditure was incurred in the present year or in an earlier year.
Hence, this is very important to find out as to whether the expenditure for which the assessee is asking for set off in the present year were incurred for the objects of the trust or not? - There is no finding of the ld. CIT(A) on his aspect of the matter and therefore, we feel it proper to restore the entire matter back to the file of the ld. CIT(A) for fresh decision in all the three years after examining the nature of expenditure incurred by the assessee in the earlier years 1999-2000 to 2001-02, for which the adjustment is being claimed in the present year. Appeals filed by the revenue are allowed for statistical purposes
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2017 (4) TMI 1628 - SUPREME COURT
Validity of Sections 3(6), 3(6a) and 3(6b) of the Himachal Pradesh Private Medical Educational Institutions (Regulation of Admission and Fixation of Fee) Act, 2006 as amended vide amendment Act No. 24 of 2015 - HELD THAT:- The High Court has not touched upon the core issue relating to the autonomy of the Appellant No. 2 - University including its authority to start a constituent medical college, as prescribed by the 2010 Act. Admittedly, the Appellant No. 2 - University has been established under the 2010 Act. This Act received the assent of the Governor on 15th September, 2010 and was brought into force w.e.f. 16th June, 2010. The intendment of the 2010 Act is to provide for establishment, incorporation and Regulation of the Appellant No. 2 - University for higher education, to regulate its functioning and for matters connected therewith or incidental thereto. Section 2(b) defines the expression "Campus", as 'the area of University within which it is established'. This Act also predicates imparting of education by Appellant No. 2 -University by distance education by combination of any two or more means of communication, namely broadcasting, telecasting, correspondence courses, seminars, contact programmes and any other such methodology - The expression "study centre", means a centre established and maintained or recognized by the University for the purpose of advising, counseling or for rendering any other assistance required by the students of the Appellants in the context of distance education, as set out in Section 2(t). The expression "University" has been defined in Section 2(v) to mean Maharishi Markandeshwar University, Solan in Himachal Pradesh.
It is indisputable that the 2010 Act purports to establish an independent University in the State of Himachal Pradesh, having full autonomy as that of any other full-fledged University including the authority to start Multi-Faculty Education Courses within its campus and also constituent colleges off campus. The Appellant No. 2 - University has been bestowed with the power to confer Degrees and Diplomas in terms of Section 35 of the Act - The Appellant No. 2 - University, therefore, has all the trappings of a full-fledged University, to not only start imparting education in prescribed courses but also to set up its constituent colleges to effectuate the purpose for which the University has been established. Indubitably, a constituent college of the University would be an integral part of the University.
As noticed from the legislative scheme of the 2010 Act, the Appellant No. 2 has been established as an independent, autonomous University like any other full-fledged University. No doubt, some of the functions of the University, be it the Appellant No. 2 - University or the Himachal Pradesh University, have been controlled and regulated by the 2006 Act. The limited issue raised by the Appellants, however, is with regard to the mandate of the amended Section 3, requiring all the Private Medical Institutions set up within the State to take affiliation from Himachal Pradesh University - This Act, no doubt uniformly applies to all the institutions affiliated to the Universities within the State of Himachal Pradesh, be it Himachal Pradesh University or the Appellant No. 2 - University. However, the object of this Act is limited only to regulate admissions as per the extant and applicable pronouncements of this Court; and to determine the fee structure in colleges imparting medical courses within the State.
In the present case, it has been asserted that the Appellant No. 1 - College is a constituent of the Appellant No. 2 - University. In such a situation, it is unfathomable that the requirement of taking affiliation from another University (Himachal Pradesh University) established under a separate State Legislation, can and ought to be insisted upon. If insisted, it would, inevitably, entail in making an inroad into the autonomy of the Appellant No. 2 - University - Section 7 of the 2010 Act does not empower the Appellant No. 2 - University to affiliate or otherwise admit to its privileges any other institution. But that will have no application to the case on hand. For, the Appellant No. 1 - College is none other than a constituent college of Appellant No. 2 - University itself. The Medical Council of India as well as the Union Government have, therefore, justly stated that it was not necessary for the Appellant No. 1 - College to take affiliation from the Himachal Pradesh University.
Thus, the amended provisions, in particular Section 3(6a), would impinge upon the autonomy of an independent University established under a separate State Legislation. Further, the field of affiliation is governed by the State legislation under which the respective Universities have been established. The power of granting affiliation to colleges under the control of the concerned University, must vest with the respective University to which the college will be affiliated - since the Appellant No. 1 - College is a constituent of the Appellant No. 2 - University, the question of compelling it to take affiliation from another University (Himachal Pradesh University) cannot be countenanced.
The impugned judgment of the High Court of Himachal Pradesh dated 20.12.2016 in CWP No. 4773 of 2015 is set aside - appeal allowed.
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2017 (4) TMI 1627 - ITAT BANGALORE
TP Adjustment - Comparable selection - HELD THAT:- The entire TP issue should go back to the file of AO/TPO for fresh decision because in respect of three comparable companies i.e. M/s ADCC Research & Computing Centre Ltd. ii) M/s Bodhtree Consulting Ltd and iii) M/s Onward Technologies Ltd. the TPO has considered the data for different accounting year and not for FY: 2002-03.
This is by now a settled position of law that the data for the same FY should be considered. This is also true that even if a concerned comparable company is adopting a different accounting period as its accounting year then also, the data for relevant FY may be compiled on the basis of quarterly reports of the said company.
We restore this matter back to the file of AO/TPO for fresh decision with the direction that the AO/TPO should ascertain the availablility of data for FY: 2002-03 and if the same is not directly available because the concerned company is adopting different accounting year, he should find out the possibility of compilation of the data for AY: 2002-03 on the basis of quarterly reports of the relevant company.
Satyam Computer Services Ltd. - We feel it proper that this issue regarding Satyam Computers should also be decided by AO/TPO afresh after finding out the factual aspect as to whether the accounts for current year i.e. FY: 2002-03 were also falsified by that company i.e. Satyam Computers and if the assessee can establish that the accounts of that company were falsified in FY: 2002-03 then the same should be excluded.
Deduction u/s 10A in respect of interest and Misc. income earned by the assessee - HELD THAT:- As n the case of CIT Vs Motorola India Electronics (P) Ltd [2014 (1) TMI 1235 - KARNATAKA HIGH COURT] held that there is a direct nexus between the interest income and income of the business of the undertaking. In the present case, neither any of the authorities below have examined this aspect nor the relevant facts are available on records before us and hence, we feel it proper to restore this issue also to the file of the AO for fresh decision.
Suppression of cost and consequently its revenue - whether the allegation of the TPO is correct or not that the assessee has suppressed its cost by not including the cost to its AE on account of administrative and management support services and for user of various fixed assets received from its AE free of cost? - HELD THAT:- In the present case, the allegation is this that the assessee had suppressed its operating cost by availing various services from its AE free of cost. Unless this allegation of the TPO is proved to be wrong, the assessee has no case because if the assessee has suppressed its cost by obtaining certain services from its AE free of cost then, the cost of such services has to be included in the cost base of the assessee to work out the cost plus margin of the assessee.
As per above discussion, we have seen that none of the judgments relied by the ld. AR of the assessee is applicable in the present case because of difference in facts. Accordingly, ground of the revenue’s appeal are allowed for statistical purposes and the matter is restored back to the file of the AO/TPO for fresh decision by adopting only cost of various services not accounted for by the assessee but after excluding the value of ESOP.
Computation of total turnover - HELD THAT:- As decided in the case of M/s Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] total turnover is sum total of export turnover and domestic turnover and therefore, if an amount is reduced from the export turnover then the total turnover also goes down by the same amount automatically. In the present case, ld. CIT (A) has directed the AO to reduce the communication charges from the total turnover also because the same was reduced by him from the export turnover - therefore, we decline to interfere with the same. These grounds of the revenue are rejected.
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2017 (4) TMI 1626 - GUJARAT HIGH COURT
Special audit u/s 142(2A) - Asharam Bapu and Narayan Sai Group - breach of principles of natural justice as sufficient opportunity has not been given to the petitioner-assessee - scope, ambit and powers of the AO while passing order u/s 142(2A) before and after amendment - HELD THAT:- As object and purpose of special audit u/s 142(2A) and considering the object and purpose of amending section 142(2A) and looking to the multiplicity and complexity of transactions found from 40000 papers / material requisitioned from 42 gunny bags, it cannot be said that the impugned order is absolutely illegal and/or contrary to section 142(2A) of the IT Act.
As required to be noted that the impugned order has been passed on 15.12.2016 and the present petition has been filed on 20.02.2017 - there is a non-cooperation on the part of the petitioner again and even he has not cooperated the Special Auditor also. It is reported that on the basis of the material available, the Special Auditor has as such prepared a report. However, because of the pendency of the petition, no further steps are taken. In any case as observed hereinabove, there is no illegality committed by the Assessing Officer in ordering the special audit under section 142(2A) of the IT Act.
AO cannot direct special audit u/s 142(2A) before calling for the accounts from the petitioner in the assessment proceedings and without doubting the accounts and/or considering the complexity in the accounts - As per amended Section 142(2A) of the IT Act, apart from the nature and complexity of the accounts, etc., even in case of multiplicity of transactions or otherwise nature of the business activity of the assessee and in the interests of the Revenue, the AO can pass an order for special audit, in exercise of powers under Section 142(2A) - Therefore, while forming an opinion to get the accounts audited by Special Auditor; considering the specialized nature of business activities of the assessee, and/or while considering the multiplicity of transactions, there need not be any books of account before the AO.
In the present case AO has thought it fit to get the account audited by the Special Auditor as requisitioned material are to the extent of 40,000 papers in 45 gunny bags, which were found during the search conducted of the premises of Asharam Bapu and others and the Trust. When large number of papers are required to be considered / verified visavis the assessee and other persons whose names figured in the requisitioned papers, and when considering section 142(2A) when the vis-à-vis Assessing Officer has thought it fit to exercise powers u/s 142(2A) it cannot be said that the AO has committed any error and/or illegality. Specific reasons are given so mentioned in the show cause notice as to why and for what purpose the special audit is required. Therefore it cannot be said that the AO has committed any error and/or illegality in passing the impugned order of special audit, in exercise of powers u/s 142(2A) of the IT Act.
At this stage it is required to be noted that with respect to other assessees who are alleged to be connected with Asharam Bapu and Narayan Sai Group, on the very ground order under Section 142(2A) has been passed by the concerned AO and the petitions challenging the order of Special Audit u/s 142(2A) of the IT Act have been dismissed by this Court.
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2017 (4) TMI 1625 - ITAT DELHI
Assessment u/s 153A - Unexplained investment for purchase of plot and cost of super structure respectively - CIT(A) deleted the addition - HELD THAT:- On perusal of the order of the CIT(A) it is apparent that the addition is deleted for the reason that there is no incriminating material found during the course of search and merely for the reason of the valuation report the addition has been made. The addition in block assessment cannot be made without any evidence unearthing during the search proceedings. DR could not point out any evidence found with respect to above property during the search and none could be gathered from the order of the AO. No infirmity in the order of ld CIT(A) in deleting the addition with respect to difference in valuation of property. In the result the solitary ground of appeal of revenue is dismissed.
Addition of gross profit on sales outside the books of account - During the course of search and seizure it was found that stock is short based on trading account for the period 01.04.2001 to 26.02.2002 - HELD THAT:- As undisputed fact that the value of the shortage of the stock has been determined and confirmed by the partner of the assessee. In this confirmation there was a positive affirmation that the rate of the stock as well as the value derived on physical verification of the stock is correct. Therefore there is a shortage of stock of Rs. 1 041 3641/– compared to the stock lying in the books of the assessee.
There was no exploration by the assessee about the shortage in the stock therefore the only plausible assumption that can be drawn is that these stock has been sold outside the books of account. Now after the sale of the stock assumed to be out of the books then only plausible way of determining income thereon is applying the rate of gross profit earned by the assessee on that sale. Naturally AO has perused the past history of the assessee and thereafter adopted that rate of 33.8% for working out profit. We do not find any infirmity in the order of the Ld. CIT appeal in confirming the above addition on account of gross profit on sales not recorded in books of account. In the result ground No. 2 of the appeal of the assessee is dismissed.
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2017 (4) TMI 1624 - ALLAHABAD HIGH COURT
Irregularity in supplying of substandard items - seeking commanding the respondents not to interfere in the functioning of the petitioner as supplier of medicine - HELD THAT:- In NATIONAL HIGHWAY AUTHORITY OF INDIA VERSUS GANGA ENTERPRISES & ANR. [2003 (8) TMI 546 - SUPREME COURT], the Hon'ble Supreme Court cautioned the High Courts that while examining the contractual matters in a writ jurisdiction, the Court is duty bound first to examine the issue of maintainability for the reason that contractual matters cannot be entertained in a routine manner.
In the matter of policy decision and economic tests the scope of judicial review is very limited. Unless the decision is shown to be contrary to any statutory provision or the Constitution, the Court would not interfere with an economic decision taken by the authorities of the State. The court cannot examine the relative merits of different economic policies and cannot strike down the same merely on ground that another policy would have been fairer and better. In a democracy, it is the prerogative of each elected Government to follow its own policy - Normally, there is always a presumption that the State action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. The burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The court cannot lightly assume that the action taken by the Government is unreasonable or against public interest because there are large number of considerations, which necessarily weigh with the Government in taking an action.
In Hira Nath Mishra & Ors. Vs. The Principal, Rajendra Medical College, Ranchi & Anr. [1973 (4) TMI 115 - SUPREME COURT], the Hon'ble Supreme Court held that principles of natural justice are not inflexible and may differ in different circumstances. Rules of natural justice cannot remain the same applying to all conditions.
It is clear that when there is a failure on the part of the contractor to comply with the express terms of the contract and/or to commit breach of the said terms resulting into failure to commence/execute the work or supply the items as per specification as stipulated in the agreement or giving the performance that does not meet the statutory requirements of the contract or the action of the petitioner is reported against the provisions and against the interest of the State, the Department has a right to regulate its business through various directions to State Agencies in which the petitioner has no right to interfere.
The petition is dismissed.
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2017 (4) TMI 1623 - SUPREME COURT
Power of Court to relegate the parties before the Arbitral Tribunal after having set aside the arbitral award in question and moreso suo moto in absence of any application made in that behalf by the parties to the arbitration proceedings - Section 34 (4) of the Arbitration and Conciliation Act, 1996 - HELD THAT:- On a bare reading of provision of Section 34, it is amply clear that the Court can defer the hearing of the application filed Under Section 34 for setting aside the award on a written request made by a party to the arbitration proceedings to facilitate the Arbitral Tribunal by resuming the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. The quintessence for exercising power under this provision is that the arbitral award has not been set aside - No power has been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in Sub-Section 4 of Section 34.
In any case, the limited discretion available to the Court Under Section 34(4) can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. It is crystal clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto - the limited remedy available Under Section 34(4) is required to be invoked by the party to the arbitral proceedings before the award is set aside by the Court.
The Division Bench of the High Court of Karnataka in the case of BHASKAR INDUSTRIAL DEVELOPMENT LIMITED VERSUS. SOUTH WESTERN RAILWAY [2016 (3) TMI 1462 - KARNATAKA HIGH COURT] has expounded that the power of the Court Under Section 34 of the Act is not to remand the matter to the Arbitral Tribunal after setting aside the arbitral award.
A priori, it must follow that the Division Bench committed manifest error in issuing direction in the concluding part of the impugned judgment, as reproduced hereinbefore in paragraph No. 7. Such direction could not have been issued in the fact situation of the present case. The impugned direction suffers from the vice of jurisdictional error and thus cannot be sustained.
Appeal allowed.
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2017 (4) TMI 1622 - ITAT MUMBAI
Bogus purchases - On the basis of information of Sales Tax Department, AO found that suppliers were bogus, also AO issued notices u/s.133(6) to these parties but the same were returned with a remark “not known” - HELD THAT:- From the record, we found that AO has relied upon an affidavit of Pravin Meraj Bishnoi / Shah stating that he is the Proprietor of four concerns, however, all these concerns are having different proprietors and different PAN.
AO has also relied upon a visit report of Asst. Commissioner, Sanjay S. Pawar, Mumbai in respect of one concern namely Jitendra Enterprises. However, the assessee has not purchased any goods from the said concern at all. As per record, the assessee has asked for the copies of statements of the different persons upon which the AO was relying upon as well as their cross examination.This observation in AO’s order clearly indicates that ground No.3 taken by revenue is not correct. We direct the AO to restrict the addition to the extent of 2.5% of such alleged purchases.
Addition u/s.69A - assessee was asked to explain sources of payment towards purchase of property - after giving effect to the housing loan taken from Reliance and payment form current account the remaining amount was treated by AO as unexplained and added to the total income of the assessee - HELD THAT:- As our attention was invited to the loan sanction letter by the Reliance Home Finance and also the relevant bank statement. It appears that AO has not properly appreciated the documentary evidence placed on record. In the interest of justice, we restore this issue back to the file of the AO for verifying the correct amount of loan taken from Reliance Home Finance, pay orders made by the assessee from his own bank account towards the stamp duty and registration charges. Accordingly, AO is to decide the issue afresh.
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2017 (4) TMI 1621 - ITAT PUNE
TP Adjustment - MAM - CPM v/s CUP - methodology to be adopted while benchmarking the international transaction - international transactions relating to export sales and receipt of sales commission - HELD THAT:- The assessee has filed on record the assessment orders relating to assessment years 2009-10 and 2010-11 which clearly reveal the transaction of export to associate enterprises being entered into by the assessee with its associate enterprises - we find no merit in the order of TPO in applying the CUP method to benchmark the international transaction of export to associate enterprises in the hands of assessee. Upholding the order of CIT(A), we dismiss this part of ground of appeal raised by the Revenue.
Adjustment made in the second segment of receipt of commission from the associate enterprises - TPO had applied CUP method - The assessee has referred to the assessment orders relating to assessment years 2009-10 and 2010-11, where similar transaction of commission receipts from associate enterprises are reported as international transaction and has been benchmarked by applying CUP method and no addition has been made in the hands of assessee. We find no merit in the methodology adopted by the TPO in rejecting the method applied by the assessee.
Loss suffered on account of foreign exchange fluctuations - revenue or capital loss - HELD THAT:- The Hon’ble Supreme Court in CIT Vs. Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] had held that the losses suffered by the assessee on account of foreign exchange difference as on the date of balance sheet was an item of expenditure allowable u/s 37(1).
The assessee before us has also borrowed loan in foreign exchange and on the close of each of the year was reporting the outstanding liability following the accounting method prescribed in this regard. For the year under consideration, the assessee had claimed loss on the said account of foreign exchange i.e. valuation of loan outstanding as on date of close of the year borrowed in foreign exchange. The said loss is to be allowed as deduction in the hands of assessee, following the same method as in the earlier year when gain arising at the close of the year has been added as income of the assessee. Accordingly, we uphold the order of CIT(A) in this regard and dismiss the ground of appeal raised by the Revenue.
Addition on account of lease rental expenses - AO on perusal of the agreement held the expenditure to be non-allowable on the premise that the lease was non-cancelable - As per CIT(A) payments under the operational lease agreement were for the use of vehicles on monthly basis, wherein the normal repairs and maintenance was to the account of lessor and agreement was for limited period - HELD THAT:- where the assessee has entered into a contractual agreement for lease of vehicles which were used by the assessee during the course of its business and where the lease was cancelable and where the normal repairs and maintenance had to be undertaken by the lessor, expenditure incurred by the assessee is revenue in nature and hence, merits to be allowed in the hands of assessee. Accordingly, we hold so. Decided against revenue.
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2017 (4) TMI 1620 - ITAT MUMBAI
Rectification of mistake u/s 154 - MAT addition u/s 115JB - period of limitation - addition on account of book profit u/s 115JB in respect to provision for diminution in view of long term investment by resorting through rectification u/s 154 - whether the order of the AO u/s 154 to rectify the order giving effect to the Tribunals order is bar by limitation or not? - HELD THAT: - In this case since the original order was subjected to appeal and hence provisions of section 154(IA) of the Act would be applicable.
We notice from the provision of Section 154(1A) of the Act which provides that the AO can rectify the order in respect of a matter other than the matter which has been considered and decided by the appellate/revisional authority. In the instant case since the issue of diminution in value of an asset for calculating book profit was not a subject matter of appeal or revision, the original order u/s. 143(3) of the Act dated 27th February 2004 is the order which can be rectified by the AO and since the order passed in 2004 cannot be rectified after a period of 4 years, the order passed under 154 of the Act dated 29th March 2014 is barred by section 154(7) of the Act.
It is a settled position that the AO while giving effect to the Tribunal's order cannot go beyond the directions of the Tribunal and since in the instant case the issue of calculation of book profit qua diminution in the value of an asset was not the subject matter of the appeal, the Revenue is not justified in contending that the order is within the time limit.
Hon’ble Supreme Court in the case of Alagendran Finance Ltd [2007 (7) TMI 304 - SUPREME COURT] was dealing with section 263(2) of the Act read with clause(c) to Explanation 263(1) which is identical to section 154(1A) as held that since issue of lease equalization fund was not the subject matter of reassessment proceedings, the limitation for revising the assessment order qua lease equalization fund will start from the original assessment order passed u/s. 143(3) of the Act and not from the date of reassessment order passed u/s. 147 - Decided in favour of assessee.
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