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2019 (4) TMI 2155 - ITAT JAIPUR
Reopening of assessment - unexplained investment in plot - ‘on-money’ on purchase of the plot - information received from Investigation Wing, Jaipur by the A.O as one Sh. Madan Mohan Gupta has accepted on money receipt on sale of Revenue Residency Scheme which is Rs. 2000/- per square yard. - whether no opportunity for the cross examination of the person on whose statement addition was made? - HELD THAT:- Under similar facts, the addition made on account of on money was deleted after following the observation made in the case of Dhirendra Singh [2019 (3) TMI 2029 - ITAT JAIPUR] wherein held addition made by AO merely on the basis of statement, when there is no corroborative material with AO suggesting the alleged addition, without allowing assessee an opportunity to cross examine the person on whose statement addition was made. Accordingly, AO is directed to delete the addition so made - Decided in favour of assessee.
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2019 (4) TMI 2154 - BOMBAY HIGH COURT
Jurisdictional error in appointing Administrator pendente lite - Direction to handover the possession of the assets in custody - Whether appointment of Administrator pendente lite is justifiable? - HELD THAT:- It is not a mere factum of the appellant and Mrs. Parmeet Kaur allegedly residing together despite a decree of divorce. Nor is it restricted to the personal marital life of the appellant and Mrs. Parmeet Kaur. The circumstances in which registered documents have been allegedly got executed whereby the respondent is shown to have gifted the properties to not only her grand-daughter but also to Parmeet Kaur, the divorced wife of the appellant, cannot be said to be insignificant or inconsequential. As a part of settlement of marital dispute, under the decree of divorce, three immovable properties were transferred in favour of Mrs. Parmeet Kaur by the appellant. The two immovable properties, which stood in the name of the respondent, were shown to have been gifted away by the respondent by the gift deeds dated 18th March 2017.
The flurry of activities in close proximity to the death of the deceased, i.e., 27th April 2017, namely (i) a decree of divorce between the appellant and Parmeet Kaur dated 30th January 2017; (ii) the marriage of the appellant and Sonu Pandey on 14th February 2017; (iii) the execution of the two gift deeds by the respondent on 18th March 2017, (iv) the execution of the alleged Will by the testator in favour of the appellant on 12th April 2017 tell a different story and indicate an urgency of purpose. They cannot be brushed aside as mere coincidences.
There is material to indicate that the respondent was sought to be divested of all the immovable properties and they were tried to be settled upon first wife and the daughter of the appellant. Undoubtedly, the validity or otherwise of the gift deeds whereby the respondent is shown to have gifted the properties in favour of Parmeet Kaur and Hansmeet Kaur is a matter of trial. Nonetheless, taking an overall view of the matter, the learned Single Judge was justified in drawing an inference that the appointment of the administrator pendente lite was expedient.
Appeal dismissed.
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2019 (4) TMI 2153 - ITAT KOLKATA
Disallowance of bogus purchase - Maharashtra State Sales Tax / VAT department had found all the parties in issue to have been engaged in giving purchase entries to their respective suppliers - HELD THAT:- This tribunal’s co-ordinate bench’s decision in ITO vs. Paresh Arvind Gandhi [2015 (7) TMI 362 - ITAT MUMBAI] holds purchase made from most of the parties in issue as genuine in view of the corresponding details submitted at the concerned assessee’s behest. Case file(s) suggest that the department has also not furnished the relevant materials information as well as the alleged admissions if any of the party in issue to the assessee. We further notice that this assessee is engaged in iron and steel trade business.
As filed all the relevant evidence(s) in the nature of purchase bills, delivery challan, weigh bridge certificates, transportation details, cheque payments to suppliers as well as transporters, TDS deduction certificates, stock register, steel bills and bank statement in support of the impugned purchases claims right from assessment till the instant second appeal proceedings. All the said details have nowhere been rebutted at the AO’s end.
Revenue fails to dispute the clinching fact that the assessee’s corresponding sales have already been accepted as correct. We therefore see no reason to restore the impugned bogus purchase disallowance canvassed in Revenue’s former appeal.
10% ad hoc estimated disallowance by comparing the corresponding figures of the impugned assessment year vis-a-vis preceding assessment year - HELD THAT:- We afforded ample opportunities to the learned departmental representative for pin-pointing any specific defect; head-wise in the impugned claims comprising of clearing charges, computer repair, container rent, custom duty, CWC charge, DEPB premium, doc clearing charges, interest paid, service and testing charges and TDSC transportation charges alongwith other heads. There is no such discussion on the assessment order pointing out any such defect in all these specific heads. AO had not put even a single head to factual verification from recipient side as well. We conclude in these facts that the CIT(A) has rightly concluded that the impugned disallowance merely based on comparison of relevant figures in the two assessment years is not sustainable.
Addition of unexplained cash deposits addition - HELD THAT:- CIT(A)’s findings in his order under challenge hold that the assessee had filed its ledger account as well as cash flow statement indicating re-deposit of cash sums already withdrawn. AO’s remand report as well not disputing all these clinching supporting evidence. We therefore reject Revenue’s instant second substantive ground as well as the latter main appeal
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2019 (4) TMI 2152 - SUPREME COURT
Seeking summoning of one Dr. I. Yusuf (who had conducted first postmortem of the dead-body of the Appellant's daughter in Nigeria) through High Commission of Nigeria or to record his evidence through video-conferencing, after issuing a commission for the purpose - Section 311 of the Code of Criminal Procedure (CrPC) - HELD THAT:- It is difficult to approve the orders impugned; and it appears just and proper that the application moved in this matter Under Section 311 Code of Criminal Procedure be allowed with direction to the Trial Court to ensure that the testimony of the doctor conducting first post-mortem comes on record.
It needs hardly any emphasis that the discretionary powers like those Under Section 311 Code of Criminal Procedure are essentially intended to ensure that every necessary and appropriate measure is taken by the Court to keep the record straight and to clear any ambiguity in so far as the evidence is concerned as also to ensure that no prejudice is caused to anyone. The principles underlying Section 311 Code of Criminal Procedure and amplitude of the powers of the Court thereunder have been explained by this Court in several decisions.
The Trial Court disposed of the application Under Section 311 Code of Criminal Procedure on entirely irrelevant considerations and the High Court also failed to exercise its jurisdiction Under Section 482 Code of Criminal Procedure while overlooking and ignoring the material and relevant aspects of the case. In our view, the said application Under Section 311 Code of Criminal Procedure deserves to be allowed.
This appeal is allowed in the manner and to the extent that the impugned orders dated 31.05.2018 and 02.08.2018 are set aside and the application moved in this matter Under Section 311 Code of Criminal Procedure is allowed.
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2019 (4) TMI 2151 - CESTAT NEW DELHI
Application for rectification of the alleged mistake under Section 35 C (2) of the Central Excise Act 1944 - Time Limitation - HELD THAT:- The limitation for filing the application for rectification of mistake is six months from the date of order as stipulated in Section 35 C (2) of the Act. It is seen that the date of final order of the Tribunal is 30 October 2017 and the date of filing of the appeal before Rajasthan High Court is 15 April 2018. Thus, about five and half months were consumed by the appellant before filing the appeal before the Rajasthan High Court. After the Rajasthan High Court disposed of the Appeal on 3 October 2018, the application for rectification of the mistake was actually filed on 8 January 2019 before this Tribunal, i.e. after about three months and five days. As such, even if the time consumed by the applicant before the Rajasthan High Court is excluded the application for rectification of the mistake the order of the Tribunal has been filed beyond six months.
The Tribunal does not have the power to condone any delay beyond six months as has been held by the Larger Bench of the Tribunal in NATIONAL ENGG. INDS. LTD. VERSUS COMMISSIONER OF C. EX., JAIPUR [2001 (11) TMI 104 - CEGAT, COURT NO. I, NEW DELHI]. It needs to be stated that against this decision of the Larger Bench of the Tribunal, the Department filed Civil Appeal No. 183-186/2013 which was dismissed both on the grounds of delay as well as on merits in NATIONAL ENGINEERING INDUSTRIES LTD. VERSUS COMMISSIONER [2003 (1) TMI 721 - SC ORDER].
The application, that was filed beyond six months from the date of the order of the Tribunal, therefore, deserves to be rejected and is, accordingly rejected. The other two applications, therefore, stand rejected.
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2019 (4) TMI 2150 - KARNATAKA HIGH COURT
Validity of provisions of Section 28[4] and [5] of the Karnataka Industrial Areas Development Act, 1966 - seeking for a direction, declaring that the provisions contained in Chapter VII of the KIAD Act are void after the enactment of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - assailing the acquisition proceedings under the notification dated 09.12.2016 published in the Karnataka Gazette dated 26.01.2017 issued under Sections 3[1], 1[3] and 28[1] of the KIAD Act, as well as the notification dated 20.07.2018 published in the Karnataka Gazette dated 09.08.2018 issued under Section 28[4] of the KIAD Act.
It is the contention of the learned counsel for the petitioners that subsequent to enactment of Act, 2013, in terms of Section 2[1][b][iii] of the Act 2013, any acquisition if to be made for acquiring the lands for manufacturing zone, the Provisions of Act 2013 would apply and not the KIAD Act.
HELD THAT:- The validity of Maharashtra Industrial Development Act came into consideration before the Hon'ble Apex Court in the case of RAMTANU CO-OP. HOUSING SOCIETY LTD. VERSUS STATE OF MAHARASHTRA [1970 (8) TMI 84 - SUPREME COURT], wherein the Hon'ble Apex Court held that the Maharashtra Industrial Development Act is a valid piece of legislation and observed The powers and functions of the Corporation show in no uncertain terms that these are all in aid of the principal and predominant purpose of establishment, growth and establishment of, industries. The Corporation is established for that purpose. When the Government is satisfied that the Corporation has substantially achieved the purpose for which the Corporation is established, the Corporation will be dissolved because the raison d'etre is gone. We, therefore, hold that the Act is a valid piece of legislation.
It is further held that there is no procedural discrimination between the Maharashtra Industrial Development Act and the Land Acquisition Act, 1894. The two Acts are dissimilar in situation and circumstances. The Maharashtra Industrial Development Act is a special one having the specific and special purpose of growth, development and Organisation, of industries in the State of Maharashtra.
Applying the doctrine of pith and substance, it is clear that KIAD Act is aimed at planned establishment and development of Industries in suitable Areas in the State unlike that Central Act enacted with the object to acquire land and disburse compensation in accordance with law. The State is competent to enact such a law under Entry 24 of List-II. It is not in dispute that the KIAD Act is a comprehensive law pertaining to establishment of the Industries in the State of Karnataka which is enacted in furtherance of Entry 24 of the State List. The acquisition of the lands under the said enactment is an ancillary issue and the main purpose is of enacting the growth and development of the industries in the State of Karnataka. Entry 24 of List-II i.e., State List deals with "Industries subject to the provisions of Entry 7 and 52 of List-I". The new Act 2013 and KIAD Act can reconcile and co-exist. The Scheme of Land Acquisition Act, 1894 which is repealed by Act 2013, was an ex-proprietary legislation to provide for acquisition of lands for public purposes and for companies.
There is no bar to the authorities to take recourse to the provisions of the KIADB Act, which is also a self contained code, the acquisition of land under the said Act is justifiable. The petitioners cannot have any grievance for the same.
The main ground of attack of the petitioners is that pursuant to the enactment of Act, 2013, no notifications would have been issued for acquisition of the lands of the petitioners in the manufacturing zone resorting to the provisions of the KIAD Act - The genesis of the challenge to the provisions of the KIAD Act vis-à-vis the notifications issued under Section 28[1] and 28[4] of the KIAD Act relates to the visible distinction inasmuch as award of compensation under the two enactments and apprehension of denial of the higher compensation which otherwise the petitioners are legitimately entitled to, under the Act, 2013. This grievance of the petitioners is addressed by the Board wherein, a specific stand has been taken in the Statement of Objections filed by the Board, in paragraph 17, that the Board constituted under the KIAD Act, in its meeting has resolved that the compensation as regards lands acquired under the KIAD Act, shall be in tune with the New Act, 2013.
The resultant factors of getting compensation under the Act, 2013 being achieved by the petitioners, in view of the undertaking given by the Board before this Court in terms of the objections filed coupled with the submissions of the learned Senior counsel on instructions, the writ petitions deserve to be dismissed.
Petition dismissed.
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2019 (4) TMI 2149 - ITAT MUMBAI
Invalid revised return - Considering the income as per revised Return of Income - Revised return considered not the valid return as per section 139(5) [revised return was not filed against the return filed u/s 139(1) or in response to the notice issued u/s. 142(1)] - As per assessee as result of punching error, an amount was entered in the return of income - difference between the original return and revised return and reasons for filing the revised return of income on the next day of filing the original return.
HELD THAT:- In the instant case, the appellant filed its original return of income on 16.02.2015 declaring income at Rs. 1,28,42,730/-. Thereafter, on the very next day, it filed the revised return declaring the total income at Rs. ‘NIL’.
During the assessment proceeding before the AO, the appellant explained that there was a punching error while filing return in e-filing portal. Also, it was submitted by the appellant that the accountant dealing with it, has erroneously inserted figure of “12842725” in the column “amounts debited to the profit and loss account, to the extent disallowable u/s 40A in Row No. 16 in Schedule BP of the return form.
We find that in the instant case there was no income for the impugned assessment year and as a result of punching error, an amount of Rs. 1,28,42,730/- was entered in the return of income filed on 16.02.2015. The appellant realized the mistake and immediately corrected it by filing a revised of return of 17.02.2015. Also, revised computation income was filed in support of the revised return of income.
The above mistake, being a punching error, we uphold the order of the Ld. CIT(A). Decided against revenue.
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2019 (4) TMI 2148 - MADHYA PRADESH HIGH COURT
Appeal dismissed on the ground of time limitation - rejection of refund claim - HELD THAT:- The Tribunal relied on the decision of the Supreme Court in Singh Enterprises vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT]. In the said decision, Supreme Court examine the provisions of Section 35 of the Central Excise Act, 1944 and it was held that There cannot be any straitjacket formula for accepting or rejecting the explanation furnished for delay caused in taking steps. In the instant case, the explanation offered for the abnormal delay of nearly 20 months is that the appellant concern was practically closed after 1998 and it was only opened for some short period. From the application for condonation of delay, it appears that the appellant has categorically accepted that on receipt of order the same was immediately handed over to the consultant for filing an appeal. If that is so, the plea that because of lack of experience in business there was delay does not stand to be reason.
Thus, no case is made out to warrant interference in exercising of our powers confer under Article 226 of the Constitution of India - petition dismissed.
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2019 (4) TMI 2147 - SC ORDER
Valuation - inclusion of free of cost material supplied to appellant - HELD THAT:- As the issues raised in this appeal has been squarely answered by the decision(s) of this Court in INTERNATIONAL AUTO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BIHAR [2005 (3) TMI 132 - SUPREME COURT] and SRF LTD. VERSUS COMMISSIONER [2016 (4) TMI 1068 - SC ORDER] where it was held that As the final product was the excavator. According to the Modvat scheme, it is the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product. The Tribunal having misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand, the present appeal is disposed of on the same terms.
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2019 (4) TMI 2146 - SC ORDER
Condonation of inordinate delay of 1180 days in filing the instant appeals - no sufficient reasons for the delay - the case before CESTAT was on taxability of Commission received from shipping line for slots that were booked on ships according to instructions from exporters, and it was held by CESTAT set aside the demand holding that The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) ibid will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed.
HELD THAT:- The explanation offered for the delay is not satisfying - appeals are dismissed on the ground of delay.
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2019 (4) TMI 2145 - GUJARAT HIGH COURT
Wilful Defaulter - Participation in the process by offering resolution plan to respondent no.1 - HELD THAT:- The petitioner no.1 who had forwarded expression of interest, has been accepted in the resolution process. However, to scuttle the chance of the petitioner to participate in the process, the respondent no.2 has declared the petitioner no.2 and 3 as willful defaulter. Thereby automatically disqualifying the petitioner no.1 from any further participation - According to the petitioner, the action on the part of the respondent no.2 was not only deliberated, but also not supported by any provision.
The petitioner no.1 be permitted to participate in the process by offering resolution plan to respondent no.1.
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2019 (4) TMI 2144 - ITAT DELHI
Defect of filing the appeal manually instead of electronically - scope of new procedure of e-filing of appeal - As per rule 45(2)(a), a person who is required to file the return of income electronically, was to furnish appeal in Form No. 35 in electronic mode only - as argued appeal of the assessee dismissed without allowing the assessee an opportunity to rectify the defect in the appeal.
HELD THAT:- As DR agreed that no opportunity was allowed to the assessee to rectify the defect of filing the appeal manually instead of electronically.
We set aside the order of the CIT(A) and remand the matter back to his file to dispose of appeal of the assessee afresh after allowing opportunity to the assessee to rectify the defect in the appeal if any. Thus, the appeal of the assesse is allowed for statistical purposes.
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2019 (4) TMI 2143 - DELHI HIGH COURT
Enhancement of retirement age of the respondent to 65 years - HELD THAT:- The order passed in the case of UNION OF INDIA VERSUS DR HP SINGH [2018 (11) TMI 1951 - DELHI HIGH COURT] was carried to this Court by the Union of India, where it was held that In case the respondent continued to serve the petitioner even after attaining the age of 60 years, and he continues to do so, the petitioner is directed to make payment of arrears of salary and allowances to the respondent within four weeks from today, and to continue to pay his salary and other allowances in future till the respondent superannuates at the age of 65 years.
The present writ petition dismissed.
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2019 (4) TMI 2142 - ITAT AHMEDABAD
Addition u/s 40A(9) v/s 37(1) - payment to Prasanna trust for the training of the employees - assessee claim it as revenue expenditure u/s 37(1) - as per assessee expenditure had been incurred on three to four days of the carrier training program conducted by Presanna trust for the development and growth of the employee. Hence the above-stated expenditure is allowable u/s 37(1) as expenditures were incurred wholly and exclusively for the business - AO rejected the contention of the assessee by observing that the above-stated payment has been made for setting up and formation of the trust other than the fund as covered under section 36(1)(iv) and section 36(1)(v) - HELD THAT:- There is no evidence brought on record by the AO that the assessee has made payment for setting up or formation of trust. Admittedly the assessee made the payment to the trust, but the payment to the trust does not mean that it is not a business expense. As such if the expenses are incurred in connection with the business, then it is eligible for deduction u/s 37(1) of the Act provided the same is not in the nature of capital and personal expenses.
In the case on hand the AO has not brought on record whether the expenditures are capital or personal nature. The AO has not doubted the genuineness of the transaction. AO did not call any information regarding the transaction from the trust by using his power given under section 133(6) of the Act. Thus this expenditure should be allowable as business expenditure u/s 37(1) of the Act. Accordingly, we dismiss the ground of appeal raised by the Revenue.
Nature of expenditure - expenditure made to associates enterprises for the use of technological know-how - Assessee has debited sum as fee for technical know-how in respect of its DTA units and claimed that such fee represents the royalty payment determined as a percentage of net sales under the terms of the collaboration agreement - as per AO said expenditure incurred in respect of technical know-how fees was capital in nature - HELD THAT:- At the outset we find that in the identical facts and circumstances in the own case of the assessee, the ITAT in the AY 2002-03 and 2003-04 has deleted the addition made by the AO after having reliance on the order of the ITAT in the AY 2001-02 [2011 (9) TMI 851 - ITAT AHMEDABAD] by holding that impugned expenditure as revenue in nature.
We also find that the Hon’ble supreme court case of Ambika Parsad Mishra Vs. State of U.P. and Others [1980 (5) TMI 100 - SUPREME COURT] has taken the similar view - Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed.
TP Addition on account of royalty payment and margin of DTA unit - TPO compared the PLI/margin of the assessee for its DTA segment with the PLI/margin of the comparables by observing that margin of DTA segment as calculated by the assessee is 6.97% only which is less than with industry margin 10.66% - HELD THAT:- As decided in own case [2014 (11) TMI 552 - ITAT AHMEDABAD] there is no fault can be found from the order of the ld.CIT(A) so far as restricting the addition on account of differential operating margin to the international transactions is concerned. However, the figure of Rs. 8,43,42,316/- as worked out by the ld.CIT(A) is not correct, therefore this issue is required to be restored to the file of ld.CIT(A) for recomputation of the international transactions - also CIT(A) and TPO were not justified in adopting the CUP method and, therefore, we direct the ld.CIT(A) to adopt the method of TNMM for determination of the ALP and recompute the ALP in respect of the royalty
In view of the above and the precedent in the own case of the assessee as discussed above, we restore both the issue, i.e., adjustment in the DTA segment and the royalty payment to the file of Ld.CIT (A) for fresh adjudication.
Addition for the allocation made by the AO towards the depreciation on data processing machine and advertisement expenses deleted and addition made by the AO regarding the depreciation on the car confirmed. The AO is directed accordingly to delete/ confirm the addition made by the AO.
Depreciation on residential quarters - As Revenue for AY 2003-04 [2017 (4) TMI 1633 - ITAT AHMEDABAD] has not raised any ground against the action of the Ld.CIT (A) for deletion of allocation of depreciation on residential quarters between DTA and EOU unit. Thus it is clear that once the Revenue has not challenged the action of the Ld.CIT (A), then the order of the Ld.CIT (A) reaches its finality. As such it is settled law that the Revenue cannot challenge the same in the subsequent year until & unless there was some change in the facts and circumstances. Admittedly there was no change in the facts and circumstances regarding the claim of the assessee for the depreciation in respect of residential quarters and its allocation thereof. Therefore we are of the view, that there cannot be any disallowance on account of allocation of the depreciation of the residential quarters. In this regard we find support and guidance from the judgment of Hon’ble supreme court in case of Radhasoami Satsang vs. CIT [1991 (11) TMI 2 - SUPREME COURT] - thus we hold that there cannot be any allocation of the depreciation claimed by the assessee in respect of its residential quarters towards the DTA unit.
Allocation of the depreciation on SAP R3 expenses and renovation of the building - SAP R3 expenses and renovation expenses on the building have been treated as revenue expenditure by us earlier in this order. Thus the question of allocating the depreciation thereon does not arise.
As important to note that the AO has not disputed allocation of the expenses of SAP R3 and renovation of the building expenses in his order. As such the AO treated such expenses as capital in nature and accordingly the same was disallowed. But the AO allowed the depreciation on such expenses which was allocated between DTA and EOU unit of the assessee. Thus the issue for the allocation of SAP R3 expenses remained untouched by the AO. Thus the question arises whether such expenses need to be allocated between DTA and EOU unit. For this limited purpose, we are of the view that the justice will be served to both the assessee and the Revenue if the matter is restored back to the file of AO for fresh adjudication.
Negating the exclusion of 90% of the income from writing back of credit balance and gain from foreign exchange fluctuation - HELD THAT:- Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC of the Act. ITAT Mumbai in case of Extrusion Process (P) Ltd. [2006 (6) TMI 261 - ITAT MUMBAI] has also held that the assessee is entitled to deduction under section 80HHC of the Act in respect of the impugned income - No reason to interfere in the order of the Ld.CIT-A. Hence the ground of appeal of the Revenue is dismissed.
Gain on forex - assessee submitted that the income from the foreign currency fluctuation is part of export turnover which represents the additional sale price - HELD THAT:- Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC of the Act. In holding so, we find support and guidance from the judgment of Hon’ble Bombay High Court in the case of Alfa Laval India Ltd. [2003 (9) TMI 43 - BOMBAY HIGH COURT].- In addition to the above, we also note that the Delhi ITAT in case of Smt. Sujata Grover [2001 (11) TMI 232 - ITAT DELHI-E] where in it was held that the assessee is entitled to deduction under section 80HHC of the Act in respect of the impugned income - Decided in against revenue.
Deduction under section 80HHC - Service income, scrap sales, handling charges, and GEB - HELD THAT:- The word "interest" in clause (baa) of the Explanation connotes "net interest" and not "gross interest". Therefore, in deducting such interest, the Assessing Officer will take into account the net interest, i.e ., gross interest as reduced by expenditure incurred for earning such interest.
Where, as a result of the computation of profits and gains of business or profession, the Assessing Officer treats the interest receipt as business income, the deduction should be permissible in terms of Explanation (baa) of the net interest, i.e., the gross interest less the expenditure incurred for the purposes of earning such interest. The nexus between obtaining the loan and paying interest thereon (laying out the expenditure by way of interest) for the purpose of earning the interest on the fixed deposit, to draw an analogy from section 37, will require to be shown by the assessee for application of the netting principle.
Sale of scrap and insurance claim and handling charges - Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC of the Act. In holding so, we find support and guidance from the judgment of Alfa Laval India Ltd [2003 (9) TMI 43 - BOMBAY HIGH COURT] wherein the issue was decided in favour of the assessee.
In addition to the above, we also note that the ITAT (Chennai Bench) in the case of JCIT v/s Kadri Mills (CBE) Ltd. [2002 (3) TMI 242 - ITAT MADRAS-A] has also held that the assessee is entitled to deduction under section 80HHC of the Act in respect of the impugned income.
Interest income from GEB and Income from investment and income from UTI - Deduction u/s 80HHC is available to the assessee in respect of export of the goods. The provisions of this section do not speak about the deduction in respect of interest income from GEB. Therefore in our considered view, the assessee is not entitled to the deduction under section 80HHC in respect of such income. However, the assessee is entitled to the deduction for the expenses incurred by it against such income. Therefore we direct the AO to reduce the expenses incurred by the assessee from the interest income as discussed above. Thus the AO will reduce 90% of the balanced interest income for working out the profit of the business eligible for deduction under section 80 HHC of the Act. As such the AO will consider only the net income of the assessee before reducing 90% of the interest income while working out the deduction under section 80HHC.
Freight recovered, Insurance claim/sale tax claim/CST refund - Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC.
DEPB income - Admittedly the impugned income is eligible for deduction under section 80HHC(3) of the Act. We also note that the issue involved in the instant case stands covered in favor of the assessee by the judgment of Hon’ble Apex court in the case of CIT Vs. Avani exports [2015 (4) TMI 193 - SUPREME COURT]. Accordingly, we direct the AO to consider the aforesaid amount for working out the deduction under section 80HHC of the Act.
Discount of early payment of suppliers bill - Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC of the Act. We direct the AO to consider the aforesaid amount for working out the deduction under section 80HHC of the Act.
Octroi refund, reversal of the provisions, for the excise duty and for the testing charge - Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC.
Small amount accruing during the normal course of the business - We note that the Ld. AR before us has not advanced any argument suggesting that income is arising in the course of the business. Thus in the absence of any information contrary to the finding of the Ld.CIT (A), we are inclined to uphold the same. Hence the ground of appeal of the assessee is dismissed.
Including the profit & export turnover of EOU units eligible for tax holiday u/s 10B of the Act in the computation of deduction u/s 80HHC - As decided in own case [2017 (4) TMI 1633 - ITAT AHMEDABAD] 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 ITAT Mumbai in the case of TATA BP SOLAR INDIA limited. [2010 (9) TMI 1083 - ITAT MUMBAI]
Nature of expenses - repair expenses in the building carried out by the assessee - revenue or capital expenditure - HELD THAT:- There is no allegation of the revenue that any new asset has come into existence out of such expenditure. As such the repairing expenses were incurred to the existing building. Thus, we are of the view that such expenditure cannot be termed as capital in nature merely on the ground that it will generate enduring benefit to the assessee.
The case law relied upon by the AO i.e. Ballimal Naval Kishore & another [1997 (1) TMI 3 - SUPREME COURT] is distinguishable from the present facts of the case as observed that there was a total renovation of the theatre. New machinery, new furniture, new sanitary fittings and new electrical wiring were installed besides extensively repairing the structure of the building. However in the instant case before us, there was mere repair on the existing building. There was no change brought to our notice about the structural in the existing building out of such expenses. Accordingly we direct the AO to delete the addition made by him by treating the repairing expenses as capital in nature.
Disallowing the expenditure on scientific research claimed u/s 35(1) - HELD THAT:- As assessee has conducted the scientific research activity and therefore the assessee is eligible for deduction in respect of capital expenditure under section 35 of the Act. However, the onus lies on the assessee to prove on the basis of documentary evidence that it has carried out the scientific research activity. As such we note that, the Ld.AR for the assessee before us has not brought any iota of evidence suggesting that the assessee has carried out any scientific research activity. Thus in the absence of sufficient documentary evidence, we do not find any reason to disturb the finding of the Ld.CIT (A). Hence the ground of appeal of the assessee is dismissed.
Addition of the unutilized CENVAT Credit in the valuation of closing stock - As we note that the assessee has been recording its transactions of purchase, sales, and valuation of inventories, net of CENVAT consistently. Thus, if the inventory of closing stock is enhanced by the amount of CENVAT credit attributable to it, then the amount of corresponding purchases should also be increased by the said amount which will result in tax neutral exercise. Thus, in our considered view, the Assessing Officer erred in enhancing the value of closing stock without giving effect to the purchases.
Reimbursement of Insurance Expenses - As there is no ambiguity that the assessee cannot claim the deduction of the insurance expenses paid to the foreign insurance companies. Therefore we do not find any merit in the case of assessee. Hence the ground of appeal of the assessee is dismissed.
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2019 (4) TMI 2141 - PUNJAB AND HARYANA HIGH COURT
Seeking release of power subsidy in terms of the Enterprises Promotion Policy-2015 - HELD THAT:- It is deemed appropriate to dispose of the writ petition with a direction to respondents No.2 and 3 to examine the claim of the petitioner company against the backdrop of representation dated 04.02.2019 (Annexure P-13) and to take a final decision thereupon and to convey the same to the petitioner within a period of eight weeks from the date of receipt of certified copy of this order.
It is however clarified that this Court has not ascertained the correctness of the averments made in the petition and has not opined as regards the claim of the petitioner company to be eligible for the power subsidy under the 2015 Policy.
Petition disposed off.
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2019 (4) TMI 2140 - BOMBAY HIGH COURT
Penalty u/s 271(1)(c) - debatable issue - bonafide claim by disclosing income and particulars of such income - ITAT deleted addition as High Court has admitted the appeal on quantum addition by framing substantial question of law for consideration, ignoring all other material facts considered for levying the penalty - HELD THAT:- Firstly, it is undisputed that the assessee had made full disclosure of income and the particulars of income. The assessee had made bonafide claim of depreciation on lease assets. Whether such claim eventually stands legal requirement or not, what is important is that the assessee had raised such a bonafide claim by disclosing income and particulars of such income. As is held by the Supreme Court in its decision in the case of CIT, Ahmedabad Vs. Reliance Petroproducts Pvt Ltd [2010 (3) TMI 80 - SUPREME COURT] merely because a claim is not acceptable in law would not give rise to penalty proceedings. Decided in favour of assessee.
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2019 (4) TMI 2139 - ITAT MUMBAI
Addition u/s. 69A - unexplained jewellery - DR while relying upon the order of AO submitted before us that cut and polished diamonds were purchased on credit from M/s Raj International Ltd and were given for re-making of jewellery to Bani Kumar Mondal - HELD THAT:- We find that as far as diamond jewellery of Rs.44,40,906/- is concerned, the assessee had adduced all the relevant evidences before the AO in the form of valuation report of the assessee and Mrs. Kalawati Kothari (wife of the assessee) and the purchase bills of diamonds, remaking bills for conversion of diamonds into jewellery and payment details in support of its acquisition at the time of post search proceedings and even in the assessment proceedings.
Whereas the AO has not brought any cogent or convincing material to point out any discrepancies therein. However, it was mere presumption on the part of AO to the effect that as to why the purchases were made on credit just prior to search and paid after the date of search. According to us, the presumption howsoever strong may be cannot take place of proof. Thus, according to the facts of the present case, the assessee has not led any corroborative evidence in order to point out any discrepancies in the documents filed by the assessee.
We are also of the view that Section 69A cannot be invoked, just on the basis of presumptions, conjectures and surmises.
Even no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Resultantly, this ground raised by the revenue stands dismissed.
Addition u/s. 69A - unexplained money - assessee has accepted in his statement under oath u/s 132(4) that there was no evidence present at the time of search action - CIT(A) deleted addition - HELD THAT:- As considered the entire facts, documents and affidavit filed by Rakesh Kothari that the noting made in his diaries were his personal dealings and none of the family members was involved in his transactions.
Shri Rakesh Kothari has already considered all these alleged transactions in his Application filed before the Hon'ble Settlement Commission u/s. 245C(1) - as perused the report and the orders passed by the Settlement Commission, wherein the unaccounted transactions have already been owned up by the him and considered in the additions/offer made in his hands. Therefore in this way, the undisclosed transactions have already been brought to tax by the department. The decision of the Hon'ble Supreme Court in the case of Common Cause [2017 (1) TMI 1164 - SUPREME COURT] relied upon by the assessee is squarely applicable to the present facts and therefore we are also of the view that mere noting in diaries of a third person cannot be taken as admissible evidence u/s. 34 of the Indian Evidence Act.
No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed.
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2019 (4) TMI 2138 - ITAT BANGALORE
Provision for non-moving/obsolescence stock disallowed - as argued provision for non-moving / obsolescence in stock was made as per the mandatory requirement under AS 2 (i.e. Valuation of inventories) prescribed by ICAI and Accountant Standard 1 prescribed by the Central Govt. u/s 145 of the Income-tax Act - HELD THAT:- The fact remains the ld. AR has not demonstrated the nature of the goods which became obsolescence and what is the cost and net realizable value. The decision relied upon by the AO is on the provision for warranty whereas in the present case the disallowance is for non-moving / obsolescence goods. The ld. AR contention that they are slow moving.
The fact remains that the assessee could not substantiate and the CIT(A) has referred in the observations that the assessee could not substantiate with the detailed working of provisions and no details of listed items of obsolete have been produced and the basis of value and comparables at cost or market value and also there is no policy decision in respect of such non-moving / obsolescence goods. We are of the substantiate opinion that since both the AO and the assessee could not substantiate with the information and CIT(A) also dealt on this issue, we restore the disputed issue to the file of the AO to verify and examine the method of accounting treatment of obsolescence goods and examine the statements filed in the course of hearing. Grounds of appeal of the assessee is allowed for statistical purposes.
Non-deduction of TDS on payments made to non-residents - AR submitted that the commission is paid outside the country and Agents only procure orders - HELD THAT:- When we read the clauses and findings of CIT(A), the fact remains that the non-resident should have the some technical expertise to check quality of products. We found section 9(1)(vii) deals with fee for technical services, in the present case. We are of the substantiate opinion that the submission of the Assessee cannot be accepted because the non-resident Agent has to check the quality of goods ordered by the customers with some expertise in international market and the ld. AR could not prove that there is no permanent establishment and supported the arguments with judicial decision and explains that the assessee has paid only commission and the works are in the nature of procurement of goods but it conflicts clauses of the agreement entered by the assessee with the non-residents. Further the assessee could not substantiate with reasons that how the quality of goods can be checked by the non-residents when they do not have any expertise in the international market. Therefore we are of the opinion that the CIT(A) after considering the provisions, facts and finding has taken a reasoned decision and we uphold the same and dismiss the ground of appeal of the assessee.
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2019 (4) TMI 2137 - SUPREME COURT
Constitutional validity of Rule 8(2)(i) of the Rajasthan Prisons (Shortening of Sentences) Rules, 2006 - Conviction under Section 302 and other provisions of the Indian Penal Code - petitioners contended that they had served more than 14 years in custody but their cases were not placed by the Jail Authorities before the State Advisory Boards for shortening of their sentences and premature release - HELD THAT:- The plain language of Section 59(2) makes it manifest that there is no requirement for laying of the Rules before the Legislature prior to promulgation. No time limit for laying has been provided. As rightly urged, the use of words “as soon as” coupled with the absence of any consequence for not laying makes the provision directory and not mandatory.
Part 3 of the Rajasthan Prison Rules, 1951, under the heading Remission System, in Rule 1(e) provides that the sentence for imprisonment for life or transportation of life shall be deemed to mean imprisonment for 20 years - Rule 2(e) of the Rules 2006, defines shortening of sentence to mean the reduction of that period of sentence of a prisoner which he has to serve in the prison upon a judicially pronounced sentence as a matter of grace on the part of the State and as a recognition of his good behaviour in the prison.
Manifestly remission not being a matter of right, much less upon completion of 14 years of custody, but subject to rules framed in that regard, including complete denial of the same in specified circumstances, as a matter of State policy, nothing prevents the State from imposing restrictions in the manner done by Rule 8(2)(i) to consider claims for remission.
It is, therefore, held that the High Court erred in striking down Rule 8(2)(i) of the Rules, 2006 on both counts. The Rule is held to be valid and consistent with the law. The impugned orders of the High Court are set aside - appeals are allowed.
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2019 (4) TMI 2136 - TELANGANA HIGH COURT
Application for condonation of delay was dismissed for non-prosecution - petitioner filed an application for restoration and allowed the same to be dismissed for non-prosecution - HELD THAT:- In the affidavit filed in support of the writ petition, the petitioner has claimed that his advocate filed written submissions and requested the Tribunal to pass orders. It is represented by the Learned Counsel for the petitioner that the advocate of the petitioner is aged about 90 years and that he is residing in Guntur. Therefore, unable to be present before the Tribunal, he has filed written submissions - It is not known whether written submissions were filed or not. But the petitioner has given some semblance of reason.
The application filed by the petitioner seeking restoration of the condone delay application is allowed and the Tribunal is directed to take up the condone delay application and dispose of in accordance with law - Petition allowed.
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