TMI Blog2017 (5) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... made purchases through credit cards is not liable to TDS under section 194H - Thus commission paid to the credit card companies is not subject to the TDS provisions of the Act. Accordingly the disallowance made by the Assessing Officer cannot be sustained and the Order of the CIT(Appeals) deleting the aforesaid disallowance, is upheld. Disallowance of interest under Section 36(1)(iii) - HELD THAT:- It appears that the facts remain the same as earlier years and the loans and advances have been given to group companies as a part of routine business operations, Further it has also been brought to our attention by the Assessee company that the Assessing Officer in earlier as well as subsequent years, accepted the interest claimed under section 36(1)(iii) on similar facts. The AO has made a disallowance during the year under consideration based on his surmises without giving any cogent reason. Hence this disallowance ought to be deleted. Disallowance on account of forfeiture of share warrants - AO disallowed the said amount considering as revenue receipt - HELD THAT:- The basic nature of the transaction relates to raising of capital through convertible warrants. The amount fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itious sales and purchases admittedly involved only the bill entry and transfer of funds through banks. The department has also not alleged that the assessee company had any more role in the entire scheme of things apart from the specific role mentioned above. Given this, if any expense is to be attributed to the aforesaid transaction then it would be the salary of the senior managerial personnel and employee s wages, packaging material and other expenses involved in directing the aforesaid transactions. However it would be entirely incorrect to attribute the mall maintenance charges to the aforesaid transactions since these expenses do not appear to have any relation to the aforesaid transactions. It would be in the fitness of things if this matter be restored to the file of the AO with direction to disallow that portion of the Directors salary and employees wages, expenses on packaging material and other expenses as are directly involved in affecting the said turnover to NITCO. - Ground of assessee s appeal is allowed for statistical purposes. Exemption of long term capital gain u/s. 47 (iv) - directing the A.O. to restrict the relief given by him to the Appellant on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in directing the Assessing Officer to recomputed the disallowance u/s 14A read with Rule 8D by taking into consideration the actual indirect expenses., without appreciating the fact that the AO has properly recorded his satisfaction for invoking the provisions of Rule 8D and therefore since Rule 8D is invoked, the disallowance has to be worked out as per the formula prescribed therein and disallowance has to be worked out as per the formula prescribed therein and there is no scope for any deviation therefrom. 2. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in deleting the disallowance of ₹ 30,58,34586/- under section 40(a)(ia) of the IT Act on account of not deducting the TDS on credit card commission charged by bank on credit card transactions. 3. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in holding that there is no relationship of a Principal and Commission Agent between the assessee and the acquirer bank, without appreciating the fact that the acquirer bank acts as a conduit or middleman between the assessee and the issuing bank for credit card processing services 4. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice u/s 194J of the Act, without appreciating that such systems necessarily involve human intervention. 9. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that credit card processing services rendered by acquirer bank either by itself or through an issuing bank and other intermediaries does not involve much human intervention, and then it cannot be treated as a technical service. 10. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in deleting the disallowance of ₹ 20,87,320/- u/s 36(1)(iii) solely on the basis of generalized submissions made by the assessee as narrated in the appellate order, and without appreciating the facts of the case. 11. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in treating the amount retained by the assessee company on forfeiture of share warrants, as capital receipt not liable to tax without appreciating the fact that the amount forefeited by the assessee is the option premium receive by the assessee at the time of entering into option contract in the form of share warrants and these options were ultima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary. Ground No. 1 This ground raised by the assessee is with regard to the disallowance u/s 14A of the Act. As per the facts of the case, during the course of the assessment proceedings, the Assessing Officer disallowed the expenses incurred on earning exempt income under Section 14A of the Act r.w. Rule 8D amounting to ₹ 33crores.TheLd. CIT(A) in his order reduced the disallowance made by the Assessing Officer under Section 14A r.w. Rule 8D of the Act. Ld. DR appearing on behalf of the revenue relied upon the order of the Assessing Officer contended that a company cannot earn dividend without incurring any expense whatsoever including management or administrative expenses as investment decisions are taken at meetings of the Board of Directors for which administrative expenses are incurred. The Revenue in order to support their contention relied on the judgement of the ITAT special bench in the case of M/s. Daga Capital Management Pvt Ltd ( 26 SOT 603 (Mum)). On the other hand, Ld. AR appearing on behalf of the assessee submitted that the Assessing Officer mechanically applied the provision of Section 14A r.w Rule 8(D) without recording his non satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us years. The Assessee Company submitted that if there are funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. In order to support its contention the Assessee Company relied on the judgement of the Hon ble Bombay High Court in the case of CIT vs Reliance Utilities and Power Ltd ( 313 ITR 340(Bom)). It was further contended that the interest expenditure incurred by it during the year under consideration were to finance ongoing expansion projects, meet working capital requirements and to acquire specific capital assets. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Since facts of the case are exactly similar to the A.Y. 200809 A.Y. 2009-10 for which we have already given our finding inorder of A.Y. 2008-09. Therefore, we hereby hold that in the case of the assessee, the provisions of Section14A r.w.r. 8D will not be applicable in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, no tax is deductible at source under section 194H . The Delhi High Court in the case of JDS Apparels (P.) Ltd (370 ITR 454) has held that Commission' to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act. This issue has also been decided in favour of the assessee by various Tribunals in the following cases: Gems Paradise v. ACIT [IT Appeal No. 746 (JP) of 2011, dated 2.2.2012] Bhandari Jewellers v. ACIT [IT Appeal No. 745 (JP) of 2011, dated 2-22012] Tata Teleservices Ltd. v. Dy. CIT [2013] 140 ITD 451/29 taxmann.com 261 (Bang.) (para 8) and Dy. CIT v. Vah Magna Retail (P.) Ltd [IT Appeal No.905 (Hyd.) of 2011, dated 10-4-2012] Respectfully following the decisions cited above, it is held that the commission paid to the credit card companies is not subject to the TDS provisions of the Act. Accordingly the disallowance made by the Assessing Officer cannot be sustained and the Order of the CIT(Appeals) deleting the aforesaid disallowance, is upheld. Therefore, these grounds raised by the revenue aredismissed. Ground No. 10 This ground raised by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s capital receipts. The AO disallowed the said amount considering as revenue receipt. The CIT(A) reversed the order of the AO. Against the order of the CIT(A), the AO is preferred appeal before us. We have heard the counsels for both the parties on these grounds and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. DR relied upon the order of the AO. Whereas on the contrary Ld. AR submitted that the aforesaid amount received on the issue of optionally convertible warrants undisputedly is a capital receipt and the character of such receipt on forfeiture on account of the non exercise of the option to convert the warrant to equity shares could not change the character of receipt . The same reflected in the books under the head 'capital reserve' and this fact has also been referred by the Auditors in their Report. We have also carefully considered the submissions and perused the records. In the present case, it is undisputed that the amount of ₹ 63,25,97,200/- had been received by the assessee on account of forfeiture of optionally convertible warrants which had been shown as capital receipts by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made, the same cannot be taxed as a revenue receipt if this amount has been transferred to the capital reserve account in the balance sheet. In the present set of facts it is observed that the various facts related to issue of warrant part payment of the amounts by the investors, notice for forfeiture etc. have not been disputed by the Assessing Officer. The basic nature of the transaction relates to raising of capital through convertible warrants. The amount forfeited on account of non payment of subsequent amounts cannot be treated as a income of the assessee in view of the various judicial pronouncements as well as the basic nature of the receipt. Thus, we hold that amount received on account of forfeiture of amount due to non payment towards warrants issue has to be treated as capital receipt and since the assessee has also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income. We further find that Assessing Officer has observed in the assessment order that this addition should be treated as income from other sources as the assessee has become richer but the Departmental Representative could not throw any light on this aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is submitted that in the facts and the circumstances of the case, and in law, no such adjustment was called for. 4. EMEMPTION OF LONG TERM CAPITAL GAIN U/S. 47 (iv) OF THE ACT 4.1 The Ld. CIT (A) erred in directing the A.O. to restrict the relief given by him to the Appellant on account of exemption of long term capital gain u/s. 47 (iv) of the Act to the returned income of the Appellant, by invoking the proviso of section 240 of the Act. 4.2 It is submitted that in the facts and the circumstances of the case as well as in law, no such direction was called for. 5. LIBERTY 5.1 The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing. Ground Nos. 1 3. These grounds raised by the assessee with regard to the reduction in disallowance under Section 14A by the CIT(A) We have already adjudicated on this ground in ground number 1 of the department s appeal. The appellant raised a ground no. 3 in the appeal that The Ld. CIT (A) erred in confirming the action of the A.O. in making addition of ₹ 1,23,39,294/- to the book profit while computing minimum alternative tax, under Clause (c) to Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the fate of the assessment while it appeared that Nitco had preferred an appeal before ITAT against the aforesaid order. The Assessee also claimed basis of the statements reproduced by the AO that: (i) The entire transactions were handled, controlled, co-ordinated and conducted by NITCO alone, including handing over cheques for payments. The transactions were done by, and at the behest of, NITCO. (ii) The assessee had absolutely no role in the transactions. No delivery taken or given. (iii) No funds of the assessee were blocked in the transactions. (iv) The assessee did not have control over the pricing of the Goods nor over receipts and payments. On the other hand, Ld. DR relied upon the order of the revenue authorities. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities.The issue of circular trading i.e sales and purchases without deliveries, was detected in the case of third party Nitco Ltd, to whom the Assessee had purported to have made sales. The Assessing Officer while passing the Assessment Order in the case of the Assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restored to the file of the AO with direction to disallow that portion of the Directors salary and employees wages, expenses on packaging material and other expenses as are directly involved in affecting the said turnover of ₹ 20,29,52,216/- to NITCO. Needless to add, the assessee may be accorded adequate opportunity of being heard in the matter. The AO is directed to similarly examine the disallowance on account of financial charges and addition on account of peak credit which are also restored to his file for rectification and fresh adjudication after affording the assume adequate opportunity of being hear. Consequently ground no. 2 of assessee s appeal is allowed for statistical purposes. Ground no. 4. This ground relates to directing the A.O. to restrict the relief given by him to the Appellant on account of exemption of long term capital gain u/s. 47 (iv) of the Act to the returned income of the Appellant, by invoking the proviso of section 240 of the Act. As per the facts of the case, the assessee entered into Business Transfer Agreement with Future Value Retail Limited (100% Subsidiary of the Company) wherein it has transferred its Value Retail Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s Rights There is a Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955. It states: Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should (a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. The above circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to consider the same. They have the jurisdiction to entertain the new claim. They may choose not to exercise their jurisdiction in a given case is another matter. [Para 11] Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra ) to the effect 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made .' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz., 'if the ground so raised could not have been raised at that particular stage when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of National Thermal Power Corpn. Ltd. v. CIT [1998] 229 ITR 383. [Para 19] Both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of ₹ 40 lakhs under section 43B. The Assessing Officer is, therefore, now only to compute the assessee's tax liability which he must do in accordance with the orders allowing the assessee a deduction of ₹ 40 lakhs under section 43B. [Para 20] The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] Therefore, the appeal of the revenue was liable to be dismissed. [Para 26] CASES REFERRED TO Jute Corpn. of India v. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIT (Appeals) and the Tribunal. The question that arises in this appeal is whether the CIT (Appeals) and/or the ITAT had the jurisdiction to consider a new/additional claim/deduction subsequently raised before the Assessing Officer which, through inadvertence, was not claimed in the return of income filed by the respondent. The question is answered in the affirmative by several judgments. We intend revisting them to deal with two residual aspects raised on behalf of the appellant. 4. (A) On 18th October, 2004, the respondent filed its return for the assessment year 2004-05. The same was processed under section 143(1) on 31st March, 2005. A notice under section 143(2) was issued on 10th August, 2005. The respondent was also served with a letter dated 24th June, 2006, calling for certain information. (B). During the proceedings, it was noticed that the respondent had claimed a deduction under section 43B in respect of payment of SEBI fees of ₹ 10,00,000/- each paid on 16th July, 2004 and 29th April, 2004 i.e. during the financial year 2004-05, relevant to assessment year 2005-06. Thus, admittedly, for the relevant assessment year viz. 2004-05, the respondent was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before the CIT(A) against the assessment order which was allowed by an order dated 1st August, 2008. The order clearly indicates that the respondent had made an application for deduction under section 43-B in respect of the said sum of ₹ 40,00,000/- before the CIT(A). For instance, paragraph 2.2 refers to the respondent's submissions before the CIT(A). The submissions referred to the various judgments which support Mr. Mistri's proposition. It is of vital importance to note that it was stated before the CIT(A) that in view of the judgments, the CIT(A) can certainly entertain the claim of the applicant and allow the deduction U.s. 43B of the I.T. Act . Thus, the respondent had expressly contended that apart from everything else, the CIT(A) can entertain the said claim. It is also important to note that paragraph 3.1 of the order records the details of and refers to the material evidencing the payment of ₹ 40,00,000/- towards SEBI fees on 9th May, 2003. The order records that the evidence was produced in the paper book filed in the appeal. This meets Mr. Gupta's contention on behalf of the appellant that in any event, the fact of payment of ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under :- 5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from the existence of jurisdiction. 12.At page 694, after referring to certain observations of the Supreme Court in Addl. CITv.Gurjargravures (P.) Ltd., [1978] 111 ITR 1 , the Supreme Court observed at Page 694 as under :- The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction. The words could not have been raised must, therefore, be construed liberally and not strictly. 15. It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. However, such cases include those, where the ground though available when the return was filed or the assessment order was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act. (C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corpn. of India Ltd. (supra) set out above. It is important to note that even in this case, therefore, the ground existed when the return was filed. The mere fact that a decision of a court is rendered subsequently does not indicate that the ground did not exist when the law was enacted. Judgments are only a declaration of the law. The assessee could have raised the ground in its return itself. It did not have to await a decision of a court in that regard. Indeed, even if a judgment is against an assessee, it is always open to the assessee to claim the deduction and carry the matter higher. The words could not have been raised , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination more clearly. It is as follows: Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same. Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. 22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd ( supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. ( supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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