Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (4) TMI 1094 - AT - Income TaxL.T capital loss on extinguishment in the value of asset - Held that:- U/s. 560(5) of the Companies Act, 1956, the final procedure for striking a company’s name off the registrar is to publish a notice thereof in the official gazette and on publication in the official gazette of notice referred to in section 560(3) of the Companies Act, 1956, the company shall stand dissolved. It is only on such publication that the assessee’s right in the shares get extinguished and prior to that point of time, it cannot be said that there was any transfer to invoke provisions of section 45 of the I.T. Act, 1961. In our view, reference to provisions of section 46(2) of the Act are not appropriate, as those provisions contemplate a situation of receipt of money or other assets in the process of liquidation of a company. Admittedly, there was no receipt of money or other assets on liquidation by the assessee and therefore provisions of section 46(2) of the Act were not applicable. We are therefore of the view that the revenue authorities were justified in rejecting the claim of the assessee under the head ‘long term capital loss’. - Decided against assessee. Disallowance of refurbishing / warranty claims - non deduction of tds - Was there an obligation on the part of the Assessee to reimburse the cost of refurbishing the products sold by Mantrra Inc.? - Held that:- Perusal of the refurbishing statement shows it refers to several heads of expenses but none of the head of expense is “value of the cooker returned by customer”. Besides the above it includes expenses on retrieving returned cookers to make them fit for sale again, rent for storing returned cookers, costs of shifting the returned cookers, travelling expenses, Apartment rent paid for workmen who visited from India to refurbish the returned cookers. It is clear from these bills that none of the above expenditure can be attributed to the Assessee as per any article in the agreement between Assessee and MI. These expenses are clearly that of MI for which the Assessee has procured a Product Liability Insurance cover at its cost in favour of MI. As we have already seen and as rightly held by the revenue authorities the only obligation of the Assessee was when cookers which are found to be defective and unacceptable and hence returned to the Assessee, to give credit or replace the defective cookers. This is the only legal liability of the Assessee as per the terms of the Agreement. The claim made by the Assessee for deduction on account of refurbishing warranty is therefore held to be not sustainable as it is not the liability of the Assessee. Addition made by way of imputed interest - Held that:- The contention of having actually not earned any income cannot come to the rescue of the assessee in this scenario. AO was well within his powers in making the impugned addition. The claim of the Assessee to adopt EURIBOR rate as stated before the TPO is reasonable and deserves to be accepted Deduction on account of provision for loss arising on account of foreign exchange rate fluctuation on restatement of liability allowed by CIT(A) - Held that:- In the statement of facts before CIT(A) the Assessee has categorically claimed that the transaction in question was on current account/revenue account and not capital account. The AO has allowed part of the claim of the Assessee clearly implying that the transaction in question was on account of revenue/current account and not capital account. The order of AO is silent on this aspect. It is no doubt true that in the order of CIT(A) there is no specific finding on this aspect. In our view that by itself will not be a ground for the revenue to demand a fresh look into this aspect. We are therefore of the view that the order of the CIT(A) on this issue has to be upheld. - Decided again revenue Deduction on account of liability on account of refurbishing warranty - Held that:- The CIT(A) in the impugned orders in appeal by the Revenue for AY 06-07 to 08-09 has not examined the terms of the agreement between the Assessee and MI and has proceeded on the basis that the Assessee was bound to reimburse the warranty claims of customers to whom MI sold Pressure cookers. For the reasons stated while deciding the appeal of the Revenue for AY 05-06, we allow the additional grounds raised by the Revenue in its appeal for AY 06-07 to 08- 09. We may also add that the liability on account of exchange rate fluctuation at the time of actual payment to MI of the alleged liability on account of warranty claims cannot also be allowed as the main claim for liability on account of warranty liability itself has been held to be not that of the Assessee. Addition on account of disallowance of interest on the ground that the interest expenses claimed as deduction were on borrowed funds which was given as interest free advances to MI - CIT(A) deleted the addition - Held that:- the plea with regard to commercial expediency has been accepted by the CIT(A) without any basis. There has been no investigation of facts with regard to how the interest free loan was given to MI to enable it to warehouse and sell the Assessee’s products in US. As we have already seen the distributor agreement is silent on all these aspects and the basis on which CIT(A) has given relief to the Assessee in our view cannot be accepted. We however are of the view that the plea of the Assessee both with regard to its claim that interest free advance was given out of surplus funds of the Assessee as well as the plea with regard to commercial expediency in giving interest free loan to subsidiary requires fresh examination by the AO and accordingly the order of CIT(A) on this issue is set aside and the issue remanded to the AO for fresh examination - Decided in favour of revenue allowed for statistical purpose. Disallowance of expenses claimed under the head “Royalties” paid to a non-resident in view of the provisions of Sec.40(a)(i) - non deduction of tds - Held that:- we hold that the Assessee, in the present case, cannot be said to be obliged to deduct tax at source on payments made to the non-residents as on the date when the payments were made on the basis of the decision of the Hon’ble Madras High Court in the case of COMMISSIONER OF INCOME TAX vs. AKTIENGESELLSCHAFT KUHNLE KOPP AND KAUSCH W. GERMANY BY BHEL (2002 (11) TMI 50 - MADRAS High Court ). It is only consequent to the retrospective amendment to the law which happened after the dates on which the Assessee made payments to the non-resident that the liability of the Assessee to deduct tax at source arises. Therefore no disallowance can be made u/s.40(a)(i) of the Act - Decided in favour of assessee
|