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2016 (5) TMI 1598 - ITAT AMRITSAR
Additional income offered in survey conducted - whether this cash is relatable to the business of the assessee, in accordance with ‘Kim Pharma P. Limited’ (2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT] and if so, whether it is not a business income? - HELD THAT:- As rightly contended AO has accepted this income of the assessee as business income. The profit & loss account of the assessee for the period from 04.02.2011 to 31.03.2011. shown Palace income the details of which are, given. Therefore, the grievance of the assessee in this regard is correct and the same is accepted.
In keeping with ‘Kim Pharma P. Limited’ (supra), as relied on in ‘Gaurish Steels P. Limited’ (2015 (11) TMI 631 - ITAT CHANDIGARH] this income has been considered as the assessee’s business income and not as deemed income u/s 69A of the Act. As such, the business losses incurred by the assessee during the year can be set off against the income surrendered. As per the requirement of section 71 of the Act, the AO is directed to act accordingly. Thus, Ground Nos. 1 to 3 are accepted.
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2016 (5) TMI 1597 - BOMBAY HIGH COURT
Direction to the respondents to apply Irrigation Potential Restoration Charges - water allocated to the petitioner, based on deficit in water for irrigation as per the latest report - HELD THAT:- The water allocation is finalized on 12.12.2007 after High Power Committee accepted it in its meeting dated 13.05.2007. On 16.08.2008 sanction is granted for permanent water allocation of 87.60 MCM from completed Upper Wardha Project and it is to be operational only after agreement is made. As per clause 13, though action was to be taken within three years, period was extended up to 31.05.2012. The Petitioners have paid the amount in installments and not when it was determined or water was reserved for it. The petitioner has, in communication dated 10.05.2012, agreed to pay Rs. 232.18 Crores in five installments over a period of two years with interest. Hence, for this delayed payment of IRC, interest of justice demands that it must pay the interest @ 10% per annum.
It is declared that the demand of IRC at revised rate i.e. as per decision dated 06.03.2009 from the petitioners is illegal and unsustainable. Said decision dated 06.03.2009 fixes maximum rate of IRC at Rs. One lakh per Hectare prospectively from 01.04.2009 and is not applicable in case of petitioner to whom water allocation is finalized on 12.12.2007. Hence the Respondents shall accordingly receive the IRC at the rate of Rs. 50.000/- per Hectare with interest.
Petition allowed in part.
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2016 (5) TMI 1596 - SECURITIES APPELLATE TRIBUNAL, MUMBAI
Issue of IPO - Role of Book Running Lead Manager - Appellant had not employed reasonable skill and care while conducting its due diligence exercise in respect of the IPO of Issuer Company in its capacity as Book Running Lead Manager ("BRLM") - non-disclosure as a related party transaction - Appellant had failed to exercise due diligence with respect to the Issuer Company's IPO which had resulted in certain incorrect and inadequate disclosures in the RHP - Appellant was thus prohibited from taking up any new assignment in the securities market in any manner for a period of six months from the date of the order for allegedly violating provisions of Regulation 64(1) of the SEBI (Issue of Capital and Disclosure) Regulations, 2009 - HELD THAT:- As in accordance with the provisions of the ICDR, the disclosure on Related Party Transactions is to be submitted as a part of the overall financial information to be certified by the auditors. Once the information is so certified, and this certified financial information is reproduced in the offer document, the ICDR's requirements of Due Diligence are considered to be met. As noted above, disclosures on related party transactions need to be made as per para (B)(12) of section IX of the ICDR Regulations which, in turn, states that they must be made in accordance with AS 18. It, therefore, falls to us to consider and decide whether Gadeo or Richa Mittal qualify as related parties in accordance with AS 18.
It is evident from a plain reading of the definition of 'relative' as provided under para 10.9 of AS 18 that the relatives covered under the definition are, quite categorically put, the spouse, son, daughter, brother, sister, father and mother who may be expected to influence the key management personnel of the reporting enterprise, in this case, the Issuer Company. This definition is exhaustive in nature. It does not leave scope for the inclusion of relatives by extending the list of relatives to other people. The intention of the law maker in this regard is crystal clear viz., only those relatives particularly mentioned in para 10.9 will be relevant for determining related party transactions. Mrs. Richa Mittal being the sister-in-law of Mr. Sanjeev Mittal is not covered under AS 18. In keeping with AS 18, as per the records, even the peer review auditors have not treated the transaction with Gadeo as a related party transaction. As all documents were duly analysed by the Appellants and there was no information in any of these indicating that the transaction with Gadeo was a related party transaction.
It appears that the factum of Mrs. Richa being the sister-in-law of Mr. Sanjeev Mittal was not properly conveyed to the appellant. This is evidenced from the fact that on receiving SEBI's query regarding Richa Mittal's stature with respect to the Issuer Company, the Appellant pointedly asked the Issuer Company whether Mrs. Richa Mittal was connected with the Issuer Company in any manner, and the Issuer Company replied in the negative vide letter dated February 7, 2011 -despite the presence of certain pointers in the information that the Appellants possessed with themselves, it is a matter of fact that nothing was contained in the partnership deed that explicitly pointed towards a relationship between Mr. Sanjeev Mittal and Mrs. Richa Mittal or indicated that she was married to Mr. Sanjeev Mittal's brother. This combined with the fact that AS 18 does not mention a sister-in-law as a relative and that Mrs. Richa Mittal did after all own 97.5% of Gadeo, dwarfing the 2.5% owned by Mr. R.K. Mittal, must be construed as a mitigating factor.
Non-disclosure of the taking of ICDs by the Issuer Company - As after analyzing the concept of due diligence in detail in Appeal No. 275 of 2014, we have already held that an MB should also examine bank statement of the issuer company though mandatorily not required. Relying upon the same reasoning we note that had the Appellant looked at the bank statements of the relevant period, the ICDs would have come to light and the Appellant would have been able to reflect the same in the RHP and the Prospectus.
Albeit, it is not necessary for a BRLM to look into the bank statements it would have been prudent for the Appellant to peruse the bank statements instead of merely relying on the Statutory Auditor's Report and the statement of the Issuer Company. Although, there is some merit in the charges leveled against the Appellants, as far as non-perusal of Bank statements of the Issuer Company and disclosure of related party transactions is concerned, in view of the fact that the punishment already undergone is far in excess of the punishment which the Appellants deserved against the charges in question, we quash the remnant punishment imposed vide the Impugned Order and partly allow the Appeal.
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2016 (5) TMI 1595 - ITAT BANGALORE
TP Adjustment - DRP directed the AO to restrict the adjustment to the cost relating to import of raw material from AE, which was 33% of material cost and 16% of total operating cost - As argued this direction was not implemented by AO - HELD THAT:- As, seen from the draft order, the TP adjustment proposed was Rs. 8,98,90,000/-whereas the final adjustment made was Rs. 8,80,08,000/- It seems AO has implemented only other direction of adopting average OP/sales Of comparable companies at 8.23% as against 8.51% proposed as directed - The direction of DRP in para 3.1.3 has not been implemented. To that extent, AO's order is not in compliance with the directions of DRP. AO is directed to modify the adjustment as per the direction of the DRP on the issue. Ground No. 2 of assessee is accordingly allowed
Adjustment for capacity utilisation - Assessee capacity utilization was at 78% of total capacity there by cost of overheads is more, has not been considered - HELD THAT:- In principle we are in agreement with the contentions raised by assessee, as GP over sales can eliminate the difference in claim of depreciation due to age of machinery rate at which it was claimed and method of claims like straight line or written down value. We accordingly direct the AO/TBO to adopt the comparison of profitability ratios adopting GP over sales.
Since the details of capacity utilization of the comparable companies and rate of depreciation could not be analysed as commented by DRP, it would be better if GP analysis was undertaken taking sales less cost of raw material as basis (excluding other cost including Depreciation, interest etc) so that auto components profitability could be analysed so as to consider whether the import" of raw material from AE has effected the profitability of assessee under the TP provisions. Accordingly, we set aside the impugned orders of the Revenue authorities on this issue and restore the matter to the file of AO/TOP to carry out the exercise as stated above. Assessee should be given due opportunity. However, we make it clear that if any adjustment is required' to be made the same is to be restricted, as directed by DRP above. The matters which have attained finality are not be reopened. AO/TPO is directed accordingly. Ground No. 3 is allowed for statistical purposes.
MAT credit objected to by assessee was not adjudicated by the DRP even though AO in the draft assessment order has determined the tax liability without giving appropriate MAT credit and so assessee is aggrieved - HELD THAT:- AO is directed to give MAT credit as per the provision and facts on record. Assessee is directed To furnish necessary details to the AO. Ground is allowed.
Interest u/s. 234BC and 234C are consequential In nature and does not require separate adjudication. However, AO is directed to furnish the working of calculation of 'interest in the order so that assessee can object if there are any omissions/commissions in the levy.
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2016 (5) TMI 1594 - SUPREME COURT
Seeking transfer of investigation from the state police/special team of State Police Officers to C.B.I. - Physical and mental cruelty charge against naval officer and his family - charge of sexual abuse - allegations of wife-swapping - HELD THAT:- It is well settled that the extraordinary power of the constitutional courts in directing C.B.I. to conduct investigation in a case must be exercised rarely in exceptional circumstances, especially, when there is lack of confidence in the investigating agency or in the national interest and for doing complete justice in the matter.
Considering the facts and circumstances of the case in hand, we are of the view that the case in hand does not entail a direction for transferring the investigation from the state police/special team of State Police Officers to C.B.I. The facts and circumstances in which the offence is alleged to have been committed can be better investigated into by the state police. However, having regard to the nature of allegations levelled by the petitioner, we deem it appropriate to direct the State of Kerala to constitute a special team of police officers headed by an officer not below the rank of Deputy Inspector General of Police to investigate the matter.
Petition is disposed of with direction to the Director General of Police, Kerala to constitute a special investigation team headed by a police officer not below the rank of Deputy Inspector General of Police to take up further investigation in FIR No.260 of 2013. The special investigation team shall take up further investigation in accordance with law and complete the investigation at an early date preferably within a period of three months from today - transfer petition dismissed.
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2016 (5) TMI 1593 - SUPREME COURT
Seeking grant of bail - Framing of charges against the accused Appellant Under Sections 10, 13, 17, 18, 18A, 18B, 20, 21, 38, 39 and 40(2) of the Unlawful Activities (Prevention) Act, 1967, amended 2008 and Sections 387, 419, 465, 467, 468, 471 read with Section 120-B of the Indian Penal Code, 1860 - HELD THAT:- The accused Appellant has been in custody since April, 2011 i.e. for over five years. The trial is yet to commence inasmuch as the learned State Counsel has submitted that the 9th of May, 2016 is the first date fixed for the trial. There are over 200 witnesses proposed to be examined. The accused Appellant is a lady. She has also been acquitted of similar charges leveled against her in other cases. Taking into account all the aforesaid facts we are of the view that the accused Appellant should be admitted to bail. We accordingly direct that the accused Appellant Angela Harish Sontakke be released on bail by the learned trial Court in connection with Sessions Case No. 655 of 2011 arising out of CR No. 19/11, PS, ATS Kalachowki, Mumbai.
Appeal allowed.
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2016 (5) TMI 1592 - ITAT MUMBAI
Disallowance of provisions made on account of leave encashment under section 43B - HELD THAT:- Undisputedly, the deduction claimed by the assessee is only a provisions and no payment was actually made by the assessee during the relevant previous year. Therefore, in terms of section 43B(f), it is not allowable. However, in the case of Exide Industries Ltd. [2007 (6) TMI 175 - CALCUTTA HIGH COURT], the Hon’ble Calcutta High Court had struck down the provisions of section 43B(f) as unconstitutional. However, the Department being aggrieved of the said judgment had preferred appeal before the Hon'ble Supreme Court and the Hon'ble Supreme Court while admitting the appeal of the Department in Special Leave to Appeal (Civil) [2009 (5) TMI 894 - SC ORDER] had directed the assessee to pay tax as if section 43B(f) is in the statute book, however, the assessee permitted to claim the deduction in the return of income.
We restore the matter back to the file of the Assessing Officer with a direction that assessee will pay the tax as if section 43B(f) is on the statute book. However, till the decision of the Hon'ble Supreme Court is rendered in case of CIT v/s Exide Industries Ltd. (supra), the Department will not recover the penalty and interest which may accrue till the decision of the appeal in the case of Exide Industries Ltd. (supra). It would be open to the Department to recover the outstanding interest payment once the appeal in the case of Exide Industries Ltd. (supra) is decided in favour of the Department. Ground no.1, is allowed for statistical purposes.
Disallowance of revenue sharing - HELD THAT:- As found from the record that this is recurring dispute between the assessee and the Department right from the assessment year 2000–01. However, in a series of decisions in assessee’s own case, the Tribunal has decided the issue in favour of the assessee holding that the amount paid to DOT towards revenue sharing license fee as revenue expenditure.
There being no material difference in facts and no contrary decision has been brought to our notice by the learned Departmental Representative, respectfully following the consistent view of the Tribunal in assessee’s own case we allow assessee’s claim of deduction on account of revenue sharing license fee
Depreciation claim on revenue sharing license fee - Since we have allowed assessee’s claim of deduction in respect of revenue sharing license fee by holding it as revenue expenditure, this ground raised by the Department has become infructuous.
Disallowance of interest expenditure towards interest free loan given to the subsidiary - HELD THAT:- As relying on assessee own case [2015 (4) TMI 92 - ITAT MUMBAI] there was direct commercial expediency in advancing funds to subsidiaries have not been controverted by the Revenue by bringing any positive material on record. We therefore do not find any reason to interfere with the order of ld. CIT(A) deleting the disallowance of interest attributable to funds advanced to subsidiaries. - Decided against revenue.
Deduction towards club fee - Allowable revenue expenses or not? - HELD THAT:- On a perusal of the order of the Tribunal for the assessment year 2004–05 and 2005–06held that expenditure was incurred was revenue in nature as held by the Hon’ble High Court, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance of Club fees paid by the assessee company.
Proportionate deduction claimed u/s 35DD on legal fee - HELD THAT:- As is evident, in the impugned assessment year the assessee had not claimed the expenditure in the return of income. He put forward his claim for deduction under section 35DD only at the stage of first appellate proceedings, that too, by raising an additional ground and the learned Commissioner (Appeals) dismissed the ground of the assessee for the reason that the issue was not examined by the Assessing Officer. Therefore, on over all consideration of facts and material on record, we are inclined to restore this issue to the file of the Assessing Officer for deciding afresh after providing due opportunity of being heard to the assessee. Ground no.2, is allowed for statistical purposes.
Depreciation on revenue sharing license fee carried over by BTA Cellular Ltd. in continuation of amalgamation with the assessee - HELD THAT:- Commissioner (Appeals) having found that neither BTA nor the assessee have claimed deduction under section 35ABB directed the Assessing Officer to verify the fact and allow assessee’s claim of depreciation. We do not find any infirmity in the aforesaid direction of the learned Commissioner (Appeals). As already held by us, revenue sharing license fee paid to DOT is otherwise allowable as revenue expenditure.
Since the BTA was claiming depreciation on revenue sharing license fee after treating it as intangible asset after capitalization the assessee continued with the same accounting principle after merger of BTA insofar as revenue sharing business fee paid by BTA which was acquired as a part of block of asset. In the aforesaid facts and circumstances, assessee’s claim of deduction being legally valid has to be allowed. Therefore, we uphold the order of the learned Commissioner (Appeals) on the issue by dismissing ground no.2, raised by the Department.
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2016 (5) TMI 1591 - ITAT MUMBAI
Assessment proceedings u/s 143(3) r.w.s.143(2) - addition u/s 68 - Admission of additional evidences - HELD THAT:-Voluminous documents as additional evidences have been placed by the assessee in the paper book filed before the Tribunal and a prayer has been made by the assessee that proper and adequate opportunity was not given by the authorities below before completing the assessment and during the first appellate proceedings as set out above and it was submitted before the Tribunal that these additional evidences be admitted under rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, in the interest of substantial justice as the assessee was not accorded adequate, sufficient and proper opportunity by the Assessing Officer to file these additional evidences and the Commissioner of Income- tax (Appeals) did not admit these additional evidences during the first appellate proceedings as set out above, the appeal be decided by the Tribunal on the merits after admitting and considering these additional evidences on the merits.
Thus in the interest of substantial justice, these additional evidences needs to be admitted to advance substantial justice in accordance with rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, for the reasons and discussions as detailed above and the matter is set aside and restored to the file of the Assessing Officer for de novo determination of the matter on the merits after examination and verification of these aforestated additional evidences filed before the Tribunal - Appeal filled by assessee allowed for statistical purposes.
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2016 (5) TMI 1590 - ITAT PUNE
Belated payment of employees’ contribution to PF and ESI in contravention of the provisions of section 36(1)(va) - HELD THAT:- There is no dispute to the fact that the assessee in the instant case has deposited the employees’ contribution to PF and ESI before the due date of filing of the return of income although the same were deposited after the due date prescribed under the relevant Act.
The Coordinate Benches of the Tribunal following the decisions of the Hon’ble Bombay High Court in the case of Ghatge Patil Transports Ltd.[2014 (10) TMI 402 - BOMBAY HIGH COURT] and in the case of CIT Vs. Hindustan Organics Chemical Ltd. [2014 (7) TMI 477 - BOMBAY HIGH COURT]are consistently taking the view that employees’ contribution to PF and ESI, if paid on or before the due date of filing of the return of income, is an allowable deduction. Since the assessee in the instant case has admittedly deposited the employees’ contribution to PF and ESI before the due date of filing of the return, a fact submitted before the AO as well as CIT(A) and not controverted by the revenue, therefore, we are of the considered opinion that no disallowance on account of such delayed payment is called for. We accordingly set aside the order of the CIT(A) and direct the AO to delete the addition. Grounds raised by the assessee allowed.
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2016 (5) TMI 1589 - ITAT CHENNAI
TP Adjsutment - Addition in respect of advertisement expenditure incurred by the assessee at overseas - HELD THAT:- There is no agreement or documents produced by the assessee to show the assessee is liable to incur this expenditure - assessee is getting only mark-up on the cost of manufacture of the goods supplied to the AE and it is nowhere connected with the sales of the AEs. All the risks associated with the sales of AEs, is to be borne by AE only. In such circumstances, assessee is not required to incur any expenditure towards sales. More so, when there is no stipulation by way of any agreement between the assessee and the AE, it is to be borne in mind that if the assessee had sold similar goods to other non-AE, assessee would not have incurred such expenditure.
The benefit derived from the impugned expenditure is not at all for the assessee and it goes directly to the AE only. In our opinion, services in connection with such advertisement cost which was incurred in abroad, benefit accrued to AE and the assessee cannot claim any of such expenditure as the AE is in different tax jurisdiction constituted distinct and independent entity subject to the law of the respective countries and the parent company cannot claim the benefits of their AE’s business or may claim a beneficial ownership treating the AE as virtually non entities. This view is supported by the recent judgement of Supreme Court in the Vodafone International Holdings B. V. [2012 (1) TMI 52 - SUPREME COURT]
As held by Mumbai Bench in the case of Stream International Services Pvt. Ltd [2013 (9) TMI 339 - ITAT MUMBAI] that investment of expenditure to AE is very much a transaction as per section 92F(v) and consequently it is a international transaction as per sec.92B requiring consideration u/s.92 - argument of the assessee is that TIML is under losses and hence no TP adjustment is necessary on transaction which is not tenable in view of the decision of the Bangalore Tribunal in the case of 24/7 Customer.com Pvt. Ltd.[2013 (1) TMI 45 - ITAT BANGALORE]. Accordingly, this ground of the assessee is rejected.
TP addition on account of interest in respect of interest free advertisement advances made by the assessee - HELD THAT:- In this case, the assessee made interest free advances to the associate company, which includes the amounts spent for brand building, advertisement and related expenditures. As we discussed in the earlier para with reference to ALP of Advertisement expenses, the transaction between the assessee and the AE falls within the ambit of international transaction as per the provisions of the section 92B of the Act, then ALP with reference to the interest on such advances is to be computed. Accordingly, the TPO after considering the fact that assessee had adopted following rate of interest on its foreign currency loans to its AE in accordance with the bank rates prescribed by Reserve Bank of India.
Thus, the TPO/AO applied the same rate to determine the ALP of the advances made by it to its AE, TIML had worked out ₹ 1,20,41,897/-. Since the assessee has invested its funds in AE, thereby assessee had taken a risk of employee its working capital with the AE and if the assessee had no relation with that entity, it would not have incurred such expenditure on behalf of the assessee or advanced money to such an entity. Thus, non-charging of interest to such outstanding attracts Transfer Pricing provisions and it is appropriate to charge interest at least LIBOR plus 2% rate as held by Mumbai Bench of the Tribunal in the case of M/s.Aurinpro Solutions Ltd. [2013 (11) TMI 806 - ITAT MUMBAI] - Accordingly, we upheld the argument of the ld.D.R on this issue. If any difference in the rate of interest is charged by the TPO/AO as compared to LIBOR plus 2%, the same to be recomputed.
Computation of deduction u/s.80HHC of the Act with reference to DEPB receipts - exclusion of 90% of export incentives from the business profits under Explanation (baa) to sec.80HHC - AO was of the opinion that these export incentives received by the assessee did not fall in clauses (iiia), (iiib) and (iiic) of sec.28 - HELD THAT:- In our opinion, the issue is squarely covered by the decisions of the Supreme Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT] wherein held that when the DEPB is sold by a person, his profit on transfer of the DEPB would be the sale value of the DEPB less the face value of DEPB which represents the cost of the DEPB and not the entire sum received by him on such transfer; DEPB is chargeable as income under clause-(iiib) of section 28 in the year in which such person applies for DEPB credit against the exports whereas the profits on transfer of the DEPB by that person is chargeable as income under clause –(iiid) of Sec.28 of the Act in his hands in the year in which he makes the transfer. Accordingly, we direct the AO to re-compute the deduction u/s.80HHC of the Act by applying Explanation(baa) of Sec.80HHC of the Act.
Allocation of head office expenses and consultancy expenditure while computing eligible profit from jewellery division on the basis of turnover for the purpose of Sec.80-IB - HELD THAT:- In our opinion, when expenses incurred at Head office cannot be identified with any single unit, apportioning the same on the basis of turnover is an appropriate method as held by the jurisdictional High Court in the case of M/S. TTK PHARMA LTD. [2011 (8) TMI 307 - MADRAS HIGH COURT]. Accordingly, this ground of assessee is dismissed. The same principle is applicable in respect of allocation of professional fees paid to MCKENSEY. Accordingly, this ground of assessee is also dismissed.
Non-granting of export incentives u/s.80-IB - HELD THAT:- This issue is squarely covered by the judgement of Supreme Court in the case of Liberty India Vs. CIT[2009 (8) TMI 63 - SUPREME COURT] wherein held that incentives which flow from the schemes formulated by Central Government or from Sec.75 of the Customs Act, 1962, hence, incentives profits are not profits derived from eligible business and therefore, such incentives do not form part of net profits of the industrial undertaking for the purpose of deduction u/s.80-IA/IB of the Income Tax Act,1961. Applying the above ratio, we reject the claim of assessee. Accordingly, this ground raised by assessee is dismissed.
Exclusion of deduction claimed and allowed u/s.43B while computing deduction u/s.80-IB - claim of deduction u/s.43B in the jewellery division vis-à-vis deduction u/s.80-IB - HELD THAT:- In this case, the ld. Assessing Officer computed the income of assessee after allowing the annual payment of bonus and commission in terms of Sec.43B of the Act and grated deduction u/s.80-IB of the Act. Since the profit of assessee to be computed for the purpose of Sec.80-IB of the Act after taking into account all the expenses claimed under sections 30 to 43D of the Act and there is no infirmity in the order of the lower authorities, the same is confirmed on this issue. Hence, this ground raised by the assessee is rejected.
Disallowance of claim of deduction u/s.80-IB in respect of profits of Euro Watch division - AO found that the assessee claimed deduction u/s.80-IB at the rate of 30% of profits - HELD THAT:- Claim of deduction u/s.80-IB of the Act in respect of profits of Euro Watch Division cannot be denied on the ground that it is only notional profit, as assessee uses the products of Euro Watch Division for captive consumption of the assessee or for the reason that assessee has not earned actual profits. In our opinion, the profit from Euro Watch Division to be worked out on standalone basis by apportioning of necessary expenditure in proportionate to the turnover to this division and ascertained the true profit of the Euro Watch Division. The market value of product of the Euro Watch Division is to be determined on the average price to be paid, or paid by the assessee to the other parties in the open market, had it been purchased from the outsiders which would be in terms of Sec.80IA(8) r.w.sec.80-IB(13) of the Income Tax Act. Accordingly, the issue in dispute is remitted to the file of the AO for re-computation of the profit of Euro Watch Division and considered the claim of assessee for deduction u/s.80-IB in the light of order of Tribunal in the case of West Coast Paper Mills Ltd.2006 (4) TMI 184 - ITAT BOMBAY-I] - This issue is partly allowed for statistical purposes.
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2016 (5) TMI 1588 - ITAT CHANDIGARH
Reopening of assessment u/s 147 - Eligible material for reopening proceedings - assessee had incurred expenditure on Roka and Engagement functions of her daughter out of his unexplained income and income has escaped assessment for the period relevant to the assessment year 2005-06 - HELD THAT:- Assessee had made complaint to the SSP of Police, Ludhiana regarding Roka and Engagement functions solemnized on 29.8.2004 and expenditure of Rs.7 lacs was incurred on these functions. This observation is factually incorrect and it cannot be said that the Assessing Officer has formed a prima-facie belief that income has escaped assessment.
In the instant case notice was issued to the assessee on ground that he had made the complaint to the SSP of Police, which is factually incorrect. In fact, the assessee did not make any complaint to the SSP, Ludhiana. Secondly, the Assessing Officer has mentioned in the reasons recorded that information was received from DDIT (Investigation)-III, Ludhiana that the assessee and his daughter Ms.Sarika Jain had spent approximately Rs.37 lacs on her engagement and marriage ceremony. It is brought to our notice that no addition has been made in the hands of Ms.Sarika Jain. On the contrary, Smt.Sarika Jain alleged in her complaint made with the Police that the assessee had spent an amount of Rs.7 lacs at the time of Roka and Engagement functions. It is also observed that in this case the information was provided by DDIT (Investigation)-III, Ludhiana on the basis of Police Report, wherein the daughter of the assessee alleged that a huge amount has been spent on marriage and Roka ceremony. The complaint was made by Ms.Sarika Jain against her husband and in-laws. Shri S.K. Maingi, learned counsel for the assessee submitted that the said complaint was made by Ms.Sarika Jain in order to fetch money from her husband and in-laws. This contention of the learned counsel for the assessee has some force, which can not be ignored.
Division Bench of this Tribunal in the case of Shri Subhash Chander Goel [2016 (2) TMI 78 - ITAT CHANDIGARH] relating to assessment year 2006-07 held that statement recorded by the police officer under section 161 of CrPc, 1983 is neither given on oath, nor it is tested by cross examination and, therefore, such a statement cannot be treated as substantive evidence to reopen the assessment proceedings. In the instant case, the Assessing Officer had not examined and corroborated the information received from DDIT (Investigation)-III, Ludhiana before recording his satisfaction of the escaped income and initiating the re-assessment proceedings. In my opinion, the Assessing Officer has thus acted on the basis of suspicion and he has also not applied his mind before recording the reasons for reopening of the assessment.
statement made by Ms.Sarika Jain under section 161 of CrPc cannot be treated as relevant material for reopening proceedings under section 147 of the Act. Thus reopening of the assessment was not valid under the law - Decided in favour of assessee.
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2016 (5) TMI 1587 - DELHIHIGH COURT
Seeking reissuance of her daughter-petitioner No.2's passport without insisting upon her father's name being mentioned in the application - HELD THAT:- This Court is of the opinion that the respondents can insist upon the name of the biological father in the Passport only if it is a requirement in law, like standing instructions, manuals etc. In the absence of any provision making it mandatory to mention the name of one's biological father in the Passport, the respondents cannot insist upon the same - In the present case, there is no legal requirement for insisting upon the father's name. Respondents' reliance on Clause 4.5 of Chapter 8 of Passport Manual 2010 is misplaced as the said Chapter deals with "change in entries in passport." It does not pertain to entries to be made in the first instance. Consequently, Clause 4.5 of Chapter 8 is not applicable to the present case.
In fact, a Coordinate Bench of this Court in Ishmaan Vs. Regional Passport Office, [2011 (2) TMI 1611 - DELHI HIGH COURT] directed issuance of a passport to an applicant without mentioning her father's name on the ground that the instructions issued by the respondent itself permitted mentioning of only mother's name in the passport.
The fact that the respondents had on previous two occasions, in the year 2005 and 2011 issued Passport to petitioner No.2, without insisting on father's name, makes it evident that the said requirement is not a legal necessity, but only a procedural formality, which cannot be the basis of rejecting the petitioner No. 2's case. Consequently, it appears that legally and factually there is no impediment in issuing the Passport to the petitioner No.2, without mentioning her father's name.
The respondents are directed to modify their software and accept petitioner No.2's application and issue her a Passport without insisting upon mentioning her father's name. With the aforesaid direction, present petition and application stand disposed of.
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2016 (5) TMI 1586 - ITAT DELHI
Applicability of section 44BB - services provided by NRC’s (non resident company) to ONGC - TDS u/s 195 - CIT-A held that since the activity pertains to mining, it is out of the purview of section 9(1)(vii) of the Act - HELD THAT:- The issue is no more res integra. The Hon’ble Supreme Court in the case of Oil and Natural Gas Corporation Ltd. [2015 (7) TMI 91 - SUPREME COURT] the assesee’s own case, held that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assesses or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. Appeal of revenue dismissed.
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2016 (5) TMI 1585 - ITAT DELHI
Addition based on income surrendered - addition on the basis of statement recorded of Mr. DN Taneja wherein he surrendered the said amount on company’s account to buy peace of mind - Addition based on third party - assessee’s submissions that addition cannot be made on the basis of the statement recorded of third party and without providing opportunity of cross examination of the witness to the assessee - HELD THAT:- Addition was made by the AO on the basis of statement recorded on 7.1.2009 of Mr. DN Taneja wherein he surrendered the said amount on company’s account to buy peace of mind, in doing so, he ignored the basic fact that Sh. DN Taneja had no locus standi with respect to the assessee company, as he was never a Director nor a share holder in the assessee company and thus no reliance could have been placed on such general statement and as such, the reasons recorded by the AO were merely based on suspicion, surmises and conjectures and are hence not sustainable in the eyes of law. We find considerable cogency in the Ld. Counsel of the assessee’s submissions that addition cannot be made on the basis of the statement recorded of third party and without providing opportunity of cross examination of the witness to the assessee, in view of the Hon’ble Delhi High Court decision in the case of CIT vs. Pradeep Kumar Gupta & Anr. [2006 (11) TMI 184 - DELHI HIGH COURT]
We are of the considered opinion that the addition made on the basis of the statement in the present case is not sustainable in the eyes of law, because the right of cross examination to the assessee was not provided, hence, we delete the addition made by the AO and confirmed by the Ld. CIT(A) and allow the Appeal of the Assessee.
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2016 (5) TMI 1584 - ITAT DELHI
TP Adjustment - payment of the group charges to its AE - whether the issue as to the payment on account of other group charges made by the assessee to its AE for services rendered was to be determined by the TPO/DRP or it was to be determined by the AO u/s 37 (1) - HELD THAT:- TPO goes to prove that the TPO has decided the issue as to making payment of the group charges to its AE for rendering services, such as, OTO and support and application work in respect of various projects for which tenders were submitted. TPO returned the categoric finding that assessee has failed to demonstrate “as to whether the services were claimed to have been rendered by its AE were actually received” and as such failed “the benefit test” applied by the TPO, which amounts to assuming the powers of AO.
Identical issue has come up before the Hon’ble jurisdictional High Court in judgment cited as Commissioner of Income-tax-I vs. Cushman and Wakefield (India) (P.) Ltd. [2014 (5) TMI 897 - DELHI HIGH COURT]
TPO has exceeded his power by determining that the assessee has not received services from its AE, thus failed the benefit test and further held that the assessee had not furnished any evidence to any visit of the employee of its AE in connection with the services rendered entailing payment of group charges by the assessee. We are of the considered view that since the payment made by the assessee to its AE for services rendered was basically an expenditure incurred for the purposes of business, the same are to be determined u/s 37(1) of the Act, if allowable or not and this issue is in the exclusive domain of the AO to be determined.
Adverting to the assessment order passed by the AO which is in consonance with the direction issued by TPO/DRP vide which group charges have been treated as adjustment in the ALP - AO has neither examined nor returned any findings whatsoever if the payment made to the AE for availing services from its AE is an expenditure incurred for the purposes of business u/s 37 (1) rather passed the assessment order in mechanical manner in consonance with the directions issued by the TPO/DRP. Moreover, when the TPO has not disputed that the services were availed by the assessee from its AE, the question of determining the ALP of group charges to the tune of Rs.1,89,53,444/- does not arise because it was to be done by the AO only.
We are of the considered view that without entering into merits of the case, the matter is required to be restored to the AO to determine the issue as to the payment of group charges by the assessee to its AE afresh after providing an opportunity of being heard to the assessee in the light of the observations returned hereinbefore. Consequently, the present appeal filed by the assessee is hereby allowed for statistical purposes.
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2016 (5) TMI 1583 - HIMACHAL PRADESH HIGH COURT
Dishonor of Cheque - comparison of handwriting of the applicant-accused by Handwriting Expert - requirement of stamping or not - Section 45 of the Evidence Act - HELD THAT:- I am at a complete loss to understand as to on what basis the learned Magistrate applied Section 20 of the Act. Section 20 speaks about a stamped, incomplete, inchoate instrument delivered to any person with prima facie authority to complete the instrument and encash the same. The learned Lahore High Court in A.R. Dower v. Sohan Lal [1937 (4) TMI 25 - LAHORE HIGH COURT] held that Section 20 relating to the encashability of the inchoate stamped instrument will not apply to the cheque as it does not require stamp.
Division Bench of the learned Kerala High Court in C.T. Joseph v. I.V. Philip [2001 (3) TMI 1081 - KERALA HIGH COURT] has observed that Section 20 of the Negotiable Instruments Act will not apply to the cheque as the same does not require any stamp under the Stamp Act and the aforesaid provision would apply to other incomplete, inchoate instruments which require stamp under the Stamp Act.
It was only if the Magistrate was of the opinion that the object of the petitioner in moving the application for comparison of the signatures was vexatious and had no relevance in the proceedings could he have refused the permission. But, once this was not the case, then I see no reason why the learned Magistrate ought not to have sent the documents for examination enabling the same to be compared by the Handwriting Expert which would facilitate in arriving at a correct decision - the petitioner cannot be convicted without an opportunity of being given a fair chance to present his evidence and if it is denied then there would be no "fair trial". After-all "fair trial" includes fair and proper opportunities allowed by law to prove the parties innocence. Adducing evidence in support of the defence is a valuable right.
The order passed by the learned Magistrate is not sustainable in the eyes of law and is accordingly set aside. Consequently, the application filed by the petitioner is allowed and the cheque in question is directed to be sent for comparison of the handwriting by the Handwriting Expert to be appointed by the learned trial Magistrate - Petition allowed.
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2016 (5) TMI 1582 - ITAT CHENNAI
Nature of land sold - Capital asset or agricultural land - Whether land disposed of by the assessee was agricultural land and situated beyond 8 KMs radius of the municipal limit? - HELD THAT:- The assessee filed the return of income and claimed that he sold two pieces of agricultural land for an amount, by two sale deeds registered in the office of the Sub- Registrar, Neelankarai. The assessee appears to have produced copies of chitta-adangal maintained by the State Government, to establish that the land sold by the assessee is agricultural land. The Assessing Officer accepted the claim of the assessee without any discussion in the assessment order. The copies of chittaadangal said to be filed before the Assessing Officer are not available in the file of this Tribunal. Therefore, we are unable to examine classification of the land by the State Government.
Without knowing the classification of the land, this Tribunal is of the considered opinion that the matter cannot be adjudicated at this stage. Therefore, the classification of the land has to be examined after referring to the adangal or Village Account No.2 maintained by the State Revenue Department. In the absence of copies of the extract of adangal, this Tribunal is of the considered opinion that the matter needs to be examined by the Assessing Officer for better appreciation of the facts. Therefore, this Tribunal do not find any merit in the appeal filed by the assessee.
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2016 (5) TMI 1581 - ITAT KOLKATA
Disallowance on account of Truck hire charges - expenditure incurred by the assessee on payment of truck hire charges was not fully verifiable - CIT-A deleted the addition - HELD THAT:- No specific or material defects were pointed out by the Assessing Officer in the vouchers maintained by the assessee in support of his claim for truck hire charges except that the said vouchers were self-made vouchers and the truck hire charges were paid by the assessee in cash. Keeping in view the nature of the business of the assessee, there was nothing unusual in making the payment of truck hire charges in cash through self-made vouchers so as to doubt the genuineness of the expenditure incurred by the assessee on truck hire charges.
In the case of Ranjit Singh Prem Singh Ahuja [2015 (7) TMI 152 - ITAT PUNE] a similar issue had come up for consideration before the Pune Bench of this Tribunal and the disallowance of 2% of transport expenses made by the Assessing Officer by raising trivial objection was held to be not sustainable by the Tribunal on the ground that no material discrepancy whatsoever had been pointed out by the Assessing Officer in the books of account and other record maintained by the assessee in support of its claim for transport expenses.
Ad hoc disallowance made by the Assessing Officer out of truck hire charges was not sustainable and the ld. CIT(Appeals) is fully justified in deleting the same - Decided against revenue.
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2016 (5) TMI 1580 - RAJASTHAN HIGH COURT
Seeking release of detained petitioner - remand order - absence of cognizance of offence - section 167 of Cr.P.C. - Whether detention can be ordered by the court/Magistrate under section 167 Cr.P.C. without a report being filed before the court/Magistrate in terms of section 157 Cr.P.C.? - HELD THAT:- In the instant case, accused petitioner seems to have remained in custody for almost six days even prior to the report. After his arrest on 11.3.2016, he was produced for taking remand by the police on 12.3.2016 before the learned Magistrate. Initially, remand was given for two days followed by other order of remand for 14 days on 14.3.2016. The arrest as well as initial order of remand were without registration of an FIR. In our opinion, initial two orders for remand prior to registration of FIR are hit by section 167 Cr.P.C. - the question is accordingly answered in favour of the petitioner.
Whether remand for custody of the accused can be given without producing before the court below either physically or through video linkages? - HELD THAT:- An accused is required to be forwarded to the Magistrate for remand if the investigation is not completed within a period of 24 hours given under section 57 Cr.P.C. In that case, police officer making investigation shall forthwith transmit to the nearest Judicial Magistrate a copy of the entries in the diary prescribed relating to the case and shall at the same time forward the accused to such Magistrate. Sub-section (2) of section 167 Cr.P.C. provides that if an accused is forwarded to a Magistrate, whether he has or has no jurisdiction to try the case, may authorise detention of the accused for a term not exceeding 15 days in the whole and if such Magistrate has no jurisdiction to try the case or to commit it for trial, he may order to forward the accused to a Magistrate having jurisdiction. As per the provision aforesaid, for remand of the case, accused needs to be forwarded to the Magistrate.
The order for remand of custody of the accused is without even forwarding the accused to the Magistrate whether having or not having jurisdiction to try the offence. Thus the orders for remand of the accused petitioner without forwarding him to the Magistrate physically or through video linkages is illegal. The court below should not have passed an order under section 167 Cr.P.C. unless the accused is forwarded to him - the question is answered in favour of the petitioner.
Whether section 167 Cr.P.C. would apply after filing of the charge sheet and custody would be authorised subsequent to it without taking cognizance of the offence? - HELD THAT:- Section 309 Cr.P.C., no doubt, comes in operation on cognizance of offence or commencement of trial. The custody is authorised on cognizance of offence. We are not making reference of section 209 Cr.P.C. as it is not applicable in the case in hand. If sections 167 and 309 Cr.P.C. are read together and arranged in seriatim of events, it would become clear that section 167 Cr.P.C. would apply during the course of investigation and till filing of the charge sheet. The operation of section 167 Cr.P.C. would cease to exist after filing of the charge sheet. It is as per section 167 Cr.P.C. - Thus, it can safely be concluded that after the charge sheet/challan, section 167 Cr.P.C. ceases to apply.
Under what provision, custody can be authorised after filing of the charge sheet? - HELD THAT:- Reference of section 309 Cr.P.C. would be relevant. The custody after filing of the charge sheet is authorised under section 309 Cr.P.C.. It is, however, on taking cognizance of offence or commencement of trial. The provision of section 309 Cr.P.C. was made by the Legislature presuming that immediately on filing of the charge sheet, cognizance of offence would be taken or may be denied thus remand of custody should be allowed on cognizance of offence. The Legislature did not visualise the situation where there may be delay in taking cognizance of offence as it has happened in the present case in absence of sanction for prosecution.
The custody of the accused cannot be said to be illegal after filing of the charge sheet till cognizance of offence is taken. It is more so when it cannot be said that intervening period after filing of the charge sheet and till cognizance is taken, is due to lapse of the court or the police. The cognizance of offence could not be taken in absence of sanction for prosecution mandated by section 19 of the Act of 1988 - the question is accordingly answered against the accused petitioner.
An order for release of the accused petitioner cannot be made - petition dismissed.
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2016 (5) TMI 1579 - ITAT CHANDIGARH
Rejection of books of accounts u/s 145 - Addition of difference in valuation of closing stock of 4548.679 gms of gold jewellery and another addition being the value of diamond jewellery except the value of stone studded therein - HELD THAT:- As relying on case of Jagdish Chand [2003 (6) TMI 441 - ITAT CHANDIGARH] considering consistency of method of valuations and judicial decision the rejection of Books of account and the valuation of jewellery by the A.O. is held as not correct and the addition made by the AO is unsustainable in law and on facts - thus stating that the facts of the present case are identical to the facts of that case CIT (Appeals) was right in deleting the addition. - Decided in favour of assessee.
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