Expenditure incurred on lease hold property for improvements - revenue or capital expenditure - expenditure towards purchase of workstations, improvement of interiors and electrical works, fee paid to the architect, cabling work for networking of computers in connection with setting up of office - HELD THAT:- It is evident that the assessee had taken the premises on lease for a period of three years and had incurred expenditure for improvements in the lease premises. The premises did not belong to the assessee and the expenditure did not bring into existence any capital asset for the assessee. The expenses were incurred for conducting the business of the assessee more profitably and more successfully. The assessee therefore, got the business advantage and therefore, the tribunal has rightly treated the expenses incurred as revenue expenditure incurred for improvement in leasehold property as revenue expenditure.
Depreciation on ATM - whether ATMs are computers and are eligible for 60% depreciation? - HELD THAT:- The tribunal by placing reliance on the decision of DCIT VS. DATA CRAFT INDIA LTD. [2010 (7) TMI 642 - ITAT, MUMBAI] has held that so long as functions of the computers are performed with other functions and other functions are dependant on the functions of the computer, ATMs are to be treated as computers and are entitled to higher rate of depreciation. It has further been held that computer is integral part of ATM machine and on the basis of information processed by the computer in ATM machine only, the mechanical function of the dispensation of cash or deposit of cash is done. Therefore, it was held that ATMs are computers and are entitled to higher rate of depreciation.
Change in method of accounting - HELD THAT:- The Supreme Court in BILAHARI INVESTMENTS (P) LTD.[2008 (2) TMI 23 - SUPREME COURT] has held that in every case of substitution of one method by another method it has been held that burden is on the department to prove that the method in vogue is not correct and distorts the profit of a particular year. From perusal of the order passed by the assessing officer as well Commissioner of Income Tax (Appeals), it is evident that revenue has failed to discharge the aforesaid burden. Therefore, the tribunal has rightly held that the assessee is entitled to change the method of accounting.
Liability of directors of private company in liquidation u/s 179 - Recovery proceedings - argument is that instead of recovering the aforesaid amount in tune with the provisions of Section 179 the Department proceeded to put the immovable properties to auction - HELD THAT:- Application for extension of time is allowed till 31.07.2020.
However, if for any reason whatsoever, the entire amount is not deposited, the Special Leave Petition will stand dismissed without further reference to the Court.
Exemption u/s 11 - Registration u/s 12AA denied - Tribunal was right OR not in overlooking the fact that in the absence of “Dissolution Clause” in the Trust Deed, the net assets of the Trust on its dissolution would be transferred to any entity / distributed among the trustees - as per HC partial expenditure which is not authorized by the Trust would not be itself lead to the Trust becoming nongenuine - HELD THAT:- SLP dismissed.
Reopening of assessment u/s 147 - validity of reasons to believe - HC set aside the notice for reopening - HELD THAT:- Reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand.
The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. No reason to interfere in the matter. This special leave petition is, accordingly, dismissed.
Approval u/s 80(G)(5) - ITAT Lucknow remanded the instant matter to CIT (E) Lucknow - main contention raised by the assessee in this appeal is, the matter could not have been remanded back as the entire material was available before the ITAT to come to subjective satisfaction as to whether in the given circumstances the assessee was eligible for being granted a certificate u/s 80(G)(5), or not? - As per HC ITAT rightly remanded the matter back to the CIT (E) for fresh consideration and decision on the basis of the evidence available on record regarding genuineness of the documents and to pass a speaking order - HELD THAT:- Special Leave Petition is dismissed.
Reopening of assessment u/s 147 - gain on sale of shares - profit out of sale of shares was taxable under the normal provisions or that it was excluded for the purpose of computing book profit u/s 115JB - HELD THAT:- Delay condoned. The Special Leave Petition is dismissed.
Correct head of income - income arising on sale of shares held as capital asset after conversion from stock in trade - business income or capital gains - HELD THAT:- It is evident prior to introduction of Finance Bill, 2018 by which provisions of the Act have been amended to provide for taxability of in cases where stock in trade is converted into capital asset, there was no provision to tax the same. In the absence of any provision in the Act, the transaction in question could not have been subjected to tax. Prior to amendment of the Act, which came into force with effect from 01.04.2019, the income arising on sale of shares held as capital asset after their conversion from stock in trade was treated as capital gains as has been held by various high courts viz., in the cases ofEXPRESS SECURITIES PVT. LTD.[2013 (10) TMI 1182 - DELHI HIGH COURT], DEEPLOK FINANCIAL SERVICES LTD.[2013 (10) TMI 1182 - DELHI HIGH COURT] and ADITYA MEDI SALES LTD. [2016 (8) TMI 565 - GUJARAT HIGH COURT] and JANNHAVI INVESTMENT PVT. LTD.[2008 (1) TMI 314 - BOMBAY HIGH COURT]. We agree with the view taken by various high courts on this issue.
Tribunal erred in treating the income arising on sale of shares held as capital asset after conversion from stock in trade as business income. The substantial question of law framed in the appeals is answered in favour of the assessee and against the revenue.
Income accrued in India - Characterization of income - 'Salary' or 'Profit in lieu of Salary' OR'Business income' -Remittance of amounts to employees under non compete agreements are chargeable to tax under Section 5(2) of the Act - head of income under which it is liable for taxation under the Act and issue of its taxability under Double Taxation Avoidance Agreement 'DTAA' - Whether the Tribunal was correct in holding that a sum by the assessee is in the course of employment and would fall under the head 'Salary' or 'Profit in lieu of Salary' and not under the head 'Business income' as per Section 28(va) as held by the assessing officer? - HELD THAT:- Employees were rendering services outside India i.e., U.S. and payments were also made in U.S., Article 16 of DTAA applies and the same is taxable only in U.S.A. As held that income in the hands of the employees is salary / profit in lieu of salary and it has to be treated as such and in view of Article 16 of DTAA, the same is taxable in U.S. It was inter alia held that where the payments are in nature of salary, the payer need not approach the appropriate authority u/s 195(2) of the Act.
Held that amount paid to the employees of the assessee being in the nature of salary is not taxable in India in view of Article 16 of DTAA between India and United States and therefore, the assessee was not under an obligation to deduct at source. The assessee, therefore, cannot be deemed to be an assessee in default under Section 201(1) of the Act. It was also held that since, the assessee has not been held to be an assessee in default, therefore, the interest under Section 201(1A) of the Act is not leviable. Accordingly, the appeal was allowed.
From perusal of the substantial questions of law, on which the appeal has been admitted, we find that the findings of fact recorded by the tribunal have not been assailed as perverse.
Even in the memo of appeal neither any grounds have been urged nor any material has been placed on record to demonstrate that findings of fact recorded by the tribunal are perverse. Therefore, the substantial questions of law as framed by a bench of this court, in fact, do not arise for consideration in this appeal, as the matter stands concluded by findings of fact. The amount paid to the employees under the non compete agreement is covered by the expression 'salary / profits in lieu of salary', which is not taxable in India in view of Article 16 of DTAA.
We find that matter stands concluded by findings of fact and the revenue has not been able to either plead or place on record material to show that findings of fact recorded by the tribunal are perverse. - Decided in favour of assessee.
Reopening of assessment - change of opinion - under valuation of the stock - HELD THAT:- It appears that the assessee had furnished all the necessary details with regard to the valuation of the stock. The stock certificate of the valuation issued by the site supervisor was also on record. In the tax audit report, we find reference as regards the method of valuation. It has been stated therein that “the assessee is a developer and builder”.
The assessee is in the business of construction and sale of flats, buildings, land etc. it is impracticable to maintain item wise quantitative records of the items of building materials, which is shown in the Balance-Sheet as a closing stock in trade which is incomplete work at site. The valuation is taken on the basis of the valuation carried out by the site engineer. We, once again, go back to the reasons assigned for the purpose of reassessment. In the reasons, we find reference of the balance-sheet Form No.3CD, profit and loss account, and the very same material is now sought to be looked into for the purpose of reassessment.
In the overall view of the matter, we are convinced that this is a case of mere change of opinion. The law in this regard is well settled as explained in the case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT].The impugned notice is hereby quashed and set aside. - Decided in favour of assessee.
Revision u/s 263 - deduction u/s.54F and section 54 - HELD THAT:- The twin conditions are that the order of the AO must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order.
Whether the actions of the AO can be termed as prejudicial to the interest of Revenue? - In assessee`s case original assessment was completed much prior to search and seizure therefore the assessment year under consideration, that is, A.Y. 2010-11 is unabated and in unabated proceedings, the AO cannot disturb the findings given thereon in the original assessment unless there is incriminating material unearthed by the search team, since in assessee`s case under consideration there is no incriminating material therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue.
AO has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the AO cannot be treated as erroneous and prejudicial to the interest of the revenue as held in Malabar Industries Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME COURT].
Since the order of the AO cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ‘’null’’ in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. - Decided in favour of assessee.
Capital gain computation - reference made u/s 55A - value of immovable property determined by the District Valuation Officer - AO adopted the fair market value of the property as on 01.04.1981 as determined by DVO for the purpose of computation of long term capital gain - scope of provisions of section 55A(a) as amended - HELD THAT:- Amended provisions of section 55A(a) is applicable from 01.07.2012, that is, (previous year 01.07.2012 to 31.03.2013) for assessment year 2013-14 onwards. Whereas the assessee sold the property on 21.07.2011, therefore amended provisions of section 55A(a) does not apply to the assessee under consideration. In assessee`s case the assessment year is A.Y. 2012-13 whereas amended provisions of section 55A(a) of the Act are applicable from A.Y. 2013-14.
Hence, pre-amended section 55A(a) is applicable to the assessee wherein the terminology used is “is less than its fair market value” . We note that assessee`s qualified Registered Valuer of Income Tax had valued the property at fair market value on 01.04.1981 at ₹ 18,51,000/- which is not less than the fair market value done by the District Valuation Officer of Income Tax Department at ₹ 5,82,083/-.
Based on the position in law as explained above, we direct the assessing officer to take the fair market value of the property as on 01.04.1981 at ₹ 18,51,000/- for the purpose of computation of long term capital gain. - Decided in favour of assessee.
TP Adjustment - comparable selection - HELD THAT:- All the companies selected by the TPO are liable to be excluded on the basis of turnover filter applied by the ld. DRP and the decision rendered by the Co-ordinate Benches. Since no comparable company would remain for determining the Arms Length Price of international transaction, we are of the view the entire issue should be restored to the file of the AO/TPO for undertaking the exercise afresh by selecting fresh set of comparable companies in respect of sotware R & D segment. Accordingly we set aside the order passed by the AO/TPO on this issue and restore the same to his file for examining the issue afresh.
TP adjustment in respect of market support service - HELD THAT:- As A.R submitted that the TPO did not provide sufficient opportunity to the assessee to object to the comparable companies selected by him, we are of the view that this issue also needs to be set aside to the file of the AO/TPO. Accordingly, we set aside the order passed by AO on this issue and restore the same to the file of the AO/TPO.
Computation of ALP on the entire operating costs - whether arm’s length price ought to be computed only for the international transactions and not on the basis of costs incurred by the appellant? - HELD THAT:- PLI adopted by the assessee is operating profit by operating cost. The operating revenue has been generated by the assessee during the first two months namely April & May, 2004 only. So we find merit in the contentions of the assessee that the operating cost relatable to the operating revenue generated by the assessee should alone be considered for computing operating margin for the purpose of determining Arm’s length price of the international transactions. Considering the expenses incurred by the assessee in subsequent months, where no revenue was generated, would result in distorted picture.
Hence there is merit in the contentions of ld. AR that the expenditure incurred during the first two months should alone be considered for arriving at the profit, in view of the fact that the assessee has stopped the operations in the month of May - we hold that the TPO was not justified in considering the operating results of the whole year for computing operating margins of the assessee. We notice that the workings furnished by the assessee for the first two months of the year have not been examined by the AO/TPO and hence the same requires examination in the light of discussions made supra. Accordingly, we restore this issue to the file of the AO/TPO for determining the operating margins of first two months by considering the operating revenue and operating cost of the first two months only in accordance with the discussions made supra. Appeals of the assessee are treated as allowed for statistical purposes.
Deduction u/s. 80IC - Claim for 8th Year from the initial assessment year - substantial expansion having been made in the Plant & machinery within the specified period as provided in the Act and having fulfilled all the condition for claiming deduction @ 100% for further 5 years the appellant had claimed deduction U/s. 80IC for which Audit report in Form No 10CCB was also furnished - HELD THAT:- Since the appeal of the assessee is covered by its own order by the judgment of the Tribunal in A.Y. 2013-14 and the ld. CIT(A) allowed the appeal of the assessee as accepted the claim of the appellant and has allowed Deduction @ 100% u/s 80IC
Book profit u/s 115JC - set off of tax credit u/s 115JD for tax paid in earlier year on book profit - HELD THAT:- We direct the Assessing Officer to compute the book profit u/s 115JC of the Act and allow the set off of tax credit u/s 115JD for taxes paid by the assessee in earlier years on book profit in accordance with law. Statistical purposes the additional grounds raised by the assessee is allowed.
Order is being pronounced after 90 days of hearing - HELD THAT:- Taking note of the extraordinary situation in the light of the Covid-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Co- ordinate Bench of the Mumbai Tribunal in the case of JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
Non granting of exemption to the Appellant u/s.12AA - assessee failed to file documentary evidences to enable him to bring satisfaction about the genuineness of the assessee-trust activities - AR submitted before us that assessee had already submitted all the required documents which were not considered by ld.CIT(E) - HELD THAT:- This matter requires reconsideration at the level of Ld.CIT(E). Since according to assessee, the assessee had already submitted the required documents before Ld.CIT(E), but the same do not find mention in the order. Therefore, it can be inferred that those documents filed by the assessee were not considered. The principle of audi alteram partem is the basic concept of natural justice. The expression “audi alteram partem” implies that a person must be given an opportunity to defend himself. This principle is sine qua non of every civilized society. The right to notice, right to present case and evidence, right to rebut adverse evidence, right to cross examination, right to legal representation, disclosure of evidence to party, report of enquiry to be shown to the other party and reasoned decisions or speaking orders. We took this guidance for right of hearing, from the ratio as is laid down by the Hon'ble Supreme Court in the case of Maneka Gandhi v. Union of India [1978 (1) TMI 161 - SUPREME COURT] wherein Hon'ble Supreme Court has laid down that rule of fair hearing is necessary before passing any order.
We restore it back to Ld.CIT(E) and direct that all the documents filed by the assessee be considered and assessee be given one more opportunity of being heard and to file any other documents before the Ld.CIT(E), Ahmedabad as called for and the Ld.CIT(E) is also directed to decide the application for registration filed by the assessee - Decided in favour of assessee for statistical purposes.
Valuation - rejection of declared value - import of Synthetic Rubber PBR Non Oil Off Grade Loose Lumps in Super Sacks Packing - Confiscation - Penalty - HELD THAT:- The CIPET Test Report supports the correct description of the impugned goods in the Bills of Entry, which is rather more detailed than mentioned in the CIPET Report and thus there is no misdescription. We also find that there is no admission of Appellant admitting to undervaluation, or of any extra financial consideration apart from the declared transaction value, paid to the overseas supplier. Further, there is no evidence that the appellant and overseas supplier are related parties or that the invoice value was not the transaction value. The Department has failed to show any contemporaneous evidence of higher price, and thus the transaction value cannot be rejected, as held by the Hon’ble Apex Court in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, NOIDA VERSUS M/S. SANJIVANI NON-FERROUS TRADING PVT. LTD. [2018 (12) TMI 738 - SUPREME COURT] and COMMISSIONER OF CUSTOMS, CALCUTTA VERSUS SOUTH INDIA TELEVISION (P) LTD. [2007 (7) TMI 9 - SUPREME COURT].
The allegation of undervaluation cannot be sustained - Appeal allowed - decided in favor of appellant.
EPCG Scheme - import of the Mercedes car - allegation for use for personal purpose of director - concessional rate of Customs Duty - N/N. 97/2004CUS - export of service under “Tour and Travels services” as per prevailing the import – export policy - Circular No. RE-08/20032004 dated 7 May 2008 - HELD THAT:- since the imported capital good being a car which is a movable capital equipment and there is no allegation in the show cause notice or in the findings given in the order-in-original that the capital goods imported under the EPCG licence have been found in possession of the importing firm and its Director and was found parked at the residence of the Director - there are no violation of the condition of the EPCG licence has been done on this count as the vehicle found in the possession of the importing firm and no evidence have been adduced by the Department to sustain their claim that it was not used for the purpose for which it has been allowed to be imported by the EPCG licence on concessional rate of customs duty.
The export obligation fulfillment documents have been accepted by the Additional Director General Foreign Trade and at the same time, it is also found that imported capital goods namely car in this case under EPCG licence was imported validly declaring all the relevant facts and subsequently also there has been no violation of any of the conditions of EPCG/Customs Notification, the impugned order-in-original is devoid of any merits and therefore the same is set aside.
Maintainability of appeal - time limitation - appeal rejected on the ground that same has not been filed in time as provided under Section 128 of the Customs Act, 1962 which required that an appeal need to be filed before Commissioner (Appeals) within a period of 60 days from the date of the communication of the order-in-original - HELD THAT:- Even if the order of final assessment has been sent by the registered post to their Johari Bazar address same cannot be considered as the proper service of the order as per the provision of Section 153 of the Customs Act, 1962. Since the appellant were not available at the given address, we find that date of receipt of the order need to be taken as 25 July 2015 on which the order was actually been provided to the appellant and statutory time limit may be calculated from this date as provided under Section 128 of the Customs Act, 1962. Since the appeal has been filed well within 60 days from 25 July 2015, the Commissioner (Appeals) has erred in not considering the date of receipt of the order by the appellant as the relevant date for calculating the period of 60 days and therefore we find no merit in the Commissioner (Appeals) order and therefore set aside the same.
The appeal is remanded back to the Commissioner (Appeals) for hearing the matter on merit - appeal allowed by way of remand.
Liquidation of Corporate Debtor - section 33(1) and (2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the instant case, the CoC has estimated the liquidation cost at ₹ 9,50,000/- (refer minutes of 7th CoC meeting dated 13-12-2019). However, the CoC has not estimated the value of the liquid assets under Regulation 39B(2) of the CIRP Regulations, 2016 and has not approved a plan providing for contribution for meeting the difference between the estimated value of the liquid assets and estimated liquidation costs. The Liquidator will, therefore, take necessary action under Regulation 2A of the Liquidation Process Regulations, 2016 - The CoC has not made any assessment of sale as a going concern under Regulation 39C of the CIRP Regulations, 2016. The Liquidator will, therefore, take necessary action under Regulation 32A(3) of the Liquidation Process Regulations, 2016.
It is directed that all the directions/requirements and provisions of Chapter III of the Code and Liquidation Process Regulations, 2016 shall be strictly complied with.
Grant of Bail - Money Laundering - scheduled offences - submissions of applicant is that the applicant is an innocent person and has been falsely implicated in the case, he is having no previous criminal history and in jail since 07.01.2020 - HELD THAT:- The schedule offence was registered on 30.11.2007 by the CBI and the applicant co-operated in the aforesaid schedule offence and thereafter, charge sheet was filed before the Special Judge, CBI (Central), Lucknow on 06.10.2009, then the applicant surrendered before Special Judge, CBI (Central), Lucknow and he was released on bail on 15.12.2009, thereafter, the Enforcement Directorate registered the ECIR on 31.03.2010 and started investigation, but the applicant was not taken into custody under Section 19 of The Act and no Provisional Attachment Order under Section 5 of The Act was issued by the Enforcement Directorate in relation to the property related to the proceed of crime, his statement under Section 50 of The Act was recorded on different occasions and after eight years from the date of registering of ECIR, the complaint under Section 45 of The Act was filed on 28.09.2018 before the Sessions Judge/Special Judge PMLA, Lucknow, but merely on the basis of statement of the applicant and other accused persons, the complaint has been filed as no any statement of witness in support of the case as mentioned in para 4.5 etc. is annexed to the complaint and it was informed by the counsel for the Directorate of Enforcement that all the witnesses will be called and examined before the trial court as the applicant is in jail since 07.01.2020 and the maximum punishment provided for the offence under Section 4 of The Act is seven years, therefore, without expressing any opinion on the merits of the case, the applicant is entitled to be released on bail.
Let applicant Vinod Kumar Mishra be released on bail in the aforesaid Case Crime on his furnishing personal bond amounting to ₹ 3,00,000/- and two reliable sureties each of the like amount to the satisfaction of the court concerned subject to conditions imposed.
The Supreme Court dismissed the appeals as withdrawn after the appellant sought permission to do so. Pending applications were disposed of accordingly. (Case citation: 2020 (6) TMI 420 - SC)
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