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Case Laws
Showing 81 to 100 of 691 Records
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2008 (5) TMI 674 - CESTAT, NEW DELHI
Penalty and interest - Cenvat/Modvat credit - Capital goods - Held that: - when the credit has not been utilized and also reversed after receipt of the Adjudication order, imposition of penalty and interest are not warranted - appeal allowed.
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2008 (5) TMI 673 - SUPREME COURT
AO disallowed the interest expenses on borrowed capital u/s 36(1)(iii) on the ground that borrowed funds were deployed by the assessee Company in order to purchase equity shares of AEC, which Company is subsequently taken over not by the assessee but by its sister companies - after acquiring the shares of AEC Ltd., the assessee herein has sold the shares at profit – whether it amounts to circular trading with idea of evading tax – matter restored to HC
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2008 (5) TMI 672 - DELHI HIGH COURT
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... ... ..... nticipatory bail if the Petitioner fails to appear before it on any date, as directed by it. 8. It is accordingly, directed that in the event of his arrest, the Petitioner will be released on bail on his furnishing a personal bond in the sum of ₹ 2,00,000/- with one surety in the like amount to the satisfaction of the Respondent, DGCEI. The Petitioner will surrender his passport which will be kept in the custody of the Respondent. The Petitioner will not travel abroad without the prior permission of this Court. He will appear as and when directed by the Respondent and will cooperate in the investigation. He will not intimidate any person who is sought to be questioned by the Respondent or tamper with the evidence in any manner whatsoever. If any of these conditions is violated, it will be open to the Respondent to seek variation or cancellation of the bail. 9. The application is disposed of. 10. A copy of the order be given dasti to the learned counsel for the parties.
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2008 (5) TMI 671 - SUPREME COURT
Interpretation of statute - Section 31 of the Copyright Act, 1957 - Grant of compulsory licence - broadcast of the songs in respect whereof the first respondent holds a copyright as owner thereof or by reason of purchase of the copyright belonging to others - Principles of Valuation - "royalty" and "compensation" - 'work' defined in Section 2(y).
Whether the Copyright Board has jurisdiction u/s 31 (1)(b) of the Copyright Act, 1957 to direct the owner of a copyright in any Indian work or a registered copyright society to issue compulsory licences to broadcast such as works, where such work is available to the public through radio broadcast? - Whether in any event such a compulsory license can be issued to more than one complainant in the light of Section 31(2)? - relevant considerations which the Copyright Board must keep in view while deciding on issuance of compulsory license to a particular person and terms on which the compulsory license may be issued, including the compensation.
If the right of an author/society is so pervasive, is it necessary to construe the provisions under Section 31 of the Act having regard to the International Covenants and the laws operating in the other countries? - HELD THAT:- The answer to the said question must be rendered in affirmative. Interpretation of a statute cannot remain static. Different canons and principles are to be applied having regard to the purport and object of the Act. What is essential therefor is to see that the expanding area in which the copyright will have a role to play is covered. While India is a signatory to the International Covenants, the law should have been amended in terms thereof. Only because laws have not been amended, the same would not by itself mean that the purport and object of the Act would be allowed to be defeated. If the ground realities changed, the interpretation should also change. Ground realities would not only depend upon the new situations and changes in the societal conditions vis-'-vis the use of sound recording extensively by a large public, but also keeping in view of the fact that the Government with its eyes wide open have become a signatory to International Conventions.
Application of International Conventions in India - HELD THAT:- Applicability of the International Conventions and Covenants, as also the resolutions, etc. for the purpose of interpreting domestic statute will depend upon the acceptability of the Conventions in question. If the country is a signatory thereto subject of course to the provisions of the domestic law, the International Covenants can be utilized. Where International Conventions are framed upon undertaking a great deal of exercise upon giving an opportunity of hearing to both the parties and filtered at several levels as also upon taking into consideration the different societal conditions in different countries by laying down the minimum norm, as for example, the ILO Conventions, the court would freely avail the benefits thereof - Those Conventions to which India may not be a signatory but have been followed by way of enactment of new Parliamentary statute or amendment to the existing enactment, recourse to International Convention is permissible.
Essential Features of the Copyright Act - HELD THAT:- The underlying philosophy of the Copyright Act is that the owner of the copyright is free to enter into voluntary agreement or licenses on terms mutually acceptable to him and the licensee. The Act confers on the copyright owner the exclusive right to do the various acts enumerated in Section 14. An infringement of copyright occurs if one of those acts is done without the owner's license. A license passes no interest, but merely makes lawful that which would otherwise be unlawful. The Act also expressly recognizes the notion of an "exclusive license" which is defined in Section 2(j). But, that does not mean, as would be noticed from the discussions made hereinafter, that it would apply in all situations irrespective of the nature of right as also the rights of others - This Scheme shows that a copyright owner has complete freedom to enjoy the fruits of his labour by earning an agreed fee or royalty through the issuance of licenses. Hence, the owner of a copyright has full freedom to enjoy the fruits of his work by earning an agreed fee or royalty through the issue of licenses. But, this right, to repeat, is not absolute. It is subject to right of others to obtain compulsory licence as also the terms on which such licence can be granted.
Copyright Society - HELD THAT:- The Copyright Society is required to frame a scheme to determine the quantum of remuneration payable to individual copyright owners having regard to the number of copies of the work in circulation - Rule 14J requires that a Copyright Society shall frame a scheme of tariff to be called a "Tariff Scheme" setting out the nature and quantum of fees or royalties which it proposes to collect in respect of such copyright or other rights administered by it. Rule 14K requires a Copyright Society to frame a "Distribution Scheme" setting out the procedure for collection and distribution of royalty specified in the Tariff Scheme among the owners of copyright. Any distribution under the Distribution Scheme is required to be in the proportion to the income of the Copyright Society from actual use of the work or works of each owner of rights."
Compulsory Licence - HELD THAT:- Chapter VI relate to grant of licence, which can be divided into two parts; licences by owners of copyright and compulsory licenses. Compulsory licences can be granted by the Copyright Board subject to the limitations contained therein. It cannot be said to be an exception to the general rule in the strict sense of the term as the provisions relating to grant of license by owners of Copyright and compulsory licenses operate in different fields. It may be true that while passing an order for grant of compulsory licenses, the relevant factors as laid down therein must be kept in mind which would include the right of the owner of the copyright as a part of the right of property, but where a statute is to be construed as a balancing statute, the situation may be different.
Construction of Section 31 of the Act - HELD THAT:- Admittedly in terms therof the principles of natural justice are required to be complied with and an enquiry has to be held. The extent of such enquiry will depend upon the facts and circumstances of the case. A finding has to be arrived at that the grounds of refusal by an owner of a copyright holder is not reasonable. Only upon arriving at the said finding, the Registrar of copyright would be directed to grant a license for the said purpose. The amount of compensation payable to the owner of the copyright must also be determined. The Board would also be entitled to determine such other terms and conditions as the Board may think fit and proper. Registration is granted only on payment of such fees and subject to compliance of the other directions.
Right to Property - Is the Concept Applicable - HELD THAT:- The right of property is no longer a fundamental right. It will be subject to reasonable restrictions. In terms of Article 300A of the Constitution, it may be subject to the conditions laid down therein, namely, it may be wholly or in part acquired in public interest and on payment of reasonable compensation.
Public Interest - Public Policy - HELD THAT:- The right to property, therefore, is not dealt with its subject to restrict when a right to property creates a monopoly to which public must have access. withholding the same from public may amount to unfair trade practice. In our constitutional Scheme of statute monopoly is not encouraged. Knowledge must be allowed to be disseminated. An artistic work if made public should be made available subject of course to reasonable terms and grant of reasonable compensation to the public at large.
Royalty and Compensation - HELD THAT:- The legislature for all intent and purport equates 'compensation' with 'royalty'. In the context of the Act, royalty is a genus and compensation is a species. Where a licence has to be granted, it has to be for a period. A 'compensation' may be paid by way of annuity. A 'compensation' may be held to be payable on a periodical basis, as apart from the compensation, other terms and conditions can also be imposed. The compensation must be directed to be paid with certain other terms and conditions which may be imposed.
Parliamentary Intent - HELD THAT:- The intention of the Parliament, it is trite, must be ascertained from the plain reading of the Section. The intention is to treat works, which have been "withheld from the public" differently from the "right to broadcast". The right to broadcast is a ephemeral right. It requires special treatment as it confers upon every person, who wishes to broadcast a work or the work recorded in a sound recording, the right to do so is either by entering into a voluntary agreement to obtain a licence on such terms which appear to be reasonable to him or when the term appears to be unreasonable to approach the Board - When such a complaint is made, it confers the jurisdiction upon the Board. It may ultimately allow or reject the complaint but it cannot be said that the complaint itself is not maintainable.
Interpretation of Section 31(2) - HELD THAT:- The meaning of the Statute is neither clear nor sensible. It is a statute where a purposive construction is warranted. It is a case where sub-Section (2) should be kept confined to clause (a) for that purpose. The statute has to be read down. It is not a case of improper interpolation so as to take away a primary purpose of the legislative intent. It is expedient to give effect to the intent of the statute. This itself says that creases can be ironed out. While undertaking the said exercise, the court's endeavour would be to give a meaning to the provisions and not render it otiose - Section 31(2) refers to case falling under clause (a) of Sub-section (1) of Section 31 and not clause (b) thereof.
Principles of Valuation - HELD THAT:- The Tribunal exercises a limited jurisdiction in India. Different cases are required to be considered on its own merits. What would be reasonable for one may not be held to be reasonable for the other. The principles can be determined in a given situation. The Bombay High Court has remitted the matter back to the Board for the said purpose. We endorse the views of the Bombay High Court.
Discretionary Jurisdiction - whether the discretionary jurisdiction should have been exercised in favour of the appellant? - HELD THAT:- Reliance has been on Phonographic Performance Ltd. vs. Maitra. The general principle of grant of injunction came up for consideration before the Court of Appeal. Therein, it was held that an owner may exercise and exploit his proprietary right by licensing some and not others. He may charge whatever he wishes. Such is not the position in India. Therein, the defendant did not take part in the proceedings. It was, inter alia, from that angle, held that the court could still exercise discretion.
Conclusion:
As it was a case of abuse, the Board had the jurisdiction to entertain any application for grant of compulsory licence. How far and to what extent appellant has infringed the right of the respondent is a matter which may be taken into consideration by the Board. A suit was filed and injunction was granted. Apart from the fact that the appellant offered to take a license held negotiations with the respondents in the suit as soon as it came to know that Super Cassettes is not a member of PPL, it gave an undertaking. Each case must be considered on its own facts - However, we do not approve the manner in which the Board has dealt with the matter. It has refused to examine the witnesses. It took up the matter on a day for hearing which was fixed for production of witnesses. We, therefore, are of the opinion that the order of the Board should be set aside and the matter be remitted to the Board again for the consideration of the matter afresh on merit.
Appeal allowed.
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2008 (5) TMI 670 - DELHI HIGH COURT
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... ... ..... (supra) is not applicable but the ratio of Parimisetti Seetharamamma (supra) is applicable in the present case. At the relevant time the assessee was not holding any public post. It is also on record that he did not do any favour or help to Mr. Jain at any time, whether before or after he got elected to the Parliament, so that it can be said that there was quid pro quo for the receipt of the money, The money was in fact received by Mr. Kamal Singh, an election agent of the assessee, who is said to have spent it on the expenditure for jeeps required for the election campaign of the assessee. There is no evidence to show that the money was used by the assessee for acquiring movable or immovable properties in his name or in the name of his family members or even for his foreign travel or personal expenses. 6. In these circumstances, it is not possible to interfere with the concurrent findings recorded by the authorities below. The appeal has no merit and the same is dismissed.
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2008 (5) TMI 669 - ITAT MUMBAI
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... ... ..... a manufacturer of books. It was further held by the Court that a publisher may get books printed from any printer as the printer is a mere contractor and the publisher carries on the business of manufacturing and processing of books. In the light of the CBDT circular, the learned CIT(A), observed that it is not necessary for an industrial company to perform all the activities by its manufacturing apparatus in its premises. Even some of the activities carried on by the assessee at Daman unit could be construed as manufacturing activity. The learned CIT(A), in our opinion, has rightly held that the assessee is entitled to the relief under s. 80-IB of the Act and the operations carried out by Daman unit are nothing but manufacturing activities within the meaning of s. 80-IB of the Act. We decline to interfere with any part of his order on this issue. 18. In the result, the appeals of the Revenue are dismissed and the appeals of the assessees are to be treated as partly allowed.
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2008 (5) TMI 668 - ITAT MUMBAI
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... ... ..... restraining the recipient for a short or limited period, the expenditure incurred can only be called to have incurred to increase the profitability of the assessee and is not in capital expenditure. Keeping in view of the ratio laid down in the aforesaid cases, we find that in the instant case, the assessee has incurred the expenditure to restrain the recipient for 5 years from entering into same trades and business in the same area, as such, it is a revenue in nature and is allowable expenditure. But, this expenditure was incurred for a period of 5 years, as such, it should be allowed over a period of 5 years and not a lumpsum in the impugned assessment year and this is also an alternative submissions of the assessee which we have accepted. Since the expenditure incurred by the assessee is treated as revenue expenditure, the ground No. 2 which related to depreciation does not arise. We, therefore, reject the same. 9. In the result, appeal of the assessee is partly allowed.
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2008 (5) TMI 667 - ITAT DELHI
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... ... ..... re, only the profit on transfer of DEPB receipts is to be taken into account for the purpose of computing the export profits under third proviso of the Act. Since the cost part of the DEPB is not to be excluded under clause (baa) of the Explanation, the assessee will not be entitled for the benefit under third proviso to section 80-HHC(3) of the Act in respect of this part of receipts. Similarly the SIL has not been considered as covered by clause (baa), the benefit of first proviso will not be available in respect of SIL receipts. In view of above discussion, the order passed by the ld. CIT (Appeals) is modified and the assessing officer is directed to compute deduction under section 80-HHC accordingly. 14. In the result, the appeals filed by the assessee are partly allowed and the appeals filed by the Revenue are dismissed. 15. In the result, the appeals filed by assessee are allowed and by the Revenue, are dismissed. The order pronounced in the open court on May 30, 2008.
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2008 (5) TMI 666 - DELHI HIGH COURT
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... ... ..... f the Central Excise Act. 4. We have gone through the show cause notice and find that there is no mention made in the show cause notice invoking the extended period of limitation. We note that the Tribunal relied upon a decision rendered by it in the case of Gammon India Ltd. v. Commissioner of Central Excise, Goa, 2002 (146) ELT 173 and came to the conclusion that the show cause notice was barred by time. 5. Learned counsel for the Respondent informs us that the Revenue had taken up the decision rendered by the Tribunal in appeal before the Supreme Court but the Supreme Court declined to interfere with the order of the Tribunal on the question of limitation. 6. In that case, the show cause notice was issued two years after completion of the enquiry. In the present case, the show cause notice was issued three years after completion of the enquiry. Clearly, the show show cause notice was barred by time. 7. No substantial question of law arises for consideration. 8. Dismissed.
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2008 (5) TMI 665 - DELHI HIGH COURT
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... ... ..... lied to the petitioner. 19. At this stage, Mr. Pradeep Jain submits that as and when samples are sent for testing the writ petitioner be given an opportunity to be present. According to me, this is prejudging the issue. The Commissioner of Customs would first have to decide whether or not to accede to the request contained in the letter dated 27-3-2007. I have no doubt once the Commissioner of Customs comes to a conclusion either way, he will follow the principles of natural justice in giving an opportunity to the petitioner to be present, if it is so desire, as and when samples are sent to an expert for testing. 20. As far as the second prayer in the writ petition is concerned, Mr. Pradeep Jain informs me that the goods in issue stand released to him, hence he does not press the prayer contained in paragraph 17(ii). 21. In view of the aforesaid directions nothing further survives in the writ petition. The same is accordingly disposed of. 22. Order dasti.
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2008 (5) TMI 664 - DELHI HIGH COURT
Gift received from Swiss national - relationship and creditworthiness of the donor not established - all the three authorities have rejected the explanation of the assessee - HELD THAT:- We are not convinced that the transaction is above board. We have in particular considered the quantum of the gifts, the fact that there is inadequate material to show the resources or finances of the Swiss national: there is no apparent reason for the assessee being showered with gifts by a person who is stated to be only a family friend and that the same family friend has showered gifts of an enormous amount on several other persons as well.
Therefore, we do not find any perversity shown in the conclusion arrived at by the Tribunal on the facts of this case. No substantial question of law arises in this regard.
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2008 (5) TMI 663 - ITAT DELHI
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... ... ..... me paper, it had been considered that the value was not actual but the market value and such instances were of investment in HUDA, Agra property and value of shares and FDRs. It was, therefore, held that the CIT (A) was right in deleting the addition made in the hands of Chavan Rishi International Ltd. These findings of the Tribunal given by coordinate Bench will apply mutatis mutandis to the present case as the addition has been made on the basis of that very seized paper and it is held that the Ld. CIT (A) was right in deleting the addition based on these findings of the Tribunal given in the case of Mittal group. No extra material has been brought on record by the revenue which leads us to take a different view than the view taken by co-ordinate Bench in the aforementioned case. We decline to interfere and the appeal filed by the revenue is dismissed. 11. In the result, the appeal filed by the revenue is dismissed. 12. The order pronounced in the open court on 30-05-2008.
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2008 (5) TMI 662 - ITAT HYDERABAD
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... ... ..... other hand, in the present case, the assessee has not raised any capital in the form of cash which could be utilized over the period of the preference shares. Merely, some part of the interest which was to accrue in future, has been sacrificed by the institutions for which the assessee has been called upon to compensate in the year under consideration. Therefore, there is no question of spreading the expenditure over the period of the preference shares. Finally, we draw support from the same decision for the conclusion we have arrived at. At page 808 (of 225 ITR) the court has observed that expenditure is not necessarily confined to the money which has been actually paid out. It covers a liability which has accrued or which has been incurred although it may have to be discharged at a future date. Accordingly, we allow the claim of the assessee of ₹ 6,71,60,000. 11. In the result, the appeal of the assessee is allowed. The order was pronounced in the court on 9-5-2008.
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2008 (5) TMI 661 - ITAT CHENNAI
Eligibility for deduction u/s 10B - business of export of computer software - shifted its business to new office - 100 per cent EOU - Jurisdiction of order passed by CIT u/s 263 - HELD THAT:- It is pertinent to note here that the plant and machinery which was brought by the assessee at the new place of business was bearing charge of the bank and financial institution against the loan already availed by the assessee. Therefore the assessee could not dispose of these plant and machinery till the repayment of the earlier loan and consequently discharge of charge. This is a case where the assessee has shifted its ongoing business of export of computer software to a new place located in Software Technology Park of India notified by the Government of India.
Whether the shifting of the business place from a domestic tariff area to a Software Technology Park of India notified by Government of India amounts to formation of business by splitting up or reconstruction of business already in existence as well as by transfer of all plant and machinery previously used to a new business for any purpose as contained in cls. (ii) and (iii) of sub-s. (2) to s. 10A? - HELD THAT:- The shifting of existing business from one place to another place does not amount to forming a business by splitting or reconstruction or by transfer of plant and machinery previously used. In the facts and circumstances of the case formation of new business by splitting up a business already existing is totally ruled out. As far as reconstruction is concerned, it is not a case of transfer of asset and ownership of assets. Moreover, it is only shifting of existing business from a domestic area to STPI and getting approval as 100 per cent export-oriented undertaking. Therefore it is not establishing a new business by transfer of plant and machinery used previously for any purpose.
We are of the considered view that this is not a case of setting up of a new business but only transfer of business place of existing business to a new place located in STPI area and thereafter getting the approval from the authorities and thereby the assessee becomes entitled to deduction u/s 10A. Merely because by shifting the business from one place to another and also keeping some of the plant and machinery as those are bearing charge of financial institution does not violate cls. (ii) and (iii) of sub-s. (2) to s. 10A of the IT Act.
Board in Circular No. 1 of 2005, dt. 6th Jan., 2005 has clarified that the existing undertaking set up in the DTA and drawing profit from export of article shall be eligible for deduction under s. 10B on conversion of the area into EOU on getting approval as 100 per cent export-oriented undertaking. The only instruction (sic-restriction) is that the deduction shall be available only for the remaining period of 10 years beginning with the year in which it got the approval as 100 per cent EOU - Moreover when the claim of the assessee regarding deduction u/s 10A was considered and decided by the AO in the regular assessment and the same issue was taken by the assessee to the CIT(A), the order of assessment was merged with the order of the CIT(A), the order passed u/s. 263 is not sustainable as the CIT has exceeded the jurisdiction in invoking the provisions of s. 263 when assessment order as regards the claim of deduction u/s 10A has been merged with the order of the CIT(A).
Therefore, the order passed u/s 263 is not sustainable and liable to be set aside. Accordingly we set aside the impugned order - In the result, the appeal is allowed.
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2008 (5) TMI 660 - ITAT MUMBAI
Transfer Pricing Determine the Arms length price - Disallowance on interest - expenditure attributable to dividend income by virtue to Section 14A - Deduction u/s 80HHF - Advertisement commission income - consideration revived by the assessee by way of cable subscriptions amounts to turnover - Disallowance of security deposit written off - bad debt written off.
Transfer Pricing Determine the Arms length price - Grant of deduction of 20% of the total payment for licence fee - Payment to two entities - HELD THAT:- In the instant case the assessee has obtained the approval from the RBI before making the payment of licence fee, as such the nature of payment cannot be out rightly rejected or doubted. It requires proper adjudication in the light of detailed analysis and relevant evidences furnished by the assessee. Whereas the AO has disallowed the entire claim of payment of licence fee without looking into the merits of the case and the relevant provisions of the Act. In the impugned assessment year the claim of the assessee should have been examined in the light of the report of the Transfer Pricing Officer and the evidences filed by the assessee but the AO as well as the CIT(A) have not adjudicated the issue in accordance with law. We, therefore, are of the view that this issue requires fresh adjudication - Since the report of the Transfer Pricing Officer has already been obtained and the issue requires proper examination by the AO in the light of the report of TPO, detailed analysis of licence fee paid and other evidences filed by the assessee, we set aside the order of the CIT(A) in this regard and the matter is restored to the file of the AO to readjudicate the issue in terms indicated above.
Disallowance on interest - expenditure attributable to dividend income by virtue to Section 14A - Assessee has incurred interest expenses paid on the Loan borrowings - HELD THAT:- In the instant, case the assessee has paid a substantial amount of interest on the borrowed funds and he has also earned the dividend income from investment in Mutual Funds which is exempted from tax and from the details furnished before the AO and even before us it is not clear as to what was the sources of investment in Mutual Funds. Was it from the aforesaid short term deposits which was initially borrowed from the Credit Lyonnais Bank or the surplus funds of the assessee. Even before to the assessee could not furnish the complete details - We, however, in the interest of justice afford one more opportunity to the assessee to explain with evidence as to from where investments were made in Mutual Funds. If it was made out' of short term deposit with the Scotia Bank corresponding disallowance of interest deserves to be made as the short term deposits was made out of the borrowed funds from the Credit Lyonnais Bank which were kept in short term deposits with the ICIC1 Bank Ltd. first then Scotia Bank - If the assessee succeeds in proving that the investment in Mutual Funds was made out of the surplus funds of the assessee on which no interest was paid no corresponding disallowance can be u/s 14A of the IT matter to the file of the AO with the direction to readjudicate the issue in terms, indicated above after affording an opportunity of being-heard to the assessee.
Deduction u/s 80HHF - Advertisement commission income - HELD THAT:- We find that while re-computing deduction u/s. 80HHF the AO has excluded or reduced 90% of the gross receipt of commission from the profits of business, as computed under the head profit and gains of business or profession in order to compute profits of the business as per clause (baa) of Explanation to Section 80HHF whereas the assessee claimed deduction of 90% of the not commission received. The CIT(A) has simply followed earlier years order and confirmed the disallowance - According to the Revenue the judgment of Bangalore Clothing Co. [2003 (1) TMI 89 - BOMBAY HIGH COURT] has been over ruled by the Apex Court in the case of K.Ravindranathan Nair [2007 (11) TMI 10 - SUPREME COURT] by holding that the processing charged is held to be included in the total turnover and 90% of the same is also to be reduced as per Explanation (baa). But, according to the assessee, the judgment of the Bangalore Clothing Co. of the jurisdictional High Court, as still holds the field inasmuch the issue / question before the Apex Court was entirely different - This controversy has been examined by the Tribunal in the assessee's own case pertaining to the AY 2000-2001. Copy of the Order is placed on record and from its careful perusal we find that Tribunal has examined this aspect in detail with the help of various judicial pronouncements in his order before concluding that judgment in the case of Bangalore Clothing Co. is not over ruled as the judgment of the Apex Court in the case of K.Ravindranathan Nair (supra) was rendered in different contexts - Therefore, On perusal of the order clearly reveals that amendment was made to exclude only those incomes which do not have element of turnover. It is pertinent to note that legislature referred to element of turnover and not export turnover. Therefore, considering the above circular which is binding on the tax authorities, we are of the view that any income arising from an activity involving turnover cannot be excluded from the profits of business in terms of Explanation (baa) to section 80HHC/Explanation (f) to section 80HHF.
Whether consideration revived by the assessee by way of cable subscriptions amounts to turnover - scope of the word 'turnover' may vary in section 80HHC and Section 80HHF - HELD THAT:- In the present case, the right to exhibit the programmes telecasted by various channels owned by 'Star Group' in the Indian territory is with the assessee, the cable operators are the distributors through whom such programmes are exhibited to the subscribers of the public. Assessee receives the consideration on account of transfer of right to exhibition of programmes contained in such software and, therefore, the same would amount to turnover - There is no there that activity of distribution of channel Programmes is an independent activity and therefore the profits arising there-from would also form part of the profits of business. Accordingly, as per the test laid downin the case of K. Ravindranathan Nair, the cable subscription has to be treated as turnover - The test laid down by the Hon'ble Bombay High Court in the case of Bangalore Clothing Co. (supra) is that if the profits arising from an activity is in the nature of operational income then receipts from such activity would form part of profits of business as well as total turnover. There is no dispute that cable subscription activity is part of main objects of the assessee company and therefore the receipts arising from the same would form part of the operational income. Consequently such receipt would form part of turnove - The Constitution Bench of the hon'ble Supreme Court in the case of Navnit Lal C. Jhaveri vs. K.K. Sen [1964 (10) TMI 16 - SUPREME COURT] held that circulars issued by the Board which are beneficial to the assessee are binding on the lax authorities. Keeping in mind the above binding judgement and the circular mentioned, it must be held that cable subscription having element of turnover cannot be executed from the profits of business computed under the head 'profits and gains of business or profession'. We hold accordingly.
We are therefore, of the view that receipt of particular percentage of commission on collecting the advertisements for the principal's cannot be called to be the part of the operational income of the assessee, as such, it attracts the provisions of Explanation (baa) and 90% of the same is to be reduced. Moreover, the commission received from its principal does not have an element of turnover as it is to be received on realisation of consideration from advertisement and as such cannot be included in the total turnover, because it does not accrue from the main business of export of television programmes/content for which deduction under S. 80HHF is claimed - Hence, it falls outside the purview of explanation (1) of S. 80HHF of the Act. We have also considered the alternative arguments of the assessee that netting be allowed in case of Explanation (baa) is held to be applicable. In this regard, we find force in the contention of the assessee and we are of the view that whatever expenses are incurred by the assessee which were not debited to the accounts of the principal, are required to be set off against the commission received by the assessee. If nexus are proved in the light of the Order of the Special Bench in the case of Lalsons Enterprises [2004 (2) TMI 294 - ITAT DELHI-E] and the judgment of the Delhi High Court in the case of Shree Ram Honda Power Equipment [2007 (1) TMI 86 - HIGH COURT, DELHI]. Accordingly, we, restore the matter to the file of the AO to allow netting between the expenses incurred to earn the commission and the commission received, if nexus are proved. Accordingly, this issue is disposed off.
Disallowance of security deposit written off - bad debt written off - HELD THAT:- In the instant case the security deposit, which was claimed to be written off in this year were neither credited to the PandL Account nor taken into account while computing the income of the assessee either in the previous year relevant to the impugned assessment year or in earlier assessment years. We, therefore, of the view that assessee is not entitled for deduction as bad debt written off under Section 36(2)(vii) of the Act - We have carefully examined the facts of the case in the light of the aforesaid judgement and we find that nothing has been brought on record to show that the advance given by the assessee has become irrecoverable. Before the Assessing Officer assessee has claimed deduction of this debt as bad debt by writing it off in the year under consideration under Section 36(1)(vii) of the Act. The claim of the assessee was not examined in the light of the judgement of the jurisdictional High Court in the case of IBM World Trade Corporation vs. CIT. We accordingly set aside the order of the CIT(A) and restore it to the Assessing Officer to examine it in the light of above mentioned judgement. If the advance amount is found to be irrecoverable despite the efforts of the assessee it may be allowed as business loss.
Determination of arms length u/s 92CA(1) - Transfer pricing adjustment - international transactions with associated enterprises - We find that the assessee is in fact involved in three independent activities, i.e. (a) distribution activity for which assessee has to pay the license fee for the right to distribute the Star channels to Asian Broadcasting Corporation Ltd also based in Dubai and Indian Region Broad Casting Ltd., a company based in Hong Kong. This distribution right cannot be linked up with other activities of the assessee, i.e. with commission for collecting the advertisement sales or with the export of TV programmes. The other activity that results in receipt of commission is also independent activity and the assessee acts as a marketing and collecting agent for Star Ltd. and NGC Asia in relation to advertisement sales to the satellite television channels broadcast by them in India - From a perusal of the TPO's report and the detailed analysis furnished by the assessee, we find that neither the assessee has taken the comparable cases involved in similar activities nor the TPO has determined the Arms Length Price in the light of the guidelines laid down by the Special Bench of the Tribunal in the case of Aztec Software and Technical Services [2007 (7) TMI 50 - ITAT BANGALORE] - We are therefore of the view that Arms Length Price in relation to the impugned activities are not properly determined either by the assessee or by the TPO or the AO. As such, it requires a fresh determination in the light of the order of the Special Bench in the case of Aztec Software and Technical Services . We accordingly set aside the order of the CIT(A), confirming the order of the AO in this regard and restore the matter to the file of the AO with a direction to make a further reference to the TPO for determination of Arms Length Price in respect of each of the assessee's independent activities in the light of the comparable cases and also in the light of the decision of the Special Bench of the Tribunal in the case of Aztec Software and Technical Services (supra) and other order/judgment rendered on the issue.
In the result, Appeals of the assessee as well as the Revenue are partly allowed for statistical purposes.
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2008 (5) TMI 659 - ITAT DELHI
Running Royalty paid to NR company - Treated as Capital or Revenue expenditure - brand name of "United Colors of Benetton" - Granted exclusive licence to use the trade-marks in India - whether the assessee acquired assets itself or it was merely granted the license to use the trade-marks on the products being manufactured by it - HELD THAT:- On Persual of the license agreement, it is clear that the assessee was only granted non-assignable licence, right and privilege with reference to the licensed marks to manufacture on the mark and distribute the licensed product in India and to use the expression "Benetton". The assessee did not become the owner of the licensed marks or the holder of the trade-marks. Such license marks at all times remain the property of the licensor.
The license was initially granted for a period from October, 1992 till fall/winter season of 1999-2000. However, to continue to use the license mark for manufacturing of the licensed products, the assessee was to pay royalty @ 5 per cent of the amount of net sales. By paying the royalty the assessee did not acquire any right in the licensed trade-marks. Only the products manufactured by the assessee i.e. garments will bear the licensed marks for which the license has been granted. Accordingly it can be said that the assessee has not acquired any capital asset but has merely paid to the licensor for use of such trade-marks. Therefore, expenses are to be treated as revenue expenditure and not capital expenditure.
It is seen that the assessee was required to pay royalty every year. But for payment of royalty every year the assessee could not continue receiving the license to use the licensed marks on the products manufactured by it. Thus making payment every year, it cannot be said that the assessee received advantage of enduring nature primarily to bring it as capital expenditure. Royalty payment is not a one time but rather recurring expenditure merely to use licensed marks.
As rightly contended by the learned counsel for the assessee that granting of exclusive license to the assessee alone in India does not alter the character of payment from revenue to capital.
In the case of Avery India Ltd.[1993 (4) TMI 25 - CALCUTTA HIGH COURT] the Hon'ble Calcutta High Court held that even if the assessee was granted exclusive license, it will not convert the revenue expenditure into capital expenditure. Similar view has been held by Full Bench in the case of Praga Tools Ltd. vs. CIT [1979 (11) TMI 80 - ANDHRA PRADESH HIGH COURT]. We accordingly hold that the expenditures are revenue in nature and even do not bring into existence any capital asset or the assessee receives any advantage of enduring nature so as to treat it as capital expenditure.
In the result, Appeals are dismissed.
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2008 (5) TMI 658 - ITAT JAIPUR
... ...
... ... ..... o assigned that right. Hence, what he acquired under the said agreement for sale was therefore, property within the meaning of IT Act, 1961 and consequently a capital asset. The Court further held that his giving up of the right to claim specific performance by conveyance to him of the immovable property was a relinquishment of the capital asset and therefore, there was a transfer of a capital asset within the meaning of the IT Act. Therefore, in the present circumstances and facts of the case and decisions of various Courts of law relied upon hereinbefore, the learned CIT does not acquire jurisdiction under s. 263 and the order made by the learned CIT under s. 263 on the claim of capital gain of ₹ 61,374 is set aside and the order of the AO is sustained. Thus ground Nos. 1 to 4 of the assessee are allowed. The ground No. 5 of the assessee is general in nature which needs no adjudication by us. In the result the appeal of the assessee in ITA No. 304/Jp/2008 is allowed.
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2008 (5) TMI 657 - MADHYA PRADESH HIGH COURT
... ...
... ... ..... system, reasons at least sufficient to indicate an application of mind to the matter before the court. The affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made. 15. Having regard to the law laid down by the Supreme Court, the clear provisions of section 127(2) of the Act and the documents produced before the court, I am of the view that the impugned decision/action taken by the respondent-revenue in transferring of petitioner’s cases to Bhopal, is contrary to the requirement of section 127(2) of the Act and against the settled legal position and as such cannot be sustained. 16. Consequently, both the petitions are allowed. The impugned communication (Annexure P.7) is hereby quashed. However, respondent revenue is at liberty to take necessary steps, if so advised, for transfer of cases by adhering to the provisions of section 127(2) of the Act. No orders as to costs.
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2008 (5) TMI 656 - SUPREME COURT
Whether a Land Revenue Court has jurisdiction to set aside an ex-parte decree?
Whether terms for setting aside an ex parte decree should be reasonable?
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2008 (5) TMI 655 - HIGH COURT OF RAJASTHAN
Claim a deduction u/s 35(1)(iv) - Bank guarantee commission paid to relative of directors - Capital Expenditure incurred on R& D.
Claim for deduction under section 35(1)(iv) - bank guarantee commission paid to relatives of the directors - In CIT vs. Ayurvedic Sevashram (P) Ltd. [1986] 54 CTR (Raj.) 119 : [1986] 159 ITR 112 (Raj.), wherein, on facts also, the assessee company had paid guarantee commission to the relatives of the directors, who had secured finances for the company, and it was found that the deduction had resulted in remuneration to the relatives of the directors of the company. The guarantee commission was paid for securing finances, and thus the deduction was upheld.
In view of the matter, de hors the technicalities, even on merits, in view of the judgment of this Court in Ayurvedic Sevashram's case [1985 (7) TMI 45 - RAJASTHAN HIGH COURT], the finding on this question requires no interference by this Court.
Claim deduction in respect of capital expenditure incurred on R & D of assessee's business - machines, acquired for the purpose of R&D - HELD THAT:- We find is, that the orders are based on the basis of orders passed in earlier years, and in the basic order, we find, that the AO himself had inspected the factory premises, and found, that the plant and machinery purchased, were being used by the assessee for the purposes of maintaining its quality control. Purchasing of plant and machinery is, thus, not in dispute, may be that appropriate accounting in this regard may not have been made, as some entries have been made later, but then, it has not been found by the AO, that the items claimed to have been purchased were not purchased, or were not available, or were purchased in some other financial year, than the one in which credit is claimed.
This conclusion of the AO, arrived on the basis of personal inspection of the factory premises by the AO, has not been assailed by the Revenue to be not correct, or to be requiring any interference, for us there is no escape from the conclusion that the items are used for quality control in R&D. That being the position, in our view, it cannot be said that the deduction is allowable, without holding any enquiry, into the relevant question. It has been found by the learned CIT(A) that the assessee does hold recognition from the concerned Department of the Government, to which it is regularly furnishing tri-annual returns, and the recognition did subsist during all the relevant assessment years.
Thus, Tribunal was correct in allowing the deduction. Obviously it is answered against the Revenue and in favour of assessee.
The net result is, that we do not find any force in any of these appeals, the same are consequently dismissed.
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