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Showing 361 to 380 of 16027 Records

2014 (12) TMI 1077

Extended period of limitation - suppression of facts - import of raw material, viz., spring steel wires - The allegation of the DRI is that the raw material imported under the advance licenses as replenishment, were different from the raw material used in the manufacture of exported goods in terms of character, thickness, etc. - Notification Nos.149/1995-Customs dated 19.9.95, 30/1997-Customs dated 1.4.97, 31/1997-Customs dated 1.4.97 and 51/2000-Customs dated 27.4.00 - Held that:- Tribunal, on a perusal of the records, has held that the licences and documents were furnished at the time of export and also at the time of import of the raw materials for replenishment and such details were furnished to the licencing authority, which includes, DEEC passbook and other export documents. The said documents have been scrutinized by the DGFT and customs authorities and, thereafter, the goods were allowed clearance by an order passed by the appropriate officer. If that be the case, this issue ought to have been agitated by the Department within the period prescribed. The question of suppression does not arise in the light of the finding of the Commissioner himself, which clearly shows that goods imported and exported tally as per licence.
In the light of the above finding of the Commissioner, as extracted by the Tribunal, this Court is of the considered view that the Tribunal was justified in coming to the conclusion that there was no case of suppression. As a result, the entire cause of action for issuance of show cause notice does not survive. This Court is in entire agreement with the findings recorded by the Tribunal and is of the considered view that it warrants no interference. Accordingly, the first question of law answered against the Revenue and in favour of the respondent - Decided against Revenue.
2014 (12) TMI 1076

Penalty u/s 114(i) - Aiding and abetting for smuggling of foreign currency - Held that:- In the case of M/s. Wall Street Finance Ltd. the guidelines of RBI were not issued during the relevant time therefore, in that case the contention of the learned AR that for travellers cheques were issued without the issue of application and passport is not sustainable as there is no guidelines during the impugned period. Further, I find that as the statement shows that this travellers cheques were issued to the broker/agent to whom he has handed over his passport. When the appellant had issued currency after verifying the particulars of the passport. Therefore, it cannot be denied that this traveller cheques has not been issued in the name of the persons who is denying the statement and I also find that in this case the currency have been detected after 2½ years of issuance of travellers cheques which has passed various hands before the interception. In these circumstances, I hold merely on the ground that the appellant was not due diligence at the time of issuance of the travellers cheques which may be used in smuggling of foreign currency, the allegation is not sustainable. Therefore, following the decision of the Trade Wings Ltd. (2008 (10) TMI 524 - CESTAT, MUMBAI), I set aside the penalty imposed on the appellants.
With regard to the penalty imposed on M/s. Rose Travels, I find that the appellant has produced the application form and passport of the persons to whom the travellers cheques were issued. In fact the address of a person is to be verified by the concerned police station. In these circumstances, the allegation of aiding and abetting smuggling of travellers cheques is not sustainable merely saying that the persons are not available on the given address in the absence of any cogent evidence that these passports are fake. Further, in one of the case it is no doubt the travellers cheque has been issued in the name of the passport holder, in the show cause notice there is no allegation that the signature of the said person is not the same as in the application and the in the passport. Further, no statement of such person has been placed on record. In these circumstances, merely saying that he is not the same person cannot be the ground for the allegation in show cause notice. In these circumstances, I hold that the penalty on M/s. Rose Travels is not imposable. - Decided in favour of assessee.
2014 (12) TMI 1075

Import of Crude Palm Oil (CPO) - Availment of concessional rate of Customs duty - CPO converted to Refined Oil with the help of job worker - Held that:- Words ‘take action to recover’ have been interpreted differently by the Tribunal in two different orders. Even though, the decision of the Tribunal in the case of PCS Industries Ltd. (2013 (7) TMI 344 - CESTAT MUMBAI) was rendered on 12-6-2013 and the decision in the case of Molex (I) Ltd. (2010 (12) TMI 1046 - CESTAT, BANGALORE) was rendered on 1-12-2010, the decision in the case of Molex (I) Ltd. was not brought to the notice of the Tribunal in the case of PCS Industries Ltd. Nevertheless, the fact remains that there are contrary decisions on the same issue. It has to be noted that the decision in the case of Molex (I) Ltd. considered the relevant provisions in greater details and provided an explanation for coming to the conclusion. In view of the above, in our opinion, the appellants have made out a case for complete waiver of pre-deposit and stay against recovery during pendency of the appeals. - Stay granted.
2014 (12) TMI 1074

Valuation of goods - Discount received by assessee - Finalization of provisional assessment - whether the appellant is eligible for 40% discount as shown in the invoices - Held that:- Rule 4(3)(a) of Valuation Rules, 1988 provides that where seller and buyer are related, the transaction value shall be accepted provided the examination of the circumstances of the sale of the imported goods indicate that relationship did not influence the price. In the present case, on perusal of the adjudication order, it is seen that on verification of import invoices and bills of entry and local invoices that the importer gets 34% profit and this profit margin is abnormal for aluminium industry. We find that sub-clause (b) of sub-rule (3) of Rule 4 of Valuation Rules provide that in a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to values ascertained at or about the same time. We find that the appellant had not placed any material to establish that the relationship had not influenced the price. Such as, international price list to show that discount is to all the buyers. They have only produced a price list generated in their own system.
Discount is a general practice in the trade. On a perusal of the impugned order, it is seen that Commissioner (Appeals) observed that it is very clear that the importer is getting additional discount of 25% which is not available to anybody. In our considered view, the appellant is not eligible for additional discount as referred by the Commissioner (Appeals). After considering the facts and circumstances of the case, we direct that the invoice value would be loaded to 25% instead of 40% for the purpose of amendment of Bill of Entry. - Decided partly in favour of assessee.
2014 (12) TMI 1073

Valuation - inclusion of amount of discount given on sale of petroleum products - Gujarat Value Added Tax - Interpretation of the expression “the amount of sale price received or receivable by a dealer in respect of any sale of goods” - what would be the amount of sale price received or receivable by ONGC from OMC - Whether the Tribunal erred in confirming the demand with respect to the amount of discount given by the appellant to the OMCs on sale of its products instead of calculating the turnover on the finally determined prices – Held that:- ONGC was under an obligation to implement the policy of the Central Government and carry out such directives as may be issued from time to time in public interest - ONGC was bound by the price mechanism created by the Central Government from time to time - it is only such price which the ONGC actually collected from OMCs during the period under consideration - originally invoiced price or the subsequently discounted price would form the basis for sale price of the goods released or realizable - it is the final price which the ONGC received from the OMCs which alone can form part of the taxable turnover - under the price control mechanism, ONGC was under an obligation to sale its specified petroleum products at the rate fixed by the Government of India - To ensure that such petroleum products are available to the consumer at affordable price, the Government of India devised a mechanism where such products would be sold by ONGC and other oil companies to the OMCs at a price less than the market price or may even be less than its procurement price.
Such mechanism operates even today and operated during the entire period under consideration - to ensure that the prescribed petroleum products reach the end consumers at affordable cost, the same had to be sold at lower than the market price or at times even lower than the production or procurement cost - Instead of subsidizing this component of loss by the Government, under the said circular dated 30.10.2003, it was envisaged that the 1/3rd of the under recoveries would be borne by the OMCs by cross subsidization through other retail products - The balance of 2/3rd under recoveries would be equally shared amongst OMCs and the upstream sector i.e ONGC and GAIL - It was provided that the contribution from ONGC and GAIL would come in terms of appropriate discounts on the price of crude oil, LPG and kerosene supplied by them to OMCs.
It is the final price which the ONGC received from the OMCs which alone can form part of the taxable turnover - under the price control mechanism, ONGC was under an obligation to sale its specified petroleum products at the rate fixed by the Government of India - To ensure that such petroleum products are available to the consumer at affordable price, the Government of India devised a mechanism where such products would be sold by ONGC and other oil companies to the OMCs at a price less than the market price or may even be less than its procurement price. Such component the ONGC and other oil companies had to bear from their other profit making products by cross subsidizing the sale of specified petroleum products - This was in substitution of earlier price control mechanism where Government of India would bear the burden by subsidizing such products - In essence, ONGC could charge only such rate from OMCs as Government of India directed - The precise computation of the rate required complex considerations of economic and other aspects - Various factors such as cost of production for procurement of all products, the international price of the product, the local demand and ofcourse, the other economic considerations such as the ability of the various stake holders to absorb the loss, would enter into consideration - Since all these parameters would not be known before hand, the Government of India would announce provisional prices for such products - the broad formula adopted for such purpose was the crude price in international market minus the last discount which would prevail for a quarter.
At the end of the quarter after taking into consideration all the relevant factors, Government of India would declare the final price - Since for the petroleum products already supplied by ONGC to OMCs during such quarter, the invoices would have been raised on the basis of provisional discount, the adjustment would have to be done on the basis of final discount declared by the Government of India - Though in most cases, the final discount may be higher than the provisional discount earlier declared, it is entirely possible that in some cases, such final discount may be lower than the provisional price - ONGC would eventually therefore, adjust its accounts with OMCs by raising either the debit note or credit note as may be required.
Merely because for computation of royalty payable to the State, it is the full and not discounted price which is taken into account would not alter the situation - the royalty is paid to a State for exploitation of the natural resources located in the State - The Government of India had specifically provided that for the purpose of computing the royalty, it would be the full and not the discounted rate which would be taken into consideration - The appellate authority and the Tribunal were unduly influenced by this factor.
The observations of the Tribunal that “The OMCs are liable to pay the sale price to the appellant as per the invoices raised against them - They might have paid less sale price only because of the fact that they were given compensation for their agreeing not to increase the price of crude oil, PDS kerosene and domestic LPG to the consumers with the increase of international oil prices”, are based on no materials and only on conjectures and in any case, not in any manner relevant - the observation that “Such a practice adopted by the appellant under the mandate of the Central Government is virtually amounting to restrictive trade practice and an artificial determination of sale price which is prohibited under the Competitions Act”, with respect, was not borne out from any material on record – thus, the order of the Tribunal is set aside – Decided in favour of assessee.
2014 (12) TMI 1072

Direction to be made for release the Tanker No. UP85V9636 with Bitumen lying in the custody of respondent No.2 since 30.6.2014 or not - Held that:- The sole basis for detention of the tanker and seizure of the bitumen was the information collected by him from the toll plaza which revealed that last four digit of the registration number of the tanker in question was similar to the last four digit of registration number of a vehicle recorded in the records of toll plaza - the source of supply of bitumen from Mathura is only the Mathura Refinery of M/s Indian Oil Corporation - neither he took any steps nor the Joint Commissioner nor the Tribunal considered it appropriate to verify the invoice and the information and thus they mechanically passed the orders - Registration number of three tankers containing similar last four digits are registered with the transport department as has been admitted by the Respondents in the supplementary counter affidavit - On verification from the Indian Oil Corporation, Mathura Refinery, Mathura it was found by the authorities concerned that bitumen in the tanker in question was loaded as per invoice accompanying it and thereafter it was not loaded from the Mathura Refinery till 30.6.2014 - The bills of repair of the tanker in question in support of proof that it was under repair from the night of 28.6.2014 till 30.6.2014, were not even verified by the authorities concerned so as dispute its genuineness - In the supplementary counter affidavit dated 20.8.2014 the Respondents have even admitted that the tanker in question was detained and bitumen was seized without any basis.
Even if such an order was actually passed by the respondent No.4, yet it was a complete nullity for reasons that firstly no power is conferred under the Act and the Rules to pass such orders, secondly it was wholly impossible to remove the mounted body of the fully loaded big tanker with bitumen weight 24.60 M.T. from body of the engine and thirdly the petitioner was directed merely to take away the body of the engine which could not be of any use for the petitioner who is engaged in the business of running his tanker on hire – thus, the seizure order dated 5.7.2014, the order of Joint Commissioner under proviso to Section 48 (7) of the Act dated 8.7.2014 and the impugned order of the Commercial Tax Tribunal, Bench-I, Agra dated 16.7.2014 passed in IInd Appeal No. 223/2014 cannot be sustained - The provisional release of the tanker and bitumen in question by order dated 28th August, 2014 is confirmed.
What amount of compensation may be awarded to the petitioner for illegal detention of the tanker - Per day damages to be granted or not @ ₹ 5,000/- Held that:- The tanker in question was baselessly detained - The detention continued from 1st July, 2014 upto 28th August, 2014 - The state respondents have also not disputed the quantum of loss caused to the petitioner and compensation thereof as prayed – the petitioner is entitled for compensation – Decided in favour of petitioner.
2014 (12) TMI 1071

Appointment of Arbitrator u/s 11(6) of the Arbitration and Conciliation Act, 1996 – Dispute related to the respective rights and liabilities of the parties under the JVA – Held that:- Clause 30.2 of JVA, on a reasonable and meaningful construction thereof, would mean that in case the parties are not able to name a sole Arbitrator by mutual agreement, the Arbitrator is to be appointed by the SIAC inasmuch as the entity contemplated in clause 30.2 i.e. “Singapore Chamber of Commerce” is admittedly not an Arbitration Institution' having its own Rules for appointment of Arbitrators - the most reasonable construction of the clause would be to understand the reference to “Singapore Chamber of Commerce” as to the “SIAC” - the respondents at one time had suggested the name of a retired judge of the Supreme Court of India as the sole Arbitrator, which was not agreed to by the petitioner, who in turn, was inclined to nominate another learned judge. Be that as it may, in such a situation, the respondents by invoking Arbitration clause 30.2 had approached SIAC for appointment of an Arbitrator - This was on 5th September, 2014 i.e. before the present proceeding was instituted by the petitioner.
Though the notice of the request was served on the petitioner on 11th September, 2014, no steps were taken by the petitioner to pre-empt the appointment of a sole Arbitrator by SIAC. Mr. Steven Y.H. Lim came to be appointed as the sole Arbitrator by the SIAC on 29th September, 2014 - The petitioner has submitted to the jurisdiction of Mr. Steven Y.H. Lim - Even if it is held that such participation, being under protest, would not operate as an estoppel, what must be acknowledged is that the appointment of the sole Arbitrator made by SIAC and the partial award on the issue of jurisdiction cannot be questioned and examined in a proceeding u/s 11(6) of the Act which empowers the Chief Justice or his nominee only to appoint an Arbitrator in case the parties fail to do so in accordance with the terms agreed upon by them - To exercise the said power, in the facts and events that has taken place, would really amount to sitting in appeal over the decision of SIAC in appointing Mr. Lim as well as the partial award dated 27th November, 2014 passed by him acting as the sole Arbitrator - Such an exercise would be wholly inappropriate in the context of the jurisdiction under Section 11(6) of the Act, as the same has already been decided in Antrix Corp. Ltd. vs. Devas Multimedia P. Ltd. [2013 (5) TMI 402 - SUPREME COURT] – thus, the application u/s 11(6) of the Act failed – Decided against petitioner.
2014 (12) TMI 1070

Vicarious liability upon Director of the Company in case of dishonor of cheques - Whether the appellant is liable for prosecution u/s 138 r.w. Section 141 of the N.I. Act for the offence of dishonor of cheques committed by the default Company – Held that:- The appellant was wife of the Managing Director, and appointed as a Director of the Company— M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005 - The cheques were issued during April, 2008 to September, 2008 - So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the appellant - the appellant was not the Managing Director but only a non-executive Director of the Company - Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day-to-day affairs of the running of its business and only monitors the executive activity - To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business - Simply because a person is a Director of a Company, does not make him liable under the N.I. Act - Every person connected with the Company will not fall into the ambit of the provision - only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action - a Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 of the N.I. Act – the same has been held in National Small Industries Corpn. Ltd. Versus Harmeet Singh Paintal [2010 (2) TMI 590 - SUPREME COURT OF INDIA] – Continuation of the criminal proceedings against the appellant under Section 138 read with Section 141 of the N.I. Act is a pure abuse of process of law and it has to be interdicted at the threshold.
Validity of dismissal of Writ petition by HC - Held that:- The High Court did not deal the issue in a proper perspective and committed error in dismissing the writ petitions by holding that in the Complaints filed by the Respondent No. 2, specific averments were made against the appellant - But on the contrary, taking the complaint as a whole, it can be inferred that in the entire complaint, no specific role is attributed to the appellant in the commission of offence - to attract a case under Section 141 of the N.I. Act a specific role must have been played by a Director of the Company for fastening vicarious liability – the appellant was neither a Director of the accused Company nor in charge of or involved in the day to day affairs of the Company at the time of commission of the alleged offence - There is not even a whisper or shred of evidence on record to show that there is any act committed by the appellant from which a reasonable inference can be drawn that the appellant could be vicariously held liable for the offence with which she is charged – thus, the criminal complaint is set aside.
So far as the Letter of Guarantee is concerned, it gives way for a civil liability which the respondent No. 2—complainant can always pursue the remedy before the appropriate Court - So, the contention that the cheques in question were issued by virtue of such Letter of Guarantee and hence the appellant is liable under Section 138 read with Section 141 of the N.I. Act, cannot also be accepted in these proceedings - Decided in favour of appellant.
2014 (12) TMI 1069

Transfer of Development Rights (TDR) - Chargeability to capital gain - Invocation of section 50C - Addition under the head LTCG – computation of the sale of TDR – Held that:- The Tribunal was rightly of the view that while it is true that the AO invoked section 50C and computed these gains, in the decision of New Shailaja Co-operative Housing Society Ltd. Versus Income-tax Officer [2008 (12) TMI 442 - ITAT MUMBAI] it has been held that the sale of TDR does not give rise to any capital gains chargeable to tax - Following the decision in Union of India vs. Cadell Weaving Mill Co. P. Ltd. and Anr. [2005 (1) TMI 13 - SUPREME Court] wherein it has been held that an asset which is capable of acquisition at a cost would be included within the provisions pertaining to the head "Capital gains" as opposed to assets in the acquisition of which no cost at all can be conceived - the situation was that the FSI/TDR was generated by the plot itself - There was no cost of acquisition, which has been determined and on the basis of which the AO could have proceeded to levy and assess the gains derived as capital gains - It may be that subsection (2) of section 55 clause (a) having been amended, there is a stipulation with regard to the tenancy rights.
It was also argued that the tenancy rights now can be brought within the tax net and in the present case the asset or the benefit is attached to the property - It is capable of being transferred. - all this may be true but as the Hon'ble Supreme Court holds it must be capable of being acquired at a cost or that has to be ascertainable - additional FSI/TDR is generated by change in the D. C. Rules - a specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains - Therefore, the Tribunal was in no error in concluding that the TDR which was generated by the plot/property/land and came to be transferred under a document in favour of the purchaser would not result in the gains being assessed to capital gains - what the Assessee sold was TDR received as additional FSI as per the D. C. Regulations - It was not a case of sale of development rights already embedded in the land acquired and owned by the Assessee - the Assessee had not incurred any cost of acquisition in respect of the right which emanated from 1991 Rules, making the Assessee eligible to additional FSI - The land and building earlier in the possession of the Assessee continued to remain with it - even after the transfer of the right or the additional FSI, the position did not undergo any change - Revenue could not point out any particular asset as specified in subsection (2) of section 55 – the order of the Tribunal is upheld – Decided against revenue.
2014 (12) TMI 1068

Interest paid on borrowings - Whether the Tribunal is right in deleting the addition u/s 36(1)(iii) being the amount of interest paid by the assessee on the borrowing which amounts the assessee lent to another party with whom the assessee had business dealings – Held that:- The Tribunal was rightly of the view that the assessee is having business dealing with GMMSS Ltd. - assessee could sell its goods to the extent of ₹ 157 lakhs during the year to GMSS Ltd. - assessee company also earned ₹ 4.04 Lakhs GMMSS Ltd. - assessee company could also earn 45% gross profit out of the sale made to GMMSS Ltd. - it cannot be said that the interest free advances were made without business consideration - the funds have been borrowed by the assessee company - the transactions are genuine and they are also not entered into with any malafide intention to deprive the Department from lawful revenue, which is otherwise payable by the assessee - The dominant intention of these transactions was for ultimate benefit of the assessee and, thus, the same was entered into with business considerations - as decided in S.A.Builders Ltd. Vs. Commissioner of Income Tax (Appeals) and Another, [2006 (12) TMI 82 - SUPREME COURT] - assessee borrowed the funds, such funds have been borrowed for the purpose of business, the assessee has also paid interest on such funds, the case of the assessee is also not covered under the provisions of Section 40A(2) - the interest is allowable under the provisions of Section 36(1)(iii) – the order of the Tribunal is upheld – Decided against revenue.
2014 (12) TMI 1067

Assessment framed u/s 153C quashed – Assessment of income of any other person - Whether there is no satisfaction recorded by the AO having jurisdiction over the searched person – Held that:- The Tribunal was rightly in not accepting the initiation of the action u/s 153C - This action has to be taken against a third party in respect of the incriminating materials brought out in connection with search and seizure conducted on another party - Section 153C of the Act specifically says that the AO must be satisfied that such action is required to be initiated - the AO having jurisdiction over third party on receipt of the seized material or books of accounts or document being handed over to him shall record his own satisfaction after examining the same independently without being influenced by the satisfaction of the Seizing Officer – the section mandates recording of satisfaction of the AO(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the Act - when a thing is to be done in one particular manner under law this has to be done in that manner alone and no other way – the Tribunal has correctly followed the principle – the order of the Tribunal is upheld – Decided against revenue.
2014 (12) TMI 1066

Application of mind by Tribunal - Amount received as part payment of consideration for sale or flat or not - Whether the Authorities below erred in law to utterly ignore the well-evidenced fact that during the AY 2000-2001, the appellant had received a sum of ₹ 2,90,000/- towards part payment of consideration for the sale of his flat – Held that:- There is no application of mind by the authorities below on the aspect that a sum of ₹ 2,90,000/- was in fact received by the assessee in the financial year ending on 31/3/2000 towards part of the consideration for the sale of the old flat by minutely examining the effect thereof while passing the orders - The authorities have failed to examine the aspect, and as such, they were not justified to come to the conclusion that the addition of ₹ 2,66,000/- is to be effected - revenue was unable to point out that the material pointed out by Shri Usgaonkar – thus, the matter is to be remitted back to the Tribunal for fresh decision – Decided in favour of assessee.
2014 (12) TMI 1065

Settlement order by Income Tax Settlement Commission u/s 245D(1) - Rejection of applications for settlement for some of the AYs on the ground that there were no pending proceeding for those AYs – Held that:- As held in M/s. Shriniwas Machine Craft PVT LTD vs. The Income Tax Settlement Commission [2014 (1) TMI 1090 - BOMBAY HIGH COURT] even if it is assumed that the submission is correct, the submissions cannot be accepted that it should be read with retrospective effect particularly when the amendments of 2014 is specifically made effective from 1 October 2014 - the order under challenge has to be examined in the light of the law in force at the time when the application was filed and the impugned order was passed – the order of is upheld – Decided against assessee.
2014 (12) TMI 1064

TPA - Erroneous computation of operating margin of Caliber Point Business Solutions Ltd. ("Caliber") in the final set of comparable - IT enabled services/business process outsourcing services provided to group companies –Held that:- Assessee contended that the TPO while computing the operating margin of Caliber Point Business Solutions Ltd., has not reduced/apportioned unallocated cost of ₹ 3,96,39,162/- for which the margin of the comparable has gone up to 18.55% as compared to the correct working of 8.70% - revenue has no objection for the same – thus, the matter is remitted back to the AO for determination of working of margin of comparable – Decided in favour of assessee.
Selection of outliers companies as comparable – Accentia Technologies Ltd. - Held that:- Following the decision in Capital IQ Information Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax (International Taxation) [2014 (3) TMI 626 - ITAT HYDERABAD] - certain extraordinary events took place in the case of Accentia Technologies Ltd. for which it warrants exclusion of this company as a comparable - extra-ordinary event like merger and de-merger will have an effect on the profitability of the company in the financial year in which such event takes place - It is clear that during the previous year there were extra ordinary events that took place in the company which warrants exclusion of the company and this company cannot be considered as a comparable.
Coral Hubs Ltd. (Formerly known as Vishal Informatics Technologies Ltd. – Held that:- In Symphony Marketing Solutions India (P.) Ltd. Versus Income-tax Officer [2014 (2) TMI 83 - ITAT BANGALORE] it has been held that Coral Hubs Ltd. cannot be considered as a comparable - assessee has objected for this company being taken as comparable mainly on the ground that the activities of the company is not only functionally different, but the business model of the company is also different as it sub-contracts majority of its ITES works to third party vendors and has also made significant payments to those vendors - The payments made to vendors towards the data entry charges also supports the fact that the company outsources its works – ‘Coral Hub’ is not a suitable comparable to the taxpayer and hence needs to be dropped from the final list of comparables - assessee is not engaged in e-publishing business, therefore, Coral Hubs Ltd. cannot be considered as comparable – Decided in favour of assessee.
2014 (12) TMI 1062

Allowability of deduction u/s 10B – Set off of brought forward business losses against the profits of the year – Effect of amendment u/s 10B w.e.f. 1.4.2001 - Whether the provisions of Sec.10B of the Act are deduction provisions or exemption provisions - Held that:- The similar matter has already been decided in The Deputy Commissioner of Income Tax, LTU Versus M/s. Biocon Limited [2014 (12) TMI 838 - ITAT BANGALORE] wherein it has been held that if the provisions are considered as exemption provisions then they will not enter the computation of total income and therefore the loss of the eligible unit cannot be set off against the profits of the non-eligible unit - the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit - the claim made by the assessee deserves to be accepted.
Payment made to M/s Novatel of the USA disallowed u/s 40(a)(i) –Whether the fact that according to section 5(2)(b) total income includes income deemed to accrue or arise in India and the source of such payment being in India and the source rule reigning over the situs rule the same is chargeable under the provisions of the Act or not - Held that:- As decided in assessee’s own case for the earlier assessment year, as decided in Clearwater Technology Services (P.) Ltd. Versus Income-tax Officer, Ward-11(1), Bangalore [2012 (11) TMI 903 - ITAT BANGALORE] wherein it was held that the payment was not fees for technical services rendered by the non-resident but was business income in the hands of the non-resident and since the non-resident did not have a permanent residence in India, the same is not chargeable to tax in the hands of the non-resident in India - there was no obligation on the part of the Assessee to deduct tax at source - the disallowance made by the AO u/s 40(a)(ia) of the Act relating to the payment made to M/s Novatel of the USA is deleted.
Explanation 2 to section 195 inserted with retrospective effect from 1.04.1962 by the Finance Act, 2012 or not – whether a liability to deduct tax at source can be fastened on an assessee on the basis of a retrospective amendment to the law - Held that:- Though the Explanation 6 to sec. 9(1)(vi) inserted by Finance Act, 2012 is clarificatory in nature, the assessee cannot be held to be liable to deduct tax at source from the Pay Channel Charges – the AO was not justified in disallowing the claim of pay channel charges by invoking the provisions of sec. 40(a)(ia) – Decided against revenue.
2014 (12) TMI 1061

Addition of interest on NPA’s - Assessee is a co-operative bank carrying on banking business – Held that:- Following the decision in ACIT vs. The Omerga Janta Sahakari Bank Ltd. [2014 (12) TMI 355 - ITAT PUNE] - the interest income on NPAs is not recognizable on accrual basis. The aforesaid matrix is not challenged by the Revenue also - the stand of the Revenue is that the income, though relatable to NPAs, is deemed to have accrued since assessee has credited it in its Profit & Loss Account, and the corresponding debit in the Profit & Loss Account is only a Provision for overdue interest and it is not an allowable deduction - assessee is registered as a co-operative society and is carrying on the banking business - the interest on NPAs have been credited in the Profit & Loss Account and thus its accrual has been accepted by the assessee and that the contra entry by way of debit in the Profit & Loss Account is to be understood as a mere Provision and, since a Provision is not an allowable deduction, the amount of ₹ 47,01,85,366/- has been added to the total income.
The assessee bank is following the mercantile system of accounting - However, with regard to the recognition of income on NPAs, it has applied the RBI guidelines which say that such income is not to be recognized on accrual basis but is to be recognized as income only when it is actually received - The RBI guidelines also prescribe the manner in which the interest in relation to NPAs is to be shown in the Annual financial statements - In terms of the Master Circular on Income Recognition, Asset Classification, Provisioning & Other Related Matters issued by the RBI on 4th July, 2004 in chapter 4 of ‘Income Recognition’, the accrued interest in relation to NPAs should be computed and shown separately, though not accounted as income of the bank for the relevant period - with a view to ensuring uniformity in accounting the accrued interest in respect of both the performing and non-performing assets, the RBI guidelines inter-alia, prescribe that interest accrued in respect of NPAs should not be debited to borrowal accounts but shown separately under ‘Interest Receivable Account’ on the ‘Property and Assets’ side of the Balance-Sheet and corresponding amount shown under the ‘Overdue Interest Reserve Account’ on the ‘Capital and Liabilities’ side of the Balance-Sheet - ‘Overdue Interest Reserve Account’ cannot be regarded as a ‘reserve’ or a part of the owned funds of the bank, as it is not created out of the real income received by the bank - the assessee has not debited the interest on NPAs to the accounts of the respective borrowals but it has been shown separately under ‘Interest Receivable Account’ on the ‘Property and Assets’ side of the Balance-Sheet and corresponding amount has been shown under ‘Overdue Interest Reserve Account’ on the ‘Capital and Liabilities’ side of the Balance-Sheet - Thus, the depiction in the Balance-Sheet is in adherence to the prescription contained in the Banking Regulation Act, 1949 (as applicable to Co-operative Societies), a statute under which assessee is bound to carry out its banking business.
Assessee has drawn up its annual financial statement in compliance with the requirements of the statutes under which it functions and/or is incorporated - the RBI guidelines permit that interest income on NPAs be parked in a suspense account and it is not necessary that it has to be brought to the Profit & Loss Account by the assessee - assessee has credited the gross amount of interest on credit side of the Profit & Loss Account and simultaneously shown on the debit side of the Profit & Loss Account, the amount of interest on NPAs - instead of netting of the interest the two amounts have been shown separately one on the credit side and other on the debit side - The net effect of the said presentation is the same - Therefore, the lower authorities have misguided themselves in rejecting the claim of the assessee for non-recognition of interest income on NPAs – the order of the CIT(A) is set aside – Decided in favour of assessee.
Addition of interest on Agricultural Stabilization Fund and interest on Corpus Fund – Held that:- No fault can be found with the order of the CIT(A) on this count as it has been justifiably concluded by him that the impugned interest is only an appropriation of profits towards specific purpose and it does not constitute a business expenditure of the assessee - The constitution of the Agricultural Credit (Stabilization) Fund per the resolution of the Government of Maharashtra reflects that it is created by appropriation of the profits of the assessee bank, and the yearly credit of interest @ 3% on the balance to the credit of Fund, is not a charge against the Profit & Loss Account - the order of the CIT(A) is upheld – Decided against assessee.
2014 (12) TMI 1060

Disallowance of claim of deduction u/s 80IB deleted – job work done by the assessee amounted to carrying out manufacturing activity by an industrial undertaking or not - Held that:- The assessee’s claim for deduction u/s 80IB is mainly on account of job work which was carried out from the plant and machineries installed by the assesse for its own manufacturing purposes - the only requirement for claim of deduction u/s 80IB is that, income should be derived from the industrial undertaking and assessee is liberty to manufacture the goods for itself or for others - The section does not make any difference for the purpose of claiming deduction u/s 80IB - If the job work has been done from the raw material supplied by the customers and assessee has manufactured the goods from those raw materials, then it amounts to manufacturing from the industrial undertaking - CIT(A) noted that the plant and machinery were used for manufacturing of plastic bags and polypropylene sheets to carry out the job work for others - The only difference is that assessee instead of its own raw material, has used raw material supplied by others - Thus such an income from job work is nothing, but income derived from industrial undertaking as per the provisions of section 80IB – CIT(A) is upheld – Decided against revenue.
Disallowance on sale if manufactured product to be treated as "trading receipt" deleted – Held that:- The genesis of the controversy started when the AO noted that in the P&L Account, the assessee as debited more labour charges has compared to the labour charges shown in the TDS certificate - When required to reconcile the difference, the assessee submitted that the amount of ₹ 98,08,414/- was not on account of labour charges but on account of trading receipts - such a reconciliation statement given before the AO was not correct as the correct position is that, the said amount represents sales of manufactured goods and no trading receipt - the assesse had shown income from two kind of activities, one form job work of manufacturing and sale of manufactured goods and other on account of trading activities - under the head manufacturing, the assesse had shown opening stock of manufactured goods as on 31.07.2007 at ₹ 95,57,961/-The sale of manufactured goods was shown at ₹ 3,13,34,736/- which also included sale on account of job charges out of ₹ 2,15,25,722/- The amount was finally reconciled in the accounts - Though there has been some misrepresentation of facts before the AO, CIT(A) has duly verified the same from sales register and also copy of sale memos and has given a categorical finding that it pertains to sale of manufactured goods and not trading receipts - Thus such a finding of fact appears to be correct from the material placed on record, thus, there was no reason to disturb such a finding of fact – Decided against revenue.
Disallowance of reallocation of expenditure such as interest charges, repairs & maintenance and insurance charges between trading and manufacturing activity deleted – Determination of net profit by AO – Held that:- The finding of the Ld.CIT(A) appears to be correct, firstly, the assessee has maintained separate books of account, one for the manufacturing activity and other for trading account - The book results of manufacturing and trading activity has not been disturbed by the AO in as much as, no discrepancy with regard to the allocation of the expenses by the assessee - The entire basis of the AO for reallocation of expenses is based on presumption that certain expenses are more in the job work activity - so far as the major component of interest expenditure, the CIT(A) has analyzed the loan taken from the bank and the purpose of which the loans were taken - the finding of the CIT(A) is upheld – decided against revenue.
2014 (12) TMI 1059

Educational expenses on granddaughter of the Managing Director – Held that:- The AO has given amble opportunity to the assessee to lead evidence to justify the claim of the assessee, but the assessee has failed to avail the same - revenue has claimed that there was no resolution to this effect by the Board of Directors of the assessee-company - there is no penalty clause whatsoever in the MOU entered into between the assessee-company and the trainee, Payal Parikh that in case of failure on the part of the trainee to comply with the terms and conditions of the MOU how the trainee shall compensate the assessee-company for the heavy expenditure incurred on her higher education - the MOU entered into by the trainee with the assessee-company is merely a self-serving document - there is no evidence brought on record on behalf of the assessee to show that her selection for higher education was on merits and not due to the fact that she was closely related to the Managing Director of the assessee-company - there is no scheme laid down by the assessee-company to send employees abroad for training and employment thereafter with the assessee-company - the expenditure claimed by the assessee on higher education of the grand-daughter of the Managing Director of the assessee was not wholly and exclusively for the purpose of business of the assessee, the order of the CIT(A) is upheld – Decided against assessee.
Depreciation on intangible assets disallowed – Intangible asset treated as goodwill – Held that:- The issue of allowance of depreciation on intangible asset in the form of “goodwill” is covered in favour of the assessee as held in Commissioner of Income-tax v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] – after going through the Memorandum of Transfer of Business, a copy of which has been filed in the compilation before us, which is dated 1.4.2001 wherein it is specifically provided that all the trade names, trade-marks, permits and licenses, goodwill and knowhow attached to the business carried on in India or elsewhere were transferred to the assignees i.e. the assessee-company - the goodwill is an intangible asset entitled to depreciation - The quantification of goodwill at ₹ 75 lakhs seems to be reasonable - The assessee has filed a copy of working of the valuation of the goodwill as given by M/s. Anmol Sekhri & Associates, Mumbai, valuer, and a copy of which has been filed in the compilation before the Tribunal – the valuation report justifies the reasonableness of the valuation of the goodwill as claimed by the assessee - the claim of the assessee for depreciation on goodwill was justified – Decided in favour of assessee.
Deletion of disallowance on commission – Held that:- The payments were made to out-station parties per cheque - The commission was paid at the rate of 1% on the sale effected by these parties - The TDS as applicable was made at the time of making the payment of commission to the payees - Complete details of the payment of commission were maintained in the account books of the assessee - The assessee has also filed affidavits of the payees of the commission payment, copy of which has been filed in the compilation - CIT(A) has recorded that the assessee has made a request to the AO to call for the concerned parties by issuing summons, but he has not considered this request - the CIT(A) has recorded that all important evidences in the form of PAN, addresses, contra account and confirmation including affidavits from all such commission agents were submitted by the assessee - there were no mistake in the order of the CIT(A) in holding that all these evidences were sufficient to discharge the onus of the assessee for claiming such expenditure – Decided against revenue.
Deletion of penalty u/s 271(1)(c) – Held that:- On the issue of validity of penalty imposed for disallowance of expenses incurred for higher education of grand-daughter of the MD of the assessee-company, the assessee has made full disclosure all the material facts in its account statement, and also in the audited report of its accounts for the relevant period - There could always be an honest difference of opinion between the assessee and the Revenue regarding allowability or otherwise of a particular expenditure incurred by the assessee - the assessee has incurred expenditure on higher education of the trainee and all these facts were disclosed in the account statements of the assessee - no penalty u/s 271(1)(c) of the Act was imposable on the assessee on account of disallowance of expenditure for higher education of grand-daughter of the MD, and accordingly order of the CIT(A) on this issue is confirmed - penalty on disallowance of depreciation on goodwill, the disallowance itself has been deleted while deciding the quantum appeal of the assessee for the relevant AY 2004-05, thus, there remains no basis for imposition of penalty on the assessee - since the assessee has disclosed all the facts at the time of filing of the return itself, and claim of the assessee for depreciation on goodwill was bona fide, the penalty u/s 271(1)(c) could not be levied on the assessee – the order of the CIT(A) is upheld – Decided against revenue.
2014 (12) TMI 1058

Levy of penalty u/s 271(1)(c) - Assessee furnished inaccurate particulars at the time of assessment proceedings and claimed deduction u/s 10A at an amount higher than the actual eligibility or not – Held that:- No penalty u/s 271(1)(c) of the Act can be justifiably be levied on the facts - Revenue Authority has failed to establish that in the return of income the assessee has either shown as incorrect or inaccurate particulars of income - merely because the AO did not agree with the submission made by the assessee, the same cannot be said to be furnished of inaccurate particulars of income for the purpose of levying penalty u/s 271(1)(c).
Disallowances of expenditure cannot result in automatic levy of penalty - If an assessee has been able to offer an explanation, which is not found by the Revenue Authority to be false, and assessee has been able to prove that such explanation is bonafide and that all the facts relating to the same have been disclosed by the assessee - assessee shall be out of the clutches of Explanation1 to section 271(1)(c) of the IT Act and in such cases no penalty shall be imposed – relying upon CIT vs. Reliance Petro Products Pvt. Limited [2010 (3) TMI 80 - SUPREME COURT] - no penalty u/s 271(1)(c) of the Act can be imposed because the Revenue Authority has not disclosed any facts in its return of income - even otherwise Revenue Authority has failed to establish that in the return of income assessee has either been shown as inaccurate or incorrect particulars of its income - merely because the expenditure claimed by the assessee has been disallowed by the Revenue Authority does not lead to an inference that it is a case of furnishing inaccurate particulars of income - assessee has offered its bona fide explanation which was not proved false by the Revenue Authority – FAA has passed the well-reasoned order and the order of the CIT(A) is upheld – Decided against revenue.
2014 (12) TMI 1057

Various expenses disallowed - Discrepancy in the account of M/s Nadoka Crushers – rate of net profits to be 8.65% reasonable or not – Held that:- Assessee could not furnish required details for verification of the AO as well as the CIT(A) - The genuineness of the expenses is to be seen by the AO as the onus is on the assessee to prove that the expenditure wholly and exclusively was incurred for business purposes - non business purposes cannot be ruled out under these heads - CIT(A) confirmed the addition appears to be higher side, therefore, the additions under the head jeep vehicle expense, except depreciation on jeep and motor cycle is upheld and telephone expenses up to 10% - the expenses disallowed out of Diwali expenses is reasonable - out of expenses for labour, which is major in nature - The assessee’s maintenance record is poor and further lower authority has not specified the particular defects in muster roll except in the month of August, 2005 the main receipt from the labour supply of the assessee.
The addition of Rs. One lac in the interest of justice as against the confirmation of ₹ 1.5 lacs - CIT(A) was reasonable to confirm 10% addition under the head staff mess expenses for non-business purposes - with respect to difference in the M/s Nakoda Crushers, the assessee himself has not shown the expense for which, the argument taken by the assessee not acceptable as who has prevented to the appellant for claiming these expense - assessee himself admitted different cheque given and amount credited by the M/s Nakoda Crushers at ₹ 410 - M/s Nakoda Crushers had shown receipt of cheque of ₹ 23,662/- has not been reconciled with evidence before the lower authorities, for which sufficient time has been given to the assessee - the order of the CIT(A) under this head is upheld - the last ground of appeal is against working of net profit @ 8.65% by making the additions – substantial relief given in case of the assessee is upheld, therefore, after appeal effect, the assessee’s net profit will be reasonable – Decided partly in favour of assessee.