Maintainability of appeal - SSI Exemption - Marketability of manufactured product - HELD THAT:- The appeal is accordingly dismissed by refusing admission.
Revision u/s 263- computation of rental income under the head ‘income from house property’ - whether the rental income earned by the assessee should be assessed under the head ‘income from house property or ‘business income’? - HELD THAT:- Assessee ought to have submitted relevant information before the AO to substantiate that the income earned on leasing out the properties is assessable to tax under the head “property income”. AO had not indicated that he has actually called for any information to seek clarification as to whether the impugned income is assessable under the head “income from house property” or under the head “business income”.
In the backdrop of the available rulings as observed (M/s Rayala Corporation Pvt. Ltd.[2016 (8) TMI 522 - SUPREME COURT] that in the event of leasing out property by a company, such income should be treated as its business income. Similar view has taken in the case of Chennai Properties & Investments Ltd. [2015 (5) TMI 46 - SUPREME COURT]. Since such matters have to be considered by analysing under broader aspects of law by referring to the facts of each case, it is the duty of the AO to have obtained the relevant information, but, the record does not indicate that the AO applied his mind. Under these circumstances, we are of the view that the case law relied upon by the assessee (Malabar Industrial Co. Ltd.[2000 (2) TMI 10 - SUPREME COURT] and other such cases taking a similar view) have no application to the instant case; in the aforecited cases, only AO has taken a specific stand upon application of mind, it is one of the views possible in the circumstances and those case law cannot be applied where the AO has not applied his mind. Having regard to the circumstances and for the detailed reasoning given by the revisional authority, we are of the view that the order passed by the AO is erroneous and prejudicial to the interests of revenue.
Thus the issue as to whether the said income is assessable under the head “income from house property” or “income from business” has to be considered in the backdrop of the case law on the issue and therefore, the matter deserves to be set aside to the file of the AO instead of directing the AO to treat the income as income from business. Accordingly, we modify the order of revisional authority and direct the AO to reconsider the matter in accordance with law by properly analysing the facts and consider the issue on the touchstone of the case law available on the issue. Appeal filed by the assessee is treated as partly allowed for statistical purposes.
Disallowing of bad debts - deduction under the head bad debts written off in the books of accounts - HELD THAT:- In the case of the assessee, the explanation offered cannot be simply overlooked without looking into each and every event occurred between both the parties. The argument of the Ld.AR that, when the assessee had suffered loss due to irrecoverable of advances made during the course of its business, the same has to be allowed as deduction U/s.28 of the Act has merits.
Loss arising from business has also to be set off from the profits of the business. Further the ratio laid down in the case TRF Limited vs. CIT [2010 (2) TMI 211 - SUPREME COURT] is applicable in the case of the assessee wherein has held that “After 1st April 1989, it is not necessary to establish that the debt in fact has become irrecoverable”
Thus the loss written off by the assessee is genuine and has to be set off from the profit earned by it. Further the case cited by the Revenue has no relevance considering the facts and circumstance of the assessee’s case before us. Hence, we hereby direct the Ld.AO to grant deduction being the loss suffered by the assessee as irrecoverable advances with respect to real estate business and thereby delete the addition.
Disallowance u/s 40(a)(ia) - Disallowance of interest paid - Whether the provisions of Section 40(a)(ia) shall be attracted when the amount is not 'payable' to a contractor or sub-contractor but has been actually paid? -HELD THAT:- As relying on M/S. PALAM GAS SERVICE VERSUS COMMISSIONER OF INCOME TAX [2017 (5) TMI 242 - SUPREME COURT] if the assessee in not deemed to be an assessee in default under the first proviso to sub-section(1) of section 201, then, Section 40(a)(ia) of the Act will not be attracted w.e.f. 1-4-2013 i.e., from the assessment year 2012-13. Hence we hereby remit the matter to the file of the Ld.AO to examine the issue with respect to the applicability of the provisions of Section 40(a)(ia) of the Act in totality and thereafter decide this issue afresh in accordance with law and merits. Appeal of the assessee is partly allowed for statistical purpose.
Addition u/s 68 on account of loan received - notice issued u/s 133(6) was returned unserved - whether the identity, creditworthiness of the party and genuineness of the transaction have been proved? - HELD THAT:- As the assessee has filed confirmation of loan which is placed at paper book duly signed by the AR of the lender company besides, PAN, and other evidences and copy of ledger account of the assessee in the books of the lender company was filed duly attested by the authorized signatory of the company as placed at paper book with the income tax return and final accounts of the lender.
We are of the view that the matter requires further verification at the end of AO of all these evidences and therefore it would be fair ,reasonable and in the interest of justice to restore the matter to the file of the AO to examine all these evidences and in the light of said frame the assessment denovo as per facts and law after providing necessary opportunity of being heard to the assessee. Appeal of the assessee stands allowed for statistical purposes.
Approval of scheme of Amalgamation - Sections 230 to 232 and 234 of the Companies Act, 2013 - HELD THAT:- The Applicant Company is directed to serve notices along with the documents as mentioned.
The Applicant Company submits that the Scheme is an inbound merger in relation to the merger of the Transferor Company 1 and the Transferor Company 2 with the Transferee Company under the provisions of Sections 230 to 232 and 234 of the Companies Act, 2013. The Transferor Company was incorporated on 29th day of March, 2016 under the provisions of Mauritius Companies Act, 2001.
The Applicant Company shall file the affidavit of service in the Registry that directions contained in clause 7 have been complied with.
TDS u/s 194A - default u/s. 201(1) and 201(1A) - efault u/s. 40(a)(i) and 40(a)(ia) - whether the assessee can be considered as an assessee in default for not deducting TDS in respect of those provisions which were reversed? - HELD THAT:- It is commonsensical to expect that the appellant's creation of the provision for the services received in order to obtain a correct view of its profit at year end was not based on any arbitrary or whimsical estimate. It is clear from the provisioned expenses that the estimate has followed from pre-existing contracts with known parties for identified services and, hence, the accounting of amounts liable to be paid to these parties for services availed as per known terms of transaction is a specific exercise which carries with it the statutory responsibility for deducting tax at source also. The appellant cannot wriggle out of this responsibility by holding that the provisions were made without any basis towards unidentified parties for unascertained transactions.
Appellant argument that the AO erred in treating reversal of provision for expenditure and unutilized amount of provision as liable to deduction of tax at source unable to be agreed since the AO has not discussed liability for tax deduction on the 'reversal of provision' but on the 'creation of provision' itself before the end of FY 2011-12. This, as has been held in the paras above, was a point at which the IT Act, the Tax Auditor as well as the appellant itself had clearly agreed with the liability for tax deduction. This ground, therefore, fails.
Where the provisioned amount was higher than the invoice amount, the balance has clearly not suffered tax. Since it has been held supra that the liability for tax deduction existed on the company at the time of making the provision, the default for non-deduction of tax at source is to be limited only to the surplus over and above the invoice amount.
As the assessee has made disallowance u/s. 40a(ia) and it means that the assessee has admitted its default u/s. 40(a)(ia) and therefore, in the proceedings u/s. 201 and 201(1A), the assessee cannot argue that there was no liability under chapter XVII-B. Since none of the judgments cited by ld. AR of assessee is rendering any help to the assessee in the present case and the tribunal order cited by ld. DR of revenue is helping the case of revenue, we find no reason to interfere in the order of CIT(A). - Decided against assessee.
TDS u/s 194H - Failure to deduct tax at source from commission paid to banks for providing credit cards services - addition u/s. 40a(ia) - HELD THAT:- As decided in JDS APPARELS PRIVATE LIMITED [2014 (11) TMI 732 - DELHI HIGH COURT] payment of commission to banks with regard to the processing of credit card transactions was not liable to be considered as a ‘commission’ within the meaning of section 194H.
The bank does not act as an agent of the assessee while processing the credit card payments and a charge collected by the bank for such service does not amount to ‘commission’ within the meaning of section 194H. Thus the impugned disallowance made by the AO by invoking section 40(a)(ia) is unsustainable. - Decided in favour of assessee.
Transfer of pending proceedings of Winding up - inability to pay debts - Rule 5 of Companies (Transfer of Pending Proceedings) Rules, 2016 - HELD THAT:- In view of the fact that as per the requirement the respondent has not submitted the information as required for admission of application under section 9 before the Adjudicating Authority, it is held that in terms of rule 5 and in absence of non-supply of requisite information's in terms of the rule aforesaid the application cannot be treated as an application under section 9 for initiation of corporate insolvency resolution process of the appellant.
Dishonor of Cheque - no contemporaneous signatures are available on any unauthenticated documents - Section 45 of the Evidence Act - HELD THAT:- In view of the law declared by the Courts in the catena of judgments, it is clear that, if the order under challenge is allowed to sustain, would terminate or culminate the entire proceedings, is a determining factor to entertain a revision under Section 397 Cr.P.C - But, here, the order under challenge is an order passed on an application filed under Section 45 of the Evidence Act, the same would not culminate the entire proceedings.
In view of the law declared by the Apex Court in "Sethuraman v. Rajamanickam " [2009 (3) TMI 1086 - SUPREME COURT], the order passed on an application filed under Section 45 of Evidence Act is interlocutory in nature and against such an order, no revision is maintainable.
The orders under challenge are only interlocutory in nature, as they are orders passed on an application filed under Section 45 of the Evidence Act and they would not terminate or culminate the entire proceedings, if the same are allowed to sustain - the criminal revision cases are not maintainable in view of the bar under Section 397(2) Cr.P.C. - criminal revision cases are dismissed.
Proclaimed Offender - co-accused of the petitioner have been acquitted by the trial Court and the matter was compromised - HELD THAT:- In view of the law laid down in NARINDER SINGH & ORS. VERSUS STATE OF PUNJAB & ANR [2015 (2) TMI 1042 - SUPREME COURT], no useful purpose will be served by continuing the criminal proceedings.
Deduction u/s.80IA in respect of the profits derived from the sale of the Carbon Credits - HELD THAT:- Now the issue was squarely covered by the decision of My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] as held the Carbon Credits was not an offshoot of business but offshoot of environmental concerns. Consequently, the sale of the excess Carbon Credits was capital receipt. It was a submission that the AO may be directed to assess the benefit of Carbon Credits as a capital receipt.
Respectfully following the decision of the Hon’ble Andhra Pradesh High Court in the case of My Home Power Ltd., referred to supra, the AO is directed to treat the sale of the Carbon Credits as a capital receipt. Appeal filed by the assessee stands allowed.
Disallowance of service tax written of and charged to P&L account - HELD THAT:- The assessee has clearly explained the rationale for claiming the impugned sum which has been upheld by the different benches of the Tribunal.. As the facts of this case and the facts of the cases in which the Hon'ble ITAT, Hyderabad had relied and rendered the decision are identical with the assessee, the order of the CIT(A) is held as justified and hence the grounds of Revenue’s appeal are dismissed.
Disallowance u/s 14A - HELD THAT:- As Revenue pleads that CIT (A) ought to have brought out materials to show that the impugned investments were made out of surplus and no borrowed funds were utilized for the investments. Since the relevant facts are not brought in the order of the CIT(A) , we deem it fit to set aside this issue to the A O for a fresh examination. The A O, after affording due opportunity to the assessee , shall pass a speaking order.
Disallowance of demurrage charges u/s 40a(i) & 40(a)(ia) - HELD THAT:- DR presented his arguments on the lines of the assessment order and on the grounds of appeal . Per Contra, the AR invited our attention to the relevant portion of the paper book wherein a copy of sales contract with M/s Noble Resources, commercial invoice from M/s Noble Resources and invoice , Debit note issued to appellant from M/s Golden Agri International Pte Ltd, Singapore and submitted that the assessee made reimbursements only. The D R submitted since these documents are presented for the first time they require scrutiny.
We heard the rival contentions. Since the relevant facts require examination, we deem it fit to set aside this issue to the A O for a fresh examination. The A O, after affording due opportunity to the assessee , shall pass a speaking order.
Payments made to Chennai Port Trust without TDS - on the port Entry Pass, weighment charges, reimbursement of expenses to the port trust, the assessee pleaded before the CIT (A) that these payments do not attract TDS provisions and hence no need to deduct tax. The CIT (A) held that this is explanation is acceptable and hence the disallowances made against these amounts are directed to be deleted - HELD THAT:- Since the relevant facts require examination, we deem it fit to set aside this issue to the A O for a fresh examination. The AO , after affording due opportunity to the assessee, shall pass a speaking order.
Estimation of income - Bogus purchases - addition u/s 69C - HELD THAT:- Assessee by making the purchases from the open/grey market would had procured the goods at a lower rate, i.e by saving on the VAT liability, cash discounts and certain other factors, as in comparison to the price at which the same would be available in the organized sector. We find that as the VAT involved on ferrous and non-ferrous items during the year under consideration was 4%, therefore, keeping in view the other monetary benefits which the assessee as observed by us hereinabove would had benefited from by procuring the goods from the open/grey market, the same could safely be taken at an aggregate figure of 8%.
We thus, in the backdrop of our aforesaid observations direct the A.O to restrict the addition in the hands of the assessee to 8% of the aggregate value of the purchases claimed by the assessee to have been made from the aforementioned parties. We thus modify the order of the CIT(A) to the extent of estimation of the profit element involved in making of the purchases under consideration.
Reopening of assessment u/s 147 - bogus purchases - Estimation of income - addition of peak credit in respect of purchases made through suppliers as per information of Sales Tax Department - HELD THAT:- AO has accepted the corresponding sales made by the assessee. Books of Accounts were not rejected. However, he has added the peak credit in respect of such purchases in assessee’s income. By observing that only profit element embedded in bogus purchase which the assessee would have made, should be added in the assessee’s income, the CIT(A) has restricted the addition to 12.5% of such purchases. So far as reopening is concerned, we found that sufficient reasons were recorded by AO and he was justified in reopening the assessment.
We found that during the year under consideration the assessee had offered higher GP. GP of last two years of the assessee was at 8.39% and 8.36%. During the year under consideration GP shown by the assessee was 8.83%. Thus, the GP ratio of assessee is not only consistent as compared to the earlier years but even higher. As found that during the course of assessment proceedings, the assessee had submitted the ledger account, tax invoice, bank statements and utilization of goods supplied. Statement of reconciliation of purchases and sales was also filed before the lower authorities. Keeping in view the nature of trade assessee was carrying on vis-à-vis higher G.P. declared during the year and also totality of facts and circumstances of the case, we modify the order of both the lower authorities and upheld the addition to the extent of 2% of the bogus purchases. Decided partly in favour of assessee.
Non-payment of service tax - training and coaching service - exemption under Ext. P9 Notification dated 20-6-2012 - Non-application of mind - principles of natural justice - HELD THAT:- From a perusal of Ext. P3 show cause notice issued to the petitioner that, the case of the Department is essentially that the petitioner had been engaged in rendering commercial training or coaching services for the period from April, 2010 to June, 2012, and that for the subsequent period from April, 2012 to March, 2015, the activities of the petitioner were liable to service tax since the services rendered by petitioner would not qualify for the exemption contemplated under Ext. P9 Notification. In reply to the said show cause notice, the petitioner preferred a detailed reply, which is produced as Ext. P11 in the writ petition, wherein the case of the petitioner is essentially that the services rendered by him being in the nature of commercial training/coaching services leading to a qualification recognised by law, will not come within the ambit of the levy of service tax for the period prior to 1-7-2012. It was also pointed out in the said reply that, for the period subsequent to 1-7-2012, and upto March, 2015, the training services rendered by the petitioner would qualify for the exemption under Ext. P9 Notification under the head of “services by an entity registered under Section 12AA of the Income-tax Act, that conducts activities that answer to the description of charitable activities as defined under Clause 2K of the said Notification.
The specific contention of the petitioner that, for the period prior to 1-7-2012, the demand for tax in respect of the services rendered by him would be hit by limitation, and the further contention of the petitioner that for the services rendered by him for the period subsequent to 1-7-2012 and till March, 2015, he would qualify for the exemption under Ext. P9 Notification, were not dealt with by the respondent, who merely proceeded to record the contentions of the petitioner, and then hold that the services rendered by the trust would not come under the charitable activities mentioned in the Notification, and further, that the services rendered by the trust were of commercial nature. In my view, when the petitioner had taken a specific contention with regard to the particular head of service under which he qualified for exemption as per Ext. P9 Notification, it was incumbent upon the respondent adjudicating authority to consider the contention of the petitioner and give reasons for rejecting the said contention of the petitioner. In Ext.P8 order, I do not find such an exercise as having been done by the respondent, as there is no reason stated as to why the contention of the petitioner regarding exemption available to the services rendered by him could not be accepted.
Thus it is found that relegating the petitioner to his alternative remedy of an appeal against Ext. P8 order would be an exercise in futility since Ext. P8 order does not inform the petitioner of the reasons that found favour with the respondent while finding against the petitioner on the issue of exemption, and confirming the demand of service tax and penalty on him - the respondent are not directed to pass a fresh order in lieu of Ext. P8 after considering Ext. P11 reply of the petitioner and after hearing him in the matter.
The Supreme Court of India allowed the appeal in terms of the signed order. Pending applications were also disposed of. Leave was granted. (Case citation: 2017 (10) TMI 1555)
Disallowance of deduction u/s. 10A and 10AA - average margin of comparables is less than the PLI - HELD THAT:- AO has come to the conclusion that there is a “close connection‟ between the assessee and its overseas AE as the assessee is wholly owned subsidiary of parent company i.e. AE - AO has failed to substantiate from documents on record that there is “arrangement‟ between the assessee and its overseas AE resulting in assessee having more than ordinary profits from units eligible for deduction u/s. 10A and 10AA.
A perusal of assessment order shows that it is only presumption of Assessing Officer that there is arrangement between assessee and its AE. Merely because average margin of comparables is less than the PLI of assessee, no disallowance of deduction u/s. 10A and 10AA of the Act can be made. The Revenue has not placed on record any cogent evidence to indicate arrangement between assessee and its AE resulting in more than ordinary profits from eligible units.
As decided in M/S HONEYWELL AUTOMATION INDIA LIMITED [2015 (3) TMI 494 - ITAT PUNE] under similar circumstances deleted the disallowance of deduction u/s. 10A - Decided against revenue.
Rejection of refund of security amount deposited with the Respondents - Appellant's suit for declaration also rejected - public auction - Section 74 of the Indian Contract Act, 1872 - whether the Appellant (plaintiff) committed any breach of the terms and conditions of the public auction notice dated 07.01.1996? - whether the State was justified in forfeiting the security money deposited by the Appellant for the alleged breach said to have been committed by the Appellant of any terms and conditions of public notice dated 07.01.1996 - whether the State had power to forfeit the security money in the facts of this case?
HELD THAT:- Reading of Section 74 would go to show that in order to forfeit the sum deposited by the contracting party as "earnest money" or "security" for the due performance of the contract, it is necessary that the contract must contain a stipulation of forfeiture. In other words, a right to forfeit being a contractual right and penal in nature, the parties to a contract must agree to stipulate a term in the contract in that behalf. A fortiori, if there is no stipulation in the contract of forfeiture, there is no such right available to the party to forfeit the sum - Equally well settled principle of law relating to contract is that a party to the contract can insist for performance of only those terms/conditions, which are part of the contract. Likewise, a party to the contract has no right to unilaterally "alter" the terms and conditions of the contract and nor they have a right to "add" any additional terms/conditions in the contract unless both the parties agree to add/alter any such terms/conditions in the contract.
Similarly, it is also a settled law that if any party adds any additional terms/conditions in the contract without the consent of the other contracting party then such addition is not binding on the other party. Similarly, a party, who adds any such term/condition, has no right to insist on the other party to comply with such additional terms/conditions and nor such party has a right to cancel the contract on the ground that the other party has failed to comply such additional terms/conditions.
The public notice (advertisement), only stipulated a term for deposit of the security amount of ₹ 3 lakhs by the bidder (Appellant) but it did not publish any stipulation that the security amount deposited by the bidder (Appellant herein) is liable for forfeiture by the State and, if so, in what contingencies - a stipulation for deposit of security amount ought to have been qualified by a specific stipulation providing therein a right of forfeiture to the State. Similarly, it should have also provided the contingencies in which such right of forfeiture could be exercised by the State against the bidder. It is only then the State would have got a right to forfeit. It was, however, not so in this case.
It was mandatory on the part of the Respondents(State) to have published the four special conditions at the time of inviting the bids itself because how much money/rent the bidder would be required to pay to the State on allotment of plot to him was a material term and, therefore, the bidders were entitled to know these material terms at the time of submitting the bid itself. It was, however, not done in this case - the object behind publishing all material term(s) is/are three fold. First, such term(s) is/are made known to the contracting parties/bidders; second, parties/bidders become aware of their rights, obligations, liabilities qua each other and also of the consequences in the event of their non-compliances; and third, it empowers the State to enforce any such term against the bidder in the event of any breach committed by the bidder and lastly, when there are express terms in the contract/public notice then parties are bound by the terms and their rights are, accordingly, determined in the light of such terms in accordance with law.
In the first place, the Appellant ensured compliance of the term because he deposited 1/4th amount of ₹ 10,45,000/- on the same day, i.e., 11.01.1996 by cheque. Secondly, the Respondents also accepted the cheque from the Appellant because deposit of money by cheque was one of the modes of payment. Had it not been so, the Respondents would not have accepted the cheque from the Appellant. Thirdly, the stop payment was done when the Appellant received the acceptance letter containing four additional conditions to which he was not agreeable. He had, therefore, every right to wriggle out of the auction proceedings and stop further payment towards the transaction. Such action on the part of the Appellant (bidder) did not amount to a breach of Clause 4 so as to give right to the State to forfeit the security deposit.
Thus, the Appellant did not commit any breach of the term(s) and condition(s) of the notice inviting bids and on the other hand, it was the Respondents who committed breaches. In these circumstances, the State had no right to forfeit the security amount and instead it should have been returned when demanded by the Appellant - In this case, it was expected from the State officials to have acted as an honest person while dealing with the case of an individual citizen and in all fairness should have returned the security amount to the Appellant without compelling him to take recourse to the legal proceedings for recovery of his legitimate amount which took almost 21 years to recover.
The Courts below were not justified in their respective reasoning and the conclusion in dismissing the Appellant's suit. The Appellant's suit should have been decreed against the Respondents - Appeal allowed.
Seeking restraint on directors from transferring any immovable property of the company to respondent - also seeking directors from expelling the appellants from the membership of the company - HELD THAT:- The writ petitioners, who also claim to be directors of the company, but not made parties before the NCLT, being aware of the proceedings as before the NCLT, filed the writ petition and challenged the interim order as passed by the NCLT and based thereon the learned single Judge has granted interim relief as noted above. We have heard the appellants as well as the respondents and have considered the matter. In our view, as the proceedings before the NCLT are pending and as the NCLT has assumed jurisdiction in the matter, to avoid multiplicity of proceedings, it would only be just and proper that respondents 1 to 9 herein who were the nine writ petitioners, approach the NCLT and raise their grievance. They are at liberty to raise the issue of jurisdiction as well, if they are so advised. But surely the orders of the NCLT cannot be assailed in this indirect manner.
Let it be noted that under the provisions of the Companies Act, 2013 against any order of NCLT, an appeal lies to National Companies Appellate Tribunal. In such situation, the learned single Judge ought not to have entertained the writ petition nor passed the interim order - the writ petition is dismissed with liberty to the parties to move the NCLT in the matter for whatever relief they may seek.
Long term capital - contentions of the assessee that what was transferred was booking rights and not immovable property in the form of a flat - Section u/s 50C applicability - HELD THAT:- A perusal of the paper book filed by the assessee demonstrates that the possession was never taken by the assessee. Recitals at para-9 of the conveyance deed executed by the builder M/s. Idle Heights Pvt. Ltd in favour of Mr.Mohan Lal Dugar and Mr. Abhishek Kumar Dugar and Shri M.K.Singhania, demonstrates that the possession was handed over by the developer to these purchasers on 26.03.2013. Hence this proves that the assessee has never received possession of this property. The asset acquired was rights in the property, by way of an agreement and what was transferred was there rights. These rights are capital asset.
The finding of the ld. CIT(A) that the asset is a long term capital and liable to long term capital gain. As what is sold is not an immovable property, section 50C does not apply. Result the appeal of the revenue is dismissed.
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