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2014 (9) TMI 1188 - KARNATAKA HIGH COURT
Deduction u/s 80P(2)(a)(i) - HELD THAT:- THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX OFFICER WARD I, BAGALKOT VERSUS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] when the status of the assessee is a Co-operative society and is not a Co- operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct. - Decided in favour of the assessee.
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2014 (9) TMI 1187 - CALCUTTA HIGH COURT
Depreciation on river bank embankment and that river bank embankment is to be treated as building - HELD THAT:- The question no.(vi) as framed is general in nature. Therefore, we do not consider it to be a substantial question of law to be included in the order.
The clarification as sought is, thus, made. Urgent certified copy of this order, if applied for, be given to the appearing parties on priority basis.
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2014 (9) TMI 1186 - ITAT KOLKATA
Disallowance of the Commission to non-whole time whole time Directors and sitting fees u/s 40(a)(ia) - HELD THAT:- As decided in assessee's own case [2011 (11) TMI 478 - ITAT, KOLKATA] commission paid was held as incentive in addition to salary, bonus and other perquisites, thus out of preview of Sec 194H/194H, thus allowing the claim of assessee - Decided in favor of assessee.
Claim of deduction u/s 80IA - various captive power undertakings located in the district of Bhadrachalam and Kovai - AO was of the view that while computing the transfer price, additional demand charges has to be excluded - HELD THAT:- Assessee has computed the profit for claiming deduction by taking tariff rate @ ₹ 4.45/unit as per the policy of APSEB. This rate of APSEB contains fixed charges which are not directly relatable to the captive plant. CIT(A) reduced this rate by deleting the surcharge and additional duty and worked out the unit rate @ ₹ 4.368. The Tribunal, therefore, confirmed the market rate/unit on the basis of the policy of APSEB as reduced by the surcharge, additional duty. Thus in view of the decision of this Tribunal for A.Y 2002-03, the Assessee, in our opinion, is entitled for deduction u/s 80IA in respect of the captive power undertaking but for the purpose of ascertaining the profit, market value should be taken in respect of the two power undertakings generating electricity.
AO reduced the additional demand charges but the CIT(A) allowed the relief to the Assessee holding that determination of the market value/based on the State Government electricity power tariff inclusive of additional demand charges has been specifically decided by CIT(A) and Tribunal for the A.Y 2002-03 and the Assessee has strictly followed the same. CIT(A) decided this issue in favour of the Assessee. We noted that the Tribunal in its order for A.Y 2002-03 has accepted the rate per unit as worked out by CIT(A). CIT(A) reduced the tariff rate by surcharge and additional duty. Respectfully following the aforesaid decision of this Tribunal, we direct the AO compute the profit eligible for deduction u/s 80IA on the basis of the aforesaid finding given by the Tribunal for A.Y 2002-03.
Computation u/s 80IA of profit from power undertakings - HELD THAT:- The cost of the electricity duty payable to the State Government has accrued during the year and has to be allowed as deduction while computing the profit of the eligible undertaking. This issue, in our opinion, had neither arisen during the A.Y 2002-03 nor has been decided by the CIT(A) or by the Tribunal. The AO has simply disallowed the deduction u/s 80IA. Therefore, on this issue we set aside the order of CIT(A) and restore the order of the AO and direct the AO to reduce the profit eligible for deduction in respect of the power undertaking Bhadrachalam, power undertaking - II, Bhadrachalam and power undertaking - I, Kovai. The State Electricity Duty which has been debited by the Assessee to the Profit & Loss account be reduced for computing the profit eligible for deduction in respect of each unit.
Whether the steam generated is power or not? - deduction u/s 80IA - HELD THAT:- We noted that the AO has disallowed deduction on the basis that both units are functionally integrated as a single unit as far as generation of the steam and electricity, CIT(A) instead of giving a factual finding and looking into the budgetary speech of the Hon'ble Finance Minister, decided the issue merely on the basis of the arguments of the Assessee which were not taken before the AO. We, therefore, in the interest of justice and fair play to both the parties set aside the order of CIT(A) on this issue and restore this issue to the file of CIT(A) with the direction that CIT(A) shall re-adjudicate this issue on merits after considering the nature of the plant established by the Assessee and the budgetary speech of the Hon'ble Finance Minister which gives the intention of bringing Sec. 801 A(4) in the statute
Set off of brought forward notional loss accumulated prior to the initial year of the claim - HELD THAT:- We noted that this issue is duly covered in favour of the Assessee by the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P.) Ltd. v. CIT [2010 (3) TMI 860 - MADRAS HIGH COURT]. Also see SHRI ANIL H LAD [2014 (3) TMI 808 - KARNATAKA HIGH COURT] , we confirm the order of CIT(A) on this issue.
Deduction u/s 80IC in respect of the undertaking at Haridwar, Uttaranchal - AO did not allow the deduction holding that the Assessee had not carried out any business through this impugned undertaking and 100% goods or products are being used by the designated division of the Assessee - Assessee has not included in the credit side of the Profit & Loss account any profit while deduction has been claimed on the notional profit - CIT(A) deleted the disallowance - HELD THAT:- As relying on assessee's own case said unit is eligible for deduction u/s 80IC. So far as the issue that no profit has been credited in the Profit & Loss account, we noted that CIT(A) has even though decided in favour of the Assessee that the Assessee is eligible for deduction u/s 80IC but has not given any finding whether the income generated from this undertaking stands included in the gross total income of the Assessee. The income need not be separately credited to the Profit & Loss account when the income derived from the eligible undertaking has to be computed. The revenue authorities should only ensure whether income from the eligible undertaking is included in the gross total income of the Assessee or not as the basic condition for allowing of deduction u/s 80IC is that the Assessee is eligible for deduction if the gross total income includes any profit and gain derived by the eligible undertaking. We, therefore, restore this issue to the file of the CIT(A) with the direction that CIT(A) shall re-decide this issue and give a clear-cut finding whether the income derived by the Assessee from the said eligible undertaking stands included in the gross total income of the Assessee.
Disallowance in respect of interest payment on income tax dues - Assessee has claimed set off of interest payment on income tax dues against interest earned on the income tax refund - AO did not allow the same - CIT(A) also dismissed the ground taken by the Assessee - HELD THAT:- In the result, it is to be held that the assessee is assessable in respect of the gross interest received from the income tax department and not merely on the net interest remaining after set off of the interest paid to the income tax department. see Dy. CIT v. Sandvik Asia Ltd. [2011 (6) TMI 563 - ITAT, PUNE]
Disallowance u/s 14A - HELD THAT:- Assessee himself has disallowed a part of the expenditure being the proportionate management expenses for earning of the dividend. The Ld. AR also did not dispute the working made by the AO under Rule 8D. In view of our aforesaid discussion, we confirm the order of CIT(A). Thus, this ground stands dismissed. In the result, the appeal filed by the Assessee stands dismissed.
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2014 (9) TMI 1185 - ITAT CHANDIGARH
Scrutiny under the CASS - CIT-A confirming that the assessment framed u/s 143(3) by the Additional Commissioner of Income Tax, Range III, Chandigarh is with proper jurisdiction - HELD THAT:- CIT(A) has correctly adjudicated the issue because in this case the case was selected on the basis of CASS which is also known as Computer Assisted Scrutiny System. Moreover, the case was selected for security on 2.9.2009 when a notice u/s 143(2) was issued whereas the instructions have been issued on 8.9.2010 and, therefore, they cannot apply to the earlier period. Once the case is selected for scrutiny under the CASS and notice is issued u/s 143(2) then whole of assessment is open for scrutiny. In any case the Ld. CIT(A) has correctly observed that this is an administrative matter and could have been objected to before the Commissioner in administrative capacity and cannot be challenged in the appeal, therefore, in our opinion no interference is required in the order of Ld. CIT(A).
Disallowance u/s 40A(2)(b) - salary paid to wife of the assessee - Addition in view of the clubbing provisions of section 64(1)- AO observed that assessee was engaged in the advertising business and there was no evidence or any material on record to show that wife of the assessee was engaged in the English Copy writing and preparing the advertisement brochures - HELD THAT:- Assessing Officer has referred to the provision of section 40A(2)((b) initially but finally disallowance has been made u/s 64(1)(ii). This has been done because the assessee is running a business in his individual capacity and any remuneration paid to the wife is required to be clubbed with his income. Whether the income is clubbed or the expenditure is disallowed would amount to the same thing because net effect would be to the increase in the income of assessee. Further the Ld. CIT(A) has finally confirmed the disallowance by way of clubbing u/s 64(1)(ii) and we are concerned with the impugned order where reference has been made to section 64(i)(ii) of the Act and no cognizance can be taken for the reference made by Assessing Officer to section 40A(2)(b).
Contention as raised by the assessee that the similar expenditure has been allowed in the earlier years even under the scrutiny assessment completed for assessment year 2007-08 is not acceptable because in the case of CIT v British Paints India Ltd [1990 (12) TMI 2 - SUPREME COURT] it is incorrect to say, as contended on behalf of the assessee, that the officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and the officer is not bound by the method followed in the earlier years - there cannot be any estoppel if earlier a wrong proposition was accepted by the Assessing Officer against the clear provision of law. This is so because an error cannot be allowed to be perpetuate forever.
Difference in the sales - no entry for rebate has been made - HELD THAT:- Assessee has credited the account of Glass Palace with individual entries for rebates allowed e.g. against the bill of ₹ 22,244/- as rebate of ₹ 1,747/- is credited but no entry for rebate has been made by M/s Glass Palace. Thus, it becomes clear that M/s Glass Palace has made only one entry at the end of year towards rebates allowed to them through the year which also include adjustments on account of furniture. Similarly, in the of M/s Healthway, perusal of account would show that they have taken credit of total rebate amounting to ₹ 18,37,300/- whereas the assessee has allowed rebates only up to ₹ 16,45,654/-. If other party debits account with more debit without the consent of the assessee then assessee could not be blamed. Therefore, reading of the various entries clearly show that account was duly reconciled and whatever difference is there stand duly explained, therefore, there is no justification in this addition
Addition u/s 40A - Cash payment - as submitted that payments were made in various installments for purchase of festival gifts - as per CIT-A even if the payment was made in installments, the same was covered by the provisions of section 40A(3) - disallowance of interest u/s 40A(3) could be made for any payment in cash in excess of ₹ 20,000/-. However, the provision did not contain the expression “aggregate of payment” and Hon'ble Orissa High Court has held that in the case of CIT v Aloo Supply Co. [1979 (12) TMI 60 - ORISSA HIGH COURT] that if payments were made at various points of time in a particular day but less than ₹ 2,500/- (as applicable in the relevant year which was later changed to ₹ 20,000/-) then provisions of section 40A(3) was not attracted.
Addition u/s 68 or 69A - assessee deposited cash in excess of ₹ 10 lakhs in the year under consideration - as per CIT-A addition could not made u/s 68 and made the addition u/s 69A - HELD THAT:- Assessing Officer had information that assessee had deposited certain sums in a bank account and assessee was duly confronted with this information but assessee had no explanation and that is why the addition was made. Merely because the bank pass book cannot be treated as books of account on the basis of certain decisions does not mean that addition is not protected u/s 292B and has been rightly confirmed by the Ld. CIT(A) u/s 69A of the Act.
CIT(A) has plenary powers and the scope of the powers to be co-terminus with that of Income Tax officer. Therefore, he can do whatever can be done by the Assessing Officer. The Ld. CIT(A) under these powers has correctly upheld the addition under the correct provisions.
Assessing Officer clearly found that assessee had deposited cash for which assessee had no explanation and that is why addition was made. CIT(A) has not discovered anything new except that he agreed with the contention that addition could not made u/s 68 and made the addition u/s 69A of the Act. Thus we find nothing wrong with the order of Ld. CIT(A) and confirm the same.
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2014 (9) TMI 1184 - DELHI HIGH COURT
Offence u/s 18(2) and Section 18(3) of FERA - deliberate attempt to refrain from realising the export proceeds - imposing of penalty on the company, i.e., ('COPL') and on the individual Directors for contravention of Section 18(2) and Section 18(3) FERA - show cause why the proceedings u/s 51 FERA should not be initiated against them - HELD THAT:- The scheme of MMTC was to encourage the smaller exporters, who, on their own strength, would have normally been unable to procure orders from abroad for export of jewellery. It is difficult, therefore, to equate the exporters working as 100% EOU in the premises given on lease to the MMTC with other exporters who may be operating on a larger scale and who may have wherewithal to take more effective steps for realisation of export proceeds. The key issue here is about the sincerity of the efforts made by COPL to realise the proceeds. What Section 18(2) FERA expects is that there should be no deliberate attempt to refrain from realising the export proceeds.
The AO of DD itself notices that the Appellants made sincere efforts to realise at least part of the outstanding amount. In the circumstances, it is not possible to concur with the conclusion reached by the DD in the AO that there has been a contravention by the Appellants of Section 18(2) and Section 18(3) FERA. The AT also does not appear to have examined the documents placed on record by the Appellants to show the efforts made by them to realise the export proceeds. Consequently, this Court sets aside the impugned order of the AT dated 13th March 2008 and the order of the DD, ED dated 25th February 2008 and allows these appeals. The amounts deposited by the Appellants pursuant to the AO and the impugned order of the AT shall be refunded to them within a period of four weeks in accordance with law.
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2014 (9) TMI 1183 - COMPANY LAW BOARD, CHENNAI
Reference to arbitration - dispute relating to and is in connection with the company - dispute revolves around the alleged allotment of shares, alleged removal of directors etc which are covered in the shareholders' agreement - whether the applicant has made out any case to refer the subject matter of the company petition to arbitration? - Section 8 of the Arbitration and Conciliation Act.
Whether there is an arbitration agreement among the parties - Held that:- The SHA dated 30.07.2008 having described the promoters as those persons who are listed out in Schedule I numbering into 12 individuals, in the absence of the signature of the entire parties in the capacity as promoters, the said document cannot be titled as agreement either under the Contract Act or under the Arbitration and Conciliation Act. Hence this criteria is not satisfied.
Commonality of parties - Held that:- The parties to the S.H.A are different from the parties to the Company petition and hence one of the ingredients of the requirements to be satisfied under section 8 has not been fulfilled in the facts of the matter herein and hence the question of referring the said matter to arbitration does not arise.
Subject matter of dispute vis-a-vis agreement - Held that:- The subject matter of the petition relates to rights of members and relief in pursuance of statutory provisions as provided for in sections 397 to 403 of the Companies Act, 1956 and the same cannot be construed as matters covered by scope of arbitration agreement. However the scope of the said section as laid down by various courts makes clear the distinction between the statutory power and terms of any mutual arrangement by an agreement. It is well settled law that parties by mutual concern cannot be permitted to override the statutory provisions. Hence both factually and legally the subject matter of the company petition would not fall within the scope of arbitration agreement.
Whether the applicant had filed the said application before submitting the 1st statement on the substance of the dispute? - Held that:- This Bench is of the view that having issued a purported legal notice in February 2013, by the said applicant as per Exhibit R3 no plausible explanation was offered for their action of filing section 8 Application in November 2013 and the applicants have not approached this Bench with clean hands. Therefore the action of not filing counter not having been explained, the filing of application u/s.8 cannot be taken as bonafide one is nothing but to cover up the unexplained delay in filing 1st statement to the petition. Hence the applicant cannot be said to have acted bonafidely on this aspect.
Whether the reliefs sought in the petition are those that can be adjudicated and granted in Arbitration proceedings? - Held that:- The relief sought in the petition cannot be adjudicated and cannot be granted through arbitration in view of the Mandatory Provisions Empowering Exclusive Jurisdiction to CLB for deciding such issues. The main point of the applicant is that the reliefs sought for in the CP are arbitrable in terms of SHA and the arbitration clause in the AOA. In this aspect it is well settled law that in a matter of oppression and mismanagement any arbitration clause in the articles of association a company shall not have any legal force and validity of enforcement in view of the provisions of section 9 of the Companies Act, 1956 - In view of the mandatory provisions of the Act the question of relying upon the clauses of the AOA and making any reference to arbitrator in view of existence of arbitration clause for answering the disputes raised by members touching upon oppression and mismanagement does not arise at all.
The arbitration clause even if it forms part of Articles of Association, but is violation of section 9 of the Act, the same cannot be enforced by law. However, it is clarified that an arbitration clause in an agreement between the parties, and any disputes between the parties on subject matter covered within the terms of agreement, shall fall within the jurisdiction of any arbitrator subject to certain statutory provisions.
The core issue namely whether the applicant has made out any case to refer the subject matter of the CP to arbitration need to be answered in negative - application dismissed.
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2014 (9) TMI 1182 - ALLAHABAD HIGH COURT
Disallowance of consultancy charges - ingenuity of claim - tribunal allowed part claim - HELD THAT:- We are of the view that when the A.O. has accepted the genuineness, he might have allowed the entire claim of the assessee. But there was no reason to give the partial relief. In these circumstances, we uphold the order of the appellate authority who has rightly deleted the addition. Hence, the impugned order is set-aside and the order of the first appellate authority is hereby sustained - Decided in favour of assessee.
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2014 (9) TMI 1180 - SUPREME COURT
Deficiency in payment of court-fee - case of plaintiff is that the aspect of deficit court-fee came to the knowledge of the Plaintiffs at the time of preparation of decree only and, therefore, an opportunity deserved to be granted to the Plaintiffs to make up the deficit court-fee in the interest of justice - invocation of Sub-sections (2) & (3) of Section 6 of Court Fees Act, 1870 - Held that:- The impugned order can not be sustained for more than one reason. In the first place, the High Court has not properly construed Sub-sections (2) & (3) of Section 6 of the 1870 Act - Sub-section (2) of Section 6 provides that in plaint in which sufficient court-fee has not been paid, such plaint shall not be acted upon unless the Plaintiff makes good the deficiency in court-fee within such time as may from time to time be fixed by the Court. Sub-section (3) provides that if a question of deficiency in court-fee in respect of any plaint is raised and the Court finds that the court-fee paid is insufficient, it shall ask the Plaintiff to make good the deficiency within the time which may be granted and in case of default, the plaint shall be rejected.
The provisions of section 6 casts duty on the Court to determine as to whether or not court-fee paid on the plaint is deficient and if the court-fee is found to be deficient, then give an opportunity to the Plaintiff to make up such deficiency within the time that may be fixed by the Court. The important thread that runs through Sub-sections (2) and (3) of Section 6 of 1870 Act is that for payment of court-fee, time must be granted by the court and if despite the order of the court, deficient court-fee is not paid, then consequence as provided therein must follow - Insofar as present case is concerned, the first appellate court in its order rightly observed that after amendment of plaint and consequent amendment in valuation, the trial court did not pass any order specifying time for payment of deficient court-fee. Obviously, in the absence of such specific order, Sub-sections (2) & (3) of Section 6 of 1870 Act would not come into operation against the Plaintiff.
Clause (ii) of Section 12 of 1870 Act clearly empowers the appellate court to direct a party to make up deficit court-fee in the plaint at the appellate stage. The power exercised by the first appellate court can be traced to Clause (ii) of Section 12 of 1870 Act as well - The order of the first appellate court being eminently just and proper there was no justification for the High Court to invoke its power Under Article 227 of the Constitution of India and interfere with an order which effectively advanced the cause of justice.
The impugned order is unsustainable in the eye of law and deserves to set-aside - appeal allowed.
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2014 (9) TMI 1179 - ITAT CHENNAI
Validity of reopening of assessment - failure on the part of assessee to disclose material facts - HELD THAT:- Reopening in this case was made within a period of four years from the end of the assessment year and the reopening was made subsequent information available with the Assessing Officer and therefore reopening is valid
Deduction u/s 36(1)(viia) to be restricted to the provision made in books as against the entire eligible amount - HELD THAT:- As decided in assessee's own case [2013 (4) TMI 751 - ITAT CHENNAI] a look into the original assessment order clearly show that but for the deduction allowed to the assessee as claimed by it in its return, there was no discussion as to how Section 36(1)(viia) was applied and whether the limits were corrected worked out. Admittedly, no question was asked to the assessee during the course of assessment proceedings also with regard to the claim made by it under Section 36(1)(viia), insofar as it concerns the quantum of such claim. This obviously show that there was no application of mind by the Assessing Officer at the time of assessment. Assessing Officer had not come to any conclusion at all having not considered the claim in the light of the conditions set out in Section 36(1)(viia) of the Act. We cannot say that he had taken a view which was in accordance with law. It is not a case where the Assessing Officer had adopted one of the courses possible in law. Of course, a cryptic order of the Assessing Officer by itself may not show that there was no thought given by him on a claim of the assessee. However, here there was no enquiry made during the course of assessment proceedings. Therefore, the order which was silent on the claim made by the assessee, and allowing such claim, without any discussion, will definitely render it erroneous and prejudicial to the interests of Revenue - decided against assessee.
Addition made towards provision for bad and doubtful debts and depreciation on investments - CIT-A deleted this addition on verifying the details furnished by the assessee i.e. copy of computation of income, break-up of provisions of contingencies debited to profit and loss account etc. accepting the contention of the assessee that it has correctly added back the provision while computing its income - HELD THAT:- No infirmity in the conclusion arrived at by the Commissioner of Income Tax (Appeals) in deleting the disallowance. The Revenue has also not placed any document on record to rebut the findings of the Commissioner of Income Tax (Appeals). In the circumstances, we uphold the order of the Commissioner of Income Tax (Appeals) and reject the grounds raised by the Revenue on this issue.
Taxability of unreconciled entries in inter branch transactions credited to profit and loss account - HELD THAT:- Commissioner of Income Tax (Appeals) following the decision of Delhi Bench of this Tribunal in the case of Punjab National Bank Vs. Addl. CIT [2012 (5) TMI 437 - ITAT, NEW DELHI] deleted the addition made by the Assessing Officer. On a perusal of the decision of the Delhi Bench of this Tribunal, we find that the said decision squarely applies to the issue on hand. The Delhi Bench of this Tribunal considered a similar situation where the assessee reduced unreconciled balances while computing the income which was brought to tax by the Assessing Officer and the Tribunal held that question of bringing such sums to tax under section 41(1) are not permissible. Thus we uphold the order of the Commissioner of Income Tax (Appeals) and reject the grounds raised by the Revenue on this issue.
Non applicability of provisions of section 115JB to assessee bank as decided in assessee's own case [2013 (4) TMI 919 - ITAT CHENNAI]
Interest under section 244A on the interest component of the refund also - HELD THAT:- On going through the decision of the Hon’ble Supreme Court in the case of Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] we find that the issue on hand has been decided against the assessee by the Larger Bench holding that assessee is not entitled for interest on interest. Respectfully following the said decision, we hold that interest on interest is not allowable to the assessee. The grounds raised by the Revenue are allowed on this issue.
Disallowance u/s 14A - HELD THAT:- As perused the order of co-ordinate Bench of this Tribunal for the assessment year 2009-10, wherein the Tribunal held that authorities below have wrongly invoked section 14A in case of investments held as stock-in-trade.
Disallowing deduction in respect of contribution to staff welfare fund confirmed relying on its own case [2013 (4) TMI 751 - ITAT CHENNAI].
Disallowance of provision for wage arrears - HELD THAT:- Provision made towards wage arrears is only a provision and liability has not been crystallized. The wage arrears shall be allowed as deduction in the year in which the assessee discharges the liability by paying wage arrears to the employees. Thus, the ground raised by the assessee on this issue is partly allowed.
Relief u/s 90 to the extent of tax paid in the foreign country - HELD THAT:- As decided in assessee's own case [2014 (6) TMI 954 - ITAT CHENNAI] held that a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by ‘elimination’ method or as per the terms of agreement seeking to avoid double taxation. - Decided against assessee
Provision for loss on ‘market to market’ basis in respect of trading derivatives could not have been disallowed. So, the impugned disallowance stands deleted.
Depreciation on UPS to be allowed at 60% as decided in assessee's own case [2014 (6) TMI 954 - ITAT CHENNAI]
Claim of the assessee for allowing provision for leave encashment invoking the provisions of section 43B to be allowed to be followed in assessee's own case [2013 (4) TMI 751 - ITAT CHENNAI].
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2014 (9) TMI 1178 - ITAT MUMBAI
Rejection of books of accounts - HELD THAT:- CIT(A) himself had admitted the books of account as an additional evidence and the Department is not in appeal against those orders. Once the admission of the books of account has been accepted, then the CIT(A) ought to have gone with the books of account and if the books of account were not found proper or as per the accounting policies, the same should have been rejected but that being not the case, no reason for not admitting the books of account - the books of account ought to have been examined by the authorities below. We therefore restore this issue to the file of the A.O. to examine the correctness of the books of account with supporting evidences.
Enhancement of income in principle - mismatch in the balances in the ledger account of the appellant and Late Shri Harshad S. Mehta - difference on account of opening balance - HELD THAT:- The difference calculated by the A.O. is at ₹ 33,90,593/- leaving a megre sum of ₹ 20/-. Further, we find that Late Shri Harshad S. Mehta has to receive more amount from the assessee therefore the difference cannot be treated as income of the assessee. It is not a case where the assessee is showing more amounts to be received from Late Shri Harshad S. Mehta. Further, it is an undisputed fact that the difference is only in respect of opening balances and with a difference of ₹ 31072/- pertaining to the year under consideration. We, therefore, restore this issue to the file of the A.O. for the limited purpose of verification of reconciliation of the difference between the opening balances and the closing balances relating to brokerage and lease rent. The assessee is directed to file necessary details.
Levy of interest u/s 234A and 234B is mandatory, however, the same is consequential in nature and hence the necessity of adjudicating this ground does not arise.
Correct amount of long term capital gain - HELD THAT:- After admitting this additional ground, in our considered opinion, it requires verification of facts. We, therefore, restore the issue to the file of A.O. The A.O. is directed to verify the correct amount of long term capital gain as per the details brought to his notice. The assessee is directed to furnish necessary details. The additional ground is accordingly allowed for statistical purpose.
Addition on account of profit on sale of shares - HELD THAT:- As gone through the order of the first appellate authority in the case of Shri Hitesh Mehta dtd, 29-3-2012. We find that the entire addition has been made by the A.O. on the basis of information gathered from different sources. We find that the A.O. has merely picked up figure from the Annexure and arrived at the figure of addition without making enquiry or bringing any evidence on record. We find that on identical facts in the case of Shri Hitesh Mehta, the additions were deleted. The said order was challenged before the Tribunal but this issue was not raised before the Tribunal
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2014 (9) TMI 1177 - BOMBAY HIGH COURT
Interest on the delayed refund of excess amounts paid as tax - Held that:- When Section 244A of the Act was introduced, a Circular dated 31 October 1989 was issued by the C.B.D.T wherein it is illustrated that where the refund is granted to an assessee, interest would not be payable only for the period of delay attributable to the assessee. In this case the impugned order does not attribute any delay to the assessee in the proceedings of Revision resulting in the refund.
In the present case there is a statutory obligation to grant interest. However as observed by the Supreme Court in Tata Chemicals Ltd. [2014 (3) TMI 610 - SUPREME COURT] even in the absence of a statutory provision the State is bound to recompensate the person whose money it has used.
In the above view the impugned order is set aside to the extent it refused to grant interest to the Petitioner on the sum of ₹ 7,50,768/-lakhs being the excess amount already refunded by the Revenue to the Petitioner. However as the Petitioner has restricted his claim for interest on refund of ₹ 7,50,768/- only from the date of filing the revision application on 3 October 1997 upto the date the refund of ₹ 7,50,768/-was granted. We therefore direct the Assessing Officer to work out the interest payable to the Petitioner on ₹ 7,50,768/- from 3 October 1997 to the date of refund and pay the same to the Petitioner.
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2014 (9) TMI 1176 - ITAT JAIPUR
Rejection of books of accounts - decline of gross profit rate - sales made could not be verified and the cash sales being 72.5% of all the sales and the g.p. rate fell from 0.76% to 0.15% within one year - Held that:- As clearly emerges that the assessee was maintaining regular books of account and stock inventory. The turnover of bullion had gone up by four times. The decline of gross profit rate has been duly explained by the assessee due to the reason that there was fluctuations in the bullion prices. The books of accounts of this proprietorship concern are in order which has been properly maintained by the assessee with supporting vouchers and stock register. Thus there was no justification in rejecting the books of account of the assessee i.e. M/s. Mohan Lal Mahendra Kumar (MMJ), Jaipur. - decided against revenue
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2014 (9) TMI 1175 - ITAT KOLKATA
Unexplained cash credit u/s 68 - Held that:- A perusal of the paper book as filed by the assessee shows that the assessee has provided Permanent Account Numbers and the confirmation of the loans by all the loan creditors. A perusal of the paper book clearly shows that all the creditors are assessed to income tax and they have filed their returns of income for the assessment year 2006-07 in March, 2007.
The assessment in the case of the assessee has been initiated only after March, 2007, so obviously it cannot be assumed that the returns had been filed by the creditors after the initiation of the assessment proceedings in the case of the assessee. A perusal of the paper book clearly shows that the return acknowledgment, computation of income along with the Capital A/c. and the affidavits of the creditors were before the Assessing Officer. This fact being undisputed clearly the decision in the case of Dataware Private Limited [2011 (9) TMI 175 - CALCUTTA HIGH COURT] squarely applicable on the facts of the assessee’s case. - Decided in favour of assessee.
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2014 (9) TMI 1174 - KERALA HIGH COURT
Removal of teacher from job - rejection to reinstatement to the job - after placing a teacher under suspension and subjecting her to departmental enquiry, the management of the school recommends the Government to remove her from service. The educational authorities in the Government, apart from rejecting the recommendation of the school management, directed reinstatement of the teacher. The school management has persistently refused to reinstate the teacher in compliance with the direction of the competent authority.
Primary contention of the learned counsel for the appellant is that Exts. P-11, P-17 and P-21 orders are permissive in nature, granting privilege or liberty to the appellant to reappoint the 1st respondent - Held that:- Ext. P-11, GO. (Rt.) No. 302/1997/H.Edn., dated 17-3-1997, is the first order issued by the Government extending the particular benefit as a matter of policy decision to a group of persons, who have been displaced or retrenched from their previous employment, thereby treating them as separate class. Rest of the orders, such as Exts. P-17 and P-21, are consequential in nature - if any liberty is given or privilege is extended, it is to the displaced employees, including the 1st respondent, but not to the colleges in which they earlier worked. Since Government made reemployment of the displaced teachers contingent on the existence of vacancies, Government later issued Ext.P-14 order creating supernumerary posts. The consequential orders, Exts. P-17 and P-2, do not differ much in the scope and ambit to conclude that they are in any way permissive in nature - Exts. P-11, P-17 and P-21 are peremptory and binding, subject to their validity.
Statutory Scheme - Held that:- In the present instance, Government have created supernumerary posts and it being a college covered by Direct Payment Agreement, have agreed to pay the salary, without putting any financial burden on the appellant college. It has asked, nay directed, in terms of Section 56(7) of the Act, the appellant to reemploy its former employee, who has been made a victim of a collateral damage caused by certain judicial proceedings, in which he had essentially no say - It is fallacious to contend that always recourse shall be taken to regular recruitment from open market under all circumstances. There can be exceptions, as has been demonstrated statutorily in Section 62(2)(b). The public employment, after all, is the sovereign prerogative of the State exercised through its Executive branch - among other provisions, as per Section 56(7) of the Act, Government can bind the appellant college with its directions and directives. As per Section 59 of the Act, it can create posts and as per Section 62(2)(b) of the Act, there can be exceptions to regular open recruitment.
Inherent and Incidental Powers - Held that:- It is hardly necessary to mention that if there is a statutory rule or an act on the matter, the executive must abide by that act or rule and it cannot in exercise of the executive power under Article 162 of the Constitution ignore or act contrary to that rule or act.
Is it a Police Power? - Held that:- The action of the Government in issuing Exts. P-11, P-14, P-17 and P-21 is not ultra vires, their administrative power under the Act are in terms of the residuary constitutional provision, namely Article 162 of the Constitution - the action of the Government in issuing Exts. P-11, P-14, P-17 and P-21 is not ultra vires, their administrative power under the Act are in terms of the residuary constitutional provision, namely Article 162 of the Constitution.
Determination of sustainability of collateral challenge to an executive measure of the State vis-ŕ-vis one of its instrumentalities - Held that:- It is essential to note the jurisprudential divergence, if any, between the English Law and the Indian Law, confining the discussion only to the aspect of collateral challenge, though.
Continental Contours of Administrative Law - Held that:- The issue of collateral challenge is a procedural remedy against the orders which are manifestly void. Contextually, it can be stated that an administrative order can be void on two counts: audi alteram partem and ultra vires. Since Exts. P-11, P-14, P-17 and P-21 are not quasi- judicial in nature, ever so thin the distinction has been, we are not concerned with the aspect of principles of natural justice.
Collateral Challenge - Held that:- Constitution is a matter of limitation of powers, while statutes are regulatory in nature. For a common man, Court of law is the last resort and as such, to preserve his rights and to negate the State's excessive interference, if any, in his affairs, his resistance takes myriad forms; it can be active or passive. He can lay a direct challenge or collaterally question the acts of Government, which, in his view, are not in consonance with the law of the land. On the other hand, the Executive is not a motionless monolithic; it is, in fact, a fine tuned administrative machine. Every official is a cog in the machine required to function as per the role assigned to him or her. Any malfunctioning of a cog in the machine, however small it is, throws the whole machine out of gear and renders it malfunctioning - In the present sentence, as has statutorily demonstrated above, the appellant is under the all pervasive control of the State and its manager is an official in terms of Article 12, as well as Article 226 of the Constitution of India Ipso facto, he cannot be allowed to ignore even void orders, without laying a proper challenge against them and justify his inaction and disobedience to binding administrative directives in the name of collateral challenge, by prejudging the purative voidness of the directive.
Void Orders - Held that:- Unless a Court of law either set aside or declares an administrative instruction, direction or order as invalid and inoperative, it will be presumed to be valid and operative.
Denial of Pay & Allowance for the Interregnum - Held that:- In this case, it is the Government, which is the paymaster. All along it has been directing the management to re-employ the 1st respondent, but it is the appellant management that has proved recalcitrant. Under these circumstances, directing payment of back wages puts an unjustifiable burden on the Government, which has never been at fault. It cannot be made to pay for the mistakes of the appellant college. The fact further remains that the 1st respondent attained the age of superannuation and deemed to have been retired from service in April, 2014 - As a matter of restitution, Government is at liberty to recover the said amount of back wages being paid to the 1st respondent from the appellant either by way of direct recovery, by taking recourse to the recovery mechanism such as Revenue Recovery Act or to exercise the power of set off from and out of the funds to be disbursed to the appellant college.
Appeal disposed off.
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2014 (9) TMI 1173 - ITAT MUMBAI
MAT computation - Addition made to the book profit on account of profit made on sale of land not credited to the profit and loss account - income reflected in the company's books of account - deemed income for the purpose of assessing the tax - Held that:- In the case of Adbhut Trading Co. Pvt. Ltd. [2011 (7) TMI 716 - BOMBAY HIGH COURT] held that once the accounts including profit and loss account had been prepared and certified by the authorities under the Companies Act, it was not open for the AO to state that P&L Account has not been prepared in accordance with the provisions of Companies Act.
Respectfully following the decision of Adbhut Trading Co. Pvt. Ltd. (supra) and in the case of Akshay Textiles Trading and Agencies Pvt. Ltd [2007 (10) TMI 251 - BOMBAY HIGH COURT]), we do not find any infirmity in the order of ld. CIT(A) for deleting the addition under Section 115JB.
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2014 (9) TMI 1172 - DELHI HIGH COURT
Permission to withdraw the writ petition - Held that:- Permission is granted - The writ petition is dismissed as withdrawn.
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2014 (9) TMI 1171 - ITAT CHANDIGARH
Penalty u/s 271C - disallowance under section 40(a)(ia) - assessee paid interest to non banking financial institution and did not deduct tax - bonafide belief - Held that:- Assessing Officer made disallowance under section 40(a)(ia) and other additions were also made in the assessment order, which are accepted by the assessee and the demand raised as per assessment order has been paid. Therefore, these circumstances would clearly reveal that the assessee has reasonable cause for failure to comply with the provisions of section.
Therefore, in view it being a beginning of the assessee for failure to deduct tax and then the assessee in future has starting deducting TDS would suggest that the penalty may not be imposed in the aforesaid case. Considering the above discussion, we are of the view that the levy of penalty in the facts and circumstances of the case is not warranted. We accordingly set aside the orders of the authorities below and cancel the penalty. - Decided in favour of assessee.
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2014 (9) TMI 1170 - ITAT PUNE
Depreciation claim on wind mill - disallowing the claim of depreciation @ 80% on the total cost of the windmill by treating part of the cost as being incurred for civil works and thereby allowing depreciation @ 10% only on such costs - necessary civil works towards erection and installation of the wind turbine are integral part of the windmill without which the windmill cannot come into existence and generate electricity and therefore the same is to be treated as part of the windmill - Held that:- Tribunal in the case of CIT Vs. Everready Investments Pvt. Ltd. [2013 (11) TMI 1733 - ITAT PUNE] has held that cost of civil work apportioned towards the erection of foundation for windmill shall be eligible for depreciation @80% and the balance of the cost shall be eligible for depreciation @10%. Thus we restore the issue to the file of the AO with a direction to recompute the depreciation in the light of the direction of the Tribunal. The ground raised by the revenue as well as the ground raised by the assessee in the CO are accordingly allowed for statistical purposes.
Addition made on account of unaccounted investment in land - Held that:- Respectfully following the decision of the Tribunal in the case of Ghodawat Foods International Pvt. Ltd.[2013 (12) TMI 1672 - ITAT PUNE] where similar addition made by the Assessing Officer was deleted by the CIT(A) and the appeal filed by the revenue has been dismissed, therefore, we find no infirmity in the order of the CIT(A) deleting the addition made by the Assessing Officer on account of unaccounted payment for purchase of land. The ground raised by the revenue is accordingly dismissed.
Estimated profit on suppressed turnover - unaccounted sale of Gutkha - Held that:- Since the assessee in the instant case maintains proper books of accounts which are duly audited and since no addition has been made by the excise department on account of purchases, sales or production outside books and since no incriminating documents whatsoever were either found or seized from the office or the factory premises of the assessee regarding any unaccounted purchases or sales and since the stock found at the time of search tallied with the stock as per books of accounts maintained, therefore, under the facts and circumstances of the case, we are of the considered opinion that no addition can be made on account of estimated profit on suppressed turnover. Since the income on account of suppressed sale has been deleted by the Tribunal in the hands of Shri Dharmesh Patel, therefore, there is no question of any unaccounted sale by the assessee to Shri Dharmesh Patel. Accordingly, the grounds raised by the assessee for the A.Y. 2009-10 is allowed.
Addition on account of working capital employed to run unaccounted business of gutkha - Held that:- Admittedly, the addition was made by the AO on the ground that the assessee is running parallel unaccounted business for which initial capital is required considering the production process and average credit given to C&F agents, distributors etc. In the preceding paragraphs, we have already held that the order of the CIT(A) deleting the additions made in A.Yrs. 2003-04 to 2006-07 and 2007-08 to 2009-10 are justified and does not require any interference in absence of evidence of any unaccounted sales. We have also deleted the addition sustained by the CIT(A) for A.Y. 2009-10. Since there is no finding of any unaccounted business, therefore, there is no requirement of any additional capital. In this view of the matter, we uphold the order of the CIT(A). Ground raised by the Revenue is dismissed.
Rejection of books of accounts u/s.145 - Held that:- In view of our discussion in the preceding paragraphs while adjudicating the ground relating to deletion of estimated profit on unaccounted sales made by the AO, we find no infirmity in the order of the CIT(A) holding that the AO was not justified in rejecting the books of accounts u/s.145 of the I.T. Act. We accordingly uphold the order of the CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed.
Disallowance of depreciation and petrol of vehicles - Held that:- CIT(A) has deleted the adhoc disallowance made by the Assessing Officer by following the decision of Hon’ble Gujarat High Court in the case of Sayaji Iron and Engineering Company [2001 (7) TMI 70 - GUJARAT HIGH COURT]. No infirmity in the order of the CIT(A) deleting the adhoc disallowance. Accordingly, we uphold the same. The ground raised by the Revenue is accordingly dismissed.
Unexplained investment in cars - Held that:- Presumptions and surmises, however strong may be, cannot be the basis for addition in absence of any corroborative evidence. There is nothing on record to show that during the impugned assessment year the assessee has paid any extra money over and above the purchase price as recorded in the books of accounts. None of the sellers was examined by the AO. The AO has not brought on record the date of original purchase price by the sellers, date of purchase by them, date of sale to the assessee etc. It is well known that the price of vehicle decreases after it is purchased and used for some time and the value never remains constant or increase. It only decreases. In view of the above and considering the detailed order of the CIT(A) which in our opinion is a reasoned one, we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.
Adopting the expenditure over gross receipt of agricultural income - Held that:- We find the AO in the very first paragraph has stated that the agricultural income shown by the assessee is ₹ 3,93,99,179/. However, at para 15 of the order he has stated the agricultural income declared by the assessee at ₹ 3,62,84,200/-. We find although the Ld.CIT(A) accepted the reasoning given by the AO, he however accepted the contention of the assessee that there is some arithmetical inaccuracy. Since there is some variation in the agricultural income mentioned by the AO in the body of the assessment order, therefore, we restore this issue to the file of the AO with a direction to verify the figures and pass appropriate order. The ground raised by the Revenue is accordingly allowed for statistical purposes.
Addition with regard to silver coins - CIT(A) deleted the addition holding that the silver coins stand fully explained in the books of account - Held that:- It is the settled proposition of law that the powers of the CIT(A) are co-terminus with that of the power of the Assessing Officer. He can do anything which the AO has failed to do. From the copy of the assessment order, we find the order of the AO is silent regarding as to what type of queries were asked to the assessee. The AO simply has mentioned in the body of the assessment order that assessee has not given any explanation with regard to source of investment of silver coins found at the business premises. It is also a fact that no such seizure was made of the silver coins. Since the ledger account contains the purchase of silver as well as the bill for manufacturing of the same into coins and that those bills were debited to Advertisement account, therefore, we do not find any infirmity in the order of the CIT(A) deleting the above addition after due verification of the same - Decided in favour of assessee.
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2014 (9) TMI 1169 - ITAT MUMBAI
Income on sub lease of land and the maintenance income under the head business income - allowing of various expenses, including the maintenance income claimed by the assessee as business expenses as against the findings of the AO that no business activity has been carried out by the assessee and the consequent disallowance of the expenses - CIT(A) directed the AO to assessee the income on sub lease of land (apart from rental income) and maintenance income under the head business income - Held that:- Tribunal has confirmed the earlier orders of the first appellate authority for the A.Ys. 2007-08 and 2008-09 and similar grounds preferred by the Revenue have been dismissed by Tribunal on identical facts. The Tribunal, for said order, in turn, has relied on the earlier order of the Tribunal dated 11.09.2013 for the A.Y. 2005-06, wherein it has been held that the assessee has commenced its business activity in March, 2004. In view of the fact that the Ld.CIT(A) has relied on his own orders for the earlier assessment years, which has been confirmed by the Tribunal, and also since the Revenue is not in a position to bring any contradictory facts during the year under consideration, we do not find any justifiable reason to interfere with the decision of the Ld.CIT(A) and thus the same deserves to be upheld.
Addition made by the AO in respect of interest on borrowed capital utilized for construction of property - Held that:- The Tribunal, in the said order, has held that if interest has been paid by an assessee for acquiring or construction assets that are used for earning taxable income then his claim for interest expenditure has to be allowed. The relevant finding of the Tribunal is at para 15 of the said order. Since the decision of the Ld.CIT(A) for the A.Y. 2008-09, which has been relied on by him for the impugned decision has been upheld by the Tribunal, we do not find any justifiable reason to interfere with the impugned decision, which deserves to be upheld. Accordingly, we decide this issue against the revenue and in favour of the assessee.
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2014 (9) TMI 1168 - ITAT PANAJI
TDS u/s 194A - Whether, in respect of interest paid on time deposits by a co-op bank, the clause(v) which deals with cooperative societies will apply or the clause (viia) which mentions specifically "a co-operative society engaged in the business of banking" finds application? - Held that:- The Finance Act 1970, inserted clause (vii) in section 194A(3) which for the first time, created a new type of co-operative society engaged in carrying on the business of banking, as distinct from the cooperative society as envisaged in clause (v). By this amendment, a specific specie called a "cooperative society engaged in carrying on the business of banking" was carved out of the genus "cooperative society" mentioned in clause(v).
The scope of the above amendment is explained in Circular no 42 dated 20-06-1970 it is very clear that, by virtue clause(vii), a co-op bank is exempted from making TDS.
The Finance Act 1971, which inserted the words (to a member thereof or) in clause (v) and the said amendment was directed only at the general co-operative society and not at the specific gene i.e cooperative society engaged in carrying on the business of banking.
The stand of appellant is that, even after insertion of specific clause(vii), the general clause(v) will continue to apply to the cooperative banks. If that stand is accepted, the cooperative banks were required to deduct tax from interest paid to depositors who are not its members, rendering clause (vii) redundant.
The by Finance Act 1991, for the first time introduced TDS on time deposits by substituting above mentioned clause (vii) with two separate clauses (vii) & (viia). While clause (vii) applied to banking companies, clause (viia) applied to specially created category of cooperative societies. This reaffirms the decision of legislature to apply a specific clause to the specific genre cooperative societies, which were earlier carved out of the genus as envisaged in general clause(v). The effect of above amendment was explained by the CBDT in Circular no 617 dated 22-11-1991 where in it is clarified that: The effect of the aforesaid change is that income-tax shall now be deductible at source from the interest income on the deposits with. (i) a banking company, or cii) a co-operative society engaged in carrying on the business of banking, other than a co-operative land mortgage bank, a co-operative land development bank, primary agricultural credit society or a primary credit society (emphasized).
The above circular clearly states that, it was only by introduction of clause (viia), a cooperative society engaged in the business of banking was brought under the purview of TDS on time deposits. The TDS on time deposits was withdrawn very next year by way of substituting above mentioned clauses (vii) & (viia) with a combined clause (vii) and status quo ante was restored.
The Finance Act 1995 inserted clauses (vii) & (viia) which lay down that, the exemption as envisaged in 194A(3) is not available in respect of time deposits made on or after 01-07-1995 with a banking company and a cooperative society engaged in the business of banking.
The above explanatory note leaves no doubt, whatsoever, about the applicability of clause (viia) to a cooperative society engaged in the business of banking.
The Hon‟ble Supreme Court in the, case of South Indian Corpn. (P) Ltd. vs. Secretary, Board of Revenue [1963 (8) TMI 30 - SUPREME COURT OF INDIA] has held that “a special provision should be given to the extent of its scope leaving the general provision to control cases where the special provision does not apply”
Therefore, in terms clause (v) which is general in nature will not apply to the co-op bank. The provisions of Section 194A (1)(viia) is clearly applicable and therefore the "assessee‟ has to deduct T.D.S. on income credited or paid in respect of deposits except which falls under that provisions. We therefore, dismiss the appeal of the assessee.
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