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2016 (10) TMI 1284
Capital gain from the transfer of agriculture land - Fair market value as on 01/04/1981 of the agricultural land - land transferred by the assessee and his father (each having half share) to M/s. Soma New Towns Private Limited - Revenue has objected to the additional evidences admitted by CIT(Appeals) in respect of fair market value of the land in question as on 01/04/1981 - HELD THAT:- From the facts of the case, we find that the assessee was not granted sufficient opportunity of hearing by the AO for producing evidence in support of fair market value, which is evident from the assessment order and, therefore, in our opinion, the action of the CIT (Appeals) of admitting the additional evidence is in interest of justice and in accordance to the law. Thus, ground No. 2 of the appeal is dismissed.
Fair market value as on 01/04/1981 of the agricultural land - We find that the Tehsildar has not provided any basis for taking four times of the stamp duty value as the fair market value of the land in question. Thus, the fair market value of ₹ 10,45,000/- as on 01/04/1981 stated by the Tehsildar is not based on value adopted by his office for the purpose of stamp duty valuation. The valuation of the Tehsildar is based on guesswork and not based on the sound evidences or Rules, which could justify the market value as four times the value adopted for stamp duty purposes. In such circumstances, in our opinion the directions given by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer to adopt the fair market value of the agricultural land transferred as on 01/04/1981 at ₹ 10, 45,000/- is not justified. '
We feel it appropriate to restore the matter to the file of the Assessing Officer with the direction to make a reference to the valuation officer in terms of section 55A of the Act for ascertaining the fair market value of the land transferred by the assessee and then compute the capital gain in accordance with law.
Eligibility for exemption u/s 54B - HELD THAT:- We find from the plain language of section 54B of the Act that benefit under section would be allowed when the capital gain arising on transfer of land used for agricultural purposes, is invested in the purchase of new agricultural land within two years from the date of the agricultural land transferred. Thus, the thrust is on the utilization of the money received on sale of the agricultural land leading to capital gain towards purchase of new agricultural land.
Sale consideration on transfer of the asset was received by the assessee on 24/10/ 2008 and investment in the new agricultural land was made on 13/10/2008 and 23/10/2008, which is prior to the receipt of sale consideration and, therefore, the money received on account of capital gains has not been utilized towards purchase of new asset - Assessee has not fulfilled the conditions for availing the benefit under section 54B of the Act. In our opinion, the order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, the ground of the appeal is dismissed.
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2016 (10) TMI 1283
TP Adjustment - comparable selection - non-granting of adjustment on account of lower capacity utilization and working capital adjustment - capacity utilization adjustment - HELD THAT:- For exclusion of Electronica Machine tools Ltd., and Kulkarni Power Tools Ltd., assessee pointed out the annual reports of these two companies on the issue regarding these two companies raised by way of filing additional grounds.
Regarding inclusion of two companies i.e M/s Guindy Machine Tools Ltd., and M/s United Drilling Tools Ltd., It has been submitted before us that these companies were rejected because unavailability of data, but since the data of these two companies are now available in the annual report of these two companies, these two companies should be considered as good comparables. We are of the considered opinion that the issue regarding inclusion of these two companies should go back to the file of the TPO/ AO for fresh decision.
Adjustment on account of lower capacity utilization and working capital adjustment - HELD THAT:- It is seen that the Tribunal has given a detailed guidelines as to how to make or grant capacity utilization adjustment. Hence, we feel it proper that this matter also should go back to the file of the AO/TPO for granting capacity utilization adjustment as per the guidelines given by the Tribunal in the case of DCIT Vs Class India Pvt.Ltd. [2015 (8) TMI 1490 - ITAT DELHI] . It is ordered accordingly.
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2016 (10) TMI 1282
Claim of deduction u/s 80IB - assessee has not filed the return within the due date specified u/s 139(1) - HELD THAT:- In the present case the assessee had filed the return after the due date on 21-02-2008. The small distinction referred by the assessee that the audit reports were filed within time on 31-10-2007 cannot lead to in-application of Hon’ble Calcutta High Court decision M/S SHELCON PROPERTIES (P) LTD [2015 (3) TMI 579 - CALCUTTA HIGH COURT] in this case. Hence the undisputed fact remains that the assessee has not filed the return within the due date specified u/s 139(1) and hence the provisions of section 80AC comes into play and the assessee shall not be allowed deduction u/s 80IB.
Disallowance of interest - Non deduction of TDS - Deduction u/s 40(a)(ia) - CIT(Appeals) in this case has upheld the AO’s action only on the ground that since TDS has not been deducted u/s 40(a)(ia) the amount of expenditure cannot be allowed - HELD THAT:- It is settled law from Hon’ble Apex Court in the case of Vegetable Products [1973 (1) TMI 1 - SUPREME COURT] that when two constructions are possible, the one in favour of the assessee should be applied. Accordingly in view of the above precedent, it is of the considered opinion that the assessee deserves benefit if the payees of the interest have filed their returns and paid taxes thereon. Since this aspect need factual verification, remit this issue to the file of the AO to consider the issue afresh in accordance with the Hon’ble Delhi High Court decision ANSAL LAND MARK TOWNSHIP (P) LTD. [2015 (9) TMI 79 - DELHI HIGH COURT] - Appeal filed by the assessee stands partly allowed for statistical purposes.
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2016 (10) TMI 1281
Expenditure spread over a number of year - year of assessment - Tribunal held that the entire expenditure is not allowable in Asst. Year 200809 only but is required to be spread over a number of years - HELD THAT:- This question is covered by judgement of this Court in case of this very assessee in [2013 (10) TMI 1367 - GUJARAT HIGH COURT ] held that once the expenditure is held to be in revenue in nature incurred wholly and exclusively for the purpose of business, it can be allowed in its entirety in the year in which it is incurred. - Decided in favour of assessee.
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2016 (10) TMI 1280
Disallowance of deduction u/s 80P(4) - assessee is registered as a Cooperative Society under the Tamil Nadu Cooperative Societies Act, 1983 - HELD THAT:- As decided in M/S. VEERAKERALAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY [2016 (7) TMI 922 - MADRAS HIGH COURT] the primary agricultural credit societies, registered as such under the KCS Act and classified so under that Act, including the appellants, are entitled to such exemption.
Disallowance of provision made for bad debts - AO made disallowance of the provision made for bad debts on the ground that it was not written off in the accounts - HELD THAT:- From the above provisions of section 36(1)(vii) of the Act, it is very clear that the bad debt is allowable only if it is written off as irrecoverable in the books of the assessee. Therefore, the disallowance made by the Assessing Officer was rightly confirmed by the ld. CIT(A) and we find no reason to interfere with the above findings of the ld. CIT(A). Thus, the ground raised by the assessee is dismissed
Reopening of assessment u/s 147 - HELD THAT:- CIT(A) has not adjudicated this legal issue of reopening of assessment and proceeded to decide the disallowance made under section 80P(4) of the Act. Under these facts and circumstances, we set aside the order passed by the CIT(A) and remit the matter back to the file of the ld. CIT(A) to decide the legal issue after giving sufficient opportunities of hearing to the assessee.
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2016 (10) TMI 1279
Reopening of assessment u/s 147 - addition u/s 68 - eligibility of reasons to believe - HELD THAT:- AO has not even mentioned the letter number and date of the letter of Director of Income-tax (Investigation), which constituted the information on the basis of which, he reopened the assessment. Assessing Officer has not mentioned name of persons who gave statement that the assessee was engaged in providing accommodation entry
Assessing Officer has not verified that the assessee had already filed return of income for the year under consideration and was not sure of the amount of income escaped and thus he has not even mentioned amount of income escaped , which is evident from the sentence in the reasons recorded that escaped income on account of accommodation entry was likely to exceed ₹ 1 lakh . He not even mentioned the nature of income escaped i.e loans or share application money or share capital etc.
AO has not applied his mind to the information and he has recorded the reasons in a mechanical manner, which are vague and non-specific. It is settled law that the action of reopening has to be judged only on the basis of the reasons recorded and no extraneous material can be supplemented to see the validity of the reopening. AO has to apply his mind to the material to conclude that he has reason to believe that income of the assessee escaped assessment and unless the basic jurisdictional requirement is not satisfied, a post-mortem exercise of analysing material produced subsequent to the reopening will not rescue an inherently defective reopening orders from invalidity. - Decided in favour of assessee.
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2016 (10) TMI 1278
Disallowance u/s 14A - AO non recording satisfaction with regard to the incorrectness of claim of the assessee having regard to the accounts of the assessee - HELD THAT:- As decided in own case even though the AO has made the disallowance by relying on the provisions of section 14A but he did not comply with the conditions as stipulated in section 14A(2). He has not recorded any satisfaction with regard to the incorrectness of claim of the assessee having regard to the accounts of the assessee having no such evidence or material brought to my notice by the D/R which may show that the AO has given a finding on the basis of accounts maintained by the assessee that he is not satisfied with the claim of the assessee.
Even the AO has not recorded the satisfaction as regards to the claim of the assessee. He is bound to compute the disallowance in accordance with such method as may be prescribed. It is the rule 8D which has been notified with effect from 24.03.2008. The assessment year involved is the assessment year 2009-10. No whisper whatsoever by the AO or by the ld. D/R that the AO has computed the disallowance by applying Rule 8D. It is a case where no disallowance can be made. - Decided in favour of assessee.
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2016 (10) TMI 1277
Transfer Pricing adjustment - Comparable selection - HELD THAT:- Assessee company is engaged in developing software i.e. it is engaged in rendering designing, development and modification services relating to semi conductors for semi-conductor based products and also providing marketing support and financial and administrative support services to its AEs, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Infosys Ltd, Kals Info Systems,Tata Elxsi Ltd,Thirdware Solutions Ltd, Bodhtree Consulting Ltd, Persistent Systems Ltd ,Thinksoft Global Services Ltd, Comp U-Learn Tech India Ltd to be rejected accordingly.
Computation of deduction u/s 10A - HELD THAT:- Exclude telecommunication charges both from export turnover as well as the total turnover for computation of deduction u/s 10A of the Act. We find that this issue is covered in favour of the assessee by the decision Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT].
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2016 (10) TMI 1276
Unexplained investment u/s 69 - HELD THAT:- The assessee has filed confirmation only on 08.12.2009, which are stereo type letters without PAN thereon. None of creditors is assessed to tax. Details of date money advanced and returned back is not filed nor any interest is charged thereon. It is pertinent to note that these advances were not returned back even after lapse of 4 years. The amount claimed to have been received from 14 creditors is below ₹ 20,000/- which has been intentionally done to escape from receiving the amount by cheques. Even the mode of receiving of amount from Shri Kailash Chand Jain (father) and Smt. Pushpa Jain (mother) ₹ 50,000/- each is also in cash. The onus cast upon the assessee to prove identity, credit worthiness and genuineness of transactions has not been discharged.
Thus, these three ingredients of section 68 of the Act are remained unsatisfied. Further the decision in the case of CIT vs. P. Mohanakala [2007 (5) TMI 192 - SUPREME COURT] and Sumati Dayal vs. CIT [1995 (3) TMI 3 - SUPREME COURT] relied on by the CIT (A) also support the view of lower authorities. In view of these circumstances, the finding of lower authorities are upheld for the addition of and the balance addition is deleted. This grounds of appeal of allowed is therefore, partly allowed.
Unexplained investment u/s. 69 in purchase agreement - HELD THAT:- Shri Santosh Kumar Lalwani had agreed to purchased 1/3rd of land for ₹ 43,27,400/- and paid ₹ 8 lakhs as advance for the same which means that the total value of the said land must be three times of ₹ 43 lakh meaning there by around ₹ 120-130 lakhs. Therefore, in the same way , Shri Vijay Jain, is very likely might have paid 1/5th of as advance as Bayana at ₹ 120/5=24 lakhs or ₹ 20 lakhs ). Since the assessee has failed to produce the agreement for purchase of land with Shri Devidas & others, therefore, we are of the considered view that the lower authorities have justified in making addition of ₹ 20 lakhs on this account. AO has not only made addition based on the statement but also having regards to entire circumstances of the case.
The circumstantial evidence and surrounding circumstances make the view of the AO as correct. We also find mentioned that the purchaser (executors) of said agreement have a written agreement of purchase of said land or executor. We find that in the said agreement, it has been clearly mentioned that the assessee has an agreement by which they have authorised to sell the land and get registered the same in name of prospective buyers. In view of these circumstances, we uphold the finding of lower authorities.
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2016 (10) TMI 1275
Appointment of an Arbitrator - existence of binding agreement/contract between the parties or not - HELD THAT;- In the instant case, no jurisdiction of the Court was invoked for seeking reference to the arbitrator. There was no participation in the proceedings by respondent No.1, therefore the same would not amount to acceptance of jurisdiction of the arbitrator in any manner. There was no agreement, neither any writing, nor there was any signing of documents between the parties, therefore, there was no concluded agreement/contract between the parties. It is equally true that the new act defined the extent of judicial intervention in the arbitration proceedings. No judicial authority can interfere except where so provided. The object of new act is to encourage resolution of disputes expeditiously and less expensively. When there is an arbitration agreement, the intervention of the Court should be minimal.
The entire controversy hinges upon a fact whether there was a lawful arbitration agreement between the parties or not. In the light of different precedents as discussed above, I am of the view that there was no arbitration agreement between the parties as provided under Section 7 of Arbitration and Conciliation Act, 1996, nor the arbitration agreement was in writing executed between the parties, therefore, a contract with regard to arbitration cannot be presumed. An Agreement which is enforceable in law is a contract. The alleged agreement between the parties is not enforceable in law being not a concluded agreement between the parties.
Section 16 of the Arbitration and Conciliation Act would operate only in the event where there was a concluded agreement between the parties in terms of Section 7 of the Arbitration and Conciliation Act. There was no consensus ad idem between the parties with reference to any terms and conditions of the offer and acceptance.
Revision petition dismissed.
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2016 (10) TMI 1274
Unexplained cash credit u/s. 68 - genuineness of the loan transaction as well could creditworthiness of the lender - HELD THAT:- Once tax-payer files the basic details such as name and address of creditor, PAN, income tax return, confirmation and bank statement, the initial onus gets discharged and if the Revenue doubts the identity and/or creditworthiness of the lender and/or genuineness of the transaction, the onus shifts back to the tax-payer to offer an explanation to the satisfaction of the AO as contemplated u/s 68 so that truth behind the smokescreen could have been unraveled by the AO. In the absence of the same, the AO has the powers to make additions to the income as unexplained cash credit u/s. 68 of the Act because the AO is both an investigator and adjudicator. Thus merely submission of the name and address of the lender, income tax returns, Balance Sheet/statement of affairs, bank statement of the lender is not sufficient as the AO is to be satisfied as to the identity and creditworthiness of creditor as well as to the genuineness of the transaction entered into with the creditor.
As confessed / admitted by the partners of M/s Moxdiam in the statement recorded on oath u/s 131 of the Act that they are persons of meager financial means/resources and several bank accounts were opened by Moxdiam to provide accommodation bills and accommodation entries to various parties in lieu of commission income.
Assessee had stated before us that the admission of the partners of the firm M/s Moxdiam is restricted to providing of accommodation bills for purchase and sale invoices of diamonds and it cannot be extended towards accommodation entries of the nature of loans’ as are extended by Moxdiam to the assessee.
We are afraid that this contention of the assessee cannot be accepted as it is admitted by partners of Moxdiam that the firm is engaged in providing accommodation entries and accommodation bills in lieu of commission income and we cannot give a hyper technical restricted meaning to the words of the partners recorded in the statement as the partners clearly stated and meant that the firm M/s Moxdiam is engaged in activities of providing accommodation entries and accommodation bills to various parties and hair splitting by giving hyper technical restrictive meanings to the words recorded in the statement cannot be allowed as is referred to by the learned counsel for the assessee rather it is to be seen from the perspective of the admission of partners of Moxdiam wherein they have admitted/confessed that the firm Moxdiam is not doing any regular and genuine commercial and business dealings but is engaged in providing accommodation entries and accommodation bills in lieu of commission income, which also stood corroborated by the financial statements of Moxdiam which on perusal clearly reveals that there are no own funds invested by partners in Moxdiam as the capital invested by partners in Moxdiam seen along with their current account will reveal a deficit / debit figure.
Additions made by the AO and sustained by learned CIT(A) are to be affirmed as we do not find any infirmity in the order of learned CIT(A) which we with due respect affirm with respect of raising of loan of ₹ 1.0 crore by the assessee from Moxdiam which is held to be income of the assessee as an unexplained cash credit u/s. 68 of the Act. Consequentially, interest of ₹ 93,000/- provided by the assessee on the said loan also cannot be held to be genuine interest and is ordered to be disallowed as deduction claimed by the assessee. - Decided against assessee.
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2016 (10) TMI 1273
Valuation of land on conversion into stock u/s 45(2) - reliance on Registered Valuer’s Report - reference under section 55A - HELD THAT:- Reference was made to the valuation officer in order to determine the fair market value as on date of conversion on the pretext that the fair market value as declared by the assessee which was backed by Registered Valuer Report, was higher, which is not correct.
The issue arising in the present appeal is squarely covered by the ratio laid down by CIT Vs. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] which in turn has been followed by the Tribunal in Mrs. Anjali Bharat Kabra Vs. ITO [2016 (11) TMI 744 - ITAT PUNE] relating to assessment year 2009-10, order dated 26.08.2016. Accordingly, there is no merit in substitution of fair market value submitted by the DVO since in the pre-amended provisions of section 55A the value lesser than the value declared by the assessee cannot be adopted by way of reference under section 55A of the Act. Reversing the order of CIT(A), the additional ground of appeal raised by the assessee is allowed.
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2016 (10) TMI 1272
Grant of regular bail - siphoning of funds - investments of projects - It is the grievance of the complainants/investors that more than 60 months have lapsed since their investment, and the accused have not completed the construction at the project sites, let alone delivered possession - allegation of cheating, forgery and criminal breach of trust.
HELD THAT:- The nature of accusations in the present case is very serious and grave. The status report filed by the State on 13.07.2016 discloses that a total of 870 complaints in the subject three FIRS have been filed, and total cheated amount has been calculated to the tune of 380 Cr. which is likely to increase - Evidently, the present case appears to be a multi-victim scam. The applicant accused, as it prima facie appears, has duped more than 1500 investors to invest in his alleged project at Manesar and Gurgaon. This has been solely achieved by painting a rosy picture before the investors of them getting lucrative returns on the investments made. The applicant while presenting various schemes, have depicted association with, and sponsorship from nationalized banks, the veracity of which remains questionable. It further raises suspicion on the conduct of the accused/ applicant, as to why they reduced the sale price consideration in the sale agreements executed between the accused company and the investors. The accused deducted TDS on the assured returns promised, but apparently the same has not been deposited with the Income Tax Department, thus, prima facie, raising a possibility of misappropriation.
Prima facie, there appears to be force in the case of the prosecution that the accused, right from the beginning, had the intention to cheat and defraud the investors and to misappropriate their investments. Moreover, the applicant is accused of cheating in not just the subject FIRs but around 13 other FIRs have been registered against him arising from similar transactions. In light of the above, there can be no doubt that the nature of accusations is serious and weighty in nature.
The Court is conscious of the law that a detailed examination of evidence and elaborate discussion of merits cannot be undertaken, but the Court while exercising its discretion is duty bound to indicate the reasons to conclude why bail is being granted, or refused on prima facie look at the possible evidence and circumstances. The charge-sheet, statements of investors duped, documents seized by the Police, photographs of the projects sites, winding up petitions, prima facie, establish the fraudulent character and dishonest intentions of the accused/ applicant.
The nature and gravity of accusations against the accused is serious. The grant of regular bail in a case involving cheating, criminal breach of trust by an agent, of such a large magnitude of money, affecting a very large number of people would also have an adverse impact not only in the progress of the case, but also on the trust of the criminal justice system that people repose.
Bail application dismissed.
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2016 (10) TMI 1271
Disallowance u/s 14 r.w. Rule 8D - HELD THAT:- It is settled position of law that the provisions of Rule 8D of the I.T. Rules, 1962 are applicable prospectively for and from A.Y. 2008-09 and would not operate for the assessment years prior thereto. In this view of the matter, the learned CIT(A)’s directions to the AO to work out/compute the disallowance under section 14A of the Act by applying Rule 8D of the Rules is erroneous and we therefore delete the same and in the fitness of things, we direct the AO to recompute the disallowance under section 14A of the Act afresh, in accordance with the law prevalent for the year under consideration, after affording the assessee adequate opportunity of being heard and to file details/submissions required in this regard. Grounds I and II of the assessee’s appeal are treated as allowed for statistical purposes.
Disallowance of non-compete fee paid to ex- Directors - HELD THAT:- We find that this issue has been held in favour of Revenue and against the assessee in the decisions of the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2003-04 [2016 (8) TMI 1450 - ITAT MUMBAI] - we uphold the orders of the authorities below and against the assessee. Consequently, ground III of assessee’s appeal is disallowed.
Setting off of losses while computing deduction under section 80HHC - HELD THAT:- We hold this issue against the assessee, and uphold the orders of the authorities below following, inter alia, the decisions of the Hon'ble Apex Court in the case of CIT vs. Shirke Construction Equipment Ltd. [2007 (5) TMI 194 - SUPREME COURT] and J.K. Industries vs. ACIT [2013 (5) TMI 152 - KARNATAKA HIGH COURT].
Deduction of Miscellaneous income while computing deduction under section 80HHC - HELD THAT:- CIT(A) has rejected the assessee’s claim and confirmed the AO’s action holding that there was no direct nexus between the nature of income clubbed under the head ‘miscellaneous income’ and the export business of the assessee, without considering the breakup of the aforesaid income brought on record by the assessee. Following the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2003-04 [2016 (8) TMI 1450 - ITAT MUMBAI], to which both of us are party, we set aside the finding of the authorities below on this issue and restore this issue to the file of the AO with respect to examination of assessee’s claim of inclusion of ‘miscellaneous income’ and other items while computing the eligible deduction under section 80HHC of the Act. Needless to add, the assessee is to be afforded adequate opportunity of being heard and to file submissions/details in this regard by the AO before adjudicating this issue.
Not allowing set off of incentives against the profits (‘DEPB’/ ‘DDB’) - HELD THAT:- Respectfully following the decision of the Hon'ble Apex Court in the case Avani Exports [2015 (4) TMI 193 - SUPREME COURT] and the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2003-04 (supra), to which both of us are party, we hold that the impugned order of the learned CIT(A) on this issue is unsustainable and reverse the same. Accordingly, we hold this issue in favour of the assessee and consequently allow ground No. VII of assessee’s appeal.
Addition of unutilized Modvat Credit to closing stock - HELD THAT:- We find that, as submitted by the learned counsel for the assessee, the very same issue was considered and held in favour of the assessee and against Revenue by a Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2001-02 held that this amount as added by the assessing officer is not of unutilised Modvat but it was the amount of deposit made by the appellant with the excise authorities. Therefore, there was no reason for making this disallowance by the assessing officer hence this addition is deleted
Deduction under section 80HHC and net interest - HELD THAT:- This issue is well settled by the judicial pronouncements cited as in the case of ACG Associated Capsules (P) Ltd. vs. CIT [2012 (2) TMI 101 - SUPREME COURT], Shri Ram Honda Power Equipments [2007 (1) TMI 86 - HIGH COURT, DELHI] and Lalsons Enterprises [2004 (2) TMI 294 - ITAT DELHI-E] Respectfully following these decisions (supra), we confirm the decision of the learned CIT(A) in holding and directing the AO, that for the purpose of computing the deduction under section 80HHC if the Act, the net interest is to be considered.
‘Book Profits’ under section 115JB - Adjustment for provisions - HELD THAT:- We find, as submitted by the learned D.R., that this issue was considered and adjudicated in favour of the Revenue, by Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2003-04 [2016 (8) TMI 1450 - ITAT MUMBAI] in view of the amendments to the provisions of section 115JB of the Act being operational retrospectively, we are unable to sustain the impugned order of the learned CIT(A) on this issue and therefore set aside/reverse his finding in the matter and restore that of the AO. Consequently, Revenue’s ground No. 4 is allowed.
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2016 (10) TMI 1270
Addition u/s 14A read with Rule 8D for earning exempted income - HELD THAT:- As brought to our notice that the Hon’ble Delhi High Court in the case of Joint investments Pvt. Ltd. Vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] has taken the view that the disallowance u/s 14A of the Act cannot exceed the exempt dividend income. In view of the aforesaid judicial pronouncement, we are of the view that there is no merit in ground nos.1 and 2 raised by the Revenue.
Disallowance of interest on loan which was not utilized for business purpose - HELD THAT:- AO has accepted that the investments made out of borrowed funds in quoted shares as use of borrowed funds for the purpose of business of the company. However to the extent borrowed funds were used in making investments in unlisted/unquoted companies, the AO has treated the same as not for the purpose of business of the Assessee. Such a distinction was rightly held by the CIT(A) to be not proper. We therefore do not find any merit in Gr.No.3 raised by the Revenue. The same is accordingly dismissed.
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2016 (10) TMI 1269
Addition u/s.41(1) r.w.s 28(iv) - assessee had availed deferred scheme for sales tax liability called interest free sales tax deferral scheme introduced by Tamil Nadu Government in May, 1990 - CIT- A deleted addition - Option to persons taking the benefit of deferral scheme, to pay the deferred tax in one lumpsum at the discounted rate of 8% as availed by assessee - HELD THAT:- As decided in M/S MCDOWELL & CO LTD NOW KNOWN AS UNITED SPIRITS LTD [2014 (11) TMI 272 - KARNATAKA HIGH COURT] the tax collected was deemed to have been paid and, therefore, the tax so collected cannot be construed as income in the hands of the assessee. The tax so retained by the assessee is in the nature of a loan given by the Government as an incentive for setting up the industrial unit in a rural area. The said loan had to be repaid after 15 years. Again, it is an incentive.
By a subsequent scheme, a provision was made for premature payment. When the assessee had the benefit of making the payment after 15 years, if he is making a premature payment, the said amount equal to the net present value of the deferred tax was determined and on such payment the entire liability to pay tax/loan stood discharged. Again, it is not a benefit conferred on an assessee. Therefore, section 41(1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. - Decided against revenue.
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2016 (10) TMI 1268
Constitutional and fundamental right - right to consume alcohol - violation of the right to privacy - HELD THAT:- As some of the respondents have entered appearance, a copy of the special leave petitions be served on them and no further notice need be issued on the said respondents. The other respondents be served in the usual course.
Let the matter be listed after ten weeks.
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2016 (10) TMI 1267
TP Adjustment - selection of comparable - functionally dissimilarity - HELD THAT:- A company engaged in investment banking activity cannot be compared to a company providing investment advisory services.
We have further noted that the Tribunal, Delhi Bench, in Mckinsey Knowledge Centre India Pvt. Ltd. [2015 (3) TMI 1226 - DELHI HIGH COURT] has held that if a company is functionally similar, only because of its low turnover, it cannot be rejected if such turnover filter was not applied either by the assessee or by the Transfer Pricing Officer.
Companies functionally dissimilar with that of assessee need to be deselected from final list.
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2016 (10) TMI 1266
TPA - comparable selection - functional similarity - HELD THAT:- Most of the comparables adopted by TPO does not have segmental information. Without the segmental information on record, it is difficult to adopt the filter of 75% of revenue from services. We are not sure, how the TPO has adopted this filter without this basic information. Accordingly, we direct the TPO to collect information from the respective comparables and adopt this filter with the segmental information. TPO can determine the comparables by adopting the above filter. Hence, we find it appropriate to remit this matter back to the file of AO/TPO to determine the comparables afresh by adopting the above filter. The assessee may be given proper opportunity of being heard. Accordingly, grounds raised by the assessee in this regard are allowed for statistical purposes.
Reimbursement of income and expenditure - HELD THAT:- This issue is squarely covered by the decision of the coordinate bench of this Tribunal in assessee’s own case for AY 2007-08 [2014 (4) TMI 285 - ITAT HYDERABAD] as per segmental financials the margin in respect of transactions with AEs is 39.26% as against margin of 6.30% in respect of non AE transactions. Therefore, when segmental details have been furnished by the assessee the TPO should have considered them properly instead of rejecting them with broad and sweeping allegations. It seems, the TPO has not properly allocated the segmental expenditures. If the bad debts etc. are not related to AE transactions they cannot be considered as part of operating cost for determining ALP of the transactions with AE. Similarly, reimbursement on cost to cost basis also cannot be included in the operating cost. Since the issue in the current AY is identical to that of AY 2007-08, respectfully following the decision of the coordinate bench in that year, we remit the issue to the file of the TPO/AO to decide the issue following the directions given by the Tribunal in AY 2007-08.
Addition of corporate guarantee - HELD THAT:- As decided in assessee own case since the issue in the present case is identical to the issue decided in case of Infotech Enterprises [2014 (1) TMI 1363 - ITAT HYDERABAD] following the same, we also remit this issue to the file of the TPO to decide the quantum of corporate guarantee rates accordingly. If the assessee is able to bring on record any comparables with regard to corporate guarantee, the TPO may also consider the same while determining ALP of corporate guarantee. The TPO must provide a reasonable opportunity of being heard to the assessee before deciding the issue. This ground is allowed for statistical purposes.
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2016 (10) TMI 1265
Written off in the books of account of the assessee u/s 36(1)(vii) - HELD THAT:- In the light of Hon’ble Supreme Court in the case of TRF Limited vs. CIT [2010 (2) TMI 211 - SUPREME COURT] which holds that a mere write off of the bad debts in the books of account, as irrecoverable, is sufficient to claim deductions as bad debts.
CIT(A) was, therefore, quite justified in granting relief to the assessee on this issue. As far provision of ₹ 88,38,79,657/- is concerned, undoubtedly there is nothing on record to show, or even indicate, that these amounts have actually been written off by squaring up individual accounts of the debtors, but what is not in dispute that the provision in question has been debited to the profit and loss account, and the amount of provision is reduced from the loans and advances appearing in the balance sheet. With these facts having been verified by us with respect to material on record, we find that the issue is squarely covered in favour of the assessee in the case of CIT vs. Nawanagar Co-operative Bank Limited [2014 (7) TMI 911 - GUJARAT HIGH COURT]. - Decided in favour of assessee.
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