Disallowance u/s 14A r.w. Rule 8D - AO made disallowance of managerial expenses being 0.5% of average value of average value of investments - HELD THAT:- The facts brought before us were that no dividend income or any other exempt income has been received by the assessee during the year under concern. This factual position has not been disputed by the Ld. DR. Under these circumstances, position of law is now very clear that no disallowance u/s 14A can be made in absence of actual receipt of any exempt income. We derive support for our view from the judgment in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] it is further noted by us that in any case Ld. CIT(A) had sustained disallowance of ₹ 5,00,000/- against which the assessee has not filed any appeal. Thus, the order of Ld. CIT(A) is in accordance with law and facts, and no interference is called for therein and therefore, same is upheld. - Decided against revenue
Addition u/s 40a(ia) - failure of the assessee in deduction of tax at source on the amount debited in the P & L account under the head software and project development expenses - payments are made by the assessee to the foreign parties - HELD THAT:- The liability of the assessee in deduction of tax at source cannot arises unless the AO holds that income in the hands of the payee is chargeable to tax in India, especially in view of judgment of GE India Technology Centre P. Ltd V/s. CIT and Another [2010 (9) TMI 7 - SUPREME COURT] Further, even if the liability of the payee is determined on the basis of retrospective amendments made by Finance Act, 2010 or Finance Act, 2012, even then, the obligation to deduct TDS cannot be created through retrospective legislation in view of detailed judgment of Hon’ble Delhi High Court in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] and CIT vs. Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] and various other judgments directly on this issue.
In those cases where the expenditure has been capitalized, the claim of depreciation if otherwise allowable under the law cannot be disallowed merely on the basis of application of section 40(a)(i) for failure to deduct tax at source. In support of his proposition, Ld. Counsel has relied upon the decision of Mumbai Bench of the Tribunal in the case of SKOL Breweries Ltd. [2013 (1) TMI 623 - ITAT MUMBAI] . The Ld. Counsel has also argued that there have been duplicate disallowances/additions by the officers. One item has been disallowed at more than one place.
It is directed that the AO shall take into considerations these submissions and shall not make duplicate double disallowance/ additions of one item - assessee is free to take all the factual and legal issues before the AO as may be considered appropriate as per law, and AO is also free to ask for further details and evidences from the assessee as may be considered appropriate - Ground partly allowed for statistical purposes.
Disallowance in respect of provisions of expenses u/s 40(a)(ia) - CIT-A deleted the addition - HELD THAT:- When payments were made TDS was deducted, has not been disputed by the Revenue. It is nobody’s case that any payment has been made subsequently without deduction of tax at source. Thus, admitted facts on record or that in the subsequent years, either the TDS has been deducted while making the payment or crediting the amount in the account of payee or the excess amount of provisions has been written back. Thus, factually, there is no loss to revenue. Under these circumstances we find that no interference is called for in the order of Ld. CIT(A), and therefore, same is upheld.
Disallowance of capital work-in-progress written off by the assessee during the year as business loss - as per revenue these expenses are allegedly capital in nature - HELD THAT:- We differ with the views of the lower authorities. It is noted that expenses were incurred in connection with the existing business. Admittedly, the expenses incurred were of routine nature i.e. salary, professional fee etc. These expenditure are, otherwise clearly of the revenue in nature. It is further noted that the Ld. CIT(A) appears to have misread the judgment in the case of CIT vs. Tata Robins Fraser Ltd [2012 (10) TMI 59 - JHARKHAND HIGH COURT] as held that such expenses were allowable as revenue expenses. Also relying on M/S. MANGANESE ORE INDIA LIMITED [2016 (2) TMI 711 - BOMBAY HIGH COURT] we find the actions of lower authorities as contrary to law and facts and therefore we direct the AO to delete the disallowance and treat these expenses as revenue in nature. Thus, this ground is allowed.
Exemption u/s 11 denied - assessee trust was not carrying on educational activities falling within the definition of education as contemplated under Section 2(15) - HELD THAT:- The issue whether or not the educational activities carried out by the Trust in terms of objects did not satisfy Section 2(15) of the Act was not examined by the Tribunal. This in view of the decision of ACIT Vs. Surat City Gymkhana [2008 (4) TMI 16 - SUPREME COURT] to the effect that once registration is granted a trust under Section 12A of the Act then it is not open to the Assessing Officer while examining compliance with Section 11 of the Act to revisit objects of the assessee and to hold contrary to the registration granted. Thus the nature of activity in terms of Section 2(15) of the Act was not verified nor considered by the Tribunal. In the above view, question (a) as posed does not arise out of the order of the Tribunal and thus, it is not entertained.
Whether Tribunal was justified in holding that the AO cannot examine the objects to the Society as long as there is valid registration u/s 12A granted to the assessee? - The impugned order of the Tribunal has followed the decision of the Supreme Court in Surat City Gymkhana (supra) wherein it has been held that once the trust has received registration under Section 12A of the Act and that registration is subsisting then it is not open to the Assessing Officer to re-examine the objects of the trust to take a view contrary to the view taken while granting registration under Section 12A of the Act. The Tribunal observed that the only examination to be carried out by the Assessing Officer is whether or not the provisions of Section 11 have been complied with by the assessee for purpose of extending benefit of the exemption.
As question (b) stands concluded by the judgment of the Apex Court in Surat City Gymkhana (supra). Therefore, question (b) as posed does not give any rise to any substantial question of law.
If the petitioners supply a legible computerized printout of the scheme and the schedule of assets in acceptable form to the department, the department will append such computerized printout, upon verification, to the certified copy of the order without insisting on a handwritten copy thereof.
Let costs assessed at 300 GMs be paid by the applicants to the Central Government.
Capital gain computation - addition u/s 50C - AO denying the benefit of Valuation Report to the assessee - AO without awaiting for the Valuation Report of the Valuation Officer had passed the assessment order on 13.03.2014 and held that the assessee has under reported the sale consideration - HELD THAT:- The reference was made by the AO to the Valuation Officer on 22.1.2014. Therefore, the Valuation Officer has 6 months time as per section 142A(6) to submit the report to the Assessing Officer. However, despite that the AO insisted for submission of the report by 10th March 2014 and in fact, the report was received in the Office of the AO on 13th March, 2014. The AO, in our view, was duty bound to wait for the report of the Valuation Officer as per the mandate referred herein above and thereafter he is statutorily bound to grant opportunity of being heard to the assessee and consider the report of the Valuation Officer. In our view, the AO has brazenly violated the provisions of law and has committed serious error in denying the benefit of Valuation Report to the assessee. In view thereof, we have no option but to uphold the finding of the ld. CIT (A). In view of the above, the appeal of the revenue is required to be dismissed and is accordingly dismissed.
Since we are upholding the valuation made by the Valuation Officer as well as the order passed by ld. CIT (A), therefore, the ground no. 2 of the assessee is also dismissed.
Deduction u/s 54F - proof of purchase of new asset within the period of two years after the date of transfer of original asset - HELD THAT:- It is the admitted case that sale of unauthorized commercial land was effected on 31.1.2011 and the agreement to sale for purchase of agriculture land was executed between Shri Khiv Singh and the assessee on 2.6.2011 of the land bearing Khasra No. 1262 at village Muhana admeasuring 1.99 hector and 0.37 hector.
If Shri Khiv Singh and Shri Naurat Singh were the owners of the property, how the agreement can be executed solely by Shri Khiv Singh and how the entire sale consideration was received by Shri Khiv Singh on 2.6.2011 in the absence of any registered power of attorney in his favour executed by Shri Naurat Singh , prior to the agreement . Moreover, the agreement dated 2.6.2011 cannot be relied upon for any purpose in view of the provisions of section 17 read with section 19 of the Registration Act and Stamp Duty Act.
The agreement dated 2.6.2011 cannot be relied upon by the assessee to claim the purchase of capital asset within the statutory time limit provided by section 54F. Moreover there is no independent document or evidence to support the transfer of capital asset in favour of the assessee on 2.6.2011 or thereafter but before the registration of the sale deed dated 29.3.2013.
Since we have already held that there is no transfer or purpose of the property in pursuant to the agreement dated 2.6.2011, therefore, the assessee in our view has not been able to prove that he has purchased new asset within the period of two years after the date of transfer of original asset. Since the assessee has purchased the new asset by virtue of registered sale deed on 29.03.2013 after getting the General Power of Attorney from the brother of the seller, namely, Shri Khiv Singh dated 25.3.2013, therefore, the new asset (agricultural land) was purchased by the assessee beyond the period of 2 years. Thus the benefit of section 54F cannot be acceded to the assessee. In view thereof, the ground of the assessee is required to be decided against the assessee
Moreover, if we look into the size of the agricultural land purchased by the assessee vide registered sale deed dated 29.3.2013, we find that the total size of the plot is 37,000 sq. ft. whereas the constructed portion of the entire complex was only 1553.50 sq. ft. (tin shed). Therefore, also the assessee cannot be given the benefit of section 54F within the meaning of law as the property purchased by him was an agricultural land and the house was constructed only of 1553.50 sq. ft. against the total size of land admeasuring 37,000 sq. ft. . The character of remaining property was continued to be the agricultural in nature. In view thereof ground no. 1 is dismissed.
TP adjustment - addition made under the provisions of Chapter X of the act on the basis of a markup of cost plus 21. 30% - comparable selection - characterisation of the transaction - HELD THAT:- Assessee-company, engaged in the business of providing marketing and other support services to its Associated Enterprise (AE) thus companies functionally dissimilar with that of assessee need to be deselected from final list.
For determining ALP the TPO should identify the identical or almost identical services/ business/products. It is rightly said that a mango cannot be compared with an apple though both grow on trees and both are fruits.
Provisions of section 92 were introduced in the Act, so that under-charging or over-charging by AE in intra-group transactions can be prevented that intra-group transfers can be valued. Restructuring of legitimate business transaction would be an arbitrary exercise. However, there are two exceptions to the rule. The first being where the economic substance of the transaction differs from its form. In such cases, the tax authorities may disregard the parties’ characterisation of the transaction and re-characterise the transaction in accordance with its substance. The second exception is when the form and substance of the transaction are the same but the arrangements made in relation to the transaction, when viewed in their totality, differ from those which would have been adopted by the independent enterprise behaving in a commercially rational manner. The second exception also mandates that the actual structure should practically impede the tax authorities from determining an appropriate transfer price. We find that the TPO/DRP has not brought on record any material to prove that either of the two exceptions were present in the case under consideration.
Provisions of Chapter X were never aimed to make adjustment at any cost, but to decide fairly and equitably that the price quoted by an assessee with regard to an international transactions entered into with its AEs are at ALP. The burden is on the assessee to prove that transactions with its AEs are above board and it is paying/charging the same rate that is prevalent in the open market. The comparables selected by the assessee should not be ignored lightly, unless and until it can be proved that the variables selected by it were functionally or otherwise different from the job done by it. TPO is free to make search and refer to other comparables. But, this is not an unbridled power. He has to prove that comparables selected by him were engaged in the similar or almost similar activities of the assessee. In the case under consideration, the TPO had selected comparables which had no similarity at all with the activities of the assessee.
We are unable to understand is how the results of companies dealing in foreign exchange/maintaining freight station or engaged in providing end-to-end engineering services can be compared with marketing and allied services. Selection made by the TPO is comparables was neither methodical not scientific. It is found that NCP margin as per the TP study of the assessee was 10. 14%, that NCP margin, after excluding the six comparables, is 12. 05%. Thus, it is within the permissible limit of +/-5%. Considering these facts, we decide the first effective ground of appeal(GOA-1to7) in favour of the assessee.
Non-compliance of the direction of the DRP by the AO - as argued by the AR that the DRP had directed the AO to allow deduction of ₹ 1. 32 lakhs under section 80 G of the act against the interest income of ₹ 10. 02 lakhs, that the AO had not allowed the said deduction - HELD THAT:- We are of the opinion that the AO is bound to give effect to the order of the DRP. If he has not passed the order till date with regard to deduction under section 80 G of the Act, he should pass the order within a fortnight after receiving our order.
Charging of interest u/s. 234 of the Act, are of consequential nature. Appeal filed by the assessee stands partly allowed.
Disallowance u/s 14A read with Rule 8D - HELD THAT:- As relying on GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] no doubt the expenditure incurred to earn the exempt income is liable to be disallowed on reasonable basis by providing the reasonable opportunity to the assessee in accordance with the law specifically in view of the observations made
Disallowance of expenditure incurred in respect of reimbursement of property taxes to Precision Component(P) Ltd.(PCPL) - Assessee has drawn support from a letter claimed to have been signed by the assessee and the land lord, which states that the assessee here in should reimburse the property tax - HELD THAT:- The monthly rent paid by the assessee was ₹ 1,16,000/-. The property tax reimbursed by the assessee works out to ₹ 30,63,248/-, which works out to about 26 months of rent. This proportion appears to be highly disproportionate and beyond human conduct and probabilities. A tenant, under normal circumstances would not agree to bear such a high cost. Hence there appears to be merit in view taken by tax authorities. However, we notice that they have taken adverse view without conducting any enquiry.
There is merit in assessee contention that the reimbursement of property tax partakes the character of rent only - what is required to be seen is as to whether to aggregate amount of rent plus reimbursements compares well with the earlier years payment. If it does not compare well, then it is the duty of the assessee to justify the payment.
This issue required fresh examination at the end of AO. Accordingly we set aside the order of learned CIT(A) on this issue and restore this issue to the file of Assessing Officer for fresh examination.
Accrual of income - commission accrued to the assessee on the date of actual receipt of commission or on the date of payment by the client directly to the principal and not on the raising of invoices - when the commission received by the assessee company is required to be taxed? - HELD THAT:- The assessee company in the assessment year 1997-98 changed his method of accounting to show the said commission on receipt basis. No doubt, the A.O. disallowed the same but the Hon’ble Tribunal in his judgment [2006 (7) TMI 569 - ITAT MUMBAI] found justifiable to tax an amount at the time of receipt and appeal against the said order was dismissed by the Hon’ble Bombay High Court [ 2009 (3) TMI 990 - BOMBAY HIGH COURT] - Decided against revenue
Depreciation @ 60% on computer peripherals like rack, printer, port, routers, cord etc. - HELD THAT:- This controversy has been decided by the Tribunal in case filed as DCIT Vs. Datacraft India Ltd. [2010 (7) TMI 642 - ITAT, MUMBAI] and CIT Vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] as held computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% .
TP adjustment - determination of arm’s length compensation as per order of the Transfer Pricing Officer(T.P.O) - HELD THAT:- In view of the report of Transfer Pricing Officer no adjustment was made to declare the arm’s length price by the assessee, therefore, in view of the said circumstance no addition on account of transfer pricing adjustment was being made to taxable income declined by the assessee. Nothing came into notice that the findings given by the Assessing Officer as well as learned CIT(A) were wrong against law and fact. Hence this issue is decided in favour of assessee and against the revenue.
Disallowance of interest and other expenditure u/s 14A by attributing it to earning exempt income u/s 10 - denial of exemption u/s 10(38) in respect of long-term capital gains on sale of shares held as long term investments and taxing it as business income - disallowance of amortization of Employee Stock Option Plan (ESOP) expenses - disallowance of software expenditure towards licences fees - HELD THAT:- As relying on assessee's own case appeal for fresh adjudication after granting a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. AO is directed to decide the same strictly in the light of the ratio laid down in the said order of the Tribunal .
Broken period interest debited to the Profit & Loss Account - whether the same is required to be adjudicated in view of the judgment in the case of CIT vs. HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT] - HELD THAT:- After hearing both the parties on this issue, we remand the Ground no.5 to the file of the AO as desired by the ld Representatives of both the parties for fresh adjudication. AO is directed to adjudicate this issue in the light of the said judgment of Hon’ble High Court (supra) complying with the ratio laid down in the said judgment on the issue under consideration - Appeal of the assessee is allowed for statistical purposes.
Right to get represented by the advocates/chartered accountants at the hearing - Identification Committee of the SBI? - Wilful defaulters or not - Held that:- This Bench in its decision KINGFISHER AIRLINES LIMITED VERSUS UNION OF INDIA AND OTHERS [2016 (1) TMI 43 - BOMBAY HIGH COURT] was called upon to consider whether the United Bank of India (hereafter the UBI) was justified in refusing permission to the petitioning company to be represented by its advocates. It was held, in view of the facts pleaded in the responses to the impugned notices, that the petitioning company could claim no right to be represented by an advocate at the hearing before the GRC of the UBI.
The administrative act of grant/refusal to grant must be preceded by quasi-judicial exercises. Insofar as the master circular is concerned, there is no doubt that the lender identifies a defaulting borrower who ought to be placed in the list of wilful defaulters and upon hearing the version of the defaulting borrower ultimately decides in regard to its inclusion/noninclusion in the list. Notwithstanding the requirement of the master circular regarding the requirement of compliance with natural justice, the GRC/Identification Committee of the lending bank not being authorised to take evidence cannot be said to discharge functions other than administrative - Having regard to the above, there is no question of holding in favour of representation of the petitioners before the GRC/Identification Committee by an advocate. It cannot be gainsaid that the right of an advocate to practice is not unrestricted and is subject to reasonable restrictions.
Demand of Interest and penalty - delay in discharging of duty - Held that:- There is delay in payment of duty by the respondent - Since, interest liability is compensatory in character, levy of the same is automatic, wherever there is delay in payment of duty - the interest demand dropped in the impugned order is set aside and the appeal is allowed in favor of Revenue.
Imposition of penalty - Held that:- There was no intention on the part of the respondent in defrauding the Government Revenue inasmuch as the respondent has sufficient balance in its Cenvat account for discharging the duty liability. Further, non-payment of duty on the waste product is attributable to the interpretation of the provisions of law and also supported by the decisions of the judicial forums - penalty rightly set aside.
Addition u/s 14A - sufficiency of own funds - HELD THAT:- On perusal of the balance sheet of the appellant company it is apparent that assessee has its own interest free funds of ₹ 135.15 crore against investment made of only ₹ 482 crores, therefore the presumption should be available with the assessee that as funds invested in this investment is out of its interest free funds. See RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT] - We also get support from Hon’ble Bombay High Court’s decision in case of CIT v HDFC bank limited [2014 (8) TMI 119 - BOMBAY HIGH COURT] where identical view has been taken. In view of this, we reverse the decision of the ld. CIT (A) in confirming the disallowance. - Decided in favour of assessee.
TP Adjustment - Comparable selection - comparability of international transactions with an uncontrolled transaction - HELD THAT:- Merely because the company is having negative net worth but when the FAR is comparable, it cannot be said to be non comparable unless it is shown that how the negative net worth of the company has impacted the profitability of the comparable company.
The issue decided by Special bench in the case of DCIT V Quark Systems Limited [2009 (10) TMI 591 - ITAT, CHANDIGARH] where in the negative net worth company was considered and it was held that business organization with negative net worth cannot be treated at par with a normal business organization. However while considering that issue the comparable was also functionally not comparable in that case. Therefore there was no view expressed in that decision that though comparable has similar FAR still negative net worth company is required to be excluded without showing the impact of negative net worth on the profitability of the company. In view of this we direct the inclusion of this Company i.e. Muller & Phipp India Limited as comparable for the purpose of determining arms length price.
Other sales exclusion while working out PLI - HELD THAT:- No reason that the ld TPO to exclude the other sales of ₹ 1214675/- to be excluded while working out PLI. Against this no argument have been advanced by the ld DR that how the order of the ld CIT(A) is incorrect. In view of this we direct that other sales shall be included as operating income for working out PLI.
Corporate support service exclusion - CIT(A) has held that Corporate Support Services are aggregated with the distribution function of the assessee and are insignificant in volume therefore included as operating income of the assessee - HELD THAT:- DR has fairly agreed that if that income is to included as operating income then proportionate expenses are also required to be included as operating expenses. In our view there is no expenditure has been excluded pertaining to corporate support services. While working out the entity level PLO in case of TNMM method we are of the view that the Corporate Support service income should be included as operating income and therefore we do not find any infirmity in the order of the ld CIT(A).
Liabilities No Longer required written back - This amount has been excluded by the ld TPO without assigning any reason - CIT(A) has confirmed his view as it is an extraordinary item - Argument of the ld DR that safe harbour rules also provides for not considering it as operating income. HELD THAT:- We are of the view that safe harbour rules is optional and if the assessee has opted then only he has covered by it otherwise not. Therefore in the present case the assessee cannot precluded from stating that provision returned back written form part of the operating revenue. - Provisions no longer required written back is to be excluded if the assessee makes the provision and also reverses it as a normal business activity. Further if it is on account of revenue nature it should be included. However if the liabilities originally created are on account of capital items then their write back cannot be a normal instances of the business and hence to be excluded as operating income. As the fact for such write back are not available on record we set aside this issue to the file of the Ld. AO/ TPO to examine as per above direction and decide the issue afresh. Needless to say that the assessee may be provided reasonable opportunity for providing these details.
Profit on account of foreign exchange / Repairs and maintenance expense - HELD THAT:- We are of the view that foreign exchange gain if it is arising out of sales of goods that it should form part of the operating income of the assessee. It was submitted that Forex gain has arisen on account of export of goods. Ld. TPO as well as CIT (A) has not considered this issue and therefore we set aside it to the file of ld. TPO to deal with this issue on merit after giving proper opportunity of hearing to the assessee.
Rejection of books of account - allowance of provisions of interest - HELD THAT:- As decided in HITESH S. MEHTA VERSUS DCIT CENTRAL CIRCLE- 23, MUMBAI [2013 (10) TMI 1065 - ITAT MUMBAI] One of the reasons for not allowing the provisions of interest claimed by the assessee is that the books of accounts produced by the assessee during the assessment proceedings has been held to be unreliable. Shorn off all other unnecessary details, considering the facts and circumstances in toto, we are of the view that it would be appropriate that the issue is set aside to the file of the Ld.CIT(A) to adjudicate afresh on merits in respect of the issue pertaining to the rejection/reliability of the books of accounts produced by the assessee after giving due opportunity of being heard to the assessee
Addition u/s 69C - Personal expenses - HELD THAT:- As decided in PRATIMA H. MEHTA case [ 2013 (8) TMI 991 - ITAT MUMBAI] Expenses in the nature of household and personal expenses may comprise of kitchen/food expenses, expenses for maintenance of residence, expenditure on education of children, expenses on religious occasions, expenditure on tour and travels, expenses for special occasion of celebration on anniversaries / birthdays, medical expenses, etc. The assessee has not furnished any details to explain as to how all these essential expenses to pull on the day to day life have been incurred. I therefore, conclude that these expenses have been met from the undisclosed sources of income of the assessee. Therefore estimate an amount of ₹ 1,00,000/- p.m. as his personal expenses. Accordingly an amount of ₹ 12,00,000/- is added as assessee’s total taxable income under section 69C - thus we set aside the ground to the file of the CIT(A), thus ground No.3 is allowed for statistical purposes.
Addition u/s 14A - HELD THAT:- The assessee has earned dividend income and LTCG against which, no expenses have been said to be attributable. AO has mechanically applied Rule 8D which admittedly is not applicable in AY 2006-07. Once that is so, then the entire basis of computation of disallowance is incorrect. Looking to the nature of expenditure and claim of the assessee that it has business loss which has been assessed by AO also, we are of the opinion that this matter should be set aside to the file of the AO to work out some reasonable basis for disallowance after examining the nature of accounts and the nature of expenses debited by the assessee. Accordingly, ground No.4 is treated as allowed for statistical purposes.
Addition on account of personal household expenses - HELD THAT:- After considering the rival submissions and on perusal of the relevant finding in the impugned order, we find that the addition made by the AO as well as sustained by the CIT(A) are though on ad-hoc basis, but same was done because no details of expenditures was filed by the assessee. Before us, the Ld. Counsel has submitted that, most of the expenses have been incurred by Dr. Hitesh S Mehta and other family members living in a Joint family set-up. Further other members have contributed for household expenses and that some of the additions have been confirmed on account of personal household expenses by the Department. On these facts and circumstances, we inclined to scale down the additions to ₹ 3 lakhs. Accordingly, addition sustained on account of personal household expenses would be ₹ 3 lakhs
Addition u/s 68 - assessee failure to fulfill requisite condition of identity of creditor and genuineness of the transaction, despite the opportunities given by the AO - HELD THAT:- We find that the amount in question is a brought forward balance as shown in the account of the two parties viz., M/s.Beijia Industrial Co. Ltd., and M/s.S.I.International Co., who are stated to be suppliers of the assessee.
CIT(A) has recorded the fact that the assessee has claimed this amount being a brought forward balance in the ledger accounts of the creditors - AO made the addition on the ground that the assessee failed to produce the confirmation of the creditor - this amount was shown as credit for the financial year 2005-06 and continued as carried forward till this year, then it would not be a case of credit entries in the books of account of the assessee during the year under consideration.
Therefore, when no cash credit was entered into books of account during the year under consideration, then no addition u/s 68 can be made in respect of this amount of credit balance shown in the books of account.
As regards the genuineness of the transaction is concerned, if the assessee failed to prove the existence of the liability in question then the addition can be made under the provisions of sec.41(1) or sec.28 of the Act and not u/s 68 - wet aside this issue to the record of the AO to re-examine the same in the light of the judgment of the Hon’ble Delhi High Court in the case of Usha Stud Agricultural Farm Ltd.(2008 (3) TMI 91 - DELHI HIGH COURT). The assessee is also directed to explain the status of the repayment of the liability. - Decided in favour of assessee for statistical purposes.
Grant of stay of recovery of the disputed tax pending disposal of the appeal - alleged transfer of the right to use the Set Top Boxes and other equipment supplied by the 1st petitioner to their customers - Held that:- In similar circumstances, in the case of another DTH operator, M/S. VIDEOCON D2H LIMITED VERSUS COMMERCIAL TAX OFFICER [2016 (4) TMI 1345 - TELANGANA & ANDHRA PRADESH HIGH COURT] this Court had disposed of the writ petition directing the respondents not to take any coercive steps for recovery of the disputed tax pending disposal of the appeal by the Appellate Deputy Commissioner on condition that the petitioner therein deposited 25% of the disputed tax within two weeks; and credit for the tax already paid by them was given credit to.
On condition that the 1st petitioner deposits 25% of the disputed tax within two weeks from today, after being given credit for any amount already paid in this regard, the respondents shall not take any coercive steps for recovery of the disputed tax till the appeal is disposed of by the Appellate Deputy Commissioner.
Grant of stay on recovery - stay of collection of 50% of the balance tax of ₹ 1,81,86,984/- on condition that the petitioner deposits 25% thereof before 15.04.2016, and the remaining 25% before 30.04.2016 - Held that:- As the petitioner’s appeal is said to have been finally heard, and orders are said to have been reserved thereon, we consider it appropriate to modify the order passed by the Additional Commissioner, and direct the respondents not to take any coercive steps for recovery of the disputed tax till the disposal of the appeal pending before the Appellate Deputy Commissioner on condition that the petitioner deposits 25% of the disputed tax within two weeks from today. The petitioner shall be given credit for the tax, if any, already paid in this regard.
As the petitioner’s appeal is said to have been finally heard, and orders are said to have been reserved thereon, it is appropriate to modify the order passed by the Additional Commissioner, and direct the respondents not to take any coercive steps for recovery of the disputed tax till the disposal of the appeal pending before the Appellate Deputy Commissioner on condition that the petitioner deposits 25% of the disputed tax within two weeks from today - petition disposed off.
TDS u/s 194H - amount held by the banks / credit card agencies as collection charges in respect of credit services provided - addition made u/s 201(1)/201(1A) fr non deduction of TDS - Held that:- As perused the cited judgment in the case of JDS Apparels (P) Ltd (2014 (11) TMI 732 - DELHI HIGH COURT) and find the same is relevant for the proposition that "Commission to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act". Considering all we are of the opinion, the decision taken by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed.
Addition on account of compensation received on account of termination of trade mark 'ENO and Fruit Salt' - assessment as capital receipt - Held that:- In the instant case, the agreement with U.K. Company to manufacture 'ENO' in India formed the very foundation of the business of the assessee of producing and marketing ENO. The contract with U.K. Company vested valuable trade mark rights in the assessee's company, which formed the very basis of business of manufacturing and marketing 'ENO'; and is of the nature of capital asset. The decision of the Hon'ble Supreme Court in the case of Kettlewell Bullen and Co. Ltd. v CIT [1964 (5) TMI 4 - SUPREME COURT] is squarely applicable to the facts of the present case. Therefore, we hold that the compensation of ₹ 4.5 crores received by the assessee company for termination of the agreement for use of trademark of 'ENO' and 'Fruit Salt', with U.K. Company is a capital receipt not liable to tax.
In this case the right to produce, market and sell the products under each trade mark/brand name licence given by U.K. Company to the assessee constituted a separate source of income and the compensation received on termination of the licence agreement in respect of even one of the said trade marks constituted a capital receipt not liable to tax in the hands of the assessee. In our opinion, CIT(A) has correctly decided the issue in favour of the assessee after analyzing and considering the facts of the case and also the settled legal position. Therefore, we do not see any valid ground in interfering with the findings of the CIT(A) on this issue. Accordingly, we uphold the order of CIT(A) and dismiss ground No. 1 of the appeal.
Recompute the deduction u/s. 80HHC after excluding Excise Duty, Octroi and Sales-tax etc from the total turnover - Held that:- We observe that the issue is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon'ble Supreme Court in the case of CIT v Laxmi Machine Works [2007 (4) TMI 202 - SUPREME COURT]. We do not find any infirmity in the findings of the CIT(A) on this issue. Accordingly, we uphold the order of CIT(A) on this issue and reject ground No. 2 of the appeal.
100% depreciation on Effluent Treatment Plant - Held that:- the subsequent reply submitted by M/s. Envirad Project (P) Limited to the Assessing officer clarified that the plant had been put in the operation and started functioning w.e.f. 15.3.1997 and as per the arrangement, final payment was to be made after all modifications/completion of all obligation of order and full satisfaction of the assessee. It is true that some of the bills were made subsequent to the financial year under consideration but that cannot be a ground for rejecting the claim of the assessee. Thus, considering the entire facts and circumstances of the present case, we are of the opinion that the CIT(A) has passed a well reasoned order after appreciating the facts of the case and also the relevant documentary evidence submitted by the assessee, therefore, we do not see any valid ground in interfering with the findings of the CIT(A) on this issue.
Claim of deduction u/s. 80-I - the claim was disallowed on the ground that all the machines were installed in the existing factory premises and according to the Assessing Officer the same could be treated as routine replacements with better capacity - Held that:- Similar claim had been disallowed u/s. 80-I in-assessment year 1979-80 and when the matter came up before the Tribunal, deduction under section 80-J was held to be permissible to the assessee. The matter again traveled upto the Tribunal in assessment years 1989-90 and in 1991-92 to 1995-96 and the issue was decided in favour of the assessee. Since the basis for the disallowance are same as in earlier years, we respectfully following the orders of the Tribunal in assessee's own case for assessment years 1991-92-to 1995-96 (supra) dismiss this ground of appeal raised by the Revenue.
Addition by excluding the Excise Duty in the valuation of closing stock - Held that:- Since the assessment years involved before us are prior to 1.4.99 and section 145A not being applicable, we do not find any infirmity in the order of the CIT(A) in directing to exclude the excise duty component from the valuation of closing stock We, therefore, find no justification to interfere with the order of the CIT(A). The grounds of appeals raised by the revenue in the respective assessment years are accordingly dismissed.
Value the closing stock on the direct cost method as adopted by the assessee subject to inclusion of certain expenses - Held that:- Tribunal in assessee's own case for the assessment year 82-83 (supra), uphold the order of the CIT(A) in regard to valuation of closing stock and dismiss the above common grounds of appeals raised by the assessee as well the revenue.
Addition on account of MODVAT element not reflected in the value of closing stock - Held that:- Assessing officer had included the modvat credit in the valuation of closing stock. The CIT(A) has recorded a finding of fact that the assessee had decided the purchases not of modvat credit and accordingly has not included the modvat credit in the valuation of closing stock and has accordingly deleted the addition for the respective assessment year. The parties before us agreed that the issue is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Indo Nippon [2003 (1) TMI 8 - SUPREME COURT]. Respectfully following the said decision of the Hon'ble Supreme Court in the case of Indo Nippon, this common ground raised by the Revenue in respective assessment years is hereby dismissed.
Expenditure on account of rent paid for guest house - allowable busniss expenditure - Held that:- Hon'ble Supreme Court in the case of Britannia Industries Ltd. V CIT and Another [2005 (10) TMI 30 - SUPREME COURT], wherein held that the intention of the Legislature was to exclude from deduction the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purpose of a guest house of the nature indicated in sub-section (4) of section 37 - if the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodation used for the purpose of the business or profession, then the Legislature would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in section 37(5) and the provisions of sections 31 and 32 would have been sufficient for that purpose.
Interest charges u/s. 234B - Held that:- Present case are squarely covered by the decision of BHAGAT CONSTRUCTION CO. PVT. LTD., M/S. M.R.G. PLASTIC TECHNOLOGIES AND OTHERS [2015 (8) TMI 621 - SUPREME COURT] in as much as it is undisputed that Form I.T.N.S. 150 contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, the Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred in Explanation 1 to Section 234B. - Decided against assessee
Nature of receipts - grants in aid from the government - AO treated the grant to be income and assessed it for tax - Commissioner Appeal and the Appellate Tribunal found that the grants were received from the government by the society for creation of capital assets like Building and other Equipments and as the same has been used for the said purpose only and it is a capital assets - Held that:- As held that the aid received is in the nature of capital asset, is capital revenue and not income, therefore, the finding of the AO has been interfered with. In doing so, no error had been committed by the learned Authorities warranting consideration the concurrent finding recorded by the Commissioner and the Income Tax Appellate Tribunal are in accordance with the requirement of law. We see no substantial question involved warranting consideration. - decided against revenue
Reopening of assessment - reasons recorded for re-opening of the assessment - unexplained investments - information received from ADIT (Investigation) in reference to the search conducted in the cases of Smt. Mohinder Kaur, legal heir of late Shri Taranjit Singh - Held that:- AO has not applied his mind to the information received from ADIT (Investigation) and he was having no tangible material with him to form his belief that income chargeable to tax has escaped assessment. Rather, there was no material available with the AO to form his belief that income chargeable to tax has escaped assessment in the case of the assessee company. There was no reason to believe that income chargeable to tax has escaped assessment. The re-opening of the assessment has, thus, not been done validly in accordance with law. The re-opening of assessment is bad in law. Set aside the orders of authorities below and quash the re opening of the assessment under section 147/148.
It is not a case of A.O. that despite sale of shares/investments, assessee still possessed and controlled the same shares/investments. AO did not record anywhere in the assessment order if these statements recorded by DDIT (Investigation) of the brokers have been supplied to the assessee for the comments of the assessee and whether assessee has been given any opportunity to cross-examine these brokers. In the absence of any evidence or material on record, it is difficult to believe that assessee has been given any opportunity to cross-examine the statements of these three brokers on behalf of the assessee. Therefore, when these brokers have confirmed selling the shares on behalf of the assessee company and giving sale consideration through banking channel to the assessee company and their statements are not adverse in nature against assessee, but in the absence of giving right of cross-examination of their statement, their statements cannot be read in evidence against the assessee on certain points which have been considered by AO to be adverse in nature.
AO himself has mentioned in the assessment order that sale consideration and source of giving advance to M/s Taranjit Singh & Co., Chandigarh is the amount received through three brokers through banking channel, therefore, Assessing Officer cannot ask the assessee to prove source of the source. The Assessing Officer has also not brought any evidence on record that despite selling the investments through the brokers, assessee company was still having ownership and possession over the same investments held by the assessee company. These facts and material on record clearly suggest that assessee genuinely sold the investments/shares through three brokers and received the sale consideration through banking channel. Therefore, such consideration could not be treated as undisclosed unaccounted income of the assessee. - decided in favour of assessee.
Correctness of the authority of the Tribunal to make a reference to a larger Bench - Tribunal was confronted with conflicting decisions of two benches of the Tribunal on an identical question of law arising in the said group of tax appeals - Held that:- When the Tribunal recorded that the two Benches had given diagonally opposite decisions, the Tribunal was perfectly justified in making a reference. Even if the department were of the opinion that one of the judgements could be distinguished on facts, the same would not give rise to a substantial question of law. Being a forum discharging judicial functions, the Tribunal was bound by the law of precedence.
If two different benches of co-ordinate strength had given deferring opinions, the Tribunal had to refer the dispute to the Larger Bench. All the questions of law are, therefore, answered against the Revenue - appeal dismissed.
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