Settlement commission proceedings - HELD THAT:- The search and seizure operation was carried out at the premises of various persons including petitioner. Thereafter, assessment proceedings under section 153 A of Income Tax Act, 1961 (hereinafter referred to as 'Act' 1961) were initiated. It is also admitted by petitioner that it has already approached settlement Commission by filing application under section 245 C of Act, 1961.
In these facts and circumstances, we do not find any occasion to interfere in the matter at this stage. The writ petition is accordingly dismissed since petitioner is already pursuing remedy before Settlement Commission
Contempt for non compliance of an order dated 11th March, 2016 - HELD THAT:- In contempt proceedings, the Court is required to adjudicate and decide the question of whether there has been willful, deliberate and contumacious violation of an order of Court and upon such finding, impose a penalty. In contempt proceedings, orders may also be passed for the prevention of further contempt by issuance of directions, which ensure compliance of an order, violation of which is alleged. In proceedings for contempt, there is no scope for imposition of costs on the contemnor for delay in compliance of an order of Court. It is well settled that the scope of the original order cannot be expanded in contempt proceedings.
As contempt is basically a matter between the court and the alleged contemnor and the role of the applicant for contempt is in the nature of that of an informant, it is not deemed necessary to call upon the petitioner in the contempt petition to make submissions - appeal allowed subject to costs of ₹ 50,000/- imposed on the first respondent in the contempt petition/appellant
TP Adjustment - Volume Discount allowed by the AE for sale to third parties - assessee explained to the TPO that the AE has allowed 5% volume discount to non ITAAE enterprises depending on the turnover AND profit margin of non-AE Company has increased to that extent and accordingly sought for an adjustment of 5% volume discounts on the prices of Non AE - HELD THAT:- Assessee is a joint venture company M/s. Hyundai Corporation and there is every reason to extend all the concessions to the assessee by AE - AR also did not place any agreement entered in to by AE with Non AE companies for such volume discounts. Arms Length price is determined on transaction to transaction or on number of transactions basis in cup method. In the absence of bill to bill or invoice to invoice details of discounts allowed and the prices of comparable company such adjustments are not permissible. The purpose of transfer pricing is to plug the diversion and transfer profits outside the country without payment of due taxes. The assessee company is a joint venture company of AE which expects more concessions than unrelated companies.
In the instant case, the assessee has not demonstrated that it did not get volume discount with relevant bills of the comparable companies. The ALP is determined to arrive at the reasonable and fair price to the assessee from AE to plug diversion of profits. Since the assesse failed to prove that the Non AE company was allowed volume discount with relevant bill or account copy, we are unable to accept the adjustments sought by the assessee on account of volume discount andaccordingly dismissed the appeal of the assessee on this issue.
Addition on account of difference in SPCEN and SPCD Trading Grades - assessee argued that both the SPCEN and SPCD Trading Grades are different degrees in comparability, characteristics for applying the CUP method - HELD THAT:- As we observe that the assessee has raised this ground before the Ld. CIT(A) but the Ld. CIT(A) has not adjudicated this ground. Therefore, we remit the matter back to the file of the Ld. CIT(A) to decide this ground on merits. The assessee’s appeal on this ground is allowed for statistical purposes.
Selection of Most Appropriate Method - assessee has adopted Comparable Uncontrolled Price Method as the most appropriate methods to arrive at Arm’s Length Price - HELD THAT:- On the basis of the TP study conducted by the assessee, the AO after making analysis, collecting the information, completing the enquiries, accepted the method adopted by the assessee and determined the ALP and suggested for downward adjustment of purchases. After completing the proceedings and passing the assessment orders u/s 143(3) making argument for substitution of another method as most appropriate method amounts to reopening of assessment. Re-opening of assessment is possible as per the provisions of Sec.147 of IT Act in the specific facts and circumstances provided in the relevant provisions of IT Act. Merely to suit the needs of the assesse, the completed assessments cannot be allowed to re-open. The Transfer Pricing provisions are not an exception. Since, the assessee itself has adopted the CUP method and made TP study which was accepted by the TPO/AO we do not find any infirmity in the Orders of the Ld. CIT(A) and the assessee’s ground on this issue is dismissed.
Disallowance u/s. 32(1)(iia) - additional depreciation on the purchase of wind mills u/s. 32(1)(iia) - main business of the assessee is not producing or generating electricity therefore, the assessee company is not entitled for any benefit - CIT(A) allowed the claim on additional depreciation on windmill for the year under consideration in view of the fact that benefit of additional depreciation on power generation will apply in relation to assessment year 2013-14 onwards and will not apply to the year under consideration as per amended provisions of section 32(1)(iia) of Finance Act, 2012 w.e.f. 01.04.2013 - HELD THAT:- We on perusal of the assessment order found that the Revenue has not accepted the decision and filed SLP. This Tribunal is of the considered opinion that mere pendency of Special Leave Petition (SLP) before the Hon'ble Apex Court cannot be a reason to take a different view. The judgment of Madras High Court is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. Therefore, the Commissioner of Income Tax (Appeals) has rightly allowed the claim of the assessee by following the binding judgment of Madras High Court in EXMO PRECISION CASTINGS [2009 (10) TMI 140 - MADRAS HIGH COURT] and M/S. HI TECH ARAI LIMITED [2009 (9) TMI 60 - MADRAS HIGH COURT
Accordingly, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) and upheld the same and the Revenue grounds are dismissed. The appeal of the Revenue is dismissed.
Disallowance u/s 14A - Whether CIT(A) failed to appreciate that section 14A should be applied only when there is an exempted income earned out of investment and not otherwise. The Appellant had not earned exempted income during the AY 2013-14? - HELD THAT:- Since the assessee did not appear, we have no option, but to hear the appeal ex parte, qua the assessee. Accordingly, the revenue was heard.
We have carefully examined the order of the CIT(Appeals) on the impugned grounds and we find that he has rightly adjudicated the issues in detail and we find no infirmity therein. Accordingly, we confirm the order of CIT(Appeals).
Capital gain computation -correctness of value of the plot under sale for the purpose of determination of Capital gain with reference to Section 50C - addition on the basis of the valuation report of the impugned Property issued by the learned DVO - HELD THAT:- Having regard to the allowance of 30% claimed towards curtailment of land as referred to by CIT(A) in Para 3.2 of the CIT(A) order and also having regard to the comparable rates available at the time of sale coupled with other deficiencies such as lack of direct access to the Plot under sale and pancity of civic amenities etc. We deem it appropriate that the share of the assessee in the sale consideration be taken at ₹ 17,45,000/- instead of ₹ 34,90,000/- determined by the revenue. Accordingly, assessee gets relief to the extent of 50% in the deemed sale consideration. The AO is accordingly directed to re-compute the taxable capital gain in terms of the direction noted above. In the result, appeal of the assessee is partly allowed.
Depreciation on water supply and drainage - assessee is engaged in the business of coal mining and electricity generation - assessee grouped the assets under the head water supply and Drainage consisting of civil construction works like storage tanks, check dams, RCC Aprons and culverts, sewerage and drainage and large size pipelines and bore wells etc. and treated the same as plant and claimed the depreciation @15% - AO was of the view that the allowable depreciation is @10% as applicable in the case of non-residential buildings - CIT(A) allowed the assessee’s appeal - HELD THAT:- The civil construction in the mines cannot be treated on par with the residential buildings or non-residential buildings used for the purpose of residence or commercial use. They are to be constructed with a special technical requirement for the purpose of mining activity for excavation, generation and transmission as rightly observed by the Ld.CIT(A). The wear and tear is also very high in the mines. The decision KARNATAKA POWER CORPORATION [2000 (7) TMI 72 - SUPREME COURT] supports this view. Therefore, we hold that the civil constructions made for the drainage and water supply in the mines are to be treated as plant and entitled for excess depreciation. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The Revenue’s appeal dismissed.
Higher rate of depreciation on Electrical installations - assessee claimed the depreciation @15% and the AO restricted the same to 10% and the balance depreciation was disallowed - HELD THAT:- We agree with the Ld.CIT(A) that the electrical installations installed for the purpose of excavation, transmission of mining activities required to be considered as a plant as per the decisions relied upon by the assessee. Whereas, the electrical installations installed in the administrative buildings, bus stations, etc., perform the functions of normal transmission of electricity cannot be held as a plant. The assessee also relied on the decision of Kutti Spinners Pvt Ltd [2014 (5) TMI 692 - ITAT CHENNAI].
The Co-ordinate Bench of ITAT, Chennai held in the cited case that the electrical cables, fittings and other electrical works connected with the wind mill considered as a single capacity unit and eligible for depreciation @80%. Therefore, the issue is remitted the matter back to the file of the AO and to examine the electrical installations for the purpose of mining activity and installed for the purpose of normal electricity supply such as administrative buildings, canteen and bus stations, etc., and allow the depreciation @15% in respect of the installations made in the mines and 10% in respect of the buildings, Canteen, Bus Station, etc.
Accrual of income - Surcharge recoverable from electricity bills - AO found from the Annual Report that the surcharge recovered from the belated settlement of power bills has not reckoned as income since there is uncertainty in realization and the same would be accounted on realization - assessee is following the mercantile systems of accounting - AO held that as per the tripartite agreement entered into by the assessee with RBI, Government of India and the state governments on behalf of Electricity Boards as was no uncertainty in the accrual of surcharge and held that ₹ 118 Cr. is an accrued income required to be brought to tax for the Assessment Year under consideration -whether the recovery of surcharge levied or leviable by the assessee is uncertain or certain? - HELD THAT:- There is no doubt regarding the payment of dues when there is binding tri-partite agreement. Some sanctity and credence has to be given to the tripartite agreement. Therefore, we are unable to accept the contention of the assessee that there is no certainty in accrual of surcharge to the assessee company. The assessee has not demonstrated with the facts that recovery through Ministry of Finance is unenforceable.
The tariff could not be realized either by Court orders or Government Orders, since there was a decree granted by the Trial Court which was affirmed by the Appellate Court and there was an uncertainty in releasing the dues in the case of Godhra Electricity Co. Ltd. There was no tri-partite agreement, as if, in the case of the assessee to ensure recovery by Ministry of Finance through adjustment in the case of Godhra Electricity Co. Ltd.. Therefore, the case law relied upon by the assessee cannot come to help of the assessee. The tripartite agreement entered in to with the Government of India, Reserve Bank of India and the state Governments has to be given due credence and simply cannot be brushed aside. Considering all the facts and merits of the case we hold that there was no uncertainty in realizing the tariff or surcharge by the assessee company and accordingly we hold that the income is accrued and the assessing officer has rightly brought to tax. Therefore we set-aside the orders of the Ld.CIT(A) and restore the Assessment Order. Appeal raised by the Revenue on the issue of surcharge recovery from Electricity Boards is allowed.
Deduction u/s.80IA - AO was of the view that the Unit TPS-I was an expansion of the existing unit and hence not eligible for deduction u/s 80IA - Whether expansion cannot be considered as a new unit? - HELD THAT:- As decided in own case [2004 (8) TMI 364 - ITAT MADRAS-B]As per clause(iv) of sub-sec (4), deduction in respect of an undertaking which is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on 31st day of March, 2011 shall be 100% of the profit for a period of ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise generates power or commences transmission or distribution of the power. Therefore, deduction is clearly for the profits of an undertaking and not for an undertaking engaged in a new business. Similar expressions as found in sec 80-IA are found in sections 80HH, 80I and 80J.
Object of the section was to provide an incentive for selling up of new industries so as to accelerate the process of industrialization and that it does not appear or to have been the intention of the legislature that the benefit of the section would be confined only to parties who had not already set up such industrial undertakings and not to parties who had past experience of running similar industrial undertaking. This principle has since been approved by the Supreme Court in the case of Textile Machinery Corporation Ltd [1977 (1) TMI 3 - SUPREME COURT]. Applying the principles of the above decision of the Hon’ble Supreme Court, it has been held that mere fact that the second unit manufactured some of the items which were manufactured by the first, did not make it an integral part of the first unit as it could survive independently of the first unit - appellant is entitled to relief under section 80-lA in respect of TPS-l Expansion. The requirement regarding investment in the plant and machinery and other conditions for availing benefit of deduction u/s.80-IA have also been satisfied and the AO has not raised any other objection regarding these conditions. In view of the above factual position and authoritative precedents, the deduction claimed by the appellant us 80-IA is allowed. Accordingly, the ground is allowed.
Disallowance u/s.14A - HELD THAT:- Insofar as it relates to applicability of Rule 8D for years prior to assessment year 2008-09, stands reversed by Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd vs. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] clearly held in the said decision that Rule 8D which came with effect from 24 th March, 2008, will be applicable only after the period 2008-09. Nevertheless, their Lordship has clearly noted that even prior to that year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method having regard to the facts and circumstances of the case. Therefore, despite the argument of learned A.R. that electricity bonds were taken under compulsion and there was no expenses incurred for earning the interest income, we are inclined to remit the issue back to the file of A.O. for consideration afresh.
Disallowance of pre-paid expenditure - Expenditure disallowed by the AO stating that the expenditure was not ascertained - HELD THAT:- Both the Ld.DR and the Ld.AR accepted during the appeal hearing that the assessee’s case covered by this Tribunal order [2011 (6) TMI 997 - ITAT CHENNAI] - Since the issue is covered by this Tribunal order and the Ld.CIT(A) followed the order this tribunal we do not find any infirmity in the order of the Ld.CIT(A) and the appeal of the revenue on this issue is dismissed.
Disallowance of Advance Overburden removal of Rajasthan Mine - HELD THAT:- As decided in own case [2008 (4) TMI 381 - ITAT MADRAS-C] Expenditure on removing overburden in the continuous process of mining lignite from an old open cast mine is not expenditure for prospecting, etc. of minerals within the meaning of s.35E and also not capital expenditure but same is allowable revenue expenditure under s.37(1).
Deduction u/s.80IA only on power project TPS-I - interest received from the employees and miscellaneous income derived from industrial entity for the purpose of deduction u/s.80IA OR not? - HELD THAT:- The interest received from the employees and miscellaneous income cannot be held to be derived from industrial entity for the purpose of deduction u/s.80IA. The assessee is eligible for deduction u/s.80IA only on power project TPS-I. Handling charges, interest received from employees and miscellaneous income is not inter linked to the industrial activity of power generation Therefore, we do not find any infirmity in the order of the AO and the same is confirmed. The Hon’ble Supreme Court in the case of Liberty India[2009 (8) TMI 63 - SUPREME COURT] held that the profits on sale of duty drawback are not eligible for deduction u/s.80IA. The word used in Sec.80IA for deduction of the profits and gains derived from undertaking or enterprise from any business referred to Sec.4 of 80IA is used in narrower, connotation and intend to cover not beyond the first degree of the source. Handling charges, interest received from employees and miscellaneous income are not the direct source of income from Power generation. Therefore, we are unable to accept the contention of the assessee to allow the deduction u/s.80IA on the other income. Accordingly, the assessee ground on allowing deduction u/s.80IA on the other income is dismissed.
Exclude the expenditure relating to earning the other income for the purpose of computing the deduction u/s 80IA - HELD THAT:- Though, the assessee has argued that expenditure related to other income required to be excluded. The Ld.AR of the assessee has not furnished the details of expenditure for earning the other income. The entire expenditure has been debited to the Profit & Loss A/c relating to the earning of Gross total Income. Unless a specific details are furnished relating to the expenditure of other income. The assessee request cannot be acceded to. However, the fact cannot be denied that there would be expenses relatable to the earning of income especially in handling charges and other miscellaneous income. Considering the facts and merits of the case, we are inclined to estimate the expenses @10% of other income and direct the AO to exclude 10% of other income as expenses while computing the deduction u/s.80IA.
Addition on account of motor accident claims of earlier years - CIT- A allowed the claim - claim of the appellant that the liability crystallizes only after the award by the MACT and the payment is made thereafter - AO noticed that the assessee had claimed a deduction in respect of payments towards motor accident claims, but all these payments donot pertain to the current year alone AND in many cases the compensation award by Motor Accidents Claim Tribunal (MACT) was given much earlier, but assessee did not create any provision or liability at that point of time - HELD THAT:- We find that merely because the MACT awards are booked by the assessee at a later point of time than the date of the award cannot be reason enough to decline the claim for deduction in respect of these awards. It is sometimes possible, rather its inherent mechanism of the system as it exists, that sometimes there is considerable delay in communicating the awards granted by MACT. The awards are generally conveyed through the lawyers representing the assessee and it does take time in many cases.
It is not the case of the AO that the subsequent claims are duplication of claims in respect of the same liability, and the assessee does not stand to gain as a result of this delay in accounting. In any event, the quantification of claims is verified by the statutory auditors as also the CAG audit teams, and the same method of accounted is being followed by the assessee for last 50 years. As there is no change in method of accounting, as there is no duplication of claims, and, as assessee does not anyway gain anything from delaying accounting for these claims, we see no reasons to reject the claims merely because these claims are accounting for, in the books of accounts, at a point of time later than awards being granted i.e. when the assessee gets to know about the same.
CIT(A) has given a categorical direction to the Assessing Officer for verification of claim on account of the liability having been crystallized in the relevant previous year. Grievance of the Assessing Officer, regarding crystallization of liability, does not, therefore, survive any longer. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
Addition on account of shortage of spare parts - assessee claimed a shortage of stock with no complete details - as explained by the assessee that during the relevant previous year, the assessee has consumed diesel for ₹ 592.18 crores and CNG worth ₹ 67.04 crores, and the inherent nature of these products is such that there is scope for evaporation of diesel and CNG - CIT-A deleted the addition - HELD THAT:- The stand of the CIT(A) in this regard is very well reasoned and it does not indeed call for any interference. When an assessee is dealing with such a huge volume of diesel and CNG, as the assessee before us, it is quite understandable that there can be some loss by way of evaporation and in the process of distributing the diesel and CNG to the motor vehicles. This loss has been certified by the auditors as well. It is also not the case of the Assessing Officer that the loss is excessive or unreasonable. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
Addition being interest on mobilization advance - HELD THAT:- Assessee being a government undertaking is been following a system of accounting as per which all the items of income and expenditure are treated as accrue only after the approval is granted by competent authority. Further, the coordinate bench deleted the above addition. Therefore, respectfully following the decision of the coordinate bench in assessee’s own case for assessment year 2008-2009 we also direct the AO to delete the above addition. In the result, we reverse the finding of the Ld. CIT (A) and allow ground No. 1 of the appeal of the assessee.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- According to the provisions of section 14A(2), the Ld. assessing officer before invoking the applicability of Rule 8D should have explained as to why the voluntary disallowances or no disallowances made by the assessee was unreasonable and unsatisfactory. We failed to find any such satisfaction recorded by the Ld. assessing officer. The satisfaction is mandatory in view of the judicial precedents of the jurisdictional High Court laid down before us by the Ld. authorized representative. Therefore, respectfully following the judicial precedent of the jurisdictional High Court we direct the Ld. assessing officer to delete the disallowance u/s 14A of the income tax act applying the provisions of Rule 8D of the Income Tax Rules, 1962.
Addition on protective basis - HELD THAT:- As the disallowances been deleted in assessment year 2008 – 09 the addition is required to be confirmed in this year.
Disallowance of the assessee’s claim of deduction supplier period expenses even when the assessee was following the market system of accounting - CIT(A) has deleted the above addition following the decision of the Hon’ble high court in assessee’s own case - HELD THAT:- DR could not point out any infirmity in the order of the Ld. 1st appellate authority in following that decision of the Hon’ble high court in assessee’s own case. The coordinate bench as well as the Ld. first appellate authority has also dealt with issue of disallowance of the prior paid expenses and held in favour of the assessee. In view of this we do not find any infirmity in the order of the Ld. CIT(A), in deleting the about disallowance. In the result, appeal of the revenue is dismissed.
Allocation of expenses to the 10A unit by the AO resulting reduction of deduction u/s 10A - HELD THAT:- Identical issue was considered by this Tribunal in assessee's own case for the AY 2002-03 to 2004-05 CIT (Appeals) had deleted the allocation following the decisions of the Tribunal in assessee's own case and the Supreme Court.
Disallowance of commission expenses - AO noted that the assessee has claimed the commission paid to the sales agents - AO disallowed the commission payment made to the extent the assessee failed to produce the details of the customers however the CIT (Appeals) has estimated the disallowance only to 20% of the amount which was disallowed by the AO - HELD THAT:- It is pertinent to note that for the Assessment Year 2004-05, the CIT (A) has observed that the AO to allow the claim of the assessee subject to the verification of names or ascertain more details relating to these payments being furnished by the assessee. Thus the earlier year’s order does not give any guidance of restricting the disallowance to 20%. When the assessee has not produced complete details and there is no basis of estimation of restricting the disallowance by the CIT (Appeals), we set aside this issue to the record of the AO for reconsideration and adjudication after verification and examination of the complete details to be filed by the assessee.
Transfer Pricing Adjustment - TPO while computing the ALP has apparently taken the gross profit margin of the AMDL at entity level by assuming that the entire activity of AMDL is only trading in the medical equipments - HELD THAT:- In the case on hand, the international transactions in trading segment is confined only to the purchases made from the AE. Since there are other transactions of import and procurement from domestic market therefore the adjustment cannot be made by considering the entire trading segment of the assessee. Thus on principle, we do not find any error on these points however, the CIT (Appeals) has undertaken to recompute the margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do this exercise of recomputation without giving an opportunity to the TPO/A.O. The proper course of action on the part of CIT (Appeals) would have been to ask the TPO/A.O. for remand report by considering all the relevant material.
CIT (Appeals) did not choose to issue any remand order but undertaken the entire exercise on his own. Thus it is clear that the TPO/A.O. was not given an opportunity in this process of recomputing the margins of the comparable as well as assessee. We set aside this issue to the record of the TPO/A.O. to consider and verify relevant record and then determine the ALP in the light of our above observations.
Payment of royalty - assessee has paid the royalty to its AE @ 2% on sale - AO / TPO held that none of the comparable company has paid royalty for trading segment - HELD THAT:- Adjustment of royalty payment made by the Assessing Officer and the CIT (Appeals) has deleted the same. Since this issue is common to the issue involved in the Asst. Year 2005-06. In view of our finding on this issue for the Assessment Year 2005-06 this issue stands set aside to the record of the TPO/A.O. on same terms.
Deemed Dividend u/s 2(22)(e) - payment by way of loan or advance - HELD THAT:- For payment by way of an advance or loan as employed in section 2(22)(e) of the Act, there should be a outgoing or actual flow of money from the company to its shareholder. In the instant case, there is no outgoing or actual flow of money from M/s Saurabh Agrotech Pvt. Ltd. to the assessee, therefore, it cannot be said that there is any payment by way of advance or loan to the assessee by M/s Saurabh Agrotech Pvt. Ltd.
In the instant case where the assessee has purchased shares of Vijay Agro Mills Pvt. Ltd. from M/s Saurabh Agrotech Pvt. Ltd. and there is an amount payable to M/s Saurabh Agrotech Pvt. Ltd., it is a transaction of purchase and sale of shares and the same cannot fall within the ambit of payment by way of loan or advance. Secondly, on 10.04.2008, the day when assessee acquired shares of vijay Agro Mills Pvt. Ltd. from M/s Saurabh Agrotech Pvt. Ltd, the Assessee was not holding any shares in M/s Saurabh Agrotech Pvt. Ltd. as per annual return filed with the ROC and which is also verified by the Ld. CIT (A), therefore the second condition for invoking the provisions of deemed dividend doesn't get satisfied. In view of the fact that all the three conditions are to be satisfied cumulatively and the two conditions not being satisfied in the instant case, there is no necessity to examine the third condition in terms of extent of accumulated profits which can attract deemed dividend. We agree with the contention of the ld AR that provisions of section 2(22)(e) of the Act are not attracted in the instant case.
Disallowance u/s 14A r.w.r. 8D - contention raised by the ld. AR is that no disallowance u/s 14A of the Act can be made in the year under consideration as no dividend income has been received in respect of investment made by the assessee - HELD THAT:- There is no dividend income which is received or receivable for the year under consideration in respect of its investments in shares. It is noted that said fact is on record and remain undisputed before us. No contrary authority has been brought to our notice. In light of above discussions, respectfully following the decision of the Hon’ble Delhi High Court in case of Cheminvest Limited[2015 (9) TMI 238 - DELHI HIGH COURT] no disallowance under section 14A can be made in the instant case.
Disallowing the claim of the assessee company being VAT reimbursement and in the nature of capital receipt - HELD THAT:- In the instant case, the subsidy in the form of VAT reimbursement is provided to the assessee company in terms of the Industrial Incentive Policy of state of Bihar formulated in the year 2006. The objective of the policy was to establish new industries and to revive the sick and closed units in the state of Bihar and to create favorable environment to attract the investors of state and from abroad.
Applying the purpose test, the objective and the purpose of providing the VAT subsidy (to the extent of 300% of capital employed) is clearly related to encouraging setting up of the new units which commences production within five years from 1.4.2006 and to generate fresh employment opportunities in the state. It is noted that even the ld CIT(A) has given a similar finding where he states that the purpose of the industrial incentive scheme is to encourage all round development of the state of Bihar. Further, the subsidy is calculated on the amount of VAT collected and deposited with the Government which would subsequently be entered in the passbook and verified by the Commercial taxes department. There is a distinction between the entitlement towards the said subsidy and its subsequent disbursement. The assessee becomes entitled to such subsidy once it has set up the new unit in the state of Bihar and the disbursement happens when the assessee company actually starts production.
By its very nature, the subsidy would thus be payable after the commencement of production but that would not make it a revenue receipt as it was only a mode of disbursement and had nothing to do with the object for which the subsidy was given. The object for which the subsidy is granted, would takes primacy over the fact that it was given after the commencement of production and conditional upon the same. The subsidy is thus on capital account.
Referring to amendment in the definition of income, any subsidy given by the Central Government or a State Government or any authority etc. for any purpose, except where it is taken into account for determination of the actual cost of the asset under Explanation 10 section 43(1), has become chargeable to tax. Even if a subsidy is given to attract industrial investment or expansion, which is a otherwise a capital receipt under the pre-amended era, shall henceforth be treated as income chargeable to tax, except where it has been taken into account for determining the actual cost of assets in terms of Explanation 10 to section 43(1). This amendment is with effect from 1-4-2016 and is prospective in its application. In the instant case, as the assessment year under consideration is 2009-10, Section 2(24)(xviii) shall have no operation.
Thus VAT subsidy received by the assessee from the Government of Bihar is a capital receipt and accordingly not chargeable to tax.
Disallowance of deduction under section 80IA claimed on the profits of the Wind Mills - HELD THAT:- The Coordinate Bench in assessee’s own case for A.Y. 2007-08 has already taken a view in favour of the assessee following the decision of Hon’ble Madras High Court in case of CIT Vs. Velayudhaswamy Spinning Mills (P) limited [2010 (3) TMI 860 - MADRAS HIGH COURT].
Addition invoking the provisions of section 145(3) - Trading addition - GP rate determination - shortage of mustard seeds - HELD THAT:- AO has not pointed out any sales or purchase which is out of the books or not vouched. Day to day stock records is also maintained. The shortage of mustard seeds claimed by the assessee in the month of April 09 and March 10 is verifiable from the day to day stock register of the said months wherein the shortage is shown on day to day basis whenever the same has occurred. The reason as to why the shortage has been claimed in the month of April 09 and March 10 and not in the months of May 2009 to Feb 2010 has been duly explained before the AO. So far as non-production of laboratory test reports are concerned, it is submitted that every lot of seeds contain different quality of oil and considering the content of oil in the seed, payment is made to the supplier.
The maintenance of laboratory test report has thus no relevance for application of section 145(3). The Ld. CIT(A) after considering all these facts held that AO has no material for rejecting the book results declared by the assessee. The department has not challenged this finding of the CIT(A) where it is held that section 145(3) is not applicable. Hence, on this account itself, the ground of the department be liable to be dismissed. Adhoc trading addition is hereby deleted.
Addition u/s.68 on account of loan availed - HELD THAT:- The burden cast on assessee would shift to assessee only when assessee proved the identity of the creditors. Then only the AO could probe the matter further and investigate the material available before him to come to an independent conclusion before rejecting the explanation offered by the assessee.
In the present case, the assessee has not proved all the above ingredients stated above and the assessee being failed to discharge primarily burden cast upon it, the assessee cannot say “catch me if you can”. The only contention of the assessee is that the amount was borrowed by cheque and paid by cheque. Repayment was not by the assessee, but by the third party. By appreciating all the material on record, the AO came to the conclusion that the assessee’s explanation regarding this cash credit could not be accepted in the case of M/s. AR.Com. We are not in a position to disturb the findings of the lower authorities in respect of credit in the name of M/s. AR.Com. Accordingly, the addition of 3.05 crores in the name of M/s. AR.Com to be considered as unexplained credit in the hands of the assessee, the addition sustained by the Ld.CIT(A) is justified. Hence, this ground raised by the assessee stands rejected.
Coming to the credit in the name of M/s. MSG Associates for 50 lakhs and of Mr. Bharat Chandan for 25 lakhs, it was stated by the AO in his Remand Report that the identity of these two parties are proved by filing confirmation letters. The contention of the ld.D.R is that the assessee has not repaid the loan, but repayment by the third party - when the AO himself given in the remand report that assessee had produced the confirmation letters and credit worthiness of these parties, were also proved through bank accounts, it is not appropriate on the part of the Departmental Representative to argue contrary to the Remand Report submitted by the AO before the Ld.CIT(A) which is produced by the Ld.CIT(A) of his order. Being so, we are not in a position to interfere with the above findings of the Ld.CIT(A) in deleting these two additions. Accordingly, deletion is justified and confirmed the order of Ld.CIT(A) on this issue.
Theft of currency notes of the complainant - process attempted to kill the complainant - charges under Sections 328, 392, 307 read with Section 34 of the Indian Penal Code - Whether, the High Court in exercise of its appellate jurisdiction Under Section 386 of the Code could have set-aside the sentence of imprisonment, as imposed by trial court Under Section 328, 392 and 307 Indian Penal Code by enhancing the amount of fine to ₹ 30,000/- from the fine ₹ 2,000/- as ordered by trial court?
HELD THAT:- High Court thus has not reversed the finding of the guilt and without altering the finding of the guilt recorded by trial court, has altered the sentence. In altering the sentence High Court has exercised its power Under Section 386(b)(iii) of the Code. What is the meaning and content of 'Statutory Scheme' as delineated by the words 'alter the nature or the extent of the sentence, but not so as to enhance the same' has to be considered and answered in this appeal. Whether in altering the sentence, the High Court is empowered to alter the sentence to an extent which could not have been awarded by the trial court after recording the finding of the guilt?
The trial court after holding the Accused guilty has sentenced her for rigorous imprisonment of two years with fine of ₹ 2,000/- in default of payment, further simple imprisonment for a period of three months for each of the above offences - What is the content and meaning of the word 'shall be punished with rigorous imprisonment, which may extend to ten years, and shall also be liable to fine', whether after finding the Accused guilty of the aforesaid offences, the trial court could have imposed sentence only of a fine or it was incumbent on the trial court to impose the sentence of imprisonment as well as fine?
Prior to amendments made in Section 309 by Act 8 of 1882, the punishment provided for Section 309 was 'simple imprisonment for a term, which can be extended to one year or, and shall also be liable to fine. By the above amendments of 1882 the words 'and shall also be liable to fine' have been deleted and substituted by the words 'or with fine or with both'. The legislature is thus well aware of the distinction between the punishment which provides imprisonment and with fine and punishment by imprisonment or fine or by both. Where punishment provided is both by imprisonment and fine, can Court punish only with fine? - In the present case, High Court by its judgment has punished the Accused only with fine after affirming the finding of the guilt recorded by the trial court.
While maintaining the conviction of the Appellants, we remit the case to the High Court; the High Court will consider again on the findings already recorded the question of sentence-(a) for the offence Under Section 18(c) punishable Under Section 27(a)(ii) so far as Appellants 2 and 3 are concerned, and (b) for the offence punishable Under Section 28 of which all the three Appellants have been found guilty,- and pass appropriate sentences - Appeal allowed in part.
Whether Under Section 386 of the Code which empowers the Appellate Court to alter the nature or the extent or nature and extent of sentence empowers the Appellate Court to alter the sentence of imprisonment and fine into a sentence of fine only. The power of the Appellate Court, as contained Under Section 386 is coextensive with the power of trial court. In a case, where trial court had acquitted an Accused Under Section 386(a), the Appellate Court can reverse an order of acquittal and hold the Accused guilty and pass such sentence on him according to law.
Thus, even when the Appellate Court has been given power to reverse an acquittal and hold the Accused guilty, the power to pass sentence is to be exercised "according to" law. The word 'according to law' clearly indicates the sentence as provided under the Indian Penal Code. Thus power of Appellate Court to sentence an Accused after holding him guilty has to be in accordance with the punishment as provided under Indian Penal Code. Thus, while exercising power Under Section 386(b) when the Appellate Court has been given power to alter the nature or the extent or nature and extent both of the sentence, altering of the sentence has also to be in accordance with the Scheme of punishment as contained in the Indian Penal Code - Appellate Court cannot exercise its power under 386(b) (iii) to alter the sentence of the imprisonment and fine into a sentence of only a fine, which shall be contrary to the Statutory Scheme. In event, such power is conceded to Appellate Authority to alter a sentence of imprisonment and fine with sentence only of a fine, the consequences will be unfair and unjust.
There cannot be any dispute as to the power of the Appellate Court to alter the nature and extent of the sentence without altering the finding. Thus, even in a case when High Court affirms the finding of guilt, the nature and extent of sentence can very well be altered. The Appellate Court taking into consideration the case can alter/reduce the sentence -
In the present case, the High Court has affirmed the finding of the guilt but has erroneously set-aside the sentence of imprisonment by providing for fine of ₹ 30,000/- only.
Trial court, while sentencing the Appellant has thus taken above circumstances into consideration and for offences Under Section 328, 307 and 392 Indian Penal Code has awarded imprisonment of two years only with a fine of ₹ 2,000/- each - The maximum sentence Under Section 328 is ten years, Under Section 307 is ten years and in case of hurt, it is life imprisonment or such punishment. In Section 392 Indian Penal Code, the maximum punishment is for the period of fourteen years.
The fact that Accused has three minor sons, out of them two are mentally retarded, was taken into consideration by trial court and after considering the aforesaid fact, sentence of imprisonment of only two years was ordered - the order of the High Court, modifying the sentence is unsustainable and is hereby set-aside.
Assessment completed u/s 143(3) - trading addition -Addition solely on the basis of statements recorded during the course of survey which stood retracted by the assessee through an affidavit filed by its director - whether additions made solely on the basis of such retracted statements deserve to be deleted? - AO not accepting the affidavit given by the director of the assessee company - HELD THAT:- If we apply the ratio of the judgment rendered in the case of CIT Vs. S.Khader Khan son [2013 (6) TMI 305 - SC ORDER] on the facts of the present case, the authorities below were no justified in making the addition on the basis of the statement recorded during the course of survey. No other material suggesting that the claim of the assessee was false, is brought on record by the revenue. Under these facts and in view of the binding precedent, we are unable to confirm the finding of the ld. CIT(A). Therefore, we direct the Assessing Officer to delete the trading addition - Decided in favour of assessee.
Disallowance of stipend expenses - disallowance solely on the basis of the statement of Shri Naresh Kumar Jain recorded during the course of survey proceedings - statements recorded of Shri Naresh Kumar Jain during the survey, a surrender was obtained from him wherein he admitted 50% of the payment made to trainees as bogus. However, in the assessment order, the Assessing Officer made lump sum addition @ 75% of total expenditure claimed - CIT-A restrict the disallowances to 20% instead of 75% of the amount claimed by the appellant. - HELD THAT:- CIT(A) has restricted the disallowance on ad hoc basis. After considering the material placed before this Tribunal, we are of the considered view that when the inspection was carried out by the ESI and PF department, no discrepancy was reported in respect of rate of stipend and payment of stipend. The Assessing Officer has not placed any material suggesting that the number of trainees was not correct. Moreover, the Assessing Officer has based his finding on the basis of presumption that the assessee is not charitable institute than why it would provide training with stipend to the persons who would quit after training. This observation of the Assessing Officer is purely based on the conjecture and surmises, which cannot be the basis for making disallowance. If the Assessing Officer’s reasoning is accepted, then it would make the assessee liable for prosecution for practicing the bonded labour. Therefore, this disallowance is unjustified and the same is hereby deleted. - Decided in favour of assessee.
Addition of deemed dividend u/s 2(22)(e) - HELD THAT:- The assessee in the instant case is not shown to be one of the persons, being shareholder. Of course the two individuals being partners of the assessee-firm are the common persons, holding more than requisite amount of shareholding, and are having requisite interest, in the firm, but then, thereby the deemed dividend would not be deemed dividend in the hands of the firm, rather it would obviously be deemed dividend in the hands of the individuals, on whose behalf, or on whose individual benefit, being such shareholder, the amount is paid by the company to the concern.
Thus, the significant requirement of section 2(22)(e) is not shown to exist. The liability of tax, as deemed dividend, could be attracted in the hands of the individuals, being the shareholders, and not in the hands of the firm. - Decided in favour of assessee.
Disallowance of deduction u/s.80IB - as per AO permission for construction first was granted by the Surat Urban Development Authority (SUDA) on 05.02.1997 which was to be completed on or before 31.03.2008 for claiming deduction but the same was actually completed on 01.10.2010 - CIT-A allowed deduction - HELD THAT:- SUDA had given permission as on 5th Feb, 1997 to its erstwhile owners for making plots and thereafter construction to plinth and out of those plots, two plots were purchased by this Hemant I Desai as on 27th March, 2000 which was subsequently purchased by the father of the assessee which in turn came in possession of the assessee.
As noticed from the supporting material that the permission to develop housing project was obtained on 23rd Feb, 2007 which was revised on 17nd September, 2009 and as per the permission the housing project was completed on 31st March, 2010. CIT(A) has elaborated in his findings and order that the condition of completion of project within prescribed time were fulfilled by assessee in her case. After considering the above facts and detailed order of the Ld.CIT(A) we do not find any reason to interfere in the findings of the Ld.CIT(A). - Decided against revenue.
International transaction as contemplated u/s 92B - royalty chargeable from two Associated Enterprises (AEs) as contemplated u/s 92A - TPO was of the view that the AEs had used the trade name/brand name owned by the assessee without any compensation, therefore, the transaction of receipt of royalty was not at arm’s length - CIT(A) held that royalty @ 2% of FOB sales would be at arm’s length price - HELD THAT:- Brand name of the assessee was used by the AE and in the earlier years the assessee provided the R&D support, know-how technologies etc. which helped the AE for the year under consideration also to some extent. It is also noticed that the assessee received the royalty @ 1% in the preceding year. TPO also while working out the royalty rate for the year under consideration was of the view that the royalty @ 1% was chargeable on the products manufactured without the aid and support of assessee company but marketed by using “Dabur” name, however, no basis has been given for the same. In our opinion the estimate made by the TPO for the rate of royalty was highly excessive.
CIT(A) was not justified in directing the AO to charge the royalty from Dabur International UAE @ 2%. Particularly when, the assessee was not using the technical know-how or R&D support from the assessee, in our opinion it will be fair and reasonable to charge the royalty @ 0.75% by considering this fact that in the year under consideration the assessee had incurred huge expenses on marketing, advertisement & brand building etc. and that in the preceding year the royalty was although charged @ 1% on the products manufactured without R&D support and technical know-how from the assessee but the aforesaid expenses were comparability less.
Royalty charged from M/s Dabur Nepal Ltd. - contention of the assessee that 80% of the products manufactured by M/s Dabur Nepal Pvt. Ltd. were purchased by the assessee has not been rebutted. It is also not in dispute that the royalty was payable earlier on the sales, therefore, it is unbelievable that the assessee charged the royalty on the purchases made by it from M/s Dabur Nepal Pvt. Ltd. to increase the cost of purchases. In the present case, it is an admitted fact that there was no agreement in existence between the assessee and the AE i.e. M/s Dabur Nepal Pvt. Ltd. and nothing is brought on record to substantiate that the assessee incurred any expenditure which benefited M/s Dabur Nepal Pvt. Ltd. in any manner. Therefore, no royalty was payable to the assessee by M/s Dabur Nepal Pvt. Ltd. By considering the totality of the facts as discussed here in above, we are of the view that the royalty @ 2% directed to be charged by the ld. CIT(A) was not justified, therefore, the addition made on the said basis is deleted.
Sale of shareholdings in M/s Dabur Overseas Ltd. and M/s Dabur Nepal Pvt. Ltd. - TPO pointed out that the assessee was holding 79.96% of the shares of M/s Dabur Nepal Pvt. Ltd. which were sold to M/s Dabur International Ltd. for an amount of ₹ 17.16 crores and as a consequence to these transactions, the assessee ceased to be the holding company and M/s Dabur International Ltd. became 97.46% owner of M/s Dabur Nepal Ltd - HELD THAT:- CIT(A) categorically stated that two independent parties namely, M/s Bibhuti Pvt. Ltd. and M/s Lunar Trading Co. also sold shares of M/s Dabur Nepal Ltd. to M/s Dabur International Ltd. about three months before the sale of shares by the assessee and the sale price in case of sale transaction by those independent parties was comparable, so there was no reason to discard the sale transaction by third parties as CUP (comparable uncontrolled price), particularly when the sale transaction by those independent parties and that of the assessee were broadly comparable, the only difference was in the quantity of the shares sold which was lesser in the case of two independent parties. Those parties were in a better position to have a better bargain than the assessee. We, therefore, considering the totality of the facts are of the confirmed view that the ld. CIT(A) was fully justified in holding that arm’s length value of shares as determined by the independent valuer in the case of M/s Dabur Nepal Pvt. Ltd. need not be disturbed. We do not see any valid ground to interfere with the findings given by the ld. CIT(A).
Valuation of the shares of M/s Dabur Overseas Ltd. - CIT(A) although directed the AO to adopt average of growth figure available for three years which came to 25% but ignored the growth rate based on actual figures for the future years. In the instant case, it is not pointed out as to how and in what manner the average growth figure taken by the assessee at 19% for succeeding years, on the basis of valuation report of an independent valuer was wrong. Therefore, we are of the view that the ld. CIT(A) was not justified in adopting the figure of average growth at 25% instead of 19% adopted by the assessee. Accordingly, we modify the order of the ld. CIT(A) to this extent that the AO for the valuation of shares of M/s Dabur Overseas Ltd., shall adopt the figure of projected growth by taking average of growth figure at 19% instead of 25% directed by the ld. CIT(A). Accordingly, this issue is decided in favour of the assessee and against the department.
Addition u/s 43B r.w.s 36(1)(va) - staff welfare expenses by observing that deposits to the statutory fund was beyond the due date - HELD THAT:- In the present case, the ld. CIT(A) categorically stated that all the payment had been made by the assessee before due date of filing the return of income u/s 139(1) of the Act. Therefore, such payments could not be disallowed as per the provisions contained in first proviso to Section 43B of the Act. The view taken by the ld. CIT(A) was inconsonance with the ratio laid down by the Hon’ble Supreme Court in the case of CIT Vs Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT]. We, therefore, do not see merit in the appeal of the department on this issue.
Addition on account of club expenditure - AO disallowed the impugned amount on the ground of personal expenses - HELD THAT:- CIT(A) allowed the claim of the assessee by following the earlier order of the then ld. CIT(A) for the assessment year 1995-96 which was not challenged by the department. Therefore, on the principle of consistency also the ld. CIT(A) was justified in deleting the impugned amount, particularly when nothing was brought on record to substantiate that the personal element was actually involved. The expenses were incurred by the assessee on account of entrance fee and subscription for various club partnership in order to promote the business interest which was neither personal nor resulted in any benefit in the capital filed to the assessee. We, therefore, do not see any merit in this ground of the departmental appeal.
Deduction u/s 80IB & 80IC on the disallowance u/s 40(a)(ia) of the Act which comprises of sale of scrap, rental income and misc. income - HELD THAT:- In the present case, it is noticed that the ld. CIT(A) allowed the claim of the assessee by following the reasoning given by his predecessor for the assessment year 2005-06. It is not brought on record that the said reasoning given by the ld. CIT(A) for the preceding assessment year had been reversed by the higher firm. We, therefore, by keeping in view the principal of consistency, do not see any merit in this appeal of the department on this issue, particularly when the facts for the year under consideration and preceding year are identical.
ESOP expenses allowance - admission of additional grounds - HELD THAT:- Keeping in view the ratio laid down by the Hon’ble Supreme Court in case of NTPC ltd. [1996 (12) TMI 7 - SUPREME COURT] admit the additional ground raised by the assessee. However, it is an admitted fact that this issue has been raised by the assessee first time and the authorities below had no occasion to deal with this issue. We, therefore, deem it appropriate to remand this issue to the file of the AO/TPO to be decided in accordance with law after providing due and reasonable opportunity of being heard to the assessee
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- This Bench admits this petition under section 10 of Insolvency and Bankruptcy Code, 2016, declaring moratorium with certain directions issued.
Assessment u/s 153C - Assessee as contented proceedings u/s. 153C read with section 153A of the Act could not have been taken for the assessment year 2004-05? - HELD THAT:- We find that pursuant to a conjoint reading of Section 153A and the 1st proviso of Section 153C, it emerges that for the purpose of assessment or re-assessment in the case of a person covered by Section 153C, the date of initiation of the search under Section 132 or making of requisition under Section 132A contemplated in the 2nd proviso of Section 153A, stands substituted by the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person
In the case of the present assessee as the “reasons recorded for issue of notice under Section 153C for A.Y. 2004-05 to 2009-10” are dated 21.12.2010, therefore though it can safely be presumed that the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd. must had handed over the ‘seized material’ relatable to the assessee, to the A.O having jurisdiction over the latters case in the Financial year 2010-11 relevant to A.Y. 2011-12, and if that be so, then the A.O would had no jurisdiction for issuing notice under Section 153A r.w Sec. 153C for the said year, viz. A.Y. 2004-05, to the assessee, and as a fall out of the same the assessment framed in the hands of the assessee under Section 144 r.w.s. 153C, dated 30.12.2011, being devoid of any force of law, would be rendered non est
D.R had neither placed on record any ‘material’ to controvert and dislodge the claim of the ld. A.R that the handing over of the assets/documents relatable to the assessee by the Assessing officer of the searched person, to the Assessing officer of the asessee had taken place in F.Y. 2010- 11 relevant to A.Y. 2011-12, but then we being not oblivious of the fact that as the exact date of actual handing over of the material by the A.O of the searched person, viz. M/s Om Sai Motors Pvt. Ltd.cannot be deciphered from either the orders of the lower authorities, or the record before us, therefore in all fairness for the said limited purpose of verifying the said factual position, therein set aside the matter to the file of the A.O The Additional Ground of appeal No. 1 raised by the assessee before us is thus allowed for statistical purposes.
Addition made for the mismatch of AIR data with the Assessee’s accounts - HELD THAT:- Assessing Officer has not provided the transaction-wise and party-wise details to the Assessee for reconciliation and in the absence of such complete details simply because the Assessee could not reconcile the figure matching with the AIR data, addition cannot be made solely based on such AIR information. However, the Assessee out of ₹ 5,34,631/- has given the details and explanation to an amount of ₹ 4,93,466/-. Therefore, following the decision M/S. AF. FERGUSON & CO., C/O DELOITTE HASKINS & SELLS [2015 (1) TMI 306 - ITAT MUMBAI] we direct the Assessing Officer to delete the addition.
Correct head of income - interest earned on fixed deposits from banks and interest received on deposits with MIDC or MSEB - assessable under the head income from business or income from other sources - HELD THAT:- Almost similar issue has been considered by the Jurisdictional High Court in the case of CIT Vs. Swani Spices Pvt. Ltd [2010 (4) TMI 751 - BOMBAY HIGH COURT] wherein the Assessee received income from discounting bills and inter corporate deposits from out of surplus funds and claimed as business income for the purpose of deduction u/s 80HHC of the Act. The Jurisdictional High Court considering various decisions held that income received by way of bill discounting charges and interest on inter corporate deposits would not fall under the head of profits and gains of business or profession but would fall under the head income from other sources. The Hon’ble Supreme Court in the case of Pandian Chemicals Ltd. [2003 (4) TMI 3 - SUPREME COURT] held that interest from deposits with electricity board is not income derived from business of the undertaking. Respectfully following the above said decisions, we hold that interest on fixed deposits with banks, interest on deposits with MIDC / MSEB would not fall under the head of profits and gains of business of profession but would fall under the head income from other sources. These grounds are dismissed.
Disallowance/addition on account of debit balances of creditors written off - CIT (Appeals) held that this amount is capital and is not revenue in nature and therefore not allowable u/s 37(1) - HELD THAT:- The Chennai Bench in the case of Sterling Agro Products Processing Pvt. Ltd[2011 (8) TMI 460 - ITAT CHENNAI] considering the decision of Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] held that losses on account of irrecoverable amounts which were advanced to parties for supply of raw materials, agricultural produce etc. would result in definitely to be a loss to Assessee and such loss would lie in revenue field. Thus
We hold that the write off of all advances made to parties for rendering services / supply of material it is a revenue expenditure allowable u/s 37(1) or u/s 28 of the Act.
We hold that since the Assessee has written off only the advances made to parties for supply of materials / services, and it is not actually credit balances written off, the provisions of Section 41(1) are not attracted. Thus ground nos. 4 and 5 are allowed.
TDS u/s 195 - disallowing infrastructure service management fees and smart SMS fees u/s 40(a)(i) of the Act for non deduction of TDS - HELD THAT:- Lower authorities have not thoroughly examined the nature of services rendered by RAP to the Assessee and also whether they are rendered outside India or rendered in India. No such finding is given by the lower authorities - services were rendered by RAP to the Assessee and RAP is a resident of Singapore but it is not clear as to the detailed services rendered by RAP vis-àvis the agreement and where such services were rendered to Assessee whether in abroad or in India and how they were rendered. These findings of fact are necessary to examine as to whether RAP has rendered technical services to the Assessee within the meaning of the provisions of section 9(1)(vii) r.w.s. 195 - Assessing Officer should examine thoroughly this issue with reference to the nature of services rendered by RAP, by calling complete details from the Assessee and ascertaining whether these services were rendered outside India or in India to the Assessee and how they were rendered and also to examine the applicability of the decision of this Tribunal in Ashok Piramal Management Corporation Ltd [2016 (11) TMI 113 - ITAT MUMBAI] and decide the issue in accordingly.
Disallowance of prior period expenses incurred on survey fees and maintenance charges - as per AO expenses were not incurred during the assessment year under consideration, but were incurred in the prior years and therefore they cannot be allowed as deduction in the year of actual payment as Assessee is following mercantile system of accounting - HELD THAT:- If there is no difference in the rate of tax in the year in which the expenditure pertains to and the year in which the Assessee has claimed the expenditure as prior period expenses we do not see any reason not to allow such expenditure. Therefore, we direct the Assessing Officer to verify as to whether there is rate difference in tax or not and if there is no difference in rate of tax apply the decision of the jurisdictional High Court in the case of CIT Vs. Nagri Mills Co. Ltd. [1957 (9) TMI 30 - BOMBAY HIGH COURT] and allow the claim of the Assessee. The Assessing Officer shall also examine the ratio of decision in the case of Phalton Sugar Works Ltd [1985 (10) TMI 68 - BOMBAY HIGH COURT] and find out whether the expenses have crystalized and quantifiable during the year under consideration and allow the expenditure during this year accordingly. This ground is allowed for statistical purpose.
Assessability of income on account of insurance claim, rent recovery, scrap sale and miscellaneous income - business income OR income from other sources - HELD THAT:- CIT (Appeals) after elaborate discussion and consideration of the submissions of the Assessee and the findings of the Assessing Officer held that on examination of facts on record, receipts on account of insurance claim, rent recovery, scrap sale & miscellaneous income have to be treated as business income as they are inextricably linked with the business. The Revenue could not rebut the findings of the Ld. CIT (Appeals) and the submissions of the Assessee before the Ld. CIT (Appeals). In our view insurance claim and scrap sales are income from business. Rent recovered and miscellaneous income cannot be business income of the Assessee. Thus we direct the AO to treat the receipt from insurance claim and scrap sales as business income and rent recovered and miscellaneous income as income from other sources. This ground is partly allowed.
Nature of expenses - repairs and maintenance - revenue or capital expenditure - HELD THAT:- Since similar expenditures were allowed as revenue expenditure for preserving and maintaining the existing assets by the Tribunal in Assessee’s own case which the Ld. CIT (Appeals) followed, we do not find any valid reason to interfere with the reasoning and the decision of the Ld. CIT (Appeals). Hence order of the Ld. CIT (Appeals) is sustained. Grounds raised by the Revenue on this issue are rejected.
TDS u/s 194H - provision for payment to Equant Technology Service (I) Private Limited - Addition u/s 40(a)(ia) - HELD THAT:- As could be seen from the above, the Assessee has made only a provision which was reversed in subsequent year and therefore there is no liability to deduct TDS on such provision. It is also submitted that excess provision reversed so offered to tax in the subsequent year. Therefore, we do not find infirmity in the order passed by the Ld. CIT (Appeals). This ground is dismissed.
Nature of expenses - software expenses - revenue v/s capital expenditure - Treated as revenue expenditure by CIT (Appeals) instead of capital expenditure by AO - HELD THAT:- In the case of CIT Vs. Raychem RPG Ltd [2011 (7) TMI 953 - BOMBAY HIGH COURT]confirmed the order of the Tribunal and held that software expenditure incurred by the Assessee is not part of profit making apparatus of Assessee and therefore expenditure is revenue expenditure. In this case, the Tribunal followed the special bench decision in the case of Amway India Enterprises Vs. DCIT [2008 (2) TMI 454 - ITAT DELHI-C]and held that since the software does not form part of profit making apparatus of the Assessee, the same is to be allowed as revenue expenditure. Thus we uphold the order of the Ld. CIT (Appeals). This ground of appeal is dismissed.
Depreciation on Ambernath Unit - period for which asset is used - HELD THAT:- It is undisputed fact that the assets of Ambernath Unit were put to use by the Assessee during April to July 2008 during the assessment year under consideration. Therefore, when once the assets of a block are put to use during the year depreciation cannot be denied on the ground that they are subsequently sold by the Assessee. Even if the Assessee sold the Ambernath unit subsequently at least till the period of the asset put to use i.e. July 2008 depreciation is allowable. As relying on SWATI SYNTHETICS LTD. case [2009 (12) TMI 667 - ITAT MUMBAI] we affirm the order of the Ld. CIT (Appeals) in allowing depreciation on Ambernath plant. The grounds of revenue on this are dismissed.
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