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Showing 141 to 160 of 1666 Records
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2017 (10) TMI 1530
Allowable business expenditure - whether the building renovation expenses, incurred by the assessee is a deductible business expenditure? - HELD THAT:- It is a clear case of renovation; of substantial (if not total) replacement, so that it is not ‘repairs’ as explained in Sri Rama Sugar Mills Ltd. [1951 (5) TMI 7 - MADRAS HIGH COURT]. The account head ‘building renovation expenses’, under which the expenditure stands booked in accounts, thus, correctly describes the same, i.e., its nature. Phase-II of the modernization program, as planned, followed Phase-I, being in fact under progress at the time of inspection (for valuation) on 08.01.2014. The same may not have translated into higher revenue or yield, as sought to be emphasized by the ld. counsel during hearing, which depends on a variety of factors.
Retaining the franchise; retaining or improving the market share (which would accrue only in future as the expenditure itself continues up to March, 2013 – the repair being followed by refurbishing); upgradation/improvement in facilities, are, in our view, definite advantages in the capital field. It is clear that but for the expenditure, the assessee would not be able to retain either the franchise or a competitive edge in the market, which it wishes or intends to, and the expenditure is incurred with a long term perspective, objective and goal.
It rather advances the argument of the expenditure being incurred at the behest of the ITC group, to contend of the same being ‘repairs’ or revenue in nature. The argument is misconceived in-as-much as both the revenue and capital expenditure are incurred only in response to business decisions, so that that by itself would not determine the nature of the expenditure
As explained in Sri Mangayarkarasi Mills (P.) Ltd [2009 (7) TMI 17 - SUPREME COURT]deductibility of expenditure on repairs does not necessarily entail negating the bringing into existence of a new asset. We have in fact already found as a fact the impugned expenditure to result in an advantage in the capital field, which scotches this argument, which is in fact without merit.
This is as an asset as both quantitative and qualitative aspects/attributes to it. Two machines with the same production capacity may vary significantly in cost and/or price in view of the quality of their output. As common experience bears out, two pieces of land of the same area and, further, even same dimensions, cost (valued by market) differently depending upon their location, even if subject to the same construction regulations. Could one possibly compare a room (of a particular size) in a downtown lodge with a room (of the same size) in an upmarket hotel, much less in a star hotel? Why, two rooms of the same size in the same hotel may be priced differently depending on their furnishing; locational advantage, as (say) sea facing, etc., or even if priced equally, attract different occupancy rates, indicating being differently valued assets of the business.
As explained in C.R.Corera & Bros.[1962 (9) TMI 73 - MADRAS HIGH COURT] introduction of additional features may result in bringing a new asset or advantage into existence. In fact, to even so suggest, i.e., that no new advantage has come into existence, places a serious question on the wisdom (or the business purpose – being not for preservation or maintenance) of incurring the expenditure. It is in fact contradictory in-as-much as it is admittedly incurred to upgrade the accommodation facilities to international standards, so that it is, by implication, presently, i.e., prior to incurring the expenditure, not. - Assessee’s appeal is dismissed.
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2017 (10) TMI 1529
Validity of Reopening of assessment - validity of reasons to believe - change of opinion - capital gain computation - conclusion only on the basis of value u/s.50C(1) to reopen the assessment - assessment proceedings completed u/s.143(3) - HELD THAT:- Provisions of the section 147 of the Act does not enable the AO to exercise his jurisdiction for reopening the concluded assessment . There is no dispute to the fact that Sec.50C(1) is a deeming provision, which, mandates that if the Fair Market Value adopted by the SRO for stamp duty purpose is more than the sale consideration disclosed by the assessee, the Fair Market Value adopted by the SRO for stamp duty purpose should be deemed to sale consideration - assessee in terms of Sec.50C(2) can object to adopt such value, it cannot be denied that value u/s.50C(1), automatically it cannot be considered as understatement in sale value - it is not appropriate on the part of the AO to jump to a conclusion only on the basis of value u/s.50C(1) to reopen the assessment , when the same documents which were already brought on record at the time of original assessment, he failed to take a cognizance of that documents and framed the original assessment.
In the present case, the AO observed that on verification of documents, it was seen that the value u/s.50C was fixed by DRO, of property at ₹ 735 lakhs. Hence, it means that the said details were called for by Ao at the time of original assessment.
But inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is any fresh material to come to different conclusions. The relevant materials are available on record, but the Assessing Officer failed to apply his mind to that material in making the assessment order. In our considered opinion, Assessing Officer cannot recourse to the provisions of section 147 for his own failure to apply his mind to the material which, according to him, is relevant which is available on record - there was no tangible fresh material adverting to the reasons recorded for issuing reopening notice.
AO reopened the assessment originally completed by him on the basis of the same records as were available before him while completing the original assessment and there was no new tangible material that had come to his possession on the basis of which the assessment was reopened. - Decided in favour of assessee.
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2017 (10) TMI 1528
Undisclosed sale - AO estimated the unaccounted receipts on estimate basis - HELD THAT:- Before the ld CIT(A) the assessee submitted that full details of such advances were filed by the assessee and ld Assessing Officer issued notices u/s 133(6) of the Income Tax Act to various parties from whom advances have been received. The assessee has further stated before ld CIT(A) that replies were also received from the buyers. However, even before the ld CIT(A) the details called for by the AO were not submitted.
CIT(A) deleted the addition stating that the Assessing Officer has assumed that there may be more salable area and therefore there may be more booking amount in cash. We do not find any infirmity in such assumption by the ld Assessing Officer because the assessee has not supplied any information about the total area and list of advances received from parties. It is also surprising that the assessee has stated before the ld CIT(A) that AO has made enquiry u/s 133(6) of the Act and buyers have confirmed. No such evidences have been placed either before the ld CIT(A) or before us or no such reference could be found from the assessment orders itself.
We agree with the ld CIT(A) that AO cannot arrive at any figure without any basis by adopting an arbitrary method of calculation. Therefore, even the AO is not justified in assuming the impugned figure of cash sale out of the books. In view of this we set aside the whole issue of this addition covered in ground No. 1 of the appeal of the Revenue back to the file of the Assessing Officer with the direction to the assessee to submit the details called for by the Assessing Officer about the total salable area of the project and the persons who have booked the space.
Addition of inadmissible expenses - HELD THAT:- No doubt that if claim has arisen during the course of the business of the assessee same is allowable however, with respect to the above claim no details are furnished before the ld Assessing Officer and CIT(A) has also deleted the above disallowance without recording a finding that by which date the possession was to be given, what was the amount received at the time of original booking. Whether such claim has also arisen during the course of business vis a vis with respect to other buyers and whether at the time of booking of such space there was an agreement to pay such compensation. Before the ld Assessing Officer no details were furnished and the ld CIT(A) has not examined the claim of the assessee from above aspect. In view of this we set aside this ground of appeal to the file of the ld Assessing Officer to decide the issue of the claim afresh. Appeal of the revenue allowed for statistical purposes.
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2017 (10) TMI 1527
TDS u/s 194H - commission paid to various distributors - relation between assessee and distributors - HELD THAT:- As decided in own case [2015 (6) TMI 443 - ITAT JAIPUR] Assessee has issued sale invoices of SIM cards to its distributors net of discount. Similarly relevant entries have been entered in the books net of discount.
Discount or so called commission has not been separately paid to distributors, thus there is no payment of any income - What has been effected by way of these sale transactions is sale of service embedded or encrypted on SIM cards, and treating same as ‘Principal to Principal transaction’.
Circumstances, rival submission and material available on record assessee is not liable for deduction u/s 194H. Therefore we reverse the orders of lower authorities on these issues and delete the demand. - Decided in favour of assessee.
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2017 (10) TMI 1526
Income tax notice u/s 179 - alleged default of notice on the third appellant - HELD THAT:- The appeal was dismissed for non-prosecution; an application for restoration was filed after two years. Notice has been issued on that application, returnable for 13.12.2017. In the meanwhile, the applicant had sought urgent orders to restrain coercive action.
Having regard to the totality of the circumstances, the Court is of the opinion that it is open to the applicant - or any other party, who claims entitlement, to approach the Income Tax authorities and resist the notice or demand or any such action.
Any representation made by the applicant on behalf of the Company shall not be treated as conclusive of any contentions which any party may be entitled to seek before the Court or the National Company Law Tribunal.
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2017 (10) TMI 1525
Jurisdiction - power of DRI/DGCEI officers to issue SCN - section 2(34) of the Customs Act, 1962 - HELD THAT:- The Hon’ble High Court of Delhi in the case of BHARAT SANCHAR NIGAM LIMITED VERSUS UNION OF INDIA & ORS [2017 (6) TMI 688 - DELHI HIGH COURT] has dealt with the identical issue where the notice was also issued by DRI. The Hon’ble High Court of Delhi has considered the judgment in the case of M/S MANGALI IMPEX LTD., M/S PACE INTERNATIONAL AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2016 (5) TMI 225 - DELHI HIGH COURT] which is stayed by the Hon’ble Supreme Court reported in UNION OF INDIA VERSUS MANGALI IMPEX LTD. [2016 (8) TMI 1181 - SC ORDER]. Finally the Hon’ble High Court has granted liberty to the petitioner by observing that petitioner is permitted to review the challenge depending on the outcome of the appeals filed by the UOI in the Supreme Court against the judgment of the Court in the case of Mangli Impex Ltd.
Matter remanded to the original adjudicating authority to first decide the issue of jurisdiction after the availability of Hon’ble Supreme Court decision in the case of Mangli Impex and then on merits of the case but by providing an opportunity to the assessee of being heard - appeal allowed by way of remand.
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2017 (10) TMI 1524
Deduction u/s 80P - whether the assessee is eligible for deduction under section 80 P of the income tax act or not for assessment year 2007 – 08? - DR submitted that it has been clarified wide circular dated 25/08/2006, wherein it has been stated that regional rural banks would not be eligible for deduction under section 80 P of the income tax act from assessment year 2007 – 08 - HELD THAT:- As decided in Circular No. 6/2010, dated 20/09/2010 despite the amended provisions, some Regional Rural Banks continue to claim deduction under section 80P on the ground that they are cooperative societies covered by section 80P(1) read with Boards Circular No. 319 dated 11-1-1982.
It is, therefore, reiterated that Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards. Further more, the Circular No. 319 dated 11-1-1982 deeming any Regional Rural Bank to be cooperative society stands withdrawn for application with effect from assessment year 2007-08. The field officers may take note of this position and take remedial action, if required.
As the Ld. CIT appeal has decided this issue without considering the above circular, we set aside the whole issue back to the file of the Ld. CIT appeal to verify whether the assessee is eligible for deduction under section 80 P of the income tax act or not. Appeal of the revenue is allowed for statistical purposes accordingly.
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2017 (10) TMI 1523
Disallowance u/s. 57(iii) - Disallowance of interest expense against income from other sources - addition as lending bank has discontinued providing for interest effective from lst April, 2003 and hence, there is no liability/ obligation of the appellants to pay to the bank - appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the claim of the said interest expense against income from other sources inspite of the fact that the impugned interest is not debited by the lending bank inasmuch as the appellants are contractually liable to pay the same - HELD THAT:- If the bank later on waives the interest to be paid to them by the assessee, the provisions of section 41(1) shall not be applicable but the provisions of section 59 of the Act which are similar to section 41(1) will be applicable.
Since the allowability of interest expenditure are with respect to the details of interest due with the above banks, whereas the one time settlement entered by the assessee for assessment year 2005-06 is with Centurion Bank; hence, the contention of learned DR is not applicable to the facts of the case.
Even though assessee has not paid the interest to the bank but as per provisions of Section 145(1), assessee has to compute its income under the head ‘Profit and Gains of business and profession’ or ‘income from other sources’ subject to provisions of sub-section (2) in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Thus, the interest expenditure need not be paid in as much as the income chargeable to tax under business income or income from other sources shall be computed in accordance with cash or mercantile basis regularly employed by the assessee.
Respectfully following the decision of Tribunal in assessee’s own case [2016 (11) TMI 743 - ITAT MUMBAI] the interest claimed by assessee is to be allowed to the assessee primarily on the basis of consolidated order of the Tribunal for income-tax assessment years 208-09 and 2009-10. We direct accordingly.
Disallowance of administrative expenses, depreciation against the other income being mark-to-market valuation of shares - HELD THAT:- We found that since during the year under consideration the business was not in operation and assets were not put to use, the claim of depreciation cannot be allowed. However, when the business again starts, assessee can claim depreciation on the WDV as stood in the year when business was discontinued. We direct accordingly.
Addition made u/s.41(1) on account of waiver allowed by the Centurian Bank - HELD THAT:- Tribunal relying on the decision of the Supreme Court in the case of Megraj & Omers v Mst Bayabai [1969 (4) TMI 105 - SUPREME COURT] has expressed a view that in a one-time settlement (OTS) by the borrower with the lender, any repayments by the borrower shall first be adjusted towards the interest component and the balance, if any, shall be adjusted against the principal amount - we direct the AO to delete the addition made on account of waiver allowed by the Centurian Bank.
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2017 (10) TMI 1522
Reference of matter to DVO - valuation of the Property to valuation officer as provided in section 50C(2) - adopting the value of the property as adopted by the Stamp Valuation Authorities - HELD THAT:- AO is required to refer the issue of valuation of property to the DVO if the assessee claims that the value adopted or assessed by the Stamp Valuation Authorities exceeds the fair market value of the property as on the date of transfer. In the light of the above provision and respectfully following the judgment of SUNIL KUMAR AGARWAL VERSUS COMMISSIONER OF INCOME TAX, SILIGURI [2014 (6) TMI 13 - CALCUTTA HIGH COURT] we hereby set aside the orders of the authorities below and restore the assessment to be framed denovo to the file of the AO. The AO is directed to refer the issue of Fair Market Value of the property to the DVO. The AO shall make enquiry from the Stamp Valuation Authorities as to what was the basis for adopting the impugned valuation. Thus the ground of the assessee is allowed for statistical purposes.
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2017 (10) TMI 1521
TP Adjustment - selection of comparable - direction of the DRP to consider IDC Ltd. (ICDL) as a valid comparable - HELD THAT:- IDCL was accepted as a valid comparable in the earlier year. No fresh facts have been brought on record proving that there were distinguishing facts of the year under appeal vis-a-vis facts of earlier year. Principles of tax jurisprudence stipulate that rule of consistency should be adhered to as far as possible. In the case of Carlyle India Advisory Pvt. Ltd. [2013 (4) TMI 486 - BOMBAY HIGH COURT] has held that IDCL was a valid comparable for benchmarking investment advisory, as it was carrying out research/ consultancy activities. In the matters of General Atlantic Private Limited [2013 (1) TMI 797 - ITAT MUMBAI]and Sandstone Capital Advisors Pvt. Ltd. [2013 (9) TMI 401 - ITAT MUMBAI] the Tribunal has held that, for comparing investment advisory services, IDCL was to be considered a good comparables.
We are of the opinion that the DRP had rightly held that IDCL was a valid comparable for benchmarking investment advisory services. So, confirming its order, we decide the effective ground of appeal against the AO.
Exclusion of FCHL from the final list - If the principle is adopted for working out the RPT, it would be less than 25% and thus can be considered a valid comparable. So, Reversing the order of the TPO/AO, we decide the first effective ground of appeal in favour of the assessee.
Inclusion of MOIAPL as a comparable company - MOIAPL is into merchant banking, and therefore, is functionally different to that of the assessee which is engaged in the business of non-binding advisory services. Therefore, in our opinion, the assessee is engaged in the function of non-binding advisory services whereas MOIAPL is into the merchant banking, capital markets, finance markets etc. Therefore, we find the MOIAPL is functionally dissimilar and therefore, the same should be excluded for benchmarking the international transactions. Accordingly, AO / TPO is directed to exclude the same.
Whether single comparable can be adopted to test the validity of ALP of the IT? - We find that in the cases of J P Morgan Advisors India (P. )Ltd. [2019 (7) TMI 76 - ITAT MUMBAI], General Atlantics P. Ltd. [2016 (3) TMI 736 - BOMBAY HIGH COURT]and Pino Bisazza Glass (P. )Ltd. [2013 (9) TMI 300 - ITAT AHMEDABAD] the Tribunal has held that even a single comparable can be considered a valid comparable for determining the ALP of IT.s.
Considering the fact that we have held that FCHL and IDCL are valid comparables, we hold that the AO was not justified in making the TP adjustment. Here, we would also like to mention that if only IDCL is taken as a comparable the mean of PLI would be (7. 29%), as against 5. 81% of the assessee. As it is within the range of (+/-)5%. If HCHL is also considered the assessee would be in the safe harbour. Seen from both the angles, it is evident the IT's entered in to by the assessee are within permissible limits. So, we reverse the order of the AO, passed in pursuance of the directions of the DRP, as far these two entities are concerned and hold them to be valid comparables. The RPT issue, as discussed earlier, is decided in favour of the assessee.
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2017 (10) TMI 1520
Jurisdiction - Whether under section 362 in light of Criminal procedure Code or under section 70(2), subordinate courts can use their powers under the code of Criminal procedure or not? - HELD THAT:- Section 45 of the Act, 2002 specifies the circumstances under which bail can be taken - In the Present case, under Section 70(2) Penal Procedure, Arrest warrant issued by subordinate court, subordinate Foreclosed, aggrieved by not repeal by court Section 482 Criminal Procedure Code was presented under Miscellaneous Petitions - In such a case the provisions of Section 45 Act, 2002 are presently not compatible with the case.
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2017 (10) TMI 1519
Establishment of the District Mineral Foundation under the Mines and Minerals (Development and Regulation) Act, 1957 - contribution required to be made to the District Mineral Foundation by the holder of a mining lease or a prospecting licence-cum-mining lease in addition to the payment of royalty.
Establishment of DMF - Submission of petitioners is that the DMF could not have been established from a retrospective date prior to the date of the notification - HELD THAT:- Section 15 of the MMDR Act empowers the State Government to make rules for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. This section does not specifically or by necessary implication empower the State Government to frame any rule with retrospective effect. Also, the MMDR Act does not confer any specific power on the State Government to fictionally create the DMF deeming it to be in existence from a date earlier than the date of the notification establishing the DMF. Therefore, it must follow that under the provisions of the MMDR Act that we are concerned with, no State Government has the power to frame a rule with retrospective effect or to create a deeming fiction, either specifically or by necessary intendment - Section 13 of the MMDR Act does not confer any specific power on the Central Government to frame any rule with retrospective effect. Section 9B(5) and (6) read with clause (qqa) inserted in Section 13(2) of the MMDR Act enable the Central Government to make rules to provide for the amount of payment to be made to the DMF established by the State Government under Section 9B(1) of the MMDR Act. None of these provisions confer any power on the Central Government to require the holder of a mining lease or a prospecting licence-cum-mining lease to contribute to the DMF with retrospective effect. Therefore, even the scope and extent of the rule making power of the Central Government is limited.
The notifications issued by the State Governments must be understood to mean (assuming the DMF could not be established with effect from 12th January, 2015 by a notification issued on a later date) that the DMF was established on the date of publication of each notification - thus, the DMFs were not established retrospectively even though the notifications established them from a date anterior to the date of the notifications - but not before the date of the Ordinance. Assuming the DMFs were established with retrospective effect from 12th January, 2015 it is of no consequence since the retrospective establishment does not prejudicially affect the interests of anybody (as will be seen later).
Contribution for a period prior to the date of the relevant notifications, that is, 17th September, 2015 and 20th October, 2015 - HELD THAT:- The specification of the rate of tax (or any compulsory levy for that matter) is an essential component of the tax regime, it is difficult to agree with the learned Additional Solicitor General that specifying the maximum amount of compensation to be paid to the DMF in terms of Section 9B of the MMDR Act, being an amount not exceeding one-third of the royalty, satisfies the requirements of law. What is required by the law is certainty and not vagueness – not exceeding one-third could mean one-fourth or one-fifth or some other fraction. It is this uncertainty that is objectionable - thus, the petitioners are not liable to make any contribution to the DMF from 12th January, 2015.
Crucial date for making the contribution to the DMF - HELD THAT:- There are two categories of holders of a mining lease or a prospecting licence-cum-mining lease. For Lease holders for minerals other than coal, lignite and sand for stowing, the effective date of payment of contribution to the DMF in the case of those petitioners who are (or were) holders of a mining lease or a prospecting licence-cum-mining lease for minerals other than coal, lignite and sand for stowing would be 17th September, 2015.
For Lease holders for coal, lignite and sand for stowing, the holder of a mining lease or a prospecting licence-cum-mining lease shall pay the contribution to the DMF from 20th October, 2015 or the date of establishing the DMF, whichever is later.
Petition allowed.
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2017 (10) TMI 1518
Levy of late fine - Delay in filing return versus non-filing of return - validity of Rule 12(6) of Central Excise Rules, 2002 - vires of Section 37(3) of Central Excise Act, 1944 - It is contended that even if there is no challenge to Rule 12(6) the lower authorities have wrongly invoked a provision that is pertinent to late filing whereas there is a case of non-filing.
HELD THAT:- Rule 12(6) stipulates the payment of an amount for late filing which is not penalty but is a fee for regularization and hence reliance on the decision of Tribunal in the case of Anil Products Ltd. v. Commissioner of Central Excise, Ahmedabad [2011 (5) TMI 500 - CESTAT, AHMEDABAD] is misplaced - Turning to the contention that the said rule is not invocable for non-filing of returns, it is not in dispute that these returns have not been, should have been and would have to be filed at some point of time; that the appellant has not yet filed those returns indicates that gross disregard for the law.
Necessarily as and when those returns are filed, all of them would stand delayed by more than 200 days from due date; consequently, ₹ 20,000/- will apply. Hence, there is no requirement to set aside the demand for this fee in the impugned order - appeal dismissed - decided against appellant.
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2017 (10) TMI 1517
Deduction u/s 10A allowed in respect of the interest earned on Fixed Deposits - HELD THAT:- It is not in dispute that the interest income has been assessed by the Assessing Officer as business income of the assessee.
As in the case of Motorola India Electronics (P.) Ltd. (2014 (1) TMI 1235 - KARNATAKA HIGH COURT) has clearly taken note of the computation of income under section 80HHC and under Section10A/10B of the Act and then observed that the interest income though cannot be partake the character of profit and gain from the sale of article however, it is the income which is derived from the consideration realised by the export of articles. Therefore having considered the definition of income from profit and gain as envisaged in sub-section (4) of section 10B/10A the benefit of exemption was held to be available to the interest income.
A similar view has been taken by the Hon'ble jurisdictional High Court in other cases viz. Caritor India (P.) Ltd [2014 (10) TMI 1016 - KARNATAKA HIGH COURT ] as well as in the case of Rajesh Exports [2014 (10) TMI 1017 - KARNATAKA HIGH COURT ] . The Hon'ble Kolkata High Court in the case of Hindustan Gum & Chemicals Ltd. (2016 (7) TMI 920 - CALCUTTA HIGH COURT) has also taken a similar view by following the decision in the case of Motorola India Electronics Pvt. Ltd. (2014 (1) TMI 1235 - KARNATAKA HIGH COURT). In view of the binding precedent of Hon'ble jurisdictional High Court on the issue, we do not find any error or illegality in the impugned directions of DRP qua this issue. These grounds of revenue are dismissed.
Expenditure incurred on telecommunication expenses to be excluded from the export turnover as well as from total turnover for computing the deduction under Section 10A - HELD THAT:- We find that the issue of expenditure incurred towards telecommunication charges is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10A of the Act, is covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. The decision of Hon'ble jurisdictional High Court is a binding precedent for the Bangalore Bench of the Tribunal. Hence, this issue is decided against the revenue and in favour of assessee.
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2017 (10) TMI 1516
Allowance of prior period expenditure - assessee has not claimed any deduction on such expenditure - HELD THAT:- As decided in 2016 (2) TMI 157 - ITAT MUMBAI assessee has voluntarily added back part of the expenditure to the total income following the consistent accounting method adopted by it. It is also evident that assessee is following similar method of accounting from earlier assessment years and offered similar income on account of adjustment of prior period income and expenditure and the AO in assessments completed u/s. 143(3) has accepted non only such accounting treatment given by the assessee but also the income offered. Therefore, when the assessee has not claimed any deduction on account of prior period expenditure by debiting it to the profit loss account, the disallowance made by the AO is totally unjustified. Therefore, we direct deletion of the amount from the income of the assessee. The ground raised by the assessee is allowed.
Addition being provisions for insurance claim debited in the P&L a/c. - HELD THAT:- Provisions made on the basis of an actuarial valuation cannot be considered a contingent liability. The basic thing to be remembered is that unlike other businesses life insurance business is being regulated by IRDA. Regulatory body issues instructions time to time. One of the instructions was about follow actuarial valuation while preparing the accounts. The actuarial method of valuation has been recoginsed an approved method for valuing liabilities by various courts. So, we hold that method followed by the assessee for valuing its liabilities cannot be rejected. Besides Rule 5(a)of the First Schedule deals with provisions pertaining to expenditure or allowance or other prescribed liabilities and not in respect of income. ln short the AO is not authorised to disturb any income reflected in the P&L account.
The assessee was following the method of creating provisions based on actuarial valuation and the AO had accepted it while passing orders u/s.143(3)of the Act. Without bringing changed circumstances the AO should not have held that liabilities were contingent.
AO had not raised any objection about non filing of bifurcation of data which was made available to the actuary therefore in our opinion the DR cannot make a totally fresh ease before us at this stage about non filing of bifurcation. Neither the AO nor the FAA had dealt With the issue. The DR has a definite role in helping the bench to decide the Matters. But there are limitation of representation. ln any case the assessee had followed Rule 5 in respect of IBNR and IBNER as mentioned earlier. Therefore we do not find any force in the argument advanced by the DR in that regard. - Decided against revenue.
Disallowance made by the AO u/s. 14A - HELD THAT:- As decided in own case [2017 (5) TMI 1717 - ITAT MUMBAI] ITAT has deleted the addition. The AR also referred to the case of ICICI Prudential Insurance Company Ltd. [2012 (11) TMI 13 - ITAT MUMBAI] held when the income of the assessee as well as the expenditure are governed by specific provision which have an overriding effect then it is not open for the AO to invoke the other provisions of the Act for carrying out the disallowance of adjustment in the income. Thus, we hold that no disallowance u/s 14A can be made in the case of the assessee and hence grounds raised by assessee allowed.
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2017 (10) TMI 1515
Prohibition of Benami Property Transactions Act - identifying a benami transaction - HELD THAT:- This Court must notice the relevance of Sections 2(9)(B) and (D) of the 1988 Act (as amended) which, inter alia, collectively define a benami transaction as an arrangement in respect of a property carried out in a fictitious name where the person providing the consideration is not traceable.
This Court, on the basis of materials placed, is satisfied that the IO has applied his mind to the facts painstakingly collected and the issue now requires solid factual adjudication at the level of the AA - preliminary legal objection taken by Mr. Kar is not persuasive for a Writ court to interdict a proceeding under the 1988 Act qua a private limited company where the dominant shareholders are de facto the Company itself and it has become necessary to identify the structure and role of the entities in respect of a transaction which requires exploration at the appropriate factual level on its alleged benami colour.
Distance claimed by Mr. Kar of the shareholders from any interest in the immovable property of the Company on the strength of the decision reported MRS. BACHA F. GUZDAR, BOMBAY VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY [1954 (10) TMI 2 - SUPREME COURT] would depend on the ground situation influencing the pecuniary proximity in a given case which, require to be exhaustively examined at the level of the AA.
This Court cannot be oblivious to the fact that the attachment declared by the IO is provisional and the petitioners should not shy away from an adjudication by the AA if they are sure that factually the Company stands on firm ground.
Point against retrospectivity of the penal provisions in the 2016 Amendment Act is answered with the observation that the 1988 Act, as amended in 2016, imbibes the colour of a statute in restraint of acts constituting benami transactions. The Act does not seek to create any vested/substantive rights, only indirectly protecting transactions which fall within the exceptions of a benami transaction, viz. Section 9(A) (i) to (iv).
Section 1(3) of the 1988 Act itself provides for prospectivity of its operative portions, viz. its penal clauses, in contra distinction to its definition/defining provisions. Furthermore, this Court has no reason to accede to Prayer (a) of the Writ Petition upon noticing that the steps contemplated under Section 24 (supra) follow the notice of the IO and, being procedural apply in seriatim to the notice for the purpose of identifying a benami transaction prohibited in the statute book w.e.f. 19th May, 1988.
The orders impugned of the IO are thus not interfered with.
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2017 (10) TMI 1514
Exemption u/s 11 - denial of registration u/s 12AA - land and complex of which the assessee society is carrying out development and maintenance belongs to the government - HELD TAT:- No motive of profiteering is involved in such types of activities as the assets created are not owned by the society but are passed on to the public at large for common use and benefit. Since as per the provisions of section 11 to claim exemption from taxation, the income should be derived from property held under the trust wholly for charitable or religious purposes and to the extent to which such income is applied to such purposes in India'. Admittedly in this case, the society has constructed the building of Mandir complex and community hall etc. The property, though is not owned by the trust, yet, it has been held under the trust, wholly for charitable and religious purpose, the income from which, as per the objects of the society, is to be applied for such purposes only.
There is a copy of the advertisement on behalf of the said Association inviting the members of the public at large and the handicapped persons in particular, to join the conference at the complex, Mandir Shree Mahakali, Sangrur and further a note at the bottom of the advertisement has been given that free tea and food will be served . There are also placed copies of letters from the individuals as well from organizations for booking of rooms and providing of utensils and beddings etc. These evidences on the file prove beyond doubt that the use of community hall and the Mandir complex is not limited to any particular section or limb of the society, rather, the same is open to all and offered for utilization not only to the individuals but also to social, charitable and religious organizations as observed above. Further, a perusal of the objects of the society reveal that none of the objects gives any presumption that any activity of the assessee society is restricted to a particular caste, community or religion.
So far as the observation of the CIT(E) that the Society’s main focus is on religious ethics is concerned, there is no bar u/s 11 or 12A of the Act for giving registration to a religious trust. Rather for claiming exemption u/s 11, the application of the income is required to be for charitable or religious purposes. It is proved that not only the objects of the assessee Society are charitable in nature but the society is also carrying the activities of religious and charitable in nature.
Assessee has brought our attention to resolution dated 17.12.2015 wherein it has been resolved in the General Body meeting that in case the society is dissolved, any asset whether movable or immobile will be transferred to some other religious trust whose objects will be similar to that of the assessee trust and that the name of such trust will be decided in the general body meeting with the consent of 3/4th of its members. So far as the discrepancy in accounts pointed out by the Ld. CIT (E) is cornered, the Ld. AR of the assessee has explained that the liability shown as on 31.3.2013 has been discharged in subsequent years. In our view the examination of the account in detail / application of income is to be seen at the time of giving exemption u/s 11 of the Act and not at the time of granting of registration u/s 12A of the Act. While granting registration u/s 12A of the Act, it is to be seen whether the objects of the assessee society are charitable or religious in nature and the activities carried out by the assessee are in furtherance of such objects. In view of the above discussion, we direct the Ld. CIT (E) to grant registration u/s 12AA of the Act to the assessee society. - Decided in favour of assessee
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2017 (10) TMI 1513
Exemption u/s 11 - refusing registration u/s 12AA - violation of section 40A(3) - HELD THAT:- Order of the CIT that the reason on which registration has been denied is due to the fact that the assessee society used the funds of the society for the benefit of the members. AO had reported that the activities of the society are not in accordance with the objects as per the aims and objects of the Memorandum of Association. It is also the case of the Assessing Officer that the society had made numerous payments to a single party in cash in violation of section 40A(3).
We find from the details furnished by the assessee that although the two ladies as per the order of the ld. CIT were housewives at the time of formation of the Trust however their qualification and experience has not been doubted. Salary paid to the two ladies are much less than the salary prescribed by the Government of Haryana. Therefore, it cannot be said that the Trust by giving salary to the two ladies, who are Post- Graduates and B. Ed. and who have been paid less salary than the amount prescribed by the Government, has used the funds of the society for the benefit of the members of the society.
So far as the objection of the AO that the assessee trust has violated the provisions of section 40A(3) is concerned, the same is in our opinion can be taken care at the time of assessment and cannot be a ground for denying the registration u/s 12AA. So far as the objection of the Assessing Officer in his report that the activities of the assessee society are not in accordance with the objects as per the aims and objects in the Memorandum of Association is concerned, we do not find any activity carried out by the trust which is not in accordance with the aims and objects of the assessee trust. Even report of the Assessing Officer that the assessee has claimed corpus for donation of ₹ 3,41,000/- towards construction of building whereas the same were found to be regular donation and, therefore, there is violation in provisions of section 13(1)(c) is concerned, the same also in our opinion can be considered at the time of assessment and cannot be a ground for denying registration u/s 12AA. We hold that the ld. CIT was not justified in refusing the registration to the assessee society u/s 12AA - The grounds raised by the assessee are accordingly allowed.
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2017 (10) TMI 1512
Violations committed in relation to the GDR issue - WTM of SEBI has directed Cals Refineries Limited (‘Cals’) not to issue equity shares or any other instruments convertible into equity shares or any other security for a period of 10 years - also prohibited other appellants who at the relevant time were the Directors of Cals, from accessing the capital market, directly or indirectly, and dealing in securities or instruments with Indian securities as underlying, in any manner whatsoever, for a period of 10 years - Argument of Cals that it is a victim of fraud and not a vehicle of fraud -
HELD THAT:- As rightly contended by Counsel for SEBI, Apex Court’s decision in case of Iridium India Telecom Ltd. vs. Motorola Inc. & Ors. reported in (2010 (10) TMI 85 - SUPREME COURT), which is binding on this Tribunal, clearly postulates that criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such a case, what is to be ascertained is, whether the degree and control of the person or body of persons was so intense that a corporation could be said to think and act through the person or the body of persons controlling its affairs.
In the present case, the liability imposed on Cals is a civil liability and not a criminal liability. Sometime in May/June, 2007, Sanjay Malhotra, one of the promoters of Spice Energy group approached Goorha (promoter & director of Cals) with a proposal to take over Cals for implementing the refinery project of SRM which was a Spice Energy group company. As Cals had virtually become a defunct company, the BoD of Cals in its meeting held on 23/7/2007 approved the proposal and accordingly 4 nominees of the Spice Energy group viz. Kansagra, Chilikuri, Roy and Sundararajan were appointed as additional directors of Cals. It was inter alia resolved in the said meeting that for implementing the refinery project, Cals would raise funds through issuance of GDR/FCCB. Accordingly, Cals had issued GDRs amounting to USD 200 million.
According to SEBI, by opening an account with Banco and executing the Account Charge Agreement, Cals has financed subscription of its own GDRs which is prohibited under the Securities laws - Fact that the minutes as per the minute book of Cals does not contain any resolution to open a bank account with Banco cannot be a ground to infer that Cals had not intended to open an account with Banco because, firstly, on the basis of the Board resolution dated 30/10/2007 certified by Sundararajan, director of Cals, an account was in fact opened in the name of Cals with Banco for depositing the GDR subscription amount. Secondly, on issuance of GDRs, the GDR subscription amount was in fact deposited in the said account of Cals with Banco. Thirdly, apart from the Board resolution dated 30/10/2007 certified by Sundararajan, there is no other resolution passed by Cals to open an account for depositing the GDR subscription amount. Fourthly, the GDR subscription amount deposited in the said bank account with Banco has been withdrawn by Cals in installments from time to time which is in consonance with the Account Charge Agreement executed by Cals. Without opening a bank account, Cals could not have opened the GDR issue. Very fact that Cals operated the account opened with Banco on the basis of resolution dated 30/10/2007 certified by Sundararajan clearly falsifies the case put up by Cals that it had not authorized any one to open an account with Banco for depositing the GDR subscription amount.
Argument that Cals had never authorized any person to sign any Account Charge Agreement is also without any merit, because, the Account Charge Agreement was signed by Goorha promoter-director of Cals. The Account Charge Agreement provides that all communications in relation thereto should be addressed either to Goorha or Sundararajan as they were the two authorized signatories to operate the Bank account of Cals with Banco. It is relevant to note that Goorha was the founder, promoter, director of Cals, whereas, Sundararajan was the director of Cals nominated by the Spice Energy group which had taken over Cals with a view to implement its refinery project through Cals by raising funds through issuance of GDRs. Admittedly, Sundararajan was in-charge of the entire GDR process. Thus, the bank account with Banco for depositing the GDR subscription amount was opened by Sundararajan, director representing the Spice Energy group and the Account Charge Agreement was signed by Goorha, director representing the promoter group of Cals. In these circumstances, the conclusion drawn by SEBI that opening a bank account with Banco and executing the Account Charge Agreement were the acts done by Cals through its directors to finance Honor for subscribing the GDRs issued by Cals in gross violation of Section 77(2) of the Companies Act, 1956 and the provisions contained in the SEBI Act and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’ for convenience), cannot be faulted.
In the facts of present case, involvement of Cals controlled by the Spiece Energy group is so intense that it can be easily seen that the fraudulent acts and deeds were executed by Cals through its directors. In these circumstances, argument that Cals was not aware of the actions of its directors cannot be accepted. Consequently, the finding recorded in the impugned order that Cals and its directors had financed for the subscription of its own GDRs in gross violation of Section 77(2) of the Companies Act, 1956 and the provisions contained in the SEBI Act and the PFUTP Regulations cannot be faulted.
It is interesting to note that Cals (controlled by the Spice Energy group) not only financed Honor (owned by Malhotra, promoter of the Spice energy group) for subscribing to the GDRs of Cals, but also resolved in its BoD meeting held on 19/1/2008 to appoint Malhotra as an advisor to Cals for setting up the refinery in Haldia on a monthly consultancy charge of ₹ 15 lac. Thus, it is evident that Malhotra was not a stranger to Cals and all acts done by Cals in relation to the GDRs were at the instance of Malhotra, promoter of the Spice Energy group. As the promoter directors of Cals have also participated in the fraud committed in relation to the GDRs, Cals cannot escape liability for the misdeeds committed by its entire BoD.
Neither in the Memo of Appeal nor during the course of arguments, Cals has disputed the finding of fact recorded in the impugned order that USD 200 million was received by Cals from Honor and not from the alleged 10 foreign investors. In these circumstances, decision of SEBI that by furnishing false information to the Stock Exchange that the GDRs have been fully subscribed by 10 foreign investors, Cals has misled the investors in India cannot be faulted.
For all the aforesaid reasons, the findings recorded and the directions issued against Cals in the impugned order dated 23/10/2013 cannot be faulted.
Liability of directors - Argument of Goorha that he signed the Account Charge Agreement without knowing the contents of that agreement is ex facie untenable because, the very name of the document ‘Account Charge Agreement’ itself suggests that the amounts in the account of Cals would stand charged as per the terms set out in the Account Charge Agreement. At the relevant time, there was only one account of Cals with Banco for depositing the GDR subscription amount and there was no proposal on part of Cals to take any loan from Banco. Thus, the title of the document ‘Account Charge Agreement’ itself indicates the object with which it is being executed and to ascertain the object it was not necessary to read the entire document.
Explanation given by Sundararajan relating to the discrepancy in the resolution dated 30/10/2007 recorded in the minute book of Cals and the resolution dated 30/10/2007 certified by him is not worthy of acceptance because, assuming that there was lapse on part of the Company Secretary of Cals to record the said resolution in the minute book of Cals on 30/10/2007, then, Sundararajan would have got the error corrected in the subsequent Board meeting. However, in the meeting of BoD of Cals held on 19/1/2008, the minutes of BoD meeting dated 30/10/2007 as recorded in the minute book of Cals was approved. Very fact, that Sundararajan who was present in the BoD meeting dated 19/1/2008 did not take any steps to get the alleged error in the minutes of meeting dated 30/10/2007 rectified, clearly shows the mala fide intention on part of Sundararajan.
Sundararajan has also admitted that he had sent an e-mail to Goorha on 13/11/2007 expressing his inability to go to London for executing the documents on behalf of Cals and requested Goorha to sign necessary documents on behalf of Cals. Accordingly, Goorha had signed the Account Charge Agreement on 12/11/2007 (as per the date in London). Apart from signing the Account Charge Agreement, no other agreement was signed on behalf of Cals on 12/11/2007. These facts clearly demonstrate that Sundararajan was clearly aware that the document to be executed on behalf of Cals at London on 12/12/2007 was the Account Charge Agreement. Therefore, argument of Sundararajan that he did not know anything about the Account Charge Agreement is a blatant lie.
Inference drawn in the impugned order that Sundararajan was aware of the fact that Deep Rastogi had significant influence over Cals as contemplated under AS-18 and failure to disclose the related party transaction between Cals and Asia Texx was in violation of the Securities laws, cannot be faulted.
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2017 (10) TMI 1511
Grant of anticipatory bail - summons under Section 108 of the Customs Act - HELD THAT:- The applicant is only an employee of a firm, which was engaged for the purpose of customs clearance and transportation and change containers on behalf of M/s. Bhagyoday Enterprise of one Shri Dipak Thakor, Proprietor and Radhika Enterprise, Proprietor - Learned Advocate for the applicant on instructions states that the applicant is ready and willing to abide by all the conditions, including imposition of conditions with regard to the powers of Investigating Agency to file an application before the competent court for his remand.
The present application is allowed by directing that in the event of arrest of the applicant herein, the applicant shall be released on bail on his furnishing a personal bond of ₹ 10,000/-, subject to following the conditions imposed.
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