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Showing 141 to 160 of 2067 Records
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2017 (11) TMI 1929
Disallowance u/s. 14A r.w. Rule 8D - suo-moto disallowance by assessee - HELD THAT:- In the present case we observe that during the course of assessment, AO after considering the submissions of assessee proceeded on to working of disallowance u/s. 14A r.w. Rule 8D without commenting or recording satisfaction qua suo-moto disallowance made by assessee. The right course of action for the Assessing Officer is to first examine correctness of assessee’s claim of disallowance made u/s. 14A. If the Assessing Officer is not satisfied with the correctness of the claim made by assessee, the Assessing Officer after recording objective satisfaction should have invoked the provisions of Rule 8D.
In the instant case the Assessing Officer has not deliberated in his order as to what was the disallowance made by assessee, and as to why the disallowance made by assessee is incorrect. AO directly proceeded on to compute disallowance under Rule 8D without even taking note of suo-moto disallowance made by the assessee.
CIT (A) has erred in coming to conclusion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D.
A perusal of assessment order reveals that the Assessing Officer at the outset asked the assessee to furnish explanation as to why proportionate amount of interest expenditure should not be disallowed under Rule 8D r.w. section 14A of the Act, instead of first examining the suo-moto disallowance made by assessee and seeking explanation from the assessee the manner of computation of such disallowance. The Assessing Officer proceeded on the premise as if disallowance u/s. 14A r.w. Rule 8D is automatic irrespective of the genuineness of claim made by assessee.
In the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset Management Ltd. [2017 (10) TMI 177 - BOMBAY HIGH COURT] has held that where Assessing Officer has not commented upon the correctness or otherwise of the assessee’s working of expenditure, formula prescribed in Rule 8D(2)(iii) could not have been applied to work out disallowance u/s. 14A.
Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. [2017 (2) TMI 1005 - BOMBAY HIGH COURT] held that the Assessing Officer is required to record objective satisfaction for making disallowance of expenditure u/s. 14A - AO has made disallowance u/s. 14 r.w. Rule 8D in violation of the provisions of sub-section (2) to section 14A. Hence, the disallowance made by Assessing Officer is not sustainable. - Decided in favour of assessee.
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2017 (11) TMI 1928
Penalty u/s 271(1)(c) - bogus purchases - HELD THAT:- There is no justification to levy the penalty under section 271(1)(c) of the Act, inasmuch as, it is a case of failure of the assessee to substantiate an entry of purchase in the books of account and it is not a case where some falsity or untruth has been established.
In fact, the AO proceeded to add to the returned income only the amount of profit element because of the fact that the sales effected by the assessee corresponding to the impugned purchases were accepted. Be that as it may, it is a case of mere non-substantiation of an expenditure and not a case where falsity has been proved to the hilt. Even if one has to go by the manner in which the addition has been made by the AO by resorting to estimating the profit element no penalty is sustainable. Therefore, in this view of the matter, we set-aside the order of the CIT(A) and direct the AO to delete the penalty - Decided in favour of assessee.
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2017 (11) TMI 1927
Addition u/s 56(1) OR 68 - bogus share capital - Share premium received - assets of the assessee company don’t commensurate to premium charged - neither any business activity was performed nor any business income has been shown by the assessee - HELD THAT:- As decided in own case [2017 (10) TMI 1445 - ITAT JAIPUR] The provisions of sec 56(2)(viib) are applicable w.e.f. 1st April, 2013 and will accordingly apply in relation to AY 2013-14 and subsequent Assessment Years. The income as mentioned in section 56(2)(viib) is included in definition of section 2(24) w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the CIT(A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO.
AO has made whole addition by invoking section 56 hence the amended provision w.e.f. 01-04-2013 are applicable only on shares premium received on fair market value. In view of these facts, it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) . - Decided against revenue.
Addition u/s 68 - amount received the amount after deposit in cash/DD in respective bank A/cs - HELD THAT:- Not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove the genuineness also.
The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the Department that source of such money comes from the assessee himself or such source could be traced to the assessee itself. See KANHAIALAL JANGID VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [2007 (1) TMI 496 - HIGH COURT OF RAJASTHAN] - Also decided in ARAVALI TRADING CO. VERSUS INCOME-TAX OFFICER [2007 (1) TMI 567 - RAJASTHAN HIGH COURT] - The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source. - CIT(A) is not justified in confirming the addition - we hold that Revenue is free to initiate proceedings in the hands of these concerns who have received the amount after deposit in cash/DD in respective bank A/cs - Decided in favour of assessee.
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2017 (11) TMI 1926
Unaccounted investment and unaccounted profit out of unaccounted production - variation of consumption of electricity was more than 15% - Rejection of books of accounts - HELD THAT:-The issue is squarely covered by the above referred to decision of the Tribunal in the case of ‘ITO vs Shri Harpreet Singh’ [2017 (8) TMI 1621 - ITAT CHANDIGARH] wherein, while dismissing the identical appeals of the Revenue held CIT(A) has accepted the variation of 15% in consumption of electricity per metric ton of finished goods as per the report of the Committee. He has also observed that pursuant to the report of committee, the AO have also followed this norm while making assessment in similar type of cases and have accepted the book results shown by the assesses. No infirmity in the order of the CIT(A) while directing the Assessing officer to accept the books results shown by the assessee for this year also and to delete the additions made by the Assessing officer on account of unaccounted profits / unaccounted investment made on estimation basis - Decided in favour of assessee.
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2017 (11) TMI 1925
Assessment u/s 172(4) - freight beneficiary - CIT-A denying Appellant the benefit of the Agreement for Avoidance of Double Tax between India and Singapore - whether CIT (A) erred in not directing ITO to assess the income as nil of freight beneficiary i.e. BP Singapore Pte Ltd. while losing sight of the fact that BP Singapore Pte Ltd. is a Singapore tax resident company engaged in operation of ships in international traffic and hence entitled to benefit of Article 8 of the DTAA and their income from operation of ships in international traffic cannot be taxed in India? - HELD THAT:- Learned representatives fairly agree that whatever we decide in the case of BP Singapore Pte Ltd [2017 (11) TMI 1924 - ITAT RAJKOT] will be equally applicable here as well.
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2017 (11) TMI 1924
Assessment under section 172(4) - freight income received from India been taxed in Singapore - declined the benefit of Article 8 of the Indo Singapore DTAA - scope of ‘subject to tax’ - additional evidence submitted by the assessee - HELD THAT:- It is not in dispute that the income embedded in the freight receipts from India was not actually subjected to tax in Singapore even though it was liable to be taxed there by the virtue of fiscal domicile of the assessee.
As to what is the scope of ‘subject to tax’, we find guidance from UK’s HMRC International Manual (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm162090) which, inter alia, states that “It should be noted that the term subject to tax is different from being ‘liable to tax’. ‘Liable to tax’ means that the customer only needs to be within the general scope of tax in the UK- On the other hand, ‘subject to tax’ means that the relevant income has to be actually taxable and the customer cannot be exempt from tax on that income."
Clearly, therefore, the relief granted in the judicial precedents in question may have been based on an erroneous impression of the fact regarding actual taxability, in Singapore, of the income embedded in the freight receipts from India, particularly as the income was actually exempt from tax in Singapore as well.
As regards the plea that assessee’s income embedded in freight receipts from India is not exempt from tax in India, such a plea is contrary to the scheme of thee India Singapore tax treaty. While assigning meaning to a term employed in the tax treaty, one must not lose sight of article 3(2) which gives primacy to the context in which the term is used.The context in which expression ‘exempt from tax’ is set out in article 24, it essentially implies that the treaty benefit of non-taxation of an income, or its being taxed at a lower rate, in a contracting state depends on the status of taxability in another contracting state. In such a situation, to hold that only income covered by article 20, 21 and 22 can be said to be exempt in the source state because the expression ‘exempt from tax’ is used therein, is plainly contrary to the context in which expression ‘exempt from tax’ is used; it is the net effect not the wording which is relevant in the present context
Whether an income is taxed only in the residence country or whether an income is exempt from tax in the source country, the effect on exemption of income in the source country is the same- particularly in the context of the treaty benefit being dependent on the taxation inn the residence country is concerned. The wordings may differ but the impact is the same, and that is all the more clear when seen in the context in which the issue arises. Even if the meaning canvassed by the learned counsel was to be defined in the statute or the treaty itself, in view of the contextual requirements, such a meaning was to be discarded in the present context. Having said that we are aware that there is a division bench which has taken a contrary view on the basis of a very erudite analysis of the treaty provisions, but, without taking into account the provisions of Article 3(2) and binding judicial precedent on the same.
While we have highest respect and reverence for the view so adopted by the coordinate bench as well, it is just that we do not find ourselves in agreement with the same. To us, it appears that the view expressed by the coordinate bench is so much out of context that even the IRAS certificate from the residence country, which has been reproduced in the order itself, does not envisage treaty benefit in a situation in which the shipping profits in India are taxed on remittance basis in Singapore and the remittances to Singapore have not been made, but then, going by the analysis of the coordinate bench, the taxation in Singapore in such a situation is wholly irrelevant
We have noted that the additional evidence submitted by the assessee was admitted by us and this additional evidence has not been considered by any of the authorities below, and that certain factual aspects of the matter have come to light only as a result of questions put by the bench and the authorities below, therefore, did not have any occasion to deal with these aspects in sufficient detail.- As additional evidence is submitted at the stage of proceedings before us and as the new facts have come to light at the stage of hearing before us, the parties also should have a full opportunity of presenting their case in the light of these facts, even though this situation has arisen due to their evasive and not so transparent conduct. Let all the relevant aspects be examined afresh in this light and the perspectives of both the parties be taken to the record and be analysed properly, particularly as this issue concerns a large number of Singaporean companies operating India. Appeal allowed for statistical purposes.
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2017 (11) TMI 1923
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Following our decision in assessee’s own case for AY 2010-11 [2016 (8) TMI 1371 - ITAT JAIPUR] the disallowance under section 14A is hereby deleted. Further, given that there is no income that has been earned during the year which has been claimed as exempt from tax, there cannot be any disallowance which exceeds such exempt income as held by M/s Abhishek Inustries Ltd., Ludhiana -[2015 (2) TMI 672 - PUNJAB AND HARYANA HIGH COURT.]
In Vireet Investment (P.) Ltd [2017 (6) TMI 1124 - ITAT DELHI] following the decision of Holcem India (P.) Ltd.[2014 (9) TMI 434 - DELHI HIGH COURT], has held that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. Following the same, the disallowance made under section 14A is deleted - Decided in favour of assessee.
TP Adjustment - interest on outstanding receivables from associated enterprises as determined by the TPO in his order u/s 92CA(3) - whether delay in realization of export proceeds beyond stipulated credit period and continuing debit balance in the account of the associated enterprises amounts to an international transaction u/s 92B? - HELD THAT:- From perusal of records pertaining to AY 2007-08, 2008-09 and 2009-10, it is observed that the assessee has outstanding receivables beyond 145 days in respect of its export sale transactions with its AEs though the quantum of receivables, period of delayed realization may vary in each of these years. In each of these years, the TPO has also categorized these outstanding receivables as an independent transaction and has proposed a transfer price adjustment towards interest on such outstanding receivables beyond 145 days - at the same time, there is not enough material on record which throw light on the exact reasons for such delay in receivables and hence, in view of the same, it cannot be stated with certainty that there seems to be some pattern in delayed realization of export proceeds beyond stipulated credit period and continuing debit balance in the account of the associated enterprises which intends to benefit the associated enterprises and amounts to an international transaction in terms of explanation to section 92B of the Act.
Following the decision of the Coordinate Bench in Rushabh Diamonds [2016 (4) TMI 400 - ITAT MUMBAI] and in absence of any contrary higher authority on the subject, we agree with the contention raised by the ld. AR that such amendment by way of an explanation to section 92B is an amendment to a substantive law as it has resulted in enhancement of the scope of international transactions as envisaged u/s 92B - Accordingly, the subject transaction if at all, it has to be considered as an international transaction in light of decision in case of Kusum Healthcare [2017 (4) TMI 1254 - DELHI HIGH COURT] which it is not, in the facts of the present case, as we have held above, it has to be considered as an international transaction from AY 2013-14 onwards and for the years under consideration being AY 2007-08, 2008-09 and 2009-10, the same will thus not qualify as an international transaction.
CIT(A) has returned a finding that the assessee had adopted uniform policy of not charging interest on delayed realization on sale proceeds from both the AEs and Non AE customers. Regarding average period of realization beyond the credit period in respect of sales made during FY 2006-07 taken by AE’s and taken by Non AE’s, the ld CIT(A) has returned a finding that the AEs have taken on an average of additional 5 days from the due date, whereas Non AEs have taken on an average of additional 18 days from the due date to make the payments in respect of sales made to them during FY 2006-07 and it is quite evident that both AE’s and Non AE’s have taken additional days over and above the credit period granted to them and interest have not been charged from any of them irrespective of period of delay. There is nothing which has been brought on record by the Revenue to contest the said findings of the ld CIT(A) and the abovesaid facts and finding of the ld CIT(A) remain uncontroverted before us.
In the instant case, we therefore find that there is complete uniformity in the act of the assessee in not charging interest from both the associated enterprises and non-associated enterprises and the average period of realization of the export proceeds is titled more in favor of non-associated enterprises and thus cannot be said to benefit the associated enterprises vis-à-vis non-associated enterprises.
There is complete uniformity in noncharging of interest on delay in realization of export proceeds and the average period of realization of the export proceeds is titled more in favor of non-associated enterprises, there cannot be any ALP adjustment even applying the CUP method as done by the TPO.
Even under the TNMM method which has been applied by the assessee to benchmark its international transaction of export of goods, extending credit period for realization of sale proceeds beyond the prescribed period to the associated enterprise, where the same is considered as an international transaction, is a closely linked transaction with the transaction of export of goods and therefore, the same cannot be treated as an individual and separate transaction which will require an independent benchmarking. The same is in consonance with Rule 10A(d) as well as the concept of aggregation of closely linked transaction supported by the OECD transfer pricing guidelines. It is not the case of the Revenue before us that where such a transaction is aggregated with transaction of extending credit period for realization of sale proceeds beyond the prescribed period to the associated enterprise, it will require any further ALP adjustment than what has been determined by the assessee and accepted by the TPO. In the instant case, the international transaction of export of goods has been duly benchmarked on TNMM basis and the assessee has reported its operating margin of 6.15% as against the comparable updated margin of 6.00% which has been accepted by the TPO and thus not in dispute and thus doesn’t require any further ALP adjustment.
We confirm the order of the ld CIT(A) in setting aside the order of the TPO and the AO in relation to ALP adjustment in relation to interest on outstanding receivables from the associated enterprises. In the result, ground no. 1 of the Revenue’s appeal is dismissed.
Disallowance being 10% of the total expenses incurred on various expenses - CIT(A) confirmed 10% disallowances of business promotion expenses and the balance disallowance was deleted - HELD THAT:- AR submitted that the said disallowance has been confirmed on estimated basis without pin-pointing any specific defects in the books of account or vouchers maintained by the assessee company and hence, the same may be deleted. On perusal of orders of the lower authorities, we find that the disallowance has been made on a purely adhoc basis and such adhoc disallowance cannot be sustained in the eyes of law. In the result, disallowance of ₹ 64,060/- is hereby deleted. The ground no. 3 of the assessee’s appeal is allowed and ground no. 2 of revenue is dismissed.
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2017 (11) TMI 1922
Reopening of assessment - reasons to believe - Income accrued in India - Permanent establishment - attribution of profits - HELD THAT:- In view of the fact that the Dispute Resolution Panel has found that there is no permanent establishment in India, the judgment of the High Court is set-aside and the appeals are allowed accordingly
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2017 (11) TMI 1921
Detention of goods alongwith vehicle - Supari - E-way Bill was not presented at the time of seizure of the goods - HELD THAT:- It is not denied to the State that the recommendations have been made by the GST Council in the 22nd Meeting at New Delhi on 6th October, 2017 by which the requirement of filing the E-way Bill has been suspended by the State Government for the time being. Even otherwise the petitioner has stated in the writ petition as well as in the rejoinder affidavit that he did obtain the E-Way Bill and he did present it before the authority concerned within two hours but it was not accepted by the respondent-State.
In view of the fact that there is a recommendation of GST Council that till 31st of March, 2018 the demand of an E-way Bill will not be made. The demand itself and the consequential demand of cash security is not justified - respondents are directed to release the goods of the petitioner forthwith subject to deposit of security to the extent of 50% of the value of goods in the shape of other than cash or bank guarantee, which will abide by penalty proceedings - petition disposed off.
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2017 (11) TMI 1920
Disallowance u/s.2(22)(e) - only a journal entry passed by the company - HELD THAT:- There is no dispute that the company is having accumulated profit and the only argument of the A.R is that it is only a journal entry passed by the company, viz. M/s.Anandram Developers Pvt Ltd.
Even journal entry is having a financial implication and it may not be overlooked as decided by the Tribunal in the case of Gurbinder Singh Vs. ACIT [2012 (3) TMI 189 - ITAT CHENNAI ].
In the present case, the assessee is not able to show how it cannot be considered as deemed dividend in the hands of assessee. Accordingly, there is no evidence brought on record to this effect. - Decided against assessee.
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2017 (11) TMI 1919
Penalty u/s. 271D and u/s. 271E - Whether order of penalty is barred by limitation? - HELD THAT:- There is no finding of CIT (A) regarding this time barring aspect.
Remaining three appeals in the case of Shri Gopal S. Pandith out of which one appeal is regarding penalty imposed by the AO u/s. 271D for Assessment Year 2005-06 and the remaining two appeals are in respect of penalty imposed by the AO u/s. 271E for Assessment Years 2006-07 and 2007-08 and one appeal in the case of Smt. Rajeshwari Pandith for Assessment Year 2007-08 in respect of penalty imposed by the AO u/s. 271D was decided by CIT(A) as per his order dated 11.03.2015 and in this order also, there is no decision regarding time barring aspect.
All these eleven appeals, the time barring aspect was raised by the assessee as per ground no. 1 of the appeals in all these appeals which is not decided by CIT(A). Under these facts, we feel it proper to restore the entire matter back to the file of CIT (A) for fresh decision. - Decided in favour of assessee for statistical purposes.
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2017 (11) TMI 1918
Application for revocation of grant of probate - Appellant herein did not initiate any action either against her mother or against her other siblings in respect of the Will and the probate in question till the year 1996 - time limitation - HELD THAT:- In the absence of any evidence on record showing prejudice because of non issuance of citation at Chikmagalur, and in the absence of any evidence-much less cogent evidence-to prove fraud and undue influence, we conclude that the Trial Court as well as the High Court is justified in concluding that there is no just cause for revocation of grant of probate Under Section 263 of the Indian Succession Act - The Appellant's application for revocation of grant of probate was highly belated. The District Court as well as the High Court is correct in holding that the Appellant's application for revocation of grant of probate is hopelessly barred by limitation. As there is no provision under the Limitation Act specifying the period of limitation for an application seeking revocation of grant of probate, Article 137 of Limitation Act will apply to the case in hand.
In this matter, the Appellant was a minor at the time of grant of probate. She attained majority on 09.09.1965. She got married on 27.10.1965. In our considered opinion, three years limitation as prescribed Under Article 137 runs from the date of the Appellant attaining the age of majority i.e. three years from 09.09.1965. The Appellant did not choose to initiate any proceedings till the year 25.01.1996 i.e., a good 31 years after she attained majority. No explanation worthy of acceptance has been offered by the Appellant to show as to why she did not approach the Court of law within the period of limitation. At the cost of repetition, we observe that the Appellant failed to produce any evidence to prove that the Will was a result of fraud or undue influence. The same Will has remained un-challenged until the date of filing of application for revocation. No acceptable explanation is offered for such a huge delay of 31 years in approaching the Court for cancellation or revocation of grant of probate.
The District Court as well as the High Court is justified in dismissing the application of the Appellant for revocation of grant of probate - Appeal dismissed.
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2017 (11) TMI 1917
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - appellant is a ‘Financial Creditor’ or not - HELD THAT:- The appellant invested some amount with the respondent company and was allotted equity shares. In a petition under Sections 397 & 398 of the Companies Act, 1956, the then Company Law Board cancelled the allotment of share capital in favour of the appellant. On such cancellation, the amount is lying with the respondent company which has been shown as debt amount of ₹ 79,15,480/-. Though, the aforesaid fact has been disputed by the learned counsel for the respondent, but without going into the question as to what amount is lying with the respondent, there are nothing on the record to suggest that the appellant come within the meaning of ‘Financial Creditor’ under Section 5(8) read with Section 5(9) of the ‘I&B Code’.
Even if it is accepted that the amount has been shown to be a debt in the records of the Company, does not mean that the appellant is a ‘Financial Creditor’.
Appeal dismissed.
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2017 (11) TMI 1916
Refund of Court Fees - HELD THAT:- The parties agree that the plaint in the suit be treated as claim of the appellants and the claim petition filed by the respondents before the Arbitrator be treated as counter claim. The said documents will be furnished by the appellant to the learned Arbitrator within a period of two weeks from today. The venue of the arbitration can be at place convenient to the Arbitrator. However, the seat of the Arbitrator will be taken to be at Chennai. The arbitrator will be at liberty to take any expert assistance.
In view of section 16 of the Court Fees Act 1870, the appellant will be entitled to move the Collector for refund of the Court fee.
Appeal disposed off.
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2017 (11) TMI 1915
Reopening of assessment - Non addressing preliminary objections - tribunal has upheld the contention of the appellant and remitted back the matter for reassessment - second inning to the Assessing Officer who has to do reassessment within a period of 9 months - unexplained cash credit u/s 68 - HELD THAT:- It is not out of place to mention that the law declared by the Supreme Court in GKN Driveshafts [2002 (11) TMI 7 - SUPREME COURT] clearly held that the preliminary objection is to be decided as the first, it cannot be decided subsequently. The argument which has been canvassed by the assessee is required to be considered very seriously more particularly in view of the observations made by the Supreme Court in the case of KSS Petron Private Ltd [2016 (10) TMI 1112 - BOMBAY HIGH COURT] which is followed in Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] the law declared by the Supreme Court is taken in true spirit whether it will open a second inning in his own.
Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme Court, in that view of the matter, the issues which are raised in the matter, the Tribunal ought not to have remitted back for reassessment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act.
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2017 (11) TMI 1914
Depreciation of the Lucknow property - CIT(A) failed to note that the property was obtained by the assessee only in lieu of surrendering its tenancy rights over another property - HELD THAT:- As it is noticed that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case for the AY 1993-94 and as it is noticed that the CIT(A) has followed the judicial discipline in following the decision, we find no reason to interfere with the order of the Ld.CIT(A) on this issue.
Depreciation on non-compete fee - HELD THAT:- As it is noticed that the issue is squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of M/s.Pentasoft Technologies Ltd., [2013 (11) TMI 1057 - MADRAS HIGH COURT] the findings of the Ld.CIT(A) on this issue stands confirmed.
Addition made towards the amount taken to general reserve by the assessee - difference between the value of assets over the value of liabilities of the transferor companies, after adjusting the aggregate face value of new shares issued was added to General Reserve - HELD THAT:- A perusal of the provisions of Sec.28(iv) shows that the said provision is to treat the income as profits & gains of business or profession, the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of profession. In the present case, it is clearly shows that the acquisition, more so, the amalgamation of the three companies with the assessee company is not the business of the assessee company. Consequently, it cannot be said that the provisions of Sec.28(1)(iv) of the Act applied to the excess of the net book value of the entities over the consideration paid in any way nor is it income liable to tax under the head ‘profits & gains’ of business in the hands of the assessee company. Further clearly, the Revenue has not been able to point out any defects in the findings of the Ld.CIT(A) on this issue.
Disallowance of the contributions made to the Employee Welfare Funds - AO had disallowed the contributions to the various Employees Welfare Funds on the ground that the payments were not statutory obligations - HELD THAT:- As it is noticed that it has been categorically held by the Hon’ble High Court of Madras in the assessee’s own case for the AY 1997-98 that the settlement agreement entered into by the assessee with its employees u/s.12(3) of the Industrial Disputes Act are Statutory Agreements, we are of the view that only for the purpose of examining, as to whether the quantification is correct, the issue is restored to the file of the AO. In the result, Ground of the assessee’s appeal is partly allowed for statistical purposes.
Depreciation on goodwill - specified intangible assets acquired under slump sale - HELD THAT:- In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. [2010 (9) TMI 6 - SUPREME COURT] wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a “license” or “akin to a license” which is one of the items falling in Section 32(1)(ii) of the Act.
We are of the view that the specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section.
It is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation under Section 32(1)(ii) of the Act. In the circumstances, the substantial question of law is decided in the affirmative and this appeal is allowed in favour of the assessee and against the Revenue and the impugned order is set aside.
Disallowance of various provisions which had been claimed as an expenditure in respect of the non-transmission and distribution business - HELD THAT:- Once the whole of the non-T&D business has been transferred then admittedly there is nothing left of the said business representing a liability which is liable to be allowed in the assessee’s hands in respect of the said business. This being so, we find that the order of the Ld.CIT(A) and the AO on this issue to be on a right footing.
CIT(A) has accepted the claim of the assessee that the sale of the non T&D business was on a slump sale by applying the provisions of Sec.50B and the liabilities which have been claimed for deduction now have also not crystallized during the year as also the issue that the claim of the assessee is in respect of the provisions and mere provisions cannot be allowed as a deduction. This being so, the finding of the Ld.CIT(A) & the AO on this issue stands confirmed. In the result, Ground Nos.6 & 7 of the assessee’s appeal stands dismissed.
Taxing under capital gains - excess consideration received on the transfer of the non-T&D business - HELD THAT:- the consideration of the transfer has been specified in the said scheme at ₹ 41.30 Crs. How this difference of ₹ 10.00 Crs. has taken place, has not been explained by the assessee? Nor the assessee has been able to explain as to why the additional sum of ₹ 10.00 Crs. has been paid. If at all, it can be considered as an exchange, the question that arises is when the total net assets only ₹ 31.30 Crs. why the shares of the value of ₹ 41.30 Crs. has been allotted. Though, the assessee has mentioned that the valuation is as per the valuation done by the Accountants still the valuation arrived at by the Accountants is to an extent of ₹ 41.70 Crs. and even that is not the consideration of the transfer because as per the Scheme, the consideration for the transfer is shown at ₹ 41.30 Crs. Even otherwise, a perusal of the Scheme clearly shows that the term used is ‘consideration for the transfer’, the words are not ‘exchange’. This being so, we find no error in the findings of the AO and the Ld.CIT(A) on this issue and the same stands confirmed.
Not granting the deduction on Excise Duty paid on the Closing Stock - HELD THAT:- As it is noticed that the issue is squarely covered by the decision of the Hon’ble Special Bench of this Tribunal, respectfully following the said decision, the AO is directed to grant the assessee, the deduction of the Excise Duty to the extent that the same has been actually paid during the relevant AY u/s.43B.
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2017 (11) TMI 1913
Reopening of assessment u/s 147 - new tangible material found or not? - HELD THAT:- It is not in dispute that at the time of original assessment, the AO verified the materials consumed, labour charges, transportation charges & postage and telephone charges and after examining the same made some disallowance on such expenses.
AO has changed his mind to reopen the assessment. As observed that in the body of the order u/s.143(3), the Assessing Officer had particularly mentioned that he had examined the details and after examining the details only, he had disallowed certain expenses from transportation charges, labour charges.
In the assessment year 2005-06 in the case of the assessee itself, on similar situation, the reopening of assessment u/s.147 of the Act was treated as bad in law by this Bench of the Tribunal and following the same, the CIT(A) has quashed the reassessment u/s.147.
We find that similar issue has been considered in the case of CIT vs. Kelvinator of India Ltd[2002 (4) TMI 37 - DELHI HIGH COURT] wherein, it has been held that held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. The decision is approved in the case reported as CIT vs. Kelvinator of India Ltd[2010 (1) TMI 11 - SUPREME COURT].
AO has initiated reassessment proceedings on the same facts which were available before him at the time of making assessment u/s.143(3) and no new tangible material has come on the basis of which it could be said that he has reason to believe that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose truly and fully material of facts for the assessment. No reason to interfere with the order of the CIT(A) and accordingly, confirm the same and dismiss the grounds of appeal filed by the revenue.
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2017 (11) TMI 1912
Taxability of “Management Service Fees” - Assessing Management service fee received by the assessee as Royalty - eligibility for benefits of Indo-Netherland DTAA - assessee claimed the same as managerial services, as it did not make available any technical knowledge, experience, skill, know-how or process - HELD THAT:- We notice that the assessing officer had made identical disallowance in assessment year 2009-10 [2016 (11) TMI 1249 - ITAT MUMBAI] and the Tribunal, vide its order has held that none of the services provided by the assessee in the terms of “service agreement” falls under the scope and ambit of “royalty” as defined in Article 12(4) of the DTAA.
In the years under consideration also, the assessee received payments pursuant to very same agreement. The Ld A.R submitted that there is no change in facts between both the years. Before us, the revenue could not bring any material in order to compel us not to follow the order passed by the co-ordinate bench in AY 2009- 10. Since a particular view has already been taken by the Tribunal on identical payments received by the assessee, following the same, we hold that the payments received by the assessee in terms of “service agreement dated 01-04- 2004” do not fall under the definition of “royalty” as defined in Article 12(4) of India-Netherlands DTAA. Accordingly we set aside the order passed by the assessing officer in both the years on this issue. - Decided in favour of assessee.
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2017 (11) TMI 1911
Validity of impugned order - whether conforms to Section 212 of the Companies Act, 2013 or not - HELD THAT:- There were no materials in the present case and which can be termed as enough to warrant the exercise of power by the Central Government by resorting to section 212(1) of the Act of 2013. The Central Government, in the order under challenge, did not spell out any circumstances, except outlining its power under the above sections to order investigation into the affairs of a company in public interest. None disputes that power or its existence. In para 2 of the impugned order, however, a reference is made to the report of the Registrar of Companies, West Bengal, dated 13th January, 2016. We have already held that the findings in this report are not enough for the Central Government to exercise the drastic power. Something more was required and to be established as circumstances or material enough for exercise of the power. That is clearly lacking in this case.
The petitioner is not challenging the jurisdiction or authority of 1st respondent to order investigation by SFIO. Therefore, the procedure followed by the 1st respondent alone is examined in this writ petition. According to Merriam Websters Dictionary of Law, the word opinion means a belief stronger than impression and less strong than positive knowledge Therefore, the 1st respondent is required to form an opinion i.e., something more than mere re-telling of gossip or hearsay and reflects judgment or belief resulting from what one thinks on a particular question. Such belief or conviction is manifested by 1st respondent in ordering investigation by SFIO - In the case on hand, this Court is of the view that the order dated 10.06.2016 of 1st respondent does not reflect forming opinion on the necessity for investigation by SFIO.
The order impugned in the writ petition does not satisfy the requirements i.e., is of the opinion, that it is necessary to investigate in Section 212 (1) of the Act - the order is set aside - It is clarified that this Court has not examined the merits of the matter, and after perusing the record produced, the issue is remitted back to 1st respondent for re-consideration afresh in accordance with Section 212 of the Act.
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2017 (11) TMI 1910
Disqualification of Director from acting/operating as Directors - non-filing the financial statements and annual returns for a period of 3 years - applicability of Section 164(2)(a) of Companies Act.
HELD THAT:- Notice of motion for 07.12.2017.
In the meantime, disqualification of the petitioners as Directors shall remain stayed and their DIN, which have been de-activated, is directed to be activated/restored.
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