Absence of application of the provisions of Limitation Act - oppression and mismanagement - Held that:- The Petitioners were obliged under law to prosecute their claim within a period of 03 years which they have not done. They slept over the matter for long and, therefore, it can reasonably be said that the Petition of the petitioners is not only barred by the principle of delay and latches but also by estoppel and acquiescence. The Petitioners did not raise an issue from the years 2001-2004 or after the year 2007. On the contrary, the Petitioners duly signed and filed the Annual Returns of the Company which form a part of compilation of the public documents filed by the Respondent No. 2.
The Petitioners in the petition have also failed to arraign proper and necessary party to the proceeding, namely, Mr. Goddrayn Arengh, who it is claimed by the Petitioners is an outside shareholder, holding 8.2% of the share capital and against whom, reliefs have been sought for in the petition by way of mandatory injunction. The entire petition it is seen has been filed on the strength of a Family Adjustment Deed dated 9.10.1999 and seeking virtually its enforcement in relation to the parties figuring therein.
This Tribunal cannot go into the legality of the said Family Adjustment Deed as neither the Respondent Company is a party to such deed nor the terms contained therein are part of the Articles of Association of the Company. The subject matter of the Petition, (as is evident from the pleadings of the Petitioners themselves) seems to be more in the nature of a dispute amongst the members of HUF of their co-parcenary rights than a dispute which can be brought under the provision of Sections 111, 397 and 398 of the Companies Act, 1956, and for establishment of such rights, the petitioners are required to have recourse elsewhere and not before this Tribunal. Viewed in the context of all that has been said and done above, the petition of the petitioners suffers from delay and latches as well as estoppel and acquiescence and to cap it all the dispute is not amendable to the jurisdiction of this Tribunal for the reasons cited above.
Exemption under N/N. 6/2006, dated 1-3-2006 - non-fulfilment of condition of Project Import Regulation - Held that:- If the judgment is passed in favour of the department, it will be open for them to recover the same subject to result of SLP.
This appeal is not entertained and the same stands disposed of.
Charitable activity - Grant of benefit u/s 12A denied - activity of the applicant could not be termed as charitable within the meaning of section 2(15) and there were huge surpluses and accounts were not audited and returns of income for such years in which total income exceed ₹ 50,000/- were not filed alongwith Form No. 10B - Held that:- The issue is squarely covered by the decision of Director of Income Tax (Exemptions) vs. Spic Educational Foundation [2001 (11) TMI 22 - MADRAS HIGH COURT] wherein held non - filing of the audit report in Form No. 10B of the Income Tax Rules, 1962, would not defeat the claim of the assessee for exemption under Sections 11 and 12
The registration U/s 12A of the Act for entitlement to claim the benefits U/Ss 11 & 12 of the Act requires two conditions to be fulfilled, firstly that the person concerned should have made an application for registration in the prescribed form and in the prescribed manner to the authorities named in that section before the first day of July, 1973, or before the expiry of the period of one year from the date of the creation of the trust or establishment of the institution and secondly, the person concerned would deep the accounts in a particular manner and such accounts should be audited. Thus the assessee has fulfilled both the conditions and the delay in making the application for registration has also been successfully explained and that being sufficient cause for the delay, we condone the delay with direction to the Ld. CIT to grant the registration on the application filed by the assessee for the purpose in Form No. 10A before Ld. CIT on 27.3.2005 for the claimed period. - Decided in favour of assessee
Disallowance of expenses debited as cost of ESOP in profit and loss account - allowable deduction u/s 37 - Held that:- The issue stands covered in favour of the assessee and against the Revenue by the order of this court in CIT v. Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT]. The court had affirmed the order of the Income-tax Appellate Tribunal deciding the issue in favour of the assessee in the said case where the addition made by the Assessing Officer by way of dis allowance of the expenses debited as cost of ESOP in profit and loss account was deleted by the Income-tax Appellate Tribunal.
In the present case, the Income-tax Appellate Tribunal has by the impugned order restored the matter to the file of the Assessing Officer for re-adjudication. The impugned order of the Income-tax Appellate Tribunal is consistent with what has been held by this court in CIT v. Lemon Tree Hotels (supra) wherein held Tribunal held that it was not a case of contingent liability depending on the various factors on which the assessee had no control. The expenditure in this behalf was an ascertained liability, thus the expenditure incurred being on lines of the SEBI guidelines, there could be no interference in the relief granted by the assessing authority for the expenditure arising on account of the employees' stock option plan. This expenditure incurred as per the SEBI guidelines and granted by the Officer could not be considered as erroneous. No substantial question of law.
Discard of books of account - books of account of the assessee have been discarded by the authorities under the Act essentially on the ground that there was excess consumption of electricity in auxiliary works - Held that:- The view so taken by the Tribunal is in apparent conflict that the ratio of law laid down by this Court in M/S Shyam Rice Mills [1987 (12) TMI 336 - ALLAHABAD HIGH COURT]. This Court had relied upon two previous judgement, which have been referred to in the decision to hold that mere excess consumption of electricity, can at best given rise to suspicion so as to warrant examination of other materials, but that by itself would not be sufficient to discard the books of account.
There is nothing on record to show that accounts furnished were otherwise not reliable - the tribunal was not justified in discarding the books of account for the reasons recorded in the order.
Principles of natural justice - appellant has not filed any reply to the show cause notices issued to them - Inappropriate and fraudulent availment of Cenvat credit - Held that:- The action of not filing reply to the show cause notice by the appellant is highly despicable, at the same time, in the interest of justice, the appellants should be extended an opportunity for filing reply to the show cause notice and defend the allegation made therein. - the matter needs consideration by the adjudicating authority - appeal disposed off by way of remand.
Charitable activity u/s 2(15) - 'hostel facility' of the school provided exclusively to students of the school - whether not an integral part of "education" u/s 2(15) - but is a separate business activity in terms of section 11 (4A)? - Income for 'charitable purposes' - Held that:- Referring to the order of Director of Income Tax (Exemption) vs. Indraprastha Cancer Society [2014 (11) TMI 733 - DELHI HIGH COURT] wherein has held that where a charitable institution, which has purchased capital assets and treated amount spent on purchase of capital asset as application of income, is entitled to claim depreciation on same capital asset utilized for business. - Decided in favour of assessee
Revision u/s 263 - Order erroneous or prejudicial to revenue - Held that:- The view so taken by the Assessing Officer without making the requisite inquiries or examining the claim of the assessee will per se be an erroneous view and hence will be amenable to revisional jurisdiction under Section 263. Second reason is that it is not taking of any view that will take the matter under the scope of Section 263. The view taken by the Assessing Officer should not be a mere view in vacuum but a judicial view.
It is difficult to comprehend as to how the Assessing Officer can be attributed to have "adopted" a permissible course of law or "taken" a view where two or more views are possible when the order passed by him does not speak in that behalf. We cannot assume, in order to provide legitimacy to the assessment order, that the AO has adopted a permissible course of law or taken a possible view where his order does not say so. The submissions made by the learned Counsel, if accepted, would require us to form, substitute and read our view in the order of the AO when the AO himself has not taken a view. It could have been a different position if the AO had "adopted" or "taken" a view after analysing the facts and deciding the matter in the light of the applicable law. However, in the case before us, the Assessing Officer has not at all examined as to whether only one view was possible or two or more views were possible and hence, the question of his adopting or choosing one view in preference to the other does not arise.
The provisions of Section 263 would lose significance if they were to be interpreted in a manner that prevented the Commissioner from revising the erroneous order passed by the Assessing Officer, which was prejudicial to the interest of the revenue. In fact, such a course would be counter-productive as it would have the effect of promoting arbitrariness in the decisions of the Assessing Officers and thus destroy the very fabric of sound tax discipline. If erroneous orders, which are prejudicial to the interest of the revenue, are allowed to stand, the consequences would be disastrous in that the honest tax payers would be required to pay more than others to compensate for the loss caused by such erroneous orders.
Thus we are of the view that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning of Section 263. Accordingly we do not find any infirmity in the order of CIT and we confirm the same. - decided against assessee.
Treatment to copyright expenses - nature of expenses - revenue or capital expenditure - Held that:- The assessee had claimed copyright expenses and justified the claim stating that the same was paid for the purpose of use of copyright of products like songs, images video clips, games etc. for development of value added services for the telecommunication companies. ITAT after going through the relevant clauses of the copyright agreement, concurred with the assessee and held that the assessee had merely acquired the right to use the copyrights and had not become the owner of the copyrights/license and thus the expenses were revenue in nature.
The assessee has merely acquired right to use the copyright. The perusal of the Agreement with M/s Phonographic Performance Ltd. shows that license has been granted only for usage of the copyright. The above clearly shows that license was only for usage of copyright held by the licensor. The assessee has not become the owner of the license. Therefore, clearly the payment is of Revenue nature - Decided in favour of assessee.
Disallowance of excess depreciation claimed treating the superstructure as temporary structure - Held that:- The said opening WDV has been satisfactorily explained by the assessee as having been on account of the fact that part of the expenditure was incurred in the preceding year which was shown as opening WDV of the temporary structure and the assessee has rightly claimed depreciation in the impugned year when the said temporary construction was completed and the asset put to use. Moreover, we find that there is no basis with the Revenue to hold that the construction of the said structure was prohibited by law and was an offence as rightly pointed out by the CIT (Appeals). The Ld.CIT(Appeals) has rightly pointed out that even as per the Assessing Officer there was a bar on building/constructing "permanent" structures in the area where the assessees office was located. The said structure, undisputedly, was a "temporary" structure and thus there was no breach of law by the assessee by creating it. Therefore, we agree with the CIT(Appeals) that no disallowance could have been made u/s 37 (1) of the Act also.
We concur with the CIT (Appeals) that the temporary structure having come into existence in the impugned year and thus put to use in the impugned year, the assessee was entitled to depreciation @ 100% on the same and the disallowance made by the Assessing Officer, we hold, has been rightly deleted by the Ld. CIT (Appeals).
Treatment of royalty expenses as revenue in nature has already been settled in favour of the assessee by the Hon'ble Punjab & Haryana High Court in appeals pertaining to preceding years.
TDS u/s 194A - addition u/s 40(a)(ia) - insertion of second proviso to section 40(a)(ia) - Held that:- In the present case ,it is not disputed that the payees /recipients of the said interest income i.e. M/s Indiabulls Financial Services Ltd. and M/s Bajaj Financial Ltd have included the said income in their return of income and paid taxes on the same. Evidence in the form of Form No.26A as also report of Chartered Accountant was filed. The Revenue has not challenged this fact before us. Thus the assessee had duly demonstrated compliance with the conditions stated in the second proviso to section 40 (a)(ia), which briefly put, states that no disallowance is to be made in cases where the recipient of the income reflects the same in its return of income and pays taxes on the same.
AO also, we find, has in her Remand Report after examining the evidences produced by the assessee, admitted that the said expenses were allowable in view of the provisions of section 40 (a)(ia) r.w.s. 201 (1) of the Act. In such circumstances, since the Assessing Officer has herself admitted that the addition made was unwarranted, the addition no longer survives vis-ŕ-vis assessment order and there is no reason for the Revenue to have any grievance on the issue.
We find that the CIT (Appeals) has rightly followed the proposition laid down by the I.T.A.T. Agra Bench in the case of Rajiv Kumar Aggarwal (2014 (6) TMI 79 - ITAT AGRA) which stated that the second proviso to section 40 (a)(ia) were retrospective in nature w.e.f. 1.4.2005. The said decision has been followed by the Delhi High Court while upholding the above proposition in the case of CIT Vs. Ansal Landmark Township P. Ltd [2015 (9) TMI 79 - DELHI HIGH COURT]. - Decided against revenue.
Business Support Services - cold storage services for chilling plant to M/s. Udaipur Dugdh Utpadak Sehkari Sangh Limited, Udaipur for chilling of milk - agricultural produce or not? - exempt from tax or not - Held that:- The milk comes under the category of “agricultural produce”. The appellant is not processing/treating/trading the milk. It is just chilling the milk which was later supplied to the consumer.
It is evident that the storage of agricultural produce is exempted from the service tax - In the instant case, the appellant is providing chilling of milk and certainly, not processing/trading of milk and do not come under the head storage and warehousing services.
Valuation - Job-work - body built supplied by Tata Motors - Held that:- Identical issue decided in the appellant own case M/s. Tata Motors Ltd. and M/s. Commercial Engineers & Body Builders (P) Ltd. Versus C.C.E., Bhopal [2016 (7) TMI 1478 - CESTAT NEW DELHI] wherein the bench remanded the matter back to the adjudicating authority for reconsideration of the issue.
Matter remanded back to the adjudicating authority for consideration afresh - appeal allowed by way of remand.
Corporate insolvency process - financial debt - Held that:- Respondent No. I- Company has committed default in respect of financial debt owed to the petitioner/ financial creditor. The reasons for our satisfaction are that the factum of advance has not been disputed. The payment of interest @12% per annum was being made. It satisfies the requirement of time value of money in such like transaction as is required by Section 5(8) to constitute it as a 'Financial Debt'. The Respondent No. I Company has acknowledged the receipt of advance by confirming the same on 1.4.2016. It is also evident that no reply to the demand notice dated 10.8.2016 has been entered by the Respondent No. I-Company. Therefore we are of the view that the present petition warrants admission.
The arguments advanced on behalf of R-1 company have failed to impress us because the theory of advance money for purchase of shares cannot be accepted because the shares were purchased in the year 2015 and no intimation of the purchase of share has been sent to the petitioner. On the contrary the Respondent No. 1-Company have been paying interest @ 12 % to the petitioner company. The argument with regard to written agreement for advancing loan is also devoid of merit once it is accepted that the amount has been received and interest thereon has been paid at the rate of 12 %. We are also unable to appreciate that the confirmation of accounts on 1.4.2016 by one Mr. Neeraj Sharma under the seal of R-I Company is liable to be ignored on the ground that he was not authorised to issue such certificate. The defence of the Respondent No. 1 Company is wholly illusory and we have no hesitation to reject the same. - Petition admitted.
Unexplained expenditure u/s 69C - bogus purchases - Held that:- Books of account was duly audited and payments were made from undisclosed source/disclosed bank account and all the payments are account payee cheque and no region to doubt the purchases. AO was not rejected the books of account. The assessee further filed the letter of confirmation of the supplier copy of bank statement showing the entries of cement and stock reconciliation statement, further the sale and purchase were not doubted by the AO, the substantial amount of sale by the assessee was to the government Department.
Commissioner (Appeals) allowed the appeal of the assessee on the basis of principle of consistency as the similar addition/disallowance was deleted from the assessment of subsequent year. The ld DR could not differentiate as to how the facts for the year under consideration was different for the assessment year 2010-11. Hence, we do not find any ground to interfere in the finding of ld Commissioner (Appeals). - Decided against revenue
TPA - comparability analysis - functinal similarity - Held that:- Assessee is engaged in the business of providing advisory services to its associated enterprises noted above to assist them in providing services to the Investment funds. CCIAPL primarily carries out research and scouting activities for ChrysCapital Management Companies to identify entrepreneurs and portfolio companies requiring assistance in the form of capital infusion, strategic direction and financial advice. ChrysCapital Management Companies are asset management companies for investment funds (Private Equity Funds) who generally focus on investment in incubation ventures. These investment funds concentrate on providing funds to entrepreneurs engaged in the business of providing software services, outsourcing services and technology out of India, thus companies functionality dissimilar with that of assessee need to be delsected from final list.
We direct for excluding Brescon Corporate Advisors Limited from the list of comparables.
Deduction under Section 36(1)(ii) in respect of payment of bonus to the two shareholder-directors - Held that:- This issue is covered in favour of assessee by the decision in assessee's own case for the assessment year 2008-09 [2015 (4) TMI 949 - DELHI HIGH COURT] as held the bonuses paid to the two shareholder-directors in the preceding two financial years were in the ratio of 60-65%:40-35%, even though their shareholding was 1:1. The balance sheet of the assessee placed on record also indicates that the two shareholders also hold directorial positions in the assessee. Therefore, the assessee's contention that the bonus was paid to the shareholders in their managerial capacity, like in the case of other managers, cannot be questioned merely on the basis of a speculation by the revenue that such payment was to avoid tax. In such circumstances, the deduction under Section 36(1)(ii) in respect of payment of bonus to the two shareholder-directors is allowed
Allowability of severance cost - Held that:- Admittedly, Sri. Girish Baliga was neither a shareholder nor a director of the assessee company and did not have any other beneficial interest in the assessee. He was a qualified CA and a very experienced person. Therefore, there could not be any other consideration for severance cost of ₹ 35,10,000/- paid to him except the services rendered by him to assessee company. The assessee in its submissions has, inter-alia, pointed out that this payment was based on business exigency keeping in mind the best practices being followed in the industry. Therefore, the payment made to Sri. Girish Baliga by the assessee company as going concern was in line with the practice prevalent in the industry. In order to maintain good reputation as regards employment of Human Resources, it had to meet the common commercial practices. The payment had not been made in contemplation of closing down of unit but in regular course of carrying on assessee's business. Under such circumstances, this payment cannot be held to be in capital field and was an allowable expenditure in the hands of the assessee company. In the result, the appeal of the assessee is partly allowed.
TP addition on Import of crystal and crystal components - MAM selection - Held that:- It is noticed that the AO passed the order for the current year by mainly relying on the view taken by him for the A.Y. 2004-05. The ld. CIT(A) has also passed a combined order and there is no separate discussion for the A.Y. 2005-06. The appeal for the A.Y. 2004-05 was argued simultaneously and the submissions made for such earlier year were adopted by both the sides for the instant year as well. We have passed a separate order for the A.Y. 2004-05 in which rejection of the CUP method by the authorities below has been upheld and further direction has been given to the AO/TPO for a fresh determination of the ALP of this transaction, firstly, by considering the application of RPM and if, due to one reason or the other, the same cannot be applied, then, the TNMM.
TP addition on AMP Expenses - Held that:- As relying on SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. (NOW KNOWN AS SONY INDIA LIMITED) & OTHERS VERSUS COMMISSIONER OF INCOME TAX – III [2015 (3) TMI 580 - DELHI HIGH COURT] we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter would end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO would determine the ALP of such an international transaction.
Addition in respect of Provision of doubtful debts - AO did not allow deduction for this sum as it was a provision and not an actual write off - Held that:- Amount of provision is not deductible. Actual amount of write off has to be allowed as deduction u/s 36(1)(vii). Reversal of provision should not lead to taxable income. However, deduction allowed in respect of provision for doubtful debts for the A.Y. 2003-04 should be taken into consideration while allowing deduction on actual write off or reversal of provisions to the relevant extent so that no double deduction gets allowed.
Disallowance of advertisement and publicity expenses - Held that:- Following the view taken in our order for the A.Y. 2004-05, we hold that the entire amount of advertisement and publicity expenses should be allowed as deduction in the year of incurring itself. It is however, made clear no further deduction for 2/3rd of the total expenditure for the earlier years be granted as the same will lead to double deduction. If such a deduction has already been allowed, then the same should be reversed to that extent. This ground of the Revenue is not allowed.
Depreciation on computer peripherals at 60% - Held that:- The Hon’ble Delhi High Court in the case of BSES Yamuna Powers Ltd.(2010 (8) TMI 58 - DELHI HIGH COURT), has held that depreciation on computer peripherals should be allowed at 60%. We, therefore, uphold the view taken by the ld. CIT(A) on this issue. This ground is not allowed.
Disallowance u/s 40A(3) - payment to Jodhpur Vidyut Vitaran Nigam Ltd. in cash - Difference in opinion - Judicial Member as Third Member appointed - Hon’ble Third Member concurred with the findings of the Hon’ble Accountant Member - Held that:- The nature of business of the assessee is such that assessee is required continuous supply of electricity for which assessee shall have to make payment to Jodhpur Vidyut Vitaran Nigam Ltd. for smooth functioning of the business activity of the assessee. In case no payment is made in cash to the above Nigam, then the electricity would have been discontinued. Therefore, having regard to the nature of business activity of the assessee and that assessee did not have banking facility where payment of electricity bill is to be made and considering the business expediency and other factors, it isof the view the case of the assessee would clearly fall in exception to Rule and no disallowance should be made under section 40A(3) of Income Tax Act.
The learned Accountant Member has, therefore, rightly followed the decision of the coordinate Bench on identical issue in the case of Shri Rahul Pancholi (2015 (10) TMI 2179 - ITAT JAIPUR ) in which on identical facts and issue, the departmental appeal was dismissed. Interestingly, the learned Judicial Member who has dismissed appeal of the assessee on the same set of facts, was the party to the order in the case of Shri Rahul Pancholi (supra). The learned Accountant Member was, therefore, right in his approach in allowing the appeal o the assessee by following the order of the coordinate Bench rather of the same Bench - Decided in favour of assessee
Demand of Interest - Whether the order of the Tribunal confirming the levy of interest is without jurisdiction inasmuch as it fails to see that the petitioner had paid the duty even before the issuance of show cause notice? - Held that:- The provisions of Section 11AC of the Act are attracted only in the event of the revenue establishing fraud, collusion, wilful misstatement, suppression of facts or contravention of statutory provisions with an intent to evade payment of duty. This has not been done in the present case. Moreover, the duty itself has been remitted on 27-2-2007 even prior to the issuance of SCN by the authorities - levy of interest upheld and penalty deleted - appeal allowed in part.
Method of computing the exemption u/s 10-A - whether the expenses excluded from the export turnover are also to be excluded from the total turnover for the purpose of Section 10-A - Held that:- As decided in COMMISSIONER OF INCOME TAX v. TATA ELXSI LTD [2011 (8) TMI 782 - KARNATAKA HIGH COURT] there should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. The components of the export turnover in the numerator and the denominator cannot be different. - Decided against revenue
100% EOU - Refund of unutilized CENVAT Credit - denial on the ground of non-registration of premises - Held that:- This very question came up for consideration in a matter before this Court in the case of Commissioner, Service Tax Commissionerate Vs. M/s Atrenta India Pvt. Noida reported in [2017 (4) TMI 563 - ALLAHABAD HIGH COURT], wherein this Court took a view that the refund could not be denied to the assessee merely on the basis of non-registration of the premises - refund allowed.
Whether the Hon'ble CESTAT was correct in allowing the refund and CENVAT credit of the services, namely, carpet dry cleaning, home plant service, interior decoration services, renting on car parking, company secretary services, supply of meal vouchers, travel insurance services and on the strength of invoices (involving CENVAT credit of ₹ 16,579/-). Addressed to Guest House and other residential premises? - Held that:- This in our opinion it is a pure finding of fact recorded by the Tribunal calling for no interference by this Court in the facts of this case.
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