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Showing 21 to 40 of 1477 Records
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2016 (4) TMI 1458
Reduction of Share Capital - HELD THAT:- In view of the averments made in paragraph Sixteen and Seventeen (16 & 17) of the Affidavit in support of summons for Direction interalia stating that the proposed Reduction of Share Capital would not in any way adversely affect the interests of any of the Applicant’s Unsecured Creditors or the ordinary operations of the Applicant or the ability of the Applicant to honour its debts in the ordinary course of business.
In view of the above, the procedure prescribed under Section 101(2) of the Companies Act, 1956 is dispensed with.
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2016 (4) TMI 1457
Seeking release on Regular Bail - Fraud - misappropriation of huge amount of money - HELD THAT:- The undisputed facts is that the applicant was Chairman of MEGA and was responsible for the transaction being a head of the Company. However, the investigation is over and time was granted to the State Government for further investigation which has also been completed and supplementary charge-sheet has been submitted on 27.1.2016. In the case of Sanjay Chandra v. Central Bureau of Investigation, [2011 (11) TMI 537 - SUPREME COURT] the Hon'ble Supreme Court has dealt with most important judgments of the Hon'ble Supreme Court itself and has released the accused who were facing charges for 2G Spectrum scam wherein public exchequer has lost thousands of crores of rupees.
The Hon'ble Supreme Court has, after considering the decisions of Kalyan Chandra Sarkar v. Rajesh Ranjan, [2005 (1) TMI 704 - SUPREME COURT], Gudikanti Narasimhulu v. Public Prosecutor, [1977 (12) TMI 143 - SUPREME COURT], Vaman Narain Ghiya v. State of Rajasthan, [2008 (12) TMI 446 - SUPREME COURT], State of U.P. v. Amarmani Tripathi, [2005 (9) TMI 659 - SUPREME COURT] has ultimately held that the applicant can be released on bail by imposing appropriate conditions.
It is pertinent to note that the applicant is behind bar since 14.5.2015 and investigation is over. The Court has not even framed charge in the matter. There are about 12 accused and about 100 witnesses and there is voluminous record of documents which are relied upon by the prosecution. It is also pertinent to note that the applicant was released on temporary bail and has surrendered in Jail in time. It is not the case that he has ever tried to misuse the liberty granted to him.
It is opined that this is not a heinous crime wherein there is an apprehension that he may tamper with the prosecution witnesses or is danger to the Society at large. The case is based on documentary evidences which is required to be proved by the prosecution at the time of trial.
Considering the entire facts and circumstances of the case and the papers of investigation and charge-sheet and supplementary charge-sheet, the application requires consideration. Hence, the application is allowed and the applicant is ordered to be released on bail subject to the conditions imposed.
Bail application allowed.
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2016 (4) TMI 1456
TP Adjustment - Determination of ALP of royalty transactions at NIL against transaction value - AR submitted that TPO has determined the ALP holding that the taxpayer did not produce any cost benefit analysis at the time of entering into the agreement with its AE showing that the royalty rate is not fixed based on expected benefit - HELD THAT:- Assessee has entered into technical assistance agreement with Stanley Electric Company Japan on 01.04.2007 for grant of nonexclusive and nontransferable license without a right to sub-license, to manufacture and sale license product in India using the technical information of Stanley Electric Company. Since 1990 the royalty is being paid by the Assessee to Stanley @3% of sales.
During the period from 1990 to 1994 the two parties were unrelated party hence the royalty contract was made under uncontrolled conditions and the payment of royalty by the Assessee to AE can be considered as comparable uncontrolled price for the purpose of bench marking the royalty payment for the year.
Accordingly, Assessee in its TP Study report has said that the payment of royalty is at Arm’s length price as the agreement is in accordance with industrial policy of the Govt. In its TP study report assessee applying the TNMM method and submitted that the above transaction is also conducted at an ALP.
On the identical facts and circumstances in the case of the assessee in [2015 (10) TMI 2509 - DELHI HIGH COURT] has not admitted the appeal of the revenue with respect to the determination of ALP of royalty relying on the decision of CIT Vs. EKL Appliances Ltd. [2012 (4) TMI 346 - DELHI HIGH COURT] and CIT Vs. Sony Ericson Mobile Communication [2015 (3) TMI 580 - DELHI HIGH COURT] held that royalty payment cannot be disallowed on the basis of the so-called benefit test and the domain of the TPO is only to examine as to whether the payment based on the agreement adheres to the arm's length principle or not - we direct the ld. TPO/AO to delete the adjustment made on account of ALP of royalty payments.
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - HELD THAT:- Recording of satisfaction on the correctness of claim of the assessee on disallowance u/s 14A before invoking rule 8 D of the Income tax rules 1962 is mandatory. The language of section 14A provides that AO must record a satisfaction if he was unsatisfied with any incorrect claim of the assessee. If he failed to record such a finding then it cannot be said that he rightly invoked provision of section 14A of the act for application of rule 8D. See Taikisha Engineering India Ltd [2014 (12) TMI 482 - DELHI HIGH COURT]
Also assessee had own funds far in excess of the amount invested in investments earning tax free income. In such a case presumption is that own funds have been used to finance the investment activities.
As in case of CIT Vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that when interest free funds are available then the presumption would be that such interest free funds are invested or advanced as interest free loan. If the presumption is applied to the facts of this case then there cannot be any disallowance on account of interest expenditure. Therefore on two counts i.e. non-recording of satisfaction and interest free fund far in excess of investments, we do not incline to uphold disallowance made u/s 14A - Decided in favour of assessee.
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2016 (4) TMI 1455
Seeking appointment of a retired Judge of the Supreme Court as an Arbitrator for adjudication of the disputes between the parties - HELD THAT:- The present petition has been filed under both Sections 11(5) and 11(6) of the Act. The fundamental procedure for invocation of this Court's jurisdiction under Section 11(5) of the Act, i.e. failure on part of the parties to agree on a procedure for appointment of Arbitrator under Section 11(2) of the Act is not made out.
Appointment of an independent and impartial Arbitral Tribunal does not append the recent changes brought about in the Act, including Section 12(5) and the Seventh Schedule to the Act or in any manner contrary to the rule of law. Although, it is mentioned here and is appreciated the fairness of the learned Senior counsel for the petitioner who has made his submission that he is merely arguing the matter on legal issue otherwise he and his client have full faith and respect for the learned sole Arbitrator appointed. He submits that since it is an important legal issue therefore, he is making his submissions on legal issue only.
The petitioner's argument that the appointment of the Arbitral Tribunal is bad in view of Item 22 of the Fifth Schedule to the Act is entirely frivolous and without any basis whatsoever. Insofar as the petitioner's challenge in terms of Item 24 of the Fifth Schedule is concerned, the said argument has no consequence as Justice Shah (Retd.) has been appointed as an Arbitrator in relation to similar disputes between the same parties under two Purchase Orders pertaining to the same project at Annupur.
The Arbitral Tribunal has already been constituted and has entered into reference who has already ensured the compliance of the provision under the amended Act about no conflict. Now, the petitioner cannot be allowed to change the Arbitral Tribunal - Even, besides the stipulation of the agreement/purchase order governing the parties, this Court inclines to appoint Hon'ble Mr. Justice A.P. Shah (Retd. Chief Justice) as sole Arbitrator to decide the dispute between the parties.
There is no merit in the petition and the same is accordingly dismissed.
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2016 (4) TMI 1454
Valuation - Determination of duty payable - HELD THAT:- Appeal admitted.
Issue notice - Mr. Alok Yadav, learned counsel accepts notice on behalf of the respondent(s), therefore, the service of notice is waived.
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2016 (4) TMI 1453
TCS Credit to partnership firm - in intimation u/s 143(1) claim of TCS was restricted as reflected in the 26AS Form of the assessee - assessee is a partnership firm doing the business of liquor and all the partners are license-holders and they have formed partnership to carry on the business of liquor - HELD THAT:- From TCS Certificate, it is found that all these TCS certificates were in the name of the persons having their own PAN Numbers, TCS collected of such persons is allowed in the hands of the assessee partnership firm.
TCS was claimed in the name of different persons. The assessee is entitled to get credit of TCS.
We find that as per Rule 37BA, which has been amended from 1.4.2009, in above situation, the person to whom the payment has been made or credit has been given on the basis of information relating to deduction of tax furnished by the Deductor to the income of tax authorities or the persons authorized by such authority.
Rule 37BA provides that where any income on which the tax has been deducted at source is assessable in the hands of persons other than deductee, the credit for tax deducted at source, as the case may be, shall be given to the persons and not to the deductee.
We find that in this case, the assessment was made u/s 143(1). Therefore, in the interest of justice and fair play, we are of the view that the matter requires verification. AO is directed to give credit of this tax, which is effective from 01.04.2009 and the new rule has been amended from 2011. Therefore, the credit may be given for 24.10.2011 to the assessee after verifying whether the credit has been claimed or not in the hands of partners. If the partners have not claimed TCS certificate, the credit may be given to the partnership firm as per the decision of Bhooratnam & Company, [2013 (1) TMI 478 - ANDHRA PRADESH HIGH COURT] - Appeal of the assessee is allowed for statistical purposes.
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2016 (4) TMI 1452
Revision u/s 263 - issue of lack of application of mind of AO to the figures relating to purchase price and sale price of “beneficial interest” qua its market rate of Rs. 6.83 Crs - HELD THAT:- Principal CIT should clearly demonstrate the errors and revenue loss and not tax loss alone. Principal CIT is not allowed to assume jurisdiction u/s 263 under the guise of AO’s failure to conduct adequate inquiries. In principle, the aspect of AO’s failure is an unending process and it is difficult to find end to it. AO has to stop his inquiries somewhere given the time restrictions imposed on him for completing the assessment. Principal CIT cannot invoke the amended provisions of Explanation-2 (a) to section 263 of the Act to justify his order.
We dismiss the Ld CIT-DR’s reliance on the order of the ITAT in the case of Crompton Greaves Ltd. [2016 (2) TMI 169 - ITAT MUMBAI] we find the same constitutes obiter dicta only and has no binding nature. In any case, we find that it is not a case of completing regular assessment “without making inquiries or verification, which should have been made” [clause (a) of Explanation-2 to section 263(1) of the Act is relevant].
The clause (a) reads as - 'The order is passed without making inquiries or verification which should have been made'.
The above provisions apply only to the cases of orders passed by AO without making inquiries or verification at all, which should have been done. Unlike in the case of Marigold Nariman Pvt Ltd [2015 (8) TMI 174 - ITAT KOLKATA] heavily relied by the AO, in the instant case, AO made inquiries on the matter of transactions leading to short term capital loss. Therefore, in our opinion, the order passed u/s 263 of the Act on this issue is invalid.
Generation of long term capital gains and assessee’s claim of the same u/s 10(38) - Assessee became the owner of such shares resultantly. These shares were traded involving the SE platform electronically and de-mat accounts of the parties involves evidences the same. There is no sustainable unfavourable finding of the fact by the Principle CIT on the rates / shares involved and payments. The allegation of the Principal CIT and Ld DR is that the AO should have done more probing into the transactions and the allegation of collusive / synchronous transactions.
We also find that the AO undertook the cross verification exercise in order to verify the claims with broker. The proceedings initiated by the AO u/s 133(6) of the Act evidences the same. In our opinion, it is very clear that allegations by the Principal CIT are based on suspicion, which is unsustainable in law. There is no iota of evidence against the assessee that supports the collusiveness. Regarding as based allegations, we find that the principles of probability should take care. As such, we find there is no sustainable revenue loss reported by the Principal CIT. Actually, assessee gained in the process. In our opinion, as per the claim of assessee u/s 10(38) of the Act cannot constitute a revenue loss as it is otherwise a legitimate one. Thus, it is a case of suspicion of the Principal CIT rather than any allegations with substance. Therefore, we dismiss the finding of the Principal CIT and hold that the CIT has wrongly assumed jurisdiction.
Long term capital loss on sale of shares - We find that the inquiries of the AO cannot be considered “perfunctory or inadequate”. We need to consider the time limitation to the AO / the work load on any AO of this period. On merits also, it is not the case of Principal CIT that preferential shares of RPG-CITHL are sold below price. There were sold at face values. Of course, after indexation benefits were claimed, the capital losses are reported. Regarding shares of Saregama, we find that they are “quoted shares” and the sale price are competitive even if they are “off-market transactions”. Prevailing price of the shares on Bombay Stock Exchange are placed on record.
Regarding shares of CFL also, we find that the relevant financial statements reveals that the capital of company is eroded its worth and Chartered Accountants also certified this fact in their Annual Reports of the company. Regarding, purchase prices, we find that issue is not relevant to the year consideration. Reasons for the same includes that the shares in question were acquired in the earlier AYs and there are no new purchases in the year under consideration.
We are of the opinion, the AO conducted reasonable inquiries into the basic facts material to the making of the assessment. It is obviously not the case of “lack of inquiries” by the AO during the assessment. The documentation cited above in this order suggest the above finding. We cannot understand why the AO should travel into zone of “purchase price” of the shares of CFC, Saregama RPGCITHL as they were acquired in the past.
Any addition on the account of purchase price in this year is unsustainable in law. It is a settled legal principle. Any addition relating to investment should be made in the year of investment. Regarding sale price also, the same are competitive qua the prices quoted in BSE and the financials, as the case may be. No adverse data is placed by the CIT on records. CIT also failed to demonstrate the “loss of revenue” as required when he assumes jurisdiction u/s 263 - We also noticed that both the Principal CIT and CIT-DR have not listed / elaborated the meaning of the expression “all aspects” used by them while commenting on the AO’s failure to carryout inquiries.
Thus, it is the case of AO conducting the inquiries during the regular assessment proceedings, forming an opinion in the matter with due application of his mind and not making any addition after due inquiries. With so much of evidence on records in support of the above, we cannot hold AO failed to make “meaningful inquiries”. Thus, we dismiss the arguments of Ld DR and allow the views of the Ld Counsel for the assessee. Accordingly, we hold, Principal CIT erroneously assumed jurisdiction on this issue too.
Principal CIT cannot resort to “hit and run” approach. He is under legal obligation to enlist the details of inquiries not done by the AO, the manner of conducting such inquiries etc and quantify or demonstrate the revenue in clearly expressed language in his order. Therefore, on the facts of the present case and the settled legal propositions in force, we are of the opinion that the Principal CIT wrongly assumed jurisdiction u/s 263 on all these issues raised by him. Considering the inquiries done by the AO clearly made out in the records above, we are of the opinion that this is not the case of “inadequate inquiry or improper inquiry or perfunctory inquiry”. Therefore, we restore the order of the AO originally passed on 19.3.2014. Accordingly, ground nos.1 to 3 raised by the assessee are allowed.
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2016 (4) TMI 1451
Existence of binding extradition treaty in terms of Section 2(d) of the Extradition Act, 1962 between India and Chile or not - principle of reciprocity - general principles of international law for extraditing the Petitioner from India.
HELD THAT:- All international agreements to which India (or British India) was a party would devolve upon the Dominion of India and the Dominion of Pakistan and if necessary the obligations and privileges should be apportioned between them. There is no limitation in the above Order that it is only with regard to the 627 treaties mentioned by the Expert Committee No. IX on Foreign Relations - the reference is to "all international agreements". Quite clearly, the extradition treaty between the United Kingdom of Great Britain and Ireland and Chile was a part of all the treaties entered into (by India or British India) and in terms of the above Order the rights and obligations in that treaty devolved upon the Dominion of India and the Dominion of Pakistan.
Attention drawn to the Consular Manual (Revised Edition 1983) issued by the Ministry of External Affairs. This appears to be an internal document for the benefit of officers of the Ministry of External Affairs. This makes a reference in Chapter 8 to Annexure III on extradition treaties with foreign countries executed by the Government of the United Kingdom on behalf of India prior to January 1938 and still in force. In that list is mentioned the Extradition Treaty with Chile executed on 26th January, 1897. It may be recalled that the Gazette of India of 12th November, 1898 reproduced the Order in Council published in the London Gazette of 12th August, 1898 pertaining to the Extradition Treaty between the United Kingdom of Great Britain and Ireland and the Republic of Chile. Therefore, not only was the Extradition Treaty recognized as binding on the Government of the United Kingdom of Great Britain and Ireland but also that it was in force in India.
There is more than sufficient material to conclude that from 1897-1898 onwards, the Government of British India and the Government of India considered itself bound by the Extradition Treaty entered into with the Republic of Chile on 26th January, 1897 and the Government of India has always been of the view that the Extradition Treaty is in force in India - both from the point of view of Chile and India, the Extradition Treaty is in existence and binding upon each State.
Proceedings in the International Court of Justice - HELD THAT:- The notification of 30th May, 1974 of the Government of Pakistan was only with reference to succession by Pakistan to the rights and obligations of British India to all treaties binding upon her before partition including, of course, the General Act of 1928. That is all. The response notification of 18th September, 1974 given by the Minister of External Affairs to the Secretary-General of the United Nations therefore confined itself to the General Act of 1928 and the effect of the Indian Independence (International Arrangements) Order, 1947 and must be appreciated in that context. The Government of India was explicit that it was not a party and was never bound by the General Act of 1928.
The counter-memorial had nothing to do with any treaty with any country, much less the Extradition Treaty, nor did it concern itself with any issue other than the issue of the jurisdiction of the International Court of Justice to adjudicate the dispute between Pakistan and India in the context of the General Act of 1928. The contents of the counter-memorial did not validate the Report of the Expert Committee, as indeed it could not. This is the error made by learned Counsel for the Petitioner in appreciating the proceedings before the International Court of Justice.
The Extradition Treaty was in existence and it was not unilaterally terminated or repudiated is also clear from two major overt acts: firstly, the statement of the Prime Minister in Parliament recognizing an Extradition Treaty with Chile and secondly, the statutory enactment, namely, the Extradition Act, 1962 which specifically gave recognition through Section 2(d) thereof to all extradition treaties entered into prior to 15th August, 1947. If there was any controversy whether the Government of India recognized itself as bound by the Extradition Treaty, then that was put to rest by the notified order of 28th April, 2015 Under Section 3(1) of the Act (gazetted on 29th April, 2015 with a corrigendum issued on 11th August, 2015) whereby the Government of India made the Act applicable to the Republic of Chile. This left absolutely no manner of doubt that India was bound by the obligations under the Extradition Treaty. These public and overt acts after Independence confirm and acknowledge, on behalf of India, the existence and binding nature of the Extradition Treaty between India and Chile.
A political question - alternative view - the contention is that the word of the Government of India on the existence of a treaty should be accepted. It is difficult to fully accept the proposition in the broad manner in which it has been stated - HELD THAT:- In Sayne v. Shipley in a discussion pertaining to the 1903 treaty between the United States and the Republic of Panama, it was held, referring to Terlinden v. Ames and Ivancevic v. Artukovic that the conduct of foreign affairs is a political function but the advice that a treaty is still in effect is not conclusive though it is entitled to great weight and importance.
There are a few other decisions on the subject, but there is none that crystallizes the extent to which the judiciary can go in the matter of determining whether a treaty is subsisting or not. The matter is certainly not free from doubt, but it does appear that there cannot be complete judicial abstinence in the matter as mentioned in Sayne.
Thus, it does appear though, that the reason for terminating an extradition treaty would be a political question, so also whether India should enter into an extradition treaty with a foreign State and whether India should issue a notified order Under Section 3(1) of the Act making the Act applicable to a foreign State would also be a political decision. But whether a treaty exists between India and a foreign State may not necessarily be a political question or a political decision - a lot depends on 'governmental action' which would certainly be of 'controlling importance' though not conclusive. Nevertheless, we are clear that if the Executive were to inform the Court that there exists a treaty between India and a foreign State, the Court would defer to the decision of the Executive and would not ordinarily question the information.
Applicability of Section 34-B of the Act - HELD THAT:- Section 2(e) of the Act defines a foreign State to mean any State outside India and it includes every constituent part, colony or dependency of such State. A request made by the Embassy of a foreign State is as good as a request made by the foreign State itself. If this is not accepted, it will lead to an absurd situation where the Head of State or the Head of the Government of a foreign State would be required to make a request for extradition. This is simply not an acceptable proposition.
Extradition and reciprocity - HELD THAT:- For invoking the principle of reciprocity, there need not even be an extradition treaty between India and the foreign State as is apparent from a reading of the decision of this Court in Abu Salem. In fact, India did not have any extradition treaty with Portugal and yet it made a request for the extradition of Abu Salem on the basis of reciprocity. It is only around the time that the request was made that the Government of India issued a notified order Under Section 3(1) of the Act directing that the provisions of the Extradition Act, 1962 other than Chapter III shall apply to the Republic of Portugal.
The submission of the learned Additional Solicitor General that on the basis of a request made by Chile as contained in the Note Verbale of 22nd September, 2015 the Petitioner could have been validly detained and placed under provisional arrest Under Section 34-B of the Act, on a reciprocal basis, Extradition Treaty or no Extradition Treaty between India and Chile. The further requirement (in terms of Section 34-B of the Act) would however be for Chile to make a formal request for extraditing the Petitioner from India on the basis of credible evidence against her of having committed an extradition offence punishable both in Chile as well as in India.
Thus, it is concluded that:-
i). There is a binding extradition treaty between India and Chile and that the provisions of the Extradition Act, 1962 (other than Chapter III thereof) are applicable to the Republic of Chile in respect of the offences specified in the Extradition Treaty.
ii). The extradition proceedings pertaining to the Petitioner are pending before the Additional Chief Metropolitan Magistrate, Patiala House Courts, New Delhi.
Petition dismissed.
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2016 (4) TMI 1450
Seeking an opinion of the Court a contingent on which would be the finalization of an agreement between the two parties - Order 36 of the Code of Civil Procedure - Gambling - games of skill - business activity, protected under Article 19 (1) (g) of the Constitution of India - HELD THAT:- The petitioner submits that he does not wish any academic question to be answered and at this stage prays that permission may be granted to the parties to withdraw their reference which they had made before the Trial Judge.
Permission is accordingly granted to the petitioner to withdraw this revision petition - Petition dismissed.
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2016 (4) TMI 1449
Cenvat Credit - supplier paid the duty on clearance of goods procured locally under ARO or Invalidation Letter - Whether the Notification No. 44/2001-CE (NT) dated 26th June, 2001 has been complied with by the party or not - it was held by High Court that Since the supplier who has supplied the goods and which are stated to excisable, to the assessee before us, he has recovered the price and on such recovery including of the Tax component divested itself completely of the title in the goods, then, the apprehension of the revenue has no basis. In the given facts and circumstances, the anxiety is taken care of.
HELD THAT:- Now the matter is pending before the Hon’ble Apex Court in Special Leave to Appeal No. 16788/2015 titled as Commissioner of Central Excise & Customs, Thane-I v. M/s. Oleofine Organic Pvt. Ltd. The issue therein is same as involved herein.
These appeals are dismissed and would be covered by the judgment of the Bombay High Court, however, the revenue would be at liberty to seek revival of the appeals, if finally the Apex Court allow the appeal preferred by the revenue against the judgment of Bombay High Court.
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2016 (4) TMI 1448
Deduction u/s 80IA(4) - Tribunal held that the condition provided in clause (b) of Section 80IA(4)(i) is not mandatory, and therefore, the assessee is entitled to get deduction under Section 80IA(4) - HELD THAT:- Revenue very fairly states that the questions framed herein stands concluded by the decision of this Court in the Commissioner of Income-Tax vs. All Cargo Global Logistics Pvt. Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] in favour of the respondent – assessee.
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2016 (4) TMI 1447
Characterising of service end commission activities of the assessee company - Performing trading activity for its AE Japan or worked as a service provider? - HELD THAT:- As decided in assessee own case [2015 (8) TMI 922 - ITAT DELHI] determining the issue in favour of the assessee that the assessee company has performed routine, preparatory and ancillary activities in nature and have not created any intangibles as its role was limited to that of a routine coordination and support service provider. So, the ld. TPO/DRP have erred in recharacterizing the service end commission activities of the assessee company as equivalent to its trading segment.
Inflation of total cost by TPO/DRP - The said value was recorded sale/purchase by the AEs and was never a cost to the assessee - HELD THAT:- In view of what has been discussed above and by following the order passed by the coordinate Bench in assessee’s own case on identical facts qua the AYs 2007-08 and 2008-09, we are of the considered view that the adjustment made by the AO in compliance to the order passed by TPO/DRP for benchmarking the international transaction qua AYs 200910 and 2010-11 is not sustainable in the eyes of law as
(i) TPO/DRP have illegally and arbitrarily included the cost of sales incurred by the assessee company’s AE, for which the assessee company has rendered support services to work out the profit for determination of the ALP;
(ii) Identical and similar issue has been decided by the Tribunal in case of Mitsubishi Corporation India P Ltd. [2014 (10) TMI 702 - ITAT DELHI] by following the judgment rendered in case of Li and Fung India Pvt. Ltd. [2014 (1) TMI 501 - DELHI HIGH COURT] and held that the TPO was not justified in re-characterizing the transaction as trading transaction and it has also been held that cost of sales incurred by the AE cannot be included to work out the profit for determination of the ALP;
(iii) Nature of services rendered by the assessee company to its AE since 2003 are the same and it has been consistently benchmarking its international transaction relating to the business support services using TNMM as the most appropriate method as OP/TC as PLI, as has been used in the instant case;
(iv) As has been discussed in the preceding paras and as has been held by the coordinate Bench of the Tribunal in assessee’s own case qua the AYs 2007-08 and 2008-09 that when the FOB value of the goods on which commission/ service income is earned amounting to Rs. 4005.37 crores for AY 2009-10 and Rs. 5057 crores for AY 2010-11 is not to be added to the cost base of the assessee’s international transaction, the assessee’s international transactions computed by using TNMM as the most appropriate method and PLI selected is GP/OC i.e. berry ratio, the international transaction in question are at arm’s length;
(v) Comparables chosen by the TPO to determine the arm’s length price of the international transaction entered into by the assessee company are not correct one because all the comparables are of trading company and not of support services provider as in the case of assessee company. Decided in favour of the assessee.
Disallowance u/s 14A - HELD THAT:- By applying the law laid down in judgment cited as Cheminvest [2015 (9) TMI 238 - DELHI HIGH COURT] in the similar facts and circumstances of the case, when assessee has not earned any exempt income during the years under consideration, as is evident from the documents lying i.e. profit & loss account and audited balance-sheet, section 14A would not be applicable in the instant case. Hence, the disallowance confirmed by the DRP is not sustainable in the eyes of law.
Disallowance of expenditure on account of leased rent, staff welfare and commission income adjustment relates to prior period - AR contended that the assessee had in fact never claimed the said amount as deduction in the return of income - HELD THAT:- A perusal of the audited profit & loss account statement apparently shows that assessee has never claimed prior period expenses during the year under consideration in Income-tax return and as such, the question of disallowing the same does not arise. So, we hereby decide this ground in favour of the assessee.
Addition u/s 37 (1) - expenditure on account of payment of service fee paid abroad - expenditure has not been incurred wholly and exclusively for the purpose of business and on the ground that the assessee has merely submitted copies of the agreement of the assessee with the aforesaid companies and no evidence is available on the file - HELD THAT:- Keeping in view the fact that in the succeeding year, AY 2011-12, the DRP has decided this issue in favour of the assessee and deleted the entire addition of service fee paid to the same parties to whom this fee was paid. So in view of the matter, this issue is required to be restored to the AO to decide afresh in the light of the order dated 14.12.2015 passed by DRP qua AY 2011-12 in assessee’s own case after providing an opportunity of being heard to the assessee. Consequently, this ground is determined in favour of the assessee.
Expenditure on logistic and warehousing support service - Addition u/s 37 (1) on the ground that the same has not been incurred wholly and exclusively for the purpose of business and the assessee has failed to offer any justification for making the aforesaid payment on account of commercial expediency nor the assessee has furnished copy of agreement with M/s. Panasonic India Pvt. Ltd. and nor placed on record detailed computation of losses - HELD THAT:- AR, contention, that the amount in question has been incurred under terms of the outsourcing agreement with respective agencies, and placed on record the copy of agreement, lying at pages 7 onwards of the paper book has been overlooked by the AO as well as DRP and as such, we are of the considered view that this issue is also required to be restored to the AO to decide afresh after providing an opportunity of being heard to the assessee to adduce evidence in this regard. So, this ground is also determined in favour of the assessee.
TDS u/s 195 - Purchase from PE in India - HELD THAT:- Undisputedly, this issue is covered by the order passed by the DRP in assessee’s own case qua AY 2011-12 as held that no TDS is applicable u/s 195 on offshore supplies. When the assessee company has no PE in India it is not liable to deduct tax at source. So in the light of the facts and circumstances of the case and the fact that this issue has been decided by the ld. DRP qua the subsequent AY 2011-12 in favour of the assessee, this issue is also restored to the AO to determine afresh.
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2016 (4) TMI 1446
Survey proceedings - Excess stock of Narma was found - method of weighment - survey party drew inventory of the said excess stock, on the basis of weighment of the Narma - grievance of the assessee is that such weighment was not done in accordance with the provisions of the Standards of Weights and Measures Act, 1976, by any standardized scale using standard weights and measures, but by adhoc weighing of the Narma by using cartons - HELD THAT:- The mandate of the section 133A(1) is that it is the surveying Authority who is to 'require' the person attending to or helping in the business carried on at the premises under survey to be afforded the necessary facility to check or verify the stock found during the survey. It is only on such requirement having been expressed by the surveying Authority, that the said authority shall essentially be afforded such facility for checking or verification of the stock found in the survey.
Income-tax Authorities must help the assessees, not otherwise. The Authority cannot withhold such legal requirement from the assessee prejudicially and then, on the contrary, hold the assessee liable for not making good such legal requirement. Even the DBCT, in its Circular no.l4(XI-35) of 1995, dated 11.4.55, has directed that: "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing relief and in this regard the officers should take the initiative in guiding a tax payer where the proceedings or other particulars before them indicate that some refund or relief is due to them."
CIT(A) has remained oblivious of the above extant provisions of law and has, therefore, erroneously put the shoe on the wrong foot.
CIT(A) has illegally rest the burden on the assessee by observing that it was the assessee who did not provide the requisite facility of weighment under the Standards of Weights and Measures Act, 1976 to the surveying Authority, whereas, as discussed hereinabove, the position is quite diametrically opposite.
So, it was the surveying Authority who arbitrarily never required the assessee to provide him with the weightment facility and it was not the assessee who refused to do so. Per contra, the assessee in fact did not have any occasion whatsoever to make such a refusal.
Remarkably, it was the assessee who objected, at ground zero itself, against the action of the survey Authority, of weighing the Narma not as per the provisions of the Standards of Weights and Measures Act, 1976 , but by using cartons. This objection, however, was overruled. This fact has also not been repudiated by the Department, though it is patent on record. Therefore, the reasoning adopted by the ld. CIT(A) is unsustainable in law, for which, the addition could not have been made and the same cannot be upheld. The same, accordingly, is deleted. Ground Nos. 1 to 3 are, hence, allowed.
Disallowance of various expenses - HELD THAT:- As there has been no dispute on the part of the assessee that as observed by the ld. CIT(A), there was no mechanism for verifying the purported expenses being recorded in the books of the assessee. The only grievance raised is that the relief granted is less. As to how it is so, nothing has been brought on record. Therefore, this action of the ld. CIT(A) is justified and is confirmed. As such, Ground no.4 is rejected.
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2016 (4) TMI 1445
Validity of interim award - interim award does not contain reasons - nature of default award for non-compliance with the orders passed on the application under Section 17 - plea of equitable set of raised by Nimbus India not addressed - Nimbus India's application for inspection was still pending - the issue of limitation not adjudicated - Invocation of doctrine of equitable set off.
HELD THAT:- An adjudication has to have three necessary elements, namely: a hearing; recording of conclusion based on material available; and reasons in support of the conclusions - all three elements are satisfied in the instant case. It is not a case where Nimbus India was not given a hearing.
Recording of conclusion based on evidence - HELD THAT:- A definite conclusion recorded by the Arbitral Tribunal in its order dated May 06, 2014, to the effect that the material on record and the letters of Nimbus India and Nimbus Singapore themselves establish the claim of Prasar Bharati that the amount of ₹ 22,77,67,422/- was due to it. Before recording the said conclusion, the Tribunal had set out the respective stands of the parties. The order spanning 6 pages records the respective submissions in the first three pages, a brief capturing the important letters containing the admissions followed by the conclusion.
To invoke the doctrine of equitable set off, the cross demands should arise from the same transaction or should be so connected that they can be looked upon as part of the same transaction.
Admittedly, in this case, there were four different series and it cannot be said that cross demands arise out of the same transaction. The said demands were not so connected that they could be looked upon as part of one transaction. Further, the accounting between Prasar Bharati was independent with Nimbus Singapore and with Nimbus India. The claim of Nimbus India was that Nimbus Singapore had assigned the debts and the claims to it and thus with respect to the transactions between Prasar Bharati and Nimbus Singapore vis-a-vis those between Prasar Bharati and Nimbus India the question of inter-se equitable set off would inherently not arise. Further, Nimbus India could not raise for purposes of its counter claim any issue concerning India-England 2006 Series because the transaction between the said parties was not a subject matter of the arbitration proceedings - Just because Nimbus India in its letter dated May 16, 2009 sought to make adjustments by clubbing together all the series would not make them so inter-connected.
Set off is like a cross suit or cross action. It is well settled that even a counter claim can be ordered to be tried by way of a separate suit. Its hearing can also be deferred. Pendency of a counter claim does not bar the Tribunal from making an interim award to the extent of admissions - It is well settled that in the case of breach of contract, pecuniary liability arises only after adjudication. Prior to that, there is no liability and no obligation to pay.
A decree on admissions is to be passed if it is impossible for the party making the admission to succeed in the face thereof. In this case the admissions made are judicial admissions which cannot even be retracted.
Time limitation - HELD THAT:- The set off was claimed on May 16, 2009. The arbitration agreement between the parties is dated August 31, 2011. There is no scope to argue that the claim was barred by limitation.
We must frown upon the attitude of Nimbus India and Nimbus Singapore who are in utter breach of their respective obligations to secure the amounts by furnishing bank guarantees and to execute formal agreements. The two did not furnish the bank guarantee or deposit the amount directed by the Arbitral Tribunal nor complied with similar directions passed in the appeal. Whereas Nimbus Singapore has no asset in India, the assets of Nimbus India also appear to be nil. That is the reason why order dated October 31, 2014 passed by the learned Single Judge in AA No. 30/2014 requiring Nimbus India to file an affidavit detailing its assets located in India was not complied with.
The appeal is accordingly dismissed imposing cost in sum of ₹ 50,000/- against Nimbus India and in favour of Prasar Bharati.
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2016 (4) TMI 1444
TDS u/s 195 - payment of web hosting charges to US company - addition under section 40(a)(ia) - CIT-A deleted addition - CIT-A deleted addition - As per DR clause (iva) to Explanation-2 to Section 9(1)(vi) the use or right to use any industrial, commercial or scientific instrument would fall within the definition of "royalty", therefore, ld. CIT(Appeals) should not have deleted the addition - HELD THAT:- The word 'use' or 'right to use' in clause (iva) of Explanation-2 below Section 9(1)(iva) of of the Act is regarding use of equipment in actual sense. In the present case, it was found that assessee had nothing to do with the equipments and had only made use of facilities created by the service provider who were the owners of entire infrastructure and related equipments. The assessee company is neither in possession of equipments nor it uses the equipment solely for its own purpose. The equipments are used by the Non Resident Inc to provide service to the assessee and others, therefore, assessee has no control over the equipments as well as operating system.
When the payments are not in the nature of 'Royalty" as per Explanation-II (via) of Section 9(1)(vi) of the Act, then recipient of the said payments, being non resident, having no PE in India, is not liable to tax in India. Therefore, payments in the hands of M/s Pugmarks Inc & Others are not taxable in India and consequently, no tax required to be deducted under section 195 on such payment/remittance by the assessee. Such payments, therefore, cannot be termed as 'royalty' - as found that services are rendered outside India by non-resident and paid outside India, then the provisions of Section 195 do not apply in case of such payments. As the company who had provided web hosting services, was located outside India and the server was also located outside India, income that had arisen is not taxable in India.
We find that the issue is also covered in favour of the assessee by judgements in the case of People Interactive (I) Pvt.Ltd. [2012 (2) TMI 534 - ITAT MUMBAI], Yahoo India Pvt. Ltd. [2011 (6) TMI 162 - ITAT, MUMBAI] and decision in the case of Dell International Services (India) Pvt. Ltd. [2008 (7) TMI 9 - AUTHORITY FOR ADVANCE RULINGS] No infirmity in the order of the ld. CI T(Appeal s) have been pointed out. - Decided agaianst revenue.
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2016 (4) TMI 1443
Scheme of Amalgamation proposed - prayer for dispensation of the meetings of the Equity Shareholders and Creditors of the Applicant Company - HELD THAT:- It has been submitted that all the Equity Shareholders, Secured Creditors as well as the Unsecured Creditors of the Applicant Company have approved the Scheme in the form of written consent letters. All these consent letters are annexed with the Application respectively as Exhibit‘ D’, ‘E’ and ‘F’. The certificates confirming the status of the Shareholders and Creditors as well as the receipt of consent letters from all of them are collectively annexed as Exhibit‘ G’. In view of the same, dispensation is sought from convening the meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Company.
Considering the facts and circumstances and the submissions advanced, the same is, hereby, granted - Application disposed off.
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2016 (4) TMI 1442
Scheme of Amalgamation proposed - prayer for dispensation of the meetings of the Equity Shareholders and Creditors of the Applicant Company - HELD THAT:- The attention of the Court is drawn to paragraph11 of the Affidavit in support of the Judges Summons. It has been contended that the rights and interests of the Creditors of the Transferee Company shall not be prejudicially affected as a result of the Scheme. A certificate of the Chartered Accountant confirms the Net Worth of the Transferee Company to be substantially positive viz. Rs.2.59 Crores in the PreScheme and Rs.13.71 Crores in the PostScheme scenario. The said certificate is also placed on record as Exhibit‘F’. In view of the same, dispensation is sought from convening the meetings of the Creditors of the Applicant Company.
Considering the facts and circumstances and the submissions advanced, the same is, hereby, granted - Application disposed off.
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2016 (4) TMI 1441
Seeking permission for withdrawal of petition - it was submitted that liberty be granted to the petitioners to file an appeal along with the application for waiver of pre-deposit before the Appellate Authority - HELD THAT:- Dismissed as withdrawn. It shall, however, be open to the petitioners to take recourse to the remedies as may be available to them, in accordance with law.
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2016 (4) TMI 1440
Addition u/s 40A(3) - return of income was filed by the assessee on presumptive basis u/s 44AF - HELD THAT:- Respectfully following the decision in the case of Gopalsingh R Rajpurohit vs. ACIT, [2004 (7) TMI 271 - ITAT AHMEDABAD] hold that once the assessee has filed his return u/s 44AF, no further disallowance can be made u/s 40A(3) of the Act. It is noteworthy that in this case no trading irregularity was found and addition has been sustained only on technical issue of Section 40A(3) of the Act. The presumptive system of tax u/s 44AF starts with non-obstante clause and overrides other provisions. In view thereof, there is no justification in making the addition which is deleted. Since the addition is deleted on merits, there is no need to go into alternative ground. Thus the appeal of the assessee is allowed.
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2016 (4) TMI 1439
Challenge to certificates of demand of tax, interest, penalty, the consequent steps taken by the Revenue in treating him as an assessee in default to auction his property, the sale proclamation and the auction sale notice - Tax Recovery Officer had made a statement giving particulars of reserve prices against individual plots - HELD THAT:- The omission has caused accrual of a right in favour of the assessee inasmuch as such rectification proceeding cannot be initiated today. Hence, the actual aggregate demand for the said assessment year is also wrong. All this has been taken into account for the purpose of declaring his client as an assessee in default to proceed to sell his properties. There is no indication as to how such separation of valuations attributed to individual plots was made by the Recovery Officer, either from the documents of valuation on record or from the statement itself.
Petitioner submits that there should be interference by reason of both counts of challenge being upheld. The appropriate reliefs should be granted to the petitioner.
Mr. Bhattacharyya, learned advocate appearing on behalf of the auction purchaser who is the petitioner wants to make his submissions. His submissions will be heard after submissions made on behalf of the Revenue are heard and in the event this Court forms the opinion that the challenge cannot be upheld. Mr. Bhattacharyya informs this Court that in the event the assessee is successful, his client would want an adjudication regarding interest to be paid on the refund thereby becoming due to them.
List these writ petitions on 18th April, 2016.
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