Notice u/s 143(2) issued before the reference u/s 92CA(1) - Whether the reference u/s 92CA(1) is bad because notice under section 143(2) of the Act was issued subsequently and on that ground the assessment proceedings were vitiated and bad under law? - HELD THAT:- A reference under section 92CA(1) could validly be made by the AO to the TPO for determination of ALP of an international transaction even before a notice under section 143(2) of the Act was issued and the requirement of law is that as on the date of such a reference the income tax return in respect of which notice u/s 143(2) of the Act could be issued, must be pending without attaining finality by afflux of time; and when once a valid reference is made u/s 92CA(1) of the Act, the extended period of thirty three months is available for completion of assessment.
This conclusion leads to the necessity of investigation into the fact - whether the notice u/s 143(2) of the Act could be issued in the matter as on the date of the reference made by the AO to the TPO for determination of the arm’s length price of the international transactions.
Coming to the admitted facts of the case on hand, we find that return of income was filed by the assessee on 28.10.2005. Time to issue notice under section 143(2) of the Act was available till 30-9-2006. However, reference u/s 92CA(1) was made by the learned AO to the learned TPO on 11.7.2006. Notice u/s 143(2) was issued on 4.9.2006. TPO passed order on 31.10.2008 and the learned AO passed the assessment order on 29.12.2008, before the expiry of the period of 33 months allowed by Second proviso to Section 153(1) of the Act.
Reject the contention advanced on behalf of the assessee by way of additional grounds that the order dated 31.10.2008 passed by the TPO or the final assessment order dated 12.12.2008 passed by the learned AO or the impugned order are bad in law and void ab initio because the reference u/s 92CA(1) preceded the date of issuance of notice u/s 143(2) of the Act, and proceed to adjudicate the matter on merits.
Selection of five comparable - HELD THAT:- A reading of the TPO’s order does not indicate any other reason than the incurring of continuous losses or facing decline in revenues for the last three years. Even in the decisions relied upon by the learned DR, it is stated that the loss making companies shall not be excluded simpliciter on the ground that there are declaring losses.
What is to be culled out from the orders is that FAR analysis and other aspects shall be considered in juxtaposition to reach whether or not the comparables selected by the assessee are good comparables or not. In the case in hand, absolutely, there is no dispute on the functional profile of the assessee company similar to the comparables selected by them.
While respectfully following the dictum of the Hon’ble jurisdictional High Court in Chryscapital Investments Advisors (I) P. Ltd. [2015 (4) TMI 949 - DELHI HIGH COURT] we find that, in the absence of any dissimilarity as to the functions performed, assets utilized and reasons undertaken, mere loss making or decline in revenues cannot be a ground to reject the otherwise comparable companies from the set of comparables. With this view of the matter, we are inclined to accept the contentions advances on behalf of the assessee that the three companies, namely, ITI Ltd., Punjab communications ltd. and Himachal Futuristic Communications (P) Ltd. cannot be excluded from the list of comparables. We, therefore, direct the learned TPO to include these three comparables in the list of comparables.
Waiver of sales tax deferral loan, disallowance of the provisions for indirect expenses and disallowance of amortization of spares - HELD THAT:- Subsequent waiver of the secured loan being capital or non trading in nature cannot be considered as remission of trading liability to tax u/s 41(1)(a) and on that premise, he deleted the same. Further, in assessee’s own case in the asstt.2004-05 decided on 30.6.2017, this aspect is considered by this Tribunal and vide para 8, this Tribunal while placing reliance on the decision of the Hon’ble Bombay High Court in CIT vs Sulzer India Ltd. [2014 (12) TMI 267 - BOMBAY HIGH COURT] negatived the contention of the revenue that the addition made on account of treatment of secured loan waiver as revenue receipt. In view of this set of facts involved in this issue, while respectfully following the judicial reasoning, we do not find any merit in the contention of the revenue to treat this secured loan waiver as revenue receipt. We accordingly dismiss this ground of appeal.
Provision for indirect tax - AO has lead to double disallowance, since the aforesaid amount of provision for indirect taxes has already been suo moto disallowed by the assessee while computing the taxable income for the subject matter and in view of the same, CIT(A) deleted it. We do not find any illegality or irregularity in this finding of the CIT(A) inasmuch as it is not either pleaded or established before us that the addition made by the AO does not lead to double disallowance or that the assessee suo moto did not disallow the same. It is a matter of record. We, therefore, find that the learned CIT(A) is justified in deleting this amount only to controvert the double disallowance and upheld the same. This ground of appeal is also dismissed.
Amortization of spares - When there is consistency in the assessee following the straight line method of claiming amortization of spares in its accounts, we are also of the considered opinion that there is no justification for interfering in the method of calculation and the learned AO is not justified in making addition of the spares purchased during the current year to the opening balance of the spares of the earlier years so as to add the difference. With this view of the matter, we uphold the finding of the learned CIT(A) and dismiss this ground of appeal.
Eligibility of exemption under section 80P(2)(a)(i) - whether the Appellate Tribunal was justified in coming to the conclusion that the appellant is not a primary agricultural credit society when the same is not disputed by the Revenue before the first appellate authority or before the Assessing Officer ? - HELD THAT:- We find some force in the arguments at the hands of the learned senior counsel, that an opportunity ought to have been provided by the Tribunal before taking a decision in respect of the application under section 80P(4) of the Act. In the present set of facts of the case, more particularly, when the authorities under the first round as well as the second round proceeded on the applicability of section 80P(2)(a)(i) of the Act to the assessee and suddenly the Tribunal shifting the case to section 80P(4) is without any basis.
Having regard to the nature of the facts and circumstances of the case, we find it appropriate to remand the matters to the Assessing Officer to reconsider the issue afresh, providing an opportunity to the assessee to put forth its case, as regards the applicability of section 80P(4) of the Act and the Explanation thereof. Accordingly, these appeals are allowed. The impugned orders are set aside.
Penalty u/s 271(1)(c) - defective notice - non recording any satisfaction - non striking irrelevant portions in notice - HELD THAT:- The undisputed facts are that the AO, while framing the assessment under Section 143(3) of the Act initiated penalty proceedings for concealment of income and filing of inaccurate particulars of income, thus thereby initiating penalty proceedings for both the limbs. Similarly, while issuing penalty notice under Section 274 r.w.s. 271(1)(c) of the Act dated 27.12.2010 did not strike off one of the two limbs which was relevant thus the assessee was not appraised of the exact charge on which penalty was proposed to be levied.
Thus, we are of the view that it is mandatory on the part of the AO to specify specifically the charge on which penalty is proposed to be levied and non striking of the relevant portion would go to the root of the jurisdiction of the AO to pass penalty order. The case of the assessee is clearly covered by the judgements of the Hon'ble Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] and M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
Default assessment of tax and interest - CST Act - case of petitioner is that the said order was passed without hearing - invocation of Section 74B(5) of the Delhi Value Added Tax Act, 2004 - HELD THAT:- The Learned counsel for the petitioner submits that the Objections Hearing Authority must be an independent person, who was not member of administrative approval committee, i.e., refund committee in the present case. Learned counsel for the respondent states that the Special Commissioner would be the Objections Hearing Authority in the present case. He states that the Special Commissioner, who has not dealt with the case of the petitioner on administrative side, could be appointed as a special case.
The Special Commissioner, who is not a part of the Refund Committee, would be, as a special case, appointed to hear and decide the objections raised by the petitioner - The Objections Hearing Authority will pass a speaking order within a period of six weeks from the date of filing of objections - petitioner would file objections within three weeks.
Reopening of assessment u/s 147 - notice beyond the period of four years from the end of the relevant assessment year - Disallowance of depreciation - HELD THAT:- Scope of validity of reassessment proceedings has to be seen with reference to proviso to section 147 as the original assessment was completed u/s 143(3). The ‘reasons recorded’ for reopening the assessment has already been incorporated above. From a bare perusal of the same, it can be seen that AO is referring to the same documents which were placed on record during the course of original proceedings and from there he derives the inference that proportionate amount of depreciation should have been disallowed because certain assets were de-leased which has resulted into reduction of income from rent of these assets and depreciation of assets has been used for less than 180 days.
First of all, we find that the issue of depreciation on plant and machinery was specifically asked and enquired upon by the AO in the original assessment proceedings including the rental income received from lease of assets; and in response to that assessee has filed a detailed reply which has already been incorporated above.
CIT (A) too has given this finding that this precise issue which has been raised by the AO in the ‘reasons recorded’ has been dealt by the AO in the original round of assessment proceedings. Thus, on the present facts it cannot be held that there is any failure on part of the assessee to disclose fully and truly all material facts relevant for the assessment and without ascribing any such failure on part of the assessee, the reopening u/s 147 is clearly barred by limitation. It is a well settled proposition of law as laid down in the aforesaid judgments as relied upon by the Ld. Counsel that if there is no allegation in the ‘reasons recorded’ that assessee has failed to disclose fully and truly all material facts necessary for assessment, then action u/s 147 after the expiry of four years from the end of the relevant assessment year is unsustainable. - Decided against revenue.
Disallowance of late delivery fee - HELD THAT:- Facts in the year under appeal are identical to that of A.Y. 2005-06 and in A.Y. 2005- 06 [2017 (9) TMI 1832 - ITAT PUNE] the matter has been remitted back to AO and therefore the matter be remitted back to AO. The aforesaid contention of Ld.A.R. has not been controverted by Ld.D.R. We therefore following the order of the Co-ordinate Bench of the Tribunal and for similar reasons restore the issue to the file of AO. Thus, the ground of the assessee is allowed for statistical purposes and ground of Revenue is dismissed.
Depreciation on windmill - AO denied the claim of depreciation at 40% which is applicable to the windmills, on cost of foundation, erection and commissioning expenditure for the reason that he was of the view that the rate of depreciation applicable on such costs is the normal rate of depreciation which is applicable to building and plant and machinery - HELD THAT:- We find that Ld.CIT(A) while deciding the issue has given a finding that by applying functional test that without civil foundation the windmills will not generate power and that civil foundation cannot be separated from windmills and cannot be treated as a separate building. With respect to the cost of erection and commissioning expenditure, Ld.CIT(A) has given a finding that the same cannot be separated from windmills as the same are directly related to the functioning of windmills.
The aforesaid findings of Ld.CIT(A) has not been controverted by Revenue. We further find that in the case of CIT Vs. Mehru Electricals and Mechanical Engineers Pvt. Ltd. [2016 (7) TMI 708 - RAJASTHAN HIGH COURT] has held that the rate of depreciation applicable to windmills also applies to civil foundation and electric turbine generator for windmill as they are the part of the windmill. We further find that the Hon’ble Bombay High Court in the case of CIT Vs. CTR Manufacturing Industries Pvt. Ltd. [2016 (4) TMI 265 - BOMBAY HIGH COURT] has held that the depreciation of windmill is to be allowed even on the cost like erection and commissioning charges, electric items, application charges etc., which are capitalized to windmill. Before us, Revenue has not placed any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A) and thus, this ground of the Revenue is dismissed.
Addition on account of debit balances written off - HELD THAT:- Identical issue came up in assessee’s own case before the Pune Bench of the Tribunal [2017 (11) TMI 1841 - ITAT PUNE] for A.Y. 2006-07 wherein the claim of the assessee was allowed. He accordingly directed that the same may be allowed. With respect to the addition of ₹ 38,50,000/- he noted that it was with respect to the entry tax levied by the Karnataka Government. He has noted that assessee had filed appeal before Karnataka Bench of the Tribunal and the dispute was decided in favour of the assessee and the entire tax was refunded and the assessee has offered the same as income. In such a situation, Ld.CIT(A) was of the view that the addition of ₹ 38,50,000/- was not warranted. With respect to ₹ 21,11,554/- he noted that since assessee could not furnish the details, he confirmed the addition to that extent. Before us, Revenue has not pointed out any fallacy in the findings of Ld.CIT(A). In view of these facts, we do not find any reason to interfere with the order of Ld.CIT(A) and thus, the ground No.2 of the Revenue is dismissed.
Addition of liquidated damages - HELD THAT:- As heard the rival submissions and perused the material on record. In view of the submissions of both the parties while deciding ground No.2 in assessee’s appeal hereinabove, we have decided the issue in favour of assessee. We therefore for the similar reasons stated herein while deciding the ground No.2 of the assessee in assessee’s favour and for similar reasons, dismiss the grounds Nos.3 and 4 of Revenue. Thus, these grounds of the Revenue are dismissed.
Addition u/s 14A - HELD THAT:- The issue in the present ground is with respect to disallowance of expenses u/s 14A of the Act by following Rule 8D of I.T. Rules. It is an undisputed fact that the year under consideration is A.Y. 2007-08. The Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg., Co., Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that the method prescribed by Rule 8D of the Income Tax Rules, for working out disallowance u/s 14A are applicable from A.Y. 2008- 09. In view of the aforesaid decision of Hon’ble Bombay High Court, the provisions of Rule 8D of I.T. Rules are not applicable to the year under consideration being A.Y. 2007-08. It is also a fact that assessee has suo-motu disallowed ₹ 5 lac u/s 14A of the Act and that the assessee is not in appeal against the aforesaid addition. Further before us, Revenue has not placed any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of Ld.CIT(A) and thus, the ground of the Revenue is dismissed.
Disallowance of commission u/s 40A(2) - AO can disallow the expenditure made to close associates having substantial interest in the company for goods, services and facilities - HELD THAT:- AO can disallow only that portion of expenditure, which in his opinion, is excessive or unreasonable. Reasonableness of the expenditure has to be seen from the view point of the businessman and not from the view point of Revenue authorities. Before disallowing the expenses, the AO must establish that the payment is excessive or unreasonable and he has to place on record evidences with respect to excessiveness and unreasonableness. He cannot proceed merely on the basis of surmises and conjectures. Before us, no material has been placed by the Revenue to demonstrate that the payment of commission was not bonafide or how it was unreasonable. Merely by comparing the commission paid between two years, it cannot be concluded that the commission was excessive. We further find that CIT(A) while deciding the issue has noted that the facts for the year under consideration are identical to that of earlier years and in earlier years, the payment of commission was allowed. Before us, Revenue has not placed any material on record to controvert the findings of Ld.CIT(A). We therefore find no reason to interfere with the order of.CIT(A). Thus, the ground of Revenue is dismissed.
Addition on account of warranty expenses - HELD THAT:- We find that while deciding the issue, Ld.CIT(A) has given a finding that in case of large engines the warranty obligation starts immediately after the sales made by the assessee. CIT(A), following the decision of order in assessee’s own case in A.Ys. 2005-06 and 2006-07 also held that the provision of warranty for large engines at ₹ 1,07,02,212/- is an allowable deduction. Before us, Revenue has not placed any material on record to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of Ld.CIT(A). Thus, the ground of Revenue is dismissed.
Disallowance of claim of long term capital loss - AO had disallowed the claim of long term capital loss for the reason that the transaction was a tax planning devise to evade taxes - HELD THAT:- It is an undisputed fact that KFIL was promoted by assessee, is a listed company and had huge accumulated losses. The issuance of preference shares to the assessee on account of restructuring exercise undertaken to revive KFIL is an undisputed fact. It is also a fact that the assessee was issued preference shares in earlier years and in those years the transaction was not doubted by the Revenue. Further no material has been brought on record by Revenue to demonstrate that the transaction was a sham. We further find that while deciding the issue in favour of assessee, CIT(A) had relied on the decision of Hon’ble Bombay High court in the case of CIT Vs. Enam Securities Pvt. Ltd [2012 (5) TMI 257 - BOMBAY HIGH COURT]. Before us, Revenue has not pointed out any fallacy in the findings of Ld.CIT(A) nor has pointed out as to why the ratio of decision relied upon by Ld.CIT(A) while deciding the appeal is not applicable to the present facts. Considering the totality of aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A) and thus, the ground of Revenue is dismissed.
Waiver of penalty - Demand of security deposit on detention of goods - whether the Tribunal was right in deleting the penalty imposed on the ground that there was no evasion of tax since the transaction was reflected in the accounts? - HELD THAT:- Sub-section (6) of section 47 enables imposition of penalty only if there is evasion of tax - In the present case, we find that by annexure A, there is no explicit finding but however, it can easily be inferred that the imposition of penalty was on account of there being no delivery note accompanying the transport which was a clear attempt to evade tax. We, hence, do not find any reason to accept the claim of the assessee.
There has been an estimation made of the value of the goods to demand security deposit. This is without any basis. The invoice accompanying the transport showed the value of ₹ 78,000. Hence, the evasion would be only with respect to the tax element as per the invoice. Computation of tax being possible, the penalty imposed has to be confined to maximum of twice the amount of tax sought to be evaded.
Offence under Prohibition of Benami Property Transactions Act, 1988 - property in question is being held by the benamidar - HELD THAT:- Respondent No.3 in the impugned order has taken into consideration the information received from the Income Tax Department as well as the reply to the show cause notice filed on behalf of Aditya Parakh and Tara Chand Parakh and after recording detailed reasons has passed the order under Section 24(4) of the PBPT Act.
The respondent No.3 has formed a prima facie opinion that the property in question is being held by the benamidar and it is a fit case to refer it to the adjudicating authority.
After hearing learned counsel for the petitioner and after perusing the material available on record and the order dated 18.11.2017 passed by the Initiating Officer under Section 24(4) of the PBPT Act, it cannot be said that the respondent No.3 has passed the order dated 18.11.2017 without there being any material on record. This Court at this stage cannot record a finding to the effect that Shri Aditya Lodha cannot be termed as benamidar or the property in question is not a benami property. It is for the adjudicating authority to adjudicate upon the matter, referred to it by the Initiating Officer, after providing opportunity of hearing to Shri Aditya Lodha as per the provisions of Section 26 of the PBPT Act.
Hence, no case for interference is made out, therefore, the writ petition fails and is hereby dismissed in limine.
Levy of penalty u/s. 271(1)(c) - under valuation of closing stock - HELD THAT:- It is true that the business of the proprietary concern M/s. Suvarnamahal was continued as business of the partnership firm on and from 25.02.2008. In the case of ALA Firm [1991 (2) TMI 1 - SUPREME COURT] , the facts were that the firm was dissolved and the business was discontinued. Therefore, the stock in trade were re-valued at market price whereas the facts of the case in hand show that the business continued in the hands of the partnership firm and the stock in trade were never valued.
The facts of the case in hand are in line with the facts considered by the Hon’ble Supreme Court in the case of Shakti Trading Company [2001 (8) TMI 5 - SUPREME COURT]. When the method adopted by the assessee was duly supported by the decision of the Hon’ble Supreme Court, it cannot be said that the assessee has filed inaccurate particulars of income or has concealed the particulars of income. Moreover, when there are two decisions of the Apex Court, one in favour of the assessee and one in favour of the revenue itself makes the issue highly debatable. In our understanding of the law, penalty cannot be levied u/s. 271(1)(c) under such circumstances. We, accordingly, set aside the findings of the CIT(A) and direct the A.O. to delete the penalty so levied
Penalty levied u/s. 271(1)(c) - assessee has not disclosed the income arising from transfer of Trademark/Goodwill in the return of income - HELD THAT:- Insofar as the treatment of the consideration the dispute is settled and the same has to be taxed u/s. 45 of the Act. Admittedly, it is a fact that in spite of the findings of the Tribunal, the A.O. treated the same as income under the business head. The provisions of Section 45(3) of the Act clearly states that for the purposes of Section 48, the amount recorded in the books of accounts as the value of the capital assets shall be deemed to the full value of the consideration. In our understanding of the facts, the HUF proprietary concern could not have envisaged the value of the trademark/goodwill to be recorded by the partnership firm in its books of accounts. Therefore, the assessee cannot be held liable for concealing any particulars of the its income. Moreover, the A.O. has not taxed the income in the head of income as directed by the Tribunal but has taxed the same under a different head of income. On these facts, we do not find this to be a case for the levy of penalty u/s. 271(1)(c) of the Act and therefore there is no error or infirmity in the findings of the ld. CIT(A). Appeal filed by the Revenue is dismissed.
Disallowance of depreciation on R&D equipments - @ 10% OR 25% - HELD THAT:- Assessee has been fair enough to admit that this disallowance of depreciation has resulted into income of the assessee’s unit which otherwise is exempt u/s 80IC of the Act. Hence the above disallowance of depreciation is ‘tax neutral’ to the assessee. In view of the above, without going into merits of the case, this ground is dismissed being ‘tax neutral’ and rendered academic in nature.
Deduction u/s 80IC - @ 30% OR 100% on account of substantial expansion undertaken in earlier years - HELD THAT:- A perusal of the order of the Assessing officer reveals that the Assessing officer has not disputed that the assessee unit has carried out substantial expansion as provided under clause (b) of sub section (2) read with clause (ix) of sub section (7) of section 80IC of the Act. Almost similar view has also been taken by the Hon'ble Himachal Pradesh High Court in the case of ‘M/s Stovekraft India [2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT] - The impugned order of the Ld. CIT(A) on this issue is set aside, and the AO is directed to grant to the assessees deduction at the rate of hundred percent of its eligible profits, as per the ruling of the jurisdictional High Court in this regard in the case of ‘M/s Stovekraft India vs. Commissioner of Income Tax’ (supra). In view of the above, ground No.2 of the appeals is allowed.
Disallowance of ‘interest income’ and ‘other income’ out of deduction claimed u/s 80IC - HELD THAT:- Assessee could not demonstrate with convincing evidence on the file as to how the interest income on the FDRs and the other income relates to manufacturing activity of the assessee. In view of this, we do not find any infirmity in the order of the lower authorities in not allowing deduction u/s 80IC on the interest income and other income. This issue is decided against the assessee.
Exemption u/s 11 & 12 - depreciation on assets, cost of which were allowed as application of income - HELD THAT:- Depreciation could be allowed on assets, cost of which were allowed as application of income, it stands settled by the judgment in the case of Rajasthan and Gujarati Charitable Foundation India [2017 (12) TMI 1067 - SUPREME COURT] clearly held that an assessee enjoying exemption under section 11 & 12 of the Act was entitled to claim depreciation on assets, cost of which was claimed as application of income. Viz-a-viz second question which is on calculation of WDV, Explanation 6 to Sec.43(6).
This explanation was introduced by Finance Act, 2008 with retrospective effect from 01.04.2003. It is clear from the above that for working out WDV, depreciation provided in the books of accounts has to be deemed as depreciation actually allowed under the Act, where an assessee was not required to compute his total income. Assessee had considered itself either as an exempt entity under Section 10(22) of the Act or alternatively u/s 11 & 12. It may be true that for some of the years it would have been denied such exemption. But as far as assessee was concerned it considered itself as a person not required to compute its total income.
Assessee could take advantage of the above explanation and the claim of WDV had to be reckoned by considering book depreciation for the years it claimed exemption under Section 10(22) or Sections 11 & 12 and not depreciation as per Section 32(1). We thus do not find any reason to interfere with the order of CIT (Appeals).
A perusal of the assessment orders for the impugned assessment year we find that computation of depreciation has not been clearly done by AO. There is no clarity as to how it was computed. In the circumstances, we are of the opinion that the quantum of depreciation allowable to the assessee for the impugned assessment years requires a revisit by the AO. We therefore set aside the orders of the lower authorities on the aspect of the quantum of depreciation allowable to the assessee for the impugned assessment years and remit it back to AO for consideration afresh in accordance with law.
Disallowance for payments made by the assessee to its retired employees - HELD THAT:- Assessee had paid pension to retired employees over and above the contribution it made to employees pension and gratuity fund. Assessee had produced evidence to show that such pension payments were directly credited to the bank account of the employees. Assessee had actually paid the amount and genuineness of the payment was never doubted. CIT(Appeals) was justified in allowing such claim u/s.37(1) of the Act as a business outgo. We do not find any reason to interfere with the order of CIT (Appeals). There is no rule which stops an assessee who make payments to an approved pension fund, from making direct pension payments also, if it finds it necessary to do so in business interest. We do not find any reason to interfere with the order of CIT (Appeals) on this aspect also.
Disallowance of premium paid on redemption of preference shares - nature of expenses - revenue or capital expenditure - loan and redeemable preference shares - HELD THAT:- We find that identical issue arose in assessee’s own case in A.Y. 2006-07 and 2007-08. The Co-ordinate Bench of the Tribunal while deciding the issue in A.Y. 2006-07 in favour of Revenue had relied on the decision of Hon’ble Calcutta High Court in the case of Hindustan Gas Vs. CIT [1978 (8) TMI 58 - CALCUTTA HIGH COURT] WHEREIN wherein clear distinction has been made between a loan and redeemable preference shares and held that any expenses incurred for issue for redeemable preference shares cannot be allowed as they are in the nature of capital expenditure. The decision in A.Y. 2006-07 was followed in A.Y. 2007-08.
Disallowance of interest - no or low interest bearing advances given - excessive interest was made in earlier years even though the substantial deposits were given by assessee in earlier years - HELD THAT:- When the availability of interest free funds are far in excess of the amounts given as deposits, then as per the decision of Hon’ble Bombay High Court in the case of Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] a presumption arises that the deposits are out of interest free funds and no interest bearing funds are utilized for making the deposits. The ratio of the aforesaid decision of Hon’ble Bombay High Court in the case of Reliance Utilities (supra) has been followed by the various benches of Pune Tribunal. Before us, Revenue has not brought on record any contrary binding decision in its support. We therefore following the ratio of the aforesaid decision rendered in the case of Reliance Utilities (supra) hold that in the present case, no disallowance of interest is called for. Thus, the grounds of the assessee are allowed.
Disallowance of depreciation on non compete fees - Assessee had claimed depreciation on WDV of non compete fee treating the same as intangible asset - HELD THAT:- As no change in facts has be pointed out by Revenue. We therefore following the order of Co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2007-08 hold that assessee is eligible for depreciation. Therefore, the ground is allowed.
Set off of unabsorbed depreciation - carry forward of unabsorbed depreciation allowances even after completion of eight years - scope of amendment of section 32 (2) - HELD THAT:- As decided in M/S. HINDUSTAN UNILEVER LTD [2016 (7) TMI 1245 - BOMBAY HIGH COURT] CBDT circular No.14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) as amended by the Finance Act of 2001. The Circular No.14 of 2001 issued by the CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001-02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards. Also see ACCURA POLYTECH P. LTD. [2017 (12) TMI 866 - GUJARAT HIGH COURT] - no substantial question of law arises.
Jurisdiction of cognizance taken by the learned Chief Judicial Magistrate - Offence punishable under Section 53(a) of the Bihar Excise (Amendment) Act, 2016 - HELD THAT:- It is true that Section 85(1) of the Bihar Prohibition and Excise Act provides that a Special Judge may take cognizance of offences without the accused being committed to him for trial and, in trying the accused persons, shall follow the procedure prescribed by the Code of Criminal Procedure, 1973 for the trial of warrant cases by the Magistrates.
The Bihar Prohibition and Excise Act, 2016 came into force with effect from 2nd October, 2016 whereas the cognizance in the present case has admittedly been taken on 30th July, 2016. Prior to 2nd October, 2016, it was the Court of Magistrate, who was competent to take cognizance of the offences punishable under the Excise Act.
Reopening of assessment u/s 147 - non disposing objections of the assessee against issuance of notice for re-opening assessment - addition of Short Term Capital Gain - share of assessee and the other co-owner in the impugned plot was 1/3rd each - HELD THAT:- AO is duty bound to decide the objections of the assessee against initiation of reassessment proceedings by passing a separate speaking order. Thereafter, AO shall give four weeks time to the assessee from the date of service of the said order before proceeding with the finalization of assessment. In the case of KSS Petron Private Ltd. Vs. ACIT [2016 (10) TMI 1112 - BOMBAY HIGH COURT] has set aside reassessment proceedings were the Assessing Officer has not followed the proper procedure as mandated for disposing of the objections of the assessee on reopening.
It is apparent from record that the AO committed error in not following the proper procedure for deciding the objections of assessee against re-opening of assessment. AO is a quasi judicial authority and is therefore, duty bound to follow the law laid down by the Hon’ble Supreme Court of India, the Hon’ble High Courts and the Appellate Authorities. The assessment orders have been passed by the Assessing Officer in both the cases without following the principles as set out by the Hon’ble Apex Court and Hon’ble Jurisdictional High Court. - Appeals of Revenue are dismissed.
Disallowing u/s. 14A r.w. Rule 8D - computing book profit under MAT provision in proceedings u/s. 143(3) - HELD THAT:- Tribunal’s order in assessee’s cases itself in assessment years 2007-08 and 2008-09 dated 22.06.2016 reversing a similar Section 14A disallowance even after introduction of the computation formula in question under Rule 8D of the Income Tax Rules. DR fails to rebut this factual position. We however noticed that the issue stands covered as per the above tribunal’s decision only qua the former limb of proportionate interest expenditure disallowance.
The latter limb of administrative expenditure disallowance has nowhere been discussed either in CIT(A)’s order in question or before the tribunal.
CIT(A)’s above extracted findings also nowhere specifically deal with the instant administrative expenditure issue. There can hardly be any dispute that such an administrative expenditure has to be disallowed post assessment year 2008-09. We therefore accept learned Departmental Representative’s corresponding submission regarding this administrative expenditure issue aspect. The impugned disallowance is therefore revived to the extent of ₹ 7,21,908/- only. The Revenue’s former substantive ground is therefore partly accepted in above terms.
Impugned Section 14A r.w. Rule 8D disallowance is to be added in MAT computation - Issue is not more res integra in view of tribunal’s special bench decision in case of ACIT vs. Vireet Investment P. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] holding that such a disallowance is not to be added in MAT computation. Revenue’s instant latter substantive ground is therefore declined.
Constitutional validity of Rule 8(3A) of the Central Excise Rules 2002 - Prohibition on assessee from utilising cenvat credit for payment of excise duty for default in payment of duty - Power of Authority to frame Rules - HELD THAT:- Today a notice is issued on this matter by the Hon'ble Supreme Court and thereafter the case status reveals that it is pending.
We grant liberty to both sides to mention them after the Hon'ble Supreme Court delivers its verdict in the pending proceedings.
Classification of services - Business Auxiliary Service or not - activity of body building on the chassis - Job-work - Department has issued the SCN alleging that the appellants are job workers and that they are liable to pay tax on the activity of buses body building on chassis. The appellants have consistently submitted that they are not job workers and are engaged in manufacture of body for motor vehicles - HELD THAT:- It is clear that the activity is a manufacturing activity. The said activity cannot be treated under activity of service merely because the excisable goods manufactured are exempted from excise duty. The department has issued the show cause notice on erroneous understanding of both Central Excise law as well as Finance Act, 1994.
Taxability - hire charges collected by the appellant for hiring cranes to its customer - C.B.E. & C. Circular No. 334/1/2008-TRU, dated 29-2-2008 - HELD THAT:- TRU clarification, dated 29-2-2008 makes it clear that service tax will be liable to be paid only in those cases where the legal right of possession and effective control is not transferred - In the present case, we note that such legal right of possession and effective control is transferred. Consequently, the service does not fall within the category of SOTG service.
An identical issue has come up before Tribunal in the case of KINETIC COMMUNICATIONS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [2016 (2) TMI 1044 - CESTAT MUMBAI]in which the Tribunal has set aside the demand for service tax under above category.
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