Depreciation on UPS - 60% as against 15% - Held that:- UPS is eligible for deprecation at 60% as relying on DCIT Vs. Indian Overseas Bank [2013 (4) TMI 751 - ITAT CHENNAI ] - Decided in favour of assessee.
Disallowance of expenditure under section 14A read with Rule 8D(2)(iii) - Held that:- On a careful consideration of the facts and circumstances of the case, we are not in agreement with the assessee that no expenditure was incurred in managing the portfolio of the assessee. The assessee company is into the business of registrars and share transfer agent. It is not in dispute that management of the assessee company periodically monitors through its Board of Directors about the investments. In such circumstances, it cannot be said that assessee has not at all incurred any expenses in managing its portfolios.
Following the decision of REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA], we direct the Assessing Officer to recompute the disallowance under Rule 8D(2)(iii) by taking the amount equal to ½ percentage of the average value of the investment which has given rise to the income which does not form part of total income.
The show cause notice was dated 23rd January, 2013. It was only by a letter dated 14th April, 2014, after more than one year and three months that the writ petitioners wanted time to file their written submission before the department. On 15th May, 2014 a request was made by the petitioners to the respondent department to furnish them with documents relied on in the show cause notice.
This writ was filed after the time period for preferring the appeal before the tribunal had elapsed. - However, I am of the view that the petitioners should be given the fullest opportunity of presenting their case before the tribunal. - The Customs authority will make over to the writ petitioners photocopies of the documents relied upon in the show cause notice on a request in this behalf being made by the writ petitioners, by letter, within three working days of receipt of the said letter at their cost
Procedure of raising demand of VAT on unreported sale - re-assessment or rectification of any error apparent on the face of the record. - As per the SCN, it is seen that the petitioner has effected sale of assets during the year 2010-2011 and they have not produced any proof for having reported the said sales and paid tax to the Department. Therefore, it was proposed to levy tax at 4% on the sale value. Apart from that, there was a proposal to impose penalty under Sections 27 and 28 of the Act at 150%. - The respondent stated that Section 84 of the Act can be invoked only for the error apparent on the face of the record viz., Clerical errors and Arithmetical mistakes etc. But it cannot be invoked for considering the records filed after the assessment notice. The said notice is challenged in this writ petition. - Tamil Nadu Value Added Tax Act (TNVAT)
Held that:- the observation in the impugned notice, that Section 84 cannot be invoked for considering the records filed after the assessment is over, is an incorrect observation, since the records were never called for and those records were anterior to the Pre-Assessment Notice and the transaction is said to have been disclosed in the balance sheet which was produced by the petitioner along with the reply dated 14.05.2014. Hence, this Court is satisfied that the respondent should exercise its jurisdiction under Section 84 of the Act.
Writ Petition is allowed and the impugned order is quashed and the matter is remanded to the respondent for fresh consideration to take into consideration the documents produced by the petitioner along with the petition filed under Section 84 of the Act, after affording an opportunity of personal hearing to the petitioner and pass a reasoned order on merits and in accordance with law. - Decided in favor of assessee.
Entitlement to full claim of input tax credit (ITC) - whether the reversal of the claim of ITC was just and proper? - Held that:- It is not in dispute that the goods in question were sold by the applicant to the manufacturer-exporters against Form-E. Sale of goods in question to manufacturer-exporters was exempted under Section 7(c) of the Act vide notification no. K.A.N.I.-2-247/XI-9(341)/09-U.P. Act-5-08-order (58)-2010.
Bare reading of the provisions of Section 13(7) clearly reveals that the applicant was not entitled for the input tax credit with respect to the sale of goods exempted under Section 7(c) of the Act. Tribunal has considered the facts of the case and held that in view of the provisions of Section 13(7) of the Act, the applicant was not entitled for input tax credit.
Thus the input tax credit was lawfully reversed by the Assessing Authority. Find no infirmity in the impugned order of the Tribunal. Decided in favour of the revenue.
Disallowance of exemption claimed u/s. 10(23c)(iiiad) - CIT(A) deleted the disallowance - Held that:- The provision b to sec 10 (23C) is not applicable to claim exemption under section 10(23c)(iiiad). Similarly, Assessing Officer was not justified by invoking provisions of maintaining separate set of books of accounts for activities concern with object of society, activities incidental to the object of the society are not applicable to claim exemption u/s. 10(23c)(iiiad). In this background, CIT(A) was justified in deleting disallowance of exemption claimed u/s. 10(23c)(iiiad) made by Assessing Officer. Same is uphold. - Decided against revenue.
Assessee samiti is imparting education and exist solely and exclusively for education purposes and not for purpose of profit and not doing any other business as there is no other source of income from any other business and the aggregate receipts does not exceed the prescribed limit i.e. one crore. So, the disallowance of claim of exemption u/s. 10(23c)(iiiad) is not justified as there is no justification to assess income of assessee as business income and to disallow the expenditure treating the entity as business organization. Assessee samiti have been allowed to registration u/s. 12A of Act, with effect from 1.4.2000, by ITAT vide its order dated 13.05.2011 inter alia held that assessee satisfies list of genuineness of activities of institution as per objects of institution. In view of above, CIT(A) justified in granting relief to assessee in all these 3 years on all above issues as claimed u/s. 10(23c)(iiiad) of Act.
Extended period of limitation - Demand stands confirmed against the appellant on the ground that various iron and steel items have been used as structurals, in which case cenvat credit would not be available to them - Held that:- The demand stands raised for the period July 2007 to June 2009 vide Show Cause Notice dated 27.07.2012. Tribunal in the following cases has held that longer period of limitation cannot be applied , in such cases inasmuch as the issue was decided in favour of the assessee, prior to declaration of law by the larger bench. Continental Foundation Joint Venture v. CCE, Chandigarh-I [2007 (8) TMI 11 - SUPREME COURT OF INDIA ] and Jaiprakash Industries Ltd. v. CCE, Chandigarh [2002 (11) TMI 92 - SUPREME COURT OF INDIA ].
Thus we hold the demand in the present case also to be time barred and set aside the impugned order on this limited issue, without going into the merits of the case. - Decided in favour of assessee.
Addition u/s. 68 and u/s. 69 - Held that:- There being no direct or material evidence against the assessee to hold that the share transactions were not genuine, to hold that additions made by the AO u/s 68 are not warranted and are accordingly deleted. Since we have set-aside the findings of the lower authorities that the transactions in question were not genuine, hence the consequential additions made by the AO u/s 69 observing that the assessee might have paid commission for the bogus transactions have no legs to stand. - Decided in favour of assessee.
Challenge to the Show Cause notice - demand of service tax on import on drilling activities and levy of tax on import of taxes for the period from 1-4-2006 to 17-4-2006. - challenge to the Circular No. 80/10/2004/S.T., dated 17-9-2004 - Held that:- the impugned circular cannot be considered as sole evidence and not the sole guiding factor for issuance of show cause notice. Further, it is stated in the counter affidavit that the circular is of not the basis to levy service tax but to clarify the position. Hence, the petitioner need not have any apprehension about the circular, however, shall give reply to the notice and the respondent, in turn, shall consider the facts of the petitioner’s case and also bear in mind the principles pointed out by the Supreme Court by examining the scope of the Service Tax Act under Section 65(104a) and Section 65(105)(zzv) of the Finance Act.
Hence, the challenge to the impugned circular is to necessarily fail and no ground is made to interfere with the impugned circular dated 17-9-2004 - Writ petition dismissed - Decided against the assessee.
Reopening of assessment - advertisement expenditure incurred and the commission paid to non-resident disallowed - Held that:- It is not in dispute that during the course of original assessment proceedings the assessee furnished all the required details with regard to advertisement expenditure incurred and the commission paid to non-resident. The reason - as to why section 40(a) is not applicable - was also mentioned by taking support from the decision of the Apex Court in the case of Toshoku Ltd. (1980 (8) TMI 2 - SUPREME Court ) As can be noticed from the original assessment order the AO has thoroughly examined the facts of the case and had also noted that the assessee is having transactions with non-resident, which implies that the AO had taken note of Annexure-9 to Tax Audit Report. Thus it is not in dispute that the facts were present before the AO; more particularly, Annexure-9 to the Tax Audit Report and it could not have been overlooked by the AO at the time of making original assessment, since the AO had taken note of the fact that the assessee had business connection with certain foreign clients and some expenditure was also incurred in that connection. Thus mere subjective satisfaction of the AO, on the basis of the same set of material, would amount to change of opinion and cannot be equated to the expression "reasons to believe", in which event the reassessment proceedings, in our humble opinion, deserve to be treated as void abinitio.
Having regard to the facts and circumstances of the case before us we respectfully follow the decision of the Hon'ble Apex Court in the case of Kelvinator India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) to hold that the AO sought to reopen the assessment on mere change of opinion which is not permissible and hence we conclude that the notice issued under section 148 of the Act is not in accordance with law. Consequently we quash the reassessment proceedings - Decided in favour of assessee.
Legislative competence of the Parliament - Levy of service tax on air conditioned restaurant and hotel, inn, guest house, club or campsite under sub-clauses (zzzzv) and (zzzzw) of Clause (105) of Section 65 of Finance Act, 1994 - serving of food or beverage, including alcoholic beverages or both, in its premises - providing of accommodation for a continuous period of less than three months - Held that:- Bombay High Court in the case of Indian Hotels and Restaurants v. Union of India [2014 (4) TMI 447 - BOMBAY HIGH COURT ] has observed that, It is therefore, dear that a sales tax is on sale of goods. While selling, supply thereof is contemplated and covered by Article 366(29A)(f) of the Constitution of India. It does not mean that the service during the course of or while supplying the goods is taxed, but the tax is and remains on sale of goods. That is why the State Legislatures were held to be empowered to impose, levy, assess and recover tax on sale of articles of food and drink which have been termed as “goods.”
Parliament had the legislative competence to levy Service tax on sub-clauses (zzzzv) and (zzzzw) of clause (105) of Section 65 of the Act. - Decided against the assessee.
Assessment order passed on the amalgamated company - Initiation of proceedings u/s 153A - Addition u/s 69C - Held that:- Respectfully following the Hon’ble Delhi High Court’s decision in the case of Vived Marketing Services Pvt. Ltd. (2009 (9) TMI 917 - Delhi high court), it is held that the assessment order passed on the amalgamated company is not amenable to assessment proceedings as no assessment could be framed on a non-existent entity. Accordingly, the impugned assessment orders framed by the AO are quashed. - Decided in favour of assessee.
Retrospectivity of the amendment to Section 40(a)(ia) - Disallowance of payment of professional fees u/s 40(a)(ia) - non deduction of tds - Held that:- Undisputed facts of the case that the assessee had made payment of ₹ 2.40 lakhs to his son without deducting tax at source, that the AO had disallowed the said amount invoking the provisions of section 40(a)(ia) of the Act. We find that the Hon'ble Karnatake High Court in the case of Santosh Kumar Shetty (2015 (8) TMI 232 - KARNATAKA HIGH COURT ) has held that second proviso to section 40(a)(ia) is retrospective.Therefor, We hold that if the deductee pays the tax no disallowance should be made u/s 40(a)(ia) of the Act. We find that Hon'ble Karnataka High Court had referred to the judgment delivered in the case of Om Prakash R. Chaudhary [2015 (2) TMI 150 - GUJARAT HIGH COURT] ]. Considering the fact that son of the assessee had paid the tax on the professional fees and respectfully following the judgment of the High Court of Karnataka (supra), we decide the effective ground of appeal in favour of the assessee.
Transfer pricing adjustment - selection of comparables - Held that:- OECD guidelines [para 2.62] relied upon by the ‘TPO’ support action of the lower authorities in identifying the said comparables. The assessee fails to rebut this comparability of the aforesaid three remaining entities in ‘ITES/BPO’ domain. The facts now zero-in to six comparables in fray. The assessee had initially itself selected 13 comparables and only three of them ( M/s Accentia Technologies, M/s Coral Hub Ltd. and M/s Cosmic Global Ltd.) could clear the final hurdle. The ‘TPO’ has also not done a better exercise by taking a ‘BPO’ in the field of accounting and related services specifically but ventured in Healthcare, customer Life Cycle Management and e-commerce business comparable(supra) etc. having extraordinary profit margins(supra.) Only the fourth entity M/s Cosmic Global appears to have been involved in desktop publishing. But this comparable is not engaged in ‘BPO’ services. In other words, the Revenue’s three comparables are not in both desktop publishing and captive ‘BPO’ fields but in either one of these two. Therefore, both parties seem to have failed in finding sufficient number of most appropriate comparables.
We also notice that the assessee’s comparables have a mean ‘PLI’ of almost 19%. The Revenue’s three comparables(supra) show the same at 33.11%. It has come on record that profit margin in this field varies from 1.8% to almost 50% i.e from a miniscule percentile to extraordinary profits. The latter margins are in the Healthcare Receivables and/Medical transcription etc. We reiterate that neither of the assessee’s vocations i.e desktop publishing and a ‘captive’ BPO involves such a profit margin. All these facts make it clear that the present case does not involve interpretation of a serious question of law or fact. The dispute is only regarding selection of most appropriate comparables. In these peculiar circumstances and also in view of the fact that both parties have not been able to find sufficient number of most appropriate comparables, we observe that interest of justice would be met in case the matter is not remanded back for a fresh innings. We reiterate that in transfer pricing proceedings, finding a most suitable or appropriate comparable for bench marking of a related party transaction to ascertain ‘ALP’ is a very cumbersome task. So, we deem it proper in the interest of justice that ‘ALP’ is determined somewhere in between the two profit margins adopted i.e 13.47%(assessee) and 24.3% (the Revenue) to that @18%. The Assessing Officer is directed to pass his consequential order. The assessee’s grounds challenging comparability of the above three parties are rejected. However, it gets part relief as the ‘ALP’ stands reduced from 24.3% to 18%. - Decided against assessee.
Addition u/s. 69C - in-genuine purchases - addition made on the report of the Sales tax Department - Held that:- We find that the AO has made the addition as some of the suppliers of the assessee were declared Hawala dealer by the Sales tax Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion.
Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done. The Ld. CIT(A) has also confirmed the addition made by the AO by going on the suspicion and the belief that the suppliers of the assessee are Hawala traders. We also find that no effort has been made to verify the work done by the assessee from the Municipal Corporation of Greater Mumbai. We agree with the submissions of the Ld. Counsel that if there were no purchases, the assessee would not have been in a position to complete the civil work.
On civil contract receipts of ₹ 32.05 crores, the assessee has shown gross profit at 14.2% and net profit at 9.72%.Even if for the sake of argument, the books of accounts are rejected, the profit has to be computed on the sales made by the assessee U/s. 44AD of the Act, the presumptive profit in case of civil contractors is 8% and in case of a partnership firm, a further deduction is allowed in respect of salary and interest paid to the partners. The ratio analysis of the profitability is also in favour of the assessee. In our considered opinion, the purchases are supported by proper invoices duly reflected in the books of account. The payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee.
There is no evidence to show that the assessee has received cash book from the suppliers. The additions have been made merely on the report of the Sales tax Department but at the same time it cannot be said that purchases are bogus. We, therefore, set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition - Decided in favour of assessee
TDS u/s 194C - disallowance of payment made to C & F agent M/s Sachin Cargo Movers u/s 40 (a) (ia) - non deduction of TDS - Held that:- In our considered view the nature of between assessee & M/s. Sachin Cargo Movers, C&F Agent, was for reimbursement of expenses. Besides, the TDS thereon has been deducted by the agent as mentioned above. By now, it has been settled by various Courts that reimbursement of expenses are not liable for deduction u/s 40(a)(ia) of the Act. In any case the agent has deducted the TDS a fact not disputed by revenue, in this eventuality also the case laws cited by the ld. AR supports this proposition. In view thereof, we hold that the expenses paid to M/s. Sachin Cargo Movers, C&F Agent, being for reimbursement of expenses cannot be disallowed u/s 40(a)(ia) of the Act.
Computation of deduction u/s 10BA - Held that:- In the earlier years assesses activities have been held to be eligible for deduction u/s 10BA. Respectfully following the ITAT judgement of this Bench in the case, we hold that the assessee entitled to deduction u/s 10BA of the Act.
Deduction u/s 10BA is the eligible taxable profits from the industrial undertaking, if any disallowance of expenditure is made it increases the eligible undertakings taxable income. Ld. CIT(A) has rightly held that after any disallowance of expenditure the resultant income of the industrial undertaking will be eligible for deduction u/s 10BA. We find no infirmity in the order of ld. CIT(A) on this issue.
Rejection of books of account u/s 145(3) - addition sales outside the books of account - CIT(A) deleted the addition - Held that:- As no infirmity in the order of the ld. CIT(A) inasmuch much there is no evidence on record to suggest any sales outside the books of account. The books of account are rejected because of non-maintenance of detailed particulars of closing stock. Consequently, the assessee's gross profit rate declared at 14.11% is adopted at 17.20% by ld. CIT(A) which is commensurate to the past history of the assessee. In view thereof, we see no infirmity in the order of the ld. CIT(A) on this issue which is upheld.
Disallowance of C&F Agent - CIT(A) allowed the claim - Held that:- The C&F Agent expenditure is a controlled expenditure inasmuch as it is relatable to particular export consignments. The AO has not pointed out any particular item of expenditure or export consignments or any mismatch therein. In view thereof, we uphold the order of the ld. CIT(A) and hold that relief has been given just and proper consideration.
Disallowance u/s.40(a)(i) - non deduction of TDS on payment to one, Sangeeta Choudhary, a resident of Canada, - CIT(A) deleted the disallowance - Held that:- though for a consideration for marketing and sale support services and, thus, only in the nature of commission or service charges, the same has no nexus with India. All that, in our clear view, the said Explanation does is to remove the issue of the determination of the tax incidence on the basis of whether the payee is a tax resident in India from being a consideration for non-deduction of tax at source u/s.195. The payee in the instant case, being admittedly a resident of Canada, with the services being rendered thereat, the issue of place of business in India is not an issue. The assessee’s stating of the payee having no place of business or establishment in India, is only toward and in support of its contention of the services being rendered wholly outside India. There is in fact no charge by the Revenue of the payee having any place of business or otherwise business connection in India. The said explanation would, therefore, be of no consequence - Decided against revenue
Eligibility for exemption U/s.11 - whether there is violation to the newly inserted proviso to Sec.2(15) of the Act since the objects of the Assessee society falls under ‘General Public Utility’ as envisaged in the Act? - assessee society is a society, formed for promoting the sports of swimming and related activities - Held that:- Considering the scope of sports development in India, we are of the view that the recognized sports association in India, who impart knowledge in sports, promotion of sports by conducting various sports activities in all branches, to fall within the scope of “education as defined under the amended provisions of Section-2(15) of the Act”. Accordingly we hold that the objects of the assessee society will fall within the scope of the first limb of the amended provisions of section 2(15) of the Act viz., “education”. Further on analyzing the activities of the assessee society with regard to FIDE trainer coach fee, AICF chronicle, Prize money share, Rent on Monrai system, Title fees,Telecast charges–Doordarshan and FIDE remittances we find that all of them relate to the activities which are incidental to the main objects of the assessee’s society and therefore, proviso to section 2(15) of the Act will not be attracted. Based on our aforesaid decision the learned Assessing Officer is hereby directed to modify his order accordingly.
We hereby hold that the objects of the assessee trust falls within the scope of the first limb of Sec.2(15) of the Act viz. ‘Education’ and therefore, the proviso to Sec.2(15) of the Act will not be attracted and accordingly, the order of the Ld. CIT (A) stands confirmed in allowing exemption - Decided in favour of assessee.
Validity of assessment u/s 153C - whether in the case of assessee there was no pending proceedings as on the date of search hence there was no question of abatement of proceedings? - contention of the ld. CIT(DR) on the contrary remained that the reference of proviso 1 of section 153C is only in relation to the second proviso to sub-section 1 of section 153A which speaks about the abatement of the pending proceedings of six assessment years and not regarding the assessment of the preceding six assessment years which will be the same as in section 153A as well as in section 153C - Held that:- Similar view has been expressed by the Delhi Bench of the Tribunal in the case of V.K. Fiscal (2013 (11) TMI 1589 - ITAT DELHI) holding that the date of receiving of the seized documents would become the date of search and six years period would be reckoned from this date. - Decided in favour of the assessee.
Validity of assessment u/s 153C - Held that:- Recording of satisfaction by A.O. of searched persons is a necessary pre condition for initiation of proceedings u/s 153C which has not been done in the present appeals. Therefore, we quash the assessment proceedings being illegal. - Decided in favour of assessee.
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