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Showing 321 to 340 of 1429 Records
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2014 (12) TMI 1116
Dishonor of cheque - Directors at the time of commission of offence were in-charge or not – Complaint u/s 138 r.w. 141 of NI Act – Validity of assertions made - Whether the High Court was justified in quashing the proceedings initiated by the Magistrate on the ground that there was merely a bald assertion in the complaint filed under Section 138 r.w. Section 141 of the Negotiable Instruments Act, 1881 that the Directors were at the time when the offence was committed in charge of and responsible for the conduct and day-to-day business of the accused-company – Held that:- The decision delivered in SMS Pharmaceuticals Ltd. Versus Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT OF INDIA] holds good wherein it has been held that it is necessary to specifically aver in a complaint u/s 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company.
The Court quashed the complaint filed under Section 138 read with Section 141 of the NI Act relying on the certified copy of the annual return which was a public document as per the Companies Act read with Section 74(2) of the Evidence Act, which established that the appellant/Director therein had resigned from the Directorship much prior to the issuance of cheques.
High Court did not go into the second question raised before it as to whether the Director, who has resigned can be prosecuted after his resignation has been accepted by the Board of Directors of the company. Pertinently, in the application filed by the respondents, no clear case was made out that at the material time, the Directors were not in charge of and were not responsible for the conduct of the business of the company by referring to or producing any uncontrovertible or unimpeachable evidence which is beyond suspicion or doubt or any totally acceptable circumstances. It is merely stated that Sidharth Mehta had resigned from the Directorship of the company on 30/9/2010 but no uncontrovertible or unimpeachable evidence was produced before the High Court as was done in Anita Malhotra to show that he had, in fact, resigned long before the cheques in question were issued.
Similar is the case with Kanhaiya Lal Mehta and Anu Mehta. Nothing was produced to substantiate the contention that they were not in charge of and not responsible for the conduct of the business of the company at the relevant time. In the circumstances, we are of the opinion that the matter deserves to be remitted to the High Court for fresh hearing.
It is however, necessary for the High Court to consider the cases of other Directors in light of the decisions considered by us and the conclusions drawn by us in this judgment.
However, the order passed by the High Court quashing the process as against Shobha Mehta is upheld - Shobha Mehta is stated to be an old lady who is over 70 years of age - Considering this fact and on an overall reading of the complaint in the peculiar facts and circumstances of the case, making her stand the trial would be an abuse of process of the court – the order to the extent it quashes the process issued against Shobha Mehta is confirmed – Decided partly in favour of appellant.
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2014 (12) TMI 1115
Validity of appointment of arbitrator for adjudication of dispute u/s 11 of the Arbitration and Conciliation Act, 1996 – Arbitrable dispute existed to invoke section 11 or not - Whether the discharge upon acceptance of compensation and signing of subrogation letter was not voluntary and whether the claimant was subjected to compulsion or coercion and as such could validly invoke the jurisdiction u/s 11 - Held that:- Following the decision in National Insurance Co. Ltd. Versus M/s. Boghara Polyfab Pvt. Ltd. [2008 (9) TMI 864 - SUPREME COURT] wherein it was held that when we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practiced by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be acted upon - Consequently, any dispute raised by such party would be arbitrable.
The plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion - there was no protest or demur raised around the time or soon after the letter of subrogation was signed, that the notice dated 31.03.2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, the discharge and signing of letter of subrogation were not because of exercise of any undue influence - such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence - upon execution of the letter of subrogation, there was full and final settlement of the claim – thus, no arbitrable dispute existed so as to exercise power u/s 11 of the Act - The High Court was not therefore justified in exercising power u/s 11 of the Act and the order of the HC is set aside - Decided in favour of appellant.
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2014 (12) TMI 1114
Reopening of assessment u/s 147 - AO after examining the records and the documents filed by the Assessee, allowed the expenses as revenue expenditure – Whether, merely because the audit party has raised objections in relation to the allowability of the expenditure, the assessment cannot be reopened on the basis of change of opinion – Held that:- The Tribunal was rightly of the view that there is much substance in the contention of Assessee's representative – revenue could not produce the reasons recorded for reopening the assessment and opportunity was given to the departmental representative by the Tribunal to produce these reasons or a copy of thereof - However, beyond producing a copy of the letter written by the AO to the CIT seeking permission for reopening the assessment, nothing was produced by the revenue - the AO has initially given his own reason in the body of assessment order - the AO in the assessment has mentioned that the assessment was reopened with the prior approval of CIT(A) on the objections raised by the audit - the assessment made u/s. 143(3) r.w.s. 147 is devoid of any application of mind on the part of AO - AO has no reason to believe that income has escaped assessment or the assessee has filed inaccurate particulars of income as no new facts are brought on record - all the expenses claimed by the assessee have been verified in detail in the original assessment therefore the reopening of assessment to disallow the same merely on the basis of audit report is not justifiable.
The Tribunal proceeded to consider the correctness of the submission of the departmental representative that compliance u/s 148 was made in this case and by relying on the audit report - The audit objections could form the basis for initiation of the proceedings was the Department's stand and further that reasons are recorded in the letter which has been addressed by the AO to the Commissioner - an opinion was given by the audit party with regard to the receipts from the occupation of conference hall and rooms - in every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment - The basis of his belief must be the law of which he has not become aware - The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law - the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO - It is his belief and the statutory exercise contemplated by section 147(1) and 148(2) must be carried out by him - The Tribunal has rightly held that once the audit party raised objections, one of which was not accepted, then, the AO was expected to record reasons for his belief - Those reasons have not been recorded, as is clear from the material placed before the Tribunal – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 1113
Validity of notice for reopening of assessment u/s 148 – Failure on its part to disclose truly and fully all material facts necessary for assessment or not - Held that:- The condition precedent to clothe the AO with jurisdiction to reopen an assessment are reason to believe that income chargeable to tax has escaped assessment (a mere change of opinion would not be reason to believe) - An additional jurisdictional condition for reopening of an assessment beyond a period of four years from the end of the relevant assessment year is the failure to truly and fully disclose all material facts necessary for assessment – the notice has been issued beyond a period of four years from the end of the relevant AY - the reasons itself indicate that it is on perusal of record and details filed by the Petitioner that claim of the Petitioner in respect of export of trading goods is concerned, is disproportionately higher - there has been no failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment.
No invoice wise details of purchase of trading goods exported and failure to corelate the trading export with the purchases has resulted in failure to make a true and full disclosure - the reasons for re-opening cannot be supplemented by affidavits - The reasons have to be read as they are and cannot be improved upon by filing affidavits in Ajanta Pharma Ltd. Versus Assistant Commissioner of Income-Tax And Others [2003 (11) TMI 32 - BOMBAY High Court] wherein it has been held that the petitioners have categorically stated about the disclosure of details of trading goods exported along with direct cost of purchases for the assessment year along with their return and the fact also finds corroboration from the affidavit of the Assistant Commissioner of Income Tax wherein he has made a grievance only of non-furnishing of documents in support of those details - the reasons for issuance of notice did not disclose to be borne out from the records - the so called reasons are totally flimsy, as has been contended on behalf of the petitioners, and, by no stretch of imagination, can be said to be sufficient to draw the conclusion about escapement of income which could empower the authorities to invoke powers under Section 148 - there was no material on the basis of which the Department could have reopened the case in exercise of powers u/s 148.
Set off of trading profits against the loss of manufactured exports for purposes of claiming deduction u/s 80 HHC – Held that:- The Petitioner had pointed out in its return of income that the loss on account of export of manufactured goods is ignored for the purpose of calculation of deduction u/s 80HHC of the Act as it is an incentive provisions - there was a complete disclosure – the notice is hit by the first proviso to Section 147 – in IPCA Laboratories v/s. Deputy Commissioner of Income Tax [2001 (7) TMI 99 - BOMBAY High Court] - the loss in any of the two segments has to be set off against the other for the purpose of determining the deduction available u/s 80HHC – thus, the notice u/s 148 is unsustainable in view of no failure on the part of the Petitioner to fully and truly disclose all facts necessary for assessment, the notice is set aside on the above ground alone – Decided in favour of assessee.
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2014 (12) TMI 1112
Principle of mutuality - Contribution paid towards heavy repair fund chargeable to tax or not - contribution paid or made by the members to the co-operative society was occasioned by transfer of the flat – Revenue argued that:- If the amount is received on account of transfer of a flat and which is not restricted to ₹ 25,000/- but much more, then different consideration may apply - what has been argued and vehemently is the amount was received by the Society when the flat and the garage were transferred – it must be presumed to be nothing but transfer fees - It may have been credited to the fund and with a view to demonstrate that it is nothing but a voluntarily contribution or donation to the Society, but still it constitutes its income.
Held that:- for rendering such a conclusive finding there has to be material brought by the Revenue on record. Beyond urging that it has been received at the time of a transfer of the flat and credited to such a fund will not be enough to displace the principle laid down in the decision of Sind Cooperative Housing Society [2009 (7) TMI 15 - BOMBAY HIGH COURT]. The attempt of the Revenue therefore is nothing but overcoming the binding judgment of this Court.
It is a typical relationship between the member of the Co-operative Society and particularly a Housing Society and the Society which is a body Corporate and a legal entity by itself that is forming the basis of the principle laid down by the Division Bench - Co-operative movement is a socio economic and a moral movement - It has now been recognized by Article 43A of the Constitution of India - It is to foster and encourage the spirit of brotherhood and co-operation that the Government encourages formation of Co-operative Societies - The members may be owning individually the flats or immovable properties but enjoying, in common, the amenities, advantages and benefits. The Society as a legal entity owns the building but the amenities are provided and that is how the terms "flat" and the "housing society" are defined in the statute in question - following the decision in Sind Coop. Hsg. Society Versus Income Tax Officer [2009 (7) TMI 15 - BOMBAY HIGH COURT] - there is substance in the argument that the AO had before him the material in the form of the bye-laws of the Society - The bye- laws also are in consonance with the Government Resolution and stipulate a sum of ₹ 25,000/- towards transfer fees – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1111
Determination of Rent - AO enhanced the rent on the presumption that actual rent is low - taxable in the hands of deceased assessee as well as the Trust - double taxation – Held that:- Where the premises, are leased to the Government or its organisations, the scope for an assessee to show the rent at a lower figure, does not arise - there does not exist any particular standard, to fix the rent of any premises - much would depend upon the location and condition of the building and the demand in the locality - where the lessee is a Government, the transaction is regulated by the fixed parameters - even if the building has potential to fetch a higher rent, the Government departments are not expected to pay such rent - in case the owner of the premises is willing to lease them to the Government or its agencies, for reasons of safety and security or assured payment of rent, the discretion of the AO to determine the reasonable rent of his choice, gets virtually restricted - He cannot ignore the actual payments and fix an imaginary figure, based upon the alleged information or potential of the building - once the penalty proceedings were dropped, the suggested figure virtually loses its significance - the rent for the premises must be taken at ₹ 13,500/-, unless there was any enhancement by the lessee itself, for any subsequent period.
Period regarding which the assessee is under obligation to pay the tax – Held that:- The original assessee died on 16.09.1994 and her legal representative filed returns for the period from 01.04.1994 to 16.09.1994 - Tax was also paid on the income derived from house property - For the subsequent period, the Trust, which became the legatee, filed returns and paid the tax - once that is so, there was absolutely no basis for the AO to levy tax for the same period on the testator also - The Commissioner did not address this issue and the Tribunal refused to take that into account, on the ground that it was not raised earlier - being a last authority on facts, the Tribunal was supposed to deal with every aspect, that arises for consideration, uninhibited by any such restrictions – thus, the matter is remitted back to the AO for the limited purpose of verification of the Will Deed and the factum of the bequest of the property on the Trust – Decided in favour of assessee.
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2014 (12) TMI 1110
Invocation of power of CIT for revision u/s 263 - Erroneous or prejudicial to the interest of the Revenue – Held that:- The Tribunal rightly was of the view that the Commissioner's power u/s 263 could not have been exercised - The exercise of powers was based merely on change of opinion - If the Commissioner held the particular opinion, but on the same transaction and same dealing, then that was not enough to enable him to exercise this power, is the conclusion reached - firstly the Commissioner rendered a particular finding - an agreement for sale confers no title in the immoveable property - The Commissioner possibly is not aware of the nature of the transaction and in immoveable property in the city of Mumbai - This agreement for sale definitely confers rights and which are capable of being enforced - it is not clear as to why the Commissioner held another opinion - apart therefrom only his view and opinion will not enable him to exercise the power u/s 263, that is not found to be permissible in law by the Tribunal - if his view on the same set of facts pertaining to the transaction alone have gone into in the exercise undertaken by him and for invoking the power u/s 263 of the Act, then, there was no error in reversing his order and not upholding his view – thus, the AO’s order is not erroneous and in so far as it is prejudicial to the interest of the Revenue, but the Commissioner proceeded to exercise his power on mere change of opinion – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1109
Disallowance on expenses on adhoc basis under manufacturing, trading and other expenses – Held that:- The A.O. disallowed on ad-hoc basis 10% of the total expenditure for the reason that the assessee could not furnish item-wise details of purchase and sale of goods - the books of account were accepted by the AO and no adverse inference in maintenance thereof was pointed out - the entire expenses incurred during the year was duly vouched and supported by necessary documents - The AO could not have made any ad-hoc disallowances without pointing out even a single instance of inflation of expenditure - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) has categorically found gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found same is to be correct – the order of the CIT(A) is upheld – Decided against revenue.
Restriction of addition u/s 14A r.w. Rule 8D – Held that:- The dividend which is exempt from taxation is earned on account of investment made in share in the earlier years - The additional shares allotted to the assessee's company in the current AYs were on account of amalgamation of subsidiary companies - Therefore, no portion of the interest expenses incurred was in relation to investments in shares - the AO has not established any nexus between the investment and the borrowed funds - the assessee had enough interest free funds in the form of reserves and surplus and there was no relation between the interest expenditure and the dividend income - therefore, disallowance of interest expenditure, by invoking the provision of Section 14A, was uncalled for and the order of the CIT(A) I s upheld – Decided against revenue.
Disallowance of repair and maintenance expenses related to building and office equipment – Capital expenses or not – Held that:- The assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 for an aggregate amount of ₹ 85,99,124/- since then the building was put to use in the course of business carried on by the assessee and for the continuous use of the building for a long period of over 20 years, the factory building had naturally required certain repairs and alterations for uninterrupted and smooth operations of the business in the building - Considering the life of the building and the total amount of expenditure of ₹ 6,84,504/- incurred on repair of the factory during the year was nominal compared to the total construction cost of building of ₹ 85,99,124/- in the year 1981 – the expenditure cannot be said to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction u/s 30 or 37(1) – in Ramaraju Surgical Cotton Mills [2007 (8) TMI 39 - SUPREME COURT OF INDIA] it has been held that if a repair expenditure does not fall within the meaning of 'current repair' under section 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1).
The assessee is engaged in the business of manufacturing/ publishing and sale of city maps, manufacturing and trading of furnishing items, etc. - the assessee is not engaged in the business of manufacturing software or rendering services, through use of softwares - The softwares, if any, acquired by the assessee during the relevant year or up-gradation of existing software acquired in the earlier year, were merely application of softwares which enabled the assessee to execute tasks in the field of accounting, purchases, inventory maintenance, etc. and, thus, facilitating smooth carrying on of the business operations - such application of software did not result in creation of any new profit-earning apparatus or source of income for the assessee - the assessee only acquired license to use the softwares, it did not amount to have any ownership right in such software, and that the assessee cannot even be said to have acquired any capital asset to consider such licence fee paid as capital expenditure - the expenditure incurred on up-gradation of existing softwares or payment of license fee for new softwares for additional users cannot be said to be capital in nature – Decided in favour of assessee.
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2014 (12) TMI 1108
Determination of agricultural income – Held that:- The assessee is cultivating coffee plantation in 150 acres - AO estimated the agricultural income at ₹ 4000/- per acre which worked out ₹ 6 lakhs as against the estimation of income by the assessee at ₹ 23,07,737/- CIT(A) considered the agricultural income at ₹ 8252/- per acre working out at ₹ 12,37,850/- when the assessee has not maintained proper books of accounts regarding actual income generated from the coffee plantation, it is inevitable that the estimation of income is to be done - CIT(A) after considering the report of the Coffee Board observed that the actual production of coffee in the Annamalai area was 0.64 MT/hectare. Since the assessee’s area is rocky and barren area in the estate, the CIT(A) considered 70% of 150 acres, i.e. 105 acres of area wherein coffee plantation was carried on by the assessee and since the yield in this area is less, he considered the yield from this area as only 0.38 MT/hectare - the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board - assessee has not produced contrary material to controvert his findings - in the absence of positive evidence by the assessee to support the assessee’s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed – Decided against assessee.
Disallowance of expenses and telescoping the same against the agricultural income of the assessee under the head “Other Sources” – Held that:- The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure - when the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. - there is every chance of inflating expenses incurred for agricultural purposes to business purposes - If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any - most of the expenses are unvouched for and are supported by self-vouchers - when the assessee makes self-vouchers, there is every chance of inflating the same - being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, the order of the CIT(A) cannot be reversed – Decided against assessee.
Disallowance of 50% of the increase in traveling expenses – Held that:- The CIT(A) has very reasonably considered that no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched - CIT(A) found that self-made vouchers were made only for traveling expenses of staff and Directors and hence she disallowed 50% increase in traveling expenses at ₹ 1,54,464/- CIT(A) has taken a reasonable view and the same is confirmed – Decided against assessee.
Disallowance of foreign travel expenses – Held that:- Assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business - the assessee’s business is confined to Kerala - the Directors went abroad to mobilize deposits for the purpose of assessee’s business - what are the activities done by the assessee’s Directors with regard to the business of the assessee are not brought on record - in the absence of the details of the activities carried out by the assessee’s Directors with regard to the business at abroad, the order of the CIT(A) is upheld – Decided against assesse.
Disallowance of depreciation on vehicles – Held that:- The assessee is a limited company - the lower authorities have disallowed 1/4th of the total expenses on vehicles - assessee is a limited company and the vehicles are used by the Company for frequent visits to its 78 branches in Kerala for business purpose - Being so, disallowance is not warranted towards depreciation on vehicles for personal use - the running expense of vehicle was allowed by the Assessing officer and it was held that the expenses were incurred solely for the purpose of business –Decided in favour of assessee.
Addition of payment made for consultation charges without deduction of TDS deleted – Held that:- The reason for deleting the disallowance was that the payment was made to the person who has retired from PF Department who has no professional qualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) - if the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person - there is no necessity of professional qualification for rendering services and receiving payment - provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax - assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non-deduction of tax under the section would attract the provisions of section 40(a)(ia) – the order of the CIT(A) is upheld – Decided partly in favour of revenue.
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2014 (12) TMI 1107
Disallowance on trade mark fee deleted – Revenue expenses or not - Right to use the trade mark acquired by the assessee was an intangible asset as defined u/s 32 or not - Held that:- CIT(A) rightly deleted the disallowance of ₹ 55,70,045/- on account of trade mark fee by holding that it was a revenue expenditure and without considering that “right to use the trade mark” acquired by the assessee was an intangible asset as defined u/s. 32 - following the decision in THE COMMISSIONER OF INCOME TAX-IV NEW DELHI Versus G4S SECURITIES SYSTEM (INDIA) PVT. LTD. [2011 (7) TMI 65 - DELHI HIGH COURT] - under the terms of the agreement, the ownership rights of the trade mark and knowhow throughout vested with G4F and on the expiration or termination of the agreement the assessee was to return all G4F knowhow obtained by it under the agreement - The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of the technical knowhow and the trade mark - hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable u/s 37(1) – Decided against revenue.
Disallowance of license fee deleted – Revenue expenses or not - assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 or not – Held that:- CIT(A) rightly deleted the disallowance of license fee by holding it as revenue expenditure and without considering that the assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 – Following the decision in COMMISSIONER OF INCOME TAX Versus M/s ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - it cannot be said that the expenses brought about in an enduring benefit to the assessee - the mere fact that the assessing officer records that the expenditure, in financial year 1997-98 (assessment year 1998-99), was incurred towards what he terms as an “on-going project” would not ipso facto give it a colour of capital expenditure - after noticing the submission of the assessee that the expenditure incurred in the AY was for removing deficiencies which were found in the software installed in the earlier assessment year, and that, out of a sum of ₹ 1.71 crores a sum of ₹ 49 lacs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation – it returned a finding that the expenses were incurred to upgrade and run the system – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 1106
Establishment of PE in terms of Indo-USA DTM – Services rendered by company liable to be taxed in India or not - Held that:- Following the decision in assessee's own case as decided in Whirlpool India Holdings Ltd. Versus Dy. DIT (IT)[2011 (1) TMI 529 - ITAT, DELHI] - The term “PE” in general terms to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on - the assessee has a fixed place of business in India in the form of the branch office - there seems to be nothing on record to show that the business of the assessee has been conducted wholly or partly through this branch - The reason is that only expenditure debited to profit and loss account is payment of salaries, stated to have been reimbursed by the parent company - The employees are the employees of WIL and look after its business - The conclusion which can be drawn is that the employees are that of the parent company which has disbursed the payment of salaries through the assessee - the employees are those of the WIL - It is equally plausible to argue that since salaries have been paid by the parent company, the economic reality overtakes the legal reality - the employees are those of the parent company - it will be difficult to come to a conclusion that the employees are those of the assessee company.
Before bringing a foreign company to tax in India on its business profits, it is for the revenue to establish that it has PE in India - This has not been done – the branch office of the assessee is responsible for formulating policy and taking strategic decision for operations of WIL in India, Nepal, Sri Lanka, Bangladesh and Pakistan - The manufacturing operations of Whirlpool group extend to more than 11 countries and the products are being sold in more than 125 countries - The branch office creates export opportunities for raw material, components and finished products for overseas requirements and would ultimately generate export revenue for the assessee company - It is also responsible for identifying supplier of goods etc. both for export and local consumption of the group companies - the parent company and the Indian branch assist the suppliers to introduce new technologies etc. - The branch office acts as a coordinating agency between the parent company and the assessee for providing latest management information in respect of technology, legal, commercial and political fields.
The assessee has made payment to WIL of the salaries of the seconded employees - it has not been established in any manner that these employees are those of the assessee company - it cannot be said that the assessee has rendered any service either to WIL or to the parent company - the assessee is not chargeable to tax in India in terms of the provision contained in Article 5 of the tax treaty, it is not necessary to go into the question whether transfer pricing adjustment could be made in determining such profit - since there is no profit, there would be no question of transfer pricing adjustment – it is not necessary to go into Rule 10 of the Income-tax Rules, recognized methods of determining arm’s length profits - the assessee is not liable to pay tax in India in the year – Decided against revenue.
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2014 (12) TMI 1105
Disallowance u/s 40(a)(ia) - outstanding balance as on 31st March – Failure to TDS u/s 194H - Held that:- As decided in DCIT vs. Shri Ananda Marakala [2014 (12) TMI 613 - ITAT BANGALORE] wherein the applicability of section 40(a)(ia) has been discussed and held that the provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS
Hon’ble Allahabad High Court has however upheld the view taken by the Special Bench ITAT in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) in the case of M/s. Vector Shipping Services Pvt. Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT)
Thus there are two views on the issue, one in favour of the assessee expressed by the Hon’ble Allahabad High Court and the other against the assessee expressed by the Hon’ble Gujarat & Calcutta High Courts. - following the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. - Decided in favour of assessee.
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2014 (12) TMI 1104
Disallowance of consultancy charges expenses - Charges not been incurred wholly and exclusively for the purpose of business of the assessee - Held that:- We have gone through the application as well as the documents which are sought to be produced by the assessee company by way of additional evidence, which are consisting of copies of correspondence, agreements etc. done by the said two companies with government agencies as well as the assessee company. The above said documents as has been pleaded by the assessee company were not traceable at the time of proceedings before the lower authorities. Keeping in view the application of the assessee as well as the nature of the documents, we feel that the documents sought to be produced in evidence by the assessee are necessarily required to be looked into, as the same go to the root of the case and are vital for the just and proper decision of the case. We therefore allow the application of the assessee for additional evidence and the matter is remanded back to the file of the AO for decision afresh on the issue. - Decide din favour of assesse.
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2014 (12) TMI 1103
Disallowance of depreciation - Goods not used by the assessee company for its business purposes - Held that:- The car and TV was in the name of Director but was appearing in the balance sheet of company. Thus, the funds of company were utilized for acquiring these assets though in the name of Director. I find that this issue is squarely covered by the decision of Hon’ble Allahabad High Court in the case of M/s Varanasi Auto Sales Pvt. Ltd. (2010 (1) TMI 19 - ALLAHABAD HIGH COURT), and, therefore, Assessee was entitled for depreciation on TV and Car. - Decided in favour of assesse.
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2014 (12) TMI 1102
Penalty u/s 271(1)(b) - Delay in filing return - Search and seizure of premises - Held that:- It is noticed from the impugned order that the assessee submitted before the ld. CIT(A) that adjournments were requested on the ground that search and seizure operation had taken place and it was not possible to furnish the necessary details as all the documents and computer hard discs etc. were seized/impounded at the time of search operations. The assessee further submitted that several requests were made to the AO to release certain documents, but to no avail. These findings have not been controverted by the ld. DR with any cogent evidence. From the above recording of the factual position obtaining in this case, it is crystal clear that the assessee was prevented by a reasonable cause in not complying with the directions of the AO which led to the imposition of penalty u/s 271(1)(b) of the Act.
The cause pleaded by the assessee before the ld. CIT(A) which led to the commission of default u/s 271(1)(b) of the Act constituted a reasonable cause. The delay in filing the information/documents etc. called for by the AO would be naturally delayed when a person has been subjected to search and documents are with the Department. As the assessee proved a reasonable cause for failure to comply with the directions of the AO which culminated into the imposition of the instant penalty, we are of the considered opinion that this penalty cannot be upheld. We, therefore, set aside the impugned order and order for deletion of this penalty. - Decided in favour of assesse.
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2014 (12) TMI 1101
Violation of principle of natural justice - ex parte order passed without providing sufficient opportunity of hearing to the appellant - Held that:- CIT(A) has passed ex parte appellate order in a summary manner and has not decided the issue before him on merits. In these facts of the case, we set aside the order of the CIT(A) to his file with direction to pass de novo appellate order in accordance with law after providing opportunity of hearing to both the parties. The CIT(A) is directed to decide the issue before him on merits thereof. The assessee is directed to cooperate with the revenue authorities in finalization of the appellate proceedings before the CIT(A) and on its own approach the office of the CIT(A) to obtain the notice of hearing within the period of 60 days, from the receipt of this order of the Tribunal, and to place all the details before appellate authority - Matter remanded back - Decided in favour of assesse.
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2014 (12) TMI 1100
Withdrawal of petition - Held that:- Additional Solicitor General, on instructions, seeks permission of this Court to withdraw these special leave petitions with liberty to the petitioner to file review Petitions before the High Court bringing to Reason: the notice of the High Court the latest three-Judge Bench decision of this Court in the case of CIT v. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT]. - Leave granted.
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2014 (12) TMI 1099
Power to conduct service tax audit / Revenue Audit – Validity of Rule 5A of Service Tax Rules, 1994 - instruction of the Central Board of Excise and Customs (“CBEC”) no. F. No. 137/26/2007-CX.4 dated 1.1.2008 - whether special audit can be ordered by recourse to Section 72-A of the Finance Act, 1994 - Supreme Court stayed the operation of the impugned judgment of High Court in [2014 (8) TMI 200 - DELHI HIGH COURT].
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2014 (12) TMI 1098
Waiver of pre deposit - Repair and maintenance service - Construction service - Held that:- The impugned order directing the appellant to deposit 40% of the demand is sans any reason. The order is cryptic running into six lines recording that such cases of maintenance, repair and cleaning service have been heard earlier also and the appellant was directed to deposit 40% of the service tax demanded and report compliance by 11.04.2013. There is no other reason recorded in the order. Neither there is consideration, even worth the namesake of any prima facie case of the appellant nor there is any reason, much less finding with respect to the undue hardship. it was incumbent upon the Tribunal to have addressed the issue of prima facie case of the appellant and also that of undue hardship. impugned orders passed by the Tribunal on the waiver application, are not liable to be sustained and are set aside. As a consequence, the impugned orders passed by the Tribunal dismissing the appeals for non-compliance of the condition of pre-deposit also stands set aside. - Matter remanded back - Following decision of Mehsana Dist. Co-OP. Milk P.U. Ltd. Vs. Union of India [2003 (3) TMI 113 - SUPREME COURT OF INDIA] - Decided in favour of assesse.
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2014 (12) TMI 1097
Club Membership - Constitutionality of section 65(105) - laiblity for service tax - Whether services provided by the assessee club to its members would be liable to service tax - the club is rendering service or selling any commodity to its members for a consideration then whether the amounts to sale or not – Held that:- In the case of SPORTS CLUB OF GUJARAT LTD Versus UNION OF INDIA & 3 [2013 (7) TMI 510 - GUJARAT HIGH COURT] the provision of Section 65(25a), Section 65(105) (zzze) and Section 66 of the Finance (No.2) Act,1994 as incorporated / amended by the Finance Act,2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, was declared as ultra vires. - order passed by the Commissioner of Service Tax is required to be set aside - Decided in favour of assesse.
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