Disallowance of expenses - no business activities carried out during the year under reference - assessee is engaged in the business of lotteries - Held that:- As find from the record that the assessee is engaged in the business of lotteries and the business has never been closed or discontinued, as stated by the assessee. The firm is still in existence and maintaining regular establishment and infrastructure. The lottery business is being carried out on in terms of agreement with Nagaland and Meghalaya Authorities.
However, the business was discontinued by these authorities on the technical reasons and dispute which is still pending in arbitration. Find that the assessee has a regular establishment and incurred various expenses as a part of running business clearly establish that business has neither being closed or discontinued by the assessee. It is an established legal position that merely on the ground that there is no business receipt during the year, there cannot be any presumption about closure of the business.
Neither the AO nor the Ld. CIT(A) has appreciated the facts and evidence filed by the Assessee before needs to be considered by the AO. In the interest of justice, we remit back the issues in dispute to the file of the AO with the directions to consider the written submission filed by the assessee before the Ld. CIT(A) and decide the case afresh, under the law, after giving adequate opportunity of being heard to the assessee. Assessee is also directed to cooperate with the AO and filed all the evidences / documents to the AO to substantiate its case. - Decided in favour of assessee for statistical purposes.
Exemption to be granted as provided u/s 13(1)(d) or total denial u/s 11 - Held that:- HC order confirmed [2014 (8) TMI 681 - MADRAS HIGH COURT] the income other than dividend income has to be taxed only to the extent to which the violation was found by the AO - there is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law – Decided against Revenue.
Demand of service tax from the Sub-contractor - Commercial construction services - Appellant contended that the main contractor in regard to the service recipient had already discharged the tax liability on the service rendered - Held that:- when service tax can be demanded either from the subcontractor or from the main contractor, when the main contractor has paid the service tax, the subcontractor is not required to pay service tax for the same services rendered - Demand for the period 2006-07 to 2008-09 set aside - Decided in favor of assessee.
Levy of penalty under section 271(1)(c) - return has not been filed by the assessee within the due date of filing of the return i.e. 31.7.2008 - Held that:- In the case of the assessee, search had taken place on 15.7.2008. The due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired on the date of the search as the due date of filing of the return of income under section 139(1) was 30.9.2008. Thus, in the present case, the deeming provisions of Explanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of the return of income had not expired.
Further, the assessee explained that there was no variation in the return of income and assessed income as per the assessment order passed under section 153A r.w.s. 143(3) of the Act because the returned income was accepted including the surrendered income. The learned counsel for the assessee also explained that due to the bonafide error, surrendered income was no included in the return filed under section 139(1) or 139(4) of the Act because as per the advice, the surrendered income was to be declared in the return to be filed under section 153A of the Act. The Assessing Officer levied the penalty under deeming provisions of Explanation 5 A to section 271(1)(c) of the Act, which in our view, is not applicable to the facts and circumstances of the case. - Decided in favour of assessee
The Rajasthan High Court dismissed the appeal with liberty to file fresh if needed, expecting the authority to examine sympathetically in accordance with the law. (2015 (9) TMI 1444 - Rajasthan High Court)
Reopening of assessment - non issue of notice - Held that:- The mandatory notice under section 143(2) has neither been issued nor served upon the assessee and, therefore, the Assessing Officer cannot assume jurisdiction to frame assessment of the return filed by the assessee in response to the notice issued under section 148. Thus, the impugned assessment order is held to be illegal and the same is hereby quashed. - Decided in favour of assessee
Penalty imposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act - irregular Cenvat credit - Held that:- Taking of irregular Cenvat credit and subsequent reversal thereof in the circumstances of the present case is not attributable to the situation involving suppression, misstatement, etc., in view of the fact that the appellant had sufficient balance in its Cenvat account to take care the deficiency. Since, the appellant has reversed the irregularly availed Cenvat credit and paid the interest therein, it is of the considered view that the appellant should get the benefit of the provisions of Section 11A(2B) of the Central Excise Act, for non-imposition of penalty. - Decided in favour of assessee
Condonation of delay - Held that:- Commissioner (Appeals) order dated 10.09.2013 was received on 05.11.2013 as confirmed by the applicants themselves. From the date of receipt of the order the last date of filing of appeal was 04.02.2014. After the delay of more than 405 days they have filed the appeal on 17.03.2015. We find that once the order has been received by the appellant on 05.11.2013, they are aware of the consequences and remedies available. We also find that the impugned order is denovo order when the this Tribunal vide order dated 06.06.2012 remanded the matter to the Commissioner (Appeals). Therefore, there was no justification for delay of 405 days. The applicants justification of dislocation of residence after the receipt of the order and other personal reasons are not valid grounds for not filing the appeal in time. Therefore, we do not find any justifiable reason to condone the delay of 405 days. Accordingly, COD applications are rejected. Consequently, both the appeals are dismissed as time barred.
Service tax demand along with interest and penalties under Sections 76, 77 & 78 of the Finance Act, 1994 - Held that:- There is no doubt that the commission paid to overseas agents by the appellant was liable to service tax under BAS and the appellant is not contesting the same
As decide in Jubiliant Enpro (P) Ltd. Vs. CCE, Noida [2014 (12) TMI 598 - CESTAT NEW DELHI ] even if at the relevant time the penalties under Section 76 & 78 were not mutually exclusive, once penalty under Section 78 has been imposed, penalty under Section 76 ibid may not be justified.
Penalty under Sections 77 and 78 ibid are upheld. However, penalty under Section 78 ibid shall be 25% of the amount of demand confirmed (i.e., 25% of ₹ 35,14,649/-), if the same along with impugned demand and interest is deposited within 30 days of the receipt of this order, if the same has already not been done. Needless to say, (any) amounts already deposited towards the impugned demand, interest and penalty will be taken into account for this purpose.
Excess Cenvat credit claimed - appellants have taken excess Cenvat credit is the balance sheet figures whereas as per the Rule 9 of Cenvat Credit Rules, 2004, Cenvat credit is available on the basis of invoices issued by the input supplier - Held that:- From the show cause notice as well as the impugned order, it is not coming out whether the audit team has verified the Cenvat credit account corresponding to the invoices received by the appellants for inputs which is the prime document for availment of Cenvat credit. Therefore, I hold that show cause notice is defective for want of evidence, i.e., invoices and it is not coming out from the investigation whether the Cenvat credit account has been verified to the corresponding invoices or not. Therefore, quantification of duty admissible on Cenvat credit on the strength of balance sheet figures is incorrect. Therefore, the charge of availment of excess Cenvat credit on the appellant is not sustainable. Consequently, Cenvat credit availed by the appellant cannot be denied in the absence of any supportive evidence. In these circumstances, the Cenvat credit availed by the appellant is correct. Consequently, duty along with interest, entire demand and penalties are not imposable. With these observations, impugned order is set aside. Appeals are allowed with consequential relief, if any.
Levy of VAT on Liquor - constitutional validity of Entry No.59A of the III Schedule to Karnataka Value Added Tax Act, 2003 - it was contend that by virtue of this notification, the State has attempted to over come the legislative limitation imposed on the State not to exempt dealers or class of dealers from levy of tax under KVAT Act and the device adopted by the State to confer exemption in respect of liquor sold by the dealers who are not holding certain stated categories of licences under Excise Law and it amounts to class oriented discrimination.
Held that:- In the matters of tax laws, larger discretion is extended to the State Legislature and ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would tax and which it would not tax, so long as the classification made within this wide and flexible range, by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality and it would not be vulnerable to attack on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others.
It could be seen that State legislature in its economic wisdom of taxation has chosen to provide for levy of tax on liquor sold by certain dealers namely, Bar and Restaurants operating in urban areas i.e., licence issued in Form No.CL-9 and in respect of Star Hotels, Clubs and Hotel, Boarding Houses and Lodges located anywhere in the State considering the potential for tax collection being huge, and at the same time, exemption has been extended to similar licence holders running Bar and Restaurants by operating them in rural areas considering the fact of low value addition between the price at which liquor is purchased and sold to customers in rural areas.
However, a Hotel, Boarding House or Lodge holding licence in CL-7 though located in rural area would also serve liquor only to the residents of the Hotel and their guests who are elite customers and they can afford to pay more for the comfort they enjoy with varying degree of facilities. Thus, condition of licence itself enables the licence holder to fix the price of the liquor irrespective of MRP on account of substantial value addition and as such, the legislature has brought this class of dealer also to taxation. However, Bar and Restaurants located in the same rural area which would not cater to the elite class of customers or customers of economic superiority have been exempted by virtue of notification dated 28.02.2014.
The classification of dealers based on value addition criteria for the purpose of tax levy and exempting the dealers based on area criteria cannot be held to be discriminatory. - Decided against the petitioners.
Disallowance u/s 14A - Held that:- As it is noticed that the calculation made by the AO shows that the AO has considered all the investments which is not permissible whereas the Assessee has not provided a proper computation of the disallowance u/s 14A and the ld. CIT(A) has also not considered the calculation provided under Rule 8D, the issue of disallowance u/s 14A is restored to the file of the AO for re-adjudication in line with the decision of the co-ordinate bench of this Tribunal in the case of M/s. Sesa Resources Ltd.[2015 (8) TMI 1287 - ITAT PANAJI]
Disallowance of payment of commission to foreign agents - TDS u/s 195 - disallowance u/s 40(a)(ia) or 37 - Held that:- A perusal of the order of the ld. CIT(A) shows that the AO ha not considered the provisions of Sec. 195 or Sec. 40(a)(ia) of the Act for the purpose of disallowing the commission paid to non-residents. The ld. CIT(A) has decided the issue of the commission payment to non-resident in respect of the provisions of Sec. 37, but has not decided the issue in respect of disallowance by invoking the provisions of Sec. 40(a)(ia) of the Act on account of non-deduction of TDS. A perusal of the order of the ld. CIT(A) shows that for the A.Y 2006-07 the AO has held that there was no necessity for engaging commission agents and accordingly, the commission payment was not held to be allowable as business expenditure u/s 37 of the Act. It is noticed that the ld. CIT(A) has deleted this disallowance following the decision of the co-ordinate bench of this Tribunal in the Assessee’s own case wherein the co-ordinate bench of this Tribunal [2013 (9) TMI 233 - ITAT PANAJI ] has accepted that commission is allowable u/s 37 itself.
Disallowance made u/s 40(a)(ia) r.w.s. 195(1) towards payment of demurrage paid to non-resident buyers of iron ore - Held that:- The issue was now squarely covered by the decision of the co-ordinate bench of this Tribunal in the Assessee’s own case [2013 (9) TMI 233 - ITAT PANAJI ] wherein held non-resident buyer got compensation towards demurrage incurred through operation which are confined to purchase of goods, i.e. in relation to ship which it had arrange for taking delivery of goods from assessee/seller from India - Income cannot be deemed to accrue or arise in India in hands of foreign buyer and therefore it cannot be taxable in India and not liable to tax deduction at source - No disallowance can be made u/s 40(a)(ia) – Decided in favor of Assessee.
Disallowance of additional depreciation in respect of the iron ore extraction - Held that:- The issue was now squarely covered by the decision of the co-ordinate bench of this Tribunal in the Assessee’s own case [2013 (9) TMI 233 - ITAT PANAJI ] wherein held Assessee must be engaged in business of manufacture or production of any article or thing and new plant and machinery must be acquired and installed - Assessee has extracted iron ore and also processed it - Case of assessee duly covered by decision of Hon'ble Supreme Court in assessee's own case reported in [2004 (11) TMI 14 - SUPREME Court] – Allowed additional depreciation – Decided in favor of Assessee.
Deduction u/s 10B - Held that:- As it has been admitted that the appeal for the A.Y 2009-10 is under adjudication before the ld. CIT(A) and that fresh evidences have been found in the course of the survey conducted after the order of the Tribunal which has been followed by the ld. CIT(A), we are of the view that this issue in relation to the claim of deduction u/s 10B is liable to be restored to the file of the ld. CIT(A) for re-adjudication after granting the Assessee adequate opportunity of being heard, and we do so
Disallowance of interest as non-business expenditure - Held that:- As noticed that the issue of deduction u/s 14A has been restored to the file of the AO for re-computation and it is in this computation that the ld. CIT(A) has disallowed the amount of ₹ 6 crores towards non-business expenditure. Consequently, we are of the view that the issue of disallowance of interest as non-business expenditure is liable to be restored to the file of the ld. CIT(A) for re-adjudication after granting the Assessee necessary enhancement notice and granting the Assessee adequate opportunity to substantiate its case
Rectification of mistake - not giving credit for TDS - Held that:- The income attributable to the TDS under dispute before us has been duly offered to tax by the assessee and hence in the interest of justice , the assessee should be given due credit for TDS thereon more so when the certificate for the same has been filed by the assesee before the Learned AO on 30.5.2008.
Thus we direct the Learned AO to grant credit for TDS amounting to ₹ 1,01,090/- to the assessee. - Decided in favour of assessee
Valuation of the DVO in toto accepted ignoring the relevant provisions of Section 50C of the Act - Held that:- The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the district sub registrar for the purpose of the stamp duty. The legislature has taken care to provide adequate machinery to give fair treatment to the citizen/Tax payer. There is no reason why the machinery provided by the legislature should not be used and benefit thereof should be refused. Even in a case where no such prayer is made by the Ld. Advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. The assessee has not disputed the valuation of the stamp authority. It is very unfortunate that the AO has worked out the capital gain tax liability including the DVO report which is binding to the assessee.
From the above fact and legal provision laid down by Hon’ble Jurisdictional High Court in the case of Sunil Kumar Agarwal [2014 (6) TMI 13 - CALCUTTA HIGH COURT] , we are of the view that the value of the property estimated by DVO as on the date of sale is to be taken as final sale consideration for the purpose of computation of capital gain under section 50C of the Act. Accordingly the AO is directed to take the DVO value for the working of capital gain and adjudicate the matter afresh as per the provisions of section 50C. - Decided in favour of assessee
Registration u/s 12AA rejected - Held that:- Application of the assessee for registration under section 12A of the Act has been rightly rejected by learned CIT. If the objects and real situation is analysed, the objects are not of charitable nature. Almost in every activity there is a scent of commercialization/profit motive but in the charitable institution no profit motive is involved and the service is done mainly with the intent of social/religious upliftment of the masses in general.
We agree with the conclusion of the CIT, as contended by learned CIT-Departmental Representative, that a charitable institution provides services for charitable purposes free of cost and for no gain and are for the benefit of public at large. As we have discussed in the preceding para, the assessee acquires land at nominal rates and after developing the same, the same land (is sold) on high profit which cannot be said to be a charitable activity. Even just for argument sake, under the present facts, if registration is granted, then every private colonizer will claim charity. See PUDA Versus CIT [2006 (6) TMI 141 - ITAT CHANDIGARH-B ] - Decided against assessee.
Validity of transfer pricing adjustment order in respect of the expenditure incurred by the Assessee on advertisement, marketing and publicity expenses - Held that:- Since the issue in the present appeal concerning AY 2009-2010 is similar to the one arising in AY 2008-09, the Court finds no reason why the matter as far as AY 2009-2010 should also not be remanded to the TPO/AO for a fresh determination in accordance with the decision in Sony Ericsson Mobile Communications India P. Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT ).
Disallowance u/s.14A - Held that:- AO had rejected enhanced the disallowance made by the assessee as per the provisions of section 14A r.w.Rule 8D of the Rules,that the assessee had FAA had not dealt with the arguments taken by the assessee during appellate proceeding namely holding of shares as stock in trade and interest expenditure incurred for personal or business purposes,that while calculating the total assets appearing in the balance sheet the AO taken assets after deducting the current liabilities and provisions.In our opinion,such assets should be total of fixed assets,investments and current assets,loans and advances.We are also of the view that the interest expenditure incurred under the heads interest on share margin,interest on IPO funding,and interest on car loans should not be considered for disallowance to be made u/s.14A of the Act.We find that in the matter of India Advantage Securities Ltd.(2012 (11) TMI 458 - ITAT, MUMBAI )the issue of proportionate disallowance u/s.14A r.w.Rule 8D was discussed by the Tribunal in length and it was held that stock in trade(Shares)cannot be considered for disallowance and that shares held as investment could be taken into consideration for calculation of Rule 8D. The said judgment was confirmed by the Hon’ble Bombay High Court (2015 (6) TMI 140 - BOMBAY HIGH COURT ). Considering the above we are of the opinion that the disallowance made by the AO under rule 8D was on higher side.Following the above judgment of the Hon’ble jurisdictional High Court,we direct the AO to restrict the disallowance at ₹ 6.89 lakhs.In short,we endorse the alternate calculation submitted by the assessee.
Addition in respect of salary paid - addition u/s.40A(2)(b) - Held that:- .We have heard the rival submissions and perused the material before us.We find that the AO has claimed that the assessee was a director of the company whereas the assessee has stated that BKM was promoted as Senior Finance Executive.We do not know from where the AO arrived at the conclusion that she was a director.The FAA has not considered the arguments advanced before him about the educational qualification of BKM and duties performed by her.We find that in subsequent years she has been given higher salary and the AO has not made any disallowance in that regard while passing order u/s.143(3)of the Act. - Decided in favour of assessee
Addition towards difference in cost of construction based on Department Valuer’s Report - Held that:- In the instant case, the Obiter of Karnataka High Court would not become a binding precedent for Kolkata Tribunal. Hence we are not inclined to accede to the view of the Learned AR that the difference in cost of construction is only less than 15% and hence no addition needs to be made. If this proposition of the Learned AR is to be accepted, then the provisions of section 142A of the Act would become redundant.
Under the provisions of section 142A(2) of the Act, the Learned AO is empowered to make a reference to DVO whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. In the instant case, we have already held hereinabove that the action of the Learned AO in rejecting the books of accounts is upheld as the same is done with cogent reasons by the learned AO and not objected by the learned AR for resorting to estimate the net profit of assessee for determining business income. The Hon’ble Apex Court in the case of Sargam Cinema vs CIT reported in (2009 (10) TMI 569 - Supreme Court of India ) had held that reference to DVO could be made only after rejection of the books of accounts by the Learned AO. We are not inclined to interfere with the decision of the Learned CITA on this ground except directing the Learned AO to adopt the state PWD rates for the purpose of valuing the factory shed of the assessee and bring to tax the difference , if any, as against the reported construction cost by the assesssee. - Decided partly in favour of assessee.
Addition made towards insurance claim received, subsidy , PF deducted and interest on FD - Held that:- It is seen that the Learned AO having resorted to make estimate of business income computed @ 2% of total turnover at ₹ 4,01,930/- ought not to have made any separate addition towards insurance claim of ₹ 51,487/- ; interest subsidy of ₹ 3,53,707/- ; PF deducted of ₹ 11,094/- as they are part and parcel of business receipts. We hold that once the business income is determined on estimated basis, any further addition towards business income would only get telescoped with the net profit already determined on estimated basis.The assessment of income under presumptive basis u/s 44AD is similar to the income determined on an estimated basis by the AO after rejecting the books of account of the assessee. Once the books are rejected the doors of the AO are closed for looking after other provisions of the Act which are relevant for determining the business income of the assessee, unless or otherwise specifically provided in the provisions of section 44AD of the Act itself such as allowance of interest and remuneration to partners in the case of a partnership firm.
As far as the interest on FD of ₹ 72,355/- is concerned, we hold that the same is to be assessed as income from other sources. Reliance in this regard is placed on the decision of the Hon’ble Apex Court in the case of Liberty India vs CIT reported in (2009 (8) TMI 63 - SUPREME COURT )
Addition towards cash credits - Held that:- If the Learned AO wants to reject the books of accounts , he should do it in toto and not reject the entire books of accounts except the cash book filed by the assessee. In view of the aforesaid facts we hold that the Learned AO is not right in making an addition towards cash credit u/s 68 of the Act. - Decided in favour of assessee.
Grant of bail - nature of offence - whether the High Court have enlarged bail on the foundation of parity? - Held that:- It is clear as cloudless sky that the High Court has totally ignored the criminal antecedents of the accused. What has weighed with the High Court is the doctrine of parity. A history-sheeter involved in the nature of crimes which we have reproduced hereinabove, are not minor offences so that he is not to be retained in custody, but the crimes are of heinous nature and such crimes, by no stretch of imagination, can be regarded as jejune. Such cases do create a thunder and lightening having the effect potentiality of torrential rain in an analytical mind. The law expects the judiciary to be alert while admitting these kind of accused persons to be at large and, therefore, the emphasis is on exercise of discretion judiciously and not in a whimsical manner.
Resultantly, the appeal is allowed and the order passed by the High Court is set aside. If the respondent no.2 is at large, he shall be taken into custody forthwith; and if he is still in custody because of certain other cases, he shall not be admitted to bail in connection with the present case. We make it clear that we have not expressed any opinion with regard to other cases and simultaneously we also clearly state that our observations in this case are only meant for purpose of setting aside the order granting bail and would have no impact or effect during the trial.
TDS u/s 194C - disallowance u/s u/s 40(a)(ia) - TDS liability on reimbursement of expenses - Held that:- In pursuance of “Cost Allocation & Recharged Agreement” between the assessee and the said company, whereby GSIPL was required to incur cost and make payments after deducting the TDS. Such cost was then recharged to the assessee. Such recharged of cost was purely on account of reimbursement of expenses which were incurred by GSIPL and hence there is no income element on such a payment. Once that is so, then there is no requirement to deduct TDS, in view of the decision of Hon’ble High Court in the case of CIT vs. Siemens (2016 (4) TMI 791 - GUJARAT HIGH COURT ). Thus, the finding of the CIT(A) that there was no requirement to deduct TDS on such reimbursement of cost is factually and legally correct and is therefore, upheld. - Decided in favour of assessee.
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