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Showing 381 to 400 of 1076 Records
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2014 (10) TMI 701
Addition of contracts payments – Held that:- The supplementary cash book has been verified – it could not be understood that after making such verification how whole receipts were added to the income - It is not possible in case of various construction receipts to have 90-100% rate of profit which is shown in profit and loss account by special auditor which itself shows that contention of the assessee has merits - However, at the same time there is no evidence to show that receipts in the hands of G.M. Construction Company proprietary concern and in the hand of Matchless Associates were security receipts - these receipts do not relate to construction payment therefore whole of the amounts is required to be added to the income - these are construction receipts and therefore direct receipts and therefore the AO is directed to apply Net profit rate of 8% on these receipts - Therefore this ground is partly allowed.
Unexplained cash credits u/s 68 – Held that:- The matter was remanded to the AO and the AO has made enquiries - In response to the query u/s 133(6) Matchless Associates had clearly mentioned the fact regarding purchase of property jointly with Pritam Singh i.e the assessee and the fact that M.S. & Co. kept 30% share - PAN number and acknowledgement of return etc. have been filed - Even the copy of agreement showing 30% share belonging to him has been filed – it could not be understood that after receiving the information no further enquiry has been made then such evidence cannot be ignored - this addition is not justified.
Receipt of ₹ 5 lakh withdrawn by Hardeep Singh on various dates which becomes clear from the copy of the bank account placed - Hardeep Singh has clearly stated in his letter that he was employed by the assessee and was deputed to Gurdaspur site and the amounts were withdrawn from the bank and were handed over to Pritam Singh - clearly the assessee has discharged the onus which was put on the assessee and the AO has not made any further inquiry – the AO is not right to reject this evidence without further enquiry – the order of the CIT(A) is set aside – Decided in favour of assessee.
Addition of opening/closing work in progress – Total contract receipts received from PBIL Apex Consortium Ltd. treated as income – Held that:- The income and expenditure account clearly show that opening stock of ₹ 214700/- closing stock is also shown at ₹ 214700/-. Therefore there is no justification in addition of opening stock which has been shown as closing stock – the order of the CIT(A) is set aside – Decided and accordingly we set aside the order of the Ld. CIT(A) and delete the addition of ₹ 214700 - The contention of the assessee is accepted that for example in G.M. Construction case against the payment of ₹ 1579700/-, Net profit is shown at ₹ 1364715/- which is almost 90% which is not possible in construction business - the expenses were booked in the supplementary cash book which was verified by the AO during remand report in AY 2003-04 – the order of the CIT(A) is to be set aside and the AO is directed to apply rate of profit at 8% in respect of receipts of ₹ 2265000/- and delete the addition made on account of construction receipts – Decided in favour of assessee.
Addition of cash deposited for purchase of demand draft – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the supplementary cash book was originally admitted by the CIT(A) and sent for remand report - entry in respect of ₹ 450000/- was verified by the AO - If the Assessing officer had any further doubt he should have made further enquiry but he could not simply reject this evidence – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee.
Unexplained cash credits u/s 68 – Held that:- As far as a sum of ₹ 2 Lakh is said to have received from Sharma Associates the assessee has filed a copy of confirmation copy of account is sent by the assessee to Sharma Associates in which Mahinder Sharma has simply signed - PAN No. has also been given - The AO has not made any enquiry - Once the depositor has given the confirmation and PAN, if the AO had any doubt he should have conducted further enquiry and could not have rejected this evidence without any further enquiry - the assessee has discharged the burden of proving the genuineness of this transaction of ₹ 2 lakhs.
In respect of a sum of ₹ 4.50 lakhs and ₹ 4 lakhs received from R.K. Associates, they were having 25% share in property No. BMM 373 Ph 11, Mohali which was purchased through auction - Other details of payment through DD were also furnished. Even copy of the agreement was filed - PAN of R.K. Associates was not mentioned in the confirmation - Thus the assessee had clearly failed to discharge the onus.
Sum of ₹ 3 lakhs received from G.M. Construction, only document filed is a letter from M.S. Alagh stating that he has purchased a truck and a jeep - Even PAN No is not mentioned in such letter - during hearing whether evidence in the form of transfer of vehicles by way of endorsement in the registration certification is there, the assessee showed inability to file such evidence - in respect of the transaction the assessee has not discharged his burden and the addition has been rightly made by the CIT(A) - Decided partly in favour of assessee.
Validity of transaction - Cash withdrawal or cheque withdrawal – Held that:- The contention of the assessee is to be accepted that once additional evidence was accepted and during verification in the remand proceedings certain further documents were filed - all the evidences were filed including a certificate from bank - Certificate from the bank show that through cheque No. 252583 cash was withdrawn - This evidence cannot be brushed aside by simply saying that cash was withdrawn through Sarabjit Singh who is only a domestic help - If the Revenue had any doubt the AO should have made further enquiry during assessment proceedings – thus the order of the CIT(A) is to be set aside – Decided in favour of assessee.
Addition of undisclosed investment in jewellery – Held that:- Net jewellery is required to be added because no explanation is available and that is 598.48 gms - This jewellery is required to be added in the hands of Pritam Singh and Gurjit Singh - Since this issue has been considered jointly no details have been furnished for individual jewellery and out of the jewellery weighing 298.48 gms should be added in the hands of the assessee and balance 300 gms should be added in the hands of Gurjit Singh – the order of the CIT(A) is to be set aside and the AO is directed to make addition on account of jewellery weighing 298.48 gms in case of the assessee – Decided partly in favour of assessee.
Validity of gift received – Failure to prove the genuineness – Held that:- The Revenue has already accepted the fact of giving gifts by Shri Surinderpal Singh - after issuing notice u/s 148 on the basis of above noted reasons the assessment was ultimately completed u/s 143(3) r.w.s. 148 in case of Shri Surinderpal Singh vide order dated 28.2.2013 for AY 2005-06 in which it is clearly mentioned that the gifts given by Surinderpal Singh to Pritam Singh and Gurjit Singh were verified - Surinderpal Singh is an NRI and running many business organizations and assessable income in India was nil - Therefore it becomes clear that source of gifts stand explained - reasoning given by the CIT(A) for deleting the addition, is totally correct and the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 700
Non-admissibility of this commission u/s 37 -Applicability of section 9(1)(vii)(b) r.w. section 40(a)(i)(A) – Held that:- It is noted by the CIT(A) that countries of South America and Europe etc. are new business places which required the help of local agents who could be in close proximity with the customers and who could understand the local language whereas LEG who had big picture and also the authority to be flexible with the rate, was overall coordinator of all the LSAs - This finding of CIT(A) could not be controverted by the Revenue - copy of certain correspondences over internet/e-mail of customers /local sales agents and company in connection with procurement of sale orders/ marketing are submitted by the assessee and it is noted that Mr. Brian Young of LEG was very much involved over and above the local sales agents in procurement of orders - the assessee is in India and the customers and LSAs are in South America and Europe etc. - Therefore, if the assessee is taking the services of LEG for better coordination between the assessee company and LSAs, then it is a business decision of the assessee company which cannot be questioned by the AO.
Explanation 2 to section 9(1)(vii) has already been taken into consideration by CIT(A) and by following the Board’s Circular No. 786 dated 07/02/2000, it was held that services rendered by LEG are not managerial services falling within “Fees for Technical Services” (FTS) - commission has been paid by the assessee to LEG for acting in foreign country as selling agent and therefore, the services rendered by LEG are not managerial services to fall in the scope of Fees for technical services (FTS).
Retrospective effect of amendment u/s 195(1) w.e.f. 01/04/1962 – Held that:- As per this explanation, the amendment is this that if the payee is liable to tax in India in respect of the impugned payment than the payer cannot claim that he is not supposed to deduct TDS because the payer is neither a resident of India nor the payer has any place of business in India or business connection in India - since as per Board Instruction, the payment is not taxable in the hands of the payee, TDS is not required to be deducted by the assessee – Decided against revenue.
Addition of payment of "Top UPS" made by the company – Payment constitute Key Man Insurance Premium – Held that:- Both the policies were issued on 28/02/2005 and therefore, the issurance of these policies was before the date of this circular dated 27/04/2005 - At the time of issue of these policies in the financial year 2004-05 relevant to assessment 2005-06, the payment made by the assessee company of ₹ 4 crore was claimed and allowed as keyman insurance policy premium - at the time of issuance of these policies, these policies were not keyman insurance policy - the payment is not renewal but top up premium - if any top up premium is paid after 30/06/2006, it will be hit by this circular of IRDA but in the present case, the top up premium has been paid by the assessee and received by insurance company on 31/12/2005 which is before the date of these last two circulars dated 3/01/2006 and 30/06/2006 in which such increase in sum assured in respect of earlier policy was barred – the order of the CIT(A) is upheld – Decided against revenue.
Addition u/s 43B – Amount paid in not actual payment of Excise Duty but represents adjustment in Cenvat Receivable A/c – Held that:- The payment has been done through the CENVAT deposit account before due date of filing of return of income - this is actual payment and therefore, allowable u/s 43B because it was paid before due date of filing of return of income - payment through CENVAT or through PLA both are actual payments and therefore, both are allowable if the same has been paid before the due date of filing of return of income - If payment by way of CENVAT is not actual payment as per the AO - then he should have added all such payments also which were paid during the year but he has added only those such payments which were made after 31st march but before the due date of filing of return of income - This is not the objection of the Revenue that this payment was not made before due date of filing of return of income – the order of the CIT(A) is upheld – Decided against revenue.
Commission paid on domestic sales – Held that:- CIT(A) rightly was of the view that although the agent i.e. M/s Super Smelters Ltd. had booked its commission income in the F.Y. 2004-2005 for coordinating the sales to M/s Shiva Polymers Pvt. Ltd., the same norm cannot be thrust on the assessee company because the assessee company has booked the commission expenditure because the sales have been effected during the current year i.e. AY 2005-06 only – the order of the CIT(A) is upheld – Decided against revenue.
Commission paid to Managing Director – Held that:- CIT(A) rightly was of the view that the AO has not brought anything on record to show that the salary paid to the Managing Director is excessive in comparison to other similarly placed Managing Director (CEOs) - the Managing Director gets a fixed salary and a variable pay in the form of commission which is computed @1% of the profit of the assessee company - the payment of commission to the Managing Director is much below this ceiling as per Companies Act because no commission has been paid to any other Director - Since the payment of commission is in line with the resolution passed in Annual General Meeting of the assessee company and also in the line with the provisions of Companies Act and no adverse material has been brought on record to show that the same is excessive, there is no reason to interfere in the order of CIT(A) – Decided against revenue.
Withdrawal of depreciation on New Aluminum Structure and Water Proofing – Held that:- CIT(A) rightly noted that the expenditures were incurred in respect of water proofing - these new aluminum structure/doors were got erected for making partitions & dividing walls and the water proofing was done on the existing roof of factory shed and therefore, it is not creating any new asset nor it increased the existing efficiency or capacity - putting dividing walls and doors as partition in the existing shed and water proofing of existing factory shed, does not amount to bringing a new asset in existence and hence, the same is allowable as revenue expenditure – Decided against revenue.
Interest and expenses disallowed u/s 14A r.w. Rule 8D – Held that:- Following the decision in Godrej & Boyce Mfg. Co. Ltd. vs. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D is applicable from the AY 2008-09 and therefore, it is not applicable in the present year - But at the same time reasonable disallowance is to be made - Since disallowance was made by the Assessing Officer and confirmed by CIT(A) as per Rule 8D, the matter is liable to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.
Various expenses disallowed - staff welfare expenses, telephone expenses and vehicle running & maintenance expenses – Held that:- Ad hoc disallowance out of staff welfare, telephone expenses and vehicle running & maintenance expenses was made by the AO - Following the decision in Sayaji Iron and Engg. Co. vs. CIT [2001 (7) TMI 70 - GUJARAT High Court] - no disallowance is to be made out of telephone and vehicle running expenses in the hands of a company on the allegation of personal user of the directors/employees - the part disallowance deleted by CIT(A) under the two heads i.e. telephone expenses and vehicle expenses do not call for any interference - Regarding the part disallowance deleted by CIT(A) in respect of staff welfare, the disallowance was made by the AO for the expenses by alleging that they are not fully verifiable but he has not cited a single instance which is of not verifiable – Decided against revenue.
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2014 (10) TMI 699
Deferred revenue expenditure - assessee submitted that since the amount was of deferred revenue nature, being partly relatable to current year and partly to subsequent year, therefore, for preparation of balance sheet, it was claimed as deferred revenue expenditure in the balance sheet but for Income tax purposes the entire amount was claimed as deduction in the computation of income u/s 37 – Held that:- There is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific provisions like section 35D - unless statutory provision is there to defer the revenue expenditure over a period, the entire amount is to be allowed in the year in which it is incurred for running the business as per section 37 of the Income Tax Act – following the decision in COMMISSIONER OF INCOME TAX Versus SALORA INTERNATIONAL LIMITED [2008 (8) TMI 138 - DELHI HIGH COURT] - the entries in the books of account cannot be the basis whether a receipt is taxable or not or whether expenses are allowable as a deduction or not - Courts are compelled to go by the true nature of receipts and not to go by the entries made in the books of account – Decided partly in favour of assessee.
Credit investigation expenses – expenses on application capture – Held that:- The reasoning given by AO in regard to amount is akin to treating the amount as deferred revenue expenditure inasmuch as the AO himself has observed that there was necessity of this expenditure and while so holding, the AO himself has allowed 25% of this expenditure impliedly 1/4th of the amount has been considered as expenditure relating to current AY and the balance being allowable in subsequent three years - this treatment is not permissible in law and the entire amount had to be allowed u/s 37 of the Income Tax Act being incurred wholly and necessarily for the purpose of business - the nature of application capture expenditure, reasons for making disallowance by AO and the reasons for allowing this expenditure by ld. CIT(A) are identical to the issue relating to credit investigation expenses – thus, the order of the CIT(A) is upheld.
Partial disallowance of creation of brand and advertisement expenses – Held that:- AO had allowed 25% of the expenses treating the same being relating to current year under consideration and balance has been disallowed - he has primarily treated this amount as deferred revenue expenditure - the entire amount was rightly allowed by CIT(A) particularly because 79% of the expenditure was in the nature of commission paid to marketing agent for procuring new cardholders - It cannot be denied that this expenditure though classified under the head “advertising expenditure” was essential for running of assessee’s business – Decided against revenue.
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2014 (10) TMI 698
Interpretation of word previous owner - Family settlement agreement/memorandum – transfer of shares - Held that:- Section 49 makes it clear that if the mode of acquisition of a capital asset was by way of gift or will then it would not mean only the last previous owner but would include the previous owner from whom the capital asset devolved on the last previous owner because indexation is to be allowed in respect of period of holding of the asset and not in relation to the individuality of the assessee – following the decision in CIT vs. M/s Janhavi S. Desai [2012 (7) TMI 496 - BOMBAY HIGH COURT] - while computing the capital gains arising on sale of shares acquired by the assessee by way of gift, the indexed cost of acquisition is to be computed with reference to the year in which the previous owners first held the assets and not the year in which the assessee became the owner of the asset – thus, there was no infirmity in the order of CIT(A) directing the AO to compute the capital gains in the case of the assessee by applying the indexed cost of acquisition in which the previous owners first held the shares – Decided against revenue.
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2014 (10) TMI 697
Addition of excess consumption of diesel - Whether the CIT(Appeals) has erred in not considering the deletion of addition of ₹ 3,58,15,876/- on account of excess consumption of Diesel without appreciating the facts brought on record by the A.O. and only upholding the addition of ₹ 1,20,000/-on account of personal use of diesel in the diesel car owned by the assessee – Held that:- As per AO, the consumption of diesel was excessively high in comparison to the earlier years - CIT(A) allowed the claim of the assessee by deleting whole addition except ₹ 1,20,000 on the ground of personal use of diesel in the car owned by the assessee - the AO has made disallowance presuming that the consumption of raw material was 1,07,049.45 quintals which was of wheat only - The AO ignored a very important fact that the assessee was not doing only processing of wheat for manufacturing of atta, suji and maida upto AY 2006-07 but during the year under consideration i.e. AY 2007-08, the assessee also started the processing of choker for producing superfine choker/bran which had been sold for ₹ 6,03,38,004/- during the year - the assessee has processed 1,86,207.04 quintals of choker for production of superfine choker/bran which process also uses diesel - The AO has not considered the consumption of diesel for the purpose of manufacturing of superfine choker/bran by processing of 1.86 lakh quintals of choker - as per expert advice for production of better quality of choker etc., the assessee needed load of 625 KVA against existing load of 385 KVA but despite application and efforts by the assessee, load was not increased during the year - the assessee got connection of 625 KVA on 26.05.2009 beyond the period of financial year under consideration.
The assessee maintains proper records to show the purchase and consumption of diesel for its business purpose which justifies the increase of consumption of diesel during the year – the AO has formed opinion for disallowance on incorrect and incomplete facts and also by ignoring and not considering other important evidence submitted by the assessee to support its claim - CIT(A) has granted relief for the assessee but the findings are not based on cogent and justified reasons - the AO should have considered some substantial and cogent evidence submitted by the assessee to verify its claim pertaining to the diesel consumption - The AO ignored verification of diesel consumption log book, purchase of generators, boilers and six body chakki installed during the year for production of better quality products - The AO also ignored a very important fact that besides production of atta, suji and maida, the assessee also started production of high quality choker/bran during the year for which the assessee required increased load of electricity and power which the assessee could not get during the year and maximum use of power was based on generators - The AO also ignored another important fact that there was load shedding during the year and on the other hand, the assessee was compelled to install generators, boilers and other equipments to meet the decreased supply of electricity and increased use of power during the year – thus, the matter is to be remitted back to the AO for verification of correctness of claim – Decided in favour of revenue.
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2014 (10) TMI 696
Transfer pricing adjustment - Payment of royalty and technical service fee – Held that:- Kirby Building Systems India P. Ltd., is a wholly owned subsidiary of Alghanim Industries, a Kuwait based Multi-Billion Conglomerate - It is one of the world’s largest producers of Pre- Engineered Steel Buildings (in short “PEB”) and has been operational for more than 38 years since 1976 - There is no dispute with reference to the fact that assessee was promoted by the Kirby Building Systems, Kuwait and its original technical service agreement for payment of lump sum amount of $ 2 million dollars as technical knowhow fee and royalty of 2.5% in the first year and 5% from second year onwards up to March 31, 2007 was approved by the RBI and Ministry of Industries - assessee did not remit any of those amounts in those years and the agreement was amended periodically - in the year assessee has paid $ 1 lakh dollars as technical knowhow fee and royalty at 7.5% on domestic sales as per the agreements entered into and approved by the authorities - apart from legal position, even on merits the disallowance of entire technical knowhow payment and part disallowance of royalty payment to AE was not warranted.
The agreements were periodically approved by RBI and by Ministry of Industry and assessee was paying the amounts as per the agreements - Even though approval by the other Governmental authorities does not prevent TPO in examining the ALP as per the provisions of the Act, TPO did not examine the issue under the T.P. provisions at all but took upon the role of an A.O. in analyzing the commercial expediency of payment of royalty and technical knowhow under the provisions of section 37(1) - Since the agreements were approved by the authorities and the royalty fee and technical knowhow are at arm’s length and that assessee’s claim should be allowed as such - There is no information brought on record by the TPO that the payment at 7.5% on the net sales is not at arm’s length as there was no other comparable case brought on record - Generally, the Government of India is approving the royalty payments at 7.5% of the sales and this approval given by the RBI and Ministry of Industry is at par with similar agreements being approved in other contracts/agreements - royalty and technical knowhow payments made by the assessee to its AE are considered at arm’s length and the grounds raised by the assessee on this issue are allowed – Decided in favour of assessee.
Deferred sales tax u/s 43B - Provisions of A.P. VAT Act, 2005 – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the AO disallowed the claim of the assessee stating that it failed to produce a copy of the agreement with the Sales Tax department on conversion of deferment into interest free loan - As per this document, which the photocopy is enclosed herewith, the benefit availed under sales tax deferment scheme - They have also produced the letter of Asst. Commissioner, Large tax payers Unit, Charminar Division in their favour – thus, the AO is directed to allow the amount as well – Decided in favour of assessee.
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2014 (10) TMI 695
Partial disallowance on license fee payment u/s 40 A - excessive or unreasonable payment of royalty – Held that:- The assessee paid royalty to the extent of ₹ 100,18,62,000/- on account of general license fee payable to SPN - The AO disallowed to the extent of 40% holding that the assessee has incurred huge expenditure on advertisement which had resulted in brand building for the parent company – following the decision in COMMISSIONER OF INCOME TAX Versus M/s NESTLE INDIA LTD. [2011 (5) TMI 566 - DELHI HIGH COURT] - Past history on the issue has been the reasoning for making the disallowance by the AO and thus apart from difference in the amounts the reasoning for making the disallowance has remained the same - the CIT(A) taking into consideration the past history as discussed in the earlier appeal has deleted the addition made by a disallowance – Decided against revenue.
Disallowance u/s 14A – Held that:- The AO considering the facts that the assessee had earned dividend income which did not form part of the total income required the assessee to address why disallowance u/s 14A read with Rule 8D of I.T Rules 1962 should not be made - sub-sections (2) & (3) of section 14A and Rule 8D would operate prospectively does not mean that the AO is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure - If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further – relying upon CIT., Mumbai Versus M/s. Walfort Share & Stock Brokers P. Ltd. [2010 (7) TMI 15 - SUPREME COURT] - in this light of the departmental stand the assessee’s stand that detailed argument on facts are required to be addressed stands addressed by the issue accordingly after having the parties is restore, by the AO who shall adjudicated upon the issue denovo after giving the assessee a reasonable opportunity of being heard – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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2014 (10) TMI 694
Jurisdiction of CIT u/s 263 – Requisite enquiries carried out or not – AO not acted after obtaining the information - Held that:- the return of income was filed on 31.08.2009 - The assessee company had shown no trading activity - after collecting some information the AO did not act any further - There is no whisper in the order sheet as to whether AO made any discussion or enquiry with regard to the share capital and share premium - there was no enquiry by the AO and hence the CIT was justified in taking action u/s 263 of the Act - CIT has referred to the common practice being followed particularly in Kolkata where through the entries of share capital and share premium in dummy companies a very large amount is sought to be introduced and laundered by way of these companies - the issue of share capital and share premium needed an enquiry in the proper sense of the word and not a facade of enquiry.
It is evident that after collecting some information the AO did not act any further. There is no whisper in the order sheet as to whether AO made any discussion or enquiry with regard to the share capital and share premium. In order dated 18.03.2011 it was barely two days after the receipt of last reply the AO writes in the assessment order that “notice u/s 133(6) of the Act were issued to the share subscribers on test check basis the replies from their end are verified”. In this regard we agree with the ld. DR, the AO has shown undue haste in completing the assessment.
There was no enquiry whatsoever by the AO rather the entire exercise was to make a perfunctory attempt to give a facade of enquiry – there was no cogent substance in the submission that prior to the introduction of proviso to section 68 and introduction of section 56(2)(viib) there was no requirement on the AO to enquire the genuineness of amount received as share capital and share premium - The receipt of any amount by whatever name called if the same is not genuine does fall under the ken of section 68 - there is no infirmity in the order passed by the CIT u/s 263 – Decision in Zigma Commodities Private Limited vs ITO [2014 (5) TMI 672 - CALCUTTA HIGH COURT] followed - Decided against assessee.
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2014 (10) TMI 693
Piercing the corporate veil - Application of section 2(22)(e) and 56(2)(vi) - Realignment of the assets between family - Whether the realignment of the assets between the family members/HUF will give arise to taxable income U/s. 2(22)(e) and 56(2)(vi) or any other provisions of the Act – Held that:- For understanding the true nature of the transactions, the corporate veil of the intermingled companies in the transactions needs to be pierced - In the case of the Public Limited company M/s. SKM Egg Products Export (India) Ltd., only the equity shares of M/s. SKM Egg Products Export (India) Ltd., held by M/s.SKM Animal Feeds and Foods (India) Limited were transferred to Shri SKM Shree Shivkumar and not any assets held by the company were transferred, therefore the issue of piercing the corporate veil of this company will not arise and also being a public limited company, that may not be permitted - In the case of both the other companies, the entire shares are held by the family members only - on piercing the corporate veil of both these companies; it becomes clear that all the transactions intermingled were due to the family settlement arrived at either pursuant to Arbitration Award or oral agreements - various higher judiciaries have also validated the oral agreements in the case of Family/HUF partial or total partition.
When there is any distribution of assets pursuant to family arrangement or HUF partial/total partition, such transactions will not amount to transfer of asset attracting tax liability in the hands of the recipient under the provisions of the Act - on piercing the corporate veil with respect to the two private limited companies viz. M/s.SKM Animals Feeds and Foods (India) Ltd., and M/s. SKM Siddha and Ayurvedic Medicines India Pvt Ltd., the entire intermingled transactions can be seen only as the family settlement arrived at through Arbitration Award amongst Hindu family members - Further there are no transfers of assets with respect to the public limited company M/s.SKM Egg Products Exports (India) Ltd. - Therefore, considering the facts and circumstances of the case the provisions of section 2(22)(e), 2(24)(iv) or Sec.56(2)(vi) cannot be invoked - the addition made by the AO which is further sustained by the Ld. CIT (A) on account of deemed dividend U/s. 2(22)(e) of the Act and income from other sources U/s. 56(2)(vi) is to be deleted – Decided in favour of assessee.
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2014 (10) TMI 692
Unexplained credits u/s 68 – Onus to prove - Held that:- Whatever compliance was asked by AO, assessee has duly filed the same - onus cast u/s 68 is primary in nature – there is no infirmity in the order of CIT(A) that as a per the first requirement of sec 68 assessee discharged its primary onus – relying upon COMMISSIONER OF INCOME TAX DELHI - II Versus KINETIC CAPITAL FINANCE LTD. [2011 (9) TMI 289 - DELHI HIGH COURT] - each instance of cash credit is to be identified and a bunch of transaction without specifying the details cannot be added u/s 68 - assessee has explained each credit entry in both the bank a/cs along with the source thereof i.e. cash available in books - Bank a/cs are disclosed and part of the regular recording of assesses real estate business - They have not been rejected, therefore, the books of accounts and generation of cash is thus impliedly accepted by AO - There is total lack of appreciation of facts and material available on record and the assessing officer’s observations suffer from self-contradictions - CIT(A) after verification has given clear findings of facts that AO failed to properly considered the material produced by the assessee in discharge to it’s primary onus - due to non-appreciation of assesses explanation and evidence in a proper manner, AO has made contradictory observations – the order of the CIT(A) is upheld as the assessee duly discharged its primary onus in terms of sec 68 to explain the entries in SBI and ABN Amro bank A/cs – Decided against revenue.
Unconfirmed creditors – Held that:- Assessee has filed sufficient evidence which are detailed above and claims to have discharged its primary onus in terms of sec 68 - CIT(A) has rightly held that in income tax proceedings attested photocopies duly signed are admissible as evidence in income tax proceedings - the assessee has been able to demonstrate that due to name change of Taral Vincom to Link point Infrastructure Pvt. Ltd w.e.f. 6.5.2009, the notice u/s 133(6) remained unserved - AO has to ascertain the facts and discharge of primary onus on the basis of material available on record after giving adequate opportunity of hearing - He cannot brush aside the entire evidence on the pretext that party is not physically produced more so when it is apparent that it was physically impossible for assessee to ensure production of Kolkata party in one day’s short time.
Regarding other sundry creditors, assessee discharges its primary onus in terms of sec. 68 which is attempted to be rebutted by AO on assumptions and sweeping observations - They are all parts of books of accounts which are accepted by AO without raising iota of doubt - The due confirmation, explanation of entries and source thereof emanating from books of accounts is duly explained by the assessee – relying upon COMMISSIONER OF INCOME TAX-IV Versus M/s. DWARKADHISH INVESTMENT (P) LTD. and M/s. DWARKADHISH CAPITAL (P) LTD. [2010 (8) TMI 23 - DELHI HIGH COURT] - assessee has discharged it’s onus in terms of sec 68 – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 691
Deemed dividend u/s 2(22)(e) – Loans and advances received - substantial part of business in money lending - ordinary course of business of the company - Held that:- If the assessee receives loans or advances from a company, in which it has substantial interest, the same loan and advances would be treated as deemed dividend in the light of provisions of section 2(2)(e) of the Act - But there are exceptions in this provision and as per exclusory clause (ii), if the assessee establish that advance or loan made to shareholders/assessee by a company in the ordinary course of its business and the lending of money is substantial part of business of the company - Loan and advances by the company would not be deemed dividend - the advance or loan was given to the assessee in the ordinary course of its business - the assessee has failed to establish that substantial part of business of the company is money lending - where the money lending business of the company constitutes less than 20% of its total business, lending of money was not substantial part of business of the company – relying upon CIT vs. Parle Plastics Ltd. and Another [2010 (9) TMI 726 - BOMBAY HIGH COURT] - expression substantial part does not connote an idea of being the “major part” or the part that constitutes majority of the whole - the capital employed by a company for carrying on a particular division of its business as compared to the total capital employed by it, would also be relevant while considering whether the part of the business of the company constitutes “substantial part of the business” of the company.
There should not be any controversy that “substantial part of business” is not equivalent to the word “major part of business”, as the Legislature has not used the words “major part of business” in place of “substantial part of business” - But the Legislature has consciously used the words “substantial part of business” which means that any business of a company which the company does not regard as small, trivial, or inconsequential as compared to the whole of the business is substantial business - if particular per cent of capital of the company is employed in the money lending business, the company can be called to have substantial part of business in money lending - In the light of Explanation 3(b) below section 2(22)(e) of the Act, where a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of that concern - if 20% of the capital of the company is deployed in money lending business of the company, the company shall be held to have a substantial part of business in money lending.
Two companies i.e. Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd., in which the assessee has more than 10% shareholding and has substantial interest therein, have given loan and advance to assessee only - Except the assessee, they have not given any loan or advance to any other person - the company has substantial part of business in money lending - If the company is engaged in advancing loans to different persons apart from assessee and fulfils the conditions of percentage of capital employed in money lending business, the company has substantial part of business in money lending - loans and advances were given only to the assessee and not to others, therefore, the company cannot be called to have a substantial part of business in money lending - Thus, the second ingredient of exclusion clause (ii) contained in section 2(22)(e) of the Act is not satisfied and the assessee cannot get the benefit of exceptional clause - the A.O. has rightly treated the advance or loan given to the assessee by the company i.e. Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd. as deemed dividend - CIT(A) who has not examined all the aspects while granting relief to the assessee – the order of the CIT(A) is set aside and the matter is to be remitted back to the AO – Decided in favour of revenue.
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2014 (10) TMI 690
Consulting Engineer Services - Held that:- Appellants are not disputing the activity. The appellants undertake the activity of survey, preparation of plan and estimate of canal and distribution under a composite work order - survey and map making service has come into the service tax net from 16.6.2005. Hence the demands relates one of the activities of map making service under the composite work order which is for survey, design, preparation of plan etc therefore we find no infirmity in the impugned order - Decided against assessee.
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2014 (10) TMI 689
Denial of refund claim - Unjust enrichment - Held that:- doctrine of unjust enrichment would be applicable in the case of deposit of disputed amount. However, the appellant have been able to show that throughout they have been showing this amount in as receivables from the customs department, in their books of account. This has been supported by a Chartered Accountant certificate dated 24-11-2006. The ld. advocate on instruction from the appellant also made a statement that at present position is unchanged. Further the department has not challenged the veracity of the Chartered Accountant certificate and the balance sheet produced by the appellant. Commissioner’s order is not sustainable and hence set aside - Following decision of UOI v. Jain Spinners Ltd. [1992 (9) TMI 88 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2014 (10) TMI 688
Levy and demand of service tax from the Director of Company - appellant signed the agreement as a Director on behalf of the Company - Held that:- Demand of Service tax is confirmed against her when in para 13 of OIO dtd 31/3/2013 contains the stand of the appellant that she is only an operator and company is responsible for payment of service tax. This issue raised by the appellant has neither been deliberated upon by the adjudicating authority nor the first appellate authority under OIA dtd 13/3/2014. It is observed from the contract dated 1/4/2012 entered between BPCL and M/s Bombay Garage (Rajkot) Pvt Ltd that Ms Bhavna Jayantibhai Desai is signing on behalf of the M/s Bombay Garage (Rajkot) Pvt Ltd as a Director which is confirmed in her statement dated 12/9/2012 stating that she is receiving a salary of ₹ 25000/- per month for rendering services and is not required to pay any service tax. As the issue involved in the present proceedings lies in a narrow compass, therefore, after allowing the stay application, appeal is taken-up for disposal - appellant signing the contract as the Director of the Bombay Garage (Rajkot) Pvt. Ltd. cannot be held as the service provider. Therefore, no demand can be confirmed against the present appellant when the original show cause notice dated 20/9/2013 was issued to M/s Bombay Garage (Rajkot) Pvt. Ltd, Rajkot and by no stretch of imagination it can be considered that the Director of a Pvt. Ltd company is the service provider in the present case - Decided in favor of assessee.
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2014 (10) TMI 687
Rectifications of mistake - Typographical mistake - Held that:- as appellant had not provided any service regarding which the appellants are liable to pay service tax on reverse charge mechanism in respect of any service provided or to be provided by or to such installations, structures and vessels or for supply of any goods connected with such activity to installations, structures and vessels within the continental shelf and the exclusive economic zone of India, the appellants are entitled for refund - Rectification done.
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2014 (10) TMI 686
Waiver of pre deposit of Service Tax - construction services - sub contractor or not - Held that:- who supplied manpower to service receivers who in turn rendered construction services to the thermal project. It is the claim of the applicant that as a sub-contractor to the service receiver, the amount of service tax paid by the service receiver on the total taxable value of construction service, be considered as discharge of their service tax liability. The Revenue on the other hand disputes that the services receiver has received the services under the category of manpower supply and rendered services under the category of construction services. Therefore, the service tax paid by the service receiver under the head 'construction services' cannot absolve the present applicant from the liability of service tax on manpower supply service. Prima facie, we agree with the Revenue for the simple reason that to avoid double taxation, mechanism of CENVAT Credit has been introduced in the system. In the event, the service tax paid on manpower supply is used in providing construction service then the service receiver is allowed to take credit and discharge his tax liability. In the result, the applicant could not make out a prima facie case for total waiver of pre deposit of dues adjudged - partial stay granted.
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2014 (10) TMI 685
Waiver of the pre-deposit - clubs or association services - Held that:- It transpires from the records that the appellant has effluent treatment plant which is commercially exploited by entering into a contract with the industries nearby for treating the effluent generated. It is also seen from the records that the appellant is raising invoices for such payment of effluent. It is the case of the Revenue that the appellant is club or association person of various persons. The arguments put forth by the ld. Departmental Representative to submit that clubs of association means person or business entity providing services and facilities for the subscription or any other amount as fees may not carry the case of Revenue any further. There is nothing on record to show that the industries in and around the effluent treatment plant were the members of the appellant. In absence of any such evidence, prima facie, we find that though the appellant has rendered some kind of services, it may not fall under the category of club or association services. We are of the view that the appellant has made out a strong prima facie case for waiver of the pre-deposit of the amounts involved. - Stay granted.
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2014 (10) TMI 684
Maintainability of appeal - Bar of limitation - Delay in receipt of order - Held that:- Adjudication order was dispatched through post on 30-3-2010 and the observation of the Commissioner (Appeals) in the impugned order is that the same has been received by the appellant on 30-3-2010. The said observation of the Commissioner (Appeals) is not sustainable as the order which had been dispatched on 30-3-2010 could not be delivered by the Postal authorities on the same day. In the absence of any evidence on record of the service of the order on the same day, the observation of the Commissioner (Appeals) is not sustainable in the eyes of law whereas the appellant has produced the inward register showing the receipt of the said order on 3-4-2010. In the absence of any contrary evidence, the evidence produced by the appellant is acceptable. Therefore, I hold that the adjudication order was served on the appellant on 3-4-2010 and against the said order, the appeal was filed by the appellant on 3-6-2010, i.e. within 90 days of the communication of the adjudication order - Matter remanded back - Decided in favour of assessee.
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2014 (10) TMI 683
Waiver of pre deposit - Real Estate Agent service - Held that:- Assessee had entered into agreement with four persons for purchase of the land. However subsequently he did not purchase the land but with the four persons with whom he had entered into agreement, the land was sold to M/s. Melmont Construction (P) Ltd. In the sale deed Assessee was also shown as one of the vendors. From the grounds discussed above, it becomes quite clear that Assessee was also a seller along with other four. How he became a part of the selling group is a mystery which we can solve and may be find out at the time of final hearing only. At this stage since as per the records and as per the statement given by him without any contrary evidence, he was also a part of the sale deed, it may not be appropriate to consider him as Real Estate Agent - Stay granted.
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2014 (10) TMI 682
Denial of CENVAT Credit - Penalty u/s 11AC - Same registered office of exporter and recipient of service - Whether the manufacturing unit at Mahad of the appellant which is a manufacturer and exporter of the goods can avail CENVAT credit of Service Tax paid on CHA services in respect of the goods exported, when the exporter has a registered office at Pune - Held that:- goods were manufactured at Mahad unit and transported from there to the port of export and the CHA service was availed for the goods manufactured at the Mahad. Therefore, we do not find any infirmity or any provisions in law which prohibits the Mahad unit from availing credit of the Service Tax paid on the CHA service for export of the goods. Accordingly, we hold that the impugned order is not sustainable in law - Decided in favour of assessee.
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