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Showing 41 to 60 of 2006 Records
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2018 (4) TMI 1970
Disallowance of interest u/s 14A - expenditure incurred on earning exempt income - sufficiency of own funds - CIT(A) deleted the addition - HELD THAT:- As decided by CIT(A) what s.14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax-free income. Hence in the absence of any tax-free income, the corresponding expenditure could not be worked out for disallowance.
There are ample interest free funds available for investment in shares. A table showing year wise accruals are testimony to the same.The intention of investment was not to earn dividend. There has been no dividend during the period of holding is a testimony to that proposition. Also the objective of investment was to sit in management to influence decision making of that company and fetch construction contract and also to gain capital appreciation in value of shares by selling the same when execution risk is overcome. Therefore even presuming that the same was out of borrowed funds, it is clearly manifested that there has been no dividend but the income from acquiring contract was offered to tax. Also capital gains on sale of shares were offered to tax. Therefore in the peculiar facts and circumstances, it is demonstrated by the assessee by actually offering the income to taxation then it cannot be said that shares were intended to earn income which is tax exempt.If the investment has a potential to earn non exempt income 14A cannot be invoked.
The visit to 14A (2) or (3) is permissible only when the claim of the assessee has been held to be incorrect by showing cogent reason. Satisfaction or dissatisfaction is to be supported by valid reasons
From the order of the Ld. CIT(A), it is evident that the Ld. CIT(A) has examined the factual aspects of the case. The Revenue has not rebutted the finding by placing any contrary material on record. Therefore, we do not see any reason to interfere with the orders of the Ld. CIT(A). Decided against revenue.
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2018 (4) TMI 1969
Treatment of agricultural income as non agricultural income - search carried out u/s.132 and also survey u/s. 133A at the business premises of the assessee on 05/11/2009 - HELD THAT:- The return of income for the assessment year 2004-05 was filed on 19/12/2010 showing agricultural income which was filed before the due date of filing the return of income. Whenever the assessee declared agricultural income in his return, burden is on the assessee to show that income is actually earned from agricultural and not from other sources. In the present case, there is no evidence placed with reference to the earning of agricultural income and corresponding expenditure incurred with reference to agricultural operations. The Assessing Officer has made a reasonable estimate on the basis of material seized. Being so, for the assessment year 2004-05, the Assessing Officer treated the agricultural income and treated balance as non agricultural income. Before us also, the assessee was not able to show any material to suggest that the entire income of Rs. 2,20,000/- for the assessment year 2004-05 is from only agriculture. Being so, for the assessment year 200405, we have no hesitation to confirm the order of the CIT(A) on this issue. This ground of appeal of the assessee is rejected.
Addition towards unexplained credit in the bank accounts of the assessee - The assessee is operating bank account in the name of his employees which was admitted by the assessee in his sworn statement recorded u/s. 132(4) of the Act which itself is an evidence. The assessee though agreed to treat the account as suppressed receipts, the only plea was that the GP rate is to be considered on peak credit to estimate the income. In our opinion, whenever any unexplained deposits is found in the name of the assessee, then it is the duty of the assessee to explain the source of the same. In the present case, the assessee is not able to lead any evidence on this. The whole deposits is to be considered as income of the assessee since the expenditure relating to the receipts has already been taken care of by the expenditure claimed in the assessee’s regular books of accounts. Being so, we are inclined to sustain the addition for the assessment year 2006-07. This ground of appeal for the assessment year 2006-07 is rejected.
Deposit in the bank accounts represents suppressed sale - As such only profit element is to be considered. On the other hand, the contention of the Ld. DR is that the employees in their statements u/s. 132(4) stated that these accounts were operated in the name of the employees and it is the income of the assessee. Admittedly, in this case, the assessee was not able to show it as trading profit of the assessee and incurring of any expenditure to earn this income. It means that it is concealed income of the assessee and all relevant expenditure relating to this income has already been taken care of in the regular books of account and there is no question of any further deduction out of this. The unaccounted deposit is to be considered as the income of the assessee and not the G.P on it. We do not find any infirmity in the order of the CIT(A) on this issue. Accordingly, this ground of appeal of the assessee is for the assessment year 2008-09 is rejected.
Undisclosed investment - Admittedly there is a reference of statement of Shri K.C. Thomas in the assessment order. The Assessing Officer adopted the value of the property at Rs. 1550 per cent on the basis of the statement of Shri K.C. Thomas of 5/11/2009 in whose favour the power of attorney was obtained. Further, the land was purchased in the assessment year under consideration from 16 different owners and enquiry was not made with these persons regarding the extra payment. In our opinion, it is appropriate to remit the issue to the file of the Assessing Officer with a direction to the assessee to furnish a copy of the statement of Shri K.C. Thomas and also to enquire with the respective seller and decide thereupon. With this observation, we remit the issue to the file of the Assessing Officer for fresh consideration. This ground of appeal is allowed for statistical purpose.
Valuation of the property after applying State PWD rates - The assessee had constructed a factory and office building at Vazhakad during the period 1.3.2005 to 1.4.2008. As per the report of the Valuation Office, the total cost of construction was arrived at Rs. 1,67,92,000/-. The assessee declared only a sum of Rs. 1,14,63,115/- as the cost of construction. Thus there was a difference of Rs. 53,28,885/- between the valuation report furnished by the DVO and the cost of construction declared by the assessee. Further, the Ld. AR submitted that the State PWD rates should be applied. If the assessee spent Rs. 20 lakhs after the assessment year 2008-09, then the difference would be only Rs. 14,22,641/- . In our opinion, there is force in the argument of the Ld. AR with regard to the consideration of State PWD rates for valuation of the construction. To that extent, we agree with the contention of the Ld. AR. Accordingly, we direct the AO to re-work the valuation of the property after applying State PWD rates. Regarding the actual cost of construction, the Ld. DR cannot have any objection. Hence, this ground of appeal of the assessee is partly allowed for statistical purposes.
Agricultural lease rent received - The documents produced by the assessee are in the form of Xerox copies of the lease agreements which is only self-serving and no importance is to be given. In view of the fact brought on record by the Assessing Officer and confirmed by the CIT(A), we have no hesitation in upholding the order of the lower authorities. Hence, this ground of appeal for the assessment years 2007-08 and 2008-09 is rejected.
Assessments u/s. 153A r.w.s. 153C - HELD THAT:- We find no infirmity in the issue of notice u/s. 153A of the Act calling for filing of returns of income on 03/05/2010 for the assessment year 2004-05 to 2009-10. Being so, we are not in agreement with the argument of the ld. AR that the issue of notice u/s. 153A is bad in law and thereafter, framing of assessments u/s. 153A r.w.s. 153C of the Act.
Addition made towards lease rent from property in Maharashtra as agricultural income - HELD THAT:- The issue was dealt with in earlier paras wherein we held that it is only a make believe story so as to show the source of income to explain the investments. The facts of this case is also similar and the assessee created self serving documents towards introducing own cash in the garb of exempted agricultural income. No credence is to be given to the photocopies of the agreements filed by the assessee. Accordingly, in our opinion, the lower authorities are justified in rejecting the claim of the assessee in this case also. This ground of appeals of the assessee is dismissed.
Additions towards suppression of sale - HELD THAT:- CIT(A) considered 10% of GP on the suppressed sales in respect of entire turnover as income of the assessee. Generally, we consider the entire turnover as suppressed income of the assessee. However in the present case, CIT(A) considered only 10% of the GP on the suppressed sales as income of the assessee and he was very liberal. Since the Department is not in appeal before us, there being no option before us, we are inclined to confirm the order of the CIT(A) on this issue. This ground of appeals of the assessee is rejected.
Refusal of the assessing authority to accept the claim of receipt of the assessee from Shri Ziad - HELD THAT:- In this case, the assessee has not brought on record cogent evidence to show that the said amount has been received from Shri Ziad. In the absence of specific evidence, we are not in a position to accept the genuineness of the claim of the assessee. Hence, this ground of appeals for both the years is rejected.
Inflated expenditure to the extent of 10% - HELD THAT:- At the time of search, manager of the assessee stated that it was a normal practice of inflating expenditure at the time of finalization of the accounts which was evident from the materials seized from the premises of the assessee and the statement alongwith the return. Since there was evidence in the form of seized material to suggest inflation of expenditure, the CIT(A) considered 10% of the gross profit as inflated expenditure. In view of this we do not find any infirmity in the order of the CIT(A). Accordingly, we confirm the same. This ground of appeal of the assessee is dismissed.
Addition made on the basis of seized material found during the search - As assessee has not placed any material contrary to this. Hence we do not find any infirmity in the order of CIT(A) and confirm the same.
Unexplained investment and on the basis of valuation report filed by the DVO - HELD THAT:- As there was no incriminating material or any statement of the assessee or his employee to indicate the fact of the under valuation of the machinery. In the absence of any incriminating material it is not possible for us to sustain the addition made by the Assessing Officer. In our opinion, the deletion of addition made by the CIT(A) is justified and the same is confirmed. Accordingly, this ground of appeal of the Revenue is rejected.
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2018 (4) TMI 1968
Conviction based upon a retracted confession - circumstantial evidence - whether the High Court was right in dismissing the appeals preferred by the Appellants-Accused? - HELD THAT:- The law is well settled that each and every incriminating circumstance must be clearly established by reliable and clinching evidence and the circumstances so proved must form a chain of events from which the only irresistible conclusion about the guilt of the Accused can be safely drawn and no other hypothesis against the guilt is possible. In a case depending largely upon circumstantial evidence, there is always a danger that conjecture or suspicion may take the place of legal proof. The court must satisfy itself that various circumstances in the chain of events must be such as to Rule out a reasonable likelihood of the innocence of the Accused. When the important link goes, the chain of circumstances gets snapped and the other circumstances cannot, in any manner, establish the guilt of the Accused beyond all reasonable doubt. The court has to be watchful and avoid the danger of allowing the suspicion to take the place of legal proof for sometimes, unconsciously it may happen to be a short step between moral certainty and legal proof. There is a long mental distance between "may be true" and "must be true" and the same divides conjectures from sure conclusions.
The Court in mindful of caution by the settled principles of law and the decisions rendered by this Court that in a given case like this, where the prosecution rests on the circumstantial evidence, the prosecution must place and prove all the necessary circumstances, which would constitute a complete chain without a snap and pointing to the hypothesis that except the Accused, no one had committed the offence, which in the present case, the prosecution has failed to prove.
Both the courts below have erred in relying that part of the statement which can be termed as confession which were given to the police officer while they were in custody and it will be hit by Section 26 of the Indian Evidence Act, 1872 and only that part of the statement which led to the discovery of various materials would be permissible. Hence, in the absence of any other material evidence against the Appellants-Accused, they cannot be convicted solely on the basis of evidence of last seen together with the deceased.
The judgment and order dated 23.11.2009 passed by the High Court is set aside - Appeal allowed.
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2018 (4) TMI 1967
Striking off of names of the companies in which the petitioners were Directors from the Register of Companies - Section 164 of the Companies Act, 2013 - HELD THAT:- The names of the companies in which the petitioners were Directors were struck off from the Register of Companies and a list of disqualified directors under Section 164(2) (a) of the Companies Act, 2013 has been issued by the second respondent on 8.9.2017. Now the last date for filing the annual return has been extended from 29.11.2017 to 30.4.2018 under the Condonation of Delay Scheme, 2018. Therefore, the impugned order is liable to be interfered with.
Petition disposed off.
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2018 (4) TMI 1966
The Supreme Court of India condoned delay, granted leave, and allowed exemption from filing certified copy of the impugned order. Tagged with Civil Appeal No. 6556 of 2015. (2018 (4) TMI 1966 - SC)
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2018 (4) TMI 1965
Brutal murder of a person with a view to prohibit such person from deposing before the Court in a case against his assailant - dead body was cut into two pieces, and thrown at two different places, in order to destroy the evidence - Existence of common object or not - Doctrine of falsus in uno, falsus in omnibus (false in one thing, false in everything).
The Accused were charge-sheeted, and tried, convicted and sentenced. However, in the meanwhile, two of the Accused died.
HELD THAT:- From the entire evidence, including the ocular testimony of PWs 6, 11 and 14, in our considered opinion, it can be concluded that the prosecution has proved its case beyond reasonable doubt as against the Accused-Kameshwar Singh. However, omnibus and vague evidence is forthcoming as against the other Appellants. The incident had taken place abutting the cattle shed of Nagina Koiri, Accused No. 7. Certain articles were seized from the cattle shed of Nagina Koiri. Two iron rods from the window shutter were found to be cut, which were presumably used for the commission of the offence - It is no doubt true that the evidence on record creates suspicion in the mind of the Court about the participation of the other Accused, but any amount of suspicion may not take the place of proof.
The maxim falsus in uno, falsus in omnibus (false in one thing, false in everything) is not being used in India. Virtually, it is not applicable to the Indian scenario. Hence, the said maxim is treated as neither a sound Rule of law nor a Rule of practice in India. Hardly, one comes across a witness whose evidence does not contain a grain of untruth or at any rate exaggerations, embroideries or embellishments. It is the duty of the Court to scrutinise the evidence carefully and, in terms of felicitous metaphor, separate the grain from the chaff. But, it cannot obviously disbelieve the substratum of the prosecution case or the material parts of the evidence and reconstruct a story of its own out of the rest. Efforts should be made to find the truth. This is the very object for which Courts are created - It is the onerous duty of the Court, within permissible limits to find out the truth. It means, on one hand that no innocent man should be punished, but on the other hand to see no person committing an offence should go scot free. If in spite of such effort suspicion is not dissolved, it remains writ at large, benefit of doubt has to be credited to the Accused. The evidence is to be considered from the point of view of trustworthiness and once the same stands satisfied, it ought to inspire confidence in the mind of the Court to accept the evidence.
The evidence on record points towards the guilt of Kameshwar Singh. It is no doubt true that one man alone could not have committed such a ghastly crime by separating the dead body into two pieces. He must have taken the assistance of others. The prosecution has come out with seven names including Kameshwar Singh, but so far as the other Accused are concerned, particularly in respect of the other Appellants (except Kameshwar Singh), except the omnibus and vague evidence that they were also present and they also joined hands with the Accused-Kameshwar Singh, no other specific and reliable material has come on record. Common object is also not proved - the judgment of conviction passed against the Accused Kameshwar Singh needs to be confirmed, and the same is hereby confirmed.
The Criminal Appeal filed by the Accused-Kameshwar Singh stands dismissed, and the judgment dated 24.05.1988 passed by the VIII Additional Sessions Judge, Sasaram in Sessions Trial No. 192/117 of 1977/1983, convicting and sentencing the Accused-Kameshwar Singh to life imprisonment Under Section 302 Indian Penal Code and three years rigorous imprisonment Under Section 201 Indian Penal Code, as confirmed by the High Court by the impugned judgment, stands confirmed.
Appeal disposed off.
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2018 (4) TMI 1964
Accrual of income in India - PE in India - LO executing business or contracts independently with the customers in India - Whether the assessee’s LO in India constitutes a PE under Article 5 of the DTAA between India and Japan? - HELD THAT:- As following the parity of reasoning brought out by our co-ordinate Bench for Assessment Year 2007-08 in its order we may note that so far as the instant year is concerned, there is no evidence and material referred to by the income-tax authorities so as to establish in the instant year that the LO was executing business or contracts independently with the customers in India and, therefore, the plea of the assessee that the LO was carrying only support activities and was engaged in preparatory and auxiliary activities deserves to be affirmed and the LO could not be construed as a PE in India.
There was no material to suggest that any action was taken by the RBI or whether any correspondence in this regard was at all made by the AO or not. Be that as it may, even before us, there is nothing to suggest that the RBI has found the activities of the LO as being noncompliant with the terms and conditions of its permission and, therefore, the said factual matrix strengthens the assertions of the assessee that the LO was performing activities which were permissible by the RBI, meaning thereby, that it was only performing support activities and engaged in only preparatory and auxiliary activities and not in the nature of a PE so as to impute any business connection in India. Thus, following the precedent as also the aforesaid discussion, in our view, it is irresistible to conclude that the assessee’s LO did not constitute a PE in India for the Assessment Year 2005-06. In this view of the matter, the Ground of appeal no. 1 raised by the assessee is allowed.
Levy of interest u/s 234B - While completing the assessment, interest u/s 234B of the Act was levied by the Assessing Officer for default in payment of advance tax. It has been brought out that similar issue for Assessment Year 1998-99 was considered by our co-ordinate Bench in its order dated 12.01.2017 [2017 (1) TMI 1098 - ITAT MUMBAI] and decided in favour of the assessee following the ratio of the judgment in the case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]. Following the aforesaid precedent, the plea of the assessee on this aspect is also upheld.
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2018 (4) TMI 1963
TP Adjustment - method for ALP determination - selection MAM - CUP v/s TNMM - HELD THAT:- In the present case, the CUP method was rejected as an appropriate method having regard to the fact that it unduly restricted the choices of the Revenue. TNMM was considered to be a more appropriate method where greater choice was available. The assessee’s contention in this respect that the supplies made to the Metro Rail alone ought to be considered is equally unpersuasive. The most appropriate method or the transactional similarity does not dictate that two entities alike in all particulars, can only be considered for comparative purposes. As has been repeatedly emphasized in judicial decisions and recognized by rule making authorities, it is the functional similarity which is to be taken into account.
Having regard to these, the question Nos.1 and 2 urged do not arise.
Admit.
The following questions of law arise for consideration:
“1. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the action of the TPO in cherry-picking comparables and considering Titagarh and Texmaco as comparable companies for undertaking benchmarking analysis of international transaction of main line (MLN) segment applying TNMM, not appreciating that the said companies did not satisfy the test of comparability as provided in Rule 10B(2) of the Rules?
2. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the action of the TPO in deleting the comparables proposed by the appellant, viz., Braithwaite and Bharat Wagon, (without prejudice and in response to the additional comparables selected by the TPO), completely ignoring that the same are identical in functional profile to the comparables introduced by the TPO for undertaking benchmarking analysis of international transaction of main line (MLN) segment applying TNMM, not appreciating that the said companies satisfy the test of comparability as provided in Rule 10B(2) of the Rules?
3. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the addition made by the TPO on account of intra-group services related to management support by President and his team, human resources, Six Sigma and operation, and quality and other services, received by the appellant from its associated enterprises, on the erroneous reasoning that such services, rendered by the AEs are in the nature of shareholders activities and of no economic and commercial value to the business of the appellant?”
Issue notice of appeal.
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2018 (4) TMI 1962
Accrual of income - Income from the contract awarded by the principal - ITAT holding that CIT (A) rightly held the income from the contract awarded by the principal cannot be said to have been accrued in the hands of the assessee AOP notwithstanding JV document executed for bidding and subsequently, the assessee is not liable for income estimated on the contract awarded - HELD THAT:- Materials on record would suggest that the consortium of joint venture of two entities was constituted for execution of a project. A supplementary agreement dated 8.2.2008 between the two joint venture members was executed in which JCM, one of the members of the joint venture, was responsible for all the loss and profits. It was this JCM alone who had taken over the financial rewards and risks. The bank guarantee would be provided by JCM alone.
The bank account would also be operated by JCM alone. JCM would be responsible for compliance of all statutory requirements. It was under these circumstances that the Tribunal came to the conclusion that only one member of the joint venture was essentially responsible for the risks and for execution of the work with total control over the project. Tribunal, therefore, confirmed the view of CIT (A) and rejected the revenue's contention that such further agreement could not have overridden the initial agreement document executed at the time of bidding for the contract. We are broadly in agreement with the view of the Tribunal.
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2018 (4) TMI 1961
Levying tax u/s 201(1) and interest u/s 201(1A) - treating the assessee company in default - failure to collection of tax at source u/s 206C on the sale of material as scrap - HELD THAT:- The word "waste and scrap" are one item. Thereafter, the word used is "from" the manufacture or mechanical working of material. It would mean that the waste and scrap being one item should arise from the manufacture or mechanical working of material. It is, therefore, necessary to read the words waste and scrap together which are generated out of manufacturing process of the assessee. The words waste and scrap should have nexus with the manufacturing or mechanical working of material.
Thereafter, the word used is "which is" definitely not usable. The word "is" as used in this definition of the scrap meant for singular item i.e., "waste and scrap". The word waste "which is" denotes to singular item and thus the singular item would be waste and scrap.
As gone through the details of scrap sold which shows that the assessee has sold Plastic Kabrs, Old Tyre weighing scale, M S Barrel Gunny Bags, rubber tubes, M S Scrap ceiling wires which can be re used.
These items of scrap sold are not generated out of manufacturing processes of sugar factory, therefore, such items sold are not filing under the definition given under explanation (b) to 206C - The words waste and scrap thus cannot be read differently as is considered by ld. CIT (A). The list of scrap sold by the assessee is reproduced above which are not connected with manufacture or mechanical working of material.
The findings of the learned CIT(A) are based on presumption only that since the assessee is engaged in manufacture of sugar, therefore, entire scrap is generated out of its manufacturing activities. The findings of the learned CIT(A) are not based on any material or evidence. By the nature of the scrap items noted above, the same cannot be used while manufacturing gases or doing any mechanical working of the material for the gases.
The items of the scrap in the case of the assessee would not form part of the definition of the scrap as is provided in Explanation (b) to section 206C - Thus, the Explanation is wrongly applied in the case of the assessee.
Reliance placed by the assessee on the decision of Navine Fluorine International Ltd. [2011 (2) TMI 1110 - ITAT, AHMEDABAD] also supports thus, view wherein it was held the assessee has sold certain scrap of consisting of plastic drums, wooden scrap , plates materials, used oil, electric cables etc. was not held to be covered by the definition of scrap as defined under section 206C of the Act.
Authorities below have wrongly applied the meaning of scrap as is provided in Explanation (b) to section 206C of the Income-tax Act in the case of the assessee. Therefore, the assessee cannot be held to be in default. The assessee is not required to deduct tax u/s 206C(6) of the Income-tax Act on the items of scrap as noted above. Assessee cannot be treated a assessee in within the meaning of section 206C - Ex-consequenti, no tax could be raised under section 201(1) and no interest could be charged under section 201(1A) - Appeal of the assessee allowed.
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2018 (4) TMI 1960
Reopening of assessment u/s 147 - as per the AIR information the AO noticed that assessee has deposited cash in the saving bank account which was actually the sales which were deposited in cash in the bank account of sole proprietor - HELD THAT:- We find that the return of income filed on 30.9.2009 was processed u/s 143(1)(a) of the Act which means that there was no scrutiny of accounts and records of the assessee.
Subsequently, received information on the basis of AIR received by the Income Tax Department which revealed that during the F.Y. 2008-09 total cash has been deposited in the savings bank account of the assessee held with Union Bank of India, Neemuch. This information supported by the material; evidence in the shape of AIR information was sufficient enough for the AO to issue notice u/s 148 - The action taken by the AO further seems to be correct because the alleged cash was deposited in the savings bank account and one cannot ignore the possibility that the income may have been concealed and not duly reflected in the income tax return.
We, find no infirmity in the findings of CIT (A) confirming the action of the Assessing Officer in issuing notice u/s 148 of the Act and to make the reassessment u/s 147.
Estimated disallowance of car expenses, mobile expenses, travelling expenses and depreciation AND addition for household expenses - HELD THAT:- The alleged cash deposit was also duly explained by the assessee through its account books and the AO was satisfied with the information and he has mentioned that the alleged cash was in the nature of sales during the year. AO after failing to make any addition on the count of alleged cash deposit, further scrutinised the account books and without pointing out any specific mistake made an ad hoc disallowance of 15% of various expenses treating them to be personal in nature.
Similarly, addition for household withdrawals was made just for the lack of information to be received by the assessee. In our view, to make such disallowances the AO should have made a test check of the bills and vouchers and should have brought on record sample of such expenditure which were personal in nature and had been booked as business expenditure. In the instant case, no such finding has been brought on record by the AO. We, therefore, find no basis for the disallowance made by the Assessing Officer for expenses as well as household withdrawals.
Appeal of the assessee stands partly allowed.
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2018 (4) TMI 1959
The High Court of Andhra Pradesh issued an order for personal notice to the respondent, with a post scheduled after four weeks and an interim suspension in place. (2018 (4) TMI 1959 - ANDHRA PRADESH HIGH COURT)
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2018 (4) TMI 1958
Levy of Excise Duty - ''other charges'' - assessee-Respondents had collected the Sales Tax amount and shown the same in the books of account as ''other charges'' - HELD THAT:- Any amount recovered attributable to “other expenses” i.e. Sales Tax is not includible in the transaction value as it can only be considered as profit on an activity.
Similar view has come up for consideration before the Tribunal in the assessee Respondents’ own case INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., AHMEDABAD [2013 (9) TMI 310 - CESTAT AHMEDABAD], where the majority decision was in favour of the assessee-Respondents.
There are no reason to interfere with the impugned order and the same is hereby upheld - the appeal filed by the Department is dismissed.
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2018 (4) TMI 1957
TP Adjustment - ALP determination - AO accepted the consideration received by FIPL from the assessee as appropriate and did not make any adjustment on account of ALP - whether the fact that income declared by FHPL and FIPL has been accepted as at Arm’s Length, means that the corresponding payment by the Assessee to FHPL and FIPL should also be regarded as at Arm’s Length? - HELD THAT:- ALP has to determined in the hands of the Assessee irrespective of the acceptance of ALP in the hands of FHPL and FIPL. The question as to whether the payment for such services are at Arm’s Length or commensurate with the benefit received by the Assessee are all matters which needs examination by the TPO. No such exercise has been carried out by the TPO. But that does not mean that the ALP has been established by the Assessee.
It would be just and proper to set aside the order of the Assessing Officer on this issue and remand the question of determination of ALP to the TPO for fresh consideration. It is made clear that the TPO shall not dispute that services were rendered by the AE. If the approach of the Assessee in adopting TNMM at entity level is disputed by the TPO, the Assessee should be permitted to file TP study for each of the international transaction separately.
Assessee is also directed to file the TP study, if not already filed which is in accordance with the provisions of the Act and substantiate that the price paid by it to its AE is at arm's length within the methods laid down in the Act and the judicial decisions rendered on this issue. TPO will consider the same in accordance with the law, after affording an opportunity of being heard.
Validity of the order of assessment making addition on account of adjustment in ALP suggested by TPO on the ground that TPO did not confront to the Assessee information received from IRA, Singapore - As as already held, the TPO misdirected himself by not examining these evidence on the premise that the payment to the AE’s was only with a view to reduce tax liability in India and to shift profits earned in India out of India. The tests laid down in the judicial decision referred to in the earlier part of this order have to be applied to the evidence filed by the Assessee. Since this exercise has not been carried out, we have remanded the issue to the TPO for fresh consideration.
Assessee vehemently argued that the revenue should not be given a second innings. We are of the view that there cannot be any estoppels in cases involving Transfer Pricing. These are new provisions and are evolving. The ITAT special bench in the case of Quark Systems Pvt.Ltd. [2009 (10) TMI 591 - ITAT, CHANDIGARH] has held that there cannot be estoppel in Transfer Pricing issues and the law on the subject was evolving and it would not be unfair to hold that an Assessee can take a stand that a company chosen by it as comparable is in fact not comparable. Keeping in mind the decision of the Special Bench referred to above, we are of the view that the determination of ALP is an exercise which has to be carried out by the TPO in accordance with the provisions of the Act.
Appeal by the Assessee is treated as allowed for statistical purpose.
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2018 (4) TMI 1956
Validity of assessment order framed u/s 144 - an ex-parte order - HELD THAT:- We as considered the assessment order and we find that in spite of several notices the assessee did not attend the assessment proceedings and therefore the Assessing Officer was left with no choice but to frame an ex-parte order under section 144 - No infirmity in the order so framed. Ground No. 1 is accordingly dismissed.
Estimation of income - estimation of net profit by the CIT(A) @ 3% as against 8% applied by the AO - There is no dispute that the books of account of the assessee are audited and audited financial statements were available with the AO at the time of the assessment proceedings. No doubt the assessee did not produce the relevant bills/vouchers nor any supporting evidence was produced at the time of assessment proceedings. But as mentioned else were the AO should not have ignored the past history of the assessee in estimating the net profit @ 8%.
Though FAA has reduced the net profit rate to 3% but at the same time he also ignored the past history of the assessee. Considering the nature of business of the assessee the profit rate as declared appears to be reasonable. No comparable cases have been brought on record by the AO or the CIT(A) to justify the adoption of the profit rate. Therefore we are inclined to accept the profit rate shown by the assessee. The Assessing Officer is directed to accept the net profit rate as shown by assessee in its financial statements. The addition on this ground is directed to be deleted.
Non allowability of the depreciation on adoption of profit rate - HELD THAT:- Since the assessee has claimed the depreciation in its return of income and has furnished necessary details in its audited statement of account, in our considered opinion, the claim of depreciation cannot be denied. In light of aforementioned circular Circular No. 029D (XIX-14) dated 31.08.1965 has clarified the claim of depreciation on adoption of profit rate, we accordingly direct the Assessing Officer to allow the claim of depreciation as further provisions of the law. Ground No. 3 is allowed.
Disallowance of interest paid u/s 40(a)(ia) - HELD THAT:- In our considered opinion due to the amendment brought in the relevant provisions of the Act this issue needs to be restored to the file of the Assessing Officer. The assessee shall furnish necessary details demonstrating that the payee has shown the receipt of the interest as its income and shall also furnished necessary certificate as provided. AO is directed to verify the details so furnished by the assessee and decide the issue afresh as per the amended provisions of the law. With these directions ground No. 5 is treated as allowed for the statistical purposes.
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2018 (4) TMI 1955
Seeking modification of the Tribunal order [2017 (11) TMI 2035 - ITAT BENGALURU] - applicability of LIBOR - As submitted that while adjudicating ground Nos.5 & 6, vide para.12 of the order, it was observed by this Tribunal that this ground of appeal was not raised before the lower authorities - HELD THAT:- We heard rival submissions and perused the material on record. We find that the findings of the Tribunal vide para.12 are contrary to material on record. Accordingly, we recall the impugned Tribunal order for the limited purpose of adjudicating grounds No.5 and 6. The registry is directed to post the appeal for hearing in the regular course.
Misc. Petition filed by the assessee is allowed.
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2018 (4) TMI 1954
Suit for recovery - conversion of the property of the plaintiff being the goods - guilty of the tort of negligence and/or guilty of wrongful conversion - forum selection clause in the Bills of Lading - suit barred by time limitation or not - burden to prove - HELD THAT:- In the instant case, the plaintiff has discharged the burden of nonpayment by production of the original Bill of Lading and the Banker's Certificate certifying non-payment. The ledger accounts for the relevant years are neither relevant nor necessary to prove the claim of the plaintiff. The very fact that the original Bills of Lading were returned to the Allahabad Bank by the Middle East Bank itself raises a strong presumption that payment has not been made. All the documents along with original copies of Bills of Lading were returned to Allahabad Bank by Middle East Bank. The defendants did not dispute that goods were delivered without production of the original Bills of Lading - Once the defendants are able to establish that the goods are released to the consignee with the consent of the plaintiff and the plaintiff has claimed a duty drawback of such exports, the plaintiff could have been asked to produce the documents as put forth to the witnesses of the plaintiff.
The first witness of the plaintiff during cross-examination has stated that the caption bill of lading namely the BL No. 30313 was "At sight bill of lading". The witness explains the expression 'at sight' by stating that said explanation implies that after the concerned goods reached at sight the buyer first makes the payment and then obtains the bill of lading on the basis of which it can get the goods released. It is the obligation of the importer, first make the payment and thereafter obtain the bill of lading so that it can get the goods released on the basis of such bill of lading - In absence of such evidence and failure on the part of the defendant to establish that the goods covered by the bill of lading COK/30312/DXB were released with the consent of the plaintiff and the plaintiff has claimed duty drawback the defendants cannot escape their liability on account of conversion and liable for loss and damage suffered by the plaintiff.
The defendants were under an obligation not to part with the goods without production of the original Bills of Lading. The plaintiff sues the defendant for this breach. The plaintiff has also specifically alleged conversion of goods - The very fact that the original Bill of Lading have been returned to the banker of the plaintiff without payment and failure on the part of the defendants to return the goods or account for the goods, the defendants are guilty of conversion.
In the instant case the plaintiff has relied upon several causes of action and made necessary pleadings in support of its claim for damages on account of conversion and had throughout the trial maintained that apparent is not the real state of things in view of the fact that the defendant Nos. 1 and 4 are one and the same carrying on same business and had jointly and severally made themselves liable for performance of the contract. The burden of proof in this regard has been ably discharged by the plaintiff. The plaintiff is successful in establish loss and damage against the defendants for conversion.
The defendants were aware of the stipulation that the goods would be released only against the production of the original Bill of Lading and not otherwise. Still then the defendant admits to have delivered the goods to the consignee without the production of the original Bill of Lading. The original Bill of Lading has been returned to the plaintiff by its bankers. The defendants are unable to account for the goods. The defendants claimed to have delivered the goods to the consignee with the consent of the plaintiff has not been proved by the defendants at the trial. Under such circumstances the plaintiff can always claim for damages in tort - It is no doubt a duty of the plaintiff to establish at any rate prima facie, that the suit is within the time and not barred by lapse of time. The plaintiff is able to establish that the claim against the defendant No. 1 is not barred by limitation.
In the instant case, the defendant No. 4 is the wholly owned subsidiary of the defendant No. 1 and even before the filing of the written statement has become defunct. The suit cannot proceed against the defendant No. 4. The bogey of defendant No. 4 as foreign principal is still canvassed to stave off a possible attack on the other defendants for realisation of the price of the goods entrusted to the defendants for delivery.
The plaintiff has led evidence to show that the defendant No. 1 has clearly represented that it would be the obligation of the defendant No. 1 to ensure delivery of the goods through the defendant No. 4. The said representation read with the evidence and surrounding circumstances makes it clear that the defendant No. 1 had an arrangement with the defendant No. 4 and had jointly undertaken to deliver the goods to the oversees consignee. Although it may be true that the defendant No. 4 was in existence at the time of entering the contract but subsequently the defendant No. 4 became defunct and at least made to look so to defraud its creditor and whenever proceedings were filed in India against the defendant No. 4 the said non-existent defendant through the defendant No. 1 raised issue of jurisdiction by suppressing the fact that defendant No. 4 had ceased to exist since 2007 and for all intents and purposes the defendant No. 1, 2 and 3 are the real persons - Under the Indian Law the standard of proof required to establish such nexus is one of probability and may be established having regard to the relation of the parties alleged to be acting in concert that is to show their conduct and their own interest from which it may be inferred that they must be acting together. The preponderance of evidence in absence of any contrary evidence leads to the conclusion that the circumstance are such, as human experience would tell that it can safely be taken that the said defendants must be acting together.
Although in the written statement, defendant and defendants both are used singular and plural with regard to interchangeably describe the defendants, it is clear from the reading of the written statement that the said written statement has been filed to safeguard interest of the defendant No. 4 as well. The entrustment of goods upon the defendants are not denied and an artificial contrive to separate the defendants have failed as the evidence on record has clearly supported the stand of the plaintiff that the defendant No. 1 is jointly and severally liable under the contract. The defendants have not come forward with any contrary evidence - Under such circumstances there shall be a decree for Rs. 37,89,000/- against the defendant No. 1 along with simple interest at the rate of 8% per annum from December, 2000 until realisation.
Application disposed off.
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2018 (4) TMI 1953
Classification of imported goods - re-rollable plate & pipes material scrap - goods found to be second and defective pipes - to be classified under the Heading 7204 49 00 “others” which attracts the duty @ 15% or under the Heading 72082510 as “plates”? - benefit of N/N. 21/2002-Cus., dated 1-3-2002 at Serial No. 190B - HELD THAT:- It appears that in the previous orders the Department has classified the same item under the Heading 7204 49 00. It is the finding of the original authority that the goods were found to be ‘seconds and defective steel plates’ which cannot be considered as ‘fresh plates’ - When it is so, then the assessee-Appellants have rightly classified the subject goods as Heading 7204 49 00. Hence, the enhanced value declared by the Department is set aside and the goods will have to be accepted on the declared value.
The impugned orders are set aside and the appeals are allowed.
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2018 (4) TMI 1952
GP addition on AUDA and electric connection charges expenses - Alternative plea of re-quantification of the impugned addition in order to avoid double addition - HELD THAT:- As come on record that learned lower appellate authority has taken into account the relevant figures which already stood added as income in preceding assessment year. It is thus a case of consistency in the impugned assessment year visà-vis earlier assessment year qua the very issue. There is no material on record which could rebut this factual position. We therefore find CIT(A)’s approach to be consistent in re-computation of the impugned addition as per the relevant facts in preceding assessment year. The assessee therefore fails in his former substantive ground.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- There is no dispute about the fact that both the lower authorities have applied rule 8D whilst computing the impugned disallowance as applicable from assessment year 2008-09 onwards. The hon’ble apex court recent decision in Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] settles the law that relevant expenditure in case of exempt income has to be apportioned between taxable and non-taxable income. The assessee’s arguments therefore challenging application of rule 8D in principle in light of section 14A are rejected. As alternative plea in view in the case of Joint Investments Pvt. Ltd [2015 (3) TMI 155 - DELHI HIGH COURT] that such disallowance cannot exceed the actual exempt income figure. Revenue fails to rebut this legal position. We therefore restrict the impugned disallowance to the extent of exempt income and delete the remaining disallowance component out - Assessee’s latter instant substantive ground is therefore partly accepted. This assessee’s appeal is partly allowed.
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2018 (4) TMI 1951
Levy of Stamp Duty - Immovable Property - wind mill sold as a running out along with the immovable property, where the Wind Electric Generators were erected and shown as an item of property in the registered sale deed - to be assessed to stamp duty, treating it as a Conveyance under Entry 23 of Schedule I of the Indian Stamp Act 1899 or not? - HELD THAT:- The question as to whether a movable property was permanently attached or annexed to the immovable property is essentially a question of fact. It is so because there is no definition given to the term movable property in the Transfer of Property Act. There is no fixed guideline to arrive at a conclusion whether a particular movable property if attached to the immovable property would become an immovable property - In case, the owner of the land for the beneficial enjoyment of the land erected a windmill and constructs a building to house the plant, it would certainly be an immovable property.
The establishment of a windmill requires fixing the windmill machinery to the earth. The erection of windmill is through a process. Erection is not a temporary phenomena. There should be a small structure for the windmill station. The possibility of removing the windmill and the related machinery imbedded in the earth, later would be of no consequence. Such possible act is not a relevant factor to decide the issue.
In MOHAMMED IBRAHIM VERSUS NORTHERN CIRCARS FIBRE TRADING CO. [1944 (4) TMI 9 - MADRAS HIGH COURT], a Division Bench of this Court held that if a thing is imbedded in the earth or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached, then, it is part of the immovable property.
In South Indian Bank Ltd., by its THE SOUTH INDIAN BANK LTD., BY ITS GENERAL MANAGER, M.G.P. NAMBIAR VERSUS V. KRISHNA CHETTIAR AND BROTHER BY ITS PARTNER V.K. PALANIAPPAN AND ORS. [1974 (12) TMI 80 - HIGH COURT OF MADRAS] the Division Bench indicated that the onus is on the person, who alleges that though the movable property is annexed to land, it was never intended to be the part of land.
The recitals in the Sale Deeds clearly indicates that windmill machineries were erected by attaching it to the earth, and it was part of the immovable property. The respondents included the windmills as an item of transferred asset along with the immovable property. The respondents wanted a statutory recognition to the sale of windmills without paying required Stamp Duty.
The windmill has no existence without the immovable property. The machineries for the windmill should be attached to the earth. It should be an attachment of a permanent nature as otherwise the machineries would be washed out by the wind - The sale in question was a composite one relating to an immovable property. The fact that the respondents valued the windmill and its machineries separately and paid the value also separately would not make any difference. It was a sale of immovable property which includes the land and windmill. The Sub-Registrar therefore correctly levied the stamp duty.
The order passed by the learned single Judge is legally and factually unsustainable. The common order is therefore set aside. The writ petitions are dismissed.
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