Settlement Commission order accepted the offer of settlement of the applicants and granted immunity from penalty and prosecution - Department has challenged this order as committed a serious error in estimating profit of the assessee at the rate of 15 per cent of the own money received in the course of business of construction and initial offer of settlement was not containing true and full disclosure of previously under declared income - Held that:- As in COMMISSIONER OF INCOME TAX - I Versus INCOME TAX SETTLEMENT COMMISSION AND 1 [2016 (7) TMI 960 - GUJARAT HIGH COURT] held that these revised offers of tax was in the nature of spirit of settlement and cannot be seen in strict sense of abandoning initial disclosures and replacing the same by fresh disclosures on the basis of such revised offers. What in essence the assessee did was to raise their offers marginally to put an end to the entire dispute through settlement or in the spirit of settlement as is referred to in the said letter. This cannot be seen as accepting that original or initial declaration was not true and full disclosure thereby paving way for the application of judgment in the case of Ajmera Housing Corporation (2010 (8) TMI 35 - SUPREME COURT OF INDIA ). - Decided against revenue
Condonation of delay - reasons for delay - Held that:- We find that it is an undisputed fact that the delay in disposal of the appeals has occurred due to the difference of opinion between the Judicial Member and the Accountant Member. The Hon’ble President of the ITAT had referred the matter for decision by a Third Member and the appeals were listed for hearing on 10.05.2016, on which date, the matter got adjourned sine die, as is apparent from the note sheet placed in the file in ITA No.554(Asr)/2014. Therefore, the delay in the disposal of the cases cannot be attributed to the assessee.
Thus this is a deserving case for extension of stay beyond a period of 365 days, as the reason for delay in disposal of the appeals is not attributable to the assessee, but due to non functioning of the Bench.
Denial of exemption u/s 10(10) in respect of the amount received by the assessee towards arrears of gratuity and arrears of leave encashment - Held that:- It is observed that the Delhi bench of the tribunal in Shri Ram Kanwar Rana vs. ITO, Ward-3, Hisar [2016 (6) TMI 687 - ITAT DELHI ] has allowed exemption in respect of the arrears of gratuity and arrears of leave encashment and dismissed the grounds about the initiation of re-assessment. Similar view has been taken in the case of Raghubir Singh Panghal vs. ITO [2016 (6) TMI 1163 - ITAT DELHI] . Following the same, extend the benefit of exemption to the instant assessee also in respect of arrears of gratuity and arrears of leave encashment u/s 10(10)(i) and 10(10AA)(i). - Decided in favour of assessee.
Writ appeals barred by the principles of res judicata - With the threat of a UPSA getting retrenched looming large, the clamour to establish that each is an LPSA was intense - claim of the two teachers to be the LPSAs was upheld. The aggrieved two filed writ appeals. They have, however, chosen to file appeals in their own writ petitions, but not in those filed by the other teachers - Held that:- Res judicata is a common law principle of preclusion, devised to deter endless cycles of litigation; it is animated by a public policy against repetitious recourse to judicial remedies. Also of not less importance is the economy of judicial time, which can be spent on worthier causes. Three maxims can be cited as forming the foundation for this rule aimed at efficiency and finality: (a) Nemo debet lis vaxari pro eadem causa (no man should be vexed twice for the same cause); (b) Interest republicae ut sit finis litium (it is in the interest of the state that there should be an end to a litigation); and (c) Re judicata pro veritate occipitur (a judicial decision must be accepted as correct).
The four elements of res judicata-a black letter law- are as follows: (a) the parties are identical or in privity; (b) the judgment in the prior action was rendered by a court of competent jurisdiction; (c) the prior action was concluded by a final judgment on the merits; and (4) the same claim or cause of action was involved in both actions.
Though Section 11 of the Code of Civil Procedure consecrates this common law principle as a statutory mandate, it incontrovertibly applies to public law remedies, too, apart from civil disputes. The Courts have held that even the public interest litigation falls within its mischief and its enforcement demands vigil.
Illustratively stated, on a common issue two rival contenders, let us assume, take out independent legal proceedings before a court of law. The court, we further assume, allows one and dismisses the other. The aggrieved party files one appeal. Though the initial adjudication was through one single judgment, it actually amounts to two decisions, notionally. As no appeal is filed against the other decision, the finding notionally attributable to it attains finality. In such an event, the single appeal arising out of a case dismissed or allowed, as the case may be, is hit by the principle of res judicata.
As there are no appeals against W.P.filed by Rajitha K and Latha E.V. Thus, the findings in these two writ petitions have become final. The findings, as sought in W.P. include that (a) Sajithkumar is a UPSA; (b) Sajithkumar will have no claim to the post of LPSA; (c) Sajithkumar be retrenched in view of his conflicting claim; Nisha M.Nair is not entitled to be treated as an LPSA; and authorities should not post Sajithkumar as an LPSA without/before posting Rajitha.
The irresistible, inescapable conclusion, to our mind, is that the above two appeals are barred by the principles of res judicata. Thus, any further discussion on the merits, we conclude, is obviated.
Maintainability of petition - Pre-deposit - Section 35F of the CEA, 1944 - section has been amended with effect from 6th August, 2014 by section 105 of the Finance ( No.2) Act, 2014 - it is submitted by the counsels for the Union of India that the newly substituted section 35F has diluted earlier provisions, so far as the amount to be deposited is concerned. Originally 100% was to be deposited whereas now, only 7.5% or 10% is to be deposited. Thus, 92.5% or 90% of the duty demanded or the penalty levied is already waived by the new section 35F, in each and every case, without any order of Tribunal or without any order of the Commissioner (Appeals) and without any application for waiver of deposit - It is also submitted by the counsels for the Union of India that in a statute relating to taxation, the government should be allowed greater latitude with respect to classification for imposing tax.
Held that: - the substituted Section 35 F of the Act, 1944 is not applicable to the stay applications and appeals already preferred or pending before any appellate authority, prior to commencement of the Finance (No.2) Act, 2014, which shows the clear intention on the part of Legislature, meaning thereby Finance (No.2) Act, 2014 shall be applicable to all the stay applications and appeals which are being preferred on or after 6th August, 2014. Thus, effect of Section 6 of the General Clauses Act, 1897 is being taken away by 2 nd proviso to Section 35F of the Act, 1944, which is the “different intention” of the Legislature.
The legislature, in its wisdom, has thought it fit to extend the benefit of the Scheme to such of those assessees whose tax arrears are outstanding as on 31-3-1998, or who are issued with the demand or show-cause notice on or before the 31st day of March, 1998, though the time to file declaration for claiming the benefit is extended till 31-1-1999.
In extreme cases always the assessees can take recourse to the writ jurisdiction under Article 226 of the Constitution of India. Few extreme cases will not make the substituted Section 35F of the Act, 1944 unconstitutional. All care can be taken with respect to such types of cases under Article 226 of the Constitution of India. “Ubi jus, ibi remidum” - where there is wrong, there is remedy.
How the cut off date has to be fixed and the nature of the cut off date etc. is to be left at the discretion of the legislature. The court should be slow to interfere or in altering a cut off date. The cut off date in question is 6th August, 2014 and looking to the second proviso to Section 35F if any stay application or appeal is already preferred and pending before the appellate authority before 6th August, 2014, those will not be governed by the newly substituted Section 35F. This is the intention of the legislation, in no uncertain terms, meaning thereby that with respect to appeals preferred on or after 6 th August, 2014, the newly substituted Section 35F shall be applicable.
Substituted Section 35F, is not at all confiscatory in nature. On the contrary it is more than reasonable and leaning more towards the assessee rather than the revenue.
The petitioner would not be justified in urging that the amended provisions of Section 35F(1) of the Act would not apply merely on the ground that the notice to show-cause was issued prior to the enforcement of Finance (No. 2) Act, 2014 - endless litigations, arising out of waiver applications, have been brought to an end and looking to the very meager percentage of the amount to be deposited, Section 35F- as amened cannot be said to be violative of Article 14 of the Constitution of India much less of Article 19(1)(g) of the Constitution of India.
Input tax credit - Whether the Tribunal has rightly held that, coal used in the manufacture of sponge iron is raw material and therefore, input tax credit cannot be reduced by applying Section 11(3)(b)(iii) of the GVAT Act, 2003? - Held that: - the issue is squarely covered by the decision in the case of The Addl. Commissioner of Sales Tax, VAT-I, Mumbai, Versus M/s. Gupta Metallics & Power Ltd., [2012 (8) TMI 818 - BOMBAY HIGH COURT], where it was held that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel. The assessing officer as well as the appellate authority misread the text of the report and the Tribunal has rightly held that the coal used by the dealer was a raw material and not used as a fuel and allowed it to set off the entire tax paid on the purchase of coal - appeal dismissed - decided in favor of assessee.
Recovery notice under Section 226(3) - recovery of penalty u/s 271(1)(c) - demand of stay - extension of stay - Held that:- We will assume that the order dated 05.06.2015 was not limited in time and that, therefore, recovery of the penalty was contrary to the order. In our view, however, there was no wilful disobedience on the part of the respondents in having recovered the amount. They were under the impression that the order dated 05.06.2015 was operative only for 180 days, which is the period stipulated in the Act. Even assuming that the order dated 05.06.2015 was in existence, this would, at the highest, be only a bona fide error in perception on the part of the officer. There is no question of contempt. In any event, an affidavit has been filed by the officer apologizing for the same. Even assuming that the action was contrary to the order, the apology ought, in the circumstances, to be accepted.
It is not necessary to consider the effect of the order dated 05.06.2015 for ultimately by the order dated 03.02.2016, the final stay order was passed which was restricted to only 180 days. This period would come to an end on 02.08.2016.
The ends of justice would be met as in the event of the stay being extended by the Tribunal for any period, the respondents shall refund the amount recovered, but subject to any conditions imposed by the Tribunal.
Bogus purchases - purchases made by the assessee from three parties appearing in the sales tax hawala list - Held that:- Merely on the basis of information from sales tax department, the AO has treated the purchases as bogus without making any independent enquiry. As found that assessee had shown net profit of ₹ 13,85,827/- on the sales of ₹ 5.29 crores. However, the AO has declined the corresponding sales made by the assessee, nor rejected assessee’s books of accouns. Keeping view judicial pronouncements referred by the AR in the case of Ganpatraj A Sanghvi [2014 (11) TMI 295 - ITAT MUMBAI] and also considering the net profit rate shown by the assessee, we restrict the disallowance/addition to the extent of 5% of the bogus purchases so made by assessee. - Decided partly in favour of assessee.
Interpreting the provisions of section 80IB, 80IA (9) and 80HHC read with section 80IA - Whether the deduction under section 80IB and 80HHC should be computed independently and with an only rider that the total deduction should not exceed more than 100% of the eligible profit computed under any of the provisions independently as well as cumulatively ? - Held that:- Issue involved in these appeals is covered by the decision of this Court in the case of Commissioner of Income Tax v. Atul Intermediates, reported in [2014 (4) TMI 676 - GUJARAT HIGH COURT] held that Sub-section (9) of section 80IA was aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act - If section 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of section 80IA could not be applied - This would completely render the provisions of subsection (9) of section 80IA redundant and meaningless.
Sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI - different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources - at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply - clause (baa) to explanation to section 80HHC defines a term 'profits of the business' - While working out the business profits as specified therein, in terms of sub-section (9) of section 80IA the profit or gain which had already been allowed deduction to the extent mentioned therein would have to be ignored.
In IPCA Laboratory Ltd. v. Deputy Commissioner of Income-Tax reported in [2004 (3) TMI 9 - SUPREME Court] it has been held that Section 80AB is also in Chapter VI-A - It starts with the words "where any deduction is required to be made or allowed under any Section of this Chapter" - This would include Section 80HHC - Section 80AB further provides that "notwithstanding anything contained in that Section" - Thus Section 80AB has been given an overriding effect over all other Sections in Chapter VIA -Section 80HHC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB - Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act - If the income has to be computed in accordance with the provisions of the Act, and then not only profits but also losses have to be taken into consideration. Assessing Officer may give effect to this order only after the decision of the Larger Bench of the Supreme Court in the case referred to it by the decision reported in [2015 (12) TMI 708 - SUPREME COURT ].– Decided in favour of Revenue.
Eligibility to Registration u/s. 12AA - proof of charitable activities - Held that:- Hon'ble Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax (Exemption) [2006 (3) TMI 91 - KARNATAKA High Court] has set out the guidelines that for the purposes of registration under section 12A the authorities have to be satisfied about the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable purpose and not the nature of the activity by which the income is being derived by the trust.
AO while passing the scrutiny assessment u/s. 143(3) for A.Y. 2012-13 has accepted the income of assessee at Nil as returned by assessee. Thus it can hardly be said that the income derived by the trust by way of fees from the students were applied by the assessee-trust for the purpose other than the aims and objects of the trust.
Also not the case of the Commissioner that the fees charged from the students received have been used for the purposes other than running the Educational Institution managed by the Assessee Trust. It is also not the case of the Commissioner that the activities carried out by the assessee are not in consonance with its objects. The ld. CIT has also not mentioned the exact enquiry report sent by the departmental authorities to ascertain as to on what basis they did not recommend for registration to the assessee. Thus CIT was not justified in rejecting the application of assessee for grant of registration. - Decided in favour of assessee.
Computing deduction under sections 80HHC and 80-I - whether deductions u/s 35(1)(iv) are not to be deducted ? - Held that:- While determining profit of eligible industrial undertaking, the income and expenditure which has direct nexus with the industrial undertaking must be taken into account.
It is not in dispute that research centre is an independent centre and that its main object is to conduct research for the business of the asses see. The research centre, therefore, in our opinion, is not directly linked with the eligible undertaking. Thus, for the purpose of computing deduc tion under sections 80HH and 80-I, profit from eligible undertaking is to be computed on the basis of gross income by reducing expenditure which has been incurred for the eligible undertaking out of the gross income derived from the industrial undertaking. In view of the aforesaid, question No. (A) is answered in favour of the assessee
Allowable deduction on redemption premium payable on debenture - Held that:- The payment of ₹ 105 by the assessee- company against the collection of receipt of ₹ 100 from debenture-holders was not contingent upon the happening of any event in future. The company's obligation to pay ₹ 105 against receipt of ₹ 100 was certain in praesenti and known at the time when the debentures were issued and was to be payable in ordinary circumstances. It was only for the company to avoid payment of such liability if it decides to repurchase the debentures earlier. Such repayment prior to the due date, was contingent on exercise of option. It would not make the liability, which is certain in praesenti, to be contingent merely because on happening of a certain event, which could be avoided. In view of the aforesaid, the Tribunal was in error in con firming the order of the Assessing Officer of disallowing the expenditure towards redemption premium payable to the debenture-holders. Conse quently, we answer question No. (B) in favour of the assessee
Disallowance of interest expenditure - Held that:- Commissioner of Income-tax (Appeals) correctly deleted the disallowance by following the decision of this court in the case of Deputy CIT v. Core Healthcare Ltd. reported in [2001 (4) TMI 46 - GUJARAT High Court]. The said decision of this court has been confirmed by the apex court by judgment rendered in Deputy CIT v. Core Health Care Ltd. reported in [2008 (2) TMI 8 - SUPREME COURT OF INDIA]. Thus, we answer question No. (B) in favour of the assessee and against the Revenue.
Disallowance of interest on funds utilized for non-business advances - Held that:- Advance had been given for the purpose of business. It appears from the record that the assessee had earned income during the year to the extent of ₹ 36 crores. The assessee had submitted evidence to prove that it was having interest-free funds to the extent of ₹ 225.83 crores with it. How ever, the said fact was not appreciated by the Assessing Officer. Nothing was on record to prove that the borrowed funds had been diverted by the assessee for making advances to M/s. Baldevbhai Dosabhai group. Hence, we answer the question in favour of the assessee and against the Revenue.
Deduction under section 80HHC computation - whether for computation of deduction under section 80HHC only net interest receipts should be excluded? - Held that:- This issue is covered by the decision of the apex court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] wherein, it has been held that ninety per cent. of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. In view of the above decision, this question is also answered in favour of the assessee and against the Revenue.
Interim relief - recovery of dues - Inter-state sale - Section 3 of the Central Sales Tax Act - Specific bar contained in Section 7 of the U.P. VAT Act - both the first appellate authority and the learned Tribunal have failed to apply their mind to the relevant parameters while considering the application for interim relief and have declined a complete stay on the disputed tax-liability mechanically - Held that - The parameters which are required to be considered while deciding an application for interim relief, have been settled by the Supreme Court in a catena of decisions, yet this Court finds from the revisions which are filed before it including this revision that not only the first appellate authority but the learned Tribunal pass un-reasoned orders which do not disclose due and proper application of mind to the relevant parameters, ignoring the pronouncement of the Supreme Court and also those of this Court on the subject.
On a bare perusal of the interim order passed, as aforesaid complete disregard and non application of mind to the parameters laid down by the Supreme Court and this Court in various decisions is writ large. Merely saying that "considering the facts in totality 70% of the disputed tax liability shall remain stayed" does not by any cannon of judicial discipline satisfy the requirement of adherence to the principles laid down by the Supreme Court and this Court on the subject.
Financial condition/hardship is an important consideration but then the businessmen, dealer etc. has to place relevant material in this regard showing dire financial condition. Income-tax Return are relevant material in this regard - Thus, the discretion vested in the learned Tribunal and First Appellate Authority in matters of interim relief under a Taxing Statute such as the one under consideration is to be exercised judicially and it should be guided by the principles of law enunciated by precedents as aforesaid and not in dis-regard thereof as has been done in the present case.
This Court would have remanded the matter to the learned Tribunal to decide the same afresh - appeal allowed by way of remand.
The Appellate Tribunal CESTAT, Allahabad dismissed the appeal due to the appellant's absence and non-compliance with the order to pre-deposit Rs. 95 lakhs. The appellant has the liberty to pray for restoration.
Grant of refund with interest - whether the amount deposited as pre-deposit entitled to refund even without formal application or not? - Held that: - Circular No.275/37/2KCX. 8A dated 2/1/2002, clearly indicates that the amount received u/s 35F has to be given as refund even without a formal application. The provisions u/s 129E is in pari materia with the provision under Section 35F - This is a case in which amount had been deposited under protest during the pendency of the appeal and the petitioner is entitled to refund - petition allowed - decided in favor of petitioner.
TPA - selection of comparable of Techprocess Solutions Ltd. - Held that:- TPO rejected this company on the ground of non-availability of financial data and annual report. The assessee has pointed out that application dated 20.10.2015 filed before the ld. DRP u/r 13 of IT DRP Rules that the ld. TPO has rejected the comparables selected by the assessee holding that data of the company for the relevant financial year was not available in the public domain, however, the assessee has submitted the annual report of that company for F.Y. 2010-11. On objection before the ld. DRP, the stand of the TPO was upheld without considering the annual report submitted by the assessee. This application is pending adjudication. However, as the annual report of the company is available and the same is also submitted in paper book before us, we set aside this ground of appeal to the file of ld. TPO to consider this company for comparability analysis. In the result, ground No. 6 of the appeal is allowed for statistical purposes.
Remit the matter to the ld.TPO for including R. Systems International Ltd. in the list of comparables for working out the PLI of the assessee. We also make it absolutely clear that it would be the duty of the assessee to substantiate the financial information with respect to R Systems International with authentic and reliable data. The ld. TPO or the Assessing Officer are also directed to verify and assure them about the reliability of the information. After this verification, the above company may be treated as proper comparable if found proper on such examination. In the result, ground of the appeal of the assessee is allowed accordingly.
Companies functionally dissimilar with that of assessee as engaged in providing ITES such as back office, financial and fund accounting services to its AE need to be deselected from final list of companies.
Computation of risk adjustment - Held that:- In the present case, the assessee has submitted the claim at page No. 280, risk adjustment computation with respect to set of comparables. We do not find any sound reasoning given by the ld. TPO, who did not state how the data submitted by the assessee is not reliable. Therefore, in the interest of justice, we set aside this matter to the file of the ld. TPO to verify the computation of risk adjustment submitted by the assessee and to allow the same after proper verification and if found in accordance with law. In the result, ground No. 10 of appeal is set aside to the file of the ld. TPO with the above directions and the same is accordingly allowed.
Refund claim - rejection on account of time bar - Held that: - the refund has not been filed within 6 months of date of final assessment or within one year of payment of duty. Hence, the time limit of neither the Section 27 nor the notification dated 1.8.2008 has been adhered to in this case - refund claim rightly rejected - appeal dismissed - decided against assessee.
Disallowance u/s 14A read with Rule 8D - Held that:- The exempt income surely cannot swallow the entire amount and the disallowance u/s 14A read with Rule 8D cannot exceed the exempt income [SEE Daga Global Chemicals P Ltd (2015 (1) TMI 1204 - ITAT MUMBAI)]. Considering the settled legal position of the issue, we are of the opinion that the disallowance under the said provisions of 14A read with Rule 8D should be restricted to the exempt income. We direct the AO accordingly. - Decided in favour of assessee.
TPA - selection of M/s.Quintegra Solutions Limited (Quintegra) as comparable - Held that:- It is appropriate to remit the issue to the file of AO to see whether any extraordinary event took place in this assessment year or not and also to see whether the loss is persisting continuously or not, decide the issue accordingly.
Computing the deduction u/s.10AA - Held that:- Direction to AO to exclude to reduce same amounts which has reduced from export turnover from total turnover also for computing the deduction u/s.10AA r. See Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D]
Addition made on account of difference in stock - difference in statement as furnished before the bank as compared to shown in books of account for availing higher credit facility - Held that:- Only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities.See COMMISSIONER OF INCOME TAX RAJKOT-I. Versus PATEL PROTEINS PVT. LTD.[2014 (12) TMI 1246 - GUJARAT HIGH COURT ] Accordingly, the question is answered in the affirmative, i.e., against the appellant Revenue and in favour of the assessee.
Provision for transit breakages - Held that:- High Court [2015 (10) TMI 491 - DELHI HIGH COURT] has clearly held that in the case of assessee (petitioner), the actual transit breakages, as and when they occur, are allowable as revenue expenditure in the accounting year in which such breakages occur.
In that view of the matter, we do not find any justification to interfere with the impugned judgment.
9911796707
