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Showing 421 to 440 of 1076 Records
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2014 (10) TMI 661
Unclaimed credit balances excluded but included in part of book profits – unilateral action by the assessee in writing back a liability - addition u/s 41(1) - Held that:- The tribunal proceeded on the assumption the appellate commissioner has recorded a finding of fact after verification of the materials that these amounts were already included in sales turnover of respective years and suffered tax - The Assessing Authority asserts that no records were produced before it - No records were produced before the Appellate Authority also. Both the Appellate Authorities have not looked into the records - The Assessing Authority did not look into the records because the records were not produced before it - the findings recorded by the Appellate Authorities is based on no evidence and it cannot be sustained - matter remanded back for reconsideration.
Payment made to perfect its title and the right to manufacture IMFL – Capital or revenue in nature - Held that:- This unit run by SDPL was running under loss - It was taken on lease by them from the sister concern of the assessee - Then the assessee granted the licence to manufacture the assessee’s products - It is properly attributable to capital and capital expenditure - It is not a case where the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct the assessee’s business to be carried on more efficiently or more profitably - It is not the expenditure which is incurred to improve the business of the concern or spend for its expansion of its business or for substantial replacement of its equipment - This amount is paid to regain the profit making unit which had gone out of the hand of the assessee and the expenditure incurred in regaining this profit company unit is in the nature of a capital expenditure and not the revenue expenditure - the Appellate Authorities were not justified in recording a finding to the contrary solely based on the judgments referred by them when those judgments expressly stated in every case which should matter and only in that context the law has to be applied – Decided in favour of revenue.
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2014 (10) TMI 660
Reopening of assessment u/s 147 r.w section 148 - Held that:- Nothing new tangible material was available before the AO for reopening the assessment and consequently, the AO acted on the same material, which was available before him at the time of original assessment – following the decision in CIT Vs. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - It cannot be accepted that only because in the assessment order, detailed reasons have not been recorded, an analysis of the materials on the record by itself may be justifying the AO to initiate a proceeding u/s. 147 of the Act - When a regular order of assessment is passed in terms of section 143(3) of the Act, a presumption can be raised that such an order has been passed on application of mind - a presumption can also be raised to the effect that in terms of section 114(e) of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed - If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without any thing further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong – thus, the reopening u/s. 147 r.w.s. 148 of the Act is bad in law – Decided in favour of assessee.
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2014 (10) TMI 659
Scope of Explanation to sec. 73 – Deemed speculative loss or not - Whether delivery based share trading loss come under the ambit of Explanation to sec. 73 of the Act or not – Held that:- The assessee is engaged in the business of share trading which involves stock and share broking activities, purchase and sale of delivery based shares and purchase & sale of non-delivery based shares i.e., derivative trading - assessee incurred loss on delivery based purchase and sale of shares and earned profit on non-delivery based sale purchase of shares - both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of "speculative transaction" exclusively for purposes of section 28 to 41 of the Act - both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction.
Before application of the said Explanation, aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative transaction – relying upon assessee’s own case as decided in Commissioner of Income Tax, Kol-III Versus M/s. Baljit Securities Pvt. Ltd. [2014 (6) TMI 475 - CALCUTTA HIGH COURT] - where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business - The assessee is a share broker, as already indicated - The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given - the entire transaction carried out by the assessee was within the umbrella of speculative transaction - There was no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares – thus, the order of the CIT(A) is upheld – Decided against revenue.
Invocation of section 14A – Held that:- A plain reading of Rule 8D(2)(ii) and (iii) can only be applied, in the situations, wherever share are held as an investment and this rule will not have any application when the shares are held as stock in trade – relying upon DCIT Vs. Gulshan Investment Co. Ltd. [2013 (3) TMI 393 - ITAT KOLKATA] - the provisions of Rule 8D(2)(ii) and 8D(2)(iii) of the I.T. Rules, 1962 will not be attracted to dividend earned from shares held as stock in trade - the provision of section 14A are indeed attracted whether or not the shares are held as stock in trade or as investments, even though the provisions of rule 8D2(ii) and (iii) cannot be invoked in such a case, and even though the provisions of rule 8D2(1) are much narrower in scope than the scope of section 14A simplicitor – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 658
Classification of expenses – Capital or revenue expenses - expenses on conversion of WBM Road into Concrete Road – Held that:- The road is provided for enduring benefit to assessee Expenditure incurred on repair of roads by appellant is revenue expenditure and allowable u/s 37 – following the decision in CIT vs. Pandian Chemicals Ltd. [1997 (4) TMI 38 - MADRAS High Court ] - the road within the factory premises should be treated as a part of the building and the assessee shall accordingly be eligible to depreciation.
Expenditure though may be for enduring benefit if incurred for augmenting revenue generating apparatus of the assessee's business is to be allowed as a Revenue expenditure - the assessee's premises is involved with huge and heavy vehicle traffic movement and having the proper road and its maintenance will increase the efficiency of movement of raw materials as well as clearance of finished goods – the order of the CIT(A) is upheld – Decided against revenue.
Enhanced depreciation on guest house – Held that:- The harmonious construction of these two sections makes it clear that for the purpose of depreciation, the WDV means actual cost of the asset as reduced by the depreciation actually allowed in the past - even though depreciation was claimed by the assessee during the AYs 1986-87 to AYs 1997-98, it was not allowed in view of provision of Section 37 (4) of the I.T. Act - Since no depreciation was actually allowed to the assessee, the WDV for this year has to be enhanced by an amount of depreciation, which was claimed by the assessee in the past but not allowed by the Department – relying upon Smt. Laxmi vs. DCIT [2006 (2) TMI 60 - HIGH COURT, KERALA] – Decided against revenue.
Non-inclusion of Excise Duty in the closing stock u/s 145A – Held that:- Statutory auditors have certified that even though provision for Excise Duty has not been made on closing stock, it has no impact on profit for year - assessee also explained before AO that in any case the entire amount of Excise Duty on closing stock was duly paid before due date of filing of return - assessee valued its closing stock as per consistently followed practice of excluding the Excise Duty element of valuation of closing stock, it has no effect on the profit and loss a/c - Besides closing outstanding Excise Duty amount as on 31-03-2000 has been duly paid before the due date of filing of return of income u/s 139(1) - Copy of the challan evidencing payment of Excise Duty was produced before AO - the corresponding debit of Excise Duty of an identical amount to the profit and loss account shall be deductible in view of the provisions of Section 43B of the Act read with first proviso thereto - the order of CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 657
Income from royalty from M/s. DP Lanka Pvt. Ltd. – Accrual of income - Whether the assignment of accrual of royalty from the Sri Lankan subsidiary namely M/s. DPLPL results into non-taxability of the royalty income in the hands of the assessee company - Held that:- Following the decision in Provat Kumar Mitter. Vs. CIT [1960 (12) TMI 8 - SUPREME Court] - fundamental principle is that an application of income is an allocation of one's own income after it accrues or has arises, although such application may be under a contract or obligation, whereas diversion of income is that which diverts away or deflects before it accrues to or reaches the assessee and it is received by him only for the benefit of the person who is entitled to the income under an overriding charge or little - there is accrual of income to the appellant - The assignment of the income by the appellant cannot waive the liability under the Act - The accrual of the royalty would take place as soon as Pizza is sold by M/s. DPLPL in Sri Lanka - The accrual of royalty is not dependent upon the repayment of loan by the Sri Lankan company to the Ceylon Bank - The assessee's liability to pay to the Sri Lankan/ Ceylon Bank arises because the assessee stood as a corporate guarantor for the loan from the Sri Lankan / Ceylon Bank to the Sri Lankan entity - The utilization of the royalty money by the Sri Lankan entity to the Ceylon Bank will not affect the accrual of royalty to the assessee - The subsequent payment thereof of Sri Lankan Bank is only the application of that accrued royalty for and on behalf of the assessee – thus, the addition made by the CIT(A) is upheld – Decided against assessee.
Expenses on sundry balance written off – assessee was not able to provide the details of the sale to which the amount relates – expenses on meeting the accident expenses of the employee – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been decided in DCIT, Circle 4(1), New Delhi Versus Jubilant Foodworks Pvt. Ltd. [2014 (8) TMI 458 - ITAT DELHI] - The AO has not examined whether the debt has been written off in accounts of the assessee - When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer - In the case of Companies, the provision is deducted from Sundry Debtors - Following the decision in TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] - no appeal was filed by the revenue against the deletion – Decided in favour of assessee.
Classification of expenses - Capital or revenue - Franchisee fee disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been decided in DCIT, Circle 4(1), New Delhi Versus Jubilant Foodworks Pvt. Ltd. [2014 (8) TMI 458 - ITAT DELHI] - CIT(A) has considered each and every aspect of the matter before arriving at the conclusion as drawn by him - the assessee had acquired only access to the technical information and there was no transfer of ownership with respect to the process and the know-how under the agreement in favour of the assessee - the payment could only be categorized as one made on revenue account - the assessee had acquired right only to use/only access to the technical information and there was neither transfer of ownership with respect to the process and the know-how nor of the brand or the trade mark in question under the agreement in favour of the assessee - Therefore, this payment is in the nature and character of revenue expenditure and not capital – Decided against revenue.
Depreciation on computer peripherals @ 60% - Held that:- CIT(A) has deleted the addition following the orders of the Hon'ble High Court in COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] - The only contention of the Revenue is that it has preferred on SLP against the order of the HC so – revenue could not bring to our notice any interim order of stay by the Hon'ble Supreme Court in respect to the operation of the order of the Hon'ble High Court relied by the CIT(A) granting relief to the assessee - In the absence of the same, Tribunal is bound by the binding precedent laid down by the Hon'ble Jurisdictional High Court - CIT(A) has rightly relied upon the order of the Hon'ble High Court in BSES Yamuna Power Ltd and there was no infirmity in the order of the CIT(A) – Decided against revenue.
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2014 (10) TMI 656
Jurisdiction of the CIT to invoke section 263 - Erroneous and prejudicial to the interest of revenue or not - Failure of AO to examine taxability of sale proceeds of the land as business income as against capital gains as offered in Return of Income or not – Held that:- As decided in Malabar Industrial Co. Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME Court] - no specific query was raised by the AO about the amounts received on sale of land as income from business - even after the receipt of reply about the details about the sale of various pieces of land, no further query was raised by the AO about the treatment of tax of the receipts on sale of land and the AO had accepted the submissions of the assessee - AO has not inquired about the details of the land development expenses, amount of advance received by the assessee, details of sales made to parties - CIT has rightly exercised the powers by invoking the provisions of Section 263 - It is true that the AO is not required to pass a very detailed order but his order must show that he has dealt with various aspects of the matter and should not be a general order - while setting aside the assessment, CIT has directed the A.O. to compute the assessee's income by treating the profit on sale of land as income from business instead of short term or long term gains - CIT cannot direct the AO to make the assessment in a particular way – thus, the order of the CIT is to be modified to the extent of deleting the direction of CIT to treat the profits as business income and thus modify the direction to AO to decide the matter of taxation on sale of land as per law – Decided against assessee.
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2014 (10) TMI 655
Disallowance u/s 14A(1) – Applicability of Rule 8D - Held that:- CIT(A) has very appropriately, considered and dealt with the assessee’s objection - The assessee’s revenue streams are from trading operations, sale of investments, dividend and interest - It is maintaining composite accounts for its indivisible business, or qua its business segments, determination of any expenditure attributable to exempt income becomes relevant in view of section 14A as explained in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The volume of the expenditure incurred in relation to a particular activity or income there-from, is a matter of fact, so that its estimation is again a factual matter – If with no prescribed rule or basis, and without even discussing the merits of the method chosen, a method is adopted to resolve an issue, which is essentially one of quantification, and which is accepted by either party or even both, if only to give a quietus to the matter, the same is not reflective of its merits, much less of it being held out as a precedent - Rule 8D becomes effective, and mandatorily so, w.e.f. the current year – there was no scope for either non-application of, or even scaling down of the amount workable with reference, to r. 8D(2)(iii) where the shares, on which the exempt income is received, are held as stock-in-trade, for the disallowance of interest u/r.8D(2)(ii).
The disallowance under r. 8D has to be in any case restricted to the amount of the relevant expenditure actually claimed per the return of income – thus, the matter is to be remitted back to the AO to allow the assessee an opportunity to present its case before him with reference to the expenditure claimed as also including expenditure which is in fact not relatable to the income not forming part of the total income - assessee is also in the business of share trading, so that the direct expenditure in respect thereof would also stand debited in its accounts and, accordingly, claimed - The onus to establish its case would only be on the assessee, which the AO shall decide by issuing definite finding/s of fact/s, limiting the disallowance under r.8D(2)(iii) to the amount of expenditure as so determined by him – Decided partly in favour of revenue.
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2014 (10) TMI 654
Reopening of assessment – Computation of profits - Assessee submitted that the only reason recorded is that agricultural income reduced from the net profit is ₹ 81,47,859/- in place of ₹ 5,229 in normal computation – Held that:- The assessment was reopened on the reason that while computing business loss under the normal provisions of the Act, the assessee added back to the income as per P&L A/c., agricultural expenses amounting to ₹ 10,943/- and subtracted agricultural income of ₹ 5,228 - While making adjustments from the net profit, in order to arrive at book profit for the purpose of MAT, only those sums can be deducted which are credited to the P&L A/c - Since the assessee had credited only ₹ 5,228 under other income, this alone can be subtracted.
The procedure for income that has escaped assessment under section 147 is contained in section 148 whereunder sub-section (2) makes it mandatory for the Assessing officer to record reasons before proceeding to issue notice - once assessment is reopened after recording reasons, the AO has to complete the income escaping assessment by following the provisions of the Act as if the return furnished against notice u/s. 148 as one filed u/s. 139 of the Act - as procedure to be followed is concerned, there is no difference between income escaping assessment and regular assessment because the provisions generally provide for issue of notice, hearing of the assessee and taking of evidence, etc., which are the same for regular assessment and income escaping assessment - Therefore, in the course of income escaping assessment, if it comes to the notice of the AO that any other item or items of income other than the item of escaped income for the assessment of which, assessment originally completed was reopened, also have escaped from original assessment, he is bound to assess such item or items of income also in the course of reassessment u/s. 147 - In view of the specific provision providing for assessment of other items of income that have escaped assessment, and that comes to the notice of the AO in the course of income escaping assessment, the reassessments made are valid – Relying upon Commissioner of Income-tax Versus TBS Publishers and Distributors [2009 (11) TMI 406 - KERALA HIGH COURT] - there is no infirmity in the order of the CIT(A) on this issue – Decided against assessee.
Computation of MAT - Provision of sales tax disallowed – Whether the AO was entitled to disturb the net profit shown by the assessee in the profit and loss account prepared as per the Companies Act, 1956 - Held that:- The assessee had contended that the AO was not entitled to make adjustments to book profit shown in the audited accounts - there is an option for the companies not to follow the accounting standards, if it feels so for any reason - Such deviation may have impact to the profit disclosed in the profit and loss account prepared in accordance with Part II and part III of Schedule VI of the Companies Act - Hence in order to enable anybody to understand the implication of such deviation, it was made mandatory for the companies to disclose the financial implications of such deviation - Such kind of deviations are acceptable under the Companies Act, however, they are not always acceptable to the income-tax authorities - Under the income-tax, the AO is entitled to examine the deviations, particularly when it has an impact on the book profit - There cannot be any dispute that it is the responsibility of the assessee to substantiate the legality of any item of expenditure/income found debited/credited in the profit and loss account by drawing support from any document or business practices or accounting requirements.
Prior period charges/credits in P&L A/c – Held that:- The assessee had passed the entry for prior period credits/charges in the AY only to ensure that the final book profit (surplus) was to be reduced – the intention of the assessee was very much apparent and glaring - the assessee also could not substantiate the claim with a legally tenable explanation - It was also not shown that the booking of such kind of entries are permitted under the accounting principles - the Assessing officer was entitled to adopt the net profit after suitable adjustment for the purpose of computing the book profit u/s. 115JB – Decided against assessee.
The assessee had continuously appeared before the assessing authority as well as before the CIT(A) and participated in all the re-assessment proceedings, answered all queries raised by the AO - even if there is any discrepancy in the format of the notice u/s. 143(2), i.e., non- adherence to some prescribed rule or mode of proceedings, it does not make the assessment orders null and void - Nullity is where there is a void act or an act having no legal force or validity – the AO have followed the rule prescribed, has given adequate opportunity of hearing to the assessee and there is no failure to consider the various objections raised by the assessee in its letters, does not amount to nullity in law – Decided against assessee.
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2014 (10) TMI 653
Addition of various incomes deleted - Income from Business Service Centre, letting out services like communication, couriers, provision of electricity, air- conditioning and DC sets are assessable under the head 'income from other sources' in connection with the letting out of business services centre – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been rightly held that it is a case wherein income from lease of premises has to be segregated from the income from services and only income from lease should be assessed as income from house property against which only standard announce of 30% should be allowed - The other receipts should be assessed as income from other sources and expenditure incurred on the provision of such services should he allowed as per sec.57 after verification - This proposal was accepted even by the assessee - the incomes should be assessed separate as income from house property and service charges collected to be assessed separately as income from business and profession after allowing expenditure incurred against provision of such services after verification of the same. Accordingly this ground is partly allowed - this ground of appeal is partly allowed as a part of the service charges collected is to be considered as 'Income from Business and Profession' / 'Income from Other Sources' – thus, the order of the CIT(A) is to be upheld - Decided against revenue.
Non-deduction of TDS on commission paid to directors u/s 40(a)(ia) – Requirement u/s 194H fulfilled or not – Held that:- The tax deducted at source was deposited before the due date of filing the return under section 139(1) of the Income Tax Act – following the decision in CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] the proviso to section 40(a)(ia) as amended by the Finance Act, 2010 are free from any ambiguity and doubt and clearly support the view that the expression "said due date" in clause (A) to the proviso to unamended section refers to the time specified in section 139(1) of the Act - the amendment vide Finance Act, 2010 as a remedial and therefore the payment of tax deducted at source before the due date of return of income u/s 139(1) is sufficient compliance of provisions of section 40(a)(ia) and no disallowance of the expenditure can be made – the order of the CIT(A) is upheld – Decided against revenue.
Disallowance u/s 14A read with Rule 8D – Held that:- Out of total investment of ₹ 59.22 crore, the investment to the extent of ₹ 33.80 crore is in the subsidiaries of the assessee - even in the subsidiaries of the assessee the investment of ₹ 32.80 crore has been made in CG International BV which is a foreign company and the dividend on such investment is not tax free as per the provisions of section 10 - the provisions of section 14A are not attracted to the extent of the investment in the foreign company – the AO is directed to exclude the investment made in the foreign company for the purpose of disallowance under section 14A.
Sufficiency of funds - Whether the assessee had sufficient funds for the investment which generates the tax free income – Held that:- Out of the total investment of ₹ 59.22 crore during the year an investment of ₹ 32.80 crore is in the foreign company and therefore after excluding the investment the investment during the year generating the tax free income comes to ₹ 26.42 crore only - there is an increase in the assessee's own fund to the tune of ₹ 300 crore and at the same time there is a decrease in the loan funds during the year to the tune of ₹ 228 crore. Therefore, even if its presumed that out of the ₹ 300 crore increase in the assessee's own fund a sum of ₹ 228 crore is used for repayment of the loan during the year, still the assessee would have a sum of ₹ 72 crore available for investment - Since the investment in the domestic companies is only to the extent of ₹ 26.42 crore during the year, the assessee's own fund is more than sufficient to meet the investment during the year - no disallowance u/s 14A is called for on account of interest expenditure when the assessee's own fund is more than sufficient for the investment generating tax free income.
Administrative expenses – Held that:- For taking an investment decision a high level thought process is required and therefore when the assessee has made investment during the year the provisions of section 14A are applicable on account of administrative expenses - out of the total investment of ₹ 59.22 crore a sum of ₹ 33.80 crore has been invested in the subsidiary companies, therefore for the purpose of disallowance under section 14A by applying rule 8D the investment made in the subsidiaries and in the foreign company shall be excluded - The apportionment of the administrative expenses can be made only by considering the investment in the domestic companies other than the subsidiary company – the AO is directed to re- compute the disallowance under section 14A in respect of the administrative expenses by excluding the investment in the subsidiaries and in the foreign companies – Decided partly in favour of assessee.
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2014 (10) TMI 652
Condonation of delay to be granted or not – Liberal approached adopted - Claim of remuneration paid to partners – The explanation of the assessee for delay in filing the appeal before the CIT(A) was that a rectification application was pending before the AO and it was not decided by the CIT(A) - Held that:- A specific ground was also taken by the assessee that the AO has not disposed of the rectification application within the period of six months - This ground of the assessee was not decided by the CIT(A) in his order - So far as the finding of the CIT(A) that the pendency of application u/s.154 cannot be termed as a sufficient cause for filing the appeal is concerned, there is no infirmity of finding that the provisions of section 250 and section 154 of the Act, operate in different field - while considering the question of limitation in taxing matter, a liberal approach has to be adopted – relying upon N.Balakrishnan vs. M.Krishnamurthy [1998 (9) TMI 602 - SUPREME COURT OF INDIA] - Revenue could not point out that there was any deliberate act for delay or the assessee has tried to take advantage of delay - The Revenue also could not point out any mala fide on the part of the assessee.
CIT(A) ought to have examined whether there is a deliberate attempt on the part of the assessee to avoid liability of tax in making belated claim and thereby filing the appeal after prescribed period - the delay in filing of the appeal is about a month - taking a liberal view the delay is condoned and the appeal is to be remitted back to the CIT(A) for fresh adjudication – Decided in favour of assessee.
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2014 (10) TMI 651
Transfer pricing adjustments - Restriction of payment of royalty to 2% instead of 5% and 4% of net sales – Held that:- The assessee was being rendered technical assistance through the royalty agreement entered into with Owens Corning Invest Cooperatief U.A., Netherlands and the royalty agreement has been in application from 1.7.2008 - the TPO was incorrect in going into the business expediency of payment of royalty and arriving at the conclusion of the quantum of the royalty – relying upon CIT vs. EKL Appliances [2012 (4) TMI 346 - DELHI HIGH COURT] - if the expenditure has been incurred or laid out for the purposes of business it is no concern of the TPO to disallow the same on any extraneous reasons - the assessee has claimed that the royalty payments were based on agreement which was approved by RBI and hence the TPO cannot question the same.
Once the RBI approval of royalty rate was obtained the payment was considered to be held at arm's-length - the TPO erred in holding that no tangible benefits were derived by the assessee out of royalty payments made by it and restricted the payment to 2% of net sales – the transactions made under Royalty agreement approved by RBI are to be considered to be at arm's-length – Decided partly in favour of assessee.
Claim of depreciation @ 25% - Whether non-compete fees paid by the assessee company is eligible to claim depreciation at 25% or not – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that applying this principle of construction, if the business or commercial right of a patent, trademark, license, franchise etc, fulfilled the condition of being intangible assets, then, the payment made by the assessee company towards non-compete fee also fulfilled the condition by way of a logical corollary - the non-compete right is eligible for depreciation u/s 32 (1) (ii) of the act - when the provisions of the Act make the assessee eligible for depreciation in respect of an intangible asset, assessee has to be allowed the same, notwithstanding any ambiguity which the Income-tax Rules may give rise to, since the statutory legislation, viz., provisions of a statute prevail over the rules framed thereunder - the revenue allowed depreciation for the aforesaid intangible asset in the scrutiny assessment as well - Even though principles of res judicata have no application to income-tax proceedings, principle of consistency has to be respected and followed - payments made towards acquiring marketing network rights have also to be treated as payments made for acquiring commercial/business rights akin to know-how, patent, trade mark, licences, franchises, etc. which are eligible for depreciation – thus, the order of the CIT(A) is to be set aside and the AO is directed to allow the claim for depreciation on payments made by the assessee by way of non-compete fee and for acquiring rights over market network – Decided against revenue.
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2014 (10) TMI 650
Administrative and collection charges disallowed u/s 14A – Held that:- The AO was of the view that the assessee has made investment of ₹ 21,14,07,850/- and the assessee has paid interest on borrowed funds of ₹ 40,10,861 – the AO as well as CIT(A) could not pinpoint any error in the computation of disallowance made by the assessee of ₹ 2,00,000/- in earning tax free dividend income - disallowance of ₹ 6,22,228/- could not have been sustained CIT(A) – relying upon CIT vs. Consolidated Photo & Finvest Ltd [2012 (7) TMI 312 - DELHI HIGH COURT] – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee.
Restriction of Travelling expenses – Held that:- The AO made a disallowance of 50% of directors' travelling expenses to the income of the assessee on the ground that the assessee had not justified the reasons for incurring of the expenses which were more than five times of expenses incurred on other employees and the assessee has not produce vouchers in support of its claim - the estimated disallowance sustained by the CIT(A) - it is seen that the fact that the travel was undertaken entirely for business purposes has not been established – the order of the CIT(A) is upheld – Decided against assessee.
Addition u/s 40(a)(ia) – Effluent treatment charges paid by assessee - Held that:- CIT(A) rightly was of the view that the decision in Sing Killing Vs. ITO [2002 (3) TMI 39 - GAUHATI High Court] is to be followed - TDS provisions were not applicable on services rendered by the attendant association to members - the contribution made by the assessee to its association Vapi Waste Effluent Management Company as a member cannot be classified as payment for contractual services as covered u/s. 194C of the Act – revenue could not bring any material on record to show that the payments were covered under the provisions of section 194C of the Act – thus, the order of the CIT(A) is upheld – Decided against revenue.
Overseas freight expenditure – Held that:- CIT(A) rightly was of the view that the decision in ITO vs. Freight Systems India Private Ltd. [2005 (10) TMI 229 - ITAT DELHI-F] is to be followed - demurrage charge or handling charge or any other amounts of similar nature are treated at par with carriage freight payable to the ship owner or charter - amounts in the nature of demurrage etc. which may not end up being paid to non-residents are treated as amounts falling within special provisions of section 172 - This has been clarified by CBDT in Circular No. 723 of 1995 where such amounts have been taken outside the purview of the section 192C - where payments are made to shipping agent of non-resident owner or chartership at a port in India, provisions of section 172 will be applicable because the agent steps into the shoes of the owner - These charges are not covered under the provisions of law and no deduction of tax is called for u/s. 194C of the Act – revenue could not point out any specific error in the order of the CIT(A) – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 649
Validity of reassessment u/s 143 r.w section 147 – Change of opinion - Nexus between the reasons recorded and additions made in the guise of escapement of income or not – Held that:- CIT(A) erred in holding that the AO had valid reasons to reopen the assessment of Assessee-company to examine the veracities and financial implications between Assessee-company and M/s. Satyam Computer Services Limited - there is no rationale nexus with such statement by Sri Ramalinga Raju and reassessment made - even though the assessment was reopened to examine the transaction between M/s Satyam computers and assessee, no such exercise was undertaken and no findings were given on that issue - The additions made are routine disallowances out of already allowed expenditure in original assessment - There is no nexus between the reasons recorded and additions made in the guise of escapement of income – relying upon Ganga Saran & Sons P. Ltd. vs. ITO and others [1981 (4) TMI 5 - SUPREME Court] – AO had no tangible material to come to the conclusion that there was escapement of income from the original assessment.
The assessment made u/s 143(3) has been wrongly reopened u/s 147 beyond period of 4 years, as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself - The reopening was on wrong foundation of reasoning of the financial implication between the assessee-company and M/s. Satyam Computer Services Limited, which was not established in the reassessment to justify the reopening – thus, there being no nexus or live-link with the reasons recorded and the ‘formation of belief’ to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being ‘no tangible material’ for the reopening of the assessment, the CIT(A) erred in confirming the order of the AO – hence, the reopening of the assessment u/s 147 is bad in law and is to be quashed – Decided in favour of assessee.
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2014 (10) TMI 648
Waiver of pre deposit - Modification of order - Held that:- Order relies upon the decision of the Hon’ble High court of Andhra Pradesh in the case of Sai Samhita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT]. Learned counsel fairly agrees that even though this decision has been mentioned in Appeal Memorandum and during the arguments it was not brought to the notice of the Tribunal nor it was pressed. It cannot be said that there is any apparent error in the order passed by the Tribunal. When there is no apparent error, if the order is modified, it would amount to review of the order of the Tribunal by the Tribunal itself for which the Tribunal has no power. Accordingly, no case has been made out for modification of the stay order passed by the Tribunal and accordingly, the application is rejected.
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2014 (10) TMI 647
Mandap Keeper Service - Renting of immovable property - Extended period of limitation - Held that:- Appellant is doing restaurant business, it cannot be said that they had valid ground not to pay tax. Prima facie, we find that extended period also is invokable. - entire amount ordered to be deposited - stay denied.
As regards renting of immovable property, extended period could not have been invoked since the levy has been regularized by retrospective amendment. Therefore, prima facie, the appellant has made out a case for waiver of pre-deposit of service tax demanded on ‘renting of immovable property service’ - Stay granted.
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2014 (10) TMI 646
Valuation of the taxable service - inclusion of value of free supply - construction of commercial or industrial complex - section 67 - whether the value of free issue material supplied by the service recipient has to be included while computing the gross amount charged for the purpose of exemption Notification No. 15/04-ST and 1/06-ST - Held that:- Just because the materials were sold by the service provider to the buyer and he in turn provided it as free supply for construction work, the nature of transaction between the service receiver and the service provider that of supply of goods free of cost in our opinion does not change. As regards other decisions relied upon by the learned A.R., we find that all of them were decisions which were rendered before the case of Bhayana Builders (Pvt) Ltd [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] and therefore the Larger Bench decision would prevail. We also take note of the fact that appellants have deposited an amount of ₹ 96,57,536/- in our opinion, this amount is sufficient towards pre-deposit for hearing the appeal. - stay granted.
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2014 (10) TMI 645
Waiver of pre deposit - Cargo handling service - Held that:- Applicant in their Profit & Loss Account mentioned the service as ‘Cargo Transport Hire Charges’ - classification dispute of the service would be examined at the time of appeal hearing at length. Prima facie, we find it would be treated as Cargo Handling Service as evident from the various documents - After considering the overall facts and circumstances of the case and the financial hardship pleaded, we direct the applicant to predeposit ₹ 1,50,00,000 within a period of eight weeks - Partial stay granted.
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2014 (10) TMI 644
Waiver of pre deposit - Reversal of CENVAT Credit - CVD taken on import of goods - Held that:- Prior to 1-4-2011, in the absence of any specific procedure or specific provisions of law, the appellants cannot be found fault with for entertaining the belief that they are eligible for the credit. However the appellant has reversed the Cenvat credit attributable to the normal period amounting to ₹ 6,43,007 - table shows the total value of manufactured goods, total value of exempted goods and total value of traded goods and proportion worked out, in our opinion, on a prima facie basis, is correct. The entire tax has been paid for the normal period. Whether the extended period is invocable or not is required to be considered in greater detail in the light of facts and circumstances, case laws, etc. In view of the above, we are of the view that at this stage, the amount deposited by the appellant is sufficient for the purpose of hearing the appeal - requirement of pre-deposit of balance dues is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.
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2014 (10) TMI 643
Waiver of penalty u/s 80 - Penalty u/s 76 & 77 - electrical illumination services - Held that:- It is a fact that the appellant has provided temporary electrical illumination service to Govt. of Gujarat for celebrations of Independence Day, Republic Day and other State Govt. functions for which he could have entertained a bona fide belief that Service Tax liability may not arise on the services rendered by him. In my view, such belief is a justifiable reason to set aside the penalties under Sections 76 and 77 by invoking provision of Section 80 of Finance Act, 1994. In my view, the appellant has made out the case for invoking provisions of Section 80 of Finance Act, 1994, doing so I set aside the penalties imposed under Sections 76 and 77 of Finance Act, 1994 - Decided in favour of assessee.
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2014 (10) TMI 642
Denial of refund claim - Bar of limitation - Held that:- It is admitted fact that the appellant was not required to pay any service tax for acquisition of residential unit as held by the Hon’ble High Court in K.V.R. Constructions (2009 (8) TMI 150 - KARNATAKA HIGH COURT). As it is not an amount of service tax, therefore, provisions of Section 11B of the Central Excise Act are not applicable to the facts of this case. Therefore, the time limit prescribed under 11B is not applicable. Hence impugned order deserves no merit and same is set aside - Decided in favour of assessee.
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