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Showing 461 to 480 of 1076 Records
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2014 (10) TMI 620
Tax deduction on interest accrued on term deposits on orders passed in Motor Accident Claims cases – Validity of Circular dated 14.10.2011 – Held that:- The circular, dated 14.10.2011, issued by the Income-tax Authorities, is not in tune with the mandate of Sections 2(42) and 2(31), read with Section 6 of the Income Tax Act, 1961 – the circular also is not in accordance with the mandate of Section 194A of the Act – As decided in Ghaziabad Development Authority vs. Dr. N.K. Gupta [2002 (9) TMI 292 - National Consumer Disputes Redressal Commission] - damages paid for the death of a person cannot be equated with the income and tax cannot be deducted – also in Delhi Development Authority v. ITO [1995 (1) TMI 126 - ITAT DELHI] - the amounts credited in the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) and directed that what is recovered by the DDA be refunded – in the present facts and circumstances, the Circular, dated 14.10.2011, issued by the Income Tax Authorities, whereby deduction of income tax has been ordered on the award amount and interest accrued on the deposits made under the orders of the Court in Motor Accident Claims cases, is quashed and in case any deduction has been made, they are directed to refund the same, with interest at the rate of 12% from the date of deduction till payment – Decided in favour of assessee.
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2014 (10) TMI 619
Addition u/s 69B – Income from resort - Investment in land and building – Reference made to DVO for determination of value of investment – Held that:- The addition was made on the basis of the report of the DVO wherein the DVO had valued the property on the basis of the rates adopted for the purpose of stamp duty by treating the property to be for commercial usage whereas the land had not been converted from agricultural land into commercial land by the Government under change of land use - the Deputy Commissioner-cum-Collector vide order dated 24.2.2011, it has accepted the value of the property as depicted by the assessee in the sale deed to be full value of consideration - the Tribunal had rightly not relied upon the report of the DVO – the order of the Tribunal is upheld – Decided against revenue.
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2014 (10) TMI 618
Non-deduction of tax for payment of ship charter hire charges - Royalty u/s 9(1)(vi) - Whether the payment made by the assessee is a royalty and whether it is taxable in India - Held that:- The assessee entered into an agreement with Lots International Ltd, a company incorporated in Dubai, UAE for time charter of a vessel by name, M.V. Thekkadi - if the provisions in the DTAA are more beneficial to the assessee, then the provisions in the DTAA would prevail over the Indian Income-tax Act - Article 8 of the DTAA between government of India and Government of UAE would be applicable to the facts of the case, since it is more beneficial to the assessee - Article 8 of the DTAA, more particularly, sub clause 2 clearly says that the profit from operation of the ship in international traffic will also include the charter or rental of ships incidental to such transportation - the profit arising to the non -resident company on charter of the vessel has to be taxed only in the UAE in view of the DTAA between Government of India and Government of UAE, more particularly, Article 8(1) of the DTAA.
The material filed by the assessee clearly shows that the vessel M.V. Thekkadi was operated between Tuticorin Port to Mali Port in Maldives. Therefore, it operates in international traffic/waters – the distinction made by the CIT(A) between the charter hire and time charter is unwarranted - Since the material filed by the assessee discloses that the vessels were operated between India and Maldives in the international traffic, merely because there was a clause that the vessel would be delivered at Tuticorin Cochin Range after the expiry of the charter period in the agreement, that cannot justify for application of Explanation 5(c) to section 9(1)(vi) of the Act. The CIT(A) placed reliance on the Explanation 5 to section 9 of Indian Income-tax Act - Since the DTAA between Government of India and Government of UAE, is more beneficial to the assessee, the provisions of section 9(1)(vi) Explanation 5 is not applicable – the order of the lower authorities is to be set aside – Decided in favour of assessee.
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2014 (10) TMI 617
Invocation of provisions of section 263 by CIT – Held that:- The power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist – relying upon Malabar Industrial Co Ltd Vs CIT [2000 (2) TMI 10 - SUPREME Court] - during the course of assessment proceedings AO had raised query with respect to the exchange fluctuation loss and in response to which the Assessee has submitted its reply - the reply of Assessee was found to be acceptable by the AO because no addition on account of exchange rate fluctuation was made by the AO in the assessment order - for A.Y. 2006-07 and A.Y. 2008-09, AO had had made full inquiries by raising the queries and the same were also replied by the assessee and on receipt of the replies accepted the claim of the assessee – in CIT vs. Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India] - where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of Revenue, unless the view taken by the ITO is unsustainable in law - during the course of assessment proceedings, the AO examines numerous issues and generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made - provisions of s. 263 cannot be resorted to – relying upon Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - when a regular assessment is made u/s 143(3) a presumption can be raised that the order has been passed upon on application of mind - Revenue has not brought any material on record to demonstrate that the view taken by the AO was an impermissible view and was contrary to law or was upon erroneous application of legal principles necessitating the exercising of Revisionary powers u/s 263 – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee.
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2014 (10) TMI 616
Disallowance u/s 14A r.w Rule 8D – Claim of exemption u/s 10(34) and 10(35) – Held that:- There is no scope for either inclusion or exclusion of any expenses - which method the assessee adopts, while applying rule 8D, estimation per which is based on the volume of investment yielding (or liable to yield) income not forming part of total income held during the year, i.e., is investment based (though of course would have to be capped at the total amount of expenditure incurred), rather than expense based - the law does not circumscribe the estimation of the expenditure incurred by the assessee in relation to - implying a proximate nexus therewith, income not forming part of the total income, to any particular or one method or formulae - When it is said that rule 8D is mandatory (i.e., AY 2008-09 onwards), all that is meant is where the said expenditure cannot be reasonably ascertained with reference to the assessee's accounts, toward which the AO is to issue his satisfaction or, as the case may be, dissatisfaction, he has no discretion in case of the latter in formulating a method of his own, nor indeed has the assessee, and is bound to adopt the prescription of rule 8D.
The assessee has in restricting the disallowance to ₹ 4 lacs, i.e., the interest on borrowed capital availed to fund its investments made during the year, confused between the interest cost directly relatable to such investment, which is a subject matter of rule 8D(2)(i), and that indirectly relatable to such investment, estimation of which is governed by rule 8D(2)(ii) – relying upon The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - there was no basis to the Revenue's claim as made before it, so that the Revenue's appeal was dismissed.
The assessee has also earned interest income – the income is on long term investments and on loans forming part of current assets - The entire interest income is offered as, and admittedly, business income - the fact of earning of interest income would in our view be by itself of little consequence - There is no claim, which would, where so, though need to be established, of the interest being on borrowings which stood relent on interest - no nexus had been established between borrowed funds and investments by the assessee in dividend yielding shares/income yielding mutual funds - the assessee had utilized its own funds for the purpose of making the investments - the assessee has utilized its own funds in making the investments would not be dispositive of the question as to whether the assessee had incurred expenditure in relation to the earning of such income - Even if the assessee has utilized its own funds for making investments which have resulted in income which does not form part of the total income under the Act, the expenditure which is incurred in the earning of that income would have to be disallowed.
Adjustment of amount disallowed u/s 14A – Computation of book profits u/s 115JB – Hedl that:- The disallowance u/s.14A is not qua notional, but actual expenditure - The only adjustment is that the expenditure shall have to be valued at the amount as per the assessee's books, so that where there is a difference, as in the case of depreciation, or the loss on the sale of assets, etc., it is the latter, i.e., the book value, which shall prevail - The expenditure disallowed u/s.14A is only that incurred and claimed by the assessee in respect of dividend income, exempt u/s 10 - the amount disallowed u/s.14A provides a ready basis for determining the amount of such expenditure is another matter.
Loss on write off as receivable – Allowable u/s 36(1)(vii) or section 37(1) – Held that:- What the assessee in effect claims is the loss, on perceiving the amount as no longer receivable in view of the ceasure of some business/es, on reorganization, so that the same would henceforth be carried on by another group concern/s - The claim is u/s.28 and not either u/s. 36(1)(vii) or section 37(1) - What all therefore the assessee has to demonstrate is an honesty of its intent in effecting the write off - nothing more and nothing less – it could not be viewed as to how the write off does not represent a honest assessment by the management of the amount being no longer receivable, so that the write off would qualify for deduction on the ground of prudence - It may well be that circumstances may arise in future making available the credit of input available to the assessee; there being no time bar for the claim of the same - If and when claimed, the same would stand to be brought to tax as income for the relevant year - the assessee is bound to maintain accounts so as to reflect the true and fair view of its affairs, and any future adjustment, if any, would therefore find due reflection therein – thus, the contention of the assessee is upheld.
Computation of book profits u/s 115JB – Held that:- The write off to be in pursuance to an accounting policy which is in conformity with the fundamental accounting principles as advocated by the Accounting Standards issued by the ICAI (so that it is in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956) as well as by CBDT – there was no merit in confirming the adjustment in computing the book profit u/s 115JB – Decided partly in favour of assessee.
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2014 (10) TMI 615
Order for adjustment towards advance tax liability - Whether the CIT(A) was right in law in holding and directing that the amount seized from the assessee be adjusted towards the advance tax liability without appreciating that the provision of section 132B of the IT Act do not provide for the same – Held that:- Following the decision in CIT vs. Shelly Products and Ors. [2003 (5) TMI 4 - SUPREME Court] - the clarificatory and declaratory provisions which were inserted to clarify the law so as to remove doubts are of retrospective effect even if, the same provisions are stated to be applicable from a particular assessment year or date - in a Memorandum of Explanation the provisions of Finance Act, 2013 it has been stated that the amendment for insertion of Explanation-1 and Explantion-2 to the provisions of section 132B of the Act are propose to amend the section was as to clarify the existing liability does not include advance tax payable in accordance with the provisions of part 'C' of Chapter XVII of the Act - Therefore, the Explanation 2 to section 132B of the Act is a clarificatory provision which was inserted to clarify the intention of the legislature that the "existing liability" does not include advance tax payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act – revenue rightly contended that the Explanation 2 attached to section 132B of the Act, is a clarificatory provision which is of retrospective effect, even if, the same was stated to be applicable from a particular date - Explanation 2 to section 132B of the Act is retrospectively effective from the date of insertion of provision of section 132B of the Act w.e.f. 1.6.2002.
The assets or cash seized u/s 132 of the Act is adjustable against the amount of any "existing liability" under the Act which does not include "advance tax" payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act – as per section 208 of the Act, the amount of cash seized could not be adjusted as advance tax for the A.Y. 2008-09 – the assessee has shown advance tax paid besides self-assessment tax paid and cash seized - the assessee himself has not treated the amount of cash seized as an advance tax.
The assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income, therefore, the application of assets u/s 132B of the Act r/w Explanation 2 would be possible only on conclusion of assessment proceedings i.e. 24.12.2010 - the AO was wrongly granted adjustment of seized cash from 23.2.2011 and the CIT(A) was also grossly erred in holding that the assessee was entitled to adjustment of seized cash from 01.07.2008 - the AO is directed that the adjustment of cash seized be given for the assessee from the date of completion of assessment proceedings u/s 153A /143(3) of the Act i.e. from 24.12.2010 as per provisions of Explanation 2 to section 132B of the Act.
Non-credit of seized cash before levy of interest u/s 234A – Held that:- The CIT(A) has not specifically granted any relief for the assessee on the issue of levy of interest u/s 234A and 234B of the Act, but the CIT(A) has directed the AO to adjudicate the issues while giving appeal effect to the main grounds and the AO is also directed by the CIT(A) to take consideration of the decisions of Commissioner of Income-tax Versus Ashok Kumar [2010 (9) TMI 771 - Punjab and Haryana High Court] - the adjustment of seized cash is to be given for the assessee from the date of completion of assessment which was 24.12.2010, therefore, levy of interest u/s 234A of the Act being consequential is also restored to the file of the AO with a direction that the issue of levy of interest u/s 234A of the Act shall be decided in view of our findings on the main issue and in accordance with calculation of adjustment of seized cash u/s 132B r/w Explanation 2 of the Act – Decided in favour of revenue.
Admission of additional grounds – Held that:- The letters dated 30.06.2008 and 18.08.2008 were submitted before the AO and the AO gave detail deliberations and findings thereon - However, during first appellate proceedings the CIT(A) considered the letters and relief was granted for the assessee relying on the same letters but this contention of the Revenue is not acceptable that the CIT(A) admitted additional evidence without confronting the same to the AO in contravention of Rule 46A of the Rules - Hence, additional grounds based on this legal contentions are not admissible – Decided against revenue.
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2014 (10) TMI 614
Applicability of the provisions of Sec.60, 61 and 63 - Obligation to pay tax by the trust – Tax obligation has been fully discharged by beneficiaries of the assessee trust or not – Held that:- Assessee contended that the AO has not disputed in his remand report the fact that the Assessee trust is revocable but only says that beneficiaries are assessed at different places in India and it is very difficult to monitor all these beneficiaries as to whether they have filed their returns and even if filed, whether correct share of income received/receivable from the Assessee are admitted - To avoid such eventuality it would be correct to Assessee the trustee/representative Assessee - once the trust is accepted to be revocable then there is no question of assessing the transferee and it is only the transferor who can be assessed - It Sec.61 mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor and therefore the assessment in the hands of the transferee/representative assessee is not proper.
U/s 164 as so replaced, a `representative assessee' who receives income for the benefit of more than one person whose shares in such income are indeterminate or unknown, will be chargeable to income-tax on such income at the flat rate of 65% or the rate which would be applicable if such income were the total income of an AOP, whichever course would be more beneficial to the Revenue – the object of the amendments to the provision was only that the distribution of the income should not be entirely at the discretion of the trustees and that the trust deed should regulate the shares.
The power of revocation under Clause 13 of the Deed of Trust is a general power of revocation and the same would be sufficient for construing the transfer in the present case as a revocable transfer - it is not necessary that the power of revocation should be at the instance of the contributors/beneficiaries/ transferor and it can be at the instance of any person either settlor, trustee, transferee or the beneficiaries - Provisions of Sec.61 of the Act do not contemplate a power of revocation only at the instance of the transferor – relying upon Additional Commissioner of Income-Tax, Gujarat Versus Surat Art Silk Cloth Manufacturers Association (And Other References) [1979 (11) TMI 1 - SUPREME Court] - the existence of a power to revoke the transfer that has to be seen and not the manner in which/ or at whose instance such revocation is brought about.
Following the decision in Jyotendrasinhji Versus SI Tripathi And Others [1993 (4) TMI 1 - SUPREME Court] - Sec. 63(1) of the Act does not say that the deed of transfer must confer or vest an unconditional or an exclusive power of revocation in the transferor - the fact that concurrence of the trustee had to be obtained by the transferor/settler for revocation will not make the trust an irrevocable transfer - the deed contains a provision giving the transferor a right to re-assume power directly or indirectly over the whole or any part of income or assets within the meaning of s. 63(a)(ii) of the Act – thus, Sec.61 read with Sec.63 of the Act which mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor will apply to the facts and circumstances of the present case and therefore the assessment in the hands of the transferee/representative assessee was not proper.
Applicability of provisions of Sec.164(1) - Charge of tax where share of beneficiaries unknown – Held that:- There are two aspects to be noticed, the first aspect is the identification of the beneficiaries while the second aspect is with regard to ascertainment of the share of the beneficiaries - Clause 1.1.13 of the Trust Deed clearly lays down that beneficiaries means the Persons, each of whom have made or agreed to make contributions to the Trust in accordance with the Contribution Agreement – the clause is sufficient to identify the beneficiaries - share income of the beneficiaries cannot be determined or known from the trust deed – if the trust deed sets out expressly the manner in which the beneficiaries are to be ascertained and also the share to which each of them would be entitled without ambiguity, then it cannot be said that the Trust deed does not name the beneficiaries or that their shares are indeterminate - The persons as well as the shares must be capable of being definitely pin-pointed and ascertained on the date of the trust deed itself without leaving these to be decided upon at a future date by a person other than the author either at his discretion or in a manner not envisaged in the trust deed - Even if the Trust deed authorises addition of further contributors to the trust at different points of time, in addition to initial contributors, than the same would not make the beneficiaries unknown or their share indeterminate - Even if the scheme of computation of income of beneficiaries is complicated, it is not possible to say that the share income of the beneficiaries cannot be determined or known from the trust deed – thus, the provisions of Sec.164(1) of the Act would not be attracted in the present case - identity by reference to the terms of the trust deed is sufficient and it is not necessary that the beneficiaries should be specifically named in the deed of trust – Decided against revenue.
Assessee trust to be assessed as AOP or not – Held that:- The beneficiaries contributed their money to the Assessee and a separate agreement was entered into between the Assessee and each beneficiary - There is no inter se arrangement between one contributory/ beneficiary and the other contributory/beneficiary as each of them enter into separate contribution arrangement with the Assessee - it cannot be said that two or more beneficiaries joined in a common purpose or common action and therefore the tests for considering the Assessee as AOP was satisfied - The beneficiaries have not set up the Trust - Therefore it cannot be said that the beneficiaries have come together with the object of carrying on investment in mezzanine funds which is the object of the trust - The beneficiaries are mere recipients of the income earned by the trust - They cannot be regarded as an AOP – Decided against revenue.
Income of a person has to be assessed in the correct and appropriate status – Held that:- Sec.161(1) by implication permits assessment of either the beneficiary or the Trustee - When the Trustee is assessed as representative assessee in respect of income received on behalf of the beneficiary, the section provides that tax shall be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 613
Nature of receipts – Revenue or capital receipts – Character of the grant received by the assessee from the Government of Maharashtra of ₹ 110 crores - Held that:- Even if the grant received by the assessee bank has been used for meeting SLR requirements of RBI, which is relatable to its banking activity, yet the purpose of the payment made by the Government was to safeguard the interest of farmers and small depositors in the district Nande - The strategy of providing financial assistance by way of the grant was a mechanism devised by the Government of Maharashtra with the purpose of safeguarding the interest of farmers and depositors from the Nanded district, and the same clearly emerges from the Government decision dated 10.08.2009 - Following the decision in Commissioner of Income Tax, Madras Versus Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] – thus, the grants received are not in the course of any trade but is of capital nature, which is not chargeable to tax – Decided in favour of assessee.
Denial of claim of deduction u/s 36(1)(viia) – Restriction of claim of provision for bad debts - Held that:- Creation of provision for bad and doubtful debts equal to the amount mentioned in section 36(1)(viia) is a must for claiming such deduction - As the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, Following the decision in Shri Mahalaxmi Co-op Bank Ltd. Versus ITO, Ward 1 (1), Kolhapur [2014 (1) TMI 1366 - ITAT PUNE] - the claim of the assessee for deduction u/s 36(1)(viia) of the Act is liable to be restricted to the actual amount of Provision for bad and doubtful debts made in the books of account - the income-tax authorities have rightly allowed the deduction u/s 36(1)(viia) of the Act – Decided against assessee.
Addition of interest income on sticky advances/Non- Performing Asset advances – Held that:- The assessee is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India - the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act – as decided in M/s Southern Technologies Ltd. Versus Joint Commnr. of Income Tax, Coimbatore [2010 (1) TMI 5 - SUPREME COURT OF INDIA] - the provision of 45Q of Reserve Bank of India Act has an overriding effect vis-à-vis income recognition principle under the Companies Act - Hence Sec.45 Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks also - the AO has to follow the Reserve Bank of India directions 1998.
The assessee did not admit the interest relatable to NPA advances in its total income – in Commissioner of Income tax Versus Vasisth Chay Vyapar Ltd. & others [2010 (11) TMI 88 - Delhi High Court] it has been held that the interest on NPA assets cannot be said to have accrued to the assessee – there is no reasons to interfere with the ultimate conclusion of the CIT(A) in deleting the addition relating to interest income in respect of NPAs – Decided against revenue.
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2014 (10) TMI 612
Sales commission disallowed – contractual obligation with family members of Director - Held that:- The payment of commission was made after due deduction of tax at source - The assessee was engaged in the business of chemical exports for last many years - During the year under consideration, the assessee secured the contract for setting up galvanized plants in UAE and Iraq from M/s. Azady Trading FZCO and Pioneer Machinery & Equipment Industry LLC which the assessee got executed by availing services of M/s. Gunatit Builders - The assessee claimed to have incurred commission expenses in respect of this business and setting up of galvanized plants at UAE and Iraq - the confirmation of M/s. Gunatit Builders filed by the assessee shows that Mr. Bipinchandra N. Attawala was instrumental in entering of contract between the assessee company and M/s. Gunatit Builders - the assessee company claimed that the business proposal of setting up of galvanized plants in UAE and Iraq was brought to it by Mr. Bipinchandra N. Attawala, Ms. Jasmine B. Lala & Ms. Sejal Dhaval Lala and they assisted the assessee company in entering into contract with M/s. Gunatit Builders also for executing the contract and setting up galvanized plants.
Merely because in the legal contract which was directly entered into between the Assessee Company and Azady Trading FZCO and Pioneer Machinery & Equipment Industry LLC, the names of these three persons did not appear, does not evidence that the business proposal was not brought to the assessee company by these three companies - it was not necessary for the three persons to physically visit Iraq before bringing a business proposal in Iraq to the knowledge of the knowledge of the company - In absence of any positive material brought on record by the AO after examining the three recipients of the commission to show that in fact no services were rendered by these three persons, the adverse inference drawn by the AO on the basis of his subjective opinion only cannot be sustained - the genuineness of payment is not in doubt as the payment was made through banking channel after deducting tax at source and the recipients of commission have also shown the same as their income – relying upon Swastik Textile Co. Pvt. Limited v/s CIT [1984 (1) TMI 29 - GUJARAT High Court] - commission was allowable as deduction where the revenue had failed to controvert the broker's statement that he had brought the parties of contract together - the disallowance of commission payment cannot be sustained – Decided in favour of assessee.
Addition of foreign sales commission – Held that:- The assessee paid commission to Mrs. Jigna K. Babla and Mrs. Pramodini K. Babla on account of sale to M/s. Carus Chemicals of ₹ 7.23 crore – the evidences the fact that recipients of the commission were instrumental in getting the sales order from M/s. Carus Chemical Corporation of USA - the assessee company earned gross profit of ₹ 1.71 crores on the sales made to M/s. Carus Chemical Corporation, USA of ₹ 7.23 crores and that the profit after commission was 15.85% and the commission was 7.7% of sales – relying upon Swastik Textile Co. Pvt. Limited v/s CIT [1984 (1) TMI 29 - GUJARAT High Court] - commission was allowable as deduction where the revenue had failed to controvert the broker's statement that he had brought the parties of contract together - the commission payment was incurred for commercial expediency of the assessee - there were other contracts also for which commission to Mrs. Jigna K. Bala and Mrs. Pramodini K. Bala is paid and the same has been allowed by the AO - the AO was not justified in disallowing the commission payment and the CIT(A) was not justified in confirming the same – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.
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2014 (10) TMI 611
Revision u/s 263 - Erroneous and prejudicial order to the interest of the revenue - period of limitation - Held that:- The assessee has filed a letter dated 'nil' informing the AO of the commission income having been omitted to have been offered to tax - In the said letter the assessee has also enclosed profit and loss account - It is on the basis of this letter that notice u/s 148 was issued - in the letter and response to the notice u/s 148 the assessee itself has back tracked on its letter earlier filed having the escaped income - in the course of 142(1) proceedings the assesee voluntarily has produced details of the share application and the share premium received by the assessee - the assessee was meticulously by design drawn the attention of the AO to the share application money and the share premium - if there is any error which is prejudicial to the interest of the Revenue on the issue of share application moneys and share premiums then it would be in the reopened assessment which has been rightly revised by the CIT u/s 263 - If this re- assessment order is taken into consideration then the order passed u/s 263 is well within the limitation - a perusal of the order passed u/s 263 clearly shows that it is this reassessment order which the CIT has held to be erroneous and prejudicial to the interest of the Revenue, in so far as, no investigation whatsoever have been done by the AO, much less any investigation worth its name - This is also clearly evidence from the order sheet notings in the assessment folder - the order passed u/s 263 is not barred by limitation – Decided against assessee.
Validity of order u/s 147 – Whether there was lack of proper enquiry as to the issue of share capital premium when the reopening was done for the specific purpose of escapement of commission income – Held that:- The AO cannot in a reopened assessment do roving enquiry, but what is to be understood is that it is not the reassessment which are in appeal, but, it is revisionary proceedings - If at all, the assessee wanted to challenge the so called roving enquiry which has been done by design, it was to be done within the prescribed time provided in respect of reopened assessment It is not something that can be done in an appeal against the revisionary order passed u/s 263 - The assessee himself having brought to the attention the issues to the AO and the AO have not done any investigation and as rightly submitted by the assessee, being lack of proper enquiries as to the issue of share capital and premium, the action of the ld. CIT in invoking the provisions of 263 is on a right footing and does not call for any interference – Decided against assessee.
Addition of share capital u/s 68 – Held that:- The assessee has made investments in other companies also - The assessee came into existence on 20th November, 2007 with an initial share capital of about ₹ 1 or 2 lakh - The assessee decide to increase its share capital vide an ordinary meeting of the members of the company held on 31.03.2008 and increased the authorised share capital of the company from ₹ 2 lakhs to ₹ 35 lakhs - The issue of section 68 would clearly apply, as the proviso which has been added w.e.f. 01.04.2013 specifically provides for verification of the source of the source especially in respect of share application money, share capital, share premium or any such amount, by whatever name called - The AO have not conducted the enquiry to its logical end and having been carried away by the design of the assessee, CIT was right in invoking the provision of section 263 - proviso to section 68 has been introduced after the decision in COMMR. OF INCOME TAX Versus M/s LOVELY EXPORTS(PVT) LTD [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - as the proviso is now applicable the AO would be right in verifying the source of the source - invocation of the proviso of section 68 has not been done by the CIT and that the CIT has done in his order u/s 263 is to treat the reassessment order passed by the AO to be erroneous and prejudicial to the interest of the Revenue, in so far as, the issue of share capital has not been looked into or investigated by the AO - Thus it is in the proceedings in consequence to the 263 order that the proviso to section 68 would be more applicable –Decided against assessee.
Power to give directions - Whether the CIT in exercise of power u/s 263 can give direction in respect of subsequent assessment for which revisionary power u/s 263 has not been exercised – Held that:- CIT after verifying the records as available have issued the show cause notice and after considering the reply of the assessee had done further investigation and as the information was not fully coming from the assessee had directed the AO to verify whether these three issues relate to the same assessment year - In the order passed u/s 263 the CIT has not in any case extended his jurisdiction u/s 263 to any other assessment year - There is no direction in the order of the CIT directing the AO to consider anything for any other AY - The direction of the CIT is specific - Now it is for the assessee to show as to which year the issues raised by the ld. CIT would relate to - It is only in the knowledge of the assessee as to what the assessee has done in his books - What has happened in the assessee's books cannot be within the knowledge of the ld. CIT - as it is noticed that the CIT has invoked revisionary powers for the relevant AY and has not given any direction in respect of any subsequent AY, the order of the CIT is upheld – Decided against assessee.
Erroneous and prejudicial to the interest of the revenue or not - Whether order passed by the AO can be said to be erroneous and prejudicial to the interest of the revenue when the AO has passed the order after inquiry or investigation on the issue of share capital – Held that:- The fact that the AO has not taken the issue of the share capital to its logical conclusion is evident - the whole reopening itself was by design of the assessee is also evident - Now to take shelter under such design and claim that investigation and inquiry has been done by the AO when the facts clearly stand against such claim is also evident - In any case in regard to the issues of the show cause notice u/s 263 in such cases the issue has been decided in Zigma Commodities Private Ltd; & Another Versus Income Tax Officer And Others [2014 (5) TMI 672 - CALCUTTA HIGH COURT] - CIT has verified and has found that the investigation was not done – Thus, clearly recognizing the design of the assessee in respect of re-assessments – Decided against assessee.
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2014 (10) TMI 610
Validity of reopening of assessment u/s 147 – Change of opinion - Held that:- The assessee along with the return of income, has made a claim for deduction under section 80IC with regard to its Century Pulp & Paper unit - Such a claim of deduction under section 80IC, were duly supported by the audit report under section 10CCA - during the course of the original assessment proceedings, the AO has raised queries with regard to the claim of deduction u/s 80IC, not once but twice - the assessee has duly responded to such query and filed replies before the AO - the AO has reduced the claim of deduction u/s 80IC, by allowing the claim in respect of profits attributable to paper and the deduction relating to profits attributable to sale of pulp was denied – "change of opinion" preclude the reopening of the assessment, whether within or outside the four years' limit from the end of the relevant assessment year - the "reasons recorded" by the AO is purely based on "change of opinion" de–hors any tangible material coming into record – following the decision in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the notice dated 15th December 2011, u/s 148, and consequent assessment order dated 22nd December 2011, passed u/s 147/143(3), is held as void as the "reasons recorded" are based on "change of opinion" and do not clothe the AO with jurisdiction to re–open the assessment – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.
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2014 (10) TMI 609
Deemed dividend u/s 2(22)(e) – Loan received from M/s. Morgan Credits (P) Ltd. - Business of investment in shares/securities of listed companies - Held that:- The assessee-company is not a shareholder holding the required percentage of shares in any of the two companies – Following the decision in COMMISSIONER OF INCOME TAX Versus ANKITECH PVT LTD. & OTHERS [2011 (5) TMI 325 - DELHI HIGH COURT] - such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under s. 2(22) (e) of the Act - Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to "shareholder" - under no circumstance, it could be treated as shareholder/member receiving dividend - If the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", then the legislature would have inserted deeming provision in respect of shareholder as well, that has not happened - the loan of ₹ 27.75 crores received is not to be treated as deemed dividend u/s 2(22)(e) of the IT Act – Decided in favour of asssessee.
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2014 (10) TMI 608
Computation of capital gain u/s 50C(1) – Adoption of FMV determined by the Stamp Valuation Authority for the purpose of stamp duty - Capital gains on sale of agriculture - land Held that:- Land sold is a capital asset as defined u/s 2(14) of the Act - Though, the assessee has disclosed the total consideration received on sale of property by all the coowners at ₹ 4,50,00,000/- but the Registering Authority has valued the property for stamp duty purpose at ₹ 14,76,00,000 - understatement in sale value in terms of section 50C(1) is prima-facie established - the AO in terms with section 50C(2) did refer the valuation of the property to the DVO - DVO submitted a report to the AO on 25/10/2012 by determining the value of the property at ₹ 7,93,80,483 by estimating the fair market value of the property as on the date of registration at ₹ 43.41 lakh per acre - the AO ignoring the statutory mandate as contained u/s 50C(2) and (3) completed the assessment on the very same day he referred the valuation to the DVO by adopting the value of property at ₹ 14.76 crores as determined by the SRO for stamp duty purpose - AO’s action cannot be approved - When the assessee has objected to the SRO value and the valuation of the property has been referred to the DVO, the AO is duty bound to take into account the valuation made by the DVO and thereafter compute the capital gain in terms with section 50C(3).
Assessee has complied to the provisions of section 50C(2) and AO has referred the valuation to DVO - adoption of SRO value by completely ignoring the valuation made by the DVO is totally wrong and in violation of statutory mandate of section 50C - value determined by SRO cannot be considered as the fair market value of the property for computation of capital gain.
Determination of value by DVO – Held that:- section 50C is a deeming provision, assessee is required to establish that sale consideration shown by him is the actual fair market value as on the date of execution of agreement of sale cum GPA on 30/10/2008 - Neither the assessee nor the department has brought any substantive evidence on record to justify the value adopted by them – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of assesse.
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2014 (10) TMI 607
Waiver of pre deposit - Manpower recruitment and supply agency’s service - penalties under Section 77 & 78 - Held that:- Issue involved requires consideration of the contract, decisions relating to reimbursement of expenses of various High Courts and Tribunals, definition of ‘manpower supply service’ as applicable to the facts of this case, facts as to whether extended period could have been invoked, etc. which can be done at the time of final hearing. At this stage, we consider that the amount already deposited by the appellant is sufficient for the purpose of hearing the appeal. Accordingly, there shall be waiver of pre-deposit and stay against recovery of the balance dues for 180 days from the date of this order - stay granted.
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2014 (10) TMI 606
Reversal of differential duty of 50% of CENVAT credit - Benefit of Section 80 - Held that:- Since there is direct judgement on the issue in the case of Ceolric Services [2011 (2) TMI 764 - CESTAT, BANGALORE] remanding the matter to the adjudicating authority, I set aside the impugned order and remand the matter back to the adjudicating authority for reconsideration in view of provisions of Rule 7C of the Rules and after verification of the records. This has to be done as ld. Advocate has contended that they have actually taken cenvat credit of 50% on capital goods but due to mistake it was shown as 100% - Adjudicating authority shall pass order within three months from the date of issue of this order after affording a reasonable opportunity of producing records - Decided in favour of assessee.
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2014 (10) TMI 605
Waiver of pre deposit - Information Technology services - service consumed in SEZ - Held that:- In the case of Adani Power Ltd. (2014 (1) TMI 200 - CESTAT AHMEDABAD), unconditional stay was granted on the ground that the Notification No.4/2004-ST dt. 31.3.2004 specifically extended to the consumption of taxable service of any description to a developer of Special Economic Zone or any unit in any Special Economic Zone for consumption of the services within such Special Economic Zone. The other issues would be examined in detail at the time of appeal hearing - deposit of ₹ 14.53 lakhs is sufficient for waiver of predeposit of balance amount of tax along with interest and penalty. Accordingly, predeposit of balance amount of tax along with interest and penalty would be waived and recovery be stayed till disposal of appeal - Stay granted.
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2014 (10) TMI 604
Waiver of pre deposit - Eligibility of Cenvat Credit - construction of an immovable property - Held that:- in the case of Sai Sahmita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] and this tribunal in the case of Navratna S.G. Highway Pro. (P) Ltd. [2012 (7) TMI 316 - CESTAT, AHMEDABAD] has held that Cenvat Credit of service tax paid on input services used in the construction of immovable property would be available if such immovable property is used for rendering other taxable services. Following the same in the present case also, we hold that the appellant has made out a prima facie case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (10) TMI 603
Penalty u/s 78 - erection, commissioning and installation services - Held that:- During the impugned period, Service Tax was payable on receipt basis. Therefore the allegation of the ld. AR that the appellant has utilised the Service Tax is not sustainable in the facts that still the appellant has not received 100% remuneration of the services provided by them. We further find that the appellant have calculated the liability on accrual basis and paid Service Tax payable along with interest as pointed out by the department. In these circumstances, it cannot be said that they had mala fide intention to evade payment of service tax. Therefore, the appellants need immunity from imposing penalty under Section 78 of the Finance Act, 1994. Accordingly, we set aside the penalty under Section 78 of the Finance Act, 1994 - Decided in favour of assessee.
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2014 (10) TMI 602
Adjustment of tax - Management and repair services - money deposited by the respondent in the old Service Tax registration code belonging to the partnership firm - Held that:- Admittedly, the Service Tax was wrongly deposited in a wrong code belonging to partnership firm which was dissolved at the relevant time. As such, it is a mistake on the part of the respondents which is required to be rectified and the amount deposited in the partnership firm is required to be adjusted in the assessee’s registered code - Decided against Revenue.
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2014 (10) TMI 601
Denial of remission claim - adjustment of the excess service tax deposited - Authority rejected the claim for availing the benefit of this deposit on the ground that the assessee had filed only a photocopy of the internet banking challan dated 31-3-2008 without attestation - Held that:- Adjustment claimed of the excess service tax remitted just about 9 months prior to the due date on which the service tax liability accrues cannot be rejected on the basis of conditions spelt out in Rule 6(4A) and (4B). If an excess amount of service tax has been remitted and within a reasonable period thereof adjustment of this excess amount deposited is sought in respect of a service tax liability arising in subsequent months, there cannot be appropriation of the excess service tax deposit. Of this prima facie premise, the relevant provisions of Rule 6 may perhaps have to be interpreted by directory and not mandatory. demand of ₹ 58,36,314/- relatable to services provided to M/s. HCL Infinite, it is incumbent upon the Adjudicating Authority to verify the records to ascertain whether the amount was deposited by internet banking, particularly when the assessee provides a copy of a challan purportedly in proof of such deposit. since an amount of nearly ₹ 89,00,000/- was deposited, either in respect of the taxable services provided to M/s. HCL Infinite or by way of excess remittance of service tax on 30th June, 2006, we find a strong prima facie case in favour of the assessee. Accordingly, we grant waiver of pre-deposit and stay all further proceedings for recovery of the assessed liability, during pendency of the appeal - Stay granted.
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