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Showing 481 to 500 of 1962 Records
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2017 (3) TMI 1483
Limitation for grant of bail under Section 45(1) of PML Act - Held that:- The fact remains that whilst there was an earlier raid in the year 2008 and Lokayukta is awaiting approval from the Government to prosecute the petitioner, the current raid by the Income Tax has taken place. The explanation with regard to legitimacy of ownership of properties listed in the complaint are all subject matters of previous raid in the year 2008 and investigation thereon. Thus, prima facie , it appears that petitioner after a raid in the year 2008, has again indulged in the offences alleged against him in the FIR registered by the CBI on 03.12.2016. There is no order passed by any competent Court holding that the offences alleged against the petitioner, which are scheduled offences are not made out.
In the light of all discussions, two indubitable determinants emerge. Firstly, that even before he was cleared of allegation of acquisition of assets disproportionate to his known source of income of 1 02.69% during the check period 1.2.1985 to 18.12.1988, petitioner has been alleged of converting demonetized currency of ₹ 6,12,50,000/- out of which possession of ₹ 27 Lakhs has been admitted in the petition itself. Secondly, that the explanation to the possession of ₹ 27 Lakhs is not satisfactory.
In the circumstances, petitioner’s case does not merit recording a finding of satisfaction by this Court to the effect that there are reasonable grounds for believing that the petitioner is not guilty of the offences alleged against him and that he is not likely to commit any offence while on bail.
Grant of bail in this case is undebatably contingent upon this Court recording it’s satisfaction as required under Section 45(ii) of the PML Act. In view of the finding that the petitioner’s case does not merit recording such satisfaction, the said statutory requirement remains unfulfilled. Resultantly, this petition fails and is accordingly dismissed.
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2017 (3) TMI 1482
Levy of fees under section 234E in intimation issued under section 200A(1) - scope of amendment to section 200A(1) - Held that:- Following the referred decision in the case of Gajanan Constructions and others [2016 (11) TMI 1247 - ITAT PUNE] we hold that the amendment to section 200A(1) is prospective in nature and therefore the AO, while processing the TDS statements/returns in the present appeal for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act.
Therefore the intimations issued by the AO under section 200A of the Act in this appeal are unsustainable and the demand raised by way of charging of the fees under section 234E of the Act not being valid is deleted. AO is not empowered to charge fees under section 234E of the Act by way of intimation issued under section 200A of the Act in respect of defaults before 01.06.2015 and consequently allow the ground of appeal raised by the assessee.
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2017 (3) TMI 1481
TDS liability - ascertained liability or not - primary liability of payment of income tax - Held that:- In the present case, no evidence has been brought on record hat interest credited as per this software was only a notional provision and the same was reversed afterwards. But this is also an undisputed fact that the bank is using CBS software as in that case. Hence, we feel it proper that the matter should be restored back to the file of the AO for a fresh decision in the light of this Tribunal order rendered in the case of Bank of Maharashtra (2010 (3) TMI 885 - ITAT AHMEDABAD ) and if the assessee is able to establish that it was only a notional provision which was reversed afterwards then no TDS liability can be imposed on the assessee. We order accordingly.
I
order under section 201(1) & 201(1A) validity - Held that:- In the present case, the orders u/s 201(1) & 201(1A) of the IT Act were passed by the AO on 29-09-2014 and the earliest assessment year involved is 2008-09 and therefore, it is seen that six years from the end of the relevant assessment year has not elapsed at the time of passing the impugned orders
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2017 (3) TMI 1480
Section 14A Disallowance - investment income - interest paid by the Assessee Company on borrowed funds - Held that:- The Hon’ble Bombay High Court in CIT Vs. M/s. Delite Enterprises (2009 (2) TMI 498 - BOMBAY HIGH COURT) have held that where there is no income arising to the assessee on its investment, then no disallowance is to be made under section 14A of the Act i.e. interest expenses related to such tax profits are not to be disallowed under section 14A of the Act. Accordingly, we hold that in so far as the interest expenditure being attributable to such investments, against which the assessee had not received any exempt income, no disallowance of interest expenditure could be made under section 14A of the Act. Accordingly, we allow the claim of assessee in respect of interest expenditure of ₹ 21,52,504/- and allow the ground of appeal No.1 raised by the assessee.
Balance interest expenditure - Held that:- Admittedly, the assessee had borrowed the funds but on the other hand, the assessee has sufficient interest free funds available with it, which is apparent from the copy of balance sheet filed by the assessee. The Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ) have clearly laid down that in such cases, where the assessee has sufficient capital available with it, no disallowance was to be made out of interest expenditure under section 14A of the Act. Applying the ratio laid down by the Hon’ble Bombay High Court, we hold that no disallowance is to be made out of balance interest expenditure of ₹ 5,80,523/-. The ground of appeal No.2 raised by the assessee is thus, allowed.
Disallowance of part of administrative expenses under section 14A - Held that:- Applying th e ratio laid down by the Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT), we direct the Assessing Officer in restricting the disallowance under section 14A of the Act on account of administrative expenses to ₹ 50,000 /-. Accordingly, we partially allow the claim of assessee and ground of appeal No.3 raised by the assessee is thus, partly allowed. The grounds of appeal raised by the assessee are thus, partly allowed.
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2017 (3) TMI 1479
Entitled to the benefit of deduction u/s 80P - belated filing of return of income - Held that:- It is not justified in denying the benefit of exemption u/s 80P of the Act on the mere ground of belated filing of return of income. See Chirakkal Service Co-Operative Bank Ltd. Versus The Commissioner of Income Tax [2016 (4) TMI 826 - KERALA HIGH COURT]
The assessee, in the instant case, is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon’ble High Court, in assessee’s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, we hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. - Decided in favour of assessee
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2017 (3) TMI 1478
Entitled to the benefit of deduction u/s 80P - belated filing of return of income - Held that:- It is not justified in denying the benefit of exemption u/s 80P of the Act on the mere ground of belated filing of return of income. See Chirakkal Service Co-Operative Bank Ltd. Versus The Commissioner of Income Tax [2016 (4) TMI 826 - KERALA HIGH COURT]
The assessee, in the instant case, is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon’ble High Court, in assessee’s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, we hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. - Decided in favour of assessee
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2017 (3) TMI 1477
Reopening of assessment - amount of loan taken by M/s K. N. Parikh (firm) can be considered as income of assessee - Held that:- AO failed to appreciate the facts properly while reaching to the conclusion that there was any ‘escapement of income’ on behalf of assessee. Since in the present case no amount was taken as loan by the assessee from M/s N.H. Securities. Therefore, in such circumstances, the very basis for reopening is not based on correct appreciation of facts. Hence, the orders of ACIT for reopening the assessment of the assessee on the basis of reasons recorded by him u/s 148(2) of the Income Tax Act is not sustainable in the eyes of law. In such circumstances, we allow this ground of appeal and set aside the order of CIT(A) sustaining the order of reopening. - Decided in favour of assessee.
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2017 (3) TMI 1476
Denial of benefits of exemption under s.10(23B) - AO treated the interest income as ‘income from other sources’ and held that the interest income cannot equated with income earned from activities of development of Khadi or village industries - whether interest income on surplus funds deployed in fixed deposits and other investments etc. partakes the character of income attributable to business of production, sale or marketing of khadi and allied products in terms of section 10(23B)? - Held that:- As decided in assessee’s own case in earlier years the provisions under which relief is claimed by the assessee is part of exemption provisions whose purpose is also to encourage prescribed activities of such institutions and therefore as per settled judicial principal in this regard such provisions are always to be given a beneficial interpretation with a view to advance the legislative intent. From the facts and financial figures on record we also note that the income of interest is attributable to and arises from working funds in an integrated manner and for this reason also we find that interest cannot be separated from the overall income and activities of the Trust. For the reasons above we therefore hold that the interest income earned by the assessee is entitled to the exemption u/s.10(23B) of the Act. This ground of appeal of the department is therefore dismissed.
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2017 (3) TMI 1475
Claim of deduction u/s 80P(2) denied - assessee is primarily engaged in the business of banking - Held that:- In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon’ble High Court, in assessee’s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, we hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act.
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2017 (3) TMI 1474
Revision u/s 263 - proper opportunity of being heard was not granted - issues relating to 40 A (2) (b) in respect of one of the parties was not examined by the assessing officer - Held that:- Commissioner of income tax in his order has duly noted that on several occasion notices were issued but nobody attended. Before us also despite several notices nobody has attended. Hence we do not find any cogency in this aspect of assessee submission that proper opportunity of being heard was not granted. As regards the merits of the order passed we find that learned Commissioner of income tax has raised relevant issues on which the assessing officer should have made enquiries, which are not emanating from the assessment order. Hence it was incumbent upon the assessee to prove that the assessing officer has duly examined these aspects. In absence of any responses from the assessee in our considered opinion there is no infirmity in the direction of learned Commissioner of income tax to the assessing officer to examine the issues denovo. - Decided against assessee
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2017 (3) TMI 1473
Application of provisions of Section 150(1) - period of limitation - Held that:- If we read sub Section (2) of Section 150, it provided that sub Section (1) thereof will not apply to a case of assessment, reassessment or recomputation of income, if it related to assessment year in respect of which assessment, reassessment etc. could not have been made at the time when the order, which was the subject matter of appeal, reference or revision was made, by reason of the time limits fixed u/s 153 for making the reassessment, it would be seen that sub section (2) of Section 150 does not refer to Section 153. It only refers to “ any other provisions limiting the time within which any action for assessment, reassessment or recomputation may be taken. The word “taken” refers only to initiation of proceedings and not to completion. The time limit for initiation of such proceedings are contained in Section 149 & 150 while the time limit for completion of such proceedings are mentioned in sub Section (2) & (3) of Section 153 just as Section 150 is the proviso to Section 149, sub Section (3) of Section 153 is a proviso to sub section (2) thereof. We find that the plain language of sub-section (2) of Section 150 clearly restricts the application of sub-section (1) of Section 150 to enable the authorities to reopen the assessments which have not already become final on the expiry of the period of limitation prescribed u/s 149(2) of the Act.
In the light of above discussion in respect of provisions of Section 150(1) and (2) of the Act and relying on various judicial pronouncements as relied on by the ld. Authorized Representative of the assessee as well as discussed as above by us and the decision of Jurisdictional High Court in the case of Computer Science Corporation India (P) Limited (2013 (3) TMI 743 - MADHYA PRADESH HIGH COURT), we are of the considered opinion that the directions issued by the ld. CIT(A) u/s 150(1) of the Act for the assessment years 2004-05 to 2006-07 are barred by limitation legally and not permissible considering the facts of the present case. Accordingly, the same are directed to be expunged and deleted.
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2017 (3) TMI 1472
Addition applying net profit rate of 8% after invoking the provisions of Section 145(3) - Held that:- As find from the copy of the order of Sales Tax Authority dated 04.11.2010, wherein the assessee has shown gross sales in computation sheet at ₹ 6,03,44,734/-, which also shows that there is a variation in the sales shown by the assessee in profit and loss account and as per sales registers as well as sales to the Sales Tax Authorities. Further, the Sales Tax Authorities has also pointed out the variation of sales amounting to ₹ 4,72,299/- in their assessment order dated 04.11.2010. In the light of these facts and circumstances of the case, we are of the considered opinion that the AO was correct in invoking the provisions of Section 145(3) of the Act, as in absence of non-production of original documents, audit report, sales and purchase bills, vouchers of expenses and FIR, profit from the books of accounts cannot be deduced properly. Therefore, we are of the view that the AO was justified in invoking the provisions of section 145(3) of the Act.
Considering the claim of the assessee, the deduction/ set-off on account of DEPB income of ₹ 18,70,576/- would also be available to the assessee as set-off as the assessee has already shown this income in profit and loss account. Therefore, net income is worked out at ₹ 14,80,589/- (33,51,165-18,70,576) as against the income computed at ₹ 44,68,220/-by the AO as per the assessment order and ₹ 6,25,650/- disclosed in return of income by the assessee under regular provision of Act. As regards, the deletion of ₹ 18,70,576/- on account of addition of DEPB income by the AO, we are of the view that the ld. CIT(A) has wrongly deleted the same while deleting total addition of ₹ 44,68,220/- made on application of net profit as the said income is shown by the assessee in its profit and loss account. However, the set off of the same is available to the assessee as given above by us from the estimated income as computed above by taking the gross profit at 6% estimate of gross profit rate. Therefore, we make it clear that the net taxable income after this order would be at ₹ 14,80,589/- as against returned income of ₹ 6,25,650/- as shown by the assessee. Appeal of the Revenue is partly allowed.
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2017 (3) TMI 1471
Denial of claim of exemption u/s 10(23C)(iiiad) - Held that:- We find that the assessee society is engaged in the running of school and amount of surplus has also been utilized by the assessee for construction of school building, which was also used by the assessee, hence, the society is engaged in the charitable purpose u/s 2(15) of the Act. Since the gross receipts of society is less than ₹ 1 crore, therefore, it is eligible for exemption u/s 10(23C)(iiiad) of the Act. We also find that the facts of the present case are squarely covered by the above decisions discussed above. Therefore, we are of the considered opinion that the lower authorities were not justified in not allowing the deduction to the assessee u/s 10(23C)(iiiad) of the Income-tax Act, 1961. Accordingly, the AO is directed to treat the Society as covered by Section 10(23C)(iiiad) of the Act and allow the relief accordingly.
Addition u/s 40(a)(ia)- Held that:- Since, the claim of assessee that the recipient has paid due tax in the light of second proviso to Section 40(a)(ia), we deem fit to restore this issue to the file of the AO for verification and if found correct allow the same as the ratio laid down in the case of Ansal Land Mark Township P.Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT ]
Disallowance out of kitchen expenses - Held that:- The assessee has claimed kitchen expenses of ₹ 5,75,486/- out of which ₹ 1,89,000/- were claimed as reimbursement to Imperial Academy and for balance of ₹ 2,86,484/- only ledger copy was filed. On spot inquiry, the Inspector found that no meal was provided to students, considering the genuineness, the AO disallowed ₹ 28,648/- being 10% of expenses of ₹ 2,86,480/- as income for non- education activity.
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2017 (3) TMI 1470
Addition u/s. 68 - gifts received by the assessee - Held that:- The bank accounts from which the stated gifts have been given are NRE accounts. All deposits in the said accounts can be made only out of the earnings made outside the country. In any case, no cash deposits have been found in the said accounts. Further there are enough deposits in the said accounts to make the impugned gifts. When the availability of funds has been adequately proved, the capacity of the donors to make the gifts also stands proved. By asking the assessee to file copies of the Income Tax Returns and also their bank statements in their country of residence, the Revenue is indulging in the exercise of verifying the source of the source which is settled law, cannot be done in this case. The onus to explain the credit being on the assessee, reflects the general rule of law of evidence codified in section 106 of the Evidence Act, 1872, ,as per which the source of income is a matter with the exclusive knowledge of the assessee which he has to prove and demonstrate. It is for this reason only that the source of source, which is not within the knowledge of the assessee at all, is not required to be proved by the assessee.
The addition we find has been made merely on the basis of suspicion, without any iota of evidence to even lead to the fact that the amount received as gifts were actually the assessees income only. This cannot be the basis of making an addition under a deeming provision, section 68 in the present case.
We reject the contention of the learned D.R. that the assessee has failed to prove the capacity and genuineness of the transaction by not filing the copies of income tax returns as also copies of bank statements of the donors in their countries of residences.
In view of the above, we hold that the assessee has adequately discharged its onus of proving identity of the donor, capacity of the donor as also the genuineness of the transaction being in the nature of gift received from brothers and, therefore, there is no reason to make any addition under section 68 on account of unexplained credit. The addition so made of ₹ 45,00,000/-, is therefore, deleted. - Decided in favour of assessee.
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2017 (3) TMI 1469
Reopening of assessment - approval does not meet the requirements laid down u/s 151(2) - Held that:- The assessee applied for PAN on 8.11.2006. Based on the information provided by the assessee it was assigned to the jurisdiction of Circle 1(2)(1), Delhi, which came under the jurisdiction of Addl DIT(IT), Range 1, Delhi. Vide notifications no. 263/2001 of 14.09.2001 and 250/2007 dated 28.09.2007 read with order of DIT (IT)-l Delhi dated 11.10.2007 (copies enclosed), the Add DIT (IT), Range 1, Delhi was empowered to exercise the powers and the functions of Additional Commissioner of Income-tax. Therefore, the grant of approval for issue of notice u/s 148 by Addl DIT (IT), Range-1, Delhi was as per law.
The proposition canvassed by the AR that notices u/s 143(2)/142(1) cannot be issued till the disposal of objections made by the assessee in response to the communication of 'reasons to believe' -is an erroneous interpretation of the SC judgment in 'GKN Driveshafts' [2002 (11) TMI 7 - SUPREME Court ]case. After issue of notice u/s 148 the AO cannot be expected to remain idle waiting for the assessee to seek reasons and then prefer objections at the last minute. It is also worth noting that the time available with the AO for passing draft assessment order was only up to 31.03.2015. Under the circumstances, and keeping in view that the assessee had not sought reasons for almost six months even after receiving the notice u/s 148 on 21.03.2014 the action on part of the AO to issue notices u/s 143(2) and 142(1) before 10.06.2014 cannot be faulted upon.
Regarding claim of assesses that Reasons Recorded by the AO were not signed contention has never been raised before at any stage. Not only that the assessee through letter dated 16.10.2014 responded to the reasons conveyed, but continued to participate in the proceedings even after that without raising any disagreement about the same, till now. Nevertheless, the fact that the AO not only recorded reasons (and, of course, signed those) for reopening of assessment, but also obtained approval of the competent authority for issue of notice u/s 148 is undeniable.
Moreover, the AO conveyed the 'reasons' for issue of notice u/s 148 to the assessee on 25.07.2014 through a duly signed covering letter of the same date. The office copy of the signed letter along with the sticker of 'Speed Post' bar-code is available in the assessment records (P-201/c). It is worth noting that another similar letter addressed to Cairn Energy PLC (a group company) was also sent on the same date to the same address receipt of which is not denied. Proof of dispatch of these letters is also available with the office (copy enclosed). The assessment records in original were produced for kind perusal of Hon'ble Members. The Bench also allowed the AR to inspect the assessment file and verify that the AO had indeed sent the reasons for reopening through a covering letter under his signature.
Information on share transfer was available with AO of CIL - Held that:- Even though information was available with the AO of CIL, it reached the AO of the assessee much later. In any case, the law does allow action against an erring assessee (i.e. reopening of assessment in cases where income has escaped assessment) within certain time frame. In this case the action was taken within the prescribed time frame i.e. within 6 years of income having escaped assessment.Even though the assessment of CIL was made with full application of mind, income in the case of the assessee had escaped assessment because, among other aspects, the assessee had failed to file any return whatsoever till the notice u/s 148 was sent.
Regarding claim that Reopening is contrary to 'Vodafone'Judgment [2012 (1) TMI 52 - SUPREME COURT OF INDIA ] - Held that:- Vodafone judgment, to remove doubts the Parliament clarified the law as it stood since 1962. Whether the Parliament of the Country was competent to do so, it is most humbly submitted, cannot be deliberated in this Hon'ble Tribunal. At the time of issue of notice, the law was thus clear and the AO had clearly stated (order disposing of objections; page 36 - 47 of assessee's paper book) that the conditions laid down in section 9(l)(i) were satisfied and the capital gains accruing to the assessee from transfer of CIHL shares which derived all their value from the assets situated in India, was taxable in India.
Regarding issue on Survey Report - Held that:- The assessee did not file the tax return voluntarily is a fact. In such a scenario, whether the survey brought out any new facts for the purposes of reopening is not material. That there was income chargeable to tax in India and the assessee had not even filed the tax return was sufficient reason to believe that the income had escaped assessment. The survey only confirmed the aspect of income accruing or arising in India through the transfer of assets situate in India. Whether survey report was received by the AO before or after issue of notice u/s 148 does not come in the way of the legality of such notice.
Issue regarding Territorial Jurisdiction - Held that:- The challenge to the jurisdiction was made 72 days after the service of notice u/s 148, much after the 30 days bar placed in that regard u/s 124 of the Income Tax Act. Any challenge to the jurisdiction of the assessing officer at this stage deserves to be rejected.
Approval does not meet the requirements laid down under section 151 (2) - Held that:- Necessarily the grant of approval for issue of notice under section 148 of the Income Tax Act was also required to be given by the Additional Director of income tax (International Taxation), New Delhi. The appellant also could not say that the notifications relied upon by the revenue are not in accordance with the law. The decisions relied upon by the Ld. authorized representative are not applicable to the facts of the present case as in this particular case there is a notification issued by the Central board of direct taxes conferring jurisdiction of the Joint Commissioner/Additional Commissioner of income tax on the joint director/ Additional Director of income tax. In view of this we reject the contention of the Ld. authorized representative that the approval does not meet the requirements laid down under section 151 (2) of the Income Tax Act, 1961.
Form number ITNS – 34 provides for the format of notice under section 148 of the Income Tax Act, 1961 - Held that:- Undisputedly, in this case proper approval of Ld. Additional Director of income tax (international taxation) has been taken by the Ld. assessing officer under section 151 of the Income Tax Act. Merely if the notice issued does not mention some facts that are prescribed in a non-statutory form when substantially the procedure laid down by the Income Tax Act has been complied with cannot make the notice invalid. In view of this we also rejected the contention of the Ld. authorized representative of the assessee that the notice is not in the prescribed format, it should be held to be invalid.
Violation of guidelines - Held that:- In the present case, the notice under section 148 was issued on 21/01/2014 where the Ld. assessing officer granted time of 30 days from the date of service of the notice to file a return. In response to that notice, assessee filed return only on 03/04/2014, beyond the time limits provided by the Ld. assessing officer. The assessee sought the reasons only on 10/06/2014, which were supplied on 25th July 2014 and assessee filed its objection only on 16/10/2014. Therefore, we do not agree with the contention of the Ld. authorized representative that in this case there is any violation of the guidelines
Share transfer of Cairn India Holdings Ltd was available with the Ld. assessing officer - Held that:- It cannot be argued that if assessment in the case of some another assessee has been made who was also a party to the contract, reassessment proceedings in the hands of the other party cannot be initiated. Here, the argument of the assessee is that that the information could have been passed on to the Ld. assessing officer of the appellant from the assessing officer of the Cairn India Ltd, and such information has not been passed by the Ld. assessing officer of the Cairn India Ltd to the Ld. assessing officer of the appellant and therefore the reopening is invalid. Such an argument is required to be rejected at the threshold only because the assessment proceeding of one person is quite different from the assessment proceedings of another person and the provisions of the Income Tax Act should be applied fully with respect to the records and information relevant to that assessee only.
Chargeability of capital gain - whether transaction entered into by appellant of transferring 251224744 shares of Cairn India holdings Limited to Cairn India Limited on 12/10/2006 is whether liable to tax in India or not ? - assessee company is a tax resident of United Kingdom - Held that:- 1st contention of the assessee is that lower authorities have erred in holding that capital gains arising to the appellant on account of the sales of shares of Cairn India Holdings Ltd to cairn India Ltd is deemed to accrue or arise in India under section 9 (1) (i) of the act and is therefore, chargeable to tax in India. The argument of the assessee is that retrospective amendment to section 9 (1) (i) of the act by The Finance Act, 2012 is bad in law and ultra vires. In view of the decision of the Hon‘ble Supreme Court in L. Chandra Kumar V Union of India [1997 (3) TMI 90 - SUPREME Court] this is not the right forum to challenge validity of provisions of the Income Tax Act. In view of this contention of the assessee rejected.
As an internal reorganization of the group there is no change in controlling interest as a result of these internal or reorganization - Held that:- According to us there are series of transactions entered in to by the group, which culminated in to the Initial Public Offering of 98639903 shares @ 160 per share of Cairn India Limited. Part of the purchase price of the share of ₹ 6101 crores have been paid out of the proceeds of the public issue by Cairn India Limited to the appellant. In the IPO as per Annexure 1 to the letter submitted before DRP placed at page no 159 of the paper book of the revenue shows that in IPO, cairn India Limited has divested 30.50 % of the stake to the General Public and Institutional investors. The complete financial arrangement of the Group has ended through series of transfer of shares from U K Jurisdictions to Jersey Jurisdiction to India. On divesting 30 % stake in these oil and gas assets located in India and part of IPO proceeds app. ₹ 6101/- Crore paid to the appellant in U K. Therefore, we are not convinced that these series of transactions entered in to by the group is merely a business reorganization process in consolidation of its oil and gas business India. Furthermore arguments of the assess also do not have any rational that there is no increase in the wealth of appellant as the value of the holdings of the appellant in Cairn India Limited has been unlocked due to IPO and value is derived by the book building process.
No real income accruing to the assessee and only real income can be taxed - Held that:- The argument of the assessee that there is no increase in the wealth of the appellant and there is no real income earned by the assessee does not deserve to be accepted. In fact, the assessee has earned substantial gain on sale of the shares and also has gained on account of taxes too as according to the assessee itself such gain is not chargeable to tax. Therefore, the assessee has earned the real income on account of sale of its shares in Cairn India Holdings Ltd to Cairn India Ltd.
Cost of acquisition should be stepped up to the fair value of the shares of cairn India holding Ltd on the date of acquisition while computation of the capital gain - Held that:- On conjoint reading of provisions of section 48, 49 and 55 of the Act it is apparently clear that property held by the assessee and its mode of acquisition do not fall in any of the clauses which provides for taking the cost of acquisition in the hands of the assessee in these transaction being cost to the previous owner. No such provision has also been cited before us. We also do not agree with the contention of the assesee that as there is no timing difference between the acquisition and disposal of shares , the full value of consideration and the cost of acquits ion is same. Provision of section 48, 49 and 55(2) of the act does not allow such treatment. Therefore the computation of capital gain in the hands of the assessee is required to be made by deducting from the full value of consideration cost of acquisition incurred by the assessee for acquisition of the property. We do not find any infirmity in the order of the ld AO in taking the cost of acquisition, which is derived by issues of shares as well as by sale of debt. In the result we confirm the order of the Ld AO in working out capital Gain on sale of shares of Cairn India Holding limited in the hands of appellant of ₹ 245035012588/-.
DTAA provisions applicability - whether according to Article 14 of Indian United Kingdom except as provided in Article 8 and 9 each contracting state may tax capital gain in accordance with the provisions of its domestic law? - Held that:- In relation to applicability of Article 3(2) of the relevant DTAAs, that it can apply only to terms not defined in the DTAA. Since the relevant DTAAs in the case before them defined “royalty”, Article 3(2) could not be applied. For terms which are defined under the DTAA, there is no need to refer to the laws in force in the Contracting States, especially to deduce the meaning of the definition under the DTAA. Further, the court has held that neither act of parliament supply or alter the boundaries of DTAA or supply redundancy to any part of its. Similarly, according to us, the provisions of DTAA where it simply provides that particular income would be chargeable to tax in accordance with the provisions of domestic laws , such article in DTAA also cannot the limit the boundaries of domestic tax laws. In view of this, we do not find any force in the argument of the assessee and dismiss ground of the appeal.
Interest u/s 234A and 234B - retrospective amendment made by The Finance Act, 2012 - Held that:- Admittedly in the present case, the income of nonresident appellant has become chargeable to tax due to retrospective amendment in the act and further the payments made to assessee was also subject to withholding tax u/s 195 of the act and in view of the above judicial precedents cited before us, we are of the opinion that assessee cannot be burdened with interest u/s 234A and 234B of the Act on tax liability arising out of retrospective amendment w.e.f. 01.04.1962 in the provision of section 9(1) of the Income Tax Act. In the result ground of the appeal of the assessee is allowed.
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2017 (3) TMI 1468
Higher depreciation civil foundation work - Held that:- Civil structure and electric fitting, equipments are part and parcel of wind mill and depreciation on investment of such work should be allowed. CIT vs. K.K. Enterprises [2015 (2) TMI 508 - RAJASTHAN HIGH COURT]
Not allowing the set off of loss on shares - Held that:- CIT(A) has rightly confirmed the action of the AO by not allowing the set off of loss on shares claimed as business loss by the assessee.
Addition u/s 14A - Held that:- During assessment proceedings, the assessee explained that Section 14A are not applicable as some investments and advances wee interest bearing and also that the assessee had a share capital which adequately covers such advances and investment in shares. The AO did not agree with the submissions of the assessee as no details of availability of funds with details of investments and their linkage to own funds was provided. Therefore, the AO invoked the provisions of Section 14A of the Act made a disallowance which has been confirmed by the ld. CIT(A) in first appeal. Taking into consideration the facts, circumstances of the case and the written submission of the assessee, the assessee is directed to submit the details of investment made, own funds available and the availability of the same at the time of making investment relating to the linkage of the own funds before the AO. The AO is directed to provide adequate opportunity of being heard to the assessee in accordance with law
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2017 (3) TMI 1467
Disallowance of deduction under section 80IB(11A) - Discount amount - Held that:- Discount is an item by which the assessee has reduced its cost of purchase, i.e. cost of material has been saved which has resulted a little higher profit. Thus, this discount has a direct nexus with activities of the assessee and it is treated as business profit. Accordingly, we allow the claim of the assessee and direct the AO to consider sum as eligible for grant of deduction under section 80IB(11A) of the Act.
Interest received from PGVCL - Held that:- Assessee conceded that in view of the judgment in the case of CIT Vs. Nirma Ltd.(2014 (10) TMI 388 - GUJARAT HIGH COURT ) only net interest income is to be excluded for grant of deduction under section 80IB. We remit this aspect to the AO. He shall exclude net interest income from PGVCL for admissibility of deduction under section 80IB.
Interest subsidy received from Govt. of Gujarat - Held that:- Thus issue is squarely covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules P.Ltd. vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA). The AO himself has not treated the interest income as income from other sources. He treated it as a business income, but did not grant deduction under section 80IB(11) of the Act. Since this interest income has direct nexus with the activities of the assessee, it only goes to reduce the expenditure incurred on the loans availed from the bank. The assessee could reduce the net interest expenditure. In other words, if bank has charged 12% and it got subsidy of 5%, then it had charged the rate of 7% on the profit & loss account, then it would have enhanced its profit to this extent, and therefore, this interest subsidy is to be considered as eligible for grant of deduction under section 80IB(11) of the Act.
Eligible profit to claim deduction under section 80IB(11) - interest payable to the partners on their capital contribution and remuneration reduction - Held that:- Direct the AO not to reduce interest payable to the partners on their capital contribution and remuneration from the eligible profits for grant of deduction under section 80IB because, it is the discretion of the assessee to pay interest and remuneration to partners or not.
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2017 (3) TMI 1466
TDS u/s 194J - incurred expense towards the technical and professional charges without deducting the TDS - addition u/s. 40(a)(ia) - Held that:- Since the expenses has not been claimed in the profit and loss account, the question of any disallowance under section 40(a)(ia) of the Act does not arise.
A careful analysis to the above provisions of Section 40(a)(ia) reveals that it is applicable to sums allowable u/s 30 to 38 of the Act. Hence, if any capital expense is allowable as deduction u/s 30 to 38 of the Act while computing income under the head “Profits and gains from business or profession”, the same will be covered u/s 40(a)(ia) of the Act. Now, the issue arises where the claim of depreciation u/s 32 of the Act is covered u/s 40(a)(ia) of the Act. The provisions of Section 40(a)(ia) of the Act is applicable to payments specified therein which are allowable u/s 30 to 38 of the Act. Since the claim of depreciation is not payment or expenditure in strict sense but the same is statutory allowance, so strictly the claim of depreciation will not be covered u/s 40(a)(ia) of the Act. Further, the actual cost and WDV is defined in Section 43 of the Act and provisions of Section 40(a)(ia) of the Act does not override the provisions of Section 43 of the Act. In view of above, we are of the considered opinion that the provisions of section 40(a)(ia) of the Act is not applicable in the instant case. Therefore, there is no question of deducting the TDS on capital expenditure.
Short deduction of TDS - Held that:- In case of short deduction the Hon’ble Calcutta High Court in the case of M/s S.K Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT ] has held that the disallowances cannot be made under the provisions of section 40(a)(ia) of the Act. Thus, we find no reason to interfere in the order of ld CIT(A). Hence, the ground of appeal raised by the revenue is dismissed.
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2017 (3) TMI 1465
Revision u/s 263 - decline in GP rate from 5.19% in AY 2010-11 to 3.17% in the impugned assessment year - Held that:- AO has made relevant enquiries and after being satisfied has accepted the the fall in the GP rate and trading results. The reasons for the fall in GP rate has been explained by the assessee and duly considered by the AO in terms of increase of prices of the raw material. Once the necessary enquiries have been made and the explanation furnished by the assessee explaining its position, it is the discretion of the AO to accept the explanation of the assessee or where he is not satisfied with the assessee’s explanation, to carry out further enquiries in the matter. In the instant case, the necessary enquiries have been made by the AO and accordingly we do not see a reason for the ld. CIT to exercise his revisionary powers u/s 263 of the IT Act.
Accretion/addition to Partners capital account - Held that:- Merely raising a query is not sufficient enough to dislodge the revisionary jurisdiction under section 263 of the Act. What is essential is that relevant questions are asked and enquiries are made to examine about a particular transaction, explanation of the assessee is sought and then a final view is formed by the AO taking into consideration all the relevant facts and circumstances of the case. Now given that the assessee has furnished its explanation regarding the source of deposits in the partner’s capital account and having considered the said explanation, the ld. CIT is correct in remanding the matter back to the AO to examine the said explanation of the asessee. Had the assessee furnished the said explanation before the AO, the ld. CIT may not have the occasion to exercise his revisionary powers u/s 263 of the Act. In our view, these are the basic and the relevant enquiries in terms of examining the source of accretion to the capital account which the AO should have been made at the first place and the AO having been failed to do, the ld. CIT was correct in exercising his revisionary powers u/s 263 of the Act.
Unsecured loans - Held that:- In the instant case, though the AO has raised the initial enquiry about this test but while concluding the assessment, there is nothing on record to suggest that he has carried out the necessary investigation to test these basic requirements. This clearly shows nonapplication of mind by AO, blindly accepting what is being part- submitted by the assessee, without conducting the necessary enquiry and investigation which are bare minimum to examine the transactions in respect of unsecured loans. As we have stated earlier, merely raising a query is not sufficient enough to dislodge the revisionary jurisdiction under section 263 of the Act. What is essential is that relevant questions are asked and enquiries are made to examine about a particular transaction, explanation of the assessee is sought and then a final view is formed by the AO taking into consideration all the relevant facts and circumstances of the case. We therefore do not see any justifiable reason to interfere with the order of ld CIT in this regard.
Appeal decided partly in favour of assessee
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2017 (3) TMI 1464
Allocation of the administrative expenses on proportionate basis towards work in progress - whether expenses in question are directly relatable to the projects - Held that:- The expenses out of the administrative expenses of ₹ 1,11,31,064/- which are related directly to the work in progress in respect of three projects, cannot be decided by apportioning the expenses in the ratio of work in progress to total turnover including work in progress. The Assessing Officer is required to examine the expenses case to case basis, in the light of the decision of the Tribunal in the case of Sutlej Cotton Mills Ltd.(1998 (1) TMI 107 - ITAT DELHI-D ) to ascertain whether same are related directly to the three projects in reference. The expenses on Director’s remuneration have already been held by the learned Commissioner of Income-tax (Appeals) as not relatable to any of the projects and already excluded for the purpose of valuation of work in progress and that finding has not been challenged by the Revenue before us.
In view of above, we reject the allocation of the administrative expenses on proportionate basis towards work in progress and restore the matter to the file of Assessing Officer with the direction to examine all expenses under administrative expenses, other than Director’s remuneration on case to case basis, to find out whether same are directly related to any of the three projects in reference and then includes the specific expenses which are directly related to the projects to the work in progress.
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