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Showing 501 to 520 of 1551 Records
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2024 (2) TMI 1051
Revision petition u/s 264 - validity of Assessment u/s 153A/153C - whether assumption of jurisdiction by the AO u/s 153C was illegal and therefore the entire proceedings were void ab initio - As decided by HC [2017 (5) TMI 1425 - DELHI HIGH COURT] no ground to invalidate the assumption of jurisdiction under Section 153C and CIT's impugned orders are not unfair, unjust or irrational and are consistent with the basic procedural requirements. On none of these counts do the impugned orders of the CIT in the present case warrant interference
HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petitions are dismissed.
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2024 (2) TMI 1050
Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) read with Article 12 of the Indo US DTAA - HELD THAT:- The issue raised by the Revenue in the present special leave petition is covered against them in the case of “Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] wherein held that the payment received for providing access to computer software to its member firms located in India, does not amount to ‘royalty’ liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA.
As Ld' Additional Solicitor General states that a Review Petition has been filed against this judgment, which is currently pending and the right of the Revenue to revive the present special leave petitions may be reserved, in case the Review Petition is allowed.
Recording the aforesaid, the special leave petition is dismissed, as the same is covered by the said decision of this Court. In case the review petition on the issue raised in the present special leave petition is allowed, it will be open to the petitioner(s) to get the present special leave petitions revived.
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2024 (2) TMI 1049
Rectification application - Validity of Garnishee Notices for recovery of tax - contention of the writ petitioners that the Garnishee Notices had come to be issued even though various applications for rectification were pending and the respondents having adopted coercive measures without disposing of those applications - writ petitioners had contended that while dealing with the pending rectification applications, when the petitioner had approached the Centralized Processing Center [CPC] it was apprised that it would have to move the jurisdictional AO.
HELD THAT:- We find ourselves unable to appreciate the manner in which the two rectification applications have come to be disposed of and that too after we had taken cognizance of the grievance of the writ petitioners. If the AO were of the opinion that the powers of rectification did not stand conferred, it would have been well advised to desist from making observations pertaining to the merits of the application. Similarly, the fact that an appeal has not been filed would not constitute a valid ground for refusing to consider a rectification application provided the issues that are raised fall within the ambit of Section 154 of the Act.
Respondents appearing on instructions submitted that against the various demands which remain outstanding, the petitioner has chosen not to invoke the appellate remedies available and has merely moved rectification applications. He has also alluded to the petitioner having not made any deposit against the outstanding demand. We may note that the total demand as per the Garnishee Notices is stated to be INR 17,16,85,384/-.However, and notwithstanding the above, Respondents submitted that the jurisdictional AO would have no objection to considering the rectification applications afresh in case such liberty were to be accorded by the Court.
As we view the order pertaining to AY 2016-17, we find that the rectification application has come to be rejected solely on the ground that no appeal had been filed by the writ petitioner against the original order of assessment. In terms of that order, the rectification applications which had been pending right from 30 April 2021, 05 October 2021 and 09 January 2024 have come to be summarily rejected. Similarly, while passing the orderpertaining to AY 2022-23, while the jurisdictional AO has on the one hand held that it has not been transferred rectification rights by the CPC, it has proceeded further to observe that the adjustments would not fall within the ambit of Section 154 of the Act.
Therefore, both these orders are liable to be quashed and the matter remitted to the jurisdictional AO for considering the pending rectification applications afresh and in accordance with law.
Permission to securitize 20% of the outstanding tax demand - Since Garnishee Notices already operate, we take note of the additional prayer made by the writ petitioner of it being permitted to securitize 20% of the outstanding tax demand by submitting an undertaking that it would maintain a credit balance in the aforenoted accounts to the extent of INR 3,43,37,076/- being 20% of the total outstanding demand till such time as the rectification applications are disposed of. In our considered opinion the prayer for lifting of the Garnishee Notices and for provisioning of adequate security is an issue which would merit examination and consideration by the jurisdictional AO in the first instance.
We thus leave it open to the writ petitioner to move the jurisdictional AO in this regard also. The prayer for modification and lifting of the Garnishee Notices as well as for disposal of the pending rectification applications may be considered with due expedition and disposed of within a period of one week.
Assessee in default and levying interest u/s 220(1) - Case of the writ petitioner was that as per the rectification order passed by the CPC a demand of INR 1,22,310/- came to be created which was duly paid by the petitioner on 13 April 2022 and thus within 30 days of the passing of the aforesaid order. It is in the aforesaid context that they question the respondent treating it as an assessee in default and levying interest u/s 220(1). In this respect, the assessee is stated to have filed a rectification application on 08 January 2024. That rectification application has come to be rejected by an order dated 12 February 2024.
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2024 (2) TMI 1048
Time limit to decide appeal - scheme for disposal of appeals through faceless system - petitioner seeks a direction to the Respondent No. 2 to decide the pending application filed by the petitioner in a time bound manner - HELD THAT:- Looking to the fact that the appeal is pending since 2018 and has been heard and reserved for judgment. In such a situation, the Respondent No.2 is directed to decide the appeal forthwith as expeditiously as possible preferably within a period of 4 weeks from the date of receipt of certified copy of the order and pass a reasoned and speaking order. The order be communicated to the petitioner forthwith.
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2024 (2) TMI 1047
Aggregation of additional income - Validity of assessment order - three additions were made to the total income of the assessee - difference in opening and closing balances, loan availed of by the petitioner and interest income earned from Axis Bank.
HELD THAT:- As aggregate additional income was arrived at by examining the difference between the opening and closing balance. While undertaking this exercise, the respondent has failed to take into account the fact that the sale consideration from the proceeds of sale of agricultural land was duly disclosed in the statement of income read with the schedule thereto. As regards the interest income from Axis Bank, the same is also duly disclosed in the entry relating to TDS under the head 'Total income' read with Schedule 18. Thus, it appears that the AO did not take into account the material placed on record and, consequently, the order impugned herein is vitiated by non-application of mind.
Addition of loan availed of by the petitioner it appears that the petitioner has not placed all necessary documents on record. Therefore, it is just and necessary to direct the petitioner to place all relevant documents for consideration.
For reasons set out above, the writ petition is disposed of by remanding the matter for re-consideration. The assessee is permitted to respond to the assessment order by treating the same as a show cause notice within a maximum period of four weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, take into consideration all documents produced by the assessee and issue a fresh assessment order in respect of the three additions dealt with in the impugned assessment order.
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2024 (2) TMI 1046
Validity of draft assessment order and final assessment order as barred by limitation u/s 153(2A) - Scope of the word “received” - Tribunal held the draft assessment order and final assessment order passed by the AO are barred by limitation u/s 153(2A)
HELD THAT:- We note that although the Full Bench of the Court in Odeon Builders [2017 (3) TMI 1266 - DELHI HIGH COURT] was concerned with Section 260A of the Act, there are certain significant observations appearing in that decision of the Court which would have a material bearing on the question which is proposed for our consideration - Full Bench also considered the contention of the Revenue that unless the jurisdictional Commissioner receives a copy of the order of the ITAT, the limitation prescribed in the aforenoted provision for filing an appeal would not commence. It becomes pertinent to note that Section 260A also employs the expression “is received” and thus stands at par with Section 153(2A).
Full Bench proceeded to reject the contention of the Department that the receipt of the order of the ITAT must be considered as being service upon the jurisdictional Commissioner holding that the acceptance of such a view would amount to rewriting 153(2A) and construing that provision contemplating receipt of the order by the “concerned” Commissioner or Principal Commissioner of Income Tax.
Full Bench had unequivocally found that while examining the issue of limitation, one would have to pose the question of when the Department became aware of the order and not when the concerned Commissioner or Principal Commissioner may have been served or had derived knowledge. It proceeded further to observe that once a responsible officer of the Department becomes aware of the order, the period of limitation would commence form that point in time.
In GE Energy Parts [2019 (8) TMI 1068 - DELHI HIGH COURT] what is relevant is when the Commissioner of Income-tax (Judicial) representing the Department before the Income-tax Appellate Tribunal received the order, which in any event is generally made available in the public domain soon after the order is pronounced. This is the purport of the decision of the Full Bench of this court in CIT v. Odeon Builders P. Ltd. (supra), the ratio decidendi of which will apply to the case on hand as well since the language of section 260A(1) and section 275(1)(a) of the Act is identical.
ITAT has while passing the orders impugned before us proceeded on the basis of the principles enunciated in the aforenoted two decisions. We thus find no justification to interfere with the view as expressed. The appeal raises no substantial question of law
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2024 (2) TMI 1045
Taxability of salary income in India while rendering service in abroad - assessee is NRI - income accrued inside or outside India - assessee is a non-resident employee in an Indian Company IBM India Pvt. Ltd. and was sent abroad to UK for rendering services there and service was rendered in UK though the appointment made in India - relief as per DTAA between India and United kingdom denied for the want of tax residency certificate by the AO
HELD THAT:- The assessee has received total salary and the same has been returned and offered to tax in UK. The income tax return and certificate of residence has been placed on record.
Once the assessee qualifies to be treated as non-resident u/s 6 of the Act then the scope of the taxable income is in the hands of assessee would be as per Section 5(2)(b) of the Act. In the present case also the assessee undisputedly is a non-resident and therefore the salary received by the assessee while rendering service in abroad is not taxable in India.
The case of the assessee finds support from the decision of Arvind Singh Chauhan [2014 (3) TMI 18 - ITAT AGRA] wherein held once it is not in dispute that the assessee qualifies to be treated as a 'non-resident' under Section 6 of the Act, as is the undisputed position in this case, the scope of taxable income in the hands of the assessee, under Section 5(2), is restricted to (a) income received or is deemed to be received in India, by or on behalf of such person; and (b) income which accrues or arises, or is deemed to accrue or arise to him, in India. Therefore, it is only when at least one of these two conditions is fulfilled that the income of a non-resident can be brought to tax in India. In the present case, the services are rendered outside India as crew on merchant vessels and tankers plying on international routes. A salary is compensation for the services rendered by an employee and, therefore, situs of its accrual is the situs of services, for which salary paid, being rendered. Appeal of the assessee is allowed.
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2024 (2) TMI 1044
Addition made towards excess physical stock during the survey - unexplained investment u/s 69 taxable at rates prescribed u/s 115BBE - CIT(A) deleted addition and directing to assess only Gross profit on stock difference as per the working given by the assessee during the assessment proceedings - assessee submitted that physical inventory was valued at selling price which would require adjustment of GST component as well as adjustment of Gross Profit component to bring the stock at cost price which was the basis of valuation of closing stock in the books maintained in the software - as argued AO should not have merely relied upon sworn statement but should have made additional efforts in proving that the findings of survey were right.
HELD THAT:- From the facts, it emerges that physical stock was taken at selling price whereas the stock in the books of accounts was being reflected at cost price. Therefore, the physical stock was required to be adjusted for GST component as well as for Gross Profit component to make the two items comparable. The assessee furnished necessary workings in this regard during the course of assessment proceedings which could not be controverted by Ld. AO.
No defect has been pointed out by Ld. AO in assessee’s workings. No quantitative differences have been noted. The Ld. AO has merely raised an objection that the assessee did not object to the valuation at the time of survey. As in the statement recorded during survey, the assessee demanded more time to reconcile the two components. The same was done at the time of assessment proceedings. Obviously, the onus was on Ld. AO to controvert the working of the assessee which was not done.
CIT(A), in our considered opinion, clinched the issue in correct perspective. The deficit in stock could be termed as sales effected but not recorded in the books of account. CIT(A) has already estimated gross profit against the same and sustained the addition to that extent which is quite appropriate on the facts and circumstances of the case. The same has rightly been held to be business income - Decided against revenue.
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2024 (2) TMI 1043
Disallowance u/s 14A r.w.r. 8D - dividend income - AO rejecting the suo-motto disallowance made by asseessee - contention of the assessee is that had the AO excluded the non-dividend bearing investments and investment made out of non-interest bearing fund, no disallowance would have been called for - CIT(A) has sustained the additions to the extent of exempt income without adverting to the contentions of the assessee regarding exclusion of investments that did not earn dividend income, investments that earned taxable income and investments that were made out of interest free own funds.
HELD THAT:- There is no ambiguity under the law that Section 14A of the Act casts statutory obligation on the Assessing Authority to verify and satisfy itself about the correctness of claim of the assessee regarding suo-motto disallowance or no disallowance at all in relation to expenditure incurred for earning of exempt income. If the AO fails to give clear finding, he would be failing into statutory obligation.
In the present case, the AO had not adverted to the objections of the assessee and did not accept the suomotto disallowance made by the assessee.
AO failed to take into account that the assessee was having interest free fund. Certain investment did not earn exempt income and some investment in foreign entities were amendable to tax in India. AO did not give any cogent reason for rejecting the suo-motto disallowance.
Thus disallowance made by AO and restricted by CIT(A) to the extent of exempt income, is not justified. We therefore, direct the AO to delete the impugned addition. Appeal of assessee allowed.
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2024 (2) TMI 1042
LTCG - Denial of exemption u/s 54 - assessee has not purchased any new property within the time specified in the provision of Section 54 - HELD THAT:- In the present case, as per the Agreement dated 18/02/2014, the Assessee has been given full right to use, to hold, enjoy, sell, mortgage the Property to be purchased by the Assessee. On the other hand, the first party will not have any right, title or interest over the said property.
It is also obverted that as per the Assessee, the new Flat was purchased by sale endorsement dated 18/02/2014, but later on contended that the Assessee has purchased Bare-Shell flat on 13/08/2016, which is not supported by any of the documents. On the contrary, the Assessee has entered into Agreement to Sell on 18/02/2014 which itself given with certain absolute rights to the assessee as mentioned above.
For the purpose of claiming the benefit u/s 54 of the Act, within a period of one year before or two year after the date of transfer of old house, the tax payer should acquire another residential house or should construct a residential house within a specified period of three years from the date of transfer of old house. Considering the fact that assessee has not fulfilled either of the conditions mentioned in Section 54 of the Act, we find no error or infirmity in the orders of the Lower Authorities in denying the benefit of deduction to the assessee u/s 54 - Decided against assessee.
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2024 (2) TMI 1041
Nature of expenses - treatment of repair & maintenance and store and space expenses - whether such expenditure is capital or revenue? - Test of enduring benefit - assessee is required to demonstrate that the expenses have been claimed for a routine up keep of building and plant & machinery - contention of the assessee is that the expenditure was incurred to maintain the upkeep of the existing assets and no new asset came into existence by such repairs
HELD THAT:- Looking to the nature of expenditure made by the assessee it is seen that there are replacement of the entire components and laying of roads etc. Therefore, in our considered view the AO ought to have verified the correctness of the claim that it is purely for the routine upkeep of building and plant & machinery and not for major repairs which brought enduring benefit to the assessee.
Thus, in the absence of clear finding about the nature and extent of repairs treating the expenditure as capital is not justified. However, it is clarified that in respect of repairs made on road, such expenditure would be allowable since the assessee is not the owner of roads, outside its premises. We, therefore, set aside the impugned order and restore the issue to the file of AO for verification of the correctness of the claim of the assessee. Ground is allowed for statistical purpose.
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2024 (2) TMI 1040
Denial of deduction claimed u/s 80P (2)(d) - AO disallowed the benefit by invoking the provision of section 154 for rectification of mistake change of opinion - interest derived by the Co-operative society from its investments with any other co-operative society - HELD THAT:- The issue of allowability of deduction of interest received from other co-operative society (though the said co-operative society is doing banking activities) is allowable u/s 80P(2)(d) of the Act is already decided by the Jodhpur bench in the case of in the case ITO Vs. Bhilwara Zila Dugdh Utpadak Sahkari Sang Ltd., [2023 (9) TMI 1410 - ITAT JODHPUR] wherein as held Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961, thus considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest earned on the deposits.
Thus allowability of deduction of interest u/s. 80P(2)(d) decided in favour of assessee.
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2024 (2) TMI 1039
Penalty u/s 271(1)(c) - allegation of defective notice u/s 274 - charge has not been specified in the notice - Non-striking off of the irrelevant part - HELD THAT:- The charge has not been specified and it is an omnibus notice. In such circumstances, in the case of Sahara India Life Insurance Co. Ltd [2019 (8) TMI 409 - DELHI HIGH COURT] has held that the penalty order passed is liable to be quashed on account of this defect which is fatal.
We further note that in the case of Mr. Mohd. Farhan A. Shaikh[2021 (3) TMI 608 - BOMBAY HIGH COURT] has held that no specification of charge in the penalty notice leads to same becoming void and penalty on that count is to be deleted - Decided in favour of assessee.
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2024 (2) TMI 1038
Estimation of income - bogus purchases - HELD THAT:- As AO has not doubted the sales and hence considering the ratio of decision of Hon'ble Jurisdictional High Court in the case of CIT v. Nikunj Eximp [2013 (1) TMI 88 - BOMBAY HIGH COURT] and CIT Vs. Simit P Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] and to meet the ends of justice, set-aside the order of the CIT(A) on this disputed issue and direct the assessing officer to estimate the income @12.5% on unapproved/ bogus purchases and partly allow this ground of appeal of the assessee.
Deduction u/sec 80IC - disallowing the claim u/s 80-IC(2)(a) in the assessment order passed u/s 143(3) r.w.s 147 as against the same was allowed by his predecessors while passing the Assessment Order u/s 143(3) - HELD THAT:- When a query was raised to Ld.AR to substantiate with the submissions on claim of deduction u/sec 80IC of the Act in lieu of notice U/sec 142(1) of the Act discussed above, made in the original assessment proceedings u/sec 143(3) of the Act , the explanations are not convincing and are not supported with the evidences and similarly the DR also could not express the view on this query. Therefore, considering the principles of natural justice shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) on this disputed issue and remit the entire disputed issue of claim of deduction U/sec 80IC of the Act for limited purpose to the file of the Assessing Officer to examine and adjudicate afresh on merits.
Appeal filed by the assessee is partly allowed for statistical purposes.
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2024 (2) TMI 1037
Condonation of delay filing appeal before ITAT - present appeal involves a delay of 161 days - bonafide reasons for delay or not? - AR submitted that though the Ld. CIT(Appeals)/NFAC had dismissed the appeal vide his order dated 21.03.2022, but the assessee appellant remained unaware about the same, and the same had come its knowledge only in the course of its audit for A.Y. 2022-23 - HELD THAT:- As the assessee appellant was in receipt of order of the CIT(Appeals) on 21.03.2022 (as mentioned in the memorandum of appeal filed before us), therefore, we are unable to comprehend that what stopped the assessee in preferring the present appeal upto 17th June, 2022.
We are afraid that as the reasons given by the assessee for explaining the delay are not bonafide, therefore, the same cannot be summarily accepted. Considering the callous and lackadaisical conduct of the assessee company wherein it had delayed the filing of the present appeal without any justifiable reason, we do not find any substance in the claim of the Ld. AR that the delay in filing of the appeal had occasioned for bona fide reasons.
As observed in the case of Ramlal, Motilal and Chotelal Vs. Rewa Coalfields Ltd [1961 (5) TMI 54 - SUPREME COURT] that seeker of justice must come with clean hands, therefore, now when in the present appeal the assessee appellant had failed to come forth with any good and sufficient reason that would justify condonation of the delay involved in preferring of the captioned appeal - Decided against assessee.
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2024 (2) TMI 1036
Disallowance u/s. 14A r.w.r.8D - expenditure incurred in earning exempt income or not? - HELD THAT:- We note that this issue was considered by this Tribunal in the case of Canara Bank [2021 (2) TMI 1366 - KARNATAKA HIGH COURT] held from perusal of Section 14A of the Act, it is evident that for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation of the income which does not form part of his total income under the Act. The expenditure, the return of investment and cost of requisition are distinct concepts. Therefore the word 'incurred' in Section 14A of the Act have to be read in the context of the scheme of the Act and if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other incomes which is includable in the total income for the purposes of chargeability to the tax
It is equally well settled that expenditure is a pay out. In order to attract applicability of section 14A of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [See: WALFORT SHARE AND STOCK BROKERS (P) LTD [2010 (7) TMI 15 - SUPREME COURT] as well as MAXOPP INVESTMENTS LTD [2018 (3) TMI 805 - SUPREME COURT]. In the instant case, the assessee has admittedly not incurred any expenditure. Decided in favour of assessee.
Deduction u/s 36(1)(vii) - deduction claimed of bad debts of non-rural branches - claim denied as amount was not actually written off in the loan account of the debtors and entire write off (both rural and non rural debts) should be adjusted against the credit balance in the provision a/c u/s 36(1)(viia) and only the excess can be claimed. Since there is no excess amount, the write off is not allowable - HELD THAT:- As decided in own case [2022 (1) TMI 583 - ITAT BANGALORE] for AY 2014-15 in favour of the assessee after considering Explanation 2 inserted in section 36(1)(vii) by Finance Act, 2013 (after the decision of the Supreme Court in the case of Catholic Syrian Bank [2012 (2) TMI 262 - SUPREME COURT] wherein set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the bad debts relating to nonrural branches u/s 36(1)(vii) of the Act without adjusting the same against the PBDD a/c, since the said PBDD a/c relates to rural advances only.
MAT computation u/s 115JB - CIT(A) upheld the addition for provision for HD commission, provision for ex gratia and bonus, provision for gratuity to HD canvassers and provision for gratuity - HELD THAT:- We note that in respect of provision for HD commission there is provision of Rs. 1,75,00,000 and in the current year, the assessee paid Rs. 1,02,78,643 which relates to previous assessment year. We remit this issue to the AO for verification and if the provision is allowed in the previous assessment year, then principle of consistency should be followed. However, if the AO finds that this is the first year for the provision of HD commission, then the actual payment made by the assessee should be allowed.
In respect of provision for ex gratia and bonus, gratuity to HD canvassers and provision for gratuity, the assessee has made provision on the basis of actuarial valuation. However both the authorities below have disallowed by holding that it is a contingent liability which is not correct. Since the assessee has made provision on the basis of certificate from the actuarial valuer therefore the provisions made are to be treated as ascertained liability. This view is fortified by the decision of the coordinate Bench of the Tribunal in the case of Jeans Knit (P) Ltd. [2022 (3) TMI 244 - ITAT BANGALORE] wherein held AO is not right in adding back the provisions made by the assessee towards gratuity, leave encashment and bonus for computation of book profits u/s. 115JB on the ground that they are unascertained liability. Hence, we allow the appeal in favour of the assessee and direct the AO to give effect to the same in the computation of book profits u/s 115JB.
Non consideration of revised Book Profit u/s 115JB - CIT(A) held that the appellant failed to furnish the copy of the revised Audit Report in form 29B and hence the revised computation of Book Profit could not be accepted - HELD THAT:- We noted that during the course of assessment proceeding vide assessee’s letter dated 5.11.2018 the assessee submitted revised calculation of book profit. In the said calculation the appellant bank had not added the provision for NPA of Rs. 267,17,51,684 and provision for investment depreciation of Rs. 13,16,10,956. The AO did not accept the same. The CIT(A) observed that the appellant failed to furnish any copy of audit report in Form 29B to comply the provision of section 115JB(4) of the Act. Considering the argument of the ld. AR of the assessee, we remit this issue to the AO fresh consideration.
Deduction claimed u/s. 36(1)(viia) - assessee has computed deduction u/s 36(1)(viia) being a scheduled bank to the extent of 7.5% of the total income and 10% of the AAA of rural branches - AO noted that the assessee has claimed excessive deduction on two counts, firstly the assessee has not updated its information about categorization of rural branches which has either converted to semi urban branches or where the population has exceeded 10,000 and secondly the assessee has claimed 10% of the entire advances of rural branches including the opening balances - HELD THAT:- As relying on Canara Bank [2023 (1) TMI 291 - KARNATAKA HIGH COURT] while calculating AAA of rural branches under section 36(1)(viia), not only fresh advances made during year, but also amount of advance outstanding are to be considered. Accordingly, the ground taken by the revenue on this issue is dismissed.
Computation of deduction u/s. 36(1)(viia) in respect of classification of rural branches - HELD THAT:- This issue has been decided in the case of State Bank of Mysore v. ACIT [2015 (1) TMI 1328 - KARNATAKA HIGH COURT] to hold that for claiming deduction u/s. 36(1)(viia) in respect of rural branches, the latest/provisional census available should be considered. Accordingly this issue is remitted back to the AO. The assessee is directed to provide the latest/provisional census which was available for the respective assessment year. This ground is allowed for statistical purposes.
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2024 (2) TMI 1035
Addition u/s 56(2)(viib) r.w.r 11UA - excess premium charged - issuance of preference shares to the director/ex-director of the assessee company - Addition sustained by the CIT-A - whether or not the preference shares issued by the assessee company @ Rs.110/- per share was at Fair Market value (FMV)? - determining the FMV of the subject preference shares as per the “dividend discounting method”, i.e., at Rs.5/- per share as against that issued by the assessee at Rs.110/- per share
Whether or not the A.O is right in rejecting the valuation of the preference shares that were issued by the assessee company to director and ex-director by adopting the “Net Asset Value” method, and substituting the same by “dividend discounting method”?
Anti-tax abuse provision - HELD THAT:- Admittedly, it is a matter of fact borne from the record that the legislature in all its wisdom had inserted the provisions of Section 56(2)(viib) as a part of its counter-tax evasion mechanism to deter the generation and use of unaccounted money.
Although the contention of the AR that now when the genuineness of the transactions of issuance of preference shares by the assessee company to its director/ex-director had been proved to the hilt, therefore, there was no justification for the A.O to have triggered the deeming provisions of Section 56(2)(viib) i.e a counter tax evasion provision, at first blush appeared to be convincing, but going by the rule of strict literal interpretation that has to be adopted while construing the scope and gamut of a statutory provision the same does not merit acceptance. As Section 56(2)(viib) does not carve out any exception as regards the applicability of the same in a case where the shares are issued to the directors of the company, therefore, the aforesaid contention of the Ld. AR that the same would not apply to the preference shares issued by the assessee company to its director/ex-director cannot be accepted.
It is only in cases of ambiguity that the court can use other aids to discern the true meaning but where the statute is clear and the words plain, the legislation has to be given effect in its own terms.
We are unable to concur with the Ld. AR, who had tried to circumscribe the applicability of Section 56(2)(viib) of the Act by reading in it an exception as regards the applicability of the same to a specific class of persons, which, in the absence of anything to the said effect having been made available on the statute by the legislature cannot be accepted on our part. The Ground of appeal No. 2 is dismissed.
Observations of the A.O while determining FMV of preference shares as per “dividend discounting model” - Redemption of preference shares at the end of 20 years at the same value i.e. Rs.110/- - As stated by the Ld. AR, and rightly so, a perusal of the “Special Resolution” passed in the extraordinary general meeting of the assessee company reveals that the subject 7,78,000 nos. of non-cumulative redeemable preference shares were redeemable not later than 20 years from the date of allotment - We find that the A.O while referring to the allotment and conditions based on which, the preference shares were issued by the assessee company, had categorically acknowledged the fact that the subject preference shares were redeemable within 20 years of allotment at a premium of not less than Rs.100/- each; or shall be converted into similar nature of equity shares. In fact, the period of 20 years is the maximum statutory period for redemption and as per the terms of allotment of preference shares, the entire premium is redeemable. Accordingly, we concur with the claim of the Ld. AR that the observation of the A.O. that the subject preference shares under consideration were redeemable at the end of 20 years at the same value, i.e, Rs.110/- per share is factually incorrect and contrary to the facts discernible from the records.
Convertibility of preference shares into equity shares not considered by the A.O - As per the “Special Resolution” passed in the Extraordinary General Meeting of the assessee company it was specifically provided that the said preference shares shall be redeemed on not less than Rs.110/- each; or it shall be converted into a similar number of fully paid up equity shares by obtaining permission from all preference shareholders.
As in a case where the preference shares are convertible into equity shares, the fair market value of such shares would be more than the non-convertible preference shares or debt instruments, therefore, we find substance in the claim of the Ld. AR that the A.O. had grossly erred in losing sight of the material fact that the subject shares were optionally convertible non-cumulative redeemable preference shares, which, thus, had a strong bearing on the determination of the FMV vis-à-vis. nonconvertible preference shares or debt instruments.
Observation of the A.O that the assessee company will pay a 10% dividend - As the terms of issuance of the preference shares itself provide for a 100% dividend, i.e. the coupon rate is 100%, therefore, there could have been no justification for the A.O. in assuming payment of 10% dividend every alternate year by the assessee company. Because the terms of preference shares itself provide for a 100% dividend, thus, the aforesaid assumption of the AO that the assessee company would pay a 10% dividend being devoid and bereft of any basis cannot be accepted. Also, we are unable to comprehend on what basis the AO had assumed that the dividend would be paid by the assessee company every alternate year. Once again, as the aforesaid assumption of the A.O. is not backed by any concrete basis, therefore, the same cannot be subscribed on our part.
Discounted rate of 12% taken by the A.O - A.O. had not referred to any comparable instance and had arrived at his aforesaid view based on a general observation. Apart from that, we concur with the Ld. AR that the assumption of the A.O. wherein he had compared the discount rate for secured debt and equity is not only without any basis but also unrealistic.
Although, some of the terms of the preference shares match with the debt instruments, but the same on the said standalone basis could not be treated as a simpliciter debt instrument. Accordingly, we find substance in the contention of the Ld. AR that there is no justification for the A.O. in treating preference shares as a debt or a quasi-debt instrument, and thus, consider the discounting rate on that basis for estimating the FMV of the subject preference shares. Also, we find substance in the Ld. AR’s contention that the bank FDR rate as was prevailing during the year in question should have been taken as the appropriate rate of return.
Subscription of the preference shares by the promoters of the assessee company - A.O., without placing on record any material could not have merely on the ground that the subject preference shares were issued to related parties, drawn adverse inferences as regards the price at which they were subscribed by the aforementioned persons
Because the factual observations and assumptions of the A.O., as observed by us hereinabove, suffer from certain serious lapses/infirmities that had crept in while determining the FMV of the subject preference shares based on the “dividend discounting method” by the A.O., therefore, we are of the view that the matter in all fairness requires to be revisited by the A.O who is directed to redetermine the FMV of the subject preference shares in the backdrop of our aforesaid observations as regards the respective issues. Needless to say, the A.O., in the course of set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee company which will remain at liberty to substantiate its claim based on fresh documentary evidence, if any.
A.O rejecting the “Net Asset Value” method adopted by the assessee company for determining FMV of the subject preference shares - As the subject shares are optionally convertible non-cumulative redeemable preference shares, which, as observed by the A.O in the body of the assessment order, as per the terms and conditions on which they have been issued by the assessee company, inter alia, in the event of winding up shall not be entitled to its assets, therefore, their FMV in our view cannot be safely determined based on the “Net Asset Value” (NAV) method. At the same time, we are of the view that the fact that the subject shares are optionally convertible preference shares would in itself be a primary factor to be considered in the backdrop of the unlisted equity shares, and thus, will have a strong bearing while determining of their FMV by an analyst.
We, thus, in terms of our aforesaid deliberations direct the A.O to redetermine the FMV of the subject preference shares subject to our observations recorded as regards the mistakes/infirmities that had crept in the determination of the same. The Ground of Appeal No. 1 is partly allowed for statistical purposes in terms of our aforesaid observations.
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2024 (2) TMI 1034
Valuation - seeks to include the demurrage charges in the value of the imported goods for the purpose of assessment of custom duty - entire case based on explanation added to Rule 10 of Custom Valuation Rules, 2002 - Tribunal held that the demurrage charges cannot be included in the transaction value of imported goods - explanation to Rule 10 to Customs Valuation Rules was held ultra virus - HELD THAT:- Delay condoned. Owing to the low tax effect involved in this appeal, we are not inclined to interfere in the matter.
The appeal is, hence, dismissed.
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2024 (2) TMI 1033
Challenged the show cause notice issued - mergers and de-mergers - non-existing company - seeking to recover Customs duty on the imports - beyond prescribed time/ extended period of limitation - advance license issued in respect of the four bills of entry - Advance Authorization - HELD THAT:- There is no merits in these writ petitions challenging the impugned show cause notice. Merely because, the noticee company has been merged with the petitioner company ipso-facto would not mean the liability of the noticee company would stand extinguished on account of its merger with the petitioner company.
Merger or amalgamation of companies is not a tool under law to either facilitate avoidance and evasion of tax liability already incurred by a transferor company like the Noticee. If the liabilities of the Noticee Company stood undischarged, the petitioner, as the successor of the business of the Noticee company and as the transferee company not only acquires the liabilities of the transferor company but also its assets, unless, the liability was retained by the promoters of the transferor company. The petitioner has not filed Scheme of Amalgamation before this Court. Therefore, Show Cause Notice proceeding cannot be scuttled.
Since, the benefit of advance license was availed by the Noticee (transferor) and it had filed to discharge its obligation under the advance license, the liability has to be discharged by the transferee company as its successor. As a transferee company, the petitioner cannot state that the liability of the noticee company stood extinguished on account of its merger /amalgamation with it.
This writ petition is therefore liable to be dismissed. The petitioner is therefore directed to file a reply with the impugned Show Cause Notice within a period of 30 days from the date of receipt of a copy of this order.
For the sake of clarity, a corrigendum may be issued to the impugned Show Cause Notice to the petitioner as a transferee company/successor of Noticee company namely M/s.Fabritex Exports Pvt.Ltd. It is made clear that if the petitioner as the successor of the Notice company fails to co-operate with the respondents, the respondents are at liberty to confirm the demand proposed in the impugned show cause notice and recover the amount from the petitioner company based on the available material.
This writ petition is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.
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2024 (2) TMI 1032
Applications for amendment of bills of entry rejected - exemption from basic customs duty under the Australia India Economic Co-operation and Trade Agreement - manufacturer of basic iron and steel and had imported 'steam coal' in bulk - Customs duty paid on imports - Scope of Section 149 of the Customs Act, 1962 - HELD THAT:- As regards the implications of the judgment of the Hon'ble Supreme Court in ITC [2019 (9) TMI 802 - SUPREME COURT] this Court examined the same in earlier orders and concluded that the Hon'ble Supreme Court did not intend to restrict the remedies of the assessee to the filing of an appeal.
On examining the impugned order, I find that the Assistant Commissioner of Customs has rejected the claim on the basis that the importer should establish that the goods originated from Australia and by placing reliance on public notice. The said public notice was quashed by the earlier order of this Court. As regards the requirement that the importer should establish that the goods originated from Australia, as discussed earlier, this aspect should be determined by examining the certificate of origin and any other relevant documents. Since the impugned orders were issued without examining such documents, they call for interference.
Therefore, the impugned orders are quashed and the matters are remanded for reconsideration. The 1st respondent is directed to reconsider the matter in accordance with Section 149 and other applicable provisions of the Customs Act and issue fresh orders after providing a reasonable opportunity to the petitioner. This exercise shall be concluded within a maximum period of two months from the date of receipt of a copy of this order.
These writ petitions are disposed of. Consequently, connected miscellaneous petitions are closed.
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