Exemption u/s 10(34) - Assessment of Income of the life Insurance Business - Dividend income of the assessee as exempt u/s 10(34) - income of the assessee engaged in the Life Insurance Business is computed under the non obstante clause of Section 44 of the Act ? - HELD THAT:- We find that in allowing the respondent – assessee's appeal the impugned order of the Tribunal followed its own decision in Life Insurance Corporation of India [2013 (6) TMI 377 - ITAT MUMBAI] for Assessment Years 2007-08 to 2009-10 on an identical issue. Mr. Chhotaray fairly states that being aggrieved by the orders of the Tribunal passed in Life Insurance Corporation of India (supra) the revenue preferred three appeals to this Court [2015 (9) TMI 1718 - BOMBAY HIGH COURT] - All three appeals raising an identical issue as herein were dismissed by this Court on 15th September, 2015. In the above view, as the issue stands settled against the revenue by a decision of this Court the question as proposed does not give rise to any substantial question of law.
Nature of receipt - treatment to the compensation received by the assessee on termination of Joint Venture Agreement - revenue or capital receipt - HELD THAT:- Firstly, the compensation received by the assessee which is attributable to negative/ restrictive covenant is a capital receipt; and secondly, the provision of section 28(va) brought w.e.f. 01.04.2003 in the Act will apply only from AY 2003-04. Thus, the aforesaid decision of the Hon’ble Apex Court in GUFFIC CHEM PVT LTD [2009 (10) TMI 966 - HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DHARWAD] clearly clinches the issue in hand and respectively following the aforesaid principles, we hold that the amount of receipt of compensation received by the assessee on termination of an agreement and for consideration attributable to negative and restrictive covenants is to be treated as capital receipt and not business income or revenue receipt. Thus, ground no.1 is allowed in favour of the assessee.
Addition on account of forfeiture of advance share application money by treating it as a capital receipt - HELD THAT:- In the case of Solid Containers [2008 (8) TMI 156 - BOMBAY HIGH COURT] the relevant fact was that the money was received by the assessee in course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, however by efflux of time the money has become the assessee's own money, because of unclaimed by the customers.
What remains after adjustment of the deposits has not been claimed by the customers; hence the claims of the customers have become barred by limitation. The assessee itself has treated the money as its own money and taken the amount to its profit and loss account. There was no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody else's money. It was in light of these facts and background the Hon’ble Bombay High Court held that it was the income of the assessee. Here in present case no deposits have received from customers nor it is a loan taken for trading activity and neither has it been transferred to P&L Account, albeit here the share application money has been forfeited due to settlement by the share applicant and the assessee and the money has been transferred to capital reserve fund. Thus, such an amount cannot be taxed in either way under section 41(1). Accordingly, the finding of the Ld. CIT(A) on this score is confirmed and impugned issue raised by the revenue in ground no. 2 is treated as dismissed.
Addition as legal expenses to defend itself in legal suits filed - AO held that the dispute was between the two promoters of the company and not with the assessee company - HELD THAT:- The true test in respect of allowing the litigation/legal expenses is, whether the litigation was initiated while carrying on the business or during the conduct of the business or not. If litigation in any manner affects the working of the company or the source of its income or its dayto- day running or management, then such expenses has to be reckoned as incurred or expended for the purpose of the business. The test of immediate benefit or revenue is not criteria for allowing expenditure under section 37(1), albeit it has to seen, whether it has been incurred for the purposes of the assessee’s business or not. The expression “for the purpose of business” has a very wide import and covers a situation where it affects the overall business of the assessee and commercial expediency. It has to be seen from this angle also, if the assessee would not have been dragged into such litigation and proceedings before the Company Law Board, then there would not have been any requirement for the assessee to incur such expenditure. Assessee got involved only because it was made one of the respondent and defendant in the suit and in order to save its business from possible liquidation the assessee had to incur the legal expenses. Thus, in our opinion, such expenditure on legal expenses is wholly and exclusively incurred for the purpose of the business and accordingly, same needs to be allowed. Accordingly, ground no.3 of the revenue’s appeal stands dismissed.
Disallowance of interest of attributable to the interest free advance to the associated concern - CIT(A) deleted the said disallowance on the ground that, now the VCCL Ltd. has paid the amount to the LML, therefore, the entire basis of making disallowance by the AO no longer stands - HELD THAT:- If this amount would have been given to the LML then due amount could have been reduced and also the consequent interest to LML. On this premise he has made the disallowance of interest on the amount of ₹ 13.55 crores. Now, admittedly, it has been shown by the assessee before the CIT(A), which has not been disputed by the revenue before us that, VCCL Ltd has paid the amount of ₹ 13.55 crores to the assessee for which the necessary evidences were also filed before the CIT(A) and Xerox copy of the cheque is also appearing in the paper book. Thus, the entire premise on which the disallowance was made by the AO has no legs to stand. Hence, the ground raised by the revenue has been rendered baseless and without any basis or support from any material on record and accordingly, the same is dismissed.
Disallowance of interest on dues - HELD THAT:- As brought out by the assessee before the CIT(A), ₹ 17.59 crores represent the surplus on sale of undertaking which was credited to the P&L Account and was offered as long-term-capital gain/loss whereas, the part of the amount was credited to the various block-of-assets and thereby reduce the WDV of those assets. Thus, there was no occasion for disallowance of any interest on the amount of ₹ 17.51 crores.
A disallowance of interest in such cases can only be when the department/revenue makes out a case that interest bearing funds have been diverted to the sister concerns without any business purpose and without charging any interest. Ostensibly it is not the case here that any interest bearing funds have been diverted to the sister concern albeit certain sum was to be received by the assessee as part of sale consideration and in such a case how the interest component can be imputed for making any disallowance is not understandable. Not only that, it has been brought on record that ESL has been ordered to be wound up by the Hon’ble Allahabad High Court and once the amount itself is doubtful of recovery then how any amount of interest and that to be on the notional basis can be imputed for making the disallowance. The entire exercise done by the AO is very arbitrarily and we do not find any reason to deviate from the conclusion of the CIT(A) in deleting the said disallowance. Accordingly, the ground No.5 as raised by the revenue is dismissed.
Disallowance u/s 40(a)(i) on account of technical know-how fees paid to M/s AVL Austria - disallowance had been made by the AO on the ground and on the footing that the payment of technical know-how fees to AVL Austria is taxable in India even if it has been rendered outside India and since, assessee has not deducted TDS on such payments, therefore, disallowance under section 40(a)(i) should be made - HELD THAT:- If the amount is paid by an Indian enterprise for technical services furnished by enterprise in Austria then same shall not be subject to tax in India except in so far as such amount is attributable to the activities actually performed in India. This article is different from the new Article 7 applicable post September 2001 and, therefore, the benefit of old article has to be given to the assessee in the AY 2000-01. Here in this case admittedly, the activity of rendering of technical services has been performed by the Austrian Company in Austria and the amount has been paid by the Indian enterprise in Austria, therefore, by virtue of Article 7 of DTAA (as was prevalent prior to September, 2001), the amount was not taxable in India and consequently the assessee was not required to deduct TDS on payment. Thus, no disallowance under section 40(a)(i) can be made in the present case. In the result, ground No.6 as raised by the revenue is dismissed.
Disallowance u/s 40A(9) - AO has disallowed the said amounts on the ground that, similar disallowance was made in the earlier years - HELD THAT:- Before us, it has been admitted by both the parties that the Tribunal in assessee’s own case for the AYs 1997-98, 1998-99 and 1999-00 in the appeal filed by the revenue has confirmed the similar disallowance made under section 40A(9). Accordingly, following the earlier year precedence which is applicable in this year also, this issue is decided against the assessee and in favour of the revenue. Thus, ground No.7 raised by the Department is allowed.
Disallowance on account of pre-operative expenses claimed as revenue expenditure - HELD THAT:- We need not to go into merits of the issue, because already assessee had reduced the said amount of ₹ 376.18 lakhs from the pre-operative expenditure which has been added by the AO separately. This is evident from the fact that total pre-operative expenditure was ₹ 1038.20 lakhs, out of which interest and other income of ₹ 376.81 lakhs has already been reduced and only ₹ 661.39 lakhs have been claimed in the P&L A/c. Thus, there was no requirement by the AO to disallow once again the interest and other income of ₹ 376.81 lakhs. AO is accordingly is directed to rectify this mistake after verification that if the assessee has already reduced the said amount from the total pre-operative expenditure as stated before us, then no addition should be made. In the result, ground No.8 is treated as allowed in the manner indicated above.
Nature of expenditure - Expenditure incurred on obtaining “ISO 9002” and “World Class Manufacture Certificate” - Revenue or capital expenditure - HELD THAT:- We do not find any merits in the contention of the AO that payment for getting such certificates for quality products or World Class Manufacturing Facility is in the nature of trademark and hence is capital in nature. We, thus, confirm the order of the CIT(A) that such an expenditure is revenue expenditure and is allowable under section 37(1). Accordingly we dismiss the ground raised by the revenue
Disallowance of bad debt - HELD THAT:- AO himself had admitted that, it is a sundry debt which is outstanding since 1987. Lastly, it is also not disputed that the said amount was receivable and was treated as loans and advances in the books of account which has been written off in the aforesaid manner. Thus, it has rightly been held that the same will be allowable as bad debt. Once the provision for doubtful debt has been debited to the P&L Account and the corresponding provision has been reduced from the debtors account in the Balance-sheet then this would amount to writing off the debt and thus all the conditions laid down in section 36(1)(vii) r.w.s. 36(2) clearly gets fulfilled. This issue has been settled by the Hon’ble Supreme Court in the case of Vijaya Bank Ltd [2010 (4) TMI 46 - SUPREME COURT] - Thus the said amount would be allowed as a bad debt written off by the assessee and not as a long-term capital loss. Accordingly, we affirm the order of CIT(A) on this score.
Addition on account of assessable value of goods imported for job work and re-export - assessee used to import certain components free of cost from M/s Piaggio BV, the collaborator for performing job work and thereafter such components were exported - HELD THAT:- We are unable to appreciate as to how such a value of component can be brought to tax in the hands of the assessee, because to the extent assessee gets the benefit on the cost, it will be reflected in the price of the manufactured product and thereby giving a higher profit on the sale of the said product. There is no liability towards Piaggio and accordingly, it cannot be held that there is any extinguishment of any liability which needs to be taxed in this year.
CIT(A) has held that the components received without any purchase price constitutes the income cannot be upheld, because the income or profit will result only if the said component is used in the manufacturing of the product and when the product is ultimately sold. The profit imbedded on account of such free component would only be determined at the time of sale of the product and then profit would be taxed and not when the said component (free of cost) has been used, that is, at the time of the purchase itself. Thus, in our opinion, such an addition is not called and same is directed to be deleted. Resultantly ground No. 1 as raised by the assessee is treated as allowed.
Disallowance of provision for doubtful debts and provision for Doubtful Advance - HELD THAT:- We agree with the contention of the Ld. Counsel that if a provision for doubtful debt is debited to the P&L account and simultaneous reduction from the debtors account is made, then same amounts to writing off in the books of account and should be allowed as deduction under section 36(1)(vii). This principle has been reiterated by the Hon’ble Bombay Court in the case Tainwalla Chemicals and Plastics[2013 (4) TMI 211 - BOMBAY HIGH COURT] - However neither the AO nor the CIT(A) has discussed this issue in detail, accordingly, we direct the AO to examine the issue on merits - Assessee in ground No.3 is treated as allowed for statistical purposes.
Addition of bad debts written off - HELD THAT:- The assessee could not establish or bring any proof, under what circumstances, the assessee could not use the license and for what purpose it was purchased and why the desired import on these licenses could not be affected. For any claim of business expenditure or claim of write off or a business loss, the onus is on the assessee as to how it related to his business and also has to give genuine reasons with evidence for incurring the expenses and why it has been written off. In our opinion, without there being any material on record and any satisfactory explanation, we agree with the finding of the lower authorities that to the extent of amount written off there is no material to substantiate the assessee’s claim and onus cast upon the assessee has not been discharged therefore, it has rightly been disallowed.
As regards the various debit balances we find that assessee could not establish the reason for writing off and could not establish the genuineness of the entire transaction. Thus, on this score also, the order of the CIT(A) is confirmed.
Custom duty written off on export of certain scooters for exhibiting the same in Indian market - We find that assessee could not reexport the scooters as it was used in the Indian market and as such excise duty could not be recovered. Thus, custom duty which was paid by the assessee in the course of its business and once it was not recovered; then the same has to be allowed as deduction or loss while computing the income from profits and gains under section 28. The assessee had taken a business decision for importing of certain scooters for exhibiting the same in the Indian market for which it had to pay the custom duty. Thus, the said amount incurred was during the course of the business and write off of such amount which was not recoverable is to be allowed as deductible expense. Thus, the claim is clearly allowable and we order accordingly. Thus, ground no.4 is partly allowed.
Disallowance of payment made towards ‘Royalty’ and ‘Technical Know-how’ - HELD THAT:- Both the conditions have to be satisfied, that is, the services that the source of income should be in India and services have been rendered in India. However, if the services have been rendered outside India then same was held to be outside the purview of taxable in India. Once this is the admitted position, then it is very difficult to hold that, assessee should have deducted TDS on such a payment when there was no law that the payment is taxable in India. Here, the maxim of “lex non cogit ad impossplia, that is, the law of the possibly compelling a person to do something which is impossible, that is, when there is no provision for taxing an amount in India then how it can be expected that a tax should be deducted on such a payment. This view has been upheld by in catena of decisions wherein, it has been held that, assessee cannot held to be liable for deducting TDS in view of the retrospective amendment which has come at a much later date. Thus, without going into the aspect of ‘FTS’ clause in DTAAs, we hold that, at the relevant time while making the payment, assessee was not liable to deduct TDS under the domestic law. Accordingly, disallowance under section 40(a)(i) could not have been made by the AO.
Disallowance of prior period expenses - HELD THAT:- The assessee has given the reasons as to why these liabilities have been crystallized in this year. However, neither the AO nor the CIT(A) have discussed this issue in proper perspective, therefore, we are of the opinion that matter should be restored back to the AO to examine this issue afresh after considering assessee’s submission and also in the light of the decision laid down by the Hon’ble Supreme Court in the case of Taparia Tools Ltd [2015 (3) TMI 853 - SUPREME COURT]. Accordingly, ground No.8 is allowed for statistical purposes.
Addition on account of gift to various employees on various occasions - AO has disallowed 10% of the expenses which has been confirmed by the AO on ad-hoc basis - HELD THAT:- There is some degree of adhocism in such a disallowance, however, the onus was on the assessee to show that entire expenditure debited is wholly and exclusively for the purpose of business and there is no element of nonbusiness- purpose or for any personal nature expenditure. In case of the company though there cannot be any expenses of personal nature, however, in the present case assessee has mainly stated that the gifts have been given to the guests but why such an expensive gifts were given to the guests has not been specified. Thus, the element of non-business purpose is inherent in such an explanation, therefore, we do not find any reason to deviate from the disallowance as confirmed by the CIT(A). Accordingly, ground no.11 is dismissed.
Validity of Assessment u/s 153C - absence of any material seized during search - additions made by the Assessing Officer and confirmed by Ld. Commissioner of Income Tax (Appeal) are whether bad in law as the assessment for the impugned assessment year were not awaited at the time of issuance of notice u/s 153C - HELD THAT:- Unless and until any material/document or information is gathered/unearthed at the time of search, we find merit in the contention of the assessee. Our view finds support by the decision from Hon’ble jurisdictional High Court in Allcargo Global Logistic Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] thus, on this preliminary ground alone, the additions made by the Assessing Officer/confirmed by the Ld. Commissioner of Income Tax (Appeal) stands deleted.
Levy of penalty u/s. 271(1)(c) - Addition made to the capital gains - HELD THAT:- Parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability - merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Before us, l.d AR has given the reasons and the facts which had resulted into addition. These submissions have not been controverted by the Revenue - there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income.
We also get support from the judgement of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein as held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
We are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act. Thus, the ground of assessee is allowed.
Owner of the suit land - title over the suit land - plot of land situated near Krishnarajapuram Railway Station, which is around 14 KMs away from Bangalore city - HELD THAT:- It is a settled principle of law that a right to file first appeal against the decree Under Section 96 of the Code is a valuable legal right of the litigant. The jurisdiction of the first appellate Court while hearing the first appeal is very wide like that of the Trial Court and it is open to the Appellant to attack all findings of fact or/and of law in first appeal. It is the duty of the first appellate Court to appreciate the entire evidence and may come to a conclusion different from that of the Trial Court.
Similarly, the powers of the first appellate Court while deciding the first appeal are indeed well defined by various judicial pronouncements of this Court and are, therefore, no more res integra. It is apposite to take note of the law on this issue.
Application filed under Order 41 Rule 27 of the Code - HELD THAT:- The High Court committed another error when it rejected the application filed by the Appellant under Order 41 Rule 27 of the Code. This application should have been allowed for more than one reason.
First, there was no one to oppose the application. In other words, the Respondents were neither served with the notice of appeal and nor served with the application and hence they did not oppose the application. Second, the Appellant averred in the application as to why they could not file the additional evidence earlier in civil suit and why there was delay on their part in filing such evidence at the appellate stage. Third, the averments in the application were supported with an affidavit, which remained un-rebutted. Fourth, the application also contained necessary averment as to why the additional evidence was necessary to decide the real controversy involved in appeal. Fifth, the additional evidence being in the nature of public documents and pertained to suit land, the same should have been taken on record and lastly, the Appellant being the Union of India was entitled to legitimately claim more indulgence in such procedural matters due to their peculiar set up and way of working - the application filed by the Appellant under Order 41 Rule 27 of the Code deserved to be allowed and is accordingly allowed by permitting the Appellant to file additional evidence.
The other inevitable consequence is that the case has to be remanded either to the High Court for deciding the appeal afresh on merits or to the Trial Court for deciding the civil suit afresh on merits in accordance with law.
The civil suit is now restored to its file. The Trial Court, i.e., District and Sessions Judge Bengaluru, is directed to retry the civil suit on merits. The additional evidence filed by the Appellant is taken on record. The Respondents are afforded an opportunity to file additional evidence in support of their case in rebuttal - the District and Sessions Judge Bengaluru are directed to decide the civil suit expeditiously and preferably within 6 months from the date of party's appearance before him. Parties to appear before the District and Sessions Judge Bengaluru on 01.08.2016.
Seeking condonation of delay of 12 days in preferring the present revision petition and 66 days in re-filing the petition - Section 5 of Limitation Act read with Section 482 of Cr. P.C. - HELD THAT:- In present case, the factual position emerges that the accused was arrested on 29.10.2014 and the charge sheet was filed before the court on 26.12.2014. On perusal of the charge sheet, the court finding that certain aspects were incomplete due to incomplete investigation, the Investigating Officer was directed to further investigate into the matter and the charge sheet was returned for the purpose of filing the charge sheet after completing the investigation on all aspects. Undisputedly, Section 167(2) Cr. P.C. precludes the concerned Magistrate to have the custody of the detenue beyond 60 days until he receives the charge sheet under Section 173 Cr. P.C. to adjudicate upon the same.
In the present case, accepting an incomplete report on 26.12.2014 and returning the same on account of incomplete investigation on certain aspects, and making the accused disentitled for benefit under Section 167(2) Cr. P.C. is an apparent abuse of law - this court is of the considered opinion that charge sheet filed within statutory period of 60 days ought to be complete to enable the concerned Magistrate to adjudicate and not an incomplete charge sheet to infringe upon the right of the accused to be released on bail.
The order passed by the learned Magistrate whereby the accused was not granted bail is not sustainable in the eye of law and order passed by learned Additional Sessions Judge deserves to be upheld - petition dismissed.
Allowability of expenditure on project abandoned - expenditure claimed to be representing cost of labour and other revenue expenditure on putting up structure for installation of spinning machines - project was stated to be abandoned due to its non-viability and the expenditure had been written off to the P&L Account and added back in the computation of total income - HELD THAT:- As decided in PRIYA VILLAGE ROADSHOWS LTD. [2009 (8) TMI 765 - DELHI HIGH COURT] any expense incurred for a project which has been abandoned due to its non-viability, expense is an allowable revenue expense especially when all the items of expenditure are of revenue in nature. In this case certain expenses on salaries etc. were incurred on a Hotel project, which was later on abandoned due to its non-viability. ITAT following the Delhi High Court decision in the case of Modi Industries held that there was unity of control / command / management and also the expenses of the revenue nature, and as such, the expense; written off and claimed as deduction is property allowable
Accordingly, setting aside the finding the issue is restored back to the Ld.CIT(A) to decide the same in accordance with law after giving the assessee a reasonable opportunity of being heard.
Disallowance u/s 14A - AR submitted assessee has made investment of share out of its fund in Mid 1990 and no dividend has been earned in the year - HELD THAT:- On a perusal of the assessment order, it is seen that the assessee has consistently made a claim that the investments have been from its own funds. Before the CIT(A), it has also been stated that these investment in shares were made in early 1990s out of its own funds. It has been argued that in the year under consideration, no dividend has been earned thereon which is established from page 19-20 which is an extract of the P&L Account of the assessee - AR considering the request of the Revenue stated that he had no objection if the issue is verified. Accordingly in the light of the submissions of the parties and considering the material available on record and the judicial precedent cited, we set aside the issue back to the file to the CIT(A) with the direction to verify the claim of the assessee and allow necessary relief if so warranted on facts considering the judicial precedent cited.
Reopening of assessment post annulling proceeding under Section 153C -time limit for completion of the assessment - period of limitation - Argument of the assessee was that time limit for making the reassessments expired on 31.12.2011. Assessments having been completed after the said date, contention of the assessee was that assessments were barred by lapse of time and invalid - HELD THAT:- There is no dispute that first notice u/s.148 of the Act, was issued and served on the assessee on 25.03.2011. However it is also not disputed by the assessee that one more notice u/s.148 of the Act, was served on the assessee on 06.04.2011 for very same assessment years. Both the notices were dated 22.03.2011. There is nothing in law which would bar an AO from issuing two notices u/s.148 of the Act. If both the notices are dated even the second notice can only be considered as a replica of the original notice. Hence in our opinion, the time limit for completion of the assessments can be reckoned only from the date of service of notice on 06.04.2011.
If we reckon one year period from the end of the financial year in which the notice was served, the last date would be 31.03.2013. Limitation under second proviso will not apply since the notice was served on 06.04.2011. Impugned assessment orders were passed on 28.03.2013 before such last date. Hence we cannot say that the assessment orders were time barred - No infirmity in the finding of CIT (A) in this regard. As find that CIT (A) had not adjudicated on the grounds taken by the assessee on merits assailing the additions made for unexplained investment. Appeals are remitted back to the file of CIT (A) for considering the grounds of assessee on merits of the additions made. Appeals are partly allowed for statistical purpose.
Reopening of assessment u/s 147 - addition on account of commission payment which was provision in nature during the year and same was also not reflected in the return of income of the Directors - reopening has been done after expiry of four years from the end of the impugned assessment year - HELD THAT:- This is a case where AO is trying to put the Cart before the Horse’’. The approach of the AO has been highly irresponsible and casual in reopening this case. The constitution of our country has attached great sanctity to the concept of finality of litigation. No reopening of an already concluded assessment can be done except as provided by the legislature. Any casual and irresponsible reopening of an already concluded assessment is misuse of process of law and pierces the faith of the taxpayers upon the incometax department. If the directors have not shown the commission income in their individual returns and if these facts are true, then first of all, the individual cases of the directors should have been reopened, that too, after verification of primary facts. It is further noticed by us that on facts also, the Assessing Officer has gone wrong. It is shown to us that commission was paid as part of salary to the directors. Therefore, the assessee was liable to deduct TDS u/s 192 and not u/s 194H.
The company provided for the commission as part of salary in the impugned year. The TDS was deducted at the time of payment of the same in the subsequent financial year but before the due date of filing of the return u/s 139 - the same was not disallowable, in view of the clear provisions of law as has emerged after various amendments and legal precedents. Even otherwise, payments made on account of salary is not covered u/s 40(a)(ia)- where the payment was duly made by the assessee, expenses were properly booked and claimed in the return of income and due compliance was made with regard to the provisions of TDS also. No case of escapement has been made out by the Assessing Officer, at all. It is not a case where any belief could have been formed about the escapement of income. The reopening has been done in an absolutely illegal manner and is a by-product of casual approach of the Assessing Officer, who had recorded the reasons. The ld.CIT(A) has rightly held that the reopening was not valid and has rightly quashed the same. - Decided against revenue.
Validity of provisional assessment - TNVAT Act - learned Additional Government Pleader submitted that since the year is over, the authority could not have passed the provisional assessment order - HELD THAT:- The impugned order is set aside and the respondent is directed to pass a final assessment order.
The Delhi High Court case involved Dr. Satinder Kumar Gautam as the Joint Registrar (Judicial). Both the Appellant and Respondent were absent. The counsel for the plaintiff requested more time to bring relevant law. The case was adjourned to 25.07.2016.
Disallowance u/s 14A r.w. Rule 8D - disallowance towards expenditure for earning exempt income - HELD THAT:- In view of the decision of Joint Investments Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] we held that the Assessing Officer cannot make excessive disallowance under section 14A of the Act over and above the exempt income earned by the assessee and directed the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee. Thus, the ground raised by the Revenue is liable to be dismissed and dismissed accordingly.
Application of second proviso to section 40(a)(ia) - Retrospective or prospective effect - Scope of legislative amendments - Diversified views - HELD THAT:- As per Ansal Landmark Township Pvt. Ltd. v. Addl. CIT [2014 (9) TMI 194 - ITAT DELHI] as subsequently confirmed by the Hon’ble Delhi High Court in [2015 (9) TMI 79 - DELHI HIGH COURT]second proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005. During the course of hearing, the ld. DR has relied on the decision in the case of Prudential Logistics and Transports [2015 (2) TMI 847 - KERALA HIGH COURT] wherein the Hon’ble Kerala High Court has taken a view that the application of second proviso to section 40(a)(ia) of the Act is only prospective. Since there exists two contradictory decisions, we are of the considered opinion that the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] has held that the decision favourable to the assessee have to be acted upon.
Thus, respectfully following the decision of the Agra Benches of the Tribunal in the case of Rajeev Kumar Agarwal [2014 (6) TMI 79 - ITAT AGRA] which was duly affirmed by the Delhi Benches of the Tribunal in the case of Ansal Landmark Township Pvt. Ltd. v. Addl.CIT(supra) and subsequently confirmed by the Hon’ble Delhi High Court, we find no infirmity in the order passed by the ld. CIT(A) on this issue and the ground raised by the Revenue is dismissed.
Contempt petition - non-compliance of the order and direction issued by this Court - learned Senior Standing Counsel submitted that the order and direction issued by this Court has been complied much earlier - HELD THAT:- Recording the same, the contempt petition is closed. However, the issue as to whether the petitioner had received the order which is said to have been communicated, is left open, since the respondent do not have any postal acknowledgment having proof to show that the order dated 12.08.2015 has been dispatched on 25.08.2015.
Deduction u/s 80IB - manufacture or producing an article or thing - HELD THAT:- AO noticed that though in the assessee’s own case, the Hon'ble Bombay High Court had allowed the claim of the assessee in earlier year in the case reported in [2011 (11) TMI 32 - BOMBAY HIGH COURT], but he disallowed the claim in this year also because the SLP filed by the Department before the Hon'ble Supreme Court is pending. CIT(A) did not find it justifiable to sustain the disallowance in view of the prevailing judgement of the Hon'ble Bombay High Court in the assessee’s own case.
Before us, the Ld. Representative for the respondent assessee pointed out that subsequent to the decision of the CIT(A), the Hon'ble Supreme Court has since dismissed the SLP filed by the Department [2015 (4) TMI 1322 - SUPREME COURT OF INDIA] a copy of which has been placed on record. Appeal of the Revenue is dismissed.
Character of the land sold by the assessee - lands covered under Hyderabad Airport Development Authority [HADA] - agricultural land OR capital asset u/s 2(14)(iii) - AO has considered HADA as a govt. notified local authority and concluded that it is a Municipality within the meaning of section 2(14)(iii)(a) - HELD THAT:- AO consideration HADA as a govt. notified local authority and concluded that it is a Municipality within the meaning of section 2(14)(iii)(a) which is not justified as the lands covered under HADA continue to be Gram Panchayats land.
It is in record that the land sold by the assessee also does not fall within such distance of not being more than 8 kms from the local limit of any municipality or cantonment rather lands covered under HADA are more than 21 Kms from the municipal areas i.e. GHMC of Hyderabad.
As in the case of T. Urmila [2012 (12) TMI 610 - ITAT HYDERABAD] wherein in a similar issue the Tribunal held on facts that HADA is not a local body and lands within HADA is not capital asset u/s 2(14)(iii) of the Act. This decision of the Coordinate Bench was upheld by the Hon'ble Hyderabad High Court when on an appeal by the Revenue in T. Urmila’s case was dismissed. That in the instant case, the land sold by the assessee is within the HADA and therefore, the character of the land is agricultural land - Decided against revenue.
Unabsorbed depreciation set off against the long term capital gain - HELD THAT:- We find that the issue is squarely covered by the decision of the Mumbai Special Bench in the case of DCIT Vs. Times Guaranty Ltd.[2010 (6) TMI 516 - ITAT, MUMBAI], the Hon’ble High Court of Gujarat in the case of General Motors India Ltd.[2012 (8) TMI 714 - GUJARAT HIGH COURT]and the Chennai Bench of the Tribunal [2013 (8) TMI 1149 - ITAT CHENNAI] for the assessment year 2008-09. As pointed out by the learned assessee’s Representative before the learned Assessing Officer which is extracted hereinabove.
Assessing Officer had made the addition only on the ground that the aforesaid decisions were not accepted by the Department and they are in appeal before higher judicial forum. This view of the learned Assessing Officer is not appreciable. Therefore, following the above mentioned decisions and taking note of section 71(2) of the Act, we hereby direct the learned Assessing Officer to allow the claim of set off & carry forward of depreciation against the long term capital gain of the assessee in the relevant assessment year. - Decided in favour of assessee.
Validity of distraint order issued purportedly based on the order of assessment - the order was not communicated to petitioner - HELD THAT:- An order of attachment was passed on 25.08.2015, which was challenged by the petitioner in BHAGAVAN TEXTILES (DEFUNCT) VERSUS THE ASSISTANT COMMISSIONER (CT) , AVINASHI ASSESSMENT CIRCLE, AVINASHI, THE ASSISTANT COMMISSIONER (CT) , GANDHIPURAM CIRCLE, COIMBATORE. [2016 (3) TMI 1408 - MADRAS HIGH COURT] and the said Writ Petition was allowed by an order dated 03.03.2016, with a direction to the Assessing Officer to redo the entire matter.
The impugned distraint order has to be necessarily set aside - Petition allowed.
Refund of the TDS amount along with interest - failure to deduct tax at source in respect of perquisite value of stock options allotted to its employees who were covered by the Employees Stock Option, otherwise, known as ESOP scheme of the company - respective tax was recovered from the salary of the respondent by his employer and the respondent/assessee was also issued Form 16 by the employer on 25.4.2010 certifying the further deduction and remittance towards tax - HELD THAT:- Writ Appeal is allowed. The appellants are directed to refund the amount to the assessee/respondent with interest payable as per the provisions of the Act within a period of four weeks from the date of receipt of a copy of this order. See S. THIGARAJAN & U. RAMADAS KAMATH & K. SURESH KAMATH VERSUS ASSISTANT CIT AND OTHERS [2009 (8) TMI 531 - KARNATAKA HIGH COURT]
Disallowance of expenditure on loose toolls etc.- AO made addition on the ground that the assessee-company has not brought any evidence that these tools were used in the production - HELD THAT:- As decided in own case for assessment year 2008-09 we find that the Revenue has not disputed the incurring of expenditure by the assessee in purchase of the tools. The only reason for the disallowance is that it is not revenue in nature but is of capital in nature. It is also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as capital in nature and depreciation allowed thereon. Therefore, taking the totality of the facts into consideration, we hold that revenue ought to have allowed the revenue expenditure claimed by the assessee.
Disallowance of interest - interest-free loan was granted to sister concerns - CIT(A) deleted the addition following the order of the Tribunal in the assessee’s own case for assessment year 2008-09 wherein it was held that in absence of nexus between interest-bearing funds and advance-free advance, no disallowance was called for - HELD THAT:- No finding by the AO that there is nexus between the interest bearing funds of the assessee and the interest-free advances of the sister concerns. The only reason for the disallowance is that the assessee is paying interest on the loans taken by it, while it has given interest free advances to sister concerns, when there is no nexus between the interest bearing funds and the interest free advances, the presumption to be drawn is that the advances are out of the non interest bearing funds of the assessee as held by the Hon'ble supreme Court in the case of Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] therefore, it has to be presumed that the interest free advances are out of the own funds of the assessee and, therefore, no disallowance of interest is called for.
The assessee's contention of the commercial expediency of advancing the loans is not accepted for the reason that the sister concerns have not carried out any activities during the relevant previous year and the assessee also has not established the commercial expediency for the said advances. This ground of appeal is accordingly allowed.
Disallowance of salary expenses of R&D activity - AO disallowed the same holding them to be capital in nature and allowed depreciation - CIT(A) after considering details of salary expenses found to be revenue in nature allowed the same - revenue had not brought any evidence controverting the findings of the CIT(A) - HELD THAT:- The reasoning of the AO that on account of negative balance in work-in-progress, the addition of double of negative balance has to be made cannot be accepted. Therefore, the finding of the CIT(A) restricting to 50% of the addition is hereby upheld. In the circumstances, ground of appeal raised by the revenue is dismissed.
Addition on account of work-in-progress - HELD THAT:- The reasoning of the AO that on account of negative balance in work-in-progress, the addition of double of negative balance has to be made cannot be accepted. Therefore, the finding of the CIT(A) restricting to 50% of the addition is hereby upheld. In the circumstances, ground of appeal raised by the revenue is dismissed.
Disallowance of provision for erection charges - HELD THAT:- As the provisions are allowable as deduction while computing income under profits and gains of business provided the liability can be estimated with reasonable accuracy and the liability has accrued even though payment of the liability is postponed to a future date. But in the present case, the assessee had failed to demonstrate either before the lower authorities or before us that the liability has accrued during the year and the fact that the substantial provision was reversed in subsequent years goes to prove that the liability was not estimated with reasonable accuracy.
Validity of assessment order - higher amount on excess of ₹ 50 lakhs only - notification issued under Section 3 (4) of the TNVAT Act and G.O.Ms.No.135, dated 30.10.2011 to be taken into account - HELD THAT:- The Respondent should have taken into consideration the notification issued under Section 3 (4) of the TNVAT Act and G.O.Ms.No.135, dated 30.10.2011, which is effective from 01.04.2012, and the petitioner has to pay higher tax only for the excess amount of ₹ 32,228/-, which is more than ₹ 50 lakhs limit and as per the Government Order and the amendments to Section 3 (4) of the Act, the petitioner is entitled to avail Input Tax Credit for the turnover, which exceeds ₹ 50 lakhs and the said Government Order, being a beneficiary notification, is applicable to the year 2012-13 also.
This Court is of the view that the respondent should be directed to redo the entire assessment, taking into consideration the submissions made by the petitioner and take a decision after affording an opportunity of personal hearing - Petition allowed by way of remand.
9911796707
