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Showing 61 to 80 of 1664 Records
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2022 (9) TMI 1606
Disallowance of deduction claimed u/s. 80P proportionately - HELD THAT:- We find merit in the prayer of the assessee since the issue of deduction u/s 80P(2)(a)(i) of the Act requires fresh examination in the light of decision rendered in the case of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT], we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O for examining it afresh.
Addition made u/s. 68 r.w.s. 115BBE - money deposited into assessee’s bank during demonetisation period - AR submitted that it accommodated its members by extending its services by accepting the money deposited by them - HELD THAT:-The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.
Assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash.
AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law.
Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Ground allowed for statistical purposes.
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2022 (9) TMI 1605
Contempt of court - Disobedience of the order by the Deputy Commissioner of Income Tax (DCIT) - Jurisdictional error in assessing the applicant at Lucknow instead of New Delhi
Petitioner tendered his reply that he had already filed his return through e-filing at New Delhi as he has shifted his place of principle business from Lucknow to New Delhi.
As notice has already been quashed consequential orders, if any, are also quashed, a notice was issued by the Income-tax Department wherein the petitioner to furnished information in regard to assessment year 2013-14 and further an order was passed by giving final opportunity to file objections/ submissions failing which necessary inference will be drawn accordingly.
HELD THAT:- This Court is of the considered opinion that the preliminary objection raised by opposite party is misconceived as this Court while deciding the issue has quashed the consequential orders, if any.
Notice issued for the assessment year 2013-14 has also been dealt with by this Court in the judgment and order and the same has been quashed.
Let Harish Gidwani, Deputy Commissioner of Income Tax, Range-2, Lucknow may appear in person for framing of charge that why the contempt proceedings may not be initiated against him for willful and deliberate disobedience of the judgment and order [2015 (3) TMI 1229 - ALLAHABAD HIGH COURT].
List this petition on 17.10.2022. In the meantime, learned counsel for the opposite party will file reply to the supplementary affidavit.
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2022 (9) TMI 1604
Premature challenge to SCN - Challenge to notice whereby the petitioner had been directed to show cause in respect of a proposed action of blacklisting/debarment - HELD THAT:- The maintainability of a writ petition against a show cause notice was subject matter of consideration in the case of Siemens Ltd. [2006 (12) TMI 203 - SUPREME COURT] wherein it was held that ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless it is without jurisdiction; however, when a notice is issued with premeditation, writ petition would be maintainable.
The question as to what would be the proper contents of a notice to show cause, so as to be in consonance with the principles of natural justice was considered in the case of Oryx Fisheries [2010 (10) TMI 660 - SUPREME COURT] and it was observed that the notice directing show cause must state the charges only and not definite conclusions of alleged guilt otherwise the entire proceeding would stand vitiated by unfairness and bias.
The scope of judicial review in matters relating to challenge to show-cause notice was subject matter of consideration in UNION OF INDIA VERSUS VICCO LABORATORIES [2007 (11) TMI 21 - SUPREME COURT], and while holding that non-interference at the stage of issuance of show-cause notice is the normal rule, it was stated that where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, the writ court would not hesitate to interfere even at the stage of issuance of show-cause notice.
In Union of India and others Vs. Coastal Container Transporters Association and others [2019 (2) TMI 1497 - SUPREME COURT], while examining the scope of powers under Article 226 with regard to quashment of a show-cause notice, it was held that the same would not be permissible unless there is lack of jurisdiction or violation of principles of natural justice.
The power to blacklist a contractor was held to be inherent in the party allotting the contract and the freedom to contract or not to contract was held to be unqualified in the case of private parties; however when the party is State, the decision to blacklist would be open judicial review on touchstone of proportionality and the principles of natural justice.
It is legally well settled that mere issuance of show cause notice does not amount to an adverse order, which may be held to affect the rights of the parties. The necessity for issuing a show cause notice and the requirement of specifying the grounds on which the action is proposed is in fact a necessary prerequisite, so as to ensure that the noticee is aware of the grounds on which action is proposed and has an adequate opportunity to rebut the same. If the show cause notice does not specifically state the grounds on which it is being issued and the proposed action, the noticee would be taken by surprise and would not have adequate opportunity to rebut the allegations during the course of inquiry which is to follow.
The challenge to the show cause notices in the instant petitions is premature for the reason that the mere indication of the grounds and the penalty proposed, would not give rise to a cause of action, as it is open to the petitioners to present their case and rebut the imputations, whereupon it would be incumbent upon the respondent authority to proceed with the inquiry and pass an appropriate speaking and reasoned order after giving adequate opportunity to the petitioners and ensuring due compliance of the principles of natural justice.
The challenge raised to the show cause notices, at this stage, is premature - Petition disposed off.
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2022 (9) TMI 1603
Denial of exemption u/s 11 - Assessee has not carried on any charitable activities during the relevant period and, as such, violated Section 11(2) and 11(5) - Whether the AO is entitled to probe into the objects of the charitable trust which is already registered u/s.12A of the Act and hold that the objects are commercial in nature and consequently deny exemption u/s. 11? - HELD THAT:- A reading of the Trust Deed, which came to be registered under the provisions of the Act, would clearly indicate that the activity of the Trust was to allot workers to the users, as per their indent and for that purpose, maintain Office or establishment, employing necessary personnel. Further, utilize the surplus arising out of the collections from the users and voluntary contributions obtained from the public to such charitable purposes as the Board of Trustees may deem it expedient from time to time.
The objects of the Trust also clearly contemplate collection of money from the users of Private Workers’ Pool and distribute wages to the Private Workers; apart from collecting subscriptions from the Members of the Stevedor’s Association and Clearing and Forwarding Agents’ Association of Visakhapatnam, who intend to use private workers enrolled by the Trust.
Therefore, once registration is done u/s 12A of the Act, it is a fait accompli and the Assessing Officer cannot thereafter probe into the objects of the Trust and hold that there was any charitable activity, unless the material on record indicate that there was violation of conditions/ objects of the Trust Deed, which does not appear to be the case on hand.
AO as well as the Appellate Authority rejected the claims of the Assessee. Challenging the same, appeals came to be preferred before the Income Tax Appellate Tribunal, which were allowed, as in this case. The issues before the High Court [2008 (4) TMI 16 - SUPREME COURT] were as under:- (A) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that the objects of the Trust restricting benefit to the members of the Club would fall within the purview of the act of "general public utility" u/s 2(15) of the Income Tax Act constituting as a section of public and not a body of individuals? (B) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that Registration u/s 12-A was a fait accompli to hold the Assessing Officer back from further probe into the objects of the Trust?
High Court, after considering the material on record, dismissed the appeals in limine, relying upon the decision of the same court in Hiralal Bhagwati [2000 (4) TMI 14 - GUJARAT HIGH COURT] Being dissatisfied with the Order of the High Court, the Revenue preferred Civil Appeals before the Hon’ble Supreme Court. On 22.07.2022, the Court granted leave in respect of question No. “B” i.e., whether the Appellate Tribunal was justified in holding that registration u/s 12-A was a fait accompli, to hold the Assessing Officer back from further probe into the objects of the Trust.
Though the learned Counsel for the Appellant tried to contend that, the Hon’ble Supreme Court did not lay down any ratio in the judgment referred to above, but a reading of the Order would indicate that, the Hon’ble Apex Court, while referring to the case of Hiralal Bhagwati [2000 (4) TMI 14 - GUJARAT HIGH COURT] wherein, it was held that, the registration of a Trust u/s 12A of the Act, once done is a fait accompli and the Assessing Officer cannot thereafter make further probe into the objects of the Trust, dismissed the appeals therein, has attained finality, as the Revenue did not challenge the decision in the said case.
In view of the judgment of the Hon’ble Supreme Court, referred to above, the issue, in our view, is no more res integra and that the Assessing Officer totally erred in probing into the objects of the Trust.
Whether the activities of the assessee trust can be termed as business activity in terms of Section 11(4A) of the Act? - There was no profit motive in carrying on the objects by the Assessee Trust, namely, taking care of the welfare of labourers, who were not enrolled by the Dock Labour Board. The so-called business activity, when intrinsically woven into and is part of the charitable activity, the business activity is not feeding charitable activities, as they are integral to the charity / charitable activity. The wages and fees payable by the users and shipping companies are fixed by the Dock Labour Board and collected accordingly. The Trustees are not entitled for any remuneration/profit except reimbursement of expenses incurred by them on behalf of the Trust in terms of Clause 16 of the Trust Deed.
Therefore, all the above factors/activities of the Trust, which are being carried out right from the inception, would only indicate that the activities are for advancement of general public utility, as ordained in Clause 3 of the Trust Deed. Further, the Tribunal, which is a fact finding body has categorically held that these activities of the Trust are charitable in nature, which, in our view, cannot be overturned, unless it is established that there is a grave error apparent on record in coming to such conclusion, which is not so.
Violation of Section 11(5) and Section 13(1)(c) read with Section 13(2) -The amounts advanced by the Trust cannot be treated as “investments” and, as such, there is no violation of Section 11(5) of the Act and, accordingly, the question of violation of Section 11(3) also does not arise.
Whether there was any violation of Section 13(1)(c) read with Section 13(2) of the Act? - We reiterate that the principal amount was repaid on 26.02.2001 and interest on 15.05.2002, while other association repaid the principal amount of Rs.30,00,000/- with interest aggregating to Rs.46,60,000/- between October 2003 and March 2008. The interest liability in both the cases was recognized on accrual basis from the beginning i.e., from 03.11.1995 and the actual interest was accounted on cash basis, as the Trust accounts for its receipts and payments on cash basis. Hence, there is no violation of the Act.
Accumulation of income u/s 11(2) of the Act - A perusal of Form No. 10, filed by the Assessee, for the assessment year 1999-2000, would show the purpose for accumulation was, (a) building construction, (b) for payment of provident fund, pension, gratuity, productivity bonus, family security scheme, time rate and piece rate wages and (c) to meet the expenditure for other welfare amenities provided by the pool. But, the Assessing Officer held that, the purpose of accumulation is general in nature and for welfare of the workers and not for any charitable activities. It is to be noted here and as observed earlier, that the activities carried on by the Trust were in accordance with the objects for which it is formed and registered. Such activities or objects of the Trust has been approved as “charitable” by C.I.T., and registered the Trust under Section 12A of the Act. Therefore, even on this aspect, it cannot be said that there was any violation of Section 11(2) of the Act.
Since, all the substantial questions of law are answered against the Revenue and in favour the Assessee Trust, the Appeal is liable to be rejected.
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2022 (9) TMI 1602
Allowability of PF and ESIC paid beyond the prescribed date but within the due date of filing of return - HELD THAT:- The amendment to section 36(1)(va) by the Finance Act, 2021 is to operate prospectively. In the present case it is noticed that the issue is with regard to allowability of PF and ESIC paid beyond the prescribed date but within the due date of filing of return, therefore, the same is allowable.
This issue has also been decided in Odyssey Motors Pvt. Ltd. [2022 (8) TMI 1526 - ITAT CUTTACK] in favour of the assessee. This being so, respectful following the principles laid down in the case of TV Today Network Ltd [2022 (8) TMI 361 - DELHI HIGH COURT] the addition as made by the AO and confirmed by the CIT(A) stands deleted. Appeal of assessee stands allowed.
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2022 (9) TMI 1601
Addition of Arm’s Length Price of specified domestic transaction in terms of Section 92BA (i) - above clause has been omitted by The Finance Act, 2017 with effect from 1st April, 2017 - HELD THAT:- Hon'ble Karnataka High Court in TTEXPORT OVERSEAS (P.) LTD. [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] has categorically held that the resultant effect of the above omission is that it had never been passed and is to be considered as law never been existed. Therefore, we hold that no transfer Pricing adjustment could have been made in the hands of the assessee on account of ALP of specified domestic transactions. Accordingly, we direct the learned Assessing Officer to delete the transfer pricing adjustment.
Applicability of section 40A - we are conscious that the provision of Section 40A(2) of the Act, are there on the statute book and this expenditure are required to be tested under that Section with respect to their allowability. In view of this, we set aside the issue back to the file of AO to determine the allowability of this expenditure under Section 40A(2) of the Act. This was also mandate of decision of Texport Overseas Pvt. Ltd [supra].
Even otherwise it is not the case of assessee at all that provision of section 40A (20 does not apply to the assessee. Accordingly, ground nos.1 to 6 of the appeal of the assessee are allowed with above directions.
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2022 (9) TMI 1600
Classification of imported goods - Router Line Cards - to be classified under Customs Tariff Item (CTI) 8517 69 90 of the Customs Tariff Act, 1965 or CTI 8517 70 90, as claimed by the appellant - whether line cards of Router are parts/components of a Router or apparatus of Heading 85.17? - HELD THAT:- An item will not be considered as a ‘part’ if, on a standalone basis, it can be considered as an article classifiable under its own appropriate heading. It would, therefore, have to be seen whether a Router Line Card can be considered to constitute an article covered by Heading 85.17. To appreciate this, reference can be made to HSN Explanatory Notes to Heading 84.79 which deals with machines having individual functions. The inference that can be drawn from the above is that HSN itself considers an article which has an individual function as an ‘independent machine’ and not as a ‘part’. This is clear from the examples provided therein. In the case of a carburetor for an internal combustion engine, it is explained that the function performed by carburetor is distinct from that of the engine.
A perusal of the catalogue of Router Line Cards shows that these cards/modules are only parts of the existing Routers which have already been imported or installed by the appellants. The Router chassis has dedicated slots marked for these line cards, switch cards and router processor cards. The line cards are simply inserted in these slots in the existing Routers. These line cards become functional only when plugged into the said slots in the Router chassis. The line cards source intelligence from control and processor module of the Router. These line cards cannot perform its function on a stand-alone basis in the imported condition - The line cards are proprietary of the Original Equipment Manufacturer. These line cards are, therefore, not cross compatible with devices of other manufacturers but are only usable for the purpose for which they are designed for e.g., a line card manufactured by Cisco would be usable only in a Cisco Router and nowhere else.
Router Line Cards are Populated PCBs as they are printed circuit boards mounted with various active and passive electronic elements. Therefore, these cards can be classified under CTI 8517 70 10, which covers ‘populated, loaded or stuffed printed circuit boards’. It would attract NIL rate of duty.
Even from the HSN Explanatory Notes to Heading 85.17, Category II (G), NICs have been clubbed in the same category/class of equipments such as modems, routers, hubs, repeaters, multiplexers, etc. These equipments are clearly standalone apparatus which are independently capable of performing their functionality. Thus, sub- units/sub-assemblies of equipments such as modems, routers, hubs, repeaters, multiplexers would not be apparatus and NIC (i.e. a standalone apparatus) cannot be compared with Router Line Cards - thus, Router Line Cards imported by the appellant would be classified under CTI 8517 70 90 and not CTI 8517 69 90.
The impugned order dated 27.03.2019 passed by the Principal Commissioner, therefore, cannot be sustained and is set aside - appeal allowed.
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2022 (9) TMI 1599
Addition of cash deposited in an account held with Punjab National Bank - HELD THAT:- Considering the status of the assessee and his wife, the explanation of assessee that an amount of Rs. 60,000 was received from his wife out of her past savings is believable. Accordingly, we hold that the addition of Rs. 60,000 u/s 69A of the Act is unjustified. Accordingly, we delete the addition.
Addition of cash deposited in the bank account during the demonetization period - CBDT vide Instruction No. 3/2017 dated 21.2.2017 has issued standard operating procedure to be followed by the assessing officer in verification of cash transaction relating to demonetization.
In the facts of the present appeal, undisputedly, assessee is a salaried person having no business income. Further, the cash deposited during the demonetization period, does not exceed the threshold limit of Rs. 2.50 lacs in terms with the CBDT Instruction noted above. The CBDT instruction being beneficial to assessee, has to be applied. Thus, we delete the addition made under Section 69A of the Act.
Assessee appeal allowed.
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2022 (9) TMI 1598
Correct head of income - income from sale of shares - STCG or business income - HELD THAT:- We take respectful cognizance of the judgement of the Hon’ble Supreme Court in the case of Raja Bahadur Kamakhya Narain Singh [1969 (9) TMI 2 - SUPREME COURT] which was also vehemently relied on by the ld. Counsel of the assessee, wherein it was held by the Hon’ble Apex Court that the magnitude of sale and purchase of shares is a determinant in treating an income as business income or capital gains income.
We may again point out that the AO as well as the CIT(A) in the respective assessment and first appellate order, considered the facts and circumstances in which the assessee undertaken the impugned transaction and, thereafter, held that the magnitude of transaction and surrounding circumstances clearly shows that it is a business income and not short-term capital gain. Therefore, AO was right in treating the income accrued to the assessee as business income and the ld.CIT(A) was also justified in upholding the findings arrived at by the AO on this issue.
Disallowance u/s 14A applying the provisions of Rule 8D - HELD THAT:- As in Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that only those investments are to be considered for computing the average value of investment under rule 8D(2)(iii) of the Rules, which yielded exempt income during the year. Therefore, we are unable to see any reason to interfere with the findings arrived at by the FAA on this issue in partly allowing the claim of the assessee in accordance with the judgement of the ITAT Special Bench (supra). Accordingly, ground No. 3 of the assessee is dismissed.
TDS u/s 195 - non deduction of TDS on expenses incurred abroad on account of supervision charges at discharge port and expenses incurred abroad on professional and consultancy fees - HELD THAT:- CIT-DR even though vehemently supported the orders of the authorities below, but, did not controvert that the Finance Act, 2010 got assent of the President of India on 08.05.2010, much later that the date when the assessee had made payments to these parties. On behalf of the Revenue, no contrary decision or order has been shown or placed before this Bench which could lead us take a different view. Therefore, we hold that the aforementioned amendment does not create any liability against the assessee as the legal position prevailing at the relevant time, i.e., during FY 2009-10 has to be considered when the payment was made by the assessee to the non-resident party. Accordingly, we hold that the assessee was not liable for deduction of tax u/s 195 of the Act and since the assessee was not liable at that time to deduct the tax, the disallowance u/s 40(a)(ia) of the Act cannot be made.
Nature of expenses - contribution given to an school for construction of building - addition made by holding that it is in the nature of capital expenditure - HELD THAT:- We are of the considered view that it is not the case of the AO or the ld.CIT(A) that the assessee has made any bogus or false claim or the assessee has acquired any capital asset by incurring the impugned expenses towards construction of school building and renovation of two temples in the vicinity of the assessee’s mining and business activity area. So far as the conclusion of the authorities below regarding contribution towards school building is concerned, when the assessee has not acquired any capital asset and the expenditure has been made to create and build a cordial relation between the villagers residing around the mining area and business activity area of the assessee, then, in view of the order of M/s Prime Mineral Exports Pvt. Ld. [2013 (8) TMI 961 - ITAT PANAJI] such expenditure has to be allowed as revenue expenditure.
Expenditure incurred by the assessee on repair and renovation of two temples - Undisputedly, the temples were not owned by the assessee company, but, when the assessee has to conduct mining activity in the deep forest and village area, then, for creating and building cordial relations with the villagers residing in the surrounding locality of the mining and business area of the assessee, it is required by the assessee to have healthy relations with such villagers, so that a smooth business and mining activity can be undertaken. Therefore, this expenditure has to be held as incurred out of business expediency and, thus, the same is allowable as revenue expenditure. Decided in favour of assessee.
Allowance of fluctuation loss on sale proceeds of EEFC account, while such a notional loss being contingent in nature cannot be allowed to be set off against the taxable income - CIT(A) concluded that the appellant’s claim that the expenditure is attributable to revenue account - HELD THAT:- We respectfully noted that their Lordships in case of CIT vs. Vinergy International [2016 (8) TMI 1041 - BOMBAY HIGH COURT] noted that the CBDT Instruction No. 3/2010 is in respect of loss on account of foreign exchange derivatives and when in the present case it is clear that the loss was not on account of derivatives, but, in fact, the impugned losses and gains in foreign exchange relating to purchase and sale transactions, i.e., creditors and debtors outstanding as on 31st March, 2010. Then, in such circumstances the said Circular No. 3/2010 of the CBDT would have no application to the facts of the present case.
Therefore, we respectfully hold that the issue is squarely covered in favour of the judgement of Woodward Governor [2009 (4) TMI 4 - SUPREME COURT] and the judgement of Vinergy International (supra) and CBDT Circular No. 3/2010 (supra) has no application to assessee’s case. Therefore, we are unable to see any valid reason to interfere with the findings arrived at by the ld. CIT(A) on this issue and, thus, we uphold the same. Accordingly, grounds No. 1 to 3 of the Revenue being devoid of merits are dismissed.
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2022 (9) TMI 1597
Deduction u/s 80P - interest earned by the assessee from deposit with co-operative bank and nationalized bank - HELD THAT:- As decided in Krishak Sahkari Ganna Samiti Ltd. [2002 (10) TMI 89 - ALLAHABAD HIGH COURT] has held that the investment by co-operative society in the form of Government securities, equivalent to 25% of its profit, was the requirement of keeping the same as statutory reserve therefore, has held that such earning of interest was attributable to the activity carried on by the assessee.
We find that assessees had earned interest from fixed deposits from bank and co-operative societies. Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Limited [2010 (2) TMI 3 - SUPREME COURT], after acceptance of additional documents had set aside the issue before this Tribunal for re-adjudication. We find that the arguments of the assessees are that the assessees had placed the funds in the form of fixed deposits with nationalized banks and Co-operative banks in view of the specific requirements of U.P. Co-operative Societies Act.
Interest earned by a Co-operative Society on deposits, which are statutorily required to be kept in the form of bank deposits or Government securities, are attributable to the business of an assessee.
Here in the present cases, we do not find the figures regarding the interest which the assessees may have earned on fixed deposits attributable to the making of statutory reserves. We further find that bye laws of the assessee has to be gone through which, though are available in the paper book, but require examination by the AO as these were filed before Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Limited [Supra] as additional evidences.
Therefore, we deem it appropriate to remit the issue of deduction u/s 80P for read judication by the Assessing Officer, who, in the light of judgment of Hon'ble Supreme Court and keeping in view the judgments relied on by the assessee and keeping in view the additional documents, as filed before Hon'ble Supreme Court, will adjudicate the issue afresh. Ground No. 1 taken by the Revenue in all the appeals is allowed for statistical purposes.
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2022 (9) TMI 1596
Validity of Revision order u/s 263 - AO failed to conduct enquiries and verification on the issue - computational mistake in the order of the CIT with regard to work in progress and determination of percentage completion method following in respect of projects of Royal Home Town and Ellora Infratech - DR brought out the fact that the correction of the computational mistake would result in a proposition that the order of the AO is not erroneous and prejudicial to the interest of revenue - HELD THAT:- DR is fairly agreed that there is a mistake in computation. Hence, we are of the considered opinion and hold that the Tribunal need not exercise the power and authority to an issue which is prima facie rectifiable by the Pr. CIT u/s 154 and hence, the file is being remanded back to the CIT for correction of the computational mistake.
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2022 (9) TMI 1595
Maintainability of petition - availability of alternative remedy - pre-condition of having reasons to belief - Seizure of areca nuts u/s 110 of the Customs Act, 1962 - Jurisdiction to issue SCN 124 of the Act - goods (areca nuts) were illegally procured from Myanmar. or not.
Maintainability of petition - availability of alternative remedy - HELD THAT:- In the cases of Mohanlal Jitamalji Porwal & Anr. [1987 (3) TMI 111 - SUPREME COURT] as well as Indru Ramchand Bharvani & Ors. [1988 (7) TMI 78 - SUPREME COURT], the Hon’ble Supreme Court was in seisin of matters wherein the interpretation of the term “reasonable belief” had arisen, and it was held that 'There this Court observed whether or not the office concerned had seized the article under the “reasonable belief” that the goods were smuggled goods, is not a question on which the Court can sit on appeal. The circumstances under which the officer concerned entertains reasonable belief, have to be judged from his experienced eye who is well equipped to interpret the suspicious circumstances and to form a reasonable belief.'
Pre-condition of having reasons to belief - HELD THAT:- The competence of the Officer in question has not been questioned and the principal issue is that before the search and the impugned decision is taken, the concerned Officer did not have materials to construe "reasons to believe" regarding commission of an offence. Such defence is apparently fallacious inasmuch, as this Court is of the prima facie view that materials were there before the competent authority which were considered before coming to the conclusion of reasons to believe. Such satisfaction is obviously a subjective one and cannot be interfered with in a routine manner. In a given case, however, if such powers were mechanically exercised without taking into consideration the relevant facts and circumstances, the action would be without jurisdiction which is, however, not there in the instant case. This Court has seen that not only there were materials before the authority, such materials are also found to be relevant and cogent. It is a settled law that in exercise of powers under Article 226 of the Constitution of India, especially the Certiorari jurisdiction, this Court is only required to see the fact as to whether the authority, in question, has taken into consideration the relevant materials and has cited reason for the same and once a prima facie view is taken on the availability of those preconditions, this Court may not go into the sufficiency of the reasons.
Jurisdiction to issue SCN 124 of the Act - HELD THAT:- An the subject of interference at the stage of issuance of show cause notice, this Court is of the view that in most of the cases, such interference has been deprecated whereby enquiries have been stalled and investigation retarded which was initiated to find the actual facts. Therefore, only when the Court is of a firm view that there is no bona fide in the act of issuing show cause notice or the same is bad for want of jurisdiction, writ petition should not be entertained in a routine manner.
This Court is of the view that present is not a fit case for invoking the extra-ordinary powers under Article 226 of the Constitution of India. Accordingly, the writ petition stands dismissed.
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2022 (9) TMI 1594
TP Adjustment - Selection of MAM - CPM or TNMM - TPO rejected the CPM as the most appropriate method and proposes to use the Transactional Net Margin Method [TNMM] at entity level using a set of external comparables belonging to Pharmaceutical segments - HELD THAT:- When the complete set of books of accounts along with necessary supporting were produced , merely saying that certain bill and vouchers with respect to cost is not provide , is merely an attempt to reject the study of assessee. Had that been the case, the ld TPO should have provided the instances and then justified rejection of working given by assessee. There is no requirement of maintaining segmental accounts with respect to AE and Non AEs, maintaining separate quantitative details with respect to quantity dealt with AE and Non AE, or maintaining separate books of accounts under any law applicable to assessee. If a particular requirement is not mandated by law, no fault can be found on the part of assessee and then rejected a method accepted by both the parties over a time.
TNMM adopted by TPO also saddled with several flaws for which there is no answer. Assessee claims that if the margins are corrected, margins of assessee is better than comparables is los not looked in to by ld TPO as well as Ld DRP. TPO did not provide basic working of all those 65 comparables and how these comparables are selected and what are the filters applied is also not shown.
Therefore, there is no justification for adopting transactional net margin method where in earlier year as well as in subsequent year the cost plus method adopted by the assessee has been accepted. We therefore direct the ld AO/ ld TPO to delete the adjustment made in adopting entity level TNMM but accept CPM as MAM - principal ground of adopting CPM in determining arm’s length price has been adjudicated in favour of the Assessee.
Guarantee commission on account of corporate guarantees provided by the assessee to its associated enterprises - international transaction or not? - Assessee contended that providing corporate guarantee the associated enterprise cannot be an international transaction and further the same has been provided for the furtherance of the business of the assessee and therefore the non charging of any guarantee commission is a business decision - HELD THAT:- We find that scope of Section 92B has further been expanded by addition of explanation by the finance act 2012 with retrospective effect from 1/4/2002 which specifically provides that international transaction includes the guarantee. Therefore, it cannot be said that corporate guarantee issued to associated enterprise is not an international transaction. Therefore, we are inclined to agree with the submission of the Ld. DR that providing corporate guarantees to overseas AE’s is an international transaction.
Arm’s-length price of the corporate guarantee commission to associated enterprises - Considering the various decisions in this regard, we direct the AO to limit the adjustment to 0.5% p.a. on the amount of corporate guarantee provided based on the period for which the guarantee was operative in respect of each of the AE’s during the year under consideration. The learned transfer-pricing officer is directed to compute the arm’s-length price of the corporate guarantee at the rate of 0.5%. Accordingly ground number 4 of the appeal is allowed with above directions.
Imputation of share application money paid to Associated Enterprises (AE’s) - DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law were alleged in the assessment year under consideration. Thus, respectfully following the Orders passed by the Coordinate Bench in assessee’s own case supra, we direct the AO / TPO to delete the adjustment made towards notional interest on Shares and share application money for delayed allotment of shares. Accordingly, ground no. 5 raised in assessee’s appeal is allowed.
Disallowance of the deduction u/s 10B of the Act on export profit earned by its unit - HELD THAT:- We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd. [2018 (6) TMI 512 - ITAT MUMBAI] allowed the deduction claimed by the assessee under Section 10B - we direct the AO to allow the deduction claimed under section 10B of the Act. Accordingly, ground raised in assessee’s appeal is allowed.
Disallowance of weighted deduction u/s. 35(2AB) - assessee during the assessment year has incurred certain R&D expenses and claimed the weighted deduction @150% u/s 35(2AB) - same was disallowed by the AO and the DRP stating that the no Form 3CL and 3CM was furnished and only a copy of registration certificate from the competent authority recognising the assessee’s R&D facility has been furnished - HELD THAT:- As stated that the delay in issuing Form No. 3CM and report in Form No. 3CL by the DSIR was due to their administrative reasons. AR also submitted that these forms were submitted with the AO and the DRP after the DRP order but before passing the final assessment order dated 30.10.2012. The learned AR also submitted that this Tribunal in assessee's own case in AY 2002-03 [2016 (1) TMI 752 - ITAT MUMBAI] and in AY 2003-04 & 2004-05 [2016 (4) TMI 1316 - ITAT MUMBAI] and [2018 (6) TMI 512 - ITAT MUMBAI] for the assessment year 2007-08 allowed the deduction claimed by the assessee under Section 35(2AB) of the Act.
Disallowance of the rental expenditure u/s. 40A(2)(b) - HELD THAT:- We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd. [2018 (6) TMI 512 - ITAT MUMBAI] held that rent paid is not falling within the mischief of section 40A(2)(b) of the Act and seems reasonable. We allow the claim of the assessee and this issue of assessee's appeal is allowed.
Disallowance of FCCB premium and expenses - HELD THAT:- We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd. [2018 (6) TMI 512 - ITAT MUMBAI] for the assessment year 2007–08, vide order dated 08.06.2018, had deleted the said disallowances. D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co-ordinate Bench of the Tribunal in assessee’s own cases cited supra, we are of the view that the assessee has rightly claimed the liability as expense direct the Assessing Officer to delete the said disallowance u/s 37(1) of the Act.
Disallowance u/s 14A r/w rule 8D - expenditure attributable to earning of exempt income - suo–motu disallowance offered by the assessee - HELD THAT:- As in assessee’s own case in Strides Pharma Science Ltd.for the assessment year 2014–15 total investments and investments which yield exempt income is not readily available before us. We, therefore, are of the considered view that ends of justice would be met if the disallowance is made after re- computing average value of investment by considering only those investments which yield exempt income. Hence, the matter is restored to the AO to re-work the disallowance in line of our discussions given hereinabove.
Disallowance u/s 14A added back to the profits while computing the book profit u/s 115JB - HELD THAT:- We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd for the assessment year 2014–15 and for the assessment year 2015-16 [2022 (4) TMI 543 - ITAT MUMBAI] has deleted the addition made to book profit computed under section 115JB.
Adjustments made to “book profits” computed in terms of section 115JB of the Act vis-à-vis provision for leave encashment and forex losses on forward contracts - HELD THAT:- Based on the facts and circumstances of this case, we are of the view that Provision for leave encashment is an ascertained liability and accordingly, direct the AO to delete the same for determining the book profits. Further, the amount of forex losses on forward contracts appears to be an oversight since it was rectified by the AO himself only in the normal computation and not from the MAT computation. Accordingly, we direct the AO to give the same treatment and delete the same from the MAT computation as well. Accordingly, ground no.13, raised in assessee’s appeal is allowed in the favour of the assessee.
Non-grant of tax credit on the distributed profits u/s 115O/115P and short grant of TDS Credit - As per the Ld AR, proper credit for DDT and TDS has not been granted by the AO. In view of the above, we direct the Assessing Officer to verify the tax credit and allow it as per the records. Accordingly, grounds raised in assessee’s appeal is allowed for statistical purpose.
Reworking of deduction under section 10B - HELD THAT:- We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd. [2018 (6) TMI 512 - ITAT MUMBAI] had allowed the claim of the assessee. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year.
Thus we are of the view that the second proviso to Section 10B(1) of the Act was only for assessment year 2003-04 and not for other years. The AO is directed to verify the facts of the case and accordingly, allow the claim of the assessee. This issue of assessee's appeal is set aside to the file of the AO - Accordingly, this ground raised in assessee’s appeal is allowed.
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2022 (9) TMI 1593
TP adjustment - interest paid on Non-convertible Debentures (NCDs) issued by the assessee to its Associated Enterprise (AE) - TPO not considering the effective rate of interest taking into account the moratorium period - assessee benchmarked the said transactions using CUP method - TPO did not accept the effective rate considered by the assessee and made the TP adjustment by applying the coupon rate of 15% as interest on Tranche I & II of NCDs - DRP rejected the objections raised by the assessee on the ground that there is an option available to the assessee to pre-pay the interest and therefore the effective rate of interest cannot be compared for computing the ALP.
HELD THAT:- As in Goodyear South Asia Tyres P. Ltd.[2014 (12) TMI 349 - ITAT PUNE] clearly laid out the ratio that it would be appropriate to compute effective rate of interest in respect of international transaction of loan entered into with the associated enterprise before carrying out the exercise of benchmarking such international transactions vis-à-vis the arm's length price/interest of the comparable uncontrolled transactions.
In assessee’s case, though the coupon rate agreed is at 15% and 14.25%, there is a moratorium clause whereby assessee is having a moratorium period of 60 months for Tranche-I, 58 months & 11 days for Tranche-II and 24 months for Tranche-III. The assessee in the TP study has also given a detailed working for arriving at effective rate of interest (Annexure 3.1 to 3.3 of TP study) after considering the said moratorium period.
Lower authorities have not considered the said working and have rejected the same on the ground that assessee has debited the Profit & Loss account with interest accrued at 15% / 14.25% and also on the ground that there is a pre-payment of interest clause in the agreement. This, in our considered view, is not the correct approach since the time value of money needs to be considered and debit to the Profit & Loss account is not the relevant factor for determination of ALP.
Assessee has not paid any amount towards interest to the AE till date and as per the submissions of the ld AR, the assessee is in talks with the AE for extension of the moratorium period. This factual position has not been considered by the TPO/DRP.
Thus we remit the issue back to the TPO to analyse the transfer pricing study done by the assessee afresh. considering case of Goodyear South Asia Tyres P. Ltd. (supra) and the comparables chosen by the assessee. Assessee’s appeal is allowed for statistical purposes.
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2022 (9) TMI 1592
Seeking release of attached scheduled properties - the petitioners approached the High Court challenging the order of provisional attachment/ attachment as the Appellate Authority was not available - HELD THAT:- It is reported that now the Appellate Authority is available and therefore, the petitioners proposed to approach the Appellate Authority to challenge the order of attachment.
Release of attached properties - HELD THAT:- As the petitioner is ready and willing to deposit Rs. 3,00,00,000/- in fixed deposit in any nationalised Bank with the lien in faovur of the Enforcement Directorate and the copy of the fixed deposit would be deposited with the E.D., we direct that on producing the fixed deposit of Rs. 3,00,00,000/-, with no lien of any other party, except the Enforcement Directorate and by way of interim order, the attachment with respect to aforesaid properties is ordered to be lifted. Meaning thereby, the order of attachment shall be substituted by the aforesaid fixed deposit. However, the same shall be without prejudice to the rights and contentions of the respective parties in the proceedings to be initiated before the Appellate Authority.
SLP disposed off.
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2022 (9) TMI 1591
Seeking release on bail - overlooking the provisions of Section 45 of the Prevention of Money Laundering Act, 2002, while granting bail - illegal transplant of human organ - HELD THAT:- The Court acknowledged the need for a detailed hearing on the matter and directed the production of case diaries for the next hearing date. The respondent was given two weeks to file a response, with an advance copy to the petitioner. The case was listed for further proceedings on 12th October, 2022.
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2022 (9) TMI 1590
Seeking relief of declaration of ownership and perpetual injunction in respect of the suit property -Transactions of sale - Mutation of names in revenue records - Loan transactions and Ownership - Original Plaintiff adopted by Baliram - HELD THAT:- Admittedly, evidence was adduced at the trial. The Original Plaintiff examined himself as witness and examined five other witnesses. The Original Plaintiff gave evidence of adoption. The second witness Trivenibai, wife of Digamber, the brother of the Original Plaintiff, Chandrabhan stated that there was an adoption ceremony held at the residence of Rambhau. She also stated that the Original Plaintiff Chandrabhan had performed the last rites of Baliram as his adopted son. The other witnesses also deposed that they had attended the ceremony at which the Original Plaintiff Chandrabhan had been given in adoption to Baliram. The Trial Court rejected the contention of the Plaintiff on the ground of contradiction and inconsistencies in the evidence.
In this case, as observed above, evidence had been adduced on behalf of the Original Plaintiff as well as the Defendants. The First Appellate Court analysed the evidence carefully and in effect found that the Trial Court had erred in its analysis of evidence and given undue importance to discrepancies and inconsistencies, which were not really material, overlooking the time gap of 34 years that had elapsed since the date of the adoption. There was no such infirmity in the reasoning of the First Appellate Court which called for interference.
Right of appeal is not automatic. Right of appeal is conferred by statute. When statute confers a limited right of appeal restricted only to cases which involve substantial questions of law, it is not open to this Court to sit in appeal over the factual findings arrived at by the First Appellate Court.
The questions raised in High Court, did not meet the tests laid down by this Court for holding that the questions are substantial questions of law. We are constrained to hold that there was no question of law, let alone any substantial question of law, involved in the Second Appeal.
The appeal is, for the reasons, as discussed above, allowed. The impugned judgment and order is set aside and the judgment and order/decree of the First Appellate Court in Regular Civil Appeal is restored.
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2022 (9) TMI 1589
Assessment Based on Seized Materials - violation of natural justice - Addition based on estimate basis - HELD THAT:- Foundation on the basis of which the assessment has been done, being the so called extracts from BDJC-27 and CWJ-12, are not available with the department, nor they were provided to the assessee for his rebuttal.
Coming to the appraisal report, though the CIT-DR refers to the same as the excel sheet prepared by the AO, this statement of the AO in his assessment order the comparison with the same with appraisal report, shows that these are nothing but the figures dawn out by the investigation wing in the appraisal report.
The gold bars have been quantified at 98,284.36 gms and the old gold ornaments purchased net weight has been determined at 492.929 gms. The appraisal report, thus, determines the computation of purchases of Cuttack branch for the assessment year 2011-2012 at 126.555 gms whereas the sales have been determined at 50101.66 to be the transfer to the Bhubaneswar branch head office is 8572 gms. Even these are the information relating to the assessment year 2011-2012. The impugned first year of appeal is assessment year 2012-2013. After this excel sheet shows wherein for the assessment year 2012-2013, the net closing stock has been determined at 29,799 gms and in respect of silver in the assessment year 2012-2013, a net negative stock of 11,456 gms has been determined. As against this, the excel chart at page 15 shows positive figures for the four branches of the assessee being, Cuttack, Bhubaneswar, Angul and Guragaon for both gold and silver. On what basis the appraisal report has been prepared showing negative figures are also not known.
Thus, clearly the assessment made is unsupported by any of the seized materials. No stock statement of the inventory as on the date of search is also produced. The revenue has been unable to produce any of the seized material to substantiate any of the figures for any of the assessment years. The so-called “working copy” of the hard disk being BDJC-27 has also not been produced before the Tribunal nor before the ld. CIT(A).
CIT(A) was absolutely right in facts in arriving at the conclusion that the additions have been made in all the three assessment years under consideration in total violation of the principle of natural justice and that the additions have been made clearly on estimate basis. Wfind no error in the order of the ld. CIT(A) which calls for any interference. In these circumstances, the findings of the ld. CIT(A) on the issue for all the three assessment years under consideration, stands confirmed.Decided in favour of assessee.
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2022 (9) TMI 1588
Exemption of Social Welfare Surcharge - Notification No. 24/2015-CUS - Seeking refund of the Social Welfare Surcharge wrongly debited - Merchandise Export from India Scheme (MEIS) / Service Exports from India Scheme (SEIS) scrips - interest - HELD THAT:- An identical issue was considered by this court where the court by order [2022 (8) TMI 1489 - BOMBAY HIGH COURT] disposed the petition. Thus, respondents are directed not to auto debit from petitioner's MEIS and SEIS scrips any amount towards Social Welfare Surcharge.
Moreover, any amount deducted shall be refunded to petitioner within 8 weeks of receiving an application from petitioner for refund. Mr. Sridharan states that necessary application for refund to justify the quantum of refund will also be filed. Refund shall be issued together with interest thereon in accordance with law.
Petition disposed.
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2022 (9) TMI 1587
Whether demand of service tax rightly confirmed on liquidated damages/penalties recovered by the Appellant u/s 66E (e) of the Finance Act 1994 - Appellant is a PSU - Manufacture of heavy power electrical equipment - HELD THAT:- The Tribunal in South Eastern Coalfields Ltd vs Commissioner of Central Excise & Service Tax [2020 (12) TMI 912 - CESTAT NEW DELHI] observed that such amounts collected by way of penalty/liquidated damages for non-compliance of contract, cannot be considered as consideration for tolerating an act and hence, not leviable to service tax u/s 66E (e) of the Finance Act. The contracts nowhere provided obligation on the assessee to refrain from an act or tolerate an act or a situation and flow of consideration thereof. Such liquidated damages/penalty cannot be considered as receipts towards any service per say, since neither assessee is carrying on any activity to receive compensation nor there can be an intention of other party to breach or violate the contract and suffer a loss. This Tribunal relied on the ruling of Hon'ble Supreme Court in Tara Chand vs Balkishan [1963 (1) TMI 46 - SUPREME COURT].
Thus, we find that the issue herein is squarely covered in favour of the Appellant-assessee by the precedent order of this Tribunal in South Easter Coal Field Ltd vs CCE and ST (supra). Accordingly, we allow the appeal and set aside the impugned order. The appellant shall be entitled to consequential benefits, in accordance with law.
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