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2015 (2) TMI 1336
Transfer the fund lying in five numbers Fixed Deposits in 3rd respondent-Karur Vysya Bank Account - HELD THAT:- There will be a direction to the respondent Bank to transfer the funds, as requested by the petitioner and as agreed, within a period of three weeks from the date of receipt of a copy of this order.
Petition disposed off.
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2015 (2) TMI 1335
Addition u/s 68 - addition for loan unexplained - AY 1997-98 - HELD THAT:- What we notice is that AO had not doubted the VDIS declaration in respect of Shri D.I.Kamalakar. As for Shri K.I.Raghavendra, his only grievance is that bank details were not produced. He has not doubted the credit worthiness of Shri K.I.Raghavendra. In the case of Shri Vyjanath R Patil as well as Shri Naganna Swadi, these persons had appeared before the AO and confirmed the loans. They had also produced evidence for the agricultural land in their possession - such confirmations when read along with the affirmations made before the AO by these creditors on their personal appearance before him could not have been brushed aside. Assessee in our opinion had discharged his onus, vis-à-vis the loans claimed to have been taken from these 4 persons. These additions therefore, were not called for.
We confirm the order of the learned CITA) to the extent he deleted the addition for the loans from Shri D.I.Kamalakr and Shri K.I.Raghavendra and set aside his orders in so far it relates to the confirmation of the addition for the loan from Shri Vyjanath R Patil and Shri Naganna Swadi.
Addition on disbelieving the confirmation filed by one Shri Parakash Kattimani - AY 1999-2000 - HELD THAT:- It is an admitted position that Shri Prakash Kattimani in his confirmation dated 14-02-2012 had stated that he had no banks statement or books of accounts with him to show the source of the payment. A look at the affidavit of Shri Prakash Kattimani does not prove anything. It simply gives the cheque Nos. through which payment of ₹ 10,00,955/- was effected. This would not in any way show that the payments were made by Shri Prakash Kattimani himself. Nor does it show any light of the credit worthiness of Shri Prakash Kattimani. Further, the assessee had changed his version before the CIT(A). Before the AO it had given in the confirmation letter from one Dasharath and one M/s Amar Trading Co., against the above sum. Before the CIT(A) assessee roped in one Shri Prakash Kattimani as the creditor, to whom he claimed he had given sub-lease of Ron Taluk Range. We are of the opinion that the lower authorities were justified in disbelieving the version given by the assessee and making addition
Demand drafts deposited with Excise department for the purpose of bidding for arrack ranges - Assessee had given the PAN of Shri Basant Kumar Patil and Smt.D.Pushpalatha before the CIT(A). In the remand report AO had made no comments whatsoever on the confirmations. Once the PAN of the creditor is given, the AO could have verified the veracity of the claim of the assessee. It is also a fact that the payments effected to excise department were through DD’s and details of all such DD’s were with the AO. Hence, we are of the opinion that in so far as the loans claimed by the assessee to have taken from Shri Basanth Kumar Patil and Smt D.Pushpalatha are concerned, it requires a fresh verification from the AO. However, in so far as the loan alleged to have been taken from Shri M.J.Torgal, assessee was unable to produce any substantiating evidence or document. We are of the opinion the addition by the AO to this extent was justified. Thus, we set aside the orders of the CIT(A) on this issue.
Loan shown as outstanding to Standard Chartered Bank CIT(A) has mentioned that documents were produced before him. AO has not made any comments in the remand report. The amount shown as due to Shri D.I.Kamalakar, who is assessee’s father, is stated to be three instalments of ₹ 9,390/- each paid by Shri D.I.Kamalakar,to M/s ANZ Grindlays Bank, against the Car loan. On this also, AO has not made any comments in his remand report. However, in the Balance sheet a sum of ₹ 98,000/- was shown as due to Shri Chidambara Shetty whereas before the CIT(A) assessee had given confirmation from one Smt.D.Chitra, Proprietrix of M/s Chitra Enterprises. Nevertheless, confirmation which stated that the amount was paid by cheque to the assessee was not doubted by the AO in the remand report. We are therefore, of the opinion that CIT(A) was justified in considering the loans of ₹ 4,36,170/- appearing in the liability side of the balance sheet of the assessee to be genuine.
Assessment year 2001-02 - Confirmation if any received from M/s Raghavendra Dall Industries, Sri Goverdhan Auto Finance, M/s Sangameshwara Enterprises, and Sri B Manik Rao are not before. However, learned CIT(A) does mention that the confirmation of all the 12 persons were available with him. Hence, with respect of the balance of ₹ 68,00,000/- we are of the opinion that the matter requires a fresh look by the AO. If the assessee is able to show that the confirmations had the details of the DD’s, and source for raising the amounts, and if the DD numbers tally, with the list given by the AO of his order reproduced by us in the annexure and provide details as to the account from which the money for which the DD’s were drawn, then, in our opinion the additions would not stand - we do make a note that it is the onus of the assessee to substantiate its contentions regarding the claim. Thus, against the deletion of ₹ 96,96,996/- the order of the CIT(A) is sustained to the extent whereas for the balance of sum of ₹ 68 lakhs pertaining to his order is set aside and issues remitted back to the file of the AO for consideration afresh in accordance with law.
Addition by the CIT(A) admittedly, Sri D.I.Kamalakar, was an assessee and his financial statement reflected the loans given to assessee, who was his son, has not been disputed by the revenue. Hence, we are of the opinion that the CIT(A) justified in deleting this addition.
Sustaining the addition against DD’s obtained from Thirupathaiah, we find that the assessee had indeed furnished a certificate from Allahabad Bank which clearly gave the DD numbers and the account from which the DD’s were taken. We find that the such DD nos. tallied with the list given by the AO and the Allahabad Bank had certified that the accounts belonged to M/s Kanakadurga Wines owned by Sri Thirupathaiah and Sri B.Venkatesah M. In such circumstances, we are of the opinion out of the total addition of ₹ 42,50,000/- sustained by the CIT(A) the addition was not justified. This addition stands deleted.
Addition which the assessee claims to have obtained from Sri Govindaiah Goud,, it is an admitted position that confirmation of Sri Govindaiah Goud, itself was only for ₹ 20.00 lakhs and not for ₹ 34,50,000/-. Similarly, assessee was unable to produce any credible evidence for loan alleged to have been obtained from Sri U.A.Ballal and Sri M.J.Torgal, ₹ 2.00 lakhs and 5.00 lakhs respectively. We are therefore, of the opinion the CIT(A) justified in confirming these additions.
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2015 (2) TMI 1334
Re-opening u/s.147 - Review v/s reopening - return was processed u/s. 143(1) - unexplained cash credit - bogus expenditure - HELD THAT:- In the case in hand, the return was processed u/s. 143(1) of the Act but the same had attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed.
Merely because assessment was framed u/s.143(1), it will not lead to the conclusion that the requirement of Section 147 with regard to “reasons to believe” can be dispensed with when the finality of intimation u/s.143(1) is sought to be disturbed as held in the case of Orient Craft Ltd. [2013 (1) TMI 177 - DELHI HIGH COURT] and Kelvinator (I) Ltd. [2010 (1) TMI 11 - SUPREME COURT]
Assessing Officer has no power to review; he has the power to re-assess. As observed above, the reopening and reassessment in this case was nothing, but, the review u/s 143(3) of the Act in the garb of the provisions of section 147 of the Act, which was not permissible in view of the law laid down by the Hon’ble Supreme Court in the case of “CIT vs. Kelvinator of India Ltd.” (supra).
Even otherwise, in the case in hand, the issue upon which the reopening was done and the issue on which the addition was made were diagonally opposite to each other. The reopening was done on the suspicion of bogus billing allegedly arranged from Suryodaya Company i.e. the issue of bogus expenditure, which otherwise was proved to be wrong, however the addition has been made in respect of Share application money received i.e. in respect of unexplained cash credits. We annul the reopening of assessment u/s.147 of the Act. - Decided in favour of assessee.
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2015 (2) TMI 1333
Status of the assessee as AOP as against its claim as firm - completing the assessment on the assessee as an Association of Persons - failure to comply with the requirements of Section 144 - HELD THAT:- While rationalizing the provisions relating to assessment of firms it is made clear that, only in the event of a best judgment assessment is made for failure to comply with Section 144 the benefit which is available to a firm u/s 28 can be denied. If a best judgment assessment under Section 144 of the Act is not made, no disallowance u/s 184(5) can be made.
No doubt this explanatory note is not in conformity with Section 184(5) of the Act. But, when the CBDT issued the said explanatory note, it is giving relaxation and benefit to the assessee which the statute has not provided. Such a power is vested in the CBDT by virtue of Section 119. Once such a benefit is conferred by way of a circular, the authorities are bound by the same.
They cannot sit in judgment over the said explanation and deny the benefit to the assessee. Even though this Court can interpret the said provision and note that there is inconsistency between the provision and the explanation offered, but when the CBDT issued such instruction granting that benefit to the assessee that has to be respected. In that view of the matter, the approach of the three authorities in denying the benefit to the assessee was not justified. It is contrary to the said explanation found in the circular which the CBDT wanted to extend to the assessee in order to overcome the hardship by virtue of the said statutory provision. Therefore, the impugned orders cannot be sustained.
As contended that, when the partnership deed was not enclosed to the return filed, there is non-compliance of Section 184(2) and, therefore, the consequences mentioned in Section 184 has to follow. But, it is on record before the assessment, a partnership deed duly certified and signed by all the partners were produced before the assessing authority. There is substantial compliance with sub-section (2) of Section 184.
As could be seen from the language employed in Section 185, if there is non-compliance with the provisions of Section 184, the firm shall be so assessed and no deduction would be granted. It is at the time of assessment, if the authority is not given the partnership deed, the firm would be given the benefit. But, at the time of assessment, if the partnership deed was produced, certainly the authorities have to look into the partnership deed and if it is a firm which satisfies the other requirements, then the firm would be entitled to other benefits. Under such circumstances, Section 185 is not attracted.
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2015 (2) TMI 1332
Restraint on defendants from in any manner obstructing or hindering the activities of the plaintiff-Company, towards the construction of Multi-storied residential complex - permanent injunction sought - HELD THAT:- During the pendency of the above writ petition, the parties to the dispute have filed a joint memo requesting the Court to modify the ex-parte temporary injunction granted on 7-1-2015. At paragraph 2 of the joint memo, the respondents have undertaken that they will not act in any manner that is inconsistent with or detrimental to the rights of the petitioner-Company under the Joint Development Agreement dated 27-09-2012 or General Power of Attorney dated 27-09-2012 till consideration of the application filed by the plaintiff. In view of the undertaking given by the respondents, the order dated 07-01-2015 passed by the Trial Court is modified and the undertaking given by the respondent substitutes.
The Order is to be set aside as the said Appeal was allowed without issuing notice to the Respondent therein (the Petitioner in this Writ Petition). The question of maintainability of the said Appeal is kept Open - Trial Court is directed to dispose of the application filed under Order 39 Rules 1 and 2 of CPC without being influenced by the above undertaking on or before 25-03-2015, in accordance with law.
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2015 (2) TMI 1330
Interest income taxed under the head ‘Income from other sources’ - adjusting it against the interest expenditure capitalized to Incidental Expenditure during Construction (EDCP) account - HELD THAT:- As relying on own case [2013 (9) TMI 688 - ITAT MUMBAI] for the sake of consistency, we restore the issue to the file of the AO with a direction to examine the nexus between interest paid on borrowed funds and decide the issue in terms of the above reproduced directions given by the Tribunal for earlier assessment year.
Disallowance of expenditure u/s. 14A - HELD THAT:- Hon’ble Bombay High Court in the case of “Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT” [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that Rule 8D cannot be applied retrospectively but is applicable from assessment year 2008-09. For the assessment years prior to A.Y. 2008-09, the disallowance under section 14A can be made by the AO on some reasonable basis, if, the AO is not satisfied with the correctness of the working made by the assessee in this respect. We therefore direct that the AO will consider the working given by the assessee and if he will be satisfied in that respect, no further disallowance will be required to be made. However, if the AO will not be satisfied with the working given by the assessee, then the disallowance be made on some reasonable basis after giving the assessee due opportunity of representing its case in this respect. Subject to our above observations, the order of the Ld. CIT(A) on this issue is upheld.
Denial of deduction u/s. 80IB on the Technology Up-gradation Fund [TUF] subsidy received - HELD THAT:- As relying on own case [2013 (9) TMI 688 - ITAT MUMBAI] , we deem it proper to set aside this particular issue to the file of the AO with the direction to examine whether the reimbursement of interest cost is reimbursement of revenue expenditure debited to the P & L Account of that eligible unit to that extent either in this year or in any earlier years. If it is so then due to reimbursement the expenditure incurred by the assessee is reduced, to the extent the profit of the industrial undertaking will increase. Therefore, to examine the interest claim out of the unit and its reimbursement by way of subsidy, the matter is restored to the file of the AO. He is directed to keep in mind the decision of the Hon'ble Gauhati High Court in the case of Mehalaya Steels Ltd. [2010 (9) TMI 679 - GAUHATI HIGH COURT] and allow the deduction under section 80IB accordingly if the nexus is established.
Computation of disallowance made u/s. 14A for computing book profit u/s. 115JB - HELD THAT:- In view of the observations made above in the case of "Godrej Consumer Products Ltd." [2013 (11) TMI 1245 - ITAT MUMBAI] it is held that the expenditure found disallowable under section 14A can be added back while computing book profits under section 115 JB of the Act. Since in the case in hand, we have restored the issue of disallowance u/s 14A of the Act to the file of the A.O., hence, it is held that whatsoever expenditure would be found by the AO as disallowable under section 14A, the same can be added back while computing book profit under section 115JB in the case of the assessee.
Levy of interest u/s 234B - HELD THAT:- As decided in M/S CHARBHUJA INDUSTRIES PVT. LTD. [2014 (1) TMI 1623 - ITAT MUMBAI] no advance tax was payable on MAT computed u/s 115JB and accordingly, the interest u/s 234B and 234C cannot be levied for non-deposit of advance tax on MAT for the year under consideration. Hence, we delete the levy of interest u/s 234B and 234C in this case
Entire TUF subsidy received - ground raised for the first time before us only - HELD THAT:- As decided in own case [2013 (9) TMI 688 - ITAT MUMBAI] since this issue was not examined by the AO at all, we admit the additional ground and restore the matter to the file of the AO to examine the claim afresh keeping in mind the principles laid down by the Hon'ble Supreme Court on the issue of subsidy and also other case laws.
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2015 (2) TMI 1329
Disallowance of interest expenditure u/s 14A - AO observed that the assessee must have made expenditure for earning the exempt income - disallowance of administrative expenses - contention of the assessee is that the disallowance made should not exceed the exempt dividend income - HELD THAT:- Mumbai Bench of the Tribunal in the case of Daga Global Chemicals P. Ltd. Vs. DCIT [2015 (1) TMI 1204 - ITAT MUMBAI] held that disallowance under section 14A read with Rule. 8D cannot exceed the exempt income. Respectfully following the same, we direct the AO to restrict the disallowance on account of interest and administrative expenses to ₹ 33,446/-. Thus, the grounds of the appeal of the assessee are partly allowed.
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2015 (2) TMI 1328
CENVAT credit - inputs/capital goods - welding electrodes - period January' 2005 to June' 2005 - Whether the appeal filed by appellants before CESTAT under Section 35B of Central Excise Act, 1985 could be dismissed by CESTAT summarily under second proviso to Section 35B in the circumstances when clause (d) of first proviso (relating to credit of duty) inserted vide Section 109 of the Finance (No. 2) Act, 1998 had not yet been notified and made effective?
HELD THAT:- The issue decided in the case of M/S DSM SUGAR ASMOLI VERSUS THE COMMISSIONER OF CENTRAL EXCISE, MEERUT [2015 (2) TMI 1178 - ALLAHABAD HIGH COURT] where it was held that Since there is change in provisions, therefore, for the subsequent period, having examined the terms "capital goods" and "input" in the subsequent Rules and comparing with the Rules 57A, 57B and 57Q of earlier Rule, for the purpose of present case, we do not find any substantial difference which may help the appellant so as to include 'welding electrode' within either of the aforesaid terms for claiming MODVAT/CENVAT Credit on the use of "welding electrodes" in an industrial unit engaged in production of sugar and molasses.
It is, however, pointed out that on and after 10.09.2004, new Rules, i.e., CENVAT Credit Rules, 2004 (hereinafter referred to as "Rules, 2004") came into existence and the definition of "capital goods" and "input" is contained in Rule 2 (a) and (k), thereof, but for the purpose of present appeal, learned counsels for parties did not dispute that there is no substantial difference in the aforesaid definitions, so far as the question of 'welding electrodes' used in repair and maintenance in Sugar Mill is concerned and, therefore, the judgment in respect to Rules applicable prior to Rules, 2004 would cover the issue in this appeal also.
Appeal dismissed - decided against assessee.
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2015 (2) TMI 1327
CENVAT Credit - inputs/capital goods - Welding Electrode - appellant claimed that 'Welding Electrode' is specified under Head 8311.00 of Central Excise Tariff and used in repair and maintenance of 'Machines', therefore, would fall within the category of 'Capital Goods' as well as 'Input' - July' 2004 to December' 2004 - HELD THAT:- The definition of 'capital goods' under Rule 2(b) of Rules, 2002 and Rule 2(a) of Rules, 2004 is exhaustive in the sense that it clearly specifies what 'capital goods' would mean. The items which fall under certain chapters of Central Excise Tariff Act are specifiably mentioned in Rule 2(b)(i) of Rules, 2002 and Rule 2(a)(A)(i) of Rules, 2004. Then comes pollution control equipment', moulds and dies, jigs and fixtures, refractories and refractory material, tubes and pipes and fittings thereof and storage tank. All these things, if used in the factory of manufacturer of final products, or, for providing output service, would mean 'capital goods'. However, it would not include any equipment or appliance used in office.
Having failed to point out application of any other provision under Rule 2 (b) of Rules, 2002 and Rule 2(a) of Rules, 2004, the stress on the part of Assessee was on the term 'components' under Rule 2 (b) (iii) of Rules, 2002 and 2(a)(A)(iii) of Rules, 2004 and it is contended that 'Welding Electrodes', being used for maintenance and repair of machineries and factories, would fall in the category of “components”, hence would be entitled for CENVAT Credit being 'capital goods' - the 'capital goods' as defined under Rule 2(b) of Rules, 2002 and 2(a) of Rules 2004, in substance, are pari-materia with the 'capital goods' specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein.
Credit cannot be allowed - appeal allowed - decided in favor of Revenue.
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2015 (2) TMI 1326
CENVAT Credit - inputs/capital goods - Welding Electrodes (falling under Chapter Heading No. 8311.00) used in the repair and maintenance of plant and machinery - HELD THAT:- The issue raised in this appeal is squarely covered by judgment M/S DSM SUGAR ASMOLI VERSUS THE COMMISSIONER OF CENTRAL EXCISE, MEERUT [2015 (2) TMI 1178 - ALLAHABAD HIGH COURT] where it was held that Since there is change in provisions, therefore, for the subsequent period, having examined the terms "capital goods" and "input" in the subsequent Rules and comparing with the Rules 57A, 57B and 57Q of earlier Rule, for the purpose of present case, we do not find any substantial difference which may help the appellant so as to include 'welding electrode' within either of the aforesaid terms for claiming MODVAT/CENVAT Credit on the use of "welding electrodes" in an industrial unit engaged in production of sugar and molasses.
It is, however, pointed out that on and after 10.09.2004, new Rules, i.e., CENVAT Credit Rules, 2004 came into existence and the definition of "capital goods" and "input" is contained in Rule 2 (a) and (k), thereof, but for the purpose of present appeal, learned counsels for parties did not dispute that there is no substantial difference in the aforesaid definitions, so far as the question of welding electrodes used in repair and maintenance in Sugar Mill is concerned and, therefore, the judgment in respect to Rules applicable prior to Rules, 2004 would cover the issue in this appeal also.
Appeal allowed - decided in favor of appellant.
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2015 (2) TMI 1325
Deduction u/s 10B - CIT (A) in having treated the miscellaneous receipts by way of freight discount allowed by Shipping Companies and the exchange fluctuation difference as part of business receipts - HELD THAT:- Brokerage which is basically rebate allowed by the Shipping company as well as sale of sample is directly related to the business of the assessee and since the same has already been held to be part of the business income by the Tribunal, therefore, following the same we hold that these receipts are part of the business income and eligible for deduction u/s 10B.
As far as the issue regarding processing charges is concerned, the Hon' ble Punjab & Haryana High Court in the case of CIT v Vallabh Yarns P. Ltd [2010 (9) TMI 836 - PUNJAB AND HARYANA HIGH COURT] following the earlier decision in the case of CIT vs Impel Forge and Allied Industries Ltd [2008 (12) TMI 370 - PUNJAB & HARYANA HIGH COURT] held that the assessee is entitled to deduction u/s 801B from the job work done for others. Therefore, following this ratio, even this issue is covered in favour of the assessee.
We are of the opinion that assessee is entitled to deduction u/s 10B on all the items referred to in appeal. Therefore, we set aside the order of Ld. CIT (A) and direct the Assessing Officer allow deduction u/s 10B
Reducing the profits of undertaking for calculating deduction u/s 10 B which had already been reduced by the assessee - HELD THAT:- We find force in the submissions of Ld. Counsel for the assessee because sub section (4) mandates proportionate deduction on profits depending upon the quantity of export. However, the Assessing Officer has not discussed this issue in detail how much export was carried out by the assessee and whether any domestic sales were also there. Further, this issue has not been adjudicated by CIT (A) and the same required verification of facts. Therefore, in the interest of justice, we remand this issue to the file of Assessing Officer to determine the facts regarding how deduction u/s 10B was claimed and whether some exports were there and some domestic sales were also there and then decide the issue in accordance with law.
Interest received from customers on delayed payments - 'business income' OR 'income from other sources' - HELD THAT:- Interest received from delayed payments on account of sale to customers of manufactured goods is directly related to the industrial undertaking and was to be considered as part of the profit for computing deduction. The Ld. CIT (A) has decided this issue in favour of the assessee by following this decision in PHATELA COTGIN INDUSTRIES P. LTD. VERSUS COMMISSIONER OF INCOME-TAX [2007 (5) TMI 226 - PUNJAB AND HARYANA HIGH COURT] . Therefore, we find nothing wrong with the order of Ld. CIT (A) and we confirm the same.
Treat the gain on forex fluctuation to be the income eligible for deduction u/s 10B - HELD THAT:- If amounts are kept in the EEFC account and some interest and fluctuation on such EEFC account is received, then the same is not eligible for deduction. However, we again clarify that if gain on account of foreign exchange fluctuation is on account of normal sale proceeds, then such gain would be eligible for deduction. Since these facts have not been examined by the Assessing Officer or CIT (A), therefore, we set aside the order of Ld. CIT (A) and direct the Assessing Officer to examine these facts and then decide this issue in accordance with law.
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2015 (2) TMI 1324
Continuation of Proceedings covered under Section 482 of Cr.P. C - HELD THAT:- The High Court while exercising jurisdiction under Article 227 of the Constitution of India has not only administrative superintendence over the subordinate courts and tribunals, but also has the power of judicial superintendence. The power of superintendence conferred by Article 227 has to be exercised most sparingly and only in appropriate cases in order to keep the subordinate courts within the bounds of their authority and not for correcting their mere errors. Having regard to the nature of relief sought for by the appellant it cannot be said that Article 227 of the Constitution of India is attracted. And that notwithstanding the nomenclature of the petition, the learned single judge has dealt with and decided the petition under Section 482 Cr.P.C.
It is evident that there are seriously disputed facts and that by itself would render the proceedings under Article 226 of the Constitution of India, as being wholly inappropriate and incongruous - In the case on hand, the petitioner has no grievance that the power of the investigation officer has been exercised mala fide or that the police officer has been misusing his powers. Therefore, the appellant is hardly in a position to invoke the jurisdiction of this court under Article 226 of the Constitution of India.
The petition filed before the learned single Judge, notwithstanding its nomenclature, as one filed under Articles 226 and 227 of the Constitution of India read with section 482 Cr.P.C., was actually one filed under section 482 Cr.P.C. The learned single Judge was justified in treating and deciding the petition under Section 482 Cr.P.C. - this writ appeal filed under Section 4 of the Karnataka High Court Act, 1961, is not maintainable.
Appeal not maintainable.
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2015 (2) TMI 1323
Profit on sale of Investments - business income OR capital gains - assessee is an insurance company- HELD THAT:- The computation of taxable profit of an insurance company is governed by specific provision as given in section 44, read First schedule to the Income-Tax Act. Under the said scheme, only such adjustment can be made to the profits as disclosed in the annual accounts drawn under the Insurance Act, 1938, which are specifically provided under Rule 5.
As clarified by Finance Act that the amendment will be effective from A.Y. 2011-12 onwards. Thus, it is amply clear from the legislative intent that, prior to 01.04.2011, adjustment of such a gain on realization of investment cannot be added. This aspect of the matter have been dealt extensively and upheld by the Co-ordinate Benches of the Tribunal which have been referred to the learned counsel. Accordingly we hold that profit on sale of investment cannot be taxed. Thus, ground no. 2 as raised by the assessee is allowed.
Disallowance u/s 14A on estimated basis - HELD THAT:- On the perusal of various decisions of the Tribunal including that of the assessee, we find that it has been consistently held that, provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44, because it is non obstante provision wherein the income is to be computed as per P&L account prepared under the Insurance Act 1938. Section 14A contemplates exception for deduction allowable under the act, whereas section 44 creates special application of provision of computation of profit as per the Insurance Act. Thus, no disallowance u/s 14A can be made and accordingly, ground no. 3 is allowed in favour of the assessee.
Disallowance of amortization of premium - allowable revenue expenses - HELD THAT:- According to the terms of issue of the securities, the assessee was to get only the face value at the time of redemption or maturity. IRDA regulation prescribes, the accounting principle for preparation of financial statement, whereby the assessee is required to prepare the financial statements in the manner provided in the said regulation. The said regulation read with relevant rules given in the schedules therein, provides that debts securities including, Government securities shall be considered as “held to maturity” and shall be measured at historical cost subject to amortization. This IRDA regulation are binding on the insurance companies. we hold that such an amortization claimed by the assessee as revenue expenditure is allowable . As relying on TATA AIG GENERAL INSURANCE CO. LTD. VERSUS ITO [2010 (10) TMI 764 - ITAT, MUMBAI] we hold that such an amortization claimed by the assessee as revenue expenditure is allowable.
Applicability of MAT u/s 115JB to the General Insurance Company - HELD THAT:- Since the assessee’s P&L account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee. This has been held in the case of General Insurance Corporation Cited Cases GENERAL INSURANCE CORPORATION OF INDIA VERSUS ADDL. CIT RANGE (13) [2012 (2) TMI 522 - ITAT MUMBAI]
Applicability of section 69B - HELD THAT:- The assessee has sold the shares and buyers have failed to take the delivery, then in such a case how the provision of 69B gets attracted because here it is not a case that the investment exceeds the amount recorded in the books of account. On these facts alone, the addition cannot be sustained. Accordingly, the same is deleted.
Addition on account of taxes paid on foreign dividend - HELD THAT:- We find merit in the reasoning given by the AO as well as Ld. CIT(A) because taxed paid do not qualify as expenditure for the purpose of business and entire gross dividend should have accounted for in the P&L account. Thus Ground no. 5 is treated as dismissed.
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2015 (2) TMI 1322
Revision u/s 263 - claim relating to the Investment written off - HELD THAT:- As brought to our notice that this issue was decided in favour of the assessee by the coordinate bench of Tribunal while considering the appeal filed against the revision order passed by Ld CIT u/s 263 of the Act, vide its order dated 29-7-2011 passed in [2011 (7) TMI 391 - ITAT MUMBAI] to AY 2004-05. We notice from paragraph 15.7 of the order that the Tribunal has expressed the view that, neither the loss on account of diminution in the value of investment shall be allowed as deduction nor any income on investment shall be subjected to the tax. Following the said decision of the Tribunal, we uphold the order of Ld CIT(A) on this issue.
Disallowance of leave encashment claim - This issue was also decided by the Co-ordinate bench in [2011 (7) TMI 391 - ITAT MUMBAI] of the order. Following the same, we uphold the order of Ld CIT(A) on this issue.
Relief granted in respect of claim relating to the contribution made to Pension and Gratuity fund - Both the parties agreed that this issue is decided against the assessee by the Tribunal [2011 (7) TMI 391 - ITAT MUMBAI]. By following the same, we set aside the order of Ld CIT(A) on this issue and direct the AO to follow the decision rendered by the Co-ordinate bench in its order referred supra.
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2015 (2) TMI 1321
TP Adjustment - assessee had adopted TNMM method as the most appropriate method for bench marking the international transactions entered with its AE - whether purchase price of the goods exported cannot be applied as CUP for sale price charged to the AE? - HELD THAT:- As decided in own case [2015 (1) TMI 1430 - ITAT MUMBAI] assessee is providing the services to the AE and receiving the remuneration and in turn getting part of the job done through sub agent GESA and remunerating it by paying the commission as per sub agency agreement. Out of the total services provided by the assessee a part is performed through sub-agent and the remaining is performed by the assessee itself. It is like export of goods partly manufactured by the assessee and partly purchased from third party. However, purchase price of the goods exported cannot be applied as CUP for sale price charged to the AE. Accordingly considering the price received by GESA as CUP is contrary to the transfer pricing regulation. We do not rule out the CUP as most appropriate method for determination of ALP of international transaction in question. However, the comparable uncontrolled price must be a proper uncontrolled price in compliance of provisions of transfer pricing.
There is one more fallacy in the TPO's order regarding bifurcating the international transactions into two segments for determining the ALP. The TPO accepted the price charged by the assessee in respect of services provided through sub- agency, but while computing the ALP it had ignored the CUP and took the price charged by the assessee as ALP. Further, the services provided by the assessee on its own were compared with CUP. Therefore, two separate ALP were determined by the TPO for the same service provided by the assessee to AE. Even if the CUP is adopted as most appropriate method ALP cannot be more than price received by GESA. Whereas the TPO has taken into consideration the price charged by the assessee with 10% mark-up. Hence, the computation of ALP is otherwise not based on correct uncontrolled price.
We may clarify that the international transaction in question should be considered as one and price received by the assessee in total has to be compared with the ALP. The assessee received the price for providing the service as per the agency agreement. Therefore, the service provided by the assessee to the AE are closely interlinked and price of one part is dependent on the price of the other part. Therefore, the entire services provided by the assessee has to be treated as one international transaction for the purpose of determining the ALP - Consistent with the view taken in AY 2008-09, we set aside the order of Ld DRP on this issue and restore the same to the file of TPO/AO with the direction to decide the same afresh in the light of directions issued in the above said order.
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2015 (2) TMI 1320
Registration u/s 12AA - denial of claim as material required for formation of the satisfaction mandated by the Act is unavailable - HELD THAT:- CIT in the order passed by him for rejecting the claim for registration u/s 12AA that the material required for formation of the satisfaction mandated by the Act is unavailable and therefore, it is held by CIT that the assessee has failed to fulfill the conditions for grant of registration u/s 12A of the Act. Similarly, in his order for rejecting the claim of the assessee for registration u/s 80G, he has given a finding that the assessee has failed to fulfill the conditions for approval u/s 80G of the Act. Hence, we do not find any justification to interfere in these orders of learned CIT. - Decided against assessee.
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2015 (2) TMI 1319
Issues:
1. Transfer of Sessions Case No. 1006 of 2009 from one court to another based on apprehension of bias.
2. Consideration of fair trial and preconceived notions in the judicial process.
Issue 1: Transfer of Sessions Case:
The appeal before the Supreme Court arose from a dismissal order by a Single Judge of the High Court regarding the transfer of Sessions Case No. 1006 of 2009. The case involved offenses under the Indian Penal Code and the Scheduled Caste and Scheduled Tribe (Prevention of Atrocities Act), 1989. The High Court initially discharged the accused, which was challenged by the complainant. The High Court set aside the discharge order and directed a fresh consideration by the trial court. The complainant then sought transfer of the case due to apprehensions of bias based on the earlier observations of the trial court. The Supreme Court, after considering the arguments, found that despite safeguards provided by the High Court, the apprehensions of the complainant were reasonable. The Court emphasized the importance of justice not only being done but also appearing to have been done. The Supreme Court allowed the appeal and directed the transfer of the case to another court to ensure a fair trial.
Issue 2: Fair Trial and Preconceived Notions:
The dissenting judgment by Justice R. Banumathi focused on the lack of sufficient grounds for transfer. The Appellant sought the transfer based on apprehensions of bias, despite the High Court's direction for a fresh consideration by the trial court. Justice Banumathi highlighted that the Appellant did not challenge the order of remand or express bias concerns during that stage. The judge emphasized that a transfer should not be ordered based on mere presumptions or assumptions. Referring to a previous case, it was noted that trial courts operate under pressure and may make errors without improper motives. Justice Banumathi concluded that the Appellant failed to establish valid grounds for transfer and that the High Court's dismissal of the transfer petition was appropriate, leading to the dismissal of the appeal.
In summary, the Supreme Court allowed the appeal for the transfer of Sessions Case No. 1006 of 2009 to ensure a fair trial, considering the reasonable apprehensions of bias expressed by the complainant. The dissenting judgment highlighted the lack of sufficient grounds for transfer and emphasized the importance of not ordering transfers based on mere assumptions or presumptions.
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2015 (2) TMI 1318
The Supreme Court of India granted leave after hearing the case with delay condoned. The respondent did not have representation during the proceedings.
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2015 (2) TMI 1317
Deduction u/s 80-IB at Silvassa unit - proof of manufacturing or production of electrical generators - HELD THAT:- As per JACKSON ENGINEERS LTD. [2009 (12) TMI 649 - DELHI HIGH COURT] the activity involving assembling of various components and achieving a final product of a generator amounts to manufacture or production of an article or thing within the meaning of section 80-IB of the Act. Moreover as in the case of Tata Locomotive And Engineering Company Limited [1967 (2) TMI 22 - BOMBAY HIGH COURT] has also held that assembling of various components which results into a different product which is distinct then the individual components, such an activity amounts to manufacture or production. As a consequence, we therefore do not agree with the first objection of the Assessing Officer to deny assessee’s claim for deduction u/s 80-IB(4) of the Act. Thus, on this aspect assessee succeeds.
Silvassa unit of the assessee did not begin to manufacture or produce the Generators before 31.03.2004. - Assessing Officer relied upon the statement of the transporter to infer that there was neither transportation of raw material to Silvassa unit and nor the manufactured generator set was transported from Silvassa unit to M/s SNA Industries, Chakan Pune - need for cross-examination - HELD THAT: Ostensibly, there are apparent contradictions in the statements furnished by the transporter at the different points of time. The assessee pointed out that earlier it had contended that due to the contradictory position taken by the transporter a report of the handwriting expert be called for to establish as to whether the signature on the transport bills were that of Shri Padwal or not. It was also asserted by the assessee that the cross-examination would not serve any purpose when the appropriate preparation was not possible at a short notice. No doubt, technically speaking, an opportunity was allowed to the assessee to cross-examine the transporter. The assessment order has been passed on 31.12.2010 and obviously the cross-examination opportunity was allowed at the fagend of the proceedings.
Of-course, one of the reasons for the cross-examination to be allowed at the fagend was that the investigation itself were started late by the Assessing Officer. But the moot question is that can it be conclusively established on the basis of the apparently inconsistent stand of the transporter that there was no transaction effected with M/s Kavita Industries Pvt. Ltd. or M/s SNA Industries prior to 31.03.2004. In-fact, in the Excise return furnished by the assessee, a copy of which has been placed at pages 131 to 132 of the Paper Book, it is revealed that assessee returned the quantity manufactured and also showed its liability for excise duty on the quantity manufactured and sold. The said return of income is dated 05.04.2004 and at the time of hearing, the original copies of the said were also called for and perused. The said return corresponded to the quarter ending on 31.03.2004. The reflection of quantity of goods manufactured and liability of excise duty thereof in the said return has not been disapproved by the Revenue at any stage. There is also no reason for us to disregard the same. Nevertheless, it is also emerging that so far as the evidence of transportation is concerned it does not clinchingly establish the case either way. It was not only imperative but also prudent that the cross-examination of the transporter was undertaken so as to enable the Assessing Officer to come to appropriate findings.
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2015 (2) TMI 1316
Recall of Winding up order - appellant was not even a shareholder of the Company in liquidation - time limitation - procedure for revival of the Company - HELD THAT:- It is absolutely clear that the only interest of the appellant is to the extent that he is a guarantor of the loan taken by the Company from the State Bank of India. He has no share holding in the Company and had voluntarily exited from the Company in the year 2006 when he transferred his share holdings in favour of Sri S.N. Ladhani and his family members.
The assets of the Company have to be distributed as per the terms of the Companies Act. A guarantor, even though may be the initial promoter of the Company, cannot be said to be a party interested in the revival of the Company as none of the provisions of the Companies Act give any right to such a person to revive a Company, who is not even a shareholder. The Company consists of shareholders and not outsiders.
In the absence of the appellant having been able to place before us any provision under which a guarantor can be handed over the assets of the Company for its revival, (for which there is no proposal even filed by the appellant before the learned Company Judge or in appeal), the prayer for recalling the order of winding up at the instance of such guarantor (appellant) has been rightly rejected by the learned Company Judge.
Appeal dismissed.
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