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Showing 81 to 100 of 1621 Records
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2016 (5) TMI 1548
Disallowance on account of depreciation claimed on road/ on road construction while treating it as a building - HELD THAT:- As decided in ow case [2014 (9) TMI 163 - ITAT JAIPUR] allowed the depreciation @ 10% on expenditure incurred on road by considering the amendment made in item number building in depreciation schedule in favour of the assessee.
Claim of depreciation on EDP equipments - @ 60% as claimed by the assessee as against the rate of 15% allowed by the AO - HELD THAT:- As decided in own case by holding that the computer peripherals are eligible for the depreciation at the rates applicable to the computer system and following the decision of the Delhi Bench of the Tribunal allow this ground with the directions that the depreciation @ 60% be allowed. Decided against revenue.
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2016 (5) TMI 1547
Penalty u/s 271AAA - disclosure of undisclosed income earned during the financial year 2009-10 during the course of search and post-search proceedings on the basis of the seized material found during the course of search - CIT-A deleted the penalty - HELD THAT:- After going through the order passed by the learned Commissioner of Income-tax (Appeals) on the issue in dispute as well as the orders of the Tribunal relied upon by the learned Commissioner of Income-tax (Appeals) while deleting the penalty in dispute, we are of the view that the learned first appellate authority has passed a well reasoned order which does not need any interference on our part. Therefore, respectfully following the precedents of the Income-tax Appellate Tribunal as mentioned in the learned Commissioner of Income-tax (Appeals)'s order, we uphold the order of the learned Commissioner of Income-tax (Appeals) wherein the learned Commissioner of Income-tax (Appeals) has deleted the penalty in dispute and accordingly, we dismiss the appeal of the Revenue.
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2016 (5) TMI 1546
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Considering assessee's own case [2015 (6) TMI 412 - ITAT MUMBAI] and assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that considering the totality of circumstances and the facts, the expenses equal to 4% of the exempt income, earned by the assessee, was held to be reasonable disallowance, therefore, following the aforesaid decision of the Tribunal, the ld. Assessing Officer is directed to follow the aforesaid order, therefore, this ground is partly allowed.
Addition of value of closing stock u/s 145A on account of cenvat credit in respect of goods other than capital goods - HELD THAT:- Considering assessee's own case [2015 (6) TMI 412 - ITAT MUMBAI] since the assessee has followed the guidance note issued by the ICAI, it would be in a position to demonstrate the above said fact before the AO, i.e., the assessee could establish that there was no change in the income under both the methods by furnishing necessary workings. Accordingly, we are of the view that the assessee should be given one more opportunity to demonstrate this fact.
If the assessee fails to furnish the workings discussed above, in our view, the AO should consider the alternative contention of the assessee, viz., to adjust the opening stock with the correct amount that was actually adjusted in the closing stock of immediately preceding year. We have already noticed that the there was contradiction in the stand of DRP. If the service tax is considered to the tax incurred in bringing the goods to the present location and condition, then the same is required to be adjusted both in the opening stock and closing stock. Otherwise, the same should not be adjusted in both the items.
Addition u/s 40(a)(ia) - short deduction of TDS - HELD THAT:- We find that this issue has been examined by the Mumbai Bench of the Tribunal [2011 (7) TMI 956 - ITAT MUMBAI], wherein, it was held that the provisions of section 40(a)(ia) can be invoked only in the event of non-deduction of tax at source but not lessor deduction of tax at source. Identical view was taken by Hon’ble Kolkata High Court in the case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] In the absence of any contrary decision brought to our notice, we allow this ground of the assessee.
Granting credit for tax deducted at source as against claimed in the revised return and thereby short credit and charging interest u/s 234 - counsel contended that there is calculation mistake, therefore, the Assessing Officer may be directed to verify the claim of the assessee - HELD THAT:- DR had no objection to the request of the assessee. Thus, considering the totality of facts and the assertions from both sides, we direct the ld. Assessing Officer to examine the claim of the assessee and after providing due opportunity of being heard decide in accordance with law, consequently, both these grounds are allowed for statistical purposes.
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2016 (5) TMI 1545
Deduction u/s 80P in respect of interest received from the schedule bank - HELD THAT:- As relying on QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD. [2015 (6) TMI 573 - BOMBAY HIGH COURT] where assessee-cooperative society could not be regarded as “Cooperative Bank‟ on, mere fact that an insignificant proposition of revenue was coming from non-members, and thus, was entitled for deduction under section 80P(2)(a)(i) - Decided against revenue.
Deduction of interest and dividend received from cooperative bank u/s 80P(2)(d) - Assessee that the disputed amounts from the alleged banks are not investment but is a current account and the finding of the ld. Commissioner of Income Tax (Appeals) for Assessment Year 2012-13 and also in the absence of any contrary decision more specifically from the Revenue side, the assessee being a cooperative society, therefore, providing credit facilities to its members is an allowable deduction u/s 80P(2) of the Act. However, in terms of section 80P, the meaning of the words “cooperative Bank” has to be the meaning assign to it in chapter –V of the Banking Regulation Act, 1949. A cooperative bank is defined in section 5(cci) of the Banking Regulation Act to mean a state cooperative bank, a central cooperative band and a primary cooperative bank. Admittedly, the assessee is neither a state cooperative bank nor central cooperative bank but a cooperative society.
So far as the contention of the Revenue that the assessee deals with non-members is concerned, we are of the view that section 80P(1) restrict the benefit of deduction of income of cooperative society to the extent it is earned by providing credit facilities to its members, therefore, to the extent of income earned is attributable to the dealings with non-members are concerned, the benefit of section 80P will not be available, thus, while giving effect to the order, the authorities would restrict the benefit of deduction u/s 80P only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. With this rider, the appeal of the assessee is allowed.
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2016 (5) TMI 1544
Money Laundering - proceeds of crime - Gambling with the aid of mobile phone - cricket betting - Jurisdiction - power of police officers as well as the officers of the Enforcement Directorate to assist the authorities defined under section 48 and appointed under section 49(1) of the PMLA - HELD THAT:- Money laundering has been defined under Section 2(p) and 2(u) and Section 3. The proceeds of crime as per Section 2(u) pertain to any property derived, obtained directly or indirectly, as a result of criminal activity by any person relating to a scheduled offence or the value of such property. The scheduled offences have been defined under Section 2(y) and admittedly, Sections 419, 420, 467, 471 are part of the scheduled offences as described under part A of the schedule.
Under the existing provisions in Section 45 of the Act, every offence is cognizable. If an offence is cognizable, then any police officer in India can arrest an offender without warrant. At the same time, under Section 19 of the Act, only a Director or a Deputy Director or an Assistant Director or any other officer authorised, may arrest an offender. Clearly, there was a conflict between these two provisions. Under Section 45(1)(b) of the Act, the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint made in writing by the Director or any other officer authorised by the Central Government. So, what would happen to an arrest made by any police officer in the case of a cognizable offence? Which is the court that will try the offence? Clearly, there were inconsistencies in these provisions.
We have now enabled only the Director or an officer authorised by him to investigate offences. Of course, we would, by rule, set up a threshold; and, below that threshold, we would allow State police officers also to take action - The second anomaly that we found was that the expression "investigation officer" and the word "investigation" occur in a number of sections but they were not defined in the Act. Consequently, one has to go to the definition in the Criminal Procedure Code and that Code provides only "investigation by a police officer or by an officer authorised by a Magistrate". So, clearly, there was a lacuna in not enabling the Director or the Assistant Director under this Act to investigate offences. That has been cured now.
Whether the offence under the PMLA is cognizable and non-bailable? - HELD THAT:- By Prevention of Money Laundering (Amendment) Act, 2005 (20 of 2005) subclause (a) of the Money Laundering Act, 2002 (15 of 2003) stands deleted. The said sub-clause (a) provided that "every offence punishable under this Act shall be cognizable." Sub-section (1A) introduced by the Prevention of Money Laundering (Amendment) Act of 2005 provides that "notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) or any other provision of this Act, no police officer shall investigate into an offence under this Act, unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed - There are no words in the body of the section to declare the offences under the Act to be non-bailable. Since the Act has created new offences, it was necessary that there ought to have been a specific provision in that respect. However, the marginal note to the section reads as "offences to be cognizable and non-bailable". It is true that at one time the judicial view was that the marginal notes are not part of statute for they are not inserted by the Parliament, nor under the authority of the Parliament. But this view no longer holds good in India.
From reading the Act as a whole it is manifestly clear that the Prevention of Money Laundering Act being a special statute the procedure for dealing with the offences are regulated by the provisions contained in the said Act. Section 44(1b) clearly provides that cognizance for the offence punishable under the Act shall be taken only upon a complaint made by an authority authorized in that behalf under the Act. Further Section 45 of the Act put restrictions in the release of the persons on bail unless conditions mentioned therein are fulfilled. It further provides that special Court shall not take cognizance of any offence under Section 4 except on a complaint made by the Director or any Officer authorized by the Central Government or the State Government. Subsection (1-A) of Section 45 specifically provides that notwithstanding the provisions contained in the Code of Criminal Procedure, no police officer shall investigate into an offence under the Act unless specifically authorized by the Central Government by a general or special order The provisions of the Act has been given overriding effect upon any other law and further categorically mentioned that any provision of Code of Criminal Procedure which are inconsistent with the provision of this Act which deals with attachment, confiscation investigation and prosecution etc. shall not apply. There is no provision in the Act which is a special statute for filing of police report. It could file a complaint only after completion of investigation by the authorized authority, which shall be the basis of taking cognizance - the word 'investigation' as defined in Section 2(na) has been inserted by virtue of Amendment Act, 20 of 2005. According to the definition the word 'investigation' includes all the proceedings under the Act conducted by the Director or by an authority authorized by the Central Government under the Act for the collection of evidence.
It is concluded that none of the fundamental rights, or any legal rights of any of the applicants could be said to have been infringed in any manner. So far as the issue as regards the admissibility and evidentiary value of the statement recorded under section 50 of the PMLA is concerned, the same would be looked into by the Trial Court. I have reached to the conclusion that the procedure which has been adopted for the purpose of proceeding against the applicants under the PMLA has not deprived any of the applicants of their personal liberty as embodied under Article 21 of the Constitution of India.
Petition dismissed.
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2016 (5) TMI 1543
Characterization of income - income from share trading transaction - short term capital gain or business income - HELD THAT:- We find that this issue has not been examined in depth by AO that whether at the time of purchase of shares of SGLPP assessee has borrowed funds specifically to buy the shares, which could have been verified from the bank account of the assessee and secondly whether assessee has maintained separate demat account to demarcate that at the time he bought the shares, his intention was to hold them as investment and to earn capital gain (short term/ long term) therefrom.
These are very relevant in this case because assessee’s main business is of share trading and short term capital gain of ₹ 78.93 lacs has been earned which becomes further relevant because the total net profit in the audited profit and loss account is shown at 1.09 crores which is inclusive of the short term capital gain of ₹ 78.93 lacs which means that substantial turnover is of business but the substantial profit portion is coming from short term capital gain
When we look up to the assessment order, we observe that ld. Assessing Officer has not dealt with the issue relating to interest expenditure nor has he co-related specifically the borrowings of funds with the impugned purchase transaction for buying of equity shares of SGLPP
We are of the view that the order of ld. Assessing Officer is cryptic to the extent that proper verification of books of account was not made before making observation that the assessee is deemed to have taken borrowed funds for entering into the transactions of purchase/sales of shares shown in the short term capital gain and further ld. Assessing Officer has also not gone through the books of account to see as to whether assessee has maintained separate demat account which can prove the very intention of the assessee at the time of purchase of shares that they are intended to be held as investment and surplus or deficient, if any, arising in future will be shown as capital gain. - Appeal allowed for statistical purposes.
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2016 (5) TMI 1542
Accrual of income - Trading addition in the case of assessee on the same receipts as shown by JV partner - alternate statutory remedy for deletion of same income as provided by the law u/s 264 - HELD THAT:- JV members are caught in a peculiar position as in case of M/s. KIEL for the assessment year 2008-09, the time limit for filing revised return u/s 139(5) had already been expired on 31.03.2010 whereas assessment in case of assessee joint venture was completed on 29.12.2010 thus M/s. KIEL could not file the revised return of income. Thus the income from contract activity awarded by the Railway Vikas Nigam Ltd. has already been taxed in case of M/s. KIEL and its further taxation in hands of the assessee unambiguously tantamount to taxing the same income twice which is impermissible and against the principle of equity and justice and well settled principle of avoiding unjust enrichment of state.
JV constituent having taken over all the responsibilities regarding execution of the work including administrative and financial support etc., department also has not disputed the facts of Kiran Infra”s being lead partner. In these circumstances it cannot be assumed that department taxed the income in wrong hand.
The concept of accrual of income is considered in the case of E. D. Sassoon & Co. Vs CIT[1954 (5) TMI 2 - SUPREME COURT] wherein it was held that what was sought to be taxed must be income. As per the harmonious reading of JV agreement, respective obligation, the project income was accruable to said Kiran Infra. Since the income was already taxed in the hands of Kiran Infra there is no occasion to hold that it accrued to the assessee so as to tax it again. Thus the action of the AO to tax the assessee on the income already taxed in the hands of M/s Kiran Infra tantamount to double addition which is not permissible in law.
The petition U/s 264 was filed by M/s Kiran Infra on 04.03.2011 before CIT-II, Jaipur to avoid the hardship proposed by the department in taxing the assessee again. The approach of the department is incomprehensible as on one hand it accepted the assessment in the hands of Kiran Infra, then it desired to tax assessee as a logical consequence Kiran Infra approached under a statutory provision of law to revise the order u/s 264. Sec. 264 being a statutory remedy is to be exercised with judicious approach. If the CIT rejects the petition it also implies that department accepts the assessment in the hands of Kiran Infra.
Assessee’s predicament is discernible since the petition U/s 264 had been rejected, time to file the revised return had already expired on 31.03.2010 and the income stood taxed in the hands of M/s Kiran Infra Engineering Ltd. This left the assessee in a precarious situation of denying the legal remedy; consequently the impugned appeal became necessary. The department cannot insist on unjust enrichment by taxing twice the same income in the pretext of some technicalities. No infirmity in the order of ld. CIT(A) in deleting the assessment and impugned additions in the hands of the assessee. The order of ld. CIT(A) is upheld and revenue grounds are rejected.
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2016 (5) TMI 1541
TP Adjustment - selection of certain comparables - functionality dissimilarity - HELD THAT:- Assessee is engaged in global financial services in the investment advisory activities, broker dealer activities and computer based quantitative management. The assessee provides software development services to its AE. Therefore, the assessee is purely a captive service provider. The assessee has been recognised as 100% EOU registered under the Software Technology Park of India (STPI) Scheme, thus companies functionally dissimilar with that of assessee need to be deselected.
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2016 (5) TMI 1540
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - HELD THAT:- As we come to ‘satisfaction’ aspect as mandated under section 14A(2) r.w. Rule 8D of the Income Tax Rules there is no dispute that the Assessing Officer in his assessment order does not record the same so as to dispute assessee’s books of accounts recording no expenditure incurred for exempt income.
CIT(A) upholds Assessing Officer’s findings by observing that such a satisfaction need not be explicitly mentioned in assessment order as it can be deduced from the order itself. We find it to be not in tune with the specific provision in the act under section 14A(2). The legislature in its wisdom specifically envisages Assessing Officer’s satisfaction before invoking expenditure disallowance that an assessee’s books are not correct so far as they do not record any expenditure. We quote this statutory provision as well as the above stated case law that there has to be an explicit satisfaction and an Assessing Officer cannot simply brush aside the relevant books of accounts. Any violation thereof, in our considered opinion, would violate the legislative intent as well the legislation itself.
CIT(A)’s reasoning goes contrary to section 14A(2) as interpreted by various high courts hereinabove. The impugned administrative expenditure disallowance made by both the lower authorities under Rule 8D(iii) is accordingly deleted. Assessee’s appeal is allowed.
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2016 (5) TMI 1539
Disallowance u/s 14A - assessee has argued that no administrative expenses were incurred to earn the exempt income therefore no expenses are required to be deducted in view of the provision u/s. 14A - HELD THAT:- The balance sheet of both the years are on the file as annexure - 1 and 2 which speaks that the assessee was having sufficient surplus amount in comparison to the investment made in mutual fund to earn the exempt income. Therefore, the said circumstances and in view of the above mentioned law settled in Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]. We are of the view that the claim of the assessee is required to be examined a fresh in accordance with law. Therefore the finding of the learned CIT(A) on this account has been ordered to be set aside and learned Assessing Officer is hereby directed to decided the matter afresh in accordance with law. This issue is decided in favour of the Assessee against the Revenue. In the result the appeals of the assessee are allowed.
Depreciation on plant and machinery as transferred from the holding company to subsidiary company -provisions of explanation 6 to sub-section (1) of section 43 - WDV in the books or in the block of assets of the transferor company shall be considered as the actual cost in the hand of the transferee company in respect of such assets - HELD THAT:- Considering the facts of the case before us we agree that the case of the assessee is duly covered by the case of Essar Oil Ltd. [2011 (7) TMI 1371 - BOMBAY HIGH COURT]. Therefore, we do not find any infirmity and illegality in the finding given by the learned CIT(A), hence we dismissed the appeal filed by the revenue.
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2016 (5) TMI 1538
Double taxation in respect of Duty Free Import Authorization Scheme - HELD THAT:- We find from record that the claim of double taxation was not made before the AO. Even before the ld.CIT(A) it appears that the assessee-company had not filed any evidence in support of double taxation in respect of export incentive. However, this claim was made for the first time before the CIT(A). In our considered opinion, this ground of appeal does not emanate from the assessment order.
Appeal filed by the assessee-company the claim for double taxation was only in respect of ₹ 3,13,72,097/-. This should have been allowed only as additional ground as it does not emanate from the assessment order. This additional ground was apparently admitted by the CIT(A) without calling for remand report. Since the issue was restored to the file of the AO to adjudicate this issue in accordance with law, revenue is not aggrieved by this direction.
Addition on account of bad debts written off - AO had not allowed the claim by holding that the claim does not fall within the ambit of provisions of sec.36(1)(vii) read with sec.36(2) as the amounts were written off without permission of the Reserve Bank of India as required under the provisions of the Foreign Exchange Regulations Act and accordingly he brought the amount to tax - HELD THAT:- From the facts emanating from the assessment order it is clear that the amounts written off represent the claim made by the assessee-company by raising debit notes against its customers to meet the extra input cost on account of adverse foreign exchange variation. Admittedly these amounts were offered to tax in the earlier assessment year and the claims were not accepted by the respective customers, hence, reversed. Going by the facts as marshaled by the assessee-company during the assessment proceedings, income to the extent of such additional claim made by the assessee-company had not accrued.
In the instant case, if the income had not accrued, as claimed by the assessee-company in the respective years, remedy is available to the assessee-company under other provisions of the Act to seek relief but deduction cannot be allowed as bad debts and to this extent, the decision of the CIT(A) is reversed. The addition made by AO is upheld.
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2016 (5) TMI 1537
Deduction u/s 80-IB - whether the business income declared by assessee included income from eligible business? - HELD THAT:- Figures prove that the assessee had its business income from business of stone crushing only as the other income claimed in the return of income is on account of income from the house property and honorarium and interest as noted by the AO - Income of the assessee for business do not include the income from any other business than the eligible business of stone crushing, therefore, to the business income if any it made on account of disallowances of expenses will only increase income from eligible business which again will be exempt u/s 80IB.
In HARBHAJAN KAUR, PROP. [2013 (12) TMI 1559 - ITAT AMRITSAR] under similar facts and circumstances has held that disallowance of expenses claimed by assessee from the eligible business will increase its income which again will be exempt u/s 80-IB.
Increase in income of the assessee due to additions will only increase income which again will be exempt u/s 80IB of the act. The contention of learned DR that the Amritsar Bench had passed a perverse order as the assessee cannot be allowed benefit of exemption u/s 80-IB on the disallowances do not hold any force in view of the fact that the disallowance of expenses will automatically increase the income of assessee from eligible business as the additions has been made from the expenses incurred during running of such eligible business and therefore the increased income can only be attributed to the eligible business of the assessee. In view of the above respectfully following the order of Amritsar Bench we accept the alternative contentions of learned AR that additions even if sustained will not have any impact on the taxable profits as the sustenance will only increase the profits eligible for deduction u/s 80-IB. - Appeals filed by the assessee are allowed.
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2016 (5) TMI 1536
Validity of assessment u/s 153A - Jurisdiction u/s.153A - HELD THAT:- In the present case, the assessment was framed consequent to search in the case of the assessee and duly recording panchanama on the basis of incriminating material. Hence, we do not find any infirmity in framing the assessment u/s.153A of the Act and the same is confirmed. This ground of appeal of the assessee is dismissed.
Disallowance of sales promotion expenses - agreed addition - AO disallowed it on the basis of consent given by the assessee to make that addition, as the assessee has failed to produce the evidence in support of the claim of expenditure - HELD THAT:- Revenue authorities have not doubted the incurring of expenditure for sales promotion. However, they doubted the quantum of expenditure incurred. The business cannot be carried on without incurring sales promotion expenditure. The ld. AR pleaded, before us, that most of these payments were passed through banking channels. In such circumstances, the disallowance of entire sales promotion expenditure is not proper. If the sale promotion expenditure are not supported by proper bills or vouchers or receipts and payments have been made only by cash, then there are chances of inflating of such cash expenditure.
Even if it is so, the entire expenditure cannot be disallowed. Since, there is possibility of inflating of cash expenditure, disallowance of certain percentage of the expenditure to be made. From this point of view, if the expenditure is not fully vouched, the Assessing Officer is directed to disallow only 10% of the unsupported cash expenditure out of this and he shall not disallow 100% of such expenditure. Accordingly, we remit this issue to the file of the AO for fresh consideration - Assessee's ground is allowed for statistical purposes.
Levy of interest u/s.234A and 234B - HELD THAT:- The interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A of the Act, as held by the Tribunal in the case of ACIT v. VN. Devadoss [2013 (9) TMI 400 - ITAT CHENNAI]. The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A of the Act. Therefore, the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act.
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2016 (5) TMI 1535
TDS u/s 194C - advertising charges - payments made by the respondent-assessee-company to M/s.Bennet, Coleman & Co., for procurement of advertisement agency - Whether advertisement between the assessee and the media (Bennet Coleman) as agent and media and not client and media? - HELD THAT:- Though most of the advertisements belong to respondent-assessee-company’s own business, payments are made in the capacity of an advertisement agency to M/s.Bennet, Coleman & Co., Therefore, circular No.715 dated 8/8/1995 as well as circular No.5 of 2016 dated 29/2/2016 are squarely applicable.
No TDS is attracted on payments made by television channels/newspaper companies to the advertising agency for booking or procuring of or canvassing for advertisements. It is also further clarified that 'commission' referred to Question No. 27 of the Board's Circular No. 715 dated 8.8.95 does not refer to payments by media companies to advertising companies for booking of advertisements but to payments for engagement of models, artists, photographers, sportspersons, etc. and, therefore, is not relevant to the issue of TDS referred to in this Circular. ”
It is needless to mention that CBDT circulars are binding on the authorities employed for execution of the provisions of the Income-tax Act so long as they are beneficial to the assessee. The said circular is squarely applicable to the facts of the case as impugned payments were made in the capacity of agent to the publisher of newspaper. The mode of discharge of liability has no bearing on the applicability of TDS provisions. Therefore, we do not find fault with reasoning of CIT(A). - Decided against revenue.
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2016 (5) TMI 1534
Fees for technical services - services rendered by the assessee for installation of cranes - HELD THAT:- As decided in M/S. SANDVIK AB VERSUS DY. DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) -II, PUNE [2014 (12) TMI 388 - ITAT PUNE] on the basis of the protocol to the DTAA between the India and Sweden the assessee can claim the benefit of the conditions imposed for bringing to tax the fees for technical services in the treaty between the India and Portuguese. We, therefore, hold that on the principle of the most favoured nation (MFN) clauses the payment of ₹ 5.93 Crores received by the assessee company from its Indian subsidies cannot be brought to tax.
Fee charged by the assessee from SAPL for installation of crane, upgradation/service of other equipments does not involve ‘make available’ of any know how, technology which can be used by the Indian Associate of assessee independently for its benefit in any manner, whatsoever. Accordingly, we direct the Assessing Officer to delete the addition made on account of ‘fee for technical services’ for installation of machines etc.
Royalty’ towards use of CAD/CAM designing software and IT support - contention of the assessee is that the assessee has purchased the basic version of program/software from the third party and after making certain changes/modification to the basic program has standardized the software to be used by the entire group - basic program has been stored in Sweden and the users have limited accessibility to the program for using it without any further modification - HELD THAT:- Authorities below while deciding the issue has not considered the agreement between the assessee and Sandvik Asia Private Limited for the use of program. Thus, we are of the considered view that this issue needs a revisit to the file of AO
Assessee shall furnish the details of modifications/changes carried out by the assessee in the program for standardizing the same to be used by all the group concerns and also the terms and conditions for the use of program by SAPL. The Assessing Officer after considering the same shall decide the issue afresh in the light of decision of Co-ordinate Bench of the Tribunal in the case of Sandvik Australia Pty. Ltd. Vs. Deputy Director of Income Tax (International Taxation-II, Pune (supra).
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2016 (5) TMI 1533
Disallowance of expenditure u/s 14A - assessee accounted dividend income during the year under consideration which was exempted u/s 10(35) - AO by applying third limb of Rule 8D of the Income-tax Rules, disallowed 0.5% of the average investment which yielded the exempted income - as per AR no expenditure was incurred for earning the exempted income - HELD THAT:- It is nobody’s case that the assessee has borrowed any loan for the purpose of making investment, therefore, the first limb of Rule 8D may not be applicable. No material is available on record to suggest that the assessee has incurred any interest expenditure which are not directly attributable to any particular income or receipt. Second limb of Rule 8D is also not applicable.
Now coming to third limb of Rule 8D, an amount equal to 0.5% of the average value of the investment, income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee as on the first day and last day of the previous year, has to be considered for disallowance.
In this case, AO has considered the investments which are appearing in the balance sheet as on the first day and last day of the previous year and taken the income which was not formed part of the total income. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has rightly applied third limb of Rule 8D for making the disallowance. - Decided against assessee.
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2016 (5) TMI 1532
Deduction u/s 54EC - CIT(A) directing AO to assess premium received by appellant company on transfer of tenancy right of the shops from one tenant to another as capital gains - Whether premium received by the assessee company on transfer of tenancy rights of the shops from one tenant to another should be treated as income from other sources and not as capital gains as claimed by the assessee ? - HELD THAT:- We agree with the observations of the CIT(A) that during the course of time the assessee acquired bundle of rights with respect to the impugned shops. These rights include inter-alia, rights of possession in tenancy. As per section 2(14) “capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession.
A perusal of this definition shows that the legislature has intended to define the term “capital asset” in the widest possible manner. This definition has been curtailed to the extent of exclusions given in section 2(14) itself which include stock-in-trade and personal effects. The impugned asset does not clearly fall in the aforesaid exclusions given in section 2(14). The bundle of rights acquired by the assessee is undoubtedly valuable in terms of money - The said tenancy rights shall form part of a capital asset in the hands of the assessee and, therefore, any gains arising there from would be assessable under the head ”Income from capital gains” eligible for deduction u/s 54EC - Decided against revenue.
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2016 (5) TMI 1531
Re-conveyance of the bought out Land - Whether the petitioner is entitled for re-conveyance of the land without paying the market value of the land? - Section 50 of Revenue Recovery Act - HELD THAT:- In this case the petitioner paid the amount. This was accepted without any demur. The sale was concluded in the year 1985. Therefore, the petitioner's payment cannot be considered as the payment effected in the light of the Government order referred as above. There is no case that the petitioner has committed any fraud on the officials of the Government. No such case was espoused in the counter. Further, the official respondents also have no case that the petitioner made the payment by misrepresentation. It is to be noted that nobody has a case that remittance was under mistake or under compulsion. In such scenario, the only conclusion is possible is that the petitioner made the payment and he was encouraged to make such payment by the Government. The stand in the counter that since the petitioner had cleared the entire liability, the Government can re-convey the land only if the petitioner remits the market value of the land. It is to be noted that the petitioner did not make any application - Therefore, the only irresistible conclusion that can be drawn is that the Government encouraged the petitioner to make the payment or the Government remains acquiesced when payments have been effected to discharge the liability.
Certainly, the principle relating to the proprietary estoppel would come into play to the aid of the petitioner - Petition allowed.
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2016 (5) TMI 1530
Deemed dividend u/s. 2(22) (e) - Whether assessee company has share holding and substantial interest in the financial aspects of the company? - HELD THAT:- CIT- A has dealt based on the thorough financial analysis of the earlier years were the assessee is having regular business transactions on commercial expediency and dealt with subsidiary company and the payments, on terms of commercial transactions, The ld. Commissioner of Income Tax (Appeals) relied on the Tribunal decision on assessee’s own case for the assessment year 2004-05 [2010 (7) TMI 1171 - ITAT CHENNAI] on the same issue. The contention of the Department before the Tribunal that the Revenue has not accepted the order of Tribunal and an appeal has already been filed in Madras High Court and the same is pending. This Tribunal is of the considered opinion that mere pendency of appeal before High Court cannot be a reason to take a different view. The order of Tribunal is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. The Commissioner of Income Tax (Appeals) has allowed the claim of the assessee.
Diminution of value of investments - Whether assessee is not entitled for claim of diminution in value of investments as Revenue expenditure by debiting to profit and loss account which takes the characteristic of capital in nature? - HELD THAT:- If debts are written off u/s.36(i)(vii) than it should be considered as Business loss. On the other hand, the investment is written off it should be treated as Capital loss. The ld. Commissioner of Income Tax (Appeals) has confused the facts and treated investment as debt in the normal course of business. We are not in a position to appreciate the reasons given by CIT(A) and also the facts brought on record by the lower authorities are not sufficient to adjudicate the disputed issue. Therefore, we set aside the order of Commissioner of Income Tax (Appeals) to the file of Assessing Officer for fresh consideration.
Disallowance of administrative and interest expenses - no income has been generated by way of business operations - HELD THAT:- Contention of assessee on the claim of expenditure that the ld. AO has not allowed any claim of expenditure though there was some activity in the company and the income being in the nature of rental income, income from capital gains and income from other sources and also raised grounds to allow claim of write off of investments made in the year 2005 as against the sale in current year and also for advances provided to subsidiary company by the assessee in the same year are not convincing and further on perusal of assessment records these contentions never raised in assessment proceedings as the AO passed the order on the claim of expenditure, rental income and capital gains only. The write off of investments and advances to subsidiary claim are not emanating from the assessment order. Therefore, we are not inclined to adjudicate the fresh disputed issue and remit the entire file to the Assessing Officer who shall verify and examine the claims.
Advances are doubtful for recovery and claimed deduction u/s.37 - Assessee company being investment company and investments are made in subsidiary companies but due to loss in business operations of subsidiary companym this amount could not be recovered and investments has not yielded any profits and claimed write off and prayed for allowing the deduction - HELD THAT:- AO and ld. CIT (Appeals) has highlightened only on the Annual accounts of the assessee company but not the balance sheet and profit and loss account of subsidiary company which incurred loss and which plays vital role in taking decision of write off and also there is no findings on the financial statements of the subsidiary company before the AO to disallow the claim. Considering the factual aspects, we are of the opinion that the matter has to be re-examined based on the financial feasibility and losses of subsidiary company in which assessee has made investments and advanced the money for working capital. Therefore, we remit the entire file to the Assessing Officer to decided a fresh and assessee should co-operative in providing the information. This ground of the assessee is allowed for statistical purpose.
Interest expenditure on loans - AR contention of allowing total claim is only on the basis of investment in subsidiary company and CIT(A) has restricted the claim to 3% of outstanding balance as on balance sheet date which the assessee challenged - HELD THAT:- Prime facie the company is a investment company, charging of interest on subsidiary company should be considered as good business principle. Otherwise the financial result will show distress implication on liquidity. AR submissions cannot be accepted without any bonafide evidence. CIT (Appeals) has restricted to 3% of charging of interest on closing balance, we are of the opinion considering the genuineness of transaction payments and usage of funds, the matter has to be examined on the financial implication of the company. Therefore, we set aside the issue for re-examination to the file of Assessing Officer and the ground of the assessee is allowed for statistical purpose.
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2016 (5) TMI 1529
Scrutiny assessment t u/s.143(3) r.w.s.144 - findings of the CIT(A) that order passed u/s.144 is not tenable - HELD THAT:- The grievance with the Department is justified. When CIT(A) takes decision against the Department, he should have called for a remand report from the AO for which he fails to do so. Accordingly, we vacate the findings of the CIT(A) on this issue. Thus, this issue would go back to the file of AO for fresh consideration after giving due opportunity to the assessee. Appeal of Revenue is partly allowed for statistical purposes.
Forex fluctuation loss - Claim of exchange loss on forward contracts - As per revenue assessee has hedged the export proceeds receivable much more than what is available in stock as receivables therefore, falling within the ambit of speculative transactions - HELD THAT:- As decided in M/S. AISHWARYA & CO. P. LTD., [2015 (9) TMI 8 - ITAT CHENNAI] AO has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the AO is directed to compute accordingly.
AO has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from these foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration. Appeal of assessee is partly allowed for statistical purposes.
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