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2014 (3) TMI 1141
Income accrued in India - dependent agent in India is carrying on marketing activities as Appellant, is resident of Singapore - income liable to tax in India - Held that:- Substantial question of law as formulated and canvassed before us has been covered by a judgment of this Court in SET Satellite (Singapore) Pte.Ltd Vs. Deputy Director of Income Tax, International Taxation [2008 (8) TMI 96 - BOMBAY HIGH COURT] Merely because tax on income was paid for some assessment years would not estop the assessee from contending that its income is not liable to tax.
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2014 (3) TMI 1140
Penalty u/s 271AAA - assessee has not specified the manner in which the income is derived in his statement recorded u/s 132(4) - surrender of income u/s 132(4) - Held that:- From the statements, we have observed that the authorized officer has not specifically asked to the assessee during such proceedings about the manner in which the assessee has earned undisclosed income.
Regarding observation of the A.O. that the assessee should have appealed against the initiation of penalty proceedings, there is no such provision u/s 246(1) to file appeal against such initiation of penalty proceedings. Also the A.O. without making further addition assessed the income at returned income in the assessment order. Thus, the observation of the A.O. that the assessee had intentionally evaded tax is based on incorrect facts.
The assessee has explained the modus of earning this income in his statement either u/s 132(4) and 131 of the Act. It is true that no specific manner of disclosing the undisclosed income is provided in the Act. Therefore, only on this ultra technical point, penalty u/s 271AAA of the Act cannot be imposed - Decided against revenue.
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2014 (3) TMI 1139
Absolute owners of property - licensee, who was temporarily allowed to reside in one of the rooms of the property claimed permanent injunction - It is urged that the defendants are licencees and cannot continue to retain possession - status of the defendants vis-à-vis the suit property - Held that:- As admittedly, the defendants came into possession on permission granted by the father of the plaintiffs who permitted them to enter/use the premises for a limited period, the defendants were using the premises as Licensee.
The defendant admittedly as per the written statement was inducted in the suit property as a licencee. Shri Ganpat Ram has now died on 20.08.2010. Their license has been terminated. He cannot challenge the title of the licensor now at this stage after 14 years.
It is clear that the defendants are licensees. The license has been terminated. The written statement fails to bring out any title or right in the defendants to continue to retain possession - there is no merit in the contentions of the defendant - the suit is decreed.
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2014 (3) TMI 1138
Disallowance u/s 14A r.w. rule 8D - whether rule 8D has been rightly invoked in the impugned assessment year 2008-09 or not? - Held that:- Hon'ble Delhi high court in Maxopp Investment Ltd vs CIT [2011 (11) TMI 267 - DELHI HIGH COURT] has held in clear terms that rule 8D cannot be invoked for the accounting period preceding 24.3.2008 i.e date of its notification and any such disallowance pertaining to exempt income can be made only by following ‘reasonable’ computation method. Drawing support therefrom, we hold that instead of computing disallowance by following rule 8D, ‘reasonable’ method has to be adopted. In our considered opinion, computation of ‘reasonable’ expenditure @ 50% of the disallowance of ₹ 74,41,489/- already made would serve the ends of justice.
Eligibility of deduction u/s 10A in respect of income derived from on-site and off-shore software application maintenance - Held that:- Section 10A is a deduction provision which has to be liberally construed. In course of arguments, the assessee has highlighted the fact that in preceding assessment years, it has been getting benefit of deduction qua the same on-site application maintenance operations. Apart from this, the Revenue’s argument only turns out to be a hyper technical approach since in the circular dated 17.1.2013 whose contents have already been reproduced hereinabove, it is nowhere necessary that the software in question has to be mandatorily deployed at the holding company or the agreement should be between the ultimate client and assessee. The latter argument of the Revenue that there was no subsisting contract already stand repelled in our findings hereinabove that indeed there existed agreements between the assessee and its clients/associated entities. No merit in the ground raised by the Revenue that assessee’s income of ₹ 20.43 crores is not eligible for deduction u/s 10A of the Act since it had arisen from on-site and offshore software application maintenance activity.
Not to exclude the foreign currency expenditure from the export turnover - Held that:- As decided in M/S. PENTASOFT TECHNOLOGIES LTD. [2010 (7) TMI 75 - MADRAS HIGH COURT] holding therein that such gains have to be treated as part of income ‘derived’ from export for the purpose of deduction u/s 10A of the Act. On being granted opportunity to rebut, the Revenue only reiterates the pleadings in the grounds. In our view, once the hon'ble jurisdictional high court has decided the very question of law which has also been echoed in the assessee’s own case, there is hardly any reason to adopt a different approach in the impugned assessment year. Consequently, this ground is rejected.
Disallowance of expenditure incurred by the SEZ units which had not commenced operation - Held that:- DRP had given a clear finding that losses of 10AA unit which had not commenced commercial operations were in the nature of pre-operative expenses not to be set off against taxable profits of other units and the 'tribunal' had overlooked the said aspect. In our view, once on merits the issue has been decided in assessee’s favour, the order in question does not lose its significance on a mere technical ground. Moreover, on a query being put up to the bench to point out any distinction on facts, the Revenue has failed to draw any. We follow the order of the 'tribunal' and affirm the findings of the CIT(A).
TDS u/s 195 - Disallowance u/s 40(a)(ia) qua annual maintenance contract paid by the assessee to overseas entities - Held that:- The annual maintenance charges amount to ‘technical services’ within the meaning of section 9(1)(vii), go against the case law of GE India Technology Centre Pvt. Ltd vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] holding that section 195 applies only when the payment is taxable in India in the hands of non-resident payee which is not the case in hand as the concerned payees have carried out maintenance contracts outside India without ‘making available’ any technology. There is also no element of any technology changing hands as stipulated in the DTAA (supra). Thus, we agree with the findings of the CIT(A) that the assessee was not under any obligation to deduct TDS in question and section 9 r.w.s 195 is not applicable. In these circumstances, we reject the relevant grounds raised in the appeal
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2014 (3) TMI 1137
Recovery of the sales tax due from the Private Companies - section 26C of KGST Act - first contention raised by the learned counsel appearing for the parties was that S. 26C being prospective, tax due for any period prior to 01.04.1999, could not have been recovered by taking recourse to this provision - Held that:- Section 26C will be applicable for recovering the tax or other amount due under the K.G.S.T. Act from a Company either existing, wound up or is under liquidation and if the other ingredients of the section are also satisfied, every person who was a Director of such company at the time when the amount became due, shall be jointly and severally liable. This therefore means that under Section 26C, a Director, who was in office when the amount became due, is made liable for amount due from the company and such liability could have been incurred by the Company any time prior to 1.4.1999 also and if such liability is remaining outstanding and is not recoverable for any reason as stated in the Section, the Directors who were then in office are jointly and severally liable. The above elements of the Section would show that though this provision was introduced w.e.f. 1.4.1999, it applies for recovery of the liabilities incurred by the company prior to 1.4.1999 also.
Section 26C of the K.G.S.T. Act cannot be taken advantage of by the State to recover amounts due to it for the periods prior to 1.4.1999.
Appeal allowed.
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2014 (3) TMI 1136
Penalty u/s. 271(1)(c) - non deduction of tds - Held that:- It was the duty of the payer to deduct TDS. It appears that the payer namely Vodafone Essar Gujarat Ltd. deducted no TDS on interest income of ₹ 23,800/- and due to this mistake, the assessee has not shown this income in the books of accounts. Similarly, due to late receipt of statement and clerical error at accounting method, the assessee has shown less receipt of 1,26,916/- from Vodafone Essar Gujarat Ltd. Prima-facie it appears that both these mistakes are bonafide for which penalty u/s 271(1)(c) is not leviable. Therefore, cancel the penalty of ₹ 23,800/- levied by the AO u/s 271(1)(c) - Decided in favour of assessee.
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2014 (3) TMI 1135
Computing capital gains taxable in the hands of the assessee-company - determining the cost of acquisition of shares - Revalued cost of acquisition of shares as against the actual cost of acquisition incurred by the firm which has transferred the shares to the assessee-company - avoidance/evasion of tax by successively transferring shares from individuals to a company through the media of partnership firm and company - Held that:- When there is a finding by the Income Tax Appellate Tribunal, Bangalore, in the case of the partners, that all these transactions are within the four walls of the law, we have to follow the said finding of the Tribunal. The result is that we have to accept the contentions of the assessee in these appeals that all the factors leading to the successive transactions are valid and they are legitimate and therefore acceptable in law. Therefore, we cannot go beyond the facts apparent on records and examine the question of colourable device, as argued by the Revenue. Accordingly, the first issue raised by the Revenue regarding the cost of acquisition of shares is held against it.
Disallowance u/s 14A r.w.r. 8D - disallowance of 2% u/s 14A - AO has in fact applied Rule 8D - Held that:- CIT (Appeals) has rightly held that Rule 8D is not applicable for the impugned assessment year. Accordingly, as consistently done in many cases, the Commissioner of Income Tax (Appeals) has made a reasonable disallowance towards corresponding expenditure. The Commissioner of Income Tax (Appeals) has made a disallowance of 2%. We find it is very reasonable. This contention of the assessee is, therefore, rejected.
Disallowance of the claim made by it under Section 35D - Held that:- This issue was not seriously pursued at the time of hearing. This ground is accordingly rejected.
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2014 (3) TMI 1134
Refund of the extension fee received by the appellant in excess of the rates mentioned in Rule 13 of the Punjab Regional and Town Planning and Development Act, 1995.
Held that:- In the instant case, the respondents-allottees accepted the terms and conditions of the allotment letter and possession were taken but they did not raise any construction upto 2000. There was a specific condition that non-construction of building would lead to the resumption of the said plot under the provisions of the Acts and the Rules. As noticed above, when the allottees did not raise construction on the plot, the demand was raised for payment of non-construction fee/extension fee in order to avoid resumption of the plot by the Authority, allottee paid the extension fee. After availing the benefit of extension on payment of extension fee, the allottee sent a letter to the Estate Officer demanding refund of the extension fee on the basis of amended Rule 13 of 1995 Rules. The said demand was rejected by the Estate Officer by passing the reasoned order in compliance of the directions of the High Court.
The defaulting allottes of valuable plots cannot be allowed to approbate and reprobate by first agreeing to abide by terms and conditions of allotment and later seeking to deny their liability as per the agreed terms.
It is evident that the doctrine of election is based on the rule of estoppel the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when it is his duty to speak, from asserting a right which he would have otherwise had.
Appeal allowed - decided in favor of appellant.
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2014 (3) TMI 1133
Disallowance of entertainment tax capitalized as subsidy - nature of subsidy receipt - revenue or capital receipt - Held that:- In the present case, it is more than apparent that the State Government proceeded to exempt entertainment tax for a period of 5 years payable by a "new" cinema hall constructed, subject to the condition that commercial exhibition of films in such cinema hall was required to be started by 31.03.2000.
In the scheme of the Act of 1957, where entertainment tax is determined and recoverable from the proprietor of the entertainment and is levied with reference to the number of admissions to the entertainment, when the State Government had exempted such proprietor of new cinema hall from payment of entertainment tax on the given condition, in our view, the object was clearly to promote the construction of new cinema halls. Merely because the amount was not directly meant for repaying the amount taken for construction of the cinema hall, its purpose could not be considered to be other than that of promoting construction of new cinema hall.
Particularly looking to the scheme of the Act of 1957 as also the object and purport of the exemption notification, the assistance in question cannot be said to be an operational subsidy so as to be taken as a revenue receipt. We find correct the observations by ITAT that the remission had been granted by way of incentive of capital receipts in the construction of cinema building.
The submission that once the assessee has collected the entertainment tax from the persons admitted to the entertainment and has not deposited the same with the Government, it is required to be treated as revenue receipt remains devoid of substance. The remission by the Government had been to the proprietor of the entertainment and not to the person admitted to the entertainment.
Tribunal was justified in affirming the deletion of addition being the amount of entertainment tax capitalized as subsidy - Decided against revenue.
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2014 (3) TMI 1132
Rejection of books of accounts - profit estimation - unverifiable purchases - Held that:- Considering the aspects that there was substantial growth of 13.88% in the turnover in comparison to last year, it cannot be said that the g.p. rate shown at 12.73% during the year on declared sales of ₹ 14,26,90,358/- against g.p. rate of 13.97% on the turnover of ₹ 2.92 crores shown during the last year was unreasonable to justify the trading addition made by the A.O. at ₹ 7,91,855/- by applying g.p. rate of 13.28% and application of g.p. rate of 13% by the Ld. CIT(A) sustaining the trading addition of ₹ 3,99,533/- in question.
A.O. had applied g.p. rate of 13.28% on the declared sales on the basis of weighted average which has been corrected by the CIT(A) with this observation that the correct weighted average rate of g.p. actually comes to 13.01% instead of 13.28%. Thus in over all result of the assessee in comparison to the last year and that the assessee had furnished all the necessary information/details about the transaction and the parties supported with the documents as could have been expected from a prudent purchaser to establish the genuineness of the claimed transaction, we are of the view that the lump sum addition of ₹ 1,00,000/- will meet the ends of justice to plus the possible leakage, if any, as the claimed purchases remained unverified but sales declared has not been doubted.
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2014 (3) TMI 1131
Addition u/s 68 by treating the loan received - Held that:- The submissions of the assessee along with various evidences furnished to the Ld. CIT(A) was not appreciated in right perspective. The Ld. CIT(A) even did not consider this vital fact that an addition to the extent of ₹ 14.25 Lac was already made in the block assessment and that there was a dispute between the assessee and Johari Group to which creditors of about ₹ 1 Crore belonged and they had filed a FIR, but the Ld. CIT(A) neither considered the amount mentioned in the FIR nor amount assessed in the block assessment.
CIT-A simply confirmed the addition made by the Assessing Officer on this basis that the letters issued to certain persons returned back and few of the creditors did not comply the summons. However, he ignored this contention of the assessee that new addresses of few creditors were given to whom no letter was written by the Assessing Officer. We, therefore, considering the totality of the facts, deem it appropriate to set aside this issue back to the file of Ld. CIT(A) to be adjudicated afresh - Decided in favour of assessee for statistical purposes.
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2014 (3) TMI 1130
Accrual of income - Deduction of provision for non-performing assets - Held that:- We find that the issue is squarely covered in favour of the assessee by the decision of jurisdictional High Court in assessee’s own case [2007 (6) TMI 180 - MADRAS HIGH COURT]. It was held by Hon’ble jurisdictional High Court that interest on non-performing assets was to be considered only after recognizing the income from such assets. Hon’ble jurisdictional High Court in the case of Elgi Finance Ltd. (supra) held that interest on non-performing assets could not be considered as income on accrual basis. We, therefore find no merits in the appeal filed by the Revenue.
Rental receipts - assessable under the head “business” OR “ income from house property” - Held that:- We hold that the property let out by the assessee in order to exploit commercial asset of the assessee which meant for its business is assessable under the head “income from business” and not under the head "income from house property”. This position was also accepted by the Department itself over a period of decade and therefore there is no valid reason not to consider the income from exploitation of assets by the assessee as income from business. Thus, we sustain the order of the Commissioner of Income Tax (Appeals) in accepting the claim of the assessee on this issue. The grounds of appeal raised by the Revenue on this issue are rejected.
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2014 (3) TMI 1129
Principles of Segregation - validity of detention order - the petitioner had submitted that the grounds of detention in the present case are composite and not separate - Held that:- A single act might be sufficient to sustain an order of detention and it cannot be held that one single act could never constitute basis for a detention order - The principle of segregation of grounds is clearly applicable and paragraphs 37, 38, 41, etc. of the detention order relating to Pooran Chand Sharma can be segregated and treated as separate ground of detention and it is not the case of one composite ground but rather a case of multiplicity of grounds. Therefore, the detention order can be sustained with reference to other grounds.
The Central Government had independently applied their mind and representation has been rejected by the Secretary. The Joint Secretary, the detaining authority, might have given their comments but this would not affect or invalidate the consideration and application of mind by the Secretary on behalf of the Central Government, who is superior and a higher officer.
Petition dismissed.
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2014 (3) TMI 1128
Disallowance made u/s 14A - Held that:- Where the assessee had incurred interest expenditure which is set-off against the interest income offered under the head ‘income from other sources’ and where no interest expenditure is remaining to be set off, there is no merit in the orders of the authorities below in making the disallowance under section 14A in line with Rule 8D(ii) of the IT Rules.
The assessee during the year under consideration had earned dividend income of ₹ 305,730/- against which disallowance of ₹ 39,80,707/- was made by invoking the provisions of section 14A of the Act. We delete the addition made under section 14A read with Rule 8D(ii) at ₹ 33,08,071/-. In view of the assessee having incurred various expenditures, the disallowance warranted under Rule 8D(iii) at ½ % of the average of the value of investment at ₹ 672,635/- is upheld. The grounds of appeal No. 1 to 4 raised by the assessee are thus, partly allowed.
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2014 (3) TMI 1127
Difference between the market price and the employees stock option plan - revenue expenditure allowable under Section 37(1) - Held that:- In view of the fact that the Revenue had not challenged the order passed by the Tribunal the High Court has rightly rejected the revision [2012 (7) TMI 696 - MADRAS HIGH COURT]
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2014 (3) TMI 1126
Rectification of mistake u/s 154 - Allowing the appeal of the assessee against the order of CIT(A) confirming the order passed by the Assessing Officer u/s.154 - addition u/s 14A - Held that:- The applicability of provisions of section 14A was a disputed issue and hence was not rectifiable under section 154 of the Act and secondly, addition made under invocation of section 14A was not held sustainable by the Tribunal, and therefore, such order was not sustainable. Learned counsel has submitted that the order of the Tribunal on the first ground is vulnerable.
It could not have sustained considering the details provided by the assessing officer and also keeping in mind the fact that it was a mistake in the computation which was being rectified by the assessing officer. Without opining anything on the first aspect and keeping that issue open, on the second ground that on merit the decision of the Tribunal has been upheld by this Court in Tax Appeal No.[2014 (5) TMI 12 - GUJARAT HIGH COURT], this issue does not deserve any further indulgence.
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2014 (3) TMI 1125
Demand of Service Tax - Management, Maintenance and Repair Service - Information Technology Software Service - demand of Interest on belated payments - Held that:- None of the submissions have been considered in detail by the original adjudicating authority. The figures submitted have not been accepted on the ground that the appellants did not furnish chartered accountant’s certificate which they had promised to furnish - the chartered accountant’s certificate is dated 01.12.2012 whereas order-in-original is dated 03.11.2012. Obviously the chartered accountant’s certificate was not available to the Commissioner and he was handicapped.
The submission that maintenance of software was not liable to service tax till 16.05.2008 has also not been dealt with. Similarly the submission that services rendered to SEZ are not liable to service tax has not been taken into account on the ground that the chartered accountant’s certificate was not sufficiently detailed or did not give necessary details.
The matter is remanded to the original adjudicating authority for fresh consideration of all the issues - the Commissioner is directed to deal with all the submissions that are made - appeal allowed by way of remand.
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2014 (3) TMI 1124
Claiming deduction under section 80IA - whether each wind mill division is a separate entity is itself - Held that:- Admittedly, while granting relief to assessee on merits, the CIT(A) accepted its argument that each wind mill division is a separate entity is itself and option of claiming deduction under section 80IA rests with the assessee. From the statement of facts filed by the Revenue, it is noticed that its mere argument is that against the decision of the hon’ble jurisdictional high court, special leave petition before the apex court is pending. In our view, merely because the Revenue’s special leave petition is pending does not form a valid ground to adopt a different approach in the impugned assessment year in absence of any distinction on facts being pointed out. In assessment year 2004-05 (supra) the issue has travelled upto the ‘tribunal’ and stands decided in assessee’s favour. Assessee eligibility for deduction under section 80IA confirmed.
Reopening of assessment - Held that:- In the course of arguments, we have asked the Revenue to point out any failure on assessee’s part by way of placing cogent material on record and the same is nowhere forthcoming. Thus, we agree with the findings of the CIT(A) and observe that since there is no failure on assessee’s part in disclosing fully and truly all particulars of income for claiming deduction under section 80IA, the Assessing Officer could not have reopened the assessment after four years from the end of the impugned assessment year. Decided in favour of assessee.
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2014 (3) TMI 1123
Deficiency in stamp duty - inclusion of value of immovable plant and machinery for the purpose of computation of stamp duty - Section 33/47-A of Indian Stamp Act, 1899 - whether plant and machinery, in the present case, have rightly been included towards part of sale transaction of immoveable property so as to attract chargeability of stamp duty on entire consideration of ₹ 118 lacs? - Held that:- In the present case it is not disputed that besides plants and machinery, entire land and building was sold and there was no provision/agreement that plants and machinery shall be severed or removed from earth. In fact, the industrial unit has been leased out for the purpose of running. Removal of plants and machinery would not have allowed the factory to run. There is no agreement between parties that plants and machinery shall be severed or removed from earth - Even according to definition of 'goods' under Sale of Goods Act, it cannot be included therein.
It is worthy to mention that in the entire writ petition there is no pleading that the plant and machinery which has been purchased by petitioner is to be removed or displanted or that it is not affixed or attached to earth etc. Though it has been pleaded that only land and building has been purchased but paras 3 and 4 of sale deed clearly show that U.P. Financial Corporation took over physical possession of entire building and its assets - there is no error on the part of respondents-Revenue Authorities in holding that stamp duty was chargeable on entire sale consideration of ₹ 118 lacks and to this extent the impugned orders warrants no interference.
Penalty - Held that:- The transaction of sale took place on 02.03.1995 and the impugned order was passed by Additional Collector (Finance & Revenue), Bahraich on 30.01.1996. On that day under Section 33/47-A of Act, 1899 there was no provision empowering Collector to impose penalty in case the value of property set forth in document presented for registration is not true market value of the entire value and there is a deficiency of stamp duty - penalty set aside.
Appeal allowed in part.
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2014 (3) TMI 1122
Deduction under Section 10A - Denial of claim as the assessee was not engaged in the business of manufacture of garments and the auditor’s report was not filed either with the Return or at the time of assessment - Held that:- Advocate appearing for the appellant submitted before us that one of the requirements is filing of the auditor’s report which the assessee did not do. But this point was neither agitated before the C.I.T. nor before the learned Tribunal. We are not, as such, inclined to go into this question of fact as to whether the auditor’s report was, in fact, filed or not filed. That question should have been raised before the C.I.T or at any rate, before the learned Tribunal. When this question was not raised, we can proceed on the basis that this point was given up. We are, as such, of the opinion that no substantial question of law is involved
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