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Income Tax - Case Laws
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2015 (9) TMI 1626
Application u/s 256(2) - rectification of mistake - Held that:- High Court [1987 (4) TMI 20 - BOMBAY HIGH COURT]] is clearly wrong in observing that the proceedings got finality on 8.4.1987 when the reference application under Section 256(2) of the Act was dismissed by the High Court. Admittedly, it is this order dated 8.4.1987 which was the subject matter of appeal before this Court and the appeal was dismissed on 16.01.2001. Therefore, the order dated 8.4.1987 passed by the Bombay High Court had not attained finality.
We find that the proceedings got finalized only on 16.01.2001 [2001 (1) TMI 1001 - SUPREME COURT] when the appeal of the assessee was dismissed by this Court. If the period of limitation is reckoned from that date the certificate issued on 15.7.2004 is well within four years of limitation provided under law. The recovery certificate was, therefore, not time barred as held by the High Court in the impugned judgment.
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2015 (9) TMI 1625
Reopening of assessment - deduction under section 80-IC claimed - Held that:- From the perusal of reasons recorded and material available on record, we do not come across any tangible material coming in the notice of the Assessing Officer for formation of belief. The words used time and again in the reasons recorded are 'it is noticed that'. No reference to any other material is given. Even at the time of hearing before us, no such material could be brought to our notice. Therefore, admittedly, what triggered the AO to reopen the case after issuing intimation under section 143(1) of the Act, is not coming out of records. In view of this, we proceed to discuss whether the provisions of section 147 of the Act, read with section 148 of the Act are still applicable to the present case or not.
There can be no dispute that the main ingredients for initiating these provisions are presence of material and live link between the material and the belief formed by the Assessing Officer, which makes the 'reasonable belief' as propounded in the provisions itself. Coming to the "reason to believe", we may be guided by another judgment of the Hon'ble Apex Court in the case of Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT OF INDIA]. The case was rendered surely in the context of original assessment having been made under section 143(3) of the Act however, the interpretation made was that of the phrase 'reason to believe', which is applicable equally to the cases made under section 143(1)(a) as well as 143(3) of the Act - Decided in favour of assessee.
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2015 (9) TMI 1624
Scope of revision u/s 263 - eligibility to revise a non est order - Held that:- There is no quarrel with the proposition advanced by ld. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee.
As u/s 263 Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice u/s 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Case of CIT Vs. Gitsons Engineering Co. [2014 (11) TMI 59 - MADRAS HIGH COURT] clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter.
If ld. Commissioner revises such an assessment order which is non est in the eye of law, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the statute. - Decided in favour of assessee
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2015 (9) TMI 1623
Liability of the assessee to collect tax u/s.206C(1C) - Applicability of the provision of Section 206C - Whether amount collected by the appellant by way of Tehbazari, Tehbazari-Vahan Stand and Balu- Morang, Gitti- Bolder-Vahan Shulk could not be treated as amount collected towards use of 'parking lot' or 'toll plaza' so as to make obligatory for the appellant to collect tax at source (TCS) from its licenses? - Held that:- It is an undisputed fact that Tahbazari is collected by the assessee from temporary vendor squatting on the specified places for selling their goods. Thus, this is an issue of granting of a license in respect of using temporary place by the hawkers or the vendors for selling the goods. Toll has also been collected from the parking stand and market places in rural areas therefore in our opinion it cannot be different from toll plaza as well as parking lot. No illegality or infirmity in the order of the CIT(A) sustaining the order of the Assessing Officer for treating the assessee in default in each of the assessment year as the assessee fails to collect the tax at source from these licensee. - Decided against assessee
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2015 (9) TMI 1622
Validity of the proceedings u/s 153C - Held that:- Considering the facts in the light of Order of the Tribunal [2017 (11) TMI 909 (ITAT-Delhi)] the issue is covered in favour of the assessee by the above Order for subsequent A.Ys. 2009-2010 to 2011-2012. Following the same, we set aside the orders of the authorities below and quash the proceedings initiated under section 153C. Resultantly, the addition made by the A.O. stands deleted.
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2015 (9) TMI 1618
Deduction u/s 80P(2)(a)(i) denied - Assessee co-operative society providing credit facilities to members and not registered with the RBI - Held that:- Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha [2015 (1) TMI 821 - KARNATAKA HIGH COURT] held when the status of the assessee is a Co-operative society and is not a Co- operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct.
A co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i) - Decided in favour of assessee
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2015 (9) TMI 1616
Revision u/s 263 - estimating the profit at 2.5% of the total turnover - business of sale of IMFL - Held that:- AO has called for books of account of the assessee but the assessee had failed to produce the same. - AO had estimated the income of the assessee at 2.5% of the turnover. CIT wants the same to be estimated at 5% of the total turnover because the Tribunal in the case of an assessee carrying on the same business of sale of IMFL has estimated the income at 5% of the turnover. This, in our view, is not justified as held by the Coordinate Bench of this Tribunal.
The uniform net profit cannot be adopted in each and every case of similar business. Estimation of net profit must be on the basis of facts involved in each and every case. Therefore, in our view, there is no error committed by the AO in estimating the profit at 2.5% of the total turnover.
Status of the assessee being AOP or a firm - Held that:- Assessee fairly admitted that the same has not been verified by the AO during the assessment proceedings. Therefore, according to him, the assessment order is erroneous to that extent. As rightly pointed out by the CIT, the AOP attracts the maximum marginal rate of tax and therefore, non verification of the same also makes the assessment order erroneous as well as prejudicial to the interests of the Revenue. In view of the same, we reject the ground of appeal No.4.
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2015 (9) TMI 1615
Addition of interest attributable to capital work in progress - Whether the interest attributable to capital work in progress are hundi discount charges for material purchases? - Held that:- Assessee had generated ₹ 229.51 crores from its operating activities - against this, investments in fixed assets, and capital work-in-progress was only ₹ 122.81 crores which means that assessee had more than sufficient own funds for financing the capital work-in-progress - also there were no loans raised by the assessee during the relevant previous year - interest disallowance was only presumptive without any basis. - thus appeal by revenue is dismissed.
Disallowance of provision of warranty - Held that:- Provisioning should be for the present obligation arising from past events which is expected to result in out-flow of resources in respect of which reliable estimate is possible for the amount of obligation - assessee could not furnish evidence for the actual warranty expenditure debited in P/L account and could not give historical data for showing that the warranty provisioning was done on a scientific basis - Issue requires a fresh look by the AO - thus allowed for statistical purpose.
Nature of royalty paid on sales - revenue out go or a capital out-go? - Held that:- Just because the consideration was calculated as a percentage applied on net ex-factory selling price, we cannot say that it was a revenue outgo - assessee was free to use the technical knowhow obtained by it from HCCL even after the period of agreement - the agreement between the parties resulted in an enduring benefit to the assessee and thus the consideration paid by the assessee to HCCL was a percentage of the sale value, still it retained all qualities of a capital out go - addition made by the AO is reinstated.
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2015 (9) TMI 1612
Reducing expenditure in foreign currency on telecommunication and travel, both from export turn over as well as total turnover for computation of deduction u/s. 10A - Held that:- High Court in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. Just because the judgment has not been accepted by the Revenue and it has moved an SLP before the Hon'ble Apex Court would not be a reason for not following the judgment. We find no error in the order of AO in this regard. Ground. 1 is dismissed.
Comparable selection criteria - Held that:- DRP was justified in directing exclusion of comparables having turnover in excess of ₹ 200 crores. No reason to interfere. Ground 2 is dismissed.
There is a clear finding given by the Tribunal in the case of selecting comparables, 15% is the threshould limit of RPTS. Accordingly, we set aside the order of DRP and direct the AO/TPO to consider 15% as threshold limit for RP transactions and consider all the comparables in the list of comparables which do not have RPT exceeding 15%, for the analysis of international transactions of the assessee for the impugned assessment year, provided other conditions for comparability are satisfied. Ordered accordingly. Ground 3 of the Revenue is treated as allowed for statistical purpose.
Remit this issue of comparability of Akshay Software Technologies back to the file of the AO/TPO for fresh consideration in accordance with law, after considering the correct RPT of the said company.
Kals Information Systems was not a proper comparable to a software development services company.
Web site services is generally considered as falling within ITES segment. That ICRA Techno Analytics was also involved in web-development and hosting is clear from the background information mentioned in its significant accounting policies reproduced supra. Hence, in our opinion before considering ICRA Techno analytics as a proper comparable, it is necessary for a segmental analysis of its results. This issue, in our opinion, requires a fresh look by the AO/TPO so that necessary inputs are taken from the said company for proper analysis of its segmental results and deciding the comparability with that of the assessee.
AO/TPO is directed to consider both Kals Information Systems Ltd and ICRA Techno Analytics Ltd, for comparability after ensuring that they pass the RPT filter, and if required segmental data can be obtained. We, therefore, set aside the orders of lower authorities with regard to Kals Information Systems Ltd (seg) and ICRA Techno Analytics (seg) back to the file of AO/TPO for consideration afresh.
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2015 (9) TMI 1611
Incriminating materials and money found in search - presumption under section 132(4A) - Held that:- Merely because the findings of the Assessing Officer was approved by the Appellate Tribunal, the order of the Tribunal could not be said to be vitiated. That apart, on going through the order of the Appellate Tribunal, we found that each and every circumstances pointed out by the assessee during the course of the arguments were considered by the Tribunal and has found that the evidence recorded by AO during the course of the search was corroborative in nature and, therefore, were acceptable in law.
Tribunal has also found that the amount recovered from the hotel premises was proved to be the amount belonging to the company and this conclusion is corroborated by the evidence taken on oath. So also, the Tribunal has found that the slips recovered from the office premises were not explained by the assessee and also that having regard to the quantum of contract work undertaken by the assessee, it would be reasonable to presume that the amounts noted in the seized materials represented amounts in lakhs
Revision u/s 263 - Held that:- As under section 263 the Commissioner had every power to direct the Assessing Officer to take into account materials, accounts and other circumstances which were not considered when the original assessment order was prepared.
On a query from the Bench as to whether the reassessment done which was the subject matter was on the basis of the materials which were not considered by the Assessing Officer in the original assessment, learned senior counsel has informed that so far as the assessment which gave effect to the order under section 263, the materials considered were entirely different. Therefore, we are of the considered opinion that the finding of the Tribunal that the order of the Commissioner of Income-tax invoking the power under section 263 was in order does not require any interference in this appeal.
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2015 (9) TMI 1603
Reopening of assessment - addition of long term capital gain - notice issues prior to recording of reasons - Held that:- AO issued the notice u/s 148 dated 19.09.2011 prior to recording of the reasons under section 148 of the Act. Therefore, the notice issued under section 148 is wholly null and void and liable to be quashed because it was not in consonance with the provisions contained under section 148(2) of the Act. The ld. DR submitted that the notice under section 148 has been served upon assessee on 23.09.2011 and there may be a typographical error in the notice under section 148 of the Act. However, no material or evidence has been produced on record to justify such a contention.
Therefore, contention of ld. DR is rejected. In view of the above, it is clear that since notice under section 148 have been issued prior to recording of the reasons, therefore, entire re-assessment proceedings have been vitiated and the same are null and void and liable to be quashed. - Decided in favour of assessee
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2015 (9) TMI 1601
Reopening of assessment u/s 147 - notice under Section 143(2) mandatory - Held that:- Assessment completed u/s. 147 of the Act without issuing a notice u/s. 143(2)is not a valid assessment and that provisions of section 292BB cannot cure the basic defect non issuance of 143(2)notice. In the case before us, there in evidence of service of notice issued, u/s. 143(2)of the Act, by the AO. Therefore, we are of the opinion that the FAA was not justified in holding that the order passed by the AO u/s. 147 was a valid order. Reversing his order, we decide the effective ground of appeal in favour of the assessee. As a result, appeal filed by the assessee stands allowed.
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2015 (9) TMI 1600
TPA - revenue challenges the exclusion of companies on the basis of lower or higher depreciation as a percentage of total costs and on the basis of sales either less than ₹ 5 crores or more than ₹ 50 crores - Held that:- On perusal of the order of the CIT (A) it is plain that the TPO has accepted the filter on the basis of depreciation to the total costs less than 5% and more than 50%. Taking into account that the Assessee‟s sales was in the vicinity of approximately ₹ 10 crores, the CIT (A) held that the companies having turnover of more than 50% should not be included as comparables. The decision in Chryscapital Investment (2015 (4) TMI 949 - DELHI HIGH COURT) also underscores that any one parameter cannot ipso facto be determinative of how an ALP has to be determined.
In the facts and circumstances of the present case, where the TPO has accepted both filters, i.e. the filter on the basis of depreciation to the total costs less than 5% and more than 50% as well as the turnover filter, the Assessee is right in contending, on the strength of the decision MCorp Global (P) Ltd. v. CIT, Ghaziabad (2009 (2) TMI 5 - SUPREME COURT), that the benefit granted to the Assessee by the AO, who has accepted and acted upon the report of the TPO, could not have been taken away by the ITAT.
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2015 (9) TMI 1586
TDS u/s 195 - deducting tax at source on the payments made to a Netherland Entity, M/s New Skies Satellites N.V. - royalty payment - Held that:- In view of the conclusion of fact and law in case of payee, we cannot reckon the payment as royalty in the hands of payee. Further it is also an admitted fact that the M/s New Skies Satellites NV does not have any PE in India and, therefore, even if it constitutes a business income in its hand, the same is not taxable in India under Article 7 of DTAA. Now that when this issue as of now has been settled in the case of the payee from the stage of the High Court that it does not constitute income in the hands of the payee, we accordingly, hold that assessee is not in default and was not liable to deduct TDS on such a payment u/s 195 and therefore, there is no liability of the assessee to deduct TDS on the payment made on account of purchase of satellite bandwidth capacity.
So far as arguments raised by the Special Counsel of the revenue on the issue that subsequent amendment brought in statute with retrospective effect should be considered for deciding the issue that such a payment now amounts to “royalty” and same is to be viewed afresh despite the finality of the issue in the case of the payee from the stage of the High Court, we are of the considered opinion that, it will be purely an academic exercise only. The reason being that, the assessee has liability to deduct TDS u/s 195, only when the payment of the sum in the hands of the non-resident is chargeable to tax under the relevant provisions of the Income Tax Act. Here in this case, it has already been upheld that such a sum is not chargeable to tax in India in the hands of the non-resident, that is, M/s New Skies Satellites NV by the High Court, therefore, it wholly undesirable for us, to decide that payment made by the assessee constitutes income in the hands of the payee. Accordingly, the order of the CIT(A) that assessee is not required to deduct TDS on payment made to M/s New Skies Satellites NV is upheld and consequently grounds raised by the revenue are dismissed.
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2015 (9) TMI 1585
Penalty provisions under section 271(1)(c) - unrecorded payment in respect of the land purchased by the assessee survey record and statement taken during the course of survey relied upon - Held that:- Since there was a difference of opinion between the learned Members, constituting a Division Bench of I.T.A.T., Jaipur and the Hon'ble President, I.T.A.T. nominated Shri G.D. Agrawal, Vice President as Third Member.
The Hon'ble Third Member concurred with the findings of the Hon'ble Judicial Member and held as agreeing with the finding of the Assessing Officer in the penalty order that the assessee did not disclose the correct purchase consideration of the agricultural land. The purchase price of the land was recorded at a lesser value in the regular books of account. These facts were detected by the Revenue as a result of survey at the assessee's premises. During the course of survey, the Director of the Company admitted these facts. Thus, it is a clear case where the assessee furnished incorrect particulars in the original return of income with regard to purchase price of agricultural land, value of closing stock as well as the business income. The revised return modifying the figure of purchase value of agricultural land, value of closing stock as well as business income was furnished only after the detection of these discrepancies during the course of survey. In view of above, have no hesitation to hold that on the facts and circumstances of the case, learned Judicial Member rightly proposed to sustain the penalty imposed u/s 271(l)(c). - Decided against assessee.
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2015 (9) TMI 1583
Disallowance u/s 14A of the Act in respect of the exempt income - Held that:- Referring to the binding judgment of the Hon’ble Bombay High Court in the case of Godrej Agrovet (2010 (9) TMI 291 - ITAT, MUMBAI ), we are of the opinion that the disallowance @ 2% of the exempt income as upheld by the Hon’ble High Court, is appropriate.
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2015 (9) TMI 1577
Penalty u/s 271(1)(b) - assessee has committed default by not attending on the date of hearing fixed vide notice issued by AO u/s 143(2)/142(1) - reasonable cause for default - Held that:- As explained by the assessee in its written submissions that Mrs. Anju Gupta, daughter-in-law of the principal officer of the assessee was suffering from severe disease and had to be hospitalized during the relevant time and thereafter, Shri Satya Prakash Gupta, principal officer of the assessee himself became ill due to heart attack and had to be hospitalized and that the whole family was disturbed and, therefore, there was no compliance.
As find that the learned CIT(A) has recorded that in the given circumstances, the penalty is levied at ₹ 10,000/- each only for three of the six assessment years involved and the penalties for the remaining three assessment years were deleted. Also find that for the same default, multiple penalties have been levied in this case. Considering the totality of facts and circumstances of the case and the explanation of the assessee and that the penalty was levied for the same default, it is of the view that the ends of justice shall be met if the penalty levied u/s 271(1)(b) of the Act is restricted to only one assessment year and is deleted for the other years. Accordingly, the penalty of ₹ 10,000/- levied for assessment year 2006-07 confirmed rest deleted. - Decided partly in favour of assessee.
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2015 (9) TMI 1574
Rectification of mistake - applicability of section 40(a)(ia) to expenditure has already been paid during the year and is not payable at the year - Held that:- Section 40(a)(ia) applicable only to the expenditure which is payable as on 31st March of every year and that the provisions of this section cannot be invoked to disallow the amounts which have already been paid during the year, which has not been considered by this Bench as held by in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. (2008 (9) TMI 11 - SUPREME COURT) that non-consideration of the decision of the Hon’ble Jurisdictional High court [or the Hon’ble Supreme Court) is a mistake apparent on record is rectifiable u/s. 254(2). Accordingly, we recall the aforesaid Order of this Bench to that extent. The Registry is directed to fix the case in due course.
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2015 (9) TMI 1568
Misuse of exemption granted under Section 12A - Held that:- The petitioner submitted a representation dated 30.06.2015 and the same is yet to be considered.
Respondents would submit that the representation dated 30.06.2015 was sent on 08.08.2015 and received by the respondents on 11.08.2015 only and also submitted that the same will be disposed of on merits and in accordance with law. The said submission made by the learned counsel for the respondents is recorded.
Considering the limited relief sought for by the petitioner, without going into the merits of the case, the respondents are directed to consider the representation of the petitioner dated 30.06.2015 and pass appropriate orders on merits and in accordance with law within a period of eight weeks from the date of receipt of a copy of this order.
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2015 (9) TMI 1566
Calculation of disallowance as per Rule- 8D sec 14A - Held that:- We are of the opinion that the disallowance confirmed by the CIT (A) is proper but the same is subjected to the correctness of the calculations as per clause-(ii) & (iii) of Rule-8D(2). AO may examine the correctness before restricting the disallowance as held by the CIT (A). In this regard, we confirm the order of the CIT (A) in substance and therefore, it does not call for any interference. Accordingly, ground raised by the Revenue are dismissed
Nature of income - treating interest earned on money lending operation under the head Profit and Gains from Business and Profession or Income from Other Sources - Hel that:- CIT (A)’s decision, in treating the interest income earned on money lending operation as Profits & Gains of Business or Profession’, is reasonable and it does not call for any interference. In this regard, we have considered ‘object clause’ authorizing the assessee to conduct the business of money lending and the entries in the books of accounts and the bank accounts. Accordingly, ground raised by the Revenue is dismissed
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