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2016 (5) TMI 1478 - SUPREME COURT
Constitutional validity of Sections 499 and 500 of the Indian Penal Code and Section 199 of the Code of Criminal Procedure - Human Rights - fundamental right to free speech - Held that:- The principles as regards reasonable restriction as has been stated by this Court from time to time are that the restriction should not be excessive and in public interest. The legislation should not invade the rights and should not smack of arbitrariness. The test of reasonableness cannot be determined by laying down any abstract standard or general pattern. It would depend upon the nature of the right which has been infringed or sought to be infringed. The ultimate "impact", that is, effect on the right has to be determined. The "impact doctrine" or the principle of "inevitable effect" or "inevitable consequence" stands in contradistinction to abuse or misuse of a legislation or a statutory provision depending upon the circumstances of the case.
The conception of social interest has to be borne in mind while considering reasonableness of the restriction imposed on a right. The social interest principle would include the felt needs of the society.
The principles being stated, the attempt at present is to scrutinize whether criminalization of defamation in the manner as it has been done Under Section 499 Indian Penal Code withstands the said test. The submission of the Respondents is that right to life as has been understood by this Court while interpreting Article 21 of the Constitution covers a wide and varied spectrum. Right to life includes the right to life with human dignity and all that goes along with it, namely, the bare necessities of life such as nutrition, clothing and shelter and facilities for reading, writing and expressing oneself in diverse forums, freely moving about and mixing and commingling with fellow human beings and, therefore, it is a precious human right which forms the are of all other rights.
Whether Section 499 of Indian Penal Code either in the substantive sense or procedurally violates the concept of reasonable restriction? - Held that:- Explanation 1 stipulates that an imputation would amount to defamation if it is done to a deceased person if the imputation would harm the reputation of that person if he is living and is intended to be harmful to the feelings of his family or other near relatives. It is submitted by the learned Counsel for the Petitioners that the width of the Explanation is absolutely excessive as it enables the family members to prosecute a criminal action whereas they are debarred to initiate civil action for damages.
The provision along with Explanations and Exceptions cannot be called unreasonable, for they are neither vague nor excessive nor arbitrary. There can be no doubt that Court can strike down a provision, if it is excessive, unreasonable or disproportionate, but the Court cannot strike down if it thinks that the provision is unnecessary or unwarranted. Be it noted that it has also been argued that the provision is defeated by doctrine of proportionality - To treat a restriction constitutionally permissible it is necessary to scrutinize whether the restriction or imposition of limitation is excessive or not. The proportionality doctrine recognizes balancing of competing rights and the said hypothesis gains validity if it subserves the purpose it is meant for.
When a law limits a constitutional right which many laws do, such limitation is constitutional if it is proportional. The law imposing restriction is proportional if it is meant to achieve a proper purpose, and if the measures taken to achieve such a purpose are rationally connected to the purpose, and such measures are necessary. Such limitations should not be arbitrary or of an excessive nature beyond what is required in the interest of the public. Reasonableness is judged with reference to the objective which the legislation seeks to achieve, and must not be in excess of that objective.
The constitutional validity of Sections 499 and 500 of the Indian Penal Code and Section 199 of the Code of Criminal Procedure - petition disposed off.
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2016 (5) TMI 1477 - ITAT AMRITSAR (SMC).
Addition on account of undisclosed investment and on account of gross profit earned on estimated profits - Held that:- CIT(A) is not justified in sustaining the addition of ₹ 1,32,000/- by applying G.P. rate on the alleged sales. Under the Income Tax Act, addition on account of Net profit rate can be made for the purpose of assessment and not on the basis of G.P. Rate.
As such, the addition of ₹ 1,32,000/- confirmed by the CIT(A) is deleted. It is also pertinent to mention here that where N.P. rate is applied, no separate addition can be made on account of purchases made outside the books of account. Therefore, the addition of ₹ 1,00,000/- sustained by the CIT(A) on account of undisclosed investment for making undisclosed sales is deleted. - Decided in favour of assessee.
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2016 (5) TMI 1476 - ITAT MUMBAI
Reopening of assessment u/s 147 - Deduction u/s 80IA - ‘initial assessment year’ - set off against the other business income in earlier years and set-off being allowed by the Revenue shall not be adjusted from the profit so computed by the assessee company - Held that:- No hesitation in holding that the assessment year 2002-03 chosen by the assessee company shall be the ‘initial Assessment year’ for the purposes of claiming deduction u/s 80IA of the Act , although the Jojobera 67.5MW unit started generating power w.e.f. assessment year 1997-98.
Thus, Jojobera 67.5 MW power undertaking shall be deemed to be the only source of the income as provided u/s 80IA(5) of the Act only from the assessment year succeeding the assessment year 2002-03 being the initial assessment year and subsequent assessment year up-to and including the assessment year for which the determination is to be made which in any case shall not transgress beyond fifteen years from the year when Jojobera 67.5 MW power generating unit started generating power. We also hold that the notionally brought forward losses/ depreciation of the Jojobera 67.5 MW power generating unit for the period from the assessment year 1997-98 to 2001-02 which are already set off against the other business income in earlier years and set-off being allowed by the Revenue shall not be adjusted from the profit so computed by the assessee company with respect to Jojobera 67.5MW power generating unit for the assessment year 2002-03 for the purposes of computing deduction u/s.80IA of the Act.
Since, we have adjudicated this issue on merit in favour of the assessee company based on detailed discussions and reasoning as set out above, the grounds raised by the assessee company challenging the reopening of the assessment u/s 147/148 has become academic and infructuous and hence we refrain from deciding the same and the questions raised by the assessee company in the grounds of appeal are kept open.
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2016 (5) TMI 1475 - PUNJAB & HARYANA HIGH COURT
Withdrawal of application seeking Permission to bring the actual and factual position to the knowledge of the Court as an Intervenor - Held that:- Permission granted.
Appointment of President and Vice-President of Customs, Excise and Service Tax Appellate Tribunal - only a Single Bench of CESTAT is working since December, 2015 - Held that:- The litigants have fundamental right to have their litigations disposed of as expeditiously as possible. The above unhappy trend in Chandigarh Bench is found all over the country. Under such circumstances, we do not find any reason for the Government of India to delegate only the financial powers and the roster preparation work alone to Sh. M.V. Ravindran, Member (Judicial), CESTAT.
Extraordinary situation warrants extraordinary remedy under Articles 226 and 227 of the Constitution of India. Therefore, in the larger interest of public and litigants and also for smooth functioning of the Tribunal, Sh. M.V. Ravindran, Member (Judicial), CESTAT shall exercise all the powers of the President to discharge administrative as well as judicial functions including transfer and posting for smooth functioning of the Tribunal in the entire country until a regular President is posted. Member (Technical) in CESTAT Bench, Chandigarh be posted within 15 days’ time from the receipt of this order.
The order be communicated to Sh. M.V. Ravindran, Member (Judicial), CESTAT and also to Union Territory, Chandigarh forthwith for strict compliance.
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2016 (5) TMI 1474 - ITAT DELHI
TPA - Non accepting working capacity utilization furnished by the assessee in relation to CPP segment - Held that:- The assessee has, furnished segmental reporting of Annual Report 2007 of Hikal Ltd. for the first time before the ITAT with decision of Special Bench of the ITAT in the case of Quark Systems (P.) Ltd. v. ITO [2009 (10) TMI 591 - ITAT, CHANDIGARH] holding that a comparable can be considered even at the appellate stage for the first time. Similarly, the authorities below were not justified in selecting Dhanuka Agritech Ltd. as comparables since it has gone through restructuring as per director's report referred in Annual Report 2006-07. As during the year under consideration, sales of Dhanuka went up by 260%, profits by 152%, whereas overall profit margin dipped by nearly 3% as compared to earlier years. This argument has been raised by the assessee before the ITAT for the first time. Since facts of the case for the assessment year under consideration are similar to the facts in the case for the assessment year 2006-07, we respectfully following the decision taken on an identical issue in the case of assessee itself set aside the matter to the file of the Assessing Officer to decide the issue afresh.
Rejection of comparable - Held that:- A company cannot be rejected merely because it is making losses - filter of selecting company with R & D Expense less than 3% as comparable needs verification - CIT(Appeals) was not justified in allowing some of the services and rejecting others which are being part of the same agreement.
We are of the view that when nature of services provided to CPP and OC Segments is same as provided to other segments, the learned TPO ought to have adopted consistent treatment to the services utilized in CPP as well as OC Segments and services rendered to the other business segments.
We are of the view that it is not the prerogative of tax authorities to ascertain the benefit received from the availment of services and the benefit received from a particular service has to be perceived from the point of view of businessman and not the tax authorities.
The grievance of the assessee also remained that it had duly submitted evidences on sample basis relating to receipt of services from its AEs. These services were (i) marketing and business support services; (ii) sources/logistics/HR services; (iii) legal services; & (accounting and financial services). A detailed submission in this regard made on behalf of the assessee has been reproduced hereinabove while discussing submissions made by the Learned AR. It was submitted that in reference to some additional evidences, remand report was obtained by the Learned CIT(Appeals) but the same has not been duly considered. Since we are setting aside the matter to the file of the learned TPO for his fresh adjudication on the issue, he is also directed to verify the above grievance and consider the same while deciding the issue.
Further contention of the AR remained that the assessee company has no intention to shift profits from India to other jurisdiction having regard to the fact that it is some of service provider countries, the corporate tax rate is as high as 41% (Japan) and 30% (Australia, Newzeland and Thailand) which is more than or closed to the corporate tax rates in India. Reliance has been placed on several decisions in this regard including the decision in the case of Loreal India Pvt. Ltd. [2015 (2) TMI 407 - BOMBAY HIGH COURT] approving the decision of ITAT accepting the method adopted by the assessee observing that AE's which supplied to the tax-payers earned only 2-4%, hence, it cannot be said that there is set of profits.
As discussed above, TPO is directed to decide the issue of adjustment in relation to intergroup services afresh after affording opportunity of being heard to the assessee on the grievances discussed above. The ground of the appeal preferred by the assessee are thus allowed for statistical purposes.
Adjustment under intra group services and allowing the expenses related to treasury charges and safety consultancy services availed - Held that:- CIT(Appeals) has rightly come to the conclusion that no adjustment should be made on account of treasury charges services, process safety management services etc. resulted in the relief of ₹ 14,19,69,937 to the assessee. The first appellate order on the issue is reasoned one, hence, we are not inclined to interfere therewith. The same is upheld. The ground of the appeal of the Revenue are accordingly rejected.
TPO is also directed to use the data available at the time of deciding the issue of ALP afresh and consider the benefit available under proviso to section 92C of the Income-tax Act, 1961 for downward variation of 5% from the arm's length price. These grounds are thus allowed for statistical purposes.
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2016 (5) TMI 1473 - ALLAHABAD HIGH COURT
Termination of services of petitioner working as Manager in U.P. Export Corporation Limited Maintainability of writ petition under Article 226 of Constitution of India - specific relief - Held that:- The petitioner's rights is founded on a contract and once contract has already come to an end in accordance with its stipulation, no writ jurisdiction under Article 226 of the Constitution would lie so as to entitle a party to the contract for continuance of contractual obligation or for reentering into contract as there is no such statutory obligation upon respondents to enter into the contract once the same has come to an end. In such cases, where the contract of service is not governed by the statutory provisions, it is well-settled that contract of service cannot be sought to be enforced by seeking reinstatement or continuance since such a relief is barred under the Specific Relief Act.
In Executive Committee of U.P. State Warehousing Corporation, Lucknow Vs. C.K. Tyagi [1969 (9) TMI 125 - SUPREME COURT OF INDIA] held that position in law is that no declaration to enforce a contract of personal service will be normally granted. But there are certain well-recognized exceptions to this rule and they are: To grant such a declaration in appropriate cases regarding (1) a public servant, who has been dismissed from service in contravention of Article 311. (2) Reinstatement of a dismissed worker under Industrial law by Labour or Industrial Tribunals. (3). A statutory body when it has acted in breach of a mandatory obligation, imposed by statute.
The petitioner, therefore, has remedy in common law regarding damages for alleged breach of contract but relief as sought in this writ petition is not permissible.
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2016 (5) TMI 1472 - ITAT JAIPUR
Non deduction of tds u/s 194C printing and stationary expenses - Disallowance u/s 40(a)(ia) - Held that:- All the expenses related to printing and stationary on the basis of particular specification given by the assessee and the assessee had paid VAT on it. The Board circular No. 681 dated 08/3/1994 referred by the AR of the assessee is squarely applicable. Accordingly, such payments are not covered U/s 194C of the Act. Case of CIT-XVII, Delhi Vs Silver Oak Laboratories P. Ltd. (2010 (8) TMI 839 - SUPREME COURT) is also squarely applicable including other cited cases of the assessee. Alternatively, the assessee’s claim is allowable on paid basis as relied upon in the case of CIT Vs. Vector Shipping Services (P) Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT). These facts had not been controverted by the DR during the course of hearing. Therefore, we allow the assessee’s appeal on this ground.
Disallowance of provisions of gratuity - Held that:- The facts of the present case and similar additions were made in A.Y. 2008-09 by the ld Assessing Officer, which has been deleted by the Coordinate Bench in assessee’s own by relying on the Hon'ble Supreme Court decision in the case of CIT Vs Textool Co. Ltd. [2009 (9) TMI 66 - SUPREME COURT ]. The assessee had applied before the ld CIT, Kota but approval of the prescribed authority is pending. Therefore, there is no lack on the part of the assessee. Accordingly, this ground of the assessee is allowed.
Addition of pension, leave salary - amount allowable only as paid before due date of return - Held that:- CIT(A) wrongly concluded that amount paid on 03/2/2009 had been included in provision. However, as per paper book submitted by the assessee, this amount of ₹ 5,92,714/- was paid over and above ₹ 43,57,530/-. The ld DR has not controverted the facts and figures, therefore, we allow the assessee’s appeal on this ground.
Not allowing the provision of agreement arrears - Held that:- This issue has been considered by the Coordinate Bench in assessee’s own case for A.Y. 2008-09, which is squarely applicable on the facts and circumstances of the case for the year under consideration. Therefore, by respectfully following the order of the Coordinate Bench, we allow the assessee’s appeal on this ground.
Interest addition - difference in disclosing the interest - credit of TDS had been given on interest payment - Held that:- The assessee had admitted this difference on the basis of 26AS and disclosed the differences of interest income of ₹ 78,563/- in A.Y. 2010-11 and there is no revenue loss if the same amount is considered in A.Y. 2010-11 by the assessee. The Hon'ble Supreme Court decision in the case of Excel Industries (2013 (10) TMI 324 - SUPREME COURT) is squarely applicable. Therefore, we delete the addition confirmed by the ld CIT(A).
Addition of excess cash reserve - This amount is not payable on expenditure - CIT(A) restricted this addition of ₹ 34,489/- by observing that as per balance sheet as an amount of ₹ 96,342/- had been shown as excess cash reserve. This amount is not payable on expenditure - Held that:- this issue is considered by the Hon’ble ITAT in assessee’s own case in A.Y. 2008-09 wherein it has been held that reserve account in balance sheet has been created on the liability side. The same represents the excess cash found as per books which the bank is required to repay to the legitimate person on a proper claim. Thus, it is an amount in trust held by the bank, it is not credited to P&L account and is a balance sheet item. The assessee’s explanation is bonafide.
Disallowance on account of Ganesh Mahotasava - allowable busniss expenditure - Held that:- Lord Ganesha is the God of Wealth as considering in Indian methodology. The assessee also deals in banking. It is a fact that all the banks generally participate in Ganesh Mahotasava, which motivates the employee as well as maintain good relation with the customers. Therefore, it is an allowable expense U/s 37 of the Act. The case laws relied upon by the assessee is also applicable. Accordingly, order of the ld CIT(A) on this ground is confirmed.
Addition on account of leave salary encashment fund U/s 43B(f) - assessee had shown ₹ 94,84,740/- as leave salary encashment fund under “Funds and Reserve” in the balance sheet as against Rs. Nil shown in the assessment year 2008-09 - Held that:- Assessing Officer had made addition by making disallowance U/s 43B(f) of the Act by taking amount from the balance sheet, which is grossly incorrect and without even going through his own action on the same issue for the expenditure claimed in the P&L account. It is a clerical mistake before the ld CIT(A), who had verified from the record, which has also been clarified during the course of hearing by the ld AR, which has not been controverted by the ld DR. - Decided in favour of assessee
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2016 (5) TMI 1471 - ITAT MUMBAI
Addition on account of unsecured loans u/s 68 - assessee was unable to substantiate the genuineness of the transaction and unable to prove the capacity and credit worthiness of the lenders - Held that:- Most of the amount has come from the family members/group entities, which are regularly assessed to tax with the same AO and these matters could have been examined and the other allegations of the AO has also been turned down by the CIT(A) on cogent reasons as discussed. Once that is so, then there is no need for making such a wild allegation that the capacity of the lenders has not been proved.
Other important fact emerging from records as noted by the CIT(A) that the amount of ₹ 79,90,000/- received from the 12 parties consisting of the family members/group entities have been repaid back in the impugned year itself and on this aspect as pointed out by the ld. Counsel, ITAT in the case of assessee’s brother Haresh Majethia has deleted the addition on the ground that if the receipts and repayment of loan is corroborated by the ledger account and bank entries. Here also exactly the same fact is permeating, therefore, following the Tribunal order this amount of ₹ 79,90,000 has to be deleted.
On other amount of ₹ 61.50 lakhs also, it is undisputed fact that it has been received from one proprietorship concern of the assessee to another, therefore, it cannot be added as income of the assessee. Thus, on these amounts of loans no adverse inference can be drawn and has rightly been deleted by the CIT(A). As noted above, already an amount of ₹ 46,95,000/- which has been added in the hands of the lenders has already been directed to be deleted by CIT(A) for which there is no dispute by the revenue. Thus, out of ₹ 1,55,10,000/-, sum of ₹ 79,90,000/- and ₹ 61,50,000/- (aggregating ₹ 1,41,40,000) could not have been added in wake of the aforesaid facts. Regarding other small loans also, we agree with the finding of the CIT(A) that the entire onus cast upon the assessee in wake of evidences filed have been fully discharged and accordingly, no addition could be made under the deeming provisions of section 68. - Decided against revenue.
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2016 (5) TMI 1470 - ITAT DELHI
Deduction u/s 80IC on interest earned on FDR - interest income netted off with interest expenditure incurred by the assessee - Held that:- The assessee has claimed that the interest income earned by him on FDRs are linked with the business of the assessee and therefore they should be netted off with interest expenditure incurred by the assessee. Most of the fixed deposit receipts are for the purposes of obtaining bank guarantee for the purposes of the business of the assessee.
CIT (A) has himself held that Interest earned on FDR placed as margin money for securing letter of credit from bank. Assessee has placed balance sheet on record which shows that assessee has only borrowed funds such as secured loan, unsecured loan and partners capital which is also a borrowings because interest is allowable as expenditure on this sum it might not have claimed such expenditure during the year. It does not have its own reserve and surplus which does not carry interest. All FDRs have been taken from C C account, used for the bank guarantee purposes as submitted by AR, and not disputed by the Ld DR. Interest Income on FDR is also taxed by the AO as business income. It is also apparent that assessee does not have any other business other than the business of eligible undertaking. Further CIT (A) has rejected the reliance on all the decided case laws by the assessee holding that those cases pertain to Section 80 HHC not on section 80IA of the act.
Deduction u/s 80IC is allowed from the income derived from industrial undertaking. Therefore, we do not find that word “derive “can have different meaning for these two sections. In view of this we hold that all those decisions relied by the assessee squarely applies to the facts of the present case as far as the issue of netting off the interest is concerned. In view of this, the ground of the assessee so far as netting off the interest income of ₹ 302269/- is allowed and order of CIT (A) is reversed to that extent. - Decided in favour of assessee.
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2016 (5) TMI 1469 - ITAT DELHI
Disallowance u/s 43B - statutory duties paid during the year like excise duty, customs duty on import/purchase of inputs/components and also an amount of duty paid in PLA account - Held that:- Under similar set of facts has decided an identical issue after discussing in detail and following the decision cited before it including the decision of special Bench of the ITAT in the case of DCIT vs. Glaxo Smith Klin Consumer Health Care Ltd. (2007 (7) TMI 334 - ITAT CHANDIGARH) holding that the excess amount of excise duty reflected in the account-current is nothing but actual payment of excise duty even though mentioned as advance payment and hence allowable as deduction under sec. 43B of the Act in the year of payment. The special bench has further clarified that the allowing of deduction on payment basis could not result in double deduction under any circumstance. Thus we set aside the matter to the file of the Assessing Officer to decide the issue afresh.
Customs duty paid on import of components for export purposes for which exports had not been made - Held that:- Identical issue in the appeal for the assessment year 2006-07, we set aside the matter to the file of the Assessing Officer to decide the issue afresh as per the above decision of the ITAT after affording opportunity of being heard to the assessee
Duty draw back accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee and amount is quantified and not in the year of export, we direct the Assessing Officer to decide the issue afresh.
Disallowance regarding balance in RG 23A Part-II - Held that:- We set aside the matter to the file of the Assessing Officer to decide the issue afresh in view of the above decision of the ITAT in the case of assessee itself in the appeal for the assessment year 2006-07 after affording opportunity of being heard to the assessee.
Disallowance of advance payment, liability in respect of which has not crystallized and, therefore, not allowable as deduction under sec. 43B - Held that:- Identical issue under similar set of facts has been decided by the ITAT in the appeal for the assessment year 2006-07 AO is directed to first verify the argument of following the 'Inclusive method’ and then allow deduction u/s 43B in the manner discussed above, if the same did not get eventually allowed. The AO should further make it is sure that no double deduction is allowed on this score, either in the current year with the last year’s amount getting separately deducted u/s 43B or in the next year with the current year’s amount getting separate deduction.
Disallowance of excess consumption of raw-material and component - Held that:- Identical issue under similar set of facts has been decided in favour of the assessee by the ITAT in the appeal for the assessment year 2006-07 (supra) in the case of assessee itself, holding that there can be no logic in disallowing such amount which is nothing but excess consumption of inputs.
Disallowance made under sec. 14A - Held that:- Before making disallowance under sec. 14A of the Act, it is mandatory on the part of the Assessing Officer to record his satisfaction that explanation made by the assessee on the applicability of the provisions under sec. 14A of the Act. We thus in the interest of justice set aside the matter to the file of the AO to decide the issue afresh following the ratios laid down by the Hon'ble jurisdictional High Court in the case of Maxopp Investment Ltd. (2011 (11) TMI 267 - DELHI HIGH COURT) after affording opportunity of being heard to the assessee. The ground is accordingly allowed for statistical purposes.
Validity of disallowance of deduction claimed under sec. 35DDA - Held that:- Similar issue came up for consideration before the Tribunal in its order for the AY 2004-05. After making a thorough discussion on the issue, the Tribunal has held that Rule 2BA is relevant only for the purpose of availing exemption u/s 10 by employees and not for the purpose of allowing deduction to the employer u/s 35DDA of the Act. Resultantly, the disallowance made by the AO came to be knocked down by the tribunal. In the absence of any distinguishing factor having been pointed out by the ld. DR, respectfully following the precedent, we direct to allow deduction u/s 35DDA.
Validity of disallowance of expenditure incurred on club membership - Held that:- Hon’ble Supreme Court in CIT vs. United Glass Manufacturing Company Ltd. (2012 (9) TMI 914 - SUPREME COURT) in which it has been held that no disallowance can be made for club membership in respect of the employees of the company. Similar view has been taken by the Tribunal in the assessee’s own case for the earlier assessment years including the immediately preceding year. Respectfully, following the above precedents, we order for the deletion of this addition.
Validity of disallowance of royalty paid - Held that:- identical issue in the case of assessee itself for the assessment year 2006-07, we hold that the amount of royalty considered by the Assessing Officer as capital expenditure should be allowed as a revenue expenditure. At the same time, depreciation allowed by the Assessing Officer on this amount should be taken back. The Assessing Officer is directed accordingly.
Disallowance of R & D Cess paid - assessee treated the amount of royalty and cess on royalty as revenue expenditure - Held that:-There is no dispute on the nature of cess, which is on royalty and has been treated both by the assessee as well as the AO as part and parcel of royalty and accordingly claimed/disallowed in line with the treatment of royalty. Since we have allowed deduction for the entire amount of royalty paid by the assessee during the year by deleting the TP adjustment and also overturning the action of the AO in treating the remaining half part as capital expenditure, the consequential amount of cess on royalty payment automatically becomes deductible. We, therefore, direct to allow deduction.
Disallowance of sales-tax subsidy claimed as capital receipts from the total income - Held that:- Respectfully following the above decision of the ITAT for assessment year 2006-07 (supra), we hold that the sales tax subsidy claimed as capital receipt from the total income cannot be characterized as anything other than a capital receipt. It is ordered accordingly to allow the claim as capital receipt.
Non-allowance of depreciation on written down value of software expense capitalized - Held that:- We set aside the matter to the file of the Assessing Officer for allowing deduction in respect of the written down value of the software expenses capitalized in earlier years after affording opportunity of being heard to the assessee in this regard.
Disallowance on account of provisional liability – Expenditure on account of FPI-OE Components - Held that:- It is the case of appellant that consistent method of making provision for aforesaid price increase is being followed for last many assessment years. As noticed, the claim has always been allowed by the Revenue, except in assessment year 2003-04. It was therefore not appropriate on the part of the assessing officer to have disallowed claim for provision for the foreseen price increase in the year under consideration, despite similar claim being allowed in earlier assessment years.
Taking into consideration the entirety of the circumstances, we are of the considered view that provision for foreseen price increase made by the appellant during the relevant year in respect of component/material supplied by the vendors for the escalation in price, which is clearly supported by detailed item-wise working placed in the paper book, clearly represent an accrued/crystallized liability allowable as business deduction. Being so, disallowance made by the assessing officer is directed to be deleted.
Validity of disallowance on account of expenditure on excise duty - Held that:- ITAT on the issue and of the Excise Tribunal in the assessment year 2000-01 that shortage of stock of raw-material and the minor discrepancy was the result of accounting error due to use of large quantity of inputs procured from several hundred suppliers, we hold that the assessee was justified in claiming ₹ 77 lacs on account of expenditure on excise duty on payment basis under sec. 43B of the Act. The Assessing Officer is accordingly directed to allow the claim.
Adjustment on account of alleged AMP expenses, and relating to transfer pricing (royalty, royalty paid to non-AE and error in computing royalty) - Held that:- MP expenses unilaterally incurred by the appellant does not result in an international transaction so as to invoke the provisions of Chapter X of the Act. We thus set aside the matter to the file of the Assessing Officer to decide the issue as per above finding of the Hon'ble High Court after affording opportunity of being heard to the assessee.
Validity of adjustment made by the TPO on account of royalty - Held that:- Addition on account of transfer pricing adjustment can be made by making a comparison between the transacted value of an international transaction and its ALP. Thus it is clear that the availability of the transacted value of an international transaction is sine qua non. If such transacted value is either not separately available or cannot be precisely determined from a combined value of a number of international transactions, then the entire exercise of determining ALP fails. Instantly, we are confronted with such a peculiar situation. There is no separate value of the international transaction of royalty for use of licensed trademark and the tribunal has held in the earlier year that it is a payment of inseparable royalty for use of both the licensed information and the licensed trademarks. In such circumstances and respectfully following the order of the tribunal for the immediately preceding year, we order for the deletion of the addition of ₹ 127.195 crore on account of transfer pricing adjustment of royalty for use of licensed trademark.
Disallowance of credit of TDS certificate claimed through revised return - Held that:- The matter is set aside to the file of the Assessing Officer to consider the claimed TDS credit on the basis of revised return after affording opportunity of being heard to the assessee. Ground allowed for statistical purpose.
Computation of interest payable by the assessee under sec. 234B - Held that:- Charging of interest under sections 234B, 234C and 234D. This ground is consequential and is, accordingly, allowed except the charging of interest under sec. 234C. The Learned AR argued that the Assessing Officer computed interest under sec. 234C on the basis of income finally determined as against the income-tax due on returned income. We find force in the arguments put forth on behalf of the assessee that computation of interest under sec. 234C for deferment of advance tax is required to be made on the basis of ‘tax due on the returned income’ as has been enshrined in the provision itself. We, therefore, direct the Assessing Officer to verify this aspect of the matter and compute interest under sec. 234C as per law.
Royalty considered by the Assessing Officer as capital expenditure should be allowed as Revenue expenditure.
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2016 (5) TMI 1468 - ORISSA HIGH COURT
Levy of Central Excise Duty on coal - Validity of Notification dated 21-10-2015 - Held that:- The impugned notification dated 21-10-2015 issued by the Mahanadi Coalfields Limited under Annexure-1 appears to be in violation of the same - application allowed.
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2016 (5) TMI 1467 - SUPREME COURT
Principles of res judicata - Principle of estoppel - inheritance of property by illegitimate sons - U.P. Consolidation of Holdings Act, 1953 - Held that:- Where the decision is on a pure question of law then a Court cannot be precluded from deciding such question of law differently. Such bar cannot be invoked either on principle of equity or estoppel. No equitable principle or estoppel can impede powers of the Court to determine an issue of law correctly in a subsequent suit which relates to another property founded upon a different cause of action though parties may be same. As explained earlier, in such a situation the principle of res judicata is, strictly speaking, not applicable at all.
Principle of estoppel - Held that:- It operates against the party and not the Court and hence nothing comes in the way of a competent court in such a situation to decide a pure question of law differently if it is so warranted.
The issues of facts once finally determined will however, stare at the parties and bind them on account of earlier judgments or for any other good reason where equitable principles of estoppel are attracted.
Appeal dismissed.
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2016 (5) TMI 1466 - GUJARAT HIGH COURT
Jurisdiction - power of Commissioner to disqualify from attending before any authority in connection with any proceedings under the Act, any legal practitioner, Chartered Accountant, Cost Accountant or sales tax practitioner - case of petitioner is that it is the Bar Council of Gujarat which would be empowered to take disciplinary action against the petitioner and not the Commissioner, inasmuch as, the petitioner no longer continues to be a sales tax practitioner as envisaged under clause (c) of sub-section (1) of section 81 of the GVAT Act.
Held that:- Issue Notice returnable on 9th June, 2016. By way of ad-interim relief, the respondent is restrained from proceeding further pursuant to the impugned show cause notice dated April, 2016 (Annexure “D” to the petition).
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2016 (5) TMI 1465 - ITAT KOLKATA
Nature of income - power subsidy received as grant for promotion of industrial unit - revenue receipt OR capital receipt - diversion of views by members judicial and accountant - Held that:- Hon'ble President, ITAT, in his capacity as Third Member, has concurred with the conclusions arrived at by the learned Accountant Member that the power subsidy received by assessee in the above facts and circumstances is capital in nature. In accordance with the majority view, therefore, the appeals filed by the assessee are allowed.
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2016 (5) TMI 1464 - ITAT CHENNAI
Additions u/s 14A - assessee contented formula under Rule 8D has been applied without establishing any nexus between exempt income and expenditure incurred thereon for earning such exempt income - Held that:- The investments would definitely involve certain administrative and establishment cost since the decision to make investments, track investments, sale of such investments and follow-up of the receipt of income, sale proceeds etc have to be undertaken which entails definite costs. It is for this purposes that Rule 8D(2)(iii) provides that one half percent of the average value of the investments will be deemed to be expenditure incurred for the same. When the Act has specified a definite formula for working out the expenditure to be disallowed, the Department is not required to establish the nexus between the exempt income and expenditure incurred thereon for earning such exempt income. In view of the law laid down by the statute, since the assessee has not excluded any expenditure relatable to earning exempt income, AO has disallowed ˝ % of average value of the investments as per Rule 8D(2)(iii) as expenditure incurred for earning of exempt income and the ld. CIT(A) has rightly confirmed the disallowance made by the AO. - Decided against assessee.
Disallowance under section 35D - Held that:- In the present case, the assessee is stated to have incurred expenditure for creating intangible content of the motion picture industry. The expansion activity has not been completed in the assessment year under consideration as accepted by the assessee and therefore, either expansion activity has been completed or the production activity of the assessee has been carried out for which the assessee has claimed amortization of expenses under section 35D which in our opinion is not permissible. CIT(A) has elaborately discussed the issue with regard to claim of deduction u/s 35D by relying on various decisions and the assessee could not counter the findings of the CIT(A). Thus, we confirm the order of the CIT(A) - Decided against assessee.
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2016 (5) TMI 1463 - ITAT INDORE
Addition on account of peak credit - AO to apply gross profit @ 10% - Held that:- As gone through the order of Jurisdictional High Court in the case of CIT vs. Jagdishchandra Vishwakarma [2011 (2) TMI 1508 - MADHYA PRADESH HIGH COURT] wherein the facts are that all the payments were made through account payee cheques, but assessee could not produce the seller. Therefore, in that case, the Tribunal had held that if all the payments have been made through account payee cheques, the purchase cannot be termed as bogus.
In the instant case, the facts are not identical but in this case, the AO has not made any enquiry to prove that the money given by the assessee to Jai Deep Trading Company has returned back to the assessee, though the assessee has denied to make any bogus purchases from the above party. AO and CIT(A) is not justified in his action. In the result, the appeal of the assessee is partly allowed and we reverse the finding of the CIT(A) and we delete the addition on account of peak credit. We also direct the AO to apply gross profit @ 10%. - decided against revenue.
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2016 (5) TMI 1462 - ITAT MUMBAI
Nature of income - sale of land - business income or capital gains - assessee is a partnership firm, engaged in the business of development and construction - Held that:- assessee has capitalized interest cost in the cost of Badlapur land and this conduct of the assessee is in consonance with the treatment for a Capital Asset. It is a settled legal position that interest in respect of a Capital Asset is required to be added to the cost of Investment/Capital Asset.
Although the assessee has shown the Badlapur Land as WIP (i.e. inventory) in its books of accounts, yet since its inception, the accounting treatment given to Badlapur land in its books of accounts is that of/as applicable to a Capital Asset (i.e. Investment). The Hon'bIe Supreme Court has clearly held in the case of Kedarnath Jute Mfg. Co. Ltd. Vs. CIT [1971 (8) TMI 10 - SUPREME COURT] that the entries in books of accounts are not conclusive and that the true nature of income/expense is determinative in deciding the taxability of income or allowability of an expense.
AO directed to treat the gains on sale of Badlapur Land as LTCG in place of business income. - Decided in favor of assessee.
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2016 (5) TMI 1461 - DELHI HIGH COURT
Condonation of delay - eligible reasons for delay - Held that:- The Court is of the view that in view of the special circumstances explained in the petition, with the Petitioner company having been in liquidation for several years, the Petitioner should not be prejudiced in pursuing the appeal which has been decided ex parte against it by the ITAT.
In the peculiar facts and circumstances, the Court sets aside the impugned order passed by the ITAT and allows the M.A. thereby condoning the delay on the part of the Petitioner in seeking recall of the ex parte order dated 3rd June 2003 of the ITAT dismissing the appeal.
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2016 (5) TMI 1460 - DELHI HIGH COURT
Scheme of Arrangement - demerger company - adherence to Quorum of the meeting - Held that:- Requirement of obtaining the consents/no objections of the customers, joint development partners, tenants, vendors/brokers etc., as prayed for by the applicants, is dispensed with.
In case the quorum as noted above for the above meetings is not present at the meetings, then the meetings shall be adjourned by half an hour, and thereafter the persons present and voting shall be deemed to constitute the quorum. For the purpose of computing the quorum the valid proxies shall also be considered, if the proxy in the prescribed form duly signed by the person entitled to attend and vote at the meetings is filed with the registered offices of the demerged and resulting companies at least 48 hours before the meetings. The Chairpersons and Alternate Chairpersons shall ensure that the proxy registers are properly maintained.
The Chairpersons and Alternate Chairpersons shall ensure that notices for convening the aforesaid meetings of the equity shareholders, secured and unsecured creditors of the demerged and resulting companies, along with copies of the Scheme of Arrangement and the statement under Section 393 of the Companies Act, 1956, shall be sent to the equity shareholders, secured and unsecured creditors of the demerged and resulting companies by ordinary post at their registered or last known addresses at least 21 days before the date appointed for the meetings, in their presence or in the presence of their authorized representatives. Notice of the meetings shall also be published in the Delhi editions of the newspapers “Business Standard” (English) and (Hindi) editions in terms of the Companies (Court) Rules, 1959 at least 21 days before the date appointed for the meetings.
The Chairpersons and Alternate Chairpersons will be at liberty to issue suitable directions to the management of the demerged and resulting companies so that the aforesaid meetings of the equity shareholders, secured and unsecured creditors of the demerged and resulting companies are conducted in a just, free and fair manner. The fee of the Chairpersons and the Alternate Chairpersons for the aforesaid meetings shall be ₹ 50,000/- each in addition to meeting their incidental expenses. The Chairpersons will file their reports within two weeks from the date of holding of the aforesaid meetings.
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2016 (5) TMI 1459 - SUPREME COURT
Declaration of drought-like situation in some village in a district or a taluka or tehsil or block in the states of Bihar, Gujarat and Haryana - providing essential relief and compensation to people affected by the drought - failure of these States to declare a drought (if indeed that is necessary) effectively deprives the weak in the State the assistance that they need to live a life of dignity as guaranteed under Article 21 of the Constitution -
Held that:- Each of the three States that we are concerned with have their own unique method of determining whether there is a drought or not. According to the learned Additional Solicitor General the Manual and the Guidelines are indicative and not mandatory. The third affidavit of the Union of India complicates the matter by introducing the concept of 'federalism' that is the relationship between the Union and the States with respect to drought. The ostensible purpose of introducing this concept is to enable the Union of India to wash its hands off in matters concerning drought declaration and to give enough elbow room to a State Government to decide whether to declare a drought or not since the Manual is only a reference document and a guide for action and the State Governments could face situations under which they may need to deviate from the guidance given in the Manual. Under the circumstances, it is stated in the third affidavit of the Union of India that it would not be proper for the Union of India to sit in judgment over the decision of the State Governments or to frame binding guidelines.
Hence, it will not be proper to direct the states of Bihar, Gujarat and Haryana to immediately declare drought in Taluka/Tehsil/Blocks as suggested by the Petitioner. These states in any case have taken their own reasoned decision for not declaring drought in their states which have already been enumerated in the earlier affidavits filed by this department dated 10th February, 2016 and 11th March, 2016.
As mandated necessary Force, fund and plan need to be established to fulfill the required - The Secretary in the Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture in the Government of India is directed to urgently hold a meeting within a week with the Chief Secretary of Bihar, Gujarat and Haryana to review the apparent drought situation with all the available data and if so advised persuade the State Government to declare a drought in whichever district, taluka, tehsil or block is necessary.
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