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Income Tax - Case Laws
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2016 (7) TMI 1696
Disallowance of commission paid - HELD THAT:- AR and DR agreed that the issue stands decided against the assessee by the order of the Tribunal for the earlier years.
Addition u/s 40A(9) - contribution to Marine Navy Officers Welfare Fund and Utmal Employees Welfare Fund - HELD THAT:- Identical issue was decided in favour of the assessee by the Tribunal, while adjudicating the appeal for A.Y. 1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] wherein the CIT(A) has directed the Assessing Officer to allow deduction - Decided in favour of assessee.
Slump sale - Failure to treat the transfer of Bangalore undertaking as slump sale and disallowing depreciation - HELD THAT:- If ongoing concern is sold for a lump sum amount it has to be treated a slump sale and had to be taxed as such. In such cases itemized sale of the assets is not there-an amount is paid for transferring an independent unit. To find out the facts of the case we would like to refer to the agreement entered in to by the assessee with the JV company.
We find that in the agreement the assessee had specifically mentioned that the property was valued at Rs.59.31 crores for registration purposes. It is further found that in application made u/s.230A of the Act, the total sale consideration for transfer of construction manufacturing undertaking was mentioned and no separate value for land and building was indicated. Considering the above, we are of the opinion that no value was assigned to plot of land and building while transferring the assets to the JV and that the assessee had transferred the business at a lumpsum consideration by way of slump sale without assigning any individual value to various assets and liabilities.
We find that one of the reasons, given by the FAA, for not considering the transaction a slump sale was that the purchaser had assigned cost to the assets acquired by it.It is a coincidence that the AO for the assessee happened to be the AO for the JV also and from the return of income of the JV he found that the purchaser had shown exact cost of each of the assets.In our opinion, it cannot be the deciding factor.A purchaser of a going concern has to assign cost to the assets received by it. Accounting standard mandates that the entity acquiring a going concern has to get its assets valued. But, valuation report obtained by the purchaser do not prove at all that the assets had the same value for the seller .Once an assessee sells the lock stock and barrel of a unit for that assessee individual items loose existence. In the case before us, there is nothing on record to show that the value shown by the JV was the itemized value of the assets owned by the assessee.
Thus we hold that the sale of earth moving manufacturing unit was a slump sale. Here, we want to make it clear that the assessee would not be entitled to claim loss for the transaction in question. Decided partly in favour of assessee.
Computation of deduction u/s.80HHC - Respectfully following the orders of the Tribunal in earlier years part of the issue, raised by the assessee, is decided in its favour on Inclusion of scrap sales and other items of miscellaneous income in the total turnover, Set off of loss of export of trading goods against profit on export of manufactured goods.
Unclaimed credit balance in the total turnover - HELD THAT:- While deciding the appeal, filed by the assessee, the first appellate authority (FAA) followed the order of his predecessor of the earlier AY. and decided the issue against the assessee. We find that the issue is covered in favour of the assessee by the decision of Jeyar Consultants(supra), relied upon by it. Therefore, we decide issue in favour of the assessee.
Section 80HHC calculation and reduction of 90% of gross interest receipt from the profits of business disregarding interest paid by the assessee - HELD THAT:- Tribunal while deciding the issue for A.Y. 1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] allowed assessee ground of appeal - Thus decided in favour of assessee.
Set off of losses on export trading goods against profit on export of manufactured goods to be decided against assessee.
Reduction 90% of miscellaneous income received from profits of business - In the case of Sharda Gums [1999 (12) TMI 114 - ITAT JODHPUR] issue of interest income has been decided. It does not deal with the other items. Thus, the cases relied upon by the assessee are of little help to the resolve the issue. But, on the other hand the stand taken by the departmental authorities is also defective. We find that the AO and the FAA have relied upon the case of K K Doshi [2000 (8) TMI 74 - BOMBAY HIGH COURT] that stands reversed by the Hon’ble Apex Court [2007 (10) TMI 61 - SC Orde].Therefore, we are of the opinion that the issue needs a fresh adjudication at the level of the AO.
Addition u/s 14A - reducing the amount claimed as exempt under section 10 (15)and 10(33) - HELD THAT:- We find that while deciding the appeal for the AY.1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI], the Tribunal had disallowed the expenses relating to interest on tax free bonds @ 2%, and had held that strategic investments made by the assessee, should be excluded for 14A disallowance. Following the same, ground raised by the assessee is allowed in its favour, in part.
Computing book profit u/s 115JA - HELD THAT:- AR and DR stated that this issue stands decided in light of the decisions delivered in the cases of Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT], TRF Limited [2010 (2) TMI 211 - SUPREME COURT] The second item with regard to computation under section 115JA is about disallowance made under section 14A of the Act. Respectfully, following the judgment of Vijaya Bank (supra) and TRF Ltd.(supra)we allow the appeal filed by the assessee. Second item being of consequential nature, stands allowed for statistical purposes.
Disallowance of professional fees for projects not materialized - HELD THAT:- Identical issue was decided against the assessee by the Tribunal while deciding the appeal for A.Y. 1990-91 and 1993-94 wherein as held even though the proposed projects may he intimately connected to the existing business carried on by the assessee, the assessee-company was in fact exploring the prospectus of new units. Those units were not ultimately successful; we can say that they were all aborted projects. Therefore, those expenses are to be treated in the nature of loss of capital instead of revenue expenditure deductible in computing the income of the running business. Even though the items of expenditure may be in the nature of revenue expenses per se, those expenses were incurred not in connection with the business carried on by the assessee-company but those expenses were incurred for the business which were proposed by the assessee-company to commence and carry on. This line of distinction cannot overlooked. Therefore, in the light of the statutory provision governing the subject, we hold that this expenditure cannot be allowed. Decided against assessee.
Calculation of book profit for deduction u/s 80HHC - We direct the AO to follow the decision of Bahary Information Technology System Pvt. Ltd. [2011 (10) TMI 19 - SUPREME COURT] while calculating the book profit for deduction u/s.80HHC.
Disallowance of claim for loss in computation of value of work-in-progress on construction contracts - HELD THAT:- DR and the AR conceded before us that identical issue was decided in favour of the assessee by the Tribunal, while deciding the appeal in [2013 (10) TMI 1581 - ITAT MUMBAI] for A.Y. 1997-98 - Decided against revenue.
Expenditure on construction of jetty, expenses on cement plants, expenses on cement plants (towards setting up of new captive power section) depreciation, interest and commitment charges in respect of borrowings made for cement projects, Mining lease, Mining Development expenses and charges, including commitment charges, in respect of borrowings made for cement projects is to be allowed as issue decided in favour of the assessee by the Tribunal in [2013 (10) TMI 1581 - ITAT MUMBAI] for AY.1997-98.
Interest u/s 244A of the Act - HELD THAT:- At the time of hearing the AR for the assessee submitted that this issue is considered and decided in favour of the assessee by the Tribunal for AY.1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] DR could not controvert the claim made by the AR.Therefore, respectfully following the above order of the Tribunal, last ground is decided against the AO.
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2016 (7) TMI 1695
Disallowance u/s 14A r.w.r.8D under normal computation as well as in computing book profit /s 115JB - HELD THAT:- Normal computation - Since this issue is relating to the assessment year 2007-08, the provisions of Rule 8D will not be applicable in the case of the assessee as it came into effect from 24.03.2008. On earlier occasion, in the case of M/s. Hyundai Motor India Ltd. [2015 (9) TMI 962 - ITAT CHENNAI] this Bench of the Tribunal had observed that disallowance of 2% to 5% of the dividend income earned would suffice for meeting the requirement of section 14A of the Act. Accordingly, we hereby direct the Assessing Officer to disallow 5% of dividend income as allowable expenditure invoking the provisions of section 14A of the Act while computing the profit and loss under normal computation.
MAT computation - We hereby direct the AO to compute the profit and loss of the assessee under section 115JB of the Act without making disallowance of expenditure under section 14A. See M/S. BEACH MINERALS COMPANY PVT LTD. [2015 (8) TMI 1031 - ITAT CHENNAI]
Addition of foreign exchange loss relating to interest on loan for acquisition of fixed assets under normal provisions as well as u/s 115JB - Under normal provisions - HELD THAT:- As observed by the Revenue that the assessee had debited to its profit & loss account net foreign exchange loss related to interest on the loan obtained for acquiring assets. Therefore, the learned Assessing Officer added the same to the profit of the assessee by capitalizing the interest and added the same to the cost of the asset by virtue of section 43A of the Act, but however gave the benefit of depreciation @ 15%. No infirmity in the orders of the Revenue on this issue because section 43A of the Act provides that such expense has to be capitalized. AO has capitalize the loss and granted the benefit of depreciation. Hence the order of the Revenue is hereby confirmed on this issue.
Under section 115JB of the Act - The same ratio mentioned herein above in para 4.3 will be applicable because section 43A of the Act and section 115JB of the Act both has a legal fiction and therefore section 43A of the Act cannot be imposed while making computation under section 115JB of the Act. Hence, the interest expense cannot be excluded from the book profit u/s 115JB of the Act.
Addition in relation to interest on loan for acquiring fixed assets under normal computation as well as in computing book profit u/s 115JB - HELD THAT:- No infirmity in the order of the Revenue because there is no section in the Act for granting deduction towards provision made for bad and doubtful debts. Further Explanation I(c )& (i) to section 115JB of the Act clearly provides that the book profit has to be increased by (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities (i) the amount or amounts set aside as provision for diminishing in the value of any asset. Accordingly this issue is decided against the assessee.
TP Adjustment - Determining the arm’s length price of the international transaction relating to the commission paid by the assessee towards availing marketing services - AO adopting the internal cup method disallowed the commission paid to its AEs - As sbmitted that the scope of transactions between both the AEs is altogether different and that for the sale made through Saint Gobin Exprover, the AE Saint Gobain Exprover only acted as a commission agent and products were directly sold by the assessee to the purchaser - HELD THAT:- We are of the considered view that in the interest of justice, the matter needs to be remitted back to the file of the learned TPO for de novo consideration. Accordingly, we hereby remit the matter back to the file of the learned TPO for hearing the issue afresh.
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2016 (7) TMI 1694
Nature of expenses - Royalty payment - capital or revenue expenditure - AO treated it as a capital expenditure - A.R. submitted that the assessee has been incurring royalty expenditure every year, by virtue of license agreement entered into between the assessee and company in Germany - HELD THAT:- On perusal of the order passed by this Tribunal for Assessment Year 2004-05 we observe that the co-ordinate bench of this Tribunal has analyzed the agreement and the nature of the amount paid by the assessee pursuant to the agreement. It has also been observed therein that the royalty payment is a running expenditure incurred by the assessee every year.
D.R. / Ld. A.O. has not been able to bring out contrary facts, we are in agreement with the submissions of the learned counsel for relating to disallowance of royalty amount is covered in favour of the assessee by the order of the Coordinate Bench of the Tribunal rendered in assessee's own case as followed the decision of Sarda Motor Industrial Ltd [2009 (9) TMI 159 - DELHI HIGH COURT] held assessee has not obtained any benefit of enduring nature. The royalty is payable on the basis of volume of sales year to year. In the event of termination of agreement has to discontinue uses of material provided return everything in this respect. Hence it cannot be said that any benefit of enduring nature accrued to the assessee - DR only contended that the agreement also provided training to the assessee's employees, which cannot be returned in any case. We do not find any cogency in this aspect of this agreement as training expense of employee cannot be treated as capital expenditure. - Decided against revenue.
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2016 (7) TMI 1693
Allowability of claim of depreciation on fixed assets acquired for the objects of the Trust - Assessment of trust - HELD THAT:- As perused the orders of the Revenue Authorities as well as the cited judgments of Hon’ble High Court of Bombay in the case of CIT vs. Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] wherein it was held “that the Tribunal was right in law in direct the Assessing Officer to allow depreciation on the assets, the cost of which had been fully allowed as application of income under section 11 in the past years.
Thus we are of the opinion that the issue of allowability of depreciation on depreciable assets should be decided in favour of the assessee.
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2016 (7) TMI 1691
Levy of penalty u/s 271D - competent authority to levy penalty - assessee had accepted loan / deposit in cash from his wife - violation of provisions of section 269SS - JCIT observed that the assessee had failed to prove the business exigency forcing him to accept the amount in cash and further the said transactions were conducted against some business urgency also and there was no major shortage was proved by the assessee - HELD THAT:- Under the provisions of section 272A(3)(c) of the Act, it is provided that any penalty imposable under sub-section (1) or (2) of the said section shall be imposed by the Joint Director or Joint Commissioner in respect of cases other than the cases covered in clauses (a) & (b) of sub-section (3).
As considered by the CBDT that the statutory provisions clearly state that the competent authority to levy penalty is the Joint Commissioner, therefore, only the Joint Commissioner can initiate proceedings to levy penalty and such initiation of penalty proceedings could not be done by the AO. The CBDT has further acknowledged that statement in the assessment order that the proceedings under section 271D and 271E of the Act are initiated is consequential since the initiation is by an authority who is incompetent. The proceedings in this regard can be initiated only by issuance of notice by the JCIT and the same has to be initiated in the course of assessment proceedings or any other proceedings under the Act. In the above said circumstances, penalty order passed in the present case by way of reference made by the Assessing Officer to JCIT vide letter dated 03.05.2012 is beyond limits prescribed, where the assessment order was completed on 28.12.2011. Hence on this count, penalty order merits to be dismissed and the same is so dismissed.
Merits of levy of penalty under section 271D assessee was running business of contractor and his wife was a civil engineer and was also carrying on her activities. During the course of present assessment proceedings, the assessee had accepted cash from his wife. The wife of assessee was also attached to construction business of the buildings as civil engineer. The assessee claims that where he had received the aforesaid cash amount in cash from his wife, then no adverse interference is called for.
There is merit in the claim of assessee as the intention of introducing the present section 269SS of the Act was to prevent the adjustment of entries by way of cash loans. However, the assessee has received the said cash from his wife and in such circumstances, there is no merit in holding the assessee to have defaulted and being liable for levy of penalty under section 271D - On this count also, we direct the AO to delete penalty levied u/s 271D.
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2016 (7) TMI 1689
Income taxable in India - royalty receipts - taxability of consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services - India-US Tax Treaty - HELD THAT:- As common point between the parties that the issue relating to the taxability in India of consideration received for facilitating grant of user rights in software to Indian entities was decided against the assessee by the Tribunal in 2013 (8) TMI 952 - ITAT- PUNE] relating to assessment year 2004-05 and 2006-07 and [2015 (2) TMI 1391 - ITAT PUNE] relating to assessment year 2007-08.
Receipt of IT charges by the assessee from CIL and CSSL during the year under consideration - As assessee in the year consideration had provided services to the Indian entities and had received charges in respect of desktop/laptop software licence and internet mail and had determined the value of transactions by allocating cost based on cost estimates
TPO adopted the actual cost incurred by the assessee in order to determine the adjustment, if any, to be made on account of international transactions.
Main plea of the assessee before the authorities below was that cost allocation based on cost estimates was an accepted method for the purpose of determining the arm's length price and if the actual cost allocation results in any erosion of overall base of India, then no adjustment is required to be made to the value of international transaction. This has to be seen from the angle that where the assessee is a foreign company and is recipient of internet mail charges and desktop/laptop service charges from the Indian entities, then in cases where it is held that the assessee should have been charged higher amounts from the Indian entities, then the same would result in reduction of overall tax base of India. In such circumstances, the Indian Transfer Pricing provisions are not to be applied.
DRP in assessment year 2007-08 and the AO in assessment year 2009-10 has not made any adjustment in the hands of assessee on account of internet mail service charges and desktop/laptop service charges though identical international transactions were carried out in the later years also. In the totality of the above said facts and circumstances of the case, we reverse the order of CIT(A) and direct the Assessing Officer to delete the addition. Ground of assessee allowed.
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2016 (7) TMI 1687
Disallowance of prior period expenses - AO made disallowance by observing that for the prior period expenses cannot be allowed as assessee is following mercantile system of accounting and that the assessee has not submitted any basis for determination as to when they crystallized - assessee as regularly followed same system of accounting - assessee submitted that assessee has submitted all the details pertaining to the expenses claimed under the head ‘prior period expenses’. No case has been made out that any voucher is missing or that expense is not genuine, branches spread over a vast area. The assessee is debiting the expenses split over to the subsequent years and the Assessing officer had been allowing the same - HED THAT:- As system of accounting of the assessee has been regularly accepted by the Department in the past. There is no change in the facts and circumstances of the case. It has also been submitted that necessary details were duly submitted before the Assessing officer that all of the expenses are supported by proper vouchers and supporting evidence. It is not the case of the AO that any short coming has been noted in the vouchers. This is also not the case that any distortion in profit has been observed as compared to preceding year in view of the above said expenditure. In these circumstances, in our considered opinion, the Revenue has no cogent reason why the prior period expenses claimed by the assessee which have been consistently so claimed and allowed by the Department in earlier years should be disallowed in the current year.
The case laws referred by assessee above duly support the above proposition. In this regard we may gainfully refer to the Hon'ble Delhi High Court decision in the case of CIT Vs. Jagjit Industries Limited [2010 (9) TMI 58 - DELHI HIGH COURT] held that if a particular accounting system has been followed and accepted and there is no acceptable reason to differ with the same, the doctrine of consistency would come into play. The said accounting system has been followed for a number of years and there is no proof that there has been any material change in the activities of the assessee as compared to the earlier years. Nothing has been brought on record to show that there has been distortion of profit or the books of account did not reflect the correct picture in the absence of any reason whatsoever, there was no warrant or justification to depart from the previous accounting system which was accepted by the department in respect of the previous years.
This system of accounting has been regularly followed and the Department has not disputed about this in the past. We also agree with the contention that the Assessing Officer has clearly erred in drawing adverse inference on the crystallization of these expenditures. It is not the case of the AO that any voucher of the assessee company has been found to be Jacking credibility. Thus assessee appeal allowed.
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2016 (7) TMI 1686
Valuation of Tenali house property - Real owner - assessment in whose hand? - CIT(A) has considered the value of the site as per the registered sale deed and as far as cost of construction of the building is concerned, has given 15% deduction by taking into consideration the local rates (PWD rates) and 10% deduction to self supervision, thus directed the A.O. to adopt the total value of the Tenali house property including site and construction - objection raised by the Ld. Counsel for the assessee in respect of assessment which has to be made in the hands of the assessee’s wife - HELD HAT:- After careful consideration of the assessment order and also order passed by the Ld. CIT(A), keeping in view of the specific observations made by the ITAT that there is no evidence of record which suggest that assessee’s wife had some independent source of income. It is trite law that in the case of house wife, it is the customary practice of house holder to purchase property in the name of the wife, particularly when lady is a house wife and no regular source of income is proved.
A.O. keeping in view of the observations made by the ITAT, called the assessee to explain the source of investment. The assessee’s wife was not able to substantiate the source. Therefore, based the observation made by the Hon’ble ITAT, assessment was completed. On appeal, the Ld. CIT(A) has given partial relief. We find that there is no infirmity in the order passed by the Ld. CIT(A). This ground of appeal raised by the assessee is dismissed.
Loss incurred in business in the block assessment period for set off against the income - assessee has submitted that the loss incurred by the assessee in his business in the block assessment period may be set off against the income - HELD THAT:- We find that the A.O. has passed the consequential order in respect of the construction of the Tenali House property keeping in view of the observations made by the Hon’ble ITAT. From the ITAT order this issue is not emanating, therefore, this ground raised by the assessee cannot be adjudicated. Therefore, this ground of appeal raised by the assessee is dismissed.
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2016 (7) TMI 1682
Validity of adjustment proposed by TPO u/s 92CA (5) - order of the DRP as not in consonance with the provisions of sec.144C - HELD THAT:- DRP in this case, against the provisions of the Act, passed a very non-speaking order, though the assessee’s counsel made a voluminous submission before the DRP against the draft assessment order. It is accepted by the DRP that it has to be considered every point of dispute and pass a speaking order.
Contrary to this, the order passed by the DRP very critic and there is no addressing the issues raised by the assessee mentioned herein above and it was not properly adjudicated.
Being of, we are not in a position to uphold the order of the DRP as it is not consistent with the provisions of sec.144C of the Act.
We find that the Supreme Court in the case of Sahara India [2008 (4) TMI 4 - SUPREME COURT] has held that even “an administrative order has to be consistent with the rules of natural justice”. The same view has been taken in the case of GAP International Sourcing India (P) Ltd. vs. DCIT [2010 (12) TMI 94 - ITAT, NEWDELHI]
Further, in the case of M/s. Adobe Systems India Private Ltd. [2011 (1) TMI 933 - ITAT NEW DELHI] held that when the DRP passed the order in cursory and laconic order without going into the details of the submissions, it should be decided afresh. Considering all these facts and circumstances, we are inclined to the remit the issues back to the DRP to pass a speaking order on the disputed issues.
Hence, we remit the issue back to the file of DRP to consider the objections of the assessee in proper perspective and pass a speaking order.
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2016 (7) TMI 1681
Unaccounted income - unaccounted interest receipts - documentary evidence seized during the search and the statement of the other family members - whether ITAT right in law in deleting the addition made on the proportionate share of interest and treated by it as undisclosed income of the respondent for the block period? - HELD THAT:- Revenue would not be justified in resting its case on the loose paper and documents found from the residence of a third party even if such documents contain narrations of transactions with the assessee-Company. See Chuharmal v. CIT [1988 (5) TMI 1 - SUPREME COURT]
Also in the absence of any opportunity having been given to the assessee to cross-examine the person from whose possession loose papers were recovered, the same could not be relied upon. See S.C. Sethi case [2006 (3) TMI 60 - HIGH COURT, RAJASTHAN] - Decided in favour of assessee.
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2016 (7) TMI 1679
Additional liability on account of exchange rate fluctuation allowable as a deduction in the computation of the applicant's business profits - HELD THAT:- Tribunal while allowing the Revenue's appeal followed its order in the case of the applicant assessee for AY 1985-86 on an identical issue. The applicant assessee being aggrieved filed an application for Reference to the Tribunal and it on an identical question a Reference was made to this Court.
On 21st August 2014 [2014 (9) TMI 283 - BOMBAY HIGH COURT] this Court answered the identical question referred to it in Reference No. 271 of 1997 in favour of the applicant assessee and against the Revenue. This by following the decision of the Apex Court in Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT]
Decided in favour of the applicant assessee and against the Revenue.
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2016 (7) TMI 1677
Rectification of mistake u/s 254 - Appeal challenged by the assessees after a period of 04 years - HELD THAT:- In the case of Parsuram Potteries Works Co. Ltd [1976 (11) TMI 1 - SUPREME COURT] observed that stale issues should not be re-activated beyond a particular stage and there must be a point of finality in all the legal proceedings; lapse of time must induce or set at rest all judicial and quasi-judicial controversies as it must in others spheres of human activity.
A proper approach is to challenge the order before a higher Forum, either under section 260-A of the Income Tax Act or in writ jurisdiction, by taking immediate steps, after disposal of the appeals.
Here is a case where there was more than 07 years delay and in fact, the assessees did not choose to pursue such a kind of remedy. At the same time, assessee submits that the impugned order passed by the Tribunal cannot be treated as an order passed under section 254(1) - Section 254(2) of the Act speaks of rectifying mistakes in the orders passed under section 254(1) of the Act and if the assessees claim that there was no order passed under section 254(1), there is no right of filing a petition u/s 254(2) of the Act.
The impugned order was passed by the Tribunal u/s 254(1) of the I.T. Act and in the given circumstances, dismissal of the appeals is the only conclusion that can be drawn which could have been challenged by the assessees within a period of 04 years and beyond such period the Tribunal has no power to condone the delay and therefore, the M.As are not maintainable.
Dismissal of appeal for want of prosecution - Even if it is presumed that the Tribunal has got the power to condone the delay the reasons given by the assessees herein are vague and not supported by proper evidence and therefore, it has to be concluded that the assessees have no sufficient cause for the delay in filing M.As.
If the assessees claim that the common order passed by the Tribunal in 2008, dismissing the appeals for want of prosecution, cannot be equated to an order passed under section 254(1) of the I.T. Act and therefore, section 254(2) does not come into play and consequently, the period of limitation does not apply, then the remedy to the assessees would have been to approach an appropriate Forum to challenge the order which is claimed to be invalid in law. But the assessees chose not to prefer either appeal or writ petition before the Hon’ble High Court and thus, by efflux of time it has attained finality and such stale issues should not be reactivated at this stage in the light of observations of the Hon’ble Supreme Court in the case of Parsuram Potteries Works Co. Ltd., vs. ITO [1976 (11) TMI 1 - SUPREME COURT] - M.As filed by the assessees are dismissed.
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2016 (7) TMI 1675
Assessment of trust - Addition u/s 68 - donation received from 234 persons - capacity and genuineness of donors remained unproved - HELD THAT:- As we find that the order of the CIT(A) is cryptic and non speaking. If the CIT(A) was of the opinion that the donations were anonymous, then he ought to have invoked the provisions of Section 115BBC but he failed to do so, which amounts to miscarriage of justice. As held by the AO that the donations received by the assessee are not anonymous donations. The details in respect of the names and addresses are available on record in the form of donations receipts, which were impounded in the course of survey.
As the CIT(A)’s order is non speaking order without recording any independent finding or giving any reason. In view of aforesaid finding, we send back this matter to the CIT (A) for verifying all the documents relating to donors PAN, addresses etc. and to decide the matter afresh after allowing adequate opportunity of being heard to the assessee.
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2016 (7) TMI 1672
Levy of penalty u/s 271(1)(c) - non admission of additional evidences - deduction on account of commission paid to several persons who have procured new LIC policies from different persons - addition was made because the assessee could not adduce complete details and list of the persons to whom commission was paid - assessee has now filed application for admission of additional evidence, in which it is stated that the list of sub-agents and their affidavits alongwith names of the parties who had been introduced by each sub-agents alongwith list was filed as additional evidence - CIT (A) did not consider these nine affidavits of the persons in support of claim of payment of commission because no request under Rule 46A of the Income Tax Rules was made - HELD THAT:- Though the findings given in the quantum proceedings are relevant and have probative value but these are not conclusive for levy of penalty against the assessee under section 271(1)(c) - It is well settled that the quantum and penalty proceedings are distinct and independent proceedings. Assessee in the penalty proceedings still could have explained that it is not a case of levy of penalty based on the evidence on record.
Hon'ble Supreme Court in the case of Tek Ram Vs. CIT [2013 (8) TMI 459 - SC ORDER] and case of CIT Vs. Mukta Metal Works [2011 (2) TMI 250 - PUNJAB AND HARYANA HIGH COURT] admitted the additional evidence being relevant and required to be looked into.
We admit these additional evidences for the purpose of hearing - contention of the D.R. that same additional evidences were not admitted by the CIT (Appeals), has no merit because the assessee did not make any request under Rule 46A of the Income Tax Rules for admission of the additional evidence. These additional evidences so admitted would have bearing on the issue and could explain the matter in issue with reference to the penalty matter
We set aside the orders of the authorities below and restore the issue of levy of penalty to the file of the Assessing Officer with direction to redecide the issue in the light of additional evidence so admitted above - Appeal of the assessee is allowed for statistical purposes.
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2016 (7) TMI 1671
Reopening of assessment u/s 147 - depreciation on ‘computer based’ editing equipments at 25% as against @ 60% claimed by the assessee treating the same as computer - reassessment in the instant case is clearly beyond a period of four years from the end of the relevant assessment year - HELD THAT:- No lapse on the part of the assessee to disclose fully and truly all the material facts necessary for the computation of its income, and neither has any been pointed to us, the claim has been subject to verification by the A.O. in the original proceedings. Further, though there is no discussion by him in the assessment order, he can only be considered as conscious and alive to this claim as the assessee had clearly bifurcated the editing equipments into two components, i.e., recorder based/others and computer based, claiming depreciation at the general and the enhanced rate (of 60%) thereon respectively, filing details in their respect, called for separately. This then is a case of review, impermissible under the Act.
CIT(A) has allowed the reopening on the basis that there is no evidence to show that the assessee has furnished all the necessary details, including bills and vouchers for purchase of the equipments or their specification or technical expert reports, etc. during the course of the original assessment proceedings, so that the A.O. forming a view that the assets under reference may not qualify to be computers, cannot be entirely faulted. We cannot agree.
No sound reason with the A.O., but merely a reason to suspect that the assessee’s claim may not be correct. Two, the assessee had furnished all the details as were called for during the original proceedings, including details of computer based equipments. There is nothing to show that these details were not true or correct in any respect, much less material. Thirdly, the assessing authority forming a view on the basis of the material not found incorrect or untrue, is nevertheless a view, so that it becomes a case of review. Rather, as it appears, the A.O.’s action is guided by the consideration of being consistent in-as-much as like claim was not accepted by the Revenue for the immediately preceding year, i.e., A.Y. 2004-05. That by itself cannot be a ground for reopening. Decided in favour of assessee.
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2016 (7) TMI 1669
Disallowing the notional interest paid by the assessee attributable on the non interest bearing advances out of interest bearing funds - HELD THAT:- It is seen that the Ld. CIT (Appeals) has examined the issue in detail in his order for AY 2006-07 and has agreed with the aforesaid contentions of the assessee. The copies of FIRs have also been placed on record and the contention of the assessee about having surplus funds as on 31.03.2002 is also correct. Hence, we find no reason to interfere with the order of the Ld. CIT (Appeals) and uphold the same.
Disallowance u/s 14A - contention of the assessee before the AO that the provisions of sec. 14A did not apply in the relevant asstt year as no exempt income had been earned on the bonds/investments - HELD THAT:- If there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact by the Commissioner of Income-tax (Appeals) - Thus following the ratio laid down by the Hon’ble Bombay High Court in the case of Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] we confirm the order of the Ld. CIT (A).
Disallowances of expenses on the ground as incurred in cash and remained un-vouched - HELD THAT:- CIT (Appeals) has opined that he agrees with the submission of the assessee that maintenance of proper vouchers for petty expenses is not possible and that producing all the vouchers procured from various locations before the AO after a long period is in onerous task. The ld. CIT (A) also held that no comments have been made in the tax audit report regarding the genuineness of the expenditure claims. Having perused the records and also the reasoning adopted by the Ld. CIT (A) on this issue as well as the fact that the Ld. DR could not successfully controvert the observations of the Ld. CIT (A), we find no reason to differ from the conclusion arrived at by the ld. CIT (Appeals) and while upholding his finding on the issue, we dismiss ground of the Department’s appeal.
Disallowance under the sub-head “sales promotion dealer expenses” under the head “advertisement and sales promotion expenses”- HELD THAT:- It is seen that section 40A(3) provides that where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds Rs. 20,000/- a disallowance shall be made. However, it is apparent from the assessment order that this disallowance has been made without bringing out the fact on record as to whether these cash expenses of Rs. 40,000/- pertained to one single payment or comprised of a bundle of small payments made for different purposes. Hence, in absence of any specific recording of fact by the AO, we are unable to uphold this disallowance and set aside the order of the ld. CIT (Appeals) on this issue and direct the AO to delete this addition. Accordingly, ground of the assessee’s appeal is allowed.
Disallowance of club expenses - CIT(A) deleted this disallowance by holding that the assessee has paid fringe benefit tax (FBT) on the entire amount and on the principle of equity, no amount can be taxed twiceHELD THAT:- DR has not disputed the fact that FBT has been paid on the impugned additions and the Ld. CIT (A) has also given a concrete finding on the issue. Hence, drawing strength from the decision of Micro Turners [2013 (3) TMI 466 - ITAT DELHI] we find no reason to interfere with the finding of the ld. CIT (A) on this issue and accordingly, uphold the adjudication by the ld. CIT (A). Hence, ground of the Department’s appeal is dismissed.
Addition on account of alleged penal expenditure - HELD THAT:- On appeal the ld. CIT (Appeals) gave a categorical finding that out of the total amounts disallowed, only Rs. 533/- pertained to late fee penalty and the balance pertained to tax and interest on late deposit which had wrongly been shown under the head “miscellaneous expenses”. In view of the specific finding of the ld. CIT (A), we find no reason to interfere with the adjudication of the ld. CIT (A) on this issue. Ground of the Department’s appeal is accordingly dismissed.
Addition of personal marriage gift expenses of the Directors of the assessee - HELD THAT:- AO held that the marriage gifts were made by the individuals and as such they were personal expenses not related to the business of the company and they were accordingly disallowed. The ld. CIT (A) held that since the assessee has already declared the amount and paid tax under FBT, the disallowance merited deletion. Considering the factual matrix as well as drawing strength from the decision of the co-ordinate Bench of ITAT Delhi in ACIT vs Micro Turners [2013 (3) TMI 466 - ITAT DELHI] we find no reason to disturb this finding of the ld. CIT (A) on this issue. In the result, ground of the Department’s appeal is dismissed.
Addition of non-business expenditure - HELD THAT:- CIT (A) held that since FBT had already been paid, no disallowance was called for. Having heard the rival submissions and perused the material on record and also the decision rendered by the coordinate bench in own case we are of the opinion that the matter stands covered by the said decision of the Tribunal in favour of the assessee.
Excessive expenditure on horticulture - HELD THAT:- Having considered the rival submissions and the findings in the impugned order, we are of the considered opinion that the ld. CIT (A) has not dealt with this issue in an appropriate manner. On one hand, he has accepted the contention of the assessee that the evidences were furnished before the AO and on the other hand, he also mentions the fact that the AO has mentioned in his remand report that these were fresh evidences. Hence, in the interest of justice, we restore the issue to the file of the AO for fresh adjudication after giving assessee due opportunity to present its case. Ground is allowed for statistical purposes.
Addition of expenses incurred by the assessee on account of publishing the photo of its founder Sh. Jankidas Kapoor on his death anniversary - HELD THAT:- It is seen that this issue/identical issue of advertisement was not before the coordinate Bench of the Tribunal in AY 2000-01 and hence the Ld. CIT (A) has allowed the assessee’s ground on a wrong appreciation of facts. Hence we have no option but to restore the issue to the file of the Ld. CIT (A) for de novo adjudication after giving due opportunity of being heard to the assessee. Ground of the department’s appeal is allowed for statistical purposes.
Disallowance under prize and rewards - HELD THAT:- CIT (A) has stated in the impugned order that the AO has not given any factual finding regarding the genuineness of the payments. CIT (A) has noted that giving prizes and rewards is a policy of the Company and the prize money is included in the salary of the employee on which TDS is also duly deducted. Considering the finding of fact recorded by the ld. CIT (A) which could not be controverted by the Department, we find no reason to interfere on this issue as well. Ground of the department’s appeal is accordingly dismissed.
Penalty u/s 271(1)(c) - HELD THAT:- No case can be made out for furnishing inaccurate particulars for both the years under appeal. Respectfully following the dicta of the Hon’ble Apex Court in the case of CIT vs Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT], we find no reason to disturb the findings of the Ld. CIT (A) for both the years under appeal and we uphold the same.
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2016 (7) TMI 1665
Deduction u/s. 80P(2)(a)(i) - interest income on bank deposits with various banks other than cooperative banks/societies - CIT-A allowed the deduction - HELD THAT:- Tribunal in [2015 (8) TMI 1085 - ITAT PUNE] has elaborately discussed the issue and held that interest income earned by the assessee on short term deposits kept with banks has to be allowed as deduction u/s.80P(2)(a)(i) of the Act.
Since the facts of the impugned assessment year are identical to the facts in A.Y. 2010-11, therefore, following the decision of the Coordinate Bench of the Tribunal in assessee’s own case and in absence of any contrary material brought to my notice uphold the order of the CIT(A) on this issue and the grounds raised by the Revenue are dismissed.
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2016 (7) TMI 1662
Character of receipt - Addition of subsidy by way of refund/exemption of excise duty/VAT - HELD THAT:- In some and substance receipt in hands of the assessee has to be determined with respect to purpose for which the subsidy is given. One has to apply the purpose test. However, lower authorities misdirected in holding that since subsidy was to be received only after commencement of commercial production, the same was revenue in nature.
Hon‟ble Supreme Court in the case of Ponni Sugar & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] had clearly held that character of receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. Merely because subsidy was to be paid after commencement of production will not alter the nature of receipt, insofar as the point of time at which the subsidy paid or the source from which the subsidy is paid is immaterial, even the form in which subsidy is paid is also immaterial as observed by the Hon‟ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd.(supra).
Applying the proposition of law laid down we have no hesitation to hold that various incentives received by assessee was in nature of capital receipt and the same was meant for establishing new unit. Accordingly, we set aside orders of lower authorities and direct the AO to treat various incentives received by assessee as capital receipts not liable to tax.Appeals of the assessee are allowed.
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2016 (7) TMI 1661
Disallowance u/s 40(a)(ia) - scope of section 40(a)(ia) as amended by the Finance act, 2012 - retrospectively of law as amended - whether the proviso is applicable from 1.4.2005 or from 01/04/2013 - HELD THAT: As relying onf Ansal Landmark Township Private Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] we hold that the proviso to the section is applicable from 01.04.2005,that the deductee had paid the taxes on the income that was subject of TDS provisions, that no action could be taken against the assessee making the payment to HL. The basic aim of chapter XVII is to ensure that no portion of income remains untaxed.
To ensure it, TDS provisions were introduced-the person making payment was made responsible to deduct tax and pay it with the government account. But, the proviso to section 40(a)(ia)made it clear that if the deductee pays the taxes on the entire income liable for taxation then no action would be taken against the deductor. The proviso is quite logical. It ensures that whole of the taxable income is taxed. Once the specific purpose is served there is no justification to indulge in unnecessary litigation. It is not the case of the AO or the FAA that the deductee had not paid the taxes on the taxable income or that it was not paid within the prescribed time limit. Therefore, reversing the order of the FAA we decide the effective ground of appeal in favour of the assessee.
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2016 (7) TMI 1658
Disallowance u/s 14A r.w.r. 8D - necessity of recording satisfaction - objection of the assessee is that no satisfaction was recorded by the Assessing Officer for the purpose of making disallowance under Rule 8D - HELD THAT:- Either sec. 14A or Rule 8D does not prescribe any form for the purpose of recording satisfaction. The satisfaction has to be inferred from the observation made by the AO in the computation made. When the Assessing Officer found there was a direct expenditure relating to earning of the exempted income and the assessee has not computed the disallowance under Rule 8D, this Tribunal is of the considered opinion that the AO was not satisfied with regard to the claim made by the assessee. Therefore, the Assessing Officer has to recompute the disallowance by applying the procedure prescribed under Rule 8D.
Either sec. 14A or Rule 8D does not prescribe any form for the purpose of recording satisfaction. The satisfaction has to be inferred from the observation made by the Assessing Officer in the computation made. When the Assessing Officer found there was a direct expenditure relating to earning of the exempted income and the assessee has not computed the disallowance under Rule 8D, this Tribunal is of the considered opinion that the Assessing Officer was not satisfied with regard to the claim made by the assessee. Therefore, the Assessing Officer has to recompute the disallowance by applying the procedure prescribed under Rule 8D.
Nature of expenditure - royalty payment - assessee has paid to Shriram Ownership Trust for using their logo in the assessee’s business - AO treated the payment as capital in nature and allowed depreciation @ 12.5% - According to the ld. DR, the payment made by the assessee was in the nature of capital, therefore, the CIT(A) ought not to have allowed the expenditure as revenue - HELD THAT:- Shriram Ownership Trust is a Trust by itself, therefore, its logo cannot be used by any other concern. The object of the Trust is not to do business. The assessee-company was established for the purpose of business. When the assessee-company used the logo belongs to Shriram Ownership Trust, this Tribunal is of the considered opinion that for the purpose of using the logo, the assessee has to necessarily make the payment. In the case before us, the payment was made on turnover basis, therefore, the same has to be allowed as revenue expenditure u/s 37(1) of the Act. This Tribunal do not find any reason to interfere with the order of the CIT(A) and accordingly, the same is confirmed.
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