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2020 (5) TMI 663
Approval of Resolution Plan - section 30(6) of the Insolvency Bankruptcy Code 2016 - HELD THAT:- The Resolution Plan is in conformity of section 30 (2) of the IBC and Regulation 38 of the CIRP Regulations. The Resolution Plan also includes the mandatory contents of the Code.
In the vogue of the current pandemic COVID-19 Virus, the RBI announced "Developmental and Regulatory Policy" in the public interest. The Reserve Bank of India (RBI) announced an extension of the moratorium on loan EM's by three months, i.e. August 31,2020 vide statement on Developmental and Regulatory Policies which sets out various developmental and regulatory policy measures to improve the functioning of markets and market participants; measures to support exports and imports; efforts to further ease financial stress caused by Covid-19 disruptions by providing relief on debt servicing and improving access to working capital; and steps to ease financial constraints faced by State Governments - In view of the relaxation so granted by R.B.I as "Developmental and stated above, the claim of Resolution Applicant in Regulatory Policies", respect of the concession /relaxation in the time line for payment to its Financial Creditors/Operational Creditors/Other stakeholders, if any, is genuine and bonafide, therefore, Resolution Applicant deserves relaxation/concession. Such relaxation in the time frame or timeline for payments is/are not going to change the nature and character of the Plan, moreover such concession/modification is approved by UCO Bank having 83.31% stake, while SBI is having 16.69% stake, but UCO Bank has approved the relaxation, so sought for by the resolution applicant in timeline for the payment. However, SBI though approved its first tranche of payment but have reservation in 2nd tranche of payment.
It is needless to mention herein that, the very object of the IBC is, "Resolution is the rule and Liquidation is an exception", liquidation brings the life of a Corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only, if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The IB Code', therefore does not allow liquidation of a corporate debtor directly. It allows liquidation only on failure of 'Corporate Insolvency Resolution Process'.
This Adjudicating Authority, is of the considered opinion and also being satisfied that the Resolution Plan as approved by the Committee of Creditors (COC) meets the requirements as provided under section 30(2) of the Code, along with revised/concession/relaxation, so sought for, by Resolution Applicant on the timeline of payment to Financial Creditors/Operational Creditors and/or other stakeholders, as the case may be, which also became part and parcel of Resolution Plan dated 12.02.2020 - Resolution plan approved.
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2020 (5) TMI 662
Transfer pricing adjustment to the international transaction of provision of software development services - Comparable selection - HELD THAT:- Assessee is into developing software for the associated enterprises thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2020 (5) TMI 661
TP Adjustment - exclusion of M/s.Infosys Ltd., M/s.E-Inforchips Ltd., E-Zest Solutions Ltd. and EClerx Services Ltd. as comparables for the transfer pricing exercise - HC decided issue in favour of assessee - HELD THAT:- No reason to interfere in the matter. The special leave petition is, accordingly, dismissed.
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2020 (5) TMI 660
Reduction of share capital - Section 66(1) of the Companies Act, 2013 - Section 66(1) of the Companies Act, 2013 - HELD THAT:- Section 66(3) of Companies Act, 2013 states that no application for reduction of share capital shall be sanctioned by the Tribunal unless the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards specified in Section 133 or any other provision of this Act and a certificate to that effect by the company's auditor has been filed with the Tribunal.
We have perused the minutes of the Annual General Meeting of the company held on 19.08.2019 (page 123 to 126 of the paper book). Page 123 of the Paper book records that "With the consent of the Members present, Mr. Balvinder Sahrawat was elected to chair the meeting." On Page 124 of the paper book, it is recorded that the meeting has passed the resolution for reduction of capital "as an ordinary resolution". The minutes of the meeting have been signed by the Chairman of the meeting on pg 126 of the paper book - thus, the company has not met the specific requirement of Section 66 of the Companies Act by passing 'Special Resolution' for reduction of share capital. The Company has also not complied with the requirements of its own Articles of Association.
Petition dismissed.
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2020 (5) TMI 659
Jurisdiction - power of Authority to implead - It is the contention of the Appellant that the impugned order bristles with numerous infirmities and that the Adjudicating Authority does not possess the powers to pass an order, which was in the 'nature of rule' under the guise of an 'order' - HELD THAT:- It is axiomatic principle in law that if a third party is concerned with a dispute, that party is to be arrayed as a necessary or proper party to the adjudication of main issue centering around the dispute. Besides this, an opportunity of hearing is to be given to a third party to explain its stand. Suffice it for this Tribunal to make a pertinent mention that the rules of 'principles of Natural Justice' are to be adhered to by the Tribunal because of the latent and patent fact that the act of Tribunal/ Court/ Competent Authority shall cause no harm to any person - Of course, the 'principles of natural justice' are not the edicts of a statute. The 'principles of natural justice' are not to be imprisoned in a straight-jacket cast-iron formula. Notwithstanding the same, observing the tenets of natural justice is of paramount importance in the considered opinion of this Tribunal.
In fact, 'impleadment of parties' is only a matter of fact and not a matter of Law. Addition of parties/ striking out parties of course, is a matter of discretion to be exercised by a Tribunal/ Court based on sound judicial principles. The said discretion can be exercised either on the application of a Petitioner/ Respondent or suo-motu or on the application of a person who is not a party to any pending proceedings. However, the said discretion cannot be exercised in a cavalier and whimsical fashion.
In the present case, the 'Ministry of Corporate Affairs' was neither arrayed as a party nor impleaded in the subject matter before the Adjudicating Authority. Also, that the 'Registrar of Companies' had not filed any response/ reply/ counter (in respect of the clarification sought for) prior to the passing of the impugned order. An Adjudicating Authority (National Company Law Tribunal) has a quasi-judicial one is to abide by the principles of 'Natural Justice'. After providing a reasonable opportunity of being heard to the other side, the Tribunal can pass appropriate orders. If an order is passed by the Tribunal, without affording an opportunity of hearing to the parties, the same is unsustainable in Law.
Appeal allowed.
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2020 (5) TMI 658
Settlement Commission order - Madras High Court jurisdiction to look into the matter - valid reason to come to the conclusion that the relief under Section 80HHC is not required to be computed - HELD THAT:- This Court is not inclined to go into the merits of the case since the petitioner herein and the assessing authorities are at Bangalore and merely because the order under challenge had been passed by the Chennai Bench of the Settlement Commission, the cause of action cannot be said to arise within the territorial jurisdiction of this Court, when the events leading to the filing of the proceedings before the Chennai Bench of the Settlement Commission and the parties to such proceedings are outside the territorial jurisdiction of this Court and hence it would not be appropriate to entertain this writ petition by this Court.
Taking note of the principles enunciated in the above decisions and taking note of the fact that the petitioner herein and the assessing authorities are at Bangalore, as already observed above, it would not be appropriate for this Court to entertain this writ petition and accordingly the writ petition is dismissed, however, leaving it open to the petitioner to approach the High Court of Karnataka, for appropriate relief.
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2020 (5) TMI 657
MAT applicability u/s 115JB - Provision for leave encashment - pension which are unascertained liabilities and deserves to be disallowed which computing income under section 115JB - HELD THAT:- Substantial question of law No.2 is answered by a Division Bench of this Court in M/S. ING VYSYA BANK LIMITED [2020 (1) TMI 1116 - KARNATAKA HIGH COURT] wherein held Companies Act, 1956 has excluded insurance, banking companies or the companies engaged in the generation or supply of electricity from the purview of Section 211(1) of the Companies Act, 1956 and resultantly from the purview of Section 115JB of the Act.
Deduction u/s 80IA - Whether tribunal’s order can be said as perverse in nature in not adjudicating issue pertaining to 80IA deduction even though same is pleaded by Revenue? - HELD THAT:- Issue pertaining to Section 80IA of the Act, the Tribunal has followed the order passed in the previous assessment year 2007-08 [2013 (10) TMI 1505 - ITAT BANGALORE] and the same is answered against the Revenue. Therefore, in view of the preceding analysis, no substantial questions of law arise
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2020 (5) TMI 656
Application for settlement of cases u/s 245C - whether the 1st respondent Settlement Commission was justified in admitting the case of the 2nd respondent for settlement? - whether the 2nd respondent was entitled to file an application for settlement of cases u/s 245C as amended with effect from 01.06.2007, for the Assessment Years 2008-09, 2010-11, 2011-12 and 2012-13? - HELD THAT:- In the present case, when the application was filed on 27.4.2012 to settle the case under chapter XIX A of the Income Tax Act, 1961, case was pending.
Since the time for completion of assessment under section 153 of the Income Tax Act, 1961 had not expired as far as assessment years 2010-11, 2011-12 and 2012-13 when the application was filed Commission, it would be safe to hold that the case was pending before the Assessing Officer and therefore, the application was maintained under Chapter XIX-A of the Income Tax Act, 1961.
Therefore of the view that there is no merits in the contention of the petitioner that the application filed for settling the case was without jurisdiction under the aforesaid Chapter of the Income Tax Act, 1951 as far as these three AYs.
As far as AY 2008-09 is concerned, the last date for completing the assessment in terms of section 153 expired on 31.12.2010. However, for this Assessment Year also no assessment order was passed by AO.
If Circular No.3 of 2008 dated 12.03.2008 is applied, assessment is deemed to have been completed on the date of service of assessment on the 2nd respondent applicant.
If Circular No.16/2014[F.No.142/14/2007- TPL(PART)] dated 17.11.2014 is applied, assessment shall be deemed to have been completed on the date on which the assessment order is passed.
Only after the statutory amendment in 2015, restriction have been imposed. However, such restriction cannot be retrospectively made applicable to the application filed in 2012. The fate of the application is to be decided in the light of the provision as it stood in 2012. Subsequently, though the Explanation to Section 245A of the Act was amended, it cannot be made applicable retrospectively.
1st respondent Settlement Commission has therefore correctly entertained the application of the 2nd respondent. If the application was disposed then and there, there was no scope for confusion based on the plain reading of the provision.
Find no merits in the challenge to the impugned order. - Therefore dispose the present writ petition and direct the 1st respondent Settlement Commission to pass appropriate order on merits and bring a closure to the application filed by the 2nd respondent under Chapter XIX-A of the Income Tax Act, 1961, within a period of six months from the date of receipt of a copy of this order.
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2020 (5) TMI 655
Exemption u/s 11 - hostel receipt to be treated as business income of the trust in absence of not maintaining separate books of accounts as per section 11 (4A) - assessee has not maintained separate books of account of hostel activity as assessee is running a hostel and every year surplus is generated - HELD THAT:- In this case , it is not denied that student who pays the hostel fees do not get education in classrooms - Assessee is running educational institutes , income from which has been accepted by ld AO himself as falling u/s 2 (15 ) of the act. We direct the learned assessing officer to not to treat the excess as taxable income on account of hostel receipts under section 11 (4A) of The Income Tax Act. As hostel fee income is subservient to the main object of the education and therefore the learned assessing officer is directed to treat the same as not a business income but income derived from the charitable activities of "education". - Decided in favour of assessee.
Depreciation to assessee trust - additional ground - double deduction - HELD THAT:- The assessment year in appeal before us is assessment year 2011 – 12, which is prior to assessment year 2015 – 16 where from the amendment has been made denying the double deduction. Therefore, for this year the assessee is entitled to the depreciation allowance. Accordingly, additional ground raised by the assessee is allowed.
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2020 (5) TMI 654
Validity of the reassessment proceedings - approval by the Additional Commissioner of Income Tax - HELD THAT:- The material facts of the present case being identical inasmuch as the reopening, beyond any doubt or controversy, is entirely based on the Hon’ble Justice M B Shah Commission report, as in the case that SESA STERLITE LTD [2019 (8) TMI 16 - BOMBAY HIGH COURT] were dealing with, the ratio of the aforesaid judgment clearly applies on the facts of this case. As a plain look at the reasons recorded for reopening the assessment, as also for the approval by the Additional Commissioner of Income Tax, the only basis for reopening of the present assessment, as in the judgment cited above, was report submitted by Hon’ble Justice M B Shah Commission report.
Respectfully following the binding judicial precedent, extracts from which are extensively reproduced above, we must hold that the initiation of reassessment proceeding itself, on the facts of this case as evidenced by the reasons recorded by the AO, is unsustainable in law. We, therefore, quash the reassessment proceedings.
Order pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown ordered by GOI - HELD THAT:- This period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.
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2020 (5) TMI 653
Accrual of income - Addition on sale of development rights - Whether amount had accrued to the assessee on account of transfer of its rights in the property and therefore was liable to offer this amount for taxation as income from capital gains?- ‘transfer’ under section 53A of the Transfer of Property Act, 1872 - HELD THAT:- What was to be received by the assessee was from a joint venture, in which assessee itself was a participant, but, under the said arrangement, it was to be entirely funded by Shivalik Ventures Pvt Ltd. The essence of the arrangement was the performance of obligations by the assessee so far as the above obligations are concerned - while the assessee was to help the assessee get the development rights in favour of the joint venture, the payment was to be received by hum “as original developer appointed by the said societies” and this payment cannot be read in isolation with all its obligations under the joint venture arrangement. It was a composite agreement, and, irrespective of whether we look at the modifications or not, and all the terms of the agreement were to be read in conjunction of each other.
When an assessee had an obligation to perform something, and the assessee had not performed those obligations nor does he even seem to be in a position to perform these obligations, it cannot be said that a partial payment for fulfilling these obligations can be treated as income in the hands of the assessee. The obligations under the agreement, as extracted above, have not been performed till date, as is the uncontroverted stand of the assessee. Clearly, therefore, the income in question never accrued to the assessee.
When obligations of the assessee under the joint venture agreement are not yet performed, there cannot be any occasion to bring the consideration, for performance of such obligations, to tax. The very foundation of the impugned taxability is thus devoid of any legally sustainable basis. As regards the supplementary agreement, in our humble understanding, even if we are to disregard it, the fact remains that income could accrue only on performance of obligations under the joint venture agreement. In any case, it cannot be open to the AO to disregard the supplementary, or modification- whichever way one terms it, agreement, only because it’s result is clear and unambiguous negation of tax liability in the hands of the assessee. As to whether the amount is actually refunded or not, nothing turns on that aspect either. Just because the assessee does not pay the amounts to be paid by the assessee as income of the assessee. The taxability on account of what is alleged to be, transfer of development rights is wholly devoid of merits.- Decided in favour of assessee.
Pronouncement of orders within 90 days - Covid-19 epidemic - Worldwide lockdown - HELD THAT:- Hearing in this case was concluded on 19th February 2020 but the order is being passed today on th day of May 2020, i.e. well after 90 days, but then given the extraordinary times that we are going through in these days of Covid 19 epidemic, the period of lockdown is required to excluded in computation of the 90 days. In support of this proposition we find support from a coordinate bench decision in the case of DCIT Vs JSW Ltd.[2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (5) TMI 652
Reopening of assessment u/s 147 - proper sanction u/s 151 - unexplained deposited cash in his savings bank account - whether the sanction of reopening given by the learned approving authority is proper or not? - HELD THAT: - As decided in SONIA GANDHI, OSCAR FERNANDES, RAHUL GANDHI [2018 (9) TMI 720 - DELHI HIGH COURT] for the purpose of Section 151(1) of the Act, what the Court should be satisfied about is that the Additional CIT has recorded his satisfaction "on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice". In the present case, the Court is satisfied that by recording in his own writing the words: "Yes, I am satisfied", the mandate of Section 151(1) of the Act as far as the approval of the Additional CIT was concerned, stood fulfilled - we dismiss the argument of the assessee that there is no proper sanction recorded by the approving authority while sanctioning the action of the learned assessing officer under section 147.
AO reopened the case of the assessee for the purpose of verification of the cash deposited in the savings bank account as income escaped - Cash deposit and consequent assessment of sale of agricultural land through which cash has been generated by the assessee is not an independent and unconnected issue. Therefore, respectfully following the ratio laid down by RANBAXY LABORATORIES LIMITED [2011 (6) TMI 4 - DELHI HIGH COURT], we do not find any infirmity in the reopening of the assessment by the learned assessing officer. Therefore, this argument of the learned authorized representative is rejected.
In view of this we do not find any infirmity in the action of the Ao in reopening of the case as well as the action of approving authority in granting approval u/s 151 (1) of the act. - Decided against assessee.
Capital gain - nature of land sold - capital asset v/s agricultural land - whether the agricultural land sold by the assessee or his HUF is a ‘capital asset’? - Before us, the assessee has submitted a certificate of the tehsildar of village Bhapra dated 29th of December 2017 which certifies that the impugned land sold by the assessee is situated approximately 5.5 km from the municipal limits of Samalkha. The above certificate produced by the assessee before the lower authorities have been rejected for the reason that the tehsildar has mentioned the distance in ‘approximation’ and further there is difference in signature. This issue if examined on verification of the certificate issued by that particular authority, they have stated that the distance is approximately 5.5 km. Definitely the property is not situated within 5 km of the municipality limits of that particular region.
Otherwise, that authority would not have certified so - merely because the authority has mentioned ‘approximately”, that does not mean that property is situated within the 5 km of the municipal limits of that particular municipality. It may be possible that distance is higher than 5.5 km. there is no reason to presume that as the distance is certifying in approximation it is definitely within 5 Km of Municipal limits. It is one of the ways of certifying the distance because same is not measured up to last meter. Therefore for this reason rejection of the above certificate is devoid of any merit.
Why the certificate is rejected is that the signature on the first page and on the second page are not similar as held by the learned CIT Appeal - On the first page there was no signature of Tehsildar, naturally but only intials. On the second page, Tehsildar has signed and certified approximate distance of the impugned land from the municipal limit of Samalkha. On the second page of the certificate, there is a stamp of ‘Tashdique Shuda” which means “issued”. Therefore, doubting the veracity of the certificate was not proper by the learned CIT Appeal.
In fact, if he has any doubt about that he should issue direction to the ld AO to ascertain veracity of the same. We hold that the impugned property is situated beyond 5.5 km of the municipal limit of Samlakha ( Dist. Panipat), therefore the impugned property is not a capital asset. The sale of such land will not make any capital gain liable to be taxed in the hands of the assessee. Therefore on this reason itself, we reverse the orders of the lower authorities and direct the assessing officer to delete the addition. - Decided in favour of assessee partly.
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2020 (5) TMI 651
Disallowance of expenses on various heads viz., tours & travels and repairs & maintenance - assessee failed to produce direct evidence in respect of the expenses claimed - according to the AO, genuineness of the expenses could not be verified - HELD THAT:- Assessee has brought to our notice that its director’s parents expired during the year under consideration and, therefore, he was held up in hospital discharging his pious obligation by looking after them in the Hospital. Since the assessee could not produce the evidence, AO has disallowed the expenses. Since there is a reasonable cause for the assessee not to appear before the AO, in the interest of Justice and fairplay, set aside the impugned order of Ld. CIT(A) and remand the matter back to the file of AO for fresh adjudication.
As relying on TIN BOX COMPANY VERSUS COMMISSIONER OF INCOME-TAX [2001 (2) TMI 13 - SUPREME COURT] set aside the impugned order of the Ld. CIT(A) and remand the matter back to the file of AO for fresh adjudication.
Order pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown ordered by GOI - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, rely upon the decision of the Co-ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI].
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2020 (5) TMI 650
TP Adjustment - payment made to its AE towards Maintenance services relating to software licenses - determine ALP of transaction under TNMM method - TPO has restricted the payment made to AE to 10% by holding that 10% shall be the ALP of the transactions - HELD THAT:- The assessee herein is the distributor of software licenses of its AE. Hence there should not be any dispute that core technical problems could only be resolved by its AE. Unless proper and appropriate maintenance services are provided to its customers, it would be difficult to market the software licences. There is merit in the contentions of the assessee that the distribution of software licenses and their maintenance are inter-linked. Accordingly, we are inclined to agree with the contentions of the assessee.
TPO was not justified in viewing maintenance services as separate from the distribution activity. We notice that the assessee and its AE have agreed that the assessee shall make payment of 40% of the revenue realised on sale of software licenses and on entering into maintenance contracts.
A.R has further pointed out that the above method of sharing the revenue has been accepted to be at Arms length under TNMM method in the immediately preceding year and succeeding year. Hence we agree with the contentions of the assessee that there is no reason to take a different view in this year alone by re-characterising the payment relating to maintenance services alone. Accordingly, we set aside the order passed by the AO/TPO in this regard. Accordingly we direct them to determine ALP of transaction under TNMM method by aggregating them. Appeal of the assessee is allowed.
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2020 (5) TMI 649
Disallowance of provision for warranty - assessee is engaged in the business of manufacturing and trading of toys for heavy vehicles, which are sold along with warranty, the moment the sale takes place, the assessee places itself under the obligation to replace during the warranty period, free of cost, any competent suffering from manufacturing defects - HELD THAT:- As rightly pointed out by the Ld. AR, assessment order nowhere show that the learned AO considered the details furnished by the assessee along with the letter dated 17/02/2014 not ready comment on such details as to their consistency and genuineness. It is only on verification of the record CIT(A) found that the learned AO added in observing that no details are scientific method of computation of provision for warranty was filed by the assessee, because such details to be found in record being filed alongwith the reply dated 17/02/2014. There is no reason for us not to believe the factual findings returned by the Ld. CIT(A) after going through the record. A reading of the orders of the authorities below not support the argument advanced on behalf of the Revenue.
From the record that against the order of the Ld. CIT(A) for assessment year 2010-11 [2019 (3) TMI 1782 - ITAT DELHI]. Tribunal while following the decision of the Hon’ble Supreme Court in the case of Rotork Controls India Ltd [2009 (5) TMI 16 - SUPREME COURT]upheld the findings of the Ld. CIT(A) in deleting the disallowance.
There is no dispute that the facts involved for this year are similar to the facts involved for the immediately preceding year, i.e. 2010-11 - we uphold the findings of the Ld. CIT(A) and while allowing ground No.1, direct the learned Assessing Officer to delete the disallowance and consequential addition.
Addition on account of processing fee and interest paid - HELD THAT:- Having accepted that the assessee had offered ₹ 66,18,000/- paid as processing fee for taxation, the assessing officer shall not be heard to say anything contrary. Finding of the Ld. CIT(A) do not suffer any legal infirmity. Insofar as the amount of ₹ 5,78, 387/- is concerned, assessee had deducted the TDS on interest amount and, therefore, the addition is unsustainable. Ground No. 2 of the Revenue’s appeal is devoid of merits and is dismissed.
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2020 (5) TMI 648
Expenditure incurred towards maintenance / upkeep of inventories - being part of trading operations - allowable revenue expenditure - HELD THAT:- Assessee has incurred expenditure towards maintenance of inventories. The payment is duly supported by the debit note issued by M/s Sharan & Co. It is also evident that said entity has made further payment to another entity i.e. M/s First Canvass towards rendering of services, which fact AO has also accepted in the alternative and proposed that the payment to that extent could be allowed to the assessee.
From perusal of Tribunal order for AY 2009-10, as placed on record, it is also noted that similar payment was paid by the assessee to avail similar services in that year. The Ld. AO termed the payment to be excessive and allowed partial claim to the extent of ₹ 37.97 Lacs.
CIT(A) deleted the disallowance as proposed by Ld.AO which was agitated by the revenue before this Tribunal. Tribunal, inter-alia, noting that the payment was in accordance with the agreed terms, it was not correct on the part of AO to question the correctness of the decision taken by the assessee out of commercial expediency. Therefore, the revenue’s appeal was dismissed.
We find that an expenditure has been incurred by the assessee towards maintenance / upkeep of inventories and the same being part of trading operations, would constitute allowable revenue expenditure. Therefore, by deleting the impugned disallowance - Decided in favour of assessee.
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2020 (5) TMI 647
Addition u/s 69B on the basis of DVO's report only - Unexplained investment in the hotel building - 99 years lease deed was converted to a sale deed - HELD THAT:- In the case in hand, a perusal of the report of the government valuer reveals that the valuer has taken the cost of construction / Fair market value as on 31.8.2006. It is not the case of the valuer that the building was newly constructed on the date, rather, the valuer has mentioned categorically that the date of construction is not known. He even has failed to estimate the age of the building as on the date of valuation.
Under the circumstances, the said report of the valuer cannot be relied upon. Even, we find that the Assessing Officer has formed his opinion to refer the matter to the government valuer only because the 99 years lease deed was converted to a sale deed at the almost at the same price.
This, in our view, is not a matter of suspicion as 99 years lease is almost the sale of the property itself. This fact, in our view, is not sufficient to hold that the actual value of the property was more than that the sale deed mentioned. The assessee has also claimed a sum to have been incurred for the repair and maintenance of the property.
The said claim of the assessee has been denied on the ground that no specific bills and vouchers were produced.
The assessee submitted before the AO that in the office of the Registering Authority / Tehsildar the report of the approved valuer was submitted, wherein, the value of the building was mentioned and the stamp duty accordingly accepted by the Assistant Collector. These submissions of the assessee find mention at page 8 of the assessment order. AO totally ignored the above submissions of the assessee. Moreover, the AO has held that the value of the property was more than that was depicted in the sale deed but he had not initiated any action for corresponding addition to the income of the seller.
Because of the aforesaid discrepancies and ambiguities in the valuation report, the reliance on the same was wrongly placed by the lower authorities, whereas, the record furnished by the assessee in the office of Tehsildar for determining the value has been disregarded without any reasons - registered valuer assessed / determined the value of the property at a later date without taking into consideration the actual facts and circumstances of the case. In view of the above, the addition made by the lower authorities on this issue is not sustainable and the same is accordingly ordered to be deleted.
Disallowance of expenses - addition based on incriminating loose papers found in course of survey proceedings carried out u/s 133A(1) - estimation of the actual income of the assessee from room rent and refreshment bills - AO has taken note of the rates fixed by the Tourism Department at ₹ 1,000 /- to ₹ 1,100/- per room, however, giving benefit of doubt to the assessee that sometimes the rooms are booked at a lower rate than the rates fixed by the Tourism Department has adopted the average rate of ₹ 600/- per room - HELD THAT:- No reason to interfere in the above order of the Assessing Officer so far as the estimation of the room rent is concerned. However, the Assessing Officer having estimated the room rent should have given the deduction of the expenditure claimed at ₹ 1,52,626/- on water and electricity charges and ₹ 45,000/- on food material. AO has allowed only ₹ 1 lac against this, which does not seems to be justified. We, therefore, partly allow this ground.
Estimation of restaurant income - HELD THAT:- AO has taken the restaurant income at ₹ 600/- per day, however, considering the overall facts and circumstances, and the plea of the assessee that on most of the days hotel remains vacant, the restaurant income is directed to be estimated at ₹ 500/- per day. The Assessing Officer is direct to restrict the addition accordingly on this issue.
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2020 (5) TMI 646
Unexplained income out of undisclosed sources - second statutory appeal - claim of the appellant for assessing the income u/s. 44AD not acceptable - CIT(A) partly allowed the appeal of the assessee - HELD THAT:- As we can see neither assessee filed return u/s 139 or section 148 of the Act and no submission have been made before any of the authority and there is no cooperation on behalf of the assessee.
In the matter of Vishnukumar Bhargav vs. ITO ITAT Jaipur [2018 (3) TMI 1864 - ITAT JAIPUR]Tribunal has held that if assessee has not produced any evidence in support of his case. In appellate proceeding also, addition was confirmed as supportive evidenced was not submitted by the assessee. In that case, there is no error or illegality in the orders of authorities below.
Thus, in parity with the above said order and it appears from the conduct of assessee that he is not serious about his case and we do not have any cooperation from the assessee. Thus, we confirm the action of the ld. CIT(A) as we did not have any assistance from the assessee in the present case. - Decided against assessee.
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2020 (5) TMI 645
Revision u/s 263 - validity of the revision order on the plea that they have been passed against the draft assessment orders - HELD THAT:- One gets the impression that the assessee knowingly and deliberately desisted from objecting to the initiation of proceedings against the draft assessment order in course of revision proceedings to take advantage of such mistake in future. From the aforesaid facts, it is very much clear that the assessee has not approached the Tribunal with clean hands on this issue. Therefore, no relief can be granted to the assessee. The decisions relied upon by the assessee would also be of no help as they would not apply to facts of these appeals. The grounds raised by the assessee challenging the validity of the revision order on the plea that they have been passed against the draft assessment orders are devoid of merit, hence, cannot be entertained. In any case of the matter, the mistake in the revision orders with reference to the mentioning of the draft assessment order stands rectified by issuance of corrigendum by Commissioner.
For the present, assessee’s challenge regarding the validity of the revision orders no longer survives. As regards assessee’s contention that Commissioner does not have the power to issue corrigendum, we are unable to accept the same. Accordingly, ground no.1 along with additional grounds no.(IV) and (V) 4 and 5 are dismissed.
Validity of exercise of power u/s 263 - Excise Duty exemption received by the assessee, whether revenue or capital - HELD THAT:- Facts and materials on record clearly demonstrate that the Assessing Officer has failed to conduct proper enquiry or has made perfunctory enquiry with regard to assessee’s claim of excise duty incentive as capital receipt. Whether the excise duty incentive is capital or revenue depends upon various factors, including, the scheme formulated by the Government allowing incentive/subsidy. AO is required to examine the issue factually and only thereafter apply the ratio laid down in the judicial precedents.
AO has not even undertaken the exercise required to be undertaken by him in the first step to factually examine the nature of incentive. Allowance of assessee’s claim in respect of excise duty incentive while computing the income under the normal provisions without necessary inquiry has certainly made the assessment order erroneous and prejudicial to the interest of Revenue.
Conditions of section 263 are fulfilled so as to enable the Commissioner to revise the assessment orders u/s 263 - exercise of power u/s 263 in the facts of the present case is valid. Though, we respectfully agree with the ratio laid down in the decisions cited before us by learned Counsel for the assessee, however, they would not be of any help to the assessee as we have factually found that before allowing assessee’s claim in respect of excise duty incentive, the Assessing Officer has not conducted any inquiry.
We do not approve the decision of learned Commissioner in directing the Assessing Officer to disallow the excise duty incentive and add it to the income of the assessee. In our considered opinion, the issue whether the excise duty incentive is capital or revenue has to be examined by the Assessing Officer as he has not enquired into or examined it in the course of assessment proceedings. Therefore, he has to examine the issue and take a final decision on it without any fetters being put by the higher appellate authorities. Therefore, the direction of learned Commissioner insofar as it relates to addition of excise duty incentive is set aside/modified.
AO is directed to examine the issue in proper perspective and take an independent view after considering all relevant facts and materials on record, submissions made by the assessee, the relevant incentive schemes/notifications, ratio laid down in the decisions to be cited as well as the orders passed by the Appellate Authorities on the issue in assessee’s own case in other assessment years. We make it clear, while deciding the issue the AO should not be influenced by any of the observations of learned Commissioner on merits. Needless to mention, the assessee must be provided adequate and proper opportunity of being heard in the matter. Ground no.2 is partly allowed for statistical purposes.
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2020 (5) TMI 644
Impleadment of Airport Authority of India [AAI], Air Operator, and Concessionaire - HELD THAT:- The respondents will be at liberty to file a combined counter-affidavit both qua the original writ petition as well as the additional-affidavit, if any, filed by the petitioners.
Renotify the matter on 14.05.2020.
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