TMI Tax Updates - e-Newsletter
April 3, 2018
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Capital Gain - Transfer - In the absence of registration of JDA the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. - HC
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Income Tax:
DRP had summarily upheld the change from TNMM to CUP method without assigning any cogent reason whatsoever. By no means it is justified to keep on finding a method for addition by trial and error method - there was no justification in rejecting the TNMM method applied by the assessee as in the preceding year - AT
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Income Tax:
Fees for technical services (FTS) - nature of payment - the assessee was not exploiting the D&D for business purposes, that IPR of the D&D were retained by the non resident supplier - disputed amount cannot be considered as FTS - AT
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Income Tax:
Assessing Officer was not justified in making disallowance u/s 40(a)(ia) on account of alleged failure to deduct tax at source on purchase of software capitalized in books of account - AT
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Income Tax:
Bogus purchase - purchase bills from these non-existent the/bogus parties cannot be taken as cogent evidence of purchases, in light of the overwhelming evidence the revenue authorities cannot put upon blinkers and accept these purchases as genuine. - AT
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Income Tax:
Disallowance of expenses as no activity was carried on by the assessee - a private limited company being a body corporate has to incur certain expenses to keep its status active - expenditure claimed by the assessee allowed as deduction - AT
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Income Tax:
Penalty u/s 271(1)(c) - the order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. - AT
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Income Tax:
Addition u/s 68 - share application money and share premium - in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected as has been done by the AO in the instant case - AT
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Income Tax:
The assessee will be eligible for set off of current year business loss against the undisclosed investment towards purchase of plot of land which has been surrendered during the course of search, and subsequently offered and brought to tax u/s 69 read with section 115BBE - AT
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Customs:
Valuation of imported goods - the original authority has undertaken the exercise of re-assessment to provide for recovery in the contingency of breach of the conditions of import. In the absence of ascertainment of such contingency, the re-assessment remains an academic exercise. - AT
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Service Tax:
Rejection of VCES Declaration - short payment of tax - the time limit provided in the scheme should have been adhered to for depositing the 50% amount by 31.12.2013 which the appellant failed to comply - Rejection of VCES Declaration justified - AT
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Service Tax:
Refund - relevant date - the appellant has admittedly filed the refund claim within one year from the receipt of convertible foreign exchange - the relevant date is the date of FIRC and not the date of service. - AT
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Service Tax:
Refund of accumulated CENVAT credit - time limitation - in the case of service providers exporting 100% of its services, such disputes should not arise and refund of CENVAT credit irrespective of when he has taken the credit, should be granted if otherwise in order. - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2018 (4) TMI 45
Capital Gain - Transfer - exigible to tax by reference to Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Whether there was grant and assignment of various rights in the property by the appellant alongwith handing over physical and vacant possession, the same tantamount to “transfer”? - Held that:- The facts of the case of assessee are admittedly identical as have been decided in the case of Shri C.S. Atwal Vs CIT, Ludhiana [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] issue of exigibility to capital gain in favour of the assessee and against the revenue wherein held as no possession had been given by the transferor to the transferee of the entire land in part performance of JDA so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA no further amount has been received and no action thereon has been taken. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic- Decided in favour of assessee.
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2018 (4) TMI 44
Addition u/s 36(1)(iii) - assessee has advanced the money for the purpose of its business as a measure of commercial expediency - Held that:- Relying on the decision of hon’ble Supreme Court in the case of SA Builders Ltd. vs CIT(A) (2006 (12) TMI 82 - SUPREME COURT) holding that the assessee has advanced money for the purpose of its business as a measure of commercial expediency. The assessee has advanced the money for the purpose of its business as a measure of commercial expediency and accordingly, the addition made by the AO in A.Y.2006-07 u/s 36(1)(iii) of the Act has been deleted. Thus, the finding of the CIT(A) in deleting the addition made by the A.O u/s 36(1)(iii) of ₹ 31,00,953/-, holding that the same cannot be sustained on the facts of the case is justified. Disallowance u/s 14A r.w.r. 8D - Held that:- We find that the assessee company has invested ₹ 56.12 lacs in the shares of other companies, which are, very old; that the Paid-up capital & Free reserves of the assessee company at the end of the financial year were ₹ 17.53 crore and that the assessee claimed that no expenditure was incurred for earning the dividend. However, the AO has disallowed deemed interest expenditure of ₹ 6.10,968/- U/s 14A u/r 8D ignoring the fact about sufficient availability of own funds with the company for the purpose of investment in the shares. CIT(A) noted that AO has wrongly calculated addition u/s 14A, as total assets of the company as on 31.03.2008 were ₹ 56,17,79,311/- as against ₹ 3,66,92,065/- as considered in the assessment order which resulted in to wrong calculation of addition on this count. Accordingly, the ld. CIT(A) reduced the addition to ₹ 29,560/- as against ₹ 6,10,968/- made by the AO.The ld. DR. has not disputed the said calculation.
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2018 (4) TMI 43
Reopening of assessment - eligible reasons to believe - no allegation against the petitioner of failing to disclose fully and truly all material facts - pre-requisite for issuing notice u/s 148 - unexplained receipt of share capital - Held that:- No reassessment framed under Section 143(3) will be reopened after a period of 4 years unless AO record a satisfaction that on the basis of the information received that he is of the view that there is a failure on the part of the assessee. Not mentioning of this formation of belief that there is a failure on the part of the assessee, in the reasons, means that AO has not applied his mind on this aspect and merely on the receipt of the information from Investigation Wing, he has straight away reopened the assessment. In the present case, in the absence of any such satisfaction being recorded that there was a failure on the part of the assessee to disclose fully and truly all material and facts which led to escapement of income, it is of the view that reopening of the assessment framed originally under Section 143(3) after a period of 4 years will be barred by limitation For unexplained receipt of share capital addition there is a difference in making an allegation and sustaining the allegation. On the basis of allegation, the AO can carry out the investigation but the addition can be sustained only when there are sufficient evidences to support the allegation. In the present case, it is of the view that the assessee has fairly discharged this onus. - Decided in favour of assessee
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2018 (4) TMI 42
Addition u/s 41 - addition of outstanding liability - Held that:- We find ourselves to be in agreement with the view taken by the CIT(A) that in the absence of any positive evidence being placed on record by the A.O, which would irrefutably prove that the liability to pay on account of the unrealized slips had ceased to exist in the hands of the assessee, the same merely on the basis of presumptions could not be characterized as a liability which had ceased to exist. We are of the considered view that now when the assessee bank was showing the aforesaid amount as an outstanding liability under the head “other creditors”, therefore, a very heavy onus was cast upon the revenue to disprove and dislodge the said claim of the assessee, before concluding that the said liability had ceased to exist. As the A.O had failed to place on record any positive evidence to support his view that the aforesaid outstanding liability had ceased to exist, and had only on the basis of presumptions so inferred, therefore, we are unable to persuade ourselves to be in agreement with the said view of the A.O. CIT(A) rightly appreciating the facts of the case in the backdrop of the settled position of law had vacated the addition made by the A.O in the hands of the assessee under Sec. 41(1) of the Act. We thus finding no infirmity in the order of the CIT(A), therefore, uphold the same. Amortization of premium of investments - Held that:- As the amortization of premium paid on purchase of securities classified under the “HTM” category was an ascertained and determined loss to the bank which was not expressly disallowed by any provisions of the Income Tax Act, 1961, therefore, the same were to be allowed while computing the business income of the assessee bank. We are of the considered view that the CIT(A) had on the basis of a well reasoned order concluded that as the amortization premium of investment of government securities amounting to ₹ 1,74,90,500/- was an allowable revenue expenditure, therefore, the same had wrongly been disallowed by the A.O. Nothing has been submitted before us by DR which could persuade us to conclude that the aforesaid observations of the CIT(A) suffers from any infirmity or are found to be perverse. We thus finding ourselves persuaded to be in agreement with the view taken by the CIT(A), therefore, uphold his order as regards admitting the aforesaid claim of the assessee and concluding that amortization premium of investments in government securities amounting to ₹ 1,74,90,500/-, being a revenue expenditure was allowable as a deduction. Disallowance under Sec. 14A r.w. Rule 8D - Held that:- We are of the considered view that though it remains as a matter of fact that certain expenses are related to collection of the exempt income, but however, we cannot remain oblivious of the fact that a major part of expenses viz. salary expenses, management expenses, miscellaneous expenses etc. would also be involved in management of the investment portfolio of the assessee, and taking of important decisions in respect of holding of the investments, who we find had made a substantial investment of ₹ 2,00,00,000/- in the UTI Master Value Fund. We find that the A.O had made a disallowance under Sec. 14A only under Rule 8D(2)(iii). We find no reason to dislodge the view of the CIT(A), who we find had upheld the disallowance of ₹ 1,00,000/- made by the A.O under Sec. 14A r.w. Rule 8D(2)(iii). Allowability of Investment Depreciation Reserve - Held that:- As the assessee had not raised this claim before the lower authorities, nor the facts pertaining to the same emerges from the record, therefore, in all fairness we restore this matter to the file of the A.O for fresh adjudication. The A.O is directed to readjudicate the issue after deliberating on the facts involved in the case of the assessee, in the backdrop of the aforesaid judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court).
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2018 (4) TMI 41
Non providing opportunity to the assessee before reference of the matter to the Transfer Pricing Officer - Held that:- We find that in the case of Vodafone India Services P. Ltd. (2015 (10) TMI 2487 - HIGH COURT OF BOMBAY), the Hon'ble jurisdictional High Court has expounded that the grant of personal hearing before referring the matter to TPO has to be read into section 92CA(1) in cases where the jurisdiction to tax under Chapter X has been challenged by the assessee. It was further expounded that in case no objection is raised by the assessee to the applicability under Chapter X, then the prima facie view of the Assessing Officer would be sufficient before referring the matter to the Transfer Pricing Officer for determination of the AMP. The additional ground raised by the assessee cannot be sustained. It is not at all the case of the assessee that there is any objection to the applicability of Chapter X of the I. T. Act. Hence, on the anvil of the above said Hon'ble jurisdictional High Court decision, this additional ground raised by the assessee deserves to be dismissed. Adjustment to the international transactions relating to export of goods - MAM selection - TNMM or CUP method - rejecting the TNMM method in the present year - Held that:- ransfer Pricing Officer has proceeded to examine the issue on the basis of TNMM method. He has ordered for updated data of comparable. Thereafter, when even on the basis of updated data, the international transaction was found to be at arm’s length, he laconically held that CUP method would be preferred. The DRP had summarily upheld the change from TNMM to CUP method without assigning any cogent reason whatsoever. By no means it is justified to keep on finding a method for addition by trial and error method. Accordingly, we hold that there was no justification in rejecting the TNMM method applied by the assessee as in the preceding year. Since as per the same computation the assessee’s margin was found to be at arm’s length, we set aside the order of authorities below and decide the issue in favour of the assessee. Adjustment to the international transaction relating to corporate guarantee - Held that:- DRP has carefully examined the issue and passed a reasonable order. A downward adjustment to the naked quotes of the rates of bank Guarantee has been done in this year, while benchmarking the transaction. It is seen that the bank guarantee rates vary generally between 1% to 3% giving an average of about 2.0%. Accordingly, it would be appropriate to charge a corporate guarantee of 1.5% from the AE. Disallowance u/s 14A - whether no exempt income has been earned? - Held that:- In the present case, the assessee’s contention is that it has not earned any dividend income from its subsidiary company in India. As regards the income from foreign subsidiary it has been submitted that the same is subject to tax u/s. 115BBD of the Act. We find that principally we are in agreement with the above said submissions of the ld. Counsel of the assessee. However, since the above requires factual examination of the contention that no dividend income has been received from the subsidiary companies in India and dividend income from foreign subsidiary are already subject to tax, the issue is remitted to the file of the Assessing Officer. The Assessing Officer shall examine the veracity of the above submissions and thereafter grant the assessee necessary relief, as per law. Disallowance u/s. 35(2AB) - benefit of weighted deduction - assessee submitted that the said certificate could not be produced before the authorities below as the same was received late - Held that:- As the assessee has made additional submissions, which needs to be verified at the Assessing Officer’s level. Hence, we remit this issue to the Assessing Officer to consider the same afresh in light of submission being made by the assessee.
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2018 (4) TMI 40
Revision u/s 263 - allowability of charge of interest - Held that:- We find that the Assessing Officer has duly asked the assessee and made enquiry regarding the charge of interest. The specific question asked was: “the assessee is asked to explain why interest has not been capitalized.” From the above, it is apparent that the charge of interest to profit and loss account and non capitalization of the same was duly enquired by the Assessing Officer. In response, the assessee has referred to Accounting Standard 16 issued by the Institute of Chartered Accountant of India. Now we note that it is not the case of the Commissioner of Income Tax (Appeals) that the said project was not substantially completed as submitted by the assessee. Hence, prima facie, the view adopted by the Assessing Officer cannot be said to be incorrect. Hence, if the Assessing Officer has adopted one of the views, it cannot be said that the assessment order needs to be visited by revisionary powers of the ld. Commissioner of Income Tax (Appeals). Furthermore, it is also not the case of the ld. Commissioner of Income Tax (Appeals) that the project is not substantially complete and the said Accounting Standard – 16 has not been rightly completed. Thus we set aside the order of the ld. Commissioner of Income Tax (Appeals) and quash the order passed u/s. 263 of the Act. - Decided in favour of assessee.
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2018 (4) TMI 39
Penalty levied u/s. 271(1)(c) - non specified in the notice whether the penalty is going to be levied for concealment of income or furnishing inaccurate particulars - Held that:- As the notice issued by the Assessing Officer u/s. 274 r.w.s. 271(1)(c) of the Act is on account of non-application of mind and therefore on this account itself the penalty imposed u/s.271(1)(c) is liable to be deleted. Thus, we direct the Assessing Officer to delete the penalty levied u/s.271(1)(c). See Orbit Enterprises v. Income Tax Officer [2017 (11) TMI 172 - ITAT MUMBAI]. - Decided in favour of assessee
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2018 (4) TMI 38
Payment made by the assessee to the nonresident supplier constituted 'fees for technical services'(FTS) - Services rendered in pursuance of the purchase agreement could be taxed as FIS/FTS - India-Japan DTAA - whether the payments made by the assessee to Nippon for supply of D&D, as per the agreement, constituted FTS? - Held that:- D & D were not merely inextricably linked with the plant but the plant would not have been installed and commissioned without D&D. So, it can safely be said that D&D would constitute part of cost of acquisition of the Plant. In the case under consideration, it is also clear that the assessee was not exploiting the D&D for business purposes, that IPR of the D&D were retained by the non resident supplier. Considering the above, we hold that the FAA was not justified in holding that disputed amount was FTS. We have gone through the cases relied upon by the FAA. In none of the cases, referred to by him, the issue was not deliberated upon as to whether the consideration, received by a manufacturer of plant and machinery for supplying to its customer, wherein D&D was essential for installation of Plant and machinery, constituted part of cost of acquisition of plant. So, reversing the order of the FAA, we decide the effective Ground of appeal in favour of the assessee.
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2018 (4) TMI 37
Re-assessment made u/s. 147 - Held that:- Assessee filed return of income without admitting any capital gain nor there is any mention in the return about the development agreement entered by assessee. The information has come to the knowledge of the AO consequent to the survey proceedings in M/s. Diamond Infra which led to the reopening of assessment u/s. 147 not only in assessee’s case but also in other cases, where all the owners have entered into development agreement with the said party. After examining the facts, it is of the opinion that the AO correctly invoked the provisions of Section 147 and therefore, the proceedings are valid in law. Addition of capital gains - as contented possession was not given and assessee retained possession of the property thereby the capital gains arises in the year in which the new flats were handed over - Held that:- There are various judicial principles supporting the contentions that registration is only a conclusive evidence but ownership can be obtained much earlier also. As seen from the purchase deed also, there are recitals that Shri Bala Swamy, father of vendor has himself developed the property and then obtained permissions but later on made four gift settlements to his son and after obtaining HUDA permissions, has registered the property on that date. Even though the receipt of sale consideration date-wise has not mentioned, it is the contention that assessees have paid the amounts much earlier also. This aspect has not been examined by the AO at all. Therefore, in the interest of justice, the issue of having possession of the property at the time of purchase of property by assessee, before registration is to be examined in the light of the payments made by assessee, permissions obtained from HUDA etc., so that the issue can be finally concluded on facts whether the property has to be considered as long term capital asset or short term capital asset. Therefore, this issue is restored to the file of AO Full value of consideration for computation of capital gains - eligibility to benefit u/s. 54/54F - Held that:- We direct the AO to consider the probable cost of construction as on May 2008 or the SRO Value of the land-in-question on the date of agreement should be considered as full value of consideration for the purpose of computation of capital gains on the transfer of 50% of the land holding for development. Therefore, while upholding the reopening of assessment and also bringing to tax the capital gains in the impugned year, the issue whether the land is short term capital asset or long term capital asset and the value for considering the capital gains computation is restored to the file of AO for fresh examination. Needless to say that assessee should be given due opportunity. For this purpose, the order of AO and CIT(A) on the above issues are set aside to the re-done as per the facts and law. In case the property was held to be long term capital asset, assessee may be eligible for consequent benefit u/s. 54/54F of the Act, which should be considered on the facts of the case.
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2018 (4) TMI 36
TPA - machineries purchased along with accessories from its AE - determine the fair market value of the said machine - Held that:- These are some of the illustrative factors which by and large need to be seen while valuing the old machines, which in our opinion TPO has failed to take note of. He has also not carried out any independent exercise for the value of the machinery by any approved valuer/Chartered Engineer so as to controvert the fair market value determined by the assessee’s Chartered Engineer. Moreover, here in this case, it is an admitted fact that in the A.Y.2008-09, the TPO has accepted the same value as per the valuation report given by the Chartered Engineer in respect to the purchase of similar old machine along with its accessories from its AEs. Thus, we do not find any infirmity in the order by the ld. CIT (A) in holding that the adjustment made by the TPO is without any basis and has rightly been deleted by him. Accordingly, ground no.1 is dismissed. Disallowance on account of u/s.14A read with Rule 8D - Held that:- As no interest bearing funds have been diverted for the purpose of investment, therefore, ld. CIT(A) has rightly deleted the disallowance of interest Disallowance of claim of depreciation @ 60% on UPS - Held that:- CIT(A) has deleted the addition, following the judgment of Hon'ble Delhi High Court in the case of CIT vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT], wherein computer accessories/peripherals like printers, scanners, server, UPS, etc., have been held to be integral part of computer system, and therefore, entitled to depreciation @60%. - Appeal of revenue dismissed.
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2018 (4) TMI 35
TPA - ALP determination - whether the arm's length price determined by the Transfer Pricing Officer is within ±5% range as provided in the second proviso to section 92C(2)? - Held that:- A reading of the said proviso makes it clear that the ±5% range is applicable to the arm's length price and not arm's length profitability. Therefore, the learned Commissioner (Appeals) has completely misconceived the statutory provisions while rejecting the claim of the assessee. In view of the aforesaid, we direct the Assessing Officer to verify the working of ±5% referred to above and if assessee’s claim is found to be correct no addition on account of transfer pricing adjustment should be made. With the aforesaid observations, the ground is allowed for statistical purposes. Increase the value of opening stock of current year on account of addition made to closing stock being unutilized modvat credit - Held that:- Hon'ble Jurisdictional High Court in CIT v/s Mahalaxmi Glass Works Ltd. [2009 (4) TMI 182 - BOMBAY HIGH COURT] as per section 145A of the Act, if there is any change in the closing stock at the end of the year then there must necessarily be a corresponding adjustment made in opening stock of that year. - Decided against revenue
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2018 (4) TMI 34
Validity of assessment u/s 144C - A.O. has failed to forward a draft assessment order to the assessee, which is in gross violation of the provisions of the Act and the procedure laid down in section 144C - Held that:- From the conjoint reading of both the sections, it is quite ostensive that the appeal before the Tribunal against the assessment order would lie if it has been passed in pursuance of direction given by the DRP in terms of section 144C and no appeal can be filed before the first appellate authority in such a case. In the original round of proceedings, the appeal before the Tribunal has come through DRP route and that is the reason how this Tribunal has decided the appeal and thereafter has remanded the matter back to the file of the AO/TPO. Once an appeal has been disposed of by the Tribunal by remanding back the matter before the A.O. to be pass fresh assessment order in accordance with the law, then it relegates back to the stage of assessment proceedings as if it is a fresh assessment which has to be done by the A.O. Even if the matter is remanded with specific direction or purpose of verification or re-computation etc., then also the A.O. has to give effect to such direction and pass a fresh assessment order thereby determining the income of the assessee and work out the tax demand accordingly. If the assessee is aggrieved by such an assessment order giving effect to the appellate order, then in that case, the only remedy open for appeal is before the first appellate authority in terms of section 246 and 246A.
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2018 (4) TMI 33
Additions on account of advances and service tax written off - Held that:- We are of the considered view that depositing the security deposit for taking the office space on lease by the taxpayer and subsequently terminating the agreement due to business consideration is a business decision which cannot be questioned by the Revenue. So, following the decision rendered by the coordinate Bench of the Tribunal in Fab India Overseas (P.) Ltd. (2013 (9) TMI 301 - ITAT DELHI) in an identical issue, the addition made by the AO on account of advances and service tax written off is ordered to be deleted. Addition on account of non-charging of mark-up on support service charges billed to AT&T Global Network Services India Pvt. Ltd. (AGNSI) - Held that:- In case of both the resident parties, terms and conditions of the arrangement cannot be questioned by the Revenue unless specifically provided under the Act. In case of a contract by both the parties who are admittedly resident Indian entities, they make the law for themselves which cannot be interfered unless contract is unlawful or specially barred by the law of the land. Moreover by such a decision of not charging mark up by the taxpayer on support services charges billed to AGNSI, no loss of tax has been caused to Revenue. So, the findings of the TPO/DRP that the taxpayer is not only to cut charges but mark up also is not sustainable in the eyes of law. So, we order to delete the addition on account of not charging of mark up on support services charges billed to AGNSI. When the taxpayer has worked out the liability by using a substantial degree of estimation by proving 95% of the invoices on the basis of historical trend, no disallowance can be made. So, we order to delete this addition. Comparability analysis - Held that:- We are of the considered view that Government undertakings/companies are not the suitable comparables for benchmarking the international transaction. AO is directed to verify all the Government undertakings / companies from the final set of comparables which are taking preferential treatment from Government in getting contract etc. and are not driven by profit motive alone impacting the profit margin and to exclude the same and then benchmark the international transactions qua Network Support Services. TDS credit - Held that:- AO allowed credit of TDS 6,54,89,076/- as against the claim of ₹ 6,57,84,537/- claimed by the taxpayer in its revised return of income filed for the year under assessment. When the taxpayer has brought on record the complete detail of TDS to the tune of ₹ 6,57,84,537/- by filing revised return of income, the AO has erred in granting short credit thereof. So, we direct the AO to provide full credit of TDS of ₹ 6,57,84,537/- after duly verifying the facts.
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2018 (4) TMI 32
TPA - comparables selection criteria - Held that:- Assessee was engaged in the business of software development and exports, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Economic adjustment on account of risk differences - Held that:- We direct the Assessing Officer to allow risk adjustment in turn relying on the proposition laid down by the Delhi Bench of Tribunal in the case of Sony India Pvt. Ltd. (2008 (9) TMI 420 - ITAT DELHI-H) wherein it was allowed @ 20%, and compute the TP adjustment, if any, in the hands of assessee. The ground of appeal Nos.3 to 8 are thus, allowed.
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2018 (4) TMI 31
Transfer pricing addition on account of AMP expenses - Held that:- It is observed that albeit a specific direction was given by the Tribunal for considering the impact of non-payment of royalty on the question of determining the transfer pricing adjustment of AMP expenses, the TPO did not examine such issue. Under these circumstances, we are left with no option but to send matter back to the AO/TPO for considering the effect of non-payment of royalty on the transfer pricing adjustment in the light of the decision rendered by the Special Bench in the case of LG Electronics (2013 (6) TMI 217 - ITAT DELHI). To sum up, we set aside the impugned order on the transfer pricing addition on account of AMP expenses and send the matter back to the TPO/AO for determining its ALP afresh Allowability of software expenses - revenue or capital expenditure - Held that:- Assessee did not furnish complete details of software expenses. We fail to appreciate as to how the AO could have determined the nature of software expenses, being capital or revenue, without going through the relevant bills. In the given situation, we are of the considered view that it would be in the fitness of things if the impugned order is set aside and the matter is remitted to the AO for examining this issue afresh. It is made clear that the assessee will be duty bound to submit any detail as called for by the AO in this regard. If the assessee again fails to produce such bills/details, the AO will be entitled to draw adverse inference against the assessee.
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2018 (4) TMI 30
TPA - Comparable selection criteria - Held that:- Assessee is engaged in providing business support services and IT-enabled services to its associate enterprises (AEs), thus companies functionally dissimlar with that of assessee need to be deselected from final list. Working capital adjustment - Held that:- We find that the DRP has given clear direction on this issue to grant working capital adjustment on the basis of OECD guidelines. Being so, the Assessing Officer is directed to compute the same accordingly. Hence this ground of appeal of the assessee is allowed. Risk adjustment - Held that:- As AR was not able to show the exact nature of the risk undertaken by the assessee and its effect on the profitability of the assessee. Accordingly, this ground of appeal is rejected.
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2018 (4) TMI 29
Applicability of provisions of section 40(a)(ia) to the purchase of capital assets - Held that:- This issue is now covered by the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Mark Auto Industries Ltd.(2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT) wherein held that in absence of any requirements in law for making deduction of tax at source on expenditure incurred on technical know-how which was capitalized, disallowance under the provisions of section 40(a)(ia) cannot be made. Assessing Officer was not justified in making disallowance u/s 40(a)(ia) on account of alleged failure to deduct tax at source on purchase of software capitalized in books of account. - Decided in favour of assessee.
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2018 (4) TMI 23
Revision u/s 263 - apportionment of expenses against exempted income under Section 14A r.w.r.8D - Held that:- The issue involved in the present case stands concluded against the revenue in The Pr. Commissioner of Income Tax, Patiala Vs. State Bank of Patiala [2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT] as held the amount of disallowance under section 14A was restricted to the amount of exempt income only and not at a higher figure. Once that was so, we do not consider it appropriate to discuss the scope of section 263 of the Act as the same has been rendered academic in view of the issue being answered in favour of the assessee on the merits. Thus, no substantial question of law arises.
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2018 (4) TMI 22
Rejecting books results and estimating profit at 12% of the turnover - non discharge of the onus of proving genuineness of commission payment - Held that:- Existence or otherwise of proprietary concern is of no relevance as the AO has considered total turnover of 5 concerns. This issue has no bearing on rejection of books of account. But we find that the assessee has not discharged the onus of proving genuineness of commission payment which can be valid reason to reject book results and resort to estimation of profit. AO cannot indulge in wild guess work for adopting the rate of profit. It is now trite law that the rate of profit should be based on past history of the assessee or the profit earned by assessee in similar line of business, whereas in the present case, though the AO referred to profits shown in the immediately preceding year, these figures were disputed by the assessee stating that the AO had not considered net profit rate of assessment year 2004-05, considered only net profit of assessment year 2002-03 and 2003-04 - we remit this issue back to the file of the AO to adopt rate of profit based either on past history or by comparable profits of concerns in the similar line of business. - Decided partly in favour of assessee for statistical purposes.
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2018 (4) TMI 21
Addition u/s 69C - addition on loose paper found during search - Held that:- In the case of the assessee when on one hand affidavit was furnished stating that the amount belongs to someone else and if the Department was not agreeing with it, it could have enquired independently regarding the status of affidavit and verify the statement therein. Secondly, we do not find anything on record to suggest that seized document was supported by any other corroborative evidence. Therefore, we hold that addition made in the hands of the assessee is arbitrary, illegal and liable to be deleted. We, therefore, set aside the order of the ld. CIT(A) and direct deletion of addition made in the hands of the assessee. - Decided in favour of assessee
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2018 (4) TMI 20
Reopening of assessment - Addition of gift of property received U/s 68 - non disposal of assessee's objection - Held that:- The AO having not disposed of the assessee’s objections to the reasons recorded, by passing a separate speaking order before proceedings with the assessment the assessee has been illegally debarred from exercising a legally enforceable right which would have become available to him. For this reason, the assessment order is null and void and it is quashed as such. - Decided in favour of assessee.
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2018 (4) TMI 19
Set off of amount so surrendered during the course of search against business loss - Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D - Held that:- The amendment brought in section 115BBE wherein no set off of losses against surrendered income brought to tax is prospective in nature and doesn t apply for the assessment year under consideration. The decisions relied upon by the Revenue have also been examined and doesn t support its case. For the year under consideration, there is no bar for set off of current year business loss u/s 71 against income brought to tax under the head income from other sources . We are therefore of the view that the assessee will be eligible for set off of current year business loss of ₹ 767,768 against the undisclosed investment of ₹ 36,00,000 towards purchase of plot of land which has been surrendered during the course of search, and subsequently offered and brought to tax under section 69 read with section 115BBE of the Act. - Decided in favour of assessee
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2018 (4) TMI 18
Addition u/s 68 - unexplained credits introduced in the form of share application money and share premium - Held that:- Where the same set of existing shareholders invest further sum of money by way of share application and the assessee company issues shares to them, it would not be appropriate for the Revenue to challenge the identity and genuineness of the share transaction which has occurred during the year. When the assessee company has again furnished complete particulars of all these companies in terms of name, address, PAN no., copy of their confirmation, copy of their income tax returns, copy of their balance sheet and bank statements through which the cheque payment has been made. CIT(A) has returned a finding that the balance sheet and bank statement of these companies prove the credit worthiness of making further investment during the year. There is nothing on record which controvert the said findings of the ld CIT(A). We confirm the findings of the ld CIT(A) and set-aside the order of the AO in respect of these 14 companies who are existing shareholders and have made fresh investment during the year. In respect of remaining 6 companies we find that the assessee company has again furnished complete particulars of all these companies in terms of name, address, PAN no., copy of their confirmation, copy of their income tax returns, copy of their balance sheet and bank statements through which the cheque payment has been made. We find that these documents have been submitted before the DDIT, Kolkatta who has not examined these documents and merely forwarded these documents to the AO. Thus in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected as has been done by the AO in the instant case. - Decided in favour of assessee
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2018 (4) TMI 17
Addition u/s 14A - Held that:- The dominant purpose for which the investment in shares is made by an assessee is not relevant in determining the allowability of that expenditure and section 14A of the Act has to be interpreted particularly, the word “in relation to the income” that does not form part of the total income. If the expenditure is incurred in making investment which yield exempt income, that much of expenditure which is attributable to that income is to be disallowed and cannot be treated as business expenditure. If no expenditure is incurred in relation to exempted income, no disallowance can be made under section 14A of the IT Act. It was further observed that only that expenditure which has been incurred in relation to non-taxable income has to be disallowed. If an expenditure incurred has no ‘principal connection” with the exempted income, then such an expenditure would clearly be treated as not “in relation to the income which does not form part of the total income”, and such expenditure would be allowed as business expenditure. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. - Decided against revenue
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2018 (4) TMI 16
Penalty u/s 271(1)(c) - disallowances on account of setting off the income from the capital work in progress as claim of depreciation on non-factory building - Held that:- We find that assessee, with a view to set up a new unit for producing poster paper, raised funds through equity financing and due to delay in implementation of the project, placed the funds for a short period in the form of FDR and also a part of funds were invested in mutual fund and from these investments the assessee earned income in the form of interest and profit from mutual funds. The said incomes were disclosed by the assessee in the books of account and in the balance sheet. Instead of declaring the same as income, the same were reduced from the capital work in progress and therefore, the assessee had disclosed the full particulars of such income in its balance sheet. In fact the Assessing Officer came to know about these incomes from the particulars filed by the assessee itself therefore, it cannot be said that the assessee had concealed particulars of income or had furnished inaccurate particulars of income. Learned CIT(A) has rightly deleted the penalty. - Decided against revenue
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2018 (4) TMI 15
Penalty u/s 271(1)(c) - Imposing penalty for alleged concealment of income whereas the said penalty has been initiated for furnishing inaccurate particulars of income - defect in a notice u/s 274 - Held that:- Concealment of income and furnishing of inaccurate particulars of income in Section 271(l)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under section 271(l)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT). - Decided against revenue
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2018 (4) TMI 14
'Unexplained money' u/s. 69A - assessee has not explained the source of money received in the year 2009-10 - Held that:- The assessee failed to bring on record any evidence to prove the findings of fact recorded by the lower authorities. Therefore, we are of the considered view that the CIT(A) was right in confirming addition made by the AO towards money received from Vishesh Entertainment Ltd as unexplained money u/s 69A of the Act. We do not find any error or infirmity in the order of CIT(A). Hence, we are inclined to uphold the finding of the CIT(A) and dismiss the appeal filed by the assessee.
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2018 (4) TMI 13
Penalty u/s 271(1)(c) - Held that:- Addition on account of disallowance of commission payment has already been deleted, therefore, the penalty levied on disallowance of commission payment would not survive. Disallowance consists of foreign travel expenses - Admittedly, the disallowance of foreign travel expenses was made on adhoc basis. It is settled law that no penalty is leviable on the disallowance/addition made on mere estimation basis. Thus the penalty levied by Assessing Officer is deleted. - Decided in favour of assessee
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2018 (4) TMI 12
Disallowance u/s 14A - Held that:- There are 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 fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established. - Decided in favour of assessee. Nature of expenditure - website creation expenditure is a revenue expenditure and not a capital expenditure. See CIT vs. Mahindra Realty & Inf. Developers Ltd. [2013 (9) TMI 113 - ITAT MUMBAI ]
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2018 (4) TMI 11
Disallowance u/s 68 on account of sale of shares - parties to whom shares were sold did not respond to the notices issued under section 133(6) - Held that:- It is undisputed fact that the necessary details as the confirmation and contract notes were duly filed by the assessee in respect of the aforesaid parties and no defect of whatsoever was pointed out by the lower authorities. On specific question from the Bench to the learned DR about the remand report submitted by the AO, the learned DR has not pointed out any defect.Assessing Officer was not able to brought anything on record that it was assessee’s own money which was rooted in the form of share application money, thus addition to be deleted - Decided in favour of assessee Disallowance of expenses as no activity was carried on by the assessee - Held that:- In the instant case, the assessee has claimed certain expenses to keep the status of the assessee-company active. These expenses were claimed as business loss under the head “business and profession”. It is well settled law that a private limited company being a body corporate has to incur certain expenses to keep its status active. In this regard, we find support and guidance from the judgment of Hon'ble Calcutta High Court in the case of CIT vs. Ganga Properties Ltd.(1989 (5) TMI 10 - CALCUTTA High Court) - Decided in favour of assessee.
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2018 (4) TMI 10
Validity of reopening of assessment - bogus purchases - Held that:- In identical issue was examined by the AO during the scrutiny assessment for the A.Y. 2003-04 in reassessment proceeding and consequently the initiation of proceeding for the reassessment for the year under consideration was initiated by the AO and in view of the decision in case of Multiscreen Media P. Ltd. vs. Union of India (2010 (2) TMI 269 - BOMBAY HIGH COURT). No error or illegality in the reopening of the assessment under consideration. The decisions relied upon by the ld. AR are not applicable in the facts of the present case because at the time of issuing notice u/s 148 of the Act the AO had already conducted any enquiry about the genuineness of the purchases made from M/s Ambica Traders. Addition u/s 69C - Held that:- Since, the assessee is seeking the directions to the AO for proper examination of additional evidence therefore, in the facts and circumstances of the case and in the interest of justice the matter on merits is remanded to the record of the Assessing Officer for denovo adjudication after consideration of evidence filed by the assessee.
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2018 (4) TMI 9
Rejection of books of accounts - G.P. estimation by applying GP rate at 17.5% - Held that:- Though there are disputes regarding the verifiability of the purchases made by the assessee even in the past years, however, when the issue of applying the GP rate has already been settled in the process of appeals and has attained the finality then the GP which has attained the finality or was accepted by the AO can be considered for the purpose of estimation of income of the assessee for the year under consideration. We direct the AO to compute the income of the assessee by taking the average GP of the past years of the assessee which is accepted and/or attained finality. Hence this issue is set aside for limited purpose of applying the average GP for computation of income of the assessee. Addition u/s 68 - Held that:- When the assessee has failed to discharge its onus of proving the genuineness of the transaction and even failed to produce the confirmation and PAN of the loan creditor, the addition made by the authorities below is justified as the record produced by the assessee also goes against the claim of the assessee. - Decided against assessee.
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2018 (4) TMI 8
Bogus purchases of diamonds - Addition u/s 69C - Held that:- AO has placed his reliance fully on the statement given by Shri Hiren Raval and accordingly disallowed entire purchases made from M/s Zalak Impex. We also notice that the AO has also added the sales value of ₹ 10.17 lakhs also. With regard to the addition of ₹ 10.17 lakhs, we agree with the contentions of Ld A.R that the said addition is liable to be deleted, as the assessee itself has already offered the same as its income in the form of sales. Accordingly we direct the AO to delete the addition. Disallowance of purchases made from M/s Zalak Impex, Task force committee has recommended profit range of 1.5% to 4.5% for manufacturing activities and profit range of 1% to 3% was recommended for trading activities. The assessee has undertaken both trading and manufacturing activities. Accordingly we are of the view that the profit element embedded in the impugned purchases may be estimated at 3%. Accordingly we set aside the order passed by CIT(A) and direct the AO to sustain the addition to 3% of the value of alleged bogus purchases and in our view, the same would meet the ends of justice. We order accordingly.
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2018 (4) TMI 7
Validity of reopening of assessment - sustaining 12.5% addition on account of bogus purchase - Held that:- Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. Decision of the Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd [2007 (5) TMI 197 - SUPREME Court] fully justify the validity of reopening in this case. For bogus purchases Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and nonexistent and there is no cogent evidence of transportation of goods. The sales tax Department in its enquiry have found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. The assessing officer has noted that there is no cogent evidence of the provision of goods. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. Hence purchase bills from these non-existent the/bogus parties cannot be taken as cogent evidence of purchases, in light of the overwhelming evidence the revenue authorities cannot put upon blinkers and accept these purchases as genuine. - Decided against assessee.
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Customs
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2018 (4) TMI 28
Valuation of imported goods - primary aluminium ingots - DEEC Scheme - rejection of declared value - princples of Natural Justice - Held that: - There is no evidence of the importer having been given an opportunity to rebut the contents of the bills of entry that were the purported foundation of the re-assessment by the original authority. In the absence of such opportunity, the rejection of declared value is an incomplete exercise that does not have the sanction of law - The original authority has undertaken the exercise of re-assessment to provide for recovery in the contingency of breach of the conditions of import. In the absence of ascertainment of such contingency, the re-assessment remains an academic exercise. There are no reason to uphold the contention of Revenue that the impugned order is not legal and proper - appeal dismissed - decided against Revenue.
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2018 (4) TMI 27
Classification of imported goods - valuation - flavors of whey protein concentrate - casein - glutamine powder - creatine - whether classifiable under heading no.21061010 and 21069099? - Held that: - The description for 'whey' in heading no. 0404 is no different and the principles governing the classification of 'milk products' with addition can be no different when flavorings and sweetenings have been added to 'whey'; the attempt to shift the classification to that of edible preparations does not find merit - It would appear that the legislature did not intend interference with the 'retail selling price' except where the price at the retailer end varied with the declaration made for assessment, the enforcement empowered by Central Excise Act, 1944. The Customs Act, 1962 does not provide the wherewithal to do so. The re-determination of value for assessment of additional duties of customs by the adjudicating authority fails to find the backing of law. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 6
Revocation of CHA License - time limitation - proceedings initiated by the Customs Authorities for revocation of the Customs Broker License, has been assailed by the appellants, mainly on the basis of the failure in observance of the time limit - Held that: - Regulation 20 of the Customs Brokers Licensing Regulations, stipulates that after issuance of SCN, an Inquiry Authority has to be appointed to look into the allegation, who is required to submit inquiry report within 90 days of this appointment as per Regulations 20 (5) - In the present case, it is seen from the records that the Inquiry Officer has submitted his report on 23.05.2016, after a delay of 360 days. The time taken by the Inquiry Officer is very much beyond the limit of 90 days prescribed in Regulations 20 (5). It was held in the case of M/s. Saro International Freight System Versus The Commissioner of Customs [2015 (12) TMI 1432 - MADRAS HIGH COURT] that when time limit is prescribed in Regulations, which empowers action under Regulation 18 by following the procedure in Regulation 20 (1), the use of the term shall cannot be termed as directory. Under such circumstances, the rule can only be termed as Mandatory. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 5
Misdeclaration of value of export goods - DEPB Scheme - it was alleged that the goods which have been entered for export were not Steel Welding Electrodes, but were made of Mild Steel Electrodes - Held that: - The adjudicating authority in the present case observed that the proceedings in the present case pertaining to the export of 149 shipping bills is on the basis of the earlier investigation in respect of 10 shipping bills - present impugned order has been passed also relying on substantially the same evidences which were covered in the earlier investigations, but we note that the earlier proceedings were concluded in favour of the assessee-Appellants in which the charge of mis-declaration has been set aside as well as the declared value of the goods stands accepted. Impugned order do not sustain - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 4
Jurisdiction - officers of DRI/SIB/Commissioner of Customs(Prev.) - power to issue SCN - Held that: - the powers of officers working in these organizations to issue notice under Customs Act, 1962 as proper officers has been subject matter of decision by various High Courts - the matter remanded to the original authority to decide the question of jurisdiction first and thereafter on merit after the matter is settled by the Hon’ble Supreme Court in the pending appeals by the Revenue against the decision of Hon’ble Delhi High Court in the case of Mangali Impex Vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT] - appeal allowed by way of remand.
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Service Tax
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2018 (4) TMI 26
Refund of accumulated CENVAT credit - time limitation - rejection on the grounds viz the appellant has received all the export proceeds in month of July, which is not during the claim period i.e. April-June 2012 and also on the ground that no export of service is involved in the present case - Held that: - the original authority has passed the order without complying with the principles of natural justice and therefore, the order passed is contrary to the principles of natural justice and is bad in law. Board vide its Circular No.120/01/2010-ST dt. 19/01/2010 has clarified in para 3.3 that in the case of service providers exporting 100% of its services, such disputes should not arise and refund of CENVAT credit irrespective of when he has taken the credit, should be granted if otherwise in order. Rejection of refund not justified - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 25
Refund - relevant date - Whether the period of one year for filing the refund should be taken from the date of receipt of foreign exchange i.e. date of FIRC or from the date of invoice? - Held that: - in case of export of service, the same qualifies as export only when convertible foreign exchange is received - In the present case, the appellant has admittedly filed the refund claim within one year from the receipt of convertible foreign exchange - the relevant date is the date of FIRC and not the date of service. Whether the remittance received against the export in Indian rupees will be considered as receipt of convertible foreign exchange for the purpose of qualifying the supply of service as export? - Held that: - in the case of Sun-Area Real Estate Pvt. Ltd. [2015 (5) TMI 885 - CESTAT MUMBAI] in the identical facts, it was held that the Indian rupees received through foreign bank is considered as the payment in convertible foreign exchange. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 24
Rejection of VCES Declaration - short payment of duty under the scheme - appellant was supposed to pay 50% of the said amount by 31st December 2013 which they failed to deposit - Against the 50% amount, they have paid ₹ 7,07,259/-. Thus they have short paid ₹ 1,64,759/- which was subsequently paid on 8.1.2014 - Held that: - as per VCES scheme, the time limit for making payment of 50% of the total amount declared is 31.12.2013 and there is no provision for extension of time to the statutory limit provided in the scheme - the time limit provided in the scheme should have been adhered to for depositing the 50% amount by 31.12.2013 which the appellant failed to comply. Rejection of VCES Declaration justified - appeal dismissed - decided against appellant.
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CST, VAT & Sales Tax
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2018 (4) TMI 2
Principles of Natural Justice - the petitioner was not granted clear 15 days time to submit its objection - cancellation of registration certificate - Held that: - the petitioner did not have opportunity to produce any record to establish that the cancellation of the registration of the selling dealer was with retrospective effect. Thus, this Court is of the view that the respondent could have afforded reasonable opportunity to the petitioner before finalizing the assessment as has been done by virtue of the impugned order - petition disposed off.
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2018 (4) TMI 1
Rejection of books of accounts - Whether learned Tribunal was justified in maintaining the rejection of the books of accounts despite the fact neither there was any survey nor any adverse material was found in the books of accounts? - Held that: - In view of the findings of Deputy Commissioner which were contradictory but shows that all documents verifying provincial purchase were available and still attitude of victimization and arbitrariness was adopted by Assessing Officer and it was vitiated in law, the entire assessment and consequential punishment, therefore cannot be sustained - decided partly in favor of revisionist - few matters were remanded leaving it open to be examined by authorities concerned while passing fresh order - appeal allowed in part and part matter on remand.
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Indian Laws
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2018 (4) TMI 3
Offence under Prevention of Corruption Act, 1988 - Inherent power of a High Court available to stay a trial under the Act - whether order framing charge is not purely an interlocutory order - instance of Municipal Corporation of Delhi (MCD) against the appellant and certain officers of MCD alleging causing of wrongful loss to the MCD by using fake invoices of Oil Companies relating to transportation of Bitumen for use in Dense Carpeting Works of roads in Delhi during the year 1997 and 1998 Held that:- A Bench of three Judges in Madhu Limaye (1977 (10) TMI 111 - SUPREME COURT) held that legislature has sought to check delay in final disposal of proceedings in criminal cases by way of a bar to revisional jurisdiction against an interlocutory order under sub-Section 2 of Section 397 Cr.P.C. At the same time, inherent power of the High Court is not limited or affected by any other provision. It could not mean that limitation on exercise of revisional power is to be set at naught. Inherent power could be used for securing ends of justice or to check abuse of the process of the Court. This power has to be exercised very sparingly against a proceeding initiated illegally or vexatiously or without jurisdiction. The label of the petition is immaterial. Situation of proceedings remaining pending for long on account of stay needs to be remedied. Remedy is required not only for corruption cases but for all civil and criminal cases where on account of stay, civil and criminal proceedings are held up. In cases where stay is granted in future, the same will end on expiry of six months from the date of such order unless similar extension is granted by a speaking order. The speaking order must show that the case was of such exceptional nature that continuing the stay was more important than having the trial finalized. The trial Court where order of stay of civil or criminal proceedings is produced, may fix a date not beyond six months of the order of stay so that on expiry of period of stay, proceedings can commence unless order of extension of stay is produced. We declare the law to be that order framing charge is not purely an interlocutory order nor a final order. Jurisdiction of the High Court is not barred irrespective of the label of a petition, be it under Sections 397 or 482 Cr.P.C. or Article 227 of the Constitution. However, the said jurisdiction is to be exercised consistent with the legislative policy to ensure expeditious disposal of a trial without the same being in any manner hampered. Thus considered, the challenge to an order of charge should be entertained in a rarest of rare case only to correct a patent error of jurisdiction and not to re appreciate the matter. Even where such challenge is entertained and stay is granted, the matter must be decided on day-to-day basis so that stay does not operate for an unduly long period. Though no mandatory time limit may be fixed, the decision may not exceed two-three months normally. If it remains pending longer, duration of stay should not exceed six months, unless extension is granted by a specific speaking order, as already indicated. Mandate of speedy justice applies to the PC Act cases as well as other cases where at trial stage proceedings are stayed by the higher court i.e. the High Court or a court below the High Court, as the case may be. The High Courts may also issue instructions to this effect and monitor the same so that civil or criminal proceedings do not remain pending for unduly period at the trial stage. The question referred stands answered. The matter along with other connected matters, may now be listed before an appropriate Bench as first matter, subject to overnight part-heard, on Wednesday, the 18th April, 2018.
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