TMI Tax Updates - e-Newsletter
May 3, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
-
Income Tax:
TCS - Time and mode of payment to Government account of tax collected at source under section 206C.
-
Income Tax:
TDS returns - Due dates - Rule 31A prescribing due dates for furnishing TDS statements amended
-
Income Tax:
TDS on salary - Time and mode of payment to Government account of tax deducted at source or tax paid under sub-section (1A) of section 192
-
Income Tax:
TDS on salary - Furnishing of evidence of claims by employee for deduction of tax under section 192 - CBDT Notified new Rule.
-
Income Tax:
Capital loss V/S business loss - nature of loss - merely because the assessee abandoned the project after paying advance of ₹ 50 laks, that cannot be a reason for treating the loss claimed by the assessee as capital loss. - AT
-
Income Tax:
Since the assessee has treated the securities as investment and not as stock in trade in all the years, therefore, in view of the CBDT Circular No. 6/2016 dated 29.02.2016 i, the revenue is not permitted to take a contrary view - AT
-
Income Tax:
Estimation of gross profit - the sale price of the product sometimes may be less than the purchase price when the market trend is going down. Therefore, based on the selling price, the AO cannot estimate the sales turnover for the part period by taking into account the remaining period sales - AT
-
Income Tax:
TDS liability - FTS - the consideration paid under the secondment agreement was not “fees for technical services” because the fact that the seconded employee was responsible and subservient to the payer (assessee) and was required to also act as officer or authorized signatory or nominee of the assessee made it inconsistent with an agreement for providing technical services - AT
-
Income Tax:
Addition on account of gift u/s 56(2)(v) - the gift was received from friend before the amendment provision come on to the statute books i.e. 02.07.2004 therefore amended provisions are not applicable to the facts of the case - AT
-
Income Tax:
TDS u/s 195 - payment to non-resident for the purpose of testing charges FTS paid to KEMA Netherlands and CESI, Italy, TDS is, therefore, deductible u/s 195 - AT
-
Income Tax:
Nature of lease rent - revenue or capital in nature - AS per AS-19, assessee charged depreciation on the asset treating the whole transaction as capital in nature, could not disentitle the assessee to claim the expenditure in computation of income on the basis of true nature of the transaction - AT
-
Income Tax:
Transfer pricing adjustment - The provisions were not incorporated to make adjustment at any cost and ignoring the basic facts - No adjustment to be made if transaction are at Arm’s length price - AT
-
Income Tax:
Addition u/s 40A(2)(b) - AO has failed to prove that the payment made to the directors was excessive having regard to the fair market value of the said goods or services as no comparable case was brought on record to substantiate the disallowance made by the AO - AT
-
Income Tax:
Addition u/s 68 - Subscription of share capital - The FAA has mentioned that the incidence of price rigging took place in the month of December of the succeeding year whereas the subscription was made in earlier year. Thus, it could not be said that assessee had routed its unaccounted money through the subscribers. - AT
-
Income Tax:
Registration u/s 12A - When the assessment is carried out by QCI, the assessed body is required to pay assessment fee to the assessee based on the cost incurred - As the assessee is not involved in any activity of trade, business or commerce or service in relation to trade, business or commerce, the provision to S.2(15) of the Act has wrongly been invoked by the A.O - AT
-
Income Tax:
Amount of repayment - deductiblility in computing the income in the year of receipt - Once it is clear that the liability arose on the date of the contract but what was postponed was only the payment, there is no escape from the conclusion that the assessee can claim the expenditure in the year of Fixed Deposit Receipt. - HC
-
Income Tax:
Depreciation on the new Turbine Generator (TG) set - extent of user is not the basis of allowing depreciation under Section 32 of the Act - Tribunal rightly allowed claim at full rate i.e. 80% by relying on the internal minutes of the meeting between the assessee and the erectors - HC
-
Income Tax:
Issue of shares at a premium by the petitioners to its non -resident holding company does not give rise to any international transaction, that in such a case application of the provisions of Chapter X of the Act would not arise - AT
-
Income Tax:
TDS u/s 194C - payments to camera attendants engaged on 'ad-hoc' basis for a day or two or as and when required basis - would not amount to contract for carrying out of 'work' - No TDS liability - AT
-
Income Tax:
Penalty u/s. 271(1)(c) - as assessee did not prefer an appeal due to smallness of the tax involved that does not mean that there is concealment of income, more so, by way of furnishing of inaccurate particulars so as to attract penalty u/s. 271(1)(c) of the Act - AT
-
Income Tax:
Clubbing of income of a daughter at the hands of her father - property of M/s. Parbati Engineering Works belongs to his wife or minor daughter, income of such property will be clubbed with the income derived from M/s. Jeypore Small Scale Industries of the appellant - HC
-
Income Tax:
Discount allowed to distributors in respect of prepaid cards - section 194H are not applicable - no TDS liability - AT
-
Income Tax:
Expenditure incurred on brand creation - Spread of the brand expenses over a period of five years was actually in the nature of deferred revenue expenditure and the question of treating it as capital expenditure did not arise - HC
-
Income Tax:
Interpretation of Total Turnover & Export Turnover under 10A - there should be uniformity in the ingredients of both the numerator and the denominator of the formula - HC
-
Income Tax:
TDS - Transactions of downloading of photographs for exclusive one time use for publication in the magazine did not fall within the provisions of relevant Article 12 of DTAA and therefore, assessee was not liable to deduct tax on the payments made for the same - AT
-
Income Tax:
TDS - placing the magazines on the back of the seats of the aircraft - Sharing of incremental advertisement revenue shall not fall within the provisions of section 194C - AT
-
Wealth-tax:
Inclusion of Agricultural lands for the purpose of wealth tax - Once the lands are classified as agricultural lands, in the revenue records of Government and used for agricultural purpose, then the same are outside the purview of the definition of assets as per section 2(ea) of the Wealth tax Act. - AT
-
Service Tax:
When the provision of construction service has been completed prior to 01/04/2011 denial of credit only because of the delay in issuing the invoice is not justified as the Board has clarified that credit is available if the provision of the service was completed before 01/04/2011. - AT
-
Service Tax:
Cenvat credit - Common Input services belongs to three units but whole of the credit was availed at one unit - assessee has been able to prove that all the three units are one and the same, have common management - credit allowed - HC
-
Central Excise:
Cenvat credit - Duty paying documents - only upon the invoices being issued, the cenvat credit, on the strength of such documents could be availed by the manufacturer - documents endorsed by the consignee are not eligible for availing credit - HC
-
Central Excise:
100% EOU - manufacture of garbage bags - we are not assisted in any manner by such a short and cryptic order of the Tribunal and the Tribunal's order impugned in these Appeals cannot be sustained - demand set aside - HC
-
Central Excise:
Maintainability of appeal before the High Court - SSI Exemption - only question that arises for consideration in these appeals is as to whether the clearances made by the assessee for the period under consideration have exceeded the limit specified for being entitled to the exemption notification - Appeal is maintainable - HC
-
Central Excise:
If the duty ordered to be refunded u/s 11B(2) is not refunded within three months from the date of receipt of the application u/s 11B(1), then, the award of interest must follow as mandated by Section 11BB(1) - HC
-
Central Excise:
Once the Assistant Commissioner approached the matter in terms of Section 11B of the Act but the amount as directed to be refunded was not refunded within the time provided by the statutory provision, interest to be awarded for delayed refund - HC
-
Central Excise:
Export of goods - Failure to furnish ARE 1 and proof of export of goods as required under Rule 19 of the Rules - Order in appeal as well as revisionary order passed by the officers of the same rank is not permissible as per law - HC
-
VAT:
DVAT - A drive to motivate the officers to acquire knowledge of the Delhi Value Added Tax Act, 2004, Central Sales Tax Act, 1956, other relevant Acts, Rules and provisions and to inculcate the spirit of healthy competitiveness
-
VAT:
Refund of un-utilized input tax credit - Review and Revision u/s 75 of the GVAT Act - writ petition - remedy of appeal u/s 73 - There is no merit in the contention of the revenue that direction to disburse the refund adversely affects the State Government - refund to be granted - HC
-
VAT:
Waiver of pre-deposit under APGST Act - It is always open to the petitioner to file appropriate proceedings before ADC seeking stay in the appeal filed or by filing a separate application as required under Section 19(2A) - SC
Notifications
Circulars / Instructions / Orders
News
Case Laws:
-
Income Tax
-
2016 (5) TMI 44
Addition u/s 40A(2)(b) - excessive and unreasonable payments to the directors - Held that:- No cogent materials was brought on record by the AO or by the CIT(A) to prove that the payment was excessive and unreasonable to the directors of the assessee to whom the payments were made equal to 30% total advisory fee received by the assessee of ₹ 73,66,218 from Yatra Art Fund. The provision of section 40A (2) are very clear that the disallowance could only be made if expenditure incurred by the assessee by making payment to specified persons including the directors by the company is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, then so much of the expenditure as is so considered by the AO to be excessive or unreasonable shall not be allowed as deduction. In the instant case the AO has failed to prove that the payment made to the directors was excessive having regard to the fair market value of the said goods or services as no comparable case was brought on record to substantiate the disallowance made by the AO. The AO also did not bring any cogent evidence to prove that the assessee has not received any services and paid the mony. In view of this fact the order of CIT(A) confirming the addition made by the AO u/s 40A(2)(b) cannot be sustained and therefore, the addition to be deleted by deciding issue in favour of the assessee. Penalty u/s 271AAA - Held that:- We find from the additional grounds raised by the assessee vide application dated 02.07.2015 qua ignoring the statutory construction of section 271(AAA) of the Act and other issues of sustaining the penalty u/s 271(1)(c) when the statutory explanation to the said section does not apply to the assessee’s case. It is also a fact that this issue was not raised before First Appellate Authority. In the present circumstances and facts we are of the view that this issue should go back to the file of CIT(A) for fresh adjudication. We, therefore, without going into the merits of the case restore this issue to the file of the ld. CIT(A) to examine the issue raised by the assessee regarding section 271AAA of the Act and decide the same in accordance with law after affording the opportunity of being heard to the assessee. - Decided in favour of the assessee for statistical purposes.
-
2016 (5) TMI 43
Addition u/s 68 - subscription of share capital received during the year - Revenue contended that assessee had not produced the directors of the company, that SEBI had made enquiries in the case of RGTPL, HTCPL and YVJL, that they were found to be indulged in price rigging - Held that:- We find that the assessee had filed copies of income tax returns, directors reports, confirmations and affidavits of the directors of all the three subscribers. Thus, it had discharged the burden of proof cast upon it. However, the AO ignored these evidences and did not make any further enquiries. It is surprising that in spite of clear direction of the FAA, he chose not to examine the evidences produced by the assessee. The FAA had given a clear finding of fact that there was no evidence of deposit of cash in the bank accounts of the subscriber at the time of issuing cheques to the assessee for allotting shares. The AO has ignored the fact that the net worth of all the three subscribers was approximately ₹ 2. 00 crores, that the transactions were carried out through banking channels. It is found that the AO did not make any enquiries with the subscribers about the investments made by them. The FAA has mentioned that the incidence of price rigging took place in the month of December of the succeeding year whereas the subscription was made in earlier year. Thus, it could not be said that assessee had routed its unaccounted money through the subscribers. In our opinion, assessee had discharged its onus in proving the identity of the creditor as well as creditworthiness of the subscribers and genuineness of the transactions. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. The AO had not made any enquiries to substantiate his stand. Considering the above, we uphold the order of the FAA and decide the effective ground of appeal against the AO.
-
2016 (5) TMI 42
Depreciation on the new Turbine Generator (TG) set - Tribunal allowed claim at full rate i.e. 80% by relying on the internal minutes of the meeting between the assessee and the erectors i.e. TEIL Ltd. - Held that:- We find that the impugned order of the Tribunal has on the basis of the minutes of the meeting held on 17th November, 2006 found that the TG set is running smoothly and satisfactorily at a load of 1100KW. Further the log sheets maintained by the respondent-assessee for the period from 19th September, 2006 to 26th September, 2006 indicates that the TG set was in fact put to use post its commissioning. The mere fact that the TG set operates on a lower level of load than its capacity would not justify holding that the machine was not put to use for the purposes of claiming depreciation under Section 32 of the Act. The TG set as recorded in the minutes of the meeting as well as in the impugned order was ready for performance. However it was unable to perform beyond the load of 1100KW for want of sufficient generation of steam. This does not detract from the finding of fact that it has been put to use to the extent of load of 1100KW for the purposes of the respondent-assessee's business. Needless to state that extent of user is not the basis of allowing depreciation under Section 32 of the Act. The view taken by the Tribunal is a finding of fact on the basis of the evidence before it. The same has not been shown to us to be either arbitrary and/or perverse in any manner. In these circumstances, as the issue is one of finding of fact no substantial question of law arise for our consideration
-
2016 (5) TMI 41
Amount of repayment - whether not liable to be deducted in computing the income in the year of receipt itself? - whether Tribunal is right in law in holding that only 1/5th of the amount can be claimed as deduction in each of the five years? - Held that:- As rightly pointed out by the Commissioner of Income Tax (Appeals), the buyer of a plot of land was issued with a bank guarantee, so that the cost of the plot paid by him is repaid by the bank, after the expiry of five years. In order to enable the bank to do this, the assessee creates a Fixed Deposit. Therefore, the Tribunal found that the liability was incurred immediately, but the payment was postponed. But unfortunately, the Tribunal took a different view merely on the ground that the Fixed Deposit stood in the name of the assessee and not in the name of the buyer of the plot. This is completely a misconceived view, in view of the fact that two consequences would follow if the Fixed Deposit Receipt is taken in the name of the buyer of the plot. The first is that the interest accrued on the Fixed Deposit would be the income of the buyer of the plot. The buyers may not agree to such a course of action. The appellant/assessee has accounted for the interest accruing on the Fixed Deposit Receipts, as their own income and the same has been accepted by the Department. The second consequence that may flow out of the issue of Fixed Deposit Receipt in favour of the buyers of the plots is that they may foreclose the same and take away the proceeds even before the expiry of the period of five years. This may result in the bank not offering the benefit of a special scheme known as "Money Multiplier Scheme". Therefore, the Commissioner was right in holding that the decision of the Supreme Court in M/s Calcutta Company Limited [1959 (5) TMI 3 - SUPREME Court], would apply squarely to the facts of the case. Once it is clear that the liability arose on the date of the contract but what was postponed was only the payment, there is no escape from the conclusion that the assessee can claim the expenditure in the year of Fixed Deposit Receipt. Hence, the questions of law are answered in favour of the assessee.
-
2016 (5) TMI 40
Transfer pricing adjustment - Held that:- The object of the TP provisions is to make adjustment if it is found that the international transactions were not at Arm’s length. The provisions were not incorporated to make adjustment at any cost and ignoring the basic facts. If the correct figure of GP margin is taken it works out to 19. 35%. The assessee’s gross margin(28. 45%) is higher than the margin of 19. 35% of the comparables. Therefore in our opinion the transaction in question is at arm’s length. We are not adjudicating the issue of total turnover versus turnover with the AE and the related issues - Decided in favour of assessee
-
2016 (5) TMI 39
Addition on account of undervaluation of equity shares considered as deemed loan and interest computed thereon - Held that:- The issue stands covered in favour of the assessee by the judgment of the Hon’ble Jurisdictional High Court, delivered in the case of Vodafone India Services Pvt. Ltd. (2014 (11) TMI 881 - BOMBAY HIGH COURT ) held that the issue of shares at a premium by the petitioners to its non -resident holding company does not give rise to any international transaction, that in such a case application of the provisions of Chapter X of the Act would not arise - Decided in favour of assessee Addition made on account of rejection of Comparable Uncontrolled Price(CUP)in respect of the international transactions - Held that:- We find that the assessee had imported MEL on 27. 1. 2009 @ ₹ 25. 87 per Kg, that the CUP rate as on 30. 1. 2009 was ₹ 26. 71 per Kg, that the rate adopted by the assessee fits within the ± 5% of the CUP range. In our opinion the date chosen by the assessee was more appropriate than the date adopted by the TPO. The DRP itself had held that nearest CUP data should be considered. In the case under consideration the assessee had adopted the data of 30th January which was the nearest date for the transaction in question. Therefore, in our opinion adjustment made by the TPO was not proper.- Decided in favour of assessee
-
2016 (5) TMI 38
Registration u/s 12A denied - nature of activity - profit motive - When the assessment is carried out by QCI, the assessed body is required to pay assessment fee to the assessee based on the cost incurred. - Held that:- No hesitation in holding that the Assessing Officer was wrong in coming to a conclusion that the assessee activities are in the nature of trade, business or commerce or that the assessee was rendering any service in relation to such trade, business or commerce. The assessee has no profit motive and the fees collected for accreditation etc., is not for any activity which can be termed as business. As the assessee is not involved in any activity of trade, business or commerce or service in relation to trade, business or commerce, the provision to S.2(15) of the Act has wrongly been invoked by the A.O. In our view the Ld.CIT(A) has correctly appreciated the facts of this case and had applied the correct proposition of law to the facts of this case and granted relief to the assessee. Thus we uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue. - Decided in favour of assessee.
-
2016 (5) TMI 37
TDS u/s 194C - payments to camera attendants engaged on 'ad-hoc' basis for a day or two or as and when required basis - Held that:- The payments to the persons engaged on 'ad-hoc' basis do not fall within the expression 'work' for the purposes of section 194C of the I.T. Act, 1961. The appellant has incurred the impugned expenditure on account of engaging some camera attendants on ad-hoc basis i.e. for a day or two or as and when required basis. Obviously, an activity of engaging some camera attendants for using them in the business of providing of video production services would not amount to contract for carrying out of 'work' as contemplated under section 194C of the I.T. Act, 1961. There is no material on record to demonstrate that the impugned payments constituted payments for carrying out of any work within the meaning of section 194C. of the Act. The Assessing Officer has not asserted that there was any contract between the appellant and the above individuals for providing services as camera attendants. Engaging some persons on 'ad-hoc' basis or 'as and when required' basis, in my view, cannot be equated to a contract contemplated u/s 194C of the I.T. Act, 1961. Therefore, considering the facts and circumstances of the case, hold that the AO was not justified invoking section 40(a)(ia) and making impugned disallowance. - Decided in favour of assessee Payment of interest for delayed payments of certain types of taxes and imposts i.e. cess, purchase tax, sales-tax etc.- whether the impugned sum was compensatory or penal in nature? - Held that:- The expenditure in respect of payments of interest on late deposit of service tax is an allowable business expenditure incurred by the appellant for the purpose of carrying on its business. The interest on delayed payments of service tax is certainly compensatory in nature and hence allowable as deduction as it is not in the nature of penalty. The facts of the cases cited by the Assessing Officer are completely different from the facts of the instant case as they relate to non-compliance of specific provisions of Income-tax Act and payment of penalty for nonpayment/ delayed payment of sales-tax. Penalty and interest are two different things and thus cannot be equated. The penalty is an impost for an infraction/violation of any law whereas interest is an impost of a compensatory nature for holding the statutory dues for a period longer than as stipulated by the relevant law. Therefore, considering the facts and circumstances of the case and respectfully following the various case laws hold that that the interest claimed on delayed payment of service-tax is an allowable expenditure u/s 37(1) of the I.T. Act, 1961 - Decided in favour of assessee
-
2016 (5) TMI 36
Penalty u/s. 271(1)(c) - undisclosed share application money introduced - Held that:- As can be seen from the order of the AO as well as CIT(A) in the assessment proceedings, the entire share application money in this Private Limited company was from the Directors or from their minor children. The proceedings were also consequent to search operations conducted in that group. Still AO records that assessee has not proved the genuineness of creditors, identity and creditworthiness while making the addition. Ld. CIT(A) gave relief to the extent of the investments made by the Director as they are Income tax assessees’, who also confirmed the investment made in the name of minor children. As pointed out by the Ld. Counsel, assessee did not prefer an appeal due to smallness of the tax involved. That does not mean that there is concealment of income, more so, by way of furnishing of inaccurate particulars so as to attract penalty u/s. 271(1)(c) of the Act. Mere disallowance in assessment or addition by invoking the deeming provisions does not automatically attract the provisions of Section 271(1)(c), unless the conditions thereon are satisfied. The facts of the case does not fall either under the head ‘concealment of income’ or under the head ‘furnishing of inaccurate particulars’. All the necessary details were furnished by assessee and there is no furnishing of inaccurate particulars in this case. - Decided in favour of assessee
-
2016 (5) TMI 35
Clubbing of income of a daughter at the hands of her father - Held that:- Section 64 of the Act purportedly directs for computing income of individual where income of wife be included. Section 64A of the Act also enshrines about clubbing of income of minor child with income of father under individual category if it is not derived from his (minor) manual work or activity concerning minor’s skill, talent and likewise. So even if for argument sake it is considered that this property of M/s. Parbati Engineering Works belongs to his wife or minor daughter, income of such property will be clubbed with the income derived from M/s. Jeypore Small Scale Industries of the appellant. In view of the analysis made above, we are of the view that M/s.Parbati Engineering Works belongs to appellant and income of such fabrication unit is income of the appellant. So, we are of the considered view that income of M/s. Parbati Engineering Works should be clubbed with the income of the appellant. Thus, we do not find any infirmity with the impugned orders of the ITAT. Facts and circumstances of the case as discussed above do not purportedly show income derived from M/s. Parbati Engineering Works is of K. Sandhyarani or K. Parbati but it is income of appellant. So, the appellant being assesee is liable to pay Income Tax on the income derived from M/s. Parbati Engineering Works and question of income of his daughter at the hand of appellant does not arise. Moreover, other questions whether provisions of Section 64 of the Act is contrary to above findings now becomes academic.
-
2016 (5) TMI 34
TDS u/s 194H and 194J - non-deduction of TDS on commission expenses - free talk-time was being given as a discount or margin to the distributors on the retail price of prepaid products - Held that:- The provisions contained in Chapter XVIIB have to be given effect to while quantifying the liability of an assessee. The computation of income cannot be effected without having recourse to section 40(a)(ia) and consequently to provisions of chapter XVII-B. Section 40(a)(ia) comes into play when any interest, commissions or brokerage etc. payable to a resident, on which tax was deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139 then such payments will not be allowed as deduction. Admittedly, as regards discount allowed to distributors in respect of prepaid cards, the Gauhati Bench of the ITAT as well as Jaipur Bench of ITAT in assessee’s own case for AY 2008-09 have clearly held that the said provisions of section 194H are not applicable Therefore, it follows that there should be sum paid by assessee on which tax was deductible at source under Chapter XVIIB before 40(a)(ia) could come into play. Admittedly in the case of assessee, it has been held that the provisions of section 194H as well as provisions of section 194J are not attracted and therefore, there was no amount on which tax was deductible. Therefore, section 40(a)(ia) cannot come into play. The machinery provisions cannot operate independently and before the computation provisions contained in section 40(a)(ia) can come into the play, the effect of applicability of machinery provision has to be considered. Keeping in view the integrated scheme of the Act, we are of the opinion that Non-deduction of tax under Chapter XVIIB leads to consequences contemplated u/s 201 and, therefore, Section 40(a)(ia) and provisions contained in chapter XVII-B constitute an integrated code and, accordingly, effect has to be given to the decisions of Tribunal’s Guwhati and Jaipur Benches, which will operate as res-judicata. In any view of the matter, the view beneficial to the assessee is to be taken. - Decided in favour of assessee Addition on account of amortization of license fee and spectrum charges U/S 35ABB - Held that:- As decided by Hon’ble Delhi High Court in assessee’s own case the expenditure incurred towards licence fee is partly revenue and partly capital. Licence fee payable upto 31 5t July, 1999 should be treated as capital expenditure and licence fee on revenue sharing basis after 15t August, 1999 should be treated as revenue expenditure. Capital expenditure will qualify for deduction as per Section 35ABB of the Act Addition on account of lease rent paid to IBM - revenue or capital in nature - whether merely because assessee in its books of a/c had given some treatment to the transaction, has to be taken as sacrosanct or the substance of the transaction is to be considered - Held that:- There cannot be any quarrel with the proposition that the substance of the transaction has to be taken into consideration and merely because in books of a/c, the assessee had complied with the requirement of AS 19 and, accordingly, charged depreciation on the asset treating the whole transaction as capital in nature, could not disentitle the assessee to claim the expenditure in computation of income on the basis of true nature of the transaction. It is well settled law that a particular mode of recording a transaction in books of a/c is of little consequence and the substance of the transaction has to be considered to arrive at proper conclusion. CIT(DR) has very rightly submitted that substance of the transaction has to be considered. His main plank of argument is that the assets are identified in terms of identity as well as sequence. Certain clause of the agreement also states that these assets could be handed over to the assessee upon exit of IBM. With reference to these two aspects, ld. CIT(DR) submits that the assessee was the beneficial owner of these assets and the IBM was only titular owner. His contention is that these being movable properties, such titular ownership does not entitle the owner to any benefit or right except, principal security against finance lease charges. Had the ownership rights been effectively transferred to assessee it would have taken all necessary steps to protect the assets from all risks. However, the agreement clearly lays liability on IBM on this count. Therefore, the substance of the transaction clearly suggests that the beneficial ownership remained with IBM and not with assessee and, therefore, the assessee had rightly claimed the entire lease rent paid by it to IBM.
-
2016 (5) TMI 33
Provision for breakage in transit - whether amounts to provisioning for contingent liability? - Held that:- It is not in dispute that it stands covered in favour of the Revenue by the decision of this Court in Seagram Distilleries Pvt. Ltd. v. CIT (2015 (10) TMI 491 - DELHI HIGH COURT). Consequently, the appeals are admitted as far as this question is concerned and the question is answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of the ITAT to that extent is set aside. Expenditure incurred on brand creation - Held that:- Spread of the brand expenses over a period of five years was actually in the nature of deferred revenue expenditure and the question of treating it as capital expenditure did not arise.
-
2016 (5) TMI 32
Interpretation of Total Turnover & Export Turnover under 10A - Held That:- Matter is covered by the decision of this Court in the case of Tata Elxsi Limited ( 2011 (8) TMI 782 - KARNATAKA HIGH COURT ) wherein held that there should be uniformity in the ingredients of both the numerator and the denominator of the formula. The components of the export turnover in the numerator and the denominator cannot be different.
-
2016 (5) TMI 31
TDS u/s 194C - placing the magazines on the back of the seats of the aircraft - payment made by the assessee to KAL on account of sharing of incremental advertisement - Held that:- The agreement between the two was on account of sharing of incremental advertisement only and nothing else. According to Ld. DR, displaying of magazine to the captive audience by KAL in its flight would itself fall within the definition of 'work'. In this regard we beg to differ with the views of Ld. DR. The admitted facts are that KAL has purchased the magazines, which was a separate transaction and for which KAL had made payment to the assessee. Thus displaying of magazines by KAL was for its own consumption and purposes. Once the product of the assessee was purchased by KAL, thereafter whatever has been done by KAL with the said product was for own benefits, advantages and purposes of KAL only. Under these circumstances it could not be said at all that KAL had displayed the magazine for and on behalf of the assessee, nor it could be said that by placing the magazines on the back of the seats of the aircraft, KAL had done a 'work' for the assessee. KAL provided magazines to its guest passengers as part of its effort for creating a five star in-flight experience for its customers. Thus, increase in the advertisement revenue cannot be said to have occurred directly as a result of any 'work' done by KAL for on behalf of the assessee. Further, no such 'work' could have been recognized or merged in any tangible or quantifiable terms. Thus, without any hesitation, we can say that the impugned payment made by the assessee to KAL on account of sharing of incremental advertisement revenue shall not fall within the provisions of section 194C. - Decided in favour of assessee. TDS u/s 195 - payment for for procuring images and figures to be published in assessee's magazines in India - Held that:- To be included in the definition of 'royalty', the payment should be made for use of a copyright of the items. Even if we presume, although denied by the assessee, that photograph will fall in any one or more of the items mentioned in the above said definition, even, then it is mandatory on the part of the revenue before applying these provision to show that the payment was for use of 'copyright' and not 'copyrighted article'. In our opinion, use of copyright and 'copyrighted article' are altogether two different things as has been held in many judgments also. The admitted fact is that the photograph has been given to the assessee for the limited purpose of its one time use in the magazine. The assessee can neither edit the photograph nor can it make copies of the photograph to be sold further or to be used elsewhere. The assessee is not permitted to make resale of these photographs to any other person for any other use. Thus, what has been permitted to the assessee is to make use of the article and not use of the copyright. Thus, we find that the transactions of downloading of photographs for exclusive one time use for publication in the magazine did not fall within the provisions of relevant Article 12 of DTAA and therefore, assessee was not liable to deduct tax on the payments made for the same. It is further brought to our notice that in the assessment year 2009-10 also payments were made to these very parties namely M/s Getty Images and M/s Famous-Pictures & Features Agency, for downloading of photos. But no disallowance has been made by the assessing officer in the assessment order passed under section 143 (3) dated 24.11.2011.- Decided in favour of assessee.
-
2016 (5) TMI 30
Capital loss V/S business loss - nature of loss - Assessing Officer treated the loss as capital loss on the ground that the land in question was treated as capital transaction by the vendors of the land - Held that:- The assessee, for the reasons best known to it, decided not to proceeded with the project and accordingly abandoned the project which resulted in forfeiture of the advance amount of ₹ 50 lakhs by the vendors of the land. It is for the assessee to decide whether it intend to proceed with the project or not. The Assessing Officer cannot comment upon the decision of the assessee. When the assessee decided not to proceed with the project, whatever may be the reason, it was the decision taken by the assessee in the course of the business activity, therefore, the forfeited amount is a loss in the business. It is not in dispute that the advance paid by the assessee to acquire stock-in-trade in the course of the business was forfeited. Therefore, this Tribunal is of the considered opinion that the assessee has suffered the loss in the regular course of business. The Assessing Officer treated the loss as capital loss on the ground that the land in question was treated as capital transaction by the vendors of the land. The Assessing Officer has also found that if the land was retained and sold, the assessee would have earned more gain than incurring loss. We are unable to uphold the reasoning of the authorities below. As discussed earlier, it is for the assessee to decide whether to proceed with the project or not. The assessee can also decide to sell the land as such by keeping the same. The Assessing Officer cannot step into the shoes of the assessee and suggest what should be for the best interest of the assessee. The assessee being a businessman knows well how to arrange its affairs for earning maximum profit. This Tribunal is of the considered opinion that merely because the assessee abandoned the project after paying advance of ₹ 50 laks, that cannot be a reason for treating the loss claimed by the assessee as capital loss. An asset may be a capital asset in the hands of the seller and it may be a stock-in-trade in the hands of the purchaser. It all depends upon the transaction. For example, when a manufacturing industry purchases a machinery for its manufacturing activity from the industry which manufactures the machinery, the machinery purchased by the manufacturing industry may be a stock-in-trade in the hands of the company which manufactures machinery. However, it is a capital asset in the hands of the company which purchases the machinery for using the same in its manufacturing activity. Similarly, when the land owners sell the land to a real estate dealer, the land is a capital asset in the hands of the land owner. However, the same land purchased by the real estate dealer becomes a stock-in-trade. Therefore, the treatment in the hands of the vendors of the land cannot be a determining factor to allow the claim of the assessee either as revenue loss or as capital loss. It has to be decided whether the loss has occurred in the course of the business activity for acquiring a stock-in-trade in the hands of the assessee. In this case, admittedly, the assessee acquired a stock-in-trade for construction of residential flats at Ambattur in Madhavaram Vilalge. Therefore, the loss, if any, suffered in the course of the acquisition of the stock-in-trade has to be necessarily allowed a revenue loss, hence, it has to be allowed as business loss while computing the total income. In view of the above, we are unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow ₹ 50 lakhs as business loss while computing the taxable income of the assessee. - Decided in favour of assessee Disallowance of labour expenditure - Held that:- Obtaining proper voucher from such kind of unorganized laboruers is something beyond the control of the assessee. Therefore, the assessee has to necessarily make self-made vouchers to evidence the payment of salary to such labourers engaged in the construction activity. Therefore, the Assessing Officer has to examine whether there was any inflation of the expenditure claimed by the assessee after comparing the nature of the work carried out by them. In the case before us, it is nobody’s case that the assessee has inflated the expenditure. In the absence of any allegation that the assessee has inflated the expenditure, this Tribunal is of the considered opinion that merely because self-made vouchers are made with regard to payment made to labourers who engaged in the construction activity that alone cannot be reason for disallowing any part of the expenditure on estimate basis. Therefore, this Tribunal is of the considered opinion that the disallowance made by the Assessing Officer at 3% of the total expenditure is not called for. Accordingly, the orders of the lower authorities are set aside and the disallowance made by the Assessing Officer @ 3% to the extent of ₹ 37,37,206/- is deleted. Allowability of interest on borrowed funds - Held that:- This Tribunal is of the considered opinion that the entry in the books of account is irrelevant for the computation of taxable income. The income is computed as per the Income-tax Act, 1961 irrespective of the entries made in the books of account. When the assessee borrowed funds and paid interest on such borrowed funds, this Tribunal is of the considered opinion that the interest paid on the borrowed funds has to be allowed as business expenditure. Thaiyur is one of the project proposed by the assessee. Merely because the loan was borrowed for Thaiyur project there is no restriction for the assessee to use the borrowed funds for other projects. The borrowed funds can also be utilized for other projects. It is not the case of the Revenue that the assessee is not constructing any other flats or residential complex at the relevant point of time. When the assessee is constructing residential complexes during the relevant period of time and also proposed to commence a project at Thaiyur, this Tribunal is of the considered opinion that the expenditure on the borrowed funds has to be necessarily allowed. In view of the above, we are unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the payment of interest on the borrowed funds claimed by the assessee while computing the taxable income.
-
2016 (5) TMI 29
Income arising from sales of shares - treated as business income or short term capital gain - Held that:- Since the assessee has treated the securities as investment and not as stock in trade in all the years, therefore, in view of the CBDT Circular No. 6/2016 dated 29.02.2016, the revenue is not permitted to take a contrary view in the present year and claimed that the security is stock in trade and, therefore, the profit/gain caused to the assessee be treated as business income. In our view, there is no merit in the contention of the revenue and is deserves to be dismissed in view of the circular. - Decided against revenue
-
2016 (5) TMI 28
Additions towards sundry creditors - Held that:- During the course of hearing, the assessee has filed a paper book, wherein submitted the ledger account copies of the respective creditors along with confirmation letters issued by the parties. On perusal of the confirmation letters issued by the assessee, we find that in the case of two parties, where there was a difference in closing balances, the assessee has explained the difference in closing balance and submitted that the difference in balances in sundry creditors is not closing balance and it is opening balance difference. Therefore, AO cannot make additions towards opening balance difference during the year under consideration. We find force in the arguments of the assessee for the reason that on perusal of such confirmation letters and also reconciliation furnished by the assessee, we noticed that the creditors have been explained before the Assessing Officer and also explained the reasons why the difference is appeared in the creditors’ balance. The CIT(A) after considering the submissions made by the assessee rightly deleted the additions. We do not see any error or infirmity in the order passed by the CIT(A). Hence we inclined to uphold the CIT(A) order - Decided against revenue. Additions towards suppressed turnover and related gross profit - Held that:- AO stated that the average sales price is less than the purchase price for the above period. We do not see any merits in the findings of the AO for the reason that additions cannot be made based on the average selling price of a particular period and apply it to the remaining period by stating that there was a difference in selling price for the particular period. Unless, A.O. analyse the total financial results of the period including opening stock, purchases, sales and closing stock, no additions can be made on the basis of a part period by taking the average selling price. In the present case on hand, the AO has not pointed out any defects in the quantity of product sold by the assessee. The AO is mainly harping upon the selling price of the particular period by stating that the sale price of the product sold is less than the purchase price. In the present case on hand, the assessee is in the business of trading in steel and iron. The iron and steel prices are prone to ups and downs depending upon the demand in the market. The sale price of the product sometimes may be less than the purchase price when the market trend is going down. Therefore, based on the selling price, the AO cannot estimate the sales turnover for the part period by taking into account the remaining period sales. The CIT(A) after considering the explanations furnished by the assessee, rightly deleted the additions - Decided against revenue. Adhoc disallowance on 30% of expenditure - Held that:- CIT(A) restricted the additions to ₹ 1 lakh by holding that though this expenditure are supported by self made vouchers, the relevance of such expenditure cannot be ruled out in the business of the assesee. The fact remains same even before us. The revenue has not brought on record any evidence to show that the findings of the facts recorded by the CIT(A) is incorrect. Therefore, we do not see any reasons to interfere with the order passed by the CIT(A).
-
2016 (5) TMI 27
Disallowance of expenses on account of employee’s expenses of secondment - non-deduction of TDS by invoking the provisions of section 40(a)(ia) - Held that:- The issue is covered by the decision of ITAT, Bangalore bench in the case of IDS Software Solutions (India) (P) Ltd. Vs. ITO [2009 (1) TMI 363 - ITAT BANGALORE-A] wherein the facts discussed as regards to where the assessee entered into a ‘secondment agreement’ with a US Company and obtained the services of an employee and the question arose whether the reimbursement by the assessee to the US Company of the salary paid by the US Company was chargeable to tax as “fees for technical services” . It was held that though the US Co was the employer in a legal sense but since the services of the employee had been seconded to the assessee and since the assessee was to reimburse the emoluments and it controlled the services of the employee, it was the assessee which for all practical purposes was the employer. Accordingly, the salary reimbursed to the US Co was not chargeable to tax. Though the person deputed by the US Co was a technical person, the consideration paid under the secondment agreement was not “fees for technical services” because the fact that the seconded employee was responsible and subservient to the payer (assessee) and was required to also act as officer or authorized signatory or nominee of the assessee made it inconsistent with an agreement for providing technical services. - Decided against revenue Addition of compensation from customers made by AO on estimate basis - Held that:- This issue has already been remitted back to the file of AO in the immediate preceding year exactly on identical facts by Tribunal in assessee’s own case for Asst. Year 2008-09. and on similar line if the issue is remitted back to the file of the AO that will suffice the matter. On query from the bench, ld. Sr. DR has not objected to the stand of the assessee. Hence, we direct the AO to decide the issue in term of the principles laid down above
-
2016 (5) TMI 26
Addition on account of gift - Held that:- The provision of section 56(2)(v) has been amended by inserting clause(v) by Finance Act,2004 and the same was applicable on the transactions taken place between 01.09.04 to 01.04.06 wherein in the present case, the transaction had taken much before the said time i.e. on 02.07.04 therefore, amendment provision of section 56(2)(v) are prospective in nature and not retrospective in nature and thus are applicable w.e.f. 1.09.04. Ld. CIT(A) has applied the amended provision with retrospective effect. This interpretation of CIT(A) is improper and bad in law and is thus unsustainable. Further as per the facts of the present case, a sum of ₹ 2,00,000/- were delivered as gift by Jitesh Mehta to the assessee through account payee cheque and the said amount has been credited in the account of the assessee which means that the gift amount was transferred by Jitesh Mehta to the assessee and the same was also accepted by the assessee. There is no pre condition in section 122 or123 of Transfer of Property Act which defines gift that the donor or donee should be related to each other. However in the Income Tax Act there was an amendment in section 56(2)(v) which was brought into effect by Finance Act, 2004 and was effective from 1st September, 2004. However, in the present case the gift was received before the amendment provision come on to the statute books i.e. 02.07.2004 therefore amended provisions are not applicable to the facts of the case. And even otherwise as per the facts brought out on the record Shri Jitesh Mehta was having friendly relation with the assessee therefore he was competent to give the said amount by way of gift to the asessee. Thus we direct the AO to delete the addition. - Decided in favour of assessee
-
2016 (5) TMI 25
TDS u/s 195 - disallowance under section 40(a)(i) of the Act in respect of payment to non-resident for the purpose of testing charges - Held that:- In the instant case, it is a fact that the export contracts are concluded in India and the assessee's products are sent outside India under these contracts. Further the manufacturing activity of the assessee is also located in India. The source of income is created at the moment when the export contracts are concluded in India. Even though the importer of the assessee’s products is situated outside India, he is only the source of the monies received and he cannot be regarded as a source of income. In order to fall within the second exception provided in Section 9(1)(vii)(b) of the Act, the source of the income, and not the receipt should be situated outside India and this condition is not satisfied in the present case. The assessee’s case does not even fall under the first exception, since in order to get the benefit of the first exception it is not sufficient for the assessee to prove that the technical services were not utilised for its business activities of production in India, but it is further necessary for the assessee to show that the technical services were utilised in a business carried on outside India. The meaning of the term source of income in section 9(1)(vi)/(vii) of the Act has been a subject matter of dispute since over some time. It is not the payer of income but the location of the manufacturing activity and concluding of the export contract from India that will determine the source of income. Further the assessee needs to specifically demonstrate that the technical services were utilised in a business carried on outside India in order to fall under the exception. Under the above facts and circumstances, the Hon’ble Delhi High Court in the above case has held that the assessee’s case does not fall within the second exception provided in Section 9(1)(vii)(b) of the Act. Accordingly, respectfully following the decision of the Hon’ble Delhi High Court in the case of CIT v. Havells India Ltd. (2011 (5) TMI 530 - ITAT DELHI ), we hold that the FTS paid to KEMA Netherlands and CESI, Italy, TDS is, therefore, deductible under section 195 of the Act and the Assessing Officer has rightly invoked provisions of section 40(a)(i) of the Act and made disallowance. - Decided against assessee
-
2016 (5) TMI 24
Gifts received from daughter - addition as unexplained cash credit u/s 68 - Held that:- We find from the records that the monies have been transferred by daughter Mrs. Fariah Rahman, who is a resident of Manchester, United Kingdom, to her father (assessee herein) as gift which are duly supported by her bank statements and affidavit confirming the gift. The fact that she is a resident of Manchester and employed therein is not in dispute. The affidavit filed by the daughter is also not in dispute. The fact that the monies were transferred by Mrs. Fariah Rahaman from her UK bank account in pound sterlings to her Indian Bank account is not in dispute. It is not the case of the Learned AO that the assessee had channellised his undisclosed income through hawala channels to UK and got it back in the guise of gift from his daughter - Decided in favour of assessee Amount received from wife - addition as unexplained cash credit u/s 68 - Held that:- We find from the records that the assessee has received ₹ 5,70,000/- as loan from his wife Mrs. Chasfida Rahman. The assessee also explained that his wife had received gift from her mother. It was also explained that her mother who was 82 years old and lying in death bed , sold her property and gave the share attributable to the assessee’s wife. Hence it was proved that out of income of mother in law of assessee, she has gifted the same to her daughter (assessee’s wife) . It is a common practice in any family to distribute the assets to the children which includes out of sale of property to avoid any legal disputes and to maintain the harmony of the family. In the instant case, we find that the assessee has proved source of source. Moreover, the wife of the assessee had even appeared before the Learned AO and confirmed the fact of advancing loan to the assessee. In these circumstances, we find that the Learned CITA had rightly deleted the said addition - Decided in favour of assessee Transfer from one bank to another bank account - addition as unexplained cash credit u/s 68 - Held that:- We find from the records that the assessee has merely transferred certain amounts from his Bombay Mercantile Cooperative Bank account to his HSBC account. We find that the Learned AO had almost added all the credits in the bank account maintained with Bombay Mercantile Cooperative Bank account of the assessee. Having said so, he ought not to have held that the said bank account is not disclosed by the assessee for the purpose of making this addition of ₹ 4,50,000/-. Even otherwise, the various credits that were otherwise added as income in previous grounds itself, would act as a source for making this fund transfer to HSBC account . Ultimately, it is only a question of fund transfer from one bank account (i.e Bombay Mercantile Cooperative Bank) to HSBC Bank account. There is no question of any element of income involved therein. The source is explained by the Learned AO himself and hence it does not become unexplained. Hence the provisions of section 68 of the Act cannot be applied to the facts of the instant case - Decided in favour of assessee Sale proceeds as unexplained cash credit u/s 68 - Held that:- It is not in dispute that the credits in the subject mentioned bank account to the tune of ₹ 6,89,410/- represents sale proceeds of trading business for which income is already offered to tax u/s 44AF of the Act. Hence there is no question of treating the said sale proceeds as unexplained cash credit u/s 68 of the Act. Hence we find no infirmity in the order of the Learned CIT(A) in this regard - Decided in favour of assessee Investment made in mutual funds - unexplained investment - Held that:- It is not in dispute that the cheques for purchase of two mutual funds were issued from HSBC bank account of the assessee. The immediate source of credit for issuing these cheques was explained to be funds transferred from Bombay Mercantile Cooperative Bank to the extent of ₹ 3,50,000/- and remaining ₹ 5,50,000/- received from his wife. We find that the Learned AO had already given a finding that Bombay Mercantile Cooperative Bank account is maintained by the assessee while making certain additions that were adjudicated in previous grounds. We also find that assessee had indeed received certain monies as loans from his wife Mrs Chasfida Rahman which were credited in HSBC bank account of the assessee. This issue was adjudicated in previous grounds hereinabove. We find that the assessee had duly explained the source for purchase of mutual funds and had also offered the short term capital gains on redemption of the same which has also been taxed by the Learned AO. In these circumstances, there is no scope for treating the investment in mutual funds of ₹ 9,00,000/- as unexplained - Decided in favour of assessee Amount transferred from two minor daughters’ bank account to the bank account of the assessee - Held that:- It is not in dispute that the monies were transferred from two minor daughters bank account to the account of the assessee. It is not in dispute that the bank statements of two minor daughters were also produced before the Learned AO. It is not the case of the Learned AO that the assessee had chanellised his undisclosed income in the bank account of the two minor daughters and had received it back in cheques from them. Nothing prevented the Learned AO to enquire about the sources of credits in the bank account of the two minor daughters. In these circumstances, we find that the Learned CITA had rightly deleted the addition - Decided in favour of assessee
-
2016 (5) TMI 23
Levy of penalty u/s 271(1)(c) - Held that:- In the instant case it cannot be said that the assessee withheld any relevant information regarding the receipts and income from the AO. The figure added back by the AO pertaining to the loss on sale of shares was a figure disclosed by the assessee itself. With regard to the provisions of section 271(1)(c ) of the Act pertaining to penalty, the Hon’ble Apex court has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. Thus, in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) - Decided in favour of assessee
-
2016 (5) TMI 22
Rectification of mistake - rectification of the order passed u/s 201(1) and 201(1A) seeked - Held that:- what is required for adjudication is only the subsequent appeal of the assessee which is filed by him against the order u/s 154 dated 30th April, 2015. The order u/s 154 dated 30th March, 2013 stood modified by the subsequent order passed u/s 154 dated 30th April, 2015. Therefore, in our opinion, no separate adjudication is required with reference to the order u/s 154 dated 30th March, 2013. To that extent, the present appeals filed by the assessee which have originated from the order u/s 154 dated 30th March, 2013 have been rendered infructuous. However, we find some merit in the assessee’s contention that the observation of learned CIT(A) in the order dated 8th December, 2014 wherein he has upheld the order u/s 154 dated 30th March, 2013 may cause prejudice to the case of the assessee while disposing of its appeal against the order u/s 154 dated 30th April, 2015. Therefore, we hold that learned CIT(A) while deciding the appeal against the order u/s 154 dated 30th April, 2015 would not be influenced by any observation or finding given in his order dated 8th December, 2014 but he will decide the appeal afresh uninfluenced by any observation/finding in his order dated 8th December, 2014 Levy of penalty imposed u/s 271C - period of limitation - Held that:- As per clause (c) of Section 275(1), the penalty proceedings were initiated in the course of order u/s 201(1) and 201(1A) dated 27th June, 2008 and the relevant financial year would expire on 31st March, 2009. Six months from the end of the month in which penalty proceedings were initiated would expire on 31st December, 2008. Therefore, the competent authority could have imposed the penalty before the expiry of 31st March, 2009. However, the penalty order has been passed on 2nd March, 2010 which is clearly barred by limitation. We, therefore, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of JKD Capital & Finlease Ltd. (2015 (10) TMI 1281 - DELHI HIGH COURT ) hold that the penalty order passed u/s 271C was barred by limitation
-
2016 (5) TMI 21
Income earned from the shares - “Short Term Capital Gains” OR “Income from Business and Profession” - Held that:- Merely because 41 shares/securities were bought and sold could not per se lead to the conclusion that the earnings therefrom were not Short Term Capital Gains but business income. The mere percentage of the investment from the available surplus funds of the Assessee could not be by itself be determinative of the issue. One important factor would be how frequently the Assessee was purchasing shares during the relevant AY. This crucial factor does not seem to have been addressed by the AO. Although Mr. Manchanda repeatedly stressed that the ITAT had gone only by the order passed by the AO for AY 2005-06 whereas the said assessment had been reopened subsequently under Section 153A of the Act, but in the considered view of the Court, independent of that fact, the finding of the ITAT that the earning of the Assessee was only a Short Term Capital Gains does not suffer from any legal infirmity - Decided against revenue
-
2016 (5) TMI 20
Transfer of jurisdiction - Held that:- The reason for the order under Section 127(2) of the Act was stated to be for the purposes of the coordinated and effective investigation in Animal Husbandry Department Scam (AHD Scam) cases which arose in Patna. It is stated that the Petitioner was assisting in the filing of the income tax returns of the persons involved in the said cases. It is further stated that the assessments of those persons have also been centralized in Patna and those assessments have been completed. The orders of the Income Tax Appellate Tribunal for the relevant assessment years in the cases pertaining to those other persons have been placed on record. Considering the passage of time during which the Petitioner has continued to be assessed in New Delhi and that there is an obvious change in circumstances, the order passed by the Respondent No.1 way back on 26/27th February, 2002 would obviously have to be reviewed. That order cannot possibly be said to hold good even today. In similar circumstances in Smt. Avijeeta Mohanty Casshyap v. Commissioner of Income Tax [2007 (6) TMI 181 - GAUHATI High Court] the Gauhati High Court had come to form a similar opinion in relation to an order passed under Section 127 of the Act. - Transfer orders set aside.
-
2016 (5) TMI 19
Addition on on account of inflated purchased - Held that:- AO in the instant case has disallowed the substantive purchase without making the substantive enquiry about the prevailing market price of the product in question. The AO also not considered the payment to the party which was made through the banking channel. The goods were exported after the custom clearance and the payment was realized in terms of convertible of foreign exchange. We also find from the report of the custom department that no over invoicing for the export of the goods was made. Addition on account of bogus purchase from M/s Monoharlal Mahabir Prasad - Held that:- AO has disallowed the purchase expenses due to non availability of the purchase bills. However the same has been allowed by the ld. CIT(A) after due verification of the necessary supporting evidence. Before us the ld. DR has not brought anything on record to controvert the finding of the ld. CIT(A), therefore we are confirming the order of the ld. CIT(A) and dismissed this ground of the Revenue. Deduction claimed by the assessee under section 80HHC - CIT(A) allowed the same on the ground that all the aforesaid conditions have been fulfilled by the assessee - Held that:- Now to avail the benefit under section 80HHC for the profit arising from the sale of the DEBT license the above said twin conditions needs to be satisfied. We accordingly find from the submission of the assessee that both the conditions have been fulfilled as provided in (a) and (b) of third proviso to section 80HHC of the Act. For the condition specified in clause (b) the assessee submitted that the Drawback credit attributable to custom duty was 35% in terms of Custom Tariff Heading 7018 and where as the DEPB entitlement was only 20%. We also find that the ld. DR has not brought anything contrary to the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Therefore we dismiss the ground of Revenue.
-
2016 (5) TMI 18
Reopening of assessment - At the time of scrutiny assessment u/s 143(3), AO was conscious of the fact that deduction had been claimed under Section 80-O - Revenue contended that copy of agreement was not supplied during the original assessment proceedings - Held that:- Significantly in the affidavit filed by Respondent No. 1, he does not state that the AO had the files for the concerned AYs before him when he issued the notice. He in fact candidly states in his affidavit that the reasons recorded are based on the information received from the office of the CIT(A) pertaining to the appeals for AYs 1990-91 and 1991-92. He also admits that the file for AY 1993-94 is not traceable. In other words, the Revenue has been unable to demonstrate that for AYs 1992-93 and 1993-94 the agreement with Sumitomo Corporation was not produced by the Assessee. - The fundamental condition for resorting to Section 147 in a case where reopening is sought to be done after expiry of four years after the expiry of the relevant assessment year in which the assessment orders were passed, is not fulfilled in the present case. - Decided in favour of assessee
-
2016 (5) TMI 17
Validity of revision orders - jurisdiction - Assessment after transfer of a case u/s 127 - Held that:- Reading the order dated 3rd September, 2012 as a whole, it does not appear that any restricted transfer was sought to be made for any particular year or years or otherwise. The order of transfer, as we have already indicated, was passed in the interest of revenue for better coordination, effective investigative and meaningful assessment. - CIT Kolkata – II, Kolkata had become functus officio prior to 18th March, 2013 because the transferee – assessing officer had assumed jurisdiction without which the notice dated 18th March, 2013 under Section 143(2) could not have been issued. Therefore, the order of transfer was duly published/ notified and/or communicated and thereafter acted upon by the transferee-assessing officer. We are, as such of the opinion that the issuance of the notice dated 18th March, 2013 under Section 263 and the consequent order dated 26th March, 2013 passed under Section 263 of the Income Tax Act were acts without jurisdiction and therefore a nullity.
-
2016 (5) TMI 16
Estimation of income - LTCG - purchase of shares - Held that:- Since we have held that the shares have been purchased by the assessee on 27.04.2005 i.e., on the date on which the shares were transferred to his Demat account consequently assessment is required to be made in the following manner:- (a) The difference between the market value of shares as on 27.04.2005 and the cash balance available with the assessee as on that date is required to be assessed as unexplained investment. It is pertinent to note that the assessee should be in a position to prove the availability of cash balance as on that date to the satisfaction of the assessing officer. We may also add that, if the assessee does not maintain regular cash book and the explanation offered by him was not satisfactory, then the entire amount of market value of shares is required to be assessed as unexplained investment. (b) The difference between the sale consideration of shares and the market value of shares as on 27.04.2005 is required to be assessed as short term capital gain. (c) The AO has estimated the commission expenses @ 5% for procuring long term capital gains. Since we have held that the assessee could not prove the claim of purchase of shares in April, 2004, we are of the view that the Ld CIT(A) was justified in confirming the assessment of commission expenses. Claim of agricultural income - Held that:- Since the assessee has furnished documents with regard to the ownership of lands and confirmation letters supporting the sales, we are of the view that the claim of agricultural income cannot be rejected altogether. At the same time, we notice that the assessee has not furnished the details relating to agricultural operations. Under these set of facts, we are of the view that the agricultural income is required to be estimated in order to put this issue at rest. Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to restrict the disallowance to 40% of the agricultural income reported by the assessee and accept the agricultural income to the extent of 60% of the amount reported by the assessee.
-
2016 (5) TMI 15
Penalty u/s 271(1)(c) - Held that:- It is seen that initially during the assessment proceedings, addition was made by the Assessing Officer because as per him, the brought forward losses were insufficient to cover the business profits for Assessment Year 2008-09. However, with the First Appellate Authority allowing the appeal of the assessee for Assessment Year 2005-06, the business losses to be set off against the income for Assessment Year 2008-09 have again increased so as to reduce the business income for Assessment Year 2008-09 to NIL. In our considered view, the starting point of determining concealment for imposing penalty is the return of income. In the present appeal, the Assessing Officer has not found any discrepancy, inaccuracy or concealment in the return. The Assessing Officer’s view is totally misplaced and de hors any merit as section 271(1)(c) of the Income Tax Act, 1961 empowers the Assessing Officer to impose penalty on the assessee when such assessee has concealed the particulars of his income or has furnished inaccurate particulars. However, in the present appeal, there is nothing on record to hold that the assessee has either concealed the particulars of its income or furnished any inaccurate particulars thereof. We accordingly decide the issue in favour of the assessee and direct the Assessing Officer to delete the penalty. - Decided in favour of assessee
-
Corporate Laws
-
2016 (5) TMI 2
Scheme of Arrangement in the nature of Amalgamation - Held that:- Taking into account all the contentions raised by the affidavits and counteraffidavits, as well as the submissions advanced during the course of hearing, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been satisfactorily redressed. It appears to this Court that the present Scheme of Arrangement would be in the interest of the shareholders and creditors of all the companies as well as in the public interest and the same deserves to be sanctioned.
-
Service Tax
-
2016 (5) TMI 13
Admissibility of Cenvat credit for the period April 2011 February 2012- Service tax paid on construction services - Department contended that as the services have been used for construction of building which is neither for finished goods nor output services, but the output being property, the credit is not admissible. Also from 01.04.2011 the service of construction of a building for civil structure or part thereof has been specifically excluded from the definition of input service but appellant submitted that these services were availed by the appellant and building/construction was completed and handed over before 01/04/2011. Held that:- appellant submitted certain documents like letter dated 28/01/2011 issued by M/s Sunshine Constructions, copy of the ledger account, memo for the sanction of Electricity load extension to the newly constructed building and copies of drafts for payment made by appellant towards Building and Other Construction Workers Welfare Cess which establish that the provision of availing the construction service had been completed before 01/04/2011 but that invoice was raised only on 26/04/2011. When the provision of construction service has been completed prior to 01/04/2011 denial of credit only because of the delay in issuing the invoice is not justified as the Board has clarified that credit is available if the provision of the service was completed before 01/04/2011. Therefore, the credit is admissible on these services as the provision has been completed prior to 01/04/2011. - decided in favour of appellant with consequential relief
-
2016 (5) TMI 12
Cenvat credit - Common Input services belongs to three units but the whole of the credit was availed at one unit - Assessee contended that the units may be situated at different places but are under the common management and the Cenvat Credit has rightly been claimed. - Held that:- no substantial question of law arise out of the order of the Tribunal and the Tribunal has rightly found that all the three units had a common management and no contrary material was placed on record by the Commissioner while holding that there was no nexus in between the three units. By applying the judgment of Gujarat High Court in the case of Commissioner of Central Excise Vs. Dashion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT], the objection of the department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. The respondent has been able to prove that all the three units are one and the same, have common management and the Revenue has not been able to disprove this fact. - Decided against the revenue
-
Central Excise
-
2016 (5) TMI 11
Maintainability of appeal before the High Court - Question relating to availability of exemption notification versus question relating to Determination of rate of duty of excise or the value of goods for assessment - SSI Exemption - Held that:- Section 35G of the Act expressly excludes orders passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Correspondingly, section 35L of the Act provides for appeal to the Supreme Court against an order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Thus, on the conjoint reading of sections 35G and 35L of the Act, it is crystal clear that an appeal shall not lie before the High Court against an order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Whether the clearances made by the respondent for the period under consideration, in fact, exceeded the limit stipulated under the exemption notification or were within such limit - Held that:- the question of applicability of the exemption notification does not arise, inasmuch as, it is not the case of the revenue that the assessee is not entitled to the benefit of the exemption notification. At the cost of repetition, it is reiterated that the only question that arises for consideration in these appeals is as to whether the clearances made by the assessee for the period under consideration have exceeded the limit specified for being entitled to the exemption notification. The controversy involved in the present cases does not relate to the determination of any question having a relation to the rate of duty or value of goods for the purposes of assessment, and as such, the appeals have rightly been filed before this court under section 35G of the Act. - Decided against the revenue
-
2016 (5) TMI 10
Cenvat credit on the inputs on the basis of documents endorsed by the consignee - Duty paying document - Availing modvat credit on duty paid inputs under Rule 57A of the Central Excise Rules, 1944 - Held that:- in exercise of powers under Rule 57G of the Central Excise Rules, 1944, the Central Government under notification dated 30.3.1994 prescribed invoices issued by a manufacturer from his factory or depot or wholesale distributor or dealer of a manufacturer who has bought the excisable goods either from the manufacturer at the factory or from the manufacturer's depot or an importer from his godown subject to certain conditions, as document for the purpose of said Rules. Likewise, under notification dated 4.7.1994, the Central Government had prescribed invoices issued by a manufacturer from the factory or his depot or dealer of an excisable goods registered with the Central Excise Officer or an importer from his godown or dealer of an imported goods registered with the Central Excise Officer containing the details, as are prescribed under Rule 57GG as the documents for the purpose of Rule 57G. In other words, subject to fulfilling the conditions provided in the said notifications, the invoices issued by the said category of persons would qualify a manufacturer to avail cenvat credit on the inputs used. This decision was completely lost sight of by the Tribunal. We find that major changes were made in the procedure prescribed in availing cenvat credit. By virtue of such changed procedure, only upon the invoices being issued under Rule 52A, the cenvat credit, on the strength of such documents could be availed by the manufacturer. The Tribunal thus committed an error. Therefore, the decision of the Tribunal is reversed. - Decided in favour of revenue
-
2016 (5) TMI 9
Seeking direction for grant of interest - Deposited voluntarily till the date of actual payment under Section 11B of the Central Excise Act, 1944 - Appellant submitted that interest is due and payable from the date of the application seeking refund till the date of payment. Also once there is an order of refund of duty and which is traceable under sub-section (2) of Section 11B, then to the Applicant to whom this amount is not refunded within three months from the date of receipt of the application under sub-section (1) of that Section, there shall be paid interest not below five per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government by notification in the Official Gazette. Held that:- once the Assistant Commissioner approached the matter in terms of Section 11B of the Act but the amount as directed to be refunded was not refunded within the time provided by the statutory provision, that, this is a fit case to award interest that is to be awarded for delayed refund. If the duty ordered to be refunded under sub-section (2) of Section 11B is not refunded within three months from the date of receipt of the application under subsection (1) of Section 11B of the Act, then, the award of interest must follow as mandated by Section 11BB(1) of the Central Excise Act, 1944. In the present case, the application made for refund under Section 11B is dated 4th October 2006. The amount of refund as directed in terms of the order dated 28th April 2015 has been disbursed and paid on 28th April 2015 by RTGS. Therefore, the Petitioners are entitled to interest at the rate of 6% from the expiry of the period of three months from the date of the application, meaning thereby the amount shall carry interest at the rate of 6% per annum from 4th January 2007 to 27th April 2015. - Decided in favour of assessee.
-
2016 (5) TMI 8
100% EOU - Violation of Notification No. 53/97 and 1/95 - Manufacture of plastic bags but have to manufacture the garbage bags of plastic, plastic Rolls and recycled granules of plastic - Held that:- if the Letter of Permission dated 19 November 1997, under which permission to set up 100% export oriented unit for manufacture and export of garbage bags of plastic, enables the Appellant/Assessee to import plastic waste/scrap without payment of duty and to use the same in manufacture of specified goods as per the Letter of Permission, then, demand of duty on the ground that the Appellant has not manufactured garbage bags of plastic but plastic bags which are used for packaging textile materials must be clarified and with proper reasoning. As per modified or amended Letter of Permission, it was allowed to manufacture plastic bags. If the amendment is to be treated as retrospective in nature as per the Assessee, then we expected the Tribunal as last fact finding Authority to discuss as to whether that argument of the Assessee has any merit. It should have been clarified whether the Letter of Permission would govern the acts and transactions or deals in the present case or the substantial Notifications. We do not find in Tribunal's order any reference made to the relevant and germane material including terms and conditions of the Notifications, the Letter of Permission, its amendment and thereafter the effect of the same, inasmuch as, whether it can be termed as retrospective or otherwise. Therefore, we are not assisted in any manner by such a short and cryptic order of the Tribunal and the Tribunal's order impugned in these Appeals cannot be sustained. - Decided in favour of appellant
-
2016 (5) TMI 7
Export of goods - Failure to furnish ARE 1 and proof of export of goods as required under Rule 19 of the Rules - Manufacture and export of hand tools through merchant exporter who applied Form H - Availed benefit of Small Scale Industries Exemption notification dated 1.3.2003 - Held that:- the impugned order was passed by the Joint Secretary to Government of India who was also Commissioner of Central Excise and Customs. Thus, the order in appeal as well as revisionary order had been passed by the officers of the same rank which is not permissible as per law. Therefore, the impugned order is set aside - liberty is granted to the State to proceed afresh in accordance with law - Decided in favor of assessee.
-
2016 (5) TMI 6
Cenvat Credit - Classification of 'anode slime' and its unconditional exemption under serial no. 195 of Notification No. 12/2012-CE dated17.03.2012. - Held that:- in view of the Clarification issued by the Central Board of Excise & Customs, in Circular No.F.No. 871/4/2012/CX.1, dated 14.07.2015, we are not inclined to accept the contention of the Revenue. Hence, the impugned order in Original, are set aside. - Decided in favour of appellant
-
CST, VAT & Sales Tax
-
2016 (5) TMI 5
Waiver of pre-deposit under APGST Act - Revision petition - High Court dismissed the petition on the ground that though the appeal before ADC did not seek stay of collection of the tax either in the appeal or by filing a separate application as required under Section 19(2A) of APGST Act, 1957, the question of passing an order by the ADC for stay of collection of tax does not arise and when no such order was passed under Section 19(2A) ibid, no revision lies under Section 19(2B)of the said Act - Hon'ble Supreme Court did not found any fault, as it is always open to the petitioner to file appropriate proceedings before the ADC seeking stay in the appeal filed by the petitioner or by filing a separate application as required under Section 19(2A) of the said Act. - Apex Court dismissed the SLP
-
2016 (5) TMI 4
Validity of assessment order - No opportunity of personal order granted - finalized ex-parte by creating additional demand - Held that:- A Division Bench of this Court on M/s Olam Agro India Ltd's case [2015 (8) TMI 823 - HIGH COURT OF PUNJAB AND HARYANA] had held that Rule 86 of the Rules does not envisage service of a general notice or by publication on the website of the department. It was further held that the service of an individual notice is a sine qua non for invoking power and the absence of such individual notice renders the assessment orders illegal and void. The said judgment was followed by another Division Bench of this Court in Sony India Pvt. Ltd. Versus Union Territory of Chandigarh And Another [2015 (4) TMI 1097 - PUNJAB & HARYANA HIGH COURT]. No individual notices were issued to the petitioners whereas general notices were put up on the website which would not meet the legal requirement under proviso to Section 29(4) of the Act read with Rule 86 of the Rules. Therefore, Annexure P-2 is quashed in both the writ petitions. - Petition disposed of
-
2016 (5) TMI 3
Refund of un-utilized input tax credit - Review and Revision u/s 75 of the GVAT Act - writ petition - remedy of appeal under section 73 of the GVAT Act - earlier the court had vacated the order to withheld the refund u/s 39 - revenue contended that direction to disburse the refund adversely affects the State Government - Held that:- apart from the fact that this is a submission on the merits of the main petition, it is a matter of record that in the order dated 3.7.2015 made under section 39(1) of the GVAT Act, no such satisfaction has been recorded, inasmuch as, there is not even a whisper therein to the effect that grant of refund would adversely affect the revenue nor is there any reference to any fraudulent or false transaction, and now by way of this application the grounds stated in the said order are sought to be supplemented by bringing in new grounds. Invokation of powers of review - Held that:- on behalf of the applicant no new or important matter or evidence which after the exercise of due diligence could not be produced on record has been produced, nor has any error apparent on the face of the record been shown. For the reasons recorded hereinabove, no other sufficient reason for exercise of review jurisdiction can be stated to have been made out. In the absence of any of ingredients for invoking powers of review as contemplated under rule 1 of Order XLVII of the Code of Civil Procedure being satisfied, the applicant is not entitled to any of the reliefs prayed for in the application. - Decided against the revenue - Refund to be allowed
-
Wealth tax
-
2016 (5) TMI 14
Inclusion of Agricultural lands for the purpose of wealth tax - A.O. was of the opinion that though, the lands are agricultural lands, they are situated within the 8 kms. from the local limits of the municipality, therefore, liable for wealth tax - contention of the assessee that the lands are classified as agricultural lands and also used for agricultural purpose as per the revenue records of the Government - Held that:- We find force in the arguments of the assessee for the reason that the Finance Act, 2013, with retrospective effect from 1.4.1993, has amended the definition of urban lands and as per the amended definition, urban land means, any lands classified as agricultural land as per the revenue records of the Government and used for the agricultural purpose are not asset within the meaning of section 2(ea) of the Act. In the present case on hand, it is an undisputed fact that the lands are agricultural lands and used for agricultural purposes. The A.O. himself has admitted that these lands are agricultural lands. The only contention of the A.O. is that these lands are situated within 8 kms. from the local limits of municipality. As per the amended definition of urban land, the distance from the municipality is not a criteria to determine whether the lands are assets or not. Once the lands are classified as agricultural lands, in the revenue records of Government and used for agricultural purpose, then the same are outside the purview of the definition of assets as per section 2(ea) of the Act. The CIT(A) after considering the explanations furnished by the assessee, rightly deleted the additions made by the AO. Therefore, we inclined to uphold the order of the CIT(A) and direct the A.O. to exclude the agricultural lands for the purpose of wealth tax. - Decided in favour of assessee Taxability of house property situated at Tirupur - Held that:- On verification of the sale deed, we find that though the property has been sold for a consideration of ₹ 14,01,000/-, the sub registrar, at the time of registration of the property has collected additional stamp duty and penalty. The sale deed copy was available in the local language of Tamil. Though, English translation copy is available in the file, the details are not clear from the sale deed that whether the market value of the property is at ₹ 14,01,000/- or not. The assessee contends that the market value of the property is at ₹ 14,01,000/-. But, the fact remains that at the time of registration of the property, additional stamp duty and penalty was collected cannot be ignored. Under these circumstances, we are of the opinion that the issue needs to be examined by the A.O. in the light of the above discussions. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine, whether the sale deed copy produced by the assessee shows the market value of the property at ₹ 14,01,000/- or not. In case the market value of the property is at ₹ 14,01,000/- then the same should be adopted for the purpose of determination of taxable wealth. - Decided in favour of revenue for statistical purposes.
-
Indian Laws
-
2016 (5) TMI 1
Seeking refund of excess privilege amount collected from the petitioner from the 2005-2006 to till date and collect the privilege fee applicable non-star status hotels in respect of the license - Petitioner had paid the privilege fee of ₹ 2,00,000/- for the year 2004-05 on 23.02.2005 - Held that:- when the petitioner had established that they paid the privilege fee till the date of expiry of the three star license, on 07.03.2005, they are not liable to pay the privilege fee meant for Three Star Hotels from 2005-06. The petitioner's Hotel is liable to pay the fee applicable for regular Hotels. Inspite of the expiry of the license on 07.03.2005, the respondent collected privilege fee, which is applicable for the Three Star Hotels even after 07.03.2005. The 1st respondent, without taking into consideration the expiry of the Three Star license on 07.03.2005 and the letter dated 11.05.2005 by the Regional Director, India Tourism, has erroneously rejected the petitioner's representation for refund of the privilege fee collected after 07.03.2005. The petitioner is entitled to get refund of the excess amount paid by them from the year 2005-06 (i.e.) from 01.04.2005. - Petition disposed of
|
