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Showing 61 to 80 of 1220 Records
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2014 (3) TMI 1164 - SUPREME COURT
Interpretation of statute - recovery of charas - Chance recovery - State is in appeal against the acquittal of Sunil Kumar and the broad submission is that the recovery of charas from him was a chance recovery - whether the accidental or chance recovery of narcotic drugs during a personal or body search would attract the provisions of section 50 of the Narcotic Drugs and Psychotropic Substances Act, 1985? - HELD THAT:- In view of the Constitution Bench decision in Baldev Singh which endorsed the view taken in State Of Punjab v. Balbir Singh. [1994 (3) TMI 173 - SUPREME COURT] the personal search of Sunil Kumar resulting in the recovery of contraband did not violate Section 50 of the Act - Reliance was placed by the learned counsel on para 25 in Balbir Singh which was also endorsed by the Constitution Bench. It was submitted that it is only after a chance or accidental recovery of any narcotic drug or psychotropic substance by any police officer that the provisions of the Act would come into play. It is then that the empowered officer should be informed and that empowered officer should thereafter proceed to investigate the matter in accordance with the provisions of the Act.
Meaning of chance recovery - HELD THAT:- The expression “chance recovery” has not been defined anywhere and its plain and simple meaning seems to be a recovery made by chance or by accident or unexpectedly - In MOHINDER KUMAR VERSUS THE STATE, PANAJI, GOA [1995 (1) TMI 388 - SUPREME COURT] this Court considered a chance recovery as one when a police officer “stumbles on” narcotic drugs when he makes a search - Applying this to the facts of the present appeal, it is clear that the police officers were looking for passengers who were travelling ticketless and nothing more. They accidentally or unexpectedly came across drugs carried by a passenger. This can only be described as a recovery by chance since they were neither looking for drugs nor expecting to find drugs carried by anybody.
Applicability of Section 50 of the Act - HELD THAT:- It is true that Sunil Kumar behaved in a suspicious manner which resulted in his personal search being conducted after he disembarked from the bus. However, there is no evidence to suggest that before he was asked to alight from the bus, the police officers were aware that he was carrying a narcotic drug, even though the Chamba area may be one where such drugs are easily available - We are not in agreement with the view of the High Court that since the police officers had a positive suspicion that Sunil Kumar was carrying some contraband, therefore, it could be said or assumed that they had reason to believe or prior information that he was carrying charas or some other narcotic substance and so, before his personal or body search was conducted, the provisions of section 50 of the Act ought to have been complied with. The recovery of charas on the body or personal search of Sunil Kumar was clearly a chance recovery and, in view of Baldev Singh, it was not necessary for the police officers to comply with the provisions of section 50 of the Act.
The decision of the trial court convicting Sunil Kumar for an offence punishable under Section 20 of the Act is upheld - appeal allowed.
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2014 (3) TMI 1163 - ITAT CHANDIGARH
Penalty u/s 271D - contravention of the provisions of section 269SS - cash found during the survey which was surrendered - cash loans on various dates exceeding ₹ 20,000/- from relatives - reasonable cause u/s 273B - HELD THAT:- We find that actually the assessee has not taken any loan from the sons but excess cash which was found during the survey has been surrendered in the names of two sons of the assessee. Later on, when entries were required to be made against the surrendered income then the same was shown as loans from two sons.
In the case of CIT v Sunil Kumar Goel [2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT] wherein the assessee had accepted cash loans on various dates exceeding ₹ 20,000/- from relatives, penalty was held to be not imposable as held a family transaction, between two independent assessees, based on an act of casualness, specially in a case where the disclosure thereof was contained in the compilation of accounts, and which had no tax effect, established "reasonable cause" under section 273B. Also see SAINI MEDICAL STORE. [2005 (3) TMI 66 - PUNJAB AND HARYANA HIGH COURT].
Thus if the transactions are between relatives and without any malafide intention, then penalty is not leviable.
In this case before us, it is merely a technical breach of law because assessee might not have taken any loan but to record the surrender income, the same has been shown in the names of the sons - Decided in favour of assessee.
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2014 (3) TMI 1162 - BOMBAY HIGH COURT
Computer software as clubbed with computers as the depreciable asset @60% - HELD THAT:- Both the CIT (Appeals) and the Tribunal found that the software cannot be seen in isolation and delinked from the computer. The reasons that are assigned is that what has been always understood as obvious is now apparent by the amendment. CIT(Appeals) found that in the case of the present assessee, the software cannot be worked in isolation. It has to be loaded on the computer. Therefore, in the present case, it is an intergral part of the computer. In these circumstances, the finding of fact does not require any interference in our appellate jurisdiction as the same does not raise any substantial question of law.
Exemption u/s 10A - income generated from training given to the customer for the use of the software - HELD THAT:- There is a finding of fact that the training activity is incidental to the sale made by the assessee company in respect of the products manufactured. Unless the users are trained, further sales are going to be affected. This receipt is therefore closely related to the manufacturing activity carried out by the assessee. In these circumstances and when the findings of fact have been confirmed by the Income Tax Appellate Tribunal, but for some different reasons that we are of the opinion that this Appeal does not give rise to any substantial question of law. Therefore, we are of the opinion that the income generated from training given to the customer for the use of the software in this case was eligible for exemption under section 10A.
TP Adjustment - computation of Arm's Length Price along with the price in relation to international transactions entered into by the assessee with it's subsidiaries as commission has been paid on customisation fees - argument was that the assessee has subsidiaries which act as a sale and marketing office of the assessee. The nature of the transaction is essentially of re-sale - HELD THAT:- The ultimate sale prices are negotiated by the subsidiaries directly with the end-customers and assessee's offers are negotiated. Therefore, when there are subsidiaries, but local independent distribution agents to whom a commission has been given then, the ultimate margin offered and paid to the subsidiaries is only 10%. In other words, there has not been found to be a variation of such nature as would enable the Assessing Officer to question the payment. In such circumstances, the finding of fact which has been rendered cannot be said to be vitiated by any perversity or any error of law apparent on the face of record.
The reasons assigned by the Tribunal in paragraph no.18 of the order are based essentially on the nature of the dealings. Once the subsidiaries are found to be collecting the customization work and which work was not being done by independent distributors, then, the justification has been rightly accepted. No substantial question of law
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2014 (3) TMI 1161 - ITAT CHENNAI
Penalty u/s 271(1)(c) - disallowance u/s 14A pertaining to ‘exempt’ income - HELD THAT:- As perused the case file and nothing is forthcoming right from the assessment proceedings or till lower appellate order in penalty case which could suggest that the disallowance u/s 14A had been computed after rejecting the particulars filed by the assessee before the Assessing Officer. Thus, we hold that even the estimated disallowance u/s 14A has been made only on the basis of particulars furnished and not otherwise. In these circumstances, we observe that present is a case of mere estimated addition made in view of the overall circumstances of the case and not based on the particulars of income, which does not warrant imposition of penalty. It is a trite proposition of law that each and every case of disallowance/addition based on the facts and circumstances does not lead to imposition of penalty. Accordingly, we accept assessee’s contentions and delete penalty in question. - Decided in favour of assessee.
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2014 (3) TMI 1160 - SETTLEMENT COMMISSION, CUSTOMS, CENTRAL EXCISE, AND SERVICE TAX, MUMBAI
Maintainability of Settlement Commission application - Service Tax returns was not filed in time - Benefit of belated filing of ST-3 returns - Section 32E of the Central Excise Act, 1944 - Manpower Recruitment Agency and Management Consultancy services - levy of service tax - difference of opinion - majority order.
HELD THAT:- It is observed that the applicant had not filed the prescribed ST-3 returns consequent to obtaining registration with the Service Tax Department. The returns for the entire disputed period were filed only on 14th March, 2013, after investigations regarding alleged tax evasion had started. Filing of such [late] tax returns cannot be termed, as filing ‘in the prescribed manner’ under Section 32E, in terms of various judgements/orders
The payment of late fee for belated filing of Service Tax returns, even though prescribed under Section 70 of the Finance Act read with Rule 7C of the Service Tax Rules, 1994, it does not alter the basic character of the tax return filed i.e. late tax return.
It is only that the penal liability initiated under Section, abates in … an event. The ST-3 returns filed late, therefore, do not fulfill the basic condition under Section 32E(1) of the Central Excise Act, 1944, that the applicant has filed returns in the prescribed manner. The application filed by the applicant is, therefore, liable to be rejected.
In view of the majority decision of the Member, Shri A.K. Prasad and the Vice-Chairman, Shri Vineet Kumar, holding that the present application filed by M/s. A.G. Technologies Pvt. Ltd. is not admissible under Section 32E of the Central Excise Act, 1944, as made applicable to Service Tax, the same is rejected.
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2014 (3) TMI 1158 - ITAT MUMBAI
Disallowance of interest paid to Head Office/overseas branches by invoking the provision of section 40(a)(i) - HELD THAT:- As relying on SUMITOMO MITSUI BANKING CORPORATION VERSUS DEPUTY DIRECTOR OF INCOME-TAX, (IT) , RG. 2 (1) , MUMBAI [2012 (4) TMI 80 - ITAT MUMBAI] we decide this issue in favour of the assessee and against the revenue.
Disallowance u/s.14A of interest and operating expenses in terms of rule 8D - HELD THAT:- As stated by the assessee that the investment in question is the same as for the Assessment year 2001-02 and there is no change in the facts and circumstances. There is no change in the facts and circumstances for the year under consideration and for the assessment year 200102, in respect of the investment then no disallowance on account of interest is called for, when the assessee was having its own interest free fund for making investment in securities. As regards the disallowance of operating/ administrative expenses, by following earlier order of this Tribunal, we restrict disallowance at 2% of exempt income.
Taxability of the profit arising on revaluation of the unmatured forward forex contracts - HELD THAT:- . Having regard to the facts that the loss on revaluation of unmatured forward forex contracts has been allowed by this tribunal in the earlier years i.e. 1998-99 then the natural corollary would be that the profit arising on revaluation of the unmatured forward forex contract is liable to be taxed as income. Accordingly, we dismiss this ground of the assessee.
Disallowance of the data processing charges by the AO by classifying them to be royalty and invoking provision of section 40(a)(i) - HELD THAT:- Following the earlier orders of this tribunal, we set aside this issue to the record of the Assessing Officer to consider deductibility of this amount as per the provisions of the Act including section 44C.
Addition of TP adjustment in respect of interest received on call placement - HELD THAT:- In identical issue has been considered by the Tribunal in case of group concern name M/s. Credit Lyonnais (through their successors Calyong Bank) [2014 (7) TMI 1 - ITAT MUMBAI] held when the assessee has accepted the taxability as interest received on Nostro account and overseas placements, then as decided by this Tribunal in assessee’s own case, the natural consequential effect would be the claim of assessee regarding interest paid to the head office/overseas branches, is allowable deduction.
Disallowance of interest and commission by the TPO in respect to ECB advance to Indian borrowers - HELD THAT:- As it is clear from the earlier order of this tribunal [2014 (7) TMI 1 - ITAT MUMBAI] that the benefit of para 4 of the protocol between India and France does not apply as assessee has rendered the key services for taking decision of granting loan by the syndicate of Banks to the Indian borrowers, however as it was found that the TPO made the adjustment without considering any comparable. By following earlier orders of this Tribunal, we direct the AO/TPO to make adjustment in respect of the services performed by the assessee for foreign currency loan arranged for its existing clients by taking into account only the fee and other charges excluding interest received by the foreign branches from the borrowers in question by applying the rate of 20% as accepted in the earlier order. Accordingly, this ground is partly allowed.
Rate of tax applicable to the assessee’s income - HELD THAT:- This issue has been considered and decided by the Tribunal in the assessee’s own case for assessment year 2001-02 as held we find that the CIT(A) has sustained the order of the AO by applying rate of tax @ 48%, instead of 35% as asked for by the assessee. Now that the assessee has accepted that the coordinate Bench of Kolkata has dealt with the issue and for the reasons mentioned therein, the AR accepts the rate as applied by the AO. We also find that there is no infirmity in the order of the revenue authorities, which we sustain - we decide this issue against the assessee that the rate of tax applicable on the assessee’s income is 48%.
Deduction of expenses u/s.37(1) - disallowance incurred by the HO on credit risk assistance - HELD THAT:- As decided in M/S. AMERICAN EXPRESS BANK LIMITED [2012 (8) TMI 371 - ITAT MUMBAI] held that Departmental Representative was fair enough to concede that it was covered against the Revenue.
TP adjustment on account of interest received on call placements - HELD THAT:- The rate of interest received by the assessee was found by the CIT(A), within the tolerance limit of +/- 5% of arms length price determination by the TPO and accordingly the benefit of proviso to section 92C(2) was given to assessee. We found no error in the order of the CIT(A) qua this issue when the interest charged by the assessee is within the tolerance range of the arms length price determined by TPO.
Disallowance of provision toward country risk - AO disallowed the claim of deduction as this was not an actual return of bad debts, but only a provision was made as per the guidelines of the RBI therefore, in view of the first proviso to section 36(1)(viia)(a) of the Act no deduction is allowable to a foreign banking company - HELD THAT:- CIT(A) has confirmed disallowance made by the AO, when the assessee itself has fairly conceded that this issue is now covered against the assessee by the decision of special bench of this Tribunal in case of NEW INDIA INDUSTRIES LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. [2007 (10) TMI 325 - ITAT DELHI-F] and Ahmedabad and Gujarat Gas Financial Services Ltd. [2008 (9) TMI 447 - ITAT AHMEDABAD]
Disallowance made u/s.14A - HELD THAT:- We direct the AO to tax the interest received on Nostro account balances and consequently the disallowance made u/s.14A is deleted.
Disallowance of provision in respect of non performing assets - HELD THAT:- O has disallowed the claim of the assessee because it was found as a provision for NPA. As far as the allowbility of the claim for the provision for NPA is concern, it is settle proposition that the same cannot be allowed. The ld. AR has relied upon the decision of Hon’ble Supreme Court in case of Vijaya Bank (supra) however, when the provision in question is for NPA and not for Bad debts then in view of the decision of Hon’ble Supreme Court in case of Southern Technology Ltd. Vs. JCIT [2010 (1) TMI 5 - SUPREME COURT] , provision for NPA is not a allowable claim. Accordingly, this issue is decided against the assessee.
Non allowbility of deduction u/s.36(1)(viia)(b) - HELD THAT:- We note that this issue is connected with the issue of disallowance of provision for non performing asset. As the issue of disallowance of non performing asset has been decided against the assessee, therefore, this issue is also decided against the assessee.
TP adjustment in respect of credit risk assistance expense charged by HO to the Indian Branch for providing assistance in doing credit risk analysis for the Indian entity - HELD THAT:- Since no material has been product to show that this expenditure as claimed by the assessee separately is for the exclusive and dedicated work/service done by the HO to the assessee. Further there is no explanation by the assessee as on what basis this expenditure is charged by HO. Therefore, this issue cannot be decided in the absence of complete fact as whether the Head Office has charged this expenditure on the basis of man hour or dedicated desk was assigned for this purpose exclusively for the service of the assessee. The assessee has also not filed any certificate from the auditor of the Head Office in support of this claim. Accordingly, we set aside this issue to record of the AO/TPO to examine the facts properly and the evidence to be filed by the assessee in support of this claim. The assessee is directed to file relevant evidence and certificate from the auditor of the Head Office to show that the payment has been made towards the dedicated exclusive service rendered by the Head Office to the assessee. Accordingly this ground is allowed for statistical purpose.
Chargeability of interest under section 234D - HELD THAT:- We have heard learned DR as well as learned AR and considered relevant material on record. At the outset, we note that this issue is now covered against the assessee by the decision of Hon’ble Bombay High Court in case of CIT vs. IOC [2012 (9) TMI 517 - BOMBAY HIGH COURT] . Accordingly, this issue is decided in favour of the Revenue against the assessee.
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2014 (3) TMI 1157 - BOMBAY HIGH COURT
Deduction by way of bonds, debentures under section 36 (i) (vii) read with section 36 (2) - HELD THAT:- From June 2003 to August 2003 the company made certain payments and in August, 2003 when the amount receivable from the sub-broker was ₹ 26.93 lacs it finally conveyed to the assessee-company that it is not possible to pay any further money. It is at that stage the Assessee company claimed that it was a bad debt.
The Tribunal referred to the fact that one Mr.Harshad P.Chokshi is holding substantial shares in the assessee-company and also in SNFPL. This shows that there was a book entry wherein the assessee claimed bad debts as a means to reduce taxable profits. The reasons assigned in para 12 of the order of the Tribunal therefore, are essentially in the backdrop of the peculiar facts and circumstances emerging from the record.
No substantial questions of law arising for determination and consideration in this Appeal. This is not a case where there is a controversy or the debt written off as bad in the accounts being required to be established as indeed bad debt. This is a controversy where the claim of bad debts was raised to avoid tax liability. That having been proved and the entire version is termed as a mere eye-wash, that this is not a fit case where substantial questions of law arise for determination in this Appeal.
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2014 (3) TMI 1156 - ITAT VISAKHAPATNAM
Capital gain computation - Value estimated by the DVO - fair market value of the property - HELD THAT:- From the perusal of the compromise decree before the Lok Adalat, it is evident that there are legal disputes between the parties consequent to a registered 50 year lease deed executed between the parties in July, 1971. On a consideration of all the factors, the Lok Adalat has issued award determining the total consideration of sale at ₹ 2,62,35,000 on 20th March, 2005. On the facts and circumstances of this case, in our view, weight has to be given to this factor in determining the fair market value as on the date of sale.
Admittedly, the compromise decree could not be executed because of the delay in obtaining ULC permission. The assessee had no other alternate but to execute the sale deed in view of the award given by the Lok Adalat. The sale deed executed refers to the civil litigation filed before the Principal Senior Civil Judge of Visakhapatnam vide O.S.No.1279/2004 and the Award of the Lok Adalat passed on 25th day of March, 2005 as a reason for executing the sale deed. The purchase consideration was fixed at ₹ 4,79,00,000 in place of ₹ 2,62,35,000 as awarded by the Lok Adalat.
This figure of consideration as arrived at between the parties after long legal battles and negotiations. Under these circumstances, we are of the considered opinion that the figure mentioned in the sale deed is the fair market value on the facts and circumstances of the case. The report given by the DVO is nothing but an opinion, which when weighed against the actual fact of consideration paid for the purchase of the property, cannot be accepted on the fair market value of the property. It is a case where the facts have to be weighed against the opinions. Neither the AO nor the CIT(A) have based on themselves on any evidences or comparable documents or logical reasoning to come to a conclusion that the negotiated value of the property in question between the parties is not the fair market value of the property.
Coming the base rate analysis given by the DVO in his report, we are unable to find logic in such analysis
The land rates by sq.yards various between ₹ 1602 and ₹ 36,291. Such a variation demonstrates that the valuation report by the DVO is not correct and has to be seen as not given the appropriate fair market value.
As the factual finding is that the fair market value in this case is that the negotiated value between the parties, which was a result of prolonged litigation, supported award by a legal authority, which ultimately culminated into a sale deed, and as we have found that the value by the DVO and the value arrived at by the learned CIT(A) are both opinions, we are of the considered opinion that the fair market value of the property has to be taken. We uphold the contention of the assessee and allow the appeals.
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2014 (3) TMI 1155 - ITAT MUMBAI
Seeking stay of the outstanding demand - HELD THAT:- A total foreign exchange gain of ₹ 776.114 lacs has arisen to the assesse for the relevant year. Of the same, ₹ 23.11 lacs is admittedly on revenue account, while the balance ₹ 753.03 lacs is on the ECB loan utilized for acquiring a capital asset. The assessee has with regard thereto made out a prima facie case before us. As against the demand relatable to the gain on revenue account, as informed, the Revenue has already compensated itself by annexing the assessee’s bank account, appropriating over ₹ 16 lacs.
Under the circumstances, therefore, we consider it a fit case for grant of stay for the balance demand of little over ₹ 350 lacs. So, however, on a query by the Bench with regard to the non-fund security, with a view to safeguard the interest of the Revenue, the ld. AR agreed not to liquidate its investments (outstanding at ₹ 702.05 lacs as on CGU Logistic Limited vs. ITO 31.12.2013/PB pg.74) to that extent. In view of the foregoing, we grant stay.
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2014 (3) TMI 1154 - ITAT CHENNAI
Disallowance u/s.40a(i) - non-deduction of tax at source on the payment of ‘Royalty’ and ‘Technical Fee’ - CIT-A held that liability of the appellant to deduct TDS on a royalties and fees for technical services would arise in the year in which such payment is actually made by the appellant - HELD THAT:- We find that the order of the CIT(Appeals) is well reasoned and detailed. The assessee has been consistently following this method of deducting and depositing of tax at source for the past several years. Even after the AYs under consideration i.e., AYs. 2003-04, 2004-05 & 2005-06, the assessee has been following the same method of deducting TDS at the time of effecting the payments and depositing the same within the time prescribed u/s.200(1) of the Act and the Revenue has accepted the same. We do not find any infirmity in the impugned orders. The appeals of the Revenue are dismissed being devoid of merit.
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2014 (3) TMI 1153 - SECURITIES APPELLATE TRIBUNAL
Non closing the trading window prior to the meeting of the Board of Directors of the appellant company - penalty imposed upon the appellant under Section 15HB of the SEBI Act, 1992 - HELD THAT:- Show cause notice was in fact issued to the Compliance Officer of appellant, however, in that show cause notice issue relating to failure on part of Compliance Officer in not closing the trading window has not been raised. However, in the impugned order it is held that alleged violation recorded in the show cause notice against Compliance Officer does not stand established.
While holding that in the facts of present case, Compliance Officer is liable for not closing the trading window, in fact it is held that Compliance Officer has not violated any of the regulations. In these circumstances, making the appellant company liable for not closing the trading window cannot be sustained.
Accordingly, impugned order which purports to hold appellant company liable for not closing the trading window prior to the meeting of Board of Directors held on April 30, 2009 and November 27, 2009 is quashed and set aside.
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2014 (3) TMI 1152 - BOMBAY HIGH COURT
Non-conciliation of professional receipts with TDS certificates - HELD THAT:- Tribunal considered this submission of both sides and found that the assessee was engaged as an Advocate to argue the matters by what is popularly known as Advocates on record or instructing Advocates method, meaning thereby the client does not engage the assessee directly but a professional or the Advocate engaged by the client requests the assessee to argue the case.
Brief is then taken as the counsel brief. That being the practice, the assessee gave an explanation that the breakup as desired cannot be given and with regard to all payments. It is pointed out that at times, assessee receives fees directly from the clients or from the instructing Advocates or Chartered Accountants if such professionals have collected the amounts from the clients.
Thus the breakup as desired cannot be placed on record. An explanation which has been given by the assessee and accepted in the past has been now accepted by the Tribunal once again. Since it is accepted for the Assessment Year 2006-07, in the peculiar facts, in relation to the present assessee, we are of the view that this Appeal does not deserve to be entertained. No substantial question of law.
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2014 (3) TMI 1151 - BOMBAY HIGH COURT
Grant of mining license - vires of notification dated 29-09-2009 issued by the Central Government-respondent No.2 under Section 17-A(1-A) of the Mines and Minerals (Development and Regulation) Act, 1957 - HELD THAT:- It is explicit that the recommendation made in favour of the petitioner by the state Government vide order dated 26-06-2008 had not been culminated in actual grant of lease and therefore the area mentioned in the said order cannot be termed as the area already held under the mining lease. This fact gets crystallized by the later part of the State Government order which says that "all NOCs from the Central Government, State Government and local authorities be obtained by the applicant", meaning thereby that only thereafter the recommendation will be culminated in the grant of mining lease.
There being no approval from the Central Government and no Lease Deed executed between the petitioner and the Government of Maharashtra the area contemplated in the notification dated 29-09-2009 was very much available for reservation under Section 17-A(1-A) of the MMDR Act and the notification dated 29-09-2009 therefore cannot be held to be bad-in-law.
The challenge raised by the petitioner to the notification dated 29-09-2009 is about the manner of exercise of power under Section 17-A(1-A) of the MMDR Act and not to the availability of such power for reservation with the Central Government. Even otherwise the issue of notification dated 12-10-2006 by the State Government calling upon general public to file applications for grant of mining leases over certain areas and the order passed on 26-06-2008 in favour of the petitioner do not take away the special powers of the Central Government as vested in it under Section 17-A(1-A) of the MMDR Act - the Central Government notification cannot be said to be vitiated.
Petition dismissed.
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2014 (3) TMI 1150 - ITAT MUMBAI
Expenditure on maintenance of certain Buildings - CIT (A) rejecting the claim of the appellant that certain buildings were maintained at far flung places due to business expediency and as hotels were not available in these places, expenditure on the same is allowable as revenue expenditure - HELD THAT:- This issue was decided against the assessee, by the order of the Tribunal for the AY. 1986-87 [2014 (2) TMI 1110 - ITAT MUMBAI]
Recovery of Guest House Expenses considered under Rule 6D of the Income-tax Rules, 1962(Rules) - HELD THAT:- Tribunal for the AY. 1986-87 [2014 (2) TMI 1110 - ITAT MUMBAI] held ‘Admittedly recoveries have been made from the parent departments of the company whose persons utilised the facilities of the guest house in the course of official work relating to the business of the company. Assuming the situation of non-existence of the guest house of the company in that place, then, such employees would have stayed in a hotel or guest house run by third parties and made payments to them for use of their facilities and accordingly payments made to outside parties would have been treated as travelling expenses incurred by the company for its business. Therefore, the user of guest house facilities provided by the company to the employees of the company in connection with discharge of their official duties does not alter the basic character of the expenditure. Ultimately such expenses are connected with the travelling by such employees and, therefore, should be treated accordingly, irrespective of the fact that such employees stayed in the guest house of the company. In view of the above facts and circumstances, we direct the AO to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses ;and in accordance with Rule 6D of the IT Rules. Thus this ground of the assessee is accepted.
Disallowance under Rule 6B of the Rules, for Calendars and Diaries - Assessee before us was that the products of the company being iron and steel, the giving of diaries and calendars even with the logo of the assessee contained therein cannot be said to be in the nature of advertisement calling for invocation of Rule 6B of the Income-tax Rules read with the provisions of section 37(3A), 3(3) and (3C) of the Act - HELD THAT:- We are of the view that in the light of the decision of the Hon’ble Bombay High Court in the case of Allana Sons Pvt. Ltd. [1993 (4) TMI 13 - BOMBAY HIGH COURT] holding that presentation articles bearing the logo of the assessee would fall within the ambit of Rule 6B as expenditure in the nature of advertisement, the argument of the learned counsel for the assessee cannot be accepted.
Disallowance of Annual General Meeting Expenses of the shareholders - Addition under consideration u/s. 37 (2A)/37(2) - HELD THAT:- Tribunal for the AY. 1986-87 [2014 (2) TMI 1110 - ITAT MUMBAI] held expenditure incurred at the general body meeting is covered by the Explanation 2 to section 37(2A). Respectfully following the judgment of the Karnataka High Court in the case of Mysore Minerals Ltd. [1986 (8) TMI 54 - KARNATAKA HIGH COURT] the disallowance made by the AO u/s. 37 (2A)/37(2)is upheld. To sum up, the expenditure incurred on serving tea, coffee & soft drinks to the shareholders at the Annual General Meeting is treated as entertainment expenditure. The action of the AO is upheld.
Disallowance of expenditure on Tea and Coffee served to visitors - HELD THAT:- Respectfully, following the orders for the earlier years, 1981-82 and 1985-86, we direct the AO. s to restrict the disallowance to 25% of the expenditure incurred (₹ 2. 25lakhs, ₹ 2. 75lakhs, ₹ 35, 395/-)for the AY. s1987-88, 1989-90, 1990-91. Ground no. 5/6, for the AY. s under consideration are allowed in part.
Expenditure of expenditure on payments made to Clubs - HELD THAT:- AR admitted that issue was covered against the assessee, by the order of the earlier year. We find that identical issue was considered by the Tribunal of the order for the AY. 1985-86(supra). We have already mentioned that the Tribunal had dismissed the ground pertaining to entertainment, including the expenditure incurred in clubs for employees employers’ meetings, therefore following the same ground no. 9 is dismissed
Expenditure on payment to Tata Steel Rural Development Society(TSRDS) - As per the AO. s, assessee had claimed expenditure on rural development in the assessment years under consideration, as business expenditure u/s. 37(1) - HELD THAT:- We have perused the MOU signed by the assessee with the workers’ union. Considering the terms and conditions of the MOU we are of the opinion that orders of the Tribunal delivered in the case of the assessee as well as TELCO should be followed. In our views, MOU makes the facts and circumstances of the case peculiar. We find that Hon’ble jurisdictional High Court has, TATA IRON & STEEL CO. LTD. [2012 (4) TMI 638 - BOMBAY HIGH COURT] where similar issue of contribution to various institutions was decided in favour of the assessee by the Tribunal. (Ground no. B and F). As far as discharging of social responsibility is concerned Voltas Ltd. had to be considered the guiding case. As in that case there was no MOU with the workers, so, considering the peculiarity of facts of the case, as against the matter of Voltas, we decide the issue in favour of the assessee.
Contribution to Steel Plants’ sport Board and Tata Sports Board - admissible deduction u/s. 37(1) - HELD THAT:- We find that, following the order for allowing expenditure to TSRDC, Tribunal had decided the issue of payment to Steel Plants’Sport Board and Tata Sports Board in favour of assessee, while adjudicating appeal for the year 1986-87. Following the orders for the earlier AY, we decide the ground no. G. 12 and G. 11for the AY. 1987-88 and AY. 1990-91 in favour of the assessee .
Additional depreciation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division.
Expenses incurred in connection with increase in authorised share capital/Right share issue expense - HELD THAT:- Hon’ble supreme Court in the case of Brooke Bond India Ltd. [1997 (2) TMI 11 - SUPREME COURT] and Punjab State Industrial Development Corporation Ltd. [1996 (12) TMI 6 - SUPREME COURT] FAA held that the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making, that the action of the AO was as per the provisions of law. Before us, AR agreed that after the judgments of Hon’ble Apex Court issue has to be decided against the assessee.
Disallowance of Investment Allowance and ESA on water works - HELD THAT:- FAA held that the P&M was used for the purpose of bringing water from the rivers for manufacturing purpose and also for the purpose of supply of water to the town wherein the residential quarters were located, that the P&M was partly used for the purpose of manufacture of steel and partly for the purpose of supply of water to the residential quarters, that the investment allowance was admissible on the plant and machinery which was used for the purpose of manufacture. He directed to the AO to segregate the value of the P&M into two categories and to allow the investment allowance on the P&M attributable to the manufacturing process and not to allow investment allowance on the plant and machinery which was used for the residential purposes.
We find that identical issue was decided in favour of the assessee in the appeal for AY. 1986- 87(supra), while deciding the issue of investment allowance and ESA of town division. Following the said order, G. 18 is decided in favour of the assessee
Bad and Doubtful written off dues from Government departments - HELD THAT:- Bombay High Court in Jethabhai Hiiji v/s. CIT, [1977 (11) TMI 11 - BOMBAY HIGH COURT] wherein the following principles have been laid down: proceedings taken are pending in the year for which the claim for bad debt is made and they subsequently end in a decree in favour of the assessee. It was therefore, submitted that the bad debts written off be allowed as deduction. We are of the view that the write off of the debt as bad has to be construed as a bonafide write off. It was based on commercial providence. In the light of the principles laid down by the Hon’ble Bombay High Court we direct that the deduction claimed be allowed.
Disallowance of expenditure incurred for AGM - HELD THAT:- We find that while deciding the appeal for the AY. 1986-87(supra) contribution made by the assessee to Xavier Labour Relations Institute(XLRI), Jamshedpur has been allowed with a condition that assessee would produce necessary documents in this regard. Following the same principle, we allow G. 22 for the AY. 1989 -1990.
Contributions ranking as business expenditure - HELD THAT:- We find that out of the total expenditure of ₹ 71, 99, 185/-claimed by the assessee, AO had allowed ₹ 21, 17, 000/-, that the assessee had not produced any evidence before the AO or the FAA to support its claim for the remaining amount. Even if it is agreed, in principle, that contribution made by it were for discharging civic duties, the assessee has to prove the fact of incurring of expenditure. As it has failed to substantiate the claim made by it, so, in our opinion FAA was justified in rejecting its appeal. Before us, also fact of incurring of expenditure was not established. Therefore, confirming the order of the FAA we decided ground no. G. 23 for the year under appeal against the assessee.
Deduction u/s. 80M - HELD THAT:- We find that in the balance sheet, filed by the assessee for the year under consideration, funds available under the heads ‘capital’, ’reserves and surplus’ and ‘subscription received’ is more than ₹ 800 Crores, that investments made by the assessee in purchasing units of UTI is much less than the funds available with it. We find that with regard to availability of interest bearing and interest free fund, in the case of Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] we are of the opinion that addition made by the AO was not justified. As the interest free fund were far more than the investment, so, it has to be presumed that investment was made by the assessee -company from the interest free funds only. Reversing the order of the FAA, we decide G. 24 in favour of the assessee.
Contribution to Tata Services for maintenance of Horniman Circle gardens allowed as relying on own case.
Allowance of 20% of initial contribution as deduction in the year in which the initial contribution was made to the Approved Superannuation Funds(ASF) - HELD THAT:- Issue was covered by the judgment of the Sirpur Paper Mills [1999 (3) TMI 8 - SUPREME COURT] that in view of the said decision the assessee was entitled to claim the entire initial contribution to the ASF as deduction.
Guaranteed payment to AAML on the ground that such payment was in the nature of a capital payment - HELD THAT:- Assessee paid the shortfall in the minimum guaranteed amount in the initial three years and during the 4th and 5th year has earned more operative profit which has been offered to tax. We find in the initial three years the assessee has paid a sum of ₹ 6. 11 crores whereas in the A. Ys. 1988-89, 1989-90 and 1990-9 1 the assessee received a sum of ₹ 8. 31 crores and offered the same for taxation. Thus there is a surplus in the deal with AAML to the extent of ₹ 2. 2 crores from A. Ys. 1985-86 to 1990-91. Further nothing has been brought on record that the agreements are false or untrue or that the payments made are excessive or non-genuine or false. In this view of the matter and in view of the elaborate discussion by the CIT(A) on this issue while deleting the disallowance, we do not find any infirmity in the same and therefore, the same is upheld. The ground raised by the Revenue is accordingly dismissed
Expenditure on report for increasing production capacity and future development is allowable revenue expenditure
Exclude sales tax, excise duty from total turnover for the purpose of calculating deduction for 80HHC - HELD THAT:- As decided in favour of assessee by the decisions delivered by the Hon’ble Supreme Court in the cases of Catapharma (India) P. Ltd. [2007 (7) TMI 203 - SUPREME COURT] and Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT]
Expenditure incurred on repairs - HELD THAT:- We find that while holding that the assessee had incurred capital expenditure, AO has not given any details of the items that were of capital nature. Without giving any reason no disallowance can be made. But, the AO has done it-he has made a disallowance of ₹ 1. 25 Crores under the head repairs. In our, opinion by deleting addition, made by the AO, FAA has chosen a right and legal path. We do not find any infirmity in his order.
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2014 (3) TMI 1149 - ITAT AMRITSAR
Rejection of books of accounts - estimation of income - AO & CIT(A) applied the net profit rate of 12% without allowing the interest and salary to partners, depreciation and bank interest - HELD THAT:-There is no dispute to the fact that the assessee has produced 24 labourers in the remand proceedings, who have confirmed to have received wages, as declared by the assessee. But at the same time, the assessee could not get the verification of rest of the wages out of total wages of ₹ 2,15,33,520/-, which is a huge amount and there is possibility of leakage of revenue, where accurate income cannot be deducted by the A.O. Therefore, we find no infirmity in the order of the ld. CIT(A) who has rightly confirmed the invoking of section 145(3) of the Act.
Estimation of income - there is no dispute to the fact that the assessee in the preceding years has been assessed almost at the returned income except minor additions. The assessee during the impugned year before depreciation, interest & salary to partners and bank interest has declared better results as is evident from the comparative figures mentioned hereinabove. Therefore we modify the order of both the authorities below and direct the AO to estimate Net Profit rate of 5% on contract receipts declared by the assessee and thereafter allow salary and interest to partners and depreciation subject to the income does not fall below the returned income. Appeal of the Revenue and that of the assessee are partly allowed.
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2014 (3) TMI 1148 - ITAT JAIPUR
Addition on account of undisclosed brokerage income - addition is solely based on the statements recorded u/s 132(4) - HELD THAT:- No addition can be made solely on the basis of the statement recorded u/s 132(4) of the Act de hors any material found during search to support the same or any other substantial evidence gathered during post-search proceedings. The decisions mentioned in the written submissions are very much relevant for the purpose. The decision of ITAT Jodhpur Bench in the case of Chitra Devi vs ACIT [2002 (9) TMI 274 - ITAT JODHPUR] is most relevant in this regard. Accordingly, we order to delete this addition.
ADDITION U/S 68 - Addition on the basis of peak creditors - unexplained cash/capital employed in debtors - CIT(A) has confirmed the addition under the Provisions of Section 69B - HELD THAT:- addition u/s 68 of the Act can be made only if any sum is found credited in the books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a ‘’book of account’ in a commercial sense. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the A.O. has further made an addition of ₹ 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the A.O. is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the A.O. has not properly prepared the list of debtors and creditors based on any logic
CIT(A) has confirmed the addition under the Provisions of Section 69B - This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since the assessee does not maintain any books of account wherein the debtors and creditors are reflected , therefore, this addition has also been wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the ld CIT(A) and order to delete the entire addition so made.
Addition on account of interest income which is not the real income of the assessee - HELD THAT:- We have found that the A.O. has failed to cause enquiry in respect of these parties. In our considered opinion, the A.O. has wrongly considered the entire credits and interest entries in the hands of the assessee. Accordingly, we are in agreement with the submission of the ld. AR and order to delete the addition added on account of notional interest.
Unexplained money u/s 69A - HELD THAT:- Surrender of peak amount of ₹ 52,40,137/-, we do not find and see any justification for treating the cash in question as unexplained. Such cash forms part of the peak amount surrendered by the assessee in A.Y. 2009-10 at ₹ 52,40,137/- and at ₹ 8,94,407/- in A.Y. 2010-11. In our considered opinion, no separate addition is called for on account of availability of cash. This can be out of the credits/ realization of debits of the peak amont of ₹ 52,40,137/- which has been surrendered in A.Y. 2009-10. It is also a fact that the cash found does not exceed the peak amount of ₹ 52,40,937/- which has been worked out for the period ending31-03-2009 whereas the cash has been found on a subsequent date i.e. 23-07-2009. Thus in the totality of the facts and circumstances of the case, there is no justification of treating the cash as unexplained. Consequently, the amount has been correctly deleted by the ld CIT(A). - Decided in favour of assessee.
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2014 (3) TMI 1147 - BOMBAY HIGH COURT
Sale of plot - Section 529A of the Companies Act, 1956 - HELD THAT:- The Official Liquidator to make a report after the sale is complete. The applicants shall keep the Official Liquidator informed of the various steps under progress of the sale.
Place the report for directions on Friday, 25th July 2014.
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2014 (3) TMI 1146 - HYDERABAD HIGH COURT
Whether the sale of properties of petitioner company vitiated in view of provision in Section 20(4) of SICA?
HELD THAT:- Power is vested in the BIFR under Section 16 to cause enquiry to determine whether any industrial company has become a sick industrial company and incidental thereto. If in such enquiry it is established that a company has become a sick industrial company, in exercise of power vested by Sections 17 to19, the BIFR can take all possible steps to revive the sick industrial company. If the BIFR fails in its effort to revive the sick industrial company, it is empowered to recommend to wind up the sick industrial company in exercise of power under Section 20(1). However, such company cannot be wound up unless winding up orders are passed. Section 20(4) deals with the interregnum period between the date of recommendation by BIFR to wind up a sick industrial company and the date of order of winding up. As per Section 20(4), the power to sell the assets of sick industrial company vests only in BIFR. However, BIFR has to obtain orders from concerned High Court before utilizing the sale proceeds - Section 22(1) deals with a situation when enquiry under Section 16 or scheme referred to in Section 17 is under preparation and prior to orders of BIFR recommending for winding up of the sick industrial company were passed. It seeks to freeze the assets and liabilities during the interregnum period.
In Employees Provident Fund Commissioner, the defaulting company was wound up. The company was in default towards EPF contributions. The EPF organization approached the official liquidator for payment of amount determined under Section 7(A) of EPF Act. Since there was no response, EPF filed company application for issuance of directions to the official liquidator to pay the amount payable by the employer under the EPF Act and the same was dismissed.
The dues payable by the petitioner to the EPF acquires first charge compared to any other dues - In the instant case, EPF sold the properties of petitioner company after BIFR recommended for winding up the petitioner company.
The EPF Act, 1952 is a social welfare legislation and is intended to safeguard the interest of employees. Provident fund contribution is one of the important element in an employee’s service and savings accrued through such contributions alone are the backbone for the employee after his retirement. These contributions are part of his salary and emoluments and as a reward to the service rendered by him to the company while he was working. Therefore, the employees are entitled to receive their amounts. It is the paramount duty of employer to promptly credit the PF contributions. Failure to credit the same by employer is a serious matter - As it appears, the company is not working and proposal to wind up the company was made on 21.06.2000. For the last more than 13 years, the employees of the petitioner company are denied of their due amounts. Therefore any further delay in settlement of their dues would cause great hardship and suffering. Furthermore, in the sale conducted by EPFO, a third party paid huge sum as per auction conducted and purchased the property. He is no way concerned with the controversy. He is a bonafide purchaser. If the sale is upset, his interests would also adversely affect.
It can not be said that the infraction pointed out is not curable. Thus, in the facts of this case, though it is noticed that the procedure as mandated by Section 20(4) of the SICA is not followed, the sale confirmed in the year 2011 cannot be upset at this stage.
While rejecting the prayer of the petitioner, the EPFO is directed to approach BIFR duly intimating the sale of petitioner company assets, seek its ratification for appropriation of the sale proceeds towards PF dues of petitioner company and on receipt of such request, BIFR shall undertake required formalities to ratify the action of EPFO. Entire exercise shall be completed within a period of six (06) weeks from the date of receipt of copy of this order.
Petition disposed off.
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2014 (3) TMI 1145 - ITAT DELHI
Maintainability of appeal before CIT(A) - non-payment of tax due on income returned u/s 249(4) - As per the version of the assessee, it has remitted the self assessed tax, therefore the CIT(A) may admit and adjudicate the appeal on merits - HELD THAT:- As relying on SHAMRAJ MOORJANI. VERSUS DEPUTY COMMISSIONER OF INCOME TAX. [2004 (12) TMI 328 - ITAT HYDERABAD-B] referring to FILMISTAN LIMITED [1961 (2) TMI 2 - SUPREME COURT] the date of remittance of self assessed Tax by the assessee as the date of removal of defect in filing the appeal and if any delay happened, it need to be explained by the assessee and if the CIT(A) is satisfied with the explanation may condone the delay and adjudicate the appeal on merits.
In the result, we set aside the order of the CIT(A) and direct the CIT(A) to act as directed in Para 8 above and the appeal of the assessee is allowed for statistical purpose.
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2014 (3) TMI 1144 - ITAT MUMBAI
Rectifaction u/s.254(2) - Tribunal not considered the additional grounds of appeal filed by the assessee - Mistake apperent from record - HELD THAT:- Tribunal had not considered the additional grounds of appeal filed by the assessee.Thus, there is mistake apparent form the record that has to be rectified.
Accordingly, we fix the matter for hearing 06.03.2014 by the regular bench,so that the additional grounds raised by the assessee can be decided.As both the parties have been informed about the next date of hearing,so no separate notice of hearing will be issued. Miscellaneous Application filed by the assessee-bank stands allowed.
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