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2023 (3) TMI 1434 - ITAT KOLKATA
Disallowance u/s 14A - expenditure incurred on earning exempt income - HELD THAT:- There is no specific finding of the lower authorities indicating that the interest bearing funds have been applied for investment purposes on the basis of entries appearing in the books of accounts.
Disallowance made by ld. AO is merely based on the average investments of the assessee. Hon'ble Supreme Court of India in the case of Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] affirmed the view taken by the Tribunal that if interest free funds available with the assessee are sufficient to meet its investment then it could be presumed that investments were made from the interest free funds available to the assessee. Applying this ratio on the issue in the instant appeal we find that the assessee had interest free funds in the form of share capital and reserve and surplus as on 31.03.2012 at Rs. 73.79 Cr approx. which is much more than investments in shares and mutual funds at Rs. 39.91 Cr. Therefore, it can be safely presumed that interest free funds have been applied for the purpose of making investments in shares and therefore, interest disallowance of Rs. 14,74,087/- is uncalled for and the same is deleted.
Disallowance at the rate of 0.5% of the average investment made under Rule 8D(2)(iii) of the Rules the contention of the assessee taking shelter of the judgment of REI Agro Ltd. [2022 (3) TMI 1549 - CALCUTTA HIGH COURT] is that such disallowance should be made only in relation to income which does not form part of total income and this can be done only taking into consideration the investment which has given rise to such income which does not form part of total income.
In the instant case we notice that the exempt income is not only from dividend but also from long term capital gain from sale of equity shares. No specific details have been filed by the assessee in support of its contention and prayer is made to restore the issue to ld. AO which will keep the issue live. We, on perusal of the audited balance sheet noticed that the investments constitute investment in equity shares at Rs. 10.10 Cr, investment in mutual funds and venture capital funds at approx. 6 Cr and other investments in quoted and unquoted investments. So far as the investments in mutual funds are concerned the assessee is charged by such mutual fund companies for maintaining the investments.
So, no additional expenditure needs to be incurred to keep the investments in the mutual funds. We, therefore, in order to end the litigation and taking into consideration the investments of the assessee company, sustain the disallowance at Rs. 6 lakh under Rule 8D(2)(iii) of the Act. Therefore, the grounds raised by the assessee against the disallowance made u/s 14A are partly allowed and disallowance is sustained at Rs. 6 lakh, and thus, the assessee gets a relief of Rs. 27,86,993/-.
Disallowance u/s 14A added to the book profit for the purpose of computing the income u/s 115JB - HELD THAT:- We are inclined to hold that so far as the disallowance u/s 14A of the Act which is to be considered for computing total income under the normal provision of Income Tax Act and it cannot be considered for the purpose of computing book profit u/s 115JB of the Act, however, taking note of Clause ‘f’ to Explanation ‘1’ of Section u/s 115JB of the Act which provides that for purpose of computing book profit the same should be increased by the amount or amounts of expenditure relatable to any income to which Section 10 (other than the provisions contained in clause (38) thereof) or Section 11 or Section 12 apply and therefore, for the purpose of Clause ‘f’ to Explanation ‘1’ of Section 115JB of the Act an ad-hoc disallowance is made at Rs. 3 lakh and the same should be added to the book profit for the purpose of Section 115JB of the Act. Therefore, ground raised by the assessee is partly allowed.
Addition u/s 68 for unexplained share capital and share premium - HELD THAT:- Considering the financial details referred of the alleged share subscribers as well as the assessee company and the mode of making investment and written compliance by the share subscribers directly to ld. AO and the assessee having discharged the initial onus casted upon it and ld. AO having failed to point out any defect thereto, we are inclined to hold that ld. CIT(A) erred in sustaining the addition u/s 68 of the Act and thus, reverse the finding of ld. CIT(A) and delete the additio and allow ground raised by the assessee.
Unreconciled duty drawback - HELD THAT:- As on perusal of the details filed by the assessee in the form of the paperbook as well as details of duty drawback on examining the complete details of the duty drawback found that the alleged sum was sanctioned by the appropriate authority in the subsequent year and has been offered to tax in the return of income for AY 2019-20. The details of income for AY 2019-20 have been filed before us and we, on perusal of the same find merit in the statement made by the assessee and are inclined to hold that the alleged sum of Rs. 2,03,823/- though was applied for duty drawback during AY 2018-19 but it was finally received by the assessee during AY 2019-20 after being sanctioned by the appropriate authority and the same has been duly offered to tax in the income for AY 2019-20. Therefore, no addition is called for unaccounted duty drawback. Therefore, ground raised by the assessee is allowed.
Disallowance of bad debts claimed for alleged non-submission of the proof - HELD THAT:- Since the sales have been duly accounted for and certain portions of the sundry debtors which could not be recovered have been claimed to be bad debts and this claim of the assessee is allowable in view of the ratio laid down in the case of TRF Limited[2010 (2) TMI 211 - SUPREME COURT] - We are inclined to hold that the assessee has made a justified claim of bad debts u/s 36(1)(vii) of the Act and the same deserves to be allowed.
Addition u/s 68 - unexplained unsecured loan taken from 7 body corporates and also disallowing the interest paid on such loans - HELD THAT:- Assessee has successfully discharged its onus of proving the identity of the loan creditors which are body corporates in the instant case duly registered with Ministry of Corporate Affairs, having PAN and regularly filing the returns, further creditworthiness of the transaction is proved with the fact that they have been carried out through banking channel and sufficient funds in the form of share capital and reserve and surplus available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and huge turnover is achieved year by year and for business needs the said loan has been taken and the major portion of the unsecured loan has been repaid in the year itself and only a minor sum was paid in the subsequent year and all transactions were carried out through banking channel, interest paid on the loans and tax at source has been deducted and duly reflected by the alleged loan creditors in their income tax return and therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 of the Act.
We, thus, set aside the finding of ld. CIT(A) and delete the addition made u/s 68 and further hold that invoking the provisions of Section 115BBE of the Act was not justified and further, since provisions of Section 68 of the Act are held to be wrongly invoked and the alleged transaction is held to be genuine, the interest expenditure incurred on alleged loans is also allowable to the assessee. Thus, ground of the assessee’s appeal are allowed.
Deduction u/s 80G - CSR expenses incurred by the assessee already stands disallowed in the computation of income - HELD THAT:- Tribunal in the case of M/s. JMS Mining Pvt. Ltd. [2021 (7) TMI 907 - ITAT KOLKATA] has allowed the deduction u/s 80G of the Act on CSR expenses - Assessee appeal allowed.
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2023 (3) TMI 1433 - ITAT DELHI
TP adjustment - Advertisement, Marketing and Promotion (AMP) expenses, alleged to have been incurred on behalf of the Associated Enterprises (AEs) - international transaction or not? - HELD THAT:- As we find, the TPO has made the adjustment to AMP expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order [2022 (1) TMI 1082 - ITAT DELHI] has held that the transaction relating to AMP expenses will not fall in the category of international transaction. Thus we restore the issue to the Assessing Officer with similar direction.
Adjustment made to ALP of Information Technology (IT) support services provided by the assessee to its AEs - assessee is a resident corporate entity engaged in the business of manufacturing, marketing and selling of wrist watches and after selling services - HELD THAT:- Assessee provided services in ITES segment. In fact, in the order passed under section 92CA(3) of the Act, the TPO himself has stated that the assessee provides limited IT help desk and support services to the AEs. In spite of such factual position established on record, the TPO has gone forward to re-characterize the assessee as a software development service provider and selected fresh comparables in the software development segment. Unfortunately, Commissioner (Appeals) has also completely misconceived the facts by approving the re-characterization of the assessee.
As observed, similar erroneous approach was adopted by the TPO while proposing adjustment to similar transaction with the AEs in assessment year 2011-12. While deciding assessee’s objections on the issue, learned DRP accepted assessee’s business profile as an IT service provider and directed the AO/TPO to select comparables in ITES segment. However, the TPO again selected comparables providing Knowledge Process Outsourcing (KPO) services. While deciding the issue in appeal, the Tribunal in [2018 (12) TMI 1852 - ITAT DELHI] rejected the comparables selected by the TPO. It is relevant to observe, while dismissing Revenue’s appeal against the decision of the Tribunal in assessment year 2011-12, the Hon’ble Jurisdictional High Court upheld the decision of the Tribunal holding the assessee as an ITES segment company.
Addition on account of advance written off - assessee has debited certain amounts on account of advances written off - as deduction claimed by the assessee does not satisfy the condition of section 36(2) of the Act, the Assessing Officer disallowed the deduction - HELD THAT:- As could be seen from the facts on record, certain trade advances in relation to the business operations could not be recovered even after long lapse of time. Therefore, the assessee has written them off in its books of account. In our view, the Assessing Officer made a fundamental error by holding that the deduction claimed comes under section 36(2) of the Act. Undisputedly, the trade advances were in course of business. Therefore, if the assessee was unable to recover such advances, it can be treated as business loss, hence, allowable. Accordingly, we uphold the decision of Commissioner (Appeals) on the issue.
Spreading over of expenditure - Payment for stamp duty and brokerage for office lease - as per AO since, the period of lease is for five years, the brokerage expenditure has to be spread over the period of lease - HELD THAT:- It is a fact on record that the assessee has incurred the brokerage expenditure in the year under consideration. Therefore, the expenditure has to be allowed in the year under consideration. Merely because the lease of office premises is for particular period, the expenditure actually incurred on brokerage cannot be spread over the period of lease. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue.
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2023 (3) TMI 1432 - CALCUTTA HIGH COURT
Validity of scrutiny assessment - Jurisdiction of authority who issued notice - whether there is valid notice issued u/s 143(2) for commencing the scrutiny assessment? - HELD THAT:- As on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs.30 lakhs and the same was lying with the DCs/Acs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward-9(4), Kolkata.
Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny, the authority who issued the notice namely, the Income Tax Officer, Ward No.9(4), Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax.
The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee’s appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter.
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2023 (3) TMI 1431 - ITAT MUMBAI
Addition u/s 68 - bogus LTCG - whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham? - CIT(A) deleted the additions appreciating the contentions of the assessee together with the documentary evidences thereon, especially the final SEBI order wherein the assessee was duly discharged by SEBI as not to be involved in the price manipulation of scrip of Pine Animation Ltd. - HELD THAT:- The transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price and sale price of shares. Our view is further fortified by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal [2010 (9) TMI 81 - BOMBAY HIGH COURT]
We find that independent enquiries were conducted by SEBI and SEBI had passed an interim order dated 08.05.2015 in the case of Pine Animation Ltd, wherein the assessee and Pine Animation Ltd together with some others, were restrained from accessing the securities market, either directly or indirectly in any manner whatsoever, till the final investigation by SEBI is completed. After completion of the final investigation, SEBI had passed a final order dated 19.09.2017 in the case of Pine Animation Ltd clearly acquitting 114 persons which admittedly included the assessee on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries together with exit providers. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices.
We find that the Hon’ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli [2012 (9) TMI 1113 - CALCUTTA HIGH COURT] had observed that in that case, the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. We find that the assessee’s case before us is in a much stronger footing as no action has been initiated on the Broker by SEBI and even the action initiated on the assessee by SEBI vide Interim order dated 08.05.2015 were finally revoked by SEBI in its final order dated 19.09.2017.
In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Pine Animation Ltd within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case.
No infirmity in the order of the ld. CIT(A) granting relief to the assessee by deleting the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 6% against the same. Accordingly, the grounds raised by the revenue are dismissed.
Validity of reopening of assessment - reason to belive - huge LTCG claimed as exempt on sale of shares - HELD THAT:- Admittedly the ld. AO had indeed received information from the investigation wing unit of Mumbai that assessee had earned huge LTCG claimed as exempt on sale of shares of Pine Animation Ltd, which has been categorized as a Penny Stock by the Income Tax Department, based on the various enquiries conducted by them. These facts are also supported by searches conducted on various persons and statements recorded from various entry operators and promotes that the prices of certain scrips had been artificially rigged by certain manipulators.
This information, definitely , in our considered opinion, constitutes primafacie information, which enables the ld. AO to constitute a primafacie belief that income of the assessee had escaped assessment as admittedly, the assessee had also dealt in the said scrip. Moreover, SEBI had also passed an interim order dated 08.05.2015 wherein the assessee’s name is included as one of the beneficiary and was suspended from entering the capital market in any manner whatsoever, till the completion of investigation by SEBI. In view of this, we are not inclined to accept the arguments advanced by the ld. AR challenging the validity of reopening of assessment. Hence we hold that the assessment had been validly reopened as the ld. AO had indeed primafacie material before him to form a belief that income of the assessee had escaped assessment within the meaning of section 147 - Decided against assessee.
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2023 (3) TMI 1430 - CESTAT NEW DELHI
Levy of Service Tax - business auxiliary service - sizing of coal - appellant asserts that at the time of sale it recovered basic price of the coal, coal sizing charges, surface transport charges and other levies from the customers and paid the applicable excise duty/sales tax on the said amount - dispute relates to the period 2014-15 - HELD THAT:- It does transpire from a perusal of the decision rendered in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS CCE & ST, RAIPUR [2018 (4) TMI 838 - CESTAT NEW DELHI] that the issue stands covered in favour of the appellant. The Tribunal, after relying upon the decision of the Supreme Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT], held that both sales tax and service tax cannot be made applicable on the same transaction. In this view of the matter, when the appellant is only cutting the size of the coal to be provided to the customers, it cannot be said that any service has been offered by the appellant to the buyer of coal.
The order impugned dated 09.12.2016 therefore, cannot be sustained and set aside - Appeal allowed.
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2023 (3) TMI 1429 - ITAT BANGALORE
TP Adjustment - comparable selection - Micro Therapeutic Research Labs Limited - HELD THAT:- The contention of the ld. A.R. is that Micro Therapeutic Labs Ltd. is not having persistent loss in 2 years out of 3 years, if we consider the operating profit by applying the formal Operating Profit/Operating Cost (OP/OC). On the other hand, the AO has considered the published accounts and observed that it has been suffering loss in 2 years out of last 3 years. Accordingly, she submitted that the issue may be remitted to the file of AO/TPO to examine whether there is operating profit in 1 out of 3 immediate preceding years. We accede to the request of the ld. A.R. We remit this issue to the file of AO/TPO to examine whether there is operating profit in 1 year out of immediate last 3 previous years and if there is any operating profit in any 1 year out of 3 immediate previous years, it should be considered as a comparable. Ordered accordingly.
Non-granting of working capital adjustment - DRP observed that Rule 10B provides for making reasonably accurate adjustment to the uncontrolled comparable transaction to eliminate the material effects of differences on the price, cost or profit - HELD THAT:- We are of the opinion that similar issue came for consideration before this Tribunal in assessee’s own case as held there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the Assessee should be allowed.
Non granting risk adjustment - DRP stated in his report that he did not agree with the assessee's plea that it does not bear any significant risk and was of the view that the assessee bears single customer risk, as its entire business activity and survival depends on the AEs.- HELD THAT:- We are of the opinion that similar issue came for consideration before this Tribunal in assessee own case though the assessee in the TP report has stated that the assessee being captive contract service provider having lesser economic and business risk, nothing has been brought on record to show that the comparables are functioning with higher risk. The assessee need to substantiate the statement that the comparable companies are realizing higher profits as there are having higher risk in terms of market, product, technology etc.
We of the considered view that the assessee should be given an opportunity to bring on record the facts that will substantiate its claim based on which a reasonably accurate adjustment could be computed. We notice that the TPO and DRP have not called for any details evidence the risk adjustments and have decided the issue merely based on submissions made the assessee justifying the adjustments. We therefore remit this issue back to the TPO/AO to consider this issue on facts / data available with regard to the comparable companies and decide as per the provisions of Rule 10B(3) after giving reasonable opportunity of being heard to the assessee. The assessee is directed cooperate with the TPO/AO for producing the details as may be called for. This issue is allowed in favour of the assessee for statistical purposes.
Treating recovery of pass-through costs as operating in nature - whether AO/TPO disregarding the fact that the Assessee merely acted as a co- ordinator and facilitator for the performance of clinical trials and considering that the reimbursement of investigator fees is a value- added service which mandates mark-up - HELD THAT:- Tribunal in assessment year 2013-14 in assessee’s own case [2021 (10) TMI 908 - ITAT BANGALORE] new word ‘pass through cost’ was introduced to show the amount incurred by the assessee to be reimbursed by the parent company and called the investigation fees as part of pass through cost. The ld. AR argued that there is no investigation fees payable to assessee for the work done on behalf of parent company. In our opinion, the Addendum is w.e.f. 1.4.2012 wherein no date of execution is mentioned therein. The Addendum was solely made with an intention to evade payment of taxes and this is only a self-serving document by the assessee with the sole intention to evade taxes. Since both the parties were in a position to enter into this agreement being interrelated companies, that agreement cannot be given any credence which is a nongenuine and make believe story and it cannot be recognized as a true agreement and no benefit can be given on the basis of this agreement. Therefore, the lower authorities are justified in not giving any credence to this Addendum entered into by the assessee on the basis of which assessee has claimed that assessee is not entitled to receive any consideration for facilitating investigations.
We have to proceed on the basis of the professed intention and the AO is justified in finding out the real intention of the parties by ignoring the apparent and the conceded intention was to evade the tax liability. The lower authorities merely removed the facade to expose the real intention of the parties cleverly cloaked and discovered the real intention was to evade the taxes and Addendum cannot be given effect and the overall arrangement made by the assessee was to evade the taxes. We are well aware that all commercial arrangements and documents or transactions have to be given effect even though they result in avoidance of tax liability, provided that they are genuine, bonafide and not colourable transaction.
In the immediate earlier AY 2012-13, the assessee has shown investigator payment with mark-up and in this year on the basis of Addendum entered by the parties as discussed earlier, made the investigator payment as ‘pass through costs’ and claimed as reimbursement without any profit element, which is against the agreed norms in the earlier years which cannot be effected and accepted as genuine agreement. Accordingly, we are of the opinion that this intra-group services rendered by the assessee to the parent company cannot be considered as reimbursement of expenses or pass through costs. It is separate services in itself for which the assessee needs to determine the ALP which the assessee failed to do so. The assessee has provided services for which the TPO is justified in marking up the services so as to make TP adjustment. The various case laws relied on by the ld. AR are different on its own facts, which cannot be applied to the facts of the present case. Hence the TPO/AO correctly ascertained the ALP of this transaction and made adjustment on this count. The same is sustained. This ground of the assessee is dismissed.
TP Adjustment towards interest on outstanding receivables - HELD THAT:- In our opinion, this issue has been decided by Hon’ble Bombay High Court in the case of Aurionpro Solutions Ltd [2017 (6) TMI 1087 - BOMBAY HIGH COURT] wherein held that in case of interest on receivables, which is notional, the same should be restricted to LIBOR+2%. Accordingly, the issue is remitted to the file of AO/TPO to determine the ALP after considering the above.
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2023 (3) TMI 1428 - MADHYA PRADESH HIGH COURT
Validity and propriety of final order passed by ITAT - allegation of passing non- speaking order - ITAT sustaining the order of CIT(A) who has deleted the addition on account of profit of sale of 23 Duplex Houses, profit on sale of land, unaccounted investment in plot/land and concluding loose papers were not found and seized from the assessee - HELD THAT:- Tribunal in fact has not recorded any independent finding/reasons in respect of both the grounds raised by the assessee and thus, order of Tribunal to the extent it relates to assessment year 2004-05 is violative of principle of natural justice being non speaking.
A non speaking order not only prevents the adversely affected persons to know the exact reasons behind the conclusion arrived at but also disables the aggrieved person from effectively availing remedy before the Higher Forum.
This Court frames following new substantial question of law:-
“Whether the Tribunal fell in grave error of law in failing to record reasons and findings in regard to assessment year 2004- 05.”
In view of above discussion, aforesaid newly framed substantial question of law is answered in affirmative that the Tribunal failed to record reasons and findings in respect of assessment year 2004-05.
Thus Impugned order of Income Tax Appellate Tribunal Jabalpur Bench, Jabalpur is set aside for being non speaking in respect of assessment year 2004-05 and remanded to Income Tax Appellate Tribunal Jabalpur Bench, Jabalpur for passing speaking order.
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2023 (3) TMI 1427 - PATNA HIGH COURT
Withdrawal of entire pension having been permanently withdrawn after excluding the pension amount which was commuted by him - possession of fake currency notes - arrest on hot-chase with narcotics - HELD THAT:- For the absence of any material to justify the charge of extraneous reasons while passing the orders, it is found that the inquiry report and the decision of the Standing Committee of the High Court in withdrawing the entire pension of the petitioner is unsustainable in the eyes of law.
In KRISHNA PRASAD VERMA (D) THR. LRS. VERSUS STATE OF BIHAR & ORS. [2019 (9) TMI 1716 - SUPREME COURT], the Supreme Court has reiterated that Article 235 of the Constitution of India vests control of the subordinate Courts upon the High Courts. The High Courts exercise disciplinary powers over the subordinate Courts. High Courts ought not to take action against judicial officers only because wrong orders are passed “To err is human and not one of us, who has held judicial office, can claim that we have never passed a wrong order”.
The report of the Enquiry Committee as also the decision of the High Court is quashed and set aside - the consequences of setting-aside of such order of punishment shall follow and the petitioner shall be entitled to his pension - petition allowed.
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2023 (3) TMI 1426 - CESTAT CHENNAI
100% EOU - Wrong calculation of duty payable by them while discharging duty at the time of clearance of goods to DTA - applicability of N/N. 01/2011-C.E. dated 01.03.2011 - Scope of SCN.
According to department as there is no specific mention that Notification No. 01/2011 applies to EOU, the appellant is not eligible for the benefit and has thus short paid CVD portion of the duty for clearances of goods to DTA.
HELD THAT:- On base perusal of the Order-in-Original, it is found that there are no merits in the argument of the Learned Counsel for the assessee that the Adjudicating Authority has travelled beyond the scope of the Show Cause Notice. In the Show Cause Notice, the allegation is that the assessee is not eligible to avail benefit of the Notification No. 01/2011-C.E. dated 01.03.2011. In the Show Cause Notice it is stated that this Notification is not meant for EOU as there is no specific exemption provided as required under proviso to Section 5A (1) of the Act. Surprisingly, the Adjudicating Authority has decided to quantify the demand of duty as per Notification No. 02/2011 dated 01.03.2011. The concessional rate of duty as per Notification 01/2011-C.E. is 1% whereas the concessional rate of duty as per Notification No. 02/2011-C.E. is 5%. There is absolutely no whisper in the Show Cause Notice about Notification No.02/2011. The Department cannot then quantify and confirm the demand as per Notification No. 02/2011-C.E at a later stage. This finding is indeed beyond the scope of Show Cause Notice. For this reason itself, the Order-in-Original is vitiated and the demand raised therein cannot sustain.
The demand confirmed by denying the benefit of Notification No.01/2011 and by applying Notification No. 02/2011 is not justified and requires to be set aside - The issue is answered in favour of assessee and against Revenue.
Cess included while calculating the demand of duty confirmed by the department - HELD THAT:- The issue is already settled in favour of the assessee by the decision of the Larger Bench of the Tribunal in the case of KUMAR ARCH TECH PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II [2013 (4) TMI 482 - CESTAT NEW DELHI] where it was held that the education cess and S&H cess would be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 on the sum of basic customs duty and Additional customs duty - The ratio laid in this case applies and therefore this issue is also held in favour of assessee and against the Revenue.
The impugned order is set aside - Appeal of assessee allowed.
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2023 (3) TMI 1425 - ITAT NEW DLEHI
Disallowance u/s. 14A r.w.r. 8D(2)(iii) - HELD THAT:- As decided in assessee own case [2022 (4) TMI 147 - ITAT DELHI] where shares were held as stock-in-trade and therefore it becomes business activity of assessee - as shares and securities held by a bank are stock in trade, and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income.
Disallowance of 100% depreciation claimed by the Assessee on temporary erections - HELD THAT:- As in Assessee’s own case for A.Y.2015-16 [2022 (4) TMI 147 - ITAT DELHI] additions are temporary wooden structures, internal partitions, cabin formation, flooring and ceiling wiring etc. for computer, false ceiling, glass windows, interiors etc. as noted by the AO. These are not in the nature of construction of any structures or renovation or extension or improvement to the building. Assessee appeal allowed.
Nature of expenses - software expenses - revenue or capital expenditure - HELD THAT:- This issue is covered in favour of the assessee in its own case by the Hon’ble Delhi High Court for Assessment Years 2008- 09 to 2011-12 [2018 (4) TMI 1534 - DELHI HIGH COURT] it is nobody’s case that assessee is dealing with computer softwares or is in the business of any related services. Rather it uses specific customized software, which is specific to its banking activities. But for the use of such software, the nature of expenditure otherwise incurred for streamlining its functions i.e. towards fee payable to the consultants for systems and employment of special professionals to carry on the tasks that the software in fact performs, would have fallen undoubtedly in the revenue stream. Taking these into account and the further circumstance that the software itself would have run its course or life span as it were, given that the earlier assessment year in question is 2008-09, we are of the opinion that the question of law framed is to be answered in favour of the assessee.
Disallowance of Assessee’s claim of amortization of premium on HTM securities - Assessee claimed that amortization of this premium is allowable as relying on case of CIT vs. HDFC Bank Ltd., [2014 (8) TMI 119 - BOMBAY HIGH COURT] HELD THAT:- As decided in assessee own case [2022 (4) TMI 147 - ITAT DELHI] as held where the assessee maintains the accounts in terms of the Reserve Bank of India Regulations, the assessee is entitled to deductions and it cannot be denied by the authorities under the pretext that it was showing as investment in the balance-sheet. Accordingly, the common questions of law are answered in favour of the assessee.
Addition as bad debt u/s. 36(1)(vii) - assessee argued complete details of all the loan accounts were furnished and the condition of write off was claimed to be duly satisfied by the Assessee - HELD THAT:- Issue stands decided by the Coordinate Bench of Tribunal in favour of the Assessee in its case for A.Y. 2015-16 [2022 (4) TMI 147 - ITAT DELHI] as decided in the case of Vithaldas H. Dhanjibhai Bardanwala [1980 (8) TMI 40 - GUJARAT HIGH COURT] a mere debit to the P&L a/c was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only to debit the P&L a/c but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/ debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the High Court in its impugned judgment. In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under s. 36(1)(vii) of 1961 Act as there was an actual write off by the assessee in its books.
Applicability of MAT provision - MAT provision u/s 115JB will not apply to a Banking Company.
Addition under MAT in respect of provision for bad and doubtful debt - HELD THAT:- As assessee being a banking company; even there are specific provisions in the Income Tax Act, 1961 u/s 36(1)(viia) which allows deduction to the banks in respect of provisions made for bad and doubtful debts. The Income Tax Act has considered this peculiarity in the case of banking industry and has allowed deduction on the basis of provision whereas under normal circumstances, any provision made in the books is not allowed as deduction. The fact that the provisions of Section 115JB are now allowing the profit & loss account to be prepared in accordance with the regulatory act under which the bank operates, all provisions as mandated by RBI and duly recorded in the books should be allowed. Also when in the Income Tax Act itself the deduction is allowed to the assessee, it cannot be held that the computation under book profit provisions contemplated addition of such claim under the garb of provision for diminution in the value of assets.
Addition being loss on amortization of permanent investment alleging the same to be notional loss - HELD THAT:- The amortized value of the investment is reflected in the accounts. This is also clearly mentioned in note to the annual report.
The loss on amortization is neither a provision nor a reserve and does not fall under any of the items from (a) to (j) of the above explanation to section 115JB. AO has wrongly considered the same as falling within the preview of Clause (i) to the Explanation 1 to Sec. 115JB(2) whereas the same is not a provision for diminution in the value of assets. It is the actual loss on amortization of investments and the same is allowed under the Income Tax Act, 1961 under normal provisions also as held in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] as detailed explained while dealing with the grounds on allowing the amortization of HTM investment as allowable business deduction u/s, 37(1) of the Income Tax Act.
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2023 (3) TMI 1424 - CALCUTTA HIGH COURT
Seeking grant of Interim relief - HELD THAT:- There is no scope of passing any interim order in the matter and the issues involve require affidavit from the respondents for final adjudication.
List this matter for final hearing in the monthly list of June, 2023.
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2023 (3) TMI 1423 - ITAT RAIPUR
Addition u/s. 43B on “VAT payable” - addition towards VAT tax liability not paid on or before “due date” for furnishing of his return of income for the year under consideration u/s. 139(1) - assessee who was accounting for his sales/turnover by following an “exclusive method” had not claimed deduction of the said amount in the profit and loss account for the year under consideration - HELD THAT:- Hon’ble High Court of Chhattisgarh in the case of Assistant Commissioner of Income Tax-1, Bhilai, Dist. Durg (C.G.) Vs. M/s. Ganapati Motors, Tax Case [2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT] had held that in a case where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s. 43B of the Act as the same was not claimed as a deduction in the books of accounts.
No addition can be made of an assessee’s unpaid VAT tax liability that was not charged to the profit and loss account, there is substance in the claim of the Ld. AR that there was no justification for the A.O to have made an addition u/s. 43B of the amount of VAT payable as the same was not charged to the latters profit and loss account.
Thus for the reason that as the aforesaid claim of the assessee was in conformity with the aforesaid judgment of M/s. Ganapati Motors (supra), therefore, the same by no means could have been dubbed as an incorrect claim and brought within the realm of the adjustments contemplated in clause (a) of Section 143(1) of the Act. Accordingly, the order of the CIT(Appeals) is set-aside and the addition made by the A.O of VAT payable is vacated.
Addition towards GST not paid on or before “due date” for furnishing of his return of income for the year under consideration u/s. 139(1) - As argued assessee was accounting for his sales/turnover by following an “exclusive method” had not claimed deduction of the said amount in the profit and loss account for the year under consideration - HELD THAT:- As relying on own case A.Y.2017- 18 order of the CIT(Appeals) is set-aside and the addition made by the A.O on account of GST payable is vacated. Thus, the Ground of appeal No. 1 raised by the assessee is allowed in terms of my aforesaid observations.
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2023 (3) TMI 1422 - SUPREME COURT
Four High Courts listed for non compliances - compliance reports were filed before the Court but copy not given (regarding undertrial prisoners) - HELD THAT:- It is found that in some of the States there is a disproportionately large number of undertrial prisoners unable to comply with bail. The issue of Allahabad High Court has been flagged to the counsel. Other High Courts/States where the data stares us in face is of the Madras, Orissa and Gauhati High Court. We have to emphasize to the counsel for the Gauhati High Court and the Orissa High Court that possibly some special steps are necessary to tackle this problem and they assure us that the needful will be done. Insofar as the Madras High Court is concerned, none has even cared to attend the proceedings. Let the Registrar remain personally present in Court as even the arrangement for representation has not been made.
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2023 (3) TMI 1421 - ITAT DELHI
Rectification u/s 254 - while passing the consolidated order for various assessment years including Assessment Year 2004-05 in question, the Tribunal has omitted to adjudicate the grounds raised in [2019 (12) TMI 1221 - ITAT DELHI] filed by the Revenue a HELD THAT:- DR for the Revenue does not offer any comment on the error of non-adjudication pointed out on behalf of the assessee.
In the light of the submissions made and on appraisal of the appellate order, we find merit in the plea of the assessee. Hence, the Misc. Application is allowed.
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2023 (3) TMI 1420 - PUNJAB AND HARYANA HIGH COURT
Legality of Clause 25(viii) contained in general conditions of contract of the NIT (Note Inviting Tender) (Annexure P-1) between petitioner and respondents - requirement to deposit 10% Deposit-at-call as per Clause 25(viii) - HELD THAT:- In the light of the decision rendered by the Supreme Court in M/s Icomm Tele Ltd. [2019 (3) TMI 600 - SUPREME COURT], which has considered absolutely an identical clause contained in the agreement between the parties and after doing so has struck down the said clause, it is not for this Court i.e. the High Court to consider the contention of the respondent and take a different view as that would be not just beyond the authority of this Court but would also be an act of impropriety. This Court being bound by the decision rendered by the Supreme Court in M/s Icomm Tele Ltd. allowed the present petition filed by the petitioner and declares the arbitration clause 25(viii) of the tender conditions, quoted above, as unconstitutional and passes the same orders in similar terms as were passed by the Supreme Court in paragraph-28 of the decision rendered in M/s Icomm Tele Ltd.
In view of the fact that the Supreme Court has considered and decided the question relating to an identical clause, this Court is not required to and cannot go into any other issue raised by the petitioner, which is left open to be considered and decided in appropriate proceedings.
Petition disposed off.
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2023 (3) TMI 1419 - CESTAT MUMBAI
Valuation of goods - actual MRP declared on the package is less than 2.5 times the FOB value - declaration of more than one MRP.
SCN relied on Explanation 2(a) to Section 4A of the Central Excise Act, 1944, where more than one MRP is declared, the maximum of such MRPS shall be deemed to be the MRP for the purposes payment of duty and duty is to be discharged on the maximum of such MRP.
HELD THAT:- The appellants are industrial consumers. Therefore, even if the appellants declare MRP at the time of importation, MRP declared thereon should be ignored for the purpose of Standards of Weights and Measures Act, 1976 and rules made thereunder. Therefore, the MRP declared at the time of importation cannot be considered as MRP of the goods imported. Hence, in law, the appellants have declared MRP only once i.e., when the goods were cleared from the Panvel warehouse - The scheme of the Section 4A provides for determination of the value on the basis of the declared MRP/ RSP at the time of clearance. It do not provide for re-determination of the MRP/ RSP by the revenue authorities at the time of clearance. The same can be done only in the manner and subject to the conditions as per Section 4A (4).
The provision of Section 4A (4) do not get attracted, even if the case of revenue is that the imported goods were cleared on payment of duty on the basis of Adhoc value, which was higher than the declared MRP. The Adhoc value based on the thumb rule of 2.5 times the FOB value cannot be the declared MRP but a determined value for the specific purpose of the clearance of the goods by the customs authority at the port of importation. Further the goods cleared from the custom port have suffered manufacturing process as per the section 2 f of the Central Excise Act, 1944 and are not the same goods as cleared from the port.
There are no merits in the impugned order - appeal allowed.
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2023 (3) TMI 1418 - ITAT MUMBAI
Validity of assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT:- As in case of this assessee the addition if any to be made up to A.Y. 2013-14 shall be based on incriminating material found during the course of search. For A.Y. 2014-15, the assessment would be made under Section 143(3) read with section 153A of the Act on the basis of information contained in the return of income as well as any information available with the learned Assessing Officer during the course of search. In nutshell, for A.Y. 2014-15, there is no requirement of any incriminating material found during the course of search.
The fact also clearly shows that assessee has originally made a statement during the course of search about providing accommodation entries. This statement was also recorded in case of other assessees. The statement originally made by the assessee was retracted.
Whether on the basis of statement made by the assessee any absence of any other incriminating material, addition can be made or not in concluded assessment years? - The answer has been given by the Hon'ble Delhi HC in case of PCIT vs. Best Infrastructure (India) (P.) Ltd.[2017 (8) TMI 250 - DELHI HIGH COURT] wherein the question of law framed held that the addition made under Section 68 of the Act on account of statement made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. Having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the Assessee, the assumption of jurisdiction under Section 153A of the Act and the consequent additions made by the AO are not justified.
Statements under Section 132(4) of the Act do not by themselves constitute incriminating material. See CIT v. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd [2015 (5) TMI 656 - BOMBAY HIGH COURT].
The co-ordinate Bench in M/s Kuber Khadyan Pvt. Ltd [2021 (3) TMI 1159 - ITAT DELHI] deleted the addition based upon the admission under Section 132(4) of the Act, holding that mere statement is not a incriminating material. Based on which addition can be made in the hands of the assessee.
Thus we find that the addition has been made in the hands of the assessee from A.Y. 2008-09 to A.Y. 2013-14 which based on retracted statements. In these circumstances, merely a statement of the assessee where there is no admission of the income cannot be said to be incriminating evidence. Consequent to that the additions made by the learned Assessing Officer and by the learned CIT (A) are not sustainable. Hence, they are directed to be deleted.
With respect to A.Y. 2014-15 when the search took place, there was no material found at the premises where the business of the assessee was stated to be carried on supporting the books of accounts of the assessee. No evidences, except the books of accounts, purchase and sales invoices and bank statement was produced before the learned that lower authorities. Merely producing documentary evidences without actually supporting that in fact such transactions have taken place in ordinary course of business, the books of accounts of the assessee cannot be stated to be showing the correct picture.
It is the duty of the assessee to substantiate the transactions of purchases and sales of diamond with proving the chain of the business transaction with proper evidences. The learned AO has also rejected the books of accounts merely on the basis of the statement as well as absence of evidence of carrying on of the business actually by the assessee at the time of search. In view of this facts, we set-aside the issue of determination of the fact of actually carrying on of business by the assessee of purchase and sale of diamonds to the file of the learned assessing officer with direction to the assessee to substantiate that in fact assessee is carrying on the business and not merely an accommodation entry provider. AO is directed to examine the purchase and sales invoices as well as other evidences of each part of the chain of the trading and then decide whether the assessee is engaged in the business or is merely an accommodation entry provider. Appeal of assessee allowed for statistical purposes.
Validity of reopening of assessment - AY 2007-08 - HELD THAT:- Reopening has been made on the basis of reasons recorded by the learned assessing officer wherein the information is received from the investigation wing . Further search was carried out in case of Shri Gautam Jain and others in his group. It was found that assessee is part of that group. We find that there is a tangible material available with the learned assessing officer to reopen the assessment in case of the assessee. In view of this, we do not find any infirmity in the order of the learned assessing officer in reopening the case by issuing notice under section 148 of the act. The learned CIT-A has also confirmed the same for the reason that the learned assessing officer has tangible material. Therefore, all the grounds challenging the reassessment proceedings are dismissed.
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2023 (3) TMI 1417 - ITAT CHENNAI
Deduction u/s. 80P(2)(d) - interest earned received from deposits made with Chennai Central Cooperative Bank - HELD THAT:- Admittedly, Chennai Central Co-operative Bank is a co-operative society and registered under Co-operative Society’s Act of Tamil Nadu. This issue has been settled by the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] Also see The Tiruchengode Agricultural Producers Co-operative Marketing Society Ltd. [2022 (7) TMI 679 - ITAT CHENNAI] as relying on S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd. [2019 (1) TMI 116 - MADRAS HIGH COURT] held that t the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the Assessee’s case is out of the provisions of Section 80P(4) of the Act
In relation to the Associate members, we are of the view that the provisions of Section 22 read with Rule 32 of the Tamil Nadu Co-operative Societies Act, 1983 and Tamil Nadu Co-operative Societies Rules clearly determine the procedure to admit Associate members and accordingly in the present case, the Assessee’s Co-operative Society has admitted the same. In view of the above finding, we hold that the Assessee is entitled for the claim of deduction u/s. 80P(2)(a)(i) of the Act. Decided in favour of assessee.
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2023 (3) TMI 1416 - ITAT KOLKATA
Scope of Limited scrutiny assessment - AO jurisdiction in enquiring into issues beyond the scope of limited scrutiny - CIT(A) in confirming the action of AO in making additions in respect of issues not mentioned in limited scrutiny - HELD THAT:- As notice u/s 143(2) issued for limited scrutiny covering four issues namely Receipt of large values foreign remittance, Mismatch in amount paid to related persons u/s 40A(2)(b), Unsecured loans from persons who have not filed their return of income and Loss from currency fluctuations and also subsequent notice issued u/s 142(1) called for further information.
In our view this is incomplete disregard of the Instruction No. 5/2016 issued by CBDT on 14.07.2016 which provides that while proposing to take up complete scrutiny which was fixed for limited scrutiny, the AO shall form a reasonable view that there is a possibility of under-assessment of income if the case is not examined under complete scrutiny and that plea has to be on the existence of the credible material not merely on suspicion and conjecture or unreliable sources. We note that the instruction provide that there has to be a direct nexus between the available material and formation of such view.
AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny which is in clear violation of mandate given by CBDT in the said Circular and has been held by the Co-ordinate Bench in the case of Shri Vijay Kumar [2019 (10) TMI 13 - ITAT CHANDIGARH] to be bad in law.
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2023 (3) TMI 1415 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - reasons to believe - as per the information received, the petitioner was engaged in reversal trade resulting in non-genuine business loss or gains - As argued the reasons recorded for re-opening were scanty and non-specific and not indicated that the transactions allegedly referred to resulted into loss or profit - HELD THAT:- When it comes to exercise of powers u/s 147 and 148 there has to be a greater thrust for necessity of recording reasons. The entire exercise of reopening hinges on the reasons recorded by the AO. It is the ‘reasons’ which weigh with him.
When the concluded assessment is to be revisited with by the AO recording of reasons for exercise of such powers has to be viewed as vested rights for the assessee. While exercising powers under the Act to reopen the assessment, the AO would harbour reasons to believe that on particular set of facts, the income had escaped assessment and tax was not paid in relation to the year under consideration.
All the reasons which hold good in the eye of and with the AO must be made known to the assessee. Assessee has right to refute the reasons for reassessment by filling objections. Unless the AO appropriately delineates and communicates the reasons for reassessment, right of the assessee to file objections would remain an eye-wash.
Whether the reassessment powers are adverted to on objective basis, whether the element of assessment of income is noticed from the facts and whether formation of opinion by the AO is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to reopening of assessment that the reasons to believe with the AO must be reflected in recording of such reasons to be communicated to the assessee.
The cryptic way of recording of reasons like found in the instant case, would render the exercise of powers vitiated. With such vague reasons the respondent could be said to have failed to demonstrate that there was any escapement of income chargeable to tax. He could demonstrate such element, if he gives reasons for the same.
Notice issued to the petitioner u/s 148 is liable to be set aside on the aforesaid ground alone. Decided in favour of assessee.
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