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2023 (2) TMI 1228 - KARNATAKA HIGH COURT
Classification of goods - rate of tax - mobile phone chargers sold along with mobile phone in a composite pack - taxable at the same rate as applicable to mobile phone only or taxed at higher rate as unscheduled goods under Section 4(1) (b) (iii) of the Act? - HELD THAT:- The issue involved in Nokia India Case [2014 (12) TMI 836 - SUPREME COURT] was whether mobile charger should be excluded from the entry of concessional rate of tax which applies to cellphones under the Entry 60(6)(g) of Schedule B of the Punjab VAT Act where it was held that the battery charger cannot be held to be a composite part of the cellphone but is an independent product which can be sold separately without selling the cellphone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is part of the cellphone.
It is relevant to note that the decision in Nokia India Case is based on Entry 60(6)(g) of the Schedule B of the Punjab VAT Act. In the said Entry only cellular phone is defined and accessories are not included. The Hon'ble Supreme Court of India has upheld Revenue's contention in that case because Entry 60(6)(g) of Schedule B of the Punjab VAT Act does not mention accessories for the purpose of taxing the items/product at 4%.
Entry 53 of Schedule III of the KVAT Act read with the Notification No. FD 43 CSL 07(02) dated April 4, 2007 issued by the State Government - HELD THAT:- In Entry No. 60(6)(g) of the Punjab VAT Act, the expression used is 'cellular telephone' whereas in the Notification issued under KVAT Act, the words used are 'and parts thereof'. Further, the parts falling under Heading 8843, 8825, 8527 or 8528 have been specifically excluded. It is relevant to notice that, battery charger which falls under Entry 8504 40 30 under the CET Act and CT Act, has not been excluded. This makes it clear that charger is a composite part in the package. Thus, the intention of the Revenue is unambiguous that the Notification was applicable for telephone sets and parts thereof which includes charger. Therefore, the Entries in Punjab VAT Act and the KVAT Act are different and the Entry under the Punjab VAT Act is limited only to cellular telephones in contradistinction to the Notification under KVAT Act - 'telephone sets' can be considered as 'goods put up in sets for retail sale' under Rule 3(b) of the GRI.
A bare perusal of the Section 4 (charging section) of KVAT Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate that there is no prescribed mechanism provided for determining the value of individual goods in a composite transaction. Thus, in the absence of a valuation mechanism, tax cannot be levied differently on each of the component by separating a single composite package - the definition contained in the Notification issued under the KVAT Act includes the charger which is sold along with the mobile phone in one set and accordingly taxable at 5%.
These revision petitions are dismissed.
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2023 (2) TMI 1227 - CALCUTTA HIGH COURT
Addition on account of an arithmetical mistake - whether the Tribunal was justified in reversing the order passed by CIT (A) and restoring the addition made in the assessment excluding the case of the assessee that it was on account of an arithmetical mistake - HELD THAT:- Tribunal failed to note that this issue arose during the assessment proceedings itself and the assessing officer had issued notice dated 4th December, 2006 for which reply was given on 18th December, 2006 by the assessee which was rejected by the assessing officer while completing the assessment.
Therefore, to state that merely because the revised tax audit report was submitted later when the appeal was pending before the CIT(A), may not be a ground on which the learned Tribunal could have taken a different view.
Tribunal has observed that the assessee could not point out any mistake as claimed in the tax audit report during the course of the assessment proceedings. This also is factually incorrect as mentioned by us above as the matter was brought to the notice of the assessing officer during the course of the assessment.
Tribunal states that the copy of the remand report submitted by the AO could not be produced by both parties. Tribunal failed to note that the assessee was not furnished with the copy of the remand report called for by the CIT(A) but in the order passed by the CIT(A) the said report has been extracted in page 5 of the order passed by the CIT(A). In any event, the assessee was able to establish the factual position as to how it was a genuine arithmetical mistake. In the absence of any material to show that it was not a genuine arithmetical mistake, the tribunal erred in non-suiting the assessee on the ground that the mistake ought to have been detected earlier by the assessee itself. Thus, we are of the view that the conclusion arrived at by the tribunal for setting aside the order passed by the CIT(A)is incorrect as the learned tribunal has ignored the factual position which was available on record. Assessee appeal allowed.
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2023 (2) TMI 1226 - ANDHRA PRADESH HIGH COURT
Dishonour of Cheque - acquittal of the drawer of a cheque - discharge of legally enforceable debt or not - revision under Sections 397 read with Section 401 of Cr.P.C. - Whether the finding of the learned first appellate Court that Ex.P1 cheque was not given in discharge of debt and that Ex.P1 cheque was materially altered are findings based on evidence and in accordance with law? - HELD THAT:- It is to be mentioned here that the case of the complainant that Ex.P1 cheque in its physical form was received by Pw.1 from the accused is a fact that is admitted by the accused all throughout the trial as he stated specifically even in his evidence as Dw.1 that he physically handed over Ex.P1 cheque to Pw.1. The cheque bears the signature of the drawer. Pw.1 stated that it was given by accused. Dw.1 in his evidence categorically stated that he signed the cheque and Ex.P1 cheque bears his signature. Thus, there is legitimate handing over of the cheque which bears the signature of the drawer and that much is undisputed - As per the evidence of Pw.1 and also as per the evidence of Dw.1 there were business transactions between them and both sides stated that each of them was maintaining books of accounts concerning these business dealings. According to Pw.1 towards repayment of what was overdue the accused gave him Ex.P1 cheque. That there was overdue was shown by complainant through Ex.P8 statement of account. Dw.1 during his cross examination verified it and admitted the truth of its contents.
Ex.P1 cheque as is available on record bears the date 03.01.2003. Since the date is specifically given and is available on the negotiable instrument by the time it came to be considered by the Courts below there was mandate of the law in Section 118(b) of the Negotiable Instruments Act, 1881 to the affect that the Court shall presume, until contrary is proved, that every negotiable instrument which bears a date was made or drawn on such date. The contrary has to be proved and this presumption has to be dislodged by the one who questions the correctness of the date - there was absolutely no material to think any probability that the accused did not put the date on Ex.P1 and did not hand it over to the complainant on the date that is available on the cheque but gave it on any different date. Accused never issued any notice to complainant for return of his cheques on the promise that he had discharged the debt.
Learned first appellate Court without eliciting any experts opinion and without anybody's invitation and without considering all that relevant and material evidence and the law simply rushed to a conclusion that in its opinion there is a change in the colour of ink and Ex.P1 cheque was materially altered and was not given towards discharge of debt. No reasonable prudent man would have arrived at such conclusion on the kind of evidence that was available on record. Learned first appellate Court failed to look at the statute and the precedent and failed to apply the law to the facts. Its appreciation of evidence is unreasonable capricious and is perverse. Therefore, the conclusions reached by it cannot be supported and therefore the judgment of the first appellate Court shall be set-aside.
Having concluded to set-aside the judgment of the first appellate Court the result that emerges is that the acquittal granted to the accused is incorrect. In such circumstances, the accused shall be punished with appropriate sentence. However, since this Court is not sitting in appeal and this Court is only sitting in revision it cannot convert a finding of acquittal into one of conviction by virtue of legislative mandate in Sub Section (3) of Section 401 of The Code of Criminal Procedure, 1973.
The Judgment dated 23.01.2007 of the learned VIII Additional District and Sessions Judge (Fast Track Court) Vijayawada in Criminal Appeal No. 235 of 2005 is set aside and the matter is remitted to the said Court with a direction to rehear the appeal and render its judgment afresh in accordance with law as expeditiously as possible - this Criminal Revision case is allowed.
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2023 (2) TMI 1225 - CESTAT MUMBAI
Refund of excess duty paid - rejection on the ground of being hit by the principles of unjust enrichment - the amount ordered to be credited to consumer welfare fund.
HELD THAT:- As the issue has been considered by the revenue authorities for the past and previous period in the appellant own case on the identical issue and allowed in favour of the appellant and the orders have been accepted by the same principles should be adopted in the present case in view of the decision in NAHAR SPG. & WVG. MILLS LTD. VERSUS COMMISSIONER OF C. EX., BHOPAL [2009 (2) TMI 677 - CESTAT, NEW DELHI] where it was held that the appellants fulfilled the conditions of unjust enrichment by showing that the depot price prevailing at the relevant time.
The appellants submitted that at the time of verification of the sales invoices raised ex C & F Depot for finalization of provisional assessments, it has been verified by the verifying officer the sales invoices raised ex C & F depots do not show the duty element separately. In case of N G Thakkar [2012 (3) TMI 248 - BOMBAY HIGH COURT] it has been held that the decisions of the lower appellate authorities that the duty element has not been passed on to the customers is based on verification of the evidence adduced by the assessee.
Following the above decision and the fact that issue has been decided by the revenue authorities themselves in similar circumstances in the appellant own case, no merits found in the impugned order - appeal allowed.
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2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT
Validity of SCN - impugned proceedings do not contain the signature of the officers concerned - HELD THAT:- A reading of Section 160 of the Act makes it very much clear and candid that the safeguards contained therein cannot be made applicable for the contingency in the present case. Section 169 of the Act, which deals with the service of notice, enables the department to make available any decision, order, Summons, Notice or other communication in the common portal. In the guise of the same, the signatures cannot be dispensed with - In the considered opinion of this court, the aforesaid provisions of law would not come to the rescue of the respondent herein, for justifying the impugned action.
This Writ Petition is allowed, setting aside the impugned order of the 1st Respondent, dated 23-11-2022 and the DRC-07 notice, dated 23-11-2022 for the tax period 2017-18,2018-19 and 2019-20, as well as the show cause notice dated 22-10-2022 and DRC-01 notice, dated 22-10-2022 issued by the 1st Respondent and uploaded in the GST common portal.
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2023 (2) TMI 1223 - NATIONAL COMPANY LAW TRIBUNAL HYDERABAD
Prayer for closure of the Liquidation Process of the Corporate Debtor - HELD THAT:- It is evident that the assets of the Corporate Debtor were sold to the Successful Bidders supra. It is seen from Form-H that the amount of Rs. 10,23,89,263/- realized from the sale of Liquidation Estate was distributed among the stakeholders as per Section 52 or 53 of the Code. A copy of the Auditor Certificate is filed at page Nos. 40 to 51(a) of the application. The details of distribution is at page Nos. 28 to 29 of the Final Report. Further, by going through the Final Report, it is evident that the Liquidator has sold the Corporate Debtor as a going concern as such it is a fit case for closure of Liquidation process.
The closure of the Liquidation proceedings against the Corporate Debtor viz. M/s. ICSA (India) Limited is ordered from the date of this Order, in terms of Regulation 45 (3) of Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Consequently, the Liquidator stands relieved.
Application allowed.
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2023 (2) TMI 1222 - ITAT AHMEDABAD
Addition u/s 41(1) - cessation of liability with respect to outstanding balance of one creditor in the books of the assessee - addition made of outstanding balance of the said party, PSM, in the preceding yea finding it to be bogus - HELD THAT:- In the impugned order before us this sundry credit balance has again not been found to be genuine for the very same reason that the said party has not entered any transaction with the assessee, and there was no transaction reflected in the bank account of the said party with the assessee.
When this adverse material relating to the PSM was found to be of no relevance to its transaction undertaken with the assessee in Asst.Year 2012-13 which was examined by the AO and found to be genuine, we fail to understand how on the basis of this very same adverse material, the outstanding balance pertaining to the said transaction can now be stated to be ingenuine. Since the AO in the preceding year, had after conducting inquiry found that these adverse materials did not lead to the conclusion that the transactions of the assessee with the said party was ingenuine, the same adverse material cannot now form the basis of holding the outstanding balance pertaining to the said party in relation to very same transaction to be ingenuine.. For this reason alone, we hold that the ld.CIT(A) has rightly deleted the addition made by the AO amounting to Rs. 8,21,50,309/- by invoking section 41(1) of the Act.
No infirmity in the order of the ld.CIT(A) deleting the addition made under section 41(1) - Decided in favour of assessee.
Addition u/s 69 - outstanding credit balance of parties relating to preceding years - HELD THAT:- Revenue was unable to controvert the factual findings of the ld.CIT(A) that the majority addition deleted pertained to outstanding credit balance of parties relating to preceding years. The proposition of law that no addition could be made u/s 68 of the Act on account of opening credit balances of parties, also remained uncontroverted before us. In view of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the addition made of opening credit balance of parties.
As for the deletion of the balance outstanding the factual finding of the Ld.CIT(A) that the same pertains to purchases made during the year from the said party, Bharat Bhai Rajgor, which purchases genuineness has not been doubted by the AO, has also remained uncontroverted before us. So also his findings with respect to outstanding balance which was found to pertain to opening balance. We see no infirmity in the order of the Ld.CIT(A) deleting the aforestated two outstanding balances also in the light of the facts as noted by us.
CIT(A) has upheld the addition with respect to three parties outstanding balances amounting in all to Rs. 18 lacs. There can be no grievance of the Revenue with respect to the same.
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2023 (2) TMI 1221 - ITAT KOLKATA
Penalty u/s 271B - assessee not getting the books of account audited u/s 44AB - reasonable cause u/s 273B - assessee is an individual and is engaged in the business of mobile recharging and earns income from commission from sale of such recharge coupons of Idea Cellular - AO took basis of cash deposited in the bank account treating it as sales turnover - HELD THAT:- As considering the fact that assessee is receiving commission income and tax is deducted at source by the Telecom company treating the cash deposits as amount collected on behalf of the Telecom company from various customers and deposited in the bank account and commission on such deposits is given by the Telecom company.
The reasons cited by assessee prima facie found to be reasonable because the assessee was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and this was the first year of the business venture taken up by the assessee and thus assessee’s case is covered u/s 273B.
Since the assessee has a reasonable cause for not getting the books of account audited, he should not be visited by penalty u/s 271B of the Act - Appeal of the assessee is allowed.
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2023 (2) TMI 1220 - ITAT MUMBAI
TP Adjustment - international transaction on recovery of expenses - HELD THAT:- As in assessee’s own case for A.Y. 2011-12 and in view of the fact that no such transfer pricing adjustment has been made by the Revenue qua the international transaction on recovery of expenses from A.Y. 2004-05 to A.Y. 2010-11, we are of the considered view that when ALP of the international transactions rendering services by the assessee to its AEs, for which it is to be compensated on cost + mark up basis have already been benchmarked separately, the day to day pocket expenses incurred by the assessee during rendering of such services are to be reimbursed on cost to cost basis. Incurring of such expenses has not been disputed by the Revenue Department. When there is no element of profit or mark up in the hands of the AE in incurring the day to day pocket expenses the same is not to be bench marked.
In view of section 92(1) of the Act income arising from an international transaction is liable to be computed for the purpose of ALP as prescribed under section 92C - TPO has considered the ALP at 10% of expenses recovered on adhoc basis without conforming to the methods prescribed u/s 92C(1) - So in view of the matter and following the order passed by the co-ordinate Bench of the Tribunal adjustment made by the TPO/AO qua international transaction of reimbursement of expenses received by the assessee from its AE is not sustainable in the eyes of law, hence ordered to be deleted.
Addition u/s 143(1) without issuing any notice to the assessee and this addition has also not found mention in the draft assessment order which is in violation of section 144C - AO disallowed an amount being the difference between the disallowance reported in section 37 in the income returned (in respect of CSR contribution) and tax audit report (in respect of loss on sale of fixed assets) - AO also disallowed an amount u/s 40(a)(ia) - HELD THAT:- During the course of argument the Ld. A.R. for the assessee contended that he has already moved an application for rectification before the AO which has not been decided. We are of the considered view that since there is apparent error in making aforesaid addition by the AO, the same be rectified u/s 154 of the Act. So we hereby direct the AO to decide the rectification application lying pending with him (AO) for disposal within a period of three months from the date of receipt of order. So ground as decided in favour of the assessee for statistical purposes.
Disallowance of delay in deposit of employees contribution of provident fund (PF)/ Employees’ State Insurance Corporation (ESIC) beyond the due date prescribed under the Act - assessee candidly conceded that this issue is no longer res-integra now having been decided by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd [2022 (10) TMI 617 - SUPREME COURT] - HELD THAT:- So in view of the decision rendered by the Hon’ble Supreme Court, we are of the considered view that employees’ contribution on account of PF & ESIC deposited by the employer after due date prescribed under the Act is not an allowable deduction. So since the assessee has failed to comply with the condition precedent for depositing the employees’ contribution on account of PF & ESIC before the due date prescribed under the Act the same has been rightly disallowed by the AO. Decided against the assessee.
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2023 (2) TMI 1219 - ITAT INDORE
Disallowance of contrived losses on NMCE - execution of trades on a recognized exchange (MCE) - glaring evidences/ findings of synchronized trades executed by the assessee with a cluster of brokers/counter parties on MCE exchange which had resulted in excessive losses - as per CIT losses obtained by assessee on NMCE platform were contrived losses and these losses were incurred by executing the synchronized trade dealings in illiquid commodities, thus deleted addition - HELD THAT:- In the present case, it is not a case of AO that the transactions of the assessee have not been proved with supportive evidence but the action of the AO revolves around the sole allegation that the assessee incurred artificial losses to square up its profit earned from other commodity exchanges and to evade tax liability. AO observed that transactions are not genuine. As we have noted above that it is not a case of the AO that no transactions were undertaken and assessee booked bogus losses but the allegation of the AO is that the losses were incurred by the assessee were only contrived losses and these losses were managed with the help of brokers who always there in group of clusters so as to same can be set off against the profits earned from activities of trading other then NMCE platform.
On being asked by the Bench, the CIT(DR), except reading and supporting assessment order could not bring or substantiate any factual position or allegation against the assessee by way of cogent findings and supportive documentary evidence or positive adverse material against the assessee to prove that the alleged losses were not actually accrued to the assessee and the assessee claimed bogus losses
CIT(A) noted a very important factual position which is self speaking that the assessee incurred losses on similar commodity in the other stock exchanges on high value and also earned profit in NMCE and incurred losses on MCX in the forward trading of copper.
Allegation of the A.O. that assessee has undertaken high volume transaction in 60 second we note that the SEBI has permitted 15 to 20 transactions per minute as per revised Circular No. 97 dated 27.09.2016 and merely because the assessee has incurred losses on a particular platform does not Ipso facto established that the losses are contrived or artificial and the sole intention is to set off the profits earned from other stock exchanges and to reduce and evade the tax liability on the profits earned from other stock exchanges.
We are unable to see any ambiguity perversity or any other valid reason to interfere with findings arrived by the Ld. CIT(A). Our conclusion also gets support from Hon’ble Kolkata High Court in the case of PCIT vs. BIB Cables and Conductors [2018 (8) TMI 525 - CALCUTTA HIGH COURT] Accordingly grounds nos. 1 to 5 of revenue for A.Y. 2011-12 are dismissed.
Non-inclusion of the profit accrued to the assessee from the transactions pertaining to M/s. Victory Tip Up Pvt. Ltd. by holding that the said transactions have not been recorded in the books of accounts of the assessee - CIT(A), on examination of books of accounts found that the said speculation business transactions with M/s. Victory Tip Up Pvt Ltd. were reflected in audit report and the transactions highlighted and alleged by the AO in the assessment order were dully recorded in the books of account. Per contra, CIT(A), on examination of books of accounts found that the said speculation business transactions with M/s. Victory Tip Up Pvt Ltd. were reflected in audit report and the transactions highlighted and alleged by the AO in the assessment order were dully recorded in the books of account. Therefore, we are unable to see any valid reason to interfere with the findings arrived by the Ld. CIT(A) and thus we uphold the same. This ground of revenue is also dismissed.
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2023 (2) TMI 1218 - SC ORDER
Seeking release from jail - petitioner was arrested or not - HELD THAT:- Considering the fact that during the investigation, the Investigating Agency never arrested the petitioner(s) and that the petitioner(s) had co-operated during the investigation and that now the Charge-sheet is already filed and the custodial investigation is not required, we deem it appropriate to make order dated 23.03.2022 as absolute. It is directed that in case of arrest of petitioner(s), the petitioner(s) be released on bail on the terms and conditions that may be determined by the learned Trial Court.
SLP disposed off.
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2023 (2) TMI 1217 - CESTAT AHMEDABAD
Rebate claim of short sanctioned amount - rejection of claim only on the ground that the Maritime Commissioner in his sanctioned order has not given a liberty by giving a remark in his sanctioned order - HELD THAT:- It is surprising that that Learned Assistant Commissioner has taken that remark as the order for giving re-credit to the appellant. The remark is only suggestion to the appellant to approach the Assistant Commissioner and the Jurisdictional Assistant Commissioner was appropriate authority to decide independently the re-credit of short sanctioned amount. Therefore there is no reason to deny re-credit.
As regard the amount of Rs. 17,05,822/- the Commissioner (Appeals) has made a blunder that the said amount was already allowed as re-credit by the Assistant Commissioner and no appeal was filed by the Revenue challenging the order of the Assistant Commissioner, therefore, the Learned Commissioner (Appeals) has no jurisdiction to decide the re-credit allowed by the Adjudicating Authority - to this extent also the impugned order is liable to set aside.
The impugned order is set aside - Appeal is allowed.
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2023 (2) TMI 1216 - CESTAT AHMEDABAD
Levy of service tax - Construction of Complex Service or not - construction of residences for police personal - HELD THAT:- The definition of residential complex excludes from the levy of Service Tax “complex which is constructed by a person directly engaging any other person for designing or planning of the lay out and the construction of such complex is intended for personal use as residence by such persons.” This expression has been interpreted by Tribunal in the case of M/S. SIMA ENGINEERING CONSTRUCTIONS, S. RAJANGAM, T.M. SARAVANAN, M/S. MARIMUTHU GOUNDER & SONS VERSUS CCE, TRICHY [2018 (5) TMI 405 - CESTAT CHENNAI] where it was held that similar issue decided in the case of NITHESH ESTATES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS BANGALORE-II [2015 (11) TMI 219 - CESTAT BANGALORE], where it was held that If the land owner enters into a contract with a promoter/builder/developer who himself provided service of design, planning and construction and if the property is used for personal use then such activity would not be subject to service tax.
Thus, the use of the residential complex by (GSPHCL) is excluded from the definition of residential Complex as “intended for personal use as residence by such persons” - there are no merit in the order, the order is set aside - appeal allowed.
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2023 (2) TMI 1215 - ITAT MUMBAI
Disallowance u/s 14A r.w.r. 8D - Mandation of recording satisfaction - HELD THAT:- AO has to first examine assessee’s computation of disallowance u/s 14A of the Act vis-à-vis the accounts of assessee. If the AO is not satisfied with the assessee’s said computation has to record reasons for his dissatisfaction and thereafter proceed to invoke provisions of Rule 8D. In the instant case, we find that the assessee has furnished detailed reasons and the method of computation of disallowance with respect to indirect administrative expenditure under Rule 8D(2)(iii).
AO has examined the same, gave reasons for his rejecting the same and thereafter, has proceeded to compute disallowance under Rule 8D(2). After examining the same, we are satisfied that the AO has recorded reasons for disagreeing with the assessee’s calculation of disallowance u/s 14A of the Act. Thus, the primary objection raised by the assessee for deleting addition under Rule 8D(2)(iii) are rejected.
Assessee has raised an alternate plea that only dividend yielding investments should be considered for the purpose of disallowance - Assessee has also filed a chart identifying the companies wherein the assessee has earned dividend. It is no more res-integra that only dividend yielding investments should be considered for the purpose of computation of disallowance under Rule 8D(2)(iii). We accept the alternate contention of the assessee. The AO is directed to consider only dividend yielding investments for computing disallowance under Rule 8D (2)(iii). Consequently, ground No. 2 of the appeal is partly allowed in terms aforesaid.
Disallowance of interest paid on Perpetual Non-Convertible Debentures (PNCD)u/s 36(1)(iii) - AO rejected the assessee’s claim on the ground that the said expenditure claimed is not in the nature of interest - HELD THAT:- It is not disputed by the Department that the PNCD on which the assessee has paid interest are the same that were subject matter of dispute in AY 2011-12 and 2012-13 in proceedings u/s 263 of the Act. Thus, in the light of the decision of Co-ordinate Bench on same issue in assessee’s own case in preceding assessment year, we hold that the interest expenditure in respect of Perpetual Non-Convertible Debentures is an allowable expenditure u/s 36(1)(iii) of the Act.
Disallowance of payment made towards Compensatory Afforestation Fund - HELD THAT:- We find that the Tribunal in assessee’s own case for assessment year 2006-07 [2017 (2) TMI 272 - ITAT MUMBAI] has held that contribution towards Compensatory Afforestation Fund is an allowable expenditure.
Computation of Book Profits u/s 115JB after considering disallowance u/s 14A - HELD THAT:- Special Bench of the Tribunal in the case of Asst. CIT Vs. Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that the computation under clause (f) of Explanation 1 to section 115JB is to be made without resorting to the computation as contemplated u/s 14A r.w.r. 8D of the Act.
Admission of additional claim made first time in assessment proceedings - deduction of interest on PNCD in computation of Book Profit u/s 115JB AR fairly admitted that the claim was not made in the return of income and claim was made for the first time in assessment proceedings before the AO - HELD THAT:- Hon’ble Apex court in the case of Goetze India Limited [2006 (3) TMI 75 - SUPREME COURT] as held that the AO has no power to accept claims other than the claims made in return of income/revised return of income. No error in the AO rejecting assessee’s claim for deduction of interest on PNCD. However, the Hon’ble Apex Court has in an unambiguous terms has clarified that powers of the Appellate Tribunal are not impinged to admit additional claim.
For deciding this additional claim of the assessee, no fresh evidence is required to be adduced. Therefore, without commenting on merits of allowability of claim, we deem it appropriate to restore it to the file of AO for consideration and deciding the same, in accordance with law. In the result ground of the appeal is allowed for statistical purpose.
Non grant of full TDS/TCS credit - AR has pointed that the assessee has filed an application u/s 154 of the Act before the AO for allowing TDS/TCS credit in full - HELD THAT:- As the said application has not been decided by the AO till date. The AO is directed to dispose of the said application of the assessee expeditiously, preferably within a period of 6 months from the date of receipt of this order. Thus, ground of appeal is allowed for statistical purpose.
Disallowance of provision for leave encashment - AR submits that the assessee has made clam of deduction for leave encashment on the basis of actual payments only - HELD THAT:- In the facts of the case and the decision of Co-ordinate Bench in assessee’s own case, we hold that the amounts actually paid towards leave encashment is allowable as deduction. The assessee has placed on record Tax Audit Report for AY 2017-18. The same was available before the AO, as is evident from Assessment Order - AO has erred in holding that the assessee has claimed entire provision i.e. in excess of amount actually paid. After examining the Audit Report - The aforesaid sums were paid before the due date of filing return of income u/s 139(1) of the Act. Hence, ground is allowed pro-tanto.
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2023 (2) TMI 1214 - SUPREME COURT
Interpretation of SRO 1727/1993 which is an exemption notification issued by the State of Kerala - entitlement to exemption.
The Revenue contends that the exemption limit by five years in point of time was to commence from the date of approval by the Central Government, to the approval to the project - The assessees had on the other hand contended that the exemption would commence from the date of commencement of production.
HELD THAT:- It is evident from the overall reading of the document issued by the Department of Industrial Development, Central Government on 16-12-1993 to the assessee that it was a mere permission conditioned upon fulfilment of certain specified requirements. Therefore, it was described as a letter of intent. The actual approval in clear terms enabling the benefit of exemption was issued on 27-10-1994, when “Green Card” was issued by the Central Government. Therefore, this Court is of the opinion that the term “approval” in the present case was issued in the letter dated 27-10-1994.
In these circumstances, this Court is of the opinion that the term “approval” has to relate to unambiguous approval by the Central Government which in the present case was given on 27-10-1994 - Therefore, the assessee could have availed exemption after 27-10-1994.
The assessee’s contention that the date of commencement should be the date when the exemption also becomes determinable cannot be accepted. Another reason why such a contention is unfeasible is that it injects subjectivity with regard to assessment of proceedings itself. In a given case, the unit-holder may be vigilant and set up his or its unit early whereas in another case, the concerned unit-holder may be laid back or drags its feet resulting in the unit not commencing production. In the latter case, though it might have secured approval, the delay in the commencement of production should not be rewarded with an exemption.
The court holds that date of approval in this case was 27-10-1994 and that would be the reckonable date for grant of exemption under the Notification SRO 1727/1993.
Appeal allowed in part.
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2023 (2) TMI 1213 - AUTHORITY FOR ADVANCE RULINGS CUSTOMS, MUMBAI
Classification of goods proposed to be imported - Optoma Creative Touch 3-series Interactive Flat Panel (IFP) (Model - 3652RK, 3752RK, 3862RK) - to be classified under sub-heading 8471 41 90 or not.
Whether the features and specifications of the subject goods under consideration meet the criteria as laid down in the Note 6(A) to Chapter 84?
HELD THAT:- From the open source available, it is understood that Automatic Data Processing (ADP) machines have storage capability and also stored programs which can be changed as per the performance of tasks. Digital machines process data in coded form. A code consists of a finite set of characters (binary code, standard six-bit ISO code, etc.). The data input is either automatic through the use of data media such as magnetic tapes or manual by means of keyboards, touch screen etc. The input data are converted by the input units into signals which can be used by the machine and stored in the storage units. The data is then operated by the CPU and operating system to produce output. From Para 2 and 2.1, it is evident that these machines have a main storage capability which is directly accessible for the execution of a particular program and which has a capacity sufficient to store those parts of the processing & translating programs and the data immediately necessary for the current processing run. Therefore, the goods satisfy the condition specified in Note 6(A)1.
As per Note 6(A) 2, the machine should be able to be freely programmed in accordance with the requirement of the user. From the product details submitted, it appears that these goods come configurable with off-the-shelf, end-user applications allowing the programming of the various functions in accordance with the needs of the user. As per the product details available on the website, these devices have pre-installed apps including Office Suite, which allows users to open and edit all Microsoft Office documents. Applications available include GoToMeeting, Firefox, Evernote, and many more. Therefore, the goods satisfy condition as per 6(A)2.
Creative Touch 3-Series Interactive Flat Panels, perform the arithmetical computations specified by the user which satisfy condition 6(A)(3) of the chapter notes.
Thus, the subject goods satisfy all the requirements as mandated under Note 6(A) [previously referred to as 5(A)] to Chapter 84 of the Customs Tariff Act, 1975. Accordingly, the subject goods are classifiable under CTH 8471 as ADP.
As the machines under consideration do not have a keyboard, they appear to be classifiable as other ADP machines under 2nd one-dash sub-heading. Sub-heading 8471 41 covers other ADP machines; comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined. For the machines under consideration, the LED screen satisfies the requirement for output and the touchscreen satisfies the requirement for input apart from the CPU inbuilt into the device. Therefore, the subject goods appear to be classifiable under sub-heading 8471 41 and more specifically under sub-heading 8471 41 90 as “Other automatic data processing machines.
Optoma Creative Touch 3-series Interactive Flat Panels (IFP) (Model - 3652RK, 3752RK, 3862RK) merit classification under Heading 8471 and more specifically under sub-heading 8471 41 90 of the First Schedule to the Customs Tariff Act, 1975.
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2023 (2) TMI 1212 - ITAT MUMBAI
Reopening of assessment u/s 147 - Capital gain computation - validity of reference to DVO - HELD THAT:- The condition precedent for assumption of jurisdiction under section 147(a) is reason to believe of the ITO. If that be so, then a report or information of a valuer cannot substitute the words 'reason to believe' of the ITO. An opinion of a third person cannot be 'a reason to believe' of the ITO. It is the ITO who has to assert on materials available that he has reason to believe that any income chargeable to tax has escaped assessment or that the same was due to the fact that the assessee failed to disclose his income truly and fully. The reason to believe of an ITO cannot be substituted by an opinion of a valuer.
Therefore, reopening of assessment merely on basis of valuation report is not valid. “In this case, assessment order was passed under section 147 r.w.s.143(3) on March 31, 2015 accepting the earlier return filed on March 31, 2013, but in the meanwhile, a reference was made to the Departmental Valuation Officer (Assistant Valuation Officer-II), Mumbai in terms of section 55A of the Act, 1961 in which a preliminary valuation report was furnished on March 2, 2015, but the final report was furnished only after the completion of assessment proceedings. Thereafter, the petitioner was served with second notice under section 148 of the Act, 1961.
As entire reassessment notice has been issued based upon DVO’s report which is impermissible in the eyes of law. The notice issued by Assessing Officer u/s 148 deserves to be quashed and consequent additions made in assessment order does not survive.
On perusal of reasons recorded, it is observed that reassessment notice has been issued based upon DVO’s report in which DVO has determined fair market value of land as on 01/04/1981 which means that alleged escapement of income is to the extent of Income from capital gain based upon DVO’s report called u/s. 55A of the Act. It is observed that in original assessment proceedings, Assessing Officer has referred matter to DVO but assessed Income from Capital gain as shown in return of income as DVO’s report was not received by then.
Assessee has challenged such action of Assessing Officer and consequent re-computation of Long Term Capital Gain based upon DVO’s report as well as in Ground No 2 in present appeal.
As observed that considering detailed discussion made in assessee’s appeal and mainly relying upon decision of Hon’ble Bombay High court in the case of CIT v. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] and CIT V. Gauranginiben S. Shodhan Indl [2014 (2) TMI 78 - GUJARAT HIGH COURT] it was held that as land sold by assessee is prior to 01/07/2012 i.e amendment brought to Section 55A, assessee has determined Income from capital gain based upon Registered Valuer report and Assessing Officer has claimed that fair market value of land as on 01st April 1981 was lower than such valuer report, Assessing Officer was not justified in considering fair market value of land based upon DVO’s report obtained u/s 55A of the Act and recomputing Income from Long term capital gain based upon such report. Once the addition made in reassessment order based upon reasons recorded by Assessing Officer while issuing notice u/s 148 of the Act or basis of reassessment notice issued by Assessing Officer does not survive, other additions made in reassessment order itself does not survive.
Deduction u/s.80IA on Rail Infrastructure allowed.
Adjustment on account of CENVAT in the profits of the eligible units is to be deleted.
Re-work disallowance u/s.14A under rule 8D(2)(iii) on investment which has yielded exempt income.
Addition made on account of unutilised MODVAT credit - Tribunal has not committed any error." (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [2003 (1) TMI 8 - SUPREME COURT] and followed by case of Diamond Dye Chem Ltd.[2017 (7) TMI 616 - BOMBAY HIGH COURT] addition is to be deleted.
Nature of receipts - sales tax incentives received by assessee are rightly considered as Capital Receipts.
Additional depreciation u/s 32(1)(iia) - whether additional depreciation is allowable only on “new machinery” be the first year in which it is put to use? - HELD THAT:- It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited [2022 (11) TMI 1419 - ITAT MUMBAI] holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited [2018 (4) TMI 426 - ITAT MUMBAI] relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern’s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act.
Deduction u/s 80IA on TG-3 and TG-3, Wadi unit allowed - As deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn.
Auditor’s fee and director’s remuneration (indirect expenses) should not be apportioned for computing deduction u/s 80IA - AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis-à-vis overall expenditure. Thus, related ground of appeal in departmental appeal is dismissed.
Preoperative expenses - assessee itself had claimed the expenses as capital expenses and added them to its capital- work-in progress/fixed assets and there is no provision in Income-tax Act permitting the allowance of such expenses - HELD THAT:- It is observed that identical issue was decided by coordinate bench of Mumbai ITAT in the case of holding company of the assessee being Ambuja Cement Limited [2022 (11) TMI 1420 - ITAT MUMBAI] held as in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive.
Provision for additional gratuity is a provision for ascertained liability.
Provision for Normal/Additional Gratuity is in the nature of provision for an ascertained liability and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2).
Wealth tax provision is not required to be added back while computing Book Profits under Section 115JB.
Disallowance u/s 14A cannot be made while computing book profit u/s.115JB of the Act.
Expenditure incurred on club entrance fee and subscription fee is made to promote business interest is an allowable expenditure u/s 37(1).
Capital gain computation - AO was not justified in considering fair market value of land based upon DVO’s report obtained u/s 55A
Provision for leave encashment made while computing book profit u/s 115JB is deleted.
Recompute taxable long term capital gains arising on transfer of fixed assets as well as investments after giving the benefit of indexed cost of acquisition (if applicable) while computing taxable profits u/s 115JB
VAT paid u/s. 43B by the date of filing of return of income - deduction of VAT payment as per provision of section 43B of the Act. The issue requires verification at the end of the AO hence, this ground of appeal is allowed for statistical purpose.
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2023 (2) TMI 1211 - ITAT MUMBAI
Reassessment u/s 147 - reopening beyond four years - escapement on account of claim of deduction u/s 80IA for railway infrastructure and the second being quantification of profits from railway infrastructure - Escapement on account of CENVAT element attributable to consumption of raw material and other services in relation to Captive Power Plants (CPP) - HELD THAT:- It is apparent that reassessment notice issued by Assessing Officer on two grounds as discussed herein above, are based upon facts already on record of Assessing Officer and Assessing Officer has not pointed out that there was any failure on the part of Assessee to disclose material facts. The entire reassessment notice issued by Assessing Officer is unstainable in the eyes of law and same is quashed. The consequential addition in Assessment Order does not survive and same are deleted. This ground of appeal is accordingly allowed.
Deduction u/s.80IA on Rail Infrastructure - Hon'ble Madras High Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT [2010 (11) TMI 645 - MADRAS HIGH COURT] allowed deduction u/s 80IA of the Act where the facility was one of captive consumption. Thus even if the facility was for captive use, deduction u/s 80IA(4) cannot be denied. Thus applying the proposition of law laid down in all these case laws, in the facts of the case we hold that, on merits the assessee is entitled to claim deduction u/s 80IA of the Act.
Disallowance of proportionate CENVAT credit availed for units eligible for deduction u/s 80-IA - The fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed by the other units as is the undisputed position anyway. What the assessee has done is that the expenses are debited net of the CENVAT credit availed. To this extent, we see no infirmity in the stand of the assessee.
We uphold the plea of the assessee, and direct the AO to delete the impugned adjustment on account of CENVAT in the profits of the eligible units.
Disallowance u/s 14A - AO is directed to re-work disallowance u/s.14A under rule 8D(2)(iii) on investment which has yielded exempt income
Addition of unutilized CENVAT Credit - As irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd [2003 (1) TMI 8 - SUPREME COURT] and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd [2017 (7) TMI 616 - BOMBAY HIGH COURT] we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. This Ground of appeal is accordingly allowed.
Nature of receipt - refund of sales tax - Revenue or capital receipt - HELD THAT:- Sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld. CIT(A).
Nature of expenses - pre-operative expenses - whether, even when the expenditure is shown in the books of accounts, it can be treated as revenue in nature? - HELD THAT:- As in our considered view, stands concluded in favour of the assessee. In the case of CIT Vs Havells India Ltd [2012 (5) TMI 449 - DELHI HIGH COURT] has, in this context, observed, speaking through Hon’ble Justice Easwar, that “The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive”. The limited grievance raised by the Assessing Officer is thus devoid of any legally sustained merits, and we reject the same. In any event, even on merits, the well reasoned order of the learned CIT(A), in our considered view, does not merit any interference. We approve the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter.
Additional depreciation u/s 32(1)(iia) - Whether additional depreciation is allowable only on “new machinery” i.e. the first year in which it is put to use? - HELD THAT:- It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited [2022 (11) TMI 1419 - ITAT MUMBAI] holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited [2018 (4) TMI 426 - ITAT MUMBAI] relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern’s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act.
Deduction u/s. 80IA of the I.T. Act, in respect of power-generating unit-TG3 located at Wadiif - HELD THAT:- As deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. Thus, assessee is entitled to deduction u/s 80IA on TG-2 and TG-3, Wadi unit.
Wealth tax provision is not required to be added back while computing Book Profits under Section 115JB
Disallowance u/s 14A in respect of exempt income while computing book profits u/s. 115JB - HELD THAT:- Eventually, there is no disallowance under section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallowance, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd [2017 (6) TMI 1124 - ITAT DELHI].
Club fees made to promote business interest is an allowable expenditure u/s 37(1)
Disallowance of proportionate Head Office expenditure and Research & Development expenditure while computing deduction u/s 80IA/80IB/80IC - AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis-à-vis overall expenditure. Thus, ground of appeal in assessee’s appeal is partly allowed.
Long term capital gain on sale of Porbandar Land - absolute owner of land - FMV determination - During the course of appellate hearing, Ld. AR has argued that prior to 1st July, 2012, for the purpose of valuation u/s.55 of the Act, reference cannot be made if value of asset given by assessee was more than market price - HELD THAT:- It is observed that assessee company had used the land for manufacturing purpose for certain years but same was not carried out since few years hence Collector, Porbandar has passed the order for re-possessing such land which was in dispute before Hon’ble High court. Thus, repossession of land by the State Government cannot be terms as penalty as observed by AO but rights in lands are repossessed by the Government of Gujarat. As Hon’ble Gujarat High court has passed the order for obtaining back such possession of land from assessee company in year under consideration, assessee company has rightly computed Long Term Capital gain/loss in year under consideration. Thus, argument of AO that assessee was not absolute owner of land and re-possession of land by State of Gujarat is not transfer u/s 2(47) of the Act cannot be accepted.
Copy of such MOU, quantum of consideration received towards such MOU is not on record. Whether such MOU was legal or not or whether assessee company was legally capable of transferring such part of land to other party or not is not subject matter of present appeal as legal issue was already before Hon’ble High court as referred supra. It is emanating from the order of Hon’ble High court that approximately 35 acres of land came to be transferred in favour of HMP Cement in earlier years hence to that extent of land assessee is not entitled to long term capital loss as he was not having ownership of land to that extent in year under consideration. Considering such facts, AO is directed to re-compute income from long term loss after excluding long term capital loss pertaining to 35 acres of land as was transferred to HMP as referred supra.
AO was not justified in considering fair market value of land based upon DVO’s report obtained u/s 55A.
Assessing Officer is directed to recomputed long term capital loss in the case of assessee. This ground of appeal is accordingly allowed for statistical purpose.
Disallowing claim of leave encashment - HELD THAT:- Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [2020 (4) TMI 792 - SUPREME COURT] has upheld constitutional validity of provision of section 43B(f) for provision for leave encashment liability and considering binding decision of Hon'ble Supreme Court claim cannot be allowed. However, if payment of such provision towards leave encashment is made in subsequent year, deduction may be allowed to assessee in such years if not allowed till date. Therefore, Assessing Officer is directed to verify and the same and allow the same as per our above directions.
Addition of provision for leave encashment made while computing book profit u/s 115JB is deleted
Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB of the Act and the addition made by Assessing Officer is deleted.
Recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB
Interest u/s.244A - Though, in assessee’s case, interest u/s.244A charged to Profit & Loss account is not recovered by Assessing Officer by passing any order but same is provided based upon past experience based upon assessment orders / appellate orders in case of assessee hence such interest provided in the books of account in actual sense partakes the character of interest as provided in explanation 2 to section 115JB of the act. If assessee would have actually paid amount received u/s.244A to Assessing Officer on account of additions made in assessment order and such interest if would have been debited to P&L account, such interest would have been disallowed while computing Book Profit hence on this analogy also provision of interest deserves to be added back while computing Book Profit u/s.115JB of the Act. It is observed that if in later years such amount is actually required to be paid to Assessing Officer, assessee would adjust such interest payable directly to provision of interest appearing in balance sheet and in that scenario also such interest u/s.244A would not have been subject to Book Profit u/s.115JB of the Act which is contrary to the provision of the Act. On this ground also the claim of assessee fails and adjustment made by Assessing Officer is also upheld. This ground of appeal is dismissed.
Amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits.
Assessee has claimed deduction of VAT payment as per provision of section 43B - The issue requires verification at the end of the Assessing Officer
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2023 (2) TMI 1210 - ITAT MUMBAI
Disallowance u/s 14A r.w.r. 8D - sufficiency of own funds - HELD THAT:- It is observed that AO has not made disallowance u/s 14A applying rule 8D as it was not in statute in the year under consideration. AO has made proportionate disallowance of interest as per formula mentioned in Assessment Order [Borrowings/own funds * investements].
It is observed that Assessee has sufficient own funds in form of share capital and reserves and surplus in comparison with investment in shares made by it. Thus as relying on South Indian Bank Ltd [2021 (9) TMI 566 - SUPREME COURT] and Shapoorji Pallonji & Co Ltd [2020 (3) TMI 552 - BOMBAY HIGH COURT] held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. Ground of appeal filed by Assessee is allowed.
Addition of different unutilised CENVAT credit u/s 145A - HELD THAT:- , Coordinate bench held in the case of Mahindra & Mahindra Ltd. [2020 (2) TMI 62 - ITAT MUMBA] the amount of the unutilized Cenvat credit could not have been directly added to the closing stock. The Tribunal has not committed any error." (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [2003 (1) TMI 8 - SUPREME COURT] and followed by case of Diamond Dye Chem Ltd. [2017 (7) TMI 616 - BOMBAY HIGH COURT], we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made. Ground of appeal filed by Assessee is allowed.
Club entrance/subscription fee for its director expenditure was incurred on account of subscription to clubs for the purpose of promoting and fostering its business relationship and objective of the assessee was to enable its directors to meet various kinds of people in the clubs so that by such meeting they would develop business relationship. Thus expenditure incurred by the assessee wholly and exclusively for the purpose of business and the expenditure is allowable as deduction u/s 37 of the Act.
Nature of receipt - amount received on sale of TDR is a capital receipt.
Sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld.CIT(A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income.
Provision of Director’s retirement benefit Treating the same as unascertained liability - Allowing deduction holding the same to be a liability in praesenti to be discharged at future, capable of being estimated with reasonable certainty.
TDS u/s 195 liability on interest payment made to SBI Bank- Bahrain Branch - As settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Considering all we are inclined to accept the findings of CIT(A) for deleting the addition made by Assessing Officer.
Nature of expenses - cost of dismantling assets - By incurring expenditure no new assets of enduring nature was brought into existence and hence was claimed as revenue expenditure.
Deduction u/s 80IA on two units purchased from Tata Power Limited - deduction is denied on the ground that assessee has not set up any undertaking and same has been formed by transfer of previously used plant & machinery - HELD THAT:- A settled position that the deduction u/s 80IA is qua undertaking and not qua entity. Every undertaking will be entitled to avail deduction u/s 80IA for a period of 10 consecutive years from 15 years from the commencement of business. There is substance in the argument of assessee that Tata Power Company Limited might not have claimed for deduction u/s 80IA for various reasons and there is nothing on record to prove that said company was not entitled for deduction in respect of 80IA on such power plant.
On the other hand, claim of deduction u/s 80IA made by assessee is emanating from notes forming part of return of income for A.Y. 1999-2000 and not disputed by Assessing Officer in assessment proceedings hence there is no reason for not allowing deduction u/s 80IA for TG-2 Wadi. The Hon’ble Bombay High court in the case of Simple Food Products (P.) Ltd. [2017 (8) TMI 646 - BOMBAY HIGH COURT] has held that if deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn.
In view of holistic discussion made herein above, assessee is entitled to deduction u/s 80IA on TG-2 and TG-3, Wadi unit. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee’s appeal is allowed.
Apportionment of the indirect Head Office expenses while computing deduction u/s.80IA/80IB - HELD THAT:- AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis-à-vis overall expenditure. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee’s appeal is partly allowed as directed herein above.
Addition for provisions for wealth tax, provision for gratuity, provision for leave encashment, provision for Director’s retirement benefits, while computing the book profit u/s.115JB is to be deleted.
Addition of provision for contingencies while computing the book profit u/s.115JB - As assessee has admitted that this fact that this issue has been covered against the assessee due to insertion of clause (i) to Explanation 1 to Section 115JB vide Finance No. 2 Act, 2009 w.e.f 01.04.2001 - Accordingly, we set aside the finding of the CIT(A) on this issue and restored the issue before the Assessing Officer to decide the issue afresh by giving an opportunity of being heard to the Assessee in accordance with law.
Addition made in respect of VRS expenditure pertaining to earlier years in computing Book Profit u/s 115JB is to be deleted.
MAT computation on taxable long term capital gains arising on transfer of fixed assets - HELD THAT:- As evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the Act. It is also to be noted that in the immediately preceding year Coordinate Bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded subject to the decisions as relied supra. However, he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act.
Respectfully following the ratio laid down in Best Trading and Agencies Limited [2020 (9) TMI 94 - KARNATAKA HIGH COURT] the Assessing Officer is directed to recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB of the Act. Thus, the related ground of appeal in Departmental Appeal as well as Assessee’s appeal is partly allowed subject to the above directions.
Deduction u/s 80HHC computed on the basis of book profit u/s 115JB - whether the assessee is entitled the benefit of reducing the profit of the business eligible for deduction under section 80HHC of the Act while computing the book profit under the provisions of section 115JB? - above benefit to the assessee was denied by the Finance Act 2011 with retrospective effect 01-04-2005 - HELD THAT:- As decided in Torrent Pharmaceuticals Limited [2022 (3) TMI 340 - ITAT AHMEDABAD] Admittedly, at the time of filing the return of income the assessee was entitled for the benefit as discussed above. But on a later date there was an amendment by the finance Act 2011 which denied the benefit to the assessee with retrospective effect. The Hon'ble Supreme Court in the case of Star India Pvt. Ltd vs. Commissioner of Central Excise [2005 (3) TMI 10 - SUPREME COURT] has held that the benefit granted under the statute to the assessee cannot be withdrawn by way of retrospective amendment. Any amendment denying the benefit to the assessee cannot be brought under the statute with retrospective effect.
Exclusion of amount withdrawn from share premium account while computing book profit u/s 115JB - HELD THAT:- We confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed.
Addition being debenture redemption reserve while computing book profit u/s 115JB - Hon’ble Bombay High court in the case of Raymond Limited [2012 (4) TMI 128 - BOMBAY HIGH COURT] has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits.
Addition being expenditure incurred to earn dividend income while computing book profit u/s 115JB - HELD THAT:- As disallowance made by Assessing Officer u/s 14A is already deleted in proceeding paras hence consequential adjustment made while computing book profit u/s 115JB cannot be made.
Exclusion of Premium on Redemption of Foreign Convertible Bond in computing Book Profit u/s 115JB - HELD THAT:- Ahmadabad Bench in the case of Sun Pharmaceutical Industries Ltd. [2021 (4) TMI 998 - ITAT AHMEDABAD] and .in Mahindra & Mahindra Ltd. [2013 (12) TMI 139 - ITAT MUMBAI] has treated premium paid on redemption of FCCB is eligible for deduction - Thus it is held that assessee is entitled for deduction of Premium on Redemption of Foreign Convertible Bond in computing Book Profit u/s 115JB. Thus, this ground of appeal is allowed.
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2023 (2) TMI 1209 - ITAT HYDERABAD
TP Adjustment - MAM selection - analysing the transactions under the provisions of the TP - HELD THAT:- Insofar as the functions performed, assets deployed, and risks undertaken by the assessee are concerned, there is no change in this assessment year. Adoption of the MAM was considered by a Coordinate Bench of this Tribunal in assessee’s own case for the assessment year 2009-10 [2015 (5) TMI 861 - ITAT HYDERABAD] and the bench directed the learned Assessing Officer to consider the entire gamut of the issue relating to the selection of MAM and analyse it afresh, first by determining the MAM and then analysing the transactions under the provisions of the TP.
We are of the considered opinion that it would be in the fitness of things to set aside the impugned order for this year also with a direction to the learned Assessing Officer to determine the MAM first and to analyse the transaction under the TP provisions. Needless to say that in view of the decision of Gemplus India (P) Ltd [2010 (10) TMI 184 - ITAT, BANGALORE] the assessee has to prove the actual rendition of various services by the AEs. We direct the learned Assessing Officer accordingly.
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