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2023 (7) TMI 1569
Territorial jurisdiction to entertain the application - whether the sub-contractor has got sufficient locus to move the writ court to compel the first contracting party to make payment to the second contracting part?.
Territorial jurisdiction to entertain the application - HELD THAT:- It is absolutely true that the entire cause of action with regard to the first contract between the appellant and BEML was outside the jurisdiction of this court. Both the appellant and BEML have their places of business well outside the territorial jurisdiction of the High Court. But, the other part of the cause of action which is certainly a large part of it, was the contract between BEML and IMECO which according to the averment in the writ petition was entered into in Calcutta within the jurisdiction of this court. This writ consists of several causes of action in a chain relating to execution of contracts and sub-contracts and their performance of the contract, payment, discharge and so on. A part of this chain is certainly located within the jurisdiction of this court. Therefore, this court had the territorial jurisdiction to entertain the writ. So, this point is also answered against the appellants.
Locus of sub-contractor to move the writ court to compel the first contracting party to make payment to the second contracting part - HELD THAT:- The appellant awarded a contract to BEML for supply and the fitment of longitude middle berths in 589 “GSCN coaches and 126 ACCN coaches”. BEML ltd. had sub-contracted the work assigned to them by the contract to IMECO ltd. Mr. Chaubey, learned Advocate for the appellant showed us Clause 7 of the agreement between the parties which did not allow sub-contracting - In this particular case sub-contracting by BEML to IMECO was approved and accepted by the appellant by their conduct. Having approved or acquiesced in this act the appellants are now estopped from contending that BEML had wrongfully sub-contracted the agreement to IMECO.
For whatever reason the Railways thought that there was no point going ahead with the agreement. The Railway Board by its letter dated 18th February, 2009 terminated the contract. This termination seems to have been accepted by BEML. The Railway Board by its decision on 30th March, 2009 stated that payment could be made to BEML for berths already manufactured and made ready but not fitted till the issue of the notification. BEML was asked to submit the “Rites” inspection certificate relating to the finished products manufactured prior to the cancellation of the agreement. This date was reckoned to be 24th February, 2009.
The appellant should make payment of the bills of BEML within two months of communication of this letter. BEML in turn will make payment to IMECO within a further period of one month.
Conclusion - i) The territorial jurisdiction of the Calcutta High Court upheld. ii) The writ court's authority to direct the appellant to release payments to BEML upheld, thereby enabling IMECO to receive its dues.
Appeal dismissed.
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2023 (7) TMI 1568
TP Adjustment - rendition of services or their benefit - HELD THAT:- Neither the AO nor the TPO nor the CIT(A) doubted either the actual rendition of services rendered by the AE or the utility of such services to the assessee. To this fact situation, the decision of EKL Appliances Ltd.[2012 (4) TMI 346 - DELHI HIGH COURT] is applicable on all fours as held it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the paragraphs which we have quoted above.
Even Rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B.
So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised.
Application of CUP as most appropriate method - The view taken by the Tribunal in the case of DCIT vs. M/s. Knorr Bremse India Pvt. Ltd. [2021 (1) TMI 1289 - ITAT DELHI] is relevant wherein as placed reliance on the decision of the Tribunal which was upheld [2019 (12) TMI 1630 - PUNJAB AND HARYANA HIGH COURT] to hold that when the learned TPO did not bring on record any instance where comparable services were provided to an independent enterprise in the recipient market, the CUP method was not the most appropriate method, but on the contrary, TNMM method would be most appropriate method, because it was difficult to apply the CUP method or the cost plus method in such situation. The Tribunal, accordingly, held that the TNMM was the most appropriate method in the absence of a CUP which is applicable where the nature of the activities involved, assets used, and risk assumed are comparable to those undertaken by an independent enterprise.
No decision contrary to the view taken by the Tribunal in the case M/s. Knorr Bremse India Pvt. Ltd., (supra), is brought to our notice. Hence, respectfully following the said decision of the Co-ordinate Bench of the Tribunal, we hold the issue in favour of the assessee.
It is true that resjudicata is not applicable to tax proceedings, but the Hon'ble Supreme Court held in many cases including Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] that it is not open for the Revenue to take various stands for various years and Rule of Consistency demands that in case of a particular assessee under identical circumstances, different views cannot be taken. This factor also goes against the Revenue. Therefore, based on the Rule of Consistency, rejection of the same for the years under appeal is unjustified.
Government of India reviewed the extant policy and decided to permit payments for royalty, lumpsum fee for transfer of technology and payments for use of trade mark/brand name on the automatic route i.e., without any approval of the Government of India and there is no cap for such payment as was there in the earlier press note. The authorities below are, therefore, not correct in referring to the press notes to determine the arm’s length price either at 8% or 7.5% of the sales.
Viewing from any angle, we find force in submissions advanced on behalf of the assessee and, therefore, find it difficult to sustain the orders of the authorities below. Consequently, we allow the grounds of appeal relating to transfer pricing matters for both the years.
Not allowing of set-off the brought forward business loss and double disallowance of the service tax - CIT(A) directed the AO to verify those issues and to adjust the set-off of brought forward business losses against the income of that assessment year and also to allow the service tax receivable. No grievance could be made out by the assessee on these aspects and hence they are dismissed.
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2023 (7) TMI 1567
Preferential transactions - Substitution of the Successful Resolution Applicant (SRA) in place of the Administrator for prosecuting applications under Sections 43 and 44 of the Insolvency and Bankruptcy Code (I&B Code) - HELD THAT:- The fact is that the application under Section 43 and 44 were filed against the Appellant subsequent to approval of the Resolution Plan which fact is not disputed. In the judgment APIL WADHAWAN VERSUS PIRAMAL CAPITAL & HOUSING FINANCE LTD. & ORS. [2023 (5) TMI 663 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], the question as to whether with regard to applications filed subsequent to approval of the plan by the Successful Resolution Applicant can be prosecuted, was considered and it was held that 'The submission which has been pressed by the learned Counsel for the Appellant is that avoidance applications, which were filed after approval of the Resolution Plan by the CoC, could not have been entertained. In the Code and the Regulations, there are no such provisions, which indicate that avoidance application filed after approval of the Plan by the CoC is to be rejected or not. It depends on the facts of each case and circumstances as to whether any application filed after approval of the Resolution Plan by the CoC can be considered or not. In the present case, we noticed that Resolution Plan has noted the pending avoidance applications.'
With regard to application filed subsequent to approval of plan by the CoC substitution of Successful Resolution Applicant in place of the Administrator was approved by NCLT which was also upheld by this Appellate Tribunal - In this case, the submission of learned counsel for the Appellant is that the transaction which have assailed against Appellant are on different footing and not impugned under Section 66, hence, they were required to be objectively considered by the Adjudicating Authority and it was only Administrator who could have objectively prosecuted.
Conclusion - The substitution of the SRA in place of the Administrator upheld.
Appeal disposed off.
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2023 (7) TMI 1566
Addition u/s 68 - Addition of share capital and premium in the course of assessment in absence of identity of the creditors, genuineness and creditworthiness of the entire transactions - AO stated that the share applicants are not having regular means of income, poor turnover and meagre income and transactions in the bank statements indicate that there is regular rotation of funds which shows that share applicants are accommodation entry providers - HELD THAT:- As per the provisions of Section 68 of the Act, the assessee needs to explain the nature and source of credit appearing in its books of accounts to the satisfaction of the ld. AO.
In this case, assessee has demonstrated successfully the nature of the alleged sum received during the year and the source of the said sum being received from the share applicants is named above along with complete evidences to explain the same. AO has not pointed out any specific error in all these documents and it is judicially well settled that where an assessee has discharged the primary onus cast upon it, it is the turn of the Assessing Officer to find out errors or shortcomings in such details filed by the assessee.
But since the AO has not found any such discrepancy in the details filed by the assessee and when all the share applicants are duly assessed to tax and they have also passed through scrutiny proceedings for the very same assessment year i.e., 2012-13, there remains no reason to invoke provisions of Section 68. Decided in favour of assessee.
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2023 (7) TMI 1565
Principles of natural justice - submission of appellant is that one more opportunity ought to have been given to the Appellant for final argument, which were not advanced on 26.06.2023 due to unavailability of arguing counsel - HELD THAT:- The order having already reserved by the Adjudicating Authority and request of the Appellant for setting aside order dated 26.06.2023 having been refused, we are of the view that the Appellate Court cannot issue a direction to the Adjudicating Authority, in facts of the present case, for rehearing. Appellant has already filed its Reply and Written Submission, which was permitted by the Adjudicating Authority. There are no reason that reply and written submission shall not be considered by the Adjudicating Authority while pronouncing the order.
Appeal dismissed.
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2023 (7) TMI 1564
Forum shopping - Direction to preserve a sum of Rs.5 Crores in the form of an FDR in the name of SMC till the passing of the final award, within two weeks of the order - Section 17 of the Arbitration and Conciliation Act, 1996 - scope and ambit of jurisdiction of this Court under Section 37(2) of the 1996 Act - violation of principles of natural justice.
Scope and ambit of jurisdiction of this Court under Section 37(2) of the 1996 Act - HELD THAT:- From a reading of the observations of the Supreme Court in Wander Ltd. v. Antox India (P) Ltd. [1990 (4) TMI 280 - SUPREME COURT], it is clear that an Appellate Court shall not interfere in exercise of discretion by the Court of first instance and substitute its views except where the discretion is exercised arbitrarily, capriciously or where the decision impugned is perverse and Court has ignored the settled principles of law governing grant or refusal of interim orders. It is not open to re-assess the material and if the view taken by the Court below is a reasonable or a plausible view and all relevant material has been considered, no interference is warranted solely on the ground that the Appellate Court may have taken a different view on the same set of facts and circumstances.
In Ascot Hotels and Resorts Pvt. Ltd. and Another v. Connaught Plaza Restaurants Pvt. Ltd., [2018 (3) TMI 2053 - DELHI HIGH COURT], this Court reiterated the above principles. In Bakshi Speedways v. Hindustan Petroleum Corporation [2009 (8) TMI 1306 - DELHI HIGH COURT], Court observed that the principles applicable to an appeal under Section 37(2)(b) of the 1996 Act ought to be the same as principles in an appeal against an order passed under Order XXXIX Rules 1 and 2 CPC i.e. unless the discretion exercised by the Court against whose order the appeal is preferred is found to have been exercised perversely and contrary to law, the Appellate Court ought not to interfere merely because the Appellate Court would have exercised its discretion otherwise.
From a conspectus of the aforesaid judgments, it is explicitly and luminously clear that while exercising power under Section 37(2)(b), the Court is required to maintain an extremely circumspect approach keeping in mind the object and purpose of the legislation and Section 5 of the 1996 Act which is a clear pointer to the legislative intent of keeping the Court’s interference at the minimum.
Once the scope of interference by this Court in an order passed by the learned Arbitrator under Section 17 of the 1996 Act is understood, it is necessary to look at the scope of power of the Arbitral Tribunal under Section 17, which to my mind is an issue no longer res integra. Section 17 of the 1996 Act has been specifically enacted by the legislature to provide to a party, during the arbitral proceedings or after the award is made but before it is enforced, a right of seeking preservation of the subject matter of the arbitration agreement and/or securing the amount in dispute in arbitration. Post the amendment of Section 17 of the 1996 Act, it is in the same province as Section 9 of the Act, as held by the Supreme Court in a recent decision in Arcelor Mittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., [2021 (9) TMI 731 - SUPREME COURT] and bestows power on the Arbitral Tribunal to make orders of interim protection on a wider canvass.
In the limited scope and confines of jurisdiction that the Court has over the interim order passed by the learned Arbitrator, this Court does not find that the same warrants interference. Be it ingeminated that whether it is Section 9 or 17 of the 1996 Act, the ultimate consideration, applying the law laid down in Ajay Singh v. Kal Airways Private Limited and Others [2017 (7) TMI 1078 - DELHI HIGH COURT], is doing complete and substantial justice between the parties. The impugned order has not resulted in grant of an order in the nature of mandatory injunction to pay any amount to SMC and nor has the learned Arbitrator directed a deposit. HHEC has only been directed to preserve the amount in the form of an FDR in the name of SMC for securing the amount being part of the subject matter of the arbitration proceedings. The learned Arbitrator has exercised a power statutorily conferred under Section 17(1)(ii)(b) and the order passed is a well-reasoned order balancing the equities between the parties. The impugned order is far from being perverse or in excess of jurisdiction and cannot be termed as a product of arbitrary exercise of discretion applying the parameters circumscribing the limited window of interference under Section 37(2) of the 1996 Act.
Conclusion - The Arbitrator's order to preserve Rs.5 Crores was upheld as a valid exercise of discretion under Section 17, aimed at securing the subject matter of the dispute.
Appeal dismissed.
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2023 (7) TMI 1563
Refund claim - principles of unjust enrichment - whether the Department could raise an additional legal ground in the appeal proceedings before the Tribunal, based on a subsequent decision by the Hon'ble Apex Court in the case of ITC Ltd. Vs. CCE, Kolkata? - HELD THAT:- It is observed from the decision of M/s. Vivo Mobile India Pvt. Ltd. [2020 (12) TMI 962 - CESTAT NEW DELHI] that in Gannon Dunkerley [2020 (7) TMI 357 - CESTAT NEW DELHI], this Bench of the Tribunal had examined, at length, the relevant statutory provisions to determine whether an additional ground can be taken up under rule 10 of the 1982 Rules in an Appeal before the Tribunal. Though it is correct, as has been contended by learned Senior Counsel appearing for Vivo Mobile, that the ground that is sought to be added is contrary to a ground already taken in the Appeal since initially a ground was taken in the Appeal that the decision relied upon by the Deputy Commissioner was in connection with reassessment of bills of entry and not unjust enrichment, but still in view of the decision of the Supreme Court in ITC limited [2019 (9) TMI 802 - SUPREME COURT (LB)], it is considered appropriate, in the facts and circumstances of the case, to permit the Appellant to raise an additional ground in the two Appeals in view of the principles of law laid down by this Bench in Gannon Dunkerley.
Conclusion - i) Pure questions of law can be introduced at any stage of the adjudication process. ii) The introduction of an additional legal ground does not pre-determine its outcome on merits, which will be addressed during the substantive appeal hearing.
Application allowed.
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2023 (7) TMI 1562
Joint Venture Agreement (JVA) is capable of specific performance or not - alleged failure on the part of the respondent nos.2 to 8 to execute the sale deeds, as contemplated in the Joint Venture Agreement - HELD THAT:- The impugned order does directs the appellant and the respondent nos.2 to 8 to maintain status quo in respect of title and possession of the land in question and refrain from changing the character of the property so that no further third party right/equity are created in respect thereof. No fault whatsoever can be found with these directions - Further, the impugned order directs that if the appellant chooses to carry on factory operations or other commercial activity on the three acres of land comprising of the property in question, it will not be open to the appellant to claim any special equity by reasons thereof.
The learned Sole Arbitrator has clarified in the impugned order itself that all the observations made therein are prima facie and shall not operate to the prejudice of any of the parties at any subsequent stage of proceeding. The entire matter is still at large before the learned Sole Arbitrator. It has been informed by respective counsel, that the parties are in the process of adducing evidence before the learned Sole Arbitrator. The impugned order does not foreclose the right of any of the parties to the arbitration to place relevant material on record and/or take every contention as may be available under law before the learned Sole Arbitrator, at the time of final arguments. As such, the various legal contentions raised by the learned counsel for the appellant regarding the Joint Venture Agreement being not capable of specific performance and/or as to whether the appellant’s rights, as an alleged bonafide purchaser can be interdicted or not, are all issues which are yet to be determined by the learned Sole Arbitrator.
The law is also well settled that this court while exercising jurisdiction under Section 37 of the Act would be loathe to interfere with an interim measure of protection granted by an Arbitral Tribunal, particularly when the order passed under Section 17 is well reasoned and based on a thorough and minute examination of the matter, as in the present case.
Conclusion - JVA was capable of specific performance, subject to the final determination by the arbitrator.
Appeal dismissed.
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2023 (7) TMI 1561
Penalty u/s 43 of Black Money Act - non disclosure of foreign asset in schedule FA of the Income-tax returns - plea of the assessee is that the impugned assets primarily belonged to the husband of the assessee who has disclosed the same in the return of income in Schedule FA and therefore it can not be said that the details of the impugned assets are not furnished
HELD THAT:- As plain interpretation of the words used in section 43 means that the legislature has given a discretionary power to the AO to decide the levy of penalty after considering all relevant factors including the purpose and object the statute seeks to achieve. The discretion to impose a penalty puts the AO under a corresponding obligation to exercise the said discretion with proper regard to the facts and circumstances of the case in a holistic manner and in totality.
In assessee's case, the assets are already disclosed by assessee's husband in his return of income which is being scrutinized and accepted by the revenue. Therefore, the assets in our view cannot be termed as black money.
There is no reason for the assessee to intentionally not furnish the details of the same assets except a bonafide belief that the details are already furnished by her husband who is the primary owner and that the assessee being secondary owner is not required to furnish the details once again.
Therefore in our considered view a reasonable conclusion could be drawn that the lapse in reporting foreign investments in Schedule FA of the return of income by the assessee is bona fide and devoid of any ulterior motives. Accordingly AO is not justified in exercising the discretionary power just because it would be lawful to do so.
Further in the present case there are sufficient prima facie evidences well demonstrated by the assessee not to doubt bona fide intentions and therefore it is not just and fair for the assessee to face stringent penal consequences under BMA. Accordingly the penalty levied u/s 43 of BMA is hereby deleted. Decided in favour of assessee.
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2023 (7) TMI 1560
Levy of penalty u/s 43 of the Black Money Act - non disclosure foreign investments in the return of income - HELD THAT:- In the instant case, the assessee has admitted that he has failed to report overseas investments made during the period relevant to AY 2016-17. Assessee has made investments in his own name, as well as, in the name of his children including minor children.
Though the assessee has disclosed investments in his own name in Schedule FA in the return of income, the amount of investment mentioned against assessee’s own name is not accurate.
Instead of Rs. 5,50,44,320/-, the assessee has disclosed investment of Rs. 3,91,04,805/- only. Thus, there is furnishing of inaccurate particulars of investments in assessee’s own name and non-reporting of investments in the name of children. The assessee has contended that non-reporting is a bonafide mistake, nevertheless, it is unsubstantiated.
The contention of assessee is that investments have been made from source of funds duly accounted in books and no black money is involved for the purpose of making investments overseas. The said contention of assessee may be true, but penalty u/s 43 of BMA is levied for non-reporting of overseas investments and not for making investments from unaccounted money. The provisions of section 43 of BMA may appear to be relentless, but a plain reading of section leaves no scope of gateway to delete penalty even if overseas investments are made from known sources, but not reported in Schedule FA of return of income.
Taking into consideration entirety of facts and the provisions of section 43 of BMA, we find no infirmity in the impugned order. Appeal of the assessee is dismissed.
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2023 (7) TMI 1559
Sanction of Scheme of Amalgamation - Sections 230 & 232 of the Companies Act, 2013, read with Section 66 of the Companies Act, 2013 - HELD THAT:- The proposed Scheme contemplated between the Petitioner Companies, appears to be prima facie in compliance with all the requirements stipulated under the relevant Sections of the Companies Act, 2013. As the representation from the Statutory Authorities has been duly addressed by the Petitioner Companies and since all the requisite statutory compliance have been fulfilled, this Tribunal sanctions the proposed Composite Scheme of Amalgamation and Arrangement appended as Annexure-A1 of the Petition.
The scheme is sanctioned - petition allowed.
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2023 (7) TMI 1558
Unexplained cash credits u/s 68 protective and substantive additions made by AO - HELD THAT:- As following the order of Tribunal in the case of Shri Anand Kumar Jain [2023 (5) TMI 1186 - ITAT DELHI] deletion of protective addition on account of unexplained cash credits is upheld and ground no. 1 of revenue is dismissed for AY 2012-13.
Assessee being a conduit concern, would have earned commission income for the transactions - As per explanation and submissions of assessee, whole claim of expenses made in the P&L accounts towards earning of commission income shall be allowed and the net rate of commission earned by the assessee i.e., @0.47% of total turnover of accommodation entries after elimination of circular transaction is required to be add as income of assessee from commission. AO is therefore directed to give effect to the above order. Accordingly, ground no. 2 of revenue is allowed reversing the first appellate order.
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2023 (7) TMI 1557
TP Adjustment - transfer value of power by the captive power plant at Saharanpur - computing arm’s length price for transactions of the transfer of power by the eligible unit to the non-eligible unit - HELD THAT:- We find that the decision of the tribunal in the assessee’s own case for the assessment year 2016-17 [2021 (11) TMI 1 - ITAT KOLKATA] is squarely applicable to the present case on hand. Ld. DRP has also referred to this decision of the tribunal given for assessment year 2016-17 observing that the issue and objections are identical to Assessment Year 2016-17, the ld. DRP has only directed the assessing officer to ascertain the legal status of further appeal by the revenue and in case the matter has attained finality and the decision of this tribunal has been accepted by the revenue, the adjustments/additions shall be deleted if not then adjustment/addition is upheld until such finality is attained.
As submitted by assessee, the revenue’s appeal against the decision of the Tribunal for Ay 2016-17 is still pending and that the Hon’ble High Court is yet to decide the said issue and until such time the order of this tribunal in the assessee’s own case for the assessment year 2016-17, shall be binding.
Thus, set aside the order of the lower authority, uphold the benchmark analysis undertaken by the assessee and delete the alleged downward transfer pricing adjustment and allow the effective grounds raised by the assessee.
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2023 (7) TMI 1556
Disallowance of damages and settlement expenses - settlement documents pertaining to sale of share is not plausible expenses by the assessee before the AO - HELD THAT:- It is pertinent to note that the settlement arrived at by the assessee with the Ruparel Group was in compensatory nature and in respect of damages as well as civil suit and criminal proceedings also part of the settlement expenses. Therefore, the observations made by the AO that the same is not of compensatory nature appear to be incorrect. Thus, the CIT(A) was right in deleting the disallowance of damages and settlement expenses. Ground no.1 of Revenue’s appeal is dismissed.
Disallowance on account of surrender of rights in redemption of OCCPS - cessation of liability - DR submitted that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession is taxable income as per provisions of Section 28(iv) - HELD THAT:- As per the submissions of the Ld. AR., the Assessing Officer’s treatment of the same as cessation of liability is not justifiable as the same has been done pending the availability of funds for the redemption of capital by the assessee’s advisory. The beneficial ownership of these OCCPS has been transferred in favour of a trust of which the Company is the beneficiary and when the accounting effect of such waiver only in respect of these OCCPS are made at that time when such shares will be redeemed. Therefore, the AO’s observations is not justifiable as the right of conversion on these OCCPS lapsed on 22nd August, 2003. Thus, ground no.2 of Revenue’s appeal is dismissed.
Addition of delayed completion of project as capital receipt as claimed by the assessee - DR submitted that if it is a capital receipt against the cost of power plant, then the assessee would have to reduce this amount from the cost of Plant & Machinery for the purpose of depreciation - HELD THAT:- It is pertinent to note that the issue contested by the Revenue is already decided in favour of the assessee in assessee’s own case by the Hon’ble Apex Court [2010 (7) TMI 11 - SUPREME COURT] From the perusal of records also the assessee has received compensation for the liquidated damages for delayed completion of project which is related to assets of the Company. Therefore, the same is part of capital in nature. Thus, ground no.3 of Revenue’s appeal is dismissed.
Addition being differential royalty on Basalt considering it as allowable deduction - DR submitted that the Company has unauthorisedly procured Basalt Powder from certain suppliers without payment of Royalty - HELD THAT:- It is pertinent to note that the dispute centres around treating the recovery of differential royalty on Basalt by the Government of Gujarat as in the nature of Penalty. But the assessee’s contention is that the same is not penalty but it is value of minerals consumed by the assessee in production process appears to be correct from the records. The amount recovered from the assessee was made in direct proportion of the quantum of the basalt consumed and therefore it was it was part of consumption cost of minerals in the hands of the assessee. The decision of Ahmedabad Cotton Manufacturing Company Limited [1993 (10) TMI 1 - SUPREME COURT] is apt in assessee’s case. Therefore, ground no.4 of Revenue’s appeal is dismissed.
Disallowing additional depreciation claimed on new Plant & Machinery - DR submitted that the assessee has claimed additional depreciation on power plant which is not a Plant & Machinery eligible for additional deprecation because power is not an article or thing and, therefore, there is an excess claim being additional depreciation - HELD THAT:- The assessee during the course of assessment proceedings as well as before CIT(A) submitted that additional depreciation provided on Power Plant was subsequently reversed which was also apparent in the details furnished by the assessee before the AO. Claim of additional depreciation was in respect of new Plant & Machinery viz. Fly Ash Handling System, Air Compressor, 36KV Power Control Panels, X-ray Spectrometer Analyser etc. which was allowable to the assessee. Thus, the CIT(A) was right in deleting the same. Ground no.5 of Revenue’s appeal is dismissed.
Disallowance of Club Expenses - Treated as non-business and personal use - HELD THAT:- As pertinent to note that this issue is covered in assessee’s favour in assessee’s own case for A.Y. 1996-97. Besides this, the expenditure incurred at club as membership and other charges viz. entrance fee, subscription, cost of club service etc. were not disputed by the Assessing Officer as well as by the CIT(A). Therefore, ground no.6 of Revenue’s appeal is dismissed.
Addition of license/registration fees - DR submitted that the company’s business is of manufacture and sale of cement and clinkers, membership fee paid to Indian Energy Exchange Limited for DRID connected client and for processing & registration fee for approval of sale of power is not in consonance with the business of the assessee - HELD THAT:- It is pertinent to note that from the perusal of records it appears that the said electricity line is solely used by the assessee and, therefore, the expenses incurred related to sale of power registration and membership is for the business purpose only. Thus, the CIT(A) was right in deleting the said disallowance. Hence, ground no.7 is dismissed.
Disallowance u/s 40A(9) - DR submitted that the company is contributing every month almost uniform amount as its contribution and also for maintenance charges - HELD THAT:- It is pertinent to note that this issue is covered in favour of the assessee in assessee’s own case for A.Y. 1992-93. The expenditure incurred by the assessee on the welfare of assessee’s employees and related association is in the nature of staff welfare and not in the nature of any contribution u/s 40A(9). The decision of Tribunal is relevant in assessee’s case as the same is in assessee’s own case decided for A.Y. 1992-93. The CIT(A) was thus right in deleting the said disallowance and hence there is no need to interfere with the findings of the CIT(A).
Disallowance u/s 14A - HELD THAT:- It is pertinent to note that the assessee has made disallowance in computation of income and there is no dispute by the Revenue Authorities that total exempt income as shown by the assessee is Rs. 5,000/-. Thus, the CIT(A) was right in restricting the disallowance of Rs. 6.66 Lakhs as against Rs. 88.35 lakhs under Section 14A of the Act. Thus, ground no.9 is dismissed.
Disallowance u/s 40(a)(ia) - liable for short deduction besides late payment interest - HELD THAT:- The fact that the assessee was not given opportunity to file the details and from the perusal of records, it appears to be correct that the assessee has already made disallowance. Therefore, this tantamount to double disallowance. There is no need to interfere with the findings of the CIT(A). Ground no.10 of Revenue’s appeal is dismissed.
Disallowance being depreciation claim on electricity line - HELD THAT:- It is pertinent to note that the ownership of the said electricity line is in the hands of PGVCL and, therefore, the alternate argument with submission made by the Ld. AR that entire cost should be allowed as revenue expenditure is more plausible. Thus, the AO is directed accordingly to treat the same as revenue expenditure.
Disallowance for contribution made towards PWD Road - HELD THAT:- It is pertinent to note that the road made by the PWD was in fact for the smooth running of assessee’s business and, therefore, assessee’s contribution towards construction of 4 lane road in order to facilitate infrastructure requirement in the surrounding area should have been allowed. Thus, grounds no.3 of assessee’s appeal is allowed.
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2023 (7) TMI 1555
Validity of the termination of the contract by the petitioner - impugned award contained any or adequate findings with regard to the invalidity of the purported termination of the Contract by the petitioner - award of damages ought to have been limited to ₹5 lakhs in terms of Clause 14.6 of the Contract - quantification of damages in the impugned award is vitiated by lack of evidence or not.
Does the award contain any or adequate finding regarding invalidity of termination? - HELD THAT:- The learned arbitrator has come to a clear and unequivocal conclusion against the petitioner’s contention that it was not the same as “Team Satyam”. Relying upon documentary evidence, he has found that “Team Satyam” is the business of the petitioner itself. In coming to this finding, the learned arbitrator has specifically relied inter alia upon Ex. PW-1/F which is a communication of the petitioner dated 22.01.2009, well before the termination on 27.02.2010. A report of the respondent’s representative regarding a visit to the petitioner’s centre on 24.02.2010, prior to the termination, was also exhibited by the respondent as Ex. PW-1/M. This report also supports the conclusion of the learned arbitrator with regard to breach of the non-compete clause by the petitioner.
The impugned award in the present case contains, at the very least, an implied finding that the termination by the petitioner was invalid.
Interpretation of Clause 14.6. - HELD THAT:- The learned arbitrator’s interpretation is, in these circumstances, a possible reading of the Contract. Unless an award can be characterized as implausible or perverse, in the sense that no reasonable person could have so interpreted the clause, the learned arbitrator’s interpretation of a contract is to be given deference - there are no infirmity in the impugned award to the extent that it holds Clause 14.6 to be inapplicable.
Quantification of damages - HELD THAT:- The learned arbitrator has quantified the damages on the basis of the respondent’s earnings from the Contract during the period 01.04.2009 to 03.03.2010 i.e. during the period the contract was operative. In addition, the learned arbitrator awarded a sum of ₹1,50,000/- towards arrears of license fee and ₹2,21,864/- towards payment for the study material supplied by the respondent to the petitioner. However, he has rejected the respondent’s claim for further damages on account of infringement of intellectual property rights, expenses on granting of a third-party license, damages for mental pain and interest - In the present case, the findings of the learned arbitrator are based upon a reasonable indicator, i.e. the earnings which actually accrued to the respondent during the time the very same contract was worked, and there are no reason to interfere with the same.
Conclusion - i) The arbitral award contained an implied finding that the termination by the petitioner was invalid, and the arbitrator's reasoning was sufficient to support this conclusion. ii) The interpretation of Clause 14.6 by the arbitrator was deemed plausible, and this interpretation is deferred, holding that the damages were not limited to 5 lakhs. iii) The quantification of damages was upheld, finding the arbitrator's method of using past earnings as a benchmark to be reasonable and supported by evidence.
There are no ground to interfere with the impugned award under Section 34 of the Act. The petition is therefore dismissed, but with no order as to costs.
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2023 (7) TMI 1554
Scrutiny assessment under the ‘Limited Scrutiny’ under CASS (Computer Aided Scrutiny Selection) for verification of ‘Cash withdrawal’ - additions to the assessee's income on issues not covered under the 'Limited Scrutiny' parameters, without converting the assessment into 'Complete Scrutiny'
HELD THAT:- Asessee was selected for limited scrutiny under CASS and statutory notices were issued and duly served upon the assessee. The reason for which the case of the assessee was selected for limited scrutiny was cash withdrawals during FY 2016-17.
We note that during the course of assessment proceedings the said issue was not discussed at all, however, AO examined the issue of suppression of sales by the assessee on the basis of bank account maintained with SBI, Kaliganj and found that the turnover of the assessee was only Rs. 1,29,44,244/- as against the total credits in the bank account amounting to Rs. 7,84,62,187/-.
Accordingly, AO estimated the income @ 4.34% of the undisclosed sales of Rs. 6,25,17,943/- which is apparently and arguably not the issue in the limited scrutiny.
In our opinion, the said action of Ld. AO is in violation of the CBDT Circular No. 5/2016 dated 14.07.2016 which provides for the procedure to be followed for conversion of limited scrutiny into the complete scrutiny. In our opinion, the action of Ld. AO is not sustainable as the same is in violation of the said circular.
The assessment framed by AO is invalid and is hereby quashed. Accordingly, the additional ground raised by the assessee is allowed.
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2023 (7) TMI 1553
Doctrine of forum conveniens - Jurisdiction of Madras High Court to entertain a writ petition filed by the petitioner, who participated in an e-auction from Chennai - HELD THAT:- No part of cause of action has arisen within the jurisdiction of this Court at Chennai. Merely because the petitioner is located in Chennai and participated in the E-auction from Chennai and made payments from Chennai, the Court will not entitled the petitioner to invoke the jurisdiction of this Court. The Court will be guided by the doctrine of forum conveniens has recognized by the Hon'ble Supreme Court in KUSUM INGOTS & ALLOYS LTD. VERSUS UNION OF INDIA [2004 (4) TMI 342 - SUPREME COURT]. The doctrine is being followed universally by all the Courts in the Courts.
The party invoking the writ jurisdiction has to disclose that the integral facts pleaded in support of the cause of action do constitute a cause empowering the high court to decide the dispute and that, at least, a part of the cause of action to move the high court arose within its jurisdiction. Such pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted.
In this case, the Officers of the respondents are located in Vishakapatnam and in Nellore both within the jurisdiction of the High Court of Andhra Pradesh. Any clarification will have to be furnished only by these Officers from Andhra Pradesh of the respondents herein. Merely because, the first respondent also has an office in Chennai Ipso facto would not entitle to the petitioner to invoke the jurisdiction of this Court under Article 226(2) of the Constitution of India.
The writ petition is therefore liable to be dismissed.
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2023 (7) TMI 1552
Reopening of assessment - Scope of new regime - notice under the old regime - notice issued u/s 148 is invalid under the amended provisions - HELD THAT:- The assessment order which has been passed on 24.03.2022 is in the teeth of the judgment of Hon’ble the Supreme Court in the case of Union of India Vs. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT].The order does not survive in the eye of law. Consequently, all subsequently demand notices, which have been issued also are rendered ineffective and inoperative in law.
What survives is an order passed u/s 148A (d) on 26.07.2022 under the new regime of law after amendment in the Income Tax Act with effect from 01.04.2021.
Therefore, in view of the above, the appeal which has been filed by the petitioner assailing legality and validity of scrutiny assessment order dated 24.03.2022 is also rendered infructuous. It goes without saying that the pre deposit amount, if any, made by the petitioner while filing appeal against the order dated 24.03.2022 is required to be refunded forthwith to the petitioner. The impugned demand notice dated 24.03.2022 is also rendered ineffective and inoperative in law.
This petition is accordingly partly allowed declaring the scrutiny assessment order dated 24.03.2022 as also demand notice dated 24.03.2022 ineffective and inoperative in law. The pre-deposit amount, if any, shall be refunded to the petitioner.
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2023 (7) TMI 1551
Exemption u/s 11 - exemption disallowed on the ground that registration u/s 12AA granted to the assessee stood cancelled - what's the charitable nature of activities carried out by assessee in terms of Section 2(15)? - as decided by HC [2022 (8) TMI 1400 - ALLAHABAD HIGH COURT] for the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on noncommercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature.
Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11.
HELD THAT:- In the light of the decision in the case of Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT] and as corrected by the order [2022 (11) TMI 255 - SUPREME COURT] the present Special Leave Petition stands disposed of in terms of the said decision. Pending application also stands disposed of.
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2023 (7) TMI 1550
Sufficient time to comply with Show cause notice - mandation of minimum seven-day notice period unless curtailed due to an expiring limitation period - HELD THAT:- Whether there is any CBDT provision in Income Tax Act, 1961 or the rules having empowered the CBDT to issue a directive on dispensation of requirement to give show cause notice on earlier omission by assessee in the proceeding. Nothing could be shown.
It transpires that revenue was mandated to give the show cause notice and on having given it was bound by directions made by CBDT on reasonable time for the assessee to answer. The statement in relied on passage in the counter saying that though compliance date was 16th December, 2022, scrutiny order was passed on 23rd December, 2022 after 11 days and assessee did not comply till then, demonstrates that there is no basis for curtailment of the response time.
We set aside and quash impugned assessment order and demand. The show cause notice is restored for being replied to. Assessee is to answer by 20th July, 2023, failing which scrutiny order dated 23rd December, 2022 culminating in impugned assessment order and demand will all stand automatically restored.
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