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2015 (5) TMI 1247
TDS u/s 194C - Joint Venture responsibility to deduct the TDS on the payments made to its constituents for the work executed by them assessee has given a sub-contract to its constituents - assessee was required to deduct TDS on the payments - AO has held the assessee to be in default u/s.201(1) - HELD THAT:- As undisputed fact that the deductee has already paid the taxes on the payments received from the JV. Since the tax has been paid on the receipts by the deductee, the deductor cannot be held to be assessee in default.
In this regard a reference was made to the orders of the Tribunal in case of Raja Chkravarty [2015 (8) TMI 753 - ITAT LUCKNOW] and Rajeev Kumar Agarwal [2014 (6) TMI 79 - ITAT AGRA] in which it has been held that once the deductee has made the payment of taxes on the receipts the deductor cannot be held to be assessee in default. Therefore, on both counts, the assessee cannot be held to be in default u/s. 201(1) of the Act.
Interest charged u/s. 201(1A) cannot be charged once it is held that there is no liability to deduct the TDS on the payments made by the assessee to its constituents. It is irrelevant that in few assessment years, the assessee has deducted the TDS on payments made to its constituents. If the assessee has done something wrong, it does not make him responsible to commit mistake in succeeding years
Joint Venture is not responsible to deduct the TDS on the payments made to its constituents for the work executed by them in the light of the facts, where the Joint Venture was formed to obtain the contract from the Government and the contract was executed by the constituents. We, therefore, of the view in the instant case that, the assessee was not liable to deduct the TDS, therefore, he cannot be held to be in default and liable to be charged interest u/s. 201(1A) - Appeals of the assessee are allowed.
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2015 (5) TMI 1246
Dishonor of Cheque - discharge of legally enforceable debt or not - security cheques and could not form the basis of a complaint under Section 138 of the NI Act - HELD THAT:- The parties, admittedly, recorded the outstanding liability of the accused, existing on the date of the execution of the MOU (Ex. CW-1/4). In this light, it does not stand to reason as to why they would not record the repayment of the amount of Rs. 90,000/- in some form, if the money had actually been so returned by the accused to the complainant. Pertinently, CW-1 in his deposition stated that at the time of repayment of Rs. 1.5 lakhs in three instalments of Rs. 50,000/- each, not only three security cheques were returned by the complainant to the accused, but the accused also got the vouchers signed from the complainant. On this aspect, there was no challenge raised by the accused during the course of the complainants cross examination - it stands established beyond all reasonable doubt that the debt of Rs. 1.50 lakhs was outstanding and payable by the accused to the complainant when the three cheques in question were presented for payment.
Whether the complaint of the appellant was maintainable under Section 138 of the NI Act since the cheques in question were "security cheques"? - HELD THAT:- It has come in evidence that the cheques (Ex. CW-1/1, CW-1/2 & CW-1/3) were all filled up in all respects by the accused at the time of their being delivered to the complainant, simultaneously with the execution of the MOU (Ex. CW-1/4). The said original cheques are placed on the Trial Court Record which has been summoned and perused, and it is clear to the naked eye that they had been filled by the same person, and in the same ink. It is not even the case of the accused that these cheques were blank when given to the complainant, or that the appellant/complainant had filled them up subsequently. Even otherwise, merely because the cheque may be blank in some or all respects (except that it bears the signatures of the drawer), and the blanks may have been filled in by the drawee subsequently, that by itself does not invalidate the cheque. It cannot be said that a complaint under Section 138 NI Act would not lie in respect of such a cheque, consequent upon its dishonor for reason of insufficient funds.
There is no magic in the word "security cheque", such that, the moment the accused claims that the dishonoured cheque (in respect whereof a complaint under Section 138 of the Act is preferred) was given as a "security cheque", the Magistrate would acquit the accused. The expression "security cheque" is not a statutorily defined expression in the NI Act.
In ICDS. LTD. VERSUS BEENA SHABEER [2002 (8) TMI 577 - SUPREME COURT], the cheque in question had been issued by the guarantor (wife) of the principal debtor (husband) in respect of a hire purchase agreement entered into by the principal debtor with the complainant for purchase of a car. The cheque in question was issued by the guarantor towards part payment to the appellant/complainant - in this case Supreme Court laid emphasis on the use of the word, 'any'-which suggests that, if, for whatever reason a cheque drawn on an account maintained by the drawer with the banker in favour of another person for the discharge of any debt or other liability is dishonoured, the liability under Section 138 NI Act cannot be avoided. The Supreme Court also emphasized that the legislature had been careful enough to use not only the expression "discharge, in whole or in part, of any debt", but has also included the expression 'other liability' in the language of Section 138 NI Act. The Supreme Court held that the issue regarding the liability of a guarantor and the principal debtor being co-extensive, was out of purview of Section 138 of the NI Act and did not call for any discussion.
In Sai Auto Agencies through its partner Dnyandeo Ramdas Rane v. Sheikh Yusuf Sheikh Umar, [2010 (2) TMI 1243 - BOMBAY HIGH COURT], the defence of the respondent/accused was that, in relation to purchase of a tractor and equipments from the appellant, five blank cheques were given only as security. The respondent claimed that the complainant had already received the entire purchase consideration, and that the cheque in question was without consideration. The Court rejected the defence of the accused that the entire consideration stood paid to the appellant supplier.
Thus, the defence that the cheques in question Ex. CW-1/1, CW-1/2 and CW-1/3 were issued as "security" cheques has no force in the facts and circumstances of this case, as, on the date when the said cheques were issued simultaneously with the execution of the MOU (Ex. CW-1/4), the debt of Rs. 1.5 lacs was outstanding. The appellant was well within his rights to enforce the security in respect whereof the cheques in question were issued and to seek to recover the outstanding debt by encashment of the said cheques. Since the cheques in question were dishonoured upon presentation, the accused suffered all consequences as provided for in law and the appellant became entitled to invoke all his rights as created by law - the appellant was entitled to invoke Section 138 of the NI Act; issue the statutory notice of demand, and; upon failure of the accused to make payment in terms of notice of demand - to initiate the complaint under Section 138 of the NI Act.
The learned Magistrate has returned findings of fact which are palpably wrong; its approach in dealing with evidence is patently illegal; its decision is based on an erroneous view of the law, and; the impugned judgment, if sustained, would lead to grave miscarriage of justice - the impugned judgment is set aside - accused is convicted of the offence under Section 138 of the NI Act.
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2015 (5) TMI 1245
Maintainability of the suit on the ground that the appropriate remedy available to the plaintiffs - Section 34 of the Act specifically bars the jurisdiction of a civil court or not - suit is nothing but an endeavour to block the process of recovery initiated by the Bank or not - forum shopping or not - whether the nature of fraud, as alleged by the plaintiffs, could form the basis of maintainability of the present suit under the exception carved out by the Supreme Court in MARDIA CHEMICALS LTD. VERSUS UNION OF INDIA [2004 (4) TMI 294 - SUPREME COURT]?
HELD THAT:- On a meaningful reading of the plaint as a whole, it appears that in sum and substance, the plaintiffs‟ case is that the letter dated 31.12.2012 was not issued by them and that it was fraudulently created by the Bank, hence the transfer of monies from the plaintiffs‟ account to M/s. Tulip Telecom Limited was wrong and the said amount was depleted from their account only to classify it as an NPA. This according to the plaintiffs amounts to fraud and would form the basis of the maintainability of the present suit.
In the present case, the monies, i.e., Rs. 20 crores had clearly been credited from the plaintiffs‟ Term Loan Account to their Current Account. Thereafter, Rs. 19.89 crores was transferred to Tulip. By any standard of reckoning an amount of Rs.19.89 crores is not small and transfer of such amounts would send alarm bells ringing for any account holder especially like the plaintiffs, whose annual turnover is in the range of Rs.600.00 crores. Bank too are known to be especially careful about high-value accounts and the transaction made therein.
This Court is of the view that if a standard classic defence, such as fraud by the Bank, is allowed to form the basis for maintaining a suit, then the provisions of the Act would become redundant, all the more so in the face of the express stipulation in Section 34 thereof - the Court cannot be oblivious to whether the allegations of fraud and misrepresentation are made only for the purpose of creating cause of action, thereby leading to the maintainability of the suit.
This Court is also of the view that in the present case, the plaint does not aver any complicated facts leading to the case of fraud or how the measures adopted by the Bank are fraudulent/absurd/untenable. There is nothing in the plaint which would lead to the conclusion that the plaintiffs‟ case falls under the exception carved out by Mardia Chemicals, i.e., the plaintiffs‟ grievances ought to be determined in a suit - In the facts and circumstances of the case, this Court is of the view that the issue of fraud sought to be raised in this suit can well be agitated in proceedings under Section 17 of the Act since the plaintiffs evidently fall in the category of “any person” thereof.
This Court is of the view that the Supreme Court in Mardia Chemicals has emphasised that only to a limited extent, the jurisdiction of civil courts can be invoked. This import of the sentence is evident from the expression that recourse to civil courts will only be to a very limited extent, i.e., only when the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever.
This Court is of the view that the ground of fraud raised by the plaintiff can be duly addressed in proceedings under Section 17 of the SARFAESI Act, 2002 and the said plea of fraud, in the peculiar facts and circumstances of the case, does not fall in the exception carved out in Mardia Chemicals - the suit is not maintainable and is accordingly, dismissed.
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2015 (5) TMI 1244
Revision u/s 263 - deduction under sec.80IA - Scope of meaning of the word “derive” - interest income earned from deposits - whether the interest income earned by the assessee on the fixed deposits is business income derived from the industrial undertaking or it is an income from other sources? - HELD THAT:- In the case of Pandian Chemicals [2003 (4) TMI 3 - SUPREME COURT] the meaning of words “derived from” was again considered and after relying on the judgment of Cambay Electric Supply Industrial Co. Ltd.[1978 (4) TMI 1 - SUPREME COURT] it was held that the expression “derived from” had a narrower connotation than the expression “attributable to”.
After having considered the meaning of the words “derived from”, as per the various decisions of Supreme Court, in our opinion, the interest earned by the assessee from deposits made in trust and retention account maintained under the financing agreement with the lenders, cannot be considered as profits and gains of business derived from the industrial undertaking. Thus, we find no infirmity in the order of the Commissioner(Appeals) in following the judgment of the Supreme Court in the case of Pandian Chemicals Ltd. (supra). DR was of the opinion that benefit of netting of interest cannot be allowed in this case, as the interest paid and interest received do not partake the same character, as held by the Supreme Court in the case of CIT v. Keshavji & Ravji [1990 (2) TMI 1 - SUPREME COURT] and CIT v. V. Chinnapandi [2006 (1) TMI 65 - MADRAS HIGH COURT]. Therefore, no benefit of netting of interest is allowed. Accordingly, this ground is dismissed in both the appeals.
Invoking the provisions of sec.263 so as to withdraw deduction given to the assessee, after considering the interest income received from fixed deposits made with the trust and arising from trust and retention account required to be made with the intention to service debt under financing agreement as business income - The issue regarding treating the interest income earned from deposits and retention account made under financing agreement is to be considered as income from other sources. As such, the order of the Assessing Officer suffered from infirmity, which is prejudicial to the interests of the Revenue. Hence, the Commissioner of Income-tax is justified in invoking the jurisdiction under sec.263 of the Act stating that the said interest is to be considered as business income. As we have already held in earlier years that the said interest income is to be considered as income from other sources, the assessee fails on this ground also.
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2015 (5) TMI 1243
Lifting of Corporate Veil - Demand of transfer fee for recording the name of the petitioner-company - Change of name of a company - transfer or not - main case of the petitioners, however, is that change of the name of a company does not constitute transfer of leasehold right or any assets of the company - HELD THAT:- I am not entering into the question in this writ petition as to whether the transfer of majority equity holding of a company would result in transfer of assets of the company or not because that is not the lis which has arisen in these two proceedings, though the State has referred to that dispute tangentially. On permitting recordal of Dabur Pharma Limited as the lessee on 15th March, 2005 the State had recognized independent juridical entity of Dabur Pharma Limited as a lessee. Subsequently, change of the promoter group, which eventually led to the change of corporate name, in my opinion, cannot saddle the petitioner company with an independent obligation to pay transfer fee. That would result in combining distinct identity of the shareholders with that of the company, which can be done on certain exceptional circumstances. This dispute does not require lifting of corporate veil - there are no demand for transfer fee can be raised on the petitioner company as a condition precedent for recordal of its name as a lessee, on the ground that there has been transfer of leasehold right. The licence of the petitioner company cannot be withheld under the 2000 Order also for this reason.
The authorities are directed to record the name of the petitioner company as a lessee on compliance of all other relevant formalities, if any, in respect of the subject plot and also grant the petitioner company licence in terms of the 2000 Order if the petitioner company is otherwise eligible for such licence - application disposed off.
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2015 (5) TMI 1242
Assessment u/s 153A - Legality and validity of the proceedings under section 153A - HELD THAT:- Tribunal applied the decision of Commissioner of Income Tax Vs. Anil Kumar Bhatia [2012 (8) TMI 368 - DELHI HIGH COURT] and All Cargo Global Logistics Ltd. and Others [2012 (7) TMI 222 - ITAT MUMBAI(SB)] Mr.Kotangale fairly states that we have upheld the decision of the Special Bench in the case of All Cargo Global Logistics Ltd. and Others [2012 (7) TMI 222 - ITAT MUMBAI(SB)] The revenue's appeal challenging that decision of the Special Bench has been dismissed by us.
Following that order and finding that the controversy in the present appeal is identical, the parties are same and barring difference in the assessment year, no distinguishing features have been placed on record, once the validity of notice has not been upheld by us, then, this appeal raises no substantial question of law. It is accordingly dismissed.
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2015 (5) TMI 1241
Addition made in respect of warranty provision - AO stated that if the assessee's estimation of warranty provisions is considered in the light of above observation of the Supreme Court, it can be seen that the assessee has not made its working in a proper manner - HELD THAT:- Supreme Court in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] held that if a business liability has definitely arisen in a financial year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though actual quantification with accuracy may not be possible, if these requirements are satisfied, the liability is not a contingent one.
The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. In the present case, the assessee has not produced any basis on which the provision of warranty was determined before the Assessing Officer. However, it has produced actual working of warranty before the CIT(Appeals). It is not clear that what extent the liability actually required in the assessment year under consideration while framing the assessment by the AO. The provision made whether on actual quantification or not, was not verified by the AO. CIT (A) after getting the assessee’s actual working of warranty not get verified from the AO and he has decided himself that it is correct. Therefore, in our opinion it is appropriate to remit the issue to the file of the Assessing Officer to examine the actual quantification of the provisions made towards warranty and decide in the light of the judgment of Supreme Court in the case of Rotork Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT]
Disallowance of provision towards electricity, additional energy and demand charges and provision for interest on VABAL - AO observed that an amount as shown as provision made during the year towards litigation and related disputes in addition to the amount outstanding as at the beginning of the year - HELD THAT:- It is necessary to make provision for ascertained liability towards expenses at the end of the year. In this background, in the accounting frame work, the assessee ought to have recorded the expenses in the relevant accounting year, wherein the liability to incur such expenses arisen. A.R. tried to justify the assessee’s case that it has issued demand notice seeking the payment and it was crystallised the expenditure in this assessment year only. He is not able to say whether that expenditure entirely relates to the assessment year under consideration or not. The assessee’s accounts are mandatorily audited both, under the provisions of the Company’s Act as well as Income-tax Act, 1961. Therefore, the assessee should be made the provisions in the relevant accounting period for the expenses based upon the consumption/bill. The contention of the assessee that it is following mercantile system of accounting consistently, does not help the cause of the assessee in asmuch as, as if a practice is adopted, which is not correct as per the law, then claim is liable to be rejected, as said practice violated the principles of matching of cost with revenue and also resulting in hybrid system of accounting, which is not at all permitted now. Accordingly, in our opinion, it is not allowable expenditure in this year under consideration. In other words, in our opinion, the disputed dues of electricity charges for earlier years are not to be allowed in this assessment year and claim of deduction relating to the present assessment year to the extent it is ascertained to be allowed in this assessment year.
The issue of disallowance of provision for interest on VABAL is to be considered on similar line as in para 12 above and this ground is partly allowed. Accordingly, both these two issues are remitted back to the AO to consider afresh in the light of our observations.
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2015 (5) TMI 1240
Dishonor of Cheque - manipulation of the cheque - it is alleged that the cheques in question have been manipulated later on by filling in the necessary particulars in the body of the cheques - section 138 of NI Act - HELD THAT:- This Court in case YASH PAL VERSUS KARTAR SINGH [2003 (5) TMI 536 - PUNJAB AND HARYANA HIGH COURT], has also laid down that expert opinion to check the age of ink cannot help to determine the date of writing of the document as the ink used in the writing of the document may have been manufactured years earlier.
In case TARSEM SINGH VERSUS RAVINDER SINGH [2013 (12) TMI 1734 - PUNJAB AND HARYANA HIGH COURT], this Court has again reiterated that there is no scientific method available for determine the age of the ink. In case S. GOPAL VERSUS D. BALACHANDRAN [2008 (1) TMI 991 - MADRAS HIGH COURT], the Hon'ble Madras High Court has taken the same view and laid down that the age of the ink cannot be determined by an expert with scientific accuracy.
In view of the consistent rule of law laid down in the cases referred above, it will not be possible for an expert to give any definite opinion on the age of the ink as there is no accurate scientific method to determine the age of the ink.
Petition allowed.
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2015 (5) TMI 1239
Seeking sanction of the Scheme of Amalgamation - Sections 391(1), 393 & 394 of the Companies Act, 1956 - HELD THAT:- Considering the approval accorded by the equity shareholders of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region, and the Official Liquidator not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. The petitioner companies will comply with the statutory requirements in accordance with law. Certified copy of this order be filed with the Registrar of Companies within 30 days.
Petition allowed.
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2015 (5) TMI 1238
TP Adjustment - upward adjustment on account of determining the Arm’s Length Price of the international transactions - AO found that the assessee-company had exported printing inks as well as semi finished intermediates to various countries including USA and Europe. The assessee-company operates through a wholly owned subsidiary in USA with manufacturing facilities - HELD THAT:- Issue decided in favour of assessee as relying on assessee own case [2013 (8) TMI 332 - ITAT AHMEDABAD] wherein held that very foundation of impugned addition in arm's length price on account of excess credit period is thus devoid of any legally sustainable merits or factual basis. When all these factors were pointed out to the learned Departmental Representative, he did not have much to say except to place his bland but dutiful reliance on the orders of the authorities below. However, for the reasons set out above and in the absence of any comparative price and credit period figures on comparable product to support the case of the revenue, we uphold the grievance of the assessee and direct the Assessing Officer to delete this ALP adjustment.
Disallowance of interest out of interest paid on account of not taking deposit from M/s. Mitsu Limited - AO observed that the assessee-company had given deposit of Rs.1 crore to Bilakhia Property Private Limited as per lease deed for taking the premises on lease from the said company and that the assessee-company had given part of the said premises on rent to M/s. Mitsu Limited without charging any deposit - HELD THAT:- CIT=A agreed with the contention of the Assessing Officer, that the interest bearing funds were not utilized by the assessee-company wholly and exclusively for business purpose; however, in the end he has deleted the addition in question. Hence, there is a contradiction between the observation and conclusion in the order of CIT(A) on this issue. In view of the above, both parties agreed that let the matter be restored to the file of CIT(A) on this issue as there is a contradiction in the observation and conclusion in the order of the CIT(A). Agreeing to same, we set aside the order of CIT(A) on this issue and restore the same matter back to him with the direction to decide this issue as per facts and law, after providing due opportunity of hearing to both the sides. Since we are restoring the issue for the aforesaid reasoning, we are refraining to comment on the merit of the issue at hand. This also takes care of the corresponding issue raised in Ground No.1 of the Revenue’s appeal.
Exclusion of other incomes while computing profits eligible for deduction u/s 80IB in respect of its Silvassa 1 and Silvassa 2 Units - assessee-company has objected to the exclusions of other income made by the Assessing Officer while working out the profits eligible for deduction u/s 80IB in respect of Silvassa 1 and Silvassa 2 Units - HELD THAT:- As relying on assessee own case [2013 (8) TMI 332 - ITAT AHMEDABAD] matter restored to the file of the Assessing Officer with directions to decide the same as per fact and law after providing due opportunity of hearing.
Disallowance of telephone and electricity expenses - AO observed that in the case of residential electricity and telephone, it is used by the entire joint family members of the Managing Director and the same cannot be treated as business expenditure - HELD THAT:- With regard to telephone expenses issue decided in favour of assessee as per on assessee own case [2013 (8) TMI 332 - ITAT AHMEDABAD]
Regarding electricity expenses we find that electricity in bungalow was used by entire family members of Managing Director, so same cannot be said for business purpose. Accordingly, we uphold the findings of the CIT(A) whereby he has rightly upheld the additions on account of disallowance of electricity expenses pertaining to bungalow of Managing Director used by entire family.
Disallowance of bad debts - CIT(A) has granted relief to the assessee on the ground that the assessee submitted the details of each and every debtor alognwith reasons for writing off the same - HELD THAT:- As CIT-A relied on provision of Section 36(2) and held that the assessee-company has satisfied the required conditions as per the provisions of Section 36(2) of the Act. The view taken by the CIT(A) is fortified by the ratio of the decision of Hon’ble Apex Court in the case of T.R.F. Ltd. vs. CIT, [2010 (2) TMI 211 - SUPREME COURT] - we uphold the order of the CIT(A) on issue.
Disallowance of foreign travel expenditure - AO observed that though the assessee-company had given the names of the persons for whom expenses were incurred alognwith details of country of visit, the assessee could not give any justification about the purpose of visit and accordingly the Assessing Officer disallowed the same - HELD THAT:- We find that the ad-hoc disallowance at 1/10th of the expenditure incurred on foreign travelling expenses has been made by the Assessing Officer and the CIT(A) has deleted the addition in question, after verifying the details of the same. Moreover, similar relief has been given by ITAT in assessee’s own case for Assessment year 2002-03 to 2004-05 which has not been disputed by the Revenue - In view of the same, the order of the CIT(A), whereby he has deleted the addition, is hereby confirmed.
Disallowance of depreciation claimed on HT lines for electricity supply in respect of Vapi-1 unit and Silvassa Unit - As per AO the assessee-company has not owned the HT Lines and was claiming depreciation on it - assessee, submitted that the assessee-company is the de-facto owner of the HT lines and dispute was about the allowability of depreciation on assets not legality of ownership of the company and this alternative submission of the assessee was not adjudicated by the lower authorities - HELD THAT:- Agreeing to submission of both the parties and in the interest of justice, we set aside the order of the CIT(A) in this regard and restore issue to the file of the Assessing Officer to decide the alternative claim of the assessee which has not been adjudicated. Of course the Assessing Officer will provide the adequate opportunity of being heard to the assessee. Since we are restoring the preliminary issue to the file of the Assessing Officer, we are refraining to comment on the merit of the issue at hand.
Exclusion of discount earned on purchase of DEPB license while computing deduction u/s 80IB - CIT(A) observed that DEPB license purchased was an element of purchase cost and any discount received reduced cost of manufacturing and he, accordingly, directed the Assessing Officer to include the same as part of income from business for the purpose of calculation of deduction u/s 80IB - HELD THAT:- This view is fortified by the decision of Hon’ble Supreme Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT] wherein it has been held that such discount actually reduces the cost of raw material and therefore it reduced the manufacturing cost of the assessee subsequently Hon’ble Supreme Court in case of CIT(A) vs. Orchev Pharma (P) Ltd.[2013 (7) TMI 232 - SC ORDER] has held that duty draw receipts do not form part of net profit of eligible industrial undertaking for the purpose of deduction u/s.80IA of Act. Assessing Officer is directed to decide the issue at hand in light of this legal discussion.
Exclusion of income from the sale of scrap from the profits eligible for deduction/s 10B - HELD THAT:- The matter was carried before the First Appellate Authority, wherein he observed that scrap is natural outcome of the manufacturing process and the same is generated during the manufacturing process, thus, he directed the Assessing Officer to include the same as part of the income from business for the purpose of calculation of deduction u/10B. This issue is fortified by the decision of GE BE (P.) Ltd. [2015 (5) TMI 310 - KARNATAKA HIGH COURT]wherein the Hon’ble Court has held that when the assessee undertakes manufacturing or production activity and in process it results in any scrap, since said scrap attracts nexus between profits and gains derived from export business, income arising from sale of it is eligible for benefit of section 10B of the Act. Accordingly, we are not inclined to interfere in the findings of the CIT(A) who has rightly directed the Assessing Officer to include the same as part of income from business for the purpose of calculation of deduction u/s 10B.
MAT Computation u/s 115JB - addition made to book profit u/s 115JB in respect of loss on wind farm project - AO added loss of windmill as negative income for calculating the book profit u/s 115JB - AO has made the addition to the book profit stating that loss represents negative profit - HELD THAT:- we find that the intention of legislature u/s 115JB appears to tax the book profit excluding the profit from industrial undertaking as mentioned and also from business of generation of power. As per the section 115JB, the loss shall not include depreciation or the amount of profits derived by an industrial undertaking from the business of generation / generation & distribution of power. Thus, from the provisions of the Act, it is clear that the intention of the legislature is not to tax the profits of an industrial undertaking which is entitled for 100% exemption and also the profit from generation of power. In view of these provisions of law, the CIT(A) held that the loss from such activities cannot be added to the book profit and accordingly, he added the loss to the book profit, treating the same as negative profit and directed the Assessing Officer to delete same for the purpose of computation of income u/s 115JB. This reasoned finding of CIT(A) needs no interference from our side. - Decided in favour of assessee.
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2015 (5) TMI 1237
Rejection of books of accounts - estimation of income at 8% of the contract receipt - HELD THAT:- if the projects on which profit stands assessed for AY 2003-04, are the same for which it is for the current year, the assessee is entitled to claim a review of its profit in light of its assessment for that year. The work-in-progress (WIP) for the current year would in that case be only a continuation of the WIP for that year. The onus to establish the facts is only on the assessee. The matter is accordingly set aside to the file of the first appellate authority to examine the assessee’s contention as to parity of facts. The Department, on its part, however, cannot act de hors, or inconsistent with, the material on record, and a similarity of business conditions is a relevant factor in estimation of income. The same, however, shall not bind the Revenue authorities, who are entitled to examine other aspects of the matter as well, viz., the input costs, contract rate/s, etc. The matter, we may emphasize, is wholly factual, with it being permissible for the Revenue to show that, despite ‘parity’ of facts, the said rate does not represent or yield the correct income earned or assessable for the current year, in which case therefore the onus would shift to the Revenue.
In the facts of the case, it is not clear if the profit rate for A. Y. 2003-04, on which the assessee relies, stands assessed at net or gross of depreciation, information qua which could not be supplied by the parties on being enquired by the Bench during hearing. Rather, inasmuch as no allowance for depreciation, otherwise mandatory, stands made separately, the presumption (on facts) would only be that the profit rate stands assessed taking into account all the claims, including depreciation, being, in fact, patent. We, therefore, rather than giving any specific direction on quantum, direct that the profit for the current year be first estimated before depreciation, and depreciation as exigible allowed separately, per a speaking order, after considering all the relevant materials, and after hearing both the parties
Issuance of a direction for allowance of interest paid to bank against the income from FDRs in-as-much as the latter stands assessed as business income - The margin money, by necessary implication, would represent the assessee’s capital/quasi capital. Would, one may ask, the bank extend fund based credit to a borrower to enable it to avail non-fund credit (from the bank), further jeopardizing, rather than securing, itself? That the immediate or apparent source of FDRs is the cash credit account is of little consequence; the same representing a common pool of funds, through which funds for its different purposes are channelized by the assessee. The same thus is of little assistance in identifying the actual source of funds, which may require analysis of the assessee’s financial position with further reference to its contractual obligations. The matter stands already remanded to the file of the assessing authority on terms which cannot be regarded as either inapposite under the circumstances or prejudicial to the assessee. We accordingly find no reason to modify the same, as sought by the assessee per its appeal, even as in our view its argument, on the basis of which a direction to factually determine the matter has been made, is, on its face, without merit. The AO shall accordingly observe the directions by the ld. CIT(A), and decide per a speaking order, i.e., where the assessee furnishes any materials, etc. to substantiate its case. We decide accordingly.
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2015 (5) TMI 1236
TDS u/s 195 - Disallowance u/s 40(a)(i) for non deduction of tax at source - Payment made to non residents - HELD THAT:- Fees for technical services paid by a resident in respect of services utilised in a business carried on by the resident outside India or for the purposes of earning any income from any source outside India, does not constitute an income liable to tax under the Act as it falls in the exception to clause (b) of section 9(i)(vii) of the Act. Further, there is no dispute to the fact that rent has also been paid by the assessee in respect of property which is situated in the said country abroad and as per Article 6 of the DTAA with respective country it is taxable in that country and not in India. Accordingly, there is no tax payable by the recipient in India for rent received in respect of property situated abroad. Hence, provisions of section 195 are also not applicable in respect thereof.
Considering above facts and also in the light of decision of Hon'ble Apex Court in the case of GE India Technical Centre Pvt. Ltd. [2010 (9) TMI 7 - SUPREME COURT], if payment is not made to a non-resident which is not taxable under the provisions of Income Tax Act, question of making deduction u/s. 195 of Act does not arise. Consequently, no disallowance u/s. 40(a)(i) of the Act could be made. In view of the above, we uphold the order of learned CIT(A) and reject ground No. 1 of the appeal taken by the Department.
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2015 (5) TMI 1235
Penalty levied u/s 271(1)(c) - appeal against the quantum addition made by the Assessing Officer before the Commissioner of Income Tax (Appeals) was withdrawn by the assessee - CIT (Appeals) power to allow withdrawal of appeal - HELD THAT:- It is not in dispute that assessee filed an appeal against the quantum addition made by the AO before the CIT (Appeals). However, the said appeal was withdrawn by the assessee. It is not known how the CIT (Appeals) permitted the assessee to withdraw the appeal filed before him, when he has no such power to allow the assessee to withdraw the appeal. This Tribunal is of the considered opinion that when appeal was filed before the Commissioner of Income Tax (Appeals), the CIT(A) is bound to dispose of the same on merits. Since the appeal was withdrawn by the assessee, the Commissioner of Income Tax (Appeals) dismissed the appeal as withdrawn and confirmed the penalty levied by the Assessing Officer without any appreciation of materials available on record.
It is well settled principles of law that assessment proceedings and penalty proceedings are separate and distinct and therefore, Assessing Officer is excepted to reappreciate the materials available on record. Likewise, when the appeal filed before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) is also expected to reappreciate the materials available on record while disposing the appeal filed by the assessee. In this case, Commissioner of Income Tax (Appeals) without reappreciation of the materials available on record, simply dismissed the appeal on the ground that appeal against the order of assessment was withdrawn. This Tribunal is of the opinion that merely because appeal was withdrawn by the assessee that cannot be a reason for confirming penalty levied by the Assessing Officer and the Commissioner of Income Tax (Appeals) has to independently examine the materials available on record.
Accordingly, the order of the Commissioner of Income Tax (Appeals) is set aside and the issue of penalty is remitted back to the file of the Commissioner of Income Tax (Appeals). Appeal of the assessee is allowed for statistical purposes.
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2015 (5) TMI 1234
Seeking conversion from leasehold to freehold of its premise - whether under the policy floated by respondent No.2, the petitioner is entitled to conversion of the premises in question from leasehold to freehold or whether the action of respondent No.2 in denying such conversion amounts to a discrimination against the petitioner?
HELD THAT:- The right of ownership over a property in cases of lease is not determined on the basis of the duration for which the lease is granted to the lessee. Thus, a lease even if for 99 years, does not confer ownership rights on the lessee, unless they are specifically transferred to him in which case it stops being a lease. Even in the cases of lease for long durations, the residuary rights of a leased land belong to the owner of the land and not the lessor. It is a settled law that the length of the lease is not indicative of even permanency of lease much less of ownership - it is abundantly clear that the case of the petitioner falls in all together a different category of properties in which no provision for conversion is provided under the existing scheme.
The government cannot be held prisoner to its administrative decisions which are required to be altered from time to time - Clearly the petitioner is a tenant of the property falling in the category of disinvested hotel property. Petitioner, in no way, can compel respondent No.2 to convert their leasehold rights into freehold in the disinvested hotel and the land underneath. Respondent No.2 is well within its right to deny freehold conversion to the petitioner.
Petition dismissed.
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2015 (5) TMI 1233
Validity of reopening of assessment u/s 147 - order disposing of and rejecting the objections dated 27th January, 2015 (Annexure 'V') was served on the petitioner-assessee on 10th February, 2015 and AO without waiting for the period of four weeks from such service passed an assessment order contrary to the directions of the Division Bench judgment of this Court on 11th February, 2014. - HELD THAT:- As on the date the order dismissing the objection was served on the petitioner, the assessing officer rushed and passed the assessment order on the very next day namely, 11th February, 2015. Therefore, this assessment order should be ignored and this Court must permit the petitioner to canvass submissions challenging the legality and validity of notice under section 148 of the I.T. Act.
In that regard, reliance is placed on the Division Bench judgment of this Court in the case of Aroni Commercials Limited [2014 (2) TMI 659 - BOMBAY HIGH COURT]
At the request, post this writ petition to 12th June, 2015. Till 19th June, 2015, there would be an ad-interim order restraining the respondents from taking any coercive measures to recover the amount under the impugned assessment order. This direction is without prejudice to the rights and contentions of both sides.
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2015 (5) TMI 1232
Assessment u/s 153A - deduction u/s.54F denied on account of purchase of a flat - Eligibility to make a new claim - case of the revenue that since the proceedings u/s.153A are akin to the provisions of section 147, i.e. reassessment proceedings, therefore, the assessee cannot make a new claim which was not there in the original return of income - HELD THAT:- The character of the income remains “long term capital gain” and the assessee can make a new claim in the pending assessment which has not abated. Since the assessee otherwise fulfils the conditions laid down in provisions of section 54F of the I.T. Act, therefore, we are of the considered opinion that the assessee is entitled to claim deduction u/s.54F to the extent of ₹ 31,20,000/-. In this view of the matter we set aside the order of the CIT(A) and allow the appeal filed by the assessee.
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2015 (5) TMI 1231
Suit for declaration, possession, cancellation of Agreement to Sell - ex parte decree - HELD THAT:- This Court is prima facie of the opinion that in view of the registered Sale Deed dated 21st June, 2003, the defendant No.1 had no right, title or interest in the suit property and he had no power to execute another Agreement to Sell in October, 2003 - the legal representatives of defendant No.3 are directed to deposit the entire rental amount being received by them with the Registry of this Court after deducting the TDS within a period of six weeks. Even future rentals shall be deposited with the Registry of this Court.
Petition disposed off.
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2015 (5) TMI 1230
Validity of SCN - time limitation - In the impugned judgment, the Customs, Excise and Service Tax Appellate Tribunal has held that the extended period of limitation invoked by the appellant-Department was not justified and therefore, show cause notices were issued beyond the period of limitation.
HELD THAT:- Though there may be arguable point, however, having regard to the pettiness of the amounts involved in the various show cause notices, we are not inclined to hear the appeals on merits.
Appeal dismissed.
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2015 (5) TMI 1229
Income from running and managing an IT Park - assessed under the head “income from business” or “income from house property” - HELD THAT:- Income of the assessee from renting of I.T. Park is to be considered as ‘business income’ only and the interest expenditure incurred by the assessee for the purpose of business to be allowed u/s.36(1)(iii) - It is seen that the AO treated the income of the assessee under the head “income from house property” and he has not examined other provisions of Act as applicable while computing the income under the head “business”. If there is diversion of borrowed funds as alleged by the DR, the AO shall point out the same and that portion of the interest to be disallowed, as it is not incurred for the purpose of business.
We deem it fit to remit the issue back to the file of the Assessing Officer to decide the same afresh. Accordingly, we remit this issue back to the file of the Assessing Officer to reframe the assessment after considering the relevant provisions of the Act, as applicable while computing the income under head “business”.
The grievance of the assessee is with regard to confirming the assessment of income earned from operations of running the IT Park and providing IT infrastructure under the head “income from house property” instead of under the head “income from business or profession”.
We have already held for the assessment years 2007-08 and 2008-09 that the income of the assessee from renting of I.T. Park is to be considered as ‘business income’ only and the Assessing Officer is directed to reframe the assessment in accordance with law. Accordingly, the cross objection is allowed for statistical purposes.
Deemed dividend - Amount available in share premium account cannot be treated as accumulated profits for the purpose of applying the provisions of sec.2(22)(e) - HELD THAT:- We find that similar issue was considered by this Tribunal in the case of ACIT v. M/s. RR Industries Ltd. [2018 (7) TMI 1321 - MADRAS HIGH COURT] has observed that the balance in the share premium account cannot be considered as accrued for the purpose of application of provisions of sec.2(22)(e) of the Act. In view of the above order of the Tribunal, we are inclined to decide the issue in favour of the assessee and this ground of appeal of the Revenue is dismissed.
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2015 (5) TMI 1228
Proclamation for person absconding - Proclaimed offender or not - Section 3 of the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989 - HELD THAT:- Perusal of Section 82 Cr.P.C. makes it clear that in case a person is intentionally avoiding the warrants, Court is empowered to publish a written proclamation requiring him to appear at a specified place and at a specified time not less than thirty days from the date of publishing such proclamation and also the manner in which such proclamation shall be published. In order to ensure that an accused should have a fair opportunity to appear, 30 days clear notice is necessary and the proclamation should be published in the manner provided by law.
In the instant case, proclamation of the petitioner was issued on 20.08.2014 for 23.08.2014 and vide impugned order dated 25.09.2014 petitioner was declared proclaimed offender. It is apparent on the face of record that clear notice of 30 days as mandated under Section 82 Cr.P.C. has not been given to the petitioner and the procedure for publication of proclamation has also not been followed. Besides that, there is nothing on record to show that provisions of Sub-Section 2(i) of Section 82 Cr.P.C. have been complied with - petitioner has been wrongly declared proclaimed offender vide impugned order without following the procedure of law.
Petition allowed.
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