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Showing 81 to 100 of 1831 Records
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2017 (5) TMI 1757
Maintainability of petition - Merger of three nonbanking financial companies with a fourth company Hasham Investment and Trading Co. Pvt. Ltd. - petitioner’s challenge to the order of the Company Court permitting the merger is pending consideration before the High Court of Karnataka - HELD THAT:- Being the order of the Company Court permitting the merger is pending consideration before the High Court of Karnataka, this by itself would disentitle the petitioner from maintaining the present writ petition.
In as much as the petitioner has made a grievance that his complaints are not being examined by the respondents, this writ petition need not be maintained further, the petition is thus, disposed of with a direction to the respondent nos. 1 and 2 to examine the complaints, claimed to have been made by the petitioner, and pass orders on the same.
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2017 (5) TMI 1756
Reopening of assessment u/s 147 - whether no tangible material came to the possession of AO authorizing him to initiate reassessment proceedings? - exchange fluctuation gain - HELD THAT:- The assessee has not included this amount in the income computed under the regular provisions as also in the book profit. Since the addition has been deleted out of the computation of regular income, therefore, we deem it necessary to make no discussion on this receipt.
The set of questions before us is that Assessing Officer has recorded the reasons on 10th October, 2006. At that point of time he was required to form his opinion prima facie. It was not incumbent on the Assessing Officer to arrive at a firm conclusion. Ld. counsel for the assessee has also not disputed about the legal position that fluctuation gain should be included in the book profit. His argument is that even after inclusion there is no taxable income under MAT also. To our mind this line of argument is to accept that the Assessing Officer to form a firm opinion about ultimately taxability of income which in his prima facie opinion escaped from taxation. Therefore, we are of the view that at that time when Assessing Officer recorded reasons he cannot be expected to anticipate the ultimate taxability of an item. We do not find any force in the contentions of ld. counsel for the assessee on the first fold of submissions.
Assessee has not submitted the letter to the right official alleging therein that the return filed on 14th October, 2004 u/s 139(1) is to be treated as filed in response to the notice u/s 148 of the Act. Therefore, we do not find any merit in this contention of the ld. counsel for the assessee. We do not find any infirmity in the order of ld. CIT(A) for upholding the reassessment for Asst. Year 2004-05.
Nature of expenditure - expenditure for purchase of library books and computer software - Revenue or capital expenditure - HELD THAT:- In the present case, the assessee which is engaged in the business of providing contract research and development services to its associate enterprise is dependent on the latest information, technology developments at the international level and the future projections. To assist in its attainment of object of running the business prudently, it needs to use latest books and software. In the present era, it is well evident that the computer software are changing every now and then and similarly due to overall in-depth knowledge sharing, the assessee needs to update with the help of books.
Expenditure on library books and computer software are not providing any enduring benefit to the assessee generally and they become obsolete and unusable in a very short span of time which may be less than one year or little more and certainly if an assessee observes that majority of expenditure is having a life span of less than a year, then such expenditure on computer software and library books has been rightly treated as revenue expenditure by the assessee. We are, therefore, of the view that in the given facts and circumstances of the case and the type of business activity the assessee is engaged into, assessee has rightly claimed the expenditure on library books and computer software as revenue expenditure and lower authorities erred in treating them as capital expenditure. We, therefore, allow the related grounds of the assessee for AYs 2004-05 to AY 2007-08.
TP Adjustment - deferred revenue expenditure written off in five assessment years which has been considered as a part of operating cost by the Revenue Authorities for the purpose of calculating Arms Length Price, applying the TNMM Method - HELD THAT:- It is only the operating cost which the assessee can get reimbursed; whereas the impugned expenditure is undisputedly non-operating in nature relating to a period prior to the commencement of commercial operation and has also been disallowed by the assessee suo moto in computing the total income. We also find support to this view from the decision of Co-ordinate Bench of in the case of Pole to Win India (P.) Ltd.[2015 (9) TMI 555 - ITAT BANGALORE] wherein it has been held that the expenses which have been disallowed while computing the taxable income are excludable from the computation of operating margin.
We are of the view that the deferred revenue expenditure written off at ₹ 70.98 lacs for all the five years should be excluded from the computation of operating cost in order to calculate Arms Length Price as per TNMM Method. Accordingly, this common ground of the assessee for AY 2004-05 to AY 2008-09 is allowed.
Selection of comparable - Services provided by Alphageo (India) Ltd includes 2D and 3d surveys, Seismic data acquisition in 2D and 3D, Seismic data processing/reprocessing/special processing, Seismic data interpretation and Reservoir data acquisition and analysis. It shows that Alphageo (India) Ltd is not into research and development but is only engaged in the provision of data into organized forms.
Assessee-company SRPTL is into the field of research and development, whereas, Alphageo (India) Ltd is not into research and development but only engaged in provision of data into organized forms. It cannot be taken as a comparable for calculating Arms Length Price with Associate Enterprise by applying TNMM Method. We, therefore, respectfully following the decisions referred above, direct the ld. TPO to exclude M/s. Alphageo (India) Ltd from the list of comparable companies for AY 2004-05 to AY 2008-09.
Celestial Labs Limited is basically engaged in the development of tailor made software packages and software tools and does not involve in the research and development activities. The fact that Celestial Labs Limited is not a good comparable to a company involved in research and development activity.
Vimta Labs Limited in the list of comparable as not pressed and dismiss the same and direct the ld. TPO to retain Vimta Labs Limited in the final list of comparable companies for calculating the Arm’s length price of International transaction entered by SRTPL with Associate Enterprise SABIC. In the result this ground of the assessee is dismissed
Exclude Depreciation from operating cost for calculating Profit Level Indicator (PLI) for undertaking transfer pricing analysis or alternatively to provide depreciation adjustment to compute operating margin - HELD THAT:- There is a huge difference in asset turnover ratio so much so that assessee’s asset turnover ratio is ranging between 17% to 29%; whereas the asset turnover ratio of the comparable is ranging between 71% to 177.8%. It is an admitted fact not disputed by the revenue also that there is a variation in adoption of method of calculating depreciation and also there is a huge difference of asset turnover ratio depicted in the above table. At this level, we agree that the depreciation adjustment has to be provided to calculate the operating profit margin as if evident that there has been substantial under utilization of the assets vis-à-vis comparable companies resulting in high depreciation cost to the assessee as compared to its revenues and various depreciation methods followed by the assessee and the comparable companies. We therefore, hold that in the absence of any depreciation adjustment, being granted to the assessee, it would not be possible to make a fair comparability with the comparable and there is a need for reasonable examination/ adjustment whereby the operating margin earned by the assessee would be comparable to the operating margin earned by the comparable companies after providing deprecation adjustment.
Whether for calculating operating margin, depreciation is to be excluded from the operating cost or a depreciation adjustment to be allowed by applying the percentage of depreciation to the total cost (excluding depreciation) of the assessee to be applied to other comparable companies? - We observe that the Co-ordinate Bench of Tribunal in the case of Siemens Healthcare Diagnostics Ltd [2014 (12) TMI 892 - ITAT AHMEDABAD] has adjudicated similar issue and have held that the depreciation cost to be excluded from the operating cost for calculating operating profit margin by relying on the decision of the Schefenacker Motherson Ltd. [2009 (6) TMI 125 - ITAT DELHI]
We find substance in the plea of the assessee of excluding deprecation from operating cost because the ultimate object is to calculate the Arms Length Price with the AE. To arrive at Arms Length Price, comparable are taken as a basis to compute as to whether assessee has charged less revenue as compared to the prevailing market rate or has shown higher cost.
The assessee’s revised PLI is much better than the average of the comparable .In the given facts of the case, where the asset turnover ratio of the assesseecompany i.e. SRTPL is too low as compared to the asset turnover ratio of the comparable and also due to difference in the method of calculating depreciation and respectfully following the decisions referred above relating to this issue, we are of the view that depreciation should be excluded from the operating cost for the purpose of calculating profit level indicator for doing the transfer pricing analysis of the arm’s length price of the international transaction entered with Associate Enterprise. We therefore allow the common ground raised by the assessee. However as the chart showing revised PLI calculated after excluding depreciation cost from the operating cost has been filed before us , we direct the learned Transfer Pricing Officer to verify the calculation shown in the above chart wherein operating cost has been taken after excluding depreciation. Needless to mention that the Assessing Officer will allow adequate opportunity of being heard to the assessee for furnishing necessary details. In the result, we allow the assessee’s ground of appeal for calculating the Profit level Indicator of assessee and comparable after excluding depreciation from the operating cost.
Penalty u/s 271(1)(c) - addition of foreign exchange gain under MAT provisions for AY 2007-08 - HELD THAT:- The amount of notional foreign exchange gain is not under dispute by the Revenue and therefore, the calculation of notional foreign exchange gain submitted by assessee in its financial statement and income tax returns is free from any error. This is also a fact that the assessee is a private limited company and is a part of Saudi Basic Industries Corporation and is engaged in the business of providing contract research and development. As on 31.03.2005, the assessee was having a asset base of ₹ 34.85 crores and is regularly furnishing income tax return; books of accounts are audited and no major defect has been pointed out by the Revenue Authorities. We further observe that assessee has given plausible reasons for reducing the book profit by the amount of notional foreign exchange gain and has also referred to various judgments. For imposing a penalty under Section 271(1)(c) of the Act, the assessee should have either concealed the particulars of income or furnished inaccurate particulars of income. In the given facts, we observe that the assessee has furnished accurate particulars of income and in a bonafide belief has made a claim which was actually not sustainable in law. We find that the assessee should not have been visited with penalty under Section 271(1)(c) of the AcT.
Penalty in respect of transfer pricing adjustment - We have allowed the grounds of the assessee for excluding Alphageo from list of comparable, excluding depreciation and deferred revenue expenditure from operating cost of assessee and comparable for calculating operating profit margin, retaining Vimta Lab as comparable. Further we have dismissed revenue’s appeal of including Celestial Lab as comparable. We have accordingly directed the learned Transfer Pricing officer to perform Transfer pricing analysis of International transaction with Associate Enterprise in light of our decision on quantum issue. We are, therefore, of the view that as the ld. AO will re-compute the ALP as per our discussions above, there remains no basis for confirming penalty under Section 271(1)(c) of the Act imposed
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2017 (5) TMI 1755
Internet hacking - Wikipedia profile hacked - it is alleged that at the instance of the wife of the third respondent namely Mrs.Poonam Bhagat Shroff with whom the third respondent is engaged in a divorce proceedings, the petitioner has hacked the Wikipedia profile of Ms.Natalia Kapchuk and internet account and posted illegal, defamatory and derogatory material about respondent No.3 and made random calls and threatened to kill him and his children and demanded extortion - HELD THAT:- The apprehension voiced by the petitioner is well founded. The petitioner has made a clean breast of the fact that at the instance of the wife of the third respondent, he has deleted the offending URLs from the website of www.youtube.com in the course of his official business. As the allegations made in the complaint relate to the said incident, the grant of bail would only facilitate the Investigating Agency to expedite the investigation - No doubt there are allegations of criminal intimidation and extortion, but solely on account of the said allegations, the police machinery cannot be allowed to intermeddle with the liberties of the petitioner on the guise of conducting investigation into the allegations made against the petitioner.
On evaluating the entire material available on record, this Court is of the view that grant of anticipatory bail in the instant case would not any way prejudice the investigation, on the other hand, it would prevent harassment, humiliation and unjustified detention of the petitioner.
In the event of the arrest of the petitioner by respondent Nos.1 and 2 or by whomsoever concerned in regard to MECR No.1/2017 registered at Kherwadi Police Station, Bhandra East for the offences under sections 384, 504, 506(II), 120-B of Indian Penal Code and section 66 of the Information Technology Act, 2000, the petitioner shall be enlarged on bail on obtaining abond for ₹ 3,00,000/- with one surety for the likesum to the satisfaction of the concerned - Petition allowed.
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2017 (5) TMI 1754
Imposition of penalty equivalent to duty confirmed - seeking reduction in quantum of penalty - appellant made the payment of their dues along with 25% of penalty on 28.2.2009 i.e. within 30 days of the receipt of the order-in-original - Section 11AC of Central Excise Act, 1944 - HELD THAT:- From the facts on record, it is clear that in this case the entire amount of duty of ₹ 15,75,198/- along with interest and 25% of total penalty was paid voluntarily and this payment was made before the expiry of 30 days’ period from the receipt of order-in-original - The First proviso to then Section 11AC of Central Excise Act, 1944 says that where duty, interest and 25% of penalty is paid by the assessee within 30 days from the date of communication of the order of Central Excise officers determining the liability of duty etc., the benefit of reduced penalty of 25% will be allowed to the assessee.
In the present case, the appellant made the required payment within 30 days of receipt of the order-in-original, therefore, they are entitled to the benefit of payment of penalty at reduced rate of 25% of the duty - Appeal allowed in part.
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2017 (5) TMI 1753
Suit for declaration, permanent prohibitory injunction - joint owners in possession of 1/2 share of the suit land - It is alleged by the plaintiff that entries in the revenue record qua the suit land in favour of the defendants are wrong and without having any right, title or interest in the suit land - HELD THAT:- In the instant case, though this Court is of the view that learned first appellate Court exceeded its jurisdiction by creating new case for defendants while placing reliance upon Ex. P-1 and Ex. DX, more particularly, when no such plea of 'Azadinama' was ever raised/taken by the defendants in the pleadings as well as evidence adduced before the trial Court, but even then if findings returned by learned first appellate Court qua entitlement of defendants to 1/2 share in the suit property on the basis of aforesaid document is examined and tested in the light of aforesaid provisions of Registration Act, 1908, same cannot be held to be valid and in accordance with law. There is no relinquishment deed adduced on record by the defendants to prove their claim with regard to their having acquired 1/2 share in the suit land and as such learned first appellate Court erred in while placing reliance upon Ex. P-1, whereby, on the basis of oral Azadinama/relinquishment deed, 1/2 share in the suit land has been ordered to be mutated in the name of defendants.
In the instant case, this Court is of definite view that no reliance, if any, could be placed by first appellate Court on 'Azadinama' Ex. P-1 to conclude that plaintiff had relinquished his 1/2 share in favour of the defendants, more particularly, in the absence of registered relinquishment deed, if any, executed by the plaintiff. Since there was no registered relinquishment deed, mutation attested in favour of defendants, on the basis of Ex. P-1 is/was of no consequence and same could not be taken into consideration by the Court below while holding the defendant to be owners to the extent of 1/2 share in the suit land - Similarly, this Court has no hesitation to conclude that there is/was no authority vested in Gram Panchayat to conduct partition proceedings on the basis of order passed by Deputy Commissioner or A.D.M., Bilaspur, which is admittedly not on record because partition of the land can only be effected by the authority as prescribed under Sections 122 and 123 of the H.P. Land Revenue Act. Moreover, partition deed Ex. DW-3/A, which was prepared on 15.5.1994, could not be prepared because admittedly the defendants had no pre-existing title in the suit land, as stands duly proved on record. Defendant himself has admitted that Munshi Ram was absolute owner in possession of the land which he had acquired as Nataur.
Since this Court has already come to the conclusion, on the basis of aforesaid provision of law as well as material available on record, that no immovable property could be relinquished without there being registered document, mutation, if any, conducted on the basis of oral relinquishment/'Azadinama' as reflected in Ex. P-1 and Ex. DX has no bearing on the rights of plaintiff, who is absolute owner of the suit land and as such judgments relied upon by the learned counsel representing the defendants with regard to attestation of mutation in favour of defendants has no bearing in the present case and as such same are not discussed herein.
This Court sees valid reason to interfere in the judgment passed by first appellate Court, which is apparently not based upon the proper appreciation of evidence as well as law - judgment passed by learned first appellate Court is quashed and set aside and that of the learned trial Court is restored.
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2017 (5) TMI 1752
Depreciation @ 10% on road laid by the assessee holding that the roads are of the nature of plant and machinery - HELD THAT:- Similar issue was decided by the Tribunal in assessee’s own case [2008 (10) TMI 712 - ITAT CHENNAI] CIT(A) has directed the Assessing Officer to allow depreciation @ 10% on the road by treating it as building. The only objection of the ld. DR is that the Department has not accepted the decision of the Tribunal and the Revenue has preferred further appeal before the Hon’ble Madras High Court, but could not be able to place on record any material to show that the order of the Tribunal, on the basis of which the ld. CIT(A) has passed the order, has been reversed or set aside by the Hon’ble Jurisdictional High Court. Therefore, in view of the facts, circumstances and material on record, we do not find any valid reason to interfere in the orders passed by the ld. CIT(A) on this issue for all the four assessment years in this case and while confirming the impugned order, we dismiss the grounds of appeals of the Revenue being devoid of any merits.
Depreciation on lease hold right as eligible for depreciation as intangible asset - HELD THAT:- Transfer by way of lease is treated as transfer of a capital asset on the principle that the lease creates an interest in the land and therefore to that extent, it extinguishes the right of the transferor. If the facts of the present case are analysed in the context of the law laid down by the Hon’ble Supreme Court and various sections of the Income Tax Act, we have no difficulty at all in holding that when the assessee transfers his leasehold rights in the land in his occupation by way of a lease to another person, it amounts to extinguishing his rights in the property and since his leasehold rights had created an interest in the land, i.e. , enjoyment and possession and therefore it would definitely come within the definition of "capital asset" as defined under section 2(14) of the income tax act. Since the assessee does not own the assets in its own case, the Assessing Officer disallowed the depreciation as claimed by the assessee. Once the right is extinguished by means of lease deed and shall be treated as transfer of a capital asset on the principle that the lease creates an interest in the land and therefore, the transfer of lease would amount to transfer of a capital asset, we are of the considered opinion that the assessee is eligible to claim depreciation on the asset get transferred by means of lease deed. In view of the above, the ground raised by the Revenue is dismissed.
Disallowance u/s 14A - HELD THAT:- Exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. The language of s. 14A(1) should be read in that context and such that it advances the scheme of the Act rather than distort it. See MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1997 (4) TMI 5 - SUPREME COURT
We are of the view that the provisions of s. 14A read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e., in the absence of exempt income. The questions of law are answered in favour of the assessee and against the department and the appeal allowed
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2017 (5) TMI 1751
Disallowance u/s 14A read with Rule 8D - investment was made in subsidiary company of the assessee-company - HELD THAT:- When the investment was made by the assessee-company in its subsidiary company for the purpose of business, this Tribunal is of the considered opinion that such investment was only for commercial expediency and it has to be construed as strategic investment - investment made by the assessee was for business purpose. As rightly observed by the CIT(Appeals), the strategic investment made in the subsidiary company cannot be considered for disallowance u/s 14A - This Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the disallowance made by the AO u/s 14A - assessee ha not earn any income from the investment. Therefore, in view of this the judgment of Madras High Court in Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] there cannot be any disallowance at all.
Bogus purchases - AO disallowed the claim of the assessee only on the ground that the TIN registration was cancelled by State Commercial Tax Department on 22.02.2013 - HELD THAT:- AO has not made any independent verification with regard to existence of R.N. Enterprise and Nakoda Agency. It is also not the case of the Revenue that the assessee has no stock as claimed. When the existence of stock or availability of pen, pencil, gift boxes is not in dispute, it shows that the assessee has purchased the same. Merely because R.N. Enterprise and Nakoda Agency engaged itself in the business of sale of pen, pencil and gift items, after the cancellation of TIN registration by the Commercial Tax Department, that cannot be a reason to doubt the purchases made by the assessee.
State Commercial Tax Department may proceed further against R.N. Enterprise and Nakoda Agency for doing business even after cancellation of TIN registration - When the availability of purchased items is not in dispute, this Tribunal is of the considered opinion that merely because TINs of R.N. Enterprise and Nakoda Agency were cancelled and postal authorities returned the letter sent by State Commercial Tax Department, the Assessing Officer is not justified in disallowing the claim of the assessee without independent verification. - Decided in favour of assessee.
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2017 (5) TMI 1750
Unrecorded sales/unrecorded business transactions and unrecorded payments - Addition based on documents found in search - As argued documents on the basis of which the addition was made were dump documents - submitted that the ld. CIT(A) grossly erred in confirming the addition as the assessee from the very beginning denied that loose papers belonged to him and that the presumption u/s 292C of the Act is rebuttable presumption and does not lead to a conclusive evidence - HELD THAT:- AO made the addition by invoking the provisions of Section 292C of the Act and considering the notings of Annexure A found during the course of search in those documents, certain notings were there but name of the assessee was not mentioned, in some of the documents there were details of clothes like sari, suits and shirts etc. The claim of the assessee is that he was not engaged in the business of gold or jewellery. The assessee in the present case, from the very beginning stated that page nos. 31, 32 & 33 etc. of Annexure A did not relate to him. AO did not make any inquiry from the parties whose names were appearing in the said documents but made the addition by invoking the provisions of Section 263 of the Act.
The assessee is earning his income mainly from commission and interest which is evident from the copy of acknowledgment of ITR placed.
It is not brought on record that the assessee was engaged in the business of gold or jewellery and earning the income from said business, the addition has been made by the AO by presuming that the assessee had made payments to the certain parties but in those documents which had been relied by the AO nowhere it is mentioned that the assessee purchased the gold and even the nature of the transaction is not clear because against certain payments, some quantity of gold has been written and against the others nothing is mentioned. Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false.
The contention of the assessee that there was a family function two months prior to the search and somebody has forgotten the documents found during the course of search has not been rebutted.
Also an admitted fact that during the course of search no unaccounted stock or assets were found. It is also noticed that in the assessee’s case search took place on 09.12.2005 and the seized material was with the AO who issued notice u/s 153A of the Act on 05.09.2007 but he did not make any enquiry during that period i.e. between 09.12.2005 and 05.09.2007, to ascertain as to whom the payments, if any, were made and how the assessee was related to those payments. On the contrary, the assessee denied the ownership of the document from the very beginning. Addition made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee.
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2017 (5) TMI 1749
Set off of unabsorbed business losses pertaining to the eligible unit of 10B against the profits of non eligible undertaking of 10B units - HELD THAT:- The issue is squarely covered by the Hon’ble Supreme Court judgment in the case of CIT & Anr. v. Yokogawa India Ltd [2016 (12) TMI 881 - SUPREME COURT] in favour of assessee as held that as per the amended provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter-IV of IT Act and not at the stage of total income under Chapter-VI. Therefore, the loss of the eligible unit would be allowed as a deduction at source before computing the total income under Chapter-VI. Therefore, we do not find any infirmity in the order the Ld.CIT(A) and the same is upheld. The revenue’s appeal is dismissed.
Exclusion of freight from the export turn over for the purpose of computation of deduction u/s.10B - As per the judicial precedents the expenditure of freight incurred in foreign currency outside India for delivery of goods has to be reduced both from the export turnover as well as the total turnover i.e. numerator and denominator. CIT(A) followed the same principle decided in the case of Sak Soft Ltd.[2009 (3) TMI 243 - ITAT MADRAS-D] and allowed the assesse’s appeal. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and this ground of appeal of the Revenue is dismissed.
Apportionment of R&D expenditure to 10B units - AO found that the assessee claimed weighted deduction in respect of capital expenditure incurred towards in-house R&D facility as per Sec.35(2AB) - CIT(A) deleted the addition and allowed the assesse’s appeal stating that the R&D activity is not related to the 10B unit and the 10B unit is a separate and distinct unit - CIT(A) given a finding that the expenditure related to R&D is for a full assembly unit which cannot be allocated to the units which are manufacturing and exporting only components. CIT(A) also stated that the assessee’s case is squarely covered by the decision of jurisdictional High Court in the case of Brakes India Ltd. [2013 (9) TMI 192 - ITAT CHENNAI] and also Punjab Con Cast Steel Vs. CIT & ors.[1993 (3) TMI 142 - ITAT CHANDIGARH]. During the appeal, the Ld.DR vehemently argued stating that non-allocation of expenditure to 10B Units was only a device to reduce the taxable income but no evidence has been brought on record to controvert the submissions of the assessee or to establish that the in-house R&D facility belong to the eligible 10B units also. Therefore, we do not find any infirmity in the order of the Ld.CIT(A).
Loss on forward contracts - HELD THAT:- In the instant case the loss has arisen in the course of appellants trading operation only. The assessee has entered into forward contract for hedging purposes against the underlying receivables (exports) and payables (imports) transactions in foreign currencies. As rightly explained by the assessee derivative products are intangible and are not capable of delivery or transfer. It was also explained that forex derivatives are not traded on security markets and therefore has no application of Sec.43(5) of IT Act. The assessee has entered into forward contracts for the purpose of its business and there was no dispute on this issue. As on the closing date, the foreign exchange was restated which resulted into loss and the assessee relied on M/S WOODWARD GOVERNOR INDIA P. LTD. & M/S HONDA SIEL POWER PRODUCTS LTD. [2009 (4) TMI 4 - SUPREME COURT] wherein it was held that the loss incurred on account of restatement of foreign exchange as on the Balance sheet date is a business loss.
TDS u/s 195 - Disallowance u/s.40(a)(i) - payment made to non-resident Export agent M/s.Biggleswade Ltd., Hongkong without deduction of tax at source - HELD THAT:- Explanation to Sec.9(2) of IT Act is amended by Finance Act, 2010 w.e.f. 01.04.1976. The assessment year involved is 2007-08 to 2009-10 and there is no provision to tax the payments made to the services rendered outside India to the foreign agents in the Income Tax u/s.9(1)(vii) prior to the amendment. This view is upheld by the decision of the Hon’ble Supreme Court relied upon by the Ld.AR in the case of Ishikawajima-Harima Heavy Industries Ltd vs. DIT [2007 (1) TMI 91 - SUPREME COURT] which clarified that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. The explanation to section 9(2) was introduced by Finance Act 2010 w.e.f.1976 and as on the date of assessment there was no such provision to tax the FTS rendered outside India and hence we agree with the Ld.A.R that no tax is deductible u/s 195 and consequent disallowance is not called for.
We hold that the payment made by the assessee for the services rendered outside India are not taxable under section 9(1)(vii) of I.T. Act in the assessment years under consideration and the disallowance is not called for.
TDS u/s 195 - Disallowance u/s.40(a)(i) in respect of payment made to Sonima Logistics, Germany without deduction of tax at source - HELD THAT:- CIT(A) examined the Explanation of the assessee and the document placed before the CIT and concluded that the services rendered by the non-resident do not fall under the category of technical or managerial services. Ld.CIT(A) further stated that the services are rendered outside India and there is no permanent establishment or business connection to the non-resident in India. This fact has not been disputed by the Revenue. The profits of the services rendered outside India cannot be taxed in India unless the non-resident has permanent establishment/or business connection in India as envisaged in Sec.9(1) of IT Act. The Ld.CIT(A) deleted the addition relying on the decision of the Hon’ble Apex Court in the case of GE Technological Centre Pvt. Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT]. The findings and conclusions arrived in earlier ground in respect of payment made to M/s.Biggleswade Ltd., are squarely applicable to this ground also.
Disallowance of expenditure as per Sec.14A r.w.r.8D - CIT(A) held that the Rule 8D is not applicable for AY 2007-08 and confirmed the disallowance to the extent of 2% of dividend income - HELD THAT:- Rule 8D is introduced on 24.03.2008 and applicable w.e.f. 24.03.2008. This Tribunal has consistently followed that Rule 8D is applicable from 24.03.2008 but not to the earlier period. Therefore, we are of the considered opinion that the Ld.CIT(A) has correctly applied the provisions of Rule 8D and held that Rule 8D is not applicable for the AY under consideration. Prior to the introduction of Rule 8D this Tribunal has consistently upheld the disallowance of expenditure related to the exempt income @ 2% of exempt income. The Ld.CIT(A) also restricted the disallowance to the extent of 2%. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the Revenue on this issue is dismissed.
Additional depreciation claimed by the assessee u/s.32(1)(iia) - HELD THAT:- Balance additional depreciation which was not allowed in the year in which it was put to use, should be allowed in the subsequent year.
Depreciation @60% on UPS - we are unable to accept the contention of the Ld.AR that UPS is eligible for 80% depreciation - we uphold the order of the Ld.CIT(A) and direct the AO to allow the depreciation @60%. In the result, the assessee’s appeals as well as Revenue’s appeals are dismissed.
TDS u/s 194J - addition u/s.40(a)(i) for Software purchase for non-deduction of tax at source - HELD THAT:- The provisions of section 9(1)(vi) as a whole, would stand attracted in the case of the latter and not the former. Explanations 4 and 7 relied by the authorities would thus have to be read and understood only in that context and cannot be expanded to bring within its fold transaction beyond the realm of the provision. The Tribunal has relied on the decision of the Division Bench of the Delhi High Court in the case of The Principal Commissioner of Income Tax-6 V. M.Tech India Pvt Ltd [2016 (1) TMI 812 - DELHI HIGH COURT] which supports our view as above. It is brought to our notice that the decision of the Delhi High Court has not been accepted by the Department and an SLP is pending. Be that as it may, in view of the facts and circumstances as observed above, we have no hesitation in dismissing the Departmental Appeal answering the questions of law in favour of the assessee and against the Revenue.
Payment towards software purchase is not royalty within the meaning of non-taxable u/s.9(1)(vi) of Income Tax Act and not liable for deduction of tax at source, accordingly, we uphold the orders of the Ld.CIT(A)dismiss the revenue’s appeal on this issue.
Disallowance u/s 14A - HELD THAT:- No details regarding shares which earned dividend income was placed by the Ld.AR. This Tribunal has consistently followed that investments made from the common account attracts the disallowance u/s.14A. Once, the assessee earns the dividend income, the application of Sec.14A is attracted and consequently the disallowance has to be made applying the Rule 8D. Therefore, we do not find any infirmity in the Orders of the lower authorities and the same is upheld. The appeal of the assessee on this ground is dismissed.
Deduction u/s.35(AB) - HELD THAT:- The act does not place any restrictions to incur the expenditure. The expenditure incurred for the purpose of scientific research required to be allowed as deduction u/s.35(AB) subject to complying the conditions laid down in Rule 6. The expenditure was incurred by the assessee which is certified by the tax audit report. There is no dispute regarding the actual amount incurred by the assessee. The assessee relied on the jurisdictional High Court decision supra. The decisions relied upon by the Ld.AR are not directly related to the issue of R&D expenditure incurred over and above the specified limit of DSIR. However, the essence of the judgments relied upon by the Ld.AR suggests to allow the actual expenditure. There is no dispute regarding the genuineness of expenditure. Therefore, we hold that the assessee is entitled for the weighted average deduction on the amount actually spent.
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2017 (5) TMI 1748
Addition u/s 68 - Bogus LTCG - CIT(A) deleted the impugned addition - HELD THAT:- CIT(A) has analysed the issue in a proper perspective in accordance with the law by drawing support from the decisions rendered by Hon’ble High Courts.
CIT(A) has specifically observed that the assessee has discharged the burden of proof placed upon it u/s 68 of the Act, where as the assessing officer has failed to rebut the same. Even though the assessee has offered to produce Mr. Mukesh Chokshi before the AO, yet the AO did not order for production. Under these set of facts, we are of the view that no interference is called for in the decision rendered by Ld CIT(A) on this issue. Accordingly we affirm the same. - Decided against revenue.
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2017 (5) TMI 1747
Smuggling - illegal sale of Goat Skin - absolute confiscation - penalty - presence of “reasonable belief” and the “reason for formation of such belief” - It was contended that there was an error apparent on the face of Annexure-5 as the same officer while noting that the goods are highly perishable in nature was directing the petitioner to deposit 100% cash security but also at the same time, asking him to execute a bond - HELD THAT:- The contention of the petitioner that the goods were not notified goods form the basis of his challenge to the action of the respondents. This Court had issued a specific query to the Customs authorities to justify as to whether the goods, so seized by its authorities, were specified goods and had been seized from specified routes. The counter-affidavit filed by the respondents does not, in any way, substantiate this fact and a perusal of the adjudicatory order indicates that it was seized from the godown. There is also no satisfaction expressed by the authorities at the time of seizure that they had “reason to believe” that the goods so seized were liable for confiscation. Thus, the very initiation of the proceedings against the petitioner seems to be without jurisdiction.
Penalty - HELD THAT:- The petitioner has categorically submitted that he could not be forced to participate in the proceedings, which was without jurisdiction and was liable to be refunded the amount, which was the cost of his goods, which had been taken in hot haste by the authority without following the due process of law - imposition of a penalty after confiscation of the Goat Skins, which had been illegally auction sold by the authorities, could not be sustained as by no stretch of imagination the same authority, who issued the show cause notice, proceed to pass the final orders, in the present case. Such action clearly reveals the mechanical manner in which the authorities have been functioning and is indicative of the non-application of mind and also is deemed to be vested with ulterior motives.
The entire proceedings against the petitioner having been conducted in gross violation of the statutory provisions of the Act stands vitiated, more so because the petitioner has been subjected not only to irreparable loss and injury but has also been denied the basic principle of audi alteram partem, leading to much harassment and injury by the illegal acts of the respondents.
This Court, considering the facts that the whole proceedings against the petitioner stands vitiated as being without jurisdiction, also allows the prayer of the petitioner for refund of ₹ 1,21,620/-, being the price of 2027 pieces of Goat Skins, which has been illegally sold by the respondent-authorities - Application allowed.
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2017 (5) TMI 1746
Rectification of Mistake - errors apparent from the record or not - Section 129B of Customs Act, 1962 - refund of accumulated credit - HELD THAT:- The applicant sought refund of accumulated credit that remained unutilised at the time of closure. Each refund claim needs to be tested on the facts leading to the claim. In the claim of the appellant, credit accumulated because of failure to add sufficient value through manufacture and appellant is, as pointed out supra, an end user to that extent. Just as a final consumer cannot claim a refund of tax liability devolving on a manufacturer precedent in the chain of value added, an assessee who is an end user is similarly excluded from entitlement for refund. Had inputs representing the accumulated credit been available in stock, those could have been cleared by debit such credit thus obviating the need for claiming refund. Such is not the situation of the applicant.
Grant of refund would, therefore, be tantamount to acknowledging incorrect application of rate of duty on the manufacturer preceding the applicant in the value added chain. In the absence of such a finding, it would be contrary to Article 265 of the Constitution to reduce the tax liability of that assessee. The denial of refund by the lower authorities cannot be faulted.
The rectification sought in the application is recall of the order to find in favour of the applicant by complying with the requirements of judicial discipline. After considering the various decisions cited in favour of applicant, the outcome has not varied - Application dismissed.
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2017 (5) TMI 1745
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- In the case of the assessee, the provisions of Section 14A r.w.r. 8D will not be applicable in regard to investments made in group concern i.e. subsidiary, associate concern etc. Accordingly, we remit the matter back to the file of the AO with a direction to re-compute the disallowance u/s 14A r.w.r. 8D after deleting investments made by the assessee in group concerni.e. subsidiary, associate concern etc for computing average value of investment. The company has sufficient own funds therefore disallowance under second limb of Rule 8D (2) is also not warranted. Ground no. 1 raised by assessee allowed for statistical purposes.
TDS u/s 194H - disallowance under section 40(a)(ia) in respect of commission on credit card companies paid to various banks for non-deduction of tax at source - HELD THAT:- Delhi High Court in the case of JDS Apparels (P.) Ltd [2014 (11) TMI 732 - DELHI HIGH COURT] has held that Commission' to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H - Thus commission paid to the credit card companies is not subject to the TDS provisions of the Act. Accordingly the disallowance made by the Assessing Officer cannot be sustained and the Order of the CIT(Appeals) deleting the aforesaid disallowance, is upheld.
Disallowance of interest under Section 36(1)(iii) - HELD THAT:- It appears that the facts remain the same as earlier years and the loans and advances have been given to group companies as a part of routine business operations, Further it has also been brought to our attention by the Assessee company that the Assessing Officer in earlier as well as subsequent years, accepted the interest claimed under section 36(1)(iii) on similar facts. The AO has made a disallowance during the year under consideration based on his surmises without giving any cogent reason. Hence this disallowance ought to be deleted.
Disallowance on account of forfeiture of share warrants - AO disallowed the said amount considering as revenue receipt - HELD THAT:- The basic nature of the transaction relates to raising of capital through convertible warrants. The amount forfeited on account of non payment of subsequent amounts cannot be treated as a income of the assessee in view of the various judicial pronouncements as well as the basic nature of the receipt. Thus, we hold that amount received on account of forfeiture of amount due to non payment towards warrants issue has to be treated as capital receipt and since the assessee has also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income.
AO has observed in the assessment order that this addition should be treated as income from other sources as the assessee has become richer but the DR could not throw any light on this aspect. It solely indicates that Assessing Officer was not certain about the nature of these receipts. Thus, considering the above facts, we come to the conclusion that the nature of receipt in this case has clearly been established as being the capital receipt. The provision of Income Tax Act does not provide for taxation of such capital receipt, even if it is forfeiture of amount. Accordingly, in the background of the aforesaid discussions and precedents, we do not find any infirmity in the order of the Ld. CIT(A).
Addition to the book profit while computing minimum alternative tax, under Clause (c) to Explanation 1 of section 115JB (2) for disallowance u/s 14A - HELD THAT:- There is ruling of the Mumbai tribunal in the case of RBK Share Broking (P) Ltd [2013 (12) TMI 74 - ITAT MUMBAI] and Dabur India Ltd. [2013 (12) TMI 1009 - ITAT MUMBAI] held that expenditure incurred to earn exempt income will be disallowed under Section 14A while computing MAT Profits, therefore relying on the same ruling in the present case has held that the disallowance under Section 14A will be applicable while arriving at the book profits under Section 115JB(2) of the Act.
Disallowance of various expenses - AO concluded to disallow proportionate amount of administrative expenses, finance charges and peak credit - AO concluded that the assessee had entered into circular trading transactions wherein the assessee showed purchase of goods from Nitcowithout delivery and subsequent sale thereof to another company again without delivery which in turn showed sales without delivery to Nitco - HELD THAT:- On perusal of the statements of senior management/directors recorded in the Assessment Order, it appears that the fictitious sales and purchases admittedly involved only the bill entry and transfer of funds through banks. The department has also not alleged that the assessee company had any more role in the entire scheme of things apart from the specific role mentioned above. Given this, if any expense is to be attributed to the aforesaid transaction then it would be the salary of the senior managerial personnel and employee’s wages, packaging material and other expenses involved in directing the aforesaid transactions. However it would be entirely incorrect to attribute the mall maintenance charges to the aforesaid transactions since these expenses do not appear to have any relation to the aforesaid transactions.
It would be in the fitness of things if this matter be restored to the file of the AO with direction to disallow that portion of the Directors salary and employees wages, expenses on packaging material and other expenses as are directly involved in affecting the said turnover to NITCO. - Ground of assessee’s appeal is allowed for statistical purposes.
Exemption of long term capital gain u/s. 47 (iv) - directing the A.O. to restrict the relief given by him to the Appellant on account of exemption to the returned income of the Appellant, by invoking the proviso of section 240 of the Act - HELD THAT:- AO ought to have examined whether the assessee’s claim made in the course of assessment proceedings that the transfer of its value retail business to Future Value Retail was not exigible to LTCG, as declared by it, in view of the provision of section 47(iv) of the Act, instead of summarily rejecting it at the threshold since no revised return of income was filed. We set aside the findings of the Ld. CIT(A) and restore the matter to the file of AO for examination and adjudication thereon after affording the assessee adequate opportunity of being heard.
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2017 (5) TMI 1744
Restoration of name of Company in the Registrar of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- n the basis of the report of the Registrar of Companies it appears that the name of the company was struck off on account of non-filing of statutory documents w.e.f 2008-2009. The appellant has again filed the application for revival of the company. Permission for revival of the company can only be granted on the condition of compliance with the requisite formalities which the Registrar of Companies has pointed out in his report.
The petitioner is directed to file the documents including the Balance Sheets and Annual Returns upto the year 2016 and deposit the fees of ₹ 1,04,000/- as mentioned out in the report of the Registrar of Companies within four weeks from the date of the order. If all the requisite formalities are complied with within the prescribed time, then applicant company may be revived - petition disposed off.
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2017 (5) TMI 1743
Grant of Bail - Validity of Detention order - four offences of criminal conspiracy, cheating, kidnapping and extortion - case of Appellant is that the grounds of detention are stale, they are based on the incidents which are said to have occurred between the period from 2002 to 2007 and are relied on by the detaining authority while forming its opinion and recording its satisfaction that the detenu needs to be detained on 23.11.2016 - HELD THAT:- The detention order in this case is vitiated by taking into account incidents so far back in the past as would have no bearing on the immediate need to detain him without a trial. The satisfaction of the authority is not in respect of the thing in regard to which it is required to be satisfied. Incidents which are stale, cease to have relevance to the subject matter of the enquiry and must be treated as extraneous to the scope and purpose of the statute - In this case, the authority has come to a conclusion so unreasonable that no reasonable authority could ever reach. A detaining authority must be taken to know both, the purpose and the procedure of law. It is no answer to say that the authority was satisfied.
The influence of the stale incidents in the detention order is too pernicious to be ignored, and the order must therefore go; both on account of being vitiated due to malice in law and for taking into account matters which ought not to have been taken into account - There is another reason why the detention order is unjustified. It was passed when the Accused was in jail in Crime No. 221 of 2016. His custody in jail for the said offence was converted into custody under the impugned detention order. The incident involved in this offence is sometime in the year 2002-2003. The detenu could not have been detained preventively by taking this stale incident into account, more so when he was in jail.
Appeal allowed.
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2017 (5) TMI 1742
Disallowance u/s.14A - CIT-A deleted addition - whether earning of exempt income is not the criteria for 14A disallowance, and once exempt income bearing investments are made by the assessee, disallowance u/s.14A becomes mandatory in such cases? - HELD THAT:- The issue is settled by the Hon’ble jurisdictional High Court in the case of Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] that where there is no exempted income in the relevant year, there cannot be disallowance of expenditure u/s.14A in relation to exempted income. - Decided against revenue.
Addition of foreign exchange fluctuation loss - AO disallowed the foreign exchange loss arising on account of forward contracts as speculation loss - HELD THAT:- In the present case, we find that the assessee has incurred loss relating to its business only and in view of the decision in the case of CIT v. Panchmahal Steel Ltd. [2013 (5) TMI 686 - GUJARAT HIGH COURT] this ground of appeal raised by the Revenue is dismissed.
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2017 (5) TMI 1741
On-money receipt - material found during the course of survey is to be taxed intoto or income is to be determined by applying a specific rate of profit out of this “on-money receipt” - HELD THAT:- Survey team was well aware about this aspect and that is why net income of ₹ 15 crores was accepted as a declaration on behalf of the assessee. Had that not been in the knowledge of the Department, then the survey team would have emphasized the assessee to declare ₹ 36.53 crores. Consistently approach of the Revenue was to work out profit element embedded in those on-money receipts.
Tribunal has also considered this aspect in the case of Jay Builders [2010 (9) TMI 1194 - ITAT AHMEDABAD]. Thus, there was no clinching evidence with the Department to demonstrate that gross-receipts of on-money calculated out of impounded material found during the course of survey is deserved to be considered as net profit. As far as statement of Shri Murarilal Agarwal, that statement has duly been considered by the ld.First Appellate Authority.
Reply to question no.7 has been specifically dealt by the ld.CIT(A) on pages 8, 9 and 10 of the impugned order. In other words, it is a cumulative analysis of all the facts at the end of the First Appellate Authority to demonstrate that alleged calculation of gross on-money at the end of AO was not the income of the assessee. It contained certain expenditure also which are noted on those very pages and credit of those expenditure are also to be considered. Taking into consideration these aspects, books were not considered as reliable and profit element embedded in the receipts has been added. This profit has been calculated at the rate of 16%. Therefore, we do not find any error in the order of the ld.CIT(A), and first ground of appeal is rejected.
Applying net profit rate at 16% - HELD THAT:- As applied at the rate of 42%. We find that this rate has been applied by the ld.CIT(A) after taking into consideration comparable cases of eight assessees. Specific example has been given on page no.16 of the impugned order. Thus, in our opinion, the ld.CIT(A) has exercised his discretion after taking into consideration various other factors.
Disallowance u/s 40A - HELD THAT:- Once income of the assessee has been estimated after rejection of the books of accounts, there cannot be other disallowance specifically under section 40A(2), 40A(3) etc. We do not find any error in the observation of the ld.CIT(A) in this regard. Therefore, this ground of appeal is also rejected.
Profit from unaccounted business on the money attributable to the sale of flats during the year - According to the CIT(A), the income of the assessee would be assessed on the method of accountancy followed by the assessee and the revenue would be recoginised in the year in which the sales have been made by the assessee - HELD THAT:- After taking into consideration finding of the ld.CIT(A), we do not find any error because the assessee itself has offered an income of ₹ 15 crores in different years and recognized this income on sale of flats. In this year, the project was not completed. It was under construction, therefore, it cannot be said that the income has accrued to the assessee. In a given case, booking of flats may be canceled, advance taken by the assessee including on-money could be returned, therefore, the ld.CIT(A) has took a view in right perspective. We do not find any error in the finding of the ld.CIT(A) on this issue.
Addition of investment added u/s 69/69C and u/s 68 - HELD THAT:- Once the receipts are accounted, expenditure cannot be added. The source of expenditure is on-money receipts. Out of the on-money receipts, the income would be assessed in the year when the flats would be sold. Similarly, the ld.CIT(A) has observed that ₹ 36.49 lakhs cannot be considered as cash credit because the assessee has already explained that these are on-money receipts. The assessee has also identified flat numbers against which such amounts have been received.
CIT(A) has entertained additional evidence in violation of Rule, 46A of the Income Tax Rules - AO was not provided an opportunity of hearing on this issue - income of the assessee embedded in on-money receipts is to be estimated, then this should be estimated at the rate of 42% and not at the rate of 16.25% as done by the ld.CIT(A) - HELD THAT:- CIT(A) has not entertained any additional evidence, rather reappreciated existing material available on the file of the AO. Thus, there is no force in such ground.
We find that the ld.CIT(A) has adopted rates after taking into consideration relevant material and comparable cases. The ld.CIT(A) made reference to eight comparable cases before adopting percentage of 16% required to be applied on on-money receipts. Similarly, thereafter, the ld.CIT(A) made reference to order of the ITAT in different cases. Thus, we are of the view that the ld.CIT(A) has appreciated the facts and circumstances in right perspective and has applied pragmatic rate of profit on-money receipts. We do not find any merit in these grounds of appeal. They are rejected.
Unexplained investment plus expenditure - HELD THAT:- The assessee has pointed out that entry of ₹ 1,14,12,000/- in the Asstt.Year 2009-10 has been made twice by the AO in table no.3 on page 36-38 of the assessment order. This aspect has been appraised from the seized material also. CIT(A) has considered it an error at the end of the AO. No material was brought to our notice pointing out as to how the ld.CIT(A) has erred in construing this figure. Therefore, after going through the order of the ld.CIT(A), we do not see any error in it.
As far assessment of income from the on-money receipt is concerned, we have already adjudicated this issue in the Asstt.Year 2008-09, wherein we have upheld the finding of the ld.CIT(A) that gross-receipt of on-money cannot be taxed. Only income part embedded on this receipt is to be taxed. In view of our finding in the Asstt.Year 2008-09, we do not find any merit in other alternative arguments of the Revenue.
Addition u/s 68 - share application money received during the F.Y.2007-08 that is relevant to Asstt.Year 2008-09 - AO treated this amount as unexplained cash credit and made addition - CIT(A) has deleted the addition on the ground that perusal of ledger account as well as bank account statement would indicate that these amounts have been received by the assessee in the accounting year relevant to A.Y.2008-09 and cannot be taxed in the Asstt.Year 2009-10 - HELD THAT:- Since this amount has not been received in this year and is not taxable in this year, therefore, the ld.CIT(A) has rightly deleted the addition.
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2017 (5) TMI 1740
Oppression and Mismanagement - appointment of Director - It is the case of the petitioner that he was away from the management and affairs of the 1st respondent company from 2012, of course, according to the petitioner, on account of non-cooperation from respondents. According to the respondents, on 08.10.2013, in the meeting of Board of Directors of the 1st respondent company, respondent 3 was appointed as Director.
Whether appointment of respondent 3 as Director of the company as per resolution passed in the Board of Directors meeting held on 8th October, 2013 is valid?
HELD THAT:- From the material available on record it is clear that petitioner himself stayed away from affairs of the company from 2012. Admittedly petitioner changed his residence which is recorded in the register of company - It is only on 20.10.2016 petitioner informed 1st respondent company about change of his address from 4A, Anupam Bungalows, New City Light Road, Surat to B/202, Dreamworld Residency, Canal Road, Near G.D. Goenka School, Surat. It is the duty of the petitioner to inform the change in his address and it is not for the company or other shareholders to find out the change in address of the petitioner. Therefore, petitioner has no right to say that he was not served with notice.
Without placing any material on record by merely filing form MGT-7 it cannot be concluded that petitioner attended five Board meetings. Therefore, from the facts and the material available on record it appears that the petitioner was not involved in the management affairs of the company from 2012 to 2016.
Considering the powers of this Tribunal under section 242(2) of the Companies Act, 2013 in order to do substantial justice to the parties and smooth conducting of business and affairs of the company, this Tribunal under section 242(2) of the Companies Act, 2013 can pass an order even in absence of finding of oppression. Petitioner being one of the promoters of the company and being a technical person would certainly have rights and expectation, which would submerge in corporate structure. Legitimate expectations of the petitioner in the business of the company shall also be safeguarded and at the same time the interest of the company and inputs given by the respondents shall also be taken into consideration.
The appointment of respondent 3 as director is set aside. Allotment of shares as per resolution dated 26.12.2016 is set aside. Petitioner is not entitled for any other reliefs in this petition.
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2017 (5) TMI 1739
Revised working of capital gains in respect of transaction of BSE shares - Claim denied on the ground that the same was not prayed either in return or in the revised return - HELD THAT:- The issue involved in the aforesaid proposed question is squarely covered against the Revenue in light of the decision of the Division Bench of this Court in the case of Commissioner of Income Tax vs. Mitesh Impex [2014 (4) TMI 484 - GUJARAT HIGH COURT] as held by the Division Bench of this Court that if the revised working of capital gain is brought on record during the course of the assessment, the same is permissible and the same was required to be allowable. Under the circumstances, no error has been committed by the learned ITAT in allowing the revised working of capital gains in respect of transaction of BSE shares. Under the circumstances, present Tax Appeal qua question No.(1) stands dismissed.
Disallowance of deduction u/s 40(a)(ia) - reimbursement of expenses - HELD THAT:- The said proposed question of law is also answered against the Revenue by the Division Bench of this Court in the case of Commissioner of Income tax-III vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014 (4) TMI 235 - GUJARAT HIGH COURT] wherein as held that on the amount which is reimbursed the TDS is not required to be deducted. The aforesaid is not disputed by Shri Bhatt, learned Counsel appearing on behalf of the Revenue. Under the circumstances, present Tax Appeal qua proposed question No.(3) stands dismissed.
Appeal is ADMITTED to consider the following question of law - “Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in deleting the disallowance of deduction u/s 40(a)(ia) of ₹ 30,68,705/in respect of office management and maintenance expenses?”
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2017 (5) TMI 1738
TP Adjustment - benchmarking the Direct Sales Compensation (‘DSC’) - commission @ 2% for the indenting services received by the assessee from its AEs - HELD THAT:- Aassessee while arriving at the average commission rate of 3.62% in respect of the aforesaid two concerns, viz. M/s Sumitomo Corporation India Pvt. Ltd. and M/s Bayer Material Science Pvt. Ltd., for the year under consideration, viz. A.Y. 2008-09, had in respect of M/s Bayer Material Science Pvt. Ltd.[2011 (12) TMI 393 - ITAT MUMBAI] adopted the commission rate of 5% that was upheld by the Tribunal in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, as there was no transfer pricing adjustment in the hands of the said concern during the year under consideration.
We have given a thoughtful consideration to the aforesaid facts and are of the considered view that the contention of the assessee in the light of the order passed by the Tribunal in its own case for the preceding years, therein warrants acceptance. We, thus in the light of our aforesaid observations direct the A.O. to adopt 3.62% as the appropriate rate for benchmarking the Direct Sales Compensation (‘DSC’) received by the assessee from its AEs. The Ground of appeal No. 1 to 1.3 raised by the assessee before us are thus allowed.
Addition @10% of the expenses incurred on Global Work Space Solutions/Facilities Management - HELD THAT:- Now when the assessee had substantiated its claim towards the expenses on the basis of material made available on the record, then the disallowance of any part of such expense on adhoc basis stood ruled out. We are further not persuaded to accept the observations of the lower authorities that the disallowance of 10% of GWS expenses were carried out in conformity with adhoc disallowance carried out by the A.O in the immediately preceding year, viz. A.Y. 2007-08, which thereafter had been sustained by the Tribunal vide its order [2015 (12) TMI 1838 - ITAT MUMBAI] of the assessee. We find that unlike the case of the assessee for the year under consideration, the disallowance of ₹ 2.98 crores, i.e @10% of the expenses was upheld by the Tribunal in A.Y. 2007-08, for the reason that the assessee had failed to substantiate its claim of expenses on the basis of supporting bills, which therein justified carrying out of adhoc disallowance @ 10.21% in the hands of the assessee. We thus in light of our aforesaid observations, are thus of the considered view that the half hearted approach of the A.O , which can safely be held to be based on misconceived facts, thus cannot be sustained. We thus direct the A.O to delete the addition/disallowance - Decided in favour of assessee.
Disallowance of write off of earnest money deposit - claim of assessee as a revenue loss under Sec. 37 r.w Sec. 28 - HELD THAT:- Advance by the assessee at the start of the project, and thus was never taken into account by the assessee as its income during the year under consideration, or in any of the previous years, therefore, the same did not satisfy the conditions contemplated u/s 36(1)(vii) r.w.s. 36(2) of the ‘Act’, and as such could not be allowed as a ‘bad debt’ in the hands of the assessee - assessee had alternatively claimed that as the said loss had been suffered by the assessee in the normal course of its business, therefore, the same was allowable under Sec. 37 r.w Sec. 28 of the ‘Act’. We are of the considered view that as the said claim of the assessee requires to be tested against the facts of the case, therefore, we restore the issue to the file of the A.O who shall verify the entitlement of the assessee towards claim of the aforesaid amount as a revenue loss under Sec. 37 r.w Sec. 28 of the ‘Act’ - Issue allowed for statistical purposes.
Non granting of credit of TDS - HELD THAT:- If it emerges from the records that a short credit of TDS had been given to the assessee, then the requisite remedial action be taken and the balance credit of the TDS be allowed in the hands of the assessee. We further direct the A.O. to verify the contention of the assessee that no refund had been received by the assessee, while for a fact to the contrary had been recorded by the A.O. The A.O. is herein directed to verify the factual position in respect of both of the aforesaid contentions of the assessee and give the necessary consequential effect, as per law.
Disallowance of bad debts - ‘bad debts’ written off as part of the operating expenses of the CoEE segment, which had been benchmarked by the assessee applying TNMM - HELD THAT:- Characterizing of the writing off of the debt by the assessee as an operating expense by the DRP, would in no way adversely affect the operating margin of the assessee, as the PLI of the assessee, as claimed by the Ld. A.R continues to remain within the parameters of +/-5% variation, as a result whereof no TP adjustment would be called for in the hands of the assessee in respect of the CoEE segment to which such ‘bad debts’ so pertain, wherein the benchmarking for the said segment had been carried out by adopting TNMM. We thus not being impressed by the aforesaid observations of the lower authorities are thus not persuaded to subscribe to the same, and as such direct the A.O to delete the addition/disallowance so made in the hands of the assessee.
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