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2022 (12) TMI 1561
Disallowance of expenses in earning exempt income u/s. 14A r/w Rule 8D - HELD THAT:- As per the spirit of the decision of Hon’ble Kerala High Court Catholic Syrian Bank [2010 (10) TMI 1068 - KERALA HIGH COURT], the AO can resort to Rule 8D of the Rules, only, if he in terms of Sec. 14A(2) of the Act, he arrives at a satisfaction that having regard to the accounts of the assessee, that the claim of the assessee in respect of expenditure in relation to income which does not form part of the total income under the Act is incorrect.
Therefore the AO cannot blindly apply Rule 8D of the Rules without first complying with the requirements of Sec. 14A(2) of the Act. This exercise has to be necessarily carried out by the AO and therefore we are of the view that the issue requires fresh examination by the AO as directed by the Tribunal in it’s order after affording the Assessee opportunity of being heard and after considering the submissions made before us with regard to the amount to be disallowed u/s. 14A of the Act and in particular the mandate laid down in the provisions of Sec. 14A(2) of the Act. The AO will also consider the specific submissions made by the Assessee before us as to why disallowance u/s. 14A of the Act cannot be made in the case of the Assessee. We therefore allow both the appeals by the Revenue and the Assessee for statistical purpose.
Disallowance of deduction on account of provision for leave encashment - HELD THAT:- Hon’ble Supreme Court in the case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT] overruled the decision of Calcutta High Court in the case of Exide Industries [2007 (6) TMI 175 - CALCUTTA HIGH COURT] and upheld the constitutional validity for deduction of leave encashment on payment basis under section 43B(f) of the Act. Deduction on account of provision for leave encashment cannot be allowed unless it is actually paid. Assessee will not be entitled to claim deduction on leave encashment on the basis of the provision.
Deduction on account of amortization of premium on securities not claimed or allowed in earlier years now allowable on sale of securities of the Act in the computation of total income instead of the correct amount - It was not a case where no claim was made in the return of income but a case where only the quantum of deduction claimed was sought to be enhanced. An additional ground was raised before CIT(A) to adjudicate the claim of the Assessee but the same was not adjudicated or considered by the CIT(A). We therefore restore the issue to CIT(A) to consider the additional claim made by the Assessee.
Non examining of claim made without filing a revised return of income - Revised the original claim and claimed enhanced deduction on account of amortization of premium on securities not claimed or allowed in earlier years now allowable on sale of securities - HELD THAT:- The law by now is well settled that the appellate authority under the Act can entertain a legal claim even though the said claim has not been made by way of a revised return of income. In Jute Corporation of India Ltd. [1990 (9) TMI 6 - SUPREME COURT] it was held that the first appellate authority has wide powers u/s. 251(1)(a) of the Act and can entertain an additional claim.
In the case of Chicago Pneumatic India Ltd. [2007 (3) TMI 409 - ITAT MUMBAI] in the context of allowability of new claims during the assessment proceedings without having recourse to a revised return, has, placing reliance on principle embedded in Article 265 of Indian constitution (No tax can be collected except by the authority of law), CBDT Circular No. 14 dated 11 April 1955 and explaining the ratio of the Goetz (india) Ltd. [2006 (3) TMI 75 - SUPREME COURT] ruling, categorically held that assessee has the right to make new claims during assessment proceedings without recourse to a revised return. The CIT(A), in our view, therefore ought to have entertained the claim of the Assessee in this regard.
Deduction on account of bad debts written off in accordance with the provisions of Sec. 36(1)(vii) - HELD THAT:- Before CIT(A), the claim was made for deduction. The CIT(A) however held that the claim was not made in the original return filed and no revised return was filed and hence the claim cannot be entertained. We are of the view that in the light of the discussion on identical issue in the earlier paragraphs, the claim of the Assessee should be examined and rejecting the claim without even examining the same on merits was not proper and that the CIT(A) ought to have entertained the claim. Since the issue requires examination by the AO, we deem it fit and proper to remand this issue for consideration on merits.
Deduction u/s. 36(1)(viii) - what is the sum to be reduced from the gross income as deduction under clause 36(1)(viii)? - HELD THAT:- CIT(A) rightly appreciated the position that while computing profits of eligible business only proportionate expenses relatable to the eligible business should be reduced from gross receipts from eligible business to arrive at the profits of the eligible business.
Expenses which are not pertaining to eligible business cannot enter into computation of net income from eligible business and this position has rightly been appreciated by the CIT(A) and hence his order on this issue is upheld and the ground of appeal of the revenue is dismissed.
Proceedings u/s. 154 for quantification of deduction u/s. 36(1) -HELD THAT:- We are of the view that the CIT(A) in his order dated 23.1.2014 has upheld the quantification of deduction u/s. 36(1)(viii) of the Act at Rs. 18 Crores as claimed by the Assessee. Therefore, the AO cannot rectify the said quantum in an order u/s. 154 of the Act and that in the event of dispute with regard to the quantum of amount that should have been allowed u/s. 36(1)(viii) of the Act, the AO ought to have filed appeal against the order of CIT(A) dated 23.1.2014 and without doing so ought not to have resorted to proceedings u/s. 154.
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2022 (12) TMI 1560
Violation of principles of natural justice - Challenge to impugned order of recovery of the demand raised by service tax authority relating to transaction pertaining to the period 2016-17 upto June, 2017 - HELD THAT:- The aforesaid order has been passed by the respondent authorities concerned is neither without jurisdiction nor there is any violation of principle of natural justice nor constitutionality of any provision of statute is involved in this writ petition.
It is not inclined to entertain this writ petition in view of the availability of alternative remedy by way of appeal under Section 85 of the of the Finance Act, 1994 before the appellate authority, this writ petition being WPA 26134 of 2022 is dismissed.
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2022 (12) TMI 1559
Challenge to ex-parte assessment order - fair opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, an opinion is formed that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences; (c) The authorities are not found to have adjudicated the matter on the attending facts and circumstances. All issues of fact and law ought to have been dealt with, even if the proceedings were ex parte in nature.
Petition disposed off.
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2022 (12) TMI 1558
Accrual of income in India - receipts on account of provision of information technology and other administrative services to its affiliate in India are in the nature of Fees for Technical Services [FTS] under the India Singapore DTAA - AO concluded by holding that the services in the nature of managerial services provided by the assessee to its Indian AE and such technical knowledge, experience, skill, know-how etc. were made available by the assessee to the Indian affiliate and, therefore, they are in the nature of FTS being taxable @ 10% under the provisions of the DTAA.
HELD THAT:- In order to qualify as FTS, the services rendered ought to satisfy the ‘make available’ test. Therefore, in our considered opinion, in order to bring the alleged managerial services within the ambit of FTS under the India-Singapore DTAA, the services would have to satisfy the ‘make available’ test and such services should enable the person acquiring the services to apply the technology contained therein.
Mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the AO/CIT (A) is the incidental benefit to the assessee which has been considered to be of enduring advantage.
In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider.
We are of the considered view that the service recipient of the assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the assessee year after year.
The receipts of the assessee on account of provision of information technology and other administrative services to its affiliate in India are not in the nature of Fees for Technical Services under the India Singapore Double Taxation Avoidance Agreement and we, accordingly, direct the AO to delete the same. Appeal of assessee allowed.
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2022 (12) TMI 1557
Validity of scrutiny assessment - sustainability of the order passed by the A.O u/s. 143(3) without issuing a notice u/s. 143(2) - validity of the jurisdiction assumed by the A.O, i.e., ITO, Ward-1(1), Raipur for issuing notice u/s. 143(2) and validity of the assessment framed u/s 143(3), dated 18.03.2015 by the ITO, Ward-2(1), Raipur
HELD THAT:- No infirmity can be attributed to the notice u/s. 143(2) of the Act, dated 08.08.2013 that was issued by the ITO, Ward-1(1), Raipur.
In case the jurisdiction over the assessee’s case was vested with the ITO, Ward-1(2), Raipur, then, as per the mandate of Section 124(3) of the Act, the assessee having filed his return of income u/s. 139(1) of the Act on 17.09.2012 was obligated to have called in question within a period of one month the validity of the jurisdiction that was assumed by the aforesaid A.O, which, we find that he had failed to do. Considering the fact that the ITO, Ward 1(1), Raipur who had validly issued notice u/s. 143(2), dated 08.08.2013 to the assessee, we are of the view that pursuant to the restructuring and reallocation of the territorial jurisdictions of the AO’s vide the CBDT Notification No. 1/2014-15, dated 15.11.2014, the automatic transfer of the territorial jurisdiction over the case of the assessee from the ITO, Ward-1(1), Raipur to ITO, Ward-2(1), Raipur could also not be faulted.
We, say so, for the reason that now when the ITO, Ward-1(1), Raipur pursuant to the residential address that was provided by the assessee in his PAN database was validly vested with the territorial jurisdiction over his case, therefore, the subsequent transfer of the territorial jurisdiction over the said residential area to ITO, Ward-2(1) could by no means be called in question by the assessee. We, thus, are of the considered view that as the territorial jurisdiction over the case of the assessee stood transferred to ITO, Ward-2(1), Raipur, therefore, the latter in exercise of his jurisdiction had validly framed the assessment vide his order passed u/s. 143(3), dated 18.03.2015.
We, thus, on the basis of our aforesaid deliberations are unable to concur with the claim of the assessee that the A.O, i.e., ITO, Ward-1(1), Raipur had wrongly assumed jurisdiction and issued notice u/s. 143(2), dated 08.08.2013. Also, we find no substance in the claim of the Ld. AR that the ITO, Ward-2(1), Raipur had exceeded his jurisdiction and framed the assessment in the case of the assessee vide his order passed u/s. 143(3), dated 18.03.2015. Accordingly, finding no substance in the additional ground of appeal raised by the assessee before us, we dismiss the same in terms of our aforesaid observations.
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2022 (12) TMI 1556
Dismissal of second appeal - time was the essence of the contract in the Sale Agreements between the parties - wilful avoidance performance of their contractual obligations - recovery of earnest money following the breach of contract - defence set up by the Appellants was that it was the Respondent who was at fault for not executing the sale deed within the agreed time period and that the suit must be dismissed for his willful non-performance.
Whether Time was the Essence of the Contract? - HELD THAT:- The decision of this Court in Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates Private Ltd. [2011 (8) TMI 1390 - SUPREME COURT] and Saradamani Kandappan v. S. Rajalakshmi Saradamani Kandappan v. S. Rajalakshmi [2011 (7) TMI 1293 - SUPREME COURT] wherein it was held that defense Under Section 55 of Contract Act is valid against anyone who is seeking the relief of specific performance.
Hence on the dual factual premise that it was the clear intention of the parties to treat time as the essence of the contract and that there was an undue delay on behalf of the Respondent to institute the suit, the relief of specific performance cannot be granted. It is clarified that this finding also holds true for the land subsequently released in favor of the Appellants.
Whether it was Proved that Appellants were Willfully Avoiding Performance of Their Contractual Obligations? - HELD THAT:- The courts below have harped on the inability of the Appellants to procure the necessary NOC Under Section 7A of HUDA Act, to hold that they were non-cooperative and willfully avoiding the performance of their contractual obligation. However, as the learned Counsel for Appellants rightfully pointed out, the evidence on record clearly indicates that they gave duly signed blank proformas and relevant documents to the Respondent in order to obtain any necessary sanction or NOCs.
The Respondent had fulfilled his contractual obligation under Under Clause 8 of the Sale Agreements by taking all necessary steps necessary to obtain NOC Under Section 7A of HUDA Act, there are merit in the Appellants' contention that no such NOC was required in the first place as the Concerned Property was agricultural land on the Date of Execution. In this respect, learned Counsel for the Appellants correctly pointed out that the Concerned Property was brought under the Municipal Corporation of Gurugram vide notification dated 02.06.2008 only.
The High Court, therefore, ought not to have made any fact based observations especially when the records of the courts below were not requisitioned to reach an independent conclusion to hold that the said finding of fact by the two courts was contrary to the record. The re-appreciation of evidence is ordinarily impermissible and beyond the scope of a second appeal. Even otherwise, the presence of Appellants before the Sub-Registrar on the Date of Execution is not disputed. In this backdrop where time was the essence of the contract, we conclude that the Respondent has failed to prove that the Appellants were willfully avoiding the performance of their contractual obligations.
Whether Respondent was Entitled to recovery of earnest money? - HELD THAT:- The Respondent has neither prayed for the relief of refund of earnest money in the original plaint nor he sought any amendment at a subsequent stage. In the absence of such a prayer, it is difficult to accept that the courts would suo-moto grant the refund of earnest money irrespective of the fact as to whether Section 22(2) of SRA Act is to be construed directory or mandatory in nature.
Section 74 of Contract Act primarily pertains to the grant of compensation or damages when a contract has been broken and the amount of such compensation or damages payable in the event of breach of contract, is stipulated in the contract itself - in a scenario where the contractual terms clearly provide the factum of the pre estimate amount being in the nature of 'earnest money', the onus to prove that the same was 'penal' in nature squarely lies on the party seeking refund of the same. Failure to discharge such burden would treat any pre-estimated amount stipulated in the contract as a 'genuine pre-estimate of loss'.
The Respondent in the instant case has neither pleaded for refund of the earnest money nor has he claimed any damages or penalty from the Appellants. From the perusal of the records, it is conspicuous that Respondent never raised any concern that the pre estimated amount was 'penal' in nature and instead his sole objective was to gain titular rights over the Concerned Property on the strength of Sale Agreements.
Conclusion - i) The Respondent's delay in seeking specific performance invalidated his claim. ii) The forfeiture of earnest money was deemed justified as it was not contested as 'penal' by the Respondent, and no specific claim for its refund was made.
The decree granted by the courts below was hinged on a logical fallacy wherein the Appellants were held to be unjustly enriched on the premise that the contract was rendered impossible to perform due to acquisition proceedings - Suit dismissed.
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2022 (12) TMI 1555
Utility for filing the return of income electronically in ITR-6 refusing to allow petitioner to upload the return of income for making certain claims which petitioner proposes to make as per the provisions of the Income Tax Act - HELD THAT:- If petitioner does not have positive income under the head “profits and gains” from business but the Gross Total Income is in the positive, then petitioner should be permitted to file its return.
Also draws the attention of this court to two ad-interim orders in the case of Tata Sons Private Limited [2022 (3) TMI 1627 - BOMBAY HIGH COURT] and [2022 (11) TMI 1542 - BOMBAY HIGH COURT] where in view of the inability of the software to permit the petitioner therein to make a particular claim, this court had granted ad-interim relief to petitioner to file paper return of income subject to final outcome of the petition. Similar appears to be the case here.
Issue notice to the respondents. Waives service of notice on behalf of the respondents. The respondents may file reply within a period of six weeks from today with an advance copy to the other side.
List on 27th January, 2023. Pending the hearing and the final disposal of this petition, the petitioner is permitted to file paper return of the income for the assessment year 2022-23 subject to final outcome of the petition.
Since there is a constitutional challenge to the vires of Rule 12 of the Income Tax Rules, issue notice to the Attorney General for India in so far as prayer clause (a) is concerned.
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2022 (12) TMI 1554
Application to permanently stay the order dated 5 September 2005 passed by this Court winding up Svadeshi Mills Company Limited (in liquidation) - HELD THAT:- Apart from the workers, none participated in the instant proceedings. Having regard to the huge potential of the assets of the company in liquidation, and the claims which have been made by the government agencies like MHADA, it is imperative that the Court has full assurance that the rights of the parties who have the stake in the company in liquidation are not affected before the order of permanent stay of the winding up order is passed.
To provide an opportunity to the Applicant to establish its bonafide, it may be expedient to pass an order calling upon the Applicant to make deposit and file requisite undertakings and direct the Official Liquidator to publish a notice inviting the attention of all the stake holders to the proposal to permanently stay the winding up order and revive the Company.
Conclusion - The winding up order ought to be permanently stayed.
Application disposed off.
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2022 (12) TMI 1553
Validity of the assessment framed u/s 147 - no valid approval obtained from the JCIT under the provisions of section 151 - HELD THAT:- AO before issuing notice u/s 148 of the Act for initiation of reopening of the assessment is required to take approval from the higher authority being JCIT/CIT u/s 151 of the Act
Approval from the JCIT was obtained dated 28 September 2017 whereas the reasons were recorded on 30 September 2017. Thus, it becomes evident that the approval has been granted by the ld. JCIT without verifying the reasons recorded by the AO for initiating the proceedings under section 147 of the Act which is contrary to the provisions of law. Hence, we hold that the notice u/s148 of the Act was issued without having valid approval and jurisdiction. Therefore the assessment framed u/s 147 r.w.s. 143(3) of the Act in the present facts is not sustainable. Decided in favour of assessee.
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2022 (12) TMI 1552
Addition made u/s. 56(2)(viib) - assessee company issued 6250 equity shares of Rs. 100/- each at a premium of Rs. 9500/- per share - NAV Method or the DCF Method to determine the fair market value of shares - revenue had rejected the said DCF method and had re-determined the share value at Rs. 2603/- per share using NAV - HELD THAT:- DCF method is certainly one of the prescribed methods provided in Rule 11UA of the Rules and assessee is given an option either to use the DCF method or NAV method. In the instant case, the assessee has chosen to adopt DCF method. The aforesaid facts which are mentioned in various tables reproduced supra goes clearly to prove that the independent valuer had relied on various projections and free cash flow provided by the management for the purpose of share valuation, the said projections had indeed become true and assessee could achieve more than the projections in the subsequent years. Hence, so called non-existing discrepancies pointed out by the AO which have been duly met by the assessee are hereby dismissed as factually incorrect.
Whether the ld. AO could change the method of share valuation was subject matter of consideration in the case of Vodafone M-Pesa Ltd. [2018 (3) TMI 530 - BOMBAY HIGH COURT] as held AO is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee.
Also in Credtalpha Alternative Investment Advisors (P) Ltd. [2022 (1) TMI 937 - ITAT MUMBAI] addressed the issue that DCF method adopted by the assessee cannot be rejected merely on the basis of comparing projections with actuals.
Thus, we direct the ld. AO to delete the addition made u/s. 56(2)(viib).
Seeking set off of unabsorbed depreciation with the addition made by the AO - This has to be factually verified by the ld. AO. But in view of our decision given for ground Nos. 1-3 hereinabove, this unabsorbed depreciation figure if found to be correct, has to be carried forward to subsequent years as per law.
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2022 (12) TMI 1551
Benami transaction - provisional order of attachment - HELD THAT:- It is stated that during the pendency of the present petition, and in the interregnum, the Apex Court in the case of Union of India & Anr. Vs. Ganpati Dealcom Pvt. Ltd. [2024 (10) TMI 1120 - SC ORDER (LB)] has, inter-alia, held that sections 3 and 5 of the Benami Transactions (Prohibition) Amendment Act, 2016 as having only prospective operation.
Apex Court has directed the authorities not to initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to coming into force of the Act, 2016, i.e., 25-10-2016 and that as a consequence of the above declaration, all such prosecutions or confiscation proceedings would stand quashed.
In the present case, the alleged date of transaction, as contained and reflected in the show cause notice, dated 29th January, 2019 would show the same as ‘29th March, 2010’.
As admitted by the learned counsel for the parties that the case of the petitioner is squarely covered by the Apex Court judgment in the case of Ganpati Dealcom Pvt. Ltd [supra] and therefore, all criminal prosecutions and attachment orders would have to be withdrawn by the authorities. Provisional order of attachment dated 26th April, 2019, and order of reference dated 01st May, 2019 shall stand quashed.
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2022 (12) TMI 1550
Classification of service - business of auxiliary service within the meaning of Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994 or not - whether the respondent is liable to pay service tax on the amounts received by it from National Highway Authority of India under the contract dated 08.08.2002 between them? - HELD THAT:- This Court is not called upon to examine the appellant’s policy of filing appeals. Since, there is no dispute that the present appeal is not maintainable, the same is dismissed.
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2022 (12) TMI 1549
Disallowance of interest expenditure u/s 36(1)(iii) - AO took a view that interest bearing funds have been diverted for making interest free advance - disallowance of interest pertaining to the said advances computed @12% of the interest free advances - sole contention raised by the ld. counsel for the assessee was that it had sufficient interest free funds at its disposal in the form of capital for making investment in interest free advances
HELD THAT:- Hon’ble Apex Court in the case of CIT Vs. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] that presumption in such cases was that interest free advances had been made out of interest free funds, warranting no disallowance of interest under section 36(1)(vii) of the Act.
DR was unable to controvert the factual contentions made by the ld. counsel for the assessee before us, nor was he able to distinguish the decision relied upon by the Ld. Counsel for the assessee before us of the Hon’ble Apex Court.
Since the assessee has demonstrated the availability of sufficient own funds for the purpose of making interest free funds, the issue, we find, is squarely covered by the decision of Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT] following which, we hold that no disallowance under section 36(1)(vii) is warranted in the facts and circumstances of the case. Accordingly, the disallowance of interest u/s 36(1)(iii) is hereby directed to be deleted. Appeal of the assessee is allowed.
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2022 (12) TMI 1548
Condonation of delay beyond the period of ninety (90) days in filing appeal under Section 21 of the National Investigation Agency Act - order passed by the Special Judge NIA court rejecting application of the appellant seeking production warrants against witness is an interlocutory order or not - appealable order or not - criminal court under Section 267 CrPC can be approached for issue of production warrant for recording the statement of a person acquainted with the facts and circumstances of the crime during investigation or not.
Condonation of delay beyond the period of ninety (90) days in filing appeal under Section 21 of the National Investigation Agency Act - Whether NIA Act, in particular Section 21 whereof expressly excludes the application of Sections 4 to 24 of the Limitation Act for determining the period of limitation for filing an appeal under NIA Act? - HELD THAT:- Having regard to the object of the NIA Act and the right of the accused to fair trial, the word “shall” used in second proviso to Section 21(5) of the Act deserves to be read as “may”, else the right of appeal given to the accused against his conviction would become a causality if the doors of the Appellate Court are shut to him on the ground of limitation. The right to fair trial is a right vested in the accused under Article 21 of the Constitution. The right of appeal, wherever it is provided, is a matter of substance and essentially a remedial right. If this remedy is put in jeopardy by creating bar of limitation and leaving no discretion in the Court to condone the delay even in well deserving cases, it would render the remedy otiose - the right of the accused to avail the remedy of appeal is a substantive and concomitant right of fair trial.
The word “shall” used in second proviso to sub-Section 5 of Section 21 of the Act must be read as “may” and that the High Court shall have the discretion to condone the delay even beyond the period of 90 days in appropriate cases, provided the appellant satisfies the Court that he had sufficient cause for not preferring the appeal even after expiry of period of 90 days as provided in the second proviso to sub-Section 5 of Section 21 of the NIA Act.
The application of the appellant seeking condonation of delay is held maintainable and the same, for the reasons stated therein, is allowed. Delay in filing appeal is, thus, condoned.
Whether the order passed by the Special Judge, NIA Court rejecting application of the applicant seeking production warrant against witness is an interlocutory order and, therefore, not appealable under Section 21 of the NIA Act? - HELD THAT:- In the instant case, the appellant is seeking production warrants against the witness for recording his statement under section 164 Cr.P.C which, as per the appellant, is essential to take the investigation further . The rejection of the application has terminated the controversy before the Court and has adversely affected the vital right of the investigating agency to effectively investigate the matter and take the investigation to logical end. Such orders which affect the vital rights of the parties cannot be said to mere interlocutory orders. Nor the impugned order has been passed by the trial Court at any interlocutory stage in the trial - the impugned order is not an interlocutory order within the meaning of the term used in sub-Section (1) of Section 21 and, therefore, hold the appeal against such order maintainable.
Whether a criminal court or for that matter, a Special Judge NIA can refuse to issue production warrants under section 267 of the Code of Criminal Procedure when no case is pending trial or enquiry before it? - HELD THAT:- The word “proceedings” used in Section 267 is of paramount importance and, therefore, before we proceed further, it is necessary to analyse its meaning, ambit and scope. Section 2(h) of the Cr.PC clearly provides that the word “investigation” includes all proceedings under this Code for the collection of evidence conducted by a police officer or by any person (other than Magistrate) who is authorized by a Magistrate in this behalf - The expression “other proceedings” which occurs in Section 267 CrPC includes investigation and, therefore, a Criminal Court within whose jurisdiction the crime is committed and in respect whereof a production warrant is sought, cannot reject the application for production warrant simply on the ground that no case is pending before it. The order of the trial Court, therefore, is not sustainable in law. The order impugned passed by the trial Court cannot be termed as mere interlocutory and, therefore, we hold the appeal under Section 21 of the NIA Act maintainable against the impugned order - the provisions of second proviso to subsection 5 of Section 21 of the Act are directory in nature and, therefore, an application for condonation of delay under Section 5 of the Limitation Act is maintainable.
The order passed by the trial Court is quashed - appeal allowed.
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2022 (12) TMI 1547
Disallowance of deduction of director’s remuneration u/s 40A(2)(a) - it was the claim of the assessee company before the CIT(Appeals), that the A.O had grossly erred in observing that it was not benefited at all by increasing the director’s remuneration during the year under consideration - HELD THAT:- As the AO had failed to adopt either of the prescribed basis/yardstick for verifying the reasonableness of the director’s remuneration that was paid by the assessee company during the year under consideration, therefore, there was no justification on his part to have confined the assessee’s claim for deduction of the same to Rs. 2.40 lac (supra) u/s. 40A(2)(a) of the Act.
Apart from that, we are unable to concur with the view of the CIT(Appeals), who despite taking cognizance of the contentions of the assessee that on the basis of services rendered by the directors on full time basis, it was able to scale down its expenses, liquidate its debtors, raise its commission income etc., had upheld the view taken by the A.O on the solitary basis that there was no substantial increase in the turnover and there was a comparative decline in the net profit of the company during the year under consideration.
Be that as it may, as the A.O had without adopting ant prescribed basis/yardstick held the director’s remuneration as excessive and unreasonable, therefore, unable to uphold his view. Accordingly, set-aside the order of the CIT(Appeals) and vacate the disallowance that had been sustained by him. Thus, the Ground of appeal No.2 raised by the assessee is allowed.
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2022 (12) TMI 1546
Revision u/s 263 - income relatable to the excess-stock, excess-cash and unexplained money-advanced attracted section 115BBE - application or non-application of section 115BBE - HELD THAT:- We are in agreement with Ld. DR that the Ld. AO has simply stated that the assessee has incorporated the excess-cash, excess-stock and money-advanced in the ITR. Needless to mention that the function of assessing authority is not only of adjudicator but also of investigator. In the present case, it is quite apparent from assessment-order that the Ld. AO has not made requisite enquiry to ascertain the nature and tax implications of the impugned incomes, he has simply shut the point by saying that the assessee has incorporated incomes in ITR. Therefore, the decisions relied upon by AR do not support the assessee’s stand.
As relying on Maruthi Babu Rao Jadav [2021 (1) TMI 481 - KERALA HIGH COURT] we are inclined to hold that the higher rate of tax prescribed in section 115BBE is applicable to the whole previous year 2016-17 relevant to assessment-year 2017-18 and there is no merit in the contention raised by assessee.
We are of the view that the PCIT has rightly termed the assessment-order as erroneous-cum-prejudicial to the interest of revenue and therefore the revision order passed by Ld. PCIT is a valid order in terms of section 263. Appeal of assessee is dismissed.
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2022 (12) TMI 1545
Reopening of assessment u/s 147 - Disallowances of deduction claimed by the assessee u/s 35(1)(ii) for grant of donation to SHG&PH i.e. School of Human Genetics and Population Health - whether the appellants are entitled to weighted deduction @ 175% of the donations given by them to allege Research Institute namely SHG&PH u/s 35(1)(ii) - HELD THAT:- The reasons for reopening are available as perused these reasons. AO has observed that he has received the information from the DIT (Investigation), Kolkata and he formed a belief that income has escaped assessment with regard to the bogus claim of donation under section 35(1)(ii) - Assessee has filed objections to these reasons and AO has disposed of them.
The stand of the assessee is that in the reasons, AO has not observed that these are bogus donations. There is no application of mind at his own, rather he treated the letter of the DIT(Investigation), Kolkata as gospel truth.
On due consideration of the above, we are of the view that AO did not commit any error in reopening the assessment. The information supplied by the Principal DIT(Investigation), Kolkata was sufficient to harbour belief that income in the shape of alleged claim of donation to Herbicure is a bogus one, because the Department was able to lay its hand on a large number of material, which was available with the Revenue and it was intimated to all the AO. AO has made reference to the statements of the Founder and Director Shri Dasgupta as well as other persons, who have deposed during the survey and post-survey inquiries. Thus we are of the view that sufficient material was available with the ld. AO for forming an opinion that income has escaped assessment. We do not find any merit in this ground of appeal. It is rejected in both the years.
Determination of taxable income by the ld. Deputy Commissioner - On distribution of work amongst the ITOs, vis-a-vis Addl. Commissioner/Deputy Commissioner even no order for transfer of jurisdiction u/s 127 is required to be passed. This is an exercise after the process of selection of the case for scrutiny. Once computer identifies a particular case for selection of scrutiny, then on the basis of PAN data, notice is to be issued upon the assessee providing an opportunity to the assessee that its case has been selected for scrutiny assessment and kindly submit what the assessee wants to submit in support of the return. As observed earlier, the process of selection for scrutiny does not contemplate any discretion in the Assessing Officer. He is bound to follow the CBDT guidelines issued for the purpose of selection of the cases for scrutiny. Thus in this case also, AO has issued the notice on the basis of PAN Data, which infuses jurisdiction in ITO, Ward-10 and thereafter following the Instruction No. 1 of 2011, the case was taken up for determination of taxable income by the ld. Deputy Commissioner. There is no violation in the procedure. Hence, additional ground of appeal is rejected.
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2022 (12) TMI 1544
Additions made on account of Interest Accrued on NPA - addition was made on ground that assessee was following mercantile system of accounting and, hence, whole amount of accrued interest had to be brought to tax - Assessee submitted that the assessee is a co-operative bank and was following the “Prudential Norms Directions” issued by the Reserve Bank of India and the accounting standards notified by the Central Government - HELD THAT:- Assessee had been consistently following cash method of accounting recognizing income in respect of asset qualified as bad and doubtful debt (NPA) as per RBI guideline in view of provision of sections 145 and 43D.
ITAT held, following the case of Asstt. CIT v. Osmanabad Janta Sahari Bank Ltd. [2015 (3) TMI 886 - ITAT PUNE] that assessee could offer to tax amount of interest received from bad and doubtful debts (NPA) on actual receipt basis as per RBI guideline, even though assessee was following mercantile system of accounting.
In the case of Karnavati Co-op. Bank Ltd. [2011 (11) TMI 367 - ITAT AHMEDABAD] the assessee, a co-operative bank, was following mercantile system of accounting. It had neither credited in profit and loss account nor offered for taxation amount of interest that had accrued on non-performing assets [NPA] - ITAT held that in view of clear provisions of section 43D, the Assessing Officer was wrong in adding accrued interest on NPA to income of assessee
Thus, we hold that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made in the hands of the assessee on account of accrued interest on NPA.
Disallowance of deduction u/s. 36(l)(viia) on provision for bad and doubtful debts - AO disallowed the claim of deduction of the assessee on the ground that section 36(1)(viia) of the Act applies only in cases where assessee has given rural advances - CIT(A) deleted addition - HELD THAT:- In the case of Kodungallur Town Co-op Bank Ltd. [2016 (7) TMI 1413 - ITAT COCHIN] a Cooperative Bank is entitled to claim deduction of bad debts provided in first part of clause (viia)(a) of section 36(1) being 7.5 per cent of total income and same cannot be denied linking it to rural advances.
In the case of ING Vysya Bank Ltd [2014 (9) TMI 44 - ITAT BANGALORE] the ITAT held that in order to allow assessee's claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts (PBDD) is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent PBDD is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section.
Thus, it is clear that the benefit of section 36(1)(viia) of the Act is available irrespective of whether the provision is created in respect of rural advances are not, subject to the prescribed limit specified in the said section.
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2022 (12) TMI 1543
TP Adjustment of AMP expenses - HELD THAT:- We find an identical issue raised were considered by the Tribunal in assessee’s own case for assessment year 2012- 2013 [2023 (3) TMI 656 - ITAT BANGALORE] as followed the dictum laid down in the case of Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] and Sony Ericsson Mobile Communications India (P.) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] and directed the A.O. to delete the AMP TP adjustment and the mark up thereon. Decided in favour of assessee.
Deduction to the extent of leave encashment u/s 43B - HELD THAT:- The Bangalore Bench of the Tribunal in the case of M/s. Hewlett Packard (India) Software Operation Pvt. Ltd. [2021 (3) TMI 1379 - ITAT BANGALORE] had categorically held that deduction to the extent of leave encashment, which has been actually paid should be allowed as deduction u/s 43B of the I.T.Act. The Tribunal in assessee’s own case for assessment year 2012-2013 [2023 (3) TMI 656 - ITAT BANGALORE] has also taken a similar view. Thus, we restore the issue raised to the files of the A.O. with the direction to allow deduction u/s 43B(f) of the I.T.Act with regard to leave encashment on actual payment basis.
Not allowed appropriate credit for TDS as claimed - The issue raised is restored to the files of the A.O. to examine the matter and grant TDS credit in accordance with law.
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2022 (12) TMI 1542
TP adjustment - excess AMP expenditure pertaining to trading segment - HELD THAT:- We find an identical issue raised considered by the Tribunal in assessee’s own case for assessment year 2012- 2013 [2023 (3) TMI 656 - ITAT BANGALORE] followed the dictum laid down in the case of Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT], Sony Ericsson Mobile Communications India (P.) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] and directed the A.O. to delete the AMP TP adjustment and the mark up thereon.
Thus we delete the TP adjustment made on AMP expenses - Decided in favour of assessee.
Deduction towards provision for leave encashment on accrual basis - HELD THAT:- In view of the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. [1996 (12) TMI 7 - SUPREME COURT] the additional ground raised is admitted and taken on record for adjudication. The Bangalore Bench of the Tribunal in the case of M/s. Hewlett Packard (India) Software Operation Pvt. Ltd. [2021 (3) TMI 1379 - ITAT BANGALORE] had categorically held that deduction to the extent of leave encashment has actually been paid should be allowed as deduction u/s 43B of the I.T. Act. The Tribunal in assessee’s own case for assessment year 2012-2013 [2023 (3) TMI 656 - ITAT BANGALORE] has also taken a similar view.
Thus we restore the issue raised in ground 14 to the files of the A.O. with the direction to allow deduction u/s 43B(f) of the I.T.Act with regard to leave encashment on actual payment basis.
Not allowed appropriate credit for TDS as claimed - The issue raised is restored to the files of the A.O. to examine the matter and grant TDS credit in accordance with law.
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