Disallowance of interest u/s. 36(1)(iii) - purchase of shares was mainly for acquiring controlling rights in another company - CIT(A) deleted addition - As decided by HC [2007 (7) TMI 721 - GUJARAT HIGH COURT] Revenue fairly admits that similar question has been considered by this Court in the case of the very assessee and the appeal was not admitted by the order, thus no case is made out for admission of this appeal.
HELD THAT:- In view of the low tax effect, we are not inclined to entertain this appeal or interfere with the impugned order.
The civil appeal is dismissed on that ground alone, leaving the question of law open.
TP Adjustment - loan given by the assessee to its subsidiary - AO addition on notional basis in respect of the loan advanced to the Associate Enterprise - TPO found that notional interest should be charged on the loan advanced by the assessee to its subsidiary company by applying LIBOR rate - HELD THAT:- Factual situation needs to be verified. It has to be verified whether the assessee had sufficient surplus funds for advancing the corporate loan to the Associate Enterprise in UK. It has to be verified whether there was any nexus between borrowed funds and advance made by the assessee to the Associate Enterprise in UK.
Since such an exercise was not done by the lower authorities, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Accordingly, the orders of the lower authorities are set aside.
AO is directed to verify the actual surplus funds available with the assessee. It also needs to be verified whether the assessee had borrowed loan and whether there was any nexus between the borrowed loan and advance said to be made by the assessee to the Associate Enterprise in UK.
It is open to the AO to refer the matter once again to Dispute Resolution Panel in accordance with provisions of the Act. Accordingly, the orders of the lower authorities are set aside and the AO is directed to re- examine the matter.
Disallowance u/s 14A r.w.r.8D - As argued expenditure incurred by the assessee for earning of income which does not form part of total income cannot be allowed as deduction while computing the total income - HELD THAT:- Though the assessee claims that the borrowed funds were not used for making investment, the fact remains that the assessee borrowed the funds and the interest-free funds and borrowed funds were put in a common pool. Therefore, it is very difficult to identify which part of the funds was used for making investment for earning dividend income. Moreover, the assessee-company is not in the business of investment.
Therefore, it has to necessarily incur certain expenditure on the managerial level for taking decision for investing the funds in a right company. Therefore, the assessee has to necessarily incur expenditure with regard to managerial decision that was taken for making investment.
Tribunal is of the considered opinion that Rule 8D is applicable to the facts of the case. Therefore, the Dispute Resolution Panel has rightly found that Rule 8D has to be followed. Therefore, this Tribunal do not find any reason to interfere.
Nature of expenditure - expenditure incurred by the assessee on software - HELD THAT:- Dispute Resolution Panel has rightly found that the permanent license is in the capital field. As far as application of software is concerned, again we have to see whether it was temporary one or for long period. If the application software is only for a short period, then it has to be treated as revenue expenditure and it has to be allowed in the year in which it was incurred. If the application software is for a longer period, then it will have an enduring benefit. Therefore, as rightly found by the Dispute Resolution Panel, the expenditure has to be capitalized. The Dispute Resolution Panel directed the Assessing Officer to verify the nature of expenditure and thereafter to decide the issue. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed.
Additional depreciation in respect of machinery installed - HELD THAT:- Cochin Bench of this Tribunal in Apollo Tyres Ltd. [2014 (1) TMI 33 - ITAT COCHIN] found that the assessee is eligible for additional depreciation in the subsequent year since the machinery was put to use for 180 days in the earlier assessment year.
Assessee is entitled for the balance 10% during the year under consideration. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the balance 10% additional depreciation during the year under consideration.
Mistake in recording the total income - HELD THAT:- If there is any mistake in the total income, this Tribunal is of the considered opinion that the mistake needs to be rectified. Accordingly, this issue is remitted back to the file of the Assessing Officer for reconsideration. The Assessing Officer shall re-examine the matter.
Credit for TDS and TCS - HELD THAT:- Dispute Resolution Panel directed the Assessing Officer to verify the claim of the assessee with regard to TDS and TCS to allow necessary credit on the basis of the material furnished in support of the claim of the assessee. In view of the right direction given by DRP to the AO, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed.
Whether the petition is maintainable - Scope of judicial review - Abuse of dominant position - Ericsson is an "enterprise" under Section 2(h) of the Competition Act, 2002, and whether Section 4 of the Act applies to its licensing of patents or not - Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act, 2002 - Whether the allegations made could be construed as an abuse of dominance? - The disputes, being subject matter of suits, could not be entertained by CCI - Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson’s claim for infringement? - Whether impugned orders are without jurisdiction as being perverse?
Whether the petition is maintainable - Scope of judicial review - HELD THAT:- In the facts of the present case, the Ericsson has produced communications from the DG which require Ericsson to produce "(i) certified copies of all email communication during the period January 2011 to March 2013 by the executives or Ericsson who are or have been related to the discussion/negotiation with Indian companies. The executives include Sh. Harish Sharma, Mr. Max Olofsson, Mr. Alex Fasell, Mr. Chris Houghton and other senior executives from Ericsson global". Ericsson had also placed letter dated 15th June, 2015 addressed to the Additional Director General, CCI which indicates that the Ericsson had received four probe notices (till 15th June, 2015) and was called upon to submit the detailed facts regarding Ownership and Shareholding pattern of Ericsson; copies of audited statements of accounts; details of patents relating to mobile telecom standardisation held by Ericsson; claim-chart mapping with Standards, list of SEPs of Ericsson, basis for charging licence fees as percentage of final product, illustrative rate charged to similarly placed parties; cost incurred etc. Further, certain senior employees of Ericsson have also been summoned to record their statement on oath before the DG.
Whether the impugned orders passed under Section 26(1) of the Competition Act can be subjected to judicial review under Article 226 of the Constitution of India? - HELD THAT:- Indisputably, scope of Article 226 of the Constitution of India is very wide.
It is also well settled that although, the High Court does not sit as an Appellate Court to correct every error but in cases where an authority has acted outside the scope of its jurisdiction, the High Court would interfere under exercise of its jurisdiction under Article 226 of the Constitution of India. It is well recognised that the High Court would interfere in orders passed by any authority or subordinate court where "(1) there is an error manifest and apparent on the fact of the proceedings such as when it is based on clear misreading or utter disregard of the provisions of law and (2) a grave injustice or gross failure of justice has occasioned thereby."
The contention that the present petition is not maintainable, is without merit.
Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act, 2002 - HELD THAT:- A plain reading of Section 4(1) of the Competition Act indicates that it proscribes any enterprise from abusing its dominant position. Thus, for the purposes of Section 4(1) of the Act, an enterprise must be the one which is in a 'dominant position'. The expression 'dominant position' is defined under Explanation (a) to Section 4 of the Competition Act to mean "a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour;" It, plainly, follows that alleged abuse of dominance would have to be considered in the context of the relevant market in which an enterprise is found to be in a dominant position.
The question whether Ericsson is an enterprise within the meaning of Section 2(h) of the Competition Act would, thus, have to be answered by ascertaining whether it is engaged in any activity relating to production, supply, distribution, acquisition or control of articles or goods. Admittedly, Ericsson has a large portfolio of patents and is, inter alia, engaged in developing technologies and acquiring patents. Thus, if patents are held to be goods, Ericsson would indisputably fall within the definition of ‘enterprise’ within the meaning of Section 2(h) of the Competition Act, since it is admittedly engaged in activities which entail acquisition and control of patents.
It is well settled that the provision of any statute must be read in the context of the statute as a whole. A non-obstante clause is a well known legislative device used to give an overriding effect to certain provisions over the others which are inconsistent with those provisions; in the present case, Section 60 of the Competition Act expressly provides that the provisions of the Competition Act shall have effect notwithstanding anything inconsistent in any other law. However, the said provision must be read in the context of the Competition Act as a whole and the mischief that is sought to be addressed by the Competition Act.
A prospective licensee who applies for a compulsory licence is expected to have made, prior to his application, efforts to obtain a licence on reasonable terms. However, it further specifies that this consideration would not be relevant where the conduct of a patentee is found to be anti-competitive - if CCI has finally found a patentee's conduct to be anti-competitive and its finding has attained finality, the Controller would also proceed on the said basis and - on the principle akin to issue estoppel - the patentee would be estopped from contending to the contrary - the contention that the jurisdiction of CCI under the Competition Act is ousted in matters relating to patents cannot be accepted.
Whether the allegations made could be construed as an abuse of dominance? - HELD THAT:- Given the nature of the right that a patentee enjoys, it is not easy to reconcile a patent holder's refusal to grant a licence to use his patent as a violation of antitrust laws. The interface between IPR rights and antitrust laws have been a subject matter of debate in various jurisdictions and more particularly in cases where a patentee holds an SEP.
In the present case, apart from instituting suits for infringement against Micromax and Intex, Ericsson has also threatened Micromax with complaints to SEBI, apparently, while Micromax was contemplating and/or in the process of floating a public offer of its shares. Such threats were, undoubtedly, made with the object of influencing Micromax to conclude a licensing agreement. It is not necessary for this Court to examine whether in the facts of this case, such threats also constitute an abuse of Ericsson's dominant position. Suffice it to state that in certain cases, such threats by a proprietor of a SEP, who is found to be in a dominant position, could be held to be an abuse of dominance. Clearly, in certain cases, such conduct, if it is found, was directed in pressuring an implementer to accept non- FRAND terms, would amount to an abuse of dominance.
The disputes, being subject matter of suits, could not be entertained by CCI - HELD THAT:- The contention that since, by virtue of Section 61 of the Competition Act, the jurisdiction of the Civil Courts is barred in relation to matters that CCI or COMPAT are empowered to decide and some issues before the CCI and in the suits are common, the subject matter would be outside the scope of the Competition Act, also cannot be accepted. The question whether there is any abuse of dominance is solely within the scope of the Competition Act and a civil court cannot decide whether an enterprise has abused its dominant position and pass orders as are contemplated under Section 27 of the Competition Act. Merely because a set of facts pleaded in a suit may also be relevant for determination whether Section 4 of the Competition Act has been violated, does not mean that a civil court would be adjudicating that issue. Further, merely because certain reliefs sought by Micromax and Intex before CCI are also available in proceedings under the Patents Act also does not exclude the subject matter of the complaints from the scope of the Competition Act. An abuse of dominant position under Section 4 of the Competition Act is not a cause that can be made a subject matter of a suit or proceedings before a civil court.
Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson’s claim for infringement? - HELD THAT:- The expression “willing licensee” only means a potential licensee who is willing to accept licence of valid patents on FRAND terms. This does not mean that he is willing to accept a licence for invalid patents and he has to waive his rights to challenge the patents in question. Any person, notwithstanding that he has entered into a licence agreement for a patent, would have a right to challenge the validity of the patents. This is also clear from clause (d) of Section 140(1) of the Patents Act, which was introduced with effect from 20th May, 2003. The said clause expressly provides that it would not be lawful to insert in any contract in relation to sale or lease of a patented article or in a licence to manufacture or use of patented article or in a licence to work any process protected by a patent, a condition the effect of which may be to prevent challenges to validity of a patent. Thus, a licensee could always reserve its right to challenge the validity of a patent and cannot be precluded from doing so.
A potential licensee, could without prejudice to his rights to challenge the validity of patents could take such steps or proceedings which are premised on the patents being valid. The doctrine of election would have no application in this case and it is not necessary for a potential licensee to elect to accept the validity of patents in order to assail its abuse - it would not be necessary for Micromax or Intex to waive their rights to challenge a patent for instituting a complaint which is based on the premise that Ericsson’s patents are valid. The CCI, cannot be faulted for proceeding on the basis that Ericsson holds the SEP’s that it asserts it holds; at any rate, Ericsson cannot be heard to complain against CCI proceeding on such basis.
Whether impugned orders are without jurisdiction as being perverse? - HELD THAT:- The CCI, the DG and employees of the CCI are obliged to maintain confidentiality and secrecy of the confidential information provided by Ericsson and must take adequate measures to maintain the same. In a given case of negligence, the CCI/DG may not be immune from a claim of loss or damages if they fail to maintain confidentiality/secrecy of the sensitive information provided to them. As regards the conduct of investigation; needless to state that any arbitrary, unreasonable, capricious or malafide actions would be subjected to judicial review and it would be open for Ericsson to initiate fresh proceedings if the conduct of investigation or any actions of CCI/DG are contrary to the provisions of the Competition Act or fall foul of the constitutional standards required of an authority.
Conclusion - i) Ericsson is an enterprise under the Competition Act, allowing the CCI to investigate its conduct regarding patent licensing.
ii) The Patents Act and the Competition Act operate in their respective spheres without conflict, enabling the CCI to address anti-competitive practices in patent licensing.
iii) The allegations of excessive royalty demands and unfair licensing terms could constitute abuse of dominance, justifying CCI's investigation.
iv) The pendency of suits does not bar the CCI from exercising its jurisdiction under the Competition Act.
v) The CCI's orders are not perverse and are within its jurisdiction.
Validity of reopening of assessment - payment of purchase price in excess to the SMP - petitioners are Sugarcane Factory Societies - as decided by HC [2015 (7) TMI 297 - GUJARAT HIGH COURT] impugned notices u/s 148 of the Act to reopen the proceedings beyond 4 years and within 4 years on the aforesaid ground i.e. on the ground that the payment of purchase price in excess to the SMP has escaped the assessment cannot be sustained
HELD THAT:- Delay condoned. Special leave petitions are dismissed.
DRP assuming jurisdiction u/s. 154 - TP Adjustment - TPO found from the audited financials of the assessee company that it incurred huge expenses in the nature of Advertisement and Market Promotion (AMP) - HELD THAT:- It is an undisputed fact that the assessee company filed full details which are considered as AMP expenditure by the TPO. These include sales discount, selling expenditure, warranty expenditure. These details were not considered by the DRP at the time of passing the original directions u/s. 144C of the Act.
When this fact was brought to the notice of DRP, the DRP modified its directions to exclude those items from the AMP expenditure, following the law laid down in the case of M/s. L.G. Electronics India Private Limited [2013 (6) TMI 217 - ITAT DELHI] - Therefore, it is a case of non-consideration of material on record which would constitute a mistake apparent from record, as laid down in CIT vs. Mithalal Ashok Kumar [1984 (11) TMI 43 - MADHYA PRADESH HIGH COURT] - Therefore, the DRP was justified in assuming jurisdiction u/s. 154 of the Act. Hence, the grounds of appeal filed by the Revenue are rejected and the appeal is dismissed.
Provision for warranty - as per DR only in the nature of contingent liability and therefore cannot be allowed as deduction and provision was not based on any reliable estimate - HELD THAT:- The provision was made at a percentage of sales and percentage of sales varies from year to year depending upon the past trend. Assuming that the claims for warranty are made in the next year, the actual claims are almost near to the provision created in the immediately preceding year. E.g., in the FY 2009-10, actual claims made were Rs. 51,38,524 as against provision created of Rs. 66,24,970.
Similarly, in FY 2011-12, actual claims of Rs. 1,21,09,422 was made as against provision of Rs. 1,29,27,237 and so on. This only goes to show that the provision made is not far in excess of the actual claims made in the `succeeding year. Therefore, it can be safely presumed that the provision for warranty was crated on a reliable estimate basis and based on historical trend and the ratio of Rotork Controls Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] is squarely applicable to the facts of the present case. Therefore, we are of the opinion that the DRP was right in directing the AO to delete the addition on account of provision for warranty expenditure. Hence the grounds of appeal filed by the Revenue are rejected.
Non pursuing the appeal by assessee - Penalty u/s 271(1)(c) - effect of Non appearance by assessee - assessee did not appear at the time of hearing nor even he sought for adjournment. It, therefore, appears that the assessee is not interested to prosecute the matter.
HELD THAT:- As nobody appeared on behalf of the assessee today i.e., on 15.03.2016, despite the fact that the notice for the hearing on 15.03.2016 was sent to the assessee by RPAD on 04.02.2016. It is, therefore, presumed that in spite of notice of hearing being received, the assessee did not appear before the Bench on the date of hearing. On earlier occasions also, the appeal was fixed for hearing but the assessee did not turn up at the time of hearing. This time also, the assessee did not appear at the time of hearing nor even he sought for adjournment. It, therefore, appears that the assessee is not interested to prosecute the matter.
The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, “VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT’. Considering the facts and keeping in view the provisions of rule 19(2) of the Income-tax Appellate Tribunal Rules as were considered in the case of CIT vs. Multiplan India Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] we treat this appeal as unadmitted.
Their Lordships of Hon’ble Supreme Court in the case of CIT vs. B. Bhattachargee & Another [1979 (5) TMI 4 - SUPREME COURT] held that the appeal does not mean, mere filing of the memo of appeal but effectively pursuing the same.
We dismiss the appeal of the assessee for non-prosecution
Deduction u/s 80P(2)(a)(i) in respect of interest on reserve funds, bad debt funds, PF loan etc. as well as subsidy and guest house income - HELD THAT:- The issue is squarely covered in assessee's own case for assessment year 2008-09 [2012 (4) TMI 832 - 13-04-2012] wherein similar issue has been decided by the Tribunal in favour of the assessee. Thus we uphold the impugned orders of the ld. CIT(A) deleting the disallowance made by the AO under section 80P(2)(a)(i) in respect of interest on reserve fund, bad debt fund, PF loan etc. as well as subsidy and guest house income for all the three years under consideration and dismiss the appeals of the Revenue for the said years.
Assessee's claim for deduction u/s 80P(2)(a)(i) in respect of interest on bank fixed deposits (general) -We set aside the impugned orders of the CIT(A) on this issue and restore this matter to the file of the AO for deciding the same afresh as per the same direction as given in the case of Baksara Cooperative Credit Society Ltd.[2016 (1) TMI 409 - ITAT KOLKATA] wherein held the issue as to whether the relevant investment is made by the assessee out of its own surplus funds or out of the amount payable to its members, which represent its liability, requires verification in order to determine the exact head of income under which the interest on such investment is chargeable to tax in the hands of the assessee by applying the relevant case laws. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh - The Cross objections filed by the assessee thus are treated as allowed for statistical purposes.
Revision u/s 263 - disallowance u/s 14A r.w.r.8D - basis of estimation of disallowance not accepted by AO - CIT held that if the AO was not satisfied with the method of disallowance u/s. 14A as done by the Assessee he has no other option but to resort to make disallowance in accordance with Rule 8D of the Rules - HELD THAT:- If the AO comes to the conclusion that claim made by the assessee is not correct, it is only thereafter that the AO can proceed to make the disallowance in terms of Rule 8D of the Rules.
Even in a case where the AO rejects the claim of the assessee that no expenses were incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis
By applying the Rule 8D of the Rules blindly sometimes absurd disallowances would result. Therefore while examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoking the method of disallowance of expenses as prescribed by Rule 8D(2) of the Rules. It is for this reason that the satisfaction of the AO regarding expenses incurred for earning exempt income is to be objective satisfaction.
It is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. Rule 8D(2) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income. It cannot therefore be said that once the AO rejects the mode of computation of disallowance u/s. 14A of the Act as made by the Assessee, he has no other option but to resort to Rule 8D of the Rules.
AO has adopted one of the possible course open to him in law. CIT cannot invoke jurisdiction u/s. 263 just because he does not agree with the view of the AO. In other words u/s. 263 CIT cannot substitute his view with that of the AO. The decision relied upon by the learned counsel for the Assessee clearly supports the stand taken by the Assessee in this regard.
We therefore hold that the order of the AO was neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction u/s. 263 of the Act ought not to have been invoked by the CIT. We therefore quash the order u/s. 263 of the Act and allow the appeal by the Assessee. Appeal by the Assessee is allowed.
Levy of penalty - no ex-post facto prior approval was taken - storage and removal of sugar by Sugar Mills - whether ex-post facto approval amount to sufficient compliance of the proviso to Sub-section (1) of Section 3A of the Act? -HELD THAT:- The issue is no more res-integra and has been authoritatively determined by a series of judgment of this Court. It would be sufficient to refer to the judgment in the case of ASHOK KUMAR DAS VERSUS UNIVERSITY OF BURDWAN [2010 (3) TMI 1058 - SUPREME COURT] where it was held that 'Similarly, if the words used were "with the prior approval of the State Government", the Executive Council of the University could not determine the terms and conditions of service of the non-teaching staff without first obtaining the approval of the State Government. But since the words used are "with the approval of the State Government", the Executive Council of the University could determine the terms and conditions of service of the non-teaching staff and obtain the approval of the State Government subsequently and in case the State Government did not grant approval subsequently, any action taken on the basis of the decision of the Executive Council of the University would be invalid and not otherwise.'
Thus, the dictionary meaning of the word 'approval' includes ratifying of the action, ratification obviously can be given ex-post facto approval. Another aspect which is highlighted is a difference between approval and permission by Assessing Authority that in the case of approval, the action holds until it is disapproved while in other case until permission is obtained. In the instant case, the action was approved by the Assessing Authority. The Court also pointed out that if in those cases where prior approval is required, expression 'prior' has to be in the particular provision. In the proviso to Sub-section (1) of Section 3-A word 'prior' is conspicuous.
Thus, it was not a case for levying any penalty upon the Appellant - the impugned judgment of the High Court set aside - appeal allowed.
Freezing of bank accounts of APSC - Ownership and control of assets and liabilities of APSC post -bifurcation - Interpretation of Section 75 of the Reorganisation Act, 2014 - Apportionment of assets and liabilities between Andhra Pradesh and Telangana -Whether the High Court was right in upholding the action of the Banks in freezing the accounts of APSC - HELD THAT:- It is natural that when an existing State if bifurcated to form two new States, there must be an equitable bifurcation of the assets and liabilities of the statutory bodies among the two successor States as well, to ensure welfare of the public at large residing within these territories.
In the instant case, the State of Telangana has claimed ownership over the entire funds and assets of the (erstwhile) APSC. This could surely not have been the intention of the legislature while enacting the Reorganisation Act, 2014. The main thrust of the argument of both the learned senior counsel appearing on behalf of State of Telangana, as well as the impugned judgment and order passed by the High Court is that the successor State of Andhra Pradesh has absolutely no right over the institutions in the city of Hyderabad, by virtue of the fact that Hyderabad falls in the successor State of Telangana.
Heavy reliance has also been placed on Section 75 of the Reorganisation Act, 2014, on the ground that the assets belonging to the specified institutions of the Tenth Schedule exclusively belong to the State institutions, since the Act does not provide any apportionment to them. We are wholly unable to agree with this contention advanced on behalf of the State of Telangana. If this contention is accepted, it would render Section 47 of the Act, which provides for the apportionment of assets and liabilities among the successor States, useless and nugatory.
Thus, the common impugned judgment and order passed by the High Court of judicature at Hyderabad for the States of Telangana and Andhra Pradesh in Writ Petition, upholding the freezing of the bank accounts of APSC being unsustainable in law is liable to be set aside and set aside. Accordingly, the appeals filed by the State of Andhra Pradesh and APSC are allowed.
Having allowed the appeal filed by APSC, we also hold that the action of freezing of the bank accounts of APSC is bad in law on account of the fact that what has been frozen is not just the pre bifurcation amount, but also the amounts collected by APSC for the period after the bifurcation in relation to the thirteen districts of the successor State of Andhra Pradesh. Accordingly, APSC must be allowed to operate their bank accounts in respect of the thirteen districts which fall within State of Andhra Pradesh now, in which the amounts collected post the date of bifurcation have been deposited.
The assets of APSC of the undivided State of Andhra Pradesh, that is, assets existing up to the date of bifurcation may be divided between the two successor States in the population ratio of 58:42, as provided under Section 2(h) of the Reorganisation Act, 2014, if the two successor States are agreeable to the same. If the two successor States are unable to arrive at an agreement, the Central Government may constitute a committee, which may be directed to arrive at an agreement, in accordance with the provisions of the Reorganisation Act, 2014 within a period of two months from the date such representation is made to the Central Government.
All pending applications are disposed of. No costs.
Suit for recovery of money - recovery proceedings under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 are to be treated as a suit or not - if the principal borrower is declared as a sick industrial company, proceedings under Recovery of Debts due to Banks and Financial Institutions Act, 1993 cannot lie or be continued against the guarantors?
HELD THAT:- As held in the decision BHAVNAGAR UNIVERSITY VERSUS PALITANA SUGAR MILL PVT. LTD. & ORS. [2002 (12) TMI 563 - SUPREME COURT], a judgment is a precedent for what is decided and not what logically follows from it, therefore a Division Bench of this Court in Inderjeet Arya & Anr. Vs. ICICI Bank Ltd. [2012 (11) TMI 779 - DELHI HIGH COURT] held that the judgment of the Supreme Court in Paramjit Singh Patheja's case [2006 (10) TMI 419 - SUPREME COURT] cannot be interpreted to conclude that each and every kind of action is contemplated to be included in the term 'suit' because the Supreme Court was dealing with a specific issue i.e. whether an award was a decree or an order within the meaning of Section 9(2) of the Insolvency Act.
In Inderjeet Arya's case, the Division Bench of this Court also considered the decision of the Supreme Court in Kailash Nath Agarwal & Ors. Vs. Pradeshiya Industrial & Investment Corporation of UP Ltd. & Anr. [2003 (2) TMI 338 - SUPREME COURT] wherein the enforcement of debt against the guarantors was initiated by Pradeshiya Industrial Investment Corporation of UP Limited (in short, PICUP) for loans granted to the principal debtor, one, Shaifali Papers Limited, by triggering the provisions of the UPPM Act. The Division Bench highlighted that the Supreme Court noted two significant aspects pertaining to SICA, 1985. The first being : the interpretation accorded by the Supreme Court to the expression 'proceedings' in the first part of Section 22(1) of SICA.
The Division Bench highlighted that it was noticeable that the Supreme Court categorically observed that the observations in Patheja Brothers and Forging and Stamping's case do not suggest that the protection to guarantors of loan taken by a company which later on becomes a sick industrial company is the object of the amendment brought about in sub-Section (1) of Section 22 when the amendment was made in the year 1994.
Thus, it was held that having regard to the law laid down in the various judgments, the word 'suit' cannot be understood in its broad and generic sense to include any action before a legal forum involving an adjudicatory process. If that were so, the legislature which is deemed to have knowledge of existing statute would have made the necessary provision, like it did, in inserting in the first limb of Section 22 of SICA, where the expression proceedings for winding up of an industrial company or execution, distress, etc. is followed by the expression or 'the like' against the properties of the industrial company. There is no such broad suffix placed alongside the term 'suit'.
The two appellants are guarantors and notwithstanding the principal borrower company being a sick industrial company, the Debts Recovery Tribunal as also the Debts Recovery Appellate Tribunal have rightly opined that proceedings under Recovery of Debts due to Banks and Financial Institutions Act, 1993 can continue against the two.
Addition u/s 68 - unsecured loans raised by the assessee -loan which was received prior to the start of the previous year - CIT(A) deleted addition - HELD THAT:- A categorical finding has been given by CIT(A) that there is no cash credit received during the present year and all the loans were received prior to 01/04/2008. This finding of CIT(A) could not be controverted by Learned D. R. of the Revenue. Hence, we find no reason to interfere in the order of CIT(A) because no addition can be made u/s 68 of the Act in respect of any loan which was received prior to the start of the previous year relevant to present assessment year. Accordingly, this ground is rejected.
Addition u/s 41(1) - Addition of amount appearing in the books of accounts of the assessee against sundry creditors since the assessee could not substantiate these credits - CIT(A) deleted addition - HELD THAT:- It cannot be said that there is any liability which has ceased to exist, thus we find no reason to interfere in the order of learned CIT(A) and accordingly reject ground No. 2 of the Revenue.
Disallowance of expenses - expenses not wholly necessarily and exclusively related to own business - CIT(A) deleted addition -HELD THAT:- CIT(A) has examined each and every item of expense in detail and the disallowance was deleted by him on the basis of his categorical finding that all the expenses are fully, necessarily and exclusively related to assessee’s business and the same are allowable expenses except small portion which is already disallowed by him and these findings of CIT(A) could not be controverted by Learned D. R. of the Revenue. Hence, we find no reason to interfere in the order of CIT(A).
Penalty u/s 271(1)(c) -disallowance being 10% of miscellaneous expenses, repair & maintenance etc. being unverifiable in nature and disallowance being loss on sale of asset which was debited to profit & loss account - bonafide mistake - HELD THAT:- Assessee as brought to the knowledge of the AO that the loss on sale of fixed asset was reflected in Schedule 18 of the audited accounts. We also note that while computing the depreciation under the Act, the gross sale consideration was reduced and the depreciation has been claimed at the reduced WDV. However, due to clerical mistake, the said amount was omitted in the computation. We find that in the copy of the Income-tax computation, the said disallowance had been mentioned but inadvertently the amount was omitted.
We further note that in the balance sheet at col. No.18 of Other Expenses was shown as Loss on sale of fixed assets however, in the computation in the head ‘Loss on sale / discard of assets, the amount was not reflected. We also find that even during the course of assessment proceedings, all the information relating to the sale of asset had been furnished and the bonafide mistake that was made was accepted and the said amount was offered for taxation. We note that it is also not a case wherein the said amount was reflected under wrong head or concealed but the same was duly reflected in the audited accounts.
We find that there is no deliberate attempt on the part of the assessee either to conceal income or to file inaccurate particulars of income. The assessee at the time of assessment proceedings has given all the details before the completion of the assessment proceedings. His explanation given to the AO has not been found to be false. We also find support from the decision of Price Waterhouse Coopers (P) Ltd.[2012 (9) TMI 775 - SUPREME COURT] held that the claim of the assessee could not be regarded either as “false” or not “bonafide” so as to conclude that assessee has furnished inaccurate particulars of income. Therefore, we set aside the orders of the authorities below and allow the appeal of the assessee. Assessee appeal allowed.
Taxability of income in India - receipts taxable as royalty within the meaning of section 9(1) (vi)of the Act as well as Article-12 of the Indo-US DTAA - amount received from the Indian entities - HELD THAT:- As decided by ITAT A.Y.s 2004- 05 to 2006-07 [2014 (11) TMI 432 - ITAT MUMBAI] expressions “Royalty” and “Fees for included services” have been given distinct meaning in the Indo US treaty. We have already noticed that the tax authorities were not able to come to a conclusion as to whether the consideration received by the assessee company would fall within the meaning of “Royalty” or “Fees for included services”, even though there are plethora of case laws explaining both the terms.
Hence, we are of the view that the tax authorities have not examined the impugned issue in proper perspective, i.e., the matter has not been examined in the context of Indo-US treaty by considering the meaning of various terms used therein. As stated earlier, the meaning to be ascribed to various terms used in the treaty has been the bone of contention in various case laws and we notice that the tax authorities have not considered the applicable case laws. Impugned matter requires fresh examination at the end of the assessing officer. We, restore the matter to the file of the AO for fresh adjudication. - Ground Nos. 1 to 3 are allowed in favour of the assessee in part.
Enforcing appropriately the constitutional mandate as contained under the provisions of Articles 16(4-A), 16(4-B) and 335 of the Constitution of India or, in the alternative, directing the Respondents to constitute a Committee or appoint a Commission chaired either by a retired Judge of the High Court or Supreme Court in making - survey and collecting necessary qualitative data of the Scheduled Castes and the Scheduled Tribes in the services of the State for granting reservation in promotion.
Whether a court should issue a direction to effectuate an enabling constitutional provision which has to be exercised by the State in its discretion on being satisfied of certain conditions precedent?
HELD THAT:- There can be no doubt that certain constitutional duties are inferred from the various Articles of the Constitution and this Court has issued directions. Certain directions have been issued in S.P. Gupta [1981 (12) TMI 165 - SUPREME COURT] and Supreme Court Advocates-on-Record Association [1993 (10) TMI 352 - SUPREME COURT] (IInd Judges case) but they are based on principles of secure operation of legal system, access to justice and speedy disposal of cases. In All India Judges' Association and Ors. v. Union of India and Ors. [2001 (2) TMI 1023 - SUPREME COURT], the Court issued directions by stating that it is the constitutional obligation to ensure that the backlog of cases is decreased and efforts are made to increase the disposal of cases. Keeping in view the concept of constitutional silence or abeyance, guidelines were issued in Vishaka and Ors. v. State of Rajasthan and Ors. [1997 (8) TMI 456 - SUPREME COURT] and for the said purpose, reliance was placed on international Treaties, norms of gender equality and right to life and liberty of working women.
The Courts do not formulate any policy, remains away from making anything that would amount to legislation, rules and Regulation or policy relating to reservation. The Courts can test the validity of the same when they are challenged. The court cannot direct for making legislation or for that matter any kind of subordinate legislation. We may hasten to add that in certain decisions directions have been issued for framing of guidelines or the court has itself framed guidelines for sustaining certain rights of women, children or prisoners or under-trial prisoners. The said category of cases falls in a different compartment. They are in different sphere than what is envisaged in Article 16(4-A) and 16(4-B) whose constitutional validity have been upheld by the Constitution Bench with certain qualifiers.
The relief in the present case, when appositely appreciated, tantamounts to a prayer for issue of a mandamus to take a step towards framing of a rule or a Regulation for the purpose of reservation for Scheduled Castes and Scheduled Tribes in matter of promotions. In our considered opinion a writ of mandamus of such a nature cannot be issued.
The Writ Petitions, being devoid of merit, stand dismissed.
Extension of stay on recovery by Tribunal - stay being in excess of 365 days - validity of stay on disputed demand granted earlier in respect of the appeals pending before it in exercise of power u/s 254(2A) - grievance of the Revenue is that it is without jurisdiction as the extension of the stay results in stay being in excess of 365 days, therefore, in clear breach of the third proviso to Section 254(2A) - HELD THAT:- The stay granted by the impugned orders is for a period of six months from its date i.e. 17th July, 2015 and 11th September, 2015. Thus, in the present facts, the impugned orders have exhausted its life and are no longer in force. Thus, the challenge to the impugned order is purely academic. Therefore, we see no reason to entertain the Petitions.
The issue as mentioned herein above, is no longer res integra so far as this Court is concerned in view of the decision of this Court in CIT v/s. Tata Teleservices (Maharashtra) Ltd. [2015 (12) TMI 1507 - BOMBAY HIGH COURT], wherein this Court following the earlier decision of this Court in Narang Overseas (P) Ltd. v/s. ITAT [2007 (7) TMI 5 - BOMBAY HIGH COURT] and CIT v/s. Ronak Industries [2010 (11) TMI 461 - BOMBAY HIGH COURT] held that even after substitution of the third proviso to Section 254(2A) of the Act, the Tribunal would have power to extend the stay beyond a period of 365 days as provided therein. Petition dismissed.
Disallowance of the benefit u/s 80P(2) (d)- CIT(A) allowed deductio2014 (9) TMI 1280 - ITAT JODHPUR]n - HELD THAT:- As it is noticed that the learned CIT (A) has followed judicial discipline by deleting the disallowance by following the decision of the co-ordinate Bench of this Tribunal in assessee’s own case for the immediately preceding year [2014 (9) TMI 1280 - ITAT JODHPUR] and as the Revenue has not been able to show any distinguishable facts, we are of the view that the finding of the learned CIT (A) is on right footing and does not call for any interference. As a result ground No.1 in both the Revenue’s appeal stands dismissed.
Leave encashment claimed u/s 43B - CIT (A) has deleted the same by applying the proviso to Section 43B of the Act as the said amount had been paid before the due date applicable for filing the return of income under Sub Section (1) of Section 139 of the Act in respect of the previous year in which the liability to pay such sum was incurred. The Revenue has not been able to dislodge this finding of the learned CIT (A) and consequently we are of the view that the findings of the learned CIT (A) on these issues are also on right footing and do not call for any interference.
Exemption u/s 11 - assessee is not entitled to claim of such exemption which was not made in the return - HELD THAT:- As observed that the assessee society is registered u/s 12A of the Act and enjoys its benefits. In our considered view the ld. CIT(A) being an appellate authority ought to have considered the assessee's claim which was purely legal in nature and the reservation as contemplated in the Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT] is applicable to AO and not to the appellate authority.
We are of the view that assessee's claim should have been considered and appropriate relief in accordance with law may be provided. We set aside the matter to the file of the AO to consider the assessee's claim afresh by providing adequate opportunity of being heard. If some compliance is further required, the assessee may be allowed to make the same and decide the grounds of appeal in accordance with law. Thus the appeal of the assessee is allowed for statistical purposes.
Disallowance of interest - advances granted for acquiring development rights in relation to land situated at Bhandup- interest charged @ 12% on the aggregate loan - as per AO since there is no business during the relevant previous year and the only receipt declared by the assessee is interest on debentures and assessee has advanced interest free loan to Ackruti City Ltd - HELD THAT:- We are of the considered opinion that the disallowance of interest, if any, is to be restricted to the amount of advance actually given by the assessee and should not be in reference to the expenditure incurred for the registration and stamp duty charges for registration of development agreement. We further found that since the advance was granted on 31.12.2009 as per the ‘development agreement’ therefore, the period covered during the year under consideration is only w.e.f 31.12.09 i.e. for 3 months accordingly, the AO is directed to compute the disallowance of interest only on the actual amount of advance and only for the period of three months w.e.f. 31.12.09 to 31.03.10. AO is directed accordingly.
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