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2017 (5) TMI 1838
Addition made towards trading results - CIT(A) assumed that since the Auditors have not pointed any discrepancies in the books of the assessee, no further investigation/inquiry was required to be made by the AO during the assessment proceedings - CIT(A) deleted the addition quo GP @ 2% as determined by the AO - HELD THAT:-No reasons to interfere with the order passed by the CIT(A) and in our considered view, the appeal filed by the Revenue/Department is liable to be dismissed, specially in view of the fact that the AO proceeded to reject the trading result without pointing out any defects in the books of accounts maintained by the assessee because the assessment has framed u/s 143(3) and secondly the average cost method which is reasonable and justified and followed by the assessee from year after year and recognized as one of the accepted methods for valuation of closing stock by various Co-ordination Benches as well as High Courts. Decided against revenue.
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2017 (5) TMI 1837
Dismissal of the suit, which has been filed for recovery of the advance amount paid pursuant to the agreement - statutory charge created over the property for the price paid by the buyer (plaintiffs) was continuing on the date of the suit or not - plaintiffs are entitled to recover the suit amount as claimed or not - suit not been filed within a period of three years - HELD THAT:- From the evidence of P.W. 1, it could be easily seen that, after entering into contract on 28.11.1995 and paying a sum of Rs. 5,00,000/- as advance towards the sale consideration, the plaintiffs have not taken any steps to perform their part of the contract. They never shown their readiness and willingness during the relevant period. Whereas the defendants have issued legal notice, Exs. B1, dated 11.09.1996 showing their readiness to execute the sale deed in favour of the plaintiffs. But the plaintiffs except sending legal notice under Ex. B1, have not taken any steps to get the sale registered in their favour. Whereas for the first time, under Ex. A6 dated 30.6.2005, almost after a lapse of 10 years, the plaintiffs have issued notice to the defendants for return of Rs. 5,00,000/-, which has been paid on the date of agreement, and the same was also replied by the defendants.
In K. Shamugam and another v. C. Samiappan and Others [2013 (9) TMI 1320 - MADRAS HIGH COURT], the learned single judge of this Court by relying upon the judgment of the Hon'ble Supreme Court, has held that as regards the charge, Art. 62 of the Limitation Act is applicable.
In P. Muthusamy v. K. Arumugam [2016 (11) TMI 1768 - MADRAS HIGH COURT] the learned single judge of this Court, after taking into consideration the ratio laid down by the Hon'ble supreme Court in the judgment referred above, has held that limitation to enforce charge is 12 years and for recovery of refund of advance amount would be governed under Article 62 of the Limitation Act.
Section 54 of the Transfer of Property Act shows that mere agreement itself does not create any interest or charge in the property. Section 54, in fact, requires an act of parties for creating any right or interest in any such property, meaning thereby, mere simple agreement for sale would not create any charge. Whereas Section 55(6)(b) of the Transfer of Property Act, otherwise creates a statutory charge, which can be said to have been created by the act of parties. The charge created under Section 55(6)(b) also depends upon certain contingencies that when buyer has improperly declined to accept delivery of the property or when he properly declines to accept delivery.
Only the plaintiffs have committed default and for the first time, in the year 2005 only they sent a legal notice. Therefore, this Court is of the view that even though statutory charge has been created in respect of the agreement, it has been lost due to subsequent default by the plaintiffs. In fact, they failed to get the sale deed executed in their favour and take delivery, in spite of readiness shown by the respondents. Therefore, it is clear that due to their (plaintiffs) own default, the statutory charge attached with the property has been lost. Therefore, the plaintiffs cannot now contend that they are entitled to recover the amount paid by them.
This Court is of the view that finding of the trial Court holding that the limitation to enforce charge is for three years cannot be sustained in law in view of the period of limitation governed under Article 62 of the Limitation Act. Admittedly, Article 62 of the Limitation Act prescribes 12 years period for filing the suit to enforce charge. However, in view of the conduct of the plaintiffs, i.e. in view of their own default the charge created over the property has been lost, the suit for recovery of money has necessarily to fail. In Videocon properties limited case [2003 (12) TMI 592 - SUPREME COURT], the Hon'ble supreme Court has categorically held that the charge gets attracted and attaches to the property for the benefit of the buyer the moment he pays any part of the purchase money and is only lost in case of purchaser's own default or his improper refusal to accept delivery.
In any event, the suit for recovery of money cannot be maintainable in view of the fact that statutory charge created for the price money has been lost due to plaintiffs' own default.
Conclusion - A statutory charge under Section 55(6)(b) is lost if the buyer defaults or improperly refuses delivery. The limitation period for enforcing such a charge is 12 years under Article 62 of the Limitation Act.
Though the finding of the trial Court holding that the limitation to enforce charge is for three years is hereby set aside, the appeal is dismissed and the judgment and decree of the trial Court dismissing the suit is hereby confirmed on the aforesaid factual aspects.
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2017 (5) TMI 1836
Refund of the amount paid towards purchase of the Holiday Plan Certificate from the Company - Operational Debt or not - HELD THAT:- As per the provisions of Section 9(1) of the Code after the expiry of the period of 10 days, from the date of delivery of the Demand Notice, if the Operational Creditor does not receive payment from the Corporate Debtor and there is no Notice of Dispute then the Adjudicating Authority shall initiate Corporate Insolvency Resolution Process - That Section 9(4) prescribes initiation of Corporate Insolvency Resolution by proposing name of Insolvency Professional. In this case the Petitioner has proposed Mr. Devendra Padamchand Jain, A-43, Prime Plaza, Opp. DLA School, Bodakdev, Ahmedabad, Mobile No. 9712154455, IP Registration No. IBBI/IPA- 001/IP-00224/2016-17/1511, dated 13th January, 2017. He has accepted the proposal and affirmed that there is no Disciplinary Proceedings pending against him.
Once the process has been initiated, the provisions of Moratorium as prescribed under Section 14 of the Code shall be operative henceforth with effect from 02.05.2017 shall be applicable by prohibiting institution of any Suit before a Court of Law, transferring/encumbering any of the assets of the Debtor etc. However, the supply of essential goods or services to the "Corporate Debtor" shall not be terminated during Moratorium period. It shall be effective till completion of the Insolvency Resolution Process or until the approval of the Resolution Plan prescribed under Section 31 of the Code - That as prescribed under Section 13 of the Code on declaration of Moratorium the next step of Public Announcement of the Initiation of Corporate Insolvency Resolution Process shall be carried out by the Petitioner immediately as specified.
Conclusion - Moratorium under Section 14 is declared effective from 02.05.2017, prohibiting legal actions and asset transfers, but not affecting essential services to the Debtor.
The Petition is "Admitted" and disposed of.
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2017 (5) TMI 1835
Undisclosed sales - application of a 22% profit rate on undisclosed sales - HELD THAT:- Following the law laid down in CIT vs. Balchand Ajit Kumar [2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT] we are of the considered view that total sales cannot represent the income of assessee on account of undisclosed sales which is price received by the seller of the goods for the acquisition of which the assessee has already incurred the cost.
So, in the given circumstances, the only way out is to adopt the net profit by the Revenue authorities, but the same has to be adopted judiciously in the facts and circumstances of the case.
In the instant case, there is not an iota of evidence on file as to how the net profit is estimated at exorbitant rate of 22%. Assessee cannot be compared broadly with M/s. Bhaskar Traders which has shown gross profit @ 22%. So, keeping in view the net profit shown by the assessee in the earlier year @ 16%, we do not find any evidence on record to reach at the conclusion that in the next year, net profit is increased by 6%. So, in these circumstances, we find it appropriate to estimate the net profit @ 16% on the undisclosed sales of Rs. 1,58,75,339/-. Both the appeals filed by the Revenue as well as assessee are partly allowed.
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2017 (5) TMI 1834
Classification of imported goods - Wireless Micro Phone - to be classified under Chapter sub-heading 8525 50 50 of the Customs Tariff Act, 1975 or not - benefit of N/N. 21/2002-Cus., dated 1-3-2002 (Serial No. 244, Item No. 26, Item Serial No. 9) - HELD THAT:- It is found that micro phones are classified under both Chapter Heading 8518 as well as 8525 of the [Customs] Tariff Act, 1975. Since, the exemption Notification dated 1-3-2002 exempts 'Micro Phones' and there is no specific mention on the category to which the exemption should be extended, the imported goods in this case i.e. 'wireless micro phones' should get the benefit of Notification dated 1-3-2002 for the purpose of Customs duty exemption.
There are no merits in the impugned order - appeal allowed.
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2017 (5) TMI 1833
Refund of CENVAT credit - input services - whether the input services availed by the respondent assessee like air-travel service, man power recruitment service, courier service, and chartered accountant and Rent a Car service, etc. have not been received in or in relation to the provision of the output services? - Held that: - some of the services in question are already specified in rule 2 (l), and I find that each of the service is required by the respondent assessee in providing its output services - The disallowance of input credit in part is also bad and without jurisdiction in absence of notice under Rule 14 of CCR, 2004 - credit allowed.
Management consultant service - import of services - reverse charge mechanism - the remuneration paid to Mr. Pooran Tripathi (the employee and director of Stone And Webster's Inc. deputed In USA) for providing services to the respondent company - Held that: - the very essential fact is absent in the findings of the Adjudicating Authority, wherein the facts stated by the assessee that the said person is not its employee, have not been found to be untrue - the learned Commissioner (Appeals) rightly allowed the Cenvat credit in respect of the remuneration paid to Mr. Tripathi - credit allowed.
Appeal dismissed - decided against Revenue.
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2017 (5) TMI 1831
Appointment as deputation as Chief Executive Officer of the Maharashtra State Board of Wakf, Aurangabad - scope of amended Section 23 and Rule 7 of the Maharashtra Wakf Rules - interpretation of the word "and" in Section 23 concerning the appointment criteria for the CEO.
HELD THAT:- Sec. 23 as it existed prior to the amendment of the year 2013 empowered the State Government to appoint a Chief Executive Officer, who shall be a Muslim in consultation with the board. However, after the amendment to Sec. 23 in the Wakf Act 1995 in the year 2013 rigor of consultation of the board has been done away with. However, the State Government is empowered to appoint Chief Executive Officer of the Board from panel of two names suggested by the board and who shall not be below the rank of the Deputy Secretary to the State government and in case non availability of Muslim officer of that rank, a Muslim Officer of equivalent rank may be appointed on deputation. Sec. 23 as it exist after amendment does not require the State government to consult with the board while appointing a full time Chief Executive Officer.
To read the provision in the manner that if a person not below the rank of deputy secretary to the State Government is not available, then the State Government may appoint any Muslim Officer of equivalent rank without getting two names from the board, would be doing violence to the language of the word "and" appearing between two parts of Sec. 23(1) of the Wakf Act. Whether the person to be appointed as a Chief Executive Officer is a person not below the rank of Deputy Secretary and in case of non availability of such a Muslim officer of that rank, a Muslim officer of equivalent rank is to be appointed, the names will have to be suggested by the board - Whether the person appointed is not below the rank of Deputy Secretary or of a equivalent rank, he will have to be appointed on deputation, because the Chief Executive Officer to be appointed as per Rule 7 cannot be more than 60 years of age at the time of appointment, his tenure would be three years or at the most five years.
In the present case, the name of the respondent No. 3 was not suggested by the board. If the names suggested by the board were of the persons not competent to be appointed, then the State could have called for other names from the Board and ought to have appointed a full time Chief Executive Officer from and amongst the names suggested by the Board. Of course, if some time is spent in it, then modalities can be workout for appointing incharge Chief Executive Officer in the interregnum.
Conclusion - The appointment of respondent No. 3 was invalidated due to non-compliance with Section 23, necessitating a new appointment process adhering to the statutory requirements.
Application disposed off.
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2017 (5) TMI 1830
Grant of Regular bail - gruesome murder - Evaluation of evidence and discrepancies in the prosecution's case - HELD THAT:- The conclusion arrived to grant bail is presumptive. At the stage of granting bail, a minute examination of evidence and elaborate documentation of the merits of the case was not to be undertaken.
In Puran etc.etc. vs. Rambilas & Anr.etc.etc. [2001 (5) TMI 971 - SUPREME COURT OF INDIA], it was held that at the stage of granting bail, a detailed examination of the evidence and elaborate documentation of the merits of the case has not to be undertaken. What the Additional Sessions Judge had done, in the order dated 11.9.2000, was to discuss the merits and demerits of the evidence. That was what was deprecated. It was further observed that the High Court has correctly not gone into the merits and demerits of the matter. The High Court has noted that evidence prima facie indicated demand of dowry. The High Court has briefly indicated the evidence on record and what was found at the scene of the offence. The High Court has given very cogent reasons why bail should not have been granted and why this unjustified erroneous order granting bail should be cancelled.
In the instant case, the Trial Court had found ‘the respondent’ and others, prima facie, guilty for committing murder but, strange enough opted to grant bail to ‘the respondent’ relying upon CCTV footage - This Court is conscious that cancellation of bail is a serious matter. Bail once granted can be cancelled only when there exist very cogent and overwhelming circumstances. It is settled law that parameters for grant of bail and cancellation of bail are different. However, if the Trial Court while granting bail acts on irrelevant materials, bail can be cancelled. The bail can be cancelled even in cases where the order granting bail suffers from serious infirmities resulting in miscarriage of justice.
Since the Trial Court, prima facie, found ‘the respondent’ and others to have committed the offence under Section 302/308 IPC with the aid of Section 34 IPC, grant of bail to ‘the respondent’ merely because of certain discrepancies, cannot be justified.
The petition is allowed and the bail granted to ‘the respondent’ is cancelled. ‘The respondent’ shall surrender and appear before the Trial Court on 19th June, 2017.
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2017 (5) TMI 1829
Seeking release of money deposited before the Registry of this Court - HELD THAT:- The Registrar General is directed to release the funds deposited by the judgement debtor along with interest to the account of Decree Holder no. 2 (Fujitsu Limited) with Mizuho Bank. The funds will be released directly through bank transfers or through the authorised representative of Decree Holder No. 2. It is further directed that the aforesaid bank: Mizuho Bank, DLF Capitol Point, First Floor, Hanuman, Baba Kharak Singh Marg, Connaught Place, New Delhi -110001 shall ensure all necessary approvals and permissions, including permission from RBI are obtained before remitting such funds outside India.
The registry shall also ensure that a copy of this order is served on Mizuho Bank, DLF Capitol Point, First Floor, Hanuman, Baba Kharak Singh Marg, Connaught Place, New Delhi -110001 without deposit of any process fee.
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2017 (5) TMI 1828
TP Adjustment - inclusion of comparables for the purpose of determining the arm’s length price of international transaction involving the Assessee - ITAT by the impugned order remanded to TPO the issues regarding the working out of the transfer pricing adjustment on the basis of certain parameters mentioned therein.
HELD THAT:- As pointed out by Assessee, that even if the Profit Level Indicator (PLI) is revised on the basis of the remand order of the ITAT, the PLI based on Operative Profit (OP)/cost will work out to -0.04%. Therefore, the remand order does not give rise to any substantial question of law requiring determination by this Court.
The questions urged by the Revenue in the present case are left open to be examined in an appropriate case.
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2017 (5) TMI 1827
Challenge to arbitral award delivered by the sole arbitrator - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- The jurisdiction of the arbitrator is circumscribed by the agreement between the parties and it is obvious that such limited jurisdiction cannot be used to bring within its ambit, persons that are outside the circle of consent. The arbitral tribunal, being a creature of limited jurisdiction, has no power to extend the scope of the arbitral proceedings to include persons who have not consented to arbitrate. Thus, an arbitrator would not have the power to pierce the corporate veil so as to bind other parties who have not agreed to arbitrate.
The courts would, undoubtedly, have the power to determine whether in a given case the corporate veil should be pierced and the persons behind the corporate facade be held accountable for the obligations of the corporate entity. However as stated earlier, an arbitral tribunal, has no jurisdiction to lift the corporate veil; its jurisdiction is confined by the arbitration agreement - which includes the parties to arbitration - and it would not be permissible for the arbitral tribunal to expand or extend the same to other persons.
The decision in Purple Medical Solutions Pvt. Ltd. [2015 (1) TMI 1511 - SUPREME COURT] was rendered by the Supreme Court in an application filed under Section 11(6) of the Act. In that case, serious allegations of fraud were made against respondent No. 2 (therein), who was not a party to the agreements in question. The said allegations remained uncontroverted. Thus, the Supreme Court found that the relevant facts justified lifting of corporate veil and referring respondent No. 2 to arbitration. There is no quarrel with the proposition that a court could, in given cases, lift the corporate veil. This decision is not an authority for the proposition that such power could be exercised by an arbitral tribunal.
It is not necessary to examine, whether the decision of the arbitral tribunal to lift the corporate veil falls foul of Section 34 of the Act on merits as well. Nonetheless, for the sake of completeness, this court has also examined whether the decision to lift corporate veil is otherwise sustainable.
In cases where it is established that an individual(s) and/or other entities have used a corporate form for a wrongful purpose; to perpetuate a fraud; circumvent a statute; or some other misdeeds, the Courts may decide to ignore the corporate personality and hold the directors, shareholders and/or officers (alter egos) responsible for the obligations of the corporate entity. However, as stated earlier, in the facts of the present case, there is no ground to disregard the corporate form of UEIT.
The petition is allowed and the impugned award to the extent that the petitioner is held liable for the awarded amounts, is set aside.
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2017 (5) TMI 1826
Nature of expenses - software expenses - revenue or capital expenses - HELD THAT:- We are of the view that the impugned expenditure incurred by the assessee is revenue expenditure, because the same has been incurred towards the purchase of application software and upgradation charges which were required to run efficiently the existing software as well as license charges for using the existing software uninterruptly so as to run the business efficiently. CIT(A) was not correct in confirming the disallowance and we accordingly delete this disallowance.
Expenditure was towards replacement of existing assets - HELD THAT:-Considering the nature of activities undertaken by assessee, there is lot of wear and tear to the building which necessitates incurring of expenditure and the expenses were normal repair expenditure. As further noted that going by the nature of expenses incurred it cannot be stated that any new asset has come into existence and that similar expenses were incurred by the assessee in earlier years and have been allowed by the Revenue in scrutiny assessments and that AO has not brought any material which could prove of bringing any new asset into existence or that the expenditure was towards replacement of existing assets. Revenue has not brought any material on record to point out any fallacy in the finding of CIT(A). In view of the aforesaid facts, we see no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed.
Non deduction of TDS - Expenses as Clearing and Forwarding charges on export - Assessee challenged the proposed disallowance by the A.O. on the ground that the payments are nothing but reimbursement charges and, therefore, not liable for any deduction of tax at source - HELD THAT:- We find that the order of the First Appellate Authority in A.Y. 2008-09 was challenged before the Tribunal but this relief given by the First Appellate Authority was never questioned before the Tribunal. This means that the issue has attained finality. Since in earlier assessment year, the deletion of the disallowance was not challenged before the Tribunal, we do not find any reason why on similar set of facts, such issue be raised before the Tribunal. We do not find any merit in this grievance of the revenue. Ground no. 2 is dismissed.
Transfer Pricing Adjustment - payment of guarantee commission - HELD THAT:- There is no dispute that all the three entities that is the assessee company, the lender company and the guarantor company are Associated Enterprises. There is also no dispute that the assessee has borrowed the money on interest of 12.25% per annum as against interest of 15% quoted by the Bank. Considering the guarantee commission of 0.75% paid by the assessee, the total cost of borrowing comes to 13% which is still lower than the rate of 15% quoted by the Bank. This in itself justifies the payment of guarantee commission. FAA has given a categorical finding in relation to similar transactions in earlier assessment year, where no adjustment was made by the AO/TPO. Another undisputed fact is that the operating margin of the assessee company is at 18.21% which is much better as compared to the average margin of 10.36% of the other comparables. On this account also, the payment of guarantee commission is justifiable.
Appeal filed by the Revenue is dismissed.
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2017 (5) TMI 1825
Disallowance of entertainment expenses - Assessee’s claim is that a deduction of 50% should be allowed for accompanying staff members - CIT (Appeals) has allowed 25% for accompanying staff members - HELD THAT:- ITAT Mumbai in the Assessee’s own case for the assessment year 1996-97 had been allowing 25% of the entertainment expenditure as allowable business expenditure as has been incurred for accompanying staff members. Respectfully following the earlier orders of the Tribunal, we dismiss this ground of the Assessee.
Entertainment expenses, being expenses at the time of Company’s AGM -Expenses incurred at the time of Company’s AGM are allowable expenses.
Sales promotion / entertainment expenses - Counsel submitted that the Assessee sponsored dinner at All India Glass Manufacturers Conference - HELD THAT:- The special Bench in the case of Lakhanpal National Ltd.[1999 (3) TMI 105 - ITAT AHMEDABAD-C] held that expenditure on holding conference is not an entertainment expenditure. Similarly, Hon’ble Calcutta High Court in the case of Sarada Plywood Industries Ltd.[1999 (1) TMI 16 - CALCUTTA HIGH COURT] held that expenditure on holding conference of dealers is not entertainment expenditure. Following the said decisions, we hold that the dinner expenses sponsored by the Assessee in the All India Glass Manufacturers Association is not an entertainment expenditure, but it is certainly a sales promotion expenses as these expenses were incurred for the purpose of business of the Assessee. Thus we direct the Assessing Officer to allow the said expenditure. This ground is partly allowed.
Disallowance of expenses on maintenance of guest house - HELD THAT:- As relying on own case for the assessment year 1996-97 we direct the AO to allow the expenditure incurred by the Assessee for the food served at the guest house. Coming to other expenses incurred on guest house i.e. salaries, repairs, society charges and maintenance expenses, the Tribunal following the decision in the case of Britannia India Industries [2005 (10) TMI 30 - SUPREME COURT] decided in favour of the Revenue and against the Assessee. Respectfully following the said decision, we uphold these disallowances made by the Assessing Officer. This ground is partly allowed.
Payment to Fort Medical Society allowed.
Disallowance made u/s 40A(9) regarding payment to Tata Sports Club deleted.
Disallowance of expenditure incurred on survey and feasibility expenses of wind mills - This ground is connected to the additional ground raised by the Assessee regarding expenses on wind mills which were later abandoned to be allowed as revenue expenditure or not. We shall decide this ground along with the additional ground in the subsequent paras along with additional grounds.
Expenditure on increase in authorized share capital and deduction u/s 35D - HELD THAT:- Expenditure incurred on increase in authorized share capital was held to be capital in nature in view of the decision of Brooke Bond India Ltd [1997 (2) TMI 11 - SUPREME COURT], thus we hold that the said expenses are capital in nature. However, the alternative claim of the Assessee that deduction u/s 35D should be allowed on such expenses may be considered by the Assessing Officer. Thus, the matter is restored to the AO for examining the alternative claim. This ground is partly allowed.
Disallowance of write off of un reconciled balances of consignee distributors (bad debts written off) - HELD THAT:- This issue is covered in favour of the Assessee by the Coordinate Bench decision for the assessment year 1996-97 and also the decision of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT]. It is not in dispute that these amounts were due to the Assessee Company from its distributors and agents and these balances were written off in the books of accounts. Therefore, respectfully following the same decision of TRF Ltd. Vs. CIT (supra), we allow the claim of the Assessee. This ground is allowed.
Disallowance of payment to foreign technicians - Assessee submitted that the AO allowed deduction u/s 35AB of the Act at 1/6th of the total expenses during this assessment year, thus submits that the Assessee would be satisfied if a direction is given to the Assessing Officer to allow similar deduction in subsequent years - HELD THAT:- Assessing Officer having allowed deduction at 1/6th of the total expenses during this assessment year, we see no reason for not allowing the said expenses in subsequent assessment years at 1/6th of the total expenses. Thus, we direct the Assessing Officer to allow these expenses at 1/6th in subsequent assessment years. The additional ground is admitted and allowed.
Additional ground raised - Expenses on wind mills - whether to be allowed as revenue expenditure or not - Deduction of 100% depreciation on wind mill - HELD THAT:- Tribunal found that cellular towers were set up for the purpose of Assessee’s own business and not for leasing out the towers and on these facts, the High Court held that since no new business asset was set up, impugned expenditure would be allowed as business expenditure. He strongly placing reliance on this decision submitted that the cost of abandoned project of the Assessee, the wind mills should be allowed as revenue expenditure for the reason that these wind mills were set up as a captive power plants for the existing business of the Assessee and not for a new source of income.
The additional ground raised by the Assessee for allowing write off of cost of wind mills as revenue expenditure was made for the first time before this Tribunal. This ground was not made before the Ld.CIT(Appeals) nor it is the contention of the Assessee before the Assessing Officer. The Assessee all along was claiming only 100% depreciation on this project.
The ground raised by the Assessee is purely a legal ground in the sense, the expenditure if not allowable u/s 32 should be allowed u/s 37. This contention of the Assessee was not examined by the lower authorities since the additional ground is only a legal ground, we admit this additional ground and since this was not examined by the Assessing Officer, we restore this issue to the file of the Assessing Officer, who shall decide the issue afresh in accordance with law keeping in view of the submissions of the Assessee and also the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Idea Cellular Ltd. [2016 (10) TMI 181 - BOMBAY HIGH COURT]. The additional ground is allowed for statistical purpose.
Non admission of additional ground in respect of amount transferred to debenture redemption reserve while computing book profits u/s 115JA - HELD THAT:- We are of the view that this issue should be addressed by the Ld. CIT (Appeals) by admitting the additional ground, hence, this ground is restored to the file of the Ld. CIT (Appeals) who shall admit the additional ground and decide the issue in accordance with law keeping in view the decision of the Jurisdictional High Court as referred to above. This ground is allowed for statistical purpose.
Disallowance of expenses towards community development - CIT(Appeals) taking note of the fact that the monies spent by the Assessee on community development programmes such as running of primary schools, medical facilities, technical/industrial training, distribution of seed, distribution of fertilizer, distribution of cattle field, adult education and literacy programmes, supply of drinking water etc., held that all these expenses incurred cannot be regarded as being wholly outside the scope of Assesee’s business. The Ld.CIT (Appeals) held that all these activities are done either in the name of TCL by the Company itself or through Tata Chemicals Society for rural development. Appreciating the submissions of the Assessee that this expenditure has been incurred in order to win over the good will of the employees and the nearby villagers, Ld. CIT (Appeals) held that the expenditure is in larger interest of the smooth functioning of the company and is therefore allowable deduction. Thus we sustain the order of the Ld. CIT (Appeals) on this issue. The ground raised by Revenue is dismissed.
Advertisement expenditure (deferred revenue) allowed as relying on Assessee’s own case for the assessment year 1996-97 wherein, following the decision of Bhor Industries Ltd.2003 (2) TMI 20 - BOMBAY HIGH COURT] allowed the claim of the Assessee.
Allocation of interest expenses on the borrowings between business income and interest income from tax free bonds and dividend income for the purpose of the provisions of Section 14A - HELD THAT:- We find that an identical issue arose for the assessment year 2006-07 upheld the order of the Ld. CIT (Appeals) in holding that entire borrowings was utilized for putting up new plant at Paprala and no part of the borrowings was utilized for the purpose of investment - it was held that there is no nexus between the income on investments and the interest paid on borrowings.Decided in favour of the Assessee.
MAT - computation of book profits u/s 115JA - AO completing the assessment added back provision for doubtful debts to the book profits and further deduction of profits u/s 80IA of fertilizer division was not considered while computing the book profits u/s 115JA - HELD THAT:- CIT (Appeals) following the decision of Echjay Forgings Pvt. Ltd.[2001 (2) TMI 56 - BOMBAY HIGH COURT] allowed the claim of the Assessee in respect of the provision for doubtful debts. Following the said decision, he directed the Assessing Officer not to add provision for doubtful debts while computing book profits. We do not find any infirmity in the order passed by the Ld. CIT (Appeals) as he followed the decision of the jurisdictional High Court allowing the claim of the Assessee.
Deduction u/s 80IA while computing book profits u/s 115JA - HELD THAT:- The provisions of Clause (v) of Explanation to section 115JA clearly stipulates that an industrial undertaking located in an industrially backward state or district referred to in Clause referred to sub section (2) of 80IA is to be reduced while computing the book profits. Therefore, the direction given by the Ld. CIT (Appeals) appears to be in accordance with law. However, since the Assessing Officer has not given any explanation as to why deduction is not allowed, we direct the Assessing Officer to examine this issue afresh in accordance with law after providing adequate opportunity of being heard, in view of the direction given by the Ld. CIT (Appeals) that subject to other provisions, the Assessee is entitled for deduction u/s 80IA of the Act. This ground is partly allowed.
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2017 (5) TMI 1824
Choice of Method of accounting - addition made by the assessing officer to the income of the respondent for the relevant year based on percentage completion method - HELD THAT:- Question stands answered in favour of the Assessee and against the Revenue by the order passed by this Court in Shipra Estate Ltd. & Jai Kishan Estate Developers Pvt. Ltd [2016 (11) TMI 1758 - DELHI HIGH COURT] Consequently no substantial question of law arises on this issue.
Deduction u/s 80IB (10) - The following questions are, therefore, framed for consideration:-
(i) Whether the ITAT was correct in partly allowing the deduction under Section 80IB (10) and whether the project as a whole did not satisfy the conditions in Section 80IB (10) of the Act?
(ii) Whether the ITAT was correct in directing the Assessing Officer to exclude the area of balcony which was open to the sky while calculating built up area of a flat which is contrary to the definition of built up area given in the section 80IB?
Set down for final hearing on 22nd September, 2017.
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2017 (5) TMI 1823
Entitlement to claim re-determination of the amount of compensation paid for land acquired from his possession, under Section 28A of the Land Acquisition Act, 1894, on the basis of an award passed by a Lok Adalat - HELD THAT:- The scope and effect of the deeming provision under Section 21 of the Legal Services Authorities Act has been considered by the Apex Court in a number of decisions. In the decision reported in Thomas v. Thomas Job [2003 (8) TMI 592 - KERALA HIGH COURT], the Apex Court had to consider whether an award passed by a Lok Adalat could be treated as a decree of a court. The case involved the dispute between two brothers with respect to partition of the properties left behind by their late father. There was a theatre in one of the properties, a portion of which was located in the property allotted to one of the brothers. He filed a suit seeking mandatory injunction for removal of the theatre portion. Recovery of possession was also prayed for. The suit was decreed as prayed for.
When the matter was pending in appeal, the dispute was referred to the Lok Adalat and was settled, upon one of the brothers agreeing to sell the property to the other for consideration. When the settlement was not honoured, he initiated execution proceedings and sought to compel the other brother to execute a sale deed as agreed.
The question has been again considered by the Apex Court in Govindan Kutty Menon K.N. v. C.D. Shaji [2011 (11) TMI 783 - SUPREME COURT]. The said case involved proceedings under Section 138 of the Negotiable Instruments Act. During the pendency of criminal proceedings before the Judicial First Class Magistrate's Court, the parties appeared before the Lok Adalat and the matter was settled upon payment of an amount that was agreed to. The amount was to be paid in instalments. Upon default in payment of the instalments, an Execution Petition was filed before the Munsiff's Court, Ernakulam for enforcement of the award. The Execution Court held that an award passed by a Lok Adalat on reference from the Magistrate's Court cannot be construed as a decree executable by the Civil Court.
The impugned orders are quashed. The second respondent, Special Tahsildar, is directed to consider the applications submitted by the petitioners in accordance with law and to pass appropriate orders thereon, as expeditiously as possible and at any rate within a period of six weeks of the date of receipt of a copy of this judgment - Petition allowed.
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2017 (5) TMI 1822
Estimation of income - bogus purchases - CIT(A) in restricting the addition to 12.5% of such purchases - HELD THAT:- Undisputedly, the assessee is executing civil contract work awarded mostly by MCGM. The CIT(A) has noted that without purchasing materials/goods it would not have been possible on the part of the assessee to execute the contract work with the MCGM.
The assessee is executing work of a government authority. Therefore, there cannot be any manner of doubt with regard to the nature of work or the quantum of work carried out by the assessee. It is evident from record that the AO is not disputing the turnover of contract work executed by the assessee. Therefore, unless the assessee procured the materials/goods, though may not be from the declared sources but from some other sources, it would not have been possible on the part of the assessee to execute work awarded by MCGM. That being the case, the entire purchases made by the assessee cannot be added back as income but only profit element embedded therein can be treated as income of the assessee.
No infirmity in the order of the CIT(A) in estimating profit at 12.5%. - Decided against revenue.
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2017 (5) TMI 1821
Disallowance of speed money expenditure - allowable business expenditure or not? - The assessee firm claim, that this speed money was paid out of business expediency - assessee is a partnership firm engaged in the business of clearing and forwarding agent and transport contractor - CIT(A) restricted the disallowance to 1.6% of the total payment - HELD THAT:- It is not the case of the AO that the speed money is not allowable in principle. The AO had not even doubted the genuineness of the expenditure. Having regard to the nature of the evidence produced before him, the AO has come to the conclusion that a part of the expenditure was not allowable as he felt that there was no evidence available except the self made vouchers and the expenditure incurred in cash. It is trite to law that no expenditure can be disallowed without rejecting the books of accounts and reliance in this regard can be made on the decision of Hon'ble Karnataka High Court in case of Anil Kumar & Co. Vs CIT [2016 (3) TMI 184 - KARNATAKA HIGH COURT]
The assessee firm is not on appeal against the order of the CIT(A); keeping in view the above principle, we sustain the order of the CIT(A) and appeals filed by the revenue are dismissed.
Assessment u/s 153A - Addition of speed money as illegal payment - as found during the course of search and seizure operations certain incriminating material suggesting illegal payment to the officials of port was found therefore he inferred that out of the total speed money claimed the speed money paid in excess of Rs. 26/- per tone was treated as inflated expenditure - HELD THAT:- The law is settled to the extent that the additions in the assessments u/s. 153A can be made only based on the material facts as a result of the incriminated materials found. From the perusal of the assessment order it is clear that during the course of survey and seizure operations the department had seized a loose sheet indicating payment to the certain officials of the port trust. Based on this information the AO as well as the CIT(A) has disallowed the payment to the extent of 10% of the speed money as illegal payment. Mere perusal of the loose sheet it is clear that about 10% of the cash payments was made to the officials of the port trust. Therefore in our considered opinion the disallowance to the extent of 10% is just and proper and therefore we do not want to interfere.
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2017 (5) TMI 1820
Release the confiscated vehicle during the pendency of the main criminal case - whether confiscatory proceedings are independent of the main criminal proceedings or not - Confiscation permissible unless the guilt of the Accused is completely established? - HELD THAT:- It is apparent that Section 15 gives independent power to the concerned authority to confiscate the articles even before the guilt is completely established. This power can be exercised by the concerned officer if he is satisfied that the said objects were utilized during the commission of a forest offence. A protection is provided for the owners of the vehicles/articles, if they are able to prove that they took all reasonable care and precautions as envisaged under Sub-section (5) of Section 15 of the Adhiniyam and the said offence was committed without their knowledge or connivance.
Criminal prosecution is distinct from confiscation proceedings. The two proceedings are different and parallel, each having a distinct purpose. The object of confiscation proceeding is to enable speedy and effective adjudication with regard to confiscation of the produce and the means used for committing the offence while the object of the prosecution is to punish the offender. The scheme Adhiniyam prescribes an independent procedure for confiscation. The intention of prescribing separate proceedings is to provide a deterrent mechanism and to stop further misuse of the vehicle.
The confiscatory proceedings are independent of the main criminal proceedings - High Court as well as the revisional court erred in coming to a conclusion that the confiscation under the law was not permissible unless the guilt of the Accused is completely established.
Judgement of High Court set aside - Appeal allowed.
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2017 (5) TMI 1819
MAT Addition - amount of Debt Redemption Reserve for computing the book profit u/s 115JB - HELD THAT:- We find that the assessee is adjusted the amount of Debt Redemption Reserve created by the company while working out the amount of book profit u/s 115JB of the Act. We find that similar issue is dealt in the case of Raymond Ltd. [2012 (4) TMI 127 - BOMBAY HIGH COURT] as held that mere fact that a Debenture Redemption Reserve is labeled as a reserve will not render it as a reserve in the true sense or meaning of that concept. An amount which is retained by way of providing for a known liability is not a reserve. Consequently the Tribunal was correct in holding that the amount which was set apart as a Debenture Redemption Reserve is not a reserve within the meaning of Explanation (b) to Section 115JA
In the similar case ITAT Ahmedabad Bench in the case of ACIT vs. Genus Electrotech Ltd [2016 (5) TMI 1136 - ITAT AHMEDABAD] has held that the adjustment claimed by the assessee for Debt Redemption Fund was declined with a short observation that Debt Redemption Fund was an appropriation for the purpose of creating a reserve and was a below line adjustment and it did not fall in any category of adjustments provided u/s 115JB of the Act. Respectfully following the Hon’ble Bombay High Court in the case of Raymond Ltd. [2012 (4) TMI 127 - BOMBAY HIGH COURT] we allow the claim of the assessee. The orders of the lower authorities are reversed and deduction is allowed.
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2017 (5) TMI 1818
Grant of stay on recovery of the disputed tax - Recovery u/s 11D of amount collected by the assessee in the name of duty of excise - retrospective effect - HELD THAT:- There shall be interim stay of the recovery of the disputed tax subject to the condition that the petitioner gives bank guarantee of 50% of the amount demanded, within a period of six weeks from today to the satisfaction of the Respondent.
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