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2016 (7) TMI 1714
Dishonour of cheque - Can mere overwriting on a digit in the amount entered in figures in a cheque amounts to material alteration, when there is no correction in the amount entered in words in the cheque? - HELD THAT:- From the cross-examination of DW 1, it has clearly come out that he is a chronic defaulter, and several other litigations by way of money suits as well as complaints for the offence under Section 138 of the NI Act were pending against him. His versions that he had borrowed an amount of ₹ 80,000/- only, that too for no interest, and out of which he had repaid an amount of ₹ 32,000/- etc. can only be taken with a pinch of salt. This is a case wherein the complainant as PW 1 has made out prima facie materials for inviting the presumptions under Sections 118(a) and 139 of the NI Act. The evidence adduced by DW 1 is not at all helpful for rebutting the said presumptions. The learned counsel for the first respondent has sought for an opportunity to the first respondent to rebut the presumptions available to the complainant. Whatever it is, the impugned judgment is devoid of merits and is only to be set aside.
The impugned judgment of acquittal passed by the Court below is set aside. The complaint is restored remitted to the Court below. The complainant is entitled to the presumptions under Section 118(a) and Section 139 of the NI Act. Merely for the purpose of giving one more opportunity to the first respondent to rebut those presumptions by adducing positive evidence, if any, if so advised, the case is remitted to the Court below.
Conclusion - Merely overwriting a digit in the amount entered in figures on a cheque does not constitute a material alteration if the amount in words remains unaltered.
This Criminal Appeal is allowed.
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2016 (7) TMI 1713
Addition on account of unexplained cash deposits in the bank account - HELD THAT:- Since in the instant case there is no material before the revenue authorities that the assessee has made investment in some other assets or made some expenditure which has come to the notice of the department, therefore, in absence of any such material the plea of the assessee that cash deposited in the bank account was out of the previous cash withdrawal from the bank cannot be disbelieved summarily.
Since the deposit in the bank account is much less than the amount of cash withdrawn on previous occasions from the bank and since there is no material at the disposal of the Revenue that the assessee has spent the money otherwise, therefore, cash withdrawn earlier is available with the assessee for deposit in the bank account. In this view of the matter, we set aside the order of the CIT (A) and direct the AO to delete the addition. Appeal filed by the assessee is allowed.
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2016 (7) TMI 1712
Direction to dispose of the appeal within six months - HELD THAT:- Reliance placed in M/S RK AND SONS VERSUS COMMISSIONER OF CENTRAL EXCISE, ROHTAK [2016 (1) TMI 562 - CESTAT NEW DELHI] where it was held that 'As appellant is a commission agent of ginned cotton, it is eligible for the benefit of Notification No. 13/2003-ST.'
Appeal disposed off.
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2016 (7) TMI 1711
Fraudulent and manipulative activities in the trading of shares - Pine and persons in charge of its affairs created a facade of preferential issue of equity shares in order to provide fictitious long term capital gains ("LTCG") to Pine’s preferential allotees and Promoter related entities (i.e. entities to whom Pine’s promoters transferred their shares in physical form) so as to convert their unaccounted income into accounted one
HELD THAT:- It is a well-accepted position that a preferential allotment signifies that the allottees agree with the issuer on one-to-one basis to finance its fund requirements and is not an open to all investment opportunity. Such financing pre-supposes nexus and prior understanding amongst the issuer, its promoters/directors and the allottees. A stranger cannot just make investment in a preferential allotment merely on the basis of an advice without having nexus, directly or indirectly, and prior understanding with the company.
Investigation in the matter is in progress and appropriate decision, in accordance with law, would be taken after completion thereof. As prima facie found in the interim order, Pine, its promoters, its directors, preferential allottees, Promoter related entities and Exit Providers have acted in connivance for implementation of dubious plan, device and artifice that has led to the misuse of stock exchange mechanism to artificially increase price and volume of the scrip to provide illegitimate gains to the preferential allottees and Promoter related entities in order to claim LTCG benefits that has not only eroded the market integrity but has also been detrimental to the interests of investors who might have been lured to invest in the scrip due to such manipulative and fraudulent trading in the scrip and price movement.
No reason to revoke or modify the directions of the ad interim ex parte order dated May 08, 2015 in the matter of Pine Animation Limited against the Noticees.
Therefore, in exercise of the powers conferred upon under section 19 of the SEBI Act, read with sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued against entities.
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2016 (7) TMI 1710
Disallowance u/s 14A - suo moto disallowance - HELD THAT:- There are investments in growth funds from where no dividend income is received. The secured loans are which have been utilised only for the purpose of purchase of vehicles as these where vehicle loans only. Thus, in our view, prima facie no disallowance u/s 14A is called for.
It is further noted that in A.Y. 2009-10, the Tribunal deleted the disallowance vide its order dt 13-3-2016. In A.Y. 201011 also the disallowance made u/s 14A has been deleted. Under these circumstances, we find that only suo moto disallowance of Rs.50,000 should be sustained and balance disallowances hould be deleted.
Disallowance of ESOP expenses - difference between the market price and allotment price of ESOPs granted by the assessee company’s holding company to the employees of the assessee company - HELD THAT:- Once a stock option is granted to and exercised by the employee of the assessee, then liability in that option was ascertained and the cost is allowable in the year in which stock options were granted. It is further noted that all the contentions raised by the AO in the assessment order have duly considered by the Tribunal while deciding this issue. It is further noted that no distinction has been brought before us by DR on facts or law. Thus we decide this issue in favour of the assessee.
Activity of buy back of shares is a colourable device only for the purpose of avoiding dividend distribution tax - HELD THAT:- In this year shares were bought back from same shareholder and all the facts and circumstances and the legal position also remain the same as compared to earlier
Thus, respectfully following the order of Tribunal for earlier years, we find that the Ld. CIT(A) has rightly decided this issue in favour of the assessee by holding that the impugned payment made during the year before us did not amount to deemed dividend and therefore, the same was not liable to tax under any provisions including provisions for Dividend Distribution Tax u/s 115O of the Act, in view of Indo-Mauritius DTAA. For earlier years, we dismiss the appeal filed by the revenue.
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2016 (7) TMI 1709
Whether the Cenvat Credit availed on manufacturing activity, can be utilized for discharging the deemed liability on payment made for technical know-how to the provider of service located outside India - Held that:- the issue is squarely covered by the precedent ruling of this Tribunal, in the case of Kansara Modler Ltd. Vs. CCE [2014 (1) TMI 1095 - CESTAT NEW DELHI], and the Hon’ble High Court of Punjab and Haryana in Nahar Industrial Pvt. Ltd. [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT]. Accordingly, the appellant is the person, liable to pay service tax for the technical know-how, which is received from outside India, as such, he is provider of taxable service under Rule 2(r) and consequently, becomes output service provider under Rule 2(p) of CCR. Further, Rule 5 of Taxation of Service (Provided from Outside India & Received in India), Rules 2006, refers to availing of Cenvat Credit and not to utilization of credit. Accordingly, I hold that the Ld. Commissioner (Appeals) is in error in not treating the appellant as output service provider. Therefore, the impugned orders are set aside. - Decided in favour of appellant
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2016 (7) TMI 1707
TP adjustment - providing software development services to its associate enterprises ‘AEs’ hereafter by rejecting its transfer pricing documentation - Comparable selection - inclusion of M/s Bodhtree Consulting Ltd having PLI of 22.86% as comparables - HELD THAT:- The assessee admittedly is engaged in the field of software development and M/s Bodhtree consulting provides software products, we accept assessee’s arguments on functional comparables of M/s Bodhtree Consulting Ltd. TPO is directed to exclude the same from array of comparables.
M/s Compu Learn India Tech. assessee admittedly relies upon so called drastic fluctuations in the PLIs of M/s Compu Learn India Tech Ltd. We have already held that this entity was not engaged in software development services before the impugned assessment year. Relevant data therefore does not prove out to be of any significance.
So is the case with the assessee’s next submissions pointing out erosion of net worth as on 31-03-2007. We further quote rule 10B(4) proviso to observe that it is only the data of two years prior to such financial year to the relevant previous year which can be held a relevant if only it is proved that the same had any influence on transfer pricing determination. This is not the case in hand before us. We reject all assessee’s contentions against inclusion of this latter entity PLI of 88.83% in question. We however draw support from hon’ble Delhi high court decision and direct the TPO to conduct all necessary inquiry under rule 10B(3) as per law for further proceedings. The assessee shall be afforded adequate opportunity of hearing. TPO shall also consider its case seeking working capital adjustment as agreed between the parties.
This assessee’s appeal is partly accepted for statistical purposes.
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2016 (7) TMI 1706
Denial of CENVAT Credit - services received by General Manager Office and other units - no inter-connectivity between input service and outdoor services - HELD THAT:- On identical issue the case of the appellant came up before the Chennai Bench of this Tribunal in M/S BSNL, SALEM VERSUS CCE, SALEM [2013 (1) TMI 142 - CESTAT CHENNAI] and this Tribunal has observed 'Since Modvat credit is a substantial benefit, we are of the view that the impugned credit should not be denied on account of procedural defects of minor nature as pointed out by the Revenue.'
Conclusion - Modvat credit is a substantial benefit and should not be denied due to minor procedural defects.
Appeal allowed.
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2016 (7) TMI 1705
Seeking to challenge the directions of the Commission to investigate the role of the officers/ persons in-charge of the company - vicarious liability of individuals in charge of a company for contraventions committed by the company - HELD THAT:- In Vasu Tech Limited and Others vs. Ratna Commercial Enterprises Limited [2009 (11) TMI 517 - HIGH COURT OF PUNJAB AND HARYANA], the Directors, who were in-charge of and responsible for the conduct of the business of the company were prosecuted under Section 138 of Negotiable Instruments Act, 1881 read with Section 420 of the Indian Penal Code, 1860 by virtue of provisions under Section 141 of the Act along with the company. The directors moved the Hon’ble Delhi High Court under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C.) for quashing of the summoning orders issued against them. However, their prayer was declined and their petition dismissed. In other words, prosecution of the Directors, the persons in-charge of and responsible for the conduct of the business of the company simultaneously along with the company was upheld.
Further, in Dilip S. Dhanukar vs. Air Force Group Insurance Society [2007 (1) TMI 655 - DELHI HIGH COURT], the petitioner Dilip Dhanukar was convicted under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. In the revision petition before the Hon’ble High Court, the Petitioner raised the plea that he was not separately arraigned and summoned as an accused in the case alongwith the Company. However, the Company, of course, was prosecuted through its Chairman, the Petitioner, and there his name was specifically mentioned. Hence, rejecting the said plea, the conviction of the Petitioner simultaneously with the company was upheld.
If the proposition canvassed by the Applicants that a company is to be first held guilty of contravention of provisions of Sections 3 or 4, or both, of the Act, and only then investigation can be initiated against the persons who were in-charge of and responsible for the conduct of the business of the company at the relevant time, is accepted, it would render such person defenseless. This is most likely scenario, if the company is handicapped to defend itself. The company could be non-existent or could have become defunct. Or, the person who was in the know of things and had a role in a particular conduct of the company at the relevant time might have left the company. Or, the person who has in possession some material which demonstrates the non-contravention of the provisions of the Act by the company might be posted in some other department now and not involved in defending the company. If the company fails to defend itself properly for whatsoever reason, and as a consequence, it is found guilty, the person concerned would be left with no option but to suffer consequences under Section 48 of the Act.
In the considered opinion of the Commission, since the liability of the company makes such person in-charge vicariously liable, such person must have an opportunity to contest the proceedings at the very threshold and cannot be deprived of the opportunity to plead and demonstrate that the company itself is not liable at all. A company cannot be held guilty at the back of such person in-charge or anyone else who may be sought to be made vicariously liable under Section 48 (1) or (2) of the Act.
Conclusion - The DG needs to investigate into the matter at one go in all its dimensions comprehensively. The investigations under the Competition Act should be comprehensive and simultaneous to uphold natural justice and ensure effective enforcement.
The applications are found to be devoid of any merit and the same are accordingly dismissed.
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2016 (7) TMI 1704
Levy of service tax - Tour Operator Services or not - payment received for rendering on the outbound tour, mostly in the case of holy Haj pilgrimage to Mecca, Saudi Arabia, for the benefits of tourists which included food, accommodation and guidance - HELD THAT:- The issue involved in this case is no more res integra as the Tribunal in the case of ATLAS TOURS & TRAVELS PVT LTD VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [2015 (2) TMI 476 - CESTAT MUMBAI] has held that outbound tours of Haj-Umrah to Mecca and Madina are not taxable; to come to such a conclusion the Bench relied upon the decision of M/S COX & KINGS INDIA LTD., M/S TRAVEL CORPORATION OF INDIA LTD. AND M/S SWAGATAM TOURS PVT. LIMITED VERSUS CST, NEW DELHI [2013 (12) TMI 1024 - CESTAT NEW DELHI],TRAVEL CORPORATION (INDIA) LTD AND THOMAS COOK (INDIA) LTD VERSUS COMMISSIONER OF SERVICE TAX [2014 (8) TMI 826 - CESTAT MUMBAI].
Conclusion - The outbound tours of Haj-Umrah to Mecca and Madina are not taxable.
The impugned order is set aside and the appeal is allowed.
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2016 (7) TMI 1703
Dismissal of arbitral proceedings on the ground of jurisdiction - assignment of arbitration agreement - locus standi to invoke the arbitration agreement - whether a separate arbitration agreement was required to be entered into between the petitioner and the respondent for adjudication of the disputes arising between the parties having arisen under the original contracts between the respondent herein and DLF Industries Limited or assignment of the said contracts dated 16th April, 1997 accepted by the respondent would include the assignment of arbitration agreement also recorded in the said contracts by conduct or otherwise?
HELD THAT:- A perusal of the record clearly indicates that the respondent had not disputed various factual aspects indicating the fact that the petitioner had stepped in the shoes of DLF Industries Limited and DLF Universal Limited and had complied with various obligations under the said contracts dated 16th April, 1997. The respondent had also credited the amount payable to the said DLF Industries Limited or DLF Universal Limited for the various extra works done, in the account of the petitioner.
The Supreme Court in case of Enercon (India) Limited & Ors. [2014 (2) TMI 1170 - SUPREME COURT] has considered section 16 of the Arbitration & Conciliation Act, 1996 and in that context has held that under the said provision of the Arbitration & Conciliation Act, 1996, the concept that the main contract and the arbitration agreement formed two independent contracts. Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal Civil Court remedy.
A perusal of the contracts dated 16th April, 1997 clearly indicates that there is no provision in the said contracts that even if the said contracts were assigned in favour of a third party by any of the party to the said contracts, the same could be of the entire contract however, excluding the arbitration agreement. No separate writing is contemplated under the said two contracts for execution of a fresh arbitration agreement between the assignee of the contracts by one of the party to the said contracts and other party to the said contracts.
The Supreme Court in case of M.R. Engineers & Contractors Pvt. Limited [2009 (7) TMI 1151 - SUPREME COURT] has held that an arbitration clause though an integral part of the contract, is an agreement within an agreement. It is a collateral term of a contract, independent of and distinct from its substantive terms. The Supreme Court in the said judgment was considering the case of doctrine of incorporation under section 7(5) of the Arbitration & Conciliation Act, 1996. It is held that there is a difference between the reference to another document in a contract and incorporation of another document in a contract by reference. In the first case, the parties intended to adopt only specific portions and part of referred document for the purpose of contract. In the second case, the parties intend to incorporate referred document in entirely into the contract. The facts of this case are totally different.
A perusal of the opening paragraph of the contracts clearly indicates that the said paragraph has described the parties to the contract i.e. "Owner" and "Contractor" which includes its legal successors and permitted assigns. Though prior approval in writing of the respondent was not obtained by the assignor under clause 19.1 of the said two contracts before assigning its rights, obligations and duties in favour of the petitioner, the fact remains that the respondent has accepted the said assignment in favour of the petitioner and has acted upon it. The arbitral tribunal has recorded such finding in the impugned award in favour of the petitioner.
It is not the case of the respondent that the contract between the respondent and the DLF Industries Limited was not assignable. Clause 19.1 of the General Conditions of Contract appended to the said contract dated 16th April, 1997 provided for assignment of the obligation or any benefit or interest in the said contract or any part thereof, however explicit prior approval in writing of the other party. A perusal of the said contract dated 16th April, 1997 clearly indicates that the DLF Industries Limited which was a party to the said contract as a contractor included its legal successor and permitted assigns. The intention of the party to the said contract dated 16th April, 1997 is clear from the provisions of the said contracts that the said contracts were assignable in toto.
There is no substance in the submission of the learned senior counsel for the respondent that even if the two contracts were assigned in favour of the petitioner, the arbitration agreement forming part of such contracts was not assigned - Under section 16 of the Arbitration & Conciliation Act, 1996, it is provided that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It is provided that the arbitral tribunal has power to rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of the arbitration agreement and for that purpose, the arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Merely because a party has appointed an arbitrator or has participated in the appointment of an arbitrator, he is not precluded from raising a plea of jurisdiction in the arbitral proceedings. The scheme of section 16 permitting a party to raise such an objection of jurisdiction though he had participated in the appointment of an arbitrator in an arbitration, without intervention of the Court is totally different and is limited only for that purpose.
A perusal of the record indicates that the arbitral tribunal has not accepted the case of the respondent that in view of clause 6 of the Memorandum of Sale entered into between the petitioner and DLF Universal Limited, the petitioner could act only as a constituted authority on behalf of the said assignors in case of any dispute between the petitioner and the respondent. It is not in dispute that the said assignors did not file any separate proceedings against the respondent nor the respondent filed any separate proceedings against the said assignors in respect of the dispute arising under the said two contracts dated 16th April, 1997 - no separate execution of the arbitration agreement was required to be executed between the petitioner and the respondent, in view of the fact that the said two contracts containing arbitration agreement was already assigned in favour of the petitioner and the entire contracts were acted upon by both the parties herein.
In view of the assignment of the said two contracts in favour of the petitioner, the arbitration agreement contained therein also stood assigned in favour of the petitioner. The petitioner had thus locus standi and had rightly invoked the said arbitration agreement. The impugned order holding that arbitration agreement was not assigned in favour of the petitioner shows patent illegality.
Petition allowed.
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2016 (7) TMI 1702
Validity of reopening of assessment u/s 147 - Mandation to get approval from the competent authority - notice has been issued beyond a period of four years - According to the petitioner, AO had not obtained approval from the competent authority as provided u/s 151 of the Income Tax Act, 1961 prior to its amendment w.e.f. 01.06.2015.
HELD THAT:- We had required the counsel for the Revenue to produce before us, the original file showing such approval. Previously also, such opportunity was granted. We wanted to verify for ourselves whether such approval was, in fact, granted by the competent authority i.e. the Commissioner of Income Tax as contended by the respondent in this case. Despite multiple opportunities, the respondent has produced the file which merely contains a communication of such approval by the ITO.
We were not satisfied by mere communication and desired to peruse the original file since this file contains a mere xerox copy of format for granting such approval purported to have been signed by the then S.S. Parida. We had requested the counsel for the Revenue to produce the original of these documents since the pointed contention was raised by the counsel for the petitioner that no such approval within the time permitted was ever granted.
Despite multiple opportunities, the department has failed to produce such documents in original.
Thus, separate this petition for further consideration on the limited question of the approval for issuance of notice having actually been granted by the Commissioner. Since the department has been delaying the progress in this matter, the department shall deposit a cost of Rs. 5000/- with the Gujarat State Legal Services Authority before the next date of hearing.
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2016 (7) TMI 1701
Offence u/s 8 of FEMA, 1999 and related regulations - Investigation was initiated on the basis of information received from RBI regarding non-realization of export bills and its sister companies, which were negotiated through different banks - Liability of directors under Section 42 of FEMA, 1999.
HELD THAT:- Since there is no allegation at all that the appellant was responsible in any way with the management or business activities or the exports relating to disputed transactions in any way, the finding of Adjudicating Authority wherein he has fastened the liability upon all the directors, presuming their involvement merely on the basis that they were directors of the company at the relevant period, as per documents furnished by the company as well as the banks concerned, is erroneous. Further the same Adjudicating Authority has absolved co-noticee R. K.T. Das in the Order challenged through Appeal on his plea that he was only a non-executive director and was not involved in the day to day working of the company and had not attended any board meeting of the company also.
Ex parte proceedings and Denial of principles of natural justice - Similar is the plea of the Appellant, but since the proceedings were held exparte there was no occasion for him to take such plea.
It may be pointed that by merely issuing notices to a party does not mean that notice was duly served upon that party. Sufficient service of notice as per rules is necessary before the Adjudicating Authority can decide to proceed exparte against such persons. In the instant appeals the case of the Appellant is that he had left his service during the period when the extension granted by the RBI to the company for realization was continuing, no service upon him of the SCN or call notice for personal hearing was effected, has substance because had the appellant knowledge of the proceedings he could have appeared before the Adjudicating Authority and taken the same case/plea upon which proceedings were dropped against the Appellant in the matter of M/s. Geekay Exim (India) Ltd. The impugned Adjudication Orders, in our view are not in consonance of law and smacks of arbitrariness on the part of the Adjudicating Authority, resulting in gross violation of principles of natural justice. Therefore, in view of the above, we find merit of the appeals, which deserve to be allowed.
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2016 (7) TMI 1700
Interpretation of statute - Section 2(1)(d) of the Consumer Protection Act - Whether the purchase of a car or any other goods by a company for the use/personal use of its Director amounts to purchase for a commercial purpose, within the meaning of Section 2(1)(d) of the Consumer Protection Act, or not? - HELD THAT:- Going by the dictionary meaning, a car or for that matter any goods obtained and the services hired or availed by a company can be said to have been obtained or hired or availed for a commercial purpose, only if the said goods or services are intrinsically connected with, or related to the business or commerce in which the company is engaged. The acquisition of the goods or the hiring or availing of services, in order to bring the transaction within the purview of section 2 (1) (d) of the Consumer Protection Act, therefore, should be aimed at generating profits for the company or should otherwise be connected or interwoven with the business activities of the company. The purpose behind such acquisition should be to promote, advance or augment the business activities of the company, by the use of such goods or services.
As observed by the Hon'ble Supreme Court in Laxmi Engineering Works [1995 (4) TMI 294 - SUPREME COURT], it is not the value of the goods but the purpose for which the goods are brought or put to use, which is relevant to decide whether the goods were obtained for a commercial purpose or not. The same would be the position, where services are hired or availed by a company. If the business activities of a company cannot be conveniently undertaken without the goods purchased or the services hired or availed by a company, such purchase or hiring/availing as the case may be, would be for a commercial purpose, because the objective behind such purchase of goods or hiring or availing of the services would be to enable the company to earn profits by undertaking and advancing its business activities.
If a car or other goods are purchased or the services are hired or availed by a company for the personal use of its directors or employees, the purpose behind such acquisition is not to earn profits or to advance the business activities of the company. The purpose is to make certain facilities and amenities available to the directors and employees of the company as a part of the incentive offered to them by the company, as a reward or remuneration for the work which they are expected to perform for the company. It is not as if a company cannot run its business without providing such facilities and amenities to its directors and employees - The company does not earn profit merely by making a car or certain other goods or services available to its directors and employees. Therefore, it would be difficult to say that such goods are purchased or the services are hired or availed by the company for a commercial purpose.
The issue referred to the larger Bench is answered as follows:--
"(a) If a car or any other goods are obtained or any services are hired or availed by a company for the use/personal use of its directors or employees, such a transaction does not amount to purchase of goods or hiring or availing of services for a commercial purpose, irrespective of whether the goods or services are used solely for the personal purposes of the directors or employees of the company or they are used primarily for the use of the directors or employees of the company and incidentally for the purposes of the company.
(b) The purchase of a car or any other goods or hiring or availing of services by a company for the purposes of the company amount to purchase for a commercial purpose, even if such a car or other goods or such services are incidentally used by the directors or employees of the company for their personal purposes."
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2016 (7) TMI 1699
TDS u/s 195 - bareboat hire charges for non-deduction of tax at source - Addition u/s 40(a)(i) - HELD THAT:- Payments for use of equipments under Article 13 of the treaty between India and France, if any convention or agreement or protocol are signed after 01.09.1989 between India and a third State which is a member of OECD, then for the purpose of taxation in India, the scope of taxation shall be restricted to such treaty signed after 01.09.1989 if its terms are beneficial to the assessee and as rightly pointed out by the assessee India has signed a treaty with Sweden subsequently wherein payments made for hiring equipments are excluded from taxing in the contracting State.
Therefore, as claimed by the assessee income arising out of the payment made by the assessee towards hiring equipments will not be taxable in India, accordingly assessee will not be liable for deducting tax at source. Needless to mention that protocol will form an integral part of the convention and it has to be duly respected as the same is signed between two countries under agreement for avoidance of double taxation. Therefore, the assessee succeeds in its appeal on this issue.
Determining ALP by making downward adjustment in respect of excess fees paid for technical services to AEs - HELD THAT:- DRP has only computed the correct fee payable by the assessee to its AE in accordance with the rate prescribed towards the eligible turnover while as the assessee had computed the fee according to their convenience and advantage disregarding the agreement with its AE. For the irrational payment made by the assessee over and above the terms of the agreement between the assessee and its AE the DRP/TPO has revised the profit of the assessee by downward adjustment. Therefore, we do not find it necessary to interfere with the orders of the learned DRP and the learned Assessing Officer. Accordingly, this issue is decided against the assessee.
Appeal of the assessee is partly allowed.
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2016 (7) TMI 1698
Scope and applicability of Section 91 of the Cr.P.C. - desirability and necessity of the documents to be summoned - trial of the petitioners which is at the stage of pre-charge evidence - Violation of principles of natural justice due to non-issuance of notice to the petitioners - HELD THAT:- The facts and circumstances in the present case show that neither any list of witnesses has been furnished with proposed testimony nor any list of documents has been furnished which were to be exhibited through such witnesses to prove the fact and establish the case of the complainant at the pre-charge stage. The applications dated 02.01.2016 and 01.03.2016 have been filed in a casual manner and the orders have been passed in a casual manner without looking into the fact that no list of witnesses was furnished and no summons have been issued for the purpose of summoning the documents for proving a particular fact.
The argument advanced by the complainant cannot be taken into consideration in isolation and it needs to be considered with the combined effect of the exercise of the power under Section 91 of the Cr.P.C. The facts narrated on record do not demonstrate the exercise of discretion under Section 91 of the Cr.P.C. in any other circumstance except to facilitate the evidence of the complainant. No question arises to look into the present case of exercising the power under Section 91 of the Cr.P.C. to summon the document except to render assistance and to facilitate the complainant evidence against the petitioners.
It is apparent from the arguments advanced that no list of witnesses or list of documents showing its connectivity with the witnesses or to the facts to be established before the Trial Court cannot be treated as proper application for rendering assistance to the Court to facilitate the evidence by way of seeking documents without demonstrating any necessity or desirability - The facts and circumstances, non-issuance of notice to the opposite side and impugned orders being non-speaking and without due application of mind as per the law laid down by Hon'ble Apex Court, culminates into the impugned orders as ineffective, redundant and not sustainable in the eye of law and liable to be set aside.
This Court is of the considered opinion that while passing the order under Section 91 Cr.P.C. for summoning the documents, if the other party has already joined the proceedings, it is entitled to be heard. Consequently, the orders dated 11.01.2016 and 11.03.2016 are hereby set aside along with proceedings consequent thereto - Undisputedly, the complainant always has a right to invoke the provision of Section 91 Cr.P.C. and the Court is always empowered to pass an order in the facts the circumstances of the case, keeping in view the necessity and desirability of the document in situations as discussed above and giving due opportunity of hearing to the other party.
Petition disposed off.
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2016 (7) TMI 1697
Direction to SHO to supply certain documents - validity of calling for documents at the preliminary stage of framing of charge - Section 207 of Cr.P.C. - HELD THAT:- A bare reading of provisions contained in Section 207 of Cr.P.C. shows that it is the obligation of the Magistrate to see that all the documents which are necessary for the accused for proper conduct of his defence, are furnished to him well before the trial - A conjoint reading of section 173(5), 173(6) and first proviso attached to Section 207 of Cr.P.C. leaves no scope of doubt that it is the bounden duty of the police officer to forward to the Magistrate all the statements mentioned in subsection (5)(b) of Section 173 of Cr.P.C. without any exception so as to enable the Magistrate to discharge his duty under Section 207 of Cr.P.C. by furnishing copies of such statements to the accused. In case the police officer considers that the disclosure of any part of such statements would not be expedient in the public interest nor essential in the interest of justice, he is supposed to append a note in his forwarding memorandum to the Magistrate to that effect along with his reasons for withholding such statements or parts thereof from the accused.
It is settled law that an impartial and fair opportunity in a trial is the legal right of an accused. Justice can only be ensured if the rules of procedure are diligently adhered to. No court shall allow breach of these principles - In the instant case, accused persons / respondent nos. 2 to 5 are not seeking to produce any document nor are they seeking to produce any material to prove their innocence but they have called upon the Investigating Officer of the case to supply the statement of witnesses recorded during the course of investigation report of the committee which was received by the Investigating Officer during the course of investigation.
Relying upon judgment, in Ashutosh Verma [2014 (12) TMI 1405 - DELHI HIGH COURT], this Court observed that the petitioner cannot be denied an access to the documents in respect of which prayers have been made in the petition merely because CBI does not consider it relevant. If there is a situation that arises wherein an accused seeks documents which support his case and do not support the case of the prosecution and the investigating officer ignores these documents and forward only those documents which favour the prosecution, in such a scenario, it would be the duty of investigating officer to make such documents available to the accused.
Reverting to the case in hand, accused persons called upon the Investigating Officer to supply documents / statements as mentioned in the applications. In fact, in the charge-sheet also there was a reference that during the course of investigation, the Investigating Officer had received the inquiry report etc. Under the circumstances, in order to do substantial justice to both the parties, the application moved by the respondent nos. 2 to 5 was allowed. The State has not challenged the impugned order meaning thereby it is not averse to supply the documents as ordered by the learned Trial Court.
The impugned order does not suffer from any infirmity which calls for any interference - the petition is dismissed.
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2016 (7) TMI 1696
Disallowance of commission paid - HELD THAT:- AR and DR agreed that the issue stands decided against the assessee by the order of the Tribunal for the earlier years.
Addition u/s 40A(9) - contribution to Marine Navy Officers Welfare Fund and Utmal Employees Welfare Fund - HELD THAT:- Identical issue was decided in favour of the assessee by the Tribunal, while adjudicating the appeal for A.Y. 1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] wherein the CIT(A) has directed the Assessing Officer to allow deduction - Decided in favour of assessee.
Slump sale - Failure to treat the transfer of Bangalore undertaking as slump sale and disallowing depreciation - HELD THAT:- If ongoing concern is sold for a lump sum amount it has to be treated a slump sale and had to be taxed as such. In such cases itemized sale of the assets is not there-an amount is paid for transferring an independent unit. To find out the facts of the case we would like to refer to the agreement entered in to by the assessee with the JV company.
We find that in the agreement the assessee had specifically mentioned that the property was valued at Rs.59.31 crores for registration purposes. It is further found that in application made u/s.230A of the Act, the total sale consideration for transfer of construction manufacturing undertaking was mentioned and no separate value for land and building was indicated. Considering the above, we are of the opinion that no value was assigned to plot of land and building while transferring the assets to the JV and that the assessee had transferred the business at a lumpsum consideration by way of slump sale without assigning any individual value to various assets and liabilities.
We find that one of the reasons, given by the FAA, for not considering the transaction a slump sale was that the purchaser had assigned cost to the assets acquired by it.It is a coincidence that the AO for the assessee happened to be the AO for the JV also and from the return of income of the JV he found that the purchaser had shown exact cost of each of the assets.In our opinion, it cannot be the deciding factor.A purchaser of a going concern has to assign cost to the assets received by it. Accounting standard mandates that the entity acquiring a going concern has to get its assets valued. But, valuation report obtained by the purchaser do not prove at all that the assets had the same value for the seller .Once an assessee sells the lock stock and barrel of a unit for that assessee individual items loose existence. In the case before us, there is nothing on record to show that the value shown by the JV was the itemized value of the assets owned by the assessee.
Thus we hold that the sale of earth moving manufacturing unit was a slump sale. Here, we want to make it clear that the assessee would not be entitled to claim loss for the transaction in question. Decided partly in favour of assessee.
Computation of deduction u/s.80HHC - Respectfully following the orders of the Tribunal in earlier years part of the issue, raised by the assessee, is decided in its favour on Inclusion of scrap sales and other items of miscellaneous income in the total turnover, Set off of loss of export of trading goods against profit on export of manufactured goods.
Unclaimed credit balance in the total turnover - HELD THAT:- While deciding the appeal, filed by the assessee, the first appellate authority (FAA) followed the order of his predecessor of the earlier AY. and decided the issue against the assessee. We find that the issue is covered in favour of the assessee by the decision of Jeyar Consultants(supra), relied upon by it. Therefore, we decide issue in favour of the assessee.
Section 80HHC calculation and reduction of 90% of gross interest receipt from the profits of business disregarding interest paid by the assessee - HELD THAT:- Tribunal while deciding the issue for A.Y. 1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] allowed assessee ground of appeal - Thus decided in favour of assessee.
Set off of losses on export trading goods against profit on export of manufactured goods to be decided against assessee.
Reduction 90% of miscellaneous income received from profits of business - In the case of Sharda Gums [1999 (12) TMI 114 - ITAT JODHPUR] issue of interest income has been decided. It does not deal with the other items. Thus, the cases relied upon by the assessee are of little help to the resolve the issue. But, on the other hand the stand taken by the departmental authorities is also defective. We find that the AO and the FAA have relied upon the case of K K Doshi [2000 (8) TMI 74 - BOMBAY HIGH COURT] that stands reversed by the Hon’ble Apex Court [2007 (10) TMI 61 - SC Orde].Therefore, we are of the opinion that the issue needs a fresh adjudication at the level of the AO.
Addition u/s 14A - reducing the amount claimed as exempt under section 10 (15)and 10(33) - HELD THAT:- We find that while deciding the appeal for the AY.1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI], the Tribunal had disallowed the expenses relating to interest on tax free bonds @ 2%, and had held that strategic investments made by the assessee, should be excluded for 14A disallowance. Following the same, ground raised by the assessee is allowed in its favour, in part.
Computing book profit u/s 115JA - HELD THAT:- AR and DR stated that this issue stands decided in light of the decisions delivered in the cases of Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT], TRF Limited [2010 (2) TMI 211 - SUPREME COURT] The second item with regard to computation under section 115JA is about disallowance made under section 14A of the Act. Respectfully, following the judgment of Vijaya Bank (supra) and TRF Ltd.(supra)we allow the appeal filed by the assessee. Second item being of consequential nature, stands allowed for statistical purposes.
Disallowance of professional fees for projects not materialized - HELD THAT:- Identical issue was decided against the assessee by the Tribunal while deciding the appeal for A.Y. 1990-91 and 1993-94 wherein as held even though the proposed projects may he intimately connected to the existing business carried on by the assessee, the assessee-company was in fact exploring the prospectus of new units. Those units were not ultimately successful; we can say that they were all aborted projects. Therefore, those expenses are to be treated in the nature of loss of capital instead of revenue expenditure deductible in computing the income of the running business. Even though the items of expenditure may be in the nature of revenue expenses per se, those expenses were incurred not in connection with the business carried on by the assessee-company but those expenses were incurred for the business which were proposed by the assessee-company to commence and carry on. This line of distinction cannot overlooked. Therefore, in the light of the statutory provision governing the subject, we hold that this expenditure cannot be allowed. Decided against assessee.
Calculation of book profit for deduction u/s 80HHC - We direct the AO to follow the decision of Bahary Information Technology System Pvt. Ltd. [2011 (10) TMI 19 - SUPREME COURT] while calculating the book profit for deduction u/s.80HHC.
Disallowance of claim for loss in computation of value of work-in-progress on construction contracts - HELD THAT:- DR and the AR conceded before us that identical issue was decided in favour of the assessee by the Tribunal, while deciding the appeal in [2013 (10) TMI 1581 - ITAT MUMBAI] for A.Y. 1997-98 - Decided against revenue.
Expenditure on construction of jetty, expenses on cement plants, expenses on cement plants (towards setting up of new captive power section) depreciation, interest and commitment charges in respect of borrowings made for cement projects, Mining lease, Mining Development expenses and charges, including commitment charges, in respect of borrowings made for cement projects is to be allowed as issue decided in favour of the assessee by the Tribunal in [2013 (10) TMI 1581 - ITAT MUMBAI] for AY.1997-98.
Interest u/s 244A of the Act - HELD THAT:- At the time of hearing the AR for the assessee submitted that this issue is considered and decided in favour of the assessee by the Tribunal for AY.1997-98 [2013 (10) TMI 1581 - ITAT MUMBAI] DR could not controvert the claim made by the AR.Therefore, respectfully following the above order of the Tribunal, last ground is decided against the AO.
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2016 (7) TMI 1695
Disallowance u/s 14A r.w.r.8D under normal computation as well as in computing book profit /s 115JB - HELD THAT:- Normal computation - Since this issue is relating to the assessment year 2007-08, the provisions of Rule 8D will not be applicable in the case of the assessee as it came into effect from 24.03.2008. On earlier occasion, in the case of M/s. Hyundai Motor India Ltd. [2015 (9) TMI 962 - ITAT CHENNAI] this Bench of the Tribunal had observed that disallowance of 2% to 5% of the dividend income earned would suffice for meeting the requirement of section 14A of the Act. Accordingly, we hereby direct the Assessing Officer to disallow 5% of dividend income as allowable expenditure invoking the provisions of section 14A of the Act while computing the profit and loss under normal computation.
MAT computation - We hereby direct the AO to compute the profit and loss of the assessee under section 115JB of the Act without making disallowance of expenditure under section 14A. See M/S. BEACH MINERALS COMPANY PVT LTD. [2015 (8) TMI 1031 - ITAT CHENNAI]
Addition of foreign exchange loss relating to interest on loan for acquisition of fixed assets under normal provisions as well as u/s 115JB - Under normal provisions - HELD THAT:- As observed by the Revenue that the assessee had debited to its profit & loss account net foreign exchange loss related to interest on the loan obtained for acquiring assets. Therefore, the learned Assessing Officer added the same to the profit of the assessee by capitalizing the interest and added the same to the cost of the asset by virtue of section 43A of the Act, but however gave the benefit of depreciation @ 15%. No infirmity in the orders of the Revenue on this issue because section 43A of the Act provides that such expense has to be capitalized. AO has capitalize the loss and granted the benefit of depreciation. Hence the order of the Revenue is hereby confirmed on this issue.
Under section 115JB of the Act - The same ratio mentioned herein above in para 4.3 will be applicable because section 43A of the Act and section 115JB of the Act both has a legal fiction and therefore section 43A of the Act cannot be imposed while making computation under section 115JB of the Act. Hence, the interest expense cannot be excluded from the book profit u/s 115JB of the Act.
Addition in relation to interest on loan for acquiring fixed assets under normal computation as well as in computing book profit u/s 115JB - HELD THAT:- No infirmity in the order of the Revenue because there is no section in the Act for granting deduction towards provision made for bad and doubtful debts. Further Explanation I(c )& (i) to section 115JB of the Act clearly provides that the book profit has to be increased by (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities (i) the amount or amounts set aside as provision for diminishing in the value of any asset. Accordingly this issue is decided against the assessee.
TP Adjustment - Determining the arm’s length price of the international transaction relating to the commission paid by the assessee towards availing marketing services - AO adopting the internal cup method disallowed the commission paid to its AEs - As sbmitted that the scope of transactions between both the AEs is altogether different and that for the sale made through Saint Gobin Exprover, the AE Saint Gobain Exprover only acted as a commission agent and products were directly sold by the assessee to the purchaser - HELD THAT:- We are of the considered view that in the interest of justice, the matter needs to be remitted back to the file of the learned TPO for de novo consideration. Accordingly, we hereby remit the matter back to the file of the learned TPO for hearing the issue afresh.
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2016 (7) TMI 1694
Nature of expenses - Royalty payment - capital or revenue expenditure - AO treated it as a capital expenditure - A.R. submitted that the assessee has been incurring royalty expenditure every year, by virtue of license agreement entered into between the assessee and company in Germany - HELD THAT:- On perusal of the order passed by this Tribunal for Assessment Year 2004-05 we observe that the co-ordinate bench of this Tribunal has analyzed the agreement and the nature of the amount paid by the assessee pursuant to the agreement. It has also been observed therein that the royalty payment is a running expenditure incurred by the assessee every year.
D.R. / Ld. A.O. has not been able to bring out contrary facts, we are in agreement with the submissions of the learned counsel for relating to disallowance of royalty amount is covered in favour of the assessee by the order of the Coordinate Bench of the Tribunal rendered in assessee's own case as followed the decision of Sarda Motor Industrial Ltd [2009 (9) TMI 159 - DELHI HIGH COURT] held assessee has not obtained any benefit of enduring nature. The royalty is payable on the basis of volume of sales year to year. In the event of termination of agreement has to discontinue uses of material provided return everything in this respect. Hence it cannot be said that any benefit of enduring nature accrued to the assessee - DR only contended that the agreement also provided training to the assessee's employees, which cannot be returned in any case. We do not find any cogency in this aspect of this agreement as training expense of employee cannot be treated as capital expenditure. - Decided against revenue.
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