2. Pardesi Developers and Infrastructure
Pvt. Ltd. Vs. CIT 351 ITR 8 (Del.)
Re-assessment u/s. 147 : Where
the A.O has applied his mind to the information received by him and made
enquiries, the very foundation of the notice u/s. 148 i.e “reasons to belief about escapement of income is not established even ex facie. The reassessment
order is liable to be quashed.
Facts
In
the course of assessment proceedings u/s. 143(3), the A.O. issued a questionnaire
to furnish the details of the share capital introduced and the share
application money received but there was no response from the assessee to the
questionnaire till December, 2009. On August, 2009, the Addl. CIT circulated
a letter to all A.O. including the A.O. of the instant assessee. The letter
was on the subject of a list of beneficiaries of accommodation entries.
Thereafter, on November 9, 2009, the assessee furnished a reply to the
questionnaire and gave details of the share capital raised by it and
furnished confirmations from the parties. The A.O. issued notices u/s. 133(6)
to the share applicants directly and all the five companies responded to
those notices and reaffirmed their respective confirmations. Thereafter,
assessment was completed u/s. 143(3). Then the assessment was re-opened on the alleged ground that there were
bogus accommodation entries and the assessee was one of the beneficiaries of
the accommodation entries to the extent of Rs.1,35,000/-. The reasons also
indicated that the information that the entries were accommodation entries
and were provided by bogus companies were not available with the A.O. at the
time the original assessment was done.
Held,
There
was nothing to show that the A.O. did not receive the said information. And,
there was nothing to show that the A.O. had not applied his mind to the
information received by him. On the contrary, it is apparently because he was
mindful of the said information that he issued notices u/s. 133(6) directly
to the parties to confirm the factum if application of shares and the source
of funds of such shares. Therefore, the very foundation of the notice u/s.
148 is not established even ex facie. Consequently, it cannot be said that
the A.O. had the requisite belief u/s. 147 of the Act and, as a consequence,
the impugned notice u/s. 148 and the reassessment order are liable to be
quashed.
3. CIT
vs. UTI Bank Ltd 32 taxmann.com 282
(Gujarat)
Reasonableness
of the expenditure has to be adjudged from the point of view of the businessman
and not of the IT department
FACTS
The
assessee had contracted with a landlord to take premises on lease for opening
its branch, but no formal agreement was entered into. The landlord started
the construction of the premises as per assessee's requirements. However,
before completion of construction, assessee came to know of the proposed
construction of an overbridge over the said property which would cause
hindrance to conduct its business and services. The assessee, therefore,
terminated the understanding with the landlord and paid compensation to the
landlord for the work done, in lieu of withdrawing all claims against the
assessee. The assessee claimed such amount paid as revenue expenditure. The
Assessing Officer disallowed the amount. The Commissioner (Appeals) and the
Tribunal deleted the disallowance as the compensation was paid in the course
of business and for the purpose of business, to protect the assessee's
interest and in lieu of the claims that could have been raised by the landlord.
Held
The
Tribunal referred to the case of J.K. Woollen v. CIT [1969] 72 ITR 612
(SC) in which it was held that in applying the test of commercial expediency
for determining whether an expenditure was wholly and exclusively laid out
for the purpose of the business, reasonableness of the expenditure has to be
adjudged from the point of view of the businessman and not of the IT
department.
No question of law
arises. Tax appeal is, therefore, dismissed
4. CIT
VS. Jitendra Singh Rathore 352 ITR 327 (RAJ.)
Penalty u/s. 271D
Facts
The assessee had accepted
cash loans exceeding the limit specified under section 269SS for which
penalty proceedings were initiated under section 271D by the Assessing
Officer. On reference to the Joint Commissioner, the competent authority
to impose penalty under section 271D, he held that the assessee was
liable for penalty. The Commissioner (Appeals) allowed the assessee's
appeal holding that the penalty order was barred by period of limitation
as mentioned under section 275(1)(c), as it was passed after the
expiry of six months from end of the month in which penalty proceedings
were initiated by the Assessing Officer.
The Tribunal affirmed the order of the Commissioner
(Appeals).
|
Argument of the revenue
The penalty proceedings was not
barred by limitation as the authority competent to impose penalty was the
Joint Commissioner and period of limitation should have been reckoned
from the date of issue of show cause by the Joint Commissioner.
|
Issue involved
Whether the order passed by Joint Commissioner for
penalty under section 271D was hit by bar of limitation?
|
HELD
The
notice for issuance of the penalty proceedings under section 271D for the
alleged contravention of provisions of section 269SS was issued to the
assessee by the Assessing Officer on 25-3-2003.
Even
if the matter had otherwise been in appeal before the Commissioner
(Appeals) against the original assessment order and the appeal was decided
on 13-2-2004, the same was hardly of relevance so far the penalty
proceedings under section 271D were concerned. As held by the High Court in
CIT v. Hissaria Bros. [2007]
291 ITR 244 (Raj.),
completion of appellate proceedings arising out of assessment proceedings
has no relevance over sustaining such penalty proceedings. In such matter,
clause (c) of section 275(1) would be applicable.
In
the present case, the first show cause notice for initiation of proceedings
was issued by the Assessing Officer on 25-3-2003 and was served on the
assessee on 27-3-2003. Obviously, the later period also expired on
30-9-2003 when six months expired from the end of the month in which the
action for imposing the penalty was initiated. The order as passed by the
Joint Commissioner for the penalty under section 271D on 28-5-2004 was
clearly hit by the bar of limitation and has rightly been set aside in the orders
impugned.
Even
when the authority competent to impose penalty under section 271D was the
Joint Commissioner, the period of limitation for the purpose of such
penalty proceedings was not to be reckoned from the issue of first show
cause by the Joint Commissioner; but the period of limitation was to be
reckoned from the date of issue of first show cause for initiation of such
penalty proceedings.
The
proceedings having been initiated on 25-3-2003, the order passed by the
Joint Commissioner under section 271D on 28-5-2004 was hit by the bar of
limitation and the Commissioner (Appeals) and the Tribunal had, thus, not
committed any error in setting aside the order of penalty.
|
5.Court
On Its Own Motion vs. CIT 352 ITR 273 (DELHI)
Strict
guidelines issued to end Dept’s TDS credit & refund adjustment harassment
Facts
Anand
Parkash, FCA, addressed a letter dated 30.4.2012 to the High Court in which
he set out the numerous problems being faced by the assesses across the
Country owing to the faulty processing of the Income Tax Returns and
non-grant of TDS credit & refunds. He claimed that because of the
department’s fault, the assessees were being harassed. The High Court took
judicial notice of the letter, converted it into a public interest writ
petition and directed
the CBDT to answer each of the allegations made in the letter and
certain other queries that the Court raised. The Court also appointed eminent
senior counsel to assist it. The department accepted that tax payers are
facing difficulties in receiving credit of TDS & refunds on account of
adjustment towards arrears. Thereafter, as an interim measure to provide
immediate relief to the assessees, the Court passed an order
dated 31.08.2012 by which it gave detailed directions.
Held
(i) Re Uploading of wrong or
fictitious demand: The CBDT has accepted that incorrect and wrong
demands have been uploaded on the CPC arrears portal. In his letter
dated 21.08.2012, the CIT, CPC, has
expressed his concern and anguish on account of uploading of incorrect and
wrong data in the CPU and the problem faced by them and by the assesses. The
CBDT has issued Circular
No. 4 of 2012 in which the burden is put on the assessee to approach
the AOs to get their records updated and corrected by filing s. 154
applications. While this may be the easiest option available, it should not
be a ground for the AO not to suo motu correct his records and upload correct
data. Each assessee has a right and can demand that correct and true data
relating to the past demands should be uploaded. Asking the assessee to file
s. 154 applications entails substantial expenses and defeats the main purpose
behind computerisation. Also, the AOs do not adhere to the time limit
prescribed for disposal of the s. 154 applications. To ensure transparency
(and accountability), a register must be maintained with details and
particulars of each application made u/s 154, the date on which it was made,
date of disposal and its fate. The s. 154 application has to be disposed of
by a speaking order and communicated to the assessee. There must be full
compliance of the said requirements;
(ii) Re Adjustment of refund
contrary to s. 245: S. 245 postulates two stage action; first a
prior intimation to the assessee and then, if warranted, the subsequent
adjustments of the refund towards arrears. This is not being followed by the
CPC because the computer itself adjusts the refund due against the existing
demand. To prevent this breach of the law, the department must follow the
procedure prescribed u/s 245 and give the assessee an opportunity to file a
reply which should be considered by the AO before giving the direction for
adjustment. As regards the cases where such (illegal) adjustment has been
made in the past, the cases must be transferred to the AOs for issue of
notice to the assessee seeking adjustment of refund. The assessees will be
entitled to file a reply to the notice and the AO will then pass an order u/s
245 allowing the refund. The CBDT has to fix a time limit and schedule for
completing the said process. Though the process involves expenditure and
paper work, the situation has arisen due to the lapses on the part of the AOs
and the assessees cannot be made to suffer for the wrong uploading of arrears
and wrong adjustment of refund. The question of the assessee’s entitlement to
interest on the SA tax is left open though when the delay is due to the fault
of the Revenue, interest should be paid u/s 244A. False uploading of past
arrears and failure to follow the mandate of s. 245 is a lapse on the part of
the AO;
(iii) Re non-communication of
adjusted s. 143(1) intimations: The non-communication of s. 143(1)
intimations, where adjustments on account of rejection of TDS or tax paid has
been made, is a matter of grave concern. When there is failure to dispatch
the intimation within a reasonable time to the assessee, the return shall be
deemed to have been accepted and the intimation will be treated as non est or
invalid for want of service. The onus to show that the order was served on
the assessee is on the Revenue and not upon the assessee. If a TDS or tax
credit claim has been rejected on a technicality but there is no
communication to the assessee of the order/intimation u/s 143(1), the AO
cannot enforce the demand created by the said order/intimation;
(iv) Re non-grant of credit for
TDS: The problem regarding rejection of TDS credit is in two
categories. The first is those where the deductors fail to upload the correct
particulars of the TDS which has been deducted and paid and the second is
where there is a mismatch between the details uploaded by the deductor and
the details furnished by the assessee in the ROI. As regards the first, the
CBDT had earlier directed that the AOs to accept the TDS claims without
verification where the difference between the TDS claimed and the TDS as per
AS26 did not exceed rupees one lakh. This figure has now been reduced to a
mere Rs.5,000. Ex-facie, there is no justification for the reduction because
credit is being given only if the three core fields match. The CBDT must
re-examine this aspect and take suitable remedial steps if they feel that
unnecessary burden or harassment will be caused to the assessees. As regards
cases of mismatch because of different methods of accounting, or offering
income in different years, the department must take remedial steps and ensure
that in such cases TDS is not rejected on the ground that the amounts do not
tally. The department should also fix a time limit within which they shall
verify and correct all unmatched challans. An assessee as a deductee should
not suffer because of fault made by deductor or inability of the Revenue to
ask the deductor to rectify and correct. Once payment has been received by
the Revenue, credit should be given to the assessee. The CBDT should issue
suitable directions in this regard. The department’s response on the action taken
against deductors for non-compliance is unfortunate and unsatisfactory and it
purports to express complete helplessness on the part of the Revenue to take
steps and seeks to absolve them from any responsibility. Denying benefit of
TDS to a taxpayer because of the fault of the deductor causes unwarranted
harassment and inconvenience. The deductee feels cheated. The Revenue cannot
be a silence spectator, wash their hands and pretend helplessness. S. 234E
has now been inserted by the Finance Act, 2012 to levy a fee of Rs.200 per
day for default of the deductor to file TDS statement within due date. It is
unfortunate that the Board did not take immediate steps after even noticing
lacuna and waited till FA 2012. The stand of the Revenue that they can only
write a letter to the deductor to persuade him to correct the uploaded
entries or to upload the details is not acceptable. The AO must use his power
and authority to ensure that the deductor complies with the law.
6. Hardayal
Charitable & Educational Trust vs. CIT 214 TAXMAN 655 (ALL.)
Non commencement of charitable
or educational activities- refusal of registration was not justified
Facts
Assessee-trust was established
with object of establishment and maintenance of the schools, colleges and institutions
for imparting education in different fields/subjects for helping the poor
and destitute. Its application for grant of registration under section 12AA
was rejected by the Commissioner on the grounds that the trust was in the
process of construction of colleges for medical, engineering and management
studies; that it had spent considerable amount on advertisement of the
institution, which had not started its activities as yet; and that the
prospectus of the assessee-trust had devoted substantially on carrying out
business activities of the group concern showing logo of milk product. The
Tribunal dismissed the assessee's appeal.
HELD
At the
time of registration under section 12AA which is necessary for claiming
exemption under sections 11 and 12, the Commissioner is not required to
look into the activities, where such activities have not commenced or are
in the process of its initiation. Where a trust, set up to achieve its
objects of establishing educational institution, is in the process of establishing
such institutions, and receives donations, the registration under section
12AA cannot be refused on the ground that the trust has not yet commenced
the charitable or religious activity. Any enquiry of the nature would
amount to putting the cart before the horse. At this stage only the
genuineness of the objects has to be tested and not the activities, which
have not commenced. The enquiry of the Commissioner at such preliminary
stage should be restricted to genuineness of the objects and not the activities
unless such activities have commenced. The trust or society cannot claim
exemption, unless it is registered under section 12AA and, thus, at such
initial stage the test of the genuineness of the activity cannot be a
ground on which the registration may be refused.
|
In the
instant case, it is not denied that for subsequent year the assessee has
been granted exemption under section 12AA and has also been approved
under section 80G subject to certain conditions. If the Commissioner was
satisfied with the genuineness of the objects of the trust for the
subsequent assessment year, the refusal of the registration for the
previous assessment year 2011-12 was not justified.
|
The
question of the exemption of the application of income received by way of
donation is a separate issue which may be required to be considered, when
the return is filed by the trust and is examined by the Income Tax
Officer. The question as to whether the donation by the societies was the
expenditure of the trust for charitable and religious purposes will be
examined at the time of examining the return.
In the
result the income tax appeal is allowed.
7. CIT vs. Celetronix Power India P.
Ltd. 352 ITR 70 (Bom.)
Penalty u/s.
271(1)(c) on the ground of
subsequent decision of the Supreme Court is not permissible
Facts
In
the instant case, the assessee had claimed deduction u/s. 80HHC by
relying upon the judgement of CIT vs. Shirke Construction Equipments Ltd.
246 ITR 429 (Bom.). Subsequently, the case of Shirke Construction (Supra)
has been reversed by the Apex Court in the case of IPCA Laboratories Ltd.
Vs. Dy. CIT 266 ITR 521 and accordingly disallowance has been made and
penalty u/s. 271(1)(c) was levied against the assessee on the ground of
subsequent decision of the Supreme Court.
Held,
Tribunal
had rightly deleted the penalty on the ground that the additions made on
account disallowance was neither due to the failure on the part of the
assessee to furnish accurate particulars nor on account of furnishing in
accurate particulars. There was no infirmity in the order of the
Tribunal.
8. Azimganj Estate Pvt. Ltd. Vs. CIT
352 ITR 82 (Cal.)
Rental
income from unsold flats is to be treated as Income from House Property
Facts
The
assessee, a property developer and builder, constructed a building. The A.O.,
for the relevant year, rejected the claim of the assessee to treat the
rental income from unsold stock-in-trade under the head Income from House
Property and the claim of deduction on account of repairs to the extent
of 1/5th of the gross rental income on the ground that in the
Wealth Tax proceedings the assessee had taken the plea that the unsold
flats were stock-in-trade and not assets for the purpose of the Wealth
Tax Act, 1957, which plea was accepted by the ITAT.
In
appeal, the CIT(A) accepted the contention of the assessee holding that
the appropriate head for the income derived by way of letting out the
unsold flats should be income from house property and not business
income. However, the Tribunal set aside the order passed by the CIT(A)
and restored that passed by the A.O.
Held,
What
is to be seen was being exploited commercially by the letting out or
whether the asset was being let out for the purpose of enjoying the rent.
The distinction between the two is a narrow one and has to depend upon
certain facts peculiar to each case. Commercial assets like machinery,
plants, tools, industrial sheds or godowns having high business potential
stand on a different footing from assets like land and building. The
subject matter of exploitation being unsold flats still owned by the
assessee, the CIT(A) rightly concluded that the income therefrom should
be treated as income from house property by way of letting it out.
9. CIT vs. R. Sugantha Ravindran 352
ITR 488 (Mad.)
Sec.
50C: Prior to 1.10.2009, Section 50C could not be invoked as the property
was not transferred by way of registered sale deed
The
assessee alongwith the two co-owners transferred a property measuring
23.84 cents in pursuance of an agreement of sale of consideration of
Rs.50 lakhs to a third party. The agreement was not registered one.
Pursuant to the sale agreement, physical possession of the property was
handed over to the buyer and the assessee received the sale
consideration. The assessee worked out long term capital gains and
admitted 1/3rd share therein for tax. The A.O. referred the
matter to the stamp valuation authority in order to find out the value of
the property for payment of stamp duty. As the guideline value given by
the stamp valuation authority was found to be higher than the
consideration shown in the agreement for sale, invoking the provisions of
section 50C, the assessing officer computed the long-term capital gains
adopting the guideline value, as the sale consideration instead of the
consideration admitted by the assessee. The Commissioner (Appeals) held
that section 50C can be invoked only when the property was transferred by
way of registered sale deed and assessed for stamp valuation purposes.
The Tribunal held that section 50C could not be invoked as the property
was not transferred by way of registered sale deed. On appeal:
Held,
dismissing the appeal, that since the transfer in the assessee’s case was
admittedly made prior to the amendment, section 50C, as amended with
effect from October 1, 2009, was not applicable.
State of
Tamilnadu vs. India Cements Ltd. [2011] 40 VST 225 (SC)
applied.
10. CIT vs. Crescent Export Syndicate, ITAT 20 of 2013, Order dated 03.04.2013,
S. 40(a)(ia)
TDS: Special Bench verdict in Merilyn Shipping is not a good law (source:itatonline.org)
The assessee
incurred expenditure on which TDS ought to have been deducted but was not
deducted. The AO disallowed the expenditure u/s 40(a)(ia). On appeal, the
Tribunal relied on Merilyn Shipping & Transports 146 TTJ 1 (Viz) (SB) and held
that the disallowance u/s 40(a)(ia) could be made only for the
expenditure that is “payable” as of 31st March and not for the
amounts that have already been “paid” during the year. On appeal
by the department to the High Court, HELD reversing the Special Bench:
The key words in s.
40(a)(ia) are “on which tax is deductible at source under Chapter
XVII –B” and this makes it clear that it applies to all expenses.
Nothing turns on the fact that the legislature used the word ‘payable’
and not ‘paid or credited’. Unless any amount is payable, it can
neither be paid nor credited. If an amount has neither been paid nor
credited, there can be no occasion for claiming any deduction. The
Special Bench was wrong in making a comparison between the draft Bill and
the enacted law to determine the intention of the Legislature. A
comparison is permissible only between the pre-amendment and post
amendment law to ascertain the mischief sought to be remedied or the
object sought to be achieved by the amendment. The fact that the impact
of s. 40(a)(ia) is harsh is no ground to read the same in a manner which
was not intended by the legislature. The law was deliberately made harsh
to secure compliance of the provisions requiring deductions of tax at
source. It is not the case of an inadvertent error. For the same reason,
the second proviso sought to become effective from 1st April, 2013 cannot
be held to have already become operative prior to the appointed date.
Consequently, the majority view in Merilyn
Shipping & Transports is
not acceptable.
Also see:
(i) CIT vs. Md.
Jakir Hossain Mondal, Order dated
4.4.2013 (Cal.)
(ii) CIT vs. Sikandarkhan N Tunvar, Order dated
9.5.2013 (Guj.)
(source:itatonline.org)
(B) TRIBUNALS
1. Dy. CIT vs. Gulshan Investment
Co. Ltd. 142 ITD 89 (KOL.)
Rule
8D(2)(ii) and (iii) of 1962 Rules can be applied in the situations in
which shares are held as investments, and that this rule will not have
any application when the shares are held as stock-in-trade
The
assessee was engaged in the business of share trading. During the
course of scrutiny assessment proceedings, the Assessing Officer
noticed that while the assessee had earned dividend income but he had
not made any disallowance under section 14A in respect of expenses
relatable to the above exempt income. The Assessing Officer also
noticed that the assessee had paid interest on borrowed amount.
|
The
Assessing Officer, thus, computed the disallowance under section 14A,
read with rule 8D of 1962 Rules.
|
The
Commissioner (Appeals) opined that since the assessee held shares as
stock-in-trade and no interest expenses were incurred, disallowance
could not be made in terms of rule 8D of 1962 Rules.
|
In
such circumstances, the Commissioner (Appeals) estimated 10 per cent of
dividend earned as expenditure which could be disallowed under section
14A.
|
On revenue's appeal:
HELD
(i)
Rule 8D(2)(ii) and (iii) of 1962 Rules can be applied in the situations
in which shares are held as investments, and that this rule will not
have any application when the shares are held as stock-in-trade. It is
so for the elementary reason that the one of the variables on the basis
of which disallowance under rules 8D(2)(ii) and (iii) is to be computed
is the value of 'investments, income from which does not or shall not
form part of total income, and, when there are no such investments, the
rule cannot have any application. When no amount can be computed in the
light of the formula given in rule 8D(ii) and (iii), no disallowance
can be made under rule 8D (2)(ii) and (iii) either.
(ii)
However, that does not exclude the application of rule 8D(2)(i)
which refers to the 'amount of expenditure directly relating to income
which does not form part of total income'. In other words, in a case
where shares are held as stock-in-trade and not as investments,
disallowance under rule 8D is restricted to the expenditure directly
relatable to earning of exempt income.
(iii)
Consequently, while Section 14A will still apply in the cases whether
shares are held as stock-in-trade or as investments, the disallowance
to be made under section 14A read with rule 8D will be restricted to
direct expenses incurred in the earning of dividend income.
(iv)
As a corollary to the above legal position, so far as disallowance
under section 14A in a situation in which the exempt income yielding
asset, such as shares is held as stock-in-trade, and not as investment,
the disallowance will be of related direct and indirect expenditure,
whereas disallowance under rule 8D will be restricted to disallowance
of only direct expenses.
(v)
Revenue thus, derives no advantage from invoking rule 8D in such cases;
on the contrary, the scope of disallowance is only minimized in such a
situation.
(vi)
So far as the instant case is concerned, the Commissioner (Appeals) has
upheld disallowance under section 14A in respect of even indirect
expenditure, but he has merely held that the provisions of rule 8D do
not come into play in this case as the shares are not held as
investments.
(vii)
The provisions of rule 8D can never be applied in a case where exempt
income yielding assets are not held as investments, and that the
related assets, i.e., shares, having been held as stock-in-trade
all along, there is no occasion to invoke rule 8D. There is no
infirmity in this approach, nor do revenue authorities stand to lose
anything by this approach canvassed by the assessee.
(viii)
Quite to the contrary of what revenue perceives to be advantageous to
the Assessing Officer, in case the application of rule 8D was to be
upheld, there would have been no disallowance at all since not only
that no investments were held by the assessee, admittedly there are no
direct expenses are incurred on earning of the dividends and as such in
all the three segments of disallowance under rule 8D(2) i.e. 8D(2)(i),
(ii) and (iii), there will be zero disallowance. As against this zero
disallowance under rule 8D, the Commissioner (Appeals) has upheld
disallowance to the extent of Rs. 1,57,227 in respect of indirect
expenses attributed to the earning of dividends.
(ix)
In view of the above discussion, the conclusions arrived at by the
Commissioner (Appeals) is upheld. It is also clarified that the
provisions of section 14A are indeed attracted whether or not the
shares are held as stock-in-trade or as investments, even though the
provisions of rule 8D(2)(ii) and (iii) cannot be invoked
in such a case, and even though the provisions of rule 8D(2)(i) are
much narrower in scope than the scope of section 14A simplicitor.
(x) In the result, the revenue's appeal is
dismissed.
2.
ACIT VS. Dixon Technologies (I) (P.) Ltd. 32 taxmann.com 218
(Delhi - Trib.)
Assembling
of air conditioner, DVD, microwave would fall within the ambit of
expression 'manufacture
FACTS
The
assessee had established two units, namely, Unit No. 1 which was set up
in December, 2003, was engaged in manufacturing/production of air
conditioner and microwave oven. It had established Unit No. 2 in
November 2004 and this unit was engaged in manufacture/production of
DVDS. The assessee claimed that both the units were independent and
separately eligible for deduction under sections 80-IB/80-IC. The
Assessing Officer denied the deduction to the assessee primarily for
two reasons. He held that assembling of parts for the air conditioners
or microwave oven did not constitute manufacturing activities and,
therefore, assessee was not entitled for deduction under section 80-IB.
With regard to deduction under section 80IC, he relied upon his
conclusion that assembling of different components did not amount to
manufacturing and further observed that one of the units was located in
Khasra which had not been notified as forming part of industrial area,
therefore, the unit of the assessee was not situated in an industrial
area and, consequently, assessee was not entitled for deduction under
section 80-IC. The Commissioner (Appeals), however, allowed the
assessee's claim. On revenue's appeal:
HELD
The
manufacture is a transformation of an article, which is commercially
different from the one which is converted. It is a change of one object
to another for the purpose of marketability. It brings something into
existence, which is different from that, which originally existed. The
new product is a different commodity physically as well as
commercially. The broader test to determine whether manufacture is
there or not, it is propounded that when a change or series of changes
are brought out by application of processes which take the commodity to
the point where, commercially, it cannot be regarded as the original
commodity but is, instead recognized as a distinct and new article that
has emerged as a result of the process.
The
First Appellate Authority has considered a flow chart wherein it was
demonstrated that for manufacturing air conditioners inputs required
are (a) base (b) motors (c) coil (d) gas (e) condensers etc.
Apart from these, a compressor would also be required. The First
Appellate Authority has observed that AC does not merely involved
assembling. The assessee has to carry out various operations/activities
on each of the components before the same could be utilized. Thus, the
alleged assembling of air conditioner, DVD, microwave would fall within
the ambit of expression 'manufacture'.
As
regards the objection raised by Assessing Officer in respect of
geographical location of units, the copy of the site plan available in
the revenue record, exhibiting the geographical location of each killa
number and khasra number was also filed before the Commissioner (Appeals)
along with patwari's report and there was no confusion about the
location of assessee's units. They were situated within the notified
area.
In
view of above, no error was found in the order of the Commissioner
(Appeals) on the issue of granting deduction under section 80-IB/80-IC.
I.T.A. No.: 1336/
Kol. / 2011; Order dated 12.04.2013
Advertisement charges paid to Google & Yahoo is
not chargeable to tax in India
The assessee, a florist, paid a sum of Rs. 30.44
lakhs to Google Ireland Ltd and Yahoo USA for online advertising. The
AO held that the assessee ought to have deducted TDS and that as
there was a failure, the expenditure was not allowable u/s 40(a)(i).
This was deleted by the CIT(A) on the ground that Google and Yahoo
did not have a PE in India. On appeal by the department to the
Tribunal, HELD dismissing the appeal:U/s 5(2)(b) income accruing or
arising in India is chargeable to tax in India. A website does not
constitute a ‘permanent establishment’ unless the servers on which websites
are hosted are also located in the same jurisdiction. As the servers
of Google and Yahoo are not located in India, there is no PE in
India. As regards the second limb of s. 5(2)(b) of “income deemed to
accrue or arise in India”, one has to consider s. 9. S. 9(1)(i) does
not apply as there is no “business connection” in India nor are the
online advertising revenues generated in India serviced by any entity
based in India. As regards s. 9(1)(vi), it is held in Yahoo 140 TTJ 195 (Mum) and Pinstorm 54 SOT 78 (Mum) that the
advertising revenues are not assessable as “royalty”. As regards s. 9(1)(vii),
the services are not “managerial” or “consultancy” in nature as both
these words involve a human element. Applying the rule of noscitur a
sociis, even the word “technical” in Explanation 2 to s. 9 (1) (vii)
would have to be construed as involving a human element. If there is
no human intervention in a technical service, it cannot be treated as
a technical service u/s 9(1)(vii). On facts, the service rendered by
Google & Yahoo is generation of certain text on the search engine
result page. This is a wholly automated process. In the services
rendered by the search engines, which provide these advertising
opportunities, there is no human touch at all. The results are
completely automated. Consequently, the whole process of actual
advertising service provided by Google & Yahoo, even if it be a
technical service, is not covered by the limited scope of s.
9(1)(vii). Consequently, the receipts in respect of online
advertising on Google and Yahoo cannot be brought to tax in India
under the provisions of the Act or the India US and India Ireland tax
treaty.
4. Shri Gurinder Singh Bawa vs. Dy. CIT, ITA
No. 2075/Mum/2010, Order dated 16.11.2012
|
|
|
Sec. 153A: After expiry of s. 143(2) time
limit, s. 143(1) assessment is final; addition u/s 153A can be made
only if incriminating material is found in search
For AY 2005-06, the AO passed an intimation u/s
143(1) accepting the return as filed. Subsequently, there was a search
u/s 132. The AO noticed that an amount of Rs. 93 lakhs received by the
assessee as a loan in earlier years had been treated as a gift and
credited to the capital account. He passed an assessment order u/s 153A
in which he held that the said amount was assessable as a cash credit u/s
68. The CIT(A) partly confirmed the addition. Before the Tribunal, the
assessee argued that as no incriminating material was found during the
search, the addition could not be made u/s 153A. HELD by the Tribunal
upholding the plea:
In All Cargo Global Logistics 137 ITD 287 (Mum)(SB), the Special Bench held that in a case
where the assessment has abated the AO can make additions in the
assessment, even if no incriminating material has been found. However, in
a case where the assessment has not abated, an assessment u/s 153A can be
made only on the basis of incriminating material (i.e. books of account &other
documents found in the course of search but not produced in the course of
original assessment and undisclosed income or property disclosed during
the course of search). On facts, as the assessment was completed u/s
143(1) and the time limit for issue of s. 143(2) notice had expired on
the date of search, there was no assessment pending and there was no
question of abatement. Therefore, the addition could be made only on the
basis of incriminating material found during search. As the addition u/s
153A was made on the information/material available in the return of
income (i.e. the
information regarding the gift was available in the return of income as
capital account had been credited by the assessee by the amount of gift)
and not on the basis of any incriminating material found during the
search, the AO had no jurisdiction to make the addition u/s 153A.
|
|
|
|
|
|
