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2016 (1) TMI 169
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..... 233/Kol/2012 of Revenue's appeal for AY 2007-08. The first common issue in these cross appeals is as regards to the order of CIT(A) restricting the disallowance made by AO by invoking the provisions of section 14A of the Act read with Rule 8D of the I. T. Rules, 1962(herein after referred to as the 'Rules') for exempted income @ 1%. For this, assessee has raised following ground no.1 and revenue has raised following ground no.1: "Assessee's ground No. 1(a). That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in sustaining disallowance to the extent of Rs. 6,44,193/- u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as 'Act'. 1(b) That on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the investment made by the appellant was to retain management control in such companies. 1(c) That on the facts and in the circumstances of the case the Ld. CIT(A0 failed to appreciate that no management expenses was actually incurred to earn exempt income." 3. Briefly stated facts are that the assessee earned dividend income of Rs. 6,26,69,394/- and long term capital gains of Rs. 17,49,975/- a....
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....t should be relatable, to earning of the exempted income and thus should be disallowed u/s. 14A of the Act. Now comes the question of computing the quantum of disallowance. Rule 8D has been inserted in the income tax rules to compute the quantum of disallowance under section 14A. However, on perusal of the Judgment of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd (supra), I am of the considered view that Rule 8D should not be applicable in the case of the appellant in the instant assessment year i.e. AY 2007- 08 since Rule 8D should be applicable from the AY 2008-09. Thus, the AO was wrong in applying Rule 8D in the case of the appellant. I find that AO was not reasonable in disallowing Rs. 83,93,827/- which, in my view, is very high. Based on the facts of the appellant's case and relying on my own order in the case of EIH Limited , one of the group companies of the appellant, for the Assessment Year 2007-08, I restrict the disallowance to 1% of the exempt income of Rs. 6,44,19,369/~ i.e. Rs. 6,44,193/-. My order in the case of EIH Limited is based on the order of Hon'ble ITAT, Kolkata, in the case of DCIT Vs. EIH Associated Hotels L....
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....eeming provisions under Rule 80. 1(b) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate that the investment made by the appellant was to retain management control in group companies. 1(c) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate that no additional expenses were actually incurred to earn exempt income and accordingly erred in rejecting the 'assessee's computation without any valid reason. 1(d) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in upholding the action of the A.O. in applying the deeming provisions specified in Rule 8D which was introduced w.e.f.,24.03.2008, i.e. towards the fag end of the relevant previous year and was not in existence in the beginning of the previous year." 6. Briefly stated facts are that the assessee company during the assessment year 2008-09 earned dividend income of Rs. 13,44,01,081/- and long term capital gains of Rs. 1,52,47,379/- and claimed the same as exempted from tax. The assessee also claimed to have added back interest on loan of Rs. 14,21,34,269/- and de mat charg....
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....anies with the intention to acquire and retain controlling stakes and even dividend is received through ECS. This practice assessee is following consistently and the same has not been disputed in the past assessments. Now it is well settled that even after insertion of rule 8D of the Rules, the AO must satisfy himself that the claim of expenditure made by assessee is incurred before invoking this provision. The AO has simply given a finding that some expenditure might have been incurred for earning this exempted income thereby Rule 8D of the Rules was invoked. There is no satisfaction recorded by the AO for invoking Rule 8D of the Rules despite the fact that the assessee has disclosed huge expenditure for earning of exempted income and the same was disallowed himself, the correctness of which is not in doubt. The assessee has enclosed details of investment made in group concerns and subsidiary companies in its paper book at page 8 and details of dividend income earned at page 13. In view of the above facts and circumstances, we are of the view that the AO has not recorded any satisfaction about the correctness or otherwise of the accounts of the assessee wherein the assessee himsel....
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....08-05-2009 by following observations:- "Pending hearing and final disposal of the Civil Appeals, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if section 43B(f) is on the Statue Book but at the same time it would be entitled to make a claim in its returns." In view of the above, Ld. counsel for the assessee fairly stated that let Hon'ble Supreme Court decide the issue and by that time the matter can be remitted back to the file of AO for fresh adjudication in term of the decision of Hon'ble Supreme Court. On this, Ld. CIT DR has not objected to the same. Accordingly, we set aside this issue to the file of the AO to await the decision of Hon'ble Supreme Court and decide the issue accordingly. This issue of assessee's appeal is remitted back to the file of AO and allowed for statistical purposes. 11. The next....
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....s Private Limited . 3) Perusal of audited accounts of Oberoi Private Limited, Oberoi Buildings & Investments Private Limited and Oberoi Investments Private Limited shows that the concerns are not in the business of lending of the money. 4) The said companies do not have certificates of NBFC. 5) The said companies do not have any certificate from any Government Authority showing that they are engaged in money lending business." 13. Aggrieved, assessee preferred appeal before CIT(A), who deleted the disallowance in respect of advances received from Oberoi Holdings Pvt. Ltd., the registered and beneficial shareholders for this concern are Oberoi Properties Pvt. Ltd., Oberoi Investments Pvt. Ltd. and Oberoi Building and Investments Pvt. Ltd. Similarly, the registered and beneficial shareholders for Oberoi Building & Investment Pvt. Ltd. are Oberoi Investment Pvt. Ltd., Oberoi Holding Pvt. Ltd. and Oberoi Properties Pvt. Ltd. Thus analyzing the provision of section 2(22)(e) of the Act, the CIT(A) stated that in respect to these two companies i.e. Oberoi Holding Pvt. Ltd. and Oberoi Building & Investment Pvt. Ltd. provisions of section 2(22)(e) of the Act wi....
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....ance received from Oberoi Plaza Pvt. Ltd. and Rs. 12,500,000/- from M/s. Bombay Plaza Pvt. Ltd. and instead referring the issue back to the Assessing Officer for fresh adjudication." 16. We find from the facts of the case that the AO applied the provisions of section 2(22)(e) of the Act in case of loan taken by assessee from Oberoi Plaza Pvt. Ltd. and Bombay Plaza Pvt. Ltd. since Oberoi Plaza Pvt. Ltd. is a 100% subsidiary of the assessee and Bombay Plaza Pvt. Ltd. is a 100% subsidiary of Oberoi Plaza Pvt. Ltd. During the course of appellate proceedings, the assessee filed fresh evidence before CIT(A) in the shape of Memorandum of Association which establishes that the object ancillary to the main object includes money lending, thus, for both the companies the business includes lending of money/advance. These documents were not examined by the AO, hence, we are of the view that let it be examined by the AO and decide the issue afresh. Accordingly, this issue of both the appeals of assessee and one appeal of revenue is set aside to the file of AO and allowed for statistical purposes. 17. The next common issue in these two appeals of assessee in ITA Nos. 230 & 1030/K/2012 for A....
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....nces of the case. Before us it was explained that the mode of computation of depreciation allowable under the Act had been shifted to 'Block of assets' concept, whereby the identity of an individual asset is completely lost. Now all assets having same classification and rate of depreciation would be clubbed together and the depreciation is to be computed on the entire block without distinguishing the same with reference to actual use, It may so happen that the asset may be in use but the value may be 'NIL' for reason that it's WDV is adjusted against the sale proceeds. Thus there is no provision in the Act which discriminates the allowability of depreciation on fixed assets on the basis of its use or any restriction had been provided in the statute as in the case of section 37(4); which has been deleted. The original assets used in Naila Fort are very old and in most cases the values have been exhausted from the block. The disallowance made by the AO is ad hoc, not based on any logic. Accordingly, we are of the view that the depreciation cannot be disallowed. For this proposition we are relying on the judgment of Hon'ble Delhi High court in the case of CIT Vs. 1....
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....y depreciable assets was time consuming both for the assessee and the Assessing Officer. Therefore, they amended the law to provide for allowing of the depreciation on the entire block of assets instead of each individual asset. The block of assets has also been defined to include the group of asset falling within the same class of assets. In view of the above proposition of law laid down by Hon'ble Delhi High Court and the facts of the case that this asset forms part of block of assets, the depreciation cannot be disallowed. Accordingly, we allow the claim of assessee and reverse the orders of lower authorities. This common issue of assessee's appeals is allowed. 20. The next issue in ITA No. 230/Kol/2012 of assessee's appeal is as regards to the order of CIT(A) in confirming the disallowance of depreciation of residential property let out. At the outset, Ld. Counsel for the assessee stated that he has instructions from the assessee not to press this issue. Hence, the same is dismissed as not pressed. 21. The next common issue in these appeals of revenue in ITA Nos. 233 & 1041/Kol/2012 is as regards to the order of CIT(A) in deleting the addition made by AO by enhancing t....
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....d claimed that under the identical fact Hon'ble High Court has decided the matter in favour of the assessee by concluding that in order to determine the income of assessee from house property amount actually received by it from its tenant has to be taken into consideration and not an amount at which the property might expect to let out. I have carefully considered the judgment of the Hon'ble jurisdictional High Court and found that the facts of that case are quite similar to that of the appellant's case. Thus, in my view the said judgement should be applied in the present case. In my considered view, the appellant has rightly contended that if a property is actually let out the expectation of letting out becomes an actual reality. Thus, such property cannot be expected to let from year to year at any figure higher than the rent which is being produced actually by the subject property. There is no finding in record that the appellant has received an additional amount, which was not recorded in the books. Based on the above, I feel, only the actual rent received by the appellant should be considered as income in its hand. I also find merit in th....
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.... an actual reality and such property cannot be expected to let from year to year at any figure higher than the rent which is being produced actually by the property in question. Hence, even as per the deeming provision of Section 23(l)(a), in the case of let out property, only the actual rent received was required to be considered as annual value of property. The AO failed to appreciate such estimation of annual letable value as per provision of Section 23(1)(a) was called for only in case of vacant property and not where the property was actually let out since in the case of let out property, the assessee was not entitled to anything over and above the agreed rent. The said action of the AO has resulted in taxing notional income in the hands of the assessee, which never accrued and hence cannot be brought to tax. Accordingly, we are of the view that the CIT(A) has rightly deleted the addition and hence, we confirm the order of CIT(A) on this issue. This common issue of revenue's appeal is dismissed. 24. The last issue in revenue's appeal for AY 2008-09 in ITA No. 1041/Kol/2012 is as regards to the order of CIT(A) deleting the disallowance made by AO by invoking the provisions o....
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....professional services involved, such as registration. of the trade marks etc. or providing of consultancy services were fully provided from outside India. Therefore, as per the treaty provisions, in my view, the remittances in question can only be taxed in India, if the recipients have a permanent establishment or provide services through a fixed base in India. In other words, the remittances made abroad can be taxed in India only under the 'Residency rule' and not under the 'Source rule' principle. Since the services were rendered from outside India and in the absence of any evidence that the payees have any P.E. in India, in my view, the remittances should not be subject to tax in India. Therefore, the appellant had no obligation to withhold tax while making the remittances outside India and the A.O. was not correct in applying the provisions of section 40(a)(i) of the Act. I, therefore, direct the A.O to delete the disallowance of Rs. 2,20,65,587/- under the head "professional and consultancy charges" since there was no liability to deduct tax by the A.O." 26. We have heard rival contentions and gone through facts and circumstances of the case. We find that th....
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....ll as in subsequent assessment year even though the details were filed in the same format as in the present assessment year, this was argued by Ld Sr Counsel before us. The assessee before CIT(A) also filed details in respect to payee, the amount, the nature of payment and the reasons why the remittances abroad were not taxable in India and even now before us in its paper book at pages 23 to 36. These details were filed before AO in response to query No.21 of requisition dated 13.08.2010 in the shape of sample bills of the parties. 27. We find that admittedly, these expenses in foreign currency represent on account of professional services rendered by non-residents from their offices in foreign countries. The parties reside in foreign countries namely, Thailand and Australia. Admitted position is that to these payments the provisions of DTAA will apply because with both the countries India have DTAAs. Under the tax treaties 'professional services' includes legal services and the same could only be taxed in the countries of residence of the non-residents unless the services are rendered from a fixed base in India. In these facts, the assessee relied on the decision of Coordinate ....