TaxTMI 
TaxTMI 
2017 (5) TMI 1745
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....der of A.O. the assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after hearing the parties partially allowed the appeal thereby confirming certain additions and also gave relief on some other grounds. Aggrieved by the order of Ld. CIT(A), the cross appeals by assessee as well as revenue are filed before us on the ground mentioned below;- Since both the appeals have arisen out of the same order passed by Ld. CIT(A). Therefore, we have decided to dispose of both the appeals through a common order. First of all we deal with appeal filed by the revenue bearing ITA No 5594/M/2013. The revenue has raised the following grounds:- 1. "On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in directing the Assessing Officer to recomputed the disallowance u/s 14A read with Rule 8D by taking into consideration the actual indirect expenses., without appreciating the fact that the AO has properly recorded his satisfaction for invoking the provisions of Rule 8D and therefore since Rule 8D is invoked, the disallowance has to be worked out as per the formula prescribed therein and disallowance has to be worked out as per the formula presc....
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.... (A) erred in not treating payment for credit card processing services as 'fees for technical services' u/s 194J and thus not liable for deduction of tax at source relying on the Hon'ble Madras High Court's decision in the case of Skycell Communications Ltd Vs. DCIT [2001] 251 ITR 53(Mad) without appreciating the distinguishing fact that the system of credit card processing is not a simple and standard facility provided by the acquirer bank to all those willing to avail it for a fee." 8. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that if any technology or machine is developed by human beings and put to operation on auto - mode without involving much human intervention, then it cannot be treated as a technical service u/s 194J of the Act, without appreciating that such systems necessarily involve human intervention. 9. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that credit card processing services rendered by acquirer bank either by itself or through an issuing bank and other intermediaries does not involve much human intervention, and then it cannot be t....
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....contracts whereas the contract under which call money on equity shares was sought is not an option contract." 15. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of ITAT, Chandigarh in the case of DCIT Vs. Haryana Financial Corporation (ITA No. 751/Chd/2011) wherein it was held that the amount received by the assessee on account of forfeiture of shares is a capital receipt without appreciating the distinguishing fact that share warrants are option contracts whereas a contract under which shares were forefeited is not so" 16. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored. 17. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. Ground No. 1 This ground raised by the assessee is with regard to the disallowance u/s 14A of the Act. As per the facts of the case, during the course of the assessment proceedings, the Assessing Officer disallowed the expenses incurred on earning exempt income under Section 14A of the Act r.w. Rule 8D amounting to Rs. 33crores.TheLd. CIT(A) i....
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....dvances 68 6 (62) (62) Balance utilized for working capital (151) Moreover the Assessee Company also submitted that the investments were acquired out of owned funds in previous years. The Assessee Company submitted that if there are funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. In order to support its contention the Assessee Company relied on the judgement of the Hon'ble Bombay High Court in the case of CIT vs Reliance Utilities and Power Ltd ( 313 ITR 340(Bom)). It was further contended that the interest expenditure incurred by it during the year under consideration were to finance ongoing expansion projects, meet working capital requirements and to acquire specific capital assets. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Since facts of the case are exactly similar to the A.....
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....e co-ordinate bench in the case of ACIT v. Jet Airways India Ltd (146 ITD 682) wherein it was held that "Payments to banks for utilization of credit card facilities are in nature of bank charges, and not commission, and therefore, no tax is deductible at source under section 194H". The Delhi High Court in the case of JDS Apparels (P.) Ltd (370 ITR 454) has held that Commission' to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act. This issue has also been decided in favour of the assessee by various Tribunals in the following cases: * Gems Paradise v. ACIT [IT Appeal No. 746 (JP) of 2011, dated 2.2.2012] * Bhandari Jewellers v. ACIT [IT Appeal No. 745 (JP) of 2011, dated 2-22012] * Tata Teleservices Ltd. v. Dy. CIT [2013] 140 ITD 451/29 taxmann.com 261 (Bang.) (para 8) and * Dy. CIT v. Vah Magna Retail (P.) Ltd [IT Appeal No.905 (Hyd.) of 2011, dated 10-4-2012] Respectfully following the decisions cited above, it is held that the commission paid to the credit card companies is not subject to the TDS provisions of the Act. Accordingly the disallowanc....
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....which were forfeited by the appellant company at Rs. 63,25,97,200/- (12651944*50). Assessing Officer observed that the assessee company has treated a sum of Rs. 63,25,97,200/- on a/c of Forfeiture of convertible warrants as capital receipts. The AO disallowed the said amount considering as revenue receipt. The CIT(A) reversed the order of the AO. Against the order of the CIT(A), the AO is preferred appeal before us. We have heard the counsels for both the parties on these grounds and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. DR relied upon the order of the AO. Whereas on the contrary Ld. AR submitted that the aforesaid amount received on the issue of optionally convertible warrants undisputedly is a 'capital receipt' and the character of such receipt on forfeiture on account of the non exercise of the option to convert the warrant to equity shares could not change the 'character of receipt'. The same reflected in the books under the head 'capital reserve' and this fact has also been referred by the Auditors in their Report. We have also carefully considered the submissions and perused the records. I....
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....al instruments like warrants, share capital etc. cannot be treated as revenue receipts. Since the assessee company is not in the business of selling of shares. It has been held in the judicial pronouncements that in the case of any such forfeiture made, the same cannot be taxed as a revenue receipt if this amount has been transferred to the capital reserve account in the balance sheet. In the present set of facts it is observed that the various facts related to issue of warrant part payment of the amounts by the investors, notice for forfeiture etc. have not been disputed by the Assessing Officer. The basic nature of the transaction relates to raising of capital through convertible warrants. The amount forfeited on account of non payment of subsequent amounts cannot be treated as a income of the assessee in view of the various judicial pronouncements as well as the basic nature of the receipt. Thus, we hold that amount received on account of forfeiture of amount due to non payment towards warrants issue has to be treated as capital receipt and since the assessee has also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income. We ....
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....ellant's case. 3. ADDITION U/S. 115JB (2) 3.1 The Ld. CIT (A) erred in confirming the action of the A.O. in making addition of Rs. 1,23,39,294/- to the book profit while computing minimum alternative tax, under Clause (c) to Explanation 1 of section 115JB (2) of the Act. 3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such adjustment was called for. 4. EMEMPTION OF LONG TERM CAPITAL GAIN U/S. 47 (iv) OF THE ACT 4.1 The Ld. CIT (A) erred in directing the A.O. to restrict the relief given by him to the Appellant - on account of exemption of long term capital gain u/s. 47 (iv) of the Act - to the returned income of the Appellant, by invoking the proviso of section 240 of the Act. 4.2 It is submitted that in the facts and the circumstances of the case as well as in law, no such direction was called for. 5. LIBERTY 5.1 The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing." Ground Nos. 1& 3. These grounds raised by the assessee with regard to the reduction in disallowance under Section 14A by the CIT(A) We have a....
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....ehalf of the assessee submitted that the Assessee contended that the Assessing Officer had placed blind reliance on the assessment order of M/s. Nitco Ltd. regarding disallowance of the expenses, without supplying copy thereof as well as without applying independent thought. The assessee claimed that it was not aware about the fate of the assessment while it appeared that Nitco had preferred an appeal before ITAT against the aforesaid order. The Assessee also claimed basis of the statements reproduced by the AO that: (i) The entire transactions were handled, controlled, co-ordinated and conducted by NITCO alone, including handing over cheques for payments. The transactions were done by, and at the behest of, NITCO. (ii) The assessee had absolutely no role in the transactions. No delivery taken or given. (iii) No funds of the assessee were blocked in the transactions. (iv) The assessee did not have control over the pricing of the Goods nor over receipts and payments. On the other hand, Ld. DR relied upon the order of the revenue authorities. We have heard the counsels for both the parties on this ground and we have also perused the materi....
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....ransactions. However it would be entirely incorrect to attribute the mall maintenance charges to the aforesaid transactions since these expenses do not appear to have any relation to the aforesaid transactions. In light of the above discussion and observations, we are of the view that it would be in the fitness of things if this matter be restored to the file of the AO with direction to disallow that portion of the Directors salary and employees wages, expenses on packaging material and other expenses as are directly involved in affecting the said turnover of Rs. 20,29,52,216/- to NITCO. Needless to add, the assessee may be accorded adequate opportunity of being heard in the matter. The AO is directed to similarly examine the disallowance on account of financial charges and addition on account of peak credit which are also restored to his file for rectification and fresh adjudication after affording the assume adequate opportunity of being hear. Consequently ground no. 2 of assessee's appeal is allowed for statistical purposes. Ground no. 4. This ground relates to directing the A.O. to restrict the relief given by him to the Appellant - on account of exemption of long term....
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....whether the authorities can deny any additional claim for deductions /exemptions, which are not claimed in the return of income by the Assessee? Indian Constitution Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by authority of law. CBDT Circular on Assessee's Rights There is a Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955. It states: "Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should (a) Dra....
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....T [1991] 187 ITR 688/[1990] 53 Taxman 85, it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. They may choose not to exercise their jurisdiction in a given case is another matter. [Para 11] Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra ) to the effect 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made....' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed....
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....in law is admitted and, in any event, clearly established. In the circumstances, the assessee ought not be prejudiced. [Para 18] The orders of the Commissioner (Appeals) and the Tribunal clearly indicate that they had exercised their jurisdiction to consider the additional claim, as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in the case of National Thermal Power Corpn. Ltd. v. CIT [1998] 229 ITR 383. [Para 19] Both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 40 lakhs under section 43B. The Assessing Officer is, therefore, now only to compute the assessee's tax liability which he must do in accordance with the orders allowing the assessee a deduction of Rs. 40 lakhs under section 43B. [Para 20] The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be ....
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....s requested to appear as amicus curiae. We would, at the outset, like to express our appreciation for his assistance. He took us through the material part of the record and invited our attention to the relevant judgments to enable us to deal with this appeal. 3. It is important to note two things. Firstly, the respondent is entitled to the deduction claimed. Secondly, the respondent made the claim not only before the Assessing Officer, but also independently before the CIT (Appeals) and the Tribunal. The question that arises in this appeal is whether the CIT (Appeals) and/or the ITAT had the jurisdiction to consider a new/additional claim/deduction subsequently raised before the Assessing Officer which, through inadvertence, was not claimed in the return of income filed by the respondent. The question is answered in the affirmative by several judgments. We intend revisting them to deal with two residual aspects raised on behalf of the appellant. 4. (A) On 18th October, 2004, the respondent filed its return for the assessment year 2004-05. The same was processed under section 143(1) on 31st March, 2005. A notice under section 143(2) was issued on 10th Augu....
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....s of his next submission. We find well founded, Mr. Mistri's submission that even assuming that the Assessing Officer is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and to adjudicate the same. 8. That the respondent raised the claim before the Commissioner of Incometax (Appeals) [CIT(A)] and the ITAT is clear. (A) The respondent filed an appeal before the CIT(A) against the assessment order which was allowed by an order dated 1st August, 2008. The order clearly indicates that the respondent had made an application for deduction under section 43-B in respect of the said sum of Rs. 40,00,000/- before the CIT(A). For instance, paragraph 2.2 refers to the respondent's submissions before the CIT(A). The submissions referred to the various judgments which support Mr. Mistri's proposition. It is of vital importance to note that it was stated before the CIT(A) that in view of the judgments, the CIT(A) "can certainly entertain the claim of the applicant and allow the deduction U.s. 43B of the I.T. Act". Thus, the respondent ....
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.... the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed....
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....n assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. 12.At page 694, after referring to certain observations of the Supreme Court in Addl. CITv.Gurjargravures (P.) Ltd., [1978] 111 ITR 1 , the Supreme Court observed at Page 694 as under :- "The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new p....
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....d. (supra) various judgments referred to therein as well as in subsequent cases, which we will refer to, establishes this beyond doubt. In many of the cases, the grounds were, in fact, available when the return was filed and/or the assessment order was made. In Jute Corpn. of India Ltd. (supra) the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as "it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941". Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowi....
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....e Appellate Assistant Commissioner has very wide powers while considering an appeal which may be filed by the assessee. He may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of an assessee in accordance with law. Hence an Appellate Assistant Commissioner also has the power to enhance the tax liability of the assessee although the Department does not have a right of appeal before the Appellate Assistant Commissioner. The Explanation to subsection (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act." (C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corpn. of India Ltd....
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....raised these additional grounds on learning about the legal position subsequently. The Tribunal declined to entertain these additional grounds. The Supreme Court did not answer the question on merits, but framed the following question and held as under :- "4. The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on merit, we do not propose to answer the questions relating to the merit of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows: "Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same." Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in th....
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....xpressly direct the Assessing Officer to allow the deduction of Rs. 40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs. 40,00,000/- under section 43B of the Act. 21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. 22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd ( supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. ( supra). The question before the Court was whether the appellant-asse....