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TaxTMI 
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2023 (8) TMI 22
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....g the addition of Rs. 29,41,612/- made u/s. 68 of the Act being unproved creditors for goods. 3) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 1,10,365/- made u/s. 68 of the Act being unproved creditors for expenses. 4) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition made u/s. 68 of the Act at Rs. 33,88,398/-. 5) (a) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition made u/s. 68 of the Act at Rs. 15,85,867/-. (b) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition made u/s. 68 of the Act at Rs. 63,091/- being salary payable and Rs. 1,30,111/- being expenses payable. 6) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and or. facts in holding that the receipt of Rs. 4,30,34,088/- and of Rs. 1,50,00,000/- being the amounts for termination^ bottling licence is not taxable u/s. 28(iv)/28(va) or alternatively u/s. 45 of the Act. 7) The Ld. Commissioner of Income-Tax (Appeals)-XI....
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....o was looking after the accounting and other related works also left. Therefore, the details were not timely arranged at the time of assessment. Accordingly, the assessee prayed the learned CIT-A to accept the additional evidences as per the rule 46A of the IT Rules. The AO in the remand report objected to accept the additional documents by contending that the assessee was not prevented by the genuine/ sufficient reason as provided under rule 46A of the Income Tax Rule. 6. However, the learned CIT-A admitted the additional evidences furnished by the assessee by holding as under: I have carefully considered the details filed by the appellant, the report of the A.O and the counter comments filed by the appellant. Certain evidences were not produced by the appellant before the A.O. as the operations of the company were closed and there was a difficulty in locating the records. It is also pointed out by the appellant that on similar ground Hon'ble ITAT has admitted the additional evidence in the case of the appellant for A. Y. 2002-03. It is also seen that the evidence now being submitted are contemporary in nature. The A. O. has also been given due opportunity. He has examined ....
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....n'ble bench is extracted as under: 4. In our view, CIT [A] committed no error nor the admission of additional evidence can be stated to be in breach of the requirement of Rule 46A of the Rules. Particularly when the interest of the Revenue was safeguarded by calling for the remand report and permitting the Assessing Officer to comment on such additional evidence, we see no reason to interfere. 10.1 Coming to the case on hand, the assessee before the learned CIT(A) submitted that at the time of the assessment proceeding, its business was closed and the person who was looking after the accounting and taxation related work also had left. Therefore, the assessee was facing difficulties in locating the necessary details required by the AO. Accordingly, the same were not produced before the AO during the assessment proceedings. The learned CIT(A) in view of the above explanation furnished by the assessee accepted the additional evidences and before acting on such documents provided the AO an opportunity to verify the same. Thus, the learned CIT(A) safeguarded the interest of revenue while admitting the additional evidences furnished by the assessee. Therefore, considering the facts in....
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....e remand report submitted that creditor for goods and creditor for expenses are arising out of purchases made and various expenses incurred. Before the AO, the ledger copy showing full details of purchases and expenses were furnished. The AO did not point out any adversity in the purchases made and expenses incurred. But the AO made disallowances of 20% and 30% of overall purchases and expenses incurred for the reason that the business got closed and physical evidences along with bills & voucher were not available on records. Therefore, once the purchases and expenses has been partly disallowed on adhoc basis no addition of the liability arising out of such expenses again can be made under the provisions of section 68 of the Act. 13.4 With regard to the sales tax liability of Rs. 33,88,398/-, the assessee submitted that the impugned sales tax liability pertains to AY 2006-07 where it has suo-moto made disallowance under section 43B of the Act. The assessee in support of its claim furnished ledger copy and copy of return of income. 13.5 With regard to other liabilities, the assessee submitted that other liabilities of Rs. 33,98,647.00 includes outstanding interest payable to finan....
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....al contentions of both the parties and perused the material available on records. The facts of the case have already been discussed in the preceding paragraph which are not in dispute. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same. In the present case, the AO has treated the current liabilities shown by the assessee as unexplained cash credit under the provisions of section 68 of the Act. The learned CIT-A after considering the remand report and the submission of the assessee has deleted all the items of the addition made by the AO under the head liabilities as discussed above. The learned CIT-A has given very reasoned findings which were not controverted by the learned DR at the time of hearing. It was pointed out by the learned CIT-A that there were various expenses incurred by the assessee during the year under consideration which were subject to disallowance on adhoc basis. Likewise, the AO has also disallowed the liabilities appearing as on the balance sheet date which was arising out of the expenses incurred by the assessee in the year under consideration which were also subject to disallowance on adhoc basis. Thus, if any other di....
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....rage in authorized container for exclusive sale to M/s Hindustan Coca-Cola Beverage Pvt Ltd. However, there were two different agreements between the assessee and Coca-Cola USA and assessee and Cadbury which were made for certain period of time but subject to the extension as per their mutual understanding. 19.1 However, on a later date, the disputes arose between the assessee and Hindustan Coca-Cola Beverage Pvt Ltd. in relation to purchase order issued. Therefore, it was finally decided to terminate all the agreements with the assessee with mutual understanding vide main settlement agreement dated 23rd December 2006. Under the settlement deed, it was mutually agreed upon certain terms and conditions as detailed under: 1. The Company shall on or before 28th December, 2006 pay Surbhi Rs. 5,00,00,000/- (Rupees Five crores only) (hereinafter referred to as the "Settlement Amount") as reduced by the Bank Payment which has been paid for and on behalf of Surbhi to ICICI Bank (which reduced payment shall hereinafter be referred to as the "Balance Settlement Amount") by way of cheque/demand draft, subject to further adjustments as set out in Clause 4, as settlement of all demands, diff....
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.... listed in Annex 2, which it has taken on a loan from the Company. These assets have been checked by the Company and have been found in same condition in which they were provided to Surbhi. The Company has no claim in respect of the condition of the said assets. (iv) Surbhi shall transfer title to OMT Assets, listed in Annex 3, by way of delivery of possession to the Company at nil cash consideration since the OMT Assets were paid for by tl'.e Company and further shall sell 4 sets of moulds as listed in the said Annex 3 for the consideration stated thereunder which consideration has been taken into account while arriving at the Balance Settlement Amount in accordance with Annex 5. (v) Surbhi shall sell the raw material listed in Annex 3 for the consideration which has been taken into account in terms of the reconciliation annex being Annex 5. (vi) The 'Company shall sell and transfer the assets listed in Annex 4 to Surbhi at their .written down value as reflected In the reconciliation Annex 5. 19.2 The assessee upon receiving the compensation as discussed above has accounted for as capital receipt not chargeable to tax whereas the AO was of the view that the compensa....
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....earned CIT-A after considering the submission of the assessee, assessment order and the remand report of the AO has concluded that the compensation received by the assessee represents the capital receipt not chargeable to tax. The relevant finding of the learned CIT-A reads as under: After Consideration of the Settlement agreement, report of the A.O and the submission made by the appellant, it is noted that the agreement is for complete closure of business. The application was acting as a licensed bottler for Hindustan Coca Cola company and by virtue of the agreement, the appellant has ceased to become the licensee and has to close down its business completely as if was the only business which was being carried out by the appellant. Various conditions of the closure agreement also clearly show that it is a closure of \ business as the appellant has returned all the machineries and other assets which were given by the Coca Cola company to the appellant. The agreement also lays down various terms and conditions for disposing off the stock and other related assets. The Hon'ble Supreme Court in the ', case of Oberoi Hotel Pvt. Ltd. Vs. CIT [236ITR 903] has laid down the follo....
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....ing out from business or exercise of profession as there is no continuing business. Further, the A. O. has also pointed out vide his letter dated 29/03/2012 that the amount may be considered under the provisions of section 28fva). A perusal of section 228[va) show that it mentions of any sum whether received of receivable for not carrying out any activity in relation to any business or not sharing any know-how patent etc. A careful perusal of the facts show that the section is also not applicable as in the present case, the business has closed down, whereas the provision mentions of the compensation for ript carrying our any activity in relation to any business. Had the appellant been continuing with the business and had to close one of the several activities being carried out, the provisions of this clause would have been applicable. In the present case, the payment has been received towards sterilization of the source of income and, therefore, the provisions of section 28(va) would not be applicable. The A. O. has also mentioned that the receipt should be taxed under section 45 as capital gains. It is noted that there is no transfer of capital asset in the present case which ....
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....o referred the copy of the main settlement agreement. 23. On the contrary, the learned AR before us submitted that the assessee has received the compensation on sterilization of source of income. Therefore, the same cannot be treated as revenue receipt, chargeable to tax. The learned AR to buttress his arguments has also filed the financial details of the company that the business of the assessee has closed down. 24. Both, the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 25. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee has received compensation from the parties as detailed below: S. No. Name of the company Amount of compensation 1. Hindustan Coca-Cola Beverage Pvt Ltd Rs. 5 Crore 2. Coca-Cola India Pvt Ltd Rs. 1.5 Crore 25.1 The assessee out of the compensation received of Rs. 5 crores has offered a sum of Rs. 69,15,912.00 to tax in the income tax return and the balance amount of Rs. 4.30,84,088.00 was treated as capital receipt not chargeable to tax. Likewise, the amount of compensation of ....
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....capital receipt. 25.4 Now coming to the issue on hand. As regards the compensation received by the assessee for Rs. 1.50 crores, we have referred the main settlement agreement dated -23rd December 2006, placed on pages 15 to 22 of the paper book, and find the relevant clause is reproduced as under: On closing Date, CCIL shall pay on or before 28th December 2006 a sum of Rs. 1,50,00,000 to Surbhi as compensation for termination of the Schweppes Agreement. This sum is in addition to the Settlement Amount. Upon payment of the above mentioned compensation, the Schweppes Agreement shall stand terminated and any and all accrued rights of Surbhi, whether in law or in equity, to seek remedy, either contractual or otherwise, in any manner whatsoever, against Cadbury Schweppes Beverages India Private Limited, or against Atlantic Industries Inc., for any demands, differences, losses, liabilities, damages and claims arising under the Schweppes Agreement shall stand abandoned and waived. Further, Surbhi shall not raise any claims, demands, differences, disputes or liabilities against Cadbury Schweppes Beverages India Private Limited or against Atlantic Industries Inc. under any other commu....
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.... for Rs. 1,98,00,000 comprising of a term loan and a cash credit facility "(collectively referred to as the "Loan"), The Company acted as a 'sponsored corporate' of Surbhi and in relation thereof opened an escrow account with the Bank (A/c No.010205000174) in which conversion fees were to be deposited. In relation to this arrangement, certain disputes arose between the Company and Surbhi, on the one hand, and the Bank, on the other hand. These disputes have been settled under the Bank Settlement Agreement of even date entered into by and amongst the Bank, the Company/ and Surbhi, attached hereto as Annex 1. 25.7 Based on the above clause, what is transpired is this that there were certain trade disputes arose between the assessee and the company namely Hindustan Coca-Cola Beverage Pvt Ltd and in order to settle those disputes the amount of compensation was received for Rs. 4,30,88,084/- only. Thus, it was alleged by the Revenue that the impugned amount does not represent the compensation as a result of termination of the contract and thus the principles laid down by the Hon'ble Supreme Court in the case of Oberoi Hotels Pvt Ltd (supra) cited above are not applicable. There....
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....t it has to claim the amount of compensation paid by it to the assessee as revenue expenditure. Furthermore, the character of the amount representing the compensation will not change merely on the reasoning that party has deducted the TDS on the payment made to the assessee. What is the substance in the present case is this that there was loss of source of income to the assessee on account of the main settlement agreement as discussed above. 25.11 At this juncture, it is important to note that the word 'cease to subsist' has been used in the main settlement agreement. Perhaps, these words have been used in the main settlement agreement for the reason that the original contract entered between the assessee and the company was ended by efflux of time but still the same was continued. Thus, it appears that though the agreement has come to an end but it was subsisting as on the date of main settlement agreement on account of the conduct of the assessee and the company. In other words, once the agreement has already been terminated but subsisting because of the conduct of the parties, maybe for this reason the word cease to subsist was used in the agreement. But we have to see the subst....
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.... the learned CIT-A restricted the disallowance of expenses to the extent of 15% by observing that the books of account of the assessee have been audited by independent auditor and expenses claimed are reasonable considering the nature of business of the assessee. 32. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 33. Both, the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 34. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the business of the assessee was closed down. Once the business is closed, it is obvious that the employees of the assessee must have left. But it does not mean that the onus of assessee has also come to the end for furnishing the details in support of its claim. Undeniably, the onus lies upon the assessee justify its claim based on the documents. In the event the assessee fails to justify, the AO has to see the claim of the assessee based on the circumstantial evidence, history of the case, comparable cases so as to find out whether the claim of the assessee is genuine or excessive before m....