TaxTMI 
TaxTMI 
2024 (1) TMI 482
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....al in ITA. No. 6475/M/2013 is filed by revenue against order passed by Ld.CIT(A)-16 dated 12.08.2013 passed u/s. 271(1)(c) of the Act. 3. At the time of hearing, both the counsels fairly agreed that the issues raised in these appeals are covered and adjudicated by the Coordinate Bench of the Tribunal in assessee's own case for the previous Assessment Years. Copies of the orders are placed on record. 4. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeals relating to Assessment Year 2003-04 as a lead assessment year for adjudication. A.Y. 2003-04 ITA. NO. 1606/MUM/2007 (A.Y. 2003-04) (ASSESSEE APPEAL) 5. Assessee has raised following grounds in its appeal: - "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (hereinafter referred to as the learned CIT(A)) has erred in confirming the disallowance of estimated depreciation on obsolete assets to the extent of Rs. 50,19,393/-. He ought not to have done 2. On the facts and in the circumstances of the case and ....
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....rned CIT(A) has erred in confirming the curtailment of deduction section 80HHC to the following extent: (a) 90% of the following receipts were covered under Explanation (baa) to Section 80HHC. Sales-tax set off/ refund of Rs. 42,49,253; Sale of scrap - Rs. 19,48,232; Bad debts recovered - Rs. 112,625: (b) Part deduction in respect of DEPB Entitlement of Rs. 1,68,15,592. He ought not to have done so. 12. (a) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming adjustment of Rs. 7,71,47,232 under section 92C(4) of the Act. He ought not to have done so. (b) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not considering the appellant's ground that the assessing officer had depended completely on the order passed by the learned Transfer Pricing Officer. In doing so the assessment office had not independently evaluated whether addition of Rs. 7,71,47,232 was due in the given facts. He ought to have considered it and decided. Your appellants crave leave to add, to amend any one or all the foregoing grounds o....
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....ment year 1998-99 and 1999-2000, wherein the Tribunal after considering the decision in the case of G.R. Shipping Company and Inductotherm India Ltd, 73 1TD 529, held that depreciation was allowable on obsolete assets to the assessee. However, against this decision of the Tribunal, the department has not filed any further appeal before the Hon'ble High Court. Thereafter relying the same, the Tribunal in assessee's own se for the assessment year 2000-01 has decided the issue in favour of the assessee. 8.2 As the facts and circumstances during the year under consideration are same, respectfully following the decision of the Tribunal in assessee's own case, we do not find any merit in the action of the AO for declining assessee's claim of depreciation on obsolete assets." 16. Facts being identical, respectfully following the decisions of the Tribunal, as referred to above, we delete the disallowance. This ground is allowed. 11. Further, the Coordinate Bench in assessee's own case for the A.Y.2001-02 in ITA. No. 8978/Mum/2004 held as under: - "8. Ground No.3 is regarding disallowance of estimated depreciation on obsolete assets of Rs. 68,16,036....
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....l issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3092/Mum/2006 dated 11.08.2021 held as under: - "52. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. As per the amended provision of section 36(1)(vii) of the Act, any bad debt written off in the books of account as irrecoverable is an allowable deduction. The effect of the aforesaid statutory provision has been lucidly explained by the Hon'ble Apex Court in case of TRF Ltd VS CIT (supra). Therefore, once the conditions of section 36(1)(vii) are fulfilled, assessee's claim has to be allowed. Keeping in view the uncontroverted factual position that the conditions of section 36(1)(vii) are satisfied, we allow assessee's claim. This ground is allowed. 53. In the result, appeal is partly allowed." 16. Respectfully following the above decision and following the principle of consistency, the view taken by the Coordinate Bench in previous Assessment Year is respectfully followed, ground raised by the assessee is accordingly allowed. 17. With regard to, Gr....
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....resh order after allowing opportunity of hearing to assessee." 21. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Years is respectfully followed. It is brought to our notice that the department has accepted the similar decisions in the AY 2006-07 and 2007-08 were accepted by the revenue by not preferring appeals and subsequently no adjustments were proposed by Assessing Officer in the subsequent years, accordingly, this ground is decided in favour of the assessee. Hence this ground of appeal is allowed. 22. As we have allowed Ground No. 3, ground No. 4 becomes academic. Accordingly the same is not adjudicated at this stage. 23. With regard to, Ground No. 5 which is in respect of disallowance of brokerage of Rs.. 7,00,000/-. Brief facts relating to the above ground as summarized by the Ld.CIT(A) and the decision held by the Ld.CIT(A) is reproduced below: - ASSESSING OFFICER'S CASE: The Assessing Officer in the assessment order examined the payment of brokerage amounting to Rs 7,00,000/- and held the same to be disallowable when he found that the expenditure rel....
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....6. We find merit in the argument of AR that the said receipt is a capital receipt and not liable to tax as the issue is directly covered in favour of the assessee by the following decisions of the jurisdictional high court and coordinate benches as relied and referred to by the ld AR." 25. From the above, it is clear that the decision of the coordinate bench is on mesne profit earned by the assessee, whereas the issue involved in this appeal is that the assessee has incurred brokerage charges to let out the excess space available with the assessee. The issue involved in this case is different and it is clear that the expenses are only relating to the let out of the property and not relating to the business carried on by the assessee. Since the expenses are purely relating to the earning of income under the head Income from House property, it is an expenditure deductable under that head and not under the head Income from Business or profession. Hence, we are inclined to agree with the findings of the Ld CIT(A) and at the same time, it is fact on record that gross income of the assessee is taxable, which includes income from business, income from house property, capital gains and ....
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....ion, that is, to source purchase of Rabipur vaccine by Assessee and balance surplus production 15-20% went in exports to German associate, Chiron Behring GMBH. Assessee also undertakes trading in other pharmaceutical products in domestic market and it was submitted that it earned gross margin of 24 to 25%. It was also submitted before AO that Assessee earns average gross margin of 24 to 25% on other products traded with third parties in domestic market and is a direct internal comparable so as to justify 40% gross margin earned by Assessee on sale of Rabipur vaccine. 29. It was also submitted before AO that both Assessee and Chiron India clocked profits Rs.. 103,17,49,319/- [page 3 of paper book volume 1] and Rs. 25,55,06,000/- [page 97 of paper book volume 1] respectively for Assessment Year 2003-04 and assessed to tax at same rate of corporate tax. In assessment year under appeal, Assessee purchased Rabipur Vaccine at Rs.. 127 per vial from Chiron India aggregating Rs.. 50,50,58,553/- Simultaneously, Chiron India was exporting same vaccine to its associate German company namely, M/s Chiron Behring, GMBH Rs.. 92 per vial (US$ 2 per vial). The AO adopted aforesaid export price t....
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....es the quality control is very very stringent. IN the usual trade practice, the export price is higher than the domestic price of the same goods. Moreover, it is an accepted principal of trade that a person buying goods in bulk get a heavy discount. It can be seen that in this particular case, exports constitute just about 15% of the turnover of Chiron Behring whereas the domestic turnover is very high. is also noteworthy that the assessee company purchases the vaccine from M/s Chiron Behring on payment of cash and not against credit. IN the trade parlance, if any goods if purchased in cash in bulk there is heavy discount to the customer. From the above it can be seen that the assessee company should have purchased goods at the price lower than Rs 92/- Le. the price at which the goods were sold to M/s Chiron Behring Gmbh Germany by M/s Chiron Behring India P. Ltd. However the arrangement of things were done in such a manner so as to pass on the profits to the sister concern by the assessee company. All this was done with the specific intention to reduce the tax burden of the assessee company for the reasons best known to the assessee himself. The assessee has made an argum....
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....ty by paying a higher margin of 27.55% to its own associate sister concern knowing very well that the mark-up was so high. The fact that margins based on percentages have been fixed vide an agreement cannot determine the reasonableness of the prices when it is abundantly clear that the prices which was being charged by CBVPL to its export clients was less than 27.55% than what it was being charged from the appellant. It is not a question of both the entities being profitable and paying tax but the question is of the determination the reasonableness of the transactions. There cannot be any justification for a difference of 27.55% between the prices charged by CBVPL to the appellant and to its other export entities. In view of the above discussion, I am of the view that the A.O. was correct in facts and in law to have made the aforesaid disallowance. The same is upheld. This ground is decided against the appellant." 32. Aggrieved with the order of the Ld. CIT(A) for the current assessment year, assessee is in appeal before us. At the time of hearing, Ld AR submitted that Ld. CIT(A) confirmed aforesaid addition for following reasons: - a) variance of 27.55% betwee....
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....quivalent products as may be available; k) there is nothing on record to suggest that Rabipur vaccine was sold by any independent third party in India during that period at a lower rate than Rs. 127/-: l) export and domestic sale prices cannot be compared because exports is not a core and focus area of business of Chiron India and hence undertaken by Chiron India purely on marginal costing theory to achievefull utilization of capacity and thus reduce overhead costs of company which is admitted by Chiron India in its transfer pricing assessment, m) export price fixed by Chiron India made good commercial sense to take advantage of its surplus manufacturing capacity which is similar to airline company or hotels who charge different prices to different customers so as to achieve equilibrium by earning best profits in a given situation; n) therefore, CIT(A) is of view that price charged by Chiron India for it exports is not the fair market value of Rabipur vaccine; o) Chiron India broke its relations with Assessee and tied up with its rival competitor Novartis, a non-related party under Section 40A(2)(b), vide marketing and distribution agree....
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....two entirely different, separate and distinct markets, economies and geographical regions. Moreover, price realized from associated enterprise namely, German company on export sales of vials at Rs. 92/- can never be fair market value envisaged in Section 40A(2) which proposition is fortified by decision in Van Oord Dredging v. DDIT (2007) 105 ITD 97 (ITAT) (MUM), paragraph 32 thereof. 35. Ld.AR of the assessee further submitted that addition under Section 40A(2) is unsustainable in law for the following reasons:- a) In Circular no 6-P dated 06.07.1968 in paragraph 74 thereof (page 117 of paper book volume 1], it is stated that AO is expected to exercise his judgment in a fair and reasonable manner with reference to criteria prescribed under Section 40A(2) and he must bear in mind that provision is meant to check evasion of tax through excessive and unreasonable payments to associate concerns etc. and should not be applied in a manner which will cause hardship in bonafide cases. AO must consider entire position dispassionately, judiciously and objectively from point ofview of prudent businessman and not capriciously, routinely, arbitrarily, subjectively and in a prejudic....
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....d by Novartis is 36% which is lower than 40% clocked by Assessee vindicating that price of Rs. 127 per vial paid by Assessee is not excessive or unreasonable and in this context heavy reliance is placed on points no (0) of paragraph 7 supra: e) no disallowance under Section 40A(2) has been made by AO since assessment year 1999-00 and this arrangement has been accepted up to and including Assessment Year 2002-03 and adhering to well settled consistency principle, no addition can be made; f) from commercial viewpoint, arrangement under consideration between Assessee and Chiron India is very successful for Assessee substantiated by fact that sales of Rabipur vaccine jumped from 39 crores in 1998 to 78 crores in 2002 and further to Rs. 100 crores in 2005 and Assessee has about 75% of market share resulting in substantial increase in profits; g) in transfer pricing assessment of Chiron India, purchase price Rs. 127/- per vial paid by Assessee to Chiron India for domestic purchase of Rabipur vaccine has been substituted for Rs. 92 per vial realized by Chiron India on export made to Chiron Behring, GMBH by Transfer Pricing Officer thereby resulting in contradict....
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....acent countries. There is no equivalent vaccine manufactured by any other pharmaceutical companies. Therefore, Chiron Group of companies holding monopoly in this line of business, it shows that there is no comparable available for this vaccine. Therefore, it has to be analyzed independently and on commercial basis. 39. As per the JV agreement, the Chiron India will produce and market the same by the assessee company with full monopoly on the market, therefore there is no comparable. Then it has to be bench marked on the commercial terms only. As per the commercial understanding, Chiron India produces and sells 80 to 85% of the vaccines to assessee and rest of the capacity are utilized to manufacture and sells to Chiron USA having marketing right to the rest of the world. Therefore, the success of the venture depends upon the marketing of the vaccines in the South Asia, where the assessee has the marketing rights. Further we observe that the assessee buys the vaccine at the 60% of the selling price of vaccine marketed by it. Since, the assessee has to buy the vaccine only from Chiron India, which supplies the same having monopoly over the product, it is left to the Chiron group o....
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.... The learned counsel appearing for the appellant was unable to point out that the finding rendered by the authorities below is on the basis of misreading of the evidence or that any relevant document has been over-looked while arriving at such findings of fact. As already pointed out herein above, the findings of fact are based on the documentary evidence and consequently, this Court in the present appeals under Section 260 of the Income Tax Act cannot reappreciate the evidence to come to any contrary findings. As the appellant have failed to produce any evidence or material to show that the amount of charges were excessive, we are of the opinion that there is no infirmity committed by the Tribunal while coming to the conclusion that the amount charged are not excessive and as such do not come within the four corners of Section 40A(2)(a) of the Income Tax Act. 7. In fact, this Court in the judgment in the case of V. S. Dempo & Co. (P) Ltd., ( supra ) has observed at paras 6, 9 and 10 thus : "6. In our view, in a business of export consistency of supply as well as quality of supply is important. In order to assure a consistent supply of material of the same quality....
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....e related persons mentioned in clause (b) of Section 40A(2) of the Act that the Assessing Officer gets jurisdiction to disallow the expenditure or a part of the expenditure which he considers excessive or unreasonable. Clause (b) of Section 40A(2) reads as under : "40A(2)(b) The persons referred to in clause (a) are the following, namely:- (i) where the assessee is an individual any relative of the assessee; (ii) where the assessee is a company, firm, association of persons or Hindu undivided family, any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a ....
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....ary of the assessee , is not a related person within the meaning of sub-clause (ii) of clause (b) of Section 40A(2). Sub-clause (iv) of clause (b) of Section 40A(2) provides that in case of a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member is a related person. Again a subsidiary company does not fall in any of the class of persons mentioned in sub-clause (iv) of clause (b) of Section 40A(2). In law, a holding company is a member of subsidiary company and holds more than 50% equity share capital of the subsidiary company (except in cases where it controls the composition of the board of directors without holding majority of the shares). While the holding company is a member of its subsidiary company, the subsidiary company is not a member of the holding company. As, the subsidiary company was not a member of the assessee sub- clause (iv) of clause (b) of Section 40A(2) of the Act is also not attracted in the present case." 8. Taking note of the said obs....
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....spect of disallowance of Rs.. 87,61,130/- representing 24/25 of the payment made for encashment of leave. Brief facts relating to the above ground are, Prior to introduction of clause (f) to Section 43B, provision of leave encashment based on actuarial valuation was claimed and allowed as deduction to Assessee. In compliance of foregoing amendment, Assessee with effect from Assessment Year 2002-03, began to claim expense of leave encashment on payment basis which has been countenanced by Assessing Officer. In year under appeal, Assessing Officer observed that payment of leave encashment Rs.. 91,11,130/- cannot be allowed fully because it will amount to double deduction of same expenditure inasmuch as same is already allowed in earlier years on provision basis. AO observed in his order as under: - "When a employee get leave encashment at the time of leaving the company, amount paid to him, is the accrued amount of leave salary through out the period of his service. Therefore, by claiming leave encashment on actual payment basis, the assessee is claiming a part of the leave encashment which was also claimed in the past based on the actuarial valuation report. It is worthwhil....
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....lar year. Hence full deduction should be allowed even after considering the provision of Sec 43B of the Act". DECISION: I have carefully examined the issue and I find that there cannot be any dispute on the fact that when leave encashment is claimed on actual payment basis it also includes leave encashment claimed in the past based on the actuarial valuation report. In the absence of any other method of computing the sum which can be allowed, the method followed by the A.O. is approved. The disallowance of Rs. 87,61,113/- is therefore upheld. This ground is therefore decided against the appellant." 45. Aggrieved, with the order of the Ld. CIT(A), assessee is in appeal before us. At the time of hearing, Ld.AR of the assessee submitted that provision for leave encashment Rs. 34,97,959/- is already suomotu disallowed in computation of income by Assessee. Moreover, payment Rs. 91,11,130/- incurrent assessment year which is claimed as a deduction has no one to one co-relation, correspondence and juxtaposition with amounts already allowed on provision basis in earlier years since provision in previous years founded on actuarial valuation is done on a global basis and....
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.... of actual payment. Accordingly, we allow the ground raised by the assessee for statistical purpose. 49. With regard to, Ground No. 9 which is in respect of interest of Rs.. 81,83,620 allowed under section 244(1A) for AY 2001-02 & 2002-03 ITA.NO.1606 & 1302/MUM/2007 (A.Y: 2003-04) included in computing the income of the assessment when the said amounts were already withdrawn as per orders passed u/s 143(3) of the Act. Brief facts relating to the above ground are, the Assessing Officer in the assessment order made an addition of Rs. 81,83,620/-under the head Income from Other sources'. The A.O. noted that the assessee had not subjected the interest of Rs. 49,02,558/- and Rs 32,81,032/- to tax on the plea that such interest was withdrawn on completion of regular assessment u/s 143(3) of the IT Act. The assessee submitted before AO as under: "Our clients are surprised that your Honour has proposed to bring to tax both these amounts as income from other source in this assessment by ignoring the fact that both the amounts (of interest) have been already withdrawn by your Honour in the respective assessment order passed u/s 143(3) of the Act. The amounts were not credited....
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....ght to our notice decision of the Special Bench in the case of Avada Trading Co. Pvt. Ltd., v. ACIT (2006) 100 ITD 131 (Spl. Mumbai). 53. On the other hand, Ld.DR agreed with the submissions of the assessee. 54. Considered the rival submissions and material placed on record, we observed that in the case of Avada Trading Co. Pvt. Ltd., v. ACIT (supra), the Special Bench of the Mumbai Tribunal held as under: "14. It has been apprehended by assessee's counsel that assessee would be without remedy if the interest is reduced by virtue of assessment under Section 143(3). This apprehension, in our opinion, is unfounded. If interest is reduced by virtue of Sub-section (3) of Section 244A on account of assessment under Section 143(3), the interest granted in earlier year gets substituted and it is the reduced amount of interest that would form part of income of that year. Thus, it would amount to mistake rectifiable under Section 154 of the Act. In our opinion, if the basis, on which income was assessed is varied or ceases to exist, then such assessment would become erroneous and can be rectified. This can be explained with an example. For instance, land in a village belo....
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.... issue, the Coordinate Bench of the Tribunal in ITA. No. 8978/Mum/2004 dated 23.07.2014 held as under: - "9. Ground no. 4 is in regard to fair market value as on 01.04.1981 for computation of LT capital gain on sale of 1st phase of land at Muind to Nirmal Lyfestyles Pvt. Ltd. It was fairly conceded by the Ld. AR that this issue is covered by the decision of the Tribunal in assessee's own case for A.Y. 1998-99 and 1999-2000 and 2000-01 against the assessee. Therefore, respectfully following the order of the Tribunal in assessee's own case, we dismiss this ground of assessee and decide in favour the Department. 59. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Year is respectfully followed, ground raised by the assessee is accordingly dismissed. 60. With regard to Ground No. 11 which is in respect of curtailment of deduction u/s. 80HHC and part deduction of DEPB entitlement of Rs.. 1,68,15,592/-. 61. Ld.AR of the assessee brought to our notice that Sales tax set off/refund Rs. 42,49,253/- and bad debts recovered Rs. 1,12,625/- are not to be reduced under Explanation....
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....m the record that identical issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3092/Mum/2006 dated 11.08.2021 held as under: - "41. The same view was reiterated by the Tribunal while deciding assessee's appeal in assessment year 2001-02 (supra). That being the case, respectfully following the aforesaid decisions of the co-ordinate bench, we uphold the decision of learned Commissioner (Appeals) on the issue. Accordingly, ground 7(a) is dismissed. 45. Thus, the only issue which survives now is regarding availability of deduction under section 80HHC of the Act in respect of receipts from DEPB entitlement. The core issue which needs to be looked into is, whether DEPB entitlement is hit by Explanation (baa) of section 80HHC, so as to, reduce 90% of such receipt from business profit for computing deduction under section 80HHC of the Act. As could be seen from the impugned assessment order, in course ofassessment proceedings, the assessee, vide letter dated 07-12-2004 has categorically stated that DEPB entitlement is in the nature of export incentive covered under section 28(iiib) of....
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....ssessee has an export turnover exceeding Rs. 10 crores and has made profits on transfer of DEPB under clause (d) of section 28, he would not get the benefit of addition to export profits under third or fourth proviso to sub- section (3) of section 80HHC, but he would get the benefit of exclusion of a smaller figure from "profits of the business* under Explanation (baa) to section 80HHC of the Act and there is nothing in Explanation (baa) to section 80HHC to show that this benefit of exclusion of a smaller figure from "profits of the business" will not be available to an assessee having an export turnover exceeding Rs. 10 crores. In other words, where the export turnover of an assessee exceeds Rs, 10 crores, he does not get the benefit of addition of ninety per cent, of export incentive under clause (Hid) of section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit The High Court, therefore, was not right in coming to the conclusion that as the assessee did not have the export turnover exceeding Rs, 10 crores and as the assessee did not fulfill the conditions set out in the third provis....
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....of re-iteration, we may observe that in the submissions made before the assessing officer, the assessee itself has stated that DEPB entitlement is akin to cash assistance; hence, covered under section 28(iiib). In that event, certainly it would be covered under Explanation (baa) to section 80HHC. However, assessee's alternative claim that it can still avail deduction under proviso to section 80HHC(3) requires consideration and which, according to us, has not been properly dealt with. In view of the discussion hereinabove, we are of the considered opinion that the issue has to be restored back to the assessing officer for fresh consideration after examining all facts and materials on record and submissions of the assessee, as well as, in the light of ratio laid down in the judicial precedents, including, the decision of Hon'ble Supreme Court in case of Topman's Exports vs CIT (supra). The restoration of this issue to the assessing officer is also essential, keeping in view the observations of the Tribunal in assessment years 2000-01 and 2001-02 and the compliance made by the assessing officer to the directions of the Tribunal in those assessment years. Accordingly, we set aside the ....
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....hase of shares, purchase of patent rights and trademarks from AE in Germany and France, reimbursement of expenses from AE. As it appears, the assessee aggregated the transactions relating to import and exports of active formulations, bulk drugs, payment of commission, etc. and benchmarked them in the transfer pricing study report applying transactional net margin method (TNMM). Since, the operating margin shown by the assessee at 13.83% was more than the mean operating margin of the comparable companies worked out at 7.69%, the transactions were claimed to be at arm's length. Apparently, the TPO accepted the benchmarking of the assessee in respect of all international transactions, except, payment of export commission to AE. Insofar as this transaction is concerned, the TPO has treated it as a completely independent and separate transaction and proceeded to verify whether the export commission paid at 12.5% of the sales is at arm's length or not. In response to query raised, the assessee furnished a detailed submission along with supporting evidence justifying its claim that commission paid at 12.5% on sales is at arm's length. The TPO, however, did not accept the submissions of th....
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....ent of export commission should be considered to be at arm's length. He submitted, since payment of commission is closely linked to the transactions of exports and imports, they have to be aggregated for the purpose of benchmarking. Whereas, the TPO has selectively segregated payment of commission as an independent transaction for benchmarking while accepting the other transactions. He submitted, when the TPO has accepted TNMM as the most appropriate method in respect of other closely linked transactions, he should not have segregated the payment of commission. The learned senior counsel submitted, the assessee has been paying export commission from assessment year 1992-93 onwards at the very same percentage and no adjustment has ever been made to the price of commission payment. He submitted, in the year 1999- 2000, the TPO made similar adjustment; however, learned Commissioner (Appeals) allowed the entire commission paid at 12.5% finding it to be at arm's length. He submitted, in assessment year 2005-06, the TPO himself accepted the export commission paid at 12.5% to be at arm's length. Thus, he submitted, rule of consistency has to be followed. 5. The learned department....
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....date. Rather, the decision of the TPO in determining the ALP of export commission at 3% is without any basis and purely on conjectures and surmises. The TPO has not shown any valid reason why assessee's claim that the transactions relating to import and export of formulations and bulk drugs as well as payment of export commission being closely linked, should not be aggregated together for benchmarking purpose. 8. It is also relevant to observe, learned Commissioner (Appeals), while determining the ALP of export commission at 5% also fell into the same error as the TPO. The determination of ALP at 5% by learned Commissioner (Appeals) is also purely on adhoc/estimate basis without following any prescribed method. It is relevant to observe, before us, the assessee has furnished material which demonstrates that since assessment year 1992-93, the assessee had been paying commission on export sales at the same rate of 12.5%. However, in none of the assessment years till assessment year 2001-02, the TPO has proposed any adjustment to the rate at which export commission was paid to the AE. It is evident, only in assessment years 2002-03 & 2003-04, the TPO has proposed adjustment. ....
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....e Assessing Officer to recomputed the deduction in trading export profit, without appreciating the facts of the case." 5. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in not upholding the Assessing Officer's action in not considering amount of DEPB entitlement of Rs. 1,68,15,192/- as being eligible for the purpose of computing deduction under the proviso to section 80HHC(3) and or as part of profits of business itself 6. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in not upholding the Assessing Officer not to deduct the deduction u/s 80IB amounting to Rs. 8,21,42,894/- while determining profit eligible for deduction u/s. 80HHC(3) of the Act, without appreciating the facts of the case." 7. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in not upholding the Assessing Officer's action in taxing the receipts of Rs. 14,26,834/- from Chiron Behring Vaccines Pvt. Ltd (CBVPL) under the head 'Income from house property without appreciating that the assessee has accepted before the CIT(A) that there is letting out of staff quarters to employee of CBVP....
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....ax refund and receipts from sale of scrap as part of total turnover and net profit. As agreed before us by learned counsels appearing for the parties, the issues raised in this ground have been decided by the Tribunal in the preceding assessment year. As could be seen from the order passed by the Tribunal in assessee's own case in assessment year 2000-01 vide ITA No.3703/Mum/2004 and others dated 16-04-2014, the Tribunal has held that excise duty has no element of profit; hence, cannot be included in total turnover for computing deduction under section 80HHC. For better appreciation, the relevant observations of the Tribunal are extracted hereunder for convenience:- "16. Ground No.(iv) in Revenue's appeal is regarding directing the AO to exclude the excise duty from the total turnover while computing the eligible deduction u/s. 80HHC. This issue has been decided by the Hon'ble Supreme Court in the case of CIT Vs. Laxmi Machine Works, 290 ITR 667(SC), wherein it was held that excise duty has no element of profit, therefore, not includible in total turnover for computing deduction u/s. 80HHC. Respectfully, following the decision of the Hon'ble Supreme Court, we d....
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....under: "The issue has been examined. It is apparent from the facts of the case that the sum of Rs. 44,99,700/- representing service charges cannot be classified as operational income and can therefore not become a part of the total turnover. The appellant has correctly applied explanation (baa) to section 80HHC wherein 90% was excluded. Under the circumstances, it is held that the A.O. erred in treating the sum of Rs. 79,34,650/- as part of the turnover and the A.O. is therefore directed to exclude the amount in computing the turnover. Coming to the amount of Rs. 34,34,950/- representing processing charges the A.O shall allow necessary relief to the appellant after verifying the claim that this amount had ready been included in the total turnover. 80. Ld. DR relied on the order of the Assessing Officer and prayed to set-aside the order of the Ld. CIT(A). 81. Ld.AR of the assessee submitted that total amount Rs.. 79,34,650/- comprises Tool manufacturing charges Rs.. 34,34,950/- and service charges (processing charges) Rs.. 44,99,700/- both of which are reduced from profits from business applying Explanation (baa) to Section 80HHC and consequently, both ought ....
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....n record. 85. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 86. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the revenue for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3187/Mum/2006 dated 11.08.2021 held as under: - "69. In ground 8, the department has challenged the direction of learned Commissioner (Appeals) regarding re-computation of indirect cost attributable to export of trading goods for deduction under section 80HHC. 70. Learned Senior Counsel for the assessee submitted, the issue has been decided in favour of the revenue in the preceding assessment year. The learned departmental representative agreed with the aforesaid submission of the assessee. 71. As we find from material on record, identical issue came up for consideration before the Tribunal in assessee's own case for assessment years 1998-99 to 2001-02. In the latest order passed for the assessment year 2001-02 in ITA Nos. 8978 & 8746/Mu/2004 dated 23-07-2014, the Tribunal following its earlier orders has held as under:- ....
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.... export turnover of trading goods minus direct cost and indirect cost attributable to such exports. The indirect cost has been defined under clause (e) of Explanation which means the indirect cost which is not direct cost and allocated in the ratio of export of trading goods to the total turnover. 10.3 The total turnover further defined under clause (ba) of Explanation to sub sec. AC. Therefore, the total turnover includes the local sales as well as the export safes regarding manufacturing goods and trading goods except certain items which shall be included as per clause (ba). When the indirect cost has to be allocated in the ratio of export turnover of trading goods to the total turnover, then the indirect cost subjected to be allocated in the said ratio includes all items of indirect cost incurred for the total turnover. 10.4 It is manifest from the plan reading of the relevant provisions that the indirect cost for the purpose of sec. 80HHC (3)(b) r.w.s clause (e) of Explanation does not restrict the items of expenditure incurred in relation to export of trading goods only; but the entire indirect cost incurred for the total turnover has to be allocated in the r....
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....ould stand and would have full effect in so far as it is against the respondent. The Tribunal refused to allow the assesses to take up this ground under an incorrect impression of taw that if the point was allowed to be urged and succeeded, the Tribunal would have not only to dismiss the appeal, but also to set aside the entire assessment. The point would have served as a weapon of defence against the appeal, but it could not be made into a weapon of attack against the order in so far as it was against the assesses. 10.8 The CIT(A) has given the findings on the issue in paras 28 to 30 as under:- 28. After careful consideration of the submission, it has to be said that the section of the Assessing Officer does not appear to be correct. What cannot be ignored is that subsection (3}(b) deduction inter-alia of indirect cost attributable to such exports. The phrase attributable to such export cannot be missed out. Therefore, an item of expenditure can be taken as cost for the purpose only if it has some connection, link, attributes to the export, if the expenditure is totally disconnected with the export activity, it cannot be taken as part of the indirect costs, There....
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.... be taken as the total figure of the indirect cost incurred for the total turnover and not the indirect cost directly related to the export turnover as held by the C!T(A). X X X X X X X 10.12 It is clear from the working of the Assessing Officer that for determining the indirect cost, the AO has reduced from the total cost of business, cost of goods as well as the other items. Therefore, we do not find any error as far as the formula adopted by the Assessing Officer for computation of indirect cost allocated to the export of trading goods. 22.4 As the facts and circumstances during the year under consideration are same, respectfully following the decision of the Tribunal in assessee's own case, the ground in the Revenue's appeal is allowed and the cross objection filed by the assessee is dismissed." 72. Respectfully following the aforesaid decision, we allow the ground raised by the revenue." 87. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Year is respectfully followed, ground raised by the revenue is accordingly allowed. 88. With regard ....
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.... of the Ahamadad Bench of the Tribunal in the case of ITO v. Madhusudhan Industries in ITA. No. 638/Ahd/2012 dated 14.06.2023. 94. Considered the submissions and material placed on record, we observe from the record that in the case of Associated Capsules Pvt. Ltd., v. DCIT (supra) the Hon'ble High Court considered the issued and observed as under: - "38. We find it difficult to subscribe to the views expressed by the Delhi High Court in interpreting the provisions of Section 80IA(9). In that case, in fact, the Counsel for the Revenue had argued (see para-38 of the judgment) that Section 80IA(9) applies at the stage of allowing deduction and not at the stage of computing deduction under other provisions under heading 'C' of Chapter VIA. It was argued that in the matter of grant of deduction, the first stage is computation of deduction and the second stage is the allowance of the deduction. Computation of deduction has to be made as provided in the respective sections and it is only at the stage of allowing deduction under section 80IA(1) and also under other provisions under heading 'C' of Chapter VIA, the provisions of Section 80IA(9) comes into operation. While ac....
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....he profit declared by the assessee, in this case the assessee has first claimed the deduction u/s 80IB and the balance u/s 80HHC. The above method of computation was upheld by the Hon'ble HC, hence the ground raised by the revenue is accordingly dismissed. 96. With regard to Ground No. 7, which is in respect of receipt of Rs.. 14,26,834/- from Chiron Behring Vaccines Pvt. Ltd should be taxed under the head income from House Property and not as income from business (No such reclassification from AY 2005-06 in the assessment). Ld. AR of the assessee submitted that the identical issue has been decided in the case of CIT v. Modi Industries Ltd., (1994) 210 ITR 1 (Del) and the Hon'ble High Court has decided the issue in favour of the assessee. Ld. AR of the assessee requested the principle laid down by the Hon'ble High Court may be followed. 97. On the other hand, Ld.DR relied on the assessment order and submitted that Chiron is separate person and reimbursement towards rent and electricity is separate income and chargeable to tax under the head income from house property. 98. Considered the submissions and material placed on record, we observe from the record that in t....
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....are that the assessee, a public limited company, owned a bungalow known as Modi Bhawan. The said bungalow was in occupation of R.B. Gujar Mal Modi and Shri K.N. Modi since 1932 as employees and directors of the assessee-company free of charge. It appears that subsequently M/s R.B. Multani Mal & Sons (P.) Ltd. were appointed as the managing agents of the assessee-company. On 22nd July, 1960, the shareholders of the assessee-company passed a resolution whereby R.B. Gujar Mal Modi and K.N. Modi were permitted to continue the user of Modi Bhawan as their residence but now as nominee directors of the said managing agents and on payment of a rent of Rs. 200 per annum. Thus, the bungalow remained in their occupation all through except that instead of occupying it as directors and employees of the assessee, they were allowed to occupy it from 22nd July, 1960, as nominees of R.B. Multani Mal & Sons (P.) Ltd., the managing agents of the assessee-company, on payment of nominal rent. The assessee-company claimed depreciation as also certain amounts incurred on repairs of the said premises in the relevant previous year, on the plea that the said building is a business asset and is being used fo....
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....e, classified under s. 14 of the Act, being distinct and mutually exclusive, the income derived from a distinct source falling under a specific head is to be computed under the appropriate section irrespective of its user or purpose of letting and, therefore, the income from Modi Bhawan has to be computed as income from house property even though the said property is held to be a business asset; (ii) the property is in the occupation of the representatives (nominee directors) of M/s R.B. Multani Mal & Sons (P.) Ltd., the managing agents of the assessee-company, which is a distinct entity with an independent business income and, therefore, occupation and user of the said property by the said nominees of the managing agents cannot be equated with occupation and user of the property by the assessee for the purpose of its business; and (iii) the property is used for residential purposes and, therefore, it cannot be taken to be used for business purposes of the assessee so as to entitle it to claim exemption from chargeability to tax under s. 22 of the Act. For his first proposition, Mr. Gupta has relied upon a decision of the Andhra Pradesh High Court in P.V.G. Raju's case (supra).....
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....) the profits of such business should be chargeable to income-tax There is no dispute that profits of the assessee-company, which is stated to be "occupying" the property are charged to income-tax. To attract the exemption under s. 22, it has to be seen whether the property is occupied for the purposes of any business of the assessee-company. The property, since July, 1960, has been in the occupation of the functionaries of the managing agents and not directly of the owner-assessee-company and the point falling for consideration is whether to avail of the exemption under s. 22 of the Act, the property must necessarily be : (i) in direct occupation of the assessee-company, and (ii) used as such for transaction of the assessee's business or profession. This would depend on the scope of the term "occupy". 8. The term "occupy" appearing in s. 22 has been judicially interpreted, as would be noticed hereafter, as occupation directly by the assessee himself or through an employee or agent but such occupation by the employees, etc., within the meaning of the exception in the said section, must be subservient to and necessary for the performance of the duties in connection with....
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....ess of the company and was not de hors the business. The Court accordingly held that income from the said property was to be assessed under s. 10 of the said Act. The Bench also held that the word "occupy" could not be given a restricted meaning and in the context of ss. 9 and 10 of the said Act, the occupation of a tenant should be treated as occupation of the owner and, therefore, legally the property would be in the occupation of the owner though not in its physical occupation. In taking this view, the Court sought to derive support from a decision of the Patna High Court in Jamshedpur Engineering & Manufacturing Co. Ltd. vs. CIT (1957) 32 ITR 41 (Pat) : TC 16R.1127, holding that letting of the property for residence by the assessee-company to its employees being subservient to the main business of the company, their occupation is to be taken as of the assessee. 11. In New Bank of India Ltd. vs. CIT (supra), the said bank originally had its head office at Lahore but at the time of partition of the country in 1947, it was shifted to Delhi. The staff at Lahore was transferred and came over to India and the bank considered it necessary that it should make arrangements for ....
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.... idea of providing accommodation to the employees is that they should be near the factory or should be housed in hygienic or proper conditions so as to improve their productivity, health and their commitment to the employer and in such a case the purpose of allotment will undoubtedly be business purpose, for it ultimately goes to promote the assessee's business. Drawing a similarity of purpose for provision of accommodation to a worker and a senior executive, the Court held that occupation of the company's houses by its employees, whether they are workers or directors, is for the business purpose of the assessee- company and income from such property could not, therefore, be treated as income from house property. 13. From the aforesaid decisions it would appear that the consistent view of the Courts has been that when a house property is occupied as residence by the employees or its directors, etc., if concerned with the promotion of the business of the assessee-company, whether on payment of rent or otherwise to enable them to discharge their functions efficiently and the letting out of the property is subservient and incidental to the main business of the assesse....
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.... nor is the rental charged i.e., Rs. 200 per annum tenuous or even ridiculous considering the property and amenities provided. In fact, renting at this paltry sum would show that the purpose of letting was not to earn rental income and this distinguishes the present case from the facts and findings in P.V.G. Raju's case (supra). 15. As noted above, R.B. Gujar Mal Modi and K.N. Modi were in occupation of the house property in question since 1932 as employees/directors of the assessee-company and till 1960, the said property was treated as a business asset of the assessee- company. It was only in 1960 that their occupation assumed the character of nominee directors of the managing agents of the assessee-company. The stand of the Revenue in the second leg of the arguments of Mr. Gupta is that this change takes the chargeability of the property income out of the exception carved out in s. 22 of the Act, inasmuch as, the occupation of the managing agents could not be equated with the occupation of the assessee-company within the meaning of said section. We do not feel persuaded to agree. Occupation of the property by the assessee-company's managing agents (appointed for....
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....xception in s. 22, the income from the house property must necessarily go out of the substantive charging provision of s. 22 of the Act. 18. As regards the other doubt expressed by the Division Bench that if it is held that when houses are given to its employees, s. 22 will never apply as the house will be regarded as having been given for the purpose of business and in the process s. 38(1) of the Act, providing for proportionate deductions in respect of buildings, etc., partly used for business etc., or not exclusively so used, will also never apply in the case of a company, although the point has not been argued before us, we would clarify that we are not laying down an abstract proposition of law that whenever a house property is let out by a company to its employees or directors, as the case may be, it must always he taken to have been occupied by the company for the purposes of its business. The question whether the property has been occupied by the assessee for the purpose of business or not would essentially depend on the facts of each case. In other words, it will have to be determined whether the occupation of the assessee-company's property by its employees i....
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....ction 80HHC of the Act while determining the net profit for the purpose of deduction u/s 80HHC. Therefore, there is no grievance to the revenue and it is as per the provisions of determining the deduction u/s. 80HHC of the Act. Therefore, this ground of appeal raised by the revenue dismissed. 103. In the result, appeal filed by the Revenue is partly allowed. ITA.NO. 1128/MUM/2009 (ASSESSEE APPEAL) (U/S. 271(1)(C) OF THE ACT. 104. Assessee has raised following grounds in its appeal: - 1. On the facts and in the circumstances and in law, the learned CIT(A) has erred in confirming the penalty u/s 271(1)(c) on the following additions/disallowance. (i) Addition of long term capital gain of Rs. 3,24,40,774/-. (ii) Interest refund Rs. 81,83,620/- 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred while giving decision on penalty imposed on long term capital gain of Rs. 3,24,40,774/-. He has omitted to mention that once the penalty was levied on entire addition on long term capital gain to the extent of Rs. 3,24,40,774/-, penalty was not required to be levied separately of Rs. 2,00,00,000/- as was done ....
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....n A. Shaikh v. DCIT [2021] 434 ITR 1 (Bombay). Therefore, it is submitted that since the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act did not specify the limb for which or the charge for which it was issued the penalty order passed pursuant to such notice is bad in law. 110. Ld. DR vehemently supported the orders of the authorities below. 111. Considered the rival submissions, perused the orders of the authorities below and the decision of the Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh v. DCIT(supra). On a perusal of the notices issued u/s. 274 r.w.s.271(1)(c) of the Act, we observe that the Assessing Officer has not specified any limb for which the notices were issued i.e., either for concealment of particulars of income or for furnishing inaccurate particulars of such income. Assessing Officer did not strike off irrelevant limb in the notices specifying the charge for which notices were issued. It can be seen from the notices issued u/s. 271(1)(c) of the Act it appears that the charge was for both the limbs. 112. An identical issue came up before Hon'ble Bombay High Court (Full Bench at Goa)in the case of Mr. Mohd. Farhan A. Sha....
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.... plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185. No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No.3: What is the eff....
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..... In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication." 113. As could be seen from the above the Hon'ble Bombay High Court (Full Bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh v. ACIT [(2021) 434 ITR 1 (Bom)] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s. 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of ....
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....e so. 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in curtailing/restricting deduction u/s. 80HHC by: a) Adjusting profit of the business by reducing 90% of the following income credited to profit and loss account of the year: Sales tax set off and refund Rs. 41,47,859/- Sale of Scrap and waste Rs.30,30,390/- Bad debts recovered, offered to tax u/s 41(1) Rs. 6,58,037/- Sale of Scrap credited to Misc Income Rs. 89,277/- Foreign Exchange gain (net) Rs. 2,14,030/- Insurance Claims Rs. 2,27,53,203/- b) Reducing profits of the business to the extent of Rs. 11,60,52,292/- being the amount of deduction allowed u/s 80IB of the Act. 7. Your appellants crave leave to add, to amend any one or all the foregoing grounds of appeal and also beg leave to take additional ground, if need be. 116. We proceed to dispose off the appeal by adjudicating the issues raised by the assessee ground wise. 117. With regard to Ground No. 1 which is in respect of disallowance of write off of tender & security deposits of Rs.. 11,52,393/-, at the time of hearing, Ld.AR of the assessee subm....
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....same is dismissed as not pressed. 122. With regard to Ground No. 4, which is in respect of leave encashment to the extent of Rs.. 73,87,293/-, this ground is similar to Ground No. 8 of grounds of appeal raised by the assessee for the A.Y.2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y. 2004-05. We order accordingly. 123. With regard to Ground No 5, which is in respect of encashment of long term capital gain on account of FMV as on 01.04.1981 by Rs.. 25,00,107/-, this ground is similar to Ground No. 10 of grounds of appeal raised by the assessee for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 124. With regard to Ground No. 6 (i) to 6(iv) which are in respect of reducing profits of the business by 90% of the income credited to the profit and loss account, this ground is similar to Ground No. 11 of grounds of appeal raised by the assessee for the A.Y. 2003-04 and the decision therein in the respective ground shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 125. With regard to Ground No. 6(v) which is re....
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....gly. 129. In the result, appeal filed by the assessee is partly allowed as indicated above. ITA.NO. 6548/MUM/2010 (REVENUE APPEAL) 130. Revenue has raised following grounds in its appeal: - "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation on obsolete assets without appreciating the facts of the case." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the addition of Rs. 54,61,324/- u/s. 145A of the Act being the difference between the value of MODVAT relating to opening and closing stock, without appreciating the fact that the AO has made the adjustment inconformity with the decision of ITAT, Mumbai Bench in the case of Hawkins Cookers Ltd." 3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not upholding the Assessing Officer's action in taxing the receipt of Rs. 13,91,349/- from Chiron Behring Vaccines Pvt. Ltd. under the head 'Income from House Property' without appreciating that the assessee has accepted that there is letting out of staff quarters....
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....s ground is similar to Ground No. 3 of grounds of appeal raised by the assessee for the A.Y. 2003-04 and the decision taken therein shall apply mutatis- mutandis to the appeal for the A.Y.2004-05. We order accordingly. 134. With regard to Ground No. 3 which is in respect of not treating receipts of Rs.. 13,91,349/- from Chiron Behring Vaccines Pvt. Ltd,. taxable as income from House property, this ground is similar to Ground No. 7 of grounds of appeal raised by the revenue for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 135. With regard to Ground No. 4 which is in respect of deleting addition of Rs.. 14,53,05,157/- under section 40A(2)(b) in respect of purchases of Raibipur Vaccines from Sister concern, this ground is similar to Ground No. 7 of grounds of appeal raised by the assessee for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 136. With regard to Ground No. 5 which is relating to deemed sale consideration as per section 50C vs. actual sale consideration, brief facts relating to the above gro....
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....q. mtr were given for development on 31.03.2000 under one MOU. Therefore, the stamp duty value should be considered as on the date of entering into MOU i.e, on 31.03.2000. Further, it was also submitted that the valuation was approved by the respective authorities for a consideration of Rs.. 35.82 crores. The Assessing Officer cannot adopt the present stamp duty value for the part of the total project. However, Assessing Officer rejected the submissions of the assessee and proceeded to adopt the stamp duty value as on 31.03.2004 to determine the capital gains. 139. Aggrieved assessee preferred appeal before the Ld. CIT(A) and before Ld. CIT(A) assessee has filed detailed submissions, for the sake of clarity it is reproduced below: - "4. As regard the second issue, appellant has not accepted Stamp duty valuation as the value of deemed consideration for determining the capital gain as per the provision of Sec 50C(2)(a). In this regard, the appellant relies on the certificate issued by the Competent Authority as per Sec 269UL. As per this certificate, total value of Rs 35.82 crores was the value approved by the Competent Authority for the said land after evaluating the sam....
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....dras HC in the case of K R Palanisamy vs Union of India reported in (2008) 306 ITR 61 (Mad) upholding the constitutional validity of Sec 50C. On pursuing the case report, it will be observed that the Hon. Madras HC while upholding the constitutional validity of Sec 50C, has noted that the section 50C itself provides for the safeguard to the assessee in as much in a situation like your appellant, where it is urged that the stamp duty valuation is higher than the full value of consideration. Sec 50C (2) provides for reference to be made to the Department Valuation officer (DVO), if the DVO determines the value which is more than the value adopted for stamp duty purpose, only then the AO shall adopt the market value as determined by Stamp duty authority. 6.1 In view of this legal position which has been adverted to by the Hon Madras HC in the decision cited & relied upon in Para 5, the appellant's request to the AO that in its case to make a reference to the DVO Sec 50C(2)/(3) was erroneously disregarded by him on the wrong footing that he had no option at all but to adopt Stamp duty value since it was higher than the actual consideration. In this regard, it is also reite....
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....rovided in Sec 50C(2) of the Act. There is force and substance in the submission of the appellant that having regard to the fact that the actual consideration of Rs. 8.62 crores received in respect of balance Phase III land, which is the subject matter of appeal in this ground, being the part of the apparent consideration approved by the Appropriate Authority under Chapter XX-C of the Act by issuing a no objection certificate u/s 269UL(3) dated 12/06/2000, it would not have been fair to adopt the same without referring it to the DVO. 11.5 Moreover, it has to be conceded that the Appropriate Authority as it existed in Statute at that point of time was a high powered one consisting of two Commissioners of Income Tax and a Chief Engineer of CPWD. Thus the value approved by this Authority and adopted by the appellant represented the collective wisdom of three very senior and experienced officers whereas a reference to DVO (if it had been made) would have been at the level of an Executive Engineer only. 11.6 Taking a considered view of the matter, the action of the AO in suo motto adopting the stamp duty rate is not mandated by law. As such the AO is directed to adopt ....
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....f Income Tax and a Chief Engineer of CPWD. Therefore, this valuation cannot be ignored and plays pivotal role in determining the valuation of property. Therefore, we are inclined to agree with the findings of the Ld.CIT(A) and Accordingly, ground raised by the revenue is dismissed. 143. With regard to Ground No. 6 which is in respect of reduced discounts from the total turnover of the business for the purpose of 80HHC, this ground is similar to Ground No. 8 of grounds of appeal raised by the revenue for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 144. With regard to Ground No. 7 which is in respect of indirect cost attributable to trading export at Rs.. 7,03,120/- instead of Rs.. 34,79,770/-, this ground is similar to Ground No. 4 of grounds of appeal raised by the revenue for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 145. With regard to Ground No. 8 which is in respect of recomputation of disallowance of deduction under section 80HHC(3) by applying 1st proviso (DEPB entitlement), this ground i....
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....nalty can be levied in their case. Without prejudice the assessee has also discussed the issues one by one and has urged not to levy penalty u/s. 271(1)(c). 150. After considering the submissions of the assessee, Assessing Officer levied the penalty by observing as under:- 5. To sum up, penalty is attracted on the following additions/disallowances: Sr. No. Addition/Disallowance Amount (Rs.) 1 Disallowance of Repairs Expenses 1,14,89,823/- 2 Disallowance of Brokerage paid on renting of premises. 7,00,000/- 3 Disallowance of Security Deposit Written off and debited to Profit & Loss Account 11,52,393/- 4 Enhancement of Long Term Capital Gain 25,00,107/- 5 Disallowance of Software Expenses 37,260/- TOTAL 1,58,79,583 6. Without prejudice to above, penalty u/s 271(1)(c) is also leviable in view of the following discussion (1) The Supreme Court decision in the case of Reliance Petroproducts (supra) as has been relied upon by the assessee is not applicable to the facts of the present case as the additions and disallowance made by the AO were not mere disallowances as has been referred by the....
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....counts can take either of the two forms: either an item of receipt may be suppressed fraudulently, or, an item of expenditure may be falsely (or in an exaggerated amount) claimed. Both types attempt to reduce the taxable income. Both types amount of concealment of the particulars of one's income as well as furnishing of inaccurate particulars of income. Penalty may be imposed for either or both such attempts [CIT v. India Sea Foods (1976) 105 ITR 708 (ker.) Nagin Chand Shiv Sahai v CIT (1938) 6 ITR 534 (Lah), CIT v. Gates Foam & Rubber Co. (1973) 91 ITR 467 (Ker.)] 9. Under the Act, penalty u/s 271(1)(c) is leviable not only for concealing the income but also for furnishing inaccurate particulars of such income. In the instant case, the assessee has furnished inaccurate particulars of its income. By furnishing inaccurate particulars of income the assessee has tried to get undue benefit and thus has concealed its income. It has been held the word 'income' in section 271(1)(c) is not used in the popular sense of money received but connotes the assessable figures arrived at after accounting for all the legitimate and exemptions (Naginchand v. CIT 6 ITR 534). There....
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....f the case and in law, the Ld. CIT(A) erred in deleting the penalty imposed in respect of addition to long term capital gains on account of the disallowance of higher cost of acquisition adopted by the assessee as on 01.04.1981, accepting the assessee's plea that the cost of acquisition as on 01.04.1981 was based on the report of the approved valuer and similar disallowance in the past was being disputed by the assessee before appellate authorities, without appreciating that by adopting such higher cost of acquisition as on 01.04.1981, the assessee had deliberately reduced its capital gains liable for tax and hence penalty was rightly imposed by the Assessing Officer under section 271(1)(c) read with Explanation 1 thereof." 3. "The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored." 4. "The Appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 153. Considered the rival submissions and material placed on record, at the time of hearing, both the counsels agreed that most of the issues on which Assessing Officer has levied penalty on the following addition....