TaxTMI 
TaxTMI 
2024 (3) TMI 1438
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....eals are clubbed, heard and disposed off by this consolidated order. ITA No. 6832/MUM/2010 (A.Y. 2002-03) - ASSESSEE APPEAL 3. At the outset, we observe from the record that assessee has raised following additional grounds of appeal: - "1. On the facts and in the circumstances of the case, the assessment order dated 22 March 2005 passed by the Additional Commissioner of Income Tax ('Addl. CIT') under section 143(3) of the Income-Tax Act, 1961('the Act') is bad in law, illegal and without jurisdiction and/or in the excess of jurisdiction, on the grounds amongst others, that he did not possessed legal and valid jurisdiction under the Act to pass the assessment order and consequently the Hon'ble tribunal he pleased to quash the said order. 2. On the facts and the circumstances of the case, the Addl. CIT lacked jurisdiction to pass the assessment order under section 143(3) of the Act dated 22 March 2005 and to exercise the powers of performing the functions of an assessing officer, without establishing that he possess such jurisdiction conferred on him under section 120(4)(b) of the Act. Accordingly, in the absence of an order under Section 1....
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....ioner of Income-tax-7(1), Mumbai(the Dy. CIT), pursuant to which he issued an Intimation under section 143(1) of the Act (see page 2 of Factual paper book-1). 3 12.03.2003 In response to a rectification application dated 06.03.2003 filed by the Assessee for short grant of credit of TDS, the Dy. CIT had passed an order under section 154 of the Act (see pages 3-5 of Factual paper book-1). 4 25.08.2003 The Dy. CIT issued a notice under section 143(2) of the Act, selecting the Assessee's ROI for scrutiny (see page 6 of Factual paper book-1). 5 17.10.2003 The Addl. CIT (Transfer Pricing -II) issued notice under section 92CA(2) of the Act wherein it is mentioned that the Dy. CIT vide letter dated 14.10.2003 referred the case for determination of Arm's Length price for international transaction (Copy of notice submitted during the course of hearing on 11.01.2024) 6 29.03.2004 The Assessee filed a revised ROI with the Asstt. CIT (see pages 7-8 of Factual paper book-1). 7 20.09.2004 The Asst CIT issued notice under section 143(2) of the Act (see page 9 of Factual paper book-1). 8 09.11.2004 The Addl. CIT issued notices under sections 143....
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....ubmissions dated 05.08.2021 filed by the then Ld. DR before the Tribunal, he has referred to communication dated 02.07.2021 from the Asstt. CIT (see pages 3 and 5 of the said submission) wherein, it is an accepted position that this order allegedly assigning jurisdiction in favor of the Addl. CIT is not available on record. Therefore, the presumption should be that even this order does not exist. It also clarifies that for the year under consideration, no document conferring jurisdiction in favour of Addl. CIT is available on record. 3. Section 143 of the Act which lays down the procedure for assessment identifies the assessing officer as the authority responsible for scrutinizing the return of income and passing the assessment order. The expression 'Assessing Officer' has been defined in section 2(7A) of the Act to inter-alia mean the Asst. Commissioner or the Dy. Commissioner, who is vested with the relevant jurisdiction by virtue of directions or orders issued under subsections (1) or (2) of section 120 or any other provisions of the Act. Based thereon, the jurisdiction to assess the assessee's income vested with the Dy. CIT/the Asstt. CIT pursuant to which ....
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....05.05.2008 assigning such jurisdiction in favor of the Addl. CIT (which is now admitted by the Revenue as not available in the assessment record.). The assessee submits that validity of the said assignment order is a subject matter of and would be decided by the ITAT while deciding the additional ground raised in the appeal for AY2006-07. However, for the present purpose, it is relevant to note that if the jurisdiction was admittedly assigned in favor of the Addl.CIT on 05.05.2008, then, he had no authority to carry out the assessment proceedings and pass the assessment order dated 22.03.2005 for AY 2002-03. 5. Apart therefrom, the above referred chronology of facts shows that upto 20.09.2004, the jurisdiction over the Appellant's case was exercised by the Dy. CIT /the Asst. CIT and thereafter, by the Addl. CIT. For transfer of the jurisdiction from the Dy. CIT/Asst. CIT to the Addl. CIT there has to be a valid order passed under section 127 of the Act vesting such jurisdiction in his favor. Assuming without admitting that the Addl. CIT could be regarded as the AO, in the absence of any valid transfer of jurisdiction from Dy. CIT/Asst. CIT to him, the assessment order date....
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....ctions towards the additional grounds raised by the assessee and also relied on the written submission dated 12.08.2022 objecting to the issue raised by the assessee in the additional grounds, for the sake of clarity the same are reproduced below: "In addition to the original grounds of appeal made before the Hon'ble Bench, the Appellant vide letter dated 10.03.21 filed an additional ground of appeal challenging the jurisdiction of the Addl. CIT and the validity of the Assessment Order passed 143(3) of the Act. Further, in addition to the oral arguments made before the Hon'ble Bench during the physical hearing, the following written submission in the above referred case may also kindly be considered- 1. The grievance of the assessee appellant is that the assessment order passed u/s 143(3) by the Addl. Commissioner of Income Tax is without jurisdiction as there is no order u/s 120(4)(b) r.w.s. 2(7A) or u/s 127 of the I.T. Act. 2. The undersigned wishes to contest the above additional ground of the assessee on Five (5) broad propositions, which are as under- I. The additional ground is not fit to be admitted by the Hon'ble Trib....
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....espect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier." 3.2 The Hon'ble Supreme Court has clearly observed that the additional ground is to be admitted by the Tribunal to assess the correct tax liability in accordance with law. If in a subsequent judicial decision, certain item is decided to be allowed, the assessee can raise this issue in the additional ground to claim the relief if this benefit was not allowed to the assessee. In a nutshell, additional ground is to be admitted if it is a pure question law and for determination of correct tax liability. In the assesee's case, these both aspects are missing. Firstly, challenging the jurisdiction of assessing officer after 16 years after completion of assessment, is not a pure question of law. This needs to verify the fact....
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....bmitted that the additional grounds raised by the assessee were different from the ordinary additional grounds arising from the orders of the authorities below. This is a different ground altogether where the validity of the assessment order is being challenged on account of lack of jurisdiction of the Addl.CIT for the first time after the gap of more than 16 years of filing the appeal. 5.2 In support of the above argument, the undersigned relies on the reference of Black's Law Dictionary - (i) Estoppel by acquiescence: estoppels arising from a party's failure to respond to a claim within a reasonable time after receiving notice of the claim, thereby giving rise to presumption of acceptance; (ii) Estoppel by laches: an equitable doctrine by which some courts deny relief to a claimant who has unreasonable delayed or been negligent in asserting a claim etc. Reliance is further placed on the following decisions: (i) State of Punjab vs. Bhatinda Dist. Co-operative Milk Producers Union Ltd. (2007) 11 SCC 363 (ii) State of Gujarat vs. Patel Raghav Natha and others AIR 1960 SCC 1297 (iii) Santosh Kumar Shivgonda Patil & Ors vs. Balasaheb Tukaram....
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....ith. The assessee in this case after a lapse of 15 years is making a wild guess. In our considered opinion, there is no cogent reason to accede to this request of the Id. Counsel of the assessee. The case laws referred by the Id. Counsel of the assessee were rendered on the facts of those cases where the bench upon the facts has gone into the specifics and particulars of that case. In the present case, we have already held the assessee's assertion after 15 years has no cogent basis whatsoever. Hence, we are unable to accept the assessee's request that the assessment deserves to be quashed in as much as the Assessing Officer did not have the authority of law. Hence, the additional ground raised by the assessee stands dismissed." 5.5 During the hearing, the Id. AR of the assessee has relied on the judgement of the Hon'ble ITAT, J Bench in the case of M/s. Vertiv Energy Pvt. Ltd. (ITA No. 1975/MUM/014 and ITA No. 1771/MUM/2015 dated 22.06.2021. The Id. AR has emphasised on para no. 3.6 of this order. In this para, the Hon'ble ITAT has stated as under:- "We find under similar facts and circumstances, this Tribunal had indeed admitted the additional gro....
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....n the same facts and is directly applicable in the assesee's case. 5.6 The above stated decision in M/s. Stock Traders Pvt. Ltd. (supra) was rendered on 11.07.2018 which is much later to the decisions in M/s. Tata Sons Ltd. (76 Taxmann.com 126-Mumbai-Trib.)(A.Y. 2001-02) (Date of order 31.10.2016) and M/s. Tata Communications Ltd. (ITA No. 7071/Mum/2005) dated 30.06.2017. Therefore, it is submitted that the Co-ordinate Bench of Hon'ble Tribunal has not followed the decisions stated above and dismissed the additional ground on jurisdiction of Additional Commissioner to perform the functions of an Assessing Officer. The main principle laid down in this decision of M/s. Stock Traders Pvt. Ltd. (supra) is that an additional ground filed after 15 years has no cogent basis whatsoever. In the instant case of the assessee, as stated above, the additional ground challenging the jurisdiction of the Additional CIT has been filed after more than 16 years needs to be quashed on this ground of inordinate delay. 6. Additional Ground raised is not a pure question of Law- The additional ground raised is not a pure "question of law" as contended by the assessee. Ac....
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....sfer order passed u/s. 127 of the IT Act, 1961 is more in the nature of and administrative order rather than quasi judicial order and the assessee cannot have any right to choose his assessing authority, as no prejudice can be said to have been caused to the assessee depending upon which authority of the department passes ses the assessment order. The assessee can only be concerned with getting an opportunity of hearing before the concerned assessing authority and adduce is evidence and make his submissions before the concerned authority" 7.2 The Hon'ble Supreme Court of India in the case of Kashiram Aggarwalla Vs. Union of India & Ors. Has given findings as under:- Where, as in the present proceedings, assessment cases pending against the appellant before an office in one word are transferred to an officer in another ward in the same place, there is hardly any occasion for mentioning any reasons as such, because such transfers are invariably made on grounds of administrative conveniences, and that shows that on principle in such cases neither can the notice be said to be necessary, nor would it be necessary to record any reasons for the transfer. The....
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....ve act of policy and convenience, is the power of the Government conferred on him as a delegated authority under the provisions of the statute. The power u/s.127 to transfer any case is much limited in scope as being limited to cases and subject to statutory fetters where an assessee has a right to be heard under certain conditions while the reasons for transfer are to be recorded." (emphasis supplied) 8.2 Apart from the above, the Hon'ble Delhi High Court in the decision of CIT vs. S.S. Ahuluwalia(2014) 47 taxman.com 169 (Del)has held as under :- "It is also clear that question of jurisdiction cannot be made subject matter of appeal, as the issue has to be decided on the administrative side by the Commissioner/Commissioners/ Board. Appeal can, however, be filed questioning the action of the Assessing Officer in not following the procedure mentioned/stipulated in Section 124. In Wallace Brothers & Co. Ltd. v. CIT [1945] 13 ITR 39, Federal Court had held that the objection to place of assessment could not be raised in an appeal against the assessment under the Income Tax Act, 1922. This view was affirmed by the Supreme Court in RaiBahadur Seth Teomalv. CIT [195....
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....[1980] 122 ITR 55/3 Taxman 38 (SC), the Supreme Court quashed the assessment order but then issued directions to make fresh assessment in the circumstances of the case. The said principle has been followed in cases of violation of principles of natural justice wherein an order of remit/remand when justified are passed. The courts have taken recourse of pragmatism and exigencies of the situation rather than legalistic approach of void and voidable (see Principle of Administrative Law, M.P. Jain and S.N. Jain, Fifth Edition, 2007 at pages 59295)." (emphasis supplied) 8.3 The Punjab and Haryana High Court in the case of Subhash Chander (218 CPR 191) held that the question with regard to jurisdiction should have been determined by the Director General or the Chief Commissioner or the Commissioner and not by the Tribunal or the Commissioner (Appeals) in terms of Section 124(3)(b). Thus, the ITAT cannot entertain this ground of appeal on jurisdiction and it is a matter which can only be decided u/s 124(3)(b). 8.4 Further, while quoting the decision of Hindustan Transport Co. v. Inspecting Asstt. CIT [1991] 189 ITR 326/[1992] 63 Taxman 246 of the Hon'ble Allahabad Hi....
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.... Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in Section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture. From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substanceIt treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action." 8.5 What emerges from the above judicial decisions is that, the allocation of functions to vari....
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....al can be filed before the Hon'ble Tribunal. For the sake of clarity, sec. 253 is reproduced as under. "Appeals to the Appellate Tribunal. 253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals)] before the 1st day of October, 1998or, as the case may be, a Commissioner (Appeals)] under section 154], section 250, section 270A, section 271, section 271A,section 271J or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Principal Commissioner or] Commissioner under section 12AAor under clause (vi) of sub-section (5) of section 80G or under section 263or under section 270Aor under section 271or under section 272Aor an order passed by him under section 154 amending his or....
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....be challenged before the Hon'ble Tribunal u/s 253. Thus, clearly, the additional ground of appeal is not admissible at this stage. Hon'ble Supreme Court in the case of Rai Bahadur Seth Teomal v. CIT [1959] 36 ITR 9 (SC), while deciding the issue of "place of assessment" u/s sec. 64 of 1922 Act, the corresponding provision related to jurisdiction under sec. 124 of the 1961 Act, has held as under- The question then arises whether the objection as to the place of assessment, i.e., by the Income-tax Officer of Calcutta, could be challenged in appeal to the Appellate Assistant Commissioner and then before the Appellate Tribunal. In our opinion it could not be. The scheme of the Act shows that no appeal in regard to the objection to the place of assessment is contemplated under the Act. Under proviso (iii) of section 64(3) of the Act a question as to the place of assessment, when it arises, is determined by the Commissioner. Any such order cannot be made a ground of appeal to the Appellate Assistant Commissioner under section 30 of the Act which provides for appeals against orders of assessment and other orders enumerated in section 30 but no appeal is there provided aga....
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....ed by a Division Bench of this Court in Kanji Mal & Sons v. CIT [1982] 138 ITR 391/[1983] 12 Taxman 34 (Delhi), wherein reference to said two decisions was made and it was observed that if the assessee fails to raise objection before the Income Tax Officer within the time, he will be shut out from raising the question altogether. Further, if the issue was raised and decided by the Commissioner, the decision would be final and cannot be questioned in the appellate forums..." 9.5 The aforesaid decision is further followed in the case of Abhishek Jain (2018) 94 taxamnn.com 355 (Delhi HC). In view of the above judicial precedence, it is submitted that the additional ground challenging the jurisdiction of the Add!. CIT deserved to rejected at the admission stage itself as non-maintainable. 10. Bar on the assessee in raising jurisdictional issue beyond one month as per the provisions of sec. 124(3) of the I.T. Act 10.1 It is respectfully submitted that the Supreme Court has held in Seth Hiralal Patni Vs. Sri Kali Nath, vide its decision on 4th May 1961 (1962 AIR 199), that the appellant was stopped from challenging the jurisdiction of the Bombay High Court to e....
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.... the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court." 10.4 The Hon'ble High Court of Calcutta in Elite Pharmaceuticals (73 taxmann.com 69) has held that assessee had lost right to raise objection to territorial jurisdiction by efflux of time that is beyond the time prescribed in Sec. 124(3). In para 11, the High Court agreed with the view expressed by the Hon'ble Delhi High Court in the case of Shri Shyam Sunder Infrastructure (P) Ltd. relied on by Counsel for Revenue (kindly see para 16 of the decision) that "facially, section 124(3) stipulates a bar to any contention about of lack of jurisdiction of an AO. It is not as if the provisions of the Act disable an assessee form contending that in the given circumstances, the AO lacks jurisdiction, rather Sec. 124(3) limits the availability of those options at the threshold. The assessee upon receipt of the kind mentioned in Clause (a) and (b) of section-3 has the option....
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....gh Court has used the abbreviation ACIT for Addl. Commissioner of Income Tax and DCIT for Dy. Commissioner of Income Tax. The above decisions of various High Courts and Tribunal uphold the ratio that jurisdiction has to be questioned and settled u/s 124 of the I.T. Act within the time limits prescribed therein and that is it not an appealable matter. Further, having subjected oneself to jurisdiction, the assessee cannot question the same when the time for such relief is barred by limitation as available u/s 124. 11. Additional CIT is also an Assessing Officer. It is respectfully submitted that Sec. 2(7A) which defines Assessing Officer always meant Joint Commissioner who was directed under Sec. 120(4)(b) to exercise or perform all or any of the powers and functions conferred or assigned to an Assessing Officer (Joint Commissioner was substituted for "Deputy Commissioner or Deputy Director" by the Finance Act, 1998 w.e.f. 110- 1998. Section 2(28C) was brought on the statute by Finance Act, 1998 w.e.f. 1-10-1998 and this section gives the definition of Joint Commissioner of Income Tax; Joint Commissioner means a person appointed to be a Joint Commissioner o....
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....rs and functions of Assessing Officers in respect of territorial area etc. in respect of which such Joint Commissioners of Income Tax are authorized by the CIT vide Government of India, CBDT Notification No. SO 732E dated 31-07-2001 and other notifications published in the Gazette of India. 11.2 Thus, a conjoint reading of the Notification u/s 120(4)(b) with the SO 732E unambiguously establish that the Addl. Commissioner mentioned therein has been authorized to function as Assessing Officers u/s 120(4)(b). Therefore, these Gazette Notifications establish that the Addl. Commissioner had jurisdiction as Assessing Officer over the assessee as per Sec.120(40(b) r.w.s. 2(7A) of the Act. 11.3 It is respectfully submitted that the first judicial decision, where the jurisdictional issue of Addl. CIT, identical to the additional ground as raised in the present case, is that of the Hon'ble Delhi Tribunal in the case of Mega Corporation Ltd. vs. Addl. Commissioner (2015) 155ITD 1019/62 Taxmann.com 351. In that case, the assessee raised identical additional ground i.e., in the absence of any order u/s 120(4)(b) or u/s 127 the assessment order passed by the Additional Comm....
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....rder dated 23-02-2017. Hon'ble High Court has considered the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b)." 11.5 In the question of law, the word "ACIT" is the abbreviated to the Additional Commissioner of Income Tax as mentioned in para 2 of the HC order. Similarly, the abbreviation "DCIT" is used for the Deputy Commissioner of Income Tax. The Hon'ble High Court in para 2 has noted that "the ITAT, however, considered the material on record, including the notification dated 01.08.2007, under Section 120(2) and proceeded to hold that in the absence of specific notification under section 120(4)(b), the ACIT could not have acted as an AO. It however, did not deal with the second or rather the alternative argument made by the assessee, i.e., that even the notice issued under section 143(2) was by an incompetent officer since the DCIT did not possess jurisdiction at that stage." 11.6 While rejecting the findings of the Hon'ble Tribunal, Hon'ble High Cour....
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....it, in view of the well-known Doctrine of Merger. The Hon'ble Apex Court in the case of S. Shanmugavel Nadar vs State of T.N. (2002) 8 SCC 361 367 has held that "..as a general rule the judgment order having been dealt with by a superior forum and having resulted in confirmation, reversal or modification, what merges is the operative part i.e., the mandate or decree issued by the court which may have been expressed in a positive or negative form" 11.9 Once it is held so, the reliance of any judgment on the findings of the Delhi Tribunal in Mega Corporation Ltd. vs. Addl. Commissioner (supra) has no relevance and will be against the binding ratio laid down by the Hon'ble Delhi High Court on the question of law before it. 11.10 It is further submitted that the Hon'ble High Court of Mumbai in N. Rajgopal Vs AddI CIT- 23(3), Mumbai (supra) addressed the question of jurisdiction of Assessing officer u/s 2(7A) of the Act and held at Para 4 of the order as under: "4. We would first deal with the question of jurisdiction of the Assessing Officer. We notice that Section 2(7A) of the Act defines the term "Assessing Officer" as to mean every Rev....
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....acts in the aforesaid appeals has held the assessment order to be invalid and bad in law, which was recently reported. Thus, it can be seen that the basis of filing the additional ground, the issue was the outcome of the decision of Delhi Tribunal in the case of Mega Corporation Ltd., which was subsequently overturned by the Hon'ble Delhi High Court as discussed above, ii. Reliance of Delhi Tribunal's decision in Mega Corporation Ltd was further made in para 3.15 and 3.22 (where this decision was extensively quoted) and in para 3.23, the observation made is "In the case before us, the facts are identical." Thus, it can be said that this decision of Hon'ble Mumbai Tribunal has the genesis as well as complete reliance on the Delhi Tribunal decisions in Mega Corporation Ltd (supra). iii. It is also worth mentioning here that the Hon'ble Tribunal order in the case of Tata Sons Ltd (supra) was delivered on 31/10/2016 prior to the decision of Hon'ble Delhi High Court in the case of Pr.CIT vs. Mega Corporation Ltd (supra) (date of order 23/02/2017). Hence, this Tata Sons Ltd decision cannot be relied upon after 23/02/2017. iv. It is ....
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....dered subsequent to the Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). However, the Hon'ble Tribunal did not follow the said binding decision of Delhi High Court notwithstanding the fact that this was the only non-jurisdictional High Court decision available at that time. ii. The Hon'ble Tribunal in its conclusion in para 12& 13 has taken note of the identical issue decided by the Coordinate Benches in the case of the assessee for A.Y.2001-02 vide its order dated 31-10-2016 and in the case of Tata Communication Ltd in ITA No.6981&7071/Mum/2005 for A.Y.2002-03. As discussed in the preceding paragraphs, these decisions were rendered in the absence of Hon'ble Delhi High Court on identical issue in Mega Corporation Itd (supra), which was decided in favour of the Revenue. iii The reason for non adherence of the decision of Delhi High Court in the case of Mega Corporation Ltd (supra), as cited in para 15 was that various High Courts have taken a contrary view on this issue. According to the Hon'ble Tribunal, when there is contrary decision of the jurisdictional High Court (the Hon'ble Bombay High Court decision in the case of ....
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....nch decision in Page International Pvt Ltd vs. DCIT (supra) as observed by Hon'ble Mumbai Tribunal in the case of Kaybee Pvt ltd vs. ITO (supra) have extensively discussed this Hon'ble Bombay High Court judgment. In para 13, Hon'ble Pune Tribunal in ACIT vs. Aurangabad Holiday Resorts Pvt Ltd (supra) has resolved the issue in following words :- "13. It is thus clear that while the issue before the Hon'ble High Court in Thana Electricity Co. Ltd.'s case (supra) was whether or not a High Court should follow another High Court, whereas in Godavari Devi Saraf's case (supra), Their Lordships dealt with the issue whether or not a nonjurisdictional High Court is to be followed by a Bench of the Income-tax Appellate Tribunal. To that extent, and irrespective of some casual observations on the applicability of non-jurisdictional High Court judgments on subordinate courts and Tribunals, these two decisions deal in two different areas. As we have noticed earlier also, in Thana Electricity Co. Ltd's case, a note was taken of Godavari Devi Saraf's judgment and neither the said judgment was dissented nor overruled. In any event, in Thana Electricity Co. L....
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....annot be read into section 124 of the Act. The section speaks only of jurisdiction of the ITO Jurisdiction includes both territorial and other kinds of jurisdiction. In my opinion, therefore, the objection raised by the assessee only at the appellate stage is hit by sub-section (5) of section 124 of the Act. The ITO Jorhat, cannot be said to have lacked jurisdiction". (Emphasis supplied) vii. In view of the above discussion, the Hon'ble Mumbai Tribunal decision in Tata Sons Ltd vs. ACIT for A.Y.2002-03 cannot be followed as (i) As it did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (ii) It did not take into account the retrospective amendment made in the section 2(7A) of the I.T. Act (iii) It chose to follow Tata Sons Ltd decision, for A.Y.2001-02 completely ignoring the fact that the said decision was rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). IV. Tata Sons Ltd. vs Asstt. CIT (ITA No.2519/Mum/2009) (Mumbai-Trib.) (A.Y. 2004-05) (Date of Order-11-03-2019 and Tata Communications Ltd. vs Addl.CIT (ITA No.3972/Mum/2007)....
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....he order of Hon'ble High Court of Bombay in the case of N Rajgopal (supra) dated 29.01.2019 nor did it consider the decision of Hon'ble Delhi High Court in Mega Corporation Ltd. (supra). VI Shri Kishore Vitthaldas vs JCIT (ITA No.7397/Mum/2016) (Mumbai- Trib.) (A.Y. 2007-08) (Date of Order- 16-10-2019) i. Identical issue of the jurisdiction of Addl. CIT in passing assessment order has been decided in this order too. The Hon'ble Tribunal in para 13 has come to the conclusion that in the absence of order u/s.124(b) of the I.T. Act, the re-assessment order passed by the JCIT, Rg-17, Mumbai is void ab initio since the said officer did not possess valid jurisdiction and authority to pass such order. The Hon'ble Tribunal has noted in para 14 that the issue is squarely covered in favour of the assessee by the decision of Coordinated benches in the case of Tata Communications Ltd for A.Y.2003-04 in order dated 16/08/2019 and Tata Sons Ltd in ITANo.6981&7071/Mum/2005. These decisions have been extensively quoted the Coordinated Bench judgment from page Nos.17 to 45. ii. The Hon'ble Tribunal has also stated in para 16 that the Delhi High Court d....
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....rd to the findings rendered, that question does not arise." iv. Moreover, in the present case, the Commissioner of Income Tax-2, Mumbai vide his order No.CIT-2/Assignment/2009-10 dated 04/08/2009 for A.Y.2007-08 has assigned the jurisdiction of the case to the Addl.CITRg-2(2), Mumbai for completion of the assessment. This assignment can only be u/s.120(4)(b) or u/s. 127(1) of the I.T. Act as there is no other provision in the Act for transfer of jurisdiction from one Assessing officer to another Assessing officer. V. The Hon'ble Tribunal has also relied on the judgment of Hon'ble Bombay High Court in the case of Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom)to come to the conclusion that the time limit provided u/s.124(3) of the Act has a relation to the A.O. territorial jurisdiction and would not apply to the cases where the assessee contents that the action of the A.O.is without authority of law. In this regard my respectful submission is that in Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom), the case of the assessee, a partnership firm, was that the Assessing Officer could not have issued notice u/s.153A of the Act, without carrying o....
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.... Section 124 of the Act. Section 124 of the Act pertains to jurisdiction of Assessing Officers. Sub-section (1) of Section 124 lays down territorial jurisdiction of the Assessing Officer. Sub-section (2) of Section 124 provides that where the question arises under said section, as to whether an Assessing Officer has jurisdiction to assess any person, such question shall be determined by the authority prescribed under the said sub-section. Subsection (3) of section 124 provides time limits for a person to call in question jurisdiction of an Assessing Officer. Clause (c) of sub-section (3) of section 124 provides that no person shall be entitled to call in question jurisdiction of an Assessing Officer where an action has been taken under Section 132 or section 132A, after the expiry of one months from the date on which he was served with a notice under sub-section (1) of Section 153A or sub-section (2) of Section 153C of the Act or after the completion of the assessment, whichever is earlier. In clear terms, the time limit for raising objection to the jurisdiction of the Assessing Officer prescribed under sub-section (3) of section 124 has a relation to the Assessing Officer's te....
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....019) (supra) case, the amended provisions of sec. 124(3) were before the Hon'ble Bombay High Court and the decision of the Hon'ble High Court was related to sub-section (c) of sec. 124(3) as can be seen from the discussions made in para 7 (as reproduced above). Hence, it is humbly submitted that the decision of Hon'ble Bombay High Court in Bansilal B Raisoni vs. ACIT (2019) (supra) had not applicability on the facts of the case of Kishore Vitthaldas Vs. JCIT (supra) or the present case, as these are prior to amendment of sec. 124(3) by the Finance Act, 2016. Thus, in my respectful submission there is no precedence value as far as this decision is concerned as it has totally over looked the binding precedence of the Hon'ble Delhi Court in the case of Mega Corporation Ltd (supra) on the identical question of law and facts. VII. The Indian Hotels Co. Ltd. (ITA Nos. 8570/Mum/2011, 565/Mum/2013, 2049/Mum/2014 and 1910/Mum/2014) date of order 21.05.2021. i. In the decision, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Communications Ltd. (supra) and Kishore Vitthaldas (supra)....
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....ion Ltd 229 ITR 383 as the additional ground in the present case, neither raises a pure question of law nor does it relate to determination of correct tax liability. That jurisdiction of the Addl. CIT to act as an assessing officer as per section 2(7A) read with section 120(4)(b) of the Act and existence of a valid transfer of jurisdiction from the Dy.CIT/the Asst. CIT to the Addl. CIT under section 127 of the Act raises a pure question of law which goes to the root of the matter. The relevant facts, if any, being the notifications/orders issued/ passed under the aforesaid sections has to necessarily form part of the record. Considering these circumstances, in each of the above referred Tribunal's order, where the assessee had questioned the validity of jurisdiction by an additional ground has been admitted and adjudicated by the ITAT. In this regard, the following references would be relevant. i. Tata Sons Ltd - ITA no. 4497/Mum/2205 - (see Para nos. 3.11 to 3.17 at page nos. 10 to 13 of Legal paper book no -1) ii. Tata Communications Ltd -ITA no 7071/Mum/ 2005 -(see Para nos. 4 to 6 at page nos. 42 to 44 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no: 2519/....
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....st round of proceeding. Issues raised by the additional grounds in the present case questions the validity of the assessment order passed by the Addl. CIT as without jurisdiction which also goes to the root of the matter. Hence, the additional ground may be admitted. 2 That the additional grounds have been filed on 10.03.2021 which is after a lapse of sixteen (16) years and ought not to be admitted in view of the inordinate delay in raising such ground. In this regard reliance was also placed by him on the Tribunal order in the case of Stock Traders Pvt. Ltd. The assessee has filed the present appeal before the Tribunal on 29.09.2010 challenging the appellate order passed by the CIT(A) on 20.05.2010. The additional grounds have been filed in the said appeal on 10.03.2021.Hence the delay, if any, is of (10) ten years and (5) five months approximately and not 16 years Under the Act, an additional ground can be raised by a party litigant at any stage of the appeal proceedings. There is no limitation prescribed for raising any additional ground. In this regard, reliance is placed on judgment of Rajasthan High Court in Shilpa Associate vs ITO 263 ITR 317. Hence, the said period....
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....oncluded by the Tribunal in these orders. The additional ground has been raised in the present case by letter dated 10.03.2021 which came to be filed on 17.03.2021 as the assessee became aware of the jurisdictional issue at a later point of time when it came across the above referred Tribunal orders. When filing the present appeal on 29.10.2010, it had no knowledge of such an issue arising in the present appeal. With reference to the Tribunal's Order in the case of Stock Traders Pvt Ltd, the Tribunal has observed that the assessee therein had not laid any material to show that the Additional CIT could not be regarded as its assessing officer. It is submitted that, in the aforesaid orders it has been clearly held that the burden to show that the assessing officer validly assumed jurisdiction was on the Revenue and not on the assessee. Therefore, this order is clearly distinguishable on facts. In any event, the said order has been considered and not followed in the case of Vertiv Energy Pvt Ltd.(supra) at internal page 21 of the Tribunal order 3 That the Addl. CIT was exercising concurrent jurisdiction and therefore no transfer of jurisdiction as contemplated by section 127 ....
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....ct in this favour. This issue has nothing to do with territorial jurisdiction. The jurisdictional High Court in Bansilal B. Raisoni& Sons V ACIT (2019) 101 Taxman.com 20 has accepted that the limitations under section 124(3) of the Act with respect to the authority before whom an order could be challenged and the bar of limitation for such challenge would be applicable only when question relates to territorial jurisdiction of an assessing officer and not otherwise. In any event, even this issue has been considered by the above referred Tribunal orders, wherein, the relevant references are as under: i. Tata sons Ltd - ITA no. 4497/Mum/2205 - (see Para no 3.15 at page nos 12-13 of Legal paper book no -1) ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 -(see Para no 18 at page nos 83-84 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no:2519/Mum/2009 and 2639/Mum/2009 -(see Para no 3.15 at page nos 148-149 of Legal paper book no -1) iv. Tata Sons Ltd - ITA no:5090/Mum/2012(see Para no 3.15 at page nos 174-175 of Legal paper book no -1) v. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 - (see Para 17 at page nos 502.47 - 502.48 of Legal paper boo....
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....account at Noida, especially, when the assessee had not disclosed his permanent account number and also not responded to any notices. Therein, distinction has been drawn between irregular exercise of jurisdiction and complete lack of jurisdiction and it was held that it was a case of irregular exercise of jurisdiction to which the provision of section 124 of the Act would apply. Similarly, the judgment of the Allahabad High Court in the case of British India Corporation Ltd. (supra) was again concerned with a dispute relating to territorial jurisdiction. Therein, in paragraphs 25 to 27 of the judgment distinction has been drawn between lack of jurisdiction and irregular exercise of jurisdiction observing that lack of jurisdiction would make an order to be nullity whereas that was a case where the dispute related to irregular exercise of jurisdiction. Further Calcutta High Court in Elite Pharmaceuticals was also concerned with a case of territorial exercise of jurisdiction. In the present case, the fundamental issues which require consideration are whether the Addl. CIT could be regarded as an AO in terms of section 2(7A) and section 120(4)(b) which goes to the root of the ....
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....nd exercise thereof a nullity. But a mere error in exercise of jurisdiction would not vitiate the legality and validity of the proceedings and the said order was valid unless set-aside in the manner known to law..........' .Ultimately, in the summary of propositions in paragraph 1 in sub-paras (16) to (18) thereof, both the assessing officer at Delhi and Dimapur were held to have concurrent jurisdiction since the assessee therein also had a place of residence in Delhi. Therefore, the issue arising on the facts of that case were different from the present one. The said judgment has been considered in the following above referred Tribunal decision. i. Sandoz Private Limited (ITA no 3722/ Mum/ 2013 & ITA no 3740/ mum/2013) (see Para 16 at internal page nos 11 and 12 of the order copy submitted separately) 8. Reliance has been placed on the judgment of the Calcutta High Court in the case of ITO vs Ashoke Glass Works 125 ITR 491, the Madras High Court in Advantage Strategic Consulting (P) Ltd. v PCIT 430 ITR 1 and the Hon`ble Apex Court in KashiramAggarwalla v UOI 56 ITR 14 for the proposition that transfer order under section 127 of the Act are administrati....
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....ph. A bare perusal of the said judgment shows that after referring to necessary fact in paragraphs 3 and 3.1,the issues have been summarized in paragraph 3.2. Paragraph 3.5 reproduces the contention as raised by the Ld. DR and the assessee's rebuttal in respect of each of them. It is submitted that all the above referred issues were similarly raised by the Revenue before the Tribunal in that case. The conclusion reached by the Tribunal in that case is contained in paragraphs 3.6 to 3.8. In paragraph 3.7 it has specifically observed" 3.7 We find that all the oral and written arguments of the ld. DR have been met in detail by the ld. AR before us as detailed supra. The issue indispute is already addressed by the various decisions of the Tribunal which are reproduced in the ld. AR's rebuttal referred to supra. The same are not reiterated herein for the sake of brevity. As stated earlier, the issue is already settled by various decisions of the Tribunal in favour of the assessee." .Hence, the Tribunal has considered each and every aspects raised by the Ld. DR and gave a findings in favor of the assessee. by relying upon the conclusion reached by the earlier benches of the Tri....
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....Para reference Tata Sons Ltd ITA no. 4497/Mum /2205 Page 17 para 3.20 and ITAT discussed about the power and authority between Pages 26 to 38 Paras 3.27, 3.28, 3.30 Tata Communications Ltd ITA no 7071/Mum/ 2005 Pages 58 - 61 Para 15 and Reproduced Tata sons - Pages 74 - 82 Paras 3.28, 3.30 Tata Sons Ltd ITA no: 193/Mum / 2006 Reproduced Tata sons - Pages 129 - 139 Paras 3.28, 3.30, Tata Sons Ltd ITA no: 2519/Mum /2009 and 2639/Mum /2009 Reproduced Tata sons - Pages 158 -159 Paras 3.27, 3.28, 3.30 Tata Sons Ltd ITA no: 5090/Mum /2012 Reproduced Tata sons - Pages 180 186 Paras 3.27, 3.31 Tata Communications Ltd ITA no: 2891/Mum /2010 & ITA no 1015/ Mum /2010 Co filed Page 194 para 3.1, Pages 200-202 paras 5.3 Reproduced Tata sons - Pages 219 - 226 Paras 3.27, 3.28, 3.30 Kishore Vithaldas ITA no 5661/Mum/ 2017 & ITA no 8768/Mum 2010 Page 502.16 para 14, Reproduced Tata Communications - Page 502.33 Para 3.27, 3.28, 3.30 Vertiv Energy Private Limited ITA No. 1975/ MUM/ 2014 Page 11 para d Sandoz Private Limited ITA No. 3871/ Mum/2013 Page 10 para 14 12. In paragraphs 9 to 9.5 of the written ....
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.... & 13 thereof) 7. Apart from the above, the Tribunal vide is order dated 29 November 2023 in the case of Nuclear Power Corporation Limited has upheld exercise of such jurisdiction by the Additional Commissioner of Income-tax on the facts of that case. It is submitted that the said order proceeds on the basis that in that case the Joint Commissioner of Income-tax had been promoted to the post of Additional Commissioner. In any event, undisputedly, the present case the assignment of jurisdiction in favour of Additional Commissioner of Income-tax is on 5 May 2008 while the Assessment order was passed on 22 March 2005. Lastly, it is also submitted that the said order does not lay down that the provision of section 120(4)(b) of the Act need not be complied with. 8. In view of the above, the Appellant submits that the Tribunal may be pleased to allow the Assessee's appeal and CO and dismiss the Revenue's appeal only based on this preliminary issue." 7. Considered the rival submissions on the issue of additional ground raised above, challenging the jurisdiction and validity of the assessment order passed under section 143(3) by the Addl. Commissioner of Income....
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....herein the Tribunal has quashed assessment holding that once there is no such order authorizing the Addl. Commissioner of Income Tax to act as an Assessing Officer by the concerned authority, then that assessment order is invalid and assessments have been quashed on this count. 12. Before us, Ld. DR had objected to the very admission of additional ground on the ground of delay in filing the additional ground and submitted that since the Addl. Commissioner of Income Tax had issued notice under section 143(2) of the Act on 28.09.2004 and even after passing the assessment order on 22.03.2005, this issue was never raised either before the Assessing Officer or before the Ld. CIT(A) or even for 10 years before the Tribunal. Now admitting of additional ground after delay of 16 years, and without any satisfactory explanation for the reason for such a delay right from the stage of initiation of assessment proceedings till the date of filing of additional ground same cannot be admitted. If once assessee has not objected and participated in the proceedings and never raised this issue that is Addl. Commissioner of Income Tax did not have valid jurisdiction, now after a lapse of 16 years suc....
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....onsider the conduct of the assessee and the reason for delay while adjudicating the issue raised, even it might be a legal and jurisdictional issue, but there has to be a reasonable and plausible explanation as to why this matter was not raised for 16 years and whether the benefit of doubt can be given to the assessee simply because department could not produce the records and we are also not able to verify as a matter of fact that there is no such order on record. 18. Though additional ground can be raised if it is a pure question of law, but for adjudication such question of law, ascertainment of facts are necessary, then without those facts coming on record it is difficult to decide the question of law itself. Though we are aware that in some of the decisions by the Coordinate Bench have been admitted such an additional ground after inadvertent delay and decided the issue. However, in the present case, in absence of the records being available before us, we are not able to adjudicate this issue. Had the records being made available then perhaps such delay would have been condoned, being the point of jurisdiction. However, without actual records coming on record because of bon....
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....rt dated 25 July 1997. 23. It was submitted that as per section 32 of the Act, depreciation is allowable on the written down value of the block of assets. Section 43(6) defines the expression written down value as under: - "written down value" means- (a) in the case of assets acquired in the previous year, the actual cost to the assessee; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed 63 to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force: Provided that in determining the written down value in respect of buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, "depreciation actually allowed" shall not include depreciation allowed under sub-clauses (a ), (b) and (c) of clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the purposes of the sa....
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.... the opening balance of the written down value of such assets as on 1 April 2007 as loss arising due to discarding of assets. The relevant extract of the said order is reproduced as under: "22. We intended to follow the same, however, we considered reading the section 43(6) of the Act and observe that as per provisions contained in section 43(6)(c) with regard to block of assets, it says that in respect of any previous year relevant to the assessment year, the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year and adjusted, -- (A) by the increase of the actual cost of assets falling within that block, acquired during the year. (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any,so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) ........ From the above provision, it is clear that every year the block of assets has to be adjusted in case....
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....in order to compute the opening written down value of the assets transferred for the AY 2008-09 and claim the same as one-time loss/ allowance, for the AY 2002-03 to AY 2007-08, the Tribunal may kindly direct the Assessing Officer to allow the depreciation claimed on assets vested in Ciba Specialty Chemicals (India) Ltd pursuant to demerger amounting to Rs..73,68,241. 30. On the other hand, Ld. DR relied on the order of the lower authorities. 31. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - "8. Ground No.8 deals with non eligibility of the assessee for depreciation on assets that stood vested in Ciba Speciality Chemicals (India) Ltd.(CSCIL).During the assessment proceedings the AO came to the conclusion that the book value of the transferred assets shall be adopted from block of assets for the purpose of depreciation. He was of the opinion that since consideration had flowed to the assessee for the transfer of assets to CSCIL the assessee was no....
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....h Court, that CSCIL had paid consideration to the shareholders of assessee, that the transfer of shares was in respect of the assets transferred by the assessee. He further held that AO was not justified in adopting the book value of the assets transferred while reducing the assessee's claim for depreciation, that he should have reduced from the block of asset that the WDV of the transferred assets as per the income tax records and not as per the book value of the assets. He directed the AO to substitute the written down value of the transferred assets by the WDV of the book value of such assets while reducing the value of assets from the block before allowing the assessee's claim for depreciation. 8.2. During the course of hearing before us, the AR argued that whole business was transferred under the scheme of demerger, that the assessee did not receive any money, that the share holders of the company had received the shares in pursuance of the merger, that the arrangement was about whole business and not in respect of any asset, that nothing was sold/ discarded, that for claiming depreciation the ownership of a particular asset is not mandatory, that after the block conc....
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.... observe that as per provisions contained in section 43(6)(c) with regard to block of assets, it says that in respect of any previous year relevant to the assessment year, the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year and adjusted, -- (A) by the increase of the actual cost of assets falling within that block, acquired during the year. (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any,so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) ........ From the above provision, it is clear that every year the block of assets has to be adjusted in case if there are any changes in the composition of the assets within the block. This exercise has to be done every assessment year. In the given case, it is fact on record that the impugned assets are not in existence with the organization. The ITAT has come to the conclusion in A.Y.2000-01 interpret....
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....e are, during the year under consideration, the Assessee has incurred an expenditure of Rs..55,01,084 on account of computer software packages, implementation charges and upgradation of existing software. The said expenses pertained to maintenance charges and license fees for various Microsoft Packages (like MS Word, Excel, power point, lotus notes etc). [Refer page 27 to 31 of Factual paper-book -2]. The software packages are frequently outdated and thus requires frequent upgradation. Accordingly, the Assessee follows a policy of capitalizing expenses incurred on software systems related to hardware of a computer whilst charging the costs incurred on application software to the Statement of Profit & Loss. 36. During the assessment proceedings for the captioned assessment year, the Assessing Officer has disallowed the Assessee's claim of Rs..55,01,084 towards expenditure incurred on computer software/ license fees by treating it to be capital in nature as against revenue expense. Consequently, the Assessing Officer has allowed depreciation @25% on the same i.e Rs..13,75,271. (Refer para no 7 page 11-13 of Assessment order) 37. Aggrieved, assessee preferred an appeal before Ld....
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.... to pages 236-37 of the paper book. He relied upon the case of Ashi Glass safety India Ltd.(245CTR)delivered by the Delhi High Court. 11.2. We find that while deciding the appeal for the year 199596(ITA/1749/mum/2003-25.09. 2013),Tribunal has dealt the issue as under: "The AO was of the opinion that the benefits of the software are long term or of enduring nature arid accordingly treated this expenditure as capital and allowed the depreciation and disallowed the remainder. Assessee strongly agitated this issue before CIT(A). The CIT(A) has considered this grievance of the assessee at para 8 and para 30 of its order. The CIT(A) was convinced that the application software of computers get outdated in no time. Hence, such expenditure cannot be treated as capital expenditure. The CIT(A) further observed that in immediately two preceding assessment years, his predecessors have treated similar expenditure as revenue expenditure, following the findings of his predecessors, the C1T(A) directed the AO to delete the entire disallowance. However, at the same time he directed the AO to withdraw the depreciation allowed. Aggrieved by this revenue is before us. The ld.DR strong....
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....d division. 8.2 The Ld. CIT(A) noted that the payments were in the nature of license fees or for right to use certain packages which have normally longer periods of life, usage and validity and therefore, the benefits would be enduring in nature. Accordingly, the action of Ld. AO was upheld. Aggrieved, the assessee is in further appeal before us. 8.3 We find that this issue has been adjudicated in Tribunal's order for AY 2000-01, para nos.2 to 5. The bench, following earlier years, held that the expenditure was revenue in nature. Upon perusal, we find that this ground is covered in assessee's favor in several earlier years and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to allow the expenditure fully and reverse the depreciation adjustment thus made in the assessment order. Ground No.1(a) of assessee's appeal stands allowed whereas Ground No.1(b) has been rendered infructuous." 42. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee's case for the preceding assessment ye....
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....for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - "2. Second Ground deals with disallowance of 20% of foreign travelling expenses (Rs.33, 89,997/-)on the ground that it is capital in nature. It was brought to our notice that while deciding the appeal for the AY.s 1991-921996-97(ITA/9566/Mum/1995, dt. 04.11.10; ITA No. / 1584/Mum/1999, dt.12.10.2011; ITA/334/Mum/1997, dt.29.06.2012; ITA/2874/Mum/99/ dt.31. 10.2012; ITA/2951/Mum/2000, dt.13.06.2014) respectively, the Tribunal had dealt with the said issue. We would like to reproduce the relevant portion of the said order (ITA/ 2951/Mum/2000, dated 13.06.2014) and it reads as under:- "6. Next ground is about disallowance of Rs.22,73,715/-,being 1/5th of the foreign travelling expenses. During the assessment proceedings, AO held that details of foreign travel expense were not furnished. Following the order for the year l995-96, he made the disallowance of 25% of foreign travel expenses. Before the FAA, it was argued that the details of foreign travel expenses were furnished as annexed to the return of Income. A copy of the same was also file....
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.... time and energy spent by directors and executives was devoted wholly and exclusively for business and not in connection with the business of the parent company or foreign shareholders. In AY 199192, the addition of 20% was confirmed by Ld. CIT(A). Therefore, similar disallowance of 25% was made in this year which resulted into disallowance of Rs.45.29 Lacs out of total expense of Rs.181.19 Lacs claimed by the assessee. 9.2 The ld. CIT(A), following appellate orders for AYs 1997-98 to 200001, directed Ld. AO to restrict the additions to the extent of 20%. Aggrieved, the assessee is in further appeal before us. 9.3 We find that this issue has been adjudicated in Tribunal's order for AY 2000-01, para nos.6 to 9. The bench, following earlier years, fully allowed the claim of the assessee. Upon perusal, we find that this ground is covered in assessee's favor in several earlier years also and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to delete the additions as sustained by Ld. CIT(A). Grounds No. 2(a) of assessee's appeal stands allowed which ....
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....rder of the lower authorities. 56. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - "4. Next Ground raised by the assessee is with regard to disallowance of an amount of Rs. 36,25,189/- towards hotel expenses and air fares of foreign visitors coming/visiting to India. The Tribunal had dealt with the said issue in the assessee's own case for the AY.1996-97. The relevant portion of the order in ITA No.2951/Mum/2000 dated 13.06.2014 reads as under :- "7. Ground no.6(a) is about disallowance of Rs. 46,34,888/- towards the total expenses and Air Fair of foreign visitors company of India, ground no. 6(b), 6(a) and 6(c) are alternative grounds. Additional ground of appeal no.2 of 12.05.2012 is also related to the same issue. The disallowance was made by the AO on the basis of the order for the AY.1995-96. In that year identical claim was disallowed on the ground that the expenditure was incurred for nonbusiness purposes. The assessee argued before th....
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....see contended that this expenditure cannot therefore, be considered to be entertainment expenditure. An order of the Bombay Bench of the Tribunal in the case of R H Windsor India Ltd vs ITO was relied upon the CIT(A), finding that the facts of the present case are nearly similar, held that the expenditure cannot be treated as entertainment expenditure. The revenue is in appeal. In view of the finding recorded by the CIT(A) that the foreign victors came to India for purposes of attending the board meetings, general discussion, finance, reporting etc. It is considered that the expenditure represented predominantly business expenditure. This decision of the CIT(A) is accordingly upheld and the ground is dismissed." 31.1. Therefore, following the order of the Tribunal for the AY 8384, we decide the issue in favour of the assessee. Respectfully following the orders of the earlier years, Including the order for the year 1992-93 we decide ground no.6(a) in favour of the assessee." Respectfully following the orders passed by the Tribunal of the earlier years, we decide the issue in favour of the assessee ." 57. Further, in assessee's own case for the A.Y. 2001....
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....ule 8D of I.T. Rules, during the year under consideration, the Assessee has earned dividend of Rs..5,17,808 and claimed as exempt under section 10(33) of the Act and interest of Rs..3,87,51,817 exempt under section 10(15) of the Act, both of these incomes were claimed as exempt from tax while filing the return of income. The Assessing Officer adopted the view that the exemption under section 10(15) and 10(33) should be the net income by way of interest/ dividend and not the gross amount. Thereafter, the Assessing Officer raised a query further query why expenses pertaining to exempt income should not be disallowed as per the provision of section 14A of the Act. Against the query raised by the Assessing Officer, the Assessee filed its submission dated 30 November 2004 (Refer page no 45-46 of Factual Paper book -2) that the dividend and interest income claimed exempt in the return of income is 0.77% of the total sales and other income. Hence, if one needs to consider some cost attributable to exempt income, in that case, 0.77% could be applied to the cost of treasury related function which includes cost of salary, travel, conveyance, miscellaneous etc amounting to Rs..40.52 lakhs whi....
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....being 0.77 of cost of treasury function without recording dissatisfaction. Based on Supreme Court Ruling in the case of Godrej & Boyce Manufacturing Company Ltd 81 Taxmann. com 111, unless Assessing Officer is dissatisfied with the working of disallowance as made by the Assessee, same cannot be rejected. 65. Further, it is submitted that Ld.CIT(A) without adjudicating the submission of the Assessee for computing Rs..31,200 as disallowance directed the Assessing Officer to enhance the disallowance by applying Rule 8D to Section 14A of the Act without appreciating the fact that Rule 8D is not applicable for AY 2001-02 and only applies w.e.f AY 2007-08 onwards. 66. Ld. AR of the assessee relied on the order of the Tribunal in assessee's own case for various assessment years held as under: a. AY 1998-99 and AY 1999-2000, the ITAT restricted the disallowance to 0.05% of exempt income (Refer page no 721 to 722 of Legal paper book 2) by stating that: "24.3. We have heard the rival submissions. We find that the FAA had referred to the order of the then FAA for the AY.1995-96, that in that year the issue was of deduction u/s.80M. Considering the facts of the case we ....
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....e called for an explanation from the assessee in that regard. Finally, he made a disallowance of Rs.5.41 lakhs-calling it a 'reasonable estimate' towards earning exempt income. 24.1. Before the FAA the assessee argued that no administrative/overhead expenses were incurred for earning tax free interest /dividend, that the AO had wrongly observed that certain managerial and administrative time/expenses must have been spent/devoted by assessee for managing large investment portfolio, that there had been no change in investment during the year under appeal, that in the AY 1995-96 the AO had attributed 2% of the dividend income towards administrative /overhead expenses while computing deduction u/s.80M of the Act. The assessee relied upon the case of General Insurance(254ITR203); Ingersoll Rand (I) Ltd. (ITA/1178/Bom/93) and United Collieries(203ITR 857-AT).After considering the submission of the assessee, the FAA,following the order of his predecessors for AY.1995-96, deleted the addition made by AO. 24.2. Before us, the DR stated that the issue before the then FAA was deduction u/s. 80M, that the AO had invoked the provisions of section 14A of the Act for the year un....
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....decision of CIT(A)-XXIV I had held likewise in AYs 1998-99 and 1999-00. Since the facts during the year under consideration are similar, following the view taken by me in AYs 199899 and 1999-00 and for the same reasons the disallowance of 2% is deleted. The appellant gets relief of Rs 6,86,182/-." 41. We keeping in view factual matrix of the case, equity, fair play and justice to both the parties are of considered opinion that in the instant year the end of justice will be met if the order of the AO is upheld as the disallowance u/s 14A of the 1961 Act of Rs. 6,86,182/- made by the AO being 2% of exempt income (interest income and dividend income), falls within the arena of reasonability and Revenue's appeal is allowed." 71. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee's case for the preceding assessment years is respectfully followed, we direct the Assessing Officer to restrict the disallowance @2% of the exempt income. accordingly, ground raised No.5 raised by the assessee is partly allowed. 72. In Ground No.6, assessee has raised following grievance: - GROUND NO. 6 ....
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....ince an adjustment of un-availed MODVAT credit is made to the closing stock as on 31.03.2002, similar adjustment should be made to the opening stock as on 1.04.2001, as per the orders of the Tribunal in earlier years. 76. On the other hand, Ld. DR relied on the order of the lower authorities. 77. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2000-01. While deciding the issue, the Coordinate Bench in ITA.No. 6226/Mum/2004 dated 07.07.2017 held as under: - "12. The next issue in ITA No. 6226/Mum/2004 for AY 2000-01 of assessee's appeal is against the order of CIT(A) in confirming the action of the AO in adding the value of closing stock on account of MODVAT. For this assessee has raised following ground No.5 which reads as under: - "5. The CIT(A) erred in upholding the action of the ACIT in adding an amount of Rs.97,99,187 to the value of closing stock on account of MODVAT." 19. Brief facts are that the AO made an addition of Rs. 97,99,187/- to the value of closing stock on account of MODVAT. The CIT(A) also confirmed the action of the AO by o....
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....i). This question concerns the method of valuation of inventory as contemplated by section 145A of the Income-tax Act. In the case before the Delhi High Court, the Assessing Officer contended that section 145A did not permit the assessee to make a change in the valuation of the opening stock as on April 1, 1998, though it permitted a change in the closing stock as on March 31, 1999. The question before the Delhi High Court was that the adjustment of excise duty could be made in the opening stock also. In this connection, relying upon the decision of the Privy Council in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. AIR 1930 PC 56, the Delhi High Court took a view that to give effect to section 145A, if there is any change in the closing stock at the end of the year then there must necessarily be a corresponding adjustment made in the opening stock of that year. It has been held that this would not amount to giving double benefit to the assessee and would be necessary to compute the true and correct profit for the purpose of assessment. 3. We may reproduce here, the relevant observation in the judgment of the Privy Council in the case of CIT v. Ahmedabad New Cotton....
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....towards the unutilized MODVAT credit, accordingly, ground raised No.6 raised by the assessee is allowed 79. In Ground No.7, assessee has raised following grievance: - GROUND NO. 7 (a) The CIT(A) erred in upholding the action of the ACIT in disallowing advances amounting to Rs. 26,01,978/- written off and charged to the profit and loss account by the assessee's for the previous year relevant to assessment year 2002-03. (b) Without prejudice to the above, the CIT(A) ought to have allowed the above under section 37(1) as business expenses. 80. Brief facts relating to Disallowance of advances written off amounting to Rs 26,01,978/- are, in the return of income for the A.Y.2002-03, the Assessee had claimed an amount of Rs..26,01,978 being write off of various advances / deposits, the details of which are as under: No Name Amount Nature of transaction 1 W/off A/c 11327 2,30,000 Advances 2 W/off A/c 11327 40,000 Tender deposit 3 W/off A/c 11327 900 Tender deposit 4 Golf club 5,000 Deposit given to Golf Club 5 Stallion Dyestuff 23,26,078 Old outstanding for advance given ....
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.... u/s 37(1) of the Act since the loss suffered by the assessee was in the course of carrying out its business. However, both the lower authorities adjudged the assessee's claim merely in terms of Sec. 36(1)(vii) r.w.s. 36(2) which was not the case. The perusal of the details filed before us would show that the amounts written-off by the assessee was mostly in the nature of advance payments for procurement of goods from third parties, which have become irrecoverable over a period and are under dispute. Few of the write-offs represent MODVAT claims outstanding against third party manufacturers for more than 5 years. Majority of these amounts are stated to be outstanding prior to 01/04/1996. This being the case, we are of the considered opinion that the claim is allowable in terms of Sec. 37(1) as business expenditure or alternatively as business loss u/s 28. For the same, we draw support from the decisions of Hon'ble Bombay High Court in Lord Dairy Farm Ltd. V/s CIT (1955 27 ITR 700); IBM World Trade Corpn. V/s CIT (48 Taxman 11); the decision of Mumbai Tribunal ion ACIT V/s Sodexo Food Solutions India Private Ltd. (ITA Nos.5781/Mum/2016 &ors. dated 03/10/2018). The ratio of ....
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....les Income 13,53,000 6. Excise duty Refund 12,62,000 7 Other Miscellaneous - write back of liabilities, recovery of expenses, discounts, etc 1,50,71,000 8. Profit u/s 41(3) on Sale of R & D Assets 52,98,588 Cost of Services recovered 1,02,32,000 90. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed its submissions. After considering the submissions of the assessee, Ld. CIT(A) in his appellate order (being paragraph 13 at pages 44 to 51) upheld the view of the Assessing Officer placing reliance on the earlier orders for AY 2000-01 and 2001-02 & by emphasizing on the expression "derived from" in section 80HHC(1) of the Act concluded that for a receipt to qualify for deduction under this section it should have direct nexus with the exports. Aggrieved, Assessee has filed an appeal before us. 91. At the time of hearing, Ld.AR of the assessee brought to our notice in assessee's own case the Tribunal for the AY 2001-02 (ITA 3379 & 3046/MUM/2009) (Page no. 859 to 870 of Legal Paper-book -2), for the items which are being litigated for captioned assessment year held as under:- "In respect of certain items of income excluded fro....
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....ee prays that the earlier order of the Tribunal for the AY 2001-02 be followed. Further, as regards issue of disallowance of reduction of 90% of DEPB receipts, attention was invited to Provisos 3 & 4 of section 80HHC(3) wherein by way of a retrospective amendment w.e.f 01.04.1998, position on DEPB receipts for purpose of sec. 80HHC has undergone change, therefore, Ld.AR of the assessee prays that as the Return of income and/or assessment was completed before such retrospective amendment, he submitted that this issue may be remanded back to the file of the Assessing Officer. For the other items, he prayed that this may be allowed on the basis of earlier order for AY 2001-02. 95. On the other hand, Ld. DR relied on the order of the lower authorities. 96. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2000-01. While deciding the issue, the Coordinate Bench in ITA.No. 6226/Mum/2004 dated 07.07.2017 held as under: - "35. The next issue in ITA No. 5981/Mum/2004 for AY 2000-01 of Revenue's appeal is against the order of CIT(A) in directing the AO to exclude sale tax ....
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....ceeds. Further, the meaning of export turnover in clause (b) of the Explanation to section 80HHC, therefore, clearly show that export turnover did not include excise duty and sales tax. Export turnover is the numerator in the above formula whereas total turnover is the denominator. The above formula has been prescribed to arrive at profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty cannot form part of total turnover. In fact, if the denominator was to include the above two items and if the numeration excluded the above two items then the formula would become unworkable. In the circumstances, we are of the view that in order to ascertain the export profits, the above two items cannot be introduced to inflate total turnover artificially in order to reduce the benefit which an assessee is entitled to. Ultimately, the object of section 80HHC is required to be kept in mind in order to encourage exports. The Legislature has applied the above formula in order to find out profits derived from the exports. In this connection, section 80 HHC (1) may also be noticed. Under section 80 HHC (1), it is, inter alia, provided that where an as....
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....ot be imported into section 80HHC of the Act. Hence, we do not find any merit in these appeals." 37. The learned Counsel for the assessee similarly in respect to scrap sale argued that the issue is covered by Hon'ble Supreme Court decision in the case of CIT vs Punjab Stainless Steel Industries (2014) 364 ITR 144 (SC), wherein it is held as under: "22. So far as the scrap is concerned, the sale proceeds from the scrap may either be shown separately in the Profit and Loss Account or may be deducted from the amount spent by the manufacturing unit on the raw material, which is steel in the case of the respondent-assessee, as the respondent-assessee is using stainless steel as raw material, from which utensils are manufactured. The raw material, which is not capable of being used for manufacturing utensils will have to be either sold as scrap or might have to be recycled in the form of sheets of stainless steel, if the manufacturing unit is also having its re-rolling plant. If it is not having such a plant, the manufacturer would dispose of the scrap of steel to someone who would re-cycle the said scrap into steel so that the said steel can be re-used. 23. Wh....
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.... nature of receipts mentioned in explanation (baa) of Sec.80HHC: - No. Item Amount (Rs.) 1. Interest on Employee Loans 14.09 Lacs 2. Interest on overdue debtors 19.91 Lacs 3. Interest on MSEB deposits 2.03 Lacs 4. Interest on MIDC deposits 0.18 Lacs 5. Interest on Sales Tax Refund 2.69 Lacs 6. Interest on Income Tax Refund (gross) 158.18 Lacs 7. Sales Tax Set-off 553.86 Lacs 8. Insurance Claims realized 20.61 Lacs 9. Cash Discount 2.36 Lacs 10. Scrap Sales Income 13.58 Lacs 11. Misc. Claims 0.26 Lacs 12. Excise duty Refund 54.95 Lacs 13. PDC equipment Lease 53.34 Lacs 14. Conversion Charges 4.83 Lacs 15. Other Misc. write backs 136.38 Lacs 16. Profit on Sale of R & D Assets 37.62 Lacs 17. Cost of Services recovered from CSCIL 92.24 Lacs Total 2527.38 Lacs The assessee claimed that all these receipts were business receipts and not the receipts as mentioned in explanation (baa) of Sec.80HHC. Any income which necessarily flows from assessee's business is not required to be reduced. All the receipts we....
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....must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking, held that the tabulated receipts were not directly derived from export activities and therefore, the same should not form part of the eligible profits. Another plea that only net receipts should be reduced was also dismissed. Aggrieved, the assessee is in further appeal before us. Our findings & adjudication 18.1 Upon perusal of statutory provisions, we find that sub-section (1) of Sec. 80HHC provides for certain deduction to a person who is engaged in the business of exports. Such deduction is of profits derived by the assessee from the export of goods or merchandise. Sub-section (3) thereof provides the formula for determining such profits derived from exports. Clause (c) as applicable to manufacturer exporter as well as trading exporter, provides that profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee. "Adjusted profits of the business" wou....
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....of Expln. (baa) to section 80HHC. The Tribunal was of the view that the insurance claim was not in the nature of brokerage, commission, interest, rent or charges, and therefore, was not any other receipt of a similar nature within the meaning of Expln. (baa). The Tribunal, therefore, held that 90 per cent of the insurance claim could not be excluded. 4. Counsel appearing on behalf of the Revenue submits that an insurance claim constitutes an independent income which is not relatable to the export turnover. Hence, it has been urged that 90 per cent of the insurance claim is liable to be excluded from the profits of the business under Expln. (baa) to section 80 HHC. Reliance was sought to be placed in this regard on the judgment of the Supreme Court in CIT v . K. Ravindranathan Nair [2007] 213 CTR (SC) 227 :[2007] 165Taxman 282 (SC).On the other hand it was urged on behalf of the assessee that a contract of insurance indemnifies the insured for a loss that has occurred, in the present case to the stock-in-trade. Learned counsel submitted that the claim for insurance on account of the stock-in-trade, hence, did not constitute an independent item of income similar to commissio....
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....sion Bench in Dresser Rand (supra) would therefore not conclude the issue which has fallen for determination in this appeal. 7. Sub-section (1) of section 80HHC contemplates a deduction to an assessee, being an Indian company or a person resident in India and engaged in the business of export out of India of any goods or merchandise to which the section applies. The deduction is to be allowed in computing the total income of the assessee to the extent of the profits derived by the assessee from the export of such goods or merchandise. Clause (a) of sub-section (3) of section 80HHC provides the formula for determining the profits derived from the export of goods or merchandise to which the section applies. Where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export "shall be the amount which bears to the profits of the business", the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, the proportion between the export turnover and the total turnover of the business is applied to the profits of the bu....
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....T Act. In other words, receipts constituting independent income having no nexus with exports were required to be reduced from business, profits under clause (baa). A bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges, etc. formed part of gross total income being business profits. But for the purposes of working out the formula and in order to avoid distortion of arriving export profits clause (baa) stood inserted to say that although incentive profits and "independent incomes" constituted part of gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover." 10. In determining in each case as to whether a receipt which forms part of the profits of business is liable to undergo a reduction of ninety per cent as stipulated in clause (1) of Expln. (baa), it is necessary for the Court to consider whether the receipt is "of a similar nature included in such profits". The rationale for excluding ninety per cent of the receipts by way of brokerage, commission, interest, rent or charges is that these are independent incomes and their inclusion in the pro....
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....ub-section (3) of section 80HHC has been provided by the Parliament, for the purposes of subsection (1) to compute the profits derived from the export of goods. Clause (a) of sub-section (3) specifies that where the export is of goods or merchandise manufactured or processed by the assessee the profits derived from the export shall be the amount which bears to the profits of business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, in determining the profits derived from the export of goods or merchandise the proportion of the export turnover to the total turnover of the business is applied to the profits of the business. The profits of the business in turn are defined in Expln. (baa) to section 80HHC. Hence, the element of export turnover is a facet which has been taken care of by the legislature in the application of the formula which is referred to in sub-section (3) of section 80HHC. In determining the profits of the business for the purposes of Expln. (baa), the incomes which are susceptible to a reduction of ninety per cent are those which are specifically prescribed by....
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....ompany in respect of loss of trading goods. A contract of insurance is in the nature of indemnity and indemnifies the assessee for loss of stock-intrade. Had the goods not been destroyed, the same would have been sold at profits and therefore, the insurance claims are compensatory in nature. The claims could not be said to be an independent source of income for the assessee and could not be equated with "receipts of similar nature" as mentioned in explanation (baa). Scrap Sales Income- This income arises from the sale of packing material and other material realized during manufacturing process and directly related with manufacturing activities of the assessee. Cash Discount- This represent discount received by the assessee on early payment to suppliers in respect of purchase of goods. These are directly related to normal trading operations and could not be said to be an independent source of income. Equipment lease rentals- represent amount received by assessee on lease of packing machines & other equipment to licensed manufacturers who are carrying on the manufacturing activity for the assessee. Conversion Charges- These charges are directly rel....
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....the denominator. When denominator has been reduced by these two components, similar connected items would stand excluded from the numerator also. 18.5 The Ld. AO is directed to re-compute the deduction available to the assessee u/s 80HHC in the light of our adjudication on various issues effecting computations u/s 80HHC. Ground No.9 of assessee's appeal stand partly allowed." 98. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee's own case for the preceding assessment years are respectfully followed, accordingly, ground raised No.8 raised by the assessee is partly allowed as indicated above. 99. In Ground No.9, assessee has raised following grievance: - GROUND NO. 9 (a) The CIT(A) erred in confirming the action of the AO in computing the income from house property at a notional value. (b) The CIT(A) ought to have held that as the properties were not let, the provisions of section 23 are not applicable. c) Without prejudice the CIT(A) erred in holding that the AO was right in adopting the fair rent at Rs. 15 and Rs. 30 per square foot for residential and ....
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....ed with an understanding that the proportionate cost would be recovered from the demerged entity till the time an alternative facility was arranged by the demerged entity. This being the case, the ITAT held that it could very well be said that the premises was being used by the assessee only in furtherance of its business interest, the objective of which was to facilitate demerger. Therefore, the ITAT concluded that on the peculiar facts and circumstances, the action of Assessing Officer in bringing to tax notional rental value of the common premises was not justified and hence, the addition ought to be deleted. 104. In view of the above submissions, Ld.AR of the assessee prayed for deletion of the notional house property income levied by the Assessing Officer as the facts remain the same as in AY 2001-02. 105. On the other hand, Ld. DR relied on the order of the lower authorities. 106. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench in ITA.No. 3379/Mum/2009 dated 30.04.2021 held as under: - "16.1 Upon ....
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....for AO to take into consideration the amount for which the property might be let from year to year or AO could also consider the annual ratable value. Considering the market rate for commercial premises at Goregaon, the rates would be in the region of Rs.30/- per square feet per month and that of residential premises being Rs.15/- per square feet. Applying these rates to commercial area of 34,570 square feet and residential area of 15,278 square feet, Ld. AO arrived at ALV of Rs.124.45 Lacs for commercial space and Rs.27.50 Lacs for residential space. The total ALV was thus determined at Rs.151.95 Lacs. The statutory deduction u/s 24 would not be allowed separately since the assessee did not indicate depreciation claimed in respect of let out property and also did not indicate quantum of repairs & maintenance claimed for this property. Further, both these expenditure were already claimed in the computation of income. 16.3 The Ld. CIT(A), while confirming the stand of Ld. AO, directed him to grant statutory deduction u/s 24(a). Aggrieved, the assessee is in further appeal before us. 16.4 The Ld. Counsel explained that assessee prior to its merger with Sandoz (India....
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....estimated by Ld. AO. Another alternative argument was that the amount of Rs.92.24 Lacs recovered by the assessee from CSCIL ought to have been reduced from notional rental value as computed by the Ld. AO. 16.5 We have carefully considered the peculiar facts of the case. It is noted that prior to its demerger, the assessee was carrying on various businesses from various premises including premises at Goregaon (Mumbai). In 1997, the chemical business got demerged from the assessee and new entity i.e. CSCIL came to existence to carry out the chemical business. Since the business was continuing, as a part of demerger arrangement, CSCIL was allowed to use the said premises on the basis that costs would be shared. M/s CSCIL has paid proportionate cost of Rs.92.24 Lacs to the assessee during the year which has actually gone to reduce the assessee's expenditure under the head municipal taxes, water charges and security charges. Therefore, it was not a case where the property was actually let out by the assessee to a third-party but was a case wherein to facilitate demerger and to ensure smooth running of existing business, an arrangement was made between the assessee and its demer....
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....t of the transfer/sale of development right certificate in respect of certain portion of land on the basis of a 01.04.1981 value of Rs.87 per sq.ft, or such lesser figure as may be finally upheld. 109. Brief facts relating to determination of fair market value of plot no 1 (ground 10) & development rights of vacant land (non-slum) for computing cost (ground 11) as on 1.4.1981, Assessee owned gross land area of 2,96,713.20 sqmtr at Village - Dindoshi & Pahadi, Western express Highway, Goregaon (East), Mumbai, hereinafter referred to as the big land parcel. Over the course of 3-4 years, Assessee has sold the said land/ development rights therein in piecemeal. During the year under consideration, the Assessee had sold part of the big land parcel, viz.: a) Land plot no: 1 (Ground no 10); and b) Development rights in respect of another vacant land (nonslum) (Ground no 11) c) Development rights in respect of slum land (Ground -12) - dealt separately in subsequent paragraphs 110. As a result of sale of land / development rights, the Assessee computed the capital gain/ loss as per provisions of section 48 of the Act. For the purpose of cost of acquisition o....
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....nk) issued a Letter dated 28.02.2005 - acknowledging the error in the Valuation report dt 8th March 2002 and thereafter issued a Revised Valuation Report stating the rate as on 1.04.1981 ought to have been Rs 80-90 per sqft computed based on values reported for residential and commercial property in " Directory and Reference Book on Market value of Property in Mumbai as on 01.04.1981" and further, applied backward calculation to exclude construction cost (Page no 148 - 149 of Factual paper book no 3) 115. Upon receipt of the above letter, the Assessing Officer issued a show cause notice to the valuer M/s Knight Frank dated 9 March 2005 seeking justification why the value determined should not be rejected (Page no 162 - 163 of Factual paper book no 3). In response, M/s Knight Frank vide letter dated 11 March 2005 provided justification for the valuation at Rs 87 per sqft based on the "Directory and Reference Book on Market value of Property in Mumbai as on 01.04.1981" and 5 fresh sale instances recorded with Sub registrar. (Page no 164 - 165 of Factual paper book no 3) 116. To supplement valuation report from Knight Frank, the Assessee, during the pendency of the assessment pr....
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....om AY 2003-04 to AY 2006-07, the Assessing Officer rejected both valuations furnished by the assessee. However, to bring finality to the issue, in AY 2004-05, the Assessing Officer made a reference to the District Valuation officer ('DVO') for obtaining the fair market value of the plot as on 1.04.1981. 122. Basis the valuation undertaken by the DVO vide report dated 13 July 2007 (copy of the same is placed on record), the fair market value of open area land is determined at INR 765.21 Sq meter i.e. INR 71.12 sq feet (765.21/10.76 conversion factor). 123. Ld AR submitted that to put an end to prolonged litigation and considering the DVO valuation report determining the rate at Rs..71.12 per sq feet (765.21/10.76 conversion factor) for same big land parcel, it was prayed to direct the Assessing Officer without prejudice to the various reports of Knight Frank (dated 8 March 2002, 28 February 2005 and letter filed thereto dated 11 March 2005) and Poonager Bilimoria & Co dated 17 March 2005, as sale is arising out of the same land parcel which is valued by DVO, direct the Assessing Officer to accept the valuation at INR 71.12 per sq feet as determined by the DVO in his report dat....
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....w and hence void and of no legal effect. 127. Brief facts relating to determination of fair market value of development rights of slum plot for computing cost as on 1.4.1981, in addition to the sale of Plot no 1 and development rights of vacant land, during the year under consideration, the assessee also sold development rights in land occupied by a slum arising out of the same big land parcel. In order to compute the capital gain on the under section 48 of the Act on aforesaid transaction and for the purpose of section 55(2)(b)(i), the assessee relied on the same fair market valuation ('FMV')as on 1.4.1981 as obtained from M/s Knight Frank (Ind) Pvt Ltd dt 8th March 2002 (Enclosed at Page no 140 - 147 of Factual paper book no 3). 128. As per the said valuation report, the valuer determined the rate of Rs..63 per sqft basis certain actual sale transaction listed therein. On this basis, Assessee computed a capital gain/ loss of Rs..13,17,49,949 (further expenses on transfer of Rs..31,44,090 to be reduced). To substantiate the cost as on 01.04.2001, Assessee relied on the same two independent valuations (Knight Frank and Poonager Bilimoria & Co) as mentioned in ground 10 and 11....
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....ng of whether there was actually any existence of slum dwellers on this land as on 1.4.1981. 133. Aggrieved with the above order, assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee Ld. CIT(A) upheld the stand of the Assessing Officer and agreed with the valuation of Rs..5.25 per sqmtr. 134. Aggrieved, assessee is in appeal before us. At the time of hearing, Ld.AR of the assessee submitted that the methodology adopted by the Assessing Officer is arbitrary and not justified as the reduction to the cost made by the Assessing Officer is 92% visa vis 10 to 20% as mentioned by the assessee in its submission. 135. Further it is submitted that, while considering the value of slum land as on 01.04.81, the Assessing Officer failed to consider that majority of land was free land and not encroached by slum at the relevant point of time in 1981. In fact only a small portion of the land actually had slum dwellings (ie 5367.9 sqmtr) as on AY 2002-03. However, the Assessing Officer failed to appreciate that for the purpose of FMV as on 1.04.1981 there is no evidence of existence of any slum. Therefore, it is not correct to de-value the la....
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....course of the assessment proceedings, Assessing Officer rejected the capital loss claimed by the Assessee stating that the assessee has already claimed the value of assets as deductible u/s 35 as revenue expenditure. Therefore, there is no asset in the books of assessee and hence no capital loss can be claimed. Further, the Assessing Officer taxed the balance consideration ie Rs..4,34,378 (ie Rs..11,50,000 less Rs..7,15,622) as income under section 41(3) of the Act. (Page 41 -42 of the Assessment order) 142. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee, the Ld.CIT(A) upheld the AO's order without assigning any reasons. 143. Aggrieved, Assessee has filed an appeal before us. At the time of hearing, Ld.AR of the assessee brought to our notice the provision of section 41(3) which is reproduced below: - "The provision of section 41(3) is reproduced as under: Where an asset representing expenditure of a capital nature on scientific research within the meaning of clause (iv) of sub-section (1), or clause (c) of sub-section (2B), of section 35, read with clause (4) of section 43, is sold, without h....
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....harmason Pharmaceuticals Ltd vs DCIT (2003) 87 ITD 668 (AHD) wherein the cost of the acquisition of assets earlier claimed as deduction under section 35 was allowed as cost of acquisition while computing capital gain under section 48. 146. In view of the above submissions, Ld.AR of the assessee prayed as under: - a) "The excess amount of Rs 4,34,378 (ie Rs 11,50,000 less Rs 7,15,622) taxed by the AO under section 41(3) as business income may be deleted; and b) Rs 4,34,378 may be considered for computation of capital gain under section 45 of the Act and cost of acquisition of Rs 7,15,622 be allowed to be indexed in order to determine the capital loss on the transaction." 147. On the other hand, Ld. DR relied on the order of the lower authorities. 148. Considered the submissions and material placed on record, we observe that the assessee has acquired the building which is depreciable asset for the purpose of scientific research and the same was allowed to claim as an expenditure u/s 35 of the Act. Even though the above building was allowed 100% deduction but it continued to be used by the assessee in its business. It is to be noted that it is part of block ....
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.... and considered the rival submissions. The capital expenditure was stated to have been incurred by the assessee for acquiring these assets namely the equipment and furniture and the building. These assets were the properties and, therefore, capital asset within the meaning of s. 2(14) of the Act. It is true that the deduction of the entire cost thereof has been allowed under s. 35(1)(iv) r/w s. 35(2), it being expenditure of capital nature on scientific research related to the business carried on by the assessee, but the mere fact that it has been allowed as a deduction under s. 35 does not mean that the asset used for scientific research ceases to be an asset or a capital asset within the meaning of s. 2(14) of the Act. We may usefully refer to the decision of the Andhra Pradesh High Court in the case of Warner Hindustan Ltd. (supra) wherein the Court observed at p. 227 of the report as under : "The fact that deduction is given for the purpose of computing taxable income under s. 35 for expenditure on scientific research does not mean that it ceases to be capital employed or an asset." These observations were approved by Their Lordships of Gujarat High Court in t....
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....e two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions." It is further observed that. "There is a fundamental, though unwritten, axiom that no legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions both under s. 10(2)(vi) and s. 10(2)(xiv) of the 1922 Act or both under s. 32(1)(ii) and s. 35(1)(iv) of the 1961 Act." It is also held that "The deduction of the allowance on scientific research asset and the depreciation are basically of the same nature intended to enable the assessee to write off certain items of capital expenditure against his business profit". 11. On a careful reading of the decision of supreme Court, it would be noticed that the Court itself made an exception by stating that "if in absence of clear statutory indication to the contrary". In other words, the legislature may provide for allowance of the same amount of expenditure for various purposes.....
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.... question of double deduction like the one as considered by the Supreme Court in the case of Escorts Ltd. (supra). The Bombay High Court observed in this connection as under : "In such a situation, there is no question of any double deduction of the nature contemplated by the Supreme Court in Escorts Ltd. & Anr. vs. Union of India & Ors. (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC). In fact, the Supreme Court has made this clear (p. 874 of (1922) 2 Scale) when it says that the two deductions, i.e., deductions under ss. 32 and 35 are (at p. 59 of 199 ITR) : "basically of the same nature intended to enable the assessee to write off certain items of capital expenditure against his business profits". A deduction under s. 80J is not of the same nature as a deduction under s. 35. Therefore, in our view, the ratio of the Supreme Court judgment in Escorts Ltd.'s case (supra) will not apply to the computation of capital under s. 80J for the purpose of determining the quantum of deduction under s. 80J." 13. The observations of Gujarat High Court in the case of Sarabhai Sons (P) Ltd. (supra) in this connection are at p. 733 of the report as under : "Sec. 80J fal....
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....ifferent. This is also borne out by the provisions of the Act. Sec. 80J appeared in Chapter VI-A and the Chapter was added in the Act; the legislature though it fit to define gross total income to mean total income computed in accordance with the provisions of the Act, but before making any deduction under that Chapter. Thus, for the purpose of that Chapter, the income as computed in terms of s. 28 to 43A was to be regarded as the gross total income. Having provided like this, the legislature then provided for a deduction under s. 80J. This is a clear indication in the Act itself to show that the deduction contemplated by s. 80J was to be granted in addition to other deductions that were available under other provisions of the Act." 14. The deduction claimed by the assessee is of the indexed cost which is the amount of the actual cost which is allowed under s. 35 and the amount of increase on account of inflation index. The cost of acquisition for the purposes of s. 48 as is generally understood in the common parlance is the price paid for the acquisition of an asset. Sec. 55(2) provides for some different amount to be the cost of acquisition in certain eventualit....
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....enditure on scientific research falls in Chapter-D providing for computation of profits and gains of a business or profession carried on by an assessee under ss. 28 to 43A of the Act. Both are grouped under the same Chapter-IV, and allow the cost of acquisition, as deduction, one for computing income by way of capital gain and the other for computing business income. The fact that a deduction of the entire cot of acquisition has been allowed to an assessee under s. 35 while computing the business income of the assessee may be a relevant consideration for not allowing the cost of acquisition while computing the capital gain arising on transfer of the capital asset, on the principle of prohibition for double deduction of the same amount of capital expenditure or the cost of acquisition. As both the sections deal with computing the income of the assessee under the same Chapter IV of the Act, it would be a case of allowing double deduction to the assessee of the same amount once while computing income under s. 28 and again under s. 45 of the Act and which may be held to be not contemplated by the legislature as envisaged by the Supreme Court in the case of Escorts Ltd. (supra). We, the....
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..... This type of situation would be contrary to the specific provisions of s. 71(3) referred to above. We, therefore, reject the alternative claim of the assessee. 17. The ground pertaining to investment allowance on plant and machinery written off is not pressed. It is accordingly, rejected. 18. The last ground is against upholding the view of the AO that the adjusted profit for the purposes of s. 80HHC of the Act is negative and, therefore, the assessee is not entitled to deduction thereunder. The assessee worked out the deduction under s. 80HHC at Rs. 20,523. The AO, however, observed that as per the provisions of s. 80HHC applicable from asst. yr. 1993-94 the adjusted profit, i.e., assessed profit minus 90 per cent of capital incentive of Rs. 79,400, interest received Rs. 29,27,678 and Rs. 76,00,986, rent and taxes amounting to Rs. 4,36,740 and financial charges of Rs. 12,15,450 worked out in a negative figure and, therefore, denied the claim of the assessee. The CIT(A) upheld the order of the AO as the assessee has not been able to explain as to how the action of the AO in this regard could be faulted. 19. Before us also, no material has been placed on....
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....d in law, the CIT(A) has erred in deleting the addition of Rs.44,45,792/- to the valuation of the closing stock towards estimated prorata freight on the stock lying at depots on the ground that the assessee has been allowed relief by the appellate authorities in the earlier assessment years without appreciating the facts and merits of the addition and the fact that the revenue has not accepted the decision of the appellate authorities on this issue for earlier years." 159. Further, in the cross objection filed by the assessee, assessee has raised following ground: - "1. The respondent submits that the AO be directed to increase the value of the opening stock of the subsequent year ie, assessment year 200304 by a similar amount in case the AO's action of enhancing the value of closing stock on account of estimated pro- rate freight on stocks lying at depots is upheld." 160. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideratio....
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....ng the method of valuing the closing stock by excluding the expenses incurred pm freight and cartage outwards and packing of the goods for the purpose of enduring the transport from central distribution depot on various depots across the country. Now, the departmental authorities are entitled to discord the consistent method following by the assessee, but only if the true profits of the business cannot be deducted therefrom. In the case of British Paints Ltd. (188 ITR 44), on which heavy reliance was placed by the departmental authorities as well as the ld.DR before us, the factory costs, which are undisputedly to be considered as part of the cost of the product, were not included in the closing stock valuation. It is for this reason that the Supreme Court held that the method adopted by the assessee in that case was not an acceptable or sound method from which the true profits could be deducted. It is in this context, that they held that a method of valuation of closing stock has been adopted by, it is erroneous or unsound or unacceptable or is against accounting or commercial practice, the same can be discarded. In case, this principle is not attracted because the incurring expen....
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....ofits and gains of the business because of the method of valuation followed by the assessee consistently and which has also been accepted by the departmental authorities. A stray departure just for one year tends to upset the calculations. When the method has not been found fault with for a long period of years. It acquires fundamental character and forms a sound basis for the assessment of the profits especially when the method followed is not patently false or unacceptable, and any accepted fundamental feature of an assessment cannot be lightly tinkered with as held by the Supreme Court in the case of Radhasaomi Satsang Sabha (1993 ITR 321)." The same, was followed in ITA.No.7458/Mum/1997. The learned Departmental Representative did not dispute the same. In view of discussion, we are not inclined to interfere with the finding of The same is upheld." In the year 1994-95 and 1995-96 identical issue was decided against the AO. Respectfully following the order of the Tribunal for earlier years, ground no.4, filed by the AO stands dismissed. Ground no.3 of CO is treated as infructuous." Respectfully following the above Ground No.5 is dismissed" 163. Furth....
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....s.4,05,06,586/- which related to the provisions created during the F.Y.1992-93 but disallowed in A.Y.1993-94, by merely following the appellate orders of the earlier years without appreciating the facts and circumstances of the case." 166. Further, in the cross objection filed by the assessee, assessee has raised following ground: - "2. The respondent submits that the AO be directed to allow deduction for the full amount of Rs. 4,05,06,586 being the actual payment made if the action of the AO in not allowing deduction of Rs. 3,51,59,586, accrued on account of pension under the Voluntary Retirement Scheme to the erstwhile workers of the respondents Bhandup unit is upheld." 167. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideration is similar to the issues raised in the earlier assessment years. 168. On the other hand, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate B....
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....the company and the employee and if he finds that the liability has been calculated on a scientific basis, may allow the claim of the assessee. Facts and circumstances being identical, respectfully following the afore stated direction of the Tribunal in assessee's own case for A.Y. 1994-95, this issue is restored back to the file of AO. The AO is directed to decide in the light of A.Y. 1993-94 and 1994-95. Ground no. 6 is allowed for statistical purposes." Respectfully, following the above order of the Tribunal, Ground of appeal No.1 is decided in favour of the assessee." 170. Further, in assessee's own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - "6.1 The assessee claimed an amount of Rs.253.73 Lacs towards incremental VRS (Voluntary Retirement Scheme) for Bhandup unit which was on the basis of actuarial valuation. As held in earlier years, the liability was a contingent liability. Similar disallowance made in AY 199394 was confirmed by Ld. CIT(A). Similar disallowance was in assessment order for AYs 1994-95 to 2000-01. However, actual payment of VRS payment made during relevan....
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....d raised No.3 raised by the revenue is dismissed and Ground No.2 raised by the assessee in 'CO' is allowed. 172. In Ground No.4, revenue has raised following grievance: - 4. "On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of corporate entrance fees of Rs. 1,35,000/- paid by the assessee to the clubs by observing that the fees has been paid by the assessee as a corporate entity thereby disregarding the fact that the entrance fees have actually been paid by the directors to the clubs for their own use thereby deriving a benefit enduring nature on a long term basis which makes expenditure, capital in nature." 173. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideration is similar to the issues raised in the earlier assessment years. 174. On the other hand, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Ben....