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From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Wednesday, 26 June 2013 6:45 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Gujarat high court duty of AO & Approving authority in curtailment and shortening of normal payment period of 30 days (after proving that demand will be defeated by assessee by abuse of law only then such power can be exercised) in AMUL RESEARCH's case;yd bench ITAT detailed order on Cost paid for acquiring customer data base & other rights (non compete being purely commercial and not personal) eligible for depreciation u/s 32 (Intangible asset);
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Wednesday, 26 June 2013 6:45 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Gujarat high court duty of AO & Approving authority in curtailment and shortening of normal payment period of 30 days (after proving that demand will be defeated by assessee by abuse of law only then such power can be exercised) in AMUL RESEARCH's case;yd bench ITAT detailed order on Cost paid for acquiring customer data base & other rights (non compete being purely commercial and not personal) eligible for depreciation u/s 32 (Intangible asset);
Included in this update:
a) Gujarat high court duty of AO & Approving authority in curtailment and shortening of normal payment period of 30 days (after proving that demand will be defeated by assessee by abuse of law only then such power can be exercised) in AMUL RESEARCH's case & consequential abrupt use of power u/s 226(3) QUASHED by asking revenue to refund illegal gotten amountIN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6826 of 2013
AMUL RESEARCH & DEVELOPMENT ASSOCIATION....Petitioner(s)
Versus INCOME TAX OFFICER....Respondent
As could be noted, the very object of obtaining permission of the superior officer is to ensure that the powers are not exercised arbitrarily and there is a safeguard of higher officer applying its mind independently to the issue in question when such belief is communicated by the Assessing Officer. The curtailment of the statutory period of 30 days would surely cause inconvenience to the assessee which also restricts the period of challenge of assessee before exercise of such powers by the Assessing Officer, the previous approval of the Joint Commissioner has been made mandatory by law. This being an important safeguard, as held in the case of Gujarat State Energy Generation Ltd. (supra), we are of the firm opinion that the reasons recorded by the Assessing Officer cannot be held to be with due application of mind, much less reasonably sufficient for the curtailment of the full period so as to constitute the ground 'detrimental to the Revenue'. By no stretch of imagination, it can be said that non-meeting of the budgetary deficit could be a reason for holding reasonable belief that permitting the full period of 30 days for payment of tax would be detrimental to the cause of the Revenue. It is not such a situation where interest of Revenue is likely to be affected on account of any act of assessee. We are also in broad agreement with the decision of Bombay High Court that what would amount to detrimental to the Revenue is a matter of facts and would vary from case to case, however, such a situation must be apprehended on account of misuse of process that can be attributed to the assessee. If the demand is not likely to be defeated by any abuse of process by the assessee, belief cannot be sustained on the ground that availing the full period would be detrimental to the interest of Revenue.
As could be pointed out from the record by the petitioner, the past performance all through out of the petitioner-assessee was not such which would give rise to any apprehension in the mind of the Revenue so as not to allow the entire period. On the contrary, the very letter of the Assessing Officer is self-evident that the rich cash flow enjoyed by the assessee would help him meeting the target of budget deficit and thus it can be concluded that the belief had neither any relevant or valid reasons and it also does not have any direct nexus to the conclusion of reduction of period. Both the authorities have acted without truly grasping the essence of use of this provision. Resultantly, the action of invocation of the discretionary powers under Section 220(1) of the Act shall have to fail.
Some of the vital issues raised while arguing this petition needs to be briefly dealt with. It was emphasised all along by the respondent that Note (3) of the notice of demand under Section 156 of the Act can permit the assessee to seek extension of time for payment of the amount, which in this case has not been done by the assessee. Secondly, he has already approached the Commissioner (Appeals) against such action and, therefore, eventually if the Commissioner (Appeals) holds in his favour, he would definitely get back the entire amount, which has been withdrawn from the bank. It is also denied that the notice issued under Section 226 of the Act to the assessee was after the sum of Rs.1,39,70,275/- had been withdrawn from the bank on exercise of powers under Section 226 of the Act.
As noted above while discussing the legal aspects, while issuing notice to the bank under Section 226(3) of the Act for making payment, a notice has also to be given to the assessee which in this case is on the very day when the notice was issued to the bank. No opportunity had been given to the assessee for meeting with such a notice issued to the Bank. The sizeable amount of Rs.1,39,00,000/- (rounded off) has been withdrawn and deposited in the account of Revenue on the very same day. Notice was an illusory and empty formality. This arbitrary exercise of withdrawal of amount from bank also requires interference. Moreover, when the very action of the Assessing Officer is held to be contrary to the provisions of the law, petitioner's not resorting to Note (3) of the demand notice under Section 156 of the Act or his having resorted to an alternative remedy, is no bar to the Court exercising writ jurisdiction. Therefore, on none of these counts, the Revenue can be permitted to sustain the action of the Assessing Officer of reduction of period of 30 days.
Resultantly, this petition is allowed quashing and setting aside the impugned notice dated March 13, 2013, with a formal direction to the Revenue to refund the amount of Rs.1,39,70,275/- (Rupees One Crore Thirty Nine Lac Seventy Thousand Two Hundred Seventy Five only) by way of a cheque to be issued in favour of the assessee within two weeks on receipt of the present order.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 17.06.2013
Commissioner of Income Tax III
Chennai. .. Appellant
Versus
M/s.Sriram Chits Tamil Nadu P. Ltd 4. Learned Standing Counsel appearing for the Revenue, however, pointed out that on the aspect of commission, the same being decided in favour of the assessee, there could be no case for penalty. He, however, submits that the issue of foreman's dividend, particularly in the context of the assessee giving up the principle of mutuality, calls for levy of penalty.
5. We do not agree with the submission of the learned Standing Counsel appearing for the Revenue, particularly in the context of the discussion on the role of a foreman and the acceptance of the case on the dividend under the provisions of the Income Tax Act. Thus, going by the reasoning given in the order dated 30.09.2012 in T.C.(A) Nos.141 and 213 of 2004 and batch cases that, on the mere fact that the assessee had given up the plea of mutuality, one cannot immediately draw an inference that the assessee was lacking in bona fides in the matter of its claim.
6. In similar situation, in the decision reported in [2010] 327 ITR 510 (Del.) (Commissioner of Income-tax v. Zoom Communication P. Ltd.) the Delhi High Court brought out the distinction between a claim made with bona fide intention and a claim which lacked bona fides, in the context of a deduction claimed under the provisions of the Income Tax Act. Agreeing with the decision of the Delhi High Court reported in [2010] 327 ITR 510 (Del.) (Commissioner of Income-tax v. Zoom Communication P. Ltd.) and the law laid down by the Supreme Court in the decision reported in [2010] 322 ITR 158 CIT v. Reliance Petroproducts P. Ltd.) and 2009 (238) ELT 3 (SC) (Union of India Vs. Rajasthan Spinning & Weaving Mills), we have no hesitation in rejecting the Revenue's plea, thereby confirming the orders of the Tribunal.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD "B" BENCH, HYDERABAD ITA No.435 /Hyd/2010,
1222/Hyd/2011& 1789/Hyd/11 Assessment years 2006-07 to 2008-09
M/s SKS Micro Finance Limited, Begumpet,
Hyderabad.
PAN:AAICS2940J Date of Pronouncement : 21-6-2013
14. The learned departmental representative has relied upon a decision of Hon'ble Delhi High Court in case of Sharp Business
Systems vs. CIT ( ITA No.492/Del/2012 dated 5-11-2012) wherein the Hon'ble Delhi High Court has held that depreciation cannot be allowed on non compete fee as it does not come within the meaning of intangible asset as provided u/s 32(1)(ii) of the Act. However, a reading of the aforesaid judgment would make it clear that the Hon'ble Delhi High court came to such a conclusion as it held that an agreement on non compete fee is purely personal. The Hon'ble High Court further held that the words similar or commercial rights have to necessarily result in an intangible asset against the entire world which can be asserted as such to qualify for depreciation u/s 32(1) (ii) of the Act. However, the facts in the present case are different. The MOU between the assessee and SKS Society cannot be said to be purely personal. On the other hand, the acquisition of rights over the assets of SKS Society including the customer base is an intangible asset against the entire World as held by the Hon'ble Delhi High Court. Therefore, the facts of the case considered in the light of the ratio laid down by various judicial precedents referred to hereinabove, in our view, the client acquisition cost paid by the assessee is towards acquiring an intangible asset and therefore eligible for depreciation u/s 32(1)(ii) of the Act. In aforesaid view of the matter, we direct the Assessing Officer to allow the assessee's claim of depreciation. Hence, the grounds raised by the assessee are allowed
Vs DCIT, Cir-3(2),
Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD ITA No. 70/HYD/2013
Assessment Year: 2004-05 Bandi Ramesh, … Appellant Date of Pronouncement : 21/06/2013
18. Further, We find that the coordinate bench of ITAT, Hyderabad in the case of Jasti Rama Rao Vs. ITO in ITA No. 630/H/2007 vide order dated 2/01/2010 following the ratio of the decision of the Hon'ble Supreme Court in the case of GKN & Driveshafts India Ltd. (supra) has held that the Assessing Officer is required to record the reason for the formation of his belief to reopen the assessment before initiating proceedings u/s 148. In the absence of recorded reasons the conclusion is inescapable that exercise of power u/s 148 is without any jurisdiction. In the present case, the assessee has not been furnished with a copy of reasons for issuance of notice u/s 148 of the IT Act. 19. Hence, we are of the view that the reopening of assessment made by the AO is bad in law and, therefore, the same is annulled. Since we have annulled the reopening of the assessment on legal issue, we refrain from going into the merits
of the additions made by the AO.
In the High Court of Judicature at Madras Dated: 03.06.2013 M/s. FL Smidth Minerals Pvt. Ltd
Chennai .. Appellant Vs. The Deputy Commissioner of Income Tax
The above Tax Case Appeal is filed at the instance of the assessee as against the order of Income Tax Appellate Tribunal in respect of assessment year 2003-04. The Tax Case Appeal was admitted on the following substantial questions of law:-
(i) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in confirming the disallowance of Rs.40 lakhs on account of the provision for warranty?
(ii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in confirming the addition of Rs.87,74,691/- on account of the write back of the provision?
10. On appeal before the Income Tax Appellate Tribunal, the Tribunal referred to the reasoning of the Commissioner of Income Tax and by following the decision of this Court referred to above, rejected the assessee's case. The assessee's contention is that the provision made towards the non performance guarantee is more in the nature of warranty. Thus, the company assured quality and performance and on any shortfall agreed for damages making provision based on the performance capacity of the machineries supplied. Based on the materials available, on the assured capacity of the machinery and the quality of the product, the assessee had worked out the provision. Consequently, we do not find any ground to support the reasoning of the Commissioner of Income Tax (Appeals) which persuaded the Tribunal to reject the assessee's case. In this regard, we may point out that the decision of this Court reported in 293 ITR 311 CIT v. ROTORK CONTROLS INDIA LIMITED AND OTHERS was reversed by the Apex Court in the decision reported in [2009] 314 ITR 62 ROTORK CONTROLS INDIA P. LTD v. CIT, wherein the Apex Court held that a provision is recognised when an enterprise has a present obligation as a result of a past event; that it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made on the amount of the obligation. If these conditions are not met, no provision could be recognised. Although the Commissioner of Income Tax (Appeals) pointed out the obligation that had arisen to the company has to be seen by reason of its assurance given on the aspect of quality production and the extent of production, yet he failed to take it to the logical end in granting the relief. Thus, when the company made reliable estimate based on the performance capacity and the quality therein and the materials relating thereto, we do not find any justifiable ground to reject the plea of the assesee on the provision made to the extent of Rs.20 lakhs. The Commissioner of Income Tax (Appeals) pointed out to the distinction between the liquidated damages for the delay execution and the liquidated damages for non performance. However, the Commissioner of Income Tax (Appeals) committed an error in his finding on the ground that the amount claimed in the nature of warranty was not stated so, but described as provision towards the liquidity damages. We do not find that the description of the claim would govern the claim on the provision for warranty when the terms of the agreement specifically provided that the liquidated damages was for non performance. Given the above fact, one can not reject the claim for provision made towards the warranty on the performance of the machineries supplied.
11. As far as the balance provision of Rs.20 lakhs towards rectification expenses is concerned, it was stated that the said provision was based on the information that some of the equipments supplied by the company required repair and replacement and that technical team estimated such expenses for making provision in the account. The claim thus based on materials and the information of the technical team, the claim would certainly fall for consideration within the dictum of decision of the Apex Court reported in (2009) 314 ITR 62 - ROTORK CONTROLS INDIA P. LTD v. CIT. In the circumstances, we have no hesitation in setting aside the Tribunal's order in rejecting the claim of the assessee in respect of assessee's claim to the tune of Rs.40 lakhs being provision towards warranty. Consequently, the order of the Tribunal is set aside and the above Tax Case (Appeal) is allowed. No costs.
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