----- Forwarded Message -----
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Thursday, 18 July 2013 1:12 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Mumbai bench approving CIT-A direction to AO to verify in case contract cancelled no TDS liability u/s 195 and refund of TDS; Lease premium not rental u/s 194I (TDS); 271AAA search assessment penalty fav order; Charitable trust mercantile system PROVISION ALLOWED as application of income
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Thursday, 18 July 2013 1:12 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Mumbai bench approving CIT-A direction to AO to verify in case contract cancelled no TDS liability u/s 195 and refund of TDS; Lease premium not rental u/s 194I (TDS); 271AAA search assessment penalty fav order; Charitable trust mercantile system PROVISION ALLOWED as application of income
Included in this update:
i) Mumbai ITAT on Section 195 TDS liability on cancelled contract and refund of TDS
ii) Mumbai ITAT on lease premium for lease hold rights being cost for transfer of lease hold rights not RENT u/s 194I for TDS
iii) Mumbai ITAT search case penalty 271AAA (search year)
iv) Mumbai ITAT on Charitable trust provisions for liability being valid application of income u/s 11
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI M/s. Sun Pharmaceutical Industries Ltd., I.T.A. No.6100/Mum/2011 I.T.A. No.6100/Mum/2011 The facts in the case are that assessee remitted a sum of US$ 4,00,000 to M/s. Scandinavian Health of Taiwan on 01-06-2006 on 01-06-2006 on account of consulting charges/fees. However, the assessee did not deduct tax at source u/s. 195 of the Act, therefore, AO passed an order u/s 201 and 201(1A) of the Act on 4.12.2006 and raised a total demand of Rs. 24,08,536/-. After considering the submissions and perusing the material on record Ld. CIT(A) found that the contract agreement with a Taiwan Company, Scandinavian Health Ltd.(HSL) has been cancelled. Cancellation of contract was also filed. Reliance was placed on the Board Circular No.7 of 2007 dated 23.10.2007. The CIT(A) found that since the contract has been cancelled therefore, there was no point to deduct the TDS. Accordingly, the matter was sent back to the AO to verify the contention laid down in Circular No. 7 of 2007 for a refund of tax already collected and refund the tax so collected if any to the assessee. Now the department is in appeal before the Tribunal. The Ld. DR stated that the AO was correct in holding that there is no apparent mistake
in the order passed u/s 143(3) stated that certain new evidences were filed before Ld. CIT(A) and AO was not granted any opportunity. On the other hand, the Ld. AR stated that the CIT(A) has allowed the appeal of the assessee subject to verification of the details and Board Circular, therefore, it is wrong to suggest that AO was not allowed any opportunity The above findings are self explanatory which does not require any interference, Ld. CIT(A) has allowed the issue in favour of assessee subject to verify the contention laid down under Board Circular and other details. Therefore, it cannot be said that AO was not allowed any opportunity as the AO has to verify the details before granting any
refund of tax if any. Accordingly, we confirm the order of the CIT(A).
IN THE INCOME TAX APPELLATE TRIBUNAL " G " BENCH, MUMBAI Assessment Year : 2008-09 I.T.A. No.695/Mum/2012 M/s. Wadhwa & Associates
Realtors Pvt . Ltd. , Date of Pronouncement : 03.07.2013 The facts of the case show that the assessee has
made payment of lease premium to M/s. MMRD Ltd. amounting to Rs.
949.92 crores approximately during the year under consideration. This
lease premium was paid for allotment of a plot of land namely C-59 in
'G' Block of Bandra Kurla Complex, Bandra (E), Mumbai as per lease
deed dt. 22.11.2004 and also for additional FSI in respect of the said plot.
The AO was of the firm belief that the assessee was liable to deduct tax
as per provisions of Sec. 194-I of the Act in respect of the aforesaid
payment to MMRD Ltd and as the assessee has failed to deduct tax at
source , the AO issued show cause notice dt. 21.2.2011 to the assessee.
The assessee explained that it has entered into a lease agreement with
M/s. MMRD on 22.11.2004. The land under question has been given by
the lesser i.e. MMRD to the assessee on lease and for which the assessee
has paid the premium amounting to Rs. 949.91 crores approximately.
4. The assessee carried the matter before the Ld. CIT(A). The
assessee explained that the payment referred by the AO does not bear the
character of rent mentioned in Sec. 194-I and therefore there is no
requirement of deduction of tax from such payment made to MMRD. It
was further explained that the assessee has made payment to MMRD for
a) For additional built-up area
b) For granting free of FSI area of Rs. 4 crores.
5. After considering the facts and the submissions and the nature of
transaction, the Ld. CIT(A) observed that the amount charged by MMRD
as lease premium is equal to the rate prevalent as per Stamp Duty
recovery for acquisition of the commercial premises. These rates are
prescribed for transfer of property and not for the use as let out tenanted
property. The Ld. CIT(A) further observed that even the additional FSI
given for additional charges as per Ready Reckoner rates only. It is the
finding of the Ld. CIT(A) that the whole transaction towards grant of
leasehold transaction rights to the assessee is nothing but a transaction of
transfer of property and the lease premium is the consideration for the
purchase of the said leasehold rights. 5.4. The Ld. CIT(A) finally concluded that the amount paid by the assessee is lease premium for acquiring leasehold rights and additional FSI in respect of the leased plot and the same is not in the nature of rent as contemplated u/s. 194-1 of the Act
10. We have carefully perused the lease deed as exhibited from page-1 to 42 of the Paper Book. A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. Considering the entire facts in totality in the light of the judicial decisions vis-à-vis provisions of Sec. 194-1, definition of rent as provided under the said provision, we do not find any reason to tamper or interfere with the findings of the Ld. CIT(A) which we confirm.
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "A",
MUMBAI ITA No. 6763/Mum/2011
Assessment Year : 2007-08 M/s. Kanakia Spaces Pvt. Ltd. 10.07.2013 After considering the rival submissions, we do not see any reason to interfere with the order of CIT(A). The order is in tune with the principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In the case of CIT vs. Mahendra C. Shah (299 ITR 305) the Hon'ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). In this case, the assessee was asked to explain the entries in the
'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived. The provision of clause-2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has
been lucidly explained by the Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (2005) 278 ITR 454 (All.), which was followed by the Hon'ble Gujarat High Court in the above referred case. In view of the above principles laid down, we are of the opinion that immunity provided under s/s.(2) of section 271AAA is applicable and accordingly, the order of CIT(A) does not require any modification.
Revenue's grounds are rejected. 5. In the result, revenue appeal is dismissed
THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "A", MUMBAI ITA No. : 9019/Mum/2010
(Assessment year: 2008-09 M/s. Lilavati Kirtilal Mehta
Medical Trust 14. The second ground is deletion of Rs. 14,12,93,934/- being the
provision for expenses. The AO in his order, writes,
"Provision for expenses it is seen from schedule forming part of balance
sheet that assessee has shown provision for expenses of Rs.
14,12,93,924/-. Since the provision for expenses is not allowable, the
said amount is added back while computing the total income of the
assessee".
15. The assessee approached the CIT(A) against this disallowance, before whom, the assessee made detailed submissions. The CIT(A) sought AO's comments on remand proceedings, who submitted the report, once again suggesting to sustain the addition 19. The AR submitted that the assessee maintains mercantile method and the provision is an year to year process. He further submitted that the nature of expenses are such that they are in any case allowable. Even if the expenses are denied in the year when
provision is made, it will be allowed in the year in which they are actually incurred.
20. On going through the arguments, and the details, we are in agreement that certain expenses though booked but remain pending, and in mercantile system or hybrid system, they are allowed, once they are actually incurred, in the year in which they had been booked. That's where the expression of provision comes in.
21. In these circumstances, we do not find any reason to disturb the finding of the CIT(A), which we sustain
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