Implications of reporting Invalid/ Not Available PANs in TDS Statements & Actions to be taken
Many deductor submit Invalid / Not Available PANs in the Quarterly TDS Statements filed by them. We have listed below the Implications of reporting Invalid/ Not Available PANs in TDS Statements and actions to be taken by deductors to avoid such mistakes in TDS returns/ Correct statement to be filed by them.
Implications of reporting Invalid/ Not Available PANs in TDS Statements :
- The Deductor will not be able to provide TDS certificate to the deductee, if valid PANs are not reported.
- The correct deductee will not be able to avail the credit of TDS deducted for taxes deducted.
- Under section 277 of the Income Tax Act, 1961, if a person makes a statement in any verification under this Act or under any rule made there under, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, is punishable.
Actions to be taken :
- Please note that Correct reporting at the first instance will help in avoiding submitting Correction Statements.
- In case of any errors observed in reporting, the Corrections must be reported at the earliest to avoid unwarranted delays.
- The Deductor must ensure that the PANs for deductees reported in TDS Statements are valid and correct. TAN-PAN Master can be downloaded from TRACES and should be used to file statements to avoid quoting of incorrect PANs.
- Please Login to TRACES and navigate to "Dashboard"to locate "PAN Verification" in the Quick Links menu. The functionality to download Consolidated TAN – PAN File has also been provided that includes all the PANs attached with the respective TANs.
IT : For failure to discharge statutory obligation to file return and to appear or offer explanation before authorities therefor, penalty under section 273 was to be levied
■■■
[2014] 45 taxmann.com 423 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Lajpat Rai (HUF)
v.
Commissioner of Income-tax*
RAJIVE BHALLA AND DR. BHARAT BHUSHAN PARSOON, JJ.
CIVIL WRIT PETITION NOS. 12917 & 13191 OF 1991
SEPTEMBER 3, 2013
Section 273, read with section 80J, of the Income-tax Act, 1961 - Penalty - For false estimate of or failure to pay advance tax (Sub-section (3) of Section 80J) - Assessment year 1979-80 - Assessing Officer observed that assessee was partner of a firm entitled to one half shares - Firm filed return but assessee did not file his return - Thus, Assessing Officer issued notice to assessee for imposing penalty - Assessee did not attend nor submitted reply - Assessing Officer held that since assessee had without reasonable cause failed to furnish his return within time, penalty should be imposed - In writ, petitioner submitted that, as in assessment year 1979-80, petitioner was not liable to file return with respect to income, in accordance with section 80J(3) and imposition of penalty was not warranted - Though section 80J(3) was introduced by Finance Act No. 2 of 1980 with retrospective effect from 1-4-1972, petitioner was of a bonafide belief that in view of pendency of challenge to vires of section 80J before High Court, he was not required to file a return and, thus, penalty and interest might be waived - Whether assessee's plea of ignorance could have been accepted, if petitioner would offered an explanation before Assessing Officer - Held, yes - Whether since it was not so done, orders passed by Assessing Officer or revisional authority suffered from no error - Held, yes [Paras 5 & 6] [In favour of revenue]
Anand Chhibbar and Ms. Supriya Garg for the Petitioner. Yogesh Putney for the Respondent.
JUDGMENT
Rajive Bhalla, J. - By way of this order, we shall dispose of Civil Writ Petition Nos.12917 and 13191 of 1991, as they involve adjudication of the same questions of fact and law. Facts, necessary for adjudication of the writ petitions are being taken from Civil Writ Petition No. 12917 of 1991.
2. Counsel for the petitioner submits that as in assessment year 1979-80, the petitioner was not liable to file return with respect to income, in accordance with Section 80J(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), the imposition of penalty is not warranted. Section 80J(3) of the Act was introduced by Finance Act No.2 of 1980 with retrospective effect from 01.04.1972. The petitioner was of a bona fide belief that in view of pendency of challenge to the vires of Section 80J of the Act, before the High Court, he was not required to file a return. The penalty and interest may, therefore, be waived.
3. Mr. Yogesh Putney, Advocate, for the respondents, submits that as Section 80(J)(3) was amended by Finance Act No.2 of 1980 with effect from 01.04.1972, the petitioner cannot take any benefit and, therefore, has rightly been directed to pay penalty. The order passed by the Assessing Officer as well as the revisional authority are legal and valid and should, therefore, be affirmed.
4. We have heard counsel for the parties, perused the impugned orders and find no reason to interfere with the impugned orders.
5. The petitioner having failed to discharge his statutory obligation to file a return, a penalty was proposed to be levied. The Assessing Officer, vide order dated 31.03.1989 imposed penalty. An extract from the order reads as follows:—
"Notice u/s 274 read with section 273 of the Act requiring the assessee to show cause as to why an order imposing a penalty should not be made was issued and it was duly served upon the assessee.
The assessee was provided with a fresh opportunity of hearing under this office letter dated 2.8.1988 and 9.12.1988. In response to these letters Shri J.L.Mamhotra, CA attended the proceedings and the hearing was adjourned to 27.1.1989 at his request. No body attended on this date nor any written reply has been received so far. Perusal of the record shows that the assessee main source of income is one-half share from M/s Haryana Steel Fabricator, Faridabad, in which he is a partner. It is also noticed that the return in the case of the firm was received on 30.09.1979 and the assessment was made on total income of Rs. 91,580/- u/s 143(3) of the Income-tax Act, 1961 vide assessment order dated 21.1.1981. Despite this, the assessee did not file his return and ultimately proceedings u/s 141 were initiated and notice u/s 148 was served upon the assessee on 18.09.1984. In these circumstances, I hold that the assessee had without reasonable cause failed to furnish his return of income within time. I, therefore, direct the assessee to pay a sum of Rs.23,260/- (Rs. Twenty three thousand two hundred & sixty only) by way of penalty as per following calculations:—
| Total tax payable | Rs. 18,759 | |
| Return late by 62 | . | |
| complete months, penalty imposed @ 2% per month. | : Rs. 23,260 | |
| R.O. | Rs.23,260/ |
Demand notice and challan shall be issued."
6. The revision filed by the petitioner was also dismissed. The petitioner's plea relating to ignorance of the effect of Section 80J of the Act or the pendency of a matter relating to vires of Section 80J of the Act may have been accepted, if the petitioner had offered an explanation before the Assessing Officer. The petitioner did not appear before the Assessing Officer to offer any explanation and, therefore, cannot be allowed to raise a fresh plea in proceedings under Article 226 of the Constitution of India. The Assessing Officer and the revisional authority have dealt with the petitioner's default and the lack of bona fides. We find no reason to hold that orders passed by the Assessing Officer or the revisional authority suffer from any error of jurisdiction or of law as would require interference.
Dismissed.
SB*In favour of revenue.
IT: Where a few creditors could not be traced due to riot in related areas and assessee surrendering outstanding amount in revised return, penalty under section 271(1)(c) could not be levied
■■■
[2014] 45 taxmann.com 515 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax, Ghaziabad
v.
Mathura Commercial Co.*
ASHOK BHUSHAN AND MAHESH CHANDRA TRIPATHI, JJ.
IT APPEAL NO. 54 OF 2003†
JANUARY 15, 2014
Section 271(1)(c), read with section 143, of the Income-tax Act, 1961 - Penalty - For concealment of income (Surrender of income) - Assessment year 1991-92 - In return, assessee had shown various outstanding liabilities against 20 parties - When asked for, assessee could not bring confirmation with regard to 5 entries, parties related to which became untraceable due to riots - Assessee filed revised return surrendering outstanding amount regarding those 5 entries - Whether since above explanation offered by assessee was plausible, Commissioner and Tribunal was right in deleting penalty - Held, yes [Para 8][In favour of assessee]
FACTS
| ■ | In the return, the assessee had shown various outstanding amount against different parties. | |
| ■ | The Assessing Officer doubted the genuineness of the liabilities and therefore, issued notices to assessee to explain it and bring confirmation of outstanding amount. | |
| ■ | The assessee could not bring confirmation with regard to 5 entries. The assessee's case was that the concerned parties became untraceable due to riots in the area. | |
| ■ | The Assistant Commissioner did not accept such contention and imposed penalty on ground that the assessee had deliberately concealed the income and furnished incorrect particulars. | |
| ■ | On appeals, however, the Commissioner (Appeals) and the Tribunal accepted the pleas of the assessee and cancelled the penalty imposed by the Assistant Commissioner. | |
| ■ | On appeal by revenue to the High Court: |
HELD
| ■ | The assessee has come with the explanation for filing a revised return by deleting outstanding entries regarding aforesaid five traders. The reason was noticed by the Tribunal that the dealers being belonging to particular community had left the Town during riots due to Ram Janam Bhumi and Babari Masjid dispute or otherwise refused to give confirmation letter. The mere fact that the assessee could not obtain confirmation letter of the said outstanding entries from only five traders out of 15 in no manner can be said that in his return filed on 31-10-1991, he mentioned inaccurate particulars. In the revised return those entries were deleted by the assessee on account of he having not been able to file requisite confirmation letters or proof. In the said circumstances, it cannot be said that he filed any inaccurate particulars on which penalty could have been imposed under section 271(1)(c). [Para 8] | |
| ■ | The present case is not a case of mentioning of inaccurate particulars or concealment. There is no substantial question of law in the appeal. The appeal is to be dismissed. [Para 8] |
CASE REVIEW
Bajrang Glass Emporium v. CIT [2013] 30 taxmann.com 18/213 Taxman 25 (All.)(Mag.) (para 8);Standard Hind Co. v. CIT [2012] 22 taxmann.com 62/[2013] 212 Taxman 74 (All.)(Mag.) (para 8) andCIT v. Mak Data Ltd. [2013] 352 ITR 1/31 taxmann.com 35 (Delhi) (para 8) distinguished.
CASES REFERRED TO
Standard Hind Co. v. CIT [2012] 22 taxmann.com 62/[2013] 212 Taxman 74 (All.)(Mag.) (para 5), CITv. Mak Data Ltd. [2013] 352 ITR 1/31 taxmann.com 35 (Delhi) (para 5) and Bajrang Glass Emporiumv. CIT [2013] 30 taxmann.com 18/213 Taxman 25 (All) (Mag.)(para 5).
A.N. Mahajan, Ashok Kumar, Bharatji Agarwal, D. Awasthi, G. Krishna, R.K. Upadhaya and S. Chopra for the Appellant. R.S. Agarwal and G.K. Garg for the Respondent.
ORDER
1. We have heard Sri Dhananjay Awasthi, learned counsel appearing for the appellant and Sri Ashish Bansal, learned counsel appearing for the assessee.
2. This appeal under Section 260-A of the Income Tax Appeal, 1961 has been filed by the Department against the judgment and order dated 12.09.2002 of the Income Tax Appellate Tribunal.
3. In the appeal following two questions of law have been framed for consideration:—
| "1. | Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is legally justified in holding the A.O., should prove mens rea of the assessee that it concealed the income to evade tax. | |
| 2. | Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is legally correct to uphold the order of the CIT (A), Agra cancelling the penalty under Section 271 (1)(c) imposed at Rs. 2,10,000/- without appreciating the fact that the revised return was filed only of the detection of bogus liabilities." |
4. A return was filed by the assessee in the year 1991-92 on 31.10.1991. In the return, the assessee had shown various outstanding amount against different parties. The Assessing Officer issued notices to the assessee to explain and assessee was granted opportunity by the Assessing Officer with regard to different entries showing outstanding amount. The Assessing Officer doubted the genuineness of the liabilities. The assessee took time for bringing confirmation of the entries. There were 20 such entries showing outstanding amount. The assessee could produce confirmation with regard to only 15 such parties and with regard to 5 such entries, the assessee was given a notice as to why the said outstanding amount be not deleted or added in the income of the assessee. The assessee filed a revised return surrendering the aforesaid outstanding amount regarding 5 entries. Five persons, namely, Gulshan Bardana wala, Akil Ahmad Boriwala, Satish Chand Gupta & Co., Yakub Bardana wala and Mohd. Hussain Bardana wala. The assessment was made. Notice for imposing penalty under Section 271 (1)(c) was issued and the Assistant Commissioner, Income Tax vide his order dated 29.09.1993 imposed penalty of Rs. 2,10,000/-. The Assistant Commissioner, Income Tax held that the assessee deliberately concealed the income and furnished incorrect particulars. For imposing the penalty an appeal was filed by the assessee. The Commissioner, Income Tax vide his order dated 01.08.1994 allowed the appeal and cancelled the penalty. The Department went in appeal before the Income Tax Appellate Tribunal and the same has been dismissed on 12.09.2004.
5. Sri Dhananjay Awasthi, learned counsel for the appellant vehemently submitted that filing of the revised return under Section 139(5) of the Act was a kind of notice issued by the Assessing Officer to include the said outstanding amount as income, hence, the disclosure was not voluntary. He submitted that the Assessing Officer has rightly held that the present was a case of furnishing incorrect particulars in writing penalty under Section 271 (1)(c). He submits that any disclosure for the particulars of ending the litigation or paying piece cannot be said to be voluntary disclosure nor in such disclosure can absolve assessee from the penalty under Section 271 (1)(c). Sri Dhananjay Awasthi in support of his submission has relied on two judgments of this Court and one judgment of Delhi High Court, namely, Standard Hind Co. v. CIT [2012] 22 taxmann.com 62/[2013] 212 Taxman 74 (All.)(Mag.), CIT v. Mak Data Ltd. [2013] 352 ITR 1/31 taxmann.com 35 (Delhi) and Bajrang Glass Emporium v. CIT [2013] 30 taxmann.com 18/213 Taxman 25 (All) (Mag.)
6. Sri Ashish Bansal, learned counsel appearing for the assessee refuting the submission has contended that while submitting the return, the assessee himself has deleted the aforesaid outstanding entries and since on account of riots as noticed by the Commissioner of Income Tax (Appeals)-II, the assessees were not traceable. He submitted the fact that out of 20 entries shown by the assessee as the outstanding liabilities 15 confirmation could be obtained and it was only 5 traders out of which four belonging to one particular community of Muslim, the confirmation could not be obtained. The present was not a case of disclosure of any inaccurate particulars or making any false statement. He submitted that the explanation given by the assessee for deleting the said entries in revised return was based upon correct facts which has rightly been believed by the Commissioner of Income Tax (Appeals)-II as well as the Tribunal. He submitted that no question of law raised in the appeal and the appeal deserves to be dismissed.
7. The Tribunal by considering the submission has noticed the relevant Paragraph No. 2.5 which to the following effect:—
"2.5 The CIT(A) cancelled the penalty levied u/s. 271(1)(c) for the reason that the AO failed to make proper enquiries into the genuineness of the appellant's claim with the persons in whose names the liabilities were shown to be outstanding. According to CIT(A), the AO has impounded the vouchers related to purchase of Bardana as far back as in Oct. 92 but no inquiry was made in regarding to cuttings, erasers etc. The AO found that most of suppliers of Bardana were genuine as no addition was made as he issued notice about 20 persons. While addition was made only in regard to 5 persons. According to CIT (A), the books of accounts for subsequent year, could be summoned to ascertain the correct position regarding payment made in subsequent year by the assessee. Further the AO could have also rejected the offer of assessee for surrendering. The assessment was not got barred by limitation as the same could be completed upto 31.03.1994. Further, the imposition of penalty by invoking the provisions of Sec. 271(1) (c) as it stood prior to 1.4.76, is also not justified. According to CIT(A), if it is presumed that the AO intended to invoking the existing explanation, he should have expressed intention of doing so and should give opportunity to the assessee to offer his comments. Penalty proceedings being quasi-criminal in nature, the appellant must have been provided with opportunity to rebut the presumption raised against him. The AO levied penalty on the basis of assessment completed where also he has failed to give clear findings as to the nature of concealment. The CIT(A) also mentioned in her order that there is no mention in the order that the penalty on account of concealment of income or furnishing inaccurate particulars will be initiated against the assessee. It is only towards the close of the assessment order that he has simply mentioned in routine manner "penalty proceedings u/s. 140-A and 271(1) (c) have been initiated separately".
The findings recorded by the Tribunal as contained in Paragraph No. 3.2 are to the following effect:—
"3.2.... But in the instant case, nothing was concealed. the revised return was filed only for the reasons that the dealers belong to a particular community who had left the Town during riots due to Ram Janma Bhumi and Babari Masjid dispute or otherwise refused to give confirmation letter. So, the assessee opted to surrender the amount to end the litigation. This could have been verified by the AO by making local enquires and on going through the books of account of subsequent assessment years in which the amount was paid to the dealers. Similarly, in the case of Mohd. Ibrahim Azimulla Vs. CIT, 131 ITR 680, the jurisdictional High Court has held that the acceptance of revised return of income u/s 139(5) depends on the fulfillment of certain essentials. It is only a disclosure in the revised return in the circumstances mentioned in the section which will ensure to the benefit of the assessee, as a disclosure may be voluntary yet dishonest. If the revised return showing correct higher income is to cover up what was in the knowledge of the assessee or made in bad faith then it will not come within the ambit of Sec. 139(5), nor can the assessee claim any benefit on it. But in the instant case, disclosure was voluntary as the ITO did not mention any reason to hold that the disclosure was not voluntary. We further noted that the AO has erred in invoking the provisions of Sec. 271(1) (c) by mentioning that since the difference in the return and assessed income is more than 20%, the onus lies upon the assessee to rebut the presumption raised by the said explanation. The AO's reliance placed upon the various case laws in this regard is also not called for. The case laws relied upon are required only when the explanation becomes applicable. The said explanation was deleted from the statute book w.e.f. 1.4.76 by Taxation Laws Amendment, 1975. The penalty proceedings being quasi-criminal in nature, the AO should prove the mensrea of the assessee that it concealed the income to evade tax. No such evidence was brought on record by the AO. Therefore, only for the reasons that the amount was surrendered by filing revised return of income, penalty u/s 271(1) (c) cannot be levied."
8. There cannot be any dispute to the preposition that the penalty is leviable under Section 271(1) (c) when any person has concealed the particulars of his income or furnished inaccurate particulars of such income. The present is not a case of concealment of particulars of any income of the assessee. At best, the case could have proceeded on the ground that assessee "furnished inaccurate particulars of such income".
From the order passed by the Commissioner of Income Tax (Appeals)-II as well as the Tribunal, it is clear that the assessee has shown in his initial return filed on 31.10.1991, twenty entries showing outstanding as on 31.03.1991 against the different parties. The assessee was asked to bring confirmation of the aforesaid outstanding amount. The Assessing Officer doubted the genuineness of the transaction. The Assessing Officer in fact issued notice to 20 such parties against whom outstanding were shown. The assessee could bring confirmation with regard to 15 transaction but with regard to 5 whose parties became untraceable, the revised return was filed deleting the said entries.
The findings recorded by the Tribunal as contained in Paragraph No. 3.1 are to the following effect:—
"3.1.... The AO issued notices to about 20 parties out of that only five were picked up, where the assessee could not obtain confirmation letter for the reasons that those parties were not available at the time of requirement of the AO. Therefore, the assess surrendered the credits appearing in the name of those five persons to by peace and to cooperative with the department. In view of these submissions, it was pleaded that the CIT(A) has rightly cancelled the penalty."
The assessee has come with the explanation for filing a revised return by deleting outstanding entries regarding aforesaid five traders. The reason was noticed by the Tribunal that the dealers being belonging to particular community had left the Town during riots due to Ram Janma Bhumi and Babari Masjid dispute or otherwise refused to give confirmation letter. The mere fact that the assessee could not obtain confirmation letter of the said outstanding entries from only five traders out of 15 in no manner can be said that in his return filed on 31.10.1991, he mentioned inaccurate particulars. In the revised return those entries were deleted by the assessee on account of he having not been able to filed requisite confirmation letters or proof. In the said circumstances, it cannot be said that he filed any inaccurate particulars on which penalty could have been imposed under Section 271 (1) (c).
The judgment relied by learned counsel for the appellant in Bajrang Glass Emporium (supra) where it was held that in case of surrender of income by assessee without offering plausible explanation whether he can be absolve from the charge of penalty for concealment of income. The Division Bench has held that such assessee cannot be absolve from the charge of penalty for concealment. The ratio is that the assessee cannot be absolved from charge of penalty. He does not offer any plausible explanation in the present, the explanation offered by the assessee was plausible and is rightly been accepted by the Commissioner of Income Tax (Appeals)-II as well as the Tribunal. Thus the judgment in Bajrang Glass Emporium (supra) does not help the appellant in the present case. The other judgment of this Court relied by the appellant in the case of Standard Hind Co. (supra) was case where the Court found that the revised return was a specific concealment for a particular month was detected by the Assessing Officer. The Court held that it was a clear case of concealment of income and furnishing of wrong particulars, hence penalty was rightly imposed. There cannot be dispute in the proposition as laid down in the said judgment. The judgment of Delhi High Court in the case of Mak Data Ltd. (supra) was a case where Assessing Officer required the assessee to produce evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of transactions, the assessee simply surrendered certain amount. The Assessing Officer made addition of said amount and also levied penalty under Section 271 (1) (c) specially on the ground that in absence of any explanation in respect of surrender of income first part of clause (A) under Section 271 (1)(C) was attracted. Therefore, the levy of penalty was justified. The said case is on own footing also does not help the appellant.
In view of above, we have carefully gone through the orders of Commissioner of Income Tax (Appeals)-II as well as the Tribunal where absence of notice have been recorded simply holding that an explanation given by the assessee for submitting the revised return was acceptable. The present case is not a case of mentioning of inaccurate particulars or concealment.
We do not find any substantial question of law in the appeal. The appeal is dismissed.
SB*In favour of assessee.
†Arising out of order of Tribunal, dated 12-9-2012.
Mandatory Validation of Contact Details at Income Tax Portal despite poor tale and internet density
Advocate C.P. Chugh
Recently CBDT has initiated Process of Validating Contact Details of Assessee and in the process it requires each assessee to furnish his/her Mobile Number and E-mail ID with an condition that a Mobile and Email Id can be used by not more than 4 assessee.
Perhaps the Board is not aware that in most of the cases returns being submitted by a Family or Group of Companies far exceed 4 in numbers.
It is worthwhile to mention that most of the returns (almost 90% ) are being filed either through Chartered Accountants, Tax Advocates or Tax Return Preparers who for the sake convenience use their own mobile and email id. It is because the communications delivered by the Board are well attended and responded.
Most of the time the Assessee is not physically present before his tax adviser and seeking validation details from him consume time and energy. Above all the Session at portal is available for short period before the session get terminated and it is almost impossible to call the assessee, get validated PIN sent to his Mobile/Email with in that short span of time.
The efforts of the Board, how so ever may be rational and genuine, is causing harassment and difficulty to TAX Professionals consuming lot of their energy, efforts and cost in either re-setting of passwords (another cause of harassment) or validating contact details.
One may doubt what purpose the Board want to serve by making e-filling more cumbersome, difficult and less user friendly, while at the same time it is mandating more classes of person to compulsory e-file.
May I draw your attention to the fact that only 10% of Indian House Holds are having access to Broad Band Connections, internet density and with 43% tale density, the Decision of the Board can not be termed as user friendly.
While Shri Narender Modi, Hon'ble PM of India has been reiterating again and again that there must of less governance, procedure of attestation be done away, self attestation would suffice, the Board creating an environment where every one is feeling cheated and harassed is not in tune with what He says.
May I request the Board to re-consider their decision of seeking personal mobile and email ids and devise ways and means to make the e-filling more user friendly. The following table would substantiate my claims of poor tale and internet density.
| Telephony | ||
|---|---|---|
| Telephone Subscribers (Total) (2013) | 915.19 million (December 2013) | |
| Fixed lines (December 2013) | 28.89 million | |
| Mobile phones (2013) | 886.3 million | |
| Monthly telephone additions (Net) (December 2013) | 5.5 million | |
| Teledensity (2013) | 74.02% | |
| Rural Teledensity | 42.67% | |
| Internet access | ||
| Percent household access (total), 2012 | 10.2% of households (137 million) | |
| Percent broadband household access | 1.18% of households (14.31 million) | |
| Broadband internet users | 55.20 million (December 2013) | |
Applicability of Wealth tax is on making charges of jewellery
CA Vidhan Surana & CA Sunil Maloo
Whether wealth tax leviable on the making charges of the jewellery? – A Detailed Analysis
Under the scheme of Wealth Tax in India, Wealth tax is levied on the net wealth of the every individual, Hindu undivided family and company as on the valuation date. "Net Wealth" means the amount by which the aggregate value computed in accordance with the provisions of Wealth Tax Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the Assessee on the valuation date which have been incurred in relation to the said assets.
"Assets" has been defined in section 2(ea) of the Act, which inter alia includes jewellery, bullion furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, except held as stock in trade.
Out of the above, the term 'jewellery' is further defined in explanation 1 to this section, which reads as under:-
[Explanation 1] : For the purposes of this clause, —(a) "jewellery" includes —(i) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel;(ii) precious or semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel;
Many times the registered valuers while valuing the jewellery for the purpose of wealth tax and also sometime the Assessing Officer while making the Wealth Tax Assessment, includes the 'Making Charges' in the value of the jewellery and levies Wealth Tax on the Same.
Now the question arises as to whether the 'Making Charges' incurred by the Assessee in connection with the 'jewellery', are also subject to the levy of Wealth Tax? Whether the value of Making Charges also needs to be included in the valuation of 'jewellery' for the purpose of the Wealth tax? Let's examine this issue in detail herein under:-
What 'Making Charges' exactly are?
Making Charges are the charges we pay to the Gold Smith to make the Jewel out of raw gold/ any other precious metal. It is nothing but the amount that we pay for the labour involved in making a piece of jewellery. A good design is a culmination of artistic view and effort to create a wonderful design that attracts the eyes of buyer. So for making such designs, Jewelery stores generally charges the customer with making charges. This varies from design to design based on the complexity. It varies based on jeweller. Making charges are usually a percentage of the current price of the metal used in jewellary. This means higher the price of metal, higher would be the making charges. Also the more intricate the design, the higher will be the charges. Making charges normally range between 5% and 25% of the cost of metal.
Provisions relating to Valuation of 'jewellery' under the Wealth Tax Act:-
Section 7 of the Wealth tax Act, 1957 provides for 'Value of assets, how to be determined', which reads as under:-
7. Value of assets, how to be determined(1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III.
Accordingly, the Net Wealth is to be valued at the rates as specified in the Schedule III of the Wealth Tax Act. Schedule III of the Act lays down the 'Rules for Determining the Value of Assets'. Part 'G' of the said schedule contains the rules for determination of 'Valuation of jewellery', which reads as under:-
Part G
Jewellery18. Valuation of jewellery.(1) The value of the jewellery shall be estimated to be the price which it would fetch if sold in the open market on the valuation date (hereafter in this rule referred to as fair market value).
(2) The return of net wealth furnished by the assessee shall be supported by, —(i) a statement in the prescribed form, where the value of the jewellery on the valuation date does not exceed rupees five lakhs;(ii) a report of a registered valuer in the prescribed form, where the value of the jewellery on the valuation date exceeds rupees five lakhs.
(3) Notwithstanding anything mentioned in sub-rule (2), the Assessing Officer may, if he is of opinion, that the value of the jewellery declared in the return, —(a) is less than its fair market value by such percentage or such amount as is prescribed under sub-clause (i) of clause (b) of sub-section (1) of section 16A;(b) is less than its fair market value as referred to in clause (a) of sub-section (1) of section 16A,
he may refer the valuation of such jewellery to a Valuation Officer under sub-section (1) of the said section and the value of such jewellery shall be the fair market value as estimated by the Valuation Officer.]
Thus, the levy of Wealth tax on 'Making charges' of the jewellery is unjustified because of the following reasons:-
a) 'Making Charges' are not included in the definition of the Assets either individually or also not covered in the definition of the term 'jewellary';
b) In the Rules of Valuation of jewellery, it is clearly provided that the value of jewellery shall be estimated to be the price which it would fetch if sold in the open market on the valuation date. It is well settled principle that no one in the open market shall pay for the 'making charges' incurred by the seller. The seller will fetch the amount exclusively attributable to the contents of the precious metal at the prevailing rates on that particular date and nothing more than that.
c) There is a difference between the term 'Cost' and 'Value'. In general the 'Cost' is the amount that we incur for acquisition of something and 'Value' is the amount that we can fetch is that item is sold in open market. Making Charges are without any ambiguity considered as a part of the 'cost' of the jewellery but under the scheme of the Wealth Tax, same should not be considered as a part of the 'Value' according to the provisions of the Act.
d) In many cases, the Department also argues and levy wealth tax on the making charges of the jewellery on the ground that when a manufacturer of gold jewellery or a person engaged in business of jewellery sell such items into open market, they also realize the making charges. This ground for taxing the making charges under the Wealth Tax Act does not sound to be valid, as such manufacturer / jeweler held the jewellery as stock in trade and which is specifically excluded from the definition of the term 'jewellery'.
e) Further, the 'form O-8' which is the designated form for 'Valuation of Jewellery' also does not contain any field which gives even a remote indication regarding inclusion of 'Making Charges' into the value of jewellery. Abstracts of Form O-8 is reproduced hereunder for ready reference:-
Point number 12 is for 'Total Value of Jewellery', which is succeeded to Point No. 10 and Point No. 11, which are 'Value of each precious or semi-precious stone and the total value of all such stones' and 'Value of the precious metal content in all the items of jewellery' respectively. Thus, it can also be positively inferred that Point No. 12 is nothing but a sum of Point No. 10 and 11. Inclusion of Making Charges into the value of jewellery does not find any place in the form O-8 of 'Valuation Report', which itself implies that same is not to be intended to be included in the taxable 'Value of Jewellery'.
Conclusion:- Under the background of the above analysis of the provisions of the Wealth Tax Act and 'Rules for Determining the Value of Assets', it can safely be concluded that 'Making Charges' should not be made subject to levy of Wealth Tax.Though, one may logically argue that the Making charges must, invariably form part of the value of jewellery, but the law ALWAYS does not works on mere logics. However, a clarificatory amendment on this aspect of law will be appreciated for the removal of the ambiguity amongst the department being the exchequer, taxpayers, tax-professional and registered valuers.
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. The authors do not accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
IT : Assessment within limitation period cannot be doubted merely because demand notice is served after 47 days of said period
■■■
[2014] 45 taxmann.com 513 (Calcutta)
HIGH COURT OF CALCUTTA
Commissioner of Income-tax, Kolkota- X
v.
Subrata Roy*
GIRISH CHANDRA GUPTA AND SUDIP AHLUWALIA, JJ.
IT APPEAL NO. 47 OF 2013†
MARCH 21, 2014
Section 153 of the Income-tax Act, 1961 - Assessment - Time-limit for completion of reassessment (Delayed demand notice) - Whether even if demand notice and copy of assessment order was served to assessee after 47 days from date of assessment order which was last date for making such assessment, such order could be said to have been passed on date it bore, as a period of 47 days time was not long enough to create any doubt regarding correctness of date of order and, hence, such assessment could not be held to be barred by limitation - Held, yes [Para 10] [In favour of revenue]
FACTS
| ■ | The assessee challenged the assessment order and demand notice received through post after 47 days from 31-12-2008 which was the last date for making such assessment. | |
| ■ | The assessee, before the Commissioner (Appeals), alleged that the assessment was barred by limitation and the demand notice was served 47 days after the limitation period and further, no evidence was there that the same was completed before the end of such limitation period. | |
| ■ | After perusing the assessment records and order sheets attached to the assessment record, the Commissioner (Appeals) observed that the assessment was completed on 31-12-2008 and it was signed on the same date along with the demand notice and was issued to the assessee within due time through department's notice server but the assessee refused to accept the same. Later on, such order and demand notice were sent by Registered post. It was also observed that the last date of hearing was on 15-12-2008, hence, on the basis of observations, the Commissioner (Appeals) held that the assessment was completed within the limitation period and same was not barred by limitation. | |
| ■ | On appeal, before the Tribunal, the Tribunal accepted the contention of the assessee and held that the revenue could not prove any documentary evidence that the assessment was framed on 31-12-2008i.e., on the date of the assessment order. He held that both the assessment order and demand notice was bad in law. | |
| ■ | On appeal: |
HELD
| ■ | The submission of the assessee that the assessment records were taken into account by the Commissioner (Appeals) without disclosing the same to the assessee is altogether without any merit. The appellate authority cannot be expected to dispose of an appeal without looking into the assessment records. Had the appellate authority relied upon any independent enquiry or the result of any such enquiry, then it would have been incumbent upon the appellate authority to inform the assessee about the result of such enquiry so as to afford an opportunity to the assessee to make his submission with regard thereto. But the appellate authority had no such obligation to disclose the assessment records to the assessee before taking them into account at the time of hearing of the appeal. | |
| ■ | An appellate court cannot be prevented from perusing the lower court records. It is a strange submission to make that the lower court records could not have been perused without giving an opportunity to the assessee. The submission that the Tribunal was justified in drawing an adverse inference is altogether without any merit. The Tribunal was hearing an appeal. The Tribunal was not taking evidence of the matter as a Court at the first instance would do. The question for consideration was whether the order dated 31-12-2008, could be said to have been passed on 31-12-2008 when the demand notice together with a copy of the order was served after 47 days. A period of 47 days time is not time long enough which can even make anyone suspicious as regards the correctness of the date of the order. In any case the presumption arising out of clause (e) of section 114 of the Indian Evidence Act, 1872 proves the fact that the order was passed on 31-12-2008. The same presumption once again would apply to the order dated 13-11-2009, passed by the Commissioner (Appeals). There is, as such, no reason to even entertain any doubt as regards the existence of the file including the order dated 31-12-2008. There is equally no reason to doubt that the assessment order was passed on 31-12-2008. [Para 10] |
P. Dudharia for the Appellant. R. Bharadwaj for the Respondent.
ORDER
1. The Court : The subject of challenge in this appeal, at the instance of the revenue, is a judgment and order dated 19th November, 2012 by which the learned Tribunal accepted the contention of the assessee that the assessment order was not passed on 31st December, 2008 which was the last date for making the assessment. The ground originally taken before the CIT(A) reads as follows:
"For that the assessment is barred by limitation since the order of assessment and the demand notice was served 47 days after the limitation period and there was no evidence that the same was completed before the end of the limitation period and left the control of the AO within such period."
2. The aforesaid ground of the assessee before the CIT(A) failed for the following reasons appearing from the order dated 13th November, 2009 passed by the CIT(A).
'I have considered the submission of the appellant and perused the assessment order. I have also gone through the assessment records. On perusal of assessment records and the order sheets attached to the assessment record, it is seen that the assessment was completed on 31.12.2008 and it was signed on the same date along with the demand notice and notice u/s. 274 read with section 271 of the I.T. Act. The assessment order and the notice of demand were handed over to the Departmental Notice Server for service of the same on the appellant. However, it is reported by the notice server that the assessment order and the demand notice were refused to accept by the appellant. Later on, the order and the demand notice were sent by Registered Post. It is also observed from the assessment records that the last date of hearing was on 15.12.2008 and hence there is no reason to doubt that the assessment was not completed within the limitation period. Thus, from the assessment records, it is apparent that the assessment was completed within the limitation period i.e. on 31.12.2008. Moreover, section 153 of the I.T. Act states that no order of assessment shall be made u/s. 143 or section 144 at any time after expiry of (a) two years from the end of the assessment year in which the income was first assessable; or …………………Thus, the Act also speaks about the completion of assessment and not the service of assessment order. In the case of K.U. Srinivasa Rao vs. Commissioner of Wealth-Tax, Andhra Pradesh, Visakhapatnam, 152 ITR 128 (A) the Hon'ble High Court has held as under:
'The word to be noticed is "made". It must be remembered that an order of assessment is not an administrative order, but a quasi-judicial order. It is true that an order of assessment may not have been made in the presence of the assessee and that it requires to be communicated, but still, its character as a quasi-judicial order must be kept in mind while interpreting the word "made". The Act merely requires that an order of assessment shall be made within the prescribed period. It does not further require that it should be communicated within the period prescribed."
The jurisdictional High Court in the case of India Ferro Alloy Industry (P.) Ltd. v. CIT [1993] 202 ITR 671 (Cal) on the issue involved has held as under:
"what is required for completion of the assessment is the determination of the tax liability and issue of demand notice but certainly not the service of the same on the assessee."
Similar view was taken by the Apex Court in CIT v. Balkrishna Malhotra [1971] 81 ITR 759 (SC), and also in -
| (1) | Rm. P. R. Viswanathan Chettiar v. CIT [1954] 25 ITR 79 (Mad.), | |
| (2) | Ramanand Agarwalla v. CIT [1985] 151 ITR 216 (Gauhati), | |
| (3) | Badri Prosad Bajoria v. CIT [1967] 64 ITR 362 (Cal), | |
| (4) | Kodidasu Appalaswamy & Suryanarayana v. CIT [1962] 46 ITR 735 (AP), | |
| (5) | Esthuri Aswathiah v. CIT [1963] 50 ITR 764 (Mys.). |
In view of above, it is held that the assessment was completed within the limitation period as provided under the Act and not barred by limitation. The ground no. 2 is dismissed.'
3. Aggrieved by the aforesaid order, the learned Tribunal was approached and the learned Tribunal accepted the contention of the assessee for the following reasons:
"But in the present case before us, it is a fact that despite repeated opportunities to the revenue they could not prove any documentary evidence that the assessment was framed on 31.12.2008 i.e. the date of assessment order. It is a fact that the assessment order and demand notice was handed over to Postal Authorities on 12.02.2009 and the same was received by assessee on 16.02.2009."
4. Aggrieved by the order of the learned Tribunal, the revenue has come in appeal.
5. Mr. Dudharia, learned advocate appearing for the revenue-appellant, submitted that there is a presumption in law that all official and judicial acts were regularly performed. He drew our attention to clause (e) of Section 114 of the Indian Evidence Act, 1872, which provides for a presumption as follows:
'"(e) That judicial and official acts have been regularly performed;"
Mr. Dudharia contended that the learned Tribunal was wrong in holding that the Department "could not prove any documentary evidence that the assessment was framed as on 31.12.2008."'
6. He contended that the fact that the assessment order is dated 31st December, 2008 is a proof of the fact that it was passed on 31st December, 2008. The fact was proved with the aid of the aforesaid presumption in law. It was open to the assessee to rebut the presumption which the assessee did not do. Mere fact that the demand notice was served after 47 days from 31st December, 2008 is not enough to show that the order was not passed on 31st December, 2008. He, therefore, contended that the order passed by the learned Tribunal is patently bad being contrary to law and should be set aside.
7. Mr. Bharadwaj, learned advocate appearing for the assessee, submitted that the assessment records were called for by the learned Tribunal. In spite of repeated opportunities, the department could not produce the same. Therefore, an adverse inference should be drawn that in case the documents had been produced, the same would have gone against the department. He, in this regard, drew our attention to clause (g) of Section 114, which allows a presumption as follows:
"(g) That evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it;"
8. The second submission advanced by Mr. Bharadwaj was that the income tax assessment records taken into account by the CIT(A) were never offered for inspection to the assessee and there has, thus, been violation of the principles of natural justice.
9. Mr. Dudharia submitted, in reply, that both the submissions advanced by Mr. Bharadwaj are without any substance. He contended that the second submission advanced by Mr. Bharadwaj today before this Court was never urged before the learned Tribunal. He contended that by way of an afterthought and in order to support the patently wrong order of the learned Tribunal that this submission has been made. With regard to the first submission, Mr. Dudharia contended that clause (g) of Section 114 of the Indian Evidence Act, 1872 does not apply to this case because the aforesaid clause is applicable with regard to a piece of evidence and has no application to the official records. Moreover, existence of the order dated 31st December, 2008 was never in challenge. The second submission advanced by Mr. Bharadwaj provides ample assurance to the Court that the order dated 31st December, 2008 including other records in the file were very much in existence and the CIT (Appeal) perused the same.
10. We have considered the rival submissions advanced by the learned advocates for the parties and are of the opinion that the submission of Mr. Dudharia must be accepted. The submission that the assessment records were taken into account by the CIT(A) without disclosing the same to the assessee is altogether without any merit. The appellate authority cannot be expected to dispose of an appeal without looking into the assessment records. Had the appellate authority relied upon any independent enquiry or the result of any such enquiry, then it would have been incumbent upon the appellate authority to inform the assessee about the result of such enquiry so as to afford an opportunity to the assessee to make his submission with regard thereto. But the appellate authority had no such obligation to disclose the assessment records to the assessee before taking them into account at the time of hearing of the appeal. An appellate court cannot be prevented from perusing the lower court records. It is a strange submission to make that the lower court records could not have been perused without giving an opportunity to the assessee. The submission that the learned Tribunal was justified in drawing an adverse inference is altogether without any merit. The learned Tribunal was hearing an appeal. The learned Tribunal was not taking evidence of the matter as a Court at the first instance would do. The question for consideration was whether the order dated 31st December, 2008 could be said to have been passed on 31st December, 2008 when the demand notice together with a copy of the order was served after 47 days. A period of 47 days time is not time long enough which can even make anyone suspicious as regards the correctness of the date of the order. In any case the presumption arising out of clause (e) of Section 114 proves the fact that the order was passed on 31st December, 2008. The same presumption once again would apply to the order dated 13th November, 2009 passed by the CIT (Appeal). There is, as such, no reason to even entertain any doubt as regards the existence of the file including the order dated 31st December, 2008. There is equally no reason to doubt that the assessment order was passed on 31st December, 2008.
11. We are, as such, of the opinion that the order passed by the learned Tribunal cannot be sustained, which is accordingly set aside and the order of the CIT(A) is restored.
SB †Arising out of order of Tribunal, dated 19-11-2012.
Service Tax
Mandap keeper Service or Convention Service - Neither SCN, primary authority nor Appellate order had alleged or concluded that renting appellant's Banquet Hall to pharmaceutical, insurance and other companies was for holding formal meetings or assembly which is not open to general public, specific ingredients for transaction to fall within ambit of "convention": CESTAT
THE appellant is registered for providing Mandap Keeper service. The period in question is 24.7.2001 to 10.6.2004 and during this period they were remitting service tax under the category of "Mandap Keeper" after availing abatement in terms of exemption Notification No.12/2001-ST dated 20.12.2001 and filing regular returns.
Invoking the extended period of limitation, the Revenue vide SCN dated 3.1.2006 alleged that the services are properly classifiable under 'Convention Service' and demanded Service Tax of Rs.1,98,038/-, apparently by denying the exemption.
central Excise
Exemption under Notification No 3/2001 CE to Paper and Paperboard - Two registrations given for same plot having common facilities cannot be treated as two factories for benefit of exemption - Tribunal confirms demand for normal period.
THE respondent is engaged in manufacture of paper and paper board chargeable to central excise duty. Sometime in the year 1994, they made a declaration to the jurisdictional central excise authorities that they have set up another factory for manufacture of the same products and applied to the jurisdictional central excise authorities for separate excise registration. The plot location of both the units I &II is the same. The jurisdictional Superintendent of Central Excise, after verification issued central excise registration to the other unit also.
Both the units, were manufacturing the same final products and both of them were availing of exemption under notification no.47/97-CE dated 1.3.97 and its successor notifications no.5/98-CE dated 2.6.98, no.6/2000-CE dated 1.3.2000 and no.3/2001-CE dated 1.3.2001 respectively which exempted paper and paper board and articles made thereof in a factory starting from the stage of pulp, which contains not less than 75% by weight of pulp other than bamboo, hardwoods, soft wood, reeds (other than sarkanda) or rags. This exemption was available in respect of first clearance in a financial year upto a specified limit as mentioned in the notification.
Income Tax - Whether premium paid on insurance policy designed under Unit Linked Investment Plan can be claimed as business expenditure u/s 37 - NO: ITAT
By TIOL News Service
AMRITSAR, JUNE 25, 2014: THE issues before the bench are: Whether expenditure incurred on Term Insurance Plan under Keyman Insurance Cover is eligible for deduction u/s 37, even if the assessee firm proves that the said amount has been spent wholly and exclusively for the purposes of the business as per provisions of section 37; Whether in case the insurance companies otherwise invest the funds available with them in debt/stock etc, deduction of the amount invested can be claimed as revenue expenditure; Whether the nature of investment can be a deciding factor in determining the allowability of the premium paid; Whether when the policies are taken from Unit Linked Investment Plan it becomes investment plan, premium of which has been put into growth fund and it is not a Pure Life Insurance Policy on the life of another person and Whether in case only a fraction of the total premium is meant for risk premium, the balance is for the deployment of purchase of units, can be claimed as business expenditure. And the verdict goes against the assessee.
Facts of the case
Assessee company had debited an amount of Rs. 3 lacs under the head 'Insurance' pertaining to premium paid towards 'Keyman Insurance Policy' of Joint MD. Assessee had contended that the amount paid was claimed as expense allowable u/s 37. The amount due on maturity of this policy had been received back in AY 2010-11 and had been offered for taxation in year of receipt. Payment of premium for keyman insurance cover was allowable as a business expense. The law permits deferment of payment of tax on this amount. This amount cannot be taxed twice. The claim of payment of premium was genuine. The nature of insurance plan cannot adversely effect that admissibility of claim.
During assessment, AO held that a unit linked plan can't be equated with Keyman Insurance Policy as per meaning of the term given in clause (c) of Section 10(10D) and elaborately differentiated between the quoting guidelines and circulars of IRDA, as detailed in the assessment order and held that the expense of Rs. 3 lacs was not to be treated as incurred for the purpose of business of assessee. For making the disallowance, AO relied upon the order of CIT(A) in appeal No.407/-08-09/CIT(A)/Jalandhar dated 29.10.1989 in case of M/s. Suri Son for AY 06-07 where AO had upheld the disallowance on identical facts.
On appeal, CIT(A) had upheld the action of AO and observed that all aspects of the policy and legal proportions were discussed in the details in the order of M/s. F.C. Sondhi & Co. (India) Pvt. Ltd. vs. DCIT Range-1, which need not be repeated/ Facts being parimaterial, there was no reason to deviate from the findings of the CIT(A). In confirmation with the same, it was held that the expense of Rs.3,00,000/- in case of assessee was to be disallowed as not being for the purpose of business of assessee and uphold the action of AO in this regard.
Having heard the matter, Tribunal held that,
++ we find that the facts in the present appeal are identical to the facts in the case of M/s. F.C. Sondhi & Co. (India) Pvt. Ltd. vs. DCIT Range-1, Jalandhar, in ITA No.117(Asr);/2010 for the A.Y. 2006-07 and therefore, our order in the case of M/s. F.C. Sondhi & Co. shall be identically applicable in the present appeals. In that case assessee has claimed deduction on account of Keyman Insurance on the policy of Lifetime from ICICI Prudential – a regular premium – Unit Linked Insurance Plan of premium of Rs.20,00,000/- on the life of Director, Premium Life from ICICI Prudential – a limited premium payment Unit Linked Insurance Plan of premium of Rs.20,00,000/- on the life of another director and a Jeevan Shree-I of Life Insurance Corporation of premium of Rs.19,96,355/- on the life of another director. The policy was with Guaranteed Additions for 5 years and with profits thereafter;
++ during assessment, AO found that the assessee company has taken the investment, plans floated by the Insurance Company. In the case of the two policies of ICICI Prudential, the assessee company was even given the option of choosing the investment plan out of the four investment plans tailored made by the Insurance Company. In the case of the policy taken from LIC of India, the policy Jeevan Shree-I is policy with Guaranteed Additions for 5 years and with profits thereafter. Thus, all the policies taken by the assessee company are Investment Plan & Guaranteed Return/Addition Plan and the premium paid by the assessee company after deducting for mortality cover & other administrative charges are to be put into investment Plan as selected by the assessee company in the case of ICICI – Prudential Insurance Company and the LIC has undertaken guaranteed addition for five years and later on with profits. Out of total premium amount, mortality charges is nominal and depends upon the death benefits. Mortality charges, in the case of ICICI Prudential policies are being recovered on the date of commencement of the policy and on each monthly due date while the policy remains in force and shall be recovered by cancellation of Units, as per the policy document of the Insurance Company. In the case of the policy of guaranteed additions of LIC Policy, document is not legible and the assessee did not furnish the legible copy. However, on the perusal of first page which is somewhat legible, it could be made out that premium for main plan is Rs.19,91,265/- and sum assured is Rs.56,00,000/-, whereas Accident Benefit Premium is Rs.4250/- for Accident Benefit Sum Assured at Rs.25,00,000/-. Thus, the main purpose of the three policies taken by the assessee was investment of the premium accounts in Units after deducting mortality charges and other administrative expenses. It was further observed that the policy taken is Unit Linked Insurance Plan. In view of the fact that the assessee has taken "Unit Linked Insurance Plan", the assessee was asked to explain & justify the claim of deduction under the head Keyman Insurance Policy in its profit and loss account;
++ the assessee has stated that it is eligible for deduction of claim of Keyman Insurance and submitted that as the Keyman Insurance Policies are concerned, these are on the life of a person and this is clearly mentioned on the face of the policies which have already been filed earlier. The mode in which the amount is to be invest the funds available wit them in debt/stock etc. and this cannot be the deciding factory in determining the allowability of the premium paid. Thus, AO was of the view that the assessee has invested in Unit Linked Insurance Plan under Keyman Insurance Plan and it is not Keyman Insurance Policy as per the meaning given in the Income Tax Act. The assessee was given show cause notice,in reply to which assessee had submitted that the AO had observed that the assessee admits that policies are Unit Linked and since these are on the life of the person and it will not affect the real nature of the policy. But the assessee did not respond to the violation of the basic principle that a person purchasing life insurance can only do so to the extent of his insurable interest in the assured, the meaning of "Keyman Insurance Policy" as per explanation to clause (c) to section 10(10D) i.e. policy on life as asked and pointed out vide order sheet noting dated 31.10.2008. The scope of cover should not be wider than term assurance. Status of the policy, contents, terms & conditions mentioned therein established that the plan is Unit Linked Insurance Plan and not Term Assurance Plan i.e. Policy on life as per definition of the I.T. Act as well as Circular issued by the IRDA. The assessee further claims that policy has been issued prior to issue of Circular by the IRDA. The policy of Unit Linked Insurance Plan is not "Keyman Insurance Policy" as per the provisions of the I.T. Act as discussed above and these provisions of the I.T.Act are in place when the policy has been taken by the assessee. In the brochure also, the Insurance Company does not claim of any such benefit except tax benefit u/s 80C. The Circular issued by the IRDA warning insurers confirm that the fact that "Term Assurance Plan under Keyman Insurance Policy and not Unit Linked Endowment Assurance Plan would be eligible for deduction." The assessee further admit that policies are not exactly in the nature of life insurance policies [10(f) above]. Once the assessee itself admits this, it is evident that the policy does not fulfill the condition of "Keyman Insurance Policy" as per explanation to clause (c) to section 10(10D) and it is not Keyman Policy as per Income Tax Act. Only Term Insurance Plan under Keyman Insurance Cover i.e. Policy of life not beyond it is eligible for deduction as per provisions of the I.T.Act provided the assessee firm proves that necessity and expediency of the person being Keyman and the policy taken for the benefit of the assessee so that premium paid could be justified as expenditure has been laid out on expended wholly and exclusively for the purposes of the business as per provisions of section 37. Since, the assessee has taken the Unit Linked Insurance Plan, an Investment Plan, it is not eligible for deduction;
++ in case of Jeevan Shree-I issued by L.I.C. of India, which is the policy with guaranteed additions for 5 years and with profits thereafter. Therefore, it cannot be denied that such policies are for the investment plan and are having guaranteed return and the premium paid by the assessee company to such Insurance Company after deducting for mortality cover and other administrative charges are to be put into investment plan as selected by the assessee company as far as the policies taken from ICICI Prudential are concerned. Whereas LIC has undertaken guaranteed addition for 5 years and later on with profits. These findings of the AO have been found to be correct and no cogent explanation to rebut or reverse such findings of the A.O.has been given before any of the authorities below or even before us. The findings of the AO are also found to be correct and has not been rebutted with cogent explanation before any of the authorities below or even before us that mortality charges in the case of ICICI Prudential policies are being recovered on the date of commencement of the policy and on each monthly due date while the policy remains in force and is to be recovered by cancellation of Units, as per the policy document of the Insurance Company. The accident benefit premium is Rs.4,250/- for accident benefit or sum assured of Rs. 25 lacs. Show cause notice was given to the assessee to explain whether the said polices are Unit Linked Investment Plan or not and to justify the claim of deduction in the Profit & Loss Account, the reply of the assessee was that the Insurance Companies even otherwise invest the funds available with them in debt/stock etc. and this cannot be the deciding factor in determining the allowability of the premium paid. This explanation of the assessee cannot convert investment plan into Pure Life Insurance Plan;
+ there is no dispute as argued by the counsel for the assessee that meaning to Keyman Insurance Policy is taken from the Explanation to the clause (c) of section 10(10D), which has been reproduced hereinabove. As per definition of "Keyman Insurance Policy", a person purchasing life insurance can only do so to the extent of his insurable interest in the assured. With the background of the policies and terms and conditions and from the arguments putforth by the counsel for the assessee and the DR and the relevant material on record, we are of the views that the policies have been taken from Unit Linked Investment Plan is investment plan, premium of which has been put into growth fund and it is not a Pure Life Insurance Policy on the life of another person. Therefore, the policy itself does not fall under the definition of Keyman Insurance Police as defined under explanation to clause (c) of section 10(10D). The findings of the CIT(A) and that of the A.O. in this regard are reasoned one and we find no infirmity in the orders of both the authorities below, in particular, the findings of the A.O. which have been confirmed by the CIT(A) i.e. the findings of the AO in paras 6.1, 6.2 & 6.3. with reference to the Circular of IRDA and the order of the A.O. in para 11, which are well reasoned one and we concur with the views of CIT(A) and that of the A.O. We find no infirmity in the order of the CIT(A) in this regard, who has rightly confirmed the action of the A.O. The arguments of counsel for the assessee before the authorities below were mainly that the Insurance Policies are Keyman Insurance Policies taken on the life of a person and even otherwise also invest the funds available with them in debt/stock etc, which cannot be the deciding factor in determining the allowability of the premium paid. But at the same time, assessee has admitted vide letter dated 12.11.2008 and on perusal of record, it is found that these policies are not in the nature of Life Insurance Policies exactly;
++ on perusal of facts on record and arguments of both the parties and legal position and interpretation of the Act, we are of the view that the arguments made by the DR are found to be convincing and findings of the CIT(A), who has rightly confirmed the action of the A.O. that the assessee-firm has taken policy, which is, in fact, Unit Linked Insurance Plan, an Investment Plan, the purpose of which is guaranteed returns on the premium amount through investment in Units and Unit Linked Insurance Plan for which the premium is paid though wrongly claimed as an expenditure, which is not allowable as an expenditure. The Circular of IRDA has clarified the position and the arguments made by the counsel that it is prospective in nature, cannot be accepted since the circular is clarificatory in nature. In the facts and circumstances of the case, it is not a 'term Assurance Policy Plan" as per IRDA guidelines. A nominal amount is being charged for mortality charges for life cover and balance amount has been deployed to purchase Units as per assessee's choice. Only a fraction of the total premium is meant for risk premium, the balance is for the deployment of purchase of units i.e. Investment in Units which in fact, cannot be claimed as business expenditure, which query, in fact, has never been explained by the assessee before any of the authorities below or even before us. It does not fulfill the condition of policy taken by a person on the life of another person as per definition of explanation to clause (c) of section 10(10D). Accordingly, the cases of various courts of law, which have been carefully perused by us are not at all applicable. In the facts and circumstances, the arguments made by the counsel for the assessee, cannot help the assessee for the reasons mentioned hereinabove. Accordingly, we find no infirmity in the order of the CIT(A) who has rightly upheld the order of AO. Thus, the solitary ground raised by the assessee is dismissed. Accordingly, our order hereinabove in the case of M/s. F.C. Sondhi & Co. (India) Pvt. Ltd. vs. DCIT Range-1, Jalandhar, is identically applicable in the present case and accordingly, the appeal of the assessee in ITA No.20(Asr)/2013 for the assessment year 2007-08 is dismissed. In the result, the appeal filed by the assessee in ITA No.20(Asr)/2013 is dismissed.
No reassessment for alleged non-disclosure of sum earmarked under sec. 11(2) if it was disclosed during assessment
IT: Where reasons themselves did not indicate anywhere that assessee had not truly and fully disclosed all material facts nor had any material brought to reveal such non-disclosure in respect of sum set apart by assessee charitable trust under section 11(2), notice under section 148 would be invalid
Failure to maintain books of account would bar assessee to claim min. exemption benefit from undisclosed income
IT : In block assessment, assessee shall not be entitled to exclude basic exemption granted under section 139(1) without satisfaction of Assessing Officer regarding genuineness of books of account or other documents in respect of his income
MUMBAI, JUNE 24, 2014: THE issue before the Bench is - Whether the provisions of Sec 153C allow the AO to invoke it casually and need not record any satisfaction. And the answer goes against the Revenue.
Facts of the case
The assessee is a company. Before High Court, the Revenue's counsel had submitted that section 153C had been brought on the statute book so as to enable assessment of the income of any other person. It was submitted that this section opens with a nonobstante clause and enables AO to proceed and assess the income of any other person. It was submitted that whenever the AO was satisfied that any money, bullion, jewelery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A then, such seized documents or assets and equally requisitioned shall be handed over to AO, having jurisdiction over such other person. It was further submitted that this section mandates that AO must proceed to issue notices and assess or reassess the income of such other person in accordance with the provisions of section 153A. It was further submitted that there was nothing in the language of subsection (2) which would in any manner require AO to hold that the seizure of a document was permissible only if it was incriminating. There was no discretion but the Jurisdictional AO had to issue the requisite notice was the submission. It was further submitted that the findings recorded by the Tribunal render the provisions of section 153C totally redundant. The criticism by the Tribunal of the parliamentary provisions and the approach of the Department was therefore completely uncalled for. The finding of the Tribunal would raise a substantial question of law.
On the other hand, assessee's counsel had submitted that this appeal does not involve any substantial question of law, much less, the questions projected as such before us. It was submitted that the Tribunal had rendered factual findings. The Tribunal had found that the reason for issuance of notice u/s 153C was for applicability of the provisions of section 45(4). That issue was already examined and no addition was found necessary u/s 146(3) after scrutiny. Therefore, the documents do not have any incriminating material relevant for the AY year in question. Thus, the Tribunal observed that in the absence of any incriminating material, the proceedings u/s 146(3) could not have been initiated. It was therefore submitted that the finding cannot be read in isolation but must be read in the backdrop of the stand of the Department already noted. Thus, it was submitted that the view taken was imminently possible and based on the facts and circumstances peculiar to the Assessee's case. It was submitted that the appeal deserves to be dismissed as it does not raise any substantial question of law.
Held that,
++ it is apparent that the Tribunal referred to the seized documents. During the course of the proceedings, it was noted that the seized documents referred to a transaction in relation to transferable development rights, for short TDR. The Tribunal found that the TDR was taken over by the retiring partner. In the earlier round, the issued raised was whether this was a capital asset and therefore required to be dealt with in terms of section 45, particularly subsection (4) thereof. The Assessing Officer proceeded to issue requisite notice and in relation to the transaction evidenced by the said documents. The issue of applicability of section 45(4) was considered. It was found that during the very assessment year, no addition was necessary. It is that issue which was sought to be raised once again and relying on the very document, the Revenue has proceeded against the Respondent. It is in that backdrop that the Tribunal found that the seized documents may relate to the TDR that may have been handed over or taken over by retiring partner. However, whether that attracts the provisions of section 45(4) of the Act was an issue that was considered at length and the factual finding is that it being a stock-in-trade of the firm, the provision invoked was not applicable. That is how the Tribunal proceeded and held that merely because the document evidencing the transaction was in possession of the Department, it could not have issued notice to any other person within the meaning of section 153C of the Act particularly so as to reopen the concluded issue. It is in these circumstances that the Tribunal has made the observations in paragraph 25 of the order and which according to Mr Gupta, proceed on an incorrect reading of the section;
++ we are of the view that in the facts peculiar to this case, any larger or wider controversy need not be decided. The Tribunal, as a matter of caution and in the peculiar facts of this case observed that a casual resort to section 153C of the Act is impermissible. There must be some basis for proceeding under section 153C of the Act. The Tribunal referred to the satisfaction which is recorded by the Assessing Officer. It is only thereafter that he can proceed in accordance with the provisions of the said section. We do not see how the observations by themselves raise any substantial question of law. The observations and findings in paragraphs 24 and 25 of the order must be seen as confined and restricted to the facts peculiar to the case of the Respondent – Assessee. These are findings rendered for the purpose of disposal of the Appeal before the Tribunal. Beyond that nothing is held based on which we can entertain this Appeal. Once we have clarified that every single observation and finding in paragraph 25 of the order of the Tribunal must be read in the backdrop of the facts peculiar to the case of the Respondent – Assessee and not laying down any general rule or law so also the controversy based on construction or interpretation of the provisions not being gone into, then, the apprehension of Mr Gupta need not be taken care of any further. We are of the opinion that in the light of our clarification, the apprehension of Mr Gupta has no basis. The Appeal does not raise any substantial question of law. Appeal is accordingly dismissed with no order as to costs.
Central Excise : Soap stock/fatty acid, waxes and gums, etc. arising in course of refining of oil are not waste but are by-products as they are 'valuable'; hence, they are not exempt under Notification No. 89/95-CE, even if main product being oil is exempt
■■■
[2014] 45 taxmann.com 558 (SC)
SUPREME COURT OF INDIA
A.P. Solvex Ltd.
v.
Commissioner of Central Excise, Ludhiana*
H.L. DATTU AND CHANDRAMAULI KR. PRASAD, JJ.
CIVIL APPEAL NOS. 9569, 9698, 9707, 9724-9729
9757, 9770, 9916, 9932 AND (D34641 OF 2011)
9757, 9770, 9916, 9932 AND (D34641 OF 2011)
JANUARY 2, 2012
Section 2(f) read with sections 2(d), 3 and 5A of the Central Excise Act, 1944 and section 2 read with First Schedule, to the Central Excise Tariff Act, 1985 - Manufacture - Waste or Scrap - Assessee was engaged in manufacture of refined vegetable oil and vanaspati, which were exempted goods - In course of said manufacture, soap stock/fatty acid, waxes and gums, etc. emerged and assessee claimed that said products were 'waste' and exempt under Notification No. 89/95-C.E. - Tribunal held that : (a) in view of Note 6 to Chapter 15, since refining of vegetable oil amounts to manufacture, not only main product, but all by-products obtained by that process would be manufactured product; (b) soap stock/fatty acid, waxes and gums, etc. were product and not 'waste, as 'waste' is of no value or negligible value, but said products being valuable were by-products; (c) being by products and not waste, they were not exempt under Notification No. 89/95-CE; (d) wax, gum and soap stock, were classifiable under Heading 15.22 and not under Heading 15.16; and (e) Fatty acids were classifiable under Heading 38.23 as they were specifically excluded from purview of Chapter 15 by virtue of Chapter Note 1(e) - Assessee challenged said order before Supreme Court - HELD : Supreme Court dismissed appeals filed by assessee and confirmed order of Tribunal [Para 2] [In favour of revenue]
Circulars and Notifications : Notification No. 89/95-C.E., dated 18-5-95
CASE REVIEW
CCE v. A.G. Flats Ltd. 2012 (277) ELT 96 (Tri. - Delhi) affirmed.
ORDER
1. Delay in filing Civil Appeal No. D 34641 of 2011 is condoned.
2. Civil Appeals are dismissed.
VINEET Service Tax : Where applicant received money on transfer of goodwill and right to use a particular name as part of purchaser's name for 30 years and agreement stipulated termination clause in certain circumstances, services rendered by applicant would fall under category of 'Right to Intellectual Property'
■■■
[2014] 45 taxmann.com 506 (Kolkata - CESTAT)
CESTAT, KOLKATA BENCH
Tata Global Beverages Ltd.
v.
Commissioner of Service Tax, Kolkata*
DR. D.M. MISRA, JUDICIAL MEMBER
AND DR. I.P. LAL, TECHNICAL MEMBER
AND DR. I.P. LAL, TECHNICAL MEMBER
ORDER NO. SO / 75264/2014
STAY PETITION NO. ST/S/1286/2011
MISC. APPLICATION NO. ST/MISC/70805/2013
APPEAL NO. ST/A/548/2011
STAY PETITION NO. ST/S/1286/2011
MISC. APPLICATION NO. ST/MISC/70805/2013
APPEAL NO. ST/A/548/2011
MARCH 6, 2014
Section 65(105)(zzr), read with section 86, of the Finance Act, 1994 - Intellectual Property Service - Assessee transferred ongoing business in a slump sale for Rs. 68.21 crores - Out of this, assessee received Rs. 8.98 crore on transfer of goodwill and right to use term 'Kanan Devan' as part of name of purchaser for 30 years - In relevant agreement, there were stipulations about use of said name and style and also stipulations to terminate agreement of licence and use of said name in certain circumstances - Assessee claimed that 'Kanan Devan' pertained to name of a tea hill and could not be registered under relevant Act - Whether in event, said goodwill in name and style as 'Kanan Devan' did not belong to assessee, then there could not be a question of allowing purchaser to use same for a period of 30 years - Held, yes - Whether revenue had correctly arrived at a conclusion that services rendered by applicant would fall under category of 'Right to Intellectual Property' - Held, yes - Whether assessee had failed to make out a prima facie case for total waiver of pre-deposit of dues adjudged - Held, yes [Para 4.1] [Stay partly granted] [Partly in favour of assessee]
Circulars and Notifications : Circular F. No. B-2/8/2004-TRU, dated 10-9-2004
FACTS
| ■ | The service tax demand has been confirmed against the applicant-assessee on the ground that the applicant had received the taxable value of Rs. 8.98 crore from Tata Tea Ltd. on account of 'Goodwill', right to use the name 'Kanan Devan' in favour of KDHP, which fell under the category of 'Intellectual Property Service'. | |
| ■ | The applicant submitted that — |
| - | The applicant had transferred the ongoing business undertaking to KDHP 'slump sale'. | |
| - | Separate payment made was only for the purpose of discharging the stamp duty and, hence, could not be construed as consideration received against transfer of goodwill. | |
| - | 'Kanan Devan' is the name of a tea-hill in the Idukki District of Kerala and as per section 9 of the Trade Mark Act, 1999, the name, cannot be registered. |
| ■ | The revenue submitted that — |
| - | the applicant had reserved the right to terminate the relevant agreement for violation of the conditions stipulated therein. | |
| - | A subsequent agreement clearly indicated that there was no absolute transfer of the Goodwill, i.e., 'Kanan Devan' in favour of the transferee, KDHP, but only for its use for a period of 30 years. Hence, the amount of Rs. 8.98 crore was attributable towards the use of the Goodwill and, accordingly, was chargeable to service tax. |
HELD
| ■ | The relevant deed of transfer mentioned that a consideration of Rs. 8.85 crores was to be paid towards intangibles including goodwill, right to use 'Kanan Devan' as part of the name of the Purchaser, and towards Technical Support in infrastructure and welfare facilities. | |
| ■ | It is not in dispute that the applicant had considered Rs. 8.98 crore as receipt towards the intangibles, including 'Goodwill', right to use 'Kanan Devan' as part of the name of the purchser and towards the technical support on the infrastructural and welfare facilities. The agreement between the applicant and KDHP stipulates that a non-exclusive licence was granted to KDHP to use the name and style as a part of KDHPC's corporate name for a period of 30 years. Also, there are stipulations under various clauses about the use of the said name and style as 'Kanan Devan' in the said agreement. There is also stipulation at clause 9 to terminate the agreement of the license and use of the name, 'Kanan Devan' in certain circumstances. The claim of the applicant that 'Kanan Devan' pertains to the name of a tea hill and cannot be registered under the relevant Act. The same may not sound a forcible argument for consideration, for the simple reason that the applicant themselves had consciously allowed to use the name, Kanan Devan in the corporate name of KDHP for a period of 30 years, reserving the right to terminate the use of such name within the said period. It is difficult to appreciate, prima facie, that in the event, the said goodwill in name and style as Kanan Devan, if does not belong to applicant, then there cannot be a question of allowing KDHP to use same for a period of 30 years. Prima facie, the applicant themselves had declared in the respective deeds allocating the total amount, Rs. 8.98 crore towards the use of such Goodwill, which the revenue has considered as the gross taxable value in the services of allowing to use the 'Goodwill', which would fall under the definition of Intellectual Property Right and, consequently, it is chargeable to service tax under the taxable services, Intellectual Property Services. From the observation of the Commissioner, it is found that after giving a detailed finding each and every argument of the applicant, he had arrived at a conclusion that services rendered by the applicant, would fall under the category of 'Right to Intellectual Property'. The Commissioner recorded reasoning for invoking the extended period of limitation. The question of applicability of the extended period of limitation a mixed question of law and facts, and at this stage, prima facie the Commissioner's reasoning of invoking extended, the period was apparently convincing and the same is not totally without any evidence on record. Therefore, the claim of the applicant on the question of limitation would be examined by appreciating evidences adduced by both sides, at the time of disposal of the appeal. No financial hardship has been pleaded. In the result, the applicant failed to make out a prima facie case for total waiver of pre-deposit of dues adjudged. Keeping in view the interest of the revenue and the principle of law settled by the Supreme Court and High Courts relating to disposal of stay applications, the applicant is directed to make a pre-deposit of 25 per cent of the service tax. |
R. Raghavan for the Appellant. S. Chakraborty for the Respondent.
ORDER
Dr. D.M. Misra, Judicial Member - This is an Application for waiver of predeposit of Service Tax of Rs.83.11 lakh and equal amount of penalty imposed under Section 78 and penalty of Rs.5,000/- under Section 77, of the Finance Act, 1994. The service tax demand has been confirmed against the Applicant on the ground that the Applicant had received the taxable value of Rs.8.98 crore from M/s. Tata Tea Ltd. on account of 'Goodwill', right to use the name, 'Kanan Devan' in favour of M/s. Kanan Devan Hills Plantations Company Pvt. Ltd. (here-in-after referred to as KDHP), which falls under the category of the taxable service, namely, 'Intellectual Property Service', as defined under Section 65(105)(zzr) of the Finance Act, 1994.
2. The ld. Advocate for the Applicant submitted that by an Agreement dated 30.03.2005, the Applicant had transferred the ongoing business undertaking to KDHP for a total consideration of Rs.68.21 crore by the Deeds of Transfer dated 30.03.2005 and 02.07.2005. The ongoing business had been transferred in favour of KDHP, and the transfer was made against 'slump sale'. From the total amount, Rs.8.98 crore had been referred to, in the Deeds of Transfer, attributable towards intangibles, including 'Goodwill', right to use 'Kanan Devan', as part of the name of the purchaser, KDHP. He has contended that it was only for the purpose of discharging the stamp duty and, hence, cannot be construed as consideration received against transfer of goodwill.
2.1 Further, he has submitted that 'Kanan Devan' cannot be treated as a registered Trade Mark' of the Applicant, as 'Kanan Devan' is the name of a tea-hill in the Idukki District of Kerala. It is contended that as per Section 9 of the Trade Mark Act, 1999, the name, 'Kanan Devan' cannot be registered. It is his submission that the Applicant had registered the 'Trade Mark' for 'Kanan Devan Tea' and not 'Kanan Devan' and they had merely transferred the 'Goodwill' in the name & style as 'Kanan Devan' to KDHP as part of the 'slump sale' of its ongoing business for use in the corporate name of the transferee company (KDHP) and there has been no transfer of the actual 'Trade Mark' of 'Kanan Devan Tea', which has been in use by the Applicant. It is his submission that no separate consideration has been identified in the corporate name's licensed Agreement dated 24.09.2005, whereby the 'Goodwill' in the name & style, 'Kanan Devan' has been transferred to KDHP for a period of 30 years. He submitted that the subsequent Agreement dated 24.09.2005 which allowed using the 'Goodwill' name, 'Kanan Devan', cannot, therefore, be given effect to.
2.2 The ld. Advocate has also referred to the Board's Circular F.No.B-2/8/2004-TRU dated 10.09.2004, to advance his argument that only those 'Intellectual Property Rights' (except copyright) that are prescribed under the law, for the time being in force, to come under the category of 'Intellectual Property Services'. Therefore, a goodwill associated with the name, 'Kanan Devan', is not an 'Intellectual Property Right' recognized by the law for the time being in force, as it is neither a 'Patent' nor a 'Trade Mark', and accordingly, the same cannot fall within the ambit of 'Intellectual Property Services'. Further, he has submitted that the Applicant have been filing their ST-3 return regularly, and no fact was suppressed from the knowledge of the Department and the Applicant had surrendered the registration and a new registration was taken by KDHP for the activity of manufacture undertaken by KDHP. Hence, there is no question of suppression of facts from the knowledge of the Department. Consequently, the demand is barred by limitation.
3. Per contra, ld. AR for the Revenue reiterating the findings of the ld, Commissioner, has submitted that for the purpose of payment of 'stamp duty' a total amount of Rs.8.98 crore had been earmarked towards the intangibles, including the right to use the 'Goodwill', viz. 'Kanan Devan' as part of the corporate name of the purchaser. The ld. AR further submitted that by a Corporate Licence Agreement dated 24.09.2005 between the Applicant and KDHP, the Applicant granted a non-exclusive licence to KDHP to use 'Kanan Devan' as part of KDHP's corporate name for a period of 30 years. Further, the Applicant had reserved the right to terminate the said Agreement dated 24.09.2005 for violation of the conditions stipulated therein. It is his submission that the 'Goodwill', viz. 'Kanan Devan' allowed by the Applicant to be used by KDHP, would squarely fall under the definition of 'Intellectual Property Right.' He has referred to the Circular issued by the Board dated 10.09.2004, wherein at para 9.1, it is mentioned that 'Goodwill' is also an 'Intellectual Property'. The ld. AR for the Revenue submitted that the subsequent Agreement dated 24.09.2005 clearly indicates that there is no absolute transfer of the 'Goodwill' i.e., 'Kanan Devan' in favour of the transferee, KDHP, but only for its use for a period of 30 years. Hence, the amount of Rs.8.98 crore which had been earmarked and subjected to 'stamp duty' mentioned in the Deeds of Transfer dated 30.03.2005 and 02.07.2005, is attributable towards the use of the 'Goodwill' and accordingly, is chargeable to service tax.
4. Heard both sides and perused the records. Prima facie, the issue involved, is that whether the amount of Rs.8.98 crore received by the Applicant from KDHP on the transfer of the 'Goodwill', viz. 'Kanan Devan', along with transfer of the ongoing business, against two Deeds of Transfer dated 30.03.2005 and 02.07.2005, be subjected to service tax levy, under the category of 'Intellectual Property Service' or otherwise. It is the contention of the Id. Advocate that they had transferred the ongoing business as 'slump sale' for a lump-sum consideration of Rs.68.21 crore, and the amount of Rs.8.98 crore shown under the category of a consideration towards intangibles including 'Goodwill', right to use 'Kanan Devan' as part of the name of the purchaser, is only for the purpose of payment of 'stamp duty'. The revenue, on the other hand, disputes the said claim of the Applicant and submits that there had been no absolute transfer of 'Goodwill' i.e., right to use 'Kanan Devan', in view of a subsequent Agreement dated 24.09.2005, but for use of the said name for a period of thirty years. To examine the rival contentions, it is necessary to look into the respective clauses of the Deeds of Transfer dated 30.03.05, 02.07,2005 and Corporate Name License Agreement dated 24,09.2005. At para 8 of the Deed of Transfer dated 30.03.2005 at clause (d), it is mentioned as follows:—
"(d) Balance consideration of Rs.8.85 Crores towards intangibles including goodwill, right to use 'Kanan Devan' as part of the name of the Purchaser, and towards Technical Support in infrastructure and welfare facilities."
4.1 It is not in dispute that the Applicant had considered Rs.8.98 crore as receipt towards the intangibles, including 'Goodwill', right to use 'Kanan Devan' as part of the name of the purchaser and towards the technical support on the infrastructural and welfare facilities. Similarly worded condition has been inserted in the Deed dated 02.07.2005 for an amount of Rs.0.13 crore. The Agreement dated 24.09.2005 between the Applicant and KDHP stipulates at clause (2) stating as - "Subject to the provisions of this Agreement, TTL hereby grants a non-exclusive licence to KDHPC to use the name and style as a part of KDHPC's corporate name for a period of 30 years." Also, there are stipulations under various clauses about the use of the said name and style as 'Kanan Devan' in the said Agreement. There is also stipulation at clause 9 to terminate the Agreement of the license and use of the name, 'Kanan Devan' in certain circumstances. The claim of the ld. Advocate for the Applicant that 'Kanan Devan' pertains to the name of a tea-hill and cannot be registered under the relevant Act. At this, stage, we are of the opinion that the same may not sound a forcible argument for consideration, for the simple reason that the Applicant themselves had consciously allowed to use the name, 'Kanan Devan' in the corporate name of KDHP for a period of 30 years, reserving the right to terminate the use of such name within the said period. It is difficult to appreciate, prima facie, that in the event, the said goodwill in the name and style as 'Kanan Devan', if does not belong to the Applicant, then there cannot be a question of allowing KDHP to use the same for a period of 30 years. Prima facie, we find that the Applicant themselves had declared in the respective Deeds allocating the total amount, Rs.8.98 crore towards the use of such 'Goodwill', which the Revenue has considered as the gross taxable value in the services of allowing to use the 'Goodwill', which would fall under the definition of 'Intellectual Property Right' and consequently, it is chargeable to service tax under the taxable services, 'Intellectual Property Services'. We find from the observation of the ld. Commissioner that after giving a detailed finding against each and every argument of the Applicant, he had arrived at a conclusion that the services rendered by the Applicant, would fall under the category of 'Right to Intellectual Property'. We also find that the Id. Commissioner recorded reasoning for invoking the extended period of limitation, The question of applicability of the extended period of limitation is a mixed question of law and facts, and at this stage, we are prima facie satisfied that the ld. Commissioner's reasoning invoking the extended period is apparently convincing and we also find that the same is not totally without any evidence on record. Therefore, the claim of the Applicant on the question of limitation would be examined by appreciating evidences adduced by both sides, at the time of disposal of the Appeal. No financial hardship has been pleaded. In the result, the Applicant failed to make out a prima facie case for total waiver of pre deposit of the dues adjudged. Keeping in view the interest of the revenue and the principle of law settled by the Hon'ble Supreme Court and High Courts relating to disposal of stay applications, we direct the Applicant to make a predeposit of 25% of the service tax involved in the present case, within a period of six weeks from the date of communication of this Order, and on deposit of the said amount, the balance dues adjudged would stand waived and its recovery stayed during pendency of the Appeal. Failure to deposit the said amount would result in dismissal of the Appeal without further notice. Compliance to be reported on 22.04.2014.
SBIn case of sale of an under construction building, projected cost of completion to be taken as cost of acquisition
IT : Capital gains arising out of sale of property under construction is to be computed by taking projected cost of construction and not merely on cost till date
 Follow us on Twitter | Daily news and information update for CA members, students and professionals |
| An independent group of Chartered Accountants, working for betterment of CA profession. |
Hi there,
Greetings of the day!
Greetings of the day!
| Accounting Technician Certificates issued in the month Feb, 2014. Region -wise list of Accounting Technician Certificates issued in the month of February, 2014 S.NO. REG.NO. NAME ... E-Learning on the Topics- Business Etiquette & Mastering the Interview. The Institute of Chartered Accountants of India E- Learning on the topics- Business Etiquette and Mastering the Interview by CMII of ICAI Dear Professional Colleagues, Greetings fro... Invitation for Nomination for 8th ICAI Awards 2014 th 8 ICAI AWARDS 2014 For Chartered Accountants in Industry Invitation for Nomination Dear Professional Colleagues, I am elated to inform th... Income Tax Benefits Should Be Adjusted to Inflation India's Union Budget 2014-15 is just a few days away and every taxpayer has his/her own wish list on what can be expected from it. In addition to the corporate sector, salaried taxpayers and middle cl... Budget 2014-15: Govt must rationalise indirect tax regime to revive manufacturing As expected, the new government is keen to get the economy back on the high-growth path at the earliest possible. A plethora of reforms are being considered to revive manufacturing in particular. One ... Income Tax refunds should be made after assessment Income Tax (I-T) refunds should be paid immediately after assessment of the taxpayer is over and without delay, I-T Ombudsman for Kolkata K K Mahapatra today said. "Refunds should be given soon once ... TAXATION AND ISSUES OF CO-OPERATIVE SOCIETIES,URBAN BANKS & AOP AND COMPANIES ACT AMENDMENT - HIGH LIGHTS Events Details Event Topic TAXATION AND ISSUES OF CO-OPERATIVE SOCIETIES,URBAN BANKS & AOP AND COMPANIES ACT AMENDMENT - HIGH LIGHTS Date 28-06-2014 Event Venue Bapuji MBA ... CPE seminar on taxation of charitable trust Events Details Event Topic cpe seminar on taxation of charitable trust Date 28-06-2014 Event Venue srinivasa rao thota CPE Hrs 6 Capacity of Venue 200 Joint Se... CBDT refuses to share details with the CBI The Central Bureau of Investigation (CBI) is at loggerheads with the Central Board of Direct Taxes (CBDT) over the probe into the Moin Qureshi Hawala case. The CBDT has refused to share details regar... Reviewing the Reporting and Accounting Procedure of Relief and Savings Bonds - Revised Application format - 8% Savings (Taxable) Bonds, 2003 RBI/2013-14/654DGBA.CDD. No. 6919/13.01.299/2013-14 June 12, 2014 The Chairman/Managing DirectorHead Office (Government Accounts Department)State Bank of India and AssociatesAll Nationalised Banks(E... Constitution of Special Investigating Team (SIT) – Sharing of Information with SIT by Primary (Urban) Cooperative Banks (UCBs) RBI/2013-14/655UBD.BPD (PCB) Cir. No. 73/14.01.062/2013-14 June 24, 2014 The Chief Executive Officer,All Primary (Urban) Co-operative Banks. Madam / Dear Sir, Constitution of Special Investigating... Inviting applications for filling up of two posts of Members in the Competition Commission of India. Inviting applications for filling up of two posts of Members in the Competition Commission of India. Applications are invited from India... 73 Opening Finance & Accounts Executives- Fresher Apply Salary:INR 2,00,000 - 2,50,000 P.AIndustry: Fresher / Trainee / Entry LevelFarea: Accounts, Finance, Tax, Company Secretary, AuditRole Category:AccountsRole:Accounts Executive/AccountantEducation: UG ... 86 Opening Executive - Accounts Salary:INR 2,00,000 - 2,75,000 P.AIndustry: Telecom/ISP /Farea: Accounts, Finance, Tax, Company Secretary, AuditRole Category:AccountsRole:Accounts Executive/AccountantEducation: UG - Any Graduate - A... 34 Opening Finance & Accounts Executives- Fresher Apply for HCL, Wipro, Accenture Salary:INR 1,75,000 - 4,00,000 P.AIndustry: Accounting / FinanceFarea: Accounts, Finance, Tax, Company Secretary, AuditRole Category:AccountsRole:Accounts Executive/AccountantEducation: UG - Any Gradu... General Circular No. 21/2014:Clarifications with regard to provisions of Corporate Social Responsibility under section 135 of the Companies Act, 2013. General Circular No. 21/2014 No. 05/01/2014- CSR ... General Circular No. 20/2014:Clarification with regard to voting through electronic means New Link General Circular No. 2Ol2O14 No. 1/34l2013-cL-V Government of India ... Shalini Goyal, ]44, Engineers Enclave, Pitampura, Delhi. Vs. ACIT, Central Circle-5, New Delhi. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA No.4314/Del/2013 ... ACIT, Circle 35 (1), Room No.D-4, Vikas Bhawan, New Delhi. Vs. Satish Chandra, 16, Friends Colony, Lane-2, GT Road, Shahdara, Delhi. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA No.5613/Del/2012 ... CIT vs. J. L. Morrison (India) Ltd (Calcutta High Court) S. 263: The CIT can revise an assessment only if he can show unmistakably that the order of the AO is unsustainable. Fact that the AO has passed a non-speaking order does not mean that he has not appl... Sunil Kumar Agarwal vs. CIT (Calcutta High Court) S. 50C: If the stamp duty valuation is higher than the consideration received, the AO must refer the valuation to the DVO even if there is no request by the assessee The assessee sold a piece of land... Kerala Vision Ltd vs. ACIT (ITAT Cochin) S. 40(a)(ia): If an amount is made taxable by a retrospective amendment, the payer cannot be held liable to deduct TDS on a payment made earlier and to suffer disallowance u/s 40(a)(ia) The assessee ... Transfer pricing specialist moves to KPMG KPMG has appointed a new partner to its 85-strong transfer pricing team He is Steve Labrum, former global head of transfer pricing at Alvarez and Marsal, the global professional services firm. He br... Budget 2014: 5 tax rules that need immediate attention of the FM The upcoming budgetary announcement is perhaps the most eagerly awaited one in recent memory. It is viewed as first big policy announcement on the economic front by the new government and an indicator... |
For everyday detailed news update on ICAI, profession, latest judgments etc.; please visit at www.cainindia.org everyday.
Best Regards,
CAinINDIA Team
www.cainindia.org
No TDS on sales commission paid to a non-resident for services rendered outside India
IT/ILT : Agency/sales commission payment to non-resident agents for services outside India is not tax deductible at source and outside the purview of section 40(a)(i)
Long term capital loss once accepted by revenue couldn't be reduced subsequently in year of set off
IT : Long term capital loss determined and accepted by revenue in relevant assessment year could not be reduced in year where assessee had claimed only set off assessed and determined loss
IT: Where assessee claimed to set-off certain amount toward
miscellaneous receipt but failed to produce any material to support
claim with regard to miscellaneous receipts and also failed to
maintain true and correct account, setting off could not be allowed
■■■
[2014] 45 taxmann.com 455 (Karnataka)
HIGH COURT OF KARNATAKA
Commissioner of Income-tax, Central Circle
v.
Sri Lakshmi Narasimha Distilleries (P.) Ltd.*
DILIP B. BHOSALE, AND B. MANOHAR, JJ.
IT APPEAL NO. 226 OF 2007†
SEPTEMBER 12, 2013
Section 28(i), read with section 158BC, of the Income-tax Act, 1961 -
Business income - Chargeable as (Miscellaneous receipt) - Block
assessment years 1-4-1991 to 27-4-2001 - Assessee-company was engaged
in business of manufacturing rectified spirit - Search was conducted
at premise of assessee during which evidences with regard to
unaccounted sale of rectified spirit and other discriminating
documents were seized - In pursuance to notice under section 158BC,
assessee filed return for block period declaring undisclosed income of
Rs. 49,47,000 and also set off of Rs. 31,95,000 toward miscellaneous
receipt as recorded in books - During course of assessment
proceedings, assessee had admitted that except business of rectified
spirit, they are not doing any other business - Whether since assessee
had failed to produce any material or evidence to support claim with
regards to miscellaneous receipts and also failed to maintain true and
correct account, no set off could not sustained - Held, yes [Para 8]
[In favour of revenue]
FACTS
■ The assessee company was engaged in the business of manufacturing
of rectified spirit. Search was conducted in the premises of the
assessee in which evidences with regard to unaccounted sale of
rectified spirit and other incriminating documents were seized. In
pursuance of the notice under section 158BC, the assessee filed the
return of income for the block period declaring the undisclosed income
of Rs. 49,47,000 from which it claimed reduction set off of Rs.
31,95,000 as miscellaneous receipt.
■ The Assessing Officer rejected the claim for set off on ground
that assessee had failed to produce any evidence with regard to set
off amount/miscellaneous receipt.
■ On appeal, the Commissioner (Appeals) rejected the appeal of
assessee by confirming order made by the Assessing Officer.
■ On further appeal, Tribunal allowed appeal in part by relying upon
its order in another case and held that the miscellaneous receipts
represented the income and such income is to be reduced from
undisclosed income determined on unaccounted sale of rectified spirit.
■ On revenue's appeal:
HELD
■ During the course of assessment proceedings, the assessee had
admitted that except the business of rectified spirit, they are not
doing any other business. No document has been produced with regard to
miscellaneous receipts. The Assessing Authority after considering the
matter in detail passed fresh assessment order and the same was
confirmed by the Appellate Authority. The Appellate Tribunal without
any material before it, has set aside the order solely on the basis of
an earlier order made by it. However, the said order was set aside by
the Court on an appeal filed by the revenue. The assessee has failed
to produce any materials or evidence to support the claim with regard
to miscellaneous receipts and also failed to maintain the true and
correct account. Hence, the order passed by the Appellate Tribunal
cannot be sustained. [Para 8]
CASES REFERRED TO
J.P. Narayanaswamy [IT(SS) Appeal No. 154 (B) of 2004, dated 8-9-2006]
(para 3), J.P. Narayanaswamy [IT (SS) Appeal No. 152(B) of 2004, dated
26-5-2005] (para 5) and J.P. Narayanaswamy v. Dy. CIT [2012] 340 ITR
193/202 Taxman 4 (Mag.)/[2011] 13 taxmann.com 100 (Kar.) (para 5).
G. Kamaladhar and K.V. Aravind for the Appellant. K.R. Prasad for the
Respondent.
JUDGMENT
B. Manohar, J. - The Revenue preferred this appeal under Section 260A
of the Income -tax Act, challenging the order dated 8-9 2006 made in
IT(SS)A No.154/Bang/2004 passed by the Income Tax Appellate Tribunal,
Bangalore (hereinafter referred to as 'the Appellate Tribunal' for
short) for the block assessment year from 1-4-1991 to 27-4-2001.
2. The respondent/assessee is a Limited Company engaged in the
business of manufacturing of rectified spirit. Search was conducted in
the premises of the assessee on 27-04-2001 under Section 132 of the
Income-tax Act (for short 'the Act'). During the course of search, the
evidences with regard to unaccounted sale of rectified spirit and
other incriminating documents were seized. On the basis of the said
documents, notice under Section 158 BC of the Act was issued to the
assessee directing him to file the return of income for the block
period from 1-4-1991 to 27-4-2001 in a prescribed form.
3. In pursuance of the notice, the assessee filed the return of income
for the block period on 4-3-2002 declaring the undisclosed income of
Rs.49,47,000/-. Subsequently, notices under Section 143(2) and 142(1)
were issued on the assessee. In response to the said notices, the
authorized representative of the assessee appeared before the
Assessment Officer. During the course of assessment proceedings, the
authorized representative was asked to furnish the basis for
declaration of the undisclosed income of Rs.49,47,000/- and also set
off of Rs.31,95,000/- towards miscellaneous receipts as recorded in
the books. The assessee failed to produce any evidence with regard to
set off amount claimed by him. Accordingly, the Assessing Authority
rejected the claim for set off and issued demand notice as per;
assessment order dated 30th April 2003. Being aggrieved by the
assessment order dated 30-04-2003, the assessee preferred an appeal
before the Commissioner of Income Tax (Appeals) Bangalore (hereinafter
referred to as the Appellate Authority), contending that rejection of
the claim of the assessee for set off Rs.31,95,000/- is contrary to
law. The Appellate Authority by its order dated 28-09-2004 after
considering the matter in detail rejected the appeal insofar as set
off/reduction of a sum of Rs.31,95,000/-. Being aggrieved by the order
passed by the First Appellate Authority, the assessee preferred an
appeal before the Income Tax Appellate Tribunal, Bangalore. The
Appellate Tribunal, relying upon the earlier order passed by it in
J.P. NARAYANASWAMY case made in. IT (SS) A No. 154/B/2004 allowed the
appeal in part by its order dated 8-9-2006 and held that the
miscellaneous receipts represented the income and such income is to be
reduced from undisclosed income determined on unaccounted sale of
rectified spirit. The appellant/ revenue being aggrieved by the order
passed by the Appellate Tribunal, has preferred this appeal.
4. The present, appeal was admitted for considering the following
substantial question of law:
"Whether the Tribunal was correct in holding that miscellaneous
receipts of Rs.31,95,000/- discovered in the course of search cannot
be treated as the undisclosed income of the assessee during the block
period as the same should be presumed as unaccounted sale of rectified
spirit even though these unaccounted sales had been correctly
reflected in the books discovered in the course of search?"
5. Sri.G.Kamaladhar, learned counsel appearing for the
appellants-Revenue contended that the order passed by the Appellate
Tribunal is contrary to law. The search of premises of the assessee
was conducted on 27-04-2001 and seized some materials which disclose
that 240 loads of rectified spirits were dispatched by the assessee,
each load having carrying capacity of 12,000 litres of rectified
spirit. Out of the same, 84 loads were accounted and 154 loads were
not accounted by the assessee. The profit margin on the sale of
rectified spirit was admitted at Rs.3/- per litre. Adopting the same,
value of 156 loads of rectified spirit comes to Rs.56,16,000/-. The
assessee themselves have admitted that, apart from manufacturing the
rectified spirit they are not doing any business. Hence, the question
of reduction of Rs.31,95,000/- from the undisclosed amount does not
arise. No material has been produced before the Assessing Authority or
the Appellate Authority with regard to parallel business. However, the
Tribunal without considering all these aspects of the matter relying
upon the earlier order dated 26-05-2005 passed by the Appellate
Tribunal, in IT(SS)A No.152/B/2004 made in J.P. Narayanaswamy case,
allowed the appeal in part, which is contrary to law. Further the
Revenue has preferred an appeal against the order dated 26-05-2005 in
IT (SS) A No.152/B/2004 made in J.P. Narayanaswamy (supra) case in ITA
No.3136/ 2005. The Division Bench of this Court in a judgment in J.P.
Narayanaswamy v. Dy. CIT [2012] 340 ITR 193/202 Taxman 4 (Mag.)/[2011]
13 taxmann.com 100 allowed the appeal filed by the appellant and set
aside the order passed by the Appellate Authority. Hence, the order
passed by the Appellate Tribunal cannot be sustainable and sought for
allowing the appeal.
6. On the other hand, Sri. K.R.Prasad, learned counsel appearing for
the respondent-assessee argued in support of the order passed by the
Appellate Tribunal and contended that the authorities below without
considering the contentions raised by the assessee refused to deduct a
sum of Rs.31,95,000/- towards miscellaneous receipts out of the
undisclosed income of Rs.49,47,000/-. The Appellate Tribunal after
considering the matter in detail allowed the appeal, set off of
Rs.31,95,000/- which does not call for interference. Hence, sought for
dismissal of the appeal.
7. We have carefully considered the arguments addressed by the learned
counsel for the parties.
8. The; records clearly disclose that the assessee had filed return of
income on 4-3-2002 declaring the undisclosed income of Rs.49,47,000/-.
However, they claimed reduction of Rs.31,95,000/- as miscellaneous
receipts. During the course of assessment proceedings, the assessee
had admitted that except the business of rectified spirit, they are
not doing any other business. No document has been produced with
regard to miscellaneous receipts. The Assessing Authority after
considering the matter in detail passed fresh assessment order and the
same was confirmed by the Appellate Authority. The Appellate Tribunal
without any material before it, has set aside the order solely on the
basis of the earlier order made by it in IT(SS)A No.152/B/2004 and the
said order was set aside by the court on an appeal filed by the
revenue in ITA.No.3136/2005 dated 11-08-2011. The assessee has failed
to produce any materials or evidence to support the claim with regard
to miscellaneous receipts and also failed to maintain the true and
correct account. Hence, the order passed by the Appellate Tribunal
cannot be sustained.
9. Accordingly, the appeal is allowed, the set off allowed by the
Tribunal in favour of the assessee is set aside and the substantial
question of law framed in this appeal is held in favour of the
appellants-revenue.
SB
*In favour of revenue.
†Arising out of IT(SS) Appeal No. 154 (Bang.) of 2004, dated 8-9-2006.
--
Regards,
*Pawan Singla ,** LLB*
*M. No. 9825829075*
miscellaneous receipt but failed to produce any material to support
claim with regard to miscellaneous receipts and also failed to
maintain true and correct account, setting off could not be allowed
■■■
[2014] 45 taxmann.com 455 (Karnataka)
HIGH COURT OF KARNATAKA
Commissioner of Income-tax, Central Circle
v.
Sri Lakshmi Narasimha Distilleries (P.) Ltd.*
DILIP B. BHOSALE, AND B. MANOHAR, JJ.
IT APPEAL NO. 226 OF 2007†
SEPTEMBER 12, 2013
Section 28(i), read with section 158BC, of the Income-tax Act, 1961 -
Business income - Chargeable as (Miscellaneous receipt) - Block
assessment years 1-4-1991 to 27-4-2001 - Assessee-company was engaged
in business of manufacturing rectified spirit - Search was conducted
at premise of assessee during which evidences with regard to
unaccounted sale of rectified spirit and other discriminating
documents were seized - In pursuance to notice under section 158BC,
assessee filed return for block period declaring undisclosed income of
Rs. 49,47,000 and also set off of Rs. 31,95,000 toward miscellaneous
receipt as recorded in books - During course of assessment
proceedings, assessee had admitted that except business of rectified
spirit, they are not doing any other business - Whether since assessee
had failed to produce any material or evidence to support claim with
regards to miscellaneous receipts and also failed to maintain true and
correct account, no set off could not sustained - Held, yes [Para 8]
[In favour of revenue]
FACTS
■ The assessee company was engaged in the business of manufacturing
of rectified spirit. Search was conducted in the premises of the
assessee in which evidences with regard to unaccounted sale of
rectified spirit and other incriminating documents were seized. In
pursuance of the notice under section 158BC, the assessee filed the
return of income for the block period declaring the undisclosed income
of Rs. 49,47,000 from which it claimed reduction set off of Rs.
31,95,000 as miscellaneous receipt.
■ The Assessing Officer rejected the claim for set off on ground
that assessee had failed to produce any evidence with regard to set
off amount/miscellaneous receipt.
■ On appeal, the Commissioner (Appeals) rejected the appeal of
assessee by confirming order made by the Assessing Officer.
■ On further appeal, Tribunal allowed appeal in part by relying upon
its order in another case and held that the miscellaneous receipts
represented the income and such income is to be reduced from
undisclosed income determined on unaccounted sale of rectified spirit.
■ On revenue's appeal:
HELD
■ During the course of assessment proceedings, the assessee had
admitted that except the business of rectified spirit, they are not
doing any other business. No document has been produced with regard to
miscellaneous receipts. The Assessing Authority after considering the
matter in detail passed fresh assessment order and the same was
confirmed by the Appellate Authority. The Appellate Tribunal without
any material before it, has set aside the order solely on the basis of
an earlier order made by it. However, the said order was set aside by
the Court on an appeal filed by the revenue. The assessee has failed
to produce any materials or evidence to support the claim with regard
to miscellaneous receipts and also failed to maintain the true and
correct account. Hence, the order passed by the Appellate Tribunal
cannot be sustained. [Para 8]
CASES REFERRED TO
J.P. Narayanaswamy [IT(SS) Appeal No. 154 (B) of 2004, dated 8-9-2006]
(para 3), J.P. Narayanaswamy [IT (SS) Appeal No. 152(B) of 2004, dated
26-5-2005] (para 5) and J.P. Narayanaswamy v. Dy. CIT [2012] 340 ITR
193/202 Taxman 4 (Mag.)/[2011] 13 taxmann.com 100 (Kar.) (para 5).
G. Kamaladhar and K.V. Aravind for the Appellant. K.R. Prasad for the
Respondent.
JUDGMENT
B. Manohar, J. - The Revenue preferred this appeal under Section 260A
of the Income -tax Act, challenging the order dated 8-9 2006 made in
IT(SS)A No.154/Bang/2004 passed by the Income Tax Appellate Tribunal,
Bangalore (hereinafter referred to as 'the Appellate Tribunal' for
short) for the block assessment year from 1-4-1991 to 27-4-2001.
2. The respondent/assessee is a Limited Company engaged in the
business of manufacturing of rectified spirit. Search was conducted in
the premises of the assessee on 27-04-2001 under Section 132 of the
Income-tax Act (for short 'the Act'). During the course of search, the
evidences with regard to unaccounted sale of rectified spirit and
other incriminating documents were seized. On the basis of the said
documents, notice under Section 158 BC of the Act was issued to the
assessee directing him to file the return of income for the block
period from 1-4-1991 to 27-4-2001 in a prescribed form.
3. In pursuance of the notice, the assessee filed the return of income
for the block period on 4-3-2002 declaring the undisclosed income of
Rs.49,47,000/-. Subsequently, notices under Section 143(2) and 142(1)
were issued on the assessee. In response to the said notices, the
authorized representative of the assessee appeared before the
Assessment Officer. During the course of assessment proceedings, the
authorized representative was asked to furnish the basis for
declaration of the undisclosed income of Rs.49,47,000/- and also set
off of Rs.31,95,000/- towards miscellaneous receipts as recorded in
the books. The assessee failed to produce any evidence with regard to
set off amount claimed by him. Accordingly, the Assessing Authority
rejected the claim for set off and issued demand notice as per;
assessment order dated 30th April 2003. Being aggrieved by the
assessment order dated 30-04-2003, the assessee preferred an appeal
before the Commissioner of Income Tax (Appeals) Bangalore (hereinafter
referred to as the Appellate Authority), contending that rejection of
the claim of the assessee for set off Rs.31,95,000/- is contrary to
law. The Appellate Authority by its order dated 28-09-2004 after
considering the matter in detail rejected the appeal insofar as set
off/reduction of a sum of Rs.31,95,000/-. Being aggrieved by the order
passed by the First Appellate Authority, the assessee preferred an
appeal before the Income Tax Appellate Tribunal, Bangalore. The
Appellate Tribunal, relying upon the earlier order passed by it in
J.P. NARAYANASWAMY case made in. IT (SS) A No. 154/B/2004 allowed the
appeal in part by its order dated 8-9-2006 and held that the
miscellaneous receipts represented the income and such income is to be
reduced from undisclosed income determined on unaccounted sale of
rectified spirit. The appellant/ revenue being aggrieved by the order
passed by the Appellate Tribunal, has preferred this appeal.
4. The present, appeal was admitted for considering the following
substantial question of law:
"Whether the Tribunal was correct in holding that miscellaneous
receipts of Rs.31,95,000/- discovered in the course of search cannot
be treated as the undisclosed income of the assessee during the block
period as the same should be presumed as unaccounted sale of rectified
spirit even though these unaccounted sales had been correctly
reflected in the books discovered in the course of search?"
5. Sri.G.Kamaladhar, learned counsel appearing for the
appellants-Revenue contended that the order passed by the Appellate
Tribunal is contrary to law. The search of premises of the assessee
was conducted on 27-04-2001 and seized some materials which disclose
that 240 loads of rectified spirits were dispatched by the assessee,
each load having carrying capacity of 12,000 litres of rectified
spirit. Out of the same, 84 loads were accounted and 154 loads were
not accounted by the assessee. The profit margin on the sale of
rectified spirit was admitted at Rs.3/- per litre. Adopting the same,
value of 156 loads of rectified spirit comes to Rs.56,16,000/-. The
assessee themselves have admitted that, apart from manufacturing the
rectified spirit they are not doing any business. Hence, the question
of reduction of Rs.31,95,000/- from the undisclosed amount does not
arise. No material has been produced before the Assessing Authority or
the Appellate Authority with regard to parallel business. However, the
Tribunal without considering all these aspects of the matter relying
upon the earlier order dated 26-05-2005 passed by the Appellate
Tribunal, in IT(SS)A No.152/B/2004 made in J.P. Narayanaswamy case,
allowed the appeal in part, which is contrary to law. Further the
Revenue has preferred an appeal against the order dated 26-05-2005 in
IT (SS) A No.152/B/2004 made in J.P. Narayanaswamy (supra) case in ITA
No.3136/ 2005. The Division Bench of this Court in a judgment in J.P.
Narayanaswamy v. Dy. CIT [2012] 340 ITR 193/202 Taxman 4 (Mag.)/[2011]
13 taxmann.com 100 allowed the appeal filed by the appellant and set
aside the order passed by the Appellate Authority. Hence, the order
passed by the Appellate Tribunal cannot be sustainable and sought for
allowing the appeal.
6. On the other hand, Sri. K.R.Prasad, learned counsel appearing for
the respondent-assessee argued in support of the order passed by the
Appellate Tribunal and contended that the authorities below without
considering the contentions raised by the assessee refused to deduct a
sum of Rs.31,95,000/- towards miscellaneous receipts out of the
undisclosed income of Rs.49,47,000/-. The Appellate Tribunal after
considering the matter in detail allowed the appeal, set off of
Rs.31,95,000/- which does not call for interference. Hence, sought for
dismissal of the appeal.
7. We have carefully considered the arguments addressed by the learned
counsel for the parties.
8. The; records clearly disclose that the assessee had filed return of
income on 4-3-2002 declaring the undisclosed income of Rs.49,47,000/-.
However, they claimed reduction of Rs.31,95,000/- as miscellaneous
receipts. During the course of assessment proceedings, the assessee
had admitted that except the business of rectified spirit, they are
not doing any other business. No document has been produced with
regard to miscellaneous receipts. The Assessing Authority after
considering the matter in detail passed fresh assessment order and the
same was confirmed by the Appellate Authority. The Appellate Tribunal
without any material before it, has set aside the order solely on the
basis of the earlier order made by it in IT(SS)A No.152/B/2004 and the
said order was set aside by the court on an appeal filed by the
revenue in ITA.No.3136/2005 dated 11-08-2011. The assessee has failed
to produce any materials or evidence to support the claim with regard
to miscellaneous receipts and also failed to maintain the true and
correct account. Hence, the order passed by the Appellate Tribunal
cannot be sustained.
9. Accordingly, the appeal is allowed, the set off allowed by the
Tribunal in favour of the assessee is set aside and the substantial
question of law framed in this appeal is held in favour of the
appellants-revenue.
SB
*In favour of revenue.
†Arising out of IT(SS) Appeal No. 154 (Bang.) of 2004, dated 8-9-2006.
--
Regards,
*Pawan Singla ,** LLB*
*M. No. 9825829075*
On Wednesday, 25 June 2014 7:05 AM, "info@cliofindia.com" <info@cliofindia.com> wrote:
Attention ITR ONLINE users:
ITR ONLINE is now part of
TLOL Suite 3.0
and so is
COMPANY CASES
and
soon VAT and Service Tax cases
and
Goods and Service Tax Reports too.TLOL SUITE 3.0 -
The Complete Tax and Company Law ReferenceTo be released soon
Click here to view subject index
www.cliofindia.com info@cliofindia.com
INCOME TAX REPORTS (ITR) HIGHLIGHTS
F Advance ruling : Bar where question pending before income-tax authorities : Decision of High Court and Authority set aside and matter remanded to Authority for fresh ruling : Sin Oceanic Shipping ASA, Norway v. AAR p. 546
F Profits on transfer of DEPB entitlements : Computation of deduction in accordance with decision Topman Exports : Harnam Syntex P. Ltd. v. CIT p. 548
F Capital gains payable by company on sale of assets by court not liquidation expenses, cannot be paid in priority over dues of workmen and secured creditors : CIT v. KTC Tyres (India) Ltd. p. 550
F Donations for charitable purpose : Maintenance of accounts in a particular way not necessary : Karunya Rural Health Care Society v. Director of I. T. (Exemptions) (Karn) p. 554
F Notified person : Attachment of bank accounts and assets : Interest under sections 234A, 234B and 234C chargeable : CIT v. Divine Holdings P. Ltd. (Bom) p. 558
F Directors of public company cannot be made liable for tax due from company : Radhey Mohan Sharma v. Deputy CIT (OSD) (Guj) p. 568 and Dhaval N. Patel v. CIT (Guj) p. 576
F Notifications :
F Income-tax Act, 1961 :
Notification under section 90 :
Agreement between the Government of the Republic of India and the Government of the Principality of Liechtenstein on the exchange of information on tax matters . . . 177
F Power of High Court to hear appeal on any other substantial question of law : CIT v. Engineers India Ltd. (31-3-2014) p. 686
F Payments made on stake money to horse owners : Whether assessee to comply with TDS provisions : Whether authority exceeded his jurisdiction in holding assessee in default : Assessee cannot invoke writ jurisdiction straightaway : Hyderabad Race Club v. Deputy CIT (AP) p. 547
F Previous year : Change of law : No ambiguity in adopting the period of assessment from 1-1-1987 to 31-3-1989 : CIT v. Rampur Distillery and Chemical Co. Ltd. (24-4-2014) (All) p. 551
F Block assessment : Adjustment of tax liability by sale of gold bars only after completion of assessment and determination of tax demand : Hemant Kumar Sindhi v. CIT (26-3-2014) (All) p. 555
F Delay in submitting return under section 158BC : Interest mandatory : CIT v. B. Suresh Baliga (27-1-2014) (Karn) p. 560
F Issue of levy of surcharge in block assessment to be decided following judgment of larger Bench : CIT v. B. Suresh Baliga (27-1-2014) (Karn) p. 560
F Bad debt : No finding regarding writing off : Matter remanded : CIT v. B. Suresh Baliga (27-1-2014) (Karn) p. 560
F Tax effect less than specified limit but issue regarding levy of surcharge and levy of interest in block assessment raised repeatedly : Appeal maintainable : CIT v. B. Suresh Baliga (27-1-2014) (Karn) p. 560
F Stay of recovery : During pendency order of Special Bench of Tribunal delivered and assessee making detailed submissions : AO and Tribunal bound to consider : Coca-Cola India P. Ltd. v. Assistant Registrar, ITAT (4-3-2014) (Bom) p. 567
F Correspondence in original assessment proceedings indicating every aspect of transaction not only disclosed but specifically noticed by AO : Notice after four years invalid : Bharat Bijlee Ltd. v. Asst. CIT (5-3-2014) (Bom) p. 581
F Block assessment : Appellate authorities rightly quashing order of AO : CIT v. Sairang Developers and Promoters P. Ltd. (28-4-2014) (Bom) p. 593
F Data base of programmes utilised for creation of news archives : Estimated value assigned to news archives allowable as revenue expenditure : CIT v. Television Eighteen India Ltd. (No. 1) (29-4-2014) (Delhi) p. 597
F Notice under section 142 on transferor company after date of amalgamation not valid : Khurana Engineering Ltd. v. Deputy CIT (Guj) p. 600
F Television programme : Part of news archives allowable as revenue expenditure : CIT v. Television Eighteen India Ltd. (No. 2) (30-4-2014) (Delhi) p. 605
F Succeeding AO taking a different view in the issue examined in original assessment : Notice of reassessment not valid : Heavy Metal and Tubes Ltd. v. Deputy CIT (Guj) 609
F Settlement Commission giving opportunity to Department and representative of Department both at stage of admission and also at stage of passing final order : No judicial review : CIT v. Settlement Commission (10-4-2014) (AP) p. 625
F Impact and legal effect of a order of amalgamation and winding up of assessee on penalty proceedings pure legal issue : Tribunal ought not to have remitted legal issue to AO : Kansai Nerolac Paints Ltd. v. Deputy CIT (6-5-2014) (Bom) p. 632
F Notice of reassessment issued even before the reasons recorded not valid : CIT v. Baldwin Boys High School (18-3-2014) (Karn) p. 637
F Income from HUF in original return but discovery during scrutiny assessment that major portion of income from HUF not included : Penalty imposable for concealment in original return : CIT v. L. Vishnudas (17-1-2014) (Ker) p. 642
F Tax payable on reassessment less than tax paid under regular assessment : No income chargeable to tax has escaped assessment : India Gelatine and Chemicals Ltd. v. Asst. CIT (23-4-2014) (Guj) p. 649
F Supplementary reasons recorded after issue of notice have no validity : India Gelatine and Chemicals Ltd. v. Asst. CIT (No. 2) (23-4-2014) (Guj) p. 655
F Purchase and sale of liquor : Addition on estimate basis reversed by Tribunal : No question of law : CIT v. Prayag Wines (8-5-2014) (All) p. 660
F Mutual agreement procedure : No evidence that amount paid as bank guarantee was not valid : Garnishee proceedings against bank not valid : Motorola Solutions India P. Ltd. v. CIT (P & H) p. 663
F Claim for deduction not allowed : Not a proof of concealment : CIT v. Cholamandalam Investment and Finance Co. Ltd. (5-3-2014) (Mad) p. 680
F Amounts paid without TDS in accounting year relevant to assessment year 2007-08 : Amendments to sections 40(a) and 201 allowing benefit where payee has paid tax on receipts effective from 1-4-2013 : Disallowance of amounts justified : Prudential Logistics and Transports v. ITO (13-1-2014) (Ker) p. 689
F Failure to produce donors before AO not conclusive : Amounts utilised for charitable purposes : Trust entitled to exemption : CIT v. MBA Nahata Charitable Trust (14-2-2014) (Karn) p. 693
F Sale of business at profits : Transfer of land to a different person resulting in loss : Loss on transfer of land could not be set off against profits from sale of business : CIT v. McDowell and Co. Ltd. (Karn) p. 699
F Rules :
Income-tax (Fourth Amendment) Rules, 2014 . . . 17
F Notifications :
F Income-tax Act, 1961 :
Notification under section 48, Explanation, clause (v) :
Cost Inflation Index for 2014-15 specified for purposes of computation of capital gains . . . 55
Notification under section 80G(2)(b) :
Place of public worship . . . 56
F Denial of exemption under section 11, in view of violation of section 13-S. K. Tyagi, Advocate . . . 21
F "Fee" Payable under section 234E of the Income-tax Act-V. Pasupathi, Advocate . . . 39
COMPANY LAW INSTITUTE OF INDIA PVT. LTD.
No. 2, Vaithyaram Street,
T.Nagar, Chennai - 600017.
Phone: (044) 24350752 - 55
Fax: (044) 24322015
info@cliofindia.com
To Unsubscribe : Reply back with "Unsubscribe" in subject followed by the key word "ITR" or "CC" or "VST" or "GSTR" or "ITR (Trib)", respectively or "All" if you do not want any Email. ITR : Income Tax Reports, CC : Company Cases, VST : VAT and Service Tax Cases, GSTR : Goods and Service Tax Reports, ITR (Trib) : ITR'S Tribunal Tax Reports. Also send your feedback or comments to info@cliofindia.com
__._,_.___
No comments:
Post a Comment