Chartered Accountant Finance: [aaykarbhavan] Judgments and Information [1 Attachment]

ICAI suggests Facility to submit Form C, E, F etc. online Posted In GST | Articles | 1 Comment »
       
Facility to submit Form C, E etc. online
Section 6 is charging Section. As per Section 6(2) subsequent inter-state sale transaction taking place by transfer of documents   of title to goods, when the goods are in course of movement, are   exempt. For this purpose the claimant dealer has to obtain Form E-1 from   his vendor (if such vendor is first seller otherwise, E-II) and Form   'C' from the buyer. One 'C' form can be issued for one quarter of a financial   year. Similarly EI/EII can also be issued on quarterly basis. Under   Section 6A, branch/consignment transfer is allowed only if Form 'F' is   produced, else it will be deemed to be a sale. Form 'F' is required to   be obtained from transferee branch/agent. One Form 'F' can cover   transfers affected in one calendar month.
Central Government has also substituted sub rule (7) to rule 12 with   effect from 1st October, 2005. Form C or certificate in Form E-I or E-II   will have to be submitted to sales tax   department within three months from the end of the quarter in which   sale is affected. In case of Form F, it is to be obtained on monthly   basis and it is to be submitted to the sales tax department within three   months from the end of the month in which goods are transferred to the   interstate branch or agent.
Suggestion 
With a considerable development in technology, all the relevant forms under Central Sales Tax Act like Form C, E, F etc. be allowed to be filed online. This will not only expedite the process of submitting the forms but also will save the time and streamline the process.
Form E-1 is issued by the seller of goods in case of first sales made. At the time of subsequent sale form E-II is required to be issued by the seller. It is suggested that Form E-I be allowed to be used as self declaration form by intermediate sellers in order to avoid exchange of various forms in the process.
Source- Pre-Budget Memorandum – 2014 on Indirect Taxes by The Institute Of Chartered Accountant Of India, New Delhi
 - See more at: http://taxguru.in/goods-and-service-tax/icai-suggests-facility-submit-form-online.html#sthash.cJimJcns.dpuf
MUMBAI,       JUNE 16, 2014: THE issues   before the Bench are       - Whether       without bringing something   positive on record to distinguish the facts       of earlier year and   current year, it can be argued that the assessee has       changed its   nature of charitable activities and Whether extending financial         assistance or scholarship, to students for their educational purpose   would       fall within the connotation of "education". And the verdict   goes in       favour of the assessee.
Facts       of the case
The    assessee     is a Section 25 company. As per the MOA, principle object   of the assessee     were the study of the theory of banking, to   institute scheme of examination,     to promote information on banking   etc. DIT(E) received a proposal from the     ADIT(E) for cancellation of   registration granted to the assessee u/s. 12A.     ADIT in its proposal   stated that assessee was carrying on activities in the     nature of   trading, commerce or business, that gross receipts of the assessee       were in excess of Rs. 10 lakhs, that provisions to proviso to section   2(15)     were applicable in the case of the assessee from AY 2009-10.   Vide, his letter,     DIT(E) issued a show cause notice to the assessee   asking it as to why the     registration granted to it should not be   withdrawn by invoking the provisions     of section 12AA (3). It was   stated in the show cause notice that the activities     as carried out   by the assessee were in nature of trade, commerce or business     during   the AY 2009-10, that the details of the income in the income and   expenditure     account showed that assessee had earned income of Rs.   more than 10 lakhs,     that proviso to section 2(15) were applicable in   its case, that the objects     were in nature of advancement of any   other object of general public utility.     Assessee had made   submissions before the DIT(E). After which , it was held     that if any   trust/institution; whose main object was for advancement for     any   other object and general public utility was carrying out any activity       that was in the nature of any trade, commerce or business than the   covered     activities carried out by it would be under the ambit of   aforesaid proviso,     that CCIT Mumbai had held that; institution was   not imparting formal education;     while deciding the application filed   by it u/s. 10(23)(vi), that the activities     carried out by it were   not in the field of education, that activities of     the institution   squarely fell under the field of general public utility,     that the   receipt shown by the trust would come under the field of business       income, that sums received by it included charges (Rs. 81.74 lakhs),   examination     fees (Rs. 1.44 Crores), income from investment (Rs. 8.52   Crores), educational     income (Rs. 20.60 lakhs), tutorial class (Rs.   19.45 lakhs), royalty on publication     (Rs. 57.06 lakhs), excess fees   written back (Rs. 6.28 lakhs), miscellaneous     income (Rs. 44.91   lakhs) that same were in the nature of business income,     that the   receipts were in excess of monitory limit of Rs. 10 lakhs as laid       down in the proviso to section 2(15), that provisions of the proviso   were     effective from AY. 2009-10, that once a charitable   trust/institution was     hit by the aforesaid proviso than there was   deeming provision to treat such     entity as non-genuine, that the   assessee trust was not carrying activities     for charitable purposes.   Finally, it was held that assessee trust had became     non-genuine for   the purpose of section 11, that the registration allowed     to it in   earlier years u/s. 12AA was to be cancelled/withdrawn w.e.f. AY       2009-10. 
Before       Tribunal, AR had submitted that there was no change in the objects   of the     trust, that it was carrying the same activities that were   part of the activities     of earlier years, that proviso to section   2(15) was not applicable, that     institution was carrying out   activities that were held to be educational     by the Tribunal in the   earlier years, that both the conditions for application     of proviso   were not existing. He relied the orders of Cotton Textiles Export       (44 Taxmann.com 168), Khar Gymkhana (ITA 373/Mum/2012, AY. 2009-10,   dated     10.07.2013, Tamil Nadu Cricket Association 2013-TIOL-1074-HC-MAD-IT,   Vanita     Samaj (ITA/1034/Mum/2012-AY. 2009-10, dtd. 26.02.2014).   Referring to the     orders of the Tribunal for the AY 1996-97 to   1998-99, it was contended that     institution was carrying out   educational activities. It was further argued     that registration can   be cancelled u/s 12AA(3), if the activities of trust     were not   genuine or activities were not carried out in accordance with the       objections of the trust, that activities of the institution were genuine       it was conducting examination besides supplying study material to   participants     and organising seminars etc. Departmental   Representative argued that activities     carried out by the assessee   were for earning profit, that details of income     and expenditure the   activities taken by it were not genuine account proved     the huge   profit was earning by the assessee, that same was not coming out     of   charitable activities, that it was not carrying out any charitable   activities,     that institution was in the conducting exams, that it   had collected Rs. more     than 10 lakhs during the year under appeal,   that it was hit by the provisions     of proviso to section 2(15). On   the other hand, AR had stated that DIT(E)     had nowhere stated that   assessee had made huge profit, that the assessee     was in deficit,   that as per the provisions of the Act it had to make investments,       that if interest incomes and investments made according to the   provisions     of law were ignored there was no surplus during the year   under consideration.
Held       that,
++         as per the provisions of the Act registration of a trust can be   cancelled       in two eventualities only-first that the activities of   the trust are not       genuine and secondly the activities are not   being carried out in accordance       with the objects of the trust or   institution. If these conditions are missing,       registration cannot   be withdrawn. In the case under consideration, DIT-E       has not   alleged that activities were not carried out in accordance with         the objects of the trust. He has held that activities were not genuine         and the basis for holding the view is that the trust had income   more than       10 lakhs for the year under consideration and that the   assessee was carrying       out activities which were in the nature of   general public utility. We find       that activities carried out by the   assessee in earlier years were continuing       in the year under   appeal. In the earlier years same were held to be educational         activities. DIT-E has not brought on record any fact demonstrating the         discontinuation of such activities. Like earlier years, assessee   was conducting       exams and was supplying study material to students.   These very activities       were held to be educational activities by   the Tribunal on more than one       occasions and the orders of the ITAT   have become final. Therefore, without       bringing something positive   on record to distinguish the facts of earlier       year and current   year, view has to be taken that assessee was in the field       of   education;
++         we further find that in the case of Oxford Academy for Career   Development       Lucknow Bench of Allahabad High Court has dealt with   almost similar issue.       In that matter the assessee was granted   registration on 01.04.1999. A survey       was conducted at the business   premises of the assessee u/s 133A, wherein       documents were   impounded. On the basis of the information, it was felt       by the   departmental authorities that the society was being run for the         purposes of profit. Therefore, after serving a notice, the earlier   registration       granted under section 12A was cancelled for the   reasons that the surplus       was quite heavy. In the impugned order,   it was mentioned by the Commissioner       of Income-tax that there was   an unusual huge margin and the petitioner       was engaged in the   commercial activities rather than charitable. As per       the   balance-sheet, huge amount from the student was charged. The profit         margin embodied in the charges taken from the students was so huge and         it proved the profit motive of the petitioner. Deciding the   matter in favour       of the assessee, HC held that the assessee is   preparing students by providing       coaching/guidelines to get   admissions in professional institutions to pursue       their studies.   The sense in which the word "education" has been       used in section   2(15) is the systematic instruction, schooling or training       given   to the young in preparation for the work of life. Similarly, extending         financial assistance/scholarship, etc., to students for their   educational       purpose would squarely and fairly fall within the   connotation of "education" as       per the ratio laid down in   the case of CIT v. Saraswath Poor Students Fund       [1984] 150 ITR 142   (Karn). Thus, the assessee is engaged in "educational         activities". In the instant case, the assessee is preparing students         by providing coaching/guidelines to get admissions in professional   institutions       to pursue their studies. The sense in which the word   education has been       used in section 2(15) of the Act is the   systematic instruction, schooling       or training given to the young   in preparation for the work of life. Similarly,       extending   financial assistance/scholarship, etc., to students for their         educational purpose would squarely and fairly fall within the   connotation       of "education" as per the ratio laid down in the case   of CIT       v. Saraswath Poor Students Fund [1984] 150 ITR 142 (Karn).   Thus, the assessee       is engaged in "educational activities" (357 ITR 604);
++         we find that assessee is also carrying out similar kind of   activities i.e.       educational activities, so, in our opinion proviso   to section 2(15) is       not applicable to it. Said proviso is   applicable to those institutions       that are involved in the   advancement of any other object of general public       utility. In the   case under appeal there is reason as why to not to treat       it as   educational institution. Secondly, issue of real surplus or deficit         of the income and expenditure account has not been looked in to by the         DIT-E, though he had considered various figures while deciding   the issue       against the assessee. In absence of a finding of fact   that there was change       the activities of the assessee during the   year or that the assessee was       not carrying out its activities as   per the MOA, we are not inclined to       endorse the views of the   DIT-E. Considering the peculiar facts and circumstances       of the   case, we decide effective ground of appeal in favour of the assessee.         As a result, appeal filed by the assessee stands allowed. 


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  IT : Where assessee imported metal scrap and after segregating such   scrap, produced various articles including graded brass metal, metal   vires, etc., entire process came within meaning of 'manufacture or   produce'
■■■
  [2014] 45 taxmann.com 386 (Gujarat)
  HIGH COURT OF GUJARAT
Commissioner of Income-tax
v.
  Ambika Recycling*
  AKIL KURESHI AND MS. SONIA GOKANI, JJ.
  TAX APPEAL NOS. 299 & 300 OF 2010
APRIL  9, 2014 
Section   10B of the Income-tax Act, 1961 - Export oriented undertaking   (Manufacture) - Whether where assessee, an EOU, imported metal scrap and   after segregating such scrap, produced various articles including   graded brass metal, metal vires, etc. and re-exported same, entire   process came within meaning of 'manufacture or produce' and, thus,   assessee's claim for exemption of income under section 10B was to be   allowed - Held, yes [Para 5] [In favour of assessee]
  CASE REVIEW
 
  CIT v. Mitesh Impex [IT Appeal No. 2562 of 2009, dated on 2-4-2014] (para 5) followed.
  CASES REFERRED TO
 
  Asstt. CIT v. Metal Recycling Industries [IT Appeal No. 375 (R) of 2006 and C/o No. 39 (R) of 2006] (para 3) and CIT v. Mitesh Impex [Tax Appeal No. 2562 of 2009, dated 2-4-2014] (para 4).
Pranav G. Desai for the Appellant. R.K. Patel for the Respondent.
  ORDER
 
  Akil Kureshi, J. - In these Tax Appeals the following common question of law was framed while admitting these appeals :
  "Whether in the circumstances and the facts of the case and in law, the   Appellate Tribunal erred in treating the processes employed by the   assessee in segregating the metal scrap from cable scrap as 'Manufacture   or produce' within the meaning of section 10B of the Income-tax Act ?"
2. It   was also ordered that the Tax Appeals be heard with Tax Appeal No.2567   of 2009. It is pointed out that Tax Appeal No.2657 of 2009 came to be   disposed of by a judgment dated April 02, 2014. Somehow these appeals   got segregated. These appeals involve only one question, whereas Tax   Appeal No.2567 of 2009 and other connected appeals concern certain   additional questions.
3. Though   the question of law suggested by the Revenue and framed by us is   somewhat inaccurate, the central controversy is whether the   respondent-assessee, who was an exporter, carried out manufacturing   process. The respondent-assessee was 100% Export Oriented Unit   (hereinafter referred to as 'the EOU'). It imported metal scrap and   after segregating such metal scrap, produced various articles including   graded brass metal, metal wires, etc. and reexported the same. The   entire process was explained by the assessee before the Revenue   Authorities. The Tribunal relied on the decision in the case of Asstt. CIT v. Metal Recycling Industries ITA   No.375/R/2006 and C/o.No.39/R/2006. Both the sides had agreed before   the Tribunal that this decision would cover the said case also, as can   be seen from the following observations of the Tribunal :
"5.   At the time of hearing both the parties pointed out that the issues   involved in assessee's appeals and departmental appeals are the same as   in the case of the Asstt. Commissioner of Income Tax Circle-2,V/s Metal Recycling Industries, in   ITA No.375/R/2006 and C/o., No.39/R/2006 for AY 2003-04. Both the   parties also submitted that there is no change except figures and   assessment years in the facts of the case decided one and case on hand.   Therefore from both the sides it was agreed that whatever decision this   tribunal may take in the case cited (supra) shall be followed in these appeals.
6.   We have heard both the parties, perused the material on record and also   gone through the orders of authorities below. We find that the facts of   the present case and the case cited by both the parties are similar   except the figures and assessment year. We have already decided the   appeal as filed by the revenue and cross-objection vide our order dated   31.7.2009. We find that the issues involved in these matters stand   covered by our decision passed in Asstt. Commissioner of Income Tax, Circle-2, Jamnagar V/s Metal Recycling Industries in   ITA No.375/R/2006 and CO No.39/R/2006 for the assessment year 2003-04.   Therefore, following same precedent and to maintain consistency with the   Tribunal orders we dismiss the appeals of the revenue and allow the   appeals of the assessee."
4. This Court in the case of CIT v. Mitesh Impex, decided on April 02, 2014 while dealing with Tax Appeal No.2562 of 2009, which also included the case of Metal Recycling Industries (supra),   by the aforesaid judgment dated April 02, 2014, answered the question   in favour of the assessee and against the Revenue, making following   observations :
'9.   From the record, it emerges that the assessees import three kinds of   scrap, namely, mix cable scrap, mix metal scrap and old/used   transformers. From such scrap so imported, they undertake different   processes for extraction of materials, which are possible to salvage   from such scrap. Admittedly, part of the scrap is used for production of   iron ingots. To this extent even the assessing officer accepted that   the same amounted to manufacturing activity. Production of iron ingots   would necessarily require not only segregation of the scrap but also   melting at a high temperature and thereafter production of bars. To this   aspect, therefore, the Revenue rightly did not raise any issue.
10. The process undertaken by the assessees was explained before the authorities as under:—
"(a) Mix Cable Scrap
  Principle raw material being mix metal copper cable scrap is imported.   This material when received in factory is sorted and segregated in   different diameters and of various lengths. This process is done   manually or most of the times mechanically to remove jackets, upper   layer and paper and for making them suitable for feeding in different   cable cutting machines and stripping machines. After a process various   strips in the cables are removed, the sorted cable scraps put in to   cable cutting machine for cutting and stripping. Out of this process,   several types of copper wire are generated. This process also generates   several types of impurities such as plastic, dust and other metals.   Clean copper material emerges out of this process, which is different   and distinct from the cable wire scrap. The pure copper obtained from   this process is then bailed in bailing machine. This makes this metal in   different sizes and weights as required. Then this material is packed   and exported.
(a) Mix Metal Scrap
  Mix metal scrap is imported from various countries. This scrap is   consisting of several substances such as stones, rubber, steel,   metal-ferrous as well as non-ferrous etc. It is generally the scrap   generated from dismantling of buildings or other structures and plants   etc. after importing them several processes are being carried out   manually and mechanically through various machines and Metal is derived   from the whole process. The scrap on which manufacturing process is   carried out is of no use but subject to this manufacturing process. The   mix metal was used as a raw material and a further manufacturing process   was carried out namely segregation, removal of attachments and sorting   of various metals is various grade/categories. In the entire process of   manufacturing the raw material was mix material, which has not any   direct commercial usage for other industries. In the course of   manufacturing process metals having different identity and usability are   generated from the mix metal. The mix metal loses its identity and   results in production of non-ferrous metal, ferrous metal, other   non-metallic parts, slag or ingots by using such manufacturing metals.
(b) Old/Used Transformer
  The firm has imported old & used machinery. Gadgets etc. after the   completion of their useful life. The nature of the raw material was   machinery, gadgets etc, distinct and identifiable articles. The   machinery, gadgets etc. were used as raw material and a further   manufacturing process was carried out namely opening of gadgets for   removal of clean metal by machine or hand for manufacturing different   metals. In the entire process of manufacturing the raw material was old   and used, discarded machinery, gadgets and in the course of   manufacturing process of nonferrous metal, ferrous metal, non-metallic   material or ingots by using such manufactured metals."
11. On the basis of such process, the Tribunal held and observed as under:—
  "21. We have gone through the above process and final product which is   ferrous and non ferrous metal scrap and other type of scrap was quite   different from the raw material. The final products of raw material were   further used for industrial uses. While the raw material of the   assessee is of no use in foundry or industries. The final products being   the scrap of specific metal/non-metal material had distinct identity,   use, character and name. The final products had been obtained after   applying one or more process may be manually or mechanically and   thereafter the different commodity has come into existence. Therefore   the process employed by the assessee unit is falling in the four corners   of manufacture or produce.
22.   We find that concept of EOU is covered by Excise, Customs and Foreign   Trade Rules. One of the requirements for getting EOU status was that a   person should be engaged in manufacturing or production. Anybody not   doing manufacturing is not granted EOU status. During the course of   hearing the ld.AR drawn out attention to section 10AA in IT Act granting   tax benefits to SEZ (Special Economic Zone) units and the definition of   manufacture was same as section 2(r) of SEZ Act, 2005. That definition   was very wide and included the process of cutting, repair; assemble etc,   within the meaning of manufacture. As per section 10B has to be   understood as per Income Tax Act. We find that the word "Manufacturing"   is also defined in DGFT and similarly, about the definition of   manufacturing in SEZ Act, 2005. We find that the definition used in   section 10B has to be read altogether and what shown in the definition   of manufacturing in Custom Act cannot be same while examining the claim   of the assessee u/s. 10B of the Act.
23.   We have examined the basic requirement of word "Manufacturing and   Production". The assessee has used three types of raw material viz.   mixed cable scrap, mixed metal scrap and old/used transformers. An   electric cable is a product which contains a plastic cover, a protecting   access sheet or wire mesh, below that there are further insulating and   protecting sheets which in term contain one or more insulated   copper/aluminum wire which carries electric current. We find that after   its useful life is over, such cable may be sold as scrap.
Such   cable is one type of raw material for the appellant. In order separate   different types of materials available in the cable, different processes   like cable cutting, cable stripping (removal of rubber/plastic cover)   are to be employed. We find that it is only after employing different   manual/mechanical processes it results into production of scrap of   various metal/material like aluminum, copper lead, mild steel, stainless   steel, rubber zinc, paper and waste. We find that the input raw   material was a cable scrap and the output of the processes is different   kinds of material in the form of scraps. Both these commodities are   commercially distinct and separate. Their identity, name usability is   different. Therefore, we find that the process employed by the appellant   has resulted into production of different commodity. Similarly, the   transformer also contains different kinds of material in the outside   steel body. There again various processes like cutting, stripping etc.   have to be applied to obtain in a scrap form, aluminum, copper, bead MS   etc. Hence, this process can also be treated as manufacturing or   production because the final product is commercially distinct and   different from raw material.
24.   We find that the third material being mixed metal scrap is just a   mixture of different scrap material which may include used parts,   fittings, shredded industrial waste of various non-ferrous   metal/non-metal items. From this mixed scrap, different types of scrap   material are segregated and separately collected. We find that the raw   material was simply mixture of different scrap material which has been   separated.
25.   We find that there is difference in the raw material and final product   and the process was segregation of mixed scrap. Based on the decision of   the Hon SC in the case of Vijay Ship Breaking Corpn. v. CIT [2008] 175 Taxman 77 and India Cine Agencies v. CIT [2008] 175 Taxman 361 (SC) where   production is also eligible for deduction. Therefore, out of the   processes of three different types of raw material, the segregation of   mixed metals scrap can be held as the Production. There is one more   activity which the appellant is doing which is melting the final scrap   material obtained from any of these processes and foundry to make   ingots. We find that this activity there is no doubt that it amounts to   production. Although the AO has denied the entire claim, it is submitted   by the learned AR of the assessee that in some other cases, the AO has   considered the activity of making ingots as manufacturing."
12.   The term "manufacture" was not defined in the Act till the year 2009.   Currently under section 2(29BA) introduced with effect from 1.4.2009,   the term "manufacture" is defined as under:—
"2(29BA)"manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,—
  (a)   resulting in transformation of the object or article or thing into a new   and distinct object or article or thing having a different name,   character and use; or
  (b)   bringing into existence of a new and distinct object or article or thing   with a different chemical composition or integral structure;"
  13. The Central Excise Act, 1944 contains definition of the term "manufacture" in section 2(f) as under:-
  "2(f) "manufacture" includes any process—
  (i)   incidental or ancillary to the completion of a manufactured product;
(ii)   which   is specified in relation to any goods in the section or Chapter notes   of The First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)   as amounting to manufacture; or  
(iii)   which   in relation to the goods specified in the Third Schedule, involves   packing or repacking of such goods in a unit container or labelling or   re-labelling of containers including the declaration or alteration of   retail sale price on it or adoption of any other treatment on the goods   to render the product marketable to the consumer; and the word "   manufacture" shall be construed accordingly and shall include not only a   person who employs hired labour in the production or manufacture of   excisable goods, but also any person who engages in their production or   manufacture on his own account;"  
14.   The Special Economic Zones Act,2005 also defines the term 'manufacture'   but in a slightly different manner. Such definition contained in   section 2(r) reads as under:-
"2(r)   "manufacture" means to make, produce, fabricate, assemble, process or   bring into existence, by hand or by machine, a new product having a   distinctive name, character or use and shall include processes such as   refrigeration, cutting, polishing, blending, repair, remaking,   re-engineering and includes agriculture, aquaculture, animal husbandry,   floriculture, horticulture, pisciculture, poultry, sericulture,   viticulture and mining;"
15.   Though the three Acts mentioned above contain definitions of the term   "manufacture", which definitions are worded slightly differently, the   Courts have accepted the principle of fairly universal application that   where the change or series of changes brought about by the application   of processes take the commodity to the point where, commercially, it can   no longer be regarded as the original commodity but is, instead,   recognised as a distinct and new article that has emerged as a result of   the process, it would amount to manufacture of an article or thing.   Reference in this respect may be made to the decision of the Supreme   Court in the case of M/s. Ujagar Prints and others (II) vs. Union of India and others reported in (1989) 3 SCC 488.
16.   At the same time, it is also well settled that the word "manufacture"   implies a change but every change in the raw material is not   manufacture. There must be such a transformation that a new and   different article must emerge having a distinct name, character or use.   Reference may be made in this respect to the decision of the Supreme   Court in the case of M/s. Tungabhadra Industries Ltd., Kurnool vs. The Commercial Tax Officer, Kurnool reported in AIR 1961 SC 412.
17.   In the present case, as pointed out by the counsel for the assessee, in   case of mix cable scrap the material would be sorted and segregated in   the factory in different diameters of various lengths. Thereafter,   jackets and upper layers would be removed mechanically in order to make   them suitable for feeding in different cable cutting machines and   stripping machines. Thereafter various strips in the cables are removed   and sorted cable scrap would be put in cable cutting machines for   cutting and stripping. In the process, several types of copper wires   would be generated. Impurities such as plastic, dust and other metals   would be separated through this detailed process and clean copper   material would be sold after baling them on the baling machines and   packing for export sale.
18.   Likewise, mix metal scrap would consist of several substances such as   stones, rubber, steel, ferrous as well as non-ferrous metals. This would   be derived mostly from dismantling of buildings and other structures   and plants. Scrap as such would have no other use or marketability   before subjecting to manufacturing process. Assessees would segregate   and remove attachments, sorting out various metals in categories from   the mix metals. This process would derive ferrous metal, other   non-metallic parts etc.
19.   In the case of old/used transformers the assessees would import used   old gadgets and machines once their useful life is over. From such used   machines and gadgets the assessees would remove metal and other parts   and ultimately segregate non-ferrous and ferrous metals, non-metallic   material or ingots by using such metals extracted from the gadgets.
20.   It can thus be seen that in all three cases the assessees would put the   imported material to series of manual and mechanical processes and   through such exercise so undertaken, bring into existence entirely new,   distinct and different commodities which are marketable. Thus, the   Tribunal, in our opinion, correctly came to the conclusion that this   process amounted to manufacturing. In the case of Vijay Ship Breaking Corporation and others vs. Commissioner of Income-tax (supra), the Supreme Court considered a question where activity of ship breaking amounted to manufacture and observed as under:—
"8. Firstly, in the case of Ship Scrap Traders Vs. Commissioner of Income Tax, reported   in 251 ITR 807, the Bombay High Court has analysed the entire ship   breaking activity, the articles which emerged from that activity, the   various steps which are required to be undertaken for ship breaking   activity and, consequently, after placing reliance on the judgment of   this Court in Budharaja's case [1993] 204 ITR 412, it has held   that the ship breaking activity resulted in production of articles which   emerged when the ship breaking activity stood undertaken. In our view,   the important test which distinguishes the word 'production' from   'manufacture' is that the word 'production' is wider than the word   'manufacture' as held in Budharaja's case. Further, it is true that in Budharaja's case,   the Division Bench has used the word 'new article'. However, what the   Division Bench meant was that a distinct article emerges when the   process of ship breaking is undertaken. Further, the Legislature has   used the words 'manufacture' or 'production'. Therefore, the word   'production' cannot derive its colour from the word 'manufacture'.   Further, even according to the dictionary meaning of word 'production',   the word 'produce' is defined as something which is brought forth or   yielded either naturally or as a result of effort and work (seeWebster's   new international dictionary). It is important to note that the word   'new' is not used in the definition of the word 'produce'."
21. In the case of Income-tax officer v. Arihant Tiles & Marbles P. Ltd. [2010] 320 ITR 79 (SC) in   the context of the assessee's claim for deduction under section 80IA of   the Act on its activity of cutting and polishing marbles, the Apex   Court held and observed as under:—
"22. Applying the above tests laid down by this Court in Budharaja's case   [1993] 204 ITR 412 (SC) to the facts of the present cases, we are of   the view that blocks converted into polished slabs and tiles after   undergoing the process indicated above certainly results in emergence of   a new and distinct commodity. The original block does not remain the   marble block, it becomes a slab or tile. In the circumstances, not only   is there manufacture but also an activity which is something beyond   manufacture and which brings a new product into existence and,   therefore, on the facts of these cases, we are of the view that the High   Court was right in coming to the conclusion that the activity   undertaken by the respondents assessees did constitute manufacture or   production in terms of Section 80IA of the Income Tax Act, 1961."
22.   Additionally we also notice that the assessee, as an EOU is required to   carry out manufacturing activity and on its DTA sales is also required   to pay excise duty which admittedly, the assessee paid and excise   department collected. It would be a dichotomy if on the same activity   the assessees were to pay excise duty on the ground that the same   amounted to manufacturing activity but would be declined deduction under   the Income Tax Act on the ground that the same did not. In this   context, in the case ofIncome-tax officer vs. Arihant Tiles and Marbles P. Ltd. (supra) the Supreme Court had observed as under:—
"23.   Before concluding, we would like to make one observation. If the   contention of the Department is to be accepted, namely that the activity   undertaken by the respondents herein is not a manufacture, then, it   would have serious revenue consequences. As stated above, each of the   respondents is paying excise duty, some of the respondents are job   workers and the activity undertaken by them has been recognised by   various Government Authorities as manufacture. To say that the activity   will not amount to manufacture or production under Section 80IA will   have disastrous consequences, particularly in view of the fact that the   assessees in all the cases would plead that they were not liable to pay   excise duty, sales tax etc. because the activity did not constitute   manufacture. Keeping in mind the above factors, we are of the view that   in the present cases, the activity undertaken by each of the respondents   constitutes manufacture or production and, therefore, they would be   entitled to the benefit of Section 80IA of the Income Tax Act, 1961."
23.   Under the circumstances Question No.(1) is answered in favour of the   assessee and against the Revenue. Insofar as second question is   concerned, since the Tribunal has merely remanded the entire issue   before the assessing officer for fresh consideration of the entire issue   without any observations and/or directions, we do not see any reason to   interfere. The assessing officer shall examine whether on DTA sales by   the assessee, claim of deduction under section 10B of the Act would be   allowable. It is clarified that whether the remittances on such sales   have been received in foreign exchange or not would be just one of the   additional aspects of the matter.'
5. In the result, the Tax Appeals are dismissed. There shall be, however, no order as to costs.
SUNIL
  
  *In favour of assessee.


National Council (Staff Side)  PRESS RELEASE
  NEW DELHI: 14 JUNE, 2014
  Present whispering about reverting back to six days a week in place of   the prevalent five days week working in the Administrative Office of the   Central Government.
  In this connection, the issue was discussed by Shri Shiva Gopal Mishra,   Secretary Staff Side, National Council(JCM) and General Secretary, All   India Railwaymen's Federation, with the Cabinet Secretary on 13th June,   2014, and it was brought to his notice that five days a week working was   introduced, way back in the year 1985 after prolonged deliberations at   the National Council(JCM) level. Various aspects, including energy   saving in the form of electricity and also Statutory Provision regarding   working hours were kept in view.
  After discussion, Cabinet Secretary assured to Secretary Staff Side   NC/JCM, Shri Shiva Gopal Mishra, that no such proposal is under   consideration with the Government at present.
  sd/-
  For Secretary(Staff Side)
National Council(JCM)
After coming into effect of the New Companies Act 2013, many new provisions   has been introduced which we might not be aware of. One new concept of filing of   Form MGT-14 for passing of many Board Resolutions has been introduced. 

Please find attached a short file of 2 pages to explain and brief about all   cases where filing of Form MGT-14 is mandatory.  MGT-14 to be filed within   30 days of passing of resolution along with normal fee of Rs. 300/400/500/600 as   applicable. Otherwise on requirement, late filing fee of  maximum 12 times   can be charged by ROC.

Kindly convey to your clients or keep in mind about these transactions   whenever transacted, pls file Form MGT-14 with ROC and attach respective   resolution/agreement with that. 

                                    FEE         SLABS OF FILING FEES      
      
      
      
      AUTHORISED         CAPITAL      FEE PER DOCUMENT      
      Upto Rs. 1,00,000      Rs.200      
      Rs.1,00,001-5,00,000      Rs.300      
      Rs.5,00,001-25,00,000      Rs.400      
      Rs.25,00,001-10,000,000      Rs.500      
      Rs.10,000,001 or more      Rs.600      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      FEE SLABS FOR         DELAY FILING      
      
      
      
      PERIOD OF         DELAY      FIXED RATE OF ADDITIONAL RATE      
      Upto 15 days(Section 93, 139 &         157)      One time of normal fees      
      More than15- upto 30days (Section 93,         139 & 157)      Two Times of normal fees      
      Upto 30 Days (others)      Two Times of normal fees      
      More than 30- upto 60 days      Four Times of normal fees      
      More than 60- upto 90 days      Six Times of normal fees      
      More than 90- upto 180 days      Ten Times of normal fees      
      More than 180- upto 270   days      Twelve Times of normal fees      
      
      
      
      Note:-      
      
      Section 93 relates to         Return to be filed by every listed company for change in promoter's         stake
      Section 139 relates to         notice of appointment of auditors by company to be filed with         ROC.
      Section 157 relates to         intimatig DIN by company to Registrar.      

IT   : Payment of lease premium for allotment of plot of land as also   payment for additional built up area and fees for FSI, are not liable to   TDS liability under section 194-I
■■■
    [2013] 36 taxmann.com 526 (Mumbai - Trib.)  
    IN THE ITAT MUMBAI BENCH 'G'
Income-tax Officer (TDS) -3(5)
    v.
Wadhwa & Associates Realtors (P.) Ltd.*
H.L. KARWA, PRESIDENT 
   AND N.K. BILLAIYA, ACCOUNTANT MEMBER     
  IT Appeal No. 695 (Mum.) of 2012  
  C.O. No. 6 (Mum.) of 2013
[ASSESSMENT YEAR 2008-09]         
    JULY       3,        2013 
Section   194-I, read with section 201, of the Income-tax Act, 1961  - Deduction   of tax at source - Rent [Lease premium] -  Assessment year 2008-09 -   Assessee took plot of land from MMRD and made payment of lease premium   for allotment of plot of land as also payment for additional built up   area and fees for FSI - Whether since premium was not paid under a lease   but was paid as a price for obtaining lease, it preceded grant of lease   and, therefore, by any stretch of imagination, it could not be equated   with rent which was paid periodically - Held, yes - Whether, further,   payment for additional FSI area could not be equated to rent - Held, yes   - Whether, therefore, assessee was not liable to deduct tax at source   on both types of payment under section 194-I - Held, yes [Para 10] [In   favour of assessee]  
FACTS         
     
              ■                 The assessee-realtors took a plot of land from MMRD Ltd. and made   payment of lease premium for allotment of plot. It also paid for   additional FSI.
              ■                     The Assessing Officer held that the assessee was required to deduct tax   under section 194-I in respect of the aforesaid payment to MMRD.   According to him, the assessee had not complied with the provisions of   section 194-I, it had committed default within the meaning of section   201(1) and, therefore, the assessee was treated as assessee in default.   He accordingly, directed the assessee to make payment of interest along   with TDS totalling to Rs. 314. 26 crores.
              ■                     On appeal by the assessee, the Commissioner concluded that amount paid   by the assessee were lease premium for acquiring leasehold rights and   additional FSI in respect of the leased plot and same was not in nature   of rent as contemplated under section 194-I requiring deduction of tax   at source.
              ■                   On second appeal:
    HELD         
 
              ■                     A careful reading of the lease deed transpires that the premium is not   paid under a lease but is paid as a price for obtaining the lease, hence   it precedes the grant of lease. Therefore, by any stretch of   imagination, it cannot be equated with the rent which is paid   periodically. A perusal of the records further show that the payment to   MMRD Ltd. is also for additional built up area and also for granting   free of FSI area, such payment cannot be equated to rent. 
              ■                  It   is also seen that the MMRD in exercise of power under section 43 read   with section 37(1) of the Maharashtra Town Planning Act, 1966, MRTP Act   and other powers enabling the same has approved the proposal to modify   regulation 4A(ii) and thereby increased the FSI of the entire area. The   Development Control Regulations for the area specify the permissible   FSI. Pursuant to such provisions, the assessee became entitled for   additional FSI and has further acquired/purchased the additional built   up area for construction of additional area on the aforesaid plot.
              ■                  Thus,   the assessee has made payment to MMRD under development control for   acquiring leasehold land and additional built up area. In the case of CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459/125 Taxman 104 (Bom.)   squarely and directly apply on the facts of the case wherein the   jurisdictional High Court has held that payment for acquiring leasehold   land is a capital expenditure.
              ■                  Considering the entire facts in totality in the light of the judicial decisions vis-à-vis   provisions of section 194-I, definition of rent as provided under the   said provision, there is no reason to tamper or interefere with the   findings of the Commissioner (Appeals) which is confirmed by the   Tribunal. [Para 10]
CASE REVIEW         
     
CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459/125 Taxman 104 (Bom.) (para 10) followed.
CASES REFERRED TO         
 
    Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1943] 11 ITR 513 (PC) (para 5), Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhurani [1957] 32 ITR 169 (SC) (para 5), CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459/125 Taxman 104 (Bom.) (para 5) and Jt. CIT v. Mukund Ltd. [2007] 13 SOT 558 (Mum.)(SB) (para 5).
  Pavan Ved            for the Appellant.            J.D. Mistry, A.T. Jain and Mahesh Rajora for the Respondent.
ORDER         
     
N.K. Billaiya, Accountant Member   - This appeal by the Revenue and the cross objection by the assessee   are directed against the very same order of the Ld. CIT(A)-14, Mumbai   dt.21.11.2011 pertaining to A.Y. 2008-09.
2.   The Revenue has raised as many as 12 grounds. The sum and substance of   the grievance of the Revenue is that the Ld. CIT(A) erred in law as well   as on facts in holding that the provisions of Sec. 194-I are not   applicable on the facts of the case.
3.   The impugned assessment order is dt. 29.3.2011 passed u/s. 201(1) and   201(1A) of the Act. The facts of the case show that the assessee has   made payment of lease premium to M/s. MMRD Ltd. amounting to Rs. 949.92   crores approximately during the year under consideration. This lease   premium was paid for allotment of a plot of land namely C-59 in 'G'   Block of Bandra Kurla Complex, Bandra (E), Mumbai as per lease deed dt.   22.11.2004 and also for additional FSI in respect of the said plot. The   AO was of the firm belief that the assessee was liable to deduct tax as   per provisions of Sec. 194-I of the Act in respect of the aforesaid   payment to MMRD Ltd and as the assessee has failed to deduct tax at   source, the AO issued show cause notice dt. 21.2.2011 to the assessee.   The assessee explained that it has entered into a lease agreement with   M/s. MMRD on 22.11.2004. The land under question has been given by the   lesser i.e. MMRD to the assessee on lease and for which the assessee has   paid the premium amounting to Rs. 949.91 crores approximately.
3.1   After considering the submissions made by the assessee in the light of   certain judicial decisions, the AO arrived at the conclusion that the   assessee was required to deduct tax u/s. 194-I and pay it to the   Government treasury within the stipulated time as required by provisions   of Chapter XVII-B of the I.T. Act and as the assessee has not complied   with the provisions of Sec. 194-I, it has committed default within the   meaning of Sec. 201(1) of the Act and therefore, the assessee is treated   as assessee in default and accordingly directed the assessee to make   payment of interest alongwith TDS totaling to Rs. 314.26 crores.
4.   The assessee carried the matter before the Ld. CIT(A). The assessee   explained that the payment referred by the AO does not bear the   character of rent mentioned in Sec. 194-I and therefore there is no   requirement of deduction of tax from such payment made to MMRD. It was   further explained that the assessee has made payment to MMRD for
(a)    For additional built-up area
    (b)  For granting free of FSI area of Rs. 4 crores.
5.   After considering the facts and the submissions and the nature of   transaction, the Ld. CIT(A) observed that the amount charged by MMRD as   lease premium is equal to the rate prevalent as per Stamp Duty recovery   for acquisition of the commercial premises. These rates are prescribed   for transfer of property and not for the use as let out tenanted   property. The Ld. CIT(A) further observed that even the additional FSI   given for additional charges as per Ready Reckoner rates only. It is the   finding of the Ld. CIT(A) that the whole transaction towards grant of   leasehold transaction rights to the assessee is nothing but a   transaction of transfer of property and the lease premium is the   consideration for the purchase of the said leasehold rights. The ld.   CIT(A) went on to discuss the judicial decisions relied upon by the AO   of Hon'ble Calcutta and Karnataka High Court and observed that both the   decisions pertain to the same issue i.e. whether lease premium was a   revenue or a capital expenditure. The ld. CIT(A) also discussed the   decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1943] 11 ITR 513 (PC)   wherein it has been held that the payment which under the lease is   exigible by the lesser may be classed under 3 categories (1) Premium or   salary (2) the minimum royalty and (3) the royalty per ton . The salamy   have been rightly treated as capital receipt. It is a single payment   made for the acquisition of the right of the lessees to enjoy the   benefits granted both by the lease. The Ld. CIT(A) has also considered   the decision of the Hon'ble Supreme Court in the case of Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhurani [1957]   32 ITR 169 (SC) wherein it has been held that Salami is in the form of a   lump sum non recurring payment made by a prospective tenant to the   landlord as a consideration and is paid anterior to the constitution of   relationship of landlord and tenant, it is not "rent" within the meaning   of the word used in the definition of "agricultural income" in section   291)(a) of the I.T. Act. It has all the characteristics of a capital   payment and it is not revenue. The Ld. CIT(A) further discussed certain   other judicial decisions and in particular the decision of the Hon'ble   Jurisdictional High Court in the case of CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459/125 Taxman 104 (Bom.)   wherein the Hon'ble Jurisdictional High Court has held that an amount   of Rs. 45 lakhs paid by the assessee to M/s. APVE Ltd., for acquisition   of leasehold land was a capital expenditure and hence the same was not   deductible. The Ld. CIT(A) has further considered the decision of the   Special Bench of Mumbai Tribunal in the case of Jt. CIT v. Mukund Ltd. [2007] 13 SOT 558 (Mum.)(SB)   wherein the issue was whether the premium paid for acquiring leasehold   right in land is revenue or capital . The Special Bench has held that   the same is capital expenditure.
5.2   The Ld. CIT(A) has distinguished the facts of the cases relied upon by   the AO at page-53 para 5.39 of his order and after distinguishing the   cases came to the conclusion that in none of these cases, the issue of   'lease premium as in the case of the assessee vis-à-vis 'rent' has been   considered. At para 5.41 of his order at page-54, the Ld. CIT(A) says   that—
"I   have also considered the other cases relied upon the AO. These cases   lay down general principles of interpretation of Law. I find that none   of the above cases the court has held that the lease premium in similar   circumstances is in the nature of advance rent and hence liable for   deduction of TDS u/s. 1941 of the Act. The cases relied upon by the AO   are thus distinguishable on facts and in law and the same cannot be made   applicable to the facts of the present case where the issue raised is   completely different."
5.3 The Ld. CIT(A) finally considered the decision of the Tribunal in the case of National Stock Exchange of India Ltd.   in ITA Nos. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04,   356/M/01and 5850/M/00. At para 5.45 of his order on page 57, the Ld.   CIT(A) has given a comparative chart of the facts in the case of the   assessee and that in the case of NSE and after comparing the facts   finally concluded that the facts of the case of the NSE are identical to   the facts of the case of the assessee and observed that in the case of   NSE, the stand of the department as well as the decision of the Tribunal   was that the consideration paid for acquiring leasehold rights in land   is a capital expenditure and not 'rent'.
5.4   The Ld. CIT(A) finally concluded that the amount paid by the assessee   is lease premium for acquiring leasehold rights and additional FSI in   respect of the leased plot and the same is not in the nature of rent as   contemplated u/s. 194-1 of the Act. Accordingly, the assessee was not   required to deduct tax at source u/s. 194-1 of the Act and deleted the   demand raised by the assessee.
6. Aggrieved by this finding of the Ld. CIT(A), Revenue is before us.
    7. The Ld. Departmental Representative strongly supported the findings of the AO.
8. The Ld. Senior Ld. Counsel for the assessee reiterated what has been stated before the lower authorities.
9.   We have considered the rival submissions, perused the order of the   lower authorities and the material evidence brought on record in the   form of paper Book and the judicial decisions relied upon by the rival   parties. The entire grievance revolves around the premium paid by the   assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the   assessee through the lease deed dt. 22nd November, 2004. It is the say   of the Revenue that this lease premium was liable for deduction of tax   at source failing which the assessee is to be treated as assessee in   default. It is the say of the assessee that such lease premium is in the   nature of capital expenditure and therefore there is no question of   deduction of tax at source. Further, the said lease premium does not   come within the purview of the definition of rent as provided u/s. 194-1   of the Act.
10.   We have carefully perused the lease deed as exhibited from page-1 to 42   of the Paper Book. A careful reading of the said lease deed transpires   that the premium is not paid under a lease but is paid as a price for   obtaining the lease, hence it precedes the grant of lease. Therefore, by   any stretch of imagination, it cannot be equated with the rent which is   paid periodically. A perusal of the records further show that the   payment to MMRD is also for additional built up are and also for   granting free of FSI area, such payment cannot be equated to rent. It is   also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of   the Maharashtra Town Planning Act 1966, MRTP Act and other powers   enabling the same has approved the proposal to modify regulation 4A(ii)   and thereby increased the FSI of the entire 'G' Block of BKC. The   Development Control Regulations for BKC specify the permissible FSI.   Pursuant to such provisions, the assessee became entitled for additional   FSI and has further acquired/purchased the additional built up area for   construction of additional area on the aforesaid plot. Thus the   assessee has made payment to MMRD under Development Control for   acquiring leasehold land and additional built up area. The decisions of   the Tribunal in the case of National Stock Exchange (supra) and Mukund Ltd. (supra) have been well discussed by the Ld. CIT(A) is his order. The decision of the Hon'ble Jurisdictional High Court in the case of Khimline Pumps Ltd. (supra)   squarely and directly apply on the facts of the case wherein the   Hon'ble Jurisdictional High Court has held that payment for acquiring   leasehold land is a capital expenditure. Considering the entire facts in   totality in the light of the judicial decisions vis-à-vis provisions of   Sec. 194-1, definition of rent as provided under the said provision, we   do not find any reason to tamper or interfere with the findings of the   Ld. CIT(A) which we confirm.
11. In the result, the appeal filed by the Revenue is dismissed.
    C.O. No. 06/Mum/2013         
12-13.   As we have decided that the assessee is not liable to deduct tax at   source in Revenue's appeal in ITA No. 695/M/2012, the cross objection   raised by the assessee become otiose.
14. In the result, the appeal filed by the Revenue and the cross objection filed by the assessee are dismissed.
 

     
[2007]  106 ITD 231 (MUM.)(SB) 
    IN THE ITAT MUMBAI BENCH 'A'  (SPECIAL BENCH)
Joint Commissioner of Income-tax *, Special Range 25, Mumbai
v.
    Mukund Ltd.
G.E.  VEERABHADRAPPA, VICE PRESIDENT G.C. GUPTA, JUDICIAL MEMBER  AND K.K. BOLIYA, ACCOUNTANT MEMBER
IT  APPEAL NO. 3488 (MUM.) OF 1999 C.O. NO. 329 (MUM.) OF 1999  [ASSESSMENT YEAR 1992-93]
    FEBRUARY  15, 2007
Section   37(1) of the Income-tax Act, 1961 - Business  expenditure -    Allowability of - Assessment year 1992-93 - Assessee-company entered    into an agreement with Maharashtra Industrial Development  Corporation   (MIDC) on 5-3-1992 by which it was given on lease for 99  years a land   by MIDC for purpose of factory/plant - Assessee paid an  amount of Rs.   2.04 crore which was styled as 'premium on leasehold  land' - Rent was   fixed at Re. 1 per annum and premium of Rs. 2.04  crore was over and   above rent fixed - Assessee claimed premium paid  as revenue expenditure   - Whether consideration of Rs. 2.04 crore paid  by assessee for   obtaining leasehold rights from MIDC in its favour for a  period of 99   years was capital in nature and, therefore, same was not  allowable as   deduction - Held, yes
FACTS
    The   assessee-company had entered into an agreement  with the  Maharashtra   Industrial Development Corporation (MIDC) on 5-3-1992,  by which it was   given 50 acres of land by the MIDC in the 'K' industrial  area, for the   purpose of factory/plant and the period of lease was 99  years. The   assessee paid an amount of Rs. 2.04 crore to the MIDC  which was styled   as 'premium on leasehold land'. The rent was fixed at  Re. 1 per annum   and the premium of Rs. 2.04 crore was over and  above rent fixed in the   agreement. The assessee claimed the amount of  Rs. 2.04 crore as revenue   expenditure. The Assessing Officer disallowed  the same by holding it   as being of capital nature. The reasoning given  by the Assessing   Officer was that the assessee did not claim the  amount as revenue   expenditure in the original return of income but  only claimed that in   the revised return of income and that the  premium of Rs. 2.04 crore was   over and above the rent fixed in the  agreement, which meant that the   lessor had differentiated between the  rent and the premium in the   agreement itself.
On   appeal, the Commissioner (Appeals) held that the  payment of Rs.  2.04   crore was an advance rent paid by the assessee for the land to the  MIDC   and, therefore, the entire amount of Rs. 2.04 crore could not be    treated as capital expenditure, as the assessee did not acquire any    ownership of the property. The Commissioner (Appeals) further held  that   since it was an expenditure relatable to 99 years, it should be    allowed on proportionate basis. The Commissioner (Appeals), however,    disagreed with the assessee that once expenditure was held as revenue,    it had to be allowed in one year.
On cross appeals :
    HELD
In   the instant case, lease was for a period of 99  years, which was as    good as a perpetual lease in favour of the assessee. There was no    material on record to suggest that the amount of Rs. 2.04 crore paid to    the MIDC was an advance payment of rent for the period of lease paid    in lump sum by the assessee. The terms of agreement dated 5-3-1992    entered into between assessee-company and the MIDC clearly  mentioned   that a sum of Rs. 2.04 crore was the amount of deposit to be  adjusted   towards 'premium' payable by the licensee for the allotment of  50 acres   of land in 'K' Industrial area. The plea of the assessee that the    lease agreement was not entered into till date and, hence, the status of    the assessee was that of a licensee only made no difference, since in   the  agreement dated 5-3-1992 it was specifically mentioned that the   licensee  shall be deemed to be bare licensee only of the premises at   the same  rent and subject to same terms as if the lease had been   actually  executed. A reading of the agreement dated 5-3-1992 clearly   showed  that the amount of Rs. 2.04 crore was paid by the assessee to   the MIDC  as 'premium' or 'salami' for the acquisition of the premises   on lease for  a period of 99 years. In reply to a specific query from   the Bench, the  assessee submitted that the cost of boundary walls on   this 50 acres of  land was capitalized in the account books of the   assessee and  depreciation was claimed by the assessee. The action of   the Assessing  Officer in allowing proportionate rent in the subsequent   assessment  years 1995-96 and 1996-97 would not alter the character of   the amount  paid by the assessee to the MIDC for acquisition of the   premises. The  mere use of the word 'premium' in the agreement dated   5-3-1992 would  not make the character of the amount of Rs. 2.04 crore   paid to the MIDC  as 'premium', if the combined reading of the agreement   lead to some  other conclusion. In the instant case, not only the word   'premium' had  been used in all relevant terms of the agreement dated   5-3-1992 but also  considering the terms of the agreement dated 5-3-1992   as a whole it was  clear that the amount of Rs. 2.04 crore was paid as   'premium' for  acquisition of leasehold rights in the premises. Clause   5(b )(i)   of the said  agreement dated 5-3-1992 provided that in case of   termination of lease,  the 'premium' is non-refundable. It provided that   in case the licensee  failed to complete the said factory building   within the time aforesaid  and in accordance with the stipulations   provided therein, the MIDC  without making any compensation or allowance   to the licensee for the  same and without making any payment to the   licensee for refund or  repayment of the premium aforesaid or any part   thereof, could resume  the land in question. Thus, in case of   termination of lease, the  'premium' was non-refundable and, therefore,   the same could not be  considered as advance payment of rent. There was   no clause in the  agreement to show that the amount of Rs. 2.04 crore   was paid by the  assessee as advance rent for all future years and the   lump sum payment  of future years rent had been paid to avail some   concession for advance  payment of rent or for some other business   consideration. The land in  question was inheritable also as per the   terms and conditions of the  agreement with the MIDC. Therefore, the   consideration of Rs. 2.04 crore  was paid to the MIDC as a price for   obtaining the leasehold rights for a  period of 99 years from the MIDC   in favour of the assessee. [Para 21]
The facts in the instant case are similar to the  facts in the case of CIT v.  Khimline Pumps Ltd. [2002]   258 ITR 459 /  125 Taxman 104 (Bom.).  Therefore, the ratio of the decision of the jurisdictional High Court in  the case of Khimline Pumps Ltd. (supra)   was clearly applicable  to the  facts of the instant case. In the   instant case, all the essential ingredients  of treating the amount of   Rs. 2.04 crore paid by the assessee, for  acquisition of leasehold   rights for 99 years in the land, as capital in  nature were present. The   benefit conferred on the assessee of leasehold  rights for 99 years   against the lump sum payment of Rs. 2.04 crore was  of an enduring   nature. There was no material on record to suggest that  the sum of Rs.   2.04 crore had been paid by way of advance rent nor was  there any   provision for its adjustment towards rent or for its repayment  to the   assessee. It was found that in case the assessee terminated the  lease   agreement and handed over the vacant position of the land to  the MIDC   (Lessor) prior to the expiry of lease period of 99 years, the  assessee   would not be entitled to any refund out of the amount of Rs.  2.04 crore   paid by it. There was also no material on record to show that  the   assessee had made the advance payment of rent for future years to    secure any reduction in the rent payable for the future years or for any    other business consideration. Hence, the consideration of Rs. 2.04   crore  paid by the assessee for obtaining the leasehold rights from the   MIDC in  its favour for a period of 99 years was capital in nature and,   therefore,  not allowable as deduction to the assessee. Therefore, the   order of the  Commissioner (Appeals) was to be set aside and that of the   Assessing  Officer was to be restored. [Para 26]
CASES REFERRED TO
     CIT v.  T.S. Hajee Moosa & Co. [1985]   153 ITR 422/  22 Taxman 250 (Mad.) (para 4), Sarabhai Technological Development Syndicate  (P.) Ltd. v. CIT [2002]   254 ITR 84/  121 Taxman 696   (Guj.) (para 4), Modi  Industries Ltd. v. CIT [1977]   110 ITR 855 (All.) (para 4), Ram Bahadur  Thakur Ltd. v. CIT [2002]   257 ITR 289/[2003]   130 Taxman 275 (Ker.)  (para 4), Britannia Industries Ltd. v. CIT [2005]   278 ITR 546/  148  Taxman 468 (SC) (para 6),  Asstt. CIT v. Birla  Buildings Ltd. [1992]   43  ITD 586 (Cal.) (para 7),  CIT v. Allana Sons  (P.) Ltd. [1995]   216 ITR  690/[1993]   70 Taxman 288 (Bom.) (para 8), Excel Industries Ltd. [IT  Appeal No. 8601 (Bom.) of 1992] (para 9), CIT v. Indo Nippon Chemicals  Co. Ltd. [2003]   261 ITR 275/  130 Taxman 179 (SC) (para 11), Madras  Industrial Investment Corpn. Ltd. v. CIT [1997]   225 ITR 802/  91 Taxman  340 (SC) (para 12), India  Cements Ltd. v. CIT [1966]   60 ITR 52 (SC)  (para 12), Premier Automobiles Ltd. v. CIT [1971]   80 ITR 415 (Bom.)  (para 12), CIT v.  H.M.T. Ltd. [1993]   203 ITR 820/  67 Taxman 506 (Kar.)  (para 15), Devi Construction Co. v. Asstt. CIT [IT Appeal  No. 1769 (Pune)  of 1990] (para 17), CIT v. Project Automobiles [1987]   167 ITR 781/  35  Taxman 181 (MP) (para 17),  CIT v. Panbari Tea  Co. Ltd. [1965]   57 ITR  422 (SC) (para 17), Sudharshan  Chemicals Ltd. [IT Appeal No. 37 (Pune)  of 1997] (para 17), Aditya Minerals (P.) Ltd. v. CIT [1999]     239 ITR  817/  106 Taxman 337 (SC) (para 17), CIT v.  Khimline Pumps Ltd. [2002]    258 ITR 459/  125 Taxman 104 (Bom.) (para 17), CIT v. Madras Auto  Service (P.) Ltd. [1998]   233 ITR 468/  99 Taxman 575 (SC) (para 17), CIT v.  Gemini Arts  (P.) Ltd. [2002]   254 ITR 201/[2003]   128 Taxman 105 (Mad.) (para 18),  Durga Das Khanna v.  CIT   [1969]   72 ITR 796 (SC) (para 19), Pancham  Acquaculture Farms Ltd. v. ITO [IT Appeal No. 3742 (Mum.) of 2004  (SMC)] (para 22), Raja Bahadur Kamakshya Narain  Singh of Ramgarh v. CIT [1943]   11 ITR 513 (PC) (para 24), CIT v.  Aorow India Ltd. [1998]    229 ITR 325/  96 Taxman 74 (Bom.) (para 27), CIT v. Sugauli Sugar  Works (P.) Ltd. [1999]   236 ITR 518/  102 Taxman 713 (SC) (para 28), CIT v. Abdul Ahad [2001]   247 ITR 710/  114 Taxman 740 (J & K) (para 28)  and Chief CIT v.  Kesaria Tea Co. Ltd. [2002]   254 ITR 434/  122 Taxman  91 (SC) (para 28).
U.K. Sukla and K.C.P. Patnaik  for the Appellant. 
P.J. Pardiwala  for the Respondent. 
ORDER
    Per G.C. Gupta, Judicial Member. -    This appeal by the Revenue and the  Cross Objection by the assessee   for the assessment year 1992-93 are  directed against the order of   CIT(A). In exercise of the powers vested  under section 255(3) of the   Income-tax Act, 1961, the President of the  Income-tax Appellate   Tribunal has constituted this Special Bench to  decide the following   question arising in the case of the present assessee  :—
"Whether   the CIT(A) was justified in holding  that the assessee is  entitled to   deduction of 1/99th of the sum of Rs. 2,04,00,000 being  proportionate   rent in respect of amortization of payment for  acquisition of leasehold   rights."
2.   The Hon'ble  President has referred the other grounds raised in this    appeal by the Revenue as well as the assessee for decision thereof and    the entire appeals are referred to the Special Bench for disposal.
ITA No. 3488/M/99 (Revenue's appeal)
3. The ground  of Appeal No. 1 of the Revenue is as under :—
"1.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in deleting the addition of Rs. 6,04,137 on account of    provision for doubtful debts."
The Ld. Counsel for the assessee fairly conceded that  in view of the  retrospective amendment to section 36(1)(vii)    of the Act, the ground is  to be decided in favour of the Department.   The Ld. CIT Departmental  Representative has supported the contention of   the Ld. Counsel for the  assessee. We have considered the rival   submissions. The issue of  provision of doubtful debts is decided in   favour of the Revenue in view  of the retrospective amendment to the   relevant provision of section  36(1)(vii) of the Act  and accordingly the ground of Appeal No. 1 of the  Revenue is allowed.
 4. The ground of Appeal No. 2 of the revenue is as under :—
"2.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in directing to allow as business expenditure the foreign    tour expenses of Rs. 2,11,603."
The   Ld. CIT (Departmental Representative) submitted  that the  Assessing   Officer has detailed reasons for disallowing foreign tour  expenses of   Mrs. A.V. Shah in the assessment order. He submitted that  the assessee   has failed to file any evidence to show that the tour of wife  of the   Chairman of the assessee-company was for business purposes of  the   assessee. He relied on series of decision of CIT v. T.S. Hajee Moosa &  Co. [1985]   153 ITR 422 1 (Mad.), Sarabhai  Technological Development  Syndicate (P.) Ltd. v. CIT [2002]   254 ITR 842  (Guj.), Modi Industries Ltd. v. CIT [1977]   110 ITR 855 (All.), Ram Bahadur Thakur Ltd. v. CIT [2002]    257 ITR 2893    (Ker.) in support of his argument. The Ld. Counsel for the  assessee   submitted that the facts of this year are identical with that of  the   facts in the earlier years in the case of the assessee and the issue    has been decided by the Tribunal in favour of the assessee throughout    in the preceding years. He submitted that Tribunal has decided in    favour of the assessee in assessee's own case for the earlier assessment    years 1987-88, 1988-89, 1989-90, 1990-91, 1991-92 and also in the   later  assessment year 1995-96. He submitted that the Departmental    Reference Application for the assessment year 1986-87 was rejected by    the Tribunal.
5.   We have  considered the rival submissions. We find that the assessee    has applied for release of foreign exchange to the RBI for the tour of    wife of the Chairman of the company Mrs. A.V. Shah and the same was    approved by the RBI. It was specifically mentioned by the    assessee-company in the application to the RBI that the tour of Ms. A.V.    Shah is necessary due to medical advice given to the Chairman of the    Company. The facts of the issue are same as in the earlier years    wherein the issue was decided by the Tribunal in favour of the    assessee. The issue is covered in favour of the assessee with the    decisions of the Tribunal in earlier assessment years as well as in the    assessment year 1995-96 and accordingly in the absence of any reason    for not taking a consistent view, we dismiss the ground of Appeal No. 2    of the Revenue.
 6. The Ground of Appeal No. 3 of the Revenue is as under :—
"3.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in directing to allow the Guest House expenses of Rs.    3,22,310 disallowed by the Assessing Officer under section 37(4) of the    Income-tax Act."
The   Ld. Counsel for the assessee fairly conceded that  the issue is    covered in favour of the Revenue with the decision of Hon'ble  Supreme   Court in the case of Britannia Industries Ltd. v. CIT [2005]   278  ITR 5461.    The Ld. CIT Departmental Representative has supported the  contention   of the Ld. Counsel for the assessee. We have considered the  rival   submissions. The issue being covered with the decision of the  Hon'ble   Apex Court cited supra, is decided in favour of the Revenue  and the Ground of Appeal No. 3 of the Revenue is allowed.
7. The ground  of Appeal No. 4 of the Revenue is as under :—
"4.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in holding that the disallowance of Rs. 57,250 can be  made   for the assessment year 1992-93 without specifying with any  detail as   to how many years representations were carried out by the  A.R. in   assessment year 1992-93."
The   Ld. Counsel for the assessee submitted that the  disallowance  under   section 40A(12) of the Act was made by the Assessing Officer by    observing that a sum of Rs. 10,000 is only allowable in respect of the    assessment year under consideration. The CIT(A) has taken a view that    the expenditure of Rs. 10,000 is allowable in respect of each year of    assessment for which representative fees is paid by the assessee to its    authorized representative. In this case, the authorized representative    have rendered service contemplated under section 40A(12) for a  number   of assessment years and in respect of each year expenditure of  Rs.   10,000 is allowable. The Ld. Counsel for the assessee has relied on  the   decision of the Mumbai Tribunal in assessee's own case in the  earlier   assessment year 1991-92 and decision of Calcutta Tribunal in  the case   of Asstt. CIT v. Birla Buildings Ltd. [1992]   43 ITD 586.    The Ld.  CIT (Departmental Representative) could not controvert the    submission of the Ld. Counsel for the assessee. We have considered the    rival submissions. The issue of allowability of expenditure of Rs.   10,000  for each year of assessment for which representation fees has   been  paid to the authorized representative by the assessee, is covered   in  favour of the assessee with the decision of the Mumbai Tribunal in    assessee's own case for the earlier assessment year 1991-92 and also  by   Calcutta Tribunal in the case of Asstt. CIT v. Birla Buildings Ltd. [1992]   43 ITD 586.  Accordingly, the order of the CIT(A) on this issue is  confirmed and ground of Appeal No. 4 of the revenue is dismissed.
8. The Ground  of Appeal No. 5 of the revenue is as under :
"5.   On the facts and in the circumstances  of the case and in law,  the   CIT(A) erred in deleting the additions of Rs. 2,76,937 by  holding that   no disallowance under rule 6B should be made if the  presentation   articles did not contain the logo of the company."
The   Ld. Counsel for the assessee submitted that the  issue is  covered in   favour of the assessee with the decision of Mumbai  Tribunal in   assessee's own case in all the earlier assessment years  1986-87,   1987-88, 1989-90, 1990-91 and 1991-92 and also by the  decision of   Hon'ble Bombay High Court in the case of CIT v. Allana  Sons (P.) Ltd. [1995]   216 ITR 690 1.   The Ld. CIT (Departmental  Representative) could not controvert the   submission of the Ld.  Counsel for the assessee. We have considered the   rival  submissions. The issue of disallowance under rule 6B is covered   in  favour of the assessee with the decisions of the Mumbai Tribunal  in   assessee's own case for the earlier assessment years cited supra and also by the decision of the Hon'ble jurisdictional High Court in  the case of Allana Sons (P.) Ltd. (supra) and accordingly  is decided  in favour of the assessee and the ground of Appeal No. 5 of the  revenue is dismissed.
9. The Ground  of Appeal No. 6 of the revenue is as under :
"6.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in directing to allow the project development expenses of    Rs. 6,41,829 disallowed by the Assessing Officer."
The   Ld. CIT (Departmental Representative) has relied  on the order of  the   Assessing Officer. He submitted that the expenses incurred in  obtaining   the feasibility report and the consultation fees etc. paid are  capital   in nature. The Ld. Counsel for the assessee submitted that the  details   of project development expenses were submitted before the  Assessing   Officer. He submitted that the issue is covered in favour of  the   assessee with the decision of the Mumbai Tribunal in assessee's  own   case for the earlier assessment years 1990-91 and 1991-92 and also  by   the order of Mumbai Tribunal in the case of Excel Industries  Ltd.,   assessment year 1989-90 [IT Appeal No. 8601 (Bom.) of 1992]. We have    considered the rival submissions and have perused the details of    Project Development expenses. We find that the issue of allowability of    project development expenses is covered in favour of the assessee with    the decisions of the Mumbai Tribunal relied upon by the Ld. Counsel    for the assessee. Accordingly the issue being covered in favour of the    assessee, is decided in favour of the assessee and the ground of Appeal    No. 6 of the revenue is dismissed.
10. The  Ground of Appeal No. 7 of the revenue is as under :
"7.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in deleting the addition of Rs. 30,660 made by the    Assessing Officer being the payments made to clubs."
The   Ld. CIT (Departmental Representative) has relied  on the order  of the   Assessing Officer. He submitted that the provisions of section  40A(9)   should apply to the facts of the case with regard to  disallowance of   payments to the clubs. The Ld. Counsel for the  assessee submitted that   the issue is covered in favour of the  assessee with the decision of the   Mumbai Tribunal in assessee's own  case for the assessment years   1985-86, 1990-91 and 1991-92. He  submitted that the amount of expenses   represents only the annual  membership fees paid to the club. We have   considered the rival  submissions. We have also perused the details of   payments to the  clubs given in the compilation by the assessee. The   amount of  expenditure claimed by the assessee is annual membership fees   paid  to the clubs. The issue of disallowance of payments to clubs Rs.    30,660 is covered in favour of the assessee with the decision of the    Mumbai Tribunal in assessee's own case in the earlier assessment  years   cited supra and  accordingly the ground of Appeal No. 7 of the  revenue is dismissed.
11. The  Ground of Appeal No. 8 of the revenue is as under :
"8.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in deleting the addition of Rs. 33,44,338 on account of    MODVAT element in the closing stock."
The   Ld. CIT (Departmental Representative) has relied  on the order  of   Assessing Officer. The Ld. Counsel for the assessee submitted  that the   issue is covered in favour of the assessee with the decision  of the   Mumbai Tribunal in assessee's own case for the earlier  assessment years   1989-90, 1990-91 and 1991-92 and also with the  decision of the Hon'ble   Apex Court in the case of CIT v. Indo  Nippon Chemicals Co. Ltd. [2003]   261 ITR 275 1.   We have considered the  rival submissions. The issue of addition in   respect of under valuation of  closing stock on account of MODVAT credit   is covered in favour of the  assessee with the decision of the Hon'ble   Apex Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003]   261 ITR 2751  and accordingly  the issue is decided in favour of the assessee and the ground of Appeal  No. 8 of the revenue is dismissed.
12. The  Ground of Appeal No. 9 of the revenue is as under :—
"9.   On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in directing to allow the expenses incurred on discount on    issue of commercial paper of Rs. 1,31,70,489 disallowed by the    Assessing Officer."
The   Ld. CIT (Departmental Representative) has relied  on the order of  the   Assessing Officer. He submitted that the assessee-company has  taken   short term loan from Allahabad Bank by issuing commercial  papers. The   discount and finance charges were incurred for raising the  additional   capital of the company and therefore, the expenses are  capital in   nature. He referred to para 15 of the assessment order in  support of   his argument. The Ld. Counsel for the assessee submitted  that the issue   is covered in favour of the assessee with the decision of  Mumbai   Tribunal in assessee's own case for the earlier assessment  year   1991-92. He relied on the decision of Hon'ble Supreme Court in  the case   of Madras Industrial Investment Corpn. Ltd. v. CIT [1997]   225  ITR 8022,  Hon'ble Supreme Court in the case of India Cements Ltd. v.  CIT [1966]   60 ITR 52 and Hon'ble Bombay High Court in the case of  Premier Automobiles Ltd. v. CIT [1971]   80 ITR 415.    We have considered  the rival submissions. We find that the   assessee-company has debited  the amount of Rs. 1.31 crores towards   discount and finance charges.  The assessee-company has taken short term   loan from Allahabad Bank  by issuing commercial papers. The issue of   allowability of discount  charges on issue of commercial papers for   raising short term loan is  covered in favour of the assessee with the   decision of Mumbai  Tribunal in assessee's own case for the earlier   assessment year 1991-92.  The issue being covered with the decision of   the Co-ordinate Bench of  the Tribunal in favour of the assessee, is   decided in its favour and the  ground of Appeal No. 9 of the Revenue is   dismissed.
13. The  Ground of Appeal No. 10 of the revenue is as under :
   "10. On the facts and in the circumstances  of the case and in law, the    CIT(A) erred in holding that the assessee is entitled to deduction of    1/99th of the sum of Rs. 2,04,00,000 being proportionate rent relatable    to assessment year 1992-93".
14.   This  specific issue is referred to this Bench by the President of  the   Income-tax Appellate Tribunal (ITAT), has been reproduced in  para-1 of   this order, which is again reproduced for ready reference  :—
"Whether   the CIT(A) was justified in holding  that the assessee is  entitled to   deduction of 1/99th of the sum of Rs. 2,04,00,000 being  proportionate   rent in respect of amortization of payment for  acquisition of leasehold   rights."
15.   Before  proceeding to decide the issue raised in this ground of  appeal   by the revenue and also referred by the President, ITAT to  us, we   consider it necessary to record the factual matrix of the  case. The   assessee-company has entered into an agreement with  Maharashtra   Industrial Development Corporation (MIDC) on  5-3-1992 by which the   assessee was given 50 acres of land by MIDC  for the purpose of factory   plant at Kalva, Thane and the period of  lease is 99 years. An amount of   Rs. 2.04 crores was paid by the  assessee-company as premium to MIDC   and the said payment was  styled as "premium on leasehold land". The   assessee claimed this  amount as revenue expenditure and the Assessing   Officer  disallowed the same by holding it as being of capital nature.   The  reasoning of the Assessing Officer while holding the expenditure of    Rs. 2.04 crores as that of capital in nature as recorded in the    assessment order is that the assessee did not claim the amount as a    revenue expenditure in the original return of income and only  claimed   this in the revised return of income. As per the terms and  conditions   of the agreement dated 5-3-1992 of the  assessee-company with MIDC, the   assessee was permitted to  construct factory building therein and was   permitted to utilize the  property and building for 99 years. The rent   fixed as per the  agreement dated 5-3-1992 with MIDC is Re. 1 per annum.   The  premium of Rs. 2.04 crores is over and above the rent fixed in the    agreement which means that the lessor had differentiated between  the   rent and premium in the agreement itself. The Assessing  Officer   referred to the decision of the Hon'ble Karnataka High  Court in the   case of CIT v. H.M.T. Ltd. [1993]   203 ITR 820 1,   relied  upon by the assessee and observed that the decision of Hon'ble    Karnataka High Court has not been accepted by the revenue and  the   matter is pending before the Hon'ble Supreme Court. The  assessee went   in appeal against the order of the Assessing Officer  and the CIT(A)   concluded that the payment of Rs. 2.04 crores was  an advance rent paid   by the assessee for the land to the MIDC for  the reason that the entire   amount of Rs. 2.04 crores cannot be  treated as capital expenditure as   the assessee did not acquire any  ownership of the property. The   assessee is a lessee and the said lease  is transferable and renewable   at the option of the lessor. The CIT(A)  agreed with the decision of the   Hon'ble Karnataka High Court in the  case of HMT Ltd. ( supra)   that it was rent paid in advance. The CIT(A)  held that since it was an   expenditure relatable to 99 years, it should  be allowed on   proportionate basis. The CIT(A) disagreed with the  assessee that once   expenditure is held as revenue, it has to be  allowed in one year. He   relied on the decision of Hon'ble Supreme  Court in the case of Madras Industrial Investment Corpn. Ltd. v. CIT [1997]   225 ITR 8021    which pertains to the issue of allowance of  expenditure on premium on   debentures. Against this decision of the  CIT(A), both the revenue as   well as the assessee are in appeal before  the Tribunal.
16.   This  case has three dimensions and give rise to three possible    propositions namely, the expenditure of Rs. 2.04 crores paid by the    assessee to the MIDC for acquiring 50 acres of land for the purpose  of   its factory plant for a period of 99 years is either capital in  nature   or revenue in nature and allowable in one year or though  revenue in   nature but being advance payment of rent for 99 years,  it should be   allowed on proportionate basis at 1/99th of the sum of  Rs. 2.04 crores   paid by the assessee being proportionate rent in  respect of   amortization of payment for acquisition of leasehold  rights.
17.   In the  light of the factual matrix of the case as detailed above and    the possible propositions, we record the arguments put forward by the    parties before us. The Ld. CIT (Departmental Representative)  submitted   that the reasoning of the CIT(A) that since the assessee is  not the   owner of the property as a lessee, the expenditure cannot be  treated as   capital in nature is flawed. The essential ingredient to  determine the   nature of expenditure is not the ownership, but  whether the benefit   conferred on the assessee is of enduring  nature. He submitted that the   lease of 99 years is a perpetual lease  and therefore, benefit of   enduing nature is conferred in this case  on the assessee and therefore,   the expenditure shall be treated as  capital in nature. He submitted   that in the case of CIT v. HMT Ltd. [1993]   203 ITR 8201    (Kar.), the finding of the Tribunal as a matter  of fact was that the   amount paid by the assessee in lump sum to  MIDC was the future rent   payable by it and which the assessee had  to pay periodically and   therefore, the decision of the Hon'ble  Karnataka High Court is not   applicable to the facts of the case of  the assessee. He submitted that   the premium of Rs. 2.04 crores  paid to MIDC is over and above the rent   fixed in the agreement  dated 5-3-1992 meaning thereby that the lessor   had differentiated  between rent and premium in the agreement itself.   The Ld. CIT  (Departmental Representative) submitted that Pune Bench of   the  Tribunal in the case of Devi Construction Co. v. Asstt. CIT   [IT  Appeal No. 1769 (Pune) of 1990] has considered this very issue and    also the decision of the Hon'ble Karnataka High Court in CIT v.  HMT Ltd. [1993]   203 ITR 820 1. In the case of Devi  Construction Co. (supra)   the assessee  has claimed expenditure of Rs. 1,25,000 being  a premium   paid to MIDC for premium on lease hold land. The  assessee claimed the   lease premium as in the nature of advance  rent. The period of lease in   this case was for 99 years and the lease  was also from MIDC as in the   case of the assessee. Pune Tribunal  held that the expenditure claimed   by the assessee-company was  capital in nature. Pune Tribunal has   recorded that the decision of  the Karnataka High Court in the case of HMT Ltd. (supra)   is  distinguishable in the sense that the High Court has proceeded on    the finding of fact recorded by the Tribunal that the payment of  MIDC   was the future rent of the land. The Ld. CIT (Departmental    Representative) submitted that the ratio of the decision of the  Pune   Tribunal in the case of Devi Construction Co. (supra) is  applicable to the case of the assessee since the facts of the case of  assessee are identical with that of the case of Devi Construction  Co. (supra).    The Ld. Departmental Representative submitted that  the amount of Rs.   2.04 crores is the price of transfer of possession  of the land by MIDC   in favour of the assessee for a period of 99  years in terms of section   105 of the Transfer of Property Act. Thus  the assessee gets enduring   benefit against the lump sum payment  of Rs. 2.04 crores. The Ld. CIT   (Departmental Representative)  relied on series of decision in support   of his arguments. He relied  on the decisions in the case of CIT v. Project Automobiles [1987]    167 ITR 7811  (MP), CIT v. Panbari Tea Co. Ltd. [1965]   57 ITR 422 (SC), Sudharshan Chemicals Ltd. [IT Appeal No. 37 (Pune) of 1997],  Aditya Minerals (P.) Ltd. v. CIT [1999]   239 ITR 817 2 (SC) and CIT v.  Khimline Pumps Ltd. [2002]   258 ITR 459 3   (Bom.) in support of his  argument. The Ld. CIT (Departmental   Representative) submitted  that the decision of Hon'ble jurisdictional   High Court in the case of  Khimlime Pumps Ltd. ( supra) squarely covers the issue in the  present case in favour of the revenue. He submitted that in the  case of Khimline Pumps Ltd. (supra),   the facts were  that open plot  of land in Kalva, Thane was leased out   by MIDC to assessee for a  period of 95 years on payment of yearly rent   of Re. 1 and in  consideration of the payment of Rs. 1,62,400 as   premium. In the  facts of the case, the Hon'ble jurisdictional High   Court upheld the  order of the Assessing Officer holding the payment as   capital in  nature. He submitted that facts being identical with the   case of the  assessee, the issue be decided in favour of the revenue and   the  amount of Rs. 2.04 crores paid by the assessee as premium for    acquisition of leasehold rights for 99 years may be held as capital  in   nature. The Ld. CIT (Departmental Representative) submitted  that the   decision of Hon'ble Supreme Court in the case of CIT v.  Madras Auto Service (P.) Ltd. [1998]   233 ITR 4684  relied upon by  the assessee has been distinguished by the Hon'ble Bombay High  Court in the case of CIT v. Khimline Pumps Ltd. [2002]   258 ITR  4593.
18.   The  Ld. Counsel for the assessee has opposed the submission  of the   Ld. CIT (Departmental Representative). He submitted that in  the   subsequent assessment years 1995-96 and 1996-97, the  Assessing Officer   has allowed proportionate deduction of 1/99th  of the sum of Rs. 2.04   crores being proportionate rent in respect  of amortization of the   payment for acquisition of leasehold rights.  He referred to various   clauses of terms and conditions of the  agreement dated 5-3-1992 entered   into between the  assessee-company and the MIDC, copy of which is filed   in the  compilation before the Tribunal. He submitted that the decision   of  Hon'ble Karnataka High Court in the case of HMT Ltd. (supra)   is  applicable to the facts of the case of the assessee. He relied on   the  decision of Hon'ble Madras High Court in the case of CIT v. Gemini  Arts (P.) Ltd. [2002]   254 ITR 201 1.   He submitted that the assessee is  only a licensee as per the terms and   conditions of agreement dated  5-3-1992 and no lease agreement has been   entered into with MIDC  till date. He submitted that in fact the rent   of Re. 1 per annum is  not an economic rent and hence amount of Rs. 2.04   crores is  substitution of rent for longer period. He relied on the   decision of  Hon'ble Supreme Court in the case of CIT v. Madras Auto Service  (P.) Ltd. [1998]   233 ITR 468 2.   He submitted that the terms and  conditions of the agreement dated   5-3-1992 shows that the vacant  possession of the land has to be handed   over to MIDC after the  expiry of lease period of 99 years. The Ld.   Counsel for the assessee  submitted that the case law relied upon by the   Ld. CIT  (Departmental Representative) are distinguishable on facts.   The  Ld. Counsel for the assessee submitted that the decision of Hon'ble    Bombay High Court in the case of Khimline Pumps Ltd. (supra) is  not applicable to the case of the assessee since in the case of  Khimline Pumps Ltd. ( supra) the assessee was not the original  lessee of the premises. He relied on the decision of Hon'ble  Supreme Court in the case of Durga Das Khanna v. CIT [1969]   72  ITR 796   and also decision of  Mumbai Tribunal in ITA No.  3742/M/04. The Ld.   Counsel for the assessee submitted that  nomenclature of the agreement   with MIDC is not decisive of the  issue and the facts remain that the   assessee did not acquire any  ownership of the property and therefore   the expenditure being  relatable to 99 years, it should be allowed on   proportionate basis.  The assessee by the terms of the agreement dated   5-3-1992 with  MIDC is obliged to hand over the vacant possession of the   land in  question to the lessor MIDC after the expiry of 99 years of   lease  period.
19.   The  Ld. CIT (Departmental Representative) in his rejoinder  submitted   that it is a case of perpetual lease being of 99 years and  being   inheritable also is as good as sale in favour of the assessee. He    submitted that the decision of Hon'ble Supreme Court in the case  of Durga Das Khanna v.  CIT [1969]   72 ITR 796 relied upon by the  Ld. Counsel for the assessee, is in fact in favour of the revenue.
20.   We have  considered the rival submissions carefully. We have  perused   the various copies of documents filed by the parties in the  compilation   filed before us. The material facts of the case are not  in dispute.   The assessee has entered into an agreement with MIDC  on 5-3-1992 by   which it was given 50 acres of land by MIDC in the  Kalva Industrial   Area, Thane, for the purpose of factory plant and  the period of lease   is 99 years. The amount of Rs. 2.04 crores were  paid by the assessee   and the said payment was styled as "premium  on leasehold land". The   rent was fixed at Re. 1 per annum and the  premium of Rs. 2.04 crores is   over and above rent fixed in the  agreement. We find that to decide   that whether amount paid by  the assessee for requisition of leasehold   rights in the premises is  capital in nature or revenue in nature or an   advance payment of  rent, one has to examine all the facts and   circumstances of the  respective case. In case it is found that as a   matter of fact the  amount paid for acquisition of leasehold rights of   the premises was  in the nature of advance payment of rent for future   years and is  revenue in nature, then the same has to be allowed on    proportionate basis in respect of amortization of payment for    acquisition of leasehold rights. In case it is found as a matter of    fact that the amount for acquisition of leasehold rights were paid  as   "premium" or "Salami", the same shall be capital in nature and  shall   not be deductible.
21.   In the  case before us the lease is for a period of 99 years, which is    as good as a perpetual lease in favour of the assessee. There is no    material on record to suggest that the amount of Rs. 2.04 crores paid to    the Government concern MIDC was an advance payment of rent for  the   period of lease paid in lump sum by the assessee-company. The  terms of   agreement dated 5-3-1992 entered into between  assessee-company and the   Government body M/s. MIDC clearly  mentions that a sum of Rs. 2.04   crores is the amount of deposit to be  adjusted towards "Premium"   payable by the licensee for the allotment  of 50 acres of land in Kalva   Industrial Area. The plea of the assessee  that the lease agreement was   not entered into till date and hence, the  status of the assessee is   that of a licensee only, makes no difference,  since on page-2 of the   agreement of the assessee-company with  MIDC dated 5-3-1992, it is   specifically mentioned that the licensee  shall be deemed to be bare   licensee only of the premises at the  same rent and subject to same   terms as if the lease had been  actually executed. A reading of the   agreement dated 5-3-1992  entered into with MIDC clearly shows that the   amount of Rs. 2.04  crores were paid by the assessee-company to MIDC as   "Premium"  or "Salami" for the acquisition of the premises of lease for a   period  of 99 years. In reply to a specific query from the Bench, the   Ld.  Counsel for the assessee submitted that the cost of boundary walls    on this 50 acres of land was capitalized in the account books of the    assessee and depreciation was claimed by the assessee. The action  of   the Assessing Officer in allowing proportionate rent in the  subsequent   assessment years 1995-96 and 1996-97, shall not alter  the character of   the amount paid by the assessee to MIDC for  acquisition of the   premises. We are aware that mere use of the  word "premium" in the   agreement dated 5-3-1992 shall not make  the character of the amount of   Rs. 2.04 crores paid to MIDC as  "premium", if the combine reading of   the agreement leads to some  other conclusion. In this case, not only   the word "premium" has  been used in all relevant terms of the agreement   dated 5-3-1992  with Government concern MIDC, but also considering the   terms of  the agreement dated 5-3-1992 as a whole it is clear that the    amount of Rs. 2.04 crores was paid as "premium" for acquisition of    leasehold rights in the premises. The clause 5(b)( i)   of the said  agreement dated 5-3-1992 provides that in case of   termination of  lease, the "premium" is non-refundable. It provides that   in case the  licensee fails to complete the said factory building   within the time  aforesaid and in accordance with the stipulations   provided therein,  the MIDC without making any compensation or allowance   to  licensee for the same and without making any payment to the    licensee for refund or repayment of the premium aforesaid or any  part   thereof, can resume the land in question. Thus, in case of  termination   of lease, the "premium" is non-refundable and  therefore, the same   cannot be considered as advance payment of  rent. There is no clause in   this agreement to show that the amount  of Rs. 2.04 crores was paid by   the assessee as advance rent for all  future years and the lump sum   payment of future year's rent has  been paid to avail some concession   for advance payment of rent or  for some other business consideration.   The land in question is  inheritable also as per the terms and   conditions of the agreement  with MIDC. Therefore, considering the terms   of agreement dated  5-3-1992 as a whole, we hold that the consideration   of Rs. 2.04 crores  was paid to MIDC as a price for obtaining the   leasehold rights for a  period of 99 years from MIDC in favour of the   assessee.
22. The  decision of Hon'ble Karnataka High Court in the case of  CIT v. HMT  Ltd. [1993]   203 ITR 820 1   relied upon by the assessee, is  distinguishable since the Hon'ble   Karnataka High Court has  proceeded on the finding of fact recorded by   the Tribunal that the  payment to MIDC was the future rent of the land.   In the case of  Devi Construction Co. v. Asstt. CIT   [IT Appeal  No. 1769 (Pune) of  1990] the Pune Tribunal has decided the   issue in similar facts in  favour of the revenue. In this case before   the Pune Tribunal, the  amount was paid to MIDC for obtaining the   leasehold rights of  certain premises for a period of 95 years against   the yearly rent of  Re. 1 and a payment of lump sum amount as premium   for the  land. The Pune Tribunal considered the various decisions of the    Hon'ble Courts on the issue and held that there is no condition of    existence of an economic rent in addition to the premium paid by  the   assessee. The Tribunal held that the decision of the Hon'ble  Karnataka   High Court in the case of HMT Ltd. (supra)   is  distinguishable since the Hon'ble Karnataka High Court  proceeded   on the finding of fact recorded by the Tribunal that the  payment to   MIDC was the future rent of the land. The Pune  Tribunal concluded that   the amount paid as premium for the  leasehold land taken from MIDC is   capital in nature and not  allowable. In the case of CIT v. Gemini Arts (P.) Ltd. [2002]   254 ITR  2012   (Mad.) and relied on by the Ld. Counsel for the assessee, we  find that   decision of Hon'ble Madras High Court is distinguishable  since the   Hon'ble High Court has proceeded on the basis of fact  that the payment   of rent was made by the assessee in lump sum  for the entire duration of   lease period. The decision of Hon'ble  Supreme Court in the case of CIT v. Madras Auto Service (P.) Ltd. [1998]   233 ITR 4683  was discussed by the Hon'ble Bombay High  Court in the case of CIT v. Khimline Pumps Ltd. [2002]   258 ITR  4594,  wherein held that the decision of the Hon'ble Supreme  Court in Madras Auto Service (P.) Ltd.'s case (supra)   is  distinguishable on facts since in the case before the Hon'ble    Supreme Court the old construction was dilapidated and the  assessee   could not have carried on business in the old structure  and under the   lease the old structure was permitted to be  demolished and the   demolition was at the cost of the assessee and  the assessee put up a   new construction at its own cost and under  the lease the lessee had no   right, title and interest in the new  construction, whereas in the case   before the Hon'ble Bombay High  Court in the case of Khimline Pumps Ltd. (supra), the assessee  was  entitled to take away the building on the expiry of the lease. In the  case of Sudershan Chemicals Ltd.   [IT Appeal No. 37 (Pune) of  1997], the Pune Tribunal in similar facts   decided the issue in  favour of the Revenue and held that considering   the entire  agreement as a whole, the expenses incurred by the assessee   for  obtaining the leasehold rights were capital in nature and therefore    not allowable as deduction. The facts of the case of Sudershan  Chemicals Ltd. (supra)  are similar to the facts of the case of the  assessee before us. In the case of Sudershan Chemicals Ltd. (supra),   the lump sum  payment was made by the  assessee-company to MIDC for   acquisition of leasehold rights for  the land for 99 years. In the case   of Pancham Acquaculture Farms  Ltd. v. ITO   [IT Appeal No. 3742 (Mum.) of 2004 (SMC)] allowing  amortization of   leasehold premium paid for acquiring leasehold  rights for a period of   21 years. We find that the Ld. Single Member  of the Tribunal has   followed the decision of Hon'ble Madras High  Court in the case of CIT v. Gemini Arts (P.) Ltd. [2002]   254 ITR 2011 . We have already discussed the decision of Hon'ble  Madras High  Court in the case of Gemini Arts (P.) Ltd. (supra)   and is  distinguishable since the Hon'ble Madras High Court has    proceeded on the fact that the payment of rent was made in lump  sum for   the entire duration of the lease period. Another case relied  on by the   Ld. Counsel for the assessee is of Hon'ble Supreme Court  in the case   of Durga Das Khanna v. CIT [1969]   72 ITR 796,    which  has been contested by the Ld. CIT (Departmental Representative)    by submitting that this decision of the Hon'ble Supreme Court in  fact   is in favour of the Revenue. In this case the assessee had  taken on   lease certain premises for a period of 99 years with a  right to assign   the lease and alter the structure of the premises so  as to convert it   into a cinema hall. The assessee after spending Rs.  35,000 on some   alterations, felt the necessity for having some  more money in order to   convert the premises to a cinema house  and for this purpose entered   into an agreement dated 23-2-1946 by  which the building was demised to   the lessee for a period of 30  years. The lessee agreed to pay under the   lease agreement Rs.  55,200 to the assessee toward the cost of erecting   the cinema  house and also the rent of Rs. 2,100 per month. There were   no  provision for the adjustment of the sum of Rs. 55,200 towards rent    or for its repayment by the assessee. The Tribunal and the Hon'ble  High   Court held that the amount of Rs. 55,200 was paid in the  nature of   advance payment of rent. On appeal, the Hon'ble  Supreme Court held that   the Tribunal and the High Court were in  error in holding that the sum   of Rs. 55,200 were advance payment  of rent. The Hon'ble Supreme Court   held that a sum of Rs. 55,200  was in nature of premium or salami and it   had all the  characteristics of a capital payment and was not revenue   in  nature. In these facts, we find that the decision of the Hon'ble    Supreme Court in the case of Durga Das Khanna (supra)   is in  favour of the Revenue wherein the payment of Rs. 55,200 was held    as premium or salami and capital in nature. In the case of the    assessee before us, there is no condition or stipulation in the    agreement dated 5-3-1992 from which it could be inferred that the  sum   of Rs. 2.04 crores had been paid by way of advance rent, nor  was there   any provision for its adjustment towards rent or for its  repayment to   the assessee. In the facts of the case before us, the  ratio of the   decision of Hon'ble Supreme Court in the case of  Durga Das Khanna ( supra) applies and the amount of Rs. 2.04  crores paid by the assessee is in the nature of premium and as  such capital in nature.
23. In the  case of CIT v. Project  Automobiles [1987]  167 ITR 7811    (MP), the issue was whether the premium paid to obtain land on  lease   can be claimed as revenue expenditure. The assessee in this  case had   taken a plot of land for a period of 30 years on lease and  a premium of   Rs. 62,500 was payable in 12 equal monthly  instalments. The Hon'ble   Madhya Pradesh High Court held that it  is apparent that the assessee   obtained a right of enduring nature in  the plot in question and in   order to obtain this right it had to pay  sum of Rs. 62,500 as premium   and therefore, could not on the  facts of the case be treated as advance   rent. The payment of Rs.  62,500 was apparently in nature of salami   payment in order to  obtain the right of an enduring nature in the plot   in question and  was obviously in the nature of capital expenditure.
24. In the  case of CIT v. Panbari  Tea Co. Ltd. [1965]   57 ITR 422   (SC), the facts were that the assessee-company has leased out two    estates in consideration of premium and certain amount of annual  rent.   The premium was claimed by the assessee-company as capital  receipt. The   Assessing Officer held the same as revenue receipt.  The Hon'ble High   Court held the receipt as capital receipt. On  further appeal, the   Hon'ble Supreme Court examined the law  pertaining to the concept of   premium and held the amount as  "Salami". The Hon'ble Supreme Court   referred to the observation  of Judicial Committee in Raja Bahadur Kamakshya Narain Singh  of  Ramgarh v. CIT [1943]   11 ITR 513,    519 (PC) thus "Salami is a  single payment made for the acquisition of   the right of the lessee's  to enjoy the benefits granted to them by the   lease. That general  right may properly regarded as a capital asset,   and the money paid  to purchase it may properly be held to be a payment   on capital  account." The Hon'ble Supreme Court agreed with a finding of    board of agricultural income tax in concluding that salami is of a    single non-recurring character and it is a payment prior to the    creation of a tenancy. It is the consideration paid by the tenant for    being let into possession and can be neither rent nor revenue but  is a   capital receipt in the hands of the landlord. The Hon'ble  Supreme Court   in Panbari Tea Co. Ltd.'s case (supra)   held  that  "The real test of a salami or premium is whether the amount   paid,  in a lump sum or in instalments, is the consideration paid by   the  tenant for being let into possession. When the interest of the   lessor  is parted with for a price, the price paid is premium or salami.   But  the periodical payments made for the continuous enjoyment of the    benefits under the lease are in the nature of rent. The former is a    capital receipt and the latter are revenue receipts. There may be    circumstances where the parties may camouflage the real nature  of the   transaction by using clever phraseology. In some cases, the  so-called   premium is in fact advance rent and in others rent is  deferred price.   It is not the form but the substance of the  transaction that matters.   The nomenclature used may not be  decisive or conclusive but it helps   the court, having regard to the  other circumstances, to ascertain the   intention of the parties." The  Hon'ble Supreme Court in this case has   discussed the provision of  section 105 of the Transfer of Property Act   and has observed that  "Under section 105 of the Transfer of Property   Act, a lease of  immovable property is a transfer of a right to enjoy   the property  made for a certain time, express or implied, or in   perpetuity, in  consideration of a price paid or promised, or of money, a   share of  crops, service or any other thing of value, to be rendered    periodically or on specified occasions to the transferor by the    transferee, who accepts the transfer on such terms. The transferor  is   called the lessor, the transferee is called the lessee, the price is    called the premium, and the money, share, service or other thing to  be   so rendered is called the rent. The section, therefore, brings out  the   distinction between a price paid for a transfer of a right to enjoy  the   property and the rent to be paid periodically to the lessor". In the    case of Aditya Minerals (P.) Ltd. v. CIT [1999]   239 ITR 817 1   (SC), the  facts were that the assessee obtained a lease for a period   of 15 years  at a monthly rent of Rs. 35 per acre. Clause-II of the   lease deed  stated that the lessee shall deposit with the lessor by way   of  guarantee for due performance of this lease deed for 15 years, the    amount equal to rent of lease of land for the full period of lease and    it will be adjustable against the rent of every month. This entire    guarantee deposit shall not carry any interest payable to the lessee  by   the lessor. The lease deed granted to the assessee a liberty to use    the land for excavation purpose and subsidiary purpose. The  assessee   claimed the rent amount worked out for the relevant  assessment year as   revenue expenditure. The Hon'ble Supreme  Court in the facts of the case   held the expenditure claimed by the  assessee as not allowable   deduction in computing the business profit  of the assessee-company.
25. The  case of CIT v. Khimline  Pumps Ltd. [2002]   258 ITR 459 2   (Bom.) has been heavily relied upon by the CIT (Departmental    Representative). The facts of the case are that an open plot of land  in   Kalva Industrial Area, Thane was leased out by MIDC to a  company known   as APV Equipments Ltd., for a period of 95 years  on payment of yearly   rent of Re. 1 and in consideration of payment  of Rs. 1,62,400 as   premium. The lease period was 95 years as per  the terms and conditions   of the agreement. The lessee would be  entitled to remove buildings,   erections or structures put up by the  lessee on the land and the vacant   position of the land has to be  handed over to the lessor after the end   of 95 years lease period.  The Company APV Equipments Ltd. went in   liquidation by the  order of Hon'ble Bombay High Court dated 25-7-1985.   M/s. APV  Equipments Ltd. is ordered to be wound up. Subsequently the    official liquidator sought consent of MIDC for transfer of premises    (land) to the assessee who was the highest offerer. In the deed of    assignment, it was mentioned that the value of the land and plant  and   machinery stood bifurcated for the purpose of payment of  stamp duty in   two parts i.e.,   Rs. 72 lakhs for the land and building  and Rs. 3 lakhs for the plant   and machinery. During the course of  assessment proceedings, in the case   of the assessee, i.e.,    Khimline  Pumps Ltd., the Assessing Officer found that assessee has    purchased the whole unit for Rs. 75 lakhs and out of the said  amount   for Rs. 75 lakhs, Rs. 45 lakhs related to the acquisition of  leasehold   land and Rs. 27.81 lakhs related to the building and the  balance   related to the machinery purchased by the assessee. The  assessee   contended before the Assessing Officer that Rs. 45 lakhs  were paid as   advance rent since APV Equipments Ltd. was entitled  to use and occupy   the property for 95 years for payment of Re. 1  per annum. The assessee   contended that an expiry of the lease  period of 95 years, the plot with   building had to be surrendered to  MIDC since the assessee is merely   substituting itself in the place of  APV Equipments Ltd. The Assessing   Officer held that the payment  of Rs. 45 lakhs to the official   liquidator was for the purchase of  leasehold rights and therefore   capital in nature. Alternatively, the  Assessing Officer observed that   at the highest, proportionate rent  attributable to the assessee would   be allowed. The Assessing  Officer finally disallowed Rs. 45 lakhs as   capital expenditure in the  hands of the assessee. The Tribunal was of   the view that since  benefits of these expenditure of Rs. 45 lakhs would   be exhausted in  71 years, the proportionate amount relatable to each   year  amounting to Rs. 63,380 per annum may be allowed as deduction  on   account of payment of rent for that year for 71 years. The  matter went   to the Hon'ble Bombay High Court at the instance of  Revenue which   upheld the order of the Assessing Officer and held  as under :—
"(i)allowing    the appeal of the Department, that, having come to the  conclusion   that Rs. 45 lakhs was a capital expenditure, the  Appellate Tribunal   could not have directed the department to  apportion the amount over a   period of 71 years.
(ii)Rejecting    the cross-objection of the assessee, that, on the facts,  the Tribunal   was right in coming to the conclusion that the sum  of Rs. 45 lakhs   constituted capital expenditure. The assessee was  not the original   lessee; the original lessee was APVE Ltd., which  paid the premium   amount of Rs. 1,62,400. The assessee paid Rs.  75 lakhs including Rs. 45   lakhs, to acquire the whole unit. The  payment was to secure an   advantage for the enduring benefit of  the trade—
 CIT v. Madras Auto Service  (P.) Ltd. [1998]   233 ITR 468  (SC)  distinguished.
It   is well settled that in order to ascertain  the true character and    purport of a payment, the court has to go by the substance of the    transaction and not by the manner in which the assessee allocates the    item for accounting purposes."
26. We find  that the facts of the case before us are similar to the  facts of the case in the case of Khimline Pumps Ltd. (supra).   We  are not impressed by the argument of the Ld. Counsel for the    assessee that the ratio of decision of Hon'ble Bombay High Court  in Khimline Pumps Ltd.'s case (supra) is distinguishable  since in  Khimline Pumps Ltd.'s case (supra)   the assessee  was not the  original lessee. This distinction pointed   out by the Ld. Counsel for  the assessee is not sustainable for the   reason that the decision of  the Hon'ble High Court is not based on the   fact that the assessee  was not the original lessee of the premises. All   other facts of the  case of the assessee before us are similar to the   facts of the case  of Khimline Pumps Ltd. (supra). The ratio of  the decision of  Hon'ble jurisdictional High Court in the case of Khimline  Pumps  Ltd. (supra)    is clearly applicable to the facts of the case of the  assessee. In   this case of the assessee all the essential ingredients of  treating the   amount of Rs. 2.04 crores paid by the assessee for  acquisition of   leasehold rights for 99 years in the land as capital in  nature are   present. The benefit conferred on the assessee of lease  rights is for   99 years against the lump sum payment of Rs. 2.04  crores is of enduring   nature. There is no material on record to  suggest that the sum of Rs.   2.04 crores had been paid by way of  advance rent nor was there any   provision for its adjustment  towards rent or for its re-payment to the   assessee. We find that in  case, the assessee terminates the lease   agreement and hand over  the vacant position of the land to MIDC   (Lessor) prior to the expiry of  lease period of 99 years, it shall not   be entitled to any refund out of the  amount of Rs. 2.04 crores paid by   the assessee. There is also no  material on record to show that the   assessee has made the advance  payment of rent for future years to   secure any reduction in the rent  payable for the future years or for   any other business consideration.  Considering the totality of the facts   and circumstances of the case and  the terms of the agreement dated   5-3-1992 entered into between the  assessee-company and MIDC as a whole,   we hold that the  consideration of Rs. 2.04 crores paid by the   assessee-company for  obtaining the leasehold rights from MIDC in favour   of the assessee for  a period of 99 years is capital in nature and   therefore, not allowable as  deduction to the assessee. The decision of   the Hon'ble Supreme Court  in the case of CIT v.  Panbari Tea Co. Ltd. [1965]   57 ITR 422,  Durga Das  Khanna v. CIT [1969]   72 ITR 796 (SC), Aditya Minerals (P.) Ltd. v. CIT [1999]   239 ITR 8171  (SC) and Hon'ble jurisdictional High Court in the  case of CIT v. Khimline  Pumps Ltd. [2002]   258 ITR 459 2   (Bom.) would  squarely apply to the facts of the case of the assessee,   and being  binding in nature, we decide the issue in ground of Appeal   No. 10 of the  Revenue in favour of the Revenue and the ground of Appeal   No. 10 of  the Revenue is allowed and the issue referred to the Special   Bench by  the President, Income-tax Appellate Tribunal is answered in   the  negative and in favour of the Revenue.
C.O. No. 329/M/99
    27.   The  Ground No. 1 of cross objection of the assessee is regarding    disallowance under rule 6D Rs. 1,14,207. The Ld. Counsel for the    assessee fairly conceded that the issue is covered in favour of the    Revenue with the decision of the Hon'ble Bombay High Court in  case of CIT v. Aorow  India Ltd. [1998]   229 ITR 325 3   and Mumbai  Tribunal in assessee's own case in the earlier assessment   years. The  Ld. CIT (Departmental Representative) has supported the   contention  of the Ld. Counsel for the assessee. We have considered the   rival  submissions. The issue of disallowance under rule 6D of the I.T.    Rules is covered against the assessee with the decision of the  Hon'ble   jurisdictional High Court cited supra   and decision of the  Mumbai Tribunal in assessee's own case in the   earlier assessment  years and accordingly the ground No. 1 of C.O. of   the assessee is  dismissed.
 28.   The second ground of C.O. of the assessee is regarding addition of    sundry credit balances written back amounting to Rs. 8,62,773. The Ld.    Counsel for the assessee submitted that the details of credit balances    appropriated have been filed in the compilation before the Tribunal. He    submitted that the issue is covered in favour of the assessee with the    decisions in case of CIT v. Sugauli Sugar Works (P.) Ltd. [1999]   236 ITR  5181 (SC), CIT v. Abdul  Ahad [2001]   247 ITR 710 2 (J&K), Chief  CIT v.  Kesaria Tea Co. Ltd. [2002]   254 ITR 4343  (SC) and Mumbai Tribunal in  assessee's own case for the assessment years 1990-91 and 1991-92.
29.   We have  considered the rival submissions. The issue of addition of    sundry credit balances written back is covered with the decision of the    Mumbai Tribunal in assessee's own case for the earlier assessment    years 1990-91 and 1991-92. We have also perused the details of credit    balances appropriated by the assessee filed in the compilation before    the Tribunal. We find that the Tribunal in assessee's own case for the    assessment year 1990-91 in C.O. No. 327/M/99 (in ITA No. 3486/M/97)  has   decided the issue in favour of the assessee by following the  decision   of Hon'ble Supreme Court in the case of CIT v. Kesaria Tea Co.  Ltd. [2002]   254 ITR 434 3.   Accordingly, the issue being covered in favour  of the assessee with   the decision of the Mumbai Tribunal in assessee's  own case for the   assessment year 1990-91, is decided in its favour and  the addition made   is deleted and the ground No. 2 of C.O. of the  assessee is allowed.
30. The  Ground No. 3 of C.O. of the assessee is as under :—
"Premium  on leasehold land : Rs. 2,04,00,000
3.1   On the facts and in the circumstances of  the case and in law, the    CIT(A) erred in rejecting the claim made by the respondent for    deduction of the sum of Rs. 2,04,00,000 being the lease premium paid  to   MIDC.
3.2   In rejecting the said claim the CIT(A)  erred in not appreciating the    fact that since the lease rent was only Re. 1 per annum, it was obvious    that the sum of Rs. 2,04,00,000 stated as lease premium actually    represented advance rent and was allowable as a deduction in the said    year.
3.3   The CIT(A) further erred in not appreciating  that as the facts in the    instant case were identical to the facts before the Karnataka High    Court in the case of CIT v. H.M.T. Ltd.  203 ITR  820   the ratio of the  said judgment squarely applied and hence the entire   premium paid  amounting to Rs. 2,04,00,000 ought to have been allowed   instead of  allowing deduction proportionately over the period of the   lease.
3.4   In view of the above grounds of cross objections,  the respondent    prays that the Dy. CIT be directed to allow the deduction in respect of    a sum of Rs. 2,04,00,000 in respect of premium paid for leasehold   land."
31.   We have  heard the parties. The issue of deductibility of premium  on   leasehold land amounting to Rs. 2.04 crores is identical to the  ground   of Appeal No. 10 in the Revenue's appeal for the same  assessment year   1992-93. For the reasons recorded while disposing off  the Ground of   Appeal No. 10 in Revenue's appeal in the foregoing paras  of this order,   we hold that there is no merit in this ground of C.O. of the  assessee   and accordingly the ground No. 3 of C.O. of the assessee is  dismissed.
32. The  assessee has requested for admission of the following  additional grounds of C.O.
"1. In view of the amendment to section  36(1)(vii)   with effect  from 1st  April, 1989, ground No. 1 in the Departmental   appeal bearing ITA No.  3488/M/99, in respect of provision for doubtful   debts amounting to  Rs. 6,04,137 will have to be decided in favour of   the Revenue.
2.   In view of the above facts and in the circumstances  of the case and    in law the respondent prays that directions may be issued to grant    deduction in respect of the aforesaid amount of Rs. 6,04,137 in the    year/s in which the corresponding debts have been written off against    the provision for doubtful debts created in the above assessment year.  A   statement showing the year/s in which debts aggregating to Rs.    6,04,137 have been written off out of the above provision is enclosed    herewith and marked Exhibit."
33.   We have  heard the parties regarding the admission of the  additional   grounds of C.O. filed by the assessee. In the facts of the case,  we   admit the additional grounds of C.O. preferred by the assessee.
34. The  Ld. Counsel for the assessee submitted that in view of  retrospective amendment to section 36(1)(vii)    of the Act with  effect from 1-4-1989, the ground of appeal No. 1 in   the revenue's  appeal for the assessment year 1992-93 has to be decided   in  favour of the revenue and accordingly the debts written off  against   the provision in the subsequent years ought to be allowed  in the   respective years. He submitted that the issue is covered in favour  of   the assessee with the decision of Mumbai Tribunal in assessee's own    case for the assessment years 1990-91, 1991-92 and 1995-96. The Ld.  CIT   (Departmental Representative) submitted that the subsequent  assessment   years 1993-94 and 1994-95 are not pending before the  Tribunal and   therefore, no direction can be given for the allowability of  the debts   written off against the provision in the subsequent  assessment years   1993-94 and 1994-95.
35.   We have considered the rival  submissions. The issue of direction  for   allowing the debts written off against the provision in the  subsequent   assessment years is covered in favour of the assessee with  the decision   of Mumbai Tribunal in assessee's own case for the  assessment years   1990-91, 1991-92 and 1995-96. The issue of deduction  for provisions for   doubtful debts has been decided in favour of the  Revenue due to   retrospective amendment to the provision of section  36(1)(vii)   of the Act  and the ground of Appeal No. 1 for the assessment  year   1992-93 in the revenue's appeal has been allowed in favour of the    Revenue. Accordingly the debts written off against the provision in the    subsequent years has to be allowed in those years and accordingly we    direct the Assessing Officer to consider the assessee's claim for    deduction in subsequent years in respect of debts which are written off    against the provision for doubtful debts in the subsequent assessment    years. We direct accordingly. 
36. In the result, the appeal  of the Revenue and Cross objection of the  assessee are partly allowed.
  IT/ILT : Where assessee paid commission to its foreign agents for   rendering services abroad, in view of fact that those agents did not   have PE in India and, moreover, services rendered were not in nature of   technical service, income could not be said to accrue or arise in India   and, thus, assessee was not liable to deduct tax at source while making   payments to said agents
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  [2014] 45 taxmann.com 406 (Chennai - Trib.)
  IN THE ITAT CHENNAI BENCH 'B'
Assistant Commissioner of Income-tax, Co. Circle-I (3)
v.
  Comex Exports (P.) Ltd.*
A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER 
  AND S.S. GODARA, JUDICIAL MEMBER
  IT APPEAL NO. 478 (MDS.) OF 2013
[ASSESSMENT YEAR 2009-10]
APRIL  25, 2014 
Section   9, read with section 195, of the Income-tax Act, 1961 and article 7 of   Model OECD Convention - Income - Deemed to accrue or arise in India   (Business income) - Assessment year 2009-10 - Whether where assessee   paid commission to its foreign agents for rendering services abroad, in   view of fact that those agents did not have PE in India and, moreover,   services rendered were not in nature of technical service, income could   not be said to accrue or arise in India and, thus, assessee was not   liable to deduct tax at source while making payments to said agents -   Held, yes [Para 4][In favour of assessee]
  Guru Bhashyam for the Appellant. S. Sridhar for the Respondent.
  ORDER
 
  S.S. Godara, Judicial Member - This Revenue's appeal for   assessment year 2009-10; arises from order of the Commissioner of Income   Tax (Appeals)-IX, Chennai dated 28.12.2012, passed in ITA No.276/11-12,   in proceedings under section 143(3) of the Income Tax Act 1961 [in   short the "Act"] deleting disallowance under section 40 (a)(i) of   ^58,80,824/- made by the Assessing Officer in assessment order dated   19.12.2011.
2. The   assessee; a private limited company, manufactures and exports leather   garments. On 30.09.2009, it had filed its 'return' declaring income of   Rs. 53,38,033/-. In 'scrutiny', the Assessing Officer noticed the   assessee to have incurred expenditure towards commission paid to   non-residents amounting to Rs. 58,80,824/-. He disallowed the same;   inter-alia, by observing that section 9 of the Act applied in this case   as the commission amount had accrued to a non-resident/ payee   principally on account of a business activity in India which required   TDS deduction. The Assessing Officer further held that the certificate   under section 195(2) of the Act had also not been produced. Accordingly,   he disallowed/added this sum of Rs. 58,80,824/- in assessee's income.
3. Aggrieved, the assessee preferred an appeal. The CIT(A) has accepted its contentions observing as under:—
'5.   I have considered the assessment order, grounds of appeal and the   written submissions filed by the AR of the appellant. While making the   disallowance, the AO observed in the assessment order as under :—
"On   verification of the P/L account, it is seen that the assessee has   incurred an expenditure towards commission paid to non-residents   amounting to Rs.58,80,8241-. No withholding tax was deducted on ,it as   according to the assessee, Circular No.786 of CBDT approved the act of',   Non-compliance by the assessee. The assessee had failed to deduct TDS   on this payment on the pretext that the transactions are treated under   exempted category, vide Circular No. 786 of 2000 which exemplified the   correctness of the contents and Intention pronounced in Circular No.23   of 1969., However, Circular No. 7/2009: dated 22-10-2009 had made both   Circular No.23 dated 23-07-1969 and Circular No. 786 dated 07-02-2000   redundant and inapplicable on its withdrawal vide Circular No. 7/2009 by   the Central Board of Direct Taxes. The commission income under   consideration, in the absence of the immunity granted vide Circular N023   dated 23-07-1 969 is therefore, governed by sec. 9 of IT Act, 1961   regarding taxability of income which is deemed to accrue or arise in   India because of its business connection in India. Tile source of income   emanates principally on account of the business activity conducted by   the assessee in India and since withholding tax has not been deducted   and remitted to the Government of India Account, this amount of   Rs.58,80,824!- is added to the taxable income of the assessee for the   year on its disallowance u/s, 40(a)(i).
3.2   Alternatively, the assessee ought to produce, Tax Residency Certificate   of the Commission Agent, undertaking from the commission agent that   there is not Permanent establishment in India or a certificate' u/s.   195(2) to substantiate that the commission paid shall not be Chargeable   under the Act in the hands of the nor resident to gain immunity from the   imposition of the provisions of section 40(a)(i), However, since these   documents have not been produced, the business profits of the   non-resident in the form of commission remains taxable in India. Since   tax has not been deducted on such income, the expenditure of 58,80,824/-   is disallowed u/s. 40(a)(i) and added back to the taxable income of the   assessee."
5.1   The appellant also submitted various judicial pronouncements made in   this regard. I am of the considered opinion that the AO is not justified   in in making the above disallowance for the following reasons:
  (a)   The AO has applied Sec 9 of the Act and held that the situs of the payer   and the situs of the utilization of the services which determine the   taxability of the such services in India is not relevant as long as the   services 9re utilized in India and thereby invoked the provisions u/s   40(a)(ia) of the I.T. Act. The appellant company has paid Commission to   its overseas agent for the purpose of procuring orders abroad which is   in the nature of commission payment. . As the services are rendered   outside India the provisions of section 5 cannot bE1 accepted to the   commission paid so as to make it taxable in India. Further, 'in order to   attract section 195, the services by the non resident agent should have   been rendered in India and also should have been used in India. It is   to be pointed out that Section 195 of the Act has to be read along with   the charging sections 4, 5 and 9 of the Act and the provisions of the   Tax Treaties and the combined reading of the aforesaid sections clearly   indicate that unless the income is chargeable to tax in India, there is   no obligation to withhold the tax.
(b)   The   AO has viewed that Board's Circulars 23 of 1969 and 786 dated 7.2.2000   have been withdrawn and therefore it cannot be relied upon further. The   AO's view is not acceptable as the law related to withholding of tax u/s   195 of . the Act has not been changed even after withdrawal of the   above circulars issued by the CBDT.
(c)   On similar and identical issue, Hon'ble ITAT, Hyderabad in the case of Dy. CIT v. Divi's Laboratories Ltd. [2011] 12 Taxmann.com 103 and the Hon'ble Delhi High Court in the case of CIT v. EON Technology (P.) Ltd. [2011] 15 taxmann.com 391 have   held that. the marketing fee I commission income could not be said to   have accrued to the non residents in India and hence the appellant is   hot liable to deduct tax at source from payment of commission to non   resident agent.
(d)   The Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT[2010] 327 ITR 456 has   held that if the amount is not taxable under the Act, the question of   deducti6n of tax does not arise and consequentially no disallowance of   expenditure was warranted. Further the Honble Jurisdictional ITAT in the   case of Wheels India Ltd for the AY 2005-06 in ITA no. 250/Mds/2010   dated 16/12/2010 and in ITA no. 163/Mds/2012 dated 27/07/2012 "for the   AY 2003-04 had held this issue in favour of the appellant.
6.2   Since the facts of the appellant case are similar to that of the cases   mentioned supra, respectfully following the decisions in the above   cases, I am of the opinion that the commissions received by the non   resident agent cannot be said to have accrued or arisen to the payee in   India and therefore the appellant company is not under obligation for   withholding of tax u/s 1~.5 on the abovesaid amount of Rs. 58,80,824/-.   Therefore the AO is not justified in making the disallowance of Rs.   58,8.0,824/- u/s 40(a)(i) of the Act and hence the Assessing Officer is   directed to delete the addition of Rs. 58,80,824/-made to the returned   income. This ground of appeal is allowed.'
Therefore, the Revenue is in appeal.
  4. We have heard both parties and gone through the case file and   perused the case laws quoted by the assessee i.e. M/s. Eagle Press (P)   Ltd ITA No.776/Mds/2008 dated 6.06.2011, M/s. Farida Shoes Private Ltd   ITA No.359/Mds/2013 dated 11.04.2013 and M/s. Praksh Impex ITA   No.08/Mds/2012 dated 2008-09. The Revenue's only grievance is that the   aforesaid foreign agency commission paid by the assessee to the non   residents/payee attracts disallowance under section 40 (a)(i) for non   deduction of TDS. It is made clear that in support of this plea, no   cogent evidence has been produced before us. It transpires from the case   file the assessee has paid foreign exchange commission to its   non-resident agent who do not have any permanent establishment in India.   There is no material to prove that these payment have arisen out of an   agreement executed in India. Nor there is any evidence to conclude that   the non-resident/payee has rendered any technical service to the   assessee. The Revenue also fails to prove the payments to have been   accrued, arisen or paid in India so as to make it taxable under   provision of the Act. Taking into consideration all these circumstances   and also the aforesaid case law echoing the same principle, we hold that   the assessee was not liable to deduct TDS qua abovestated commission   paid to its non resident payees. Accordingly, the CIT(A)'s findings   stand affirmed.
5. The Revenue's appeal is dismissed.
SUNIL
*In favour of assessee.

Service-tax not collected from customer but paid to Treasury is an allowable business expenditure                  June 12, 2014[2014] 45 taxmann.com 363 (Gujarat)              
IT: Where assessee had not collected and   deposited service tax but on being pointed out, deposited same, amount   being expended by assessee in course of business was allowable as   business expenditure
 

ITAT order couldn't be reviewed if assessee failed to produce docs relied upon by it before lower authoritiesJune   16, 2014[2014] 45 taxmann.com 347 (Mumbai - Trib.)
IT   : Tribunal's order cannot be recalled on ground that on date of hearing   assessee could not produce documents relied upon by it before lower   authorities
IT:   If in appeal before Tribunal assessee/representative of assessee could   not file documents relied upon by him before lower authorities, it could   not be said to be a case of any mistake apparent on record and,   therefore same was beyond scope of provisions of section 254(2)
  IT: Assessment of stock could not be done only by considering opening   stock without actually referring to sale/purchase made during year
  IT: In absence of any document or paper about hundi having been found,   no addition under section 69D could be made merely on basis of a paper   on which entries were found to have been struck down
  ■■■
[2014] 45 taxmann.com 389 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax
  v.
Deepak Chourasia*
RAJENDRA MENON AND SMT. VIMLA JAIN, JJ.
IT APPEAL NOS. 3 & 17 OF 2014
  MARCH  19, 2014 
Section   69A of the Income-tax Act, 1961 - Unexplained money (Stock) -   Assessment years 2008-09 and 2009-10 - After search, Assessing Officer   made addition of certain income on account of excess stock found and of   undisclosed sales of stock - However, Commissioner (Appeals) found that   assessment of stock was made by considering opening stock as on 1-4-2008   and by computing closing stock without actually referring to stock in   terms of reconciliation statement submitted by assessee - Whether   Tribunal was justified in giving direction to take correct opening stock   as on 1-4-2008 and recompute closing stock as at end of year by   incorporating purchases and sales made during respective years and   confining addition to difference between such calculation and value of   physical stock found as on date of search - Held, yes [Para 5] [In   favour of assessee]
Section   69D of the Income-tax Act, 1961 - Amount Borrowed or repaid on Hundi   (Search material) - Assessment years 2008-09 and 2009-10 - Assessing   Officer made certain addition on account of amount borrowed on hundi on   basis of papers found during search - However, it was found that there   was no date on seized papers - No other document or paper about hundi or   about receipt or payment was found - On paper, entries were found to be   struck down which showed that there was no outstanding loan on a   particular date - While recording statement, assessee clearly stated   that this was a list of person to whom payments were required to be made   - Still assessee offered income against entries found in loose papers -   Whether Tribunal was justified in holding that, no addition under   section 69D could be made on basis of seized papers - Held, yes -   Whether further, no addition was required to be made on account of   interest on amount which had already been accepted by assessee as his   own income - Held, yes [Para 6] [In favour of assessee]
  Sanjay Lal for the Appellant.
  JUDGMENT
 
  1. Shri Sanjay Lal, learned counsel for the appellant.
2. Both   these appeals have been filed by the department under Section 260-A of   the Income-tax Act, 1961 and they arise out of a common order for the   assessment years 2008-09 and 2009-10. As the question of law and facts   pleaded are the same they are being disposed of by this common order.
3. The   concurrent orders passed by the Commissioner of Income Tax, (Appeals)   and the Tribunal are challenged in both these appeals.
4. The   assessee is an individual dealing in fertilizer, Gutka, Cigarette and   manifacturing of pulses. A search and seizure operation under Section   132 of the Income-tax Act was carried out at the residence and business   premises on 22/01/2009, notice under Section 153-A of the Income-tax Act   was issued to him for the assessment years 2003-04 to 2008-09 and for   the assessment year 2009-10. The assessee filed his return of income on   06/09/2010. The Assessing Officer after taking into consideration all   the material and evidence that come on record computed the total income   of the assessee for the assessment year 2009-10 at Rs.   2,84,55,990/-after making certain addition under the head of excess   stock found in search and amount borrowed on Hundi under Section 69D.   Being aggrieved by this order of the Assessing Authority, the assessee   preferred an appeal before the Commissioner Income Tax (Appeal) and the   Commissioner Income Tax vide his order dated 30/08/2013 partly allowed   the appeal of the assessee. Challenging this order appeals were filed   before the Tribunal and the Tribunal having partly allowed the appeals   of the Department and having dismissed the appeal of the assessee, this   appeal by the department.
5. For   the assessment year 2008-09 the Assessing Officer taking into   consideration the material that came on record assessed the income for   the year 2008-09 at Rs. 27,97,720/-and added certain income on account   of undisclosed sales of stock and interest on Hundi loan. When the   matter went to the appellate authority, the Commissioner, Income Tax   (Appeals) found that the assessment of stock was made by considering   open stock as on 01/04/2008 at Rs. 55,74,475/- and by computing the   closing stock without actual referring to the stock in terms of   reconciliation statement submitted by the appellant. The Tribunal also   considered this aspect and remanded the matter back with the following   directions:—
"However,   no finding has been recorded by the CIT(A) on the computation of stock   as filed in terms of reconciliation statement. In the interest of   justice, we set aside this ground to the file of the AO with the   direction to take the correct opening stock as on 01/04/2008 at Rs.   55,74,475/- and recompute the closing stock as at the end of the year by   incorporating the purchases and sales made during the respective years.   The addition is to be confined to the difference so worked out between   such calculation and the value of physical stock taken as on the date of   search. We direct accordingly."
6. As   far as the addition under Section 69 with regard to Hundi were   considered in paragraphs No. 22 and 23. The Tribunal has dealt with the   matter in the following manner:—
"22.   A close scrutiny of LPS-6 reveals that there is no date on this paper.   It does not depict about the transaction. No other document or paper   about the hundi or about the receipt or the payment was found. On the   paper entries found struck down which shows that they are not   outstanding loan on a particular date. In the absence of any hundi   having been found, no addition u/s 69D can be made on the basis of this   paper. Even while recording the statement during the course of search,   the assessee has clearly stated that this is a list of persons to whom   the payments are required to be made. Thus, no addition can be made in   respect of the liability assumed by the AO on the basis of this paper.   The liability may be in respect of loans incurred or for any other   purpose. It is pertinent to mention that during the course of search, no   undisclosed investment, property or cash was found. Further the   assessee has already offered an amount of Rs. 36.40 lakh in various   years which was available to the assessee. After giving finding in para 4   page 12 of the appellate order, the CIT(A) has deleted the addition   which has not been controverted. Accordingly, we do not find any   infirmity in the order of the CIT(A) in deleting the addition made in   respect of LPS-13.
23.   Since the addition u/s 69C has already been deleted by the CIT(A), the   assessee has also offered the income against the loose papers and as   such these amounts cannot be saddled with interest. Since the amount has   been accepted by the assessee as its own income, there is no   justification in assuming that the assessee has paid interest on such   amount. No addition is required on the basis of assuming interest on the   amount which has already been accepted by the assessee as his own   income."
7. In   view of the reasons given by the Tribunal as reproduced hereinabove, we   find that the reasonable approach has been adopted by the Tribunal, in   doing so no error of law is committed and therefore, no substantial   question of law is arises for consideration now, both these appeals are   therefore, dismissed.
SONAM
  
  *In favour of assessee.

-- 
Regards,
Pawan Singla , LLB
M. No. 9825829075
Interest earned from investment of grant isn't taxable if it is repaid to grantor or reduces future grantsJune 16, 2014[2014] 45 taxmann.com 339 (Hyderabad - Trib.)
IT:   Where assessee received grant from Central Government and kept amount   in short-term deposits in bank and further it earned interest on such   deposits, since Central Government had given instruction that interest   on short-term deposits either had to be refunded back to Government or   to be adjusted against future grants to be released, interest earned   could not be said to have accrued as income to assessee
IT:   Where assessee claimed depreciation on certain assets disclosed in   balance-sheet, since entire cost of assets had not been met by assessee   but by other agencies, it   was not eligible for depreciation
AO can't invoke disallowance for cash payment unless assessee gets an opportunity to prove his claimJune 16, 2014[2014] 45 taxmann.com 349 (Kerala)
IT:   Disallowance as required under section 40A(3) can be made only if there   is proper material available either in returns or records accompanying   reports and after affording opportunity to assessee to prove his case
 
HC raps AO for making additions on estimation basis as no material was unearthed during search to justify itJune 16, 2014[2014] 45 taxmann.com 348 (Karnataka)
IT   : In block assessment, no addition can be made on basis of estimation,   where no material seized during search in support of making addition in   respect of payment
IT : In case of inflation of expenditure only inflated figure/amount is to be added to income of assessee, and not entire amount
Deloitte Consulting India Pvt. Ltd vs. ACIT  (ITAT Mumbai)S. 271(1)(c): The giving up of a bogus claim for  deduction to  eschew inquiry by AO/ TPO is not voluntary  & bona fide &  attracts levy of penalty
  
The assessee entered into a software development service  agreement  with Deloitte Consulting, USA  ("Deloitte"), to provide software related   services to Deloitte. Deloitte enters into consulting  assignments with  its US clients. For such assignments, the  areas pertaining to software  development and information  technology services are provided by the  assessee. The  assessee's income was eligible for 100% deduction u/s  10A.  The assessee claimed a deduction towards reimbursement  of marketing  support services in the return of income. As  the said arms length price  of similar reimbursement had  been determined by the TPO at Rs. Nil for  the earlier  years, the assessee, after the reference was made by the AO   to the TPO, withdrew the claim for deduction and stated that  no transfer  pricing adjustment was required to be made. It  also stated that its  income should be enhanced by the  disallowance and s. 10A deduction  granted on the enhanced  income. The AO & TPO rejected the withdrawal  of the  claim and determined the ALP thereof at Rs. Nil. The claim  for  s. 10A deduction on the said enhanced income was  rejected by relying on  s. 92CA(4). The said view of the AO  was upheld by the Tribunal. In the  s. 271(1)(c) penalty  proceedings, the assessee claimed that no penalty  can be  levied on the basis that (a) there was merit in its claim  for  deduction of the marketing expenditure and that claim  was voluntarily  given up only to avoid litigation, (b) that  in view of Gems Jewellery  330 ITR 175 (Bom), the  enhanced income was eligible was s. 10A  deduction and so  there was no tax effect and (c) there was full  disclosure  of the material facts in the return. The AO & CIT(A)   rejected the claim. On appeal to the Tribunal HELD  dismissing the  Tribunal: 
 
(iv) The assessee's next plea is of a complete  disclosure of material  facts, made, adverting to the audit  report u/s 92E. We are at loss to  fathom even the import of  the argument. It is only on failing, and  abysmally at that,  to demonstrate any business purpose of its relevant   international transaction that a TP adjustment, valuing the  same at nil,  was advised by the TPO and came to be made.  The disclosure per the  audit report u/s 92E is thus both  false and misleading. The argument of  complete disclosure,  unless the same is true, is of little consequence  in law  and, in fact, itself false. As such, looked at from any  angle  there has been both concealment as well as furnishing  inaccurate  particulars of income in the present case (Mak Data 352 ITR 1 (Del) affirmed in  358 ITR 593 (SC) referred)

http://moneylife.in/article/dividend-rules-tweaked-mca-makes-setting-off-of-past-losses-mandatory/37768.html
  

  Dividend rules tweaked: MCA makes setting-off of past losses mandatory

--   ​The tendency of pushing through substantive changes in the law through the Rules, completely bypassing the parliamentary process, continues unabated and is an extremely undesirable practice adopted by the MCA
Clearly, the Ministry of Corporate Affairs (MCA) is working fast and hard, in correcting the   scores of anomalies and absurdities of the law passed and hurriedly   enforced by the previous government. Over the last few days, lots of   circulars, notifications and removal ofdifficult orders   have continued to flow in. However, the abominable tendency to push   through substantive changes in the law, while ignoring the parliamentary   process continues unabated. The change discussed in this article, made   by a notification of 12th June, actually amounts to putting in place   a completely new provision for offsetting of past losses before   companies may distribute dividends. This changes the position as it   prevailed under the 1956 Act, and this change was nowhere discussed by   any of the Committees that preceded the 2013 Act. Neither does the main   law, the 2013 Companies Act envisage such a change. Therefore, the   question is – could such a substantial change in law have been done by a   virtually unnoticed notification?
  
Dividend declaration rule:
Rule   3 (5) of the Declaration and Payment of Dividend Rules has been   replaced by a notification of 12th June 2014. The rule, before its   replacement, read as follows:

  (5) "No company shall declare   dividend unless carried over previous losses and depreciation not   provided in previous year are set off against profit of the company of   the current year the loss or depreciation, whichever is less, in   previous years is set off against the profit of the company for the year   for which dividend is declared or paid."
  
Clearly there was something terribly wrong with the   language of the old Rule. Now, the said garbled rule has been replaced   by the following:

(5)   "No company shall declare dividend unless carried over previous losses   and depreciation not provided in previous year or years are set off   against profit of the company of the current year."
  
Impact of the change:
The   amendment, besides clearing the wording of the earlier rule, marks a   change from the position in the 1956 Act. In sec 205 (1), proviso (b)   provided as follows:

(b)   if the company has incurred any loss in any previous financial year or   years, which falls or fall after the commencement of the Companies   (Amendment) Act, 1960, then, the amount of the loss or an amount which   is equal to the amount provided for depreciation for that year or those   years whichever is less, shall be set off against the profits of the   company for the year for which dividend is proposed to be declared or   paid or against the profits of the company for any previous financial   year or years, arrived at in both cases after providing for depreciation   in accordance with the provisions of sub-section (2) or against both;
  
Though the language of the proviso was also unclear,   but in Ramaiya's Guide to Company Law, this proviso has been discussed   at length. The interpretation has been that if there is a loss before   depreciation, and then there is a loss after depreciation, it is   necessary to offset only the depreciation and not the loss before   depreciation. This interpretation became clear with the combined reading   of proviso (a) below sec 205 (1) with proviso (b). Proviso (a) required   the company to provide for depreciation, if the same was not provided   for in the previous years. There was nothing in sec 205 (1) requiring   the company to offset losses of previous years before declaring   dividends.
  
Now, Rule 3 (5) requires all "carried over losses" and all unprovided depreciation to be offset before declaring any dividends.

For   companies that have just turned around, attracting capital on the   strength of dividend payments becomes quite important, particularly if   it is preference capital. If the company has to make good all its past   losses before it starts distributing dividends, the company's ability to   declare dividends, particularly when it is so necessary to attract   capital infusion, gets impaired.
  
Substantive change comes silently via a subordinate law:
The   tendency of pushing through substantive changes in the law through   'Rules',completely bypassing the parliamentary process, continues   unabated and is an extremely undesirable practice. Before a law changes   substantively, there are extensive pre-Parliament discussions (such as   the Irani Committee, Standing Committee of Parliament, etc). There may   be debates in the House as well. There is a benefit of a Bill,   discussions with the stakeholders, and so on. However, the change in the   Rules simply comes by way of a notification, and it may actually change   the law substantively.
  
The present change in the dividend distribution rights   of companies is an example. Section 123 (1) (a) provides for payment of   dividends out of current profits. It does not make any reference to   offsetting of losses of previous years. Neither does it empower the   Central Government to make any rules about what amounts may be offset   before distributing dividends. It is questionable as to how the Central   Government goes and make a rule with no empowering provision in the Act.
  
There is no discussion in the Irani Committee Report,   or in the Parliamentary Committee reports, on the issue of whether past   losses should be offset before distributing dividends.

(Vinod Kothari is   a chartered accountant, trainer and author. He is an expert in such   specialised areas of finance as securitisation, asset-based finance,   credit derivatives, accounting for derivatives and financial instruments   and microfinance. He has written a book titled "Securitisation, Asset   Reconstruction and Enforcement of Security Interests", published by   Butterworths Lexis-Nexis Wadhwa.)
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Monday, June 16, 2014

[aaykarbhavan] Judgments and Information [1 Attachment]

ICAI suggests Facility to submit Form C, E, F etc. online

Service-tax not collected from customer but paid to Treasury is an allowable business expenditure

ITAT order couldn't be reviewed if assessee failed to produce docs relied upon by it before lower authorities

Interest earned from investment of grant isn't taxable if it is repaid to grantor or reduces future grants

AO can't invoke disallowance for cash payment unless assessee gets an opportunity to prove his claim

HC raps AO for making additions on estimation basis as no material was unearthed during search to justify it

Deloitte Consulting India Pvt. Ltd vs. ACIT (ITAT Mumbai)

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(a)		resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
(b)		bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;"
(i)		incidental or ancillary to the completion of a manufactured product;
(ii)		which is specified in relation to any goods in the section or Chapter notes of The First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii)		which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word " manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;"
FEE SLABS OF FILING FEES

AUTHORISED CAPITAL	FEE PER DOCUMENT
Upto Rs. 1,00,000	Rs.200
Rs.1,00,001-5,00,000	Rs.300
Rs.5,00,001-25,00,000	Rs.400
Rs.25,00,001-10,000,000	Rs.500
Rs.10,000,001 or more	Rs.600





FEE SLABS FOR DELAY FILING

PERIOD OF DELAY	FIXED RATE OF ADDITIONAL RATE
Upto 15 days(Section 93, 139 & 157)	One time of normal fees
More than15- upto 30days (Section 93, 139 & 157)	Two Times of normal fees
Upto 30 Days (others)	Two Times of normal fees
More than 30- upto 60 days	Four Times of normal fees
More than 60- upto 90 days	Six Times of normal fees
More than 90- upto 180 days	Ten Times of normal fees
More than 180- upto 270 days	Twelve Times of normal fees

Note:-
Section 93 relates to Return to be filed by every listed company for change in promoter's stake
Section 139 relates to notice of appointment of auditors by company to be filed with ROC.
Section 157 relates to intimatig DIN by company to Registrar.
■		The assessee-realtors took a plot of land from MMRD Ltd. and made payment of lease premium for allotment of plot. It also paid for additional FSI.
■		The Assessing Officer held that the assessee was required to deduct tax under section 194-I in respect of the aforesaid payment to MMRD. According to him, the assessee had not complied with the provisions of section 194-I, it had committed default within the meaning of section 201(1) and, therefore, the assessee was treated as assessee in default. He accordingly, directed the assessee to make payment of interest along with TDS totalling to Rs. 314. 26 crores.
■		On appeal by the assessee, the Commissioner concluded that amount paid by the assessee were lease premium for acquiring leasehold rights and additional FSI in respect of the leased plot and same was not in nature of rent as contemplated under section 194-I requiring deduction of tax at source.
■		On second appeal:
■		A careful reading of the lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD Ltd. is also for additional built up area and also for granting free of FSI area, such payment cannot be equated to rent.
■		It is also seen that the MMRD in exercise of power under section 43 read with section 37(1) of the Maharashtra Town Planning Act, 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire area. The Development Control Regulations for the area specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot.
■		Thus, the assessee has made payment to MMRD under development control for acquiring leasehold land and additional built up area. In the case of CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459/125 Taxman 104 (Bom.) squarely and directly apply on the facts of the case wherein the jurisdictional High Court has held that payment for acquiring leasehold land is a capital expenditure.
■		Considering the entire facts in totality in the light of the judicial decisions vis-à-vis provisions of section 194-I, definition of rent as provided under the said provision, there is no reason to tamper or interefere with the findings of the Commissioner (Appeals) which is confirmed by the Tribunal. [Para 10]
(a)		For additional built-up area
(b)		For granting free of FSI area of Rs. 4 crores.
(a)		The AO has applied Sec 9 of the Act and held that the situs of the payer and the situs of the utilization of the services which determine the taxability of the such services in India is not relevant as long as the services 9re utilized in India and thereby invoked the provisions u/s 40(a)(ia) of the I.T. Act. The appellant company has paid Commission to its overseas agent for the purpose of procuring orders abroad which is in the nature of commission payment. . As the services are rendered outside India the provisions of section 5 cannot bE1 accepted to the commission paid so as to make it taxable in India. Further, 'in order to attract section 195, the services by the non resident agent should have been rendered in India and also should have been used in India. It is to be pointed out that Section 195 of the Act has to be read along with the charging sections 4, 5 and 9 of the Act and the provisions of the Tax Treaties and the combined reading of the aforesaid sections clearly indicate that unless the income is chargeable to tax in India, there is no obligation to withhold the tax.
(b)		The AO has viewed that Board's Circulars 23 of 1969 and 786 dated 7.2.2000 have been withdrawn and therefore it cannot be relied upon further. The AO's view is not acceptable as the law related to withholding of tax u/s 195 of . the Act has not been changed even after withdrawal of the above circulars issued by the CBDT.
(c)		On similar and identical issue, Hon'ble ITAT, Hyderabad in the case of Dy. CIT v. Divi's Laboratories Ltd. [2011] 12 Taxmann.com 103 and the Hon'ble Delhi High Court in the case of CIT v. EON Technology (P.) Ltd. [2011] 15 taxmann.com 391 have held that. the marketing fee I commission income could not be said to have accrued to the non residents in India and hence the appellant is hot liable to deduct tax at source from payment of commission to non resident agent.
(d)		The Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT[2010] 327 ITR 456 has held that if the amount is not taxable under the Act, the question of deducti6n of tax does not arise and consequentially no disallowance of expenditure was warranted. Further the Honble Jurisdictional ITAT in the case of Wheels India Ltd for the AY 2005-06 in ITA no. 250/Mds/2010 dated 16/12/2010 and in ITA no. 163/Mds/2012 dated 27/07/2012 "for the AY 2003-04 had held this issue in favour of the appellant.