S. 253(3): Delay of 1163 days in filing the appeal due to languid and inane conduct of the assessee cannot be condoned as it would result in the limitation period becoming otiose
(i) We are of the view that there is an extraordinary delay of 1163 days in filing this appeal for which assessee has to show "sufficient cause" but the cause shown by the assessee may be considered a "sufficient cause" for the intervening period when old officers left or parted with the company and till new Manager Taxation Mr. Hemant Gupta joined, meaning thereby from October 2007 to 29.2.2008, but we are unable to see any "sufficient cause" which could justify or properly explain the delay which occurred from last date of filing the appeal as per statutory provisions of the Act to departure of Shri Suresh Chawla – AVP – Taxation i.e. from 17.6.2006 to October 2007 and from joining of Mr. Hemant K. Gupta – Manager Taxation to the date of filing this appeal i.e. from 29.2.2008 to 12.8.2009. From impugned order of the CIT(A) dated 30.3.2006, we clearly observe that Shri Suresh Chawla AVP (Taxation) of the company was present at the time of delivery of the order with Shri Satya Sethi, Advocate and Shri Harsh Singhal the representative of the assessee company which reveals that Shri Suresh Chawla was well aware about the impugned order from the date of the order i.e. from 30.3.2006, therefore, delay in filing appeal was not due to ignorance but the delay was caused due to languid and inane conduct of the assessee. We also note that the date on which Mr. Hemant Kumar Gupta found relevant papers in a file folder is neither mentioned in the application for condonation of delay nor in the affidavit of Mr. Gupta. Therefore, "sufficient cause" as shown by the assessee is not acceptable in the light of ratio of the decision of Hon'ble Apex Court in the case of Chief Postmaster General and Others vs Living Media India Ltd. and Another (supra) and Pundlik Jalam Patil (Dead) by LRS vs Executive Engineer (supra). In above facts and circumstances of the present case, we are of the considered opinion that if such kind of extraordinary delay is condoned without any sufficient cause, then the provisions of prescribed limitation period would become otiose and infructuous.
(ii) Thus, we respectfully hold that the benefit of the ratio of the decisions of Vedabai (supra) and Mst. Katiji (supra) is not available for the assessee. On the other hand, the decisions as relied by the ld. DR i.e. decisions of Hon'ble Apex Court in the cases of Chief Postmaster General and Others vs Living Media India Ltd. and Another (supra) and Pundlik Jalam Patil (Dead) by LRS vs Executive Engineer (supra) are squarely applicable to the present case as the "sufficient case" shown by the assessee in the application for condonation of delay is neither supported by the affidavit of Mr. Hemant Kumar Gupta nor by the submissions and other contentions of the assessee. Therefore, we reach to a fortified conclusion that the assessee miserably failed in establishing and substantiating "sufficient cause", as required by the statutory provisions of the Act, for the extraordinary delay of 1163 days. Hence, present application for condonation of delay is dismissed.
Ferani Hotels Pvt. Ltd vs. ACIT (ITAT Mumbai)
S. 14A Rule 8D: No presumption can be drawn that investment in tax-free securities has come from own funds. The amount of disallowance has to be added to the book profits u/s 115JB
(i) As regards the claim qua disallowance of interest expenditure, the argument of sufficient capital, so that the same must be presumed as having been applied toward investments yielding tax exempt income, misses the point completely. The matter has to be decided on the basis of facts and not presumptions. Until and unless therefore it […]
No rejection of books due to non-issuance of cash memo on every sales as assessee was issuing one memo for a day
IT : Books of account of assessee could not be rejected on sole ground that only one consolidated cash memo was issued at end of day as it is not necessary that a cash memo is required to be issued for each and every sale
BANGALORE, NOV 24, 2014: THE issues before the Bench are - Whether where the goods have been given in shipment and title of goods along with the risk has been passed on to the assessee in terms of a contract, the assessee will be said to be at loss if such goods are not received by him and Whether where the assessee has exhausted all the methods to recover the losses he incurred during previous year on account of loss of goods in transit and has not claimed deduction on those losses in the previous year, he cannot be denied from claiming deduction on the said losses in the subsequent year if such loss was not written off. And the verdict favours the assessee.
Facts of the case
The assessee is engaged in the business of trade in importing timber logs in bulk quantity. It had entered into contract with M/s Ply International, USA for import of teak logs of Tanzanian origin by shipment to be made in June and July 1994. The sale was on C & F basis where insurance was to be covered by the assessee and freight was to be paid by Ply International. The terms of the contract stipulated that once the goods were accepted on inspection, it would be considered as sold and held at the risk and responsibility of the assessee. The assessee for purpose of such contract had engaged the services of shipping vessel, M V Hazar through the charterer viz., M/s Ummall Quwain (UAE) and booked the consignment. The teak logs were inspected by the representatives of assessee at Tanga Port and a certificate was issued on behalf of the assessee stating the quality, quantity and measurement of teak logs. The teak logs shipped on M V Hazar were accordingly insured by the assessee with M/s National Insurance Company, Mysore for invoice value vide Marine policy. Subsequently, the cargo was loaded on shipping vessel, which was to arrive at Mangalore port. A bill of lading was issued by Ummall Quwain which was signed by M V Hazar and the freight had been prepaid at Dubai. However, M V Hazar did not reported at Mangalore port on the expected date of arrival. This resulted in a dispute between the Charterer and the ship owner as to non payment of freight by the former to the latter. As a result, the ship owner declared a lien over the goods and diverted the cargo to some other destination without delivering it to the assessee. The assessee tried to negotiate but it was not fruitful. Accordingly, the assessee informed these developments to its Insurance company and requested them to take immediate steps to protect its insured cargo, however, the Insurance company contended that the said risk was not covered under the policy. In the meanwhile, bill of lading endorsed in favour of assessee and bill of exchange drawn by Ply International against the assessee were presented to the assessee through its banker. The assessee accepted the bill of exchange, however, the assessee's banker could not remit the payment in the absence of bill of entry. When the banker approached RBI for instructions to remit the foreign exchange without insisting on the bill of entry, the RBI declined the permission. Therefore, the bankers of assessee returned the documents to the seller bank. Thereafter, in such circumstances, the assessee filed a suit in the Court of Civil Judge, Mangalore, impleading the ship owners, Charterers, their agents and also the National Insurance Company seeking a decree in favour of assessee against the defendants jointly and severally to make good the loss incurred by the assessee.
The assessee debited its purchases to the extent of invoice value and took goods into closing stock under the head 'goods in transit'. The assessee also showed Ply International as a creditor for supply of goods and continued it in the books of accounts with notes to the effect that provision were to be made in the account after exhausting the legal remedy available to the company. The assessee however did not made any provision for loss of goods in transit. Although in the return filed for A.Y 1996-97, the assessee claimed the loss of goods in transit by illegal diversion of cargo by ship owner and a refusal of claim by the Insurance company. The assessee submitted that since the loss was crystallized during the previous year relevant to A.Y 1996-97, so the same was claimed as deduction in the previous year. However, since the same was not allowed in the A.Y 1996-97, the assessee claimed the said deduction in A.Y 1997-98. The said assessment was disallowed by the AO on the ground that as the title in goods was not transferred to the assessee, it could not claim any loss. The assessee was not liable for payment of the cost of logs, in the circumstances, as it fall under the heading of 'Force Majeure'. Further, the AO held that the liability claimed by the assessee was an uncrystalized liability. It was also held that as the civil suit was pending and the RBI did not grant permission to remit the foreign exchange, the loss arising out of contingent liability was not allowable. It was observed that the foreign supplier Ply International was the proprietary concern owned by brother of one of the Directors of the assessee, there could be a doubt that this was not a normal business transaction.
On appeal, the CIT(A) held the assessee and its sister concerns had been regularly doing business with Ply International during subsequent years and therefore, it could not be said that it was not a normal business transaction. The contract entered into between the parties was valid and complete contract. Once in the terms of contract, inspection of goods was done and the same was loaded to the ship, the title in the goods passes to the assessee. Admittedly, the goods were not delivered to the assessee and therefore, the assessee had sustained loss. Once the acceptance of bill of exchange was signed, the liability got crystallized. The pendency of Civil Suit or the refusal of RBI to grant permission would in no way affect the liability, nor it would make the contingent liability. The assessee did not claim loss on goods in transit it as a deduction in computation of income for the A,Y 1995-96. Neither did he write off the loss in its books of account for the A.Y 1996-97, but it was written off in the books of account. Accordingly, the CIT(A) set aside the order of the AO and allowed the set off claimed by the assessee. On further appeal, the Tribunal upholding the findings of the CIT(A) held that the loss of goods in transit accrued in the commercial sense during the relevant A.Y 1996-97 and therefore, the assessee was eligible for deduction of loss of Rs.1,43,51,506/-.
On appeal before the High Court, the counsel for revenue contended that admittedly, the assessee did not receive the consignment. The consignment did not enter shores of India, therefore, there was no liability on his part to make any payment to the seller. Admittedly, the RBI did not permit the remittance of sale consideration by way of foreign exchange on the ground that the goods never reached the Indian source. Therefore, the counsel contended that the authority were not justified in treating the amount as expenditure and consequently the loss incurred by the assessee and remitting deduction of the said amount.
However the counsel for assessee supported the order of the appellate authorities.
Having heard the parties, the High Court held that,
++ it is clear from the facts that there is no dispute regarding the contract entered into between the parties. The terms of contract stipulates once the teak logs are inspected and loaded in the ship, the title in the goods passes to the buyer. The transportation of the goods is at the risk of the buyer. Therefore, the buyer was expected to take the insurance policy whereas the seller has to pay the freight charges. When the seller negotiated the document of title, the assessee received the same and acknowledged the liability. Admittedly, the ship which carried the logs did not enter the Indian waters and the goods was not delivered because of the dispute between the owner of ship and the charterer. Once the title of goods has passed to the assessee and the goods was transported at his risk, he accepted the document negotiated through the bank and acknowledged the liability. But, when the goods has not reached him, it is clear that the assessee has incurred loss of the value of goods which he has purchased. In the books of account of the assessee, necessary entries were made though loss was not claimed. The assessee approached the RBI for permission to make payment by way of foreign exchange which was refused by RBI. The assessee approached the Insurance company to settle the claim, to which they also declined. Therefore, assessee was constrained to file the Civil Suit in Mangalore Court against the ship owners, charterers, Insurance company claiming the said amount. In view of these steps taken, the assessee did not make entry in the book of accounts for the A.Y 1994-95 showing the loss. However, for the subsequent year, necessary entries were made showing loss and in the return filed, the deduction was claimed. When it was not allowed in the subsequent year after writing off the losses, deduction was claimed. In the light of these undisputed facts, both the Appellate Authorities were justified in upholding the claim of assessee and in allowing the deduction.
ITAT lays down criteria for selection of accounting method in construction projects
IT : In order to compute income from construction projects, method of accounting has to be selected keeping in view transfer of significant risks and rewards of ownership coupled with absence of uncertainty associated with realization of revenue, so that sale can be said to have taken place
ITAT had rightly set-aside time-barred assessment under sec. 144 after considering facts of the case
IT: Where Tribunal on appreciation of facts came to conclusion that order passed under section 144 read with section 251 was time-barred and cancelled same; conclusions reached by Tribunal could not be interfered with
No unexplained investment if construction cost was determined as per State PWD rates and not Central PWD rates
IT: Where assessee computed cost of construction of building on basis of rate fixed by State PWD, in absence of any circular or notification indicating that Central PWD rate alone was to be adopted in arriving at cost of construction, Assessing Officer was not justified in making addition under section 69 to assessee's income by adopting rates fixed by central PWD in respect of building in question
BI Credit Cards - RBI cautions against fraud
HAVE you got an invitation from RBI offering you a credit card? Don't believe it. RBI has issued yet another alert to the public about the newest form of fraud perpetrated in its name - a credit card issued by fraudsters in the name of the Reserve Bank. Explaining the modus operandi, the Reserve Bank stated that the gullible member of the public is sent a credit card which allows withdrawal of money up to a certain limit, albeit a small sum, from a bank account. Having gained the confidence of the victim thus, the fraudster gets him to deposit a huge sum of money in the same bank account. Once the money is deposited, the card stops working and that would also be the last time the holder of the card (victim) would hear from the fraudster.
Reserve Bank has reiterated that as India's central bank, it does not carry out any business with an individual, whether through savings bank account, current bank account, credit card, debit card, online banking services or receiving and holding funds in foreign exchange or any other form of banking services. The Reserve Bank has listed out the other kind of prevalent frauds, such as:
i) Fictitious offers of large sum of money/lottery winnings by email or through phone calls by posing as RBI official.ii) Fake Reserve Bank website for online transactionsiii) Luring members of public to secure their bank accounts against such frauds by asking them to share the bank account details, including user id/password, through an email or by clicking on a link given in email.
iv) Offer of employment in the Reserve Bank through email
The Reserve Bank has also stated that fictitious offers are also made in the name
of other public institutions, such as, International Monetary Fund (IMF), Income Tax authorities, Customs authorities or public figures like Governor, Dr. Raghuram Rajan or other senior RBI officials.
The Reserve Bank has pointed out that once the moneys are paid in fraudsters' accounts, there are remote chances of the members of public recovering the moneys.
S.37(1): Business expenditure-Payment to retiring partner- Payment of Goodwill made to the retiring partners was held to be not allowable. [S.263]
The assessee was originally a partnership firm of four partners involved in the business of pharmaceutical distribution. During the course of its business, three new partners were introduced; all four original partners then retired from the partnership firm, leaving the three new partners. The firm continued to run the business. The assessee firm claimed deduction of amounts paid to the retiring
partners on account of goodwill for the particular assessment year. The claim was allowed by the AO.The assessment was reopened suo moto by the Commissioner under Section 263. He disallowed the claim. On appeal, the Tribunal disallowed the claim and stated that there was no question of payment of any goodwill to a retiring partner, as the partnership continued to be a firm carrying on the business
without any change in the nature of business by using the earlier name. On appeal filed before High Court it was held that when one partner retired from the business, there was no severance of status so far as the partnership was concerned, as the retiring partner would take his capital investment and retire from partnership and the others would continue the business. By adopting this method, the four
partners had not transferred the entire business concern to the new partners, but had chosen to continue for some time and at their leisure, and then retire from partnership one after the other; therefore, both tangible and intangible assets and liabilities of the firm remained the same throughout. A share of the capital came to be paid to the retiring partners, but it could not be treated as cost paid to
them towards acquisition of any rights from them. A partner who retired from a partnership firm would take its initial investment and profit, if any, payable to him. Similarly, if he was accountable for any loss in a particular assessment year, that would also be worked out at the time of retirement. Therefore, there was no transfer of any interest and the money paid was only towards the share of the
capital invested by that partner along with some profit, if any, and nothing beyond that. Therefore, the question of each year some money paid towards the goodwill would not arise in the facts of the present case. Therefore, the Income Tax Appellate Tribunal was justified in disallowing the payment of goodwill claimed by the appellant assessee. (AY. 2004-2005)
Oberon Trading Corpn. .v. ITO (2014) 360 ITR 19 / 220 Taxman 350 (Ker.)(HC)
SAD Refund cannot be denied on sales made to non registered buyer despite no endorsement on invoice
SAD Refund cannot be denied when no endorsement to the effect that 'No Cenvat credit of SAD is admissible' is made on an invoice issued to the non-registered buyer as no credit is available to the buyer on account of non-registration
Vijay Steel Industries Vs. Commissioner of Customs (EP), Mumbai [2014-TIOL-2240-CESTAT-Mum]
Vijay Steel Industries (the Appellant) is a small trader who, imported stainless steel industrial raw material (the goods) on payment of proper customs duty and 4%Special Additional Duty of Customs (SAD) under Section 3(5) of the Customs Tariff Act, 1975 and subsequently domestically sold such goods on payment of CST/ VAT. They were issuing invoice to the buyers making an endorsement that the credit of SAD will not be available. However, in respect of one buyer,who is not registered with the Central Excise Department, the Appellant did not make endorsement on the invoice with regard to the fact that Cenvat credit is not available to the buyer being non-registered assessee.
Thereafter, the Appellant filed refund of SAD under Notification No. 102/2007-Customs dated September 14, 2007 ("the Notification") which was rejected by the Department on the ground that the endorsement to the effect that 'No Cenvat credit of the SAD is admissible' in respect of the goods covered therein, as required in terms of the Notification was not made on the invoice issued for sale of the goods.Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Mumbai.
The Hon'ble CESTAT, Mumbaiheld that although there is no endorsement on the invoice, the buyer is also not able to take Cenvat credit as the buyer is not registered with the Central Excise Department and as the buyer is not able to take Cenvat credit of SAD, the condition of the Notification is fulfilled to entitlement of the refund of SAD. Accordingly, the Hon'ble Tribunal allowed the appeal and held that the Appellant is entitled for refund of SAD.
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