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2018-TIOL-650-HC-DEL-IT
PR CIT Vs MOON STAR SECURITIES TRADING AND FINANCE COMPANY PVT LTD: HIGH COURT DELHI (Dated: March 23, 2018)
Income Tax - Sections 14A & 153A.
Keywords: Search assessment & Tax exempt income.
The Assessee-company, had filed its return for the relevant AY. The Assessee has preferred the appeal challenging the disallowance made u/s 14A during the search assessment u/s 153A.
On appeal, the High Court held that,
Whether the AO can reject the amounts offered by the assessee as disallowance claiming them to be expenditure for tax exempt income without providing any reasons to believe - NO: HC
++ the question of law urged is identical to what was urged by the Revenue in the case of Principal CIT v. M/s Moonstar Securities Trading and Finance Co. Pvt. Ltd. with respect to disallowance u/s 14A. The additions were made in the course of search assessment u/s 153A. Those appeals were rejected on the ground that no substantial question of law arose when the Court held that "... The relief granted by the order was based upon the decision of this Court in CIT v. Taikisha Engineering India Ltd., where it was held that unless the AO rejected the explanation or the rationale which induced the Assessee to offer particular amount as expenditure with some reasoning, the mere rejection per se cannot be accepted. In this case for both years, the Assessee had offered amounts as disallowance claiming them to be expenditure for tax exempt income. The AO merely proceeded to reject such amount as expenditure and straightaway applied Rule 8D without adducing any reasons ..."
Revenue's appeal dismissed
2018-TIOL-649-HC-RAJ-IT
GIE JEWELLS Vs PR CIT: RAJASTHAN HIGH COURT (Dated: April 3, 2018)
Income Tax - Sections 115JB, 115JC, 208 & 234B.
Keywords - Alternative minimum tax - Advance tax - Charge of interest.
The assessee filed return for relevant AY. While filing the return of income the assessee made payment of alternative minimum tax under the provisions of section 115JC however, while completing the assessment the AO charged interest u/s 234B for not paying the alternative minimum tax as per scheme of advance tax u/s 208. The assessee contended that the provisions of advance tax u/s 208 was not applicable to the facts of the case and in respect of the tax payment made u/s 115JC. On appeal, CIT(A) relying on decision of Supreme Court in case of JCIT vs. Rolta India Ltd upheld the order of AO. On further appeal, Tribunal passed order in favour of Revenue. Aggrieved assessee filed appeal before the High Court and contended that provisions of Section 115JB could not be compared with the provisions of section 115JC and therefore, the assessee could not be expected to pay the advance tax on the basis of books profits in terms of section 115JC.
On appeal, the High Court held that,
Whether the Revenue has rightly charged interest u/s 234B if the assessee retains the amount which is supposed to be paid u/s 115JC of Act - YES: HC
++ concurrent findings was that the assesse had retained the amount which was supposed to be paid under Section 115JC which had not been paid. In that view of the matter, the proviso of Section 234B had been rightly invoked by the AO and confirmed by the CIT(A) and the Tribunal. No substantial question of law arises. Hence, the appeals stand dismissed.
Assessee's appeal dismissed
2018-TIOL-648-HC-MAD-VAT
CSN SYSTEM Vs CTO: MADRAS HIGH COURT (Dated: March 27, 2018)
Maharastra VAT Act - Writ - Centralised mechanism & Mismatch cases.
The Assessee-company, has preferred the Writ petition to call for the records on the file of the CTO dated 30.03.2017 for the AY 2009-10 and to quash the same.
In Writ, the High Court held that,
Whether when the dispute is about the mismatch and the issue is already covered by the decision made by the jurisdictional Court, the same calls for re-assessment - YES: HC
++ the Counsel appearing for the Assessee submitted that the issue involved in this writ petition is mismatch and such issue is already covered by the decision of this Court in W.P.No.105/2016, dated 01.03.2017 wherein this Court has directed the AO to evaluate a centralised mechanism exclusively to deal with the cases of mismatch and to do some exercise, before issuing a notice;
++ considering the fact that the AO has to re-do the assessment, in view of the said decision of this Court, this writ petition is allowed and the order dated 30.03.2017 is set side. Consequently, the matter is remitted back to the AO to re-do the assessment commencing from the stage of issuing notice of proposal, after following guidelines/procedures issued by this Court in the said referred order. The AO shall also give personal hearing to the Assessee before finalizing the order of assessment. Whole exercise shall be completed by the AO within a period of eight weeks from the date of receipt of a copy of this order.
Case Remanded
2018-TIOL-647-HC-MAD-CX
CCE Vs SOUTHERN PRESS TOOLS: MADRAS HIGH COURT (Dated: March 20, 2018)
CX - Assessee is manufacturer of tools, dies, jigs and fixtures and sheet metal components - During audit, it is found that they were manufacturing branded radiators of M/s. Universal Radiators Ltd and T72 Cooling system and also found that no accounts were maintained and goods were cleared without payment of duty to M/s.Universal Radiators Ltd., after manufacturing - The demand and confiscation was confirmed and a penalty was imposed upon assessee under Rules 9 (2), 173 Q, 226 of CER, 1944 and Section 11 AC of CEA, 1944 and Rs.5 lakhs upon M/s. Universal Radiators Ltd., under Rule 209 A of CER, 1944, vide O-I-O - On both occasions, at the first stage, as well as on remand, accepting the contention of assessee, the Tribunal has arrived at a categorical finding that there is no manufacturing activity and accordingly, allowed the appeals filed by dealers - Finding of fact arrived at by the Tribunal cannot be said to be perverse warranting any interference: HC
Appeal dismissed
2018-TIOL-646-HC-KAR-CUS
GIVUDAN INDIA PVT LTD Vs UoI: KARNATAKA HIGH COURT (Dated: March 27, 2018)
Cus - The first prayer sought in petition does not survive for consideration in view of order passed by Respondent No.4, whereby Annexure-1 application filed by petitioner has been rejected for the reasons recorded and the petitioner is directed to follow the instructions in terms of Board Circular Nos.4/2016 - In terms of order dated 05.11.2016 read with circular instructions, petitioner has to furnish the material documents - This order passed by Respondent No.4 was challenged by petitioner before Commissioner A, whereby the Appellate Authority has confirmed the order of Respondent No.4 dated 5.11.2016 which has been accepted by petitioner and accordingly the documents are submitted before Respondent No.4 in terms of Board Circular Nos.4/2016 and 5/2016 - In view of the same, first prayer does not survive for consideration.
As regards to second prayer, Court while considering the petition by way of an interim order, directed that no extra EDD shall be charged from petitioner in terms of clause 2.2 of Board Circular Nos.4/2016-Customs, for imports to be made by it from then onwards, without the specific leave of Court - Petitioner is having the benefit of this interim order as on date and this interim order is in conformity with Board Circular Nos.4/2016.
As regards the third prayer, it is not in dispute that the petitioner has deposited EDD of Rs.7,61,04,066/- and the same requires to be adjudicated by Respondent No.4 in terms of Board Circular Nos.4/2016 and 5/2016 - This refund amount sought for by petitioner depends on the result of proceedings pending before the Respondent No.4 - Hence, Respondent No.4 is directed to adjudicate upon the issue and take a decision in accordance with law.
However, it is made clear that the interim order granted by this Court on 27.10.2016 shall continue to operate until a decision is taken by Respondent No.4: HC
Writ petition disposed of
2018-TIOL-645-HC-MAD-CUS
ANIL JAIN Vs CC: MADRAS HIGH COURT (Dated: March 20, 2018)
Cus - an SCN was issued to the petitioners, based upon which proceedings were initiated against them - Hence the present writ was filed - The Revenue claimed that the petitioners had the alternative option of appeal before the Tribunal, which the petitioners had already exercised.
Held - Considered various decisions of the Apex Court - There cannot be two parallel proceedings assailing the correctness of the very same Order-in-Original, one through appeal before the Tribunal while the other through the present writ - Doing so may give rise to conflicting decisions - Also, there is alternative remedy - The petitioners are free to approach the Tribunal to resolve their grievances: High Court (Para 1,2,3,17)
Writ Petitions Dismissed
2018-TIOL-519-ITAT-HYD + Story
DCIT Vs MARUTI SECURITIES LTD: HYDERABAD ITAT (Dated: March 23, 2018
Income tax - advances recoverable - mercantile system - notional interest - unsecured loans - waiver of interest
The assessee-company, engaged in the business of investment in capital markets, filed its return declaring loss of Rs. 5,35,493/-. During assessment proceedings, the AO observed that there were unsecured loans to the extent of Rs. 19.25 Crs under 'advances recoverable in cash or kind'. The AO verified the advances recoverable in cash or credit and found that assessee did not charge interest on three parties. Neither assessee-company had entered into any agreements for charging interest @ 8% on the various outstanding loans. The AO therefore was of the view that the company had entered into agreement for receipt of interest from such companies @ 8% per annum during the previous year relevant to the A.Y 2009-10. At the end of the years, the assessee-company again entered into agreements for not charging interest or waiver of the interest stating that all the three parties suffered losses. This practice of entering and cancellation of agreements, was found not acceptable to the AO, since the assessee-company was following mercantile system of accounting, according to which the interest accrues and subsequent relinquishment of interest after expiry of accounting year was of no consequence. Accordingly, the AO held that interest was not a notional interest and it constitutes interest income not offered to tax and hence computed the rate of interest @ 8% on amounts advanced by the assessee-company during the FY under consideration and brought to tax the same which amounts to Rs.1,26,86,509/-.
On appeal, the FAA held that no notional income could be brought to tax on loans and advances. Accordingly, he deleted the addition and directed the AO to verify whether the interest had been actually received by the assessee and tax the same on receipt basis.
On appeal, the ITAT held that,
Whether actual receipt and not mere accrual of interest on unsecured loans, makes it a taxable event, even while following mercantile system of accounting - YES: ITAT
++ the issue of notional interest is squarely covered by the order of this Tribunal in the assessee’s own case for the AYs 2005-06 & 2006-07 in ITA Nos. 468/H/2009 and others, and for the A.Y 2007-08 in ITA Nos. 841 & 1176/Hyd/2012, wherein it was held that: "....to arrive at a real income, accrual basis cannot be a justifying factor and the commercial and business realties of the assessee, should be considered. The interest income has been recognized in the books of accounts only to extent of actual collection, which is the recommended/ recognized method as per Accounting Standard 9 of ICAI which lays down that when uncertainties exist regarding the determination of amount or its collectability, the revenue shall not be treated as accrued and hence shall not be recognized until collection. The interest income has been admittedly recognised only on receipt basis. The contention of Revenue that the loan agreements have interest clause permitting the assessee to charge interest at the rate of 14% is not tenable. The terms of the agreements, which enabled the assessee company to demand interest were only enabling provisions and those enabling provisions did not guarantee the collection of overdue interest. The method of accounting, as followed by the assessee, does not create any income; but the method of accounting only recognizes income. There is some merit in the submission of assessee that when the principal itself is overdue and not collected, there is no basis for making out a case that interest income would be collectable with certainty. Even where an assessee is following the mercantile system of accounting, it is only accrual of real income which is chargeable to tax, that accrual is a matter to be decided on commercial belief having regard to the nature of business of the assessee and character of the transaction....";
++ since the facts are identical and the FAA has rightly allowed the appeal of assessee following the order of this Tribunal for the earlier years, therefore respectfully following the view taken by this Tribunal in the assessee’s own case, this Tribunal holds that the notional interest on advances cannot be charged on accrual basis and the AO is directed to verify the interest actually received and assess the same on actual receipt basis.
Case remanded
