CASE LAWS
2018-TIOL-03-AAR-GST + Story
N C VARGHESE :
AUTHORITY FOR ADVANCE RULING
(Dated: March 26, 2018)
GST - Applicant is engaged in the purchase and cutting and removal of rubber trees from the plantations of certain PSUs owned by the Government of Kerala and also from private individuals in Kerala - State Farming Corporation is demanding 18% on live rubber trees – Applicant before AAR seeking clarification on classification and rate of tax. Held: As per the definition of goods in Section 2(52) of CGST Act, 2017 , ''goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply - Rubber trees are agreed to be severed before supply and hence, comes under the definition of 'goods' – since standing rubber trees no longer remain as such, they are to be treated ad ‘wood in rough form' – There is no differentiation between Soft wood and hardwood in GST - Rate of tax on rubber wood in the aforesaid transaction is 18% under the HSN 4403: AAR [para 7, 8, 9]
Application disposed
2018-TIOL-135-SC-IT
PR CIT Vs DHARAMPAL PREMCHAND LTD: SUPREME COURT OF INDIA (Dated: April 9, 2018)
Income Tax - Sections 80IB, 80IC, 132, 143(3) & 153A.
Keywords: Assumption of jurisdiction - Incriminating material & Transfer of material to eligible units.
The Assessee-company, engaged in the business of manufacturing and trading of chewing tobacco, and premium paan masala. In response to the notice issued u/s 153A, the Assessee had filed its return declaring its income. In the course of the assessment proceeding, the AO noted that the Assessee had claimed deduction u/s 80-IB and 80-IC in respect of its units located at Himachal Pradesh and Agartala. The Assessee stated that its Noida unit was not eligible for deduction u/s 80-IB and 80-IC since, it was transferring silver flakes to the various eligible units. Further, the Assessee had also submitted that the auditor's certificate in Form 10CCB claiming deduction in respect of the profits of the eligible units. However, the Revenue's case was that, in the Form 10CCB submitted by Assessee, no disclosure was made regarding the transfer of material from Noida unit to the eligible units. After noting the failure by Assessee to disclose the transaction involving transfer of silver flakes from the Noida unit to the other units, the AO rejected the said report submitted in Form 10CCB. Accordingly, the AO disallowed the Assessee's claim. On appeal, the CIT(A) held that the disallowance of the deduction u/s 80IB/80IC was justified.
On further appeal, the High Court held that when seized material did not constitute incriminating material, then essential jurisdictional fact for justifying the assumption of jurisdiction u/s 153A did not exist.
Having heard the parties, the Apex Court condoned the delay and directed to issue notice.
Case deferred
2018-TIOL-134-SC-IT
NOKIA INDIA PVT LTD Vs ADDL CIT: SUPREME COURT OF INDIA (Dated: April 9, 2018)
Income Tax - Sections 142(2A), 142(2C), 143(2) & 153.
Keywords: Limitation period - Opportunity of hearing & Special audit.
The Assessee-company, engaged in manufacture and sale of telecommunication handsets. The Assessee had filed its return for the relvenat AY. The case was selected for scrutiny and notice u/s 143(2) was issued. According to Assessee, the assessment proceedings had remained dormant for nearly 28 months till notice dated 17th January, 2013 was issued. The Assessee was required to produce books of accounts for the first time on 28th February, 2013, barely a month before the expiry of time limit for passing the assessment order on 31st March, 2013. The Assessee submitted that books of accounts and vouchers were voluminous and accordingly, the AO had asked the Assessee to furnish books of account in a manner they could be easily examined. On 8th March, 2013, books were submitted in Systems Applications and Products (SAP) format. Trial balance in soft and hard copies was also provided. The Assessee's request to specify ledger accounts required to be produced was rejected by the AO with the direction to produce all accounts by 11th March, 2013. The Assessee on 11th March, 2013 had submitted a soft copy of its books of accounts. In the proceedings held on 14th March, 2013, numerous queries were raised and answered by the Assessee. On 21st March, 2013, 10 days before expiry of time for completing assessment, the AO issued SCN u/s 142(2A) as to why accounts for the AY 2009-10 not be audited by a special auditor. The Assessee objected by asserting that there was neither a failure to submit details nor incorrect details were furnished. It was also highlighted that adequate time and opportunity was given to respond to the said SCN. The Assessee further asserted that at 6 p.m. on 26th March, 2013, opportunity notice was received by fax from the office of the CIT. In reply, the Assessee had informed the Revenue that due to paucity of time it was not possible to submit detailed objections however, requested to extend the time by 3 to 5 working days. However, the AO, not being satisfied drawn the proposal for special audit.
When the matter reached before the High Court in Writ, it was held that the order for special audit was not bad in the eyes of law when Assessee was given with an opportunity to reply and make oral submissions to the proposal for special audit though there was delay and the proposal for special audit was initiated about 10 days before the expiry of limitation period for passing of assessment order. Accordingly, the Writ petition was dismissed by the High Court.
Having heard the parties, the Apex Court directed to issue the notice and subsequently granted stay.
Assessee's SLP allowed
2018-TIOL-133-SC-IT
PR CIT Vs NIRMA CREDIT AND CAPITAL PVT LTD: SUPREME COURT OF INDIA (Dated: April 9, 2018)
Income Tax - Section 14A (1) & Rule 8D & (2)(ii) & (2)(iii).
Keywords: Dividend income - Exempt income - Interest expenditure - Interest free fund & Shares and securities.
The Assessee-company, had filed its return for the relevant AY declaring its loss. On scrutiny, the AO noted that the Assessee had shown dividend income from the investment made by it in the shares and securities which was claimed as an exempt income. The AO opined that the Assessee failed to prove that the investment in shares and securities were made out of interest free funds only. The Assessee had also made substantial borrowings in the form of unsecured and secured loans and had claimed interest expenses. Thereby, the AO applied the formula provided in Rule 8D r/w Sec. 14. The AO then adopted the full figure of Rs. 7.01 crores on account of interest expenditure, and computed a sum under Rule 8D(2). The AO then added half a percent of the average value of investments not forming part of the total income in terms of Rule 8D(2)(iii) to come to total figure of Rs.1.06 crores for disallowance u/s 14A. On appeal, the CIT(A) upheld the AO's assessment. Further, the Tribunal had confirmed the applicability of sec. 14A and Rule 8D but clarified that for computation of disallowance under Rule 8D, not the gross interest payment but the net interest payment would be considered.
When the matter reached before the High Court, it was held that when the Assessee had paid interest on borrowings & also earned taxable interest on investments made during a particular year, the interest expenditure had to be considered as one which was the net of interest paid minus interest earned.
Having heard the parties, the Apex Court condoned the delay.
Case deferred
2018-TIOL-682-HC-MUM-IT + Story
VODAFONE INDIA LTD Vs DCIT: BOMBAY HIGH COURT (Dated: April 10, 2018)
Income Tax- Writ - Sections 245 & 250
Keywords - Adjustment of refund - Binding precedent - Outstanding tax dues
THE assessee-company is a leading provider of telecommunication services. The assessee was due to receive some amount as refund. However, during assessment in the relevant AY, the AO adjusted such refund available against the outstanding tax demands for some other AYs. The assessee claimed that such actions were taken u/s 245 of the Act. Later, the DCIT passed an order, which gave effect to an order passed by the CIT(A) resulting in the assessee being granted refund of about Rs 128.16 crores. Thereupon, the assessee was served an Income Tax computation form which reiterated that the refund granted was being adjusted against outstanding tax demands for three other AYs. Later, the assessee received an intimation u/s 245 from the DCIT, also stating the same thing. The assessee was also granted three days time to reply. Although the assessee filed objections to such adjustment and also cited judgments in its favor, it claimed that its submissions were not considered. It also claimed that the refund due to it was not granted. Hence the present writ.
On hearing the writ, the High Court held that,
Whether refunds granted for a particular AY can be adjusted against tax dues for other AYs without considering the assessee's objections to such adjustment & in ignorance of a binding precedent of the High Court on such issue - NO: HC
Whether the assessee can seek change of assessing officer, where the assessee is apprehensive of not receiving justice at the hands of such officer - YES: HC
++ the Counsel for the Revenue had been asked whether the adjustment of the refund with the arrears of tax was by a speaking order. In response, he stated that it is mere noting in the file and no detailed order has been passed. Thus the adjustment was done according to the Respondent no.1 on 15th September 2017 only after having received the assessee's objections to the adjustment on 12th September, 2017. This in the background of the fact that the notice dated 22nd August, 2017 issued u/s 245 of the Act was received by the assessee only on 8th September, 2017. Thus, neither the AO or the approval of the Commissioner of Income Tax as endorsed on order sheet dated 8th September, 2017 at all consider the assessee's objections. Also, the assessee had specifically invited the attention of the respondent no.1 to the decision of this Court in Hindustan Unilever Ltd. setting out the manner and procedure by which the refunds are to be adjusted against the pending demands u/s 245 of the Act. However, the Respondent no.1 chose to completely ignore the binding decision of this Court and proceeded to adjust the refund due for AY 2005-06 with the demands payable for the AYs 2004-05, 2006-07 and 2008-09 without considering the assessee's contentions.
++ in these circumstances, the approval obtained by the Respondent no.1 from the Commissioner of Income Tax so as to adjust the refund as recorded in the order sheet dated 8th September, 2017 is premature. Therefore, the action of the Respondent no.1 adjusting the refund due against the tax arrears as is evidenced from the computation of income accompanying the order dated 14th August, 2017 and as evidenced by the communication dated 15th September, 2017 addressed to the Bank are set aside. So also, the endorsement of the Commissioner of Income Tax approving the adjustment as found in the order sheet dated 8th September, 2017 are quashed and set aside. This for the reason that they are in defiance of the directions of this Court in Hindustan Unilever Ltd. Vs. Deputy Commissioner of Income Tax-1(1).
++ it would only be appropriate that the Revenue examine and consider the assessee's response dated 12th September, 2017 to the intimation dated 22nd August, 2017 by a speaking order before refund is adjusted against the demands of tax outstanding. However, the manner in which the Respondent no.1 has dealt with the assessee's refund claim by having it adjusted against the arrears of tax without having followed the due process of law as reiterated by the binding decision of this Court in Hindustan Unilever Ltd., the apprehension of the assessee that it would get no justice at her hands in this case, seems justified. Therefore, the Counsel appearing for the Revenue is asked to suggest or nominate any other Officer of the Revenue who would consider the assessee's response dated 12th September, 2017 to the intimation dated 22nd August, 2017 in accordance with the decision of this Court in Hindustan Unilever Ltd. On instructions, The Counsel for the Revenue states that the entire issue of adjustment in terms of Section 245 of the Act as called upon the assessee to show cause by letter dated 22nd August, 2017 would be considered by the Additional Commissioner of Income Tax, Range 8(3). The assessee is granted one week's time to file a further submission before him. Needless to state that the Additional Commissioner of Income Tax will dispose of the assessee's responses to the intimation dated 22nd August, 2017 in accordance with principles of natural justice as expeditiously as possible and preferably within five weeks from today.
Assessee's Writ Petition Allowed
2018-TIOL-681-HC-MUM-IT + Story
MEHUL JADAVJI SHAH Vs DCIT: BOMBAY HIGH COURT (Dated: April 5, 2018)
Income Tax - Writ - Section 179(1).
Keywords: Advanced loan - Delinquent company - Former Director - Fiscal statute - Strict rule of interpretation - Tax dues & Tax recovery.
The Assessee, an individual, had filed his return for the relevant AY. During the assessment proceeding, the Revenue noted that the Assessee was a former Director of M/s. Shravan Developers Pvt. Ltd. The said company failed to honour its tax obligation for AY 2011-12 hence, the said company became a delinquent Private Limited Company. Accordingly, a SCN u/s 179(1) was issued to the Assessee asking him to recover the tax dues on the part of the delinquent Private Limited company.
In reply, the Assessee stated that he had resigned in the year 2013. Further, the Assessee also sought details of the notice issued to the delinquent Private Limited Company. However, without responding to the Assessee's reply, the AO passed an order u/s 179(1) making a demand of Rs.4.69 crores upon the Assessee.
In Writ, the High Court held that,
Whether providing details of failure to recover the tax dues for the delinquent Private Limited Company in a SCN issued u/s 179(1) is a sine-qua non to put forth the proceedings - YES: HC
Whether it is open for the AO to shed the strict 'rule of interpretation' of any fiscal statute, when the statute itself prevents mere reading/implication of the provisions not expressed therein - NO: HC
++ the Act itself makes no distinction/classification between professional/paid Directors and Directors holding a large shareholding stake in the delinquent Private Limited Company. Sec. 179(1) only gives jurisdiction to the AO to proceed against a Director of a delinquent company when the AO is unable to recover the dues of the delinquent company from it. It is not, therefore, open for the AO to read conditions into Sec. 179(1) and jettison the strict rule of interpretation of fiscal statute which interalia prevents implying and/or reading anything in the statute not expressed therein;
++ the efforts which were made to recover the tax dues from the delinquent company though not stated in the SCN are found in the disputed order or in any event in the affidavit-in-reply dated 14th February, 2018. Thus, is sufficient compliance with Sec. 179. It is the Assessee's case in the petition that, an amount of Rs.49.81 crores are loans advanced to companies/associates of its Director, Mr. Praful Setna. The attempts at recovery if made known in the SCN, would have given an opportunity to the Assessee to bring the facts to the notice of the AO who could have recovered from them before proceeding with the notice. Therefore, the giving of particulars of efforts made and failure to recover the tax dues for the delinquent Private Limited Company in a notice issued u/s 179(1) is a sine-qua non for proceeding further. This is so as not only the AO can assume/acquire jurisdiction only on failure to recover its dues from a Private Limited Company after proper efforts. But is also gives an opportunity to the Assessee to point out why the efforts made are inadequate and/or improper;
++ further, in the case of Madhavi Kerkar, this Court has held that "... the SCN issued u/s 179(1) to the directors of the delinquent Private Limited Company must indicate albeit, briefly, the steps taken to recover the tax dues and its failure. In cases where the notice does not indicate the same and the Assessee raises the objection of jurisdiction on the such account, then the Assessee must be informed of the basis of the AO exercising jurisdiction and the notice/directors response, if any, should be considered in the order passed u/s 179(1) ..." Thus, giving of particulars in the disputed order or in the Affidavit-in-reply does not meet with the requirement of proper notice to the noticee;
++ it is clear that before the AO assumes jurisdiction efforts to recover the tax dues from the delinquent Private Limited Company should have failed. This effort and failure of recovery of the tax dues must find mention in the SCN howsoever briefly. This would give an opportunity to the noticee to object to the same on facts and if the Revenue finds merit in the objection, it can take action to recover it from the delinquent Private Limited Company. This before any order under Section 179(1) is passed adverse to the noticee. In this case, admittedly the SCN itself does not indicate any particulars of the failed efforts to recover the tax dues from the delinquent Private Limited Company. Thus, the issue stands covered in favour of the Assessee by the order of this Court in the case of Madhavi Kerkar. Hence, the disputed order dated 26th December, 2017 is quashed and set aside;
++ it is made clear that the AO is at liberty to pass a fresh order after issuing appropriate notice to the Assessee which must indicate briefly the steps taken by the Department to recover the tax dues from the delinquent private limited company and its failure to recover the same. Needless to state, the AO would hear the Assessee on its objection and pass a fresh order in accordance with law. As the demand relates to AY 2011-12, the Counsel for the Assessee, states that the Assessee would cooperate with the AO in early disposal of notice issued to him u/s 179;
++ the bank accounts of the delinquent private Limited company is attached. The attachment of the bank account including that of the Assessee if it stands already attached before 9th February, 2018 (when ad-interim relief was granted) would continue till the passing of the order by the AO u/s 179(1) after giving a fresh notice. However, in case the Assessee's bank accounts have not been attached till the date of hearing of this Writ, it would not, in these proceedings be attached until an order u/s 179(1), adverse to him is passed.
Assessee's Writ Petition disposed of
2018-TIOL-680-HC-MUM-IT
MADHAVI KERKAR Vs ACIT: BOMBAY HIGH COURT (Dated: January 5, 2018)
Income Tax - Writ - Section 179(1)
Keywords - Defaulting firm - Director in firm - Recovery of tax dues
THE assessee, an individual, is the director in a company. The AO passed an assessment order u/s 179(1) for the relevant AYs. The assessee claimed that such order lacked jurisdiction. The assessee mentioned that Section 179(1) enabled recovery of tax dues from a director in a defaulting firm, only if the tax dues were not recovered from the defaulting firm itself. In this regard, the assessee claimed that the AO made no attempt to recover the tax dues from the defaulting firm in which the assessee was director. He also relied on a decision of this court on the issue. Hence the present writ.
On hearing the writ, the High Court held that,
Whether tax dues can be recovered from a director in a defaulting firm, without establishing that efforts to recover such dues from the defaulting firm, had failed - NO: HC
++ considering relevant findings of this court in Dinesh Tailor vs Tax Recovery Officer & Ors. wherein Section 179(1) of the Act had been analysed, the Revenue would acquire or get jurisdiction to proceed against the directors of the delinquent Private Limited Company only after it has failed to recover its dues from the Private Limited Company, in which the assessee is a director. This is a condition precedent for the Assessing Officer to exercise jurisdiction under Section 179 (1) of the Act against the director of the delinquent company. In our view the jurisdictional requirement cannot be said to be satisfied by a mere statement in the impugned order that the recovery proceedings had been conducted against the defaulting Private Limited Company but it had failed to recover its dues. The above statement should be supported by mentioning briefly the types of efforts made and its results.
++ therefore appropriately, the notice to show cause issued under Section 179 (1) of the Act to the directors of the delinquent Private Limited Company must indicate albeit, briefly, the steps taken to recover the tax dues and its failure. In cases where the notice does not indicate the same and the assessee raises the objection of jurisdiction on the above account, then the assessee must be informed of the basis of the Assessing Officer exercising jurisdiction and the notice' directors response, if any, should be considered in the order passed under Section 179 (1) of the Act. In this case the show cause notice dated 16th December 2015 under Section 179 (1) of the Act does not indicate or give any particulars in respect of the steps taken by the Income Tax Department to recover the tax dues of the defaulting Private Limited Company and its failure. The assessee in response dated 29th December 2015 to the above notice, questioned the jurisdiction of the Revenue to issue the notice under Section 179(1) of the Act and sought details of the steps taken by the department to recover tax dues from the defaulting Private Limited Company. In fact, in its reply dated 29th December 2015, the assessee pointed out that the defaulting Company had assets of over Rs. 100 Crores. Admittedly, in this case no particulars of steps taken to recover the dues from the defaulting Company were communicated to the assessee nor indicated in the impugned order. In this case it is found that except for a statement that recovery proceedings against the defaulting assessee had failed, no particulars of the same are indicated, so as to enable the assessee to object to it on facts.
++ hence the assessment order in question is quashed, as the condition precedent to exercise jurisdiction under Section 179 (1) of the Act is not satisfied. At no time has the assessee been given a chance to meet the Revenue's case that it has taken steps to recover the amount from the defaulting Private Limited Company so as to meet the jurisdictional condition precedent before passing an order under Section 179 (1) of the Act.
Assessee's petition allowed
2018-TIOL-673-HC-MAD-ST
KAVERIPATTINAM SELECTION GRADE TOWN PANCHAYAT Vs CCE: MADRAS HIGH COURT (Dated: April 3, 2018)
ST - The petitioner, an Executive Officer of Selection Grade Town Panchayat, seeks for a direction upon first respondent to pass orders on appeal petition, challenging the order of adjudication passed by second respondent, dated 19.12.2016 wherein he has confirmed the demand of service tax on renting of immovable property in terms of proviso to Section 73 (1) r/w Section 73 (2) of FA, 1994, and imposed penalty of 25% of the service tax demanded - The Executive Officer of Town Panchayat has not objected to demand raised in SCN and accepted to pay the same within thirty days - Thus, no useful purpose would be served in directing the first respondent to consider the petitioner's appeal petition, which is hopelessly, bared by time, as there was a delay of 365 in filing the Appeal - Admittedly, the first respondent has no power to condone such delay - Therefore, the prayer sought for by petitioner cannot be granted: HC
Writ Petition dismissed
2018-TIOL-672-HC-MAD-CX
CCE & ST Vs APEX LABORATORIES: MADRAS HIGH COURT (Dated: March 19, 2018)
CX - (i) Whether the 2nd respondent was right in holding that the doctrine of unjust enrichment was not applicable to any claim for refund of duty consequential to finalization of provisional assessment for any period prior to 25.6.1999, as the refund claim in the subject case was consequent to finalization of Provisional Assessment on 30.10.2000 for the period 1998-99 especially considering that the amendment to section 11B of Central Excise Act, 1944 [Act] was brought with effect from 1.8.1998 whereby refund consequent to finalization after 1.8.1998 would be covered by the provisions of section 11B ibid, as held by the High Court, Mumbai in the case of M/s.Standard Drum & Barrels Mfg. Co. ? (ii) Whether the 1st respondent is entitled to canvass the correctness or otherwise of the order passed in order-in-original no.19/2001 dated 9.5.2001 which only rejected the claim of refund by merely following the earlier finding made in provisional assessment order-in-original no.77/2000 dated 31.10.2000 especially when such order or the finding therein has not been challenged by the 1st respondent and the same have become final, conclusive and binding on the 1st respondent ?
HELD - W hen a similar issue came up for consideration, a Division Bench of this Court in the case of Dollar Company Private Limited - 2015-TIOL-344-HC-MAD-CX, after analysing section 11B of the Act, which relates to claim for refund of duty, other provisions and following the decision of the Supreme Court in TVS Suzuki Limited - 2003-TIOL-08-SC-CX-LB, dismissed the appeal of Revenue - decision of this Court in Dollar Company Private Limited is binding on this Court and squarely applies to the facts on hand - following the said decision, substantial questions of law raised are answered in the negative, as against the Revenue - the Civil Miscellaneous Appeal is dismissed : HIGH COURT [para 18, 19]
Civil miscellaneous appeal of revenue dismissed
2018-TIOL-671-HC-MUM-CX
MUTUAL MECAPLAST LTD Vs CCE & C : BOMBAY HIGH COURT (Dated: April 2, 2018)
CX - Assessee has its manufacturing Unit located within Union Territory of Dadra & Nagar Haveli - Assessee presented this Appeal originally before High Court of Gujarat at Ahmedabad Who held that Tax Appeal is not maintainable before the Gujarat High Court and Gujarat High Court does not have any territorial jurisdiction over the matter decided with regard to Union Territory of Daman & Diu and Dadra & Nagar Haveli irrespective of the fact that the Tribunal is situated at Gujarat - In the light of this order, assessee brought this Appeal to this Court - Assessee would submit that even if Revenue appealed against the impugned order of Tribunal to the High Court of Gujarat and succeeded therein, on remand, the matter could not have been sent back to West Zonal Bench at Ahmedabad - That would not have the territorial jurisdiction any longer to decide the Appeal - The entire cause of action has arisen within the territorial limits of Bombay High Court - Therefore, it is this Court alone which can be approached by the Revenue or it is the West Zonal Bench of CESTAT at Mumbai alone, which would be able to deal with the appeal remanded to CESTAT - Let Revenue take instructions as to whether the pending Appeal before CESTAT, West Zonal Bench at Ahmedabad, can be brought for decision before the Mumbai Bench of the CESTAT - This Appeal, in any event, would not survive, because the order of Tribunal dated 20th April, 2007 has already been quashed and set aside by High Court of Gujarat: HC
Matter posted
2018-TIOL-539-ITAT-MUM
CONVERGYS INDIA SERVICES PVT LTD Vs ITO: MUMBAI ITAT (Dated: March 07, 2018)
Income Tax -Eligible entity - Proportionate rent - Rental expenditure.
The Assessee-company filed its return for the relevant AY. During the assessment proceedings, the AO noticed that the Assessee had incurred rental expenditure of Rs.3.87 cr, which was paid by it to an entity namely Pankaj Shawls Private Limited [PSPL] pursuant to lease & license agreement with respect to property situated in Mumbai. The said agreement was entered into between PSPL & sister and holding concern of the Assessee namely Stream International Services Pvt. Ltd. [SISPL]. Upon perusal, the AO found that the actual rent paid by the Assessee as per Form 16 was Rs.3.58 cr as against Rs.3.87 cr claimed by it in the P&L Account whereas the actual rent for the AY as per the terms of the agreement worked out to Rs.3.02 cr.
The AO further opined that since the agreement was between Assessee's sister concern & PSPL and the terms of the agreement suggested that the premises was being used jointly by the Assessee and his sister concern, only proportionate rent was allowable to the Assessee. However, the Assessee contended that premise in question was in sole occupation of it and it paid the rent thereof and hence, entitled to claim the same in full. However, not convinced, the AO opined that since the premises was being used jointly by the Assessee as well as the sister concern, the Assessee was entitled to claim only 50% of the rental payment and that too on Rs.3.02 cr, being the rent payable as per the terms of the contract. Accordingly, the same resulted into disallowance of Rs.2.35 Crores in the hands of the Assessee. On Assessee's appeal, the CIT(A) upheld the decision of the AO.
On appeal, the Tribunal held that,
Whether when the assessee has no primary motive to reduce taxable income, being an eligible entity to claim deduction u/s 10A, Revenue is not justified in disputing the rental expenditure claimed by it - YES: ITAT
++ the deduction of rental expenditure has not been claimed by SISPL and Revenue has also not disputed the stated fact. Secondly, upon perusal of documents placed in paper-book, the Tribunal find that SISPL has filed its return of income from Bhayender Address and it was in occupation of various premises situated at Bhayender which were taken on lease & license basis from an entity namely Shreeji Enterprises as evident from various lease & license agreements as well as Agreement for Amenities as placed in the paper-book. It is also observed that the assessee was an eligible entity to claim deduction u/s 10A, being 100% Export Oriented Unit [EOU] and therefore, had no primary motive to reduce its taxable income per-se;
++ there is nothing contrary on record against the assessee and therefore, in principal, while agreeing with the claim of the assessee, the Tribunal find that the expenditure claimed by the assessee require reconciliation and explanation as per observation in para-7. It is also observed that the assessee was in possession of 25008 Square Feet of space during first three month of the AY whereas it was occupying 17448 Square Feet during the balance period, against which no plausible explanation is available on record. It is noted that the assessee was a corporate entity registered with Service Tax Authorities, STPI Authority and other statutory bodies and was required to get appropriate endorsement as to change in premises or addresses under those laws;
++ on facts and circumstances of the case while primarily concurring with the stand of AR, the matter stands remitted back to AO with a direction to the assessee to reconcile the figures as well furnish a plausible explanation as to the space occupied by it during the AY and submit adequate documentary evidences in support of the same. After considering the same, the AO is directed to re-compute the total income of the assessee as per law. As a logical consequence, MAT computations as well as adjustment of brought forward losses etc. may suitably be carried out, if required.
Assessee's appeal allowed
