Fwd: Delhi high court on concealment penalty distinguishing Mak Data; Zoom etc and holding that ample disclosure armed with legal opinion takes assessee out of section 271(1)(c) and also held bonafide claim of earlier year expenses do not constitute "furnishing of inaccurate particulars"; On section 36(1)(iii) rent security deposit and interest disallowance; 40(a)(ia) reimbursement and 194H commission (where principal agent relationship exist) not apply to normal trade incentive (like foreign travel incentive to dealers); BOMBAY high court no income taxable from self (applied 24 ITR 506 SC); Applying Taparia SC 372 itr 605 Rejected revenue's appeal on deffered revenue expense; & specific information for reopening that Assessee had converted black money into white through an entry provider must (u/s 148)
Pramod Dayal Rungta
Subject: Delhi high court on concealment penalty distinguishing Mak Data; Zoom etc and holding that ample disclosure armed with legal opinion takes assessee out of section 271(1)(c) and also held bonafide claim of earlier year expenses do not constitute "furnishing of inaccurate particulars"; On section 36(1)(iii) rent security deposit and interest disallowance; 40(a)(ia) reimbursement and 194H commission (where principal agent relationship exist) not apply to normal trade incentive (like foreign travel incentive to dealers); BOMBAY high court no income taxable from self (applied 24 ITR 506 SC); Applying Taparia SC 372 itr 605 Rejected revenue's appeal on deffered revenue expense; & specific information for reopening that Assessee had converted black money into white through an entry provider must (u/s 148)
IN THE HIGH COURT OF DELHI AT NEW DELHI 4 + ITA 290/2015
CONTROL AND SWITCHGEAR CONTRACTORS LTD.
24.08.2015
8. Mr. N.P. Sahni, learned Senior Standing counsel for the Revenue, maintained that this was a case of the Assessee furnishing inaccurate particulars and in view of the decisions in MAK Data P. Ltd. v. CIT 358 ITR 593 (SC), CIT Delhi v. Zoom Communication 327 ITR 510 (Del) and CIT v. Escorts Finance Ltd. 328 ITR 44(Del) it must be held that the provisions of Section 271(1) (c) of the Act stand attracted.
9. Learned counsel for the Respondent Assessee on the other hand submitted that since in the Assessee‟s quantum appeal, a question has already been framed, that by itself was sufficient to set aside the penalty. He placed reliance on the decision dated 5th October 2010 in ITA No. 240 of 2009 (CIT v. Liquid Investment &Trading Co.), and CIT v. Sardar Exhibitors 2015-TIOL-1618-HC-DEL-IT.
10. The Court finds that in the present case the order of the CIT (A) explaining why Section 271(1)(c) is not attracted in the facts and circumstances of the case merits no interference. The issue that arose for determination in the quantum appeal does appear to have been debatable as is evident from the above narration of facts. There was a reference made by the Assessee itself in the note of computation, that pursuant to the settlement agreement with Schneider, it had received compensation “in lieu of giving up their right under Press Note 18, which debarred the collaborator from carrying out business in India, without the permission of JV partners”. The compensation was also “in lieu of agreeing not to use the name after an interim period i.e. to give up the benefit over a period of time of being known in the market as a joint venture partner of TE”. Secondly, the Assessee armed itself with a legal opinion. These facts are sufficient to distinguish the present case from the facts in Zoom Communication (supra) where the Court observed that apart from a making wrong claim, the Assessee did so not on the basis of any advice given to it by an auditor or tax Even in MAK Data (supra), the Supreme Court held on facts that the Assessee there had no intention to declare its true income and no explanation was offered by it for the concealment of income. 11. In the facts of the present case, the Court is satisfied that no error of law was committed either by the CIT (A) or the ITAT in holding that Explanation 1 to Section 271(1)(c) of the Act was not attracted. This was not a case of an Assessee furnishing inaccurate particulars. No substantial question of law arises. The appeal is dismissed.
IN THE HIGH COURT OF DELHI AT NEW DELHI 12. + ITA 226/2015
ASHIAN NEEDLES PVT. LTD. ..... Respondent
24.08.2015
Nevertheless, appeal has also been examined on merits. The question urged for consideration is whether the ITAT was justified in quashing the reassessment proceedings under Section 147/148 of the Income Tax Act, 1961 („Act‟) on the ground that there was no specific material with the AO to hold that any income has escaped assessment.
The decision of the ITAT appears to have turned entirely on facts. It is observed by the ITAT that there was nothing on record before the AO even in the form of any specific information that the Assessee had converted black money into white through an entry provider. Further, while in the notice issued to the Assessee for four years, the AO had observed that Rs.27 lakhs, Rs.62 lakhs, Rs.4.80 crores and Rs.6.96 crores respectively had escaped assessment, the additions actually made for the respective years were Rs. 27 lakhs, Rs. 10 lakhs, Rs. 1.5 crores and Rs. 10 lakhs respectively. This meant that the AO was himself “not sure that the entire amount which was mentioned in the report of the investigation was on account of the escaped income of the Assessee.” This also showed that the AO had not applied his mind before issuing notice under Section 148 of the Act.
The decision of the ITAT having turned on facts, which have not been controverted, no substantial question of law arises for determination.
IN THE HIGH COURT OF DELHI AT NEW DELHI 30 + ITA 635/2015\
SECURITY PRINTING & MINTING CORPORATION OF INDIA LTD.
% 24.08.2015
This penalty appeal by the Revenue is directed against the order dated 12th February 2015 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 4871/Del/2013 for the Assessment Year (AY’) 2006-07.
A short question raised before the ITAT was whether the expenses incurred by the Respondent Assessee prior to its incorporation on 13th January 2006 is allowable in its computation of income for the AY in question by debiting it to its profit and loss account and thereby furnishing inaccurate particulars? The ITAT noted that for the expenses that pertainedto the earlier periods but were claimed in the current AY, there was no attempt to conceal the income. The Assessee claimed the expenses in the current year under the bona fide belief that such expenses could be claimed as they were genuine business expenses. 3. The view taken by the ITAT that there was no furnishing of inaccurate particulars by the Assessee is not found to be perverse. No substantial question of law arises in the facts and circumstances of the present case.
IN THE HIGH COURT OF DELHI AT NEW DELHI 18-19. + ITA 35/2014
KAJARIA CERAMICS LTD.
24.08.2015
The Respondent Assessee is a company engaged in the business of manufacturing and trading of ceramics glazed and unglazed tiles and financing. As regards AY 2008-09, the Assessee filed its return of income on 29th September 2008 declaring nil income. The income was assessed under Section 143 (3) of the Act. The Assessing Officer (‘AO’) noted that the Assessee had taken a premises on rent from group company Dua Engineering Works Pvt. Ltd. (DEWPL) in terms of an agreement executed on 28th December 2006, whereby the annual rent was fixed at Rs.48,00,000. The rent agreement also provided that the Assessee would pay an interest free security deposit of Rs.5.35 crores. The AO was of the view that the interest free deposit was far in excess of the normal deposit of security and therefore was an undue favour given to Assessee’s sister concern. The AO calculated the excess security deposit at Rs.5.11 crores, computed the interest thereon @12% and held the interest expenses of Rs.61,32,000 inadmissible. It was further noted by the AO that the Assessee had failed to include in its tax audit report the details of payment of Rs. 89,60,273 to Kajaria Plus Ltd. (‘KPL’). The AO rejected the plea of the Assessee that the payment was not for goods and services and therefore not included in para 17 (m) of the Tax Audit Report. The AO held that the Assessee was liable to deduct TDS on the aforementioned payment under Section 194C of the Act. Accordingly, the aforementioned sum was disallowed under Section 40(a)(ia) of the Act. Aggrieved by the above order of the AO for AY 2008-09, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) (‘CIT (A)’). The appeal was allowed by the CIT (A) by holding that the making of the interest free deposit in favour of the sister concern was its business decision and it gained no undue advantage. On the second issue, it was held that the elements of income were not embedded in the reimbursement made to its sister concern and therefore the Assessee was not obliged to deduct TDS. The ITAT in appeal by the Revenue upheld the aforementioned order of the CIT (A). As far as AY 2009-10 is concerned, the Assessee filed its return on 30th September 2009 declaring the income of Rs.5,69,92,660. While assessing the said return under Section 143 (3) of the Act, the AO made an addition of Rs.11,25,000 being the expenses claimed on account of the foreign travel of dealers. The AO viewed these expenses to be in the nature of incentive/commission, which would be liable to TDS under Section 194H of the Act. Accordingly, the said amount was disallowed under Section 40(a) (ia) of the Act. The AO also disallowed the interest calculated on the excess security deposit made with DEWPL and accordingly made an addition of Rs. 81 lakhs.
In both the appeals one common question is common regarding the excess security deposit purportedly made by the Assessee in respect of re nting of the premises from DEWPL. The Assessee had taken the premises on monthly rent of Rs.19 per sq. ft. whereas the market rent was Rs.60-80 per sq. ft. The area was 21000 sq. ft. As per Clause 2 of the rent agreement the parties had agreed that the rent would be Rs.4 lakhs per month, whereas the security deposit would keep on increasing. Viewed in this manner, there was no undue advantage to DEWPL. Having heard learned counsel for the parties, the Court finds that the view taken by the CIT (A), as affirmed by the ITAT, on an interpretation of the clauses of the rent agreement and in coming to the aforementioned conclusion cannot be said to be perverse. It was a possible view to take. On this issue, therefore, the Court is not persuaded to hold that any substantial question of law arises. As regards reimbursement made to KPL, as pointed out by the ITAT, it did not appear to have any element of income warranting deduction of tax at source under Section 194C of the Act. The ITAT also concurred with the view of the CIT (A) that since no element of income was embedded in the reimbursement, the Assessee was not obliged to deduct TDS. The decision entirely appears to be on factual basis. Relevant to AY 2009-10, the other issue concerns the travelling expenses paid to dealers. There was no basis for AO to come to the conclusion that this payment was actually in the nature of commission to the agents. It was noticed that the entitlement to foreign travel was not proportionate to the volume of business conducted through a particular dealer/sub-dealer. Anyone who achieved the actual sale target was entitled to visit the foreign destination. In order to characterize the payment as commission, for the purposes of Section 194H of the Act, it was essential first to establish the relationship of principal and agent, which admittedly was absent in the case of the Assessee. Consequently, the CIT (A) held that the foreign travel expenses of the dealers could not be disallowed under Section 40(a)(ia) of the Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1507 OF 2013
M/s American Express Bank Ltd
DATED : 17 AUGUST 2015
We find that no specific ground as urged before us by Mr.
Tejveer Singh has been taken in memo of appeal filed in this Court.
Be that as it may, we find that respondentassessee
had claimed
benefit under the DTAA in its return of income but the same was effectively withdrawn by virtue of filing a revised return of income
on 29 March 2000. Although the Assessing Officer held that the
respondentassessee
is liable to pay tax in respect of interest earned
from its Head Office both under the normal provision of Act as well
as DTAA, both CIT(A) as well as the Tribunal have proceeded on the
basis of the claim of the respondentassessee
being under the
normal provisions of the Act. We find that in case of Sumitomo
Mutsui Banking Corporation, the assessee therein was seeking
deduction of the interest payable to the head office. It was in that
context, that the claim of the assessee for deduction was being
claimed by invoking the provision of DTAA wherein this deduction
was specifically provided for. In the present facts, the issue arising
for consideration is not the deduction on account of interest paid to
the Head Office but the non exigibility to tax on account of interest
received from its Head Office on the ground that no person can
make profit out of itself as held by the Apex Court in the case of Sir
Kikabhai Premchand Vs. Commissioner of Income Tax (Central),
Bombay 3 24 ITR 506 3. In any view of the matter, Section 90(2) of the Act itself
provides that the assessee has an option to either invoke DTAA or normal provisions of tax to the extent which of the two is more
beneficial to it. In this case, by filing the revised return of income
the claim to be subjected tot ax under the DTAA stood withdrawn.
In the above view, we see no substantial question of law arising for
our consideration. Accordingly, Question (C) as formulated by the
revenue, does not give rise to any substantial question of law.
THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 3611 OF 2010
M/s Reliance Industrial Infrastructure Ltd. ..Respondent
DATED : 17 AUGUST 2015
Before closing, we may point out that Mr. Malhotra, the
learned Counsel appearing for revenue emphatically urged that the
amount of Rs.23.42 lacs incurred on stamp duty for acquisition of
leasehold land is to be allowed as differed revenue expenditure as
held by the Assessing Officer. This on the ground that the benefit of
leasehold land would be enjoyed by respondentassessee
for a
period of 30 years. We do not accept the aforesaid submission for
reasons more than one. Firstly the CIT(A) has very categorically
taken a view that the Assessing Officer was incorrect in holding that
the expenditure of Rs.23.42 lacs on stamp duty is to be allowed as
differed revenue expenditure. The revenue did not challenge the
above finding in appeal. Before the Tribunal, the only contention
urged was that the amount cannot be allowed as revenue
expenditure and the revenue supported the order of CIT(A) that
amount of Rs.23.42 lacs paid as stamp duty is in fact a capital expenditure. Therefore the revenue having once accepted the
CIT(A)'s finding that the expenditure on stamp duty cannot be
considered to be differed revenue expenditure, it is not open to the
revenue to now urge a new ground. The second reason is, as
pointed out by the learned Counsel for the respondentassessee
is
found in the binding decision of the Apex Court in Taparia Tools
Ltd. Vs. Joint Commissioner of Income Tax 4 372 ITR 605 4 wherein it has been
held that there is no concept of differed revenue expenditure unless
so specified in the Act. Therefore on both the aforesaid grounds, the contention of Mr.
Malhotra, the learned Counsel for the revenue is not found
acceptable. Therefore Question (C) also does not give rise to any
substantial question of law.
6. Accordingly, appeal is dismissed. No order as to costs.
Warm Regards:Pramod Dayal Rungta
M.Com.,LL.B.,ACMA.,DISA(ICAI).,FCAChairman: EIRC ICAI (2015-16)
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