The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval for raising a total of Rs. 31,300 crore in the financial year 2016-17 and to service the principal and interest against the Extra Budgetary Resources (EBR) of Rs. 16,300 crore by Government of India to augment infrastructure spending.
Out of the EBR of Rs.31,300 crore, it is proposed to finance the funds to be raised by Power Finance Corporation (PFC), Indian Renewable Energy Development Agency (IREDA), Inland Waterways Authority of India (IWAI), and National Bank for Agriculture and Rural Development (NABARD) by Government of India. This implies that the principal and the interest in respect of the EBR of Rs.16,300 crore to be raised by PFC, IREDA, IWAI, and NABARD shall be financed by Government of India by making suitable budget provisions in the Demand of respective Ministries/Departments.
The move is intended to supplement the efforts of the Government to improve infrastructure spending and to improve the revenue-capital mix of the expenditure for a more sustainable growth.
Background:
Infrastructure spending is one of the key parameters to judge the sustainability of growth in a country. The proportion of Capital expenditure to the total expenditure is the yardstick to measure this. In line with this approach, an announcement was made in the Budget Speech 2016-17 that in order to augment infrastructure spending further, Government will permit mobilisation of additional finances to the extent of 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through raising of Bonds during 2016-17.
The Kolkata bench of the Income Tax Appellate Tribunal, in a recent ruling held that “grant-in Aids” received by the State Fisheries Development Corporation is not taxable for the reason that such receipts are capitals in nature. Further the Tribunal found that the payment made by the said assessee in respect of interest for delayed deposit of PF is also be allowed as deduction since the same was made as compensatory in nature, not penal.
The State Fisheries Development Corporation, the assessee in the instant case, filed an appeal before the ITAT mainly on the ground that the assessing Officer completed assessment by including the amount received by the assessee from the State Government on account of Grants-in-aid for payment of salary P.F. & Flood relief to the total income by holding that the same amount to “revenue receipt.” The assessee claimed that the said amount is a “capital receipt” and hence, cannot be included to the total income of the assessee. The Commissioner (Appeals) has also confirmed the impugned order.
The Tribunal noted that the issue is squarely covered by the order of the ITAT in an earlier case of the assessee, in which it was observed that the grant-in-aid as capital in nature therefore it is not liable to tax. Following the same, the ITAT reversed the orders impugned and concluded the issue in favour of the assessee.
The assessee has also challenged that the both the lower authorities were erred in disallowing the interest paid for delayed deposit of PF on ground that such interest is penal in nature.
The Tribunal noticed the decision of the Supreme court in Prakash Cotton Mills v. CIT, in which it was held that the interest paid for late deposit of PF with the authorities is compensatory in nature therefore it is entitled for deduction while computing the profit under the business head.
In view of the above findings, the Tribunal decided the matter in favour of the assessee and has quashed orders passed by both the Assessing Officer and the CIT(A).
Read the full text of the order below.
Recently, the Ahmedabad bench of the Income Tax Appellate Tribunal has refused to deny the exemption granted to the Trust, Amul Research & Development Association by observing that the activity of collection of cess for providing “medical relief” cannot be a reason for denying the said benefit under the relevant provisions of the Income Tax Act, 1961. In the opinion of the Tribunal, the facilities provided by the appellant Amul Research & Development Association.
The assessee-trust, in the instant case was established with an aim to carryout research, development and extension work conducive to economic development of agriculturist.During the relevant assessment year, the assessee collected cess from milk producers members depositing milk with the primary milk cooperative society @ 12 paisa per liter in lieu of providing them research, animal nursery, fertility, vaccination and breed improvement facilities etc. the assessing officer, relying upon the provision of section 2(5) of the Finance Act, 2010 refused to give exemption to the assessee on ground that as per the above provision, the advancement of any other object of general public utility would not be charitable purpose, if it involves the carrying out of any activity in the nature of trade,commerce or business or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activities. The assessee maintained that the collection of cesswas not in the nature of any trade, commerce or business including any profit motive.
On appeal, the Commissioner of Income Tax (Appeals) has confirmed the above order. Hence, the assessee preferred a second appeal before the ITAT.
The Tribunal refused to agree with the findings of the lower authorities by observing that “both the lower authorities have wrongly rejected assessee’s exemption claim by invoking section 2(15) proviso of the act, since it neither carries out any activity in the nature of trade, commerce business nor any activities or renders any service in relation to the same whilst collecting the impugned cess @ 12 paisa per liter from milk producers in lieu of making them avail the above stated facilities. A co-ordinate bench of this tribunal in DCIT vs. Andhra Pradesh Civil Supplies Corporation (2016) 70 taxmann.con 48 (Hyderabad) also interprets the above stated proviso to conclude that an Assessing Officer has to satisfy the relevant conditions u/s. 2(15) 1st proviso in question before denying such an exemption. We accordingly accept assessee’s arguments on the main issue.”
Regarding the second question, I.e. whether the assessee’s action in making available its medical facilities admittedly in the nature of providing maternity, animal nursery, fertility, vaccination to milch animals belonging to milk producers in lieu of cess collection @ 12 paisa per liter deserves to be treated under the specific category of ‘medical relief’ or it has to be held as an association advancing any other objects of general publicutility, the Tribunal held that “Section 2(15) 1st proviso applies in latter category only being specific in nature. The Legislature allows exemption to assesses performing various charitable activities in various categories u/s. 2(15) of the act. One of them is ‘medical relief’. The Revenue’s endeavour seeks to exclude this category in case of animals from getting exemption by adopting a restrictive meaning in claiming its application in case of humans only.”
In the light of the Constitutional provisions and judicial pronouncements, the Tribunal emphasized that, “The assessee’s activities herein above in making available the facilities in question to milching animals are to ensure that they are free from diseases, their breed improvement and overall well being. We apply all the above stated constitutional provisions and case law to conclude that ‘medical relief’ in section 2(15) of the Act very much includes the above referred relief made available by the assessee to the milch animals in lieu of a nominal cess @ 12 paise per litre. We reiterate that we are dealing with a charitable purpose definition clause in a tax statute to be given a broader interpretation in order to give its full effect. We hold that assessee’s activities deserve to be treated under the former specific category of ‘medical relief’ not covered by sec. 2(15) proviso inserted w.e.f. 01-04-2009 in question. It is accordingly held to be not an entity advancing any other object or general public utility without prejudice to our findings hereinabove. We reverse findings of both the lower authorities on this count as well.”
Read the full text of the order below.
While disposing a petition by Mr. Anandakumar, the single bench of Madras High Court has observed that, When an Assessee is a student in Assessment Year and resulted delay in payment of Taxes considered to be unavoidable circumstances for delay in filing Income Tax return.
The petitioner has challenged the order passed by the The Chief Commissioner of Income Tax Tiruchirappalli, dated 30.03.2004, has denies the waiver of interest chargeable under sections 234B and 234C of the Income Tax Act, 1961.
The application submitted by the petitioner for waiver of interest under Section 234A of the Income Tax Act was favourably considered by the respondent and the respondent found that the petitioner was a student till 1990 and only after he finished his studies, he involved himself in the business activities of the firms, in which he was a partner and came to know of the fact that due to the delay in getting the share income particulars from the firms, there was a delay in filing his individual return of income for the assessment year 1988-89 to 1991-92.
Justice T S Sivagnanam has relied division bench decision of Gujarat High Court in the case of VINODCHANDRA C.PATEL v. CIT, which pointed out that when circumstances resulting into late payment of taxes and when the same set of circumstances are considered to be unavoidable circumstances responsible for the delay in filing the return of income, ordinarily, such circumstances would also qualify to be considered to be unavoidable circumstances responsible for the delay in the late payment of taxes. Referring to the Notification dated 23.05.1996, it was pointed out that the powers conferred on the Chief Commissioner of Income Tax/ Director General of Income Tax to waive interest charged under sections 234A, 234 B or 234C of the Act and the classes of cases of classes of income specified in para 2 of the said order. It was pointed out that condition precedent is that reduction or waiver of such interest can be ordered only after the assessee has filed the return of income for the relevant assessment year and paid the entire tax due on the income as assessed except the amount of interest for which reduction or waiver has been requested for.
Justice T S Sivagnanam also observed that, the said case, it was pointed out that if the circumstances have been considered to be unavoidable circumstances for the purpose of waiver of interest under section 234A, in the facts of the case, the same would have to be considered as unavoidable circumstances for the purpose of reduction/waiver of interest under sections 234B and 234C as well. Accordingly, whatever waiver granted under section 234A, shall also be extended with regard to waiver of interest under sections 234B and 234C of the Act.
While directing to grant waiver of interest under sections 234B and 234C of the Income Tax Act the bench also found that, the petitioner has made out a case for waiver of interest under section 234A of the Act and the respondent recorded that it is a reasonable cause for delay in filing the return of income.
Read the full text of the Judgment here.
The Central Board of Excise and Customs (CBEC), the apex body of indirect taxes in India is to be renamed as Central Board of Indirect Taxes under the GST regime.
GST, the most discussed and the biggest ever tax reform in India is expected to be implemented from April 1st, 2017. As we know, GSTwill bring all the indirect taxes such as excise, service tax and other local levies into a single platform.
The president has given assent to the GST (Constitutional Amendment) Act. Following this, the government has started to take all possible efforts to implement the GST Act from the next financial year onwards.
As said by a revenue department official, the said organizational structure of GST is being worked out and CBEC will be renamed. In this regard, the Central is planning to restructure thecomposition of the Board.
Reportedly, the CBIT will consist of six members, who will look after Customs, policy and IT, central excise and legal issues, training and litigation. Besides, an additional secretary of the department of revenue, who will be secretary to the GST council, will be a CBIT member for CGST and IGST related matters.
As per the draft blueprint, the entire country will be divided into six regions such as eastern, western, southern, northern, north-eastern and central, which will be headed by Principal-commissioner level officers.
The designation of the Directorate General of Central Excise Intelligence will be changed to Directorate General of Indirect Taxes Intelligence. The power and role of the DGITI seem to be crucial in the GST regime since it aims to provide maximum facilitation and, at the same time, ensure optimum compliance.
It is further proposed to create a new position of DG, Risk Management Centre (RMS), which is to be constituted in order to identify, develop, update and maintain risk parametres in relation to trade, commodities, services and all the stakeholders in the domestic supply chain.
Regarding recent notification issued by Ministry of Finance on Excise Duty on goods other than Petroleum & Tobacco Goods resulted confusion amount various stake holders.
In that regard, the revenue secretary Dr. Hasmukh Adhia said, “Department of Revenue has examined the validity and implications of notifications dated 10th and 16th September with reference to the existing taxes imposed by the Union and states. There is no legal infirmity in these notifications. Law dept has confirmed that there appears to be no legal requirement to issue any further clarification or notification in this regard”.
Some experts in this field have raised doubt about the legality of levying excise duty by the Centre on various commodities till implementation of the goods and services tax (GST) from April 1, 2017, after the government on September 16 notified certain provisions of the Act.
The notification declared that no excise duty shall be levied on goods other than petroleum and tobacco products from 16th September 2016. This was with an aim to give effect to all the sections of the GST(Constitutional Amendment) Act, 2016.
1/3 DoR examined the validity and implications of notfns dated 10th and 16th Sept wrt existing taxes imposed by the Union and states
— Dr Hasmukh Adhia (@adhia03) September 19, 2016
2/3 There is no legal infirmity in these notifications.
— Dr Hasmukh Adhia (@adhia03) September 19, 2016
3/3 Law dept has confirmed that there appears to be no legal requirement to issue any further clarification or notification in this regard.
— Dr Hasmukh Adhia (@adhia03) September 19, 2016
In a recent ruling, the Kolkata bench of the Income Tax Appellate Tribunal observed that the expenses incurred in respect of website development are in the nature of “revenue expenditure” and therefore the same do not form part of the taxable income.
The assessee-company, in the instant case, is engaged in business of Website Development. The assessing officer rejected the return filed by the assessee by disallowing the amount spent on account of Website Development Expenses by treating the same as capital in nature.
On appeal, the Commissioner of Income Tax (appeals) deleted the addition and therefore, the Revenue preferred an appeal before the Appellate Tribunal.
The Tribunal noticed that the case of the assessee is squarely covered by the decision of the Apex Court in Alembic Chemical Works Co. Limited, in which it was held that the expenditure incurred by the assessee on Website Development was of a revenue nature and not of a capital nature. In the same decision, the Court made an observation that that although the Website might provide an enduring benefit to an assessee, the intended purpose behind the Website was not to create an asset but only to provide a means for disseminating the information about the assessee. The Tribunal further noted that the same decision has been applied by the Mumbai tribunal in the case of DCIT –vs. – M/s. Edelweiss Capital Limited.
In the light of the above decisions, the Tribunal confirmed the order of the CIT(A)who deleted the addition made by the assessing officer.
Read the full text of the order below.
In a significant ruling, Mumbai bench of the Income Tax Appellate Tribunal, in a recent ruling, held that the benefit if section 271(1)(c) shall be given if the assessee is ready to admit his/her undisclosed income even during the course f proceedings. In the opinion of the Tribunal, such an act makes an impression that the assessee cannot be deemed to have concealed the particulars of income and is duly falls under Explanation I of section 271(1)(c) of the Income Tax Act, 1961.
Coming to the facts of the case, the Assessing Officer, rejected the return filed by the assessee by holding that the assessee has not shown the source of cash deposited in a co-operative Bank. When the assessee received show cause notice asking for the same, the assessee agreed to offer her entire receipt as her income. However, the assessing officer passed an order by assessing the same as her taxable income and initiated penalty proceedings under section 271(1)(c) of the Act parallel.
On an appeal preferred by the assessee, the CIT(A) upheld the order with slight modifications. Being dissatisfied with the same, the assesee approached the ITAT on second appeal.
The Tribunal noted that “we find merit in the contentions of the assessee that the assessee has agreed to offer entire deposits as her income in order to buy peace from the revenue. We notice that the assessee has offered income from house property to the tune of Rs.36.91 lakhs. The assessee did not put forth a claim for telescoping the deposits with the income declared by her in the current year and in the earlier years and also with the withdrawals made from the bank account. This action of the assessee shows the bonafides of the assessee that it was an inadvertent mistake and the offer was made to buy peace from the revenue. It is well settled proposition of law that all receipts shall not constitute income.”
While nullifying the penalty order, the Tribunal observed that “We notice that the Ld CIT(A) has confirmed the penalty only on the reasoning that the offer was not voluntary, but the offer was made only after issuing show cause notice. We have held that the bonafides of the assessee cannot be doubted with upon considering the conduct of the assessee. We also notice that the explanation of the assessee has not been found to be false and at the same time, the assessee has furnished all facts relating to the bank account and material to the computation of his income, when called for by the AO. Even though the triggering point for offering the income may be the show cause notice issued by the AO, yet we are of the view that under Explanation 1 to sec. 271(1)(c) of the Act, the assessee cannot be deemed to have concealed the particulars of income.”
Read the full text of the order below.
The Kolkata bench of the Income Tax Appellate Tribunal, in recent ruling, held that the provisions of section 194C of the Income Tax Act, 1961 is not applicable in case of payments made by the assessee in respect of railway freight through a third party. While quashing the order impugned, the Tribunal accepted the contention raised by the assessee that payment made on account of railway mode of transportation is excluded from the above provision.
Coming to the facts of the case, the assessee transported goods from Orissa to West Bengal through railway rake.Instead of paying the railway freight directly, the assesseemade it through another company, to whom the assesse reimbursed the said amount subsequently. The AO asked explanation from the assessee as to why TDS is not paid in respect of the amount paid to the company. The assessee claimed that the amount paid to the said company is in the nature of reimbursement of freight charges paid on its behalf. Further, the assessee denied the liability to pay TDS on the same as the railways mode of transportation is excluded from the applicability of sec 194C of the Income Tax Act.
By rejecting the submission, the AO passed an order disallowing the amount paid by the assessee on the above transaction by holding that TDS provision is applicable since the middleman was managing the transportation as well as payment activity.
On appeal the Comissioner of Income Tax (appeals) accepted the plea of the assessee and therefore, the Revenue preferred an appeal before the Appellate Tribunal.
“We have heard the rival contentions of both the parties and perused the materials and information before us on record. From the foregoing discussion we find that the assessee in the present case paid the railway freight charges to Railways through M/s S.S. Raiser Pvt. Ltd without deduction of TDS on the presumption that the provisions of section 194C of the Act are not applicable. The AO contention is that railway charges were paid by M/s S.S. Raiser Pvt. Ltd and not by the assessee, therefore TDS Provisions are applicable. Now the question before us arises so as to whether the TDS provisions are applicable in the instant case in the aforesaid facts &circumstances.”
After analysing the provisions of section 194C of the Income Tax Act, the Tribunal observed that “from the above provisions it is clear that the TDS is to be deducted for the execution of the work other than railway freight. In the case on hand we find that the middleman has paid the railway freight on behalf of the assessee which subsequently reimbursed to it. The ld. AR in support of his claim has also submitted the railway receipt where the name of the assessee was appearing. So in our considered view we find that the railway freight was paid by middleman which was subsequently reimbursed. There was no extra charge paid to M/s S.S. Raiser Pvt. Ltd. The ld. DR failed to bring anything on record that any payment was made by the assessee over and above the amount of railway freight. Therefore we find no reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of Revenue is dismissed.”
Read the full text of the order below.
In a recent ruling, the Income Tax Appellate Tribunal, Mumbai, if the assessee does not make disallowance u/s 43-Bin bonafide belief, then the Revenue cannot impose penalty under section 271(1)(c) of the Income Tax Act, 1961.
In the instant case, the Assessing Officer levied penalty under section 271(1)(c)against the assessee on ground that a sum of Rs.35,37,287/- was shown as outstanding Service tax liability. It was noticed that the assessee did not make any disallowance u/s 43B of the Income Tax Act. The assessee maintained that the service tax liability arises on “receipt basis”, i.e., it shall become payable only upon receipt of bill amount from the concerned debtor. The assessee submitted that he was under bonafide belief that the disallowance u/s 43B of the Income Tax Act may not be required to be made, if the concerned bill amount was not received. Rejecting the submissions, the officer passed penalty orders.
On appeal, the Commissioner of Income Tax (Appeals) confimed the above order. Hence, the assessee preferred a second appeal before the ITAT.
While quashing the order impugned, the Tribunal observed that “We are of the view that the explanation of the assessee with regard to Service tax liability is also bonafide one. Thus, we notice that the explanations furnished by the assessee have not been found to be false. Even though the AO has taken the view that the assessee has corrected these mistakes upon receipt of notice only, yet we are of the view that the Explanation 1 to sec. 271(1)(c) of the Act would come to the help of the assessee, since the assessee has furnished explanations which were not found to be false and further the assessee has also furnished all the relevant details to the AO. The assessee has otherwise recorded all the details in his books of account without concealing anything. Accordingly, we are of the view that there is no justification on the part of the Ld CIT(A) in confirming the penalty levied by the AO.”
Read the full text of the order below.
The Union Finance Minister, Shri Arun Jaitley said that revival of the practice of acknowledging the tax payers for paying taxes within the prescribed time and promptly filing their Income Tax Returns, will play an important role in the nation building. Besides it, Shri Jaitley said that this will also help in bringing-about the necessary change in the attitude of the people at large to pay the due taxes on time. The Finance Minister said that payment of due taxes is the duty and responsibility of everyone. He said that to pay the due taxes is an accepted practice in most part of the world. The Finance Minister Shri Jaitley was speaking while handing over Certificates of Government’s appreciation and acknowledgement of tax payers for their contribution towards nation building here today. The Finance Minister said that as the business will grow, there will also be change in the attitude with regard to payment of taxes.
The Government acknowledges the contribution of individual tax payers in paying taxes within the prescribed time and prompt filing of Income Tax Returns. The Finance Minister, Shri Arun Jaitley today handed over certificates of appreciation issued by Central Board of Direct Taxes (CBDT) honoring select tax payers for such contribution. While it is widely acknowledged that the Nation meets its obligations towards spending in various social sector and welfare schemes and infrastructure development out of revenues mobilized through tax payments by millions of honest tax payers, this step marks the first effort by the Government to directly communicate to the tax payer its appreciation for that contribution.
CBDT will be sending out such certificates of appreciation to individual tax payers by e-mail in various categories on the basis of the level of taxes paid by them for the current Assessment Year 2016-17 where taxes have been paid in full and tax payers have no outstanding tax liabilities and where the return is e-filed within the prescribed due date. The tax payers may display these certificates in their homes / offices.
The categories for individual taxpayers and the number of certificates being issued in the first round are:
Platinum : Tax contributed Rs. 1 Crore and above
Gold : Tax contributed Rs. 50Lakh to Rs. 1 Crore
Silver : Tax contributed Rs. 10Lakh to Rs.50 Lakh
Bronze : Tax contributed Rs. 1Lakh to Rs.10 Lakh
About 8.43 lakhs tax payers will be issued this Letter of Appreciation in different categories for paying the due taxes.
The CBDT urges taxpayers to e-file their returns in time and verify their return by submitting the Electronic Verification Code online or sending their ITR-V within the 120 day period so that they can be also acknowledged for their contribution.
The Department is committed to continuous improvement of taxpayer services and seeks the cooperation of all taxpayers in contributing their fair share of taxes voluntarily.
The first bench of Punjab and Haryana High Court has upheld the ITAT order that, No Expense is Attributable to the Exempted Income as the revenue failed to establish direct nexus between expenses incurred & income earned.
During the relevant assessment year, the assessee earned interest on Maharashtra State Electricity Bonds and dividend income which are exempted in come under the Income Tax Act. The assessee deducted Rs. 3,46,97,852/-from the total income. The question involved in the case was that whether expense is attributable to the exempted income? If it is yes, whether the provisions of Section 14A of the Income Tax Act would apply?
The assessee submitted that it had not incurred any expenditure for the purpose of earning the exempt income observing that the possibility of the assessee having incurred expenditure relatable to such exempt income could not be ruled out. The assessing Officer rejected the claim on ground that on identical facts for the Assessment Year 2001-02, ad hoc disallowance relatable to such expenditure incurred for the purpose of earning exempt income was made. Accordingly he passed an order disallowing Rs.1.5 crores under Section 14A of the Income Tax Act. The assessee maintained that there was no nexus between the dividend expenditure and the expenses which were sought to be deducted for the reason that the investment had been made out of its own funds and not from the borrowed funds and, therefore, disallowance was not called for; that the dividend was received as long term investment during the relevant previous year and that no expenditure was attributable towards earning the same as the dividend received was only incidental to the holding of shares; that the dividend was received by single dividend warrants no expenditure was incurred to earn such dividend; that the assessee had not claimed any expenditure in relation to income which did not form part of the total income;
On appeal, the Commissioner of Income Tax (Appeals) sustained the assessment order and enhanced the amount of disallowance by observing that “In the light of the facts noted earlier and in the absence of details, a reasonable basis for the disallowance out of interest expenditure would be to consider that both interest bearing and non-interest bearing funds available with the assessee have been used in all the assets in their respective proportions of the total funds available with the assessee as shareholders’ funds and as borrowed funds. This includes utilization in investment from which exempt income is earned or can be earned. However, taking into account the fact that some loans do have a specific covenant for non-utilization in shares etc. and that borrowed funds invested in such shares may have been repaid from the profits or other non-interest bearing funds during the year, I think it fair to allow a 50% reduction on the borrowings so determined, on estimate, to take care of such situations. Since these funds change throughout the year, the averages of their values at the beginning and at the end of the year as per the balance sheet are considered to determine the ratios. Since many of the investments are coming from earlier years and the assessee had borrowed funds in earlier years also, I am of the view that the balance sheet of the assessee will be a better guide for apportionment of expenses as compared to the cash flow statement, since it takes into account the brought forward capital as well as the borrowings and investments. The financial cost of the borrowed funds is computed by the working out the average cost of funds, which is the total interest expenditure divided by the average of the borrowings at the beginning and at the end of the year and applying it to the average of the specified investments for the year. For this purpose, the investments in share of companies listed outside India (to which Section 115 O is not applicable), and the taxable bonds like the 6% capital index bonds, debentures of NALCO and bonds from HDFC are excluded from the total investments to arrive at the specified investments from which no income is expected to be earned.”
On appeal, the Income Tax Appellate Tribunal set aside the above order by holding that no expense is attributable to the exempted income as the revenue had failed to establish a direct nexus between the expenses incurred and the income earned ignoring that even indirect expenses are attributable u/s 14A as has been made clear by providing for Rule 8D(2) in subsequent assessment year.
Concurring with the findings of the Tribunal, the first bench comprising of Chief Justice S.J Vazifdar and Justice Deepak Sibal observed that “The Tribunal was certainly entitled to draw such an inference. It is a reasonable inference. The Tribunal addressed itself to the correct question, namely, to determine if there was any nexus between the additional investments with the interest-free borrowed funds. The following findings of fact of the Tribunal are of vital importance: the assessee had during the relevant time invested an aggregate amount of ` 152.05 crores out of which an amount of ` 28.18 crores was made in shares of foreign companies. The dividend from foreign companies was taxable. This, therefore, left an amount of ` 123.87 crores which yielded dividends that were exempt from income tax. The assessee realized 117.97 crores from the sale of its investments in the earlier years; ` 46 crores were generated from the assessee’s operating activities; ` 6.87 crores were received from the sale of fixed assets and there was an opening cash balance of ` 8.90 crores. The aggregate of surplus funds on which there was no interest burden was179.74 crores. This amount was available during the relevant previous year. Thus such funds were in excess of the investment of 123.87 crores. In addition thereto the assessee had generated cash from its financing activities of an aggregate amount of ` 24.24 crores. It had purchased fixed assets aggregating only to ` 54.62 crores during the relevant period. The findings, therefore, that the assessee had sufficient interest free funds to make the investment yielding tax free returns cannot be faulted. The absence of bank books in these circumstances would not justify an adverse inference being drawn for whichever way the matter is viewed, the assessee had sufficient funds available to it on which no interest was payable. This brings us to the legal issue of a presumption to be made when there is a pool of funds which include interest-bearing funds and interest free funds.”
Read the full text of the Judgment below.
The two judge bench of Supreme Court of India has dimissed an appeal filed by J.K. Lakshmi Cement Ltd against the denial of dual benefit of Partial exemption from the sales tax payable in respect of inter-State sales.
The appellants are manufacturers and sellers of Grey Portland Cement. As per the Notification No. F4(72)FD/Gr.IV/81-18 dated 06.05.1986, the State of Rajastan granted partial exemption from central sales tax payable in respect of inter-State sales, the benefit of which was not available to levy on cements. From the assessment year 1989-90 to 1997-98 the appellant had been granted benefit of partial exemption under the notification dated 06.05.1986 except for the assessment year 1995-96 and 1996-97 as no claims were made by the appellants being not eligible.
In the meanwhile, another notification was issued by the Government to the effect that in respect of inter-State sales of cement, tax payable under sub-sections (1) and (2) of the said Section shall be calculated at the rate of 4% without furnishing declaration in Form ‘C’, inter alia, subject to the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986.
Circular No. 2/94-95 dated 15.04.1994 was further issued to clarify that inter-State sales of cement duly supported by ‘C’ and ‘D’ forms shall be eligible for benefit of partial exemption notification dated 06.05.1986 and that such benefit would not apply to inter-State sales which are not supported by declarations in declarations in Forms ‘C’/‘D’. Another notification was issued in the year 1997 stating that that CST on inter-State sales of cement shall be calculated at the rate of 4% inter alia subject to fulfilment of the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986. This notification remained in force upto 31.03.1998. Further, the Government issued Circular No. 94-95/119 in order to clarify the applicability of partial exemption notification dated 06.05.1986 vis-a-vis notification dated 07.03.1994 and subsequent notifications dated 12.03.1997 and 21.01.2000.
By the said circular the competent authority purported to state that the dealer can avail of the benefit of either of these two notifications in any financial year meaning thereby that if he opts for the benefit under notification dated 06.05.1986 for the year 2000-2001, he would not be entitled to claim simultaneous benefit in respect of the same year under the notification dated 21.01.2000.
The grievance of the appellants are that the Governement, on the basis of the Circular issued in 2001, has initiated re-assessment proceedings against them for the assessment year 2000-2001, seeking to disallow the benefits under notification dated 06.05.1986 on a purported retrospective application of the Circular dated 16.04.2001.When the matter was challenged before the High Court, the Court held that the said circular cannot be applied retrospectively.
While dismissing the appeal, the bench comprising of Justice Dipak Misra and Justice C Nagappan held that, “The 21.01.2000 notification applies to a dealer having a place of business in the State and is in respect of sale of cement made by him from any place of business within the State in the course of inter-State trade or commerce. Apart from the above, certain other conditions are to be satisfied. They are (a) sales-tax in respect of inter-State sales as per the notification would be calculated at the rate of 6% and (b) the dealer making inter-State sales under notification dated 21.01.2000 would not be eligible to claim benefit provided in the notification dated 06.05.1986. Clause 3 of the notification lays down that if a dealer claims benefit under notification dated 21.01.2000, he is not eligible to claim the benefit under notification dated 06.05.1986. Benefit under the two notifications cannot be claimed at the same time. It is simple and clear”.
“A dealer making inter-State sales under the notification dated 21.01.2000 is disqualified and not eligible to claim benefit under the notification dated 06.05.1986. The reason is to deny dual benefit and also the notification dated 06.05.1986 computes the benefit on the basis of turnover. Bifurcation and division of turnover would lead to distortion and cause anomalies”, the bench said.
“As the factual score would depict, Notification dated 07.03.1994 was applicable from 1st April, 1994 to 31st March, 1997. It was not applicable with effect from 1st April, 1997. In such a situation, the plea of the appellant that dual benefits were availed of under notification dated 07.03.1994 post 1st April, 1997 is unacceptable and has to be rejected. Be it noted, by another notification No. 97-122 dated 12.03.1997, the State Government had rescinded notification dated 07.03.1994 and directed that the Central Sales Tax shall be calculated @ 4%, subject to the condition that the dealer making inter State sales in this notification would not be eligible to claim benefit of partial exemption under the notification dated 06.05.1986. The notification dated 12.03.1997 had remained in force upto 31st March, 1998. The circular dated 15.04.1994 in express words was not applicable to the notification dated 21.01.2000”.
While rejecting the contentions of appellant, the court said that, It is limpid that the circular dated 15.04.1994, when in force, had referred to the notifications dated 07.03.1994 as well as 06.05.1986. Under the notification dated 07.03.1994, the rate of central tax on inter-State sale of cement was unconditionally fixed at 4%, even when there was no declaration in Form C and Form D. The notification dated 06.05.1986 relating to inter-State sale required Form C and Form D, for availing the benefit. The circular did not in clear and categorical terms lay down that dual or multiple benefits under the two notifications could be availed of by the same dealer. It, however, appears that both the assessee and the Revenue had understood the circular dated 15.04.1994 to mean that inter-State transactions would qualify and would be entitled to partial exemption under the notification dated 06.05.1986, when accompanied with Form C and D and for inter-State sale transactions without Form C and D, benefit of notification dated 07.03.1994 would apply.
The bench also observed that, “the circular dated 15.04.1994 was ambiguous and, therefore, as long as it was in operation and applicable possibly doctrine of contemporanea exposition could be taken aid of for its applicability. It is absolutely clear that the benefit and advantage was given under the circular and not under the notification dated 07.03.1994, which was lucid and couched in different terms. The circular having been withdrawn, the contention of contemporanea exposition does not commend acceptation and has to be repelled and we do so. We hold that it would certainly not apply to the notification dated 21.01.2000”.
Read the full text of the Judgment below.
Following the President’s nod to GST (Constitutional Amendment) Bill, 2016, the Government is taking all the possible efforts to meet the deadline of 1st April 2017 to implement the Goods and Services Tax Act.
The Central Government, vide its recent notification dated 16.09.2016, declared that no excise duty shall be levied on goods other than petroleum and tobacco products from 16th September 2016. This is with an aim to give effect to all the sections of the GST(Constitutional Amendment) Act, 2016. The recent step has been appreciated by the entire nation since it is a welcome step aiming to roll out the GST.
However, the notification is silent about the Service Tax. The Finance Act, 1994, which is yet to be repealed by the Government, will be continued to be in force.
Read the full text of the notification below.
The Ahmedabad bench of the Income Tax Appellate Tribunal, in a recent decision, held that determination capital gain by applying section 50C of the Income Tax Act, 1961 cannot be treated as a conclusive proof that sale deed is incorrect or wrong. While observing so, the Tribunal invalidated the penalty order passed under section 271(1)(c) of the Income Tax Act.
Coming to the facts of the case, the assessing Officer determined the deemed capital gain while completing assessment against the assessee by adopting sale consideration under section 50C against the sale deed value. Instead of total sale consideration shown by the assessee, the Officer taken the value determined by the Stamp Duty Authority as the market value of the property.Accordingly, the amount equal to the difference between both the said values was included to the total income of the assessee by treating the same as undisclosed receipt.Thereafter, the amount paid as stamp duty as per original value was also added to the total income as paid from unaccounted source. Consequently, the Department initiated penalty proceedings under section 271(1)(c) of the Income Tax Act against the assessee alleging concealment of particulars of income.
Though the above penalty proceedings were challenged before the Commissioner of Income Tax (Appeals), the assessee could not secure any relief. Therefore, the matter was brought before the ITAT to decide the validity of the proceedings.
The Tribunal found that the Officer has never questioned the actual sale consideration received by the assessee. Further, the Revenue has no case that the assessee has under estimated the sale consideration while filing the return. The Tribunal noted that “The Assessing Officer had not questioned the actual sale consideration received by the assessee but the addition was purely made on deeming fiction and he has also not given the finding that actual sale consideration is more than the sale consideration admitted and mentioned in sale deed. Application of Section 50C of the Income Tax Act is not a conclusive proof that sale deed is incorrect or wrong and addition because of deeming fiction would not ipso facto attract penalty us/ 271(1)(c). It has been held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro products (P) Ltd, (2010) 322 ITR 0158 (SC), that merely by making a claim which is not accepted by the AO, penalty u/s 271(1)(c) cannot be levied. Even otherwise also the assessee’s case is not covered within the meaning of Explanaion-1 to Section 271(1)(c), because the assessee has furnished the explanation which is not found to be false. There is no allegation that the assessee has not disclosed any material fact for the purposes of assessment or for the purposes of levy of penalty and there is also no allegation that the explanation furnished by the assessee is not bonafide.”
The tribunal further noticed the decision of the Co-ordinate Bench Star International (P) Ltd vs. ACIT, reported in (2008) 23 SOT 88 (Lucknow), in which the Tribunal laid down the following three ingredients to invoke explanation-1 to section 271(1)(c) of the Act. Firstly, The assessee offers an explanation which he is not able to substantiate. Secondly, he fails to prove that such explanation is bonafide. And thirdly, all the facts relating to the same and material facts to the computation of total income then disclosed by him.
The Tribunal, referring the above decision, observed that the conditions laid down by the Tribunal in the above case are not satisfied in the above case and therefore, the penalty order is not sustainable.
Read the full text of the order below.
Recently, the Central Board of Excise and Customs (CBEC) has issued a circular clarifying that exemption from excise duty should not be denied in case of supply of manufactured goods by EOU to advance Licence/ Authorization holder in DTA, without payment of excise duty.
In the year 2003, the CBEC had issued Notification No. 22/2003 dated 31.03.2003 denying excise duty exemption to inputs, in case where goods cleared in DTA to which no excise or customs duty is levied. A similar notification was issued in case of customs duties on similar grounds.
As per the notification, various representations have been received seeking clarity on the applicability of the said notification in cases when goods manufactured by EOU are supplied to Advance Licence/Authorization holder in DTA.Recently, when the issue was discussed in the Central excise Tariff Conference wherein the CBEC was asked to clarify the same.
It is stated that “the issue has been examined. It is seen that s. no.22 of notification no. 23/2003-CE dated 31.03.2003, as amended, issued in respect of goods manufactured by EOUs and cleared in DTA, specifically exemptsCentral excise Duty when such manufactured goods are supplied to an AdvanceLicence/ Authorization Holder. In fact, clearance from EOU or DTA unit to Advance Licence/ Authorization Holder has been allowed without payment of Central Excise Duty, as both the cases are of “Import substitution”. In case of supply of goods to Advance Licence/ Authorization Holder, the export obligation is castupon person holding AdvanceLicence/ Authorization and in case of default in export obligation recovery from the person holding AdvanceLicence/ Authorization is provided for in law.”
“Further, if the EOUs are made liable to pay back the amount availedas exemption on the inputs in case of supplies to Advance Licence/ Authorization Holder, with reference to the said proviso under notification no 22/2003-CE dated 31.03.2003, then the EOUs would be placed in a disadvantageous position when compared to a DTA unit which supply manufactured goods to Advance Licence Holder without payment of Excise Duty in terms of notification 44/2001-CE(N.T) dated 26.06.2001 and without reversal of the CENVAT credit availed on inputs. This position has been clarified by Board vide circular no. 785/18/2004-CX dated 17.05.2004.”
The present circular clarifies that the above notifications are not applicable in case of supply of manufactured goods by EOU to advance Licence/ Authorization holder in DTA, without payment of excise duty.
Read the full text of the circular below.
While disposing a petition filed by Taxation Bar Association on Tax refund issue, the Delhi High Court has directed Commissioner of VAT, New Delhi to to look into the issue and take the necessary steps for rectification of the lapses, if any, in implementation of the statutory provisions.
Taxation Bar Association, a registered association of Tax Legal Practitioners dealing with cases pertaining to Value Added Tax (VAT) in Delhi, filed this petition the respondents and its subordinate officials with delegated powers to release the refunds claimed by all the registered dealers under the provision of DVAT Act.
The bench comprising of Chief Justice G Rohini and Justice Jayant Nath observed that, “the petition is liable to be dismissed in limine, having taken into consideration the fact that the cause, which apparently involves public interest, is sought to be espoused by a registered association of legal practitioners dealing with the issue in controversy on behalf of the dealers, we are of the view that the interest of justice would be met if the Respondent No.2/ Commissioner of VAT, New Delhi is directed to look into the issue and take the necessary steps for rectification of the lapses, if any, in implementation of the statutory provisions”.
The Court disposed the writ petition with a direction to the Respondent No.2 to consider the issues raised in this writ petition by treating the same as a representation.
The Court also said that, the Petitioner association is at liberty to make a representation before the Respondent No.2 within two weeks from today furnishing a list of specific instances where the refund is withheld. On receipt of the same, the Respondent No.2, after making the necessary enquiry into the allegations made in the writ petition, shall pass an appropriate order in accordance with law within eight weeks and communicate the same to the Petitioner association.
The Cochin bench of the Income Tax appellate Tribunal, recently ruled that TDS is not required on interest payment made by a primary agricultural credit society even if the society has not filed the returns within the time limit prescribed under the Income Tax Act, 1961. The decision of the Tribunal was based on the decision of the Kerala High Court, who remitted the instant case to the Appellate Tribunal in a petition filed by the assessee. While disposing the petition, the Court has categorically held that the benefit of section 80-P cannot be denied to the assessee for the reason that the return was not filed within the prescribed time.
In the instant case, the Assessing Officer has denied the benefit of section 80-P of the Income Tax Act to the assesse, a co-operative society, on ground that the assessee failed to furnish returns within the time limit prescribed under section 139 of the Income Tax Act. Further, the officer disallowed the claim of the assessee on account of interest payment on ground that no tax is deducted with regard to the said payment.On appeal, both the adjudicating authorities, i.e, the Commissioner of Income Tax (Appeals) and the ITAT confirmed the order. When the matter was brought before the High Court of Kerala, the court found that the assessee, being a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, cannot be denied the benefit of section 80-P merely on ground of belated returns. Further, the Court remitted the matter to the ITAT to decide the other issues.
The Appellate Tribunal while deciding the question, whether TDS is mandatory in case of interest payment, found that under section 194(3)(viiia) of the Income Tax Act, no tax deduction is required in case of interest payments made by a primary agricultural credit society or a primary credit society or a Cooperative Land Mortgage Bank or a Cooperative Land Development Bank.In this regard, it was held that “The AO, CIT(A) and the ITAT had decided the issue against the assessee mainly for the reason that the assessee is not a primary Agricultural Credit Society as claimed and is not entitled to exemption provided u/s 194(3)(viia) of the Income Tax Act. However, the latest judgment of the Hon’ble Kerala High Court, in the case of Chirakkal Service Cooperative Bank Ltd vs CIT reported in 384 ITR 490 (Ker) had held that a Cooperative Society registered as a primary agricultural society under the Kerala Cooperative Societies Act 1969, is entitled to the benefit of section 80P(2) of the Income Tax Act. The Hon’ble High Court had categorically held that the certificate issued the Registrar of Cooperative Socialites to the effect that the assessee is primary agricultural credit society, would suffice as regards the claim of deduction u/s 80P(2) of the Act. When the Hon’ble High Court categorically found that the assessee is a primary agricultural credit society, we see no reason as to why the benefit of exemption provided u/s 194(3)(viiia) of the Act cannot be extended to the assessee. Accordingly, the interest credited or paid in respect of the deposits with the assessee was not required for tax deduction at source and hence, the provisions of section 40a(ia) of the Income Tax Act has no application.”
Read the full text of the order below.
In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal held that penalty proceedings under section 271(1)(c) of the Incme Tax Act, 1961 cannot be initiated against the assessee on the sole ground that the claim made by him is rejected by the Assessing Officer. The Tribunal, based on the ruling of the apex Court, observed that an unsustainable claim made by the assessee in the return of income cannot be inferred as the assessee has filed inaccurate particulars of income.In the opinion of the Tribunal, this was certainly not the legislative intent behind the said provision.
Briefly explaining the facts of the case, the Assessing Officer rejected the return filed by the assessee and completed assessment making addition of unexplained cash credit. Consequently, penalty proceedings were initiated against the assessee by holding that the assessee has concealed income and has filed inaccurate particulars while filing return. Subsequently, a penalty order was passed against the assessee under section 271(1)(c) of the Act, which was challenged before the Commissioner of Income Tax (Appeals) who sustained the order. Thereafter, the impugned order was challenged before the Appellate Tribunal.
The Judicial Member of the Tribunal noted that “I find that in this case no satisfaction for concealment was recorded for penalty of Rs.7,60,512/-I further note the AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish from the facts and circumstances of the case that how the assessee has furnished inaccurate particulars of its income. Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In this regard, I draw my support from the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC) wherein the Hon’ble Supreme Court has held that ‘where there is no findings that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting the penalty u/sec. 271(1)(c) of the Income Tax Act. A mere making a claim, which is not sustainable in law, by itself, will not amount of furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to furnishing a inaccurate particulars of income. As the assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely, because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty u/sec. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c). That is clearly not the intendment of the Legislature”.
Read the full text of the order below.
The Delhi bench of the Income Tax Appellate tribunal, in a recent ruling held that payments made to foreign entities in the nature of rent, advertisement and exhibition expenses are not subject to TDS since they are business expenditure.The Tribunal opined that such expenses are subject to the provisions of TDS only if the payee had a “PE” in India as per the provisions of the relevant DTAA.
Coming to the facts of the case, an intimation under section 200A of the Income Tax Act was received by the assessee to the effect that a sum of Rs. 2360700/- was determined as payable u/s. 200A by the deductor in the TDS statement for the first quarter of the relevant financial year. The applicant deductor was found to have committed a default of Short Deduction to the tune of Rs. 2001400/-. Accordingly, a demand of Rs. 2360700 (including interest of Rs.358520/-) was determined as payable on account of the said short deduction.The assessee filed a rectification application against the same by submitting that it had made remittances to foreign countries which in connection with rent for office accommodation, expenses incurred toward exhibitions outside India and Advertisement in foreign journals towards display of its products etc for which it had erroneously deducted the TDS at minimum rates. While rejecting these contentions, the assessing officer passed order owing to non-availability of foreign parties, by applying 20% as specified in the intimation.
On appeal, the Commissioner f Income Tax (Appeals) allowed assesses contentions and therefore, the revenue approached the ITAT.
Upholding the order passed by the CIT(A), the Tribunal observed the following; “After going through the findings of the Ld.CIT(A), as aforesaid, I find from the details of payments and TDS as furnished by the assessee that the taxes have been withheld by the assessee after grossing up and taxes so withheld have been deposited into credit of central government. Therefore, pre-conditions as mentioned in section 248 of the Act are satisfied. Further, it is seen that payments made to foreign entities are in nature of rent, advertisement and exhibition expenses and therefore are in thenature of business receipts in hands of payee. Such business receipts are taxable in India only if payee had ‘PE’ in India within meaning of relevant DTAA. From the facts, it has been observed that foreign entities did not have PE in India and therefore payments were not chargeable to tax in India. Accordingly, the assessee was under no obligation to deduct taxes at source while making these payments. Accordingly, Ld. CIT(A) has rightly held that the taxes were not required to be withheld u/s. 195(1) of the Act on the impugned payments made by the assessee and allow the issue in dispute in favour of the assessee which in my considered opinion, does not need any interference on my part, hence, I uphold the order of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the raised by the Revenue.”
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In a recent decision, the Rajasthan High Court held that the audit report filed by the assessee in a later stage of proceedings are not sufficient to avail the benefit of section 80HHC of the Income Tax Act, 1961.
The assessee, an individual earns his income from Firm and export business, claimed the benefit of section 80HHC of the Income Tax Act. The Assessing Officer completed assessment by rejecting the claim on ground that the assessee failed to submit the certificate of a Chartered Accountant, which is a mandatory requirement for claiming deduction under Section 80HHC. The assessee claimed that he has fulfilled all the statutory requirements by submitting the certificate of the Chartered Accountant. It was further contended that the audit report filed before the appellate authorities at the later stage of the proceedings can be treated as sufficient for allowing the exemption.
Though the Commissioner of Income Tax (Appeals)sustained the assessment order by dismissing the appeal, the Tribunal accepted the contentions of the assessee by allowing the exemption. Being aggrieved the Revenue challenged the order of the ITAT before the High Court.
While analyzing the provisions of section 80HHC of the Income Tax Act, the division bench of the Rajasthan High Court observed that “The provision clearly envisages that an assessee who is engaged in the business of export out of India of any goods or merchandise and the amount is received in convertible foreign exchange in India within the time prescribed, an assessee becomes entitled to a deduction to the extent of profits derived by the assessee from the export of such goods or merchandise. To claim such deduction, sub-clause (4) of Section 80HHC mandates that report of a Chartered Accountant who has audited the accounts, duly signed and verified, is required to be furnished in the prescribed form along with the return of income as defined in the Explanation to sub-section (2) of Section 288 who certifies that deduction has been claimed in accordance with the provisions of law. Therefore, twin conditions are necessary: (i) the assessee should be an exporter and convertible foreign exchange is required to be received in the given time in India, and (ii) to claim such deduction, report of a Chartered Accountant is mandatory.”
Based on the various judicial pronouncements, the Court found that “While the foremost requirement is that the assessee has to be an exporter and the return ofincome is to be supported by an audit report. The latter is the requirement of furnishing substantive foundation for claiming such allowance and it is the requirement of furnishing proof that the foundation for claiming such deduction has been laid. While compliance of audit report under sub-clause (4) to claim deduction is mandatory with the return is concerned, being the requirement in the realm of procedure for furnishing evidence in support of the claim in the given facts and circumstances, if furnished during the assessment proceedings or even at the appellate stage, Courts have held that the claim cannot ordinarily be denied.”
“Even the learned counsel for the assessee isunable to place such audit report for our perusal claiming deduction under Section 80HHC. We further enquired from the learned counsel for the assessee as to the dates of the two audit reports, but he was unable to provide such dates to infer prima facie conclusion and the indisputed fact remains that there is an audit report claiming deduction of Rs.6,00,410/-and there is no audit report claiming deduction of Rs.1,07,33,971/.”
While rejecting the findings of the Tribunal, the division bench comprising of Justice Ajay Rastogi and Justice J K Ranka held that “the Tribunal simply observes that an audit report specifies the amount of rebate allowable at Rs.6,00,410/- on the basis of the amount received in the country in convertible foreign exchange, but the Tribunal is also silent about any audit report in reference to Rs.1,07,33,971/- and simply observes that the said claim of Rs.1,07,33,971/- was claimed as per computation of total income while filing the return of income and merely because the claim was made in the computation of total income, in our view such a finding is wholly perverse and not sustainable. We disapprovethe manner in which the claim has been allowed by the Tribunal on the basis of computation of total income alone and in not even uttering a word about the audit report to claim deduction for an amount of Rs.1,07,33,971/-. Merely because claim is allowable as per computation of income, is no reason to allow when sub-clause (4) of Section 80HHC mandates filing of an audit report in support for claiming deduction.”
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