The dispute is regarding disallowance of expenses relating to exempt income under section 14A of the Act. Under the said provisions, the disallowance of expenses relating to exempt income is required to be computed as per Rule 8D. The Hon’ble High Court of Bombay in the case of Godrej and Boyce Mfg. Co. v. Dy. CIT [2010] 328 ITR 81 have held that Rule 8D is applicable only from assessment year 2008-09 and in respect of prior years, it was held that disallowance had to be made on a reasonable basis after hearing the assessee. In this case, CIT(A) directed the AO to make disallowance as per Rule 8D which is not correct. We, therefore, set aside the order of CIT(A) and restore the matter back to him for necessary examination in the light of judgment of Hon’ble High Court of Bombay in case of Godrej and Boyce Mfg. Co. (supra) and for passing a fresh order after affording opportunity of hearing to the assessee.
It is seen that in the course of the assessment proceedings the Assessing Officer found that the assessee had made payments towards purchase of land in the Devanahalli taluk of Bangalore District out of which sums amounting to Rs. 87,92,635 were found to have been paid in cash in contravention of the provisions of section 40A(3) of the Act. The assessee’s explanation in letter dated December 18, 2008, that the payments were made at places which were not served by any banking facilities was not accepted by the Assessing Officer for the reason that Devanahalli taluk is a well developed suburb of Bangalore having a large number of banks and the recipients of the consideration were residing in that area and some of them were in receipt of government compensation for land acquisition and had accounts and deposits in such banks.
In the instant case also services were provided by the assessee outside India and for this business the services of non-residents were utilized to whom technical fee in question was paid. No good reason could be shown by the DR as to why the aforesaid decision of the Tribunal is not applicable in the instant case and why the said decision should not be followed in the instant case. We, therefore, following the above decision, hold that the services of non-residents to whom the technical fee of Rs. 74,63,768/- was paid by the assessee were utilized for the business which was carried out outside India for earning income from a source outside India. Therefore, the grounds of appeal of the assessee are allowed.
Admittedly, these two writ petitions have been filed challenging the orders passed by the respondent SEBI under Sections 11 and 11(b) of the Act 15 of 1992 against the company as well as Mr. A. Venkatramani, the promoter. As against that, an appeal has to be filed before the Appellate Tribunal. Further Section 29 of the Act, 1992, enables the Government to make Rules for carrying out the purposes of the Act and the notification issued by the Central Government under Rule 5(2) is valid in law.
The dispute is regarding allowability of claim of bad debt not made in the return of income. The claim had been made before AO only during assessment proceedings which had not been allowed following the judgment of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) in which it has been held that any claim before the AO has to be made by way of filing revised return if not made in the original return. CIT(A) has therefore, upheld the order of AO. It may however be noted that the judgment of the Hon’ble Supreme Court in the case of Goetz (I) Ltd. was regarding claim to be made before the AO.
In the present case, the foundation is the Consultancy Agreement between the parties, where it was agreed, as per the Petitioner, that the Petitioner would get a guaranteed fee of Rs. 50 lacs, which was payable on a monthly basis at the rate of Rs. 3 lacs per month, at least for 12 months, or at the time when the investment size is achieved and/or if the agreement is revoked at Samira’s violation, whichever is earlier, the outstanding balance will be paid as a lump sum. As per the Petitioner, after 12 months from the date of agreement i.e. 22.10.2007, apart from lump sum amount of Rs. 5 lacs, the amount claimed, according to this agreement, was outstanding. This clause itself cannot be read in isolation. The revised clause and the obligation on the part of the Petitioner as referred in other part of the Agreement, just cannot be overlooked. There are no averments to show that they have complied with their part in full and, therefore, they are entitled to claim this full consultancy guaranteed amount as agreed. The Respondent/company in the affidavit has denied and made a positive statement that there were no full compliances by the Petitioner.
After the company petition before the Bombay High Court was withdrawn on 11th November, 2011, notice under section 434(1)(a) was issued on 15th December, 2011 at the registered office of the respondent company. Section 434(1)(a) requires issue of 21 days notice for deeming fiction created by the provision to apply. However, section 434(1)(a) cannot be strictly equated with mandatory statutory notice like the one required under section 80 of the Code of Civil Procedure, 1908, when a suit is to be filed against the Government. For initiating civil proceedings for recovery of a debt, no notice under section 434(1)(a) is required to be issued.
Providing service of payment and receiving money on behalf of the government in respect of various transactions such as public deposit, RBI bond, EPF, senior citizen saving scheme, compulsory deposit scheme etc. does not fall under the category of Banking and Financial service and the above activity is exempt from banking and financial services. As the issue has attained finality by the order of the Tribunal in Canara Bank (supra) therefore following the same, we hold that the appellant are not liable to pay service tax confirmed against them by way of impugned order and we set aside the demand of service tax.
As per the definition of input service under rule 2 (1) of the Cenvat Credit Rules, 2004, it includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal, but excludes services specified in (A) (B) (BA) & C of the said definition.
The appellants are distributors of sim cards needed to enable telecommunication service provided by BSNL through mobile telephone. They also market recharge coupons which enables additional duration of time for which such service is allowed to the customers of BSNL. BSNL supplies these cards with fixed Maximum Retail Price (MRP) to the appellants.
