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In the present case, the income tax return of the donor namely Dr. Chitranjan Jain and his wife Nisha Jain was filed before the Assessing Authority. No finding has been recorded by Assessing Authority or the CIT Appeal or the ITAT that return filed by Dr. Chitranjan Jain and the Nisha Jain were fake, fabricated or false one. Once genuineness of return is not in dispute then there appears to be no reason to disbelieve that the amount was paid by Dr. Chitranjan Jain.
The interim order makes a mention about the guidelines laid down by Hon’ble Apex Court in its judgment dated 5.1.2004 in Ajay Gandhi v. B. Singh [2004] 134 Taxman 537 providing for a Collegium comprising the President, ITAT and two Senior Most Vice Presidents. A reference has also been made to a D.O letter dated 2.11.2012 (Annexure-4)from former officiating President, ITAT Sri G.E. Veerabhadrappa.. presently Senior Most Vice-President, ITAT to Sri Karwa (R-2 and 3), who has taken over as officiating President, ITAT w.e.f. 1.9.2012.
Supreme Court in the case of P. R. Prabhakar v. CIT [2006] 284 ITR 548 where the order of the Special Bench cited (supra) stands approved. It was clarified that the amendment made to clause (baa) of the Explanation below Section 80HHC which defines “profits of the business” in such a manner as to exclude receipts like interest, commission etc. which did not have an element of turnover, was introduced prospectively by the Finance (No.2) Act, 1991 w.e.f. the assessment year 1992-93 and the amendment did not operate retrospectively.
Board had issued directions that the appeals will be filed only in cases where the tax effect exceeds Rs.2 lakhs in the matter of High Court in appeals U/s 260A or Reference U/s 256(2). The aforesaid circular is binding on all the authorities under the Board including the appellant Commissioner of Income Tax, Jabalpur. The Board had taken this decision in continuation to earlier directions issued by the Board on 28.10.1992 where the monitory limit was Rs. 50,000/-. Now in view of the changed circumstances, as directed by the Board by instruction dated 27.3.2000, it is apparent that the appeal or reference below Rs. 2 lakhs, could not have been filed. The instructions of the Board are binding to all the authorities working under the Board including the appellant. This appeal which was filed on 10.1.2005 is fully covered by the instructions issued by the Board on 27.3.2000, and this appeal could not have been filed . The aforesaid position has been clarified by two Division Bench of this Court in Suresh Chand Goyal and Ashok Kumar Manibhai Patel & Co. (supra).
The partnership firm was formed on 5.7.1990 and on 7.7.1990 Master Shishir Garg deposited Rs. 1,90,000/- and Rs. 72,000/- as capital money with the Firm through bank clearance of two bank drafts. The accounting period being financial year i.e. ending on 31st of March, 1991, the Firm could not have any income at the time of its formation. The identity of the depositor i.e. Master Shishir Garg was not in issue at any point of time before the Income Tax Authorities. They treated the said deposit by Master Shishir Garg. This being so, if for one reason or the other, they were not satisfied with the financial capability of Master Shishir Garg, the amounts could have been added at the hands of Master Shishir Garg and not at the hands of Firm.
Tribunal by the impugned order followed its order in the matter of WNS North America Inc rendered on 25th November, 2011. The Tribunal while upholding the order of the CIT(A) held that the amount of Rs. 2.93 Crores was received by the Respondent-Assessee as reimbursement of lease line charges and would not classify either as royalty or as income attributed to a Permanent Establishment in India.
Insofar as the absence of any other business or source of income is concerned, first of all, respondents themselves have no case that the petitioner had any other business or source of income. It is also the admitted case of the respondents that the entire properties of the petitioner are under attachment and that the interest liability of the petitioner was satisfied from out of the compensation amount remitted by the Corporation of Cochin. These facts, in my view, prima facie substantiate the case of the petitioner that he had no business or source of income and that payment of interest as demanded, would cause genuine hardship.
This is not denied that the assessee is engaged in the business of providing credit facilities to its members. The credit facilities cannot be provided until and unless the assessee receives the deposits. It cannot always be provided out of its own capital. Receiving of the deposit is necessary and essential for advancing the money on credit and earning the interest income. The deposits may not have been derived from the income for providing the credit facilities to the members.
Now we come to argument of the assessee that there is no change in the operating model or the business activity of the assessee company, hence, rule of consistency should be followed and hence no adjustment is warranted. In this regard we are of the opinion the res judicata is not applicable to taxation cases. Moreover, as held by Apex Court in Distributors (Baroda) (P.) Ltd. (supra) that to perpetuate an error is no heroism. To rectify is the compulsion of the judicial conscience.
Insofar as question (b) is concerned, it becomes academic as if the eight comparables selected by the TPO are found not to be functionally comparable then the difference between the operating margin of the respondent at 15.05% as against the 18.97% of comparable companies being within the range of +/ – 5% the amounts received by the respondent – assessee is within the statutory limits. Therefore, we see no reason to entertain question (b).
