The ld. CIT(Appeals) erred in law in not appreciating that benefit u/s.54EC is granted on capital gains and not on sale proceeds of capital asset. And that capital gain in respect of depreciable assets can be arrived at only u/s.50 and therefore, deeming provisions of section 50 cannot be ignored for the purpose of section 54EC.
The undisputed fact is that the property in question is an I.T. Park, with all infrastructure facilities and services. This is not a simple building. The Ministry of Commerce and Industries, notifies certain building as I.T. Park only if various facilities and infrastructure, as specified by the Department, are provided. It is an undisputed fact that all the technical requirements, infrastructures, facilities and services are being provided in this building and it was only for this reason that not only the Ministry of Commerce & Industries, but also the CBDT notified the same as an I.T. Park which entitles the assessee to earn certain incentives.
We find that with regard to the investment of Rs. 5907.18 lakhs in foreign subsidiaries, no disallowance can be made under section 14A because dividend income from foreign subsidiaries is taxable in India. Regarding balance investment of Rs. 38 crores approximately in Indian subsidiaries, we find that interest-free own funds of the assessee is many times more than this investment because interest free funds available with the assessee as on March 31, 2005 as per the balance-sheet as on that date is of Rs. 929.57 crores. There is no finding given by the Assessing Officer regarding any direct nexus between interest bearing borrowed funds and investment in Indian subsidiaries. Hence, in our considered opinion, no disallowance under section 14A can be made out of interest expenditure in the facts of the present case. Accordingly, ground Nos. 2 and 3 of the Revenue’s appeal are rejected.
In the present case, admittedly there is no past demand which has remained unpaid. Therefore only when the Assessee files a return of income quantifying his total income for the assessment years in question can it be said that there has arisen tax liability for the relevant AYs. The due date for filing return of income or the fact that advance tax was due on a particular date will not make the liability of the Assessee an “existing tax liability” on those dates. The Hon’ble Karnataka High Court in the case of CIT v. R.V. Raibagy & Co. & others ITR Case Nos. 4 to 10 of 2003 dated 29.3.2005 has also taken the view that adjustment of seized cash against tax due u/s.140A of the Act, on income declared in a return of income filed should be allowed.
Director of assessee company Mr. Varun Sarup Agarwal issued a cheque on 1.2.2007 on behalf of the assessee company for payment of rent and assessee company opened its account after issuance of this cheque. The amount of Rs. 2 lakh was deposited in the bank account of Mr. Varun Sarup Agarwal with a bona fide intention to prevent dishonoring of the cheque issued to the landlord of the assessee company and the remaining amount was returned back to the assessee company’s bank account. In the facts and circumstances of the case, it is doubtful whether the amount received by director with an intention to deposit it to the bank account with a bona fide belief that this would save the prestige of the company can be characterized as a loan or a deposit within the meaning of Section 269T of the Act. Although Section 269T of the Act does not expressly confer any exemption from transaction between connected parties or sister concern but a perusal of the decided cases on this point shows that there is a cleavage of judicial opinion.
It is observed that the claim of the assessee about wrong classification of double taxation credit was rejected by the AO because the assessee did not file a revised return. This view was canvassed by the AO on the basis of the afore-referred judgment in the case of Goetze India Ltd. (supra) However, it is pertinent to note that para -4 of this judgment provides that operation of this judgment is restricted to the AO and it does not, in any way, affect the powers of the Tribunal under section 254 of the Act. We, therefore, direct the AO to examine and allow assessee’s claim about the eligible amount of double taxation credit as per law after allowing a reasonable opportunity of being heard to the assessee.
It is undisputed that the transaction involve two domestic companies, who are individual and independent subsidiaries of their own and independent holding companies. This is also not in dispute that neither of the holding companies could be called the AE of the other contracting party. This is also not in dispute that, there is any transaction, involving a non resident company.
We have heard the rival submissions and perused the material before us. In the preceding year, this forward contract profit was more than 6 crores. The nature of income was similar to preceding year in the year under consideration. Therefore, by following the order of the Co-ordinate Bench, we also held that the nature of receipt is business.
We have thoroughly gone through the findings of the ld. first appellate authority on the issue in dispute and we are of the view that the findings of the ld. first appellate authority are not based on any material or evidence and the Molasses would not form part of the definition as provided in Explanation (b) to section 206C of the Act. Thus, the Explanation has wrongly been applied in the case of the assessee because the assessee is engaged in the extraction of sugar from sugar-cane and the sugar Molasses is produced as by-product. It is obtained when sugarcane juice is boiled to obtain sugar. Molasses is by-product arise during the processing of sugarcane. It is not wastage and scrap as discussed in the foregoing paragraphs.
From a plain reading of the above clauses, it is seen that the Assessee is not doing any service which falls within the definition of “FIS” as contemplated in Para-4 of Article-12. We agree with the findings of the learned Commissioner (Appeals) that these are merely facilitation services with regard to the selection of awareness for Wockhardt Awards and WHL has not given any technical knowledge from such services, therefore, the learned Commissioner (Appeals) has rightly deleted the said addition. Accordingly, ground no.2, raised by the Revenue is dismissed.
