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Showing 41 to 60 of 1379 Records
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2023 (1) TMI 1339 - MADRAS HIGH COURT
Cancellation of GST registration of the petitioner - obtaining such registration by fraud, wilful misstatement or suppression of facts - HELD THAT:- Section 29(2)(e) of the CGST Act undoubtedly enables the proper officer to cancel the registration even with retrospective effect. However, it should be borne in mind that such cancellation may be effected under clause (e) only based on material supporting an inference that the registration was obtained by means of fraud, wilful misstatement or suppression of facts. In this case, the registration was obtained in the year 2019 and no material has been placed on record to support the inference that the registration was obtained in early 2019 by means of fraud, wilful misstatement or suppression of facts. Therefore, the impugned order calls for interference.
The impugned order is quashed and the matter is remanded to the first respondent. Consequently, the respondents are directed to restore the registration subject to the outcome of re-adjudication.
Petition disposed off by way of remand.
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2023 (1) TMI 1338 - DELHI HIGH COURT
Maintainability of petition - availability of alternative remedy of appeal to the petitioner under Section 129 A of the Customs Act, 1962 - Revocation of Custom Broker License of the petitioner - forfeiture of entire security deposit - imposing penalty - petitioner was not granted the right to cross-examination of the witnesses whose statements were relied upon - violation of Regulation 10 (d), 10 (m), 10 (n) & 10 (q) laid down in CBLR, 2018 - HELD THAT:- In the case of Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer-cum-Assessing Authority and Others [2023 (2) TMI 64 - SUPREME COURT], the question for determination before the Apex Court was whether the High Court was justified in declining interference on the ground of availability of an alternative remedy of appeal to the appellant under Section 33 of the VAT Act, which it had not pursued.
Regulation 17 of CBLR, 2018 prescribes the procedure for revoking the license or imposing penalty. The time limit (s) prescribed under the CBLR, 2018 is mandatory and not directory and this Court in a plethora of judgment has also repeatedly held so - In terms of regulations 17 (1), a show cause notice is to be issued within 90 days from the date of receipt of the Offence report, while regulation 17 (5) prescribes a time period of 90 days from the date of issue of Show Cause Notice for submission of an Inquiry Report. Regulation 17 (7) prescribes that within 90 days from the date of the submission of the Inquiry Report and after consideration thereof, the Principal Commissioner/Commissioner shall pass orders either revoking the suspension of license or revocation of license of the Customs Broker. Although, the said regulation does not prescribe an overall time limit for completing the inquiry, Circular No. 09/2010/Customs dated 08.04.2010 issued by the Central Board of Excise and Customs, Department of the Revenue, Ministry of Finance, Govt. of India, inter alia prescribed time limits for procedures governing the suspension/revocation of CB licenses.
As per regulation 17 (4) of CBLR, 2018, if the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines the permission to examine any person on the ground that his evidence is not relevant or material, he needs to record the reasons in writing for doing so but the Inquiry Officer assigned no reason what so ever. The Commissioner of Customs ignored the error on the part of the Inquiry Officer to grant an opportunity of cross examination of the exporters and rather observed that the object behind cross examination of the witnesses appeared to be to merely prolong/discredit the investigation and the denial of cross examination by the Inquiry Officer has not impacted the objectivity of the Inquiry. Such an observation is based on incorrect understanding of regulation 17 (4) of CBLR, 2018. Provisions of Regulation 17 (4) were given a complete go-by. Not allowing the Customs broker an opportunity to cross examine the persons examined in support of the grounds forming the basis of these proceedings has resulted in serious prejudice to the petitioner.
The Court in Kunal Travels [2017 (3) TMI 1494 - DELHI HIGH COURT] held that the obligation of the CHA under Section 13 (e) of the CHALR, 2004 cannot be stretched to it being obliged to undertake a further background check of the client. As such, as a Customs Broker, the petitioner cannot be held liable because exporters were not traceable, after the issuance of ‘Let Export Orders’ and export of the goods out of the country.
The Commissioner of Customs erred in accepting the findings of the Inquiry Officer regards the failure of Customs Broker to comply with the provisions of Regulation 10(d), 10 (m), 10 (n) & 10 (q) of the CBLR, 2018 - The impugned order dated 29.06.2022, insofar as, it revokes the CB License of the petitioner and levies penalty upon the petitioner shall stand quashed and set aside.
Petition allowed.
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2023 (1) TMI 1337 - BOMBAY HIGH COURT
Accrual of income in India - income from External Commercial Borrowings ("ECB") - claim of exemption u/s 90 r/w Article 11 of the DTAA as the company was carrying on bona fide banking business in Mauritius - ITAT allowed assessee's appeal and by the impugned order held that the interest income on securities was exempt from tax in India under Clause (c) of Article 11(3) of the DTAA - whether assessee in involved in bonafide banking activity? - Revenue's case is that Clause (c) of Article 11 of the DTAA will not apply to assessee. This is because assessee does not have a banking business license from the Reserve Bank of India.
HELD THAT:- To fall under Clause 3(c) of Article 11 of the DTAA, assessee need not have to be carrying on banking business in India. Assessee should only be a resident of Mauritius and must be carrying on bona fide banking business in Mauritius. We have to note that in the draft assessment order dated 30th March 2015 passed under Section 144C (1) r/w Section 143(3) of the Act, the AO while granting exemption to the interest on ECB has accepted that assessee is carrying on bona fide banking business in Mauritius. So also in the final assessment order dated 28th January 2016. Therefore, the fact that assessee is carrying on a bona fide banking business in Mauritius is not disputed.
Under Article 11(3) of the DTAA interest arising in a contracting state (in this Case India) shall be exempt from tax in that State (in India) provided it (the Income) is derived and beneficially owned by any bank carrying on a bona fide banking business which is a resident of the other contracting State (Mauritius). Therefore, so long as assessee is carrying on bona fide banking business in Mauritius being a resident of Mauritius, the interest that assessee would earn in India shall be exempt from tax in India.
If we have to accept, what DR submitted, that assessee should have had a banking license from the Reserve Bank of India, then what would be applicable is Clause 6 of Article 11 of the DTAA and that has not been relied upon by the AO. Moreover, the AO has, as noted earlier, granted exemption to the interest on FCB by accepting that assessee is carrying on bona fide banking business in Mauritius.
No infirmity in the order passed by the ITAT. No substantial question of law.
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2023 (1) TMI 1336 - SC ORDER
Condonation of delay of 445 days in filing appeal - sufficient cause for condonation of delay present or not? - It was held by High Court that In the present case after appreciating the matter it cannot be said that there was sufficient cause for condonation of delay.
HELD THAT:- In the peculiar facts and circumstances of this case, interference is not called for. However, the question of law decided by the High Court is kept open.
The Special Leave Petition is dismissed.
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2023 (1) TMI 1335 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
Benami transaction - Beneficial owner of property - Provisional attachment order - scope of Amendment Act of 2016 - Amendment to Prohibition of Benami Property Transactions Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 - HELD THAT:- The issue raised in these petitions is squarely covered by the judgment of this Court in Union of India & Anr. vs. Ganpati Dealcom Pvt. Ltd. [2022 (8) TMI 1047 - SUPREME COURT] as held Section 2 (9) (A) and Section 2 (9) (C) are substantive provisions creating the offence of benami transaction. These two provisions are significantly and substantially wider than the definition of benami transaction under Section 2 (a) of the unamended 1988 Act. Therefore, Section 2 (9) (A) and Section 2 (9) (C) can only have effect prospectively. Central Government has notified the date of coming into force of the Amendment Act of 2016 as 01.11.2016. Therefore, these two provisions cannot be applied to a transaction which took place prior to 01.11.2016.
As petitioners contends that review of the said judgment is pending.
Since as of now the issue stands covered by the judgment in the case of Ganpati Dealcom Pvt. Ltd.(supra), we dismiss these special leave petitions for the same reasons and ground.
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2023 (1) TMI 1334 - SC ORDER
Reimbursement of amount of Service Tax - maintenance of street lights - if petitioners were required to pay service tax, then whether the same, if at all, could be recovered from respondent no.1 i.e., Municipal Corporation of Delhi (MCD) or not? - It was held by High Court that During the relevant period, there was no exemption operating qua the payment of service tax on the maintenance of street lights - HELD THAT:- There are no reason to interfere with the impugned judgment and order passed by the High Court. As such, the view taken by the High Court agreed upon.
SLP stands dismissed.
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2023 (1) TMI 1333 - ITAT SURAT
Addition to share capital u/s 68 - unexplained cash credit - HELD THAT:- The assessee furnished all such details of the lenders/ depositors. We further find that there is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. Majority of the investor either in the equity shares or preference shares are made by the group company or by promotor at the face value of the shares. There is no evidence that investment in shares of assessee is a result of some circular transactions. In view of the afforesaid factual discussions, we do not find any illegality or infirmity in the finding of the ld CIT(A), which we affirm with our additional observation. In the result, the grounds of the appeal raised by the revenue is dismissed.
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2023 (1) TMI 1332 - CESTAT AHMEDABAD
Levy of service tax - construction of Approach Roads and Residential Premises within the factory of Classic Marble Company Private Limited - difference in the figures recorded in ST-3 vis-a-vis the actual receipts - HELD THAT:- In light of Circular No. B1/6/2005-TRU dated 27.07.2005, it is apparent that the activity of construction of roads is beyond the service tax net and therefore, demand of service tax on construction of road cannot be sustained. The same is set aside and appeal to that extent is allowed.
Demand of service tax on residential houses made for their clients namely Classic Marble Company Private Limited - demand confirmed on the ground that the activity of construction of road is a composite contrat for not only for construction of road but also for residential premises - HELD THAT:- When the residential complex is built for self use then it remains outside the service tax net - the demand on the construction of road and residential premises cannot be sustained and the same is set aside.
Difference in the receipts towards exempted services shown in ST-3 return - HELD THAT:- It is seen that the impugned order does not contain adequate explanation for the said exempted services - The appellant has claimed that the variation is on account of inclusion of amount in service tax gross value/ VAT amount/ booking of TDS/ declaration of receipt entry - there are no mention of these facts in the impugned order nor does the impugned order contain any examination of this data. It is doubtful if this data was submitted before the original adjudicating authority - matter remanded back to original adjudicating authority to examine the reconciliation produced by the appellant, in these appeal papers decide afresh.
Appeal allowed in part and part matter on remand.
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2023 (1) TMI 1331 - MADHYA PRADESH HIGH COURT
Anticipatory Bail - levy of additional condition that to submit passport, if any, before the trial Court and shall not leave India without prior permission of this Court - HELD THAT:- Once the apex Court seized of the matter and the impugned order is under challenge, it would not be proper for this Court to entertain this petition for modification of he order.
Petition dismissed.
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2023 (1) TMI 1330 - CALCUTTA HIGH COURT
Validity of order passed u/s 148A - re-assessment proceeding as beyond six years - jurisdiction of AO in issuance of the impugned notice u/s 148 of the Act being barred by limitation u/s 149(1)(a)/149(1)(b) - HELD THAT:- In the impugned order u/s 148A(d) of the Act, the assessing officer has tried to justify the initiation of re-assessment proceeding by relying on an instruction being No. 01/2022 dated 11th May, 2022 issued by CBDT. Admittedly, the issuance of notice and initiation of re-assessment proceeding are beyond six years and, prima facie, it is barred by limitation both under the old Act as well as under newly amended provision relating to Section 147 of the Act.
Considering the submission of the parties, it is of the view that this matter deserves adjudication by calling for affidavits from the respondents and the petitioner has been able to make out a prima facie case for an interim order by raising the issue of jurisdiction of the assessing officer concerned in initiating the impugned re-assessment proceeding.
Let the respondents file affidavit-in-opposition within four weeks; petitioner to file reply thereto, if any, within two weeks thereafter.
The matter shall appear for final hearing in the monthly list of April, 2023. In the meantime, there will be no further proceeding.
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2023 (1) TMI 1329 - KARNATAKA HIGH COURT
Maintainability of petition - availability of alternative remedy of appeal - HELD THAT:- The petition stands disposed of with liberty to the petitioner to avail the alternative remedy observing that the petitioner shall be at liberty to seek exclusion of time spent in prosecuting this petition.
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2023 (1) TMI 1328 - PUNJAB AND HARYANA HIGH COURT
Block assessment order passed u/s 158 BC - declaring undisclosed income after making additions on account of undisclosed receipt - CIT(A) deleted the additions made on account of (i) gift from Arvinder Pal Singh; (ii) notional rental income (iii) credits in bank account (iv) prize money, bonus money, match fee and tour fee (v) investment in purchase of jewellery (vi) investment in the purchase of property and sustained additions made on account of household expenses - ITAT deleted addition on account of household expenses - HELD THAT:- The deposit was in the name of HUF and the source of deposit was explained. The return in the name of HUF was furnished after receiving the notice from the department and the bank account belonged to HUF. The department had issued notice under Section 142 (1) of Act 1961 dated 02.04.2002 and the assessee filed return in the capacity of HUF. The Bank account was in the name of the HUF and not in the individual name of the assessee. The assessee explained the source of deposit in the HUF.
Bonus Money was the prize money given by the Board and the said prize money was exempted from tax. It is also not in disputed that the issue with regard to match fee was covered by CBDT Circular No. 1432 dated 26.11.87 wherein guidelines for the treatment of tour money received by cricket player had been laid down by CBDT. It was withdrawn by circular dated 22.09.1998 but this could not have been applied retrospectively.
Both these issued came up for consideration before CIT (A) Patiala during the course of assessment proceedings and the CIT (A) Patiala vide order dated 2.6.1999 had already adjudicated this issued in favour of the assessee. Further it has been noticed in the judgment that similar issue had been considered in the case of Dr. (Smt.) Navjot Kaur Sidhu w/o the assessee for the block period 01.04.1990 to 20.07.2000, vide order dated 30.08.2005 and keeping in view this fact, the appeal of the department was dismissed.
No substantial question of law arises for consideration in the present appeal.
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2023 (1) TMI 1327 - SC ORDER
Scope of Prohibition of Benami Property Transactions Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 - whether has a prospective effect? - As decided in M/S. GANPATI DEALCOM PVT. LTD.[2022 (8) TMI 1047 - SUPREME COURT] Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary. The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions.In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively.Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed.
HELD THAT:- UPON perusing papers the Court made the following
Delay condoned.Application for oral hearing of the review petition is allowed.
List the review petition for open Court hearing on 15 March 2023 at 3.30 pm.
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2023 (1) TMI 1326 - SUPREME COURT
Exercise of jurisdiction under Section 482 Cr.P.C. - seeking quashment of FIR - HELD THAT:- The materials on record pertaining to the pleadings instituted in the Civil Suit, produced in this proceeding would reveal that the respondent was in fact ousted from the membership of the trust. In the counter affidavit filed in this proceeding, the respondent has virtually admitted the pendency of the suit filed against his removal from the post of Secretary and the trusteeship and its pendency. The factum of passing of adverse orders in the interlocutory applications in the said Civil Suit as also the prima facie finding and conclusion arrived at by the Civil Court that the respondent stands removed from the post of Secretary and also from the trusteeship are also not disputed therein. Then, the question is why would the respondent conceal those relevant aspects? The indisputable and undisputed facts (admitted in the counter-affidavit by the respondent) would reveal the existence of the civil dispute on removal of the respondent from the post of Secretary of the school as also from the trusteeship.
By non-disclosure the respondent has, in troth, concealed the existence of a pending civil suit between him and the appellants herein before a competent civil court which obviously is the causative incident for the respondent’s allegation of perpetration of the aforesaid offences against the appellants.
There cannot be any doubt with respect to the position that in order to cause registration of an F.I.R. and consequential investigation based on the same the petition filed under Section 156(3), Cr.P.C., must satisfy the essential ingredients to attract the alleged offences. In other words, if such allegations in the petition are vague and are not specific with respect to the alleged offences it cannot lead to an order for registration of an F.I.R. and investigation on the accusation of commission of the offences alleged. As noticed hereinbefore, the respondent alleged commission of offences under Sections 323, 384, 406, 423, 467, 468, 420 and 120B, IPC against the appellants. A bare perusal of the said allegation and the ingredients to attract them, as adverted to hereinbefore would reveal that the allegations are vague and they did not carry the essential ingredients to constitute the alleged offences. There is absolutely no allegation in the complaint that the appellants herein had caused hurt on the respondent so also, they did not reveal a case that the appellants had intentionally put the respondent in fear of injury either to himself or another or by putting him under such fear or injury, dishonestly induced him to deliver any property or valuable security.
In respect of the issue involved, which is of civil nature, the respondent had already approached the jurisdictional civil court by instituting a civil suit and it is pending, there can be no doubt with respect to the fact that the attempt on the part of the respondent is to use the criminal proceedings as weapon of harassment against the appellants. The indisputable facts that the respondent has filed the pending title suit in the year 2015, he got no case that he obtained an interim relief against his removal from the office of Secretary of the School Managing Committee as also the trusteeship, that he filed the stated application for an order for investigation only in April, 2017 together with absence of a case that despite such removal he got a right to get informed of the affairs of the school and also the trust, would only support the said conclusion.
This case invites invocation of the power under Section 482 Cr.P.C. to quash the FIR registered based on the direction of the Magistrate Court in the afore-stated application and all further proceeding in pursuance thereof - there are no hesitation to hold that permitting continuance of the criminal proceedings against the appellants in the aforesaid circumstances would result in abuse of the process of Court and also in miscarriage of justice.
Appeal allowed.
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2023 (1) TMI 1325 - ITAT MUMBAI
Income taxable in India - Taxing of reimbursements treated as royalties and fees for technical services - Taxed at rate of 15 per cent., instead of 10.455 per cent. being the beneficial rate u/s 115A - whether the reimbursement of expenses by the assessee to its UK-associated enterprise is "fees for technical services" or not, has held that the payment made by the assessee falls within the ambit of "royalty" under section 9(1)(vii) and article 13(3)? - second round of proceedings - HELD THAT:- As the mandate of the AO was to follow the directions of the Tribunal whereby the matter was set aside to the AO for specific adjudication. The scope of set aside was circumscribed to see, whether the payment made for reimbursement falls within the ambit and scope of fees for technical services under article 13(4)(c) which stipulates that fees for technical services means payment of any kind to any person in consultation of rendering of any technical consultancy certificates which make available technical knowledge, experience, skill, know-how or process or development and transfer of a technical plan or design.
Now the AO instead of following the direction of the Tribunal has proceeded to treat the payment in the nature of royalty which cannot be sustained at the threshold. CIT (A) though has accepted this fact, but having a co-terminus power with the AO, he has chosen not to decide the issue albeit has set aside the issue to the file of the AO - On this fact alone, the entire assessment order as well as the order of the CIT(A) is unsustainable and deserves to be quashed. In any case as explained, the lotus note which was a kind of facility given to the group of companies with a view to smoothen the day-to-day work increase the overall efficiency level. It has been sated that a Foseco group companies have taken lotus note which is a software purchase from IBM for the use of entire establishment for co-ordinated activity/administration for the benefit of all the facilities too subsidiaries of the assessee-company.
The cost of services have been recovered and raised by Foseco group without any markup. Nowhere can it be said there is any kind of "make available" of any kind of technology or a terms mentioned in article 13(3)(c). Thus, it cannot be treated in the nature or fees for technical services under the Indo-UK Double Taxation Avoidance Agreement. Accordingly, on merits also, the reimbursement of lotus note for fees for technical services is allowed.
In so far as other expenses, the same are purely marketing expenses and professional which cannot be again treated as fees for technical services under clause of article 13(3)(c). Accordingly, the additions made by the AO and sustained by CIT (Appeals) is deleted. Appeals filed by the assessee stands allowed.
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2023 (1) TMI 1324 - ITAT MUMBAI
Disallowance of interest expenditure - Assessee during the year the assessee has incurred capital work-in-progress - Why proportionate interest expenditure should not be attributed to work-in-progress till the time assets was put to use? - HELD THAT:- Working capital and cash credit loans are tied up in the current assets of the company. Anyway, the alleged amount of investment in capital work-in-progress is far less than the interest free funds available with the assessee.
Therefore, in absence of any nexus, it cannot be stated that interest bearing funds have been used by the assessee for acquiring the capital work-in-progress. In view of this, we do not find any reason to confirm the disallowance - presumption would always be available in favour of the assessee that non-interest bearing funds have been used for the purpose of acquisition of capital work-in-progress. The above view is also supported by the decision of the Hon'ble Bombay High Court in case of Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] as well as the decision of Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] Accordingly, ground no.1 of the appeal is allowed.
Disallowance u/s 14A read with Rule 8D - assessee has earned exempt income and has also offered SUO Moto disallowance - AO Found that disallowance offered by the assessee is on ad hoc basis and without any mathematical working - CIT (A) after considering the explanation of the assessee rejected that no interest of disallowance can be made under Section 14A - HELD THAT:- We find that when non-interest bearing funds are much higher than the amount invested which yielded exempt income, there is no question of making any disallowance under Rule 8D2 (1) and 8D (2)(iii) of the Act. Such claim of the assessee before us is only with respect to the interest disallowance under Rule 8D of the Rules, Assessee succeeds on this issue.
Disallowance u/s 14A imputed under the computation of book profit, we find that issue is squarely covered in favour of the assessee by the decision of Sobha Developers vs. Dy. Commissioner of Income Tax [2021 (1) TMI 378 - KARNATAKA HIGH COURT] Even otherwise, we find that assessee has already complied with Provision of Section 115JB of the Act, explanation 1 clause (f) of the Act in form no 29B. There is no finding of the learned Assessing Officer that provision of Explanation 1(f) of Section 115JB of the Act is not properly applied by the assessee. Unless that fact is recorded along with the fact that disallowance under Section 14A of the Act is identical to the disallowance under that clause, the order of the learned lower authorities cannot be sustained. Accordingly, ground no.8 of the appeal is allowed.
Write back of the provisions for doubtful debts - CIT (A) confirmed the addition to the normal computation and further, for computation of book profit under Section 115JB - HELD THAT:- At the time when the provision was created, the assessee has disallowed the same in all the assessment year which is substantiated by filing the computation of total income for all these years. The learned Assessing Officer in the remand report also agreed with the above finding of the fact. The above provision for doubtful debts has been written back during this year. Naturally, this amount has not been claimed as deduction in the year in which the provision has been made. Therefore, naturally, same would be not taxable in the present assessment year when such provisions were written back. Accordingly, we find that learned lower authorities are not correct in making the addition of the above amount. Accordingly, the learned Assessing Officer is directed to delete the addition in the computation of normal taxable income. Ground no.9 of the appeal is allowed.
Addition being MAT credit added to the book profit - claim of the assessee is that the amount of income tax paid or payable required to be added to the book profit is always under a MAT credit - HELD THAT:- We find that identical view has been taken by the coordinate Bench in case of ACIT vs. JK paper Ltd. [2016 (10) TMI 1393 - ITAT AHMEDABAD] order covers the issue in favour of the assessee. We also find that whenever a provision of current tax is required to be made in the profit and loss account it has to be net of MAT credit available to the assessee. Accordingly, the separate adjustment of MAT credit cannot be made and added to the book profit. Accordingly, the adjustment made by the learned Assessing Officer and confirmed by the learned CIT (A) is not correct. Ground of the appeal is allowed.
Addition of provision for wealth tax to the book profit u/s 115JB - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the decision of Reliance Industries Ltd. 2019 (1) TMI 887 - BOMBAY HIGH COURT] as held that in plain terms, the clause (a) reference to amount of income tax paid or payable or the provision made thereof. The legislator is advisably included wealth tax in the clause 40 (a) (iia) but not u/s 115 JB of the Act. Therefore, by no interpretation process the wealth tax can be included in clause (a) of explanation 1 to section 115JB of the Act. We find that the addition deserves to be deleted. Ground of the appeal is allowed.
Disallowance of excise duty debited to the profit and loss account - AO held that above sum is the double deduction of excise duty expenses. According to him, the assessee claim deduction firstly, from sales in credit side of profit and loss account by showing net sales and consequently, by debiting the excise duty expenses in the profit and loss account - HELD THAT:- On careful consideration of note no.18 to the annual accounts which shows that excise duty on sales amounting to ₹1,322 lac has been reduced from sales in profit and loss account and excise duty on increased and decreased in stock amounting to ₹29.32 lacs has been considered as in the profit and loss account. Assessee has also shown that difference of excise duty was arising out of duty included in opening stock as well as closing stock and has also demonstrated that whatever is not paid before due date of filing of return of income, it is offered for disallowance. We find that addition is not correctly made for the reason that it is not double deduction as stated by the learned Assessing Officer. Accordingly, ground of the appeal is allowed.
Disallowance of interest expenditure on account of interest attributable to the loans to subsidiary companies - HELD THAT:- We find that in the case of the assessee in earlier the about disallowance has been deleted for the reason that assessee has higher interest free advances available then the amount of loan advanced to the sister concern. Therefore, the presumption would be available in favour of the assessee that the amount of loan advance to subsidiary companies without charging interest is out of interest-free funds available with the assessee . Above fact also remains prevalent in this year. It was not shown by the learned departmental authorities that assessee has diverted its interest-bearing funds for giving advance to its subsidiaries free of interest. Thus direct the learned law authorities to delete the disallowance.
Disallowance of prior period expenditure - AO held that assessee following mercantile system of accounting cannot book the expenses in the like manner therefore he held that only those expenses which approved for the current year is allowable - HELD THAT:- The ld.AR merely relied upon the order of co-ordinate bench which is on different facts. In view of this, we are of the view that ld.CIT(A) has exceeded his jurisdiction in directing the AO to verify and allow the claim of the expenses in the preceding assessment year. Therefore, Ground No. 1 & 2 of the appeal of the AO are allowed.
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2023 (1) TMI 1323 - SECURITIES APPELLATE TRIBUNAL, MUMBAI
Prohibition of manipulative, fraudulent and unfair trade practices - charge that NSE and its employees have colluded with TMs, especially OPG Securities Pvt. Ltd. - profit made by ISB in its report is on the basis of early login by OPG - show cause notice alleged that OPG gained materially by being the first logger as well as by connecting to the secondary server -WTM directed OPG debarring accessing the securities market for a period of five years and restraining OPG from taking any new clients for a period of one year and its Directors to disgorge jointly and severally a sum of Rs.15.57 crores alongwith interest at the rate of 12% p.a - HELD THAT:- The show cause notice alleged that OPG gained materially by being the first logger as well as by connecting to the secondary server. In this regard, NSE had appointed ISB to calculate the profits earned by TMs including OPG especially on days when they logged in first to the PDC either from the primary server or from the secondary server. The ISB in its report took 30 days on sample basis and analysed the same for the period 2012 and 2013 which were the days when OPG had consistently logged in first. ISB in its report submitted that OPG made higher profits close to Rs.25 crores when they logged in early. Based on this ISB report, the show cause notice directed OPG to show cause as to why the profit of Rs.25 crores should not be disgorged.
The ISB report used First-In-First-Out (FIFO) methodology to calculate both intraday and overnight profits. Intraday profits are profits generated through positions that are opened and closed on the same day. Overnight profits are profits generated through positions opened on a prior day and closed on that particular day
A perusal of the terminology “First Prop” indicates that the profits made by the TM is on the basis of its trades made on days when he logged in first into a Port.
WTM has calculated the unlawful gain on the basis of table A11 and A15 of the ISB report. A perusal of the aforesaid tables indicates that the calculation has been made on the basis of “First Prop” and “Non-First Prop”. The “First Prop” analysis is based on when OPG logged in first. When the WTM has given a finding that early logging in does not give any advantage and could only be given a probabilistic advantage the question of calculating profits on the basis of early login becomes wholly erroneous. The WTM could only consider probabilistic advantage, if any, which the OPG may have gained by being the first logger.
Thus, on this aforesaid short point, the calculation of unlawful gain made by the WTM cannot be accepted.
To conclude, we find that all the charges leveled in the show cause notice has not been proved. Many of the charges were dropped by the WTM himself while passing the impugned order. The WTM held that the charge of fraud and unfair trade practice by NSE under PFUTP Regulation is not made out. The charge that NSE and its employees have colluded with TMs, especially OPG has not been made out. The allegation of suppression of material facts and non-cooperation by NSE with the investigating authorities has not been made by the WTM.
We also find that early log in by TM did not create any advantage with regard to dissemination of data. May be a probabilistic advantage is obtained by a TM on account of early login, but in the absence of any further evidence on this aspect, no adverse orders can be passed. We also hold that there was randomness in the dissemination of data in the TBT architecture and, therefore, there was no requirement to add a randomiser to the existing TBT architecture.
NSE failed to monitor the secondary server which led many TMs especially OPG to misuse it to their advantage. NSE failed to follow its own norms and guidelines framed for such purpose. NSE should have placed a mechanism to check unauthorized access to the secondary server by the TMs. NSE should have placed a defined policy for use of secondary server and a mechanism ought to have been placed for monitoring connection by TM on the secondary server since it was an active server.
WTM further held that failure to place the randomizer or load balancer in the TCP IP dissemination protocol, cannot be categorised as breach of the principles of “fairness and equity” attracting the provisions of PFUTP Regulations. The WTM held that the dissemination of information which is in breach of the stipulation contained in SECC Regulations cannot automatically attract the rigors of PFUTP Regulations, without there being any proof to indicate fraud. The WTM held that in the absence of any fraud or collusion or connivance the possibility of fraud was non-existent.
Charge that NSE has violated Regulation 41(2) and 42(2) of SECC Regulations is not proved. NSE provided a level playing field for TM subscribing to the TBT data feed of NSE and provided equal, unrestricted and fair access from the TBT architecture. We, however, found that the circular of 30th March, 2012 was not followed by NSE.
WTM exonerated OPG and its Directors on issue of first login and crowding out other TMs. We, however, affirm the findings of the WTM that OPG gained an unfair access and advantage by consistently log in to the secondary server and made unlawful gains.
We, however, find that for violation of the circular, there can be no disgorgement by NSE or by Mr. Ravi Narain and Ms. Chitra Ramkrishna. Insofar as Mr. Ravi Narain and Ms. Chitra Ramkrishna are concerned, the order of disgorgement cannot be sustained. We also find that order of disgorgement against NSE also cannot be sustained.
We have already held that NSE did not commit any violation of Regulation 41(2) of the SECC Regulations. We have also found that TBT architecture provided unrestricted, transparent and fair access to data dissemination from its TBT architecture to the TMs. We have also found that there was lack of due diligence while allocating IPs on various Ports and that there was inequitable distribution of IPs. We also found that a load balancer should have been placed for equitable distribution of the IPs. We also found that there was failure to monitor frequent connections to the secondary server by certain TMs.
Even though NSE has not indulged in any unethical act or has unjustly enriched itself the direction to disgorge, in our opinion, cannot be sustained. However, NSE has not adhered to its own norms and guidelines and has not followed the circular. The SCRA Act confers a large responsibility upon the exchange to ensure that undesirable transactions do not take place. Being a first level regulator it has a front line responsibility for regulation of the market and has a mandate to ensure compliance by the TMs of its own norms, guidelines and circulars. NSE has a duty to ensure transparency and fair access to all the TMs. For lapses committed by NSE directions under Sections 11 and 11B could be passed and some of the directions of the WTM were rightly passed. However, the direction for disgorgement was unwarranted but the appellant NSE cannot be allowed go scot free and is required to pay a price for the lack of due diligence on account of human failure to comply with the circular in letter and spirit. Though there are no parameters to quantify the lapse committed by NSE but taking into consideration all facts and circumstances of the case and the factors contemplated under Section 15J of the SEBI Act read with 23J of the SCRA Act and in exercise of the powers confirmed upon this Tribunal under Rules 21 of the Securities Appellate Tribunal (Procedure) Rules, 2000, we are of the opinion that NSE should pay a sum of Rs.100 crores for this lapse which is not expected from a first level regulator and which would act as a deterrent.
In view of the reasons given in the preceding paragraph:
a. We set aside the order of the WTM directing disgorgement of an amount of Rs.624.89 cores alongwith interest at the rate of 12% p.a. against NSE.
b. Directions given by the WTM prohibiting NSE from accessing the securities market, directly or indirectly, for a period of six months and, further, directing NSE to carry out system audit at frequent interval after thorough appraisal of the technological changes introduced from time to time is affirmed.
c. We direct NSE to deposit a sum of Rs.100 crores to the Investor Protection and Education Fund created by SEBI. This amount will be adjusted by SEBI pursuant to the deposit already made by NSE vide our interim orders dated 22nd May, 2019 and 17th May, 2021. The excess amount alongwith interest accrued shall be refunded by SEBI within six weeks. The appeal of NSE is partly allowed.
d. The direction to disgorge 25% of the salary from Mr. Ravi Narain and Ms. Chitra Ramkrishna is set aside.
e. The direction prohibiting Mr. Ravi Narain and Ms. Chitra Ramkrishna from associating with any listed Company or a market infrastructure institution or any other market intermediary for a period of five years is set aside and substituted for the period undergone by them. The appeals for Mr. Ravi Narain and Ms. Chitra Ramkrishna are allowed.
f. The direction of the WTM directing NSE to initiate enquiry against its employees is affirmed.
g. The violations committed by OPG as found by WTM is affirmed. However, the direction of the WTM directing OPG and its Directors to disgorge Rs.15.57 crores alongwith interest at the rate of 12% p.a. from 7th April, 2014 onwards is set aside. The matter is remitted to the WTM to decide the quantum of disgorgement afresh in the light of the observation made above within four months from today.
h. In addition to the above, we direct the WTM to consider the charge of connivance and collusion of OPG and its Directors with any employee/officials of NSE. Further, the WTM will decide the issuance of direction/penalty concealment/destruction of vital information and will further reconsider Issue No. 2 relating to crowding out other market participants.
i. All other directions issued against OPG and its Directors are affirmed. The appeal is partly allowed.
j. The intervention applications as well as the appeal of Mr. A. Kumar are rejected.
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2023 (1) TMI 1322 - ITAT SURAT
Deduction u/s 80P(2)(d) - claim denied on interest earned from investment made in any bank not being Cooperative society - HELD THAT:- As perused the order of Division Bench of this Tribunal [2021 (8) TMI 1087 - ITAT SURAT] wherein the order of ld. Pr.CIT passed under Section 263 dated 10/10/2018 was set aside. Considering the fact that once the revision order is quashed/set aside, consequent assessment order passed, while giving effect to revision order is thereafter void ab initio. Hence, do not find any merit in the grounds of appeal raised by the revenue and same is dismiss.
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2023 (1) TMI 1321 - ITAT SURAT
Validity of reopening of assessment - Estimation of income - bogus purchases - HELD THAT:- We note that assessee has neither filed cross-objection nor filed any request under the Income Tax Appellate Rules (vide Rule 27) to argue the issue on the validity of reopening of assessment. Since the assessee has not filed the cross-appeal nor any application filed before the Tribunal under the Income Tax Appellate Tribunal Rules to argue the issue on reopening of assessment. That is, the assessee has not filed an application under Rule 27 of the Income Tax Appellate Tribunal Rules, therefore argument of the assessee on the technical issue of validity of reassessment under section 147 of the Act cannot be entertained and it is hereby rejected.
Estimation of income - Since, the issue is squarely covered by the judgment of the Co-ordinate Bench in the case of Pankaj K. Chaudhary ([2021 (10) TMI 653 - ITAT SURAT] we direct the Assessing Officer to make the addition at the rate of 6% of bogus purchases / unverifiable purchases. Hence, we allow the appeal of Revenue partly.
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2023 (1) TMI 1320 - ITAT PUNE
Disallowance of service charges and other reimbursement(s) - Addition restricted to that @ 30% in the CIT(A)'s order - Disallowance of reimbursement of travelling expenses and depreciation on coolers - HELD THAT:- We find in this factual backdrop that all these issues are no more res integra as the tribunal’s coordinate bench’s common order in assessment years 2000-2001 to 2004-2005 involving assessee’s and Revenue’s cross-appeals decided [2022 (4) TMI 1571 - ITAT PUNE] inter alia, has accepted the former’s claim of various expenses restricted to 30% in entirety by following its earlier orders, partly uphold the learned lower authorities action disallowing travelling expenses @ 10% only on estimation basis and rejected the department’s stand on depreciation on coolers provided to bottlers/vendors vis-à-vis their WDV in full, respectively.
Both the parties are fair enough in not pinpointing any distinction on facts or law in the impugned assessment year as well so far as these three issues are concerned. We thus adopt judicial consistency to decide the first and foremost issue of reimbursement [restricted to 30% in the CIT(A)'s order] to full extent assessee’s favour, uphold only 10% of travelling expenses and accept it’s stand relating to depreciation on coolers in very terms.
TP Adjustment - We advert to assessee’s pleadings raised during the course of hearing that the department, and more particularly, the TPO took a diametrically opposite view in case of the assessee and its AE regarding the very issue. Faced with the situation and more particularly in light of the fact that the learned “Panel” has not discussed even the most appropriate method [in short “MAM”] before rejecting the assessee’s contentions, we deem it appropriate to restore these remaining grounds back to the learned “DRP” for its fresh adjudication on merits, preferably within three effective opportunities of hearing as much water has flown down the stream since the impugned assessment year 2006-07. Ordered accordingly. The assessee’s 2nd substantive ground herein is accepted for statistical purposes to the above extent.
Disallowance of marketing support services - We note that the Assessing Officer has refused to follow the “DRP’s” directions regarding the matter in light of Sec. 144C(13) r.w.s. 144C(5) of the Act. He has not carried-out any verification as per his detailed discussion in page-5 para-2 of the assessment order. Faced with this peculiar situation and in view of the clinching fact that the assessee may not be able to completely verify its detailed evidence of assessment year 2007-08 in the year 2023, we deem it appropriate to restrict the impugned disallowance to that @ 5% only. Ordered accordingly.
TP Adjustment on AMP expenses - international transaction or not? - HELD THAT:- CIT-DR could hardly dispute that case law Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] has already held that such “AMP” transactions do not amount to an international transaction u/s. 92B of the Act. Faced with the situation, we reverse learned lower authorities action to this limited extent.
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