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2021 (11) TMI 1023
Income accrued in India - Hardware receipts held to be chargeable to tax in India - receipts on sale of hardware with software embedded therein can be taxed as royalty or not? - assessee is a non-resident foreign company incorporated in United Kingdom - hardware is primarily in the form of viewing cards, Set-top-Box (STB) and other connected components,usually used in viewing television through satellite. The embedded software is required to run the hardware components - assessee claimed before the AO that the receipts not offered to tax cannot be regarded as royalty in the hands of the assessee and in particular in the light of the definition of royalty as given in article 12(3)(a) of the Double Taxation Avoidance Agreement (DTAA) between India and UK - HELD THAT:- Since the AY is AY 2010-11 (ie, prior to the Finance Act, 2012 amendment by way of inserting Explanation 4 to Section 9(1)(vi) of the Act, as per the SC in its judgment, the Finance Act, 2012 amendment has to be read as expanding the scope of royalty with prospective effect from the Assessment Year 2013-14 (After FA, 2012 was enacted) and cannot be upheld as clarificatory so as to apply retrospectively for previous assessment years (para 73 - 74, 78 and 79). Therefore, the payments made under the customer contracts are not be treated as “royalty” under section 9(1)(vi) of the Act itself for the subject AY 2010-11, even without reference to the DTAA. Under the DTAA, clearly these are not “royalty” payments under Article 12 of the India – UK DTAA as held by the SC (UK DTAA has also been examined by the SC para 40.
Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. [2021 (3) TMI 138 - SUPREME COURT] ) held that A copyright is an exclusive right that restricts others from doing certain acts. A copyright is an intangible right, in the nature of a privilege, entirely independent of any material substance. Owning copyright in a work is different from owning the physical material in which the copyrighted work may be embodied. Computer programs are categorised as literary work under the Copyright Act.
The court held that a licence from a copyright owner, conferring no proprietary interest on the licensee, does not involve parting with any copyright. It said this is different from a licence issued under section 30 of the Copyright Act, which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. What is ‘licensed’ by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is the sale of a physical object which contains an embedded computer program. Therefore, it was a case of sale of goods.
Whether the provisions of the Act can override the provisions of the DTAA? - By virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for "the use of, or the right to use, any copyright "of a literary work includes a computer program or software. It was held that the regarding the expression "use of or the right to use", the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty.
The terms of the licence in the present case does not grant any proprietory interest on the licencee and there is no parting of any copy right in favour of the licencee. It is non-exclusive non-tranferrable licence merely enabling the use of the copy righted product and does not create any interest in copy right and therefore the payment for such licence would not be in the nature of royalty as defined in DTAA. We therefore hold that the sum in question cannot be brought to tax as royalty.
On the question whether the sums in question can be taxed as FTS, we agree with the submissions made by the learned counsel for the Assessee set out in paragraph-18 & 19 of this order and hold that the sums in question cannot be brought to tax as FTS.
Whether the sum which was offered to tax by the assessee and which by virtue of our conclusions as aforesaid cannot be regarded as royalty or FTS and hence cannot be taxable, the Revenue should be directed to not to tax the aforesaid sum also - Thus taxability of receipts on sale of set-top-box, the amount offered to tax by the assessee which is now found to be not taxable cannot be brought to tax. We hold and direct accordingly and allow the ground of appeal.
Reimbursements from Cisco Video for expenses incurred on behalf of Cisco Video - HELD THAT:- We hold that pure reimbursement does not give rise to any income and the decisions cited by the learned AR in this regard lay down the above principle. We find that the revenue authorities have not firstly held that as to whether there was one-to-one tally of sums spent by the Assessee that was reimbursed by NDS Pay Tv. Once this factual finding is rendered then there has been no payment for any services whatsoever. The question is can one infer that the sums reimbursed were for services rendered by Assessee when there is one to one tally. In our view it cannot be said so. As we have already mentioned the AO has proceeded to draw inferences on surmises and conjectures. Firstly there is no evidence to show that services were rendered which can be termed as FTS. Under the DTAA FTS can be taxed only when it makes available technical knowledge to the person making payment. On the application of “make available” clause of the DTAA, there is no finding whatsoever as to what was the technical service made available to NDS Pay TV. We, therefore, deem it fit to set aside this issue and remand the same for consideration by the AO in the light of the observations made above (in particular with regard to actual tally of expenses incurred and reimbursed by NDS Pay Tv to Assessee), in accordance with law, after affording assessee opportunity of being heard.
Non-grant of credit for TDS - HELD THAT:- It would be just and appropriate to direct the AO to consider the calim of the assessee and allow credit in accordance with law. The issue raised by the assessee in ground No.6 is with regard to levy of interest under section 234B of the Act. In this regard, we find that the issue with regard to levy of interest under section 234B in the case of a non-resident has been settled by the Hon’ble Supreme Court in the case of DIT Vs. Mitsubishi Corporation [2021 (9) TMI 875 - SUPREME COURT] and took when the assessee is a nonresident foreign company incorporated in Japan and when the entire income that arises to them and the payment them is subject to deduction of tax at source there was no question of advance tax payment by assessee, accordingly, no interest under section 234B could be levied upon assessee.
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2021 (11) TMI 1022
Delay in the payment of EPF relatable to the employees’ contribution as far as the time limit set out by the specific Act - HELD THAT:- It is an admitted fact that there was a delay in the payment of EPF relatable to the employees’ contribution as far as the time limit set out by the specific Act is concerned. It is also an admitted fact that the return was filed by the assessee within the due date as per the time limit as set out u/s 139(1) of the Income Tax Act. Hence, the amount of the employees’ contribution of the EPF stood paid before the filing of the return. It is seen that the disallowance made was sustained by Addl. Commissioner on account of the fact that the Amendments carried out by Finance Act 2021 in Sections 36(1)(va) and Sec. 43B were considered to be clarificatory, hence retrospective in nature. The said view has consistently been held to be incorrect by various orders of the ITAT as on a bare consideration of the Notes on Clauses appended to the Finance Bill it was clarified that the Amendment will take effect from the First April 2021. Thus, the legal position thereon is well settled. See INSTA EXHIBITIONS PVT. LTD, C/O. CHACHAN & LATH [2021 (8) TMI 1235 - ITAT DELHI].
We hold that the disallowance sustained in the present appeal by the CIT(A) qua the employees’ contribution despite late payment qua the specific Act cannot be made. Admittedly, in the facts of the present case the payment has been made well within the time line as set out under the Income Tax Act u/s 139(1). Thus, admittedly the return of income was filed well within time after making the specific payments. The position of law that the Amendments carried out by the Finance Act, 2021 are prospective in nature and not declaratory stand well settled. The disallowance, accordingly, cannot be sustained. - Decided in favour of assessee.
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2021 (11) TMI 1021
Disallowance u/s 36 (1)(va) - disallowance on account of late payment of ESI collected from its employees - addition made on account of the fact that this amount out of a payment was found to have been deposited late in terms of the statutory requirements of the specific Act - HELD THAT:- Tribunal has allowed similar claims of the assessee taking note of the fact the various Co-ordinate Benches have consistently held that the amendment to section 36(l)(va) and u/s 43B of the Act effected by the Finance Act 2021 is applicable prospectively. Reading from the Notes on Clauses at the time of introduction of the Finance Act, 2021, it has been held that the amendment is applicable from 2021-22 and subsequent assessment year. Accordingly, considering the factual backdrop of the present case and considering the amendments in Section 36(1)(va) as well as Section 43B carried out by Finance Act, 2021 and Memorandum explaining the provisions in Finance Bill, 2021 we hold that the impugned disallowance is not sustainable. Accordingly, it is directed to be deleted. The appeal of the assessee is allowed.
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2021 (11) TMI 1020
Addition u/s 36(l)(va) - Delay deposits of ESI and PF from salary of the employees - as submitted whole of the amount had been,' deposited well before the due date of filing of Income Tax Return - whether the Amendments carried out by the Finance Act, 2021 in Section 36(l)(va) and u/s 43B of the Act were prospective in nature or retrospective? - HELD THAT:- Tribunal has consistently allowed similar claims of the assessee holding that the Amendments effected by the Finance Act 2021 to section 36(l)(va) and u/s 43B of the income Tax Act are not clarificatory in nature and they do not have retrospective effect and are applicable prospectively. Reading from the Notes on Clauses at the time of introduction of the Finance Act, 2021, it has been held that the amendment being applicable in relation to assessment year 2021-22 and subsequent years. Accordingly, considering the factual backdrop of the present case and considering the amendments in Section 36(1|)(va) as well as Section 43B carried out by Finance Act, 2021 and Memorandum explaining the provisions in Finance Bill, 2021 we hold that the impugned disallowance is not sustainable. Hence, the addition is directed to be deleted as the amount stood deposited by the due date as held in Section 139(1) - Decided in favour of assessee.
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2021 (11) TMI 1019
Liquidation of Corporate Debtor - non-compliances on the part of the Resolution Applicant - provision for extension of payment time provided in the implementation of the Resolution Plan, not existing - HELD THAT:- Although, this Adjudicating Authority was of the view that the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholders and also the implementation of the Resolution Plan, after considering all the facts and circumstances of the case, allowed one last opportunity to the Resolution Applicant to fulfil all its commitment and financial obligations stated in the Resolution Plan by 31.10.2021, clearly stating that if it fails this time, actions as may be deemed appropriate as per law, shall be taken. The Resolution Applicant was also directed to submit a Weekly Progress Report in implementation of the Resolution Plan in the Registry. In total disregard to Orders of this Tribunal the Applicant has grossly failed in its commitments.
The conduct of the successful resolution applicant is completely lacking in bona fides and is therefore questionable. After such non-compliances seeking further time for the required compliances, for any reason whatsoever, is not acceptable to this Tribunal at this stage, more particularly when conduct of the applicant in its earlier commitments and compliances in response to earlier Orders of Tribunal in itself is questionable.
This Application is rejected while questioning the conduct of the Resolution Applicant in the entire matter - Application dismissed.
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2021 (11) TMI 1018
Dismissal of appeal for non prosecution - whether notice of hearing was ever served upon the assessee? - HELD THAT:- CIT(A) has dismissed the appeal without providing proper opportunity to the assessee. Moreover, he has not decided the appeal after discussing in detail, his reasons for agreeing with the assessment order. In this view of the matter, another opportunity of hearing requires to be given to the assessee to represent his case fully before the ld. CIT(A). Even otherwise, it is trite [‘S. Velu Palandar [1971 (8) TMI 42 - MADRAS HIGH COURT] and ‘Ms. Swati Pawa [2019 (4) TMI 89 - ITAT DELHI] and incumbent on the ld. CIT(A) to decide an appeal on merit even in the absence of any representation before them.
The matter is remitted to the file of the ld. CIT(A) to be decided afresh on merit, in accordance with law, on affording due and adequate opportunity of hearing to the assessee. The assessee, no doubt, shall cooperate in the fresh proceedings before the ld. CIT(A). All pleas available under the law shall remain so available to the assessee. Assessee appeal allowed for statistical purposes.
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2021 (11) TMI 1017
Late ESI/PF payments - Payment before filing of the return u/s 139(1) in 2018-19 assessment year - HELD THAT:- As we read from the Notes on Clauses at the time of introduction of the Finance Act, 2021 and have held that the amendment is applicable in relation to the assessment year 2021-22 and subsequent years and not retrospectively. Thus, in view of this legal position as considered in the case of CIT Vs Nuchem Limited [2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] and CIT Vs Hemla Embroidery Mills Pvt. Ltd. [2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT] we are of the view that the additions cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear. The departmental stand that it is clarificatory in nature has consistently been rejected.
We find that the claim of the assessee is to be allowed in the year under consideration which is 2018-19 assessment year. The impugned order, accordingly, is set aside and the AO is directed to delete the disallowance. The appeal of the assessee is allowed.
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2021 (11) TMI 1016
Condonation of delay - appeal of the assessee as time barred by 1969 days - assessee also contended that since it was an addition made u/s 50C by assuming the sale consideration equivalent to the amount on which stamp duty was paid; therefore it was necessary to ascertain the true value of the property u/s 50C(2) - there were co-owners in whose cases a valuation report was called for from the DVO and they were waiting the outcome of those appeals - HELD THAT:- This application does not disclose any reason for not challenging the order of the CIT(A) - This exercise was going on in the case of other co-owners and, therefore, the assessee did not file the appeal. When the appeals of the other co-owners have been decided, the assessee also thought to file the appeal. We are not impressed by all these contentions. It is the assessee who should have taken vigilant step in his own case.
Assessee could file application before the AO u/s 50C(2) - He could raise plea before the learned CIT(A), but after the decision of the learned CIT(A), he has accepted the result and did not chose to file the appeal for long six years. There is hardly any plausible explanation for this delay. Therefore, we do not find any merit in the explanation for condonation of delay. The appeal of the assessee is, therefore, dismissed being time barred.
Application u/s 154 - sale consideration for the purpose of computation of capital gain - in one of the co-owner’s case, a reference was made to the Valuation Officer who determined the value of the property - For doing the complete justice to an assessee, the learned First Appellate Authority ought to have treated it as an apparent error. Each co-owner should have been treated at par. It is pertinent to observe that the quasi-judicial authorities are being respected not on account of their powers to legalize the injustice on technical ground, but for their capabilities of removing injustice and is expected to do so. In the present case, the learned First Appellate Authority failed to remove the injustice with the assessee. We deem it that there was an apparent error available on record. The valuation report is in existence though in the case of other assessees and, in the moment it is brought to the notice of the learned CIT(A), it should have taken cognizance of that report. Considering that aspect of the matter, we allow the application of the assessee moved under Section 154 of the Act and set aside the impugned order dated 23.01.2019. The error committed in the order dated 26.08.2013 is rectified. The Assessing Officer is directed to take sale consideration in the hands of the assessee equivalent to the amount taken in the case of Prakash Chunilal Shah and Chirag Prakash Shah. Though we have not interfered in the order of the learned CIT(A) dated 26.08.2013 because the appeal was time barred before us, but by rectifying the error, which is a proceeding well taken by the assessee within the limitation, the assessee is able to achieve the same result.
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2021 (11) TMI 1015
Seizure of the goods and conveyance imposing tax and penalty - Section 129(3) of the Central Goods and Service Tax Act read with Section 20 of the Integrated Goods and Service Tax Act - HELD THAT:- Learned Standing Counsel has opposed the petition stating that Section 129 of the Act starts with a non-obstante clause, which has not been considered in the aforesaid judgements that have been cited by the learned counsel for the petitioner.
The matter requires consideration - List this matter on 22.12.2021 alongwith record of Writ-Tax Nos. 1019 of 2021, 1020 of 2021 and 1021 of 2021.
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2021 (11) TMI 1014
Seizure of goods alongwith vehicle - in the e-way bill, the vehicle number was not mentioned - Section 109 of the U.P. Goods and Services Tax Act, 2017 - maintainability of second appeal provided for under the provisions of Section 112 of the Act - HELD THAT:- Shri Agrawal, learned counsel for the petitioner has pointed out the order passed under Section 129(3)(Form GST MOV-9) in which the amount of tax and penalty have been assessed by the authority concerned. It is contended that the entire amount of tax so assessed in the aforesaid order under Section 129(3) of the Act, has been paid in full. Evidence whereof has been enclosed by way of challan and corresponding statements have been made in paragraphs 10, 17 and 23 of the writ petition.
Matter requires consideration.
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2021 (11) TMI 1013
Refund of unutilized input tax credit (ITC) - export of iron ore fines - export duty is nil as a result of an exemption notification - HELD THAT:- In earlier writ petition of the Petitioner i.e. W.P.(C) No.26685 of 2021, the challenge was to two instructions dated 8th June and 25th June 2021 issued by the Joint Commissioner of CT and GST (Law) at Cuttack instructing Circle Heads in Odisha to treat such export as duty paid and refusing the refund - This Court had in the said writ petition on 8th September 2021, while issuing notice directed that no further steps would be taken vis-à-vis the Petitioner by the Opposite Parties pursuant to those impugned notices. The Petitioner in the said writ petition had also challenged the show cause notice (SCN) dated 21st July 2021 which was pertaining to the period April 2019 to March. 2020.
A development that has taken place subsequent to the above order passed by this Court is that the GST Council at its 45th Meeting on 17th September 2021 decided inter alia to issue a clarification in respect of goods for which the export duty is in fact not paid. It was clarified that “only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54 (3) of the CGST Act, 2017 from availment of refund of accumulated ITC.” - As a result of the above decision of the GST Council, a fresh circular dated 20th September 2021 has been issued by the Central Board of Indirect Taxes and Customs (CBITC), GST Policy Wing, Ministry of Finance, Government of India in which one of the questions addressed is, at serial No.3, “whether the first proviso to section 54(3) of the CGST/SGST Act, prohibiting refund of unutilized ITC is applicable in case of exports of goods which are having NIL rate of export duty?”
It is seen that since the instruction dated 25th June 2021 stands withdrawn, clearly the earlier instruction dated 8th June 2021 which is in the same vein also does not survive. Therefore, one of the prayers of the previous petition as well as the present petition challenging the aforementioned circulars does not survive - Since the impugned SCN has been issued only as result of the circulars, it also does not survive and is accordingly set aside.
A direction is now issued to the Opposite Party-authority to reprocess the refund application of the Petitioner in light of the fresh circular issued on 20th September 2021 (Annexure-14) and convey the decision to the Petitioner thereon not later than 7th February, 2022. It is made clear that whatever the technical issues for reprocessing the refund application should be resolved by the authority as expeditiously as possible and in a manner to ensure compliance with the timeline set by this Court in this order.
The rejection of the refund application does not survive and is hereby set aside - Petition allowed.
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2021 (11) TMI 1012
Sanction of GST refund claim in respect of goods exported - seeking direction to third respondent to refrain from suspending or withholding the GST refund claims filed by the petitioner in respect of the future exports - HELD THAT:- Considering the refund claims and the drawbacks claims are pending for a long period even though the petitioner appears to have complied partially with the requirements called upon as far as the GST refund claim is concerned, this Writ Petition is disposed by directing the respondent to pass appropriate in respect of GST refund claims and the drawback claims, within a period of thirty (30) days from the date of receipt of a copy of this order.
Petition disposed off.
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2021 (11) TMI 1011
Request for transfer of files of enquiry to a place of petitioners' choice - seeking grant of copy of statements recorded by respondents in the process of investigation into non-collection of tax for outward supply of rice - Section 67 of the CGST/KGST Act - request of petitioner not considered - principles of natural justice - HELD THAT:- While refusing to consider the request of the petitioners, the Proper Officer failed to state any reason. The officer had not mentioned that giving copy of the statements would cause prejudice to the investigation. The request of the petitioners for issuing copies of statements already recorded by the investigating officer, as mentioned earlier was refused to be considered. There is a marked distinction between refusing to consider and rejecting an application for reasons. The Proper Officer ought to have considered the request and either granted copies of the statements or rejected such requests for reasons to be recorded, rather than avoiding consideration of such request.
Order XVI of the CPC deals with power to summon witnesses to give evidence or for production of documents. By conferring the power of summoning a witnesses to give evidence or to produce a document as provided in Order XVI of the CPC, the nature or character of the investigation or inquiry being conducted under Chapter XIV of the Act will not be changed. The power to summon or produce a document is distinct from the nature of proceedings conducted. Merely because the source of power to summon witnesses and power to direct production of documents is referable to CPC, that does not alter the nature of investigation or inquiry being conducted. It remains to be an investigation or inquiry. Therefore, the contention raised by the petitioners on the basis of section 70 of the Act is rejected.
This Court is of the view that Ext.P10 order is liable to be set aside and the first respondent is directed to reconsider the application of the petitioners for giving a copy of the statements already obtained in the course of investigation and pass fresh orders - Petition allowed.
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2021 (11) TMI 1010
Revocation of Cancellation of registration passed by the proper officer - proper officer in terms of the provision of Section 29 of the CGST Act, 2017 r/w Rule 22 of CGST Rules, 2017 - HELD THAT:- The appellant in his appeal memo has referred the Order for Cancellation of registration dated 18.03.2021 against which the appeal is filed. During personal hearing the authorized representative defended the case for appeal against Order for Rejection of application for revocation of cancellation dated 23.05.2021 and requested to allow appeal by way of revocation of registration.
On being out the appellant has agreed to the error on his part and submitted that while filing appeal date of order against which appeal is filed wrongly considered for REG-19 instead of Order of rejection of revocation application (REG-05) - on account of inadvertent mistake, particulars of disputed order dated 18.03.2021 (REG-19) were wrongly entered of Registration passed by the learned Superintendent. This was a genuine clerical mistake which has caused ab-initio incorrectness in appeal memo. That the appellant has deposited of interest and be considered as the requirement has been complied.
The adjudicating authority/proper officer has rejected the application for revocation of cancellation of registration as the appellant has not complied with the provisions of Section 30 of the CGST Act, 2017 by not filing the revocation application within the prescribed time limit. In this context, the appellant submitted that due to corona pandemic and financial problem he could file GST returns and reply to the SCN issued by the proper officer - the adjudicating authority/proper officer has passed the order for rejection of Application for Revocation of Cancellation of registrations due to non-compliance of Section 30 of the CGST Act. In this context, the appellant submitted in their written submissions due to Covid-19 lock down and financial problem application of revocation of cancellation of registration within the prescribed period before the proper officer.
The appellant has filed returns upto date of cancellation of registration hence, it is found that the appellant has substantially complied with the above said provisions of the CGST Act/Rules, 2017 in the instant case. Therefore, the registration of appellant may be considered for revocation by the proper officer.
Appeal allowed - decided in favor of appellant.
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2021 (11) TMI 1009
Deduction u/s. 54F - As per AO assessee has not appropriated the amount of long term capital gains for the purpose of purchase of residential house before the due date of filing of return of income u/s. 139(1) - main contention of the ld. DR is that the assessee did not utilize the amount of capital gains in purchasing a residential house nor deposited in any capital gain account - HELD THAT:- Admittedly, the assessee had not filed return of income u/s. 139 of the Act which is available up to 31-07-2012 but the assessee filed return of income on 02- 09-2013 which is well within the time available u/s. 139(4).
The entire sale proceeds in acquisition of new residential house prior to filing of return of income u/s. 139(4) of the Act which was not disputed by the ld. DR. The ld. AR also placed on record various decisions in the case laws compilation and submitted that the benefit of section 54F of the Act is allowable when the assessee acquired the new asset before filing of return of income u/s. 139(4) of the Act. It is noted as per the case laws as submitted by the ld. AR, which held that the requirement of utilization of capital gain amounts before the date of furnishing of return of income u/s. 139 of the Act, which include all sub-section 139 of the Act including sub-section (4)
If, the capital gain amount is utilized before the due date of filing of return of income u/s. 139 of the Act i.e. 31-03-2014 u/s. 139(4) of the Act. Therefore, it is clear that section 139 includes all sub-sections but not confined to sub-section (1) of section 139 of the Act alone. It is evident that the assessee invested amount of capital gains before the time available u/s. 139(4) of the Act and therefore, in our opinion the assessee is entitled to claim deduction u/s. 54F - Appeal of assessee is allowed.
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2021 (11) TMI 1008
Deduction u/s 80P(2)(a)(i) denied - interest from investment in Co-operative banks, nationalised banks - whether, interest income earned by assessee is eligible for deduction u/s 80P(2)(d) of the Act, whereas the deduction is one claimed u/s 80P(2)(a)(i) ? - HELD THAT:- As relying on M/S POTTERS COTTAGE INDUSTIRAL CO-OPERATIVE SOCIETY LTD. [2021 (9) TMI 137 - ITAT BANGALORE] we direct the Ld.AO to verify the interest earned on investment earned from co-operative societies and to consider the claim of assessee in accordance with law under section 80P(2)(d)
Benefit of exemption u/s. 80P for transactions done with nominal or associate member - Whether transactions with nominal or associate members can not in anyway forbid the appellant from claiming the benefit of exemption u/s. 80P? - HELD THAT:- In respect of associate/nominal members, Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] has held that the expression “Members” is not defined in the Income-tax Act. Hence, it is necessary to construe the expression “Members” in section 80P(2)(a)(i) of the Act in the light of definition of that expression as contained in the concerned co-operative societies Act. In view of this, the facts are to be examined in the light of principles laid down by the Hon’ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (supra). Accordingly, we remit this issue of deduction u/s.80P(2)(a)(i) of the Act to the file of Ld.AO to examine the same de novo in the light of the above judgment.
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2021 (11) TMI 1007
Validity of Assessment u/s 153A /153C - Mandation of recording satisfaction note for the purposes of initiating the proceedings u/s.153C - as contended by the ld. DR that the satisfaction was not only recorded in the file of the searched person but also in the file of the other person, namely, assessee before us - Deemed dividend addition u/s 2(22) - HELD THAT:- The procedure to be adopted for initiating proceedings under section 153A against a person who has not been searched, has been prescribed in the provisions of section 153C wherein a situation, the Assessing Officer having the jurisdiction over the other person is different from the Assessing Officer having jurisdiction over the person in respect of whom the search has been conducted. Before notice can be issued under section 153C, the Assessing Officer has to be satisfied that undisclosed income found during search operations belongs to the third person. A clear and plain reading of section 153C leaves no doubt that recording of satisfaction by the Assessing Officer of the person searched is mandatory and it has to precede the initiation of proceedings against the other person (not searched).
If we look into the satisfaction note in the file of the searched person namely, Model Construction Pvt. Ltd. It is abundantly clear that there is no recording of satisfaction by the Assessing Officer that the document seized during the search at the premises of Model Construction Pvt. Ltd. Belongs to the assessee and were incriminating in nature. In our view, unless there is a recovery of the document belonging to the other person, section 153C of the Act cannot trigger.
In the present case there is neither the recording of satisfaction by the AO of the searched person that the documents belong to the other person nor there is any finding that the documents so found were incriminating in nature. In our view a detailed scheme has been provided for initiation of Section 153C i.e. first there would be a satisfaction in the file of the AO of the searched person and thereafter transmission of the file along with the incriminating document to the AO of the other person and thereafter recording of satisfaction by the AO of the other person and issuance of notice u/s.153C of the Act and completion of proceedings. In the absence of the fundamental and foundational fact of recording satisfaction by the AO of the searched person no proceeding u/s.153C of the Act can be initiated by the other person. In the present case, there is no satisfaction in the file of AO of the searched person and accordingly, the issuance of proceedings u/s.153C of the Act were without of any basis.
Assuming the proceeding can be initiated without there being any satisfaction in the file of the AO whether the satisfaction on record in the file of the assessee reproduced hereinabove can be said to be satisfaction in the eyes of law.
It is fundamental that in the satisfaction note, it is not only essential to mention the PAN No. of the assessee, his address and other details by the Assessing Officer and invariably the satisfaction note should not be forming part of the order sheet and it should be separately recorded as is satisfaction note showing the application of mind by the Assessing Officer of the assessee before us. Admittedly, the application of mind is conspicuously missing in the order sheet (satisfaction) as neither the description of the document were mentioned nor how those document leads to evasion or concealment of non-disclosure of income by the assessee in all these years.
None of the document belongs to the assessee before us, and, therefore, it cannot be said to be relevant or incriminating in nature.
We may also like to point out that as confirmed by the ld. CIT-DR that none of the additions were made by the AO on the basis of the seized document and were only made u/s.2(22)(e) of the Act as is clear, from the grounds of appeal raised by the revenue before the ITAT, which were not pertaining to the seized document.
In terms of the directions of the Hon’ble High Court in SAVESH KUMAR AGARWAL [2013 (7) TMI 805 - ALLAHABAD HIGH COURT] we hereby decide the verification of the jurisdictional parameter for initiation of proceedings u/s.153C of the Act in favour of the assessee and against the revenue.
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2021 (11) TMI 1006
Ex-parte orders passed by CIT-A - Belated payments of employee's contribution to PF and ESI - HELD THAT:- We find that the CIT(A) had given only one opportunity to the assessee in both the AYs 2018-19 and 2019-20. On the given date of hearing none appeared on behalf of the assessee before the Ld. CIT(A) but, filed written submissions through e-mail/ITBA Module and requested the Ld. Revenue Authorities to dispose off the appeals on the basis of the assessee's written submissions .
CIT(A) adjudicated the appeals based on the material available on record. In this situation, considering the issues involved in the appeal as well as the prayer of the Ld. AR, in the interest of justice, We hereby remit the matter back to the file of Ld. CIT(A) in order to consider the issues involved in the appeals for the A.Y. 2018-19 and A.Y. 2019-20 afresh and decide the matter on merits by providing one more opportunity to the assessee of being heard. Appeals filed by the assessee are allowed for statistical purposes
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2021 (11) TMI 1005
Disallowance u/s 14A under rule 8D2(ii) in respect of interest expenditure - case of the assessee has been selected for scrutiny under CASS and statutory notices were duly issued and served upon the assessee - HELD THAT:- Three investments in growth funds, in foreign companies and in properties have to be excluded while calculating the average investments. Similar adjustment are required to be made in the figures of investments in the corresponding previous year ended on 31.03.02013 as stated hereinabove. We note that the average investments come to ₹ 135,63,19,992.50. Similarly, the average own funds the calculation whereof is extracted above are ₹ 136,10,03,859/-. It is apparent from the above calculation that assessee’s average own funds are more than the average value of investments and in our considered opinion , no disallowance is called for under rule 8D2(ii).
The case of the assessee is squarely covered by the decisions as referred to above by the Ld. A.R. in support of his arguments. In the case of CIT vs. HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT] and it has been held that where the interest free funds as well as own funds employed in the business are more than the investments in the shares and securities yielding exempt income, in that case no disallowance is to be made. Similar ratio has been laid in another decision in the subsequent decision in the case of HDFC Bank [2016 (3) TMI 755 - BOMBAY HIGH COURT] that where assessee’s own funds are more than the investments made in shares and securities no disallowance is to be made under section 14A. In view of the facts of the instant case and the ratio laid down by the Jurisdictional High Court we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance as made under rule 8D2(ii). - Decided in favour of assessee.
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2021 (11) TMI 1004
Adjustments while processing the return of income u/s. 143(1) - Disallowance of employees contribution to PF and ESI - HELD THAT:- In the instant case, there is no dispute that the return was processed u/s. 143(1) and there was no scrutiny assessment made u/s. 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s. 143(1) of the Act. In the instant case, what was added in the intimation u/s. 143(1) was the employees contribution to PF and ESI - employees contribution to PF and ESI is also allowable deduction, if, the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation [2021 (5) TMI 263 - ITAT VISAKHAPATNAM] held that debatable issues are not permitted to be made adjustments while processing the return of income u/s. 143(1).
Since, the facts are identical respectfully following the view taken by this Tribunal, we hold that the addition made by the CPC u/s. 143(1) is unsustainable, accordingly deleted. The appeal of the assessee is allowed.
Employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. See M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD. AND VICA-VERSA [2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] - thus we hold that on merits also, the assessee succeeds in appeal. Accordingly, appeal of the assessee is allowed.
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