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2021 (11) TMI 783
Refund of Excise Duty, paid under protest - goods are sold as waste and scrap - appellant submitted that since the goods are cleared as ‘waste and scrap’, they are not liable to pay duty - time limitation - principles of unjust enrichment - HELD THAT:- The litigation with regard to the demand raised in the Show Cause Notice dated 06.08.2009 has continued till 27.02.2018 whereby the Commissioner (Appeals), Coimbatore has set aside the demand, interest and penalties confirmed in the Order-in-Original. Though after the first adjudication and consequent appeal (whereby the demand was set aside), the appellant ought to have filed the refund claim within a period of one year, since the Department has adjudicated the Show Cause Notice for a second time and confirmed the demand again, it cannot be said that the refund claim filed by the appellant is time-barred.
The refund claim is filed within one month after passing of the second Order-in-Appeal which is dated 27.02.2018. The claim having been made within one year from the date on which the demand was set aside by the Commissioner (Appeals) finally, the rejection of refund claim as time-barred under Section 11B of the Central Excise Act, 1944 is not justified. Moreover, the amount having been paid as duty pursuant to the Show Cause Notice, the question of unjust enrichment does not arise.
There are no hesitation to hold that the appellant is eligible for the refund - appeal allowed - decided in favor of appellant.
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2021 (11) TMI 782
MODVAT Credit - stock lying as on 31.03.2003 in terms of Notification No.25/2003-CE(NT) dated 25.03.2003 - Credit in respect of inputs in transit before 31.03.2003 - Modvat Credit in respect of inputs which were in transit was denied on the ground that the goods were only in transit and were not in stock as on 31.03.2003 - HELD THAT:- The appellant have obtained the report under RTI given by the Range Superintendent to the Commissioner (Adjudication) vide letter dated 5.12.2005. From the said report, it is clear that the Range Superintendent has recorded the Grey Stock in transit therefore, it is not in dispute that there is a stock which was covered under the consignment which were in transit as on 31.03.2003.
Whether in terms of the notification allowing the credit on the stock as on 31.03.2003 whether the goods in transit shall be considered as stock as on 31.03.2003? - HELD THAT:- This tribunal in the earlier round of appeal remanded the matter making a categorical observation that the issue to be decided in the light of the judgments in the case of ELECON FABRICS VERSUS COMMISSIONER OF CUS. & C. EX., RAJKOT [2007 (6) TMI 57 - CESTAT, AHMEDABAD] where it was held that there is no dispute that the said goods have been received and utilized by the appellants. Private records including the subsequent returns filed by them indicates the details of such receipts and utilization. Inasmuch as the Board envisaged the condonation of procedural lapses to ensure the credit being taken as a transitional measure, the order of the Commissioner (Appeals) is set aside.
Thus, it is clear that even though the goods have not arrived in the factory but the assessee have purchased the goods and the said goods were in transit, the same was considered as stock as on 31.03.2003 and Modvat Credit was allowed. Therefore, ratio of the judgment is clearly applicable in the facts of the present case.
The appellant is entitle for Modvat Credit also in respect of stock which was in transit accordingly the Modvat Credit is allowed - Appeal allowed.
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2021 (11) TMI 781
CENVAT Credit - short payment of service tax - erroneous availment of CENVAT Credit - suppression of facts or not - extended period of limitation - penalty - HELD THAT:- Apparently and admittedly out of the total demand of ₹ 11,64,424/- major amount of ₹ 6,89,256/- pertaining to the alleged excess availment of input service tax credit has already been held not assessable by both the adjudicating authorities below. The remaining amount of ₹ 4,75,168/- pertaining to the alleged irregular availment of inputs service tax credit taken on any irregular service (₹ 2,20,969/-) and alleged irregular availment of inputs service tax credit taken on common inputs service ₹ 2,54,199/- was reversed in August, 2016 itself immediately after the audit team raised the objection. Also, it is admitted fact that appellant carried much more balance in their CENVAT credit account when they reversed the aforesaid amount, due to which the authorities below have accepted that there is no liability of the appellant to pay interest thereupon.
Whether the case in hand was merely a case of wrong apportionment of credit between the appellants both units, a bonafide clerical error or it was a case of intentional malafide intention to evade payment of duty? - HELD THAT:- Though the amount was not proportionately bifurcated between both the units of the appellants but simultaneously it is an admitted fact that the amount of ₹ 2,54,199/- was not further distributed to the second unit of the appellant despite being claimed by the first unit. So the eligibility of claim of credit of ₹ 8,28,621/- stand admitted - deficiency was made good even before the issue of impugned show cause notice dated 28.7.2013 and the credit were properly being recorded in their ER 1 returns at the time of taking the same and also at the time of reversing the same. Once those have been properly recorded in the books of accounts of the appellants, the allegation of intentional evasion remains only assumption having no legs to stand upon.
Extended period of limitation - penalty - suppression of facts or not - HELD THAT:- When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. Above all, suppression of facts is clearly qualified by word wilful in the section. Hence, presence of mensrea to evade duty has to be there. From the facts, it is found that since there has been prompt reversal by the appellant that too of a such amount which was meant for the appellants own both units, however was utilised only by one unit. Hence allegation of wilful mis-statement with an intent to evade payment rather not at all justified - Though the adjudicating authority below had been right while dropping the demand on the same ground by holding it to be mere clerical error, they have definitely got wrong while still imposing penalty.
Appeal allowed - decided in favor of appellant.
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2021 (11) TMI 780
CENVAT Credit - clearance of both dutiable and exempted items manufactured - non-utilization of separate inventory for input services utilized in terms of Rule 6(2) of CENVAT Credit Rules, 2004 - issue pertains to 2006-2007 - invocation of extended period of limitation - HELD THAT:- Even if extended period was applicable, the show-cause-notice should have been issued by April 2012. However, the show-cause-notice was issued on 17.08.2012 that is beyond the permissible period of 5 years without the any authority of law. The appellants have submitted the same during the proceedings before the learned Commissioner. However, it is found that learned Commissioner instead of giving reasons as to how the show-cause-notice was hit by limitation simply observes that the appellant’s claim that the show-cause-notice was received by them on 22.08.2007 is factually incorrect and it was a clear mis-representation of facts.
The show-cause-notice clearly covers the period 2006-2007 even assuming that the Returns for the month of March 2007 are filed in the month of April 2007, the 5 years period comes to an end by April 2012. When the show-cause-notice itself is issued in August 2012 which is clearly beyond the period of limitation, even if extended by 5 years therefore, it is to be held that the show-cause-notice is clearly hit by limitation and will not survive legal scrutiny.
Appeal allowed - decided n favor of appellant.
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2021 (11) TMI 779
Arbitration award - Dispute between parties - Smuggling - Gold - recovery of pure gold weighing 3648.80 grams said to have been in the possession of the appellant - modification in the original award - HELD THAT:- The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected - In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 of the 1996 Act and thereafter modifying the original award cannot be sustained.
Both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside.
The impugned judgment and orders passed by the High Court in an appeal under Section 37 of the 1996 Act and City Civil Court in arbitration suit under Section 34 of the 1996 Act and the order passed by the learned arbitrator dated 14.1.2011 modifying the original award dated 04.12.2010 are hereby quashed and set aside - the original award passed by the learned arbitrator dated 04.12.2010 stands restored.
Appeal allowed.
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2021 (11) TMI 778
Seeking grant of building permission - seeking mandamus to direct the respondents to allow the petitioner to raise the commercial construction on the leased land, as per the plans submitted by him - principle of deemed permission - HELD THAT:- This Court in the present proceeding is not required to determine or decide about the title of the land, nor could such an issue be raised in the writ petition. Going by the judgment cited by Mr. Qayoom in Mohinder Singh v. Chief Election Commissioner [1977 (12) TMI 138 - Supreme Court], this Court in its power of review is required to judge the validity of the impugned order by the reasons mentioned therein. Perusal of the impugned order reveals that there are various facts and circumstances mentioned as reasons therein which have prompted the Authority to refuse the building permission in favour of the petitioner. The principal reason mentioned therein, apparently, is that the land on which building was proposed to be constructed by the petitioner belongs to Mandir Shiv Ji under the control of Sant Tapanand, Chaila, and that pursuant to the various orders passed by the High Court in the writ/contempt petition and directions of Divisional Commissioner, Kashmir, the Srinagar Municipal Corporation has issued show cause notices dated 22.06.2020 regarding cancellation/revocation of permissions to those applicants who had previously obtained building permission on mandir properties. The Authority has clearly mentioned the directions of the Court passed in the writ petition and the contempt petition as well as the orders issued by the Divisional Commissioner, Kashmir.
The impugned order states that pursuant to the directions issued by the Divisional Commissioner, Kashmir, the Srinagar Municipal Corporation issued notices even to those persons for cancellation of building permissions in whose favour such permissions had already been issued by it, meaning thereby that the Divisional Commissioner, Kashmir, in compliance to the Court orders had issued directions to the Srinagar Municipal Corporation not only to desist from issuing building permissions for construction on the lands belonging to the religious places, but also to revoke and cancel those building permissions which the Corporation had already issued. The fact/reason thus stated in the impugned order about the orders issued by the Divisional Commissioner is not denied by the learned Advocate General, but is, in fact, admitted by him by saying that pursuant to the Court direction, the Government and its functionaries had to take action and intervene.
Alternate plea of necessity taken by the petitioner - HELD THAT:- This Court in this petition, in its capacity as being a coordinate Bench, cannot overlook, ignore or undo the aforesaid direction passed by the coordinate Bench of the Court. Swami Tapanand having failed to take recourse to either of the options available to him, the Government and its all concerned functionaries are bound by the direction passed by the Court in the said writ petition and the Srinagar Municipal Corporation is not excepted. It is, therefore, immaterial that the lease deeds have not been challenged by any person.
Plea of deemed permission - HELD THAT:- It is true that Clause 5.1 of the Bye-laws provides that in case the applicant has fulfilled all the requisite formalities and the Authority has failed to refuse the sanction of the building or work or upon refusal he has failed to communicate the refusal of the building permit to the applicant within sixty (60) days, the Authority shall be deemed to have accorded the sanction to the building etc and the applicant shall be at liberty to commence or proceed with such building or work in accordance with the plans - the question of deemed building permission in favour of the petitioner, in the given facts and circumstances, would not arise.
Since the Court has come to a definite conclusion on merits of the case, the question of maintainability of the writ petition is left to be decided in future in some other case. The judgments cited by Mr. Qayoom at the Bar, therefore, need not be mentioned - this petition is held to be without merit and, therefore, deserves to be dismissed.
Petition dismissed.
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2021 (11) TMI 777
Application for grant of permission to visit United States of America (USA) and to release the passport of the petitioner - Alleged non-cooperation of the petitioner in the investigation - placing of two purchase orders after the Board of Directors had been suspended - Offences u/s 420, 406, 120-B, 34 of the Indian Penal Code, 1860 - HELD THAT:- A perusal of the order reproduced would show that reliance has also been placed upon the order dated 04.01.2021 vide which the prosecution had withdrawn their application for cancellation of bail by stating that the petitioner and other co-accused had joined the investigation. Moreover, it is an admitted case of both the parties that in the present case, the investigation has been completed and the challan has been filed. Further, on the question of merits, the allegations in the present case are not such so as to disentitle the petitioner to travel abroad. Thus, the first three issues are decided in favour of the petitioner and it is held that the said three issues would not come in the way of the petitioner being granted the permission to travel abroad.
Change of period with respect to which permission is sought for going abroad inasmuch as before the Chief Judicial Magistrate, period was stated to be from 18.12.2020 to 10.01.2021 and before the Sessions Court, it was stated to be from 09.01.2021 to 30.01.2021 and in the present petition, it is stated to be 30 days from the date of receiving the passport - HELD THAT:- In para 2 of the judgment passed in Parvez Noordin Lokhandwalla’s case [2020 (10) TMI 1258 - SUPREME COURT], the Hon’ble Supreme Court has categorically observed that though the time period for which the appellant therein had sought permission to travel abroad had lapsed, the cause survived and thus, in the said case, the appellant therein was permitted to travel abroad.
In the present case, the visit was not for a specific function/event, upon the finishing of which, the cause would cease to survive. For instance, in case a person has to travel abroad to attend the marriage of a near and dear one and the marriage has already been performed or to participate in a particular event and the said event has already taken place, then the cause, depending upon the facts and circumstances of the case, would have invariably lapsed - Issue decided in favour of the petitioner.
Whether the Petitioner has a right to go abroad based on the pleas raised in the present petition? - HELD THAT:- In the present case, although, the pleas raised by the petitioner before the Courts below, have been considered to be sufficient by this Court so as to entitle the petitioner to travel abroad, but it is always open to this Court while exercising its powers under Section 482 of Cr.P.C. to consider any additional/ancillary plea, and thus, in this case, the same may be considered so as to grant permission to the petitioner to travel abroad. The additional plea raised with respect to the petitioner being a permanent resident of USA since 02.04.2011 which is to expire on 06.04.2023, as is apparent from Annexure P-6, as also on the basis of the relevant Chapter of the US Citizenship and Immigration Services - issue decided in favour of the petitioner.
In case, permission is to be granted, then the conditions, which are required to be imposed on the petitioner so that the petitioner would not flee from the course of justice - HELD THAT:- This Court is aware of the fact that it is a debatable issue as to whether the petitioner would be personally liable to pay the said amount or not or if it is the company in question which has to pay the said amount. There are 41 cases under Section 138 of the Act of 1881 stated to be pending against the petitioner and the company M/s Indsur Global Limited and the amount involved in the same is stated to be ₹ 25 crores by the learned Senior Counsel for the complainant. Although, learned Senior Counsel for the complainant has not been able to produce the complaints filed under Section 138 of the Act of 1881, which would have enabled this Court to come to a prima facie conclusion as to what is the total amount due and to what extent is the liability of the petitioner, however, on the other hand, even the learned Senior Counsel for the petitioner has not produced anything to affirmatively controvert the fact that the petitioner is an accused in the said 41 cases. The company in which the petitioner was on the Board of Directors, can be seen to be accused No.1 in the said complaints under Section 138 of the Act of 1881.
This Court is required to draw a balance between the right of the petitioner to travel abroad and also right of the prosecution to duly prosecute the petitioner so as to prevent him from evading the trial. From perusal of the various judgments passed by the Hon’ble Supreme Court of India as well as this Court, it is clear that paramount consideration is given to the conditions imposed upon the persons who have been granted the permission to go abroad, so as to ensure that they do not flee from justice - In the present case, keeping in view the facts and circumstances, moreso the fact that the petitioner does not own any property in his own name in India and the wife and son of the petitioner also reside abroad and also keeping in view the offer made by learned Senior Counsel for the petitioner so as to prove his bonafide, the petitioner is allowed to go abroad for a period of one month subject to the conditions imposed.
Petition disposed off.
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2021 (11) TMI 776
Reopening of assessment u/s 147 - Allowability of expenses incurred on advertisement and marketing by the Petitioner - change of opinion - HELD THAT:- As in view of notice dated 14/8/2014 and order sheet entry dated 4/10/2014, it is clear that the Assessing Officer in the original assessment was aware of the issue of expenses incurred on advertisement and marketing by the Petitioner. Once the Assessing Officer had applied his mind in the regular assessment proceedings of Petitioner having incurred advertisement and marketing expenditure, it is not open for the Assessing Officer to reopen the assessment. This Court in Aroni Commercial Limited [2014 (2) TMI 659 - BOMBAY HIGH COURT] and in Marico Limited [2019 (8) TMI 1337 - BOMBAY HIGH COURT] had taken a similar view. The pronouncements of the coordinate Bench of this Court are binding on us.
Reopening beyond period of four years - The criteria’s for reopening of assessment after a period of 4 years are no longer Res-Integra in view of the judgment of Division Bench of this Court in the case of Ananta Landmark (P.) Ltd. [2021 (10) TMI 71 - BOMBAY HIGH COURT] wherein this Court held that where assessment was not sought to be reopened on reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but was a case wherein assessment was sought to be reopened on account of change of opinion of Assessing Officer about manner of computation of deduction under Section 57, reopening was not justified. It is also held that when the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled to a change of opinion for commencing proceedings for reassessment. It is also held that when on consideration of the material on record, one view is conclusively taken by the Assessing Officer, it would not be open for the Assessing Officer to reopen assessment based on the very same material and to take another view.
We are therefore satisfied that the Assessing Officer could not have reopened the assessment merely on the basis of change of opinion and could not have issued a notice of reopening of assessment to Petitioner. - Decided in favour of assessee.
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2021 (11) TMI 775
Revision u/s 263 - Deduction u/s 54F disallowed - Case has been subsequently selected for scrutiny and notice u/s. 143(2) was issued calling for various details - assessee preferred an appeal before the CIT(A), but could not appear therefore, the CIT(A) disposed off appeal filed by the assessee ex-parte - assessee submitted that the learned CIT(A) has erred in dismissing appeal filed by the assessee without providing reasonable opportunity of hearing in violation of principles of natural justice - HELD THAT:- No doubt, appellate authority has no option, but to dispose off appeal filed by the assessee, in case appellant does not appear before the appellate authority, despite various opportunity of hearing was provided, but such appeal should be disposed off on merits on the basis of material available on record. But, before disposal of appeal, reasonable opportunity of hearing must be given to explain his case. In this case, the learned A.R submitted that the learned CIT(A) has not disposed off the appeal on merits by passing reasoned order. Therefore, considering facts and circumstances of this case, we are of the considered view that issue needs to go back to the file of learned CIT(A) to give one more opportunity of hearing to the assessee to file necessary evidences and explain his case. Appeal filed by the assessee is treated as allowed for statistical purposes.
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2021 (11) TMI 774
Validity of assessment u/s 153A - bogus LTCG - search action on the premises of Prraneta Industries Ltd. revealed that this entity was not carrying our any business activities and had no underlying assets - HELD THAT:- We find that the assessee had filed original return of income on 20/07/2011 and search operations were carried out on assessee group on 25/07/2013. It is quite evident that on the date of search, no assessment proceedings were pending against the assessee and no notice u/s. 143(2) was ever issued to the assessee till the date of search. The time limit for issuance of such notice had already expired on 30/09/2012 i.e. within 6 months from the end of relevant assessment year. Thus, AY 2011-12 was a non-abated year. In such a case, the additions which could be made has necessarily to be on the basis of incriminating material found by the department during the course of search operations as held by Hon'ble Bombay High Court in CIT Vs. Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT]
There must be a nexus between the statement recorded and the evidence/material found during search in order to sustain additions on the basis of recorded statement. Similar is the view of Hon'ble High Court in an earlier judgment of CIT Vs. Sunil Aggarwal [2015 (11) TMI 286 - DELHI HIGH COURT] wherein Hon'ble Court refused to give any evidentiary value to the statement made by the assessee u/s. 132(4) as the department could not find any unaccounted money, article or thing or incriminating document either at the premises of the company or at the residence of managing director or other directors.
In such circumstances, the finding of the Tribunal that the statement of managing director recorded patently u/s. 132(4) did not have any evidentiary value, was upheld. The ratio of all these decisions makes it clear that the surrendered income must be correlated with some incriminating material found during the course of search action so as to justify the addition. We find that there is no such incriminating material in the case of the assessee which would show that the transactions under consideration were sham transactions and there was any connection/nexus between the assessee and the group entities of Shri Shirish C. Shah.
This legal issue stood covered in assessee's favor by the decision of SMC bench of Tribunal rendered in the case of another assessee of the group i.e. Smt. Reena A. Ajmera [2021 (3) TMI 917 - ITAT MUMBAI]
We concur with the submissions of Ld. AR that in the absence of any incriminating material, the additions could not be made in the hands of the assessee as per settled legal proposition. Accordingly, the impugned additions stand deleted. The legal ground raised by the assessee stand allowed.
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2021 (11) TMI 773
Delayed payment of employees' contribution to PF and ESI - allowability of employees' contribution to PF and ESI if deposited after the due date prescribed under the relevant Act, but, before the due date of filing of return of income u/s. 139(1) - Assessee submitted that the addition is not justified since the assessee has deposited the employees' contribution to PF and ESI before the due date of filing the return of income - HELD THAT:- Admittedly, the assessee, in the instant case, has deposited the employees' contribution to PF and ESI after the relevant date prescribed under the PF and ESI Act, but, before the due date of filing the return of income.
In the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. [2018 (9) TMI 2009 - DELHI HIGH COURT] has held that 'the legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The Hon'ble High Court has further held that legislative intent and objective is not to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under the Act.
Tribunal in the case of CIT v. Dee Development Engineers Ltd.[2021 (4) TMI 393 - ITAT DELHI] has decided the issue in favour of the assessee holding that no disallowance u/s. 36(1)(v) r.w.s. Section 2(24)(x) can be made if the employees' contribution to PF and ESI are deposited after the due date prescribed under the relevant Acts, but, paid before the due date of filing of return. Since the assessee, in the instant case has, admittedly, deposited the employees' contribution to PF and ESI before the due date of filing of the return of income, therefore we hold that no disallowance u/s. 36(1)(v) r.w.s. Section 2(24)(x) can be made in the instant case - Decided in favour of assessee.
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2021 (11) TMI 772
Validity of notice u/s 143(2) - Jurisdiction of ACIT to issue notice - Proof of ay valid transfer by the competent authority from Income Tax Officer to ACIT - HELD THAT:- Jurisdiction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from Income Tax Officer to ACIT. The notice u/s 143(2) has been issued by ACIT which was beyond his jurisdiction and the same is therefore, void ab initio.
Under the circumstances, the assessment framed by ACIT, is bad in law as he did not have any pecuniary jurisdiction to frame the assessment. The issue relating to the pecuniary jurisdiction also came into consideration before the Coordinate Bench of the Tribunal [2021 (2) TMI 181 - ITAT KOLKATA], wherein the Tribunal further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that the assessment framed by Assessing Officer who was not having pecuniary jurisdiction to frame such assessment was bad in law. - Decided in favour of assessee.
assessment order passed u/s 143(3) of the Act by the ACIT being without jurisdiction is bad in law and the same is accordingly set aside. - Decided in favour of assessee.
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2021 (11) TMI 771
Delayed payment of employees’ contribution to PF & ESI - Addition under section 36(1)(va) - Contribution were paid late in terms of the provisions of ESIC and EPF, but before the filing of return of income for the present period - HELD THAT:- Since in the instant case the assessee admittedly has deposited the employees’ contribution to PF & ESI before the due date of filing of the income tax return, therefore, respectfully following the decisions INSTA EXHIBITIONS PVT. LTD, C/O. CHACHAN & LATH [2021 (8) TMI 1235 - ITAT DELHI] and PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. [2018 (9) TMI 2009 - DELHI HIGH COURT] hold that the Ld. CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC on account of belated payment of employees’ contribution to PF & ESI. Therefore, set aside the order of the Ld. CIT(A) and direct the A.O. to delete the disallowance. The grounds raised by the assessee are accordingly allowed.
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2021 (11) TMI 770
Income from house property - ALV determination - determination of income from house property as governed by the provisions of chapter IV-C of the Act - whether Income to be assessed basis actual rent received? - Revenue contends the same to be assessable at fair market rent determined on the basis of report of a Govt. approved valuer - HELD THAT:- As per the facts of the case the assessee had returned actual rent received of ₹ 6,50,000/- and deducted expenses therefrom disclosing income of ₹ 4,09,830/-,while the Revenue has determined the fair market rent relating to assesses share of property at ₹ 14,87,604/- based on valuation report of a govt. approved valuer.
Revenue while doing so has simply accepted the Valuation Report as sacrosanct for the purpose of determining the fair rental value of the property without undertaking any exercise for determining its municipal value or standard rent, when as per the Ld.CIT(A) himself and as per law interpreted by courts in this regard, these are the guiding factors for determining the annual rental value of the property and any deviation from the same is to be based on evidence showing that it is wrong. We find the entire exercise of the Revenue Authorities in the present case for determining the annual ALV of the property as being arbitrary. No reason has been given for adopting the fair rent determined by the valuer as against the municipal valuation or of the standard rent of the property, which has not even been determined in the present case.
Adoption of the fair rent as determined by a govt. approved valuer as the annual rental value of the property owned by the assessee is not justified and the same is, therefore, rejected. The income so determined by the Revenue Authorities of ₹ 14,87,600/- is set aside and that returned by the assessee is restored .
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2021 (11) TMI 769
Disallowance of expenses u/s 37(1) - legal, professional and consultancy charges was not allowed by treating the same as capital expenditure - CIT(A) observed that this expenditure may be allowed u/s. 35D, but not u/s. 37(1) - HELD THAT:- We observe that the assessee has entered joint development agreement on 18/01/2008 for the development of the land, which means, the commencement of the business was started in case of real estate business, which the assessee is doing. Therefore, there is no confusion in this regard that the assessee has not started its business. JDA was entered for development of the property which is to be treated as assessee started its business in the line of real estate business. The case law relied upon by the ld. AR support the assessee's case.
The expenditure incurred by the assessee towards legal, professional and consultancy charges is hereby allowed as revenue expenditure. Our decision is support by the judgment of Indian Railway Stations Development Corporation Ltd [2019 (4) TMI 816 - DELHI HIGH COURT] as opined that the assessee's activity, which it claims to be preliminary steps towards the fulfilment of the purpose, which is embodied in the MoU clearly indicates that it had set up its business and that these steps were for the ultimate fulfilment of its purposes, which was the preparation of development plans leading to the projects. - Decided in favour of assessee.
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2021 (11) TMI 768
Correct head of income - rental income - On perusal of the assessment order u/s. 263 CIT was of the opinion that rental income shown by the assessee under the head 'income from house property' should have been treated as income from business - assessee preferred a appeal before the CIT(A) who allowed the same partly by following the order of ITAT in assessee's own case for the AY 2014-15 wherein ITAT has directed to treat the income from letting of flats as 'income from house property' and income from furniture & fixtures as 'income from business' - as per revenue CIT(A) erred in holding that income earned from exploitation of commercial space has to be assessed under the head 'income from House Property' instead of 'Profits and Gains of Business/Profession and had incorrectly and unjustifiably deleted the action of Ld. AO - HELD THAT:- As decided in own case [2019 (5) TMI 1875 - ITAT HYDERABAD] the property let out is a commercial complex is not sufficient to treat the rental income therefrom as 'Business Income'. The tests to be applied are; 1) the tenure of the lease, 2) the objects of the company; 3) the intention of the company; and 4) the services provided or activities carried on by the assessee after letting out of the property. Though one of the objects of the company is to let out the properties on lease/rent, it is not clear whether the intention is to earn rental income only from the properties constructed/developed by it. On perusal of the returns of income for earlier assessment years, we find that the assessee had let out properties at Hyderabad, Mumbai & Delhi, but the income from said properties is not offered during the relevant assessment year.
So, whether such properties were let out since they were unsold during the relevant period and whether they were sold subsequently to which, there is no rental income during the relevant assessment year is not clear from the details filed before us. As held by the Hon'ble Bombay High Court in the case of Gundecha Builders (supra), rental income from unsold flats is to be assessed on 'income from house property'. Further, as held by the Hon'ble Courts in cases cited supra, unless the assessee is carrying on a systematic and organized activity to exploit the property commercially, it cannot be taxed as business income. We find that except for creating the infrastructure as per the requirement of the lessee, the assessee is not providing any other service during the year as is evident from the profit and loss account of the assessee for the relevant assessment year. The only expenses claimed by the assessee are interest, salaries & administrative expenses. Therefore, it is clear that the assessee's intention is to enjoy the rental income on a long term basis by leasing out the premises and not to exploit the same commercially on short term basis.
We are inclined to accept the contentions of the assessee that the rental income is to be assessed as 'income from house property' as offered by the assessee and as accepted by the Revenue in the earlier years up to A.Y 2011-12. Accordingly, assessee's appeal is allowed.
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2021 (11) TMI 767
Reopening of assessment u/s 147 - assessee stating per its’ return of income of it being not liable to get its’ account audited u/s. 44AB - HELD THAT:- Qua the first limb of the reason recorded, when the assessee states in its’ return of income – a duly verified document, that it is not liable to get its’ accounts audited u/s. 44AB, it only means that, in view of the assessee, the said provision is not applicable thereto for the relevant year. The only inference arising from the said statement by the assessee in its’ return, which is to be regarded as true and, further, only where the AO has reason/s to believe of the assessee being, on the contrary, liable to get its’ account audited u/s. 44AB, is that the assessee has not complied with the provisions of the said section. There is no income implication, even as none emanates from the (part of the) said reason, as recorded, as well. The assessee may at best be liable to penalty u/s. 271B. The first limb of the reason recorded, is, thus, clearly not valid.
Non-eligibility to deduction u/s. 80IB(11A) - Board has per its’ Circular 09/2006, relied upon by the ld. Sr. DR, clarified that the returns in old forms would not be valid, and that the assessees shall be required to furnish returns in the new forms. This is only in terms of the law; s. 139(1) providing for furnishing the return of income in the prescribed form. No dispute or objection stands raised by the Revenue in the matter, at any stage, accepting the return furnished as valid. This is particularly relevant in view of s. 80-AC. No issue qua the prescribed form, therefore, obtains.
In the instant case, the assessee has acted consistent with law – furnishing the return within the prescribed time, in the annexure-less mode; obtained the audit report in the prescribed form (Form 10CCB) in time (on 25/8/2008)(PB-1, pgs. 24-29), and furnished the same before the AO at the earliest possible time, i.e., on 23/2/2010, along with the reply in response to the notice u/s. 148(1) dated 20/1/2010.
No reason to believe non-conduct of audit u/s. 80-IB and, thus, non-eligibility to deduction thereunder could have been, in view of the foregoing, formed by the AO, who cannot but be aware of the extant procedure, or is required to be, particularly when the reason formed is based on the provisions of law. As clarified by the Apex Court in Jaganmohan Rao (V.) [1969 (7) TMI 4 - SUPREME COURT], it is only the true and correct state of law that can form a basis for the reason to believe escapement of income from assessment. AO, where he wanted to clear his doubts in the matter, ought to have inquired with the assessee, as u/s. 133(6). No wonder, the law stands amended since (by Finance Act, 2020, w.e.f. 01/4/2020), delinking the furnishing of the audit report from that of the return of income, so that both are independently required to be furnished by the due date/s prescribed in their respect.
The second limb of the reason recorded is, thus, also not valid. The assessee, accordingly, succeeds in its’ legal challenge per Gd.4, so that there is no valid assumption of jurisdiction u/s. 147 in the instant case. - Decided in favour of assessee.
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2021 (11) TMI 766
Disallowance u/s. 14A r.w.r. 8D - CIT(A) has restricted the disallowance after taking into consideration the submission of the assessee that it had sufficient interest free funds available with it and the nature of the expenditure incurred by the assessee was not related to investment made by it on which exempt income earned - HELD THAT:- It is undisputed fact that the total exempt income earned during the year under consideration was of ₹ 16,78,260/- only. In this regard, we observed that in a number of decisions the ITAT Ahmedabad had adjudicated that disallowance u/s. 14A cannot exceed the amount of exempt income earned by the assessee during the year under consideration i.e. in the case of Jivraj Tea Ltd. [2014 (9) TMI 131 - ITAT AHMEDABAD] and decision of Sahara India Financial Corporation Ltd. [2014 (1) TMI 1597 - ITAT DELHI] - disallowance u/s. 14A cannot exceed exempt income, therefore, we restrict the disallowance u/s. 14A of the act to the extent of exempt income of ₹ 16,78,260/- earned by the assessee during the year under consideration. Accordingly, the ground of appeal of revenue is dismissed.
Excess depreciation claim on commercial vehicle - assessee submitted that it was entitled for depreciation @ 50% on purchase of new commercial vehicle on or after 1st January, 2009 but before 30th Sep, 2009 and put to use before 30th Sep, 2009 - As per AO the requirement for registration for commercial vehicle was different from private vehicles and in the case of the assessee the vehicle on which higher deprecation claimed was not registered as commercial vehicle. Therefore, the claim of depreciation was restricted to the normal rate of depreciation at 15% and the excess claim of depreciation - HELD THAT:- CIT(A) has deleted the addition after following the decision on identical issue and similar facts in the case of Voltamp Transformers Ltd. [2013 (3) TMI 804 - ITAT AHMEDABAD] and the decision of Sunil Kumar Dhulichand HUF [2013 (6) TMI 902 - ITAT AHMEDABAD]as elaborated in his findings supra in this order. Following the decision of Co-ordinate Bench, we do not find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the Revenue is dismissed.
Disallowance of excise duty - assessee has claimed excise duty claim adjusted against securities premium account - assessee explained that the same has not been charged to P & L account rather it has been set off against the share premium account as per the scheme of capital reduction sanction by High Court of Gujarat dated 15th Feb, 2013 being an item of section 43B - AO has not accepted the submission of the assessee stating that the assessee has reversed the CENVAT credit on the order of excise department and the same was not certified by the auditor in his report in form 3CDCIT-A deleted the addition - HELD THAT:- The assessee has followed exclusive method of accounting as purchases and sales in the P & L A/c are reflected at net of excise duties. The CENVAT credit receivable is shown in the Balance Sheet under the head loan and advances. Since the excise authority held that CENVAT credit on fuel used for generation of electricity supplied to the outside entities is not available therefore the assessee has adjusted CENVAT credit receivable against CENVAT payable/excise duty. The assessee has exercised his option to set off CENVET credit against excise liability, which amounts to payment of excise duty, therefore, assessee is entitled to deduction u/s. 43B .
Assessee has used the CENVAT credit balance for making payment of excise duty. The records of CENVAT credit is maintained in RG 23 register as per excise law and adjustment of CENVAT credit is one of the mode of payment of excise duty under Excise Rule. Considering the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A).
Disallowance u/s. 14A for computing book profit u/s. 115JB - HELD THAT:- As relying on VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] disallowance made u/s. 14A is not required to be added for computing book profit u/s. 115JB of the Act. Therefore, this ground of cross objection of the assessee is allowed.
Disallowance on account of employee’s contribution - assessee has failed to deposit employee’s contribution to provident fund and ESIC before due date prescribed under relevant provisions of the said acts - addition as per provision of section 36(1)(va) r.w.s. 2(24)(x - HELD THAT:- It is observed that the issue is covered by the decision of Hon’ble Gujarat High Court in the case of Gujarat State Road Transport [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it is held that where an employer has not credited sum received by it as employee’s contribution to employees account in relevant fund on or before due date as prescribed in explanation to section 36(1)(va), the assessee is not entitled to deduction of such amount, therefore, we do not find any infirmity in the decision of ld. CIT(A). - Decided against assessee.
Addition made u/s. 41(1) - assessee has shown sundry creditors of ₹ 506.16 crores - liability presumed to be ceased in view of the fact that till date the amount due to such parties has not been paid - HELD THAT:- It is undisputed fact that assessee has not written back the aforesaid liability and it is still shown in the books of account as payable. Therefore, considering the decision of Hon’ble Jurisdictional High Court of Gujarat in the case of CIT vs. Bogilal Kamjibhai Atara[2014 (2) TMI 794 - GUJARAT HIGH COURT]we do not find any infirmity in the decision of ld. CIT(A) ld. CIT(A) since there was noting on record to indicate that there was cessation of liability during the year under consideration. Therefore, this ground of appeal of the revenue is dismissed.
Nature of expenditure - expenditure on repairs on plant and machinery - revenue or capital expenditure - CIT(A) has allowed the appeal of the assessee - HELD THAT:- It is clear from the facts as elaborated above in the finding of ld. CIT(A) that the assessee has incurred the expenditure for repairing of existing spare parts as evident from the invoices and detail of contract note mentioned in the finding of ld. CIT(A). The Revenue has not controverted the facts reported in the finding of the ld. CIT(A), therefore, following the decision of BANCO PRODUCTS (I) LTD. [2012 (12) TMI 572 - ITAT AHMEDABAD] as referred by the ld. CIT(A), we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed.
Disallowance of commission expenditure - assessee explained that it has been consistently making provision for commission expenditure on mercantile basis on year to year basis at the end of financial year on the basis of sale made in that financial year -CIT(A) has allowed the appeal of the assessee - HELD THAT:- In view of the decision of Hon’ble Co-ordinate Bench of the ITAT in the case of Adani Enterprises [2015 (4) TMI 324 - ITAT AHMEDABAD] as elaborated in the finding of ld. CIT(A) as above, we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed.
Disallowance u/s. 40(a)(ia) - Assessee has made payment as recruitment expenses to Perfect Connection Ltd. without deducting tax on the aforesaid payment - HELD THAT:- We do not find any infirmity in the decision of ld. CIT(A), since the Assessing Officer has not disproved the fact that assessee has made payment on account of reimbursement of expenditure on which no TDS is deductable. Therefore, this ground of appeal of the Revenue stands dismissed
Long term capital loss as against long term capital gain offered in the original return of income and revised return of income filed by revenue - HELD THAT:- assessee has brought to the knowledge of the Assessing Officer vide letter dated 29th March, 2012 that because of error in computing the income under the head long term capital gain, it has omitted to take correct cost of acquisition while computing the long term capital loss of ₹ 7,640,519/- on the sale of ₹ 7,13,383 shares of Arvind Brand Ltd. The assessee further submitted that correct long term loss on the sale of those shares would have worked out to the amount of ₹ 1,265,46,770/- as against the loss of ₹ 76,40,519/- computed in its return of income. The assessee has given the working as per which the long term capital gain of ₹ 5,30,66,091/- shown in the revised return was required to be re-stated as long term capital loss of ₹ 6,58,40,160/-. The aforesaid submission of the assessee was not considered by the Assessing Officer. Subsequently, in the appellate proceedings, the ld. CIT(A) referred the decision of CIT vs. Pruthvi Brokers and Shareholders [2012 (7) TMI 158 - BOMBAY HIGH COURT] and decisionin the case of MITESH IMPEX [2014 (4) TMI 484 - GUJARAT HIGH COURT] wherein it is stated that assessee can claim additional claim before CIT(A) even though no revised return of income is filed. Therefore, in accordance with the findings laid down in these decisions, the ld. CIT(A) has directed the Assessing Officer to allows the losses as per provision of the act after verification of the working given by the assessee - No error in the direction of the ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed.
Computation of deduction u/s 14A r.w.r. 8D - HELD THAT :- In VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] it is held by the Special Bench of the Tribunal that only those investment are to be considered by computing average value of investment which yielded exempt income during the year. We are of the considered view that ratio laid in the above decision is squarely applicable in the instant case. Therefore, we set aside the order of the ld. CIT(A) for the impugned assessment year and restore the matter to the file of the Assessing Officer to make a de-novo order after following the ratio laid down in Vireet Investment Pvt. Ltd. (supra) after giving a reasonable opportunity of being head to the assessee. In the result, this ground of appeal of Revenue and assessee are partly allowed for statistical purpose
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2021 (11) TMI 765
Revision u/s 263 - Reopening of assessment u/s 147 initiated against assessee - as per CIT A.O. failed to make any independent inquiry to verify the fact relating to the purchase of immovable property by the assessee - HELD THAT:- The documents placed on record clearly shows that the A.O. made the inquiries in depth and accepted the explanation given by the assessee as well as the co-owner. The assessment framed in the hands of the co-owners namely Smt. Monica Aggarwal W/o Shri Manish Kumar and Smt. Swati Aggarwal W/o Shri Avnish Aggarwal in whose cases also the assessments were reopened under section 147 of the Act and were framed under section 143(3) of the Act vide separate orders dt. 28/12/2018 and 27/12/2018 respectively. Those assessment framed under section 143(3) of the Act in the hands of the co-owners had been accepted. The only objection was taken to the assessment famed in the hands of the assessee under section 263 of the Act which is against the principle of consistency.
A.O. after making the proper inquiry relating to the property in question accepted the explanation. Therefore, it cannot be said that the A.O. failed to make the proper inquiries while accepting the explanation given by the assessee.
Pr. CIT considered the value mentioned in the agreement to sell which was not acted upon and nothing was brought on record that the amount stated in the agreement was paid for the sale. On the contrary the amount mentioned in the sale deed was paid through Demand Draft and was accepted as correct in the case of another co-owners also by the A.O. while framing the assessment under section 143(3) r.w.s 147 of the Act.
Pr. CIT has taken the action merely on the basis of the audit objection while the A.O. made the proper inquiries in depth at the time of framing the assessment under section 143(3) r.w.s 147 of the Act. Therefore the impugned order passed by the Ld. Pr. CIT is not maintainable, accordingly the same deserves to be quashed.Department has accepted the value of the property in the cases of two co-owners while the value of the same property in the hands of the 3rd co-owner i.e; the assessee was doubted. Therefore in view of the principle of consistency also the action taken by the Ld. Pr. CIT was not justified.
Pr. CIT was not justified in holding that the assessment order dt. 28/12/2018 passed by the A.O. was erroneous and prejudicial to the interest of the Revenue. Accordingly, the impugned order passed by the Ld. Pr. CIT is quashed. - Decided in favour of assessee.
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2021 (11) TMI 764
Gain/loss on sale of shares - legal nature of the transaction - period of holding - what was held by the assessee by virtue of purchase of shares was land - Treatment to share holding - CIT(A) rejecting the claim of long term capital loss on the sale of shares by treating the same as short term capital gain on transfer of immovable property - whether the assessee has adopted the colourable device by transferring the land in the garb of transfer of shares? - HELD THAT:- The assessee in the present case had two legal courses open to dispose of the land held by M/s ARGHPL. One was to directly sale the land and pay the capital gains tax in the hands of M/s ARGHPL either as long term or short term depending upon period of holding of land by impugned company i.e. more than 36 month or less as the case may be in accordance with the provisions provided under section 2(29A) and 2(42A) of the Act. In the other case by selling the shares of M/s ARGHPL so that control over the company as a whole was transferred. In the latter situation, the M/s ARGHPL would continue to hold the land and, the assessee company would pay long term capital gain on transfer of share after claiming indexed cost of acquisition as the holding period of shares by assessee was for more than 12 month by virtue of proviso to section 2(42A) of the Act read with section 2(29A) of the Act. Thus, the assessee chooses one option out of two legally permissible options which it deem most tax effective or viable option. There was no inserting of any device and, therefore, it could not be said that any colourable device was used to reduce the tax liability.
Entire basis of holding the transaction on hand as colourable device was that M/s ARGHPL was holding only one assets which is land, thus what was held by the assessee by virtue of purchase of shares was land which was transferred after holding period of 34 month which was less than 36 months for qualifying as long term capital assets. In other words, had these shares been transferred by the assessee after the expiry of 36 months, then the transaction would have been accepted as genuine by the revenue. However to our understanding, the period of holding for 34 months cannot be a criteria/reason to hold the transaction in dispute as colourable device. The assessee could have easily postpone the transaction by two months in order to avoid the possible hassle of the income tax proceedings.
In the present case, the assessee has not adopted the colourable device by hiding the truth or by carrying out the transaction in order to give the appearance of genuine transaction. Hence, we do not find any reason to uphold the finding of the authorities below.
As per companies Act shareholder and company both are two separate legal person capable of holding property of any kind in their own name. The land in question was held by M/s ARGHPL and not by the shareholder i.e. Assessee company. By being shareholder, the assessee cannot be said to be the owner of the land held by impugned company for the reason that a company is perpetual succession not affected by incoming and outgoing of its shareholder. Therefore, to our understanding what can be transferred by the assessee being shareholder is only the shares, held by it. Thus the transfer of share by the assessee cannot be equated with transfer of land which is not held by it.
Throughout the period the assessee has treated the said shareholdings as investment in shares and not in land. The assessee was subject to disallowances under section 14A of the Act for the expenses incurred to earn dividend from such investment. Therefore to our mind principle of consistency should be followed. As such the revenue cannot change the stand as per its will. Thus in view of above stated discussion we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Disallowance on account of diversion of interest bearing fund - assessment proceedings found that the assessee on one hand bearing interest expenses and on the other hand it has made interest free advances - AO worked out the amount of interest attributable on such advances of ₹ 9,90,000/- by taking the rate of interest @ 12% of the interest free advances - HELD THAT:- Admittedly, the own fund of the assessee exceeds the amount of interest free loans and advances shown in the balance sheet as on 31/03/2012. Therefore an inference can be drawn that the assessee had not utilized borrowed fund in making such interest free loan and advances. Thus there cannot be any disallowance on account of interest expenses under the provisions of section 36(1)(iii) of the Act - we hold that no disallowance of interest expense claimed by the assessee can be made on account of such interest free loans and advances as discussed above. Hence the ground of appeal of the assessee is allowed.
Deduction u/s 80-IB (10) denied - return not filed within the time limit provided - conditions specified therein were not fulfilled - availability of extended period of due date for filing return of income - project of the assessee was not approved/completed within the time prescribed under the provisions of section 80 IB (10) - DR submitted that the return of income was filed by the assessee beyond the due date as specified under the provisions of section 139(1) of the Act which is in contravention to the provisions of section 80AC of the Act - HELD THAT:- There is no dispute to the fact that the assessee was to file the return of income on our before 30 November 2012 in the event if it was to file TP report in form 3CEB for having international transactions with its associated enterprise. Admittedly, the assessee has filed form 3CEB for having international transactions with the AE. These transactions include the guarantee furnished by the AE as well as the brokerage agreement with the AE. This fact of filing the form 3CEB report has not been controverted by the AO. The chartered accountant being the expert of his field, his advice cannot be faulted by the AO without bringing any cogent material on record. Therefore, the opinion of the chartered accountant should be admitted.
CIT (A) has given clear finding that by virtue of guarantee deed entered between assessee, ATTCO and SIPL, the advance given by SPIL were converted into secured short term loan. Thus guarantee with respect to such short term loan of ₹ 11.34 constitute more than 10% of total borrowing of the assessee. Hence the ATTCO became the AE of the assessee by virtue of provision of section 92A(2)(d) of the Act. The Learned CIT(A) also given finding that the assessee through ATTCO sold flats in ‘Venus Parkland’ project, thus the assessee was liable to pay commission as per brokerage agreement entered by the assessee which was ultimately paid to the ATTCO after deducting withholding tax.
There was relationship of AE created between assessee and ATTCO and further entered into international transaction by crediting brokerage commission in the name of ATTCO. Thus as per the provision of section 92E, the assessee was required to get TP report in form 3CEB. Accordingly it enjoy the extended period of due date for filing return of income.
AO has disallowed the deduction claimed by the assessee for the reason that it has not got the BU permission for entire project up-to 31st March 2012 - We find that the learned CIT(A) has given flawless finding that after resolution of dispute of jurisdiction over issuance of BU permission, the AMC has issued such permission for remaining units to the assessee and certified that the project was completed before due date i.e. 31st March 2012. These permission are placed. This fact was not controverted by the revenue before us - there remains no ambiguity with respect to completion of project within the prescribed time limit. Hence we do not find any reason to interfere in the finding of the learned CIT (A) given on merit. Thus the grounds of Revenue’s appeal are dismissed.
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