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2022 (7) TMI 1329
TP Adjustment - ALP of AMP expenses - HELD THAT:- There should be existence of an agreement to incur AMP expense between the assessee and the foreign AE either expressed or there must be circumstances indicating compulsion to incur AMP expenses. On this aspect, the TPO in his order has made reference to Intellectual Property License and Exclusive Distribution Agreement dated 01.06.2008 and the terms of the said agreement referred to the order of the AO can be no basis to conclude existence of any understanding between the assessee and the foreign AE for incurring of AMP expenses.
The agreement states that "the licensor acknowledges that licensee incurs significant marketing expenses which directly impacts licensee's net operating margin” - the same further strengthens the fact that the assessee is a full fledged distributor requiring to incur marketing related expenses to operate in a competitive market and does not in any way indicate a mandate from NEON to assessee to incur such expenses. Accordingly, we hold that no clause of the royalty agreement requires the assessee to mandatorily incur any AMP expenses in the absence of which it is very clear that no written agreement exists between the assessee and its AE requiring the assessee to incur the AMP expenses. We therefore hold that the incurring of AMP expenses cannot be regarded as an international transaction at all and therefore the impugned addition cannot be sustained and the same is directed to be deleted.
Adjustment towards payment of sourcing commission - HELD THAT:- The assessee was free to choose its own contract manufacturers is no bar to the assessee adhering to the standards of the Nike products and approaching the NGTPS for such services. We are also of the view that the proof of rendering of services has to be analyzed based on the available evidence and also the additional evidence now filed by the assessee. The fact that for similar services no payment was made in the past cannot be the basis to hold that the payment in question was not warranted and commercially not expedient.
TPO is free to demand any other evidence that he may wish to be produced before being satisfied with the rendering of services by the foreign AE. Thereafter the exercise of benchmarking the payment on the touchstone of Arm’s length price, will have to be carried out in accordance with the requirements of Sec.92 - We are therefore of the view that in tune with the decision of the Tribunal in assessee’s own case for AY 2013-14, the issue should be remanded to the TPO for consideration denovo.
Disallowance on purchase of trade samples was also subject matter of TP adjustment by the TPO and to that extent there should be a direction to ensure that there is no double taxation of the same income. We accept the prayer of the learned Counsel for the assessee and direct the AO/TPO to consider the plea of the assessee in this regard and allow necessary relief in the event of the same income getting doubly taxed.
Expenditure incurred in the case of retail trader of Reebok Footware and Shoes incurring expenses - HELD THAT:- The decision rendered by the ITAT Delhi in the case of Carrier Air-conditioning [2018 (7) TMI 1087 - ITAT DELHI] was a case of renovation to a leased premises and the finding was that it was a complete replacement of the existing premises. In this case we are concerned with refurbishing a show room to make it attractive for customers to visit and purchase assessee’s products. In the given circumstances, we are of the view that the decision in the case of Emdee Apparels [2012 (12) TMI 238 - ITAT BANGALORE] is applicable. Consequently, the claim made by the assessee is directed to be accepted and the relevant grounds of appeal are allowed.
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2022 (7) TMI 1328
TP Adjustment - comparable selection - Jtekt Sona Automotive India Limited, Roots Industries India Limited AND Remi Elektrotechnik Limited - HELD THAT:- We notice that the TPO/DRP have not examined the facts pertaining to the claim of the assessee for inclusion of the mentioned three comparables and have just rejected the same on the basis that no data is available in the public domain. We also notice that the assessee has submitted the financial statements of these companies from the public domain before the lower authorities. In view of this, we remit this issue back to the TPO/AO to take into consideration the details submitted by the assessee and also verify the data from public domain and decide the issue of comparability of these companies in accordance with law, after providing reasonable opportunity of being heard to the assessee.
Exclusion of Roop Telsconic Ultrasonix Ltd - Roop Telsconic Ultrasonix Ltd. shows that it manufacture consists of ultrasonic equipments which support the claim of the ld. AR that it is into product manufacturing. In determining the degree of comparability between controlled and uncontrolled transactions, it is necessary to compare the significant risks that could affect prices or profits. The risk involved for a company involved in manufacturing of equipments would be significantly different from the component manufacturing company. The assessee is a manufacturer of components and therefore cannot be compared with an equipment manufacturing company as per the principle laid down in Rule 10B(2)(b). In view of the above discussion, we hold that Roop Telsconic Ultrasonix Ltd. is functionally different from the assessee and cannot be included as a comparable. It is directed to be excluded from the comparables.
Contract manufacturing segment - Comparability of the companies should be made with respect to functions, assets and risks. In the given case, Vikram India. Ltd. which is into manufacturing activities is not functionally comparable with the assessee and therefore, we delete the inclusion of this company from the comparables.
Not providing working capital adjustment in relation to the Contract Manufacturing segment - There would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the Assessee should be allowed.
Not granting proportionate adjustment - HELD THAT:- The coordinate bench of the Tribunal in the case of IKA India (P.) Ltd. [2018 (10) TMI 49 - ITAT BANGALORE] dealt with the similar issue and held that section 92 of the Act can be applied only in respect of international transactions i.e., transactions with AE. we hold that the transfer pricing adjustment should be restricted only to the international transactions with the AE. This ground is allowed in favour of the assessee.
Disallowing depreciation claimed by the Appellant on additions made to fixed assets - AO disallowed the entire depreciation claimed by the assessee stating that assessee has not provided any supporting details with respect to assets and depreciation claimed thereon - HELD THAT:- In view of the fact that the additional evidence has not been verified by the TPO/DRP, we deem it fit to remit this issue back to AO/TPO for fresh consideration and decision in accordance with law, after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to produce all the relevant details and evidence in respect of the claim and cooperate with the remand proceedings.
Disallowance of special discount u/s. 40(a)(ia) - HELD THAT:- We have given a careful consideration to the rival submissions and are of the view that the issue with regard to the question whether the payment in question is in the nature of discount or commission should be set aside to the AO/TPO for fresh consideration denovo in the light of the submissions made before us, the case laws cited and the real nature of the transaction and not to conclude only on the basis of entries in books of accounts and nomenclature used therein. The AO and TPO will afford opportunity of being heard to the assessee in the set aside proceedings.
Disallowance of liquidated damages - AO disallowed the claim of liquidated damages on the ground that the assessee has not provided any details with respect to the basis of quantification of liquidated damages and evidence in support of the same - DRP did not consider the additional evidence provided by the assessee and verify it for the reason of time constraint - HELD THAT:- Since the evidence and supporting bills submitted by the assessee are not verified by the lower authorities, we remit this issue to the AO to look into the facts and evidence afresh and decide the issue in accordance with law, after providing reasonable opportunity of being heard to the assessee.
Disallowance of “claims made by buyers” pursuant to the slump sale - HELD THAT:- The assessee has submitted Form 3CEA to substantiate that the capital gain / loss is computed correctly. The certificate from the chartered accountant is issued based on the information and explanation provided to the best of their knowledge and the same does not prevent the AO from going into the root of the transaction calling for further evidence. In our view the onus is on the assessee to provide the required details as a foolproof evidence to substantiate the claim that the buyer deducted an amount from the final sale consideration. In the given case we notice that the lower authorities did not take call for any further evidence and have not taken the necessary steps to verify the issue factually based on details furnished by the assessee. We therefore remit the issue back to the AO with a direction to issue summons to the buyer of the undertaking in order to verify the claim of the assessee and decide the issue in accordance with law, after giving reasonable opportunity of being heard to the assessee.
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2022 (7) TMI 1327
Assessment u/s 153A - Proof of incriminating material found during the course of search or not? - HELD THAT:- AO has nowhere made reference to any seized material in the assessment order. AO has been examining the matter as if he is passing a regular assessment order u/s 143(3) or 147 - Under the scheme of assessment as propounded in the various judgments an addition can only be made if some incriminating material regarding receipt of bogus share application money was found during the course of search. AO did not make reference to this effect.
CIT(A) is on the same line. CIT(A) has discussed the issue on merits but did not address whether the issue can be examined in an assessment framed u/s 153A or not.
The judgment of the Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] is very specific which has been discussed above. The time limit to issue notice u/s 143(2) of the Act has expired long back. Hence, it is an unabated assessment year and this assessment can be tinkered with only if incriminating material pertaining to this year has been found during the course of search. In view of the above discussion and respectfully following the judgments of various Hon’ble High Courts and Co-ordinate Benches, we allow the preliminary ground of the appeal and delete the additions made in the assessment order dt. 30/03/2015 passed u/s 153A r.w.s. 143(3) of the Act. Appeal of the assessee is allowed.
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2022 (7) TMI 1326
Discharge from Assam Rifles on securing four Red Ink entries - difference between cases of major misconducts and minor misconducts - Assignment of reasons for order of discharge - consideration of plea of malafide raised against the authority - principal argument of is that the discharge from service is not automatic or mandatory after four Red entriesis - HELD THAT:- This Court took into consideration the fact that there was no application of mind by the authority to the relevant aspects which were taken into consideration while exercising the power under Rule 13 of the Rules. In both the aforesaid cases, this Court took the view that the mere fact that the Personnel had crossed the threshold of few Red Ink entries could not have been made a ground to discharge them without considering other relevant circumstances, more particularly, the nature of the violation which led to the award of the Red Ink entries.
The action based on the subjective opinion or satisfaction, can judicially be reviewed first to find out the existence of the facts or circumstances on the basis of which the authority is alleged to have formed the opinion. It is true that ordinarily the court should not inquire into the correctness or otherwise of the facts found except in a case where it is alleged that the facts which have been found existing were not supported by any evidence at all or that the finding in regard to circumstances or material is so perverse that no reasonable man would say that the facts and circumstances exist. The courts will not readily defer to the conclusiveness of the authority’s opinion as to the existence of matter of law or fact upon which the validity of the exercise of the power is predicated.
The doctrine of reasonableness thus may be invoked. Where there are no reasonable grounds for the formation of the authority’s opinion, judicial review in such a case is permissible.
Having regard to the nature of the misconduct alleged against the appellant, the ends of justice would be met if we set aside the order of discharge and treat the appellant herein to have been in service till the time, he could be said to have completed the qualifying service for grant of pension. Such an order is passed with a view to do substantial justice as there is nothing on record to indicate that the nature of the misconduct leading to the award of four Red Ink entries was so unacceptable that the competent authority had no option but to direct his discharge to prevent indiscipline in the force.
The order of discharge passed against the appellant herein is hereby set aside. The appellant shall be treated to have been in service till the time he would have completed the qualifying service for grant of pension - The benefit of continuity of service for all other purpose shall be granted to the appellant including pension. The monetary benefits payable to the appellant shall be released expeditiously but not later than four months from the date of this order.
Appeal allowed.
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2022 (7) TMI 1325
Levy of penalty under WBGST Act - transporting the goods in question without any e-way bill - e-way bill generated within two hours after the detention of goods in question - HELD THAT:- From the statement of facts filed before the appellate authority it appears that petitioner had filed the e-way bill on the next day of detention of the goods. Considering the facts and circumstances of this case and what appears from record, no interim order is required against the impugned coercive action taken by the respondents.
There is no scope of passing any interim order in the matter and the issues involved require affidavits from the respondents for final adjudication. Let the respondents file affidavit in opposition within four weeks; reply thereto, if any, to be filed by the petitioner within two weeks thereafter.
List the matter for final hearing seven weeks hence.
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2022 (7) TMI 1324
Rectification of mistake - Levying penalty u/s 271(1)(c) on bogus purchases - HELD THAT:- It is evident that there is apparent mistake on record in deciding the appeal of the Tribunal. The Tribunal has decided the appeal assuming the appeal against quantum addition [2021 (7) TMI 1382 - ITAT MUMBAI] whereas the appeal was against relief allowed on levying penalty u/s 271(1)(c) - Accordingly, we recall the order of the Tribunal and direct the Registry to fix the appeal in due course under intimation to the assessee. Miscellaneous Application filed by the Revenue is allowed.
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2022 (7) TMI 1323
TDS on Leave Travel Concession - assessee in default u/s 201(1) - as per HC The amounts received by the employees of the appellant-assessee towards reimbursement of LTC claims are therefore not liable to exemption and, consequently, the appellant is liable to deduct tax at source in respect of payments made by it to its employees. Since the appellant had not deducted tax on the entire amount paid and deducted tax only in respect of part of the amount paid as per its own understanding, the finding that the appellant was an assessee in default, in our view, is completely justified. The Tribunal was also correct in its view that it was the primary obligation of the appellant being the deductor, to establish that the recipients had disclosed the amounts received by them towards LTC claims as part of their taxable income and paid tax thereon - HELD THAT:- Arguments concluded. Order reserved.
TDS u/s 192 - Exemption u/s 10(5) read with Rule 2B of the Income Tax Rules, 1962 - liability under Sections 201[1] and 201[1A] - appellant - Bank provides benefit of leave travel concession (‘LTC’ for short) to its employees and while deducting TDS from the salary of the employees - reimbursement of leave travel expenses as claimed by the employee of the Appellant - HELD THAT:- List after pronouncement of order in State Bank Of India Vs. Assistant Commissioner Of Income Tax [2022 (7) TMI 1323 - SC ORDER]
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2022 (7) TMI 1322
Look Out Circular (LOC) issued against petitioner - seeking permission to travel abroad - categories of cases in which the investigating agency can seek recourse of Lookout-Circular and under what circumstances - procedure required to be followed by the investigating agency before opening a Lookout-circular?
HELD THAT:- Keeping in view the aforesaid averments as well as the law laid down by this Court in Sumer Singh Salkan vs. Assistant Director & Ors.. [2010 (8) TMI 1083 - DELHI HIGH COURT] Petitioner states that he would approach the Trial Court for cancellation of the Lookout Circular as well as for permission to travel abroad.
We, accordingly, grant liberty to the Petitioner-applicant to approach the Trial Court, which Court shall consider the application for cancellation of Lookout Circular as well as for permission to travel abroad in accordance with law.
In the event such an application is filed before the Trial Court within a week, the same shall be disposed of as expeditiously as possible, preferably, within four weeks. This Court clarifies that it has not commented on the merits of the controversy. The rights and contentions of all the parties are left open.
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2022 (7) TMI 1321
Derivative transaction entered into with the bank for the purpose of securing expected business loss arising out of foreign exchange fluctuation - forex derivative transaction with the ICICI Bank to hedge the foreign currency risk - Addition on account of foreign exchange hedging loss incurred during the course of regular business by treating the same as speculative transaction - definition of speculative transaction given in Section 43(5) - HELD THAT:- In the present case the assessee was in the business of manufacturing of yarn processed fabrics and sugar etc., it was not carrying on any trading activity of foreign exchange either in India or outside India since its incorporation.
Liability for the hedging contract entered by the assessee with the bank claimed to be in normal course of business started generating heavy liability on account of unexplained fluctuation in the foreign exchange in global market, therefore, the hedging contract were abandoned by the assessee and whatever the liability arose was paid off accordingly the net liability for such hedging had been provided in the books of account as foreign exchange hedging loss and claimed as a revenue expenditure. In our opinion the derivative transaction entered into with the bank for the purpose of securing expected business loss arising out of foreign exchange fluctuation cannot not termed as speculative since the same is particularly carried out to safeguard expected business loss.
In the present case the assessee during the course of its regular business entered into derivative contract for the purpose of hedging its business loss arising out of exchange fluctuation in its day to day business activity and there was no element of speculation involved.
No derivative contract could be entered into without underlying assets. A derivative means a financial instrument whose value changes in response to change in a specific interest rate, security price, commodity price, foreign exchange rate, index of price or rates, a credit rating or credit index which requires no initial net investment or little net investment relative to other types of contract that have a similar response to changes in market condition and it is settled at a future date, in such type of cases, risk embedded in underlying assets is to be protected by means of derivative contracts invented by the banking institutions but it is neither with the intention nor it can be foreign exchange delivery. It is for the purpose of protection of difference in exchange rate by determination of value of a given currency in a given period. In India, in the case of foreign currency derivative, interest rate derivative and credit derivative, RBI is empowered to regulate for the regulatory purposes.
As per the RBI guidelines the user can undertake derivative transaction to hedge – specially reduce or extinguish an existing identified risk on an ongoing basis during the life of derivative transactions or for transformation of risk exposure as specially permitted by RBI.
The assessee entered into forward contract with the ICICI Bank to hedge the import payments and repayments of the loans therefore the transaction entered into by the assessee was not speculative transaction. Assessee entered into forex derivative transaction with the ICICI Bank to hedge the foreign currency risk involved in the transaction therefore the expenses claimed by the assessee were revenue in nature, for the reasons that the derivative transaction entered into by the assessee was not in the nature of speculative transaction.
Assessee entered into forex exchange transaction through its banker with a view to effectively hedge its foreign currency risk therefore these forex derivative transaction are a close proximity or rather incidental to the business of the assessee which cannot be considered as speculative.
Assessee entered into hedging contract with its banker i.e; ICICI Bank to minimize the possible fluctuation in foreign currency which resulted in a loss, so it was a business loss or revenue loss. We therefore delete the impugned addition made by the AO and sustained by the Ld. CIT(A).
Disallowance by invoking the provisions of Section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 - HELD THAT:- Assessee had made the investment in the securities out of common funds, the assessee was also having non interest bearing funds, even there was reduction in the investment during the year under consideration. The assessee also claimed to have received the dividend income through RTGS, therefore the disallowance made by the AO was not justified.
Similar issue having identical facts was a subject matter of the assesse’s appeal for the preceding assessment year 2010-11 [2019 (7) TMI 1601 - ITAT CHANDIGARH] direct the AO to verify the calculation made by the assessee vis a vis the calculation made in the earlier year which were accepted by the ITAT and restrict the disallowance accordingly to Rs. 4,39,093/- and since the assessee had already disallowed a sum of Rs. 66,419/- under section 14A(1) of the Act, the said amount is to be reduced and the remaining amount may only be disallowed.
Disallowance of the interest paid on working capital loan and long term loan - HELD THAT:- As noticed various Courts in the case of Hero Cycles (P) Ltd. [2015 (11) TMI 1314 - SUPREME COURT], Bright Enterprises Pvt. Ltd.[2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT] held that no disallowance of interest is called for where the assessee has got sufficient own funds. The Assessing Officer is directed to go through the fund position namely capital and interest free advances, reserves and surplus to determine whether any borrowed funds have been utilized more than available own funds and take a decision keeping in view the decisions rendered above. If sufficient own funds are available, no disallowance is called for. This ground may be treated as set aside to the file of Assessing Officer.Accordingly this ground is allowed for statistical purposes.
Addition under proviso to section 36(1)(iii) on account of borrowed amount utilized from mixed funds lying in C.C. account, for purchase of fixed assets - HELD THAT: - No disallowance of interest is called for where the assessee has got sufficient own funds. The Assessing Officer is directed to go through the fund position namely capital and interest free advances, reserves and surplus to determine whether any borrowed funds have been utilized more than available own funds and take a decision keeping in view the decisions rendered above. If sufficient own funds are available, no disallowance is called for. This ground may be treated as set aside to the file of Assessing Officer.Accordingly this issue is decided in favour of the assessee for statistical purposes.
Deduction of additional depreciation - HELD THAT:- CIT(A) rightly allowed the claim of the assessee by following the decision in the case of Budhewal Co-operative Society [2013 (5) TMI 802 - ITAT CHANDIGARH]
Income accrued on account of carbon credits - Revenue or capital receipt - HELD THAT:- As decided in own case [2015 (12) TMI 1877 - ITAT CHANDIGARH] assessee was carrying on the business of power generation for the assessment year 2007-08. Carbon credit was not an offshoot of business of the assessee but an offshoot of environmental concerns. No asset was generated in the course of business but it was generated due to environmental concerns. There was no cost of acquisition or cost of production to get entitlement for the carbon credits. Therefore, the income from sale of carbon credits was to be considered as capital receipt and not liable to tax under any head of income under the Income-tax Act, 1961
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2022 (7) TMI 1320
Seeking direction to Respondents to jointly and severally contribute to the assets of the Corporate Debtor - Section 66(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It could be seen that the Learned Counsel for the 1st Respondent has submitted that the present Application is not maintainable in view of the fact that the Resolution Plan in respect of the Corporate Debtor has been approved by this Tribunal and that the Applicant herein can no more contest the present application since he becomes functus officio. It was also submitted that as per the Resolution Plan, the CoC is required to take the present Application to its logical end in their name and the Applicant in the present case has no locus to maintain the present Application.
Admittedly in the present case, it could be seen that the cause title of the Application has not been changed or amended. It is also seen that after the approval of the Resolution Plan, the RP will become functus officio and hence he cannot prosecute the present Application under Section 66 of IBC, 2016.
Application dismissed.
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2022 (7) TMI 1319
Dishonor of cheque - post dated cheque - existence of legally enforceable debt or not - debt becoming time barred - Section 138 of NI Act - HELD THAT:- This Court in NARSI DASS VERSUS SURENDER [2014 (11) TMI 1263 - PUNJAB AND HARYANA HIGH COURT] has contended that on the date when the post dated cheque was to be encashed, the liability of the petitioner in respect of the sale would have become time barred and hence no proceedings under Section 138 of the Negotiable Instrument Act can be initiated on the basis of the dishonour of the cheque as there would be no legally enforceable debt subsisting on that date.
Notice of motion for 20.10.2022.
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2022 (7) TMI 1318
Reopening of assessment u/s 147 - violation of the principles of natural justice - issued notice u/s 148A(b) stating that he has information which suggests that income chargeable to tax for the relevant assessment year has escaped the assessment within the meaning of Section 147 - HELD THAT:- Order has been passed u/s 148A(b) - as surprising to find that in the said order the officer has furnished information which is running to more than seven paragraphs. This information was not furnished to the assessee at the first instance and what was appended to the notice was only case related information details. This court is convinced that there has been violation of principles of natural justice inasmuch as the appellant was not furnished with full information based on which the assessment was sought to be reopened.
The writ appeal as well as the writ petition is allowed. The order under Clause (d) of Section 148 A dated 07.04.2022 is set aside and the matter is remanded to the AO to the position when he issued notice u/s 148A(b). Assessee is directed to take note of the information mentioned in the order dated 07.04.2022 passed under Clause (d) of Section 148A as the basis for reopening and submit their objections within 10 days from the date of receipt of server copy of this order and on receipt of the affidavit of opposition the Assessing Officer shall proceed to complete the assessment in accordance with law.
The notice issued under Section 148A of the Act dated 07.04.2022 shall not be enforced.
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2022 (7) TMI 1317
Intimation u/s 143(1) - status of the Assessee - assessee furnished return of income mentioning status as any other AOP/BOI - assessee filed return of income in the status of AOP/BOI and has shown income against which no tax was payable at the time of filing of return of income - AO raised the demand against the returned income - Assessee argued AOP/BOI/ artificial judicial person were exempt from payment of taxes up ₹ 2 lakhs - Assessing Officer, CPC suo moto changed the status of assessee - HELD THAT:- CIT(A) in his order dismissed the appeal of the assessee by holding that the status of the assessee has not been changed by CPC. However, we note that, no enquiry was made by Ld. CIT(A) as to how this additional tax came to be levied on the assessee when the figure of returned income has not been disturbed by the AO, CPC, and the additional tax could not be levied if the rates applicable to AOI/BOI were to be applied to the assessee. Apparently, the assessee has been taxed at tax rates applicable to some other “status”, as against the rate applicable to AOP/BOI, which was the status in which the return of income was filed by the assessee.
Therefore, in the interests of justice, we are restoring the file to the jurisdictional assessing officer, to ascertain as to how this additional tax came to be levied on the assessee, especially when the status as the AOI/BOI has not been changed by CPC in the 143 (1) intimation issued to the assessee. Needless to say, it is well-settled law that change of status is not permissible under section 143 (1) of the Act. Appeal of the assessee is allowed for statistical purposes.
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2022 (7) TMI 1316
Constitutional validity and interpretation of certain provisions of the Prevention of Money-Laundering Act, 2002 - procedure followed by the Enforcement Directorate (ED) while inquiring into/investigating offences under the PMLA - effect of amendment in Section 45 of the 2002 by NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [2017 (11) TMI 1336 - SUPREME COURT] reviving the effect of twin conditions specified in Section 45 to offences under the 2002 Act - initiation of penal proceedings against an individual, without informing him of the charges - based on ECIR, the ED can summon accused persons and seek details of financial transactions or not - proceeds of crime-an untainted property? - Explanation added to Section 44(1)(d) of the PMLA by way of Finance (No. 2) Act, 2019, which posits that a trial under the PMLA can proceed independent of the trial of scheduled offence - investigation outside the purview of Section 154 or 155 of the Cr.P.C. - constitutionality of Section 50 of the PMLA, which pertains to recording of statement of a person summoned during the course of an investigation - Sections 161 and 162 of the Act, concerning inadmissible evidence in the trial of an offence, unless it is used only for the purpose of contradiction as stipulated in Section 145 of the 1872 Act - constitutional validity of vires of Section 50 of the PMLA regarding whether a police officer is in a position to compel a person to render a confession giving incriminating statement against himself under threat of legal sanction and arrest? - procedure established by law has to be in the form of a statute or delegated legislation and pass the muster of the constitutional protections, violative of Article 21 of the Constitution of India or not - non-supplying of the ECIR to the accused is in gross violation of Article 21 of the Constitution or not - onerous bail conditions under Section 45 of the Act - burden of proof under Section 24 of the PMLA - constitutionality of Sections 17 and 18 concerning absence of safeguards in lieu of searches and seizures - section 5(1) concerning attachment independent of the existence of a predicate offence - reversal of presumption of innocence at the stage of bail as an accused by Section 45(1) of the PMLA - correctness of maximum punishment of seven (7) years under PMLA, it was argued that it is disproportionate when comparing the same to other offences under the IPC which are far more serious in nature and are punishable with death - Explanation to Section 44 is contrary to Section 3 read with Section 2(1)(u) - whether money-laundering is a standalone offence or dependent on the scheduled offence? - Explanation to Section 44(1)(d) requiring the two trials to be conducted before the Special Court, but as separate trials - adjudicatory paralysis in the Appellate Tribunal - constitutional validity of Section 50(3) and Section 63(2)(a) and (c) of the PMLA, insofar as they relate to the accused persons, are ultra vires being violative of Articles 20(3) and 21 of the Constitution of India - proceedings under Section 50 is clearly a part of investigation for the collection of evidence or not - whether prosecution for money-laundering is permissible if the commission of scheduled offence and proceeds of crime takes place prior to the PMLA coming into force? - essential ingredient of ‘knowledge’ of the person for taking an action and exposing himself to criminal liability - impact of insertion of Clause (ii) of the Explanation to Section 3 vide the 2019 amendment with regard to continuing offence - constitutional validity of Section 44(1)(a) of the PMLA, having nexus of the said Section with the object of the PMLA or not - interpretation of Section 3, post addition of the Explanation vide the 2019 amendment - true meaning of the words “take possession” of property under Section 8(4) should be constructive possession instead of physical possession since it is highly prejudicial for the accused during the pendency of the trial?.
HELD THAT:- The conclusion on seminal points in issue have been arrived in the following terms: -
(i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of ROJER MATHEW VERSUS SOUTH INDIAN BANK LTD. & OTHERS [2019 (11) TMI 716 - SUPREME COURT].
(ii) The expression “proceedings” occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court.
(iii) The expression “investigation” in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of “inquiry” to be undertaken by the Authorities under the Act.
(iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence.
(v) (a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word “and” preceding the expression projecting or claiming as “or”; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise.
(b) Independent of the above, we are clearly of the view that the expression “and” occurring in Section 3 has to be construed as “or”, to give full play to the said provision so as to include “every” process or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money-laundering on its own, being an independent process or activity.
(c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected.
(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.
(vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned.
(vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove.
(viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard.
(ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness.
(x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness.
(xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional.
(xii) (a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis.
(b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned in accordance with the interpretation given in this judgment.
(xiii) (a) The reasons which weighed with this Court in Nikesh Tarachand Shah, for declaring the twin conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form.
(b) We are unable to agree with the observations in Nikesh Tarachand Shah, distinguishing the enunciation of the Constitution Bench decision in KARTAR SINGH VERSUS STATE OF PUNJAB [1994 (3) TMI 379 - SUPREME COURT]; and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, including about it posing serious threat to the sovereignty and integrity of the country.
(c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness.
(d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply.
(xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act.
(xv) (a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not “investigation” in strict sense of the term for initiating prosecution; and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such.
(b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.
(xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness.
(xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder.
(xviii) (a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating “civil action” of “provisional attachment” of property being proceeds of crime.
(b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest.
(c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering.
(xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the desirability of placing information on its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the Authority and before the Special Court.
(xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously.
(xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected.
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2022 (7) TMI 1315
Constitutional Validity of Rule 117 of the Jharkhand Goods and Services Tax Rules, 2017 - period of limitation for claiming of Input Tax Credit (ITC) in Form GST TRAN-1 - ultra vires to Section 140 of the Jharkhand Goods and Services Tax Act, 2017 or not - due date to claim transitional credit - HELD THAT:- As per order passed by the Apex Court in UNION OF INDIA & ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. & ANR. [2022 (7) TMI 1232 - SC ORDER], any aggrieved registered assesse shall file relevant Form TRAN-1 and TRAN-2 or revise the already filed Form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC) within this window period of 01.09.2022 till 31.10.2022. As such, case of the petitioner would also abide by the said direction.
Writ petition disposed off.
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2022 (7) TMI 1314
Exemption from CGST - toll charges - annuity (deferred payments) - Validity of clarificatory circular - Amount collected by the concessionaries for construction, maintenance, operation and providing road access to the vehicle which ply on the road - Notification no.12/2017 dated 28.06.2017 - HELD THAT:- Admittedly, the toll charges collected by the concessionaries for construction, maintenance, operation and providing road access to the vehicle which ply on the road are exempted from GST by notification no.12/2017 dated 28.06.2017 - Though what is exempted is mentioned as service by way of access to a road or a bridge on payment of toll charges, the said toll charges is collected as consideration by the concessionaires towards construction and maintenance of the road. In short, the entire consideration for construction and maintenance of the road by concessionaires which is collected as toll charges is exempt from GST from 01.07.2017 and onwards.
Annuity is paid to the concessionaires in lieu of toll charges. GST Council, in its 22nd meeting held on 06.10.2017 took note of the same and as entire toll charges were being exempted from GST has decided to recommend exemption of annuity also, which include the consideration received by concessionaires which is clear from the recordings in the minute book. The said recording makes it clear that it recommended treating annuity on par with the toll charges - Pursuant to the said meeting, the notifications no.32/2017 and 33/2017 dated 13.10.2017 have been issued by respondent no.1 wherein service by way of access to a road or a bridge on payment of annuity has been exempted from GST and no GST was being collected on the entire annuity being paid to the concessionaires which included the consideration towards construction as well as the service that they provide towards maintenance of the said road.
The deliberation of GST Council in its meeting held on 06.10.2017 and the notifications issued pursuant thereto clearly exempts the entire annuity being paid to the petitioners towards construction and maintenance of roads. It cannot be construed to have not exempted the annuity (deferred payments) towards construction of roads. The impugned circular has the effect of overriding the notifications bearing Nos.32 and 33/2017 dated 13.10.2017 and has to be held as bad in law - In the instant case, respondent no.1 has issued the notifications under Section 11 of the Central Goods and Services Tax Act, 2017 and Section 6 of the Integrated Goods and Services Tax Act, 2017 exempting the consideration received by concessionaires from highway authorities as annuity from GST. The clarification issued is contrary to the said notifications for the reasons recorded above. If respondent no.1 is desirous of altering the same, it has to issue fresh notifications amending its earlier notifications.
The impugned Circular dated 17.06.2021 is hereby set aside - Petition disposed off.
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2022 (7) TMI 1313
Levy of CGST and SGST - transportation services rendered by the drivers outside the State of Telangana - OLA - providing an electronic platform to the driver partners and to the customers - case of petitioner is that he had rightly paid IGST for the audit period and was not required to pay CGST and SGST - audit period April, 2019 to March, 2020 - HELD THAT:- It is prima facie evident that if the passenger is not registered under GST and avails transportation service, by way of legal fiction the place of supply would be the place where the passenger embarks or starts his journey - Though the 3rd respondent has referred to provisions of Section 12(9) of the IGST Act, he has however erroneously recorded that in case of unregistered recipient, the place of supply shall be the location of such recipient, which prima facie appears to be in contravention of Section 12(9) of the IGST Act. Thereafter, 3rd respondent levied the tax as noted above and issued notice for payment.
More particularly the requirement to pay IGST under Section 12(9) of IGST Act and correspondingly the nonliability to pay CGST and SGST insofar the transportation services rendered by the drivers were not considered in the right perspective. That apart though the impugned order is a lengthy one, the substantive portion appears to be without due application of mind to the legal provision.
The matter is remanded back to the 3rd respondent for a fresh decision in accordance with law after giving notice of hearing as well as opportunity of hearing to the petitioner - petition allowed by way of remand.
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2022 (7) TMI 1312
Additional depreciation u/s 32(1)(iia) - asset put to use for less than 180 days - remaining 50% of allowable additional depreciation in the subsequent assessment year - whether the provision for allowing additional depreciation of remaining 50% is allowable in the subsequent year i.e. Assessment Year 2010-11, although the statute allowed the same w.e.f. 01.04.2016 ? - HELD THAT:- It is not disputed before us that the substantial questions of law raised in this appeal are covered by the decision in the case of Dy. CIT v. Brakes India Ltd [2012 (3) TMI 31 - ITAT, CHENNAI] followed in the case of Commissioner of Income Tax, Chennai Vs. Aztec Auto (P) Ltd [2020 (9) TMI 541 - MADRAS HIGH COURT] as held that where plant and machinery was acquired by the assessee in the second half of the financial year 2007-2008 was put to use for less than 180 days in that year and, therefore, only 10% of the additional depreciation under Section 32(1)(iia) could be allowed on same in that year, balance additional depreciation of 10% could be allowed on these assets in the relevant subsequent year 2009-10. - Decided against revenue.
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2022 (7) TMI 1311
Change of jurisdiction u/s 127 - whether ITAT has erred in not appreciating that the PAN of the Assessee is lying at Kolkata and for the last six years the returns were being processed at Kolkata and during the period the assessee had never raised any objection to the jurisdiction? - HELD THAT:- Tribunal has found that the acknowledgment receipt of the return of income shows that the respondent assessee had been filing its returns since inception i.e. AY 2005-06 at the address mentioned at New Delhi. It is pertinent to mention that in the Assessment Year 2012-13 when the assessee’s case was selected for scrutiny, the assessee had within a month filed its objection to the jurisdiction of the ITO, Ward-10(2), Kolkata stating that the assessee’s jurisdiction lies with Assessing Officer, Range-18, New Delhi.
This Court is in agreement with the view of the Tribunal that as the assessee had raised objection within the time provided under Section 124(3) Assessing Officer, if not, satisfied with the correctness of the claim should have referred the matter for determination before the assessment was made to the PCIT.
As in the present case, the Assessing Officer rejected the objection regarding the jurisdiction and referred the matter to the PCIT to decide the issue after sixteen months. Further, the PCIT instead of deciding the issue of jurisdiction ordered that the issue of transfer of the jurisdiction will be decided after the completion of assessment.
This Court is of the view that the approach adopted by both the Assessing Officers i.e. ITO, Ward-10(2), Kolkata as well as PCIT, Kolkata was contrary to the mandate of law, in particular, Section 124(4) of the Act.
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2022 (7) TMI 1310
Revenue recognition - Accounting method - determination of income on completion of its projects - whether percentage computation method should be followed instead of project completion method followed by the assessee - whether Tribunal was justified in law to accept the accounting method followed by the assessee as accounting standard-9 (AS-9) instead of accounting standard-7 (AS-7) despite the fact that the assessing officer arrived at a conclusion finding that the assessee is a contractor and not a builder after analysing the various aspects of the business of the assessee?
HELD THAT:- After taking note of the decision in Bilahari Investment (P) Ltd. [2008 (2) TMI 23 - SUPREME COURT] and that of Manish Build Well (P) Ltd.. [2011 (11) TMI 35 - DELHI HIGH COURT] held that the assessee has been consistently following one of the recognised methods of accounting that is project completion method for computation of income and in the absence of any prohibition or restriction under the provisions of the Income Tax Act. For doing so it cannot be held that approach of the CIT(A) and the tribunal was erroneous or illegal in any manner so as to call for interference by Court. Accordingly, the appeal filed by the revenue was dismissed.
In the case on hand the CIT(A) as well as the tribunal have noted the aforementioned decision and also the fact that the method of accounting, namely, the project completion method was followed by the assessee and has been accepted by the Department and, thus, by applying the principle of consistency, the appeal of the revenue is dismissed. Thus, we find that there is no error in the order passed by the tribunal nor any substantial question of law arises for consideration in this appeal.
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