TMI Tax Updates - e-Newsletter
January 25, 2022

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. GST - Deemed service of order and right to appeal an analysis in view of recent judgment.

   By: DEVKUMAR KOTHARI

2. Budget suggestions from public to GOI. Part I

   By: DEVKUMAR KOTHARI

3. Supply of service sub-contracted by recipient company cannot be considered as ‘intermediary’

   By: Bimal jain

4. e-ADVANCE RULING SCHEME, 2022

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. CGST Bhiwandi Commissionerate arrests businessman for running fake ITC network

2. Trade Defence Wing (TDW) operations under DOC result in reduction of anti-subsidy duty imposed on Indian exporters from 11.67% to 2.82%

3. Engineering Goods exports register a stupendous growth of 54% and jump

4. Auction for Sale (Re-issue) of (i) ‘GoI Floating Rate Bond 2028’, (ii) 6.54% GS 2032’, and (iii) ‘6.95%GS 2061’

5. CCI approves acquisition by GlaxoSmithKline Consumer Healthcare Overseas Limited and GlaxoSmithKline Consumer Healthcare UK Trading Limited of shareholding in GlaxoSmithKline Asia Private Limited

6. CCI approves acquisition of shares of Future Generali India Life Insurance Company Limited by Generali Participations Netherlands N.V

7. India emerges as largest exporters of cucumber and gherkins in the world

Notifications

Customs

1. 03/2022 - dated 24-1-2022 - ADD

Seeks to rescind Notification No. 42/2016 - Customs (ADD) dated 8th August, 2016 to remove levy of ADD on PVC Flex Films.

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 32/2021-22 - dated 24-1-2022

Extension of Date for Mandatory electronic filing of Non-Preferential Certificate of Origin (CoO) through the Common Digital Platform to 31st March 2022

Central Excise

2. 1081/02/2022 - dated 19-1-2022

Master Circular on Recovery and Write-Off of Arrears of Revenue

Highlights / Catch Notes

GST

• High Court fines GST officer Rs. 10,000 for abuse of power; orders Rs. 69,000 compensation for expired e-way bill.

  Case-Laws - SC : Quantum of cost imposed by High Court on the GST officer - intent to evade tax or not - allegation that the e-way bill had expired a day earlier - traffic blockage due to agitation - abuse of power by the officer - The High Court has awarded costs to the writ petitioner in the sum of ₹ 10,000/- in relation to tax and penalty of ₹ 69,000/- that was sought to be imposed by the petitioner No.2. In the given circumstances, a further sum of ₹ 59,000/- is imposed on the petitioners toward costs, which shall be payable to the writ petitioner within four weeks from today - SC
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• GST on Submarine Cables Set at 5%: Includes 2.5% CGST and 2.5% SGST for Warship Parts.

  Case-Laws - AAR : Classification of supply - applicable rate of CGST - supply of pressure tight cables, non-pressure tight cables and special cables for use in S4 submarine - these goods would be considered to be as parts of warships - Rate of GST is 5% (i.e 2.5% CGST & SGST each.) - AAR
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Income Tax

• Reopening Assessments u/s 147: True Disclosure of Primary Facts Required, Mere Opinion Change Insufficient for Reopening.

  Case-Laws - HC : Reopening of assessment u/s 147 - The duty is cast upon the assessee to make true and full disclosure of the facts at the time of original assessment. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. It is for the Assessing officer to draw the correct inference from the primary facts. If the assessing officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. - HC
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• Private Company Converts to LLP: Business Succession Issues and Expense Disallowance Examined by Assessing Officer.

  Case-Laws - AT : Change of Private Limited company to Limited liability partnership firm - succession to business - Disallowance of expenses - non filing of return for proper period and not in appropriate status is not at all a procedural mistake, it is quite substantial mistake. - AO directed to examine the issue as per law without being influenced by other observation of the Ld.CIT(A) - AT
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• Assessee's Foreign Tax Credit Claim Approved for 2014-15; No Prior Credit Claimed, Section 199 Applied Correctly.

  Case-Laws - AT : Credit for withheld tax - Foreign Tax Credit - Both the parties below have recorded concurrent finding that the assessee company has not made any claim for credit towards the above stated withholding tax in earlier assessment years prior to the relevant assessment year 2014-15. We noted that the income has accrued in financial year 2013-14 relevant to assessment year 2014-15 and the assessee has correctly accounted this income in this very assessment year. Once the assessee has accounted for this income in this year and also claimed that tax credit, we are of the view that CIT(A) has rightly allowed the claim u/s.199 of the Act. - AT
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• Taxpayer's Right to Choose Share Valuation Method u/s 56(2)(viib); Assessing Officer Must Respect Choice.

  Case-Laws - AT : Addition u/s 56 (2) (viib) - issue of shares that exceeds the face value - Both these methods have different approaches and methodologies therefore there are bound to be differences, but it does not give any authority to the learned assessing officer to pick and choose one of the method and make the addition. It is the assessee who has to exercise one of the options available under the provisions of the law for valuing the shares. The learned assessing officer needs to examine that method. Naturally, if the discounted cash flow method and net asset value method gives the same result, where would have been the need to prescribe the two methods in the law. - AT
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• CIT's Section 263 Revision Lacks Evidence; Insufficient Proof on Income Taxability u/s 68.

  Case-Laws - AT : Revision u/s 263 by CIT - On going through the entire order of the ld. CIT(A), other than the theoretical rhetoric, no iota of tangible material has been brought on record. The established adages are that the primary onus to prove that the income is non-taxable lies on the assessee whereas the primary onus to prove that the income is taxable lie with the revenue authorities. In the instant case, we find that nothing has been proved to come to a conclusion that the income falls within the ambit of Section 68 - AT
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• Court Affirms No Error in CIT(A)'s Decision on Long-Term Capital Gains in Slump Sale u/s 50B.

  Case-Laws - AT : Computation of capital gain - slump sale - Long Term Capital Gains - aggregate value of assets for purpose of computing net worth of undertaking in terms of provisions of section 50B - there is no error or infirmity in the reasoning given by the learned CIT(A) to delete additions made towards computation of short term capital gains on transfer of undertaking in terms of section 50B of the Income Tax Act, 1961. - AT
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• Interest Deduction Dispute: Partner Challenges Disallowance of Interest on Withdrawals Used for Tax Payments.

  Case-Laws - AT : Disallowance of interest expenditure - Corresponding to interest on debit balance of partner - amounts withdrawn by the partner for the payment of income-tax from the partnership firm - Although, it is a settled proposition that the tax paid in respect of income is not a deductible expense, it is not the case here. Both the lower authorities below to have entirely misconstrued the factual matrix and have proceeded on an assumption that the assessee / partner was claiming expenditure in respect to income tax / advance tax paid, whereas, the assessee has only claimed expenditure in respect of interest on excess withdrawals made, which were utilised for the purpose of paying income tax / advance tax. - AT
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• Land Sale Income Classified as Business Income Due to Profit Intent; Listing as Investment Insufficient Evidence.

  Case-Laws - AT : Gain on sale of land - Nature of land - agricultural land or capital asset or business receipts - Simply showing the land in the balance sheet as an investment is not sufficient. The activities carried by the assessee i.e., buying and selling of the properties are considered in this case and we are of the opinion that the intention of the assessee is not to carry out agricultural operations only but to earn the profit. Therefore, the A.O has rightly taxed the income arising out of the sale of the lands as income from business. - AT
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• Successor Entities Can Claim Deductions for Amalgamations or Demergers u/s 80IA of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IA - amalgamating / demerged entity to claim any deduction in the year of amalgamation/ demerger - the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the specified situations. There cannot be any other meaning to such simple provision of the IT Act - sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of subsection (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. - AT
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• State Subsidies for Rural Development Classified as Non-Taxable Capital Receipts, Even with Revenue Concessions.

  Case-Laws - AT : Taxability of the receipt given by way of subsidy - Since all the Notifications issued by the State Government for different reimbursements/ remissions, pursuant to the Scheme and in furtherance of the avowed objectives of the State Government in issuing the Scheme, the incentive/ benefit/ subsidy being made available, it has been stated that, it is clearly in the nature of capital receipt not liable to tax under the Act. Even if any concession/rebate is given in respect of revenue items, the intent of the concession/rebate being the development of the rural economy and upliftment of backward areas, the same would still be in the nature of capital receipt not liable to tax. - AT
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• Transfer of 'Essar' Brand to Trust Deemed Non-Taxable Gift, Not Income, u/ss 2(24) and 56(1.

  Case-Laws - AT : Value of the ‘Essar’ brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration, constituted taxable income as per section 56(1) - the CIT(A) had rightly concluded, that as the contribution of brand “Essar” as a gift by EIL to the corpus of the assessee trust did neither involve any profit element which could be brought within the meaning of “Income” under Sec. 2(24) of the Act, nor partook the nature of income, therefore, it could not be subjected to tax under the residuary head i.e “Other sources” u/s 56(1) of the Act, thus, uphold his view to the said extent. - AT
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• Court Upholds CIT(A) Decision: Assessee's Evidence Admitted to Clarify Ownership of "Essar" Brand, No New Facts Introduced.

  Case-Laws - AT : Admission of additional ground of appeal - as the additional evidence filed by the assessee was not with a purpose or motive of bringing any fresh facts on the record, but with a limited purpose of dispelling all doubts and substantiating to the hilt that EIL was the owner of “Essar” brand prior to its settlement in the assessee trust, therefore, on the said count also no infirmity can be related to the admission of the same by the CIT(A). We, thus, in terms of our aforesaid observations not finding any infirmity in the admission of the additional evidence by the CIT(A), uphold his order to the said extent. - AT
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Customs

• Court Orders Response on Bank Account Attachment; First Respondent Must Act on Petitioner's Representation in 15 Days.

  Case-Laws - HC : Attachment of bank accounts of the petitioner - Jurisdiction - proper officers - It is not clear whether the bank accounts of the petitioner has been attached at the behest of the first and second respondents or by the jurisdictional officers of the customs. - Writ petition is disposed off by directing the first respondent to give proper reply/pass appropriate orders on the representation of the petitioner within a period of fifteen days - HC
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Corporate Law

• Court Validates Asset Purchase in Company Liquidation; Applicant's Good Faith Secures Transaction Legitimacy.

  Case-Laws - HC : Validity of transaction entered into by the applicant with the company in liquidation - It cannot be said that the applicant has entered into transaction of purchase of sale of the assets of the company without good faith or bona fide intention, more particularly, when the applicant has deposited the entire sale consideration with DENA bank with whom the property which was purchased by the applicant was mortgaged - HC
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IBC

• Resolution Plan Invalidated for Favoring Canara Bank, Violating IBC by Unequal Creditor Treatment and Fund Distribution.

  Case-Laws - AT : Validity of Resolution Plan - Category A are those assets which are required for the Corporate Debtor for running the business and non-core assets are those assets which are not required for running the business - The Resolution Applicant unable to justify the basis of categorization of the Financial Creditors in category A and B. It is undisputed that when this resolution plan was submitted before the CoC at that time the Appellant has raised a serious objection in regard to categorization. The Resolution Applicant is unable to convince us that the categorization is based on sound principle. - The Respondents are unable to convince that on pro-rata basis why the Canara Bank is getting more amount in comparison to the Appellant. Therefore, we hold that the resolution plan is discriminatory between two set of creditors similarly situated and is in violation of the IBC. - AT
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Service Tax

• Service Tax Not Applicable on Notice Pay Compensation for Employees Resigning Without Notice Period, Says Document.

  Case-Laws - AT : Levy of service tax - Notice pay compensation - amounts received or recovered by the employer from its employees for resigning from the service - If the employer decides to terminate the services without giving the required notice, the employment contract itself provides for a compensation to be paid. Similarly, if the employee resigns without notice, compensation is paid by the employee or recovered from his dues. Both the notice period and the compensation are incorporated in the employment contact itself but these are not the purpose of the contract. Consequently, any compensation paid is not a consideration for the contract. - AT
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Central Excise

• Eligibility of CENVAT Credit for Service Providers on Tower Parts and Pre-Fabricated Buildings Examined Under Relevant Rules.

  Case-Laws - AT : CENVAT Credit - inputs/capital goods - fabrication/ creation/ installation of capital goods - The issue involved in Bharti Airtel is about the credit on Tower parts and pre-fabricated buildings in the case of service provider and as such cannot be applied in the case of credit as inputs used in the manufacture of capital goods which are further used in the manufacture of excisable goods - the appeal stands on merits of the case and that when the appeal survive on merits, other issue like penalty etc. become irrelevant. - AT
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• Commissioner (Appeals) dismisses Chartered Accountant certificates in CENVAT credit refund case, favors unverified internet data over expert opinion.

  Case-Laws - AT : Refund of CENVAT credit reversed - It is not understood as to why such Chartered Accountant certificates, which is considered as a certificate of Statutory Auditor, had been thrown out by the Commissioner (Appeals) as unbelievable and not accepted as a piece of documentary evidence though it is in the footing of an Expert Opinion under Section 45 of the Indian Evidence Act so as to outweigh the perception that all expenditure of a company are recovered from the customers, in which event no loss making company would ever exist on earth, though he trusted the unconfirmed data of the internet available in different websites like Wikipedia.org, investopedia.com etc to analyse and elaborate the concept of “tax incidence”. - AT
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Case Laws:

• GST

• 2022 (1) TMI 954
  Quantum of cost imposed by High Court on the GST officer - intent to evade tax or not - allegation that the e-way bill had expired a day earlier - traffic blockage due to agitation - abuse of power by the officer - HELD THAT:- On the facts of this case, it has precisely been found that there was no intent on the part of the writ petitioner to evade tax and rather, the goods in question could not be taken to the destination within time for the reasons beyond the control of the writ petitioner. When the undeniable facts, including the traffic blockage due to agitation, are taken into consideration, the State alone remains responsible for not providing smooth passage of traffic. The High Court has awarded costs to the writ petitioner in the sum of Rs. 10,000/- in relation to tax and penalty of Rs. 69,000/- that was sought to be imposed by the petitioner No.2. In the given circumstances, a further sum of Rs. 59,000/- is imposed on the petitioners toward costs, which shall be payable to the writ petitioner within four weeks from today - Petition dismissed.

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• 2022 (1) TMI 953
  Service of SCN - allegation that erroneous assumption that the Company concerned is engaged in providing textile services under the provisions of the Finance Act, 1994 - show-cause notices indiscriminately under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017 - HELD THAT:- This writ application could have been rejected outright asking each of the members of the Association who are in receipt of such show-cause notice to file an appropriate reply before the authority and point out that they are not engaged in any manner in providing textile services. It would have been very easy for this Court to do so. However, the same would not have put an end to the harassment that may be caused unnecessarily to all those engaged in the business of textile processing. Let notice be issued to the respondents, returnable on 27th January, 2022. Mr. Lodha, the learned standing counsel, waives service of notice for and on behalf of the respondents Nos.3 and 4 respectively. The respondents Nos.1 and 2 respectively shall be served by RPAD as well as by E-mail.

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• 2022 (1) TMI 952
  Refund of excess tax collected from the petitioner - period from September, 2019 to August, 2020 - HELD THAT:- As per the CBIC circular, Supply of services by a subsidiary/sister concern/group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a company in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act, 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of section 8 of IGST Act, 2017 - the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act, 2017. Such supplies, therefore, would qualify as export of services , subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act . Matter remitted back to respondent No.3 for taking a fresh decision on the claim of refund made by the petitioner, having regard to the above circular dated 20.09.2021 - petition allowed by way of remand.

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• 2022 (1) TMI 951
  Interpretation of Statute - Section 50 of The Central Goods and Services Tax Act, 2017 - Levy of interest - to be levied on gross returned income or on net cash amount? - HELD THAT:- In view of the amendment carried out, the proviso to Section 50 was substituted by Finance Act, 2021 with retrospective effect from 01.07.2017, the grievance of the petitioners has been redressed. However, the details of interest to be paid by the petitioners are required to be worked out by the concerned authorities as per the amended provision. In that view of the matter and having regard to the amendments carried out by the Finance Act, 2021, all the writ petitions are allowed - Decided in favor of petitioner.

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• 2022 (1) TMI 950
  Seizure of goods alongwith the vehicle - detention on the ground that the goods were being transported without a valid e-way bill - HELD THAT:- It is directed that if the petitioner pays the penalty of Rs. 1,20,770.00, within a period of four weeks from the date of this order, the vehicle bearing registration No.AP 28X 1849 along with the goods, seized by respondent No.1 on 30.10.2020, shall be released to the petitioner. This order is only for the purpose of release of the vehicle along with goods on payment of penalty by the petitioner - Petition disposed off.

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• 2022 (1) TMI 949
  Interpretation of Statute - Section 50 of The Central Goods and Services Tax Act, 2017 - Levy of interest - to be levied on gross returned income or on net cash amount? - HELD THAT:- In view of the amendment carried out, the proviso to Section 50 was substituted by Finance Act, 2021 with retrospective effect from 01.07.2017, the grievance of the petitioners has been redressed. However, the details of interest to be paid by the petitioners are required to be worked out by the concerned authorities as per the amended provision. In that view of the matter and having regard to the amendments carried out by the Finance Act, 2021, all the writ petitions are allowed - Decided in favor of petitioner.

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• 2022 (1) TMI 948
  Classification of supply - applicable rate of CGST - supply of pressure tight cables, non-pressure tight cables and special cables for use in S4 submarine supplied by the Applicant to DMDE, Ministry of Defense, Govt of India - to be considered to be as parts of warships and accordingly classifiable under Sl.No.252 read with Sl.No.250 of Schedule I in Notification No. 01/2017 dated: 28.06.2017? - HELD THAT:- The goods supplied by the applicant are electrical cables used for electronic communication. which are specifically enumerated initially at Sl.No.161 of the Schedule IV of Notification No.01/2017 as item 8544. These goods are taxable initially at the rate of 28% and later at a reduced rate of 18% - the Entry 252 of the Schedule I of Notification 01/2017, dated.28-06-2017 as amended i.e., parts of goods of headings 8901, 8902, 8904, 8905, 8906 8907 falling under any chapter are made eligible for a concessional rate of tax of 5% under CGST SGST. The specifications for one cable i.e., CAT6 (PT-10) cable has in its scope the development of communication and signalling cables for marine applications and at clause 1.2 of these specifications it is mentioned that these cables are required for safe transmission of electrical energy between selected devices or points. These narrations in the purchase order indicate that certain cables are used to connect different devices without any indication that such devices are present on the warship. However, the design data in the appendix for certain types of cables in both the contracts pertain to MIL-DTL categories of cables which are used on ships. The end utilization certificate issued by the defence department show that such cables are used as parts of goods mentioned under headings 8901 to 8907 except 8903 - The word Component or Part is not defined in the CGST Act, 2017. The meaning and import of this word has to be obtained from the catena of case law decided by the Hon ble Courts of India. In this connection, law declared by the Hon ble Apex Court of India in the case of COLLECTOR OF C. EX. VERSUS EASTEND PAPER INDUSTRIES LTD. [ 1989 (8) TMI 81 - SUPREME COURT] comes to our aid wherein it was held that anything that enters into and forms part of that process must be deemed to be raw material or component part of the end product and must be deemed to have been used in completion or manufacture of the end product. In the present case, the applicant has submitted certain utilization certificates from the Naval authorities. The certificates categorically state that the goods supplied are used as stores for consumption onboard of Indian Navy Ship (Certificate dated: 29.08.2016 08.11.2016). Similarly, in the certificate dated: 24.02.2017 it is stated that they are exclusively for use onboard Indian Naval Ships. In the certificate dated: 30.03.2017 it is stated that these goods are required for ATV program - When the above (2) evidences are read in tandem, it is clear that the appellant is supplying special types of cables to the Naval authorities. The supplies made by the applicant to Defence Machinery Design Establishment (DMD) for the purpose of use in warship building of Indian Navy will qualify for the concessional rate of tax of 5% under CGST SGST.

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• Income Tax

• 2022 (1) TMI 1478
  Admission of additional evidence by CIT-A - As per AO evidences not been forwarded to the AO to examine verify the same and thereby violated the provisions contained under Rule 46A(3) of IT Rules, 1962 - HELD THAT:- Since the evidence entertained by Ld. CIT(A) during the appellate proceedings has not seen the light of the day during assessment proceedings and AO has never been given an opportunity to look into and verify the facts taken in the additional evidence, the order passed by the Ld. CIT(A) is not sustainable, hence liable to be set aside. Consequently, case is remitted back to the AO to decide afresh, in the light of the directions issued by the co-ordinate Bench of the Tribunal BAJAJ ENERGY LTD (FORMERLY KNOWN AS BAJAJ ENERGY PVT. LTD.) [ 2017 (10) TMI 1595 - ITAT MUMBAI] after providing opportunity of being heard to the parties. Appeal filed by the Revenue is allowed for statistical purposes.

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• 2022 (1) TMI 955
  Disallowance of deduction claimed u/s 80IA - assessee is a resident company engaged in manufacturing of staple fibre, chemicals and textiles - whether assessee s claim of deduction under section 80IA is to be allowed against gross total income or on the total income? - HELD THAT:- This issue now stands squarely settled in favour of the assessee by virtue of the decision of the Hon ble Supreme Court in case of CIT vs Reliance Energy Ltd [ 2021 (4) TMI 1237 - SUPREME COURT] While deciding identical issue, the Hon ble Supreme Court has unequivocally accepted the view expressed by appellate authorities that deduction under section 80IA has to be allowed on the gross total income. In view of the aforesaid, we are inclined to restore the issue to the file of the assessing officer for deciding assessee s claim of deduction under section 80IA of the Act following the ratio laid down by the Hon ble Supreme Court in the case referred to above. Granting interest u/s. 244A - Grant of refund - HELD THAT:- Undisputedly, order granting refund was passed by assessing officer on 09-04- 2018. Whereas, the cheque for refund was actually issued on 11-05-2018. Admittedly, there is a delay in issuing the refund cheque. A reading of section 244A(1) of the Act would make it clear that interest has to be allowed to the assessee till the date of grant of refund. Undisputedly, the refund was actually granted to the assessee with the issuance of refund cheque through State Bank of India. The delay in grant of refund cannot be attributed to the bank as it merely acts as an agent of the department. Therefore, going by the plain language of the provision of section 244A of the Act, assessee is entitled for interest under section 244A of the Act till the issuance of refund cheque. In fact, Central Board of Direct Taxes in circular No. 20D (XXII-22) dated 20.08.1968 holds the same position. Thus, the assessee is entitled to interest under section 244A of the Act till the date of issuance of refund cheque. Grounds are allowed.

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• 2022 (1) TMI 947
  Extension of due date of filing of Tax Audit Report and the Income Tax Returns for the assessment year 2021-2022 till March 31, 2022 - seeking order or direction, directing the respondents not to levy interest under section 234A till the revised due dates provided vide Circular 17/2021 dated 09.09.2021 - appropriate directions to authorities for accepting the TAR and/ or ITR in physical form till the New Income Tax Portal stabilizes and becomes glitch free - HELD THAT:- All necessary steps shall be taken to ensure that the assesses are able to upload their Income Tax Returns/Tax Audit Reports online smoothly and without any difficulties. They have also assured that in the event of any technical glitch, the same shall be attended at the earliest and taken care of as explained in the affidavit filed today. Having regard to the stance of the CBDT as it emerges from the affidavit, we are convinced that no further adjudication is required in the present litigation. We appreciate the efforts put in by the CBDT to ensure that the assesses do not have to face any hardships or difficulties on account of the technical glitches in the portal. We take notice of one pertinent feature emerging from the affidavit and i.e. the E-mail ID, which has been created to assist the filing of Tax Audit Report. A team of six members or if need be more are to examine and resolve the E-mails received at this E-mail ID. Our suggestion to Mr. Singh as well as to Mr. Krishnamurthy is that one such E-mail ID may also be created for the Income Tax Returns. Our suggestion has been graciously accepted by Mr. Singh and Mr. Krishnamurthy. They have assured that the needful shall be done in this regard also. We are convinced that with the cooperation of one and all, we have been able to resolve the controversy as regards the technical glitches in the Income Tax Portal. At this stage, Mr. Hemani, the learned Senior Counsel submitted that by and large all issues can be said to have been taken care of with view of what has been stated in the affidavit except the issue as regards the levy of interest under Section 234A of the Income Tax Act. We do not intend to look into the above controversy in the present litigation as we are informed that one writ application as regards Section 234A is already pending before this High Court. This issue shall be looked into as and when the pending writ application is taken up for hearing by this Court. We close both the writ applications and dispose of the same accordingly. The affidavit, which has been filed today on behalf of the respondents Nos.1 and 2 shall be taken on record.

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• 2022 (1) TMI 946
  Reopening of assessment u/s 147 - Existence of reason to believe - conditions precedent to the exercise of the powers to re-assessment - loan being given to group companies either at low interest rate or no interest rate - HELD THAT:- There can be no doubt in the facts of the present case that the issue of loan being given to group companies either at low interest rate or no interest rate was a subject matter of consideration by the Assessing Officer during the original assessment proceedings. It would therefore, follow that the re-opening of the assessment is merely on the basis of change of opinion of JAO from that held during the course of assessment proceedings leading to the assessment order dated 21st December, 2019. This change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. According to the JAO, survey report submitted by DDIT investigation indicate that interest should be charged at 12% per annum on loan given to sister concern totaling to Rs. 4,17,04,380/- and therefore income chargeable to tax has been under assessed by the said amount. According to the JAO this interest income of Rs. 4,17,04,380/- has escaped assessment. We find it rather strange that such an opinion is formed by the JAO. It is an accepted position that petitioner has in fact not received any interest in respect of the loans/advances given to seven of its group companies in the assessment order 2017-18. When no income is received there is no question of paying any tax on income which respondent think should have been received but was in fact not received. Income which accrues to a person is taxable in his hands but we have not seen any provision of law which says that income which he could have earned but he has not earned is taxable as income accrued to him. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment.Even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings. See INDIAN AND EASTERN NEWSPAPER SOCIETY VERSUS COMMISSIONER OF INCOME-TAX, NEW DELHI [ 1979 (8) TMI 1 - SUPREME COURT] - Decided in favour of assessee.

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• 2022 (1) TMI 945
  Reopening of assessment u/s 147 - notice u/s 148 was issued beyond the period of four years from the end of the relevant assessment year - deductibility of interest expense - whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of Assessment Year 2012-13? - HELD THAT:- The case of the assessee was selected for scrutiny for Assessment Year 2012-13 and it is after complete examination of the original computation of income, revised computation of income and audit, the Assessing Officer has allowed the claim of the assessee towards deductibility of interest expense - Thus, it is clear that the complete details were made available by the petitioner company in the course of assessment proceedings under Section 143(3) of the Act for Assessment Year 2012-13. In this backdrop, it can safely be concluded that the re-assessment proceedings for this year have been initiated despite the fact that the details in connection with the reasons for re-opening were already furnished for Assessment Year 2012-13 no disallowance were made in the assessment order regarding interest inventorization and the same was accepted by the Assessing Officer towards deductibility of interest expense Thus, the reasons for re-opening the assessment of the relevant year were based on the details furnished in the assessment proceedings of Assessment Year 2012-13. Merely, if some other decision has been taken by the Department for other years i.e., Assessment Year 2013-14 and Assessment Year 2014-15, the respondent authorities do not retain the power to review the order of Assessment Year 2012-13 in the garb of re-opening under Section 147 of the Act. Thus, on change of opinion and reviewing its own order is bad in law and without jurisdiction. In our view, re-opening of the assessment without any basis and merely change of opinion is not permissible while exercising powers under Section 147 r/w Section 148 In the present case, the reasons which have been recorded by the assessing officer for reopening of the assessment do not disclose that the assessee had failed to disclose fully and truly all material facts necessary for the purpose of assessment. The duty is cast upon the assessee to make true and full disclosure of the facts at the time of original assessment. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. It is for the Assessing officer to draw the correct inference from the primary facts. If the assessing officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. - Decided in favour of assessee.

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• 2022 (1) TMI 944
  Exemption u/s 11 - Grant of registration u/s 12A - Commissioner held that respondent / assessee had not obtained permission from the Central Board of Direct Taxes while earning income abroad. Thus, it had violated provisions of the Act - ITAT directing the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A if the objectives and activities of the Respondent-assessee are the same as for the assessment year 2020-21?- HELD THAT:- Tribunal had taken note of the fact that for the next Assessment Year 2020-21 respondent / assessee has been granted registration by the Commissioner of Income Tax (Exemptions) under Section 12A of the Act which would imply that the Commissioner was satisfied about the charitable nature of assessee s activities. In view of above, Tribunal thought it fit and proper to remand the matter back to the file of the Commissioner of Income Tax (Exemptions) with the direction to grant registration under Section 12A of the Act if the objectives and activities of the respondent / assessee are found to be the same by the Commissioner of Income Tax (Exemptions) while granting registration under Section 12A for the Assessment Year 2020-21. Tribunal has only asked the Commissioner to examine the claim of the respondent / assessee for the assessment year under consideration keeping in mind the factors which prevailed upon the Commissioner in acceding to such claim of the respondent / assessee for the succeeding assessment year on the principle of parity. Such a direction cannot be said to be illegal - No substantial question of law.

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• 2022 (1) TMI 943
  Benefit of Vivad Se Vishwas Scheme ( VVS Scheme ) - last extended date for filing declaration - Condonation of delay - HELD THAT:- As petitioner filed her declaration on 03.03.2021 which was before the last extended date for filing declaration i.e., 31.03.2021. But, before 03.03.2021, the appeal was filed by the petitioner before the Income Tax Appellate Tribunal on 24.02.2021 along with an application for condonation of delay. The delay was condoned on 23.03.2021 on which date the appeal was also disposed of considering the submission of the petitioner that she would file declaration under the Vivad Se Vishwas Act which was not objected to by the Revenue. On due consideration, we are in agreement with the view taken by the coordinate Bench in Boddu Ramesh [ 2021 (2) TMI 1174 - ITAT HYDERABAD] more particularly to those expressed in paragraph nos.40 and 43 thereof. We find that rejection of the declaration was not preceded by any notice or hearing. Though such notice or hearing is not provided under Section 5 of the Vivad Se Vishwas Act, it is axiomatic that principles of natural justice, which is the very essence of fairness, demands that before an adverse decision is taken affecting the rights and liabilities of an aggrieved person, he ought to be put on notice and given an opportunity of hearing. The same having not been done in the present case, the impugned decision suffers from violation of the principles of natural justice which is one more reason why we are constrained to interfere with the same. We set aside the impugned order dated 20.04.2021 passed by respondent no.2 rejecting the declaration / application of the petitioner dated 03.03.2021 for settlement of tax dues under the Direct Tax Vivad Se Vishwas Act, 2020 and remand the matter back to the authority for taking a fresh decision in accordance with law.

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• 2022 (1) TMI 942
  Change of Private Limited company to Limited liability partnership firm - succession to business - Disallowance of expenses - CIT deleted the disallowance and reducing the same from the closing work-in-progress carried forward to the next AY. 2014-15 - Scope of provisions of section 47(iii)(b) - CIT(A) has given the finding that two different returns should have been filed. One for the tenure of the company and second for the tenure of the LLP - HELD THAT:- We note that the order of Ld.CIT(A) is full of conjectures and surmises. Despite observing that there should have been two returns of income, one for the period of company and one for the period of LLP and despite also observing that the AO of the company may be different, he has treated the same as procedural and also assumed jurisdiction over the said possible, AO and allowed the appeal. In our considered opinion, non filing of return for proper period and not in appropriate status is not at all a procedural mistake, it is quite substantial mistake. CIT(A) cannot make a hypothetical order depending upon the order of assumed AO for the company. In our considered opinion, on the facts and circumstances of the case matter needs to be remitted to the file of AO. The AO shall examine the issue afresh keeping in light of the finding of the Ld.CIT(A) that there should have been two returns for the period and for the part of the period the AO may not have jurisdiction. Furthermore, the provision of section 170 dealing with succession to business otherwise than on death has to be kept in mind by the AO. Accordingly, we direct the at the AO to examine the issue as per law without being influenced by other observation of the Ld.CIT(A) as above. Needless to add, assessee should be granted adequate opportunity of being heard. Revenue Appeal is allowed for statistical purpose.

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• 2022 (1) TMI 941
  Credit for withheld tax - Foreign Tax Credit - On receipt of tax credit certificates in the financial year 2013-14, the assessee admitted the same as business income and claimed tax credit u/s.90 for whole of the amount in the return of income filed - HELD THAT:- AR before us also produced the computation of income and balance sheet as on 31.03.2014, wherein the certificate of tax credit issued by Omega Simulation Co. Ltd., Japan which proves that taxes were deducted only during financial year 2013-14 under DTAA of Indo-Japan. Both the parties below have recorded concurrent finding that the assessee company has not made any claim for credit towards the above stated withholding tax in earlier assessment years prior to the relevant assessment year 2014-15. We noted that the income has accrued in financial year 2013-14 relevant to assessment year 2014-15 and the assessee has correctly accounted this income in this very assessment year. Once the assessee has accounted for this income in this year and also claimed that tax credit, we are of the view that CIT(A) has rightly allowed the claim u/s.199 of the Act. We find no infirmity in the order of CIT(A) and hence the same is confirmed - Appeal filed by the Revenue is dismissed

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• 2022 (1) TMI 940
  Revision u/s 263 by CIT - Disallowance of Professional Fees u/s.40(a)(ia) for non-deduction of tax at source u/s.194J - HELD THAT:- None of the individual items of payments or aggregate to one party exceeds Rs. 30,000/-. Once the position is such, the case gets covered under the first proviso to section 194J(1), requiring no deduction of tax at source on professional fees or technical fees in terms of section 194J. The ld. Pr.CIT, without controverting the factual position stated before him, failed to consider that the assessee was, in fact, not required to deduct tax at source in view of the first proviso to section 194J. When the AO impliedly accepted the assessee s contention, the assessment order cannot be held as prejudicial to the interest of the Revenue inasmuch as there is no loss to the Revenue warranting disallowance u/s.40(a)(ia) - assessment order may be termed as erroneous from the standpoint of the ld. Pr.CIT for not having discussed the issue in the assessment order, but it cannot be branded as prejudicial to the interest of the Revenue because there is no loss to the revenue inasmuch as the issue is tax neutral. - Pr.CIT was not justified in treating the assessment order as erroneous and prejudicial to the interest of the Revenue on this score. Disallowance of Transport Expenses u/s.40(a)(ia) on account of failure to deduct TDS u/s. 194C - Even though the AO did not make a mention of the issue in the assessment order, the same cannot be considered as prejudicial to the interest of the Revenue because the provisions of sub-section (6) of section 194C did not require deduction of tax at source. The position so stated before the ld. Pr.CIT, giving all the necessary details which have been tabulated in the impugned order, has not been controverted in any manner. We, therefore, hold that the ld. Pr.CIT was not justified in exercising the revisionary power on this issue because the twin conditions for revision were not satisfied. Mismatch of Sales Turnover - Even though there is a mistake in mentioning the figure of turnover in Tax Audit report but that mistake does not affect the total income inasmuch as the amount of profit shown in the Profit and loss account has been considered for the purposes of computation of total income. In fact, the same audit report having Annexure 1 Part B gives the amount of net profit/loss to be taxed as per the Profit and loss account which matches with the amount of profit as per the Profit and loss account. Albeit , the AO did not conduct any inquiry on wrong mentioning of the amount of total turnover in the Tax Audit report, which was although correctly considered in return of income, but the assessment order cannot be considered as prejudicial to the interest of the Revenue because the amount of profit has been correctly reflected. As such, the assessment order cannot be said to pass the test of satisfying the dual conditions laid down in section 263. Improper verification of Sundry Creditors - Assessee furnished a list of sundry creditors, showing copious details of all the sundry creditors including the creditors with balances of Rs. 1.00 lakh or more that were duly confirmed by the respective parties also. Only small balances below Rs. 1.00 lakh were without confirmation. It can be seen from the details of such sundry creditors as given in the impugned order itself that large chunk of total sundry creditors got exhausted in the balances of more than Rs. 1.00 lakh, for which proper verifications were done. Some small balances here and there below Rs. 1.00 lakh even though not examined by the AO, did not render the assessment order erroneous and prejudicial to the interest of the Revenue unless the ld. Pr.CIT demonstrates something amiss in them, which is actually not the case. Interest on refund u/s.244A not offered for taxation - The amount of interest on income-tax refund has been duly credited on 16- 07-2014. The total closing balance from such account has been taken to the Profit and loss account which has been considered for declaring the income chargeable to tax. Under these circumstances, we fail to appreciate as to how the assessment order can be termed as prejudicial to the interest of the Revenue when the assessee disclosed the amount of interest on income-tax refund in its interest income account. We find that even though the AO did not specifically discuss such five issues in the assessment order, but the assessment order does not satisfy the second condition of being prejudicial to the interest of the Revenue. Ex consequenti, we hold that the ld. Pr.CIT was not justified in revising the assessment order. We, therefore, set-aside the same. - Decided in favour of assessee.

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• 2022 (1) TMI 939
  TDS u/s 195 - payments made to Intelsat Corporation, USA/IGSM, UK/MEASAT, Malaysia for transponder charges - Whether payment did not constitute royalty u/s 9(l)(vi) of the Act or under the relevant DTAA? - whether CIT (A) has erred in not taking into account that the payments made by the assessee to Intelsat for transponder charges are specifically covered by Explanation 6 to section 9(l)(vi) as being included in the expression process and hence fall under definition of royalty as per Explanation 2 to section 9(l)(vi) of the Act? - HELD THAT:- As decided in VIACOM 18 MEDIA PVT. LTD [ 2018 (7) TMI 2248 - ITAT MUMBAI] relying on G. E. Technology Centre Pvt. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] held that transponder charges are not in the nature of Royalty income in the hands of recipients despite amendment to section 9(1)(vi of the Act. In view of binding precedent of the Tribunal and Hon ble High Court followed by the Ld.CIT(A) in respective impugned orders, we do not find any error or infirmity in the impugned orders passed by the Ld.CIT(A) on the issue in dispute relevant to the orders of Assessing Officer u/s 195(2) of the Act. Accordingly, we uphold the finding of the Ld. CIT(A) in impugned orders - Decided in favour of assessee.

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• 2022 (1) TMI 938
  Revision u/s 263 by CIT - exemption u/s.11 - assessee had not furnished confirmation from donors - difference between lack of enquiry and inadequate enquiry - HELD THAT:- We find that in case if the ld. PCIT is of the opinion that the ld. AO had not made requisite enquiries, then he should have made the requisite enquiries and brought on record where the ld. AO had gone wrong. Admittedly, this has not been done in the instant case.See DELHI AIRPORT METRO EXPRESS PVT. LTD. [ 2017 (9) TMI 529 - DELHI HIGH COURT] PCIT in the instant case had merely directed the ld. AO to make fishing and roving enquiries on the existing details already available in the assessment records by merely directing him to re-verify the same details. Hon ble Delhi High Court in the case of PCIT vs. Modicare Ltd., [ 2017 (9) TMI 1238 - DELHI HIGH COURT] ; ITO vs. DG Housing Projects Ltd[ 2012 (3) TMI 227 - DELHI HIGH COURT] ; DIT vs. Jyothi Foundation [ 2013 (7) TMI 483 - DELHI HIGH COURT] had uniformly held that the exercise of jurisdiction u/s.263 of the Act by the ld. PCIT cannot be outsourced by the ld. PCIT to the ld. AO. In either case, there is a huge difference between lack of enquiry and inadequate enquiry . It is for the ld. AO to decide the extent of enquiry to be made as it is his satisfaction what is required under law. We find that the ld. PCIT had not invoked Explanation 2 to Section 263 in his entire order passed u/s.263 of the Act. Despite this fact, for academic reasons, we proceed to address the arguments of the ld. DR in this regard. The said explanation does not confer unfettered powers to the ld. PCIT to assume jurisdiction u/s.263 of the Act to revise every order of the ld. AO to re-examine the orders already examined during the course of assessment proceedings. Intention of the legislature could not have been to enable the ld. PCIT to find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The opinion of the ld. Commissioner referred to Section 263 of the Act has to be understood as legal , judicious opinion and not arbitrary opinion. Even in the case of Nirav Modi [ 2016 (11) TMI 1498 - SC ORDER] categorically stated that the ld. PCIT should conduct enquiry on his own to find out whether there is any error in the details furnished by the assessee. - Decided in favour of assessee.

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• 2022 (1) TMI 937
  Disallowance on account of business expenses and unabsorbed depreciation - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee s own case for assessment year 2012 13 [ 2019 (3) TMI 1951 - ITAT MUMBAI] The learned assessing officer has also made the addition for this impugned assessment year based on his order for assessment year 2012 13. In view of this ground number 1 and two of the appeal of the learned assessing officer are dismissed. Addition u/s 56 (2) (viib) - issue of shares that exceeds the face value - Assessee has issued share capital at Rs. 75 per share being face value of Rs. 10/- each at a premium of Rs. 65/- per share - HELD THAT:- For the purpose of determining fair market value of unquoted shares provisions of rule 11 UA (2) applies which gives an option to the assessee to either value the shares as per prescribed formula given in clause (a) or clause (b) which provides for the determination of the fair market value based on discounted cash flow method as valued by a merchant banker or a chartered accountant (till 24th of May 2018). In the present case the assessee has valued the shares according to one of the options available to assessee by adopting discounted cash flow method. Therefore, such an option given to the assessee cannot be withdrawn or taken away by the learned assessing officer by adopting different method of valuation i.e. net asset value method. The method of valuation is always the option of the assessee. AO is authorised to examine whether assessee has adopted one of the available options properly or not. In the present case, the learned assessing officer has thrust upon the assessee, net asset value method rejecting discounted cash flow method for only reason that there is a deviation in the actual figures from the projected figures. It is an established fact that discounted cash flow method is always based on future projections adopting certain parameters such as expected generation of cash flow, the discounted rate of return and cost of capital. In hindsight, on availability of the actual figures, if the future projections are not met, it cannot be said that the projections were wrong. To prove that the projections were unreliable, the learned assessing officer must examine how the valuation has been done. In a case future cash flow projections do not meet the actual figures, rejection of discounted cash flow method is not proper. Reason given by the learned assessing officer that the net asset value method and the discounted cash flow method for valuation of the shares of the company gives a wide variation between them, we do not find any reason to find fault with the assessee in such cases. Both these methods have different approaches and methodologies therefore there are bound to be differences, but it does not give any authority to the learned assessing officer to pick and choose one of the method and make the addition. It is the assessee who has to exercise one of the options available under the provisions of the law for valuing the shares. The learned assessing officer needs to examine that method. Naturally, if the discounted cash flow method and net asset value method gives the same result, where would have been the need to prescribe the two methods in the law. In view of above facts, we do not find any infirmity in the order of the learned CIT An in deleting the addition made by the learned assessing officer u/s 56 (2) (viib) of the act. Accordingly, ground number 3 and 4 of the appeal of the learned assessing officer are dismissed.

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• 2022 (1) TMI 936
  Ex-parte order of CIT-A - violation of principle of natural justice - As contended assessee could not represent his case before Ld. CIT(A) and the order being an ex parte order, stood vitiated on account of violation of principle of natural justice - assessee submits that during the appellate proceedings, assessee could not receive the notice of hearing, therefore he could not appear before the ld. CIT(A - HELD THAT:- We note that assessee has not given sufficient opportunity of being heard and could not plead his case successfully before the ld. CIT(A). We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of Ld. CIT(A) for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand forthwith. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, the appeal of the assessee is treated as allowed.

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• 2022 (1) TMI 935
  Levy of penalty imposed u/s. 271(1)(c) - Assessee had attempted to set off the capital gains earned during the year against a false claim of capital loss - HELD THAT:- As mistake was noticed by the Assessing officer during the course of assessment proceedings and on being confronted on the issue, the assessee surrendered the Long Term Capital Loss. We have also gone through the computation of income filed by the assessee and we see that this amount of capital loss has been duly mentioned in the computation of income. Therefore, apparently, we find that there is no concealment of any material fact by the assessee. At best, it can be said that the claim made by the assessee with respect to the Long Term Capital Loss was an incorrect claim or a wrong claim but it was not a false claim by any measure in as much as there was only a mistake in the legal sense that the gift made by the assessee to the son was considered as a transfer in the computation of income and the resultant figure was shown as a capital loss. It is also a fact on record that the assessee had accepted the same at the time of assessment proceedings. On the facts of the present case, we are of the considered opinion that it is not a case where the particulars of income in relation to which the penalty has been levied were either incorrect or were concealed. The amount of capital loss has duly been disclosed in the computation of income and, therefore, it cannot said to be a case of the assessee attempting to make a false claim. The Hon ble Apex Court in the case of CIT Vs. Reliance Petro Products Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] has clearly held that if all the particulars of income are duly disclosed, the mere disallowance of claim or non-acceptance of a claim would not attract levy of penalty u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

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• 2022 (1) TMI 934
  Admission of additional evidence - AO objected to the admission of additional evidences and CIT(A) confirmed the addition of short term capital gain - Despite accepting that assesses claim should be accepted as long term capital gain, in the concluding portion Ld.CIT(A) has confirmed the addition as short term capital gain. - HELD THAT:- AO has not commented upon the additional evidences. Ld. CIT(A) is taking cognizance of the addition evidences and has observed assessee s claim should be accepted as long term capital gain. However, he has concluded that assessment as short term capital gain is confirmed. Hence, the order of Ld.CIT(A) is contradictory. Furthermore, assessee has submitted a valuers report regarding the valuation and cost of improvement, which have been rejected by the Ld.CIT(A) without AO s comment or any cogent reasoning. Hence, on the facts and circumstances of the case, in the interest of justice, the issues raised in the appeal are remitted to the file of AO. The AO shall consider the issue afresh after giving the assessee proper opportunity of being heard. The Ld. Counsel of the assessee has undertaken to cooperate before the AO in the assessment. Appeal by the assessee stands allowed statistical purposes.

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• 2022 (1) TMI 933
  Disallowance of Employees contribution to PF ESI not credited before the due date of payment under respective Acts - Scope of amendment made by the Finance Act, 2021 to Section 36(1)(va) r.w.s. 43B - HELD THAT:- As decided in case of M/s.Adyar Ananda Bhavan Sweets India Pvt. Ltd [ 2021 (12) TMI 558 - ITAT CHENNAI ] payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B. For scope of amemdment as before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees contribution on account of provident fund and ESI, whether the due date is as per the respective acts or up to the due date of filing of return of income of the assessee - it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021- 22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed.

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• 2022 (1) TMI 932
  Revision u/s 263 by CIT - Reopening of assessment u/s 147 consequent to the order u/s. 263 - Addition u/s 68 - HELD THAT:- Having gone through in detail into the order u/s. 147/143 of the ITO, Ward-6(2), Kolkata dated 30.01.2012, the order u/s. 263 of ld. CIT, Kolkata-2 and the order u/s. 263/143 of the ITO, Ward-1(2), Kolkata, we find that the AO has miserably failed to bring anything on record to prove the case of the revenue. Unfortunately, the detailed instructions given by the ld. CIT have been given a crackpot. While the ld. CIT has examined the issue in detail and set aside the order, the revenue authorities down below the line valiantly ignored the directions and given a go by to all the well considered examination and directives of the ld. CIT. Case has been reopened u/s. 148 and the share capital has been examined. The ld. CIT has passed order on 21.03.2014 wherein the previous order of the AO has been set aside for fresh adjudication. The process of reassessment consequent to the order u/s. 263 was initiated on 26.12.2015 by issue of notice i.e. 9 months after the passing of the order from the order by the ld. CIT. Having initiated the proceedings on 26.02.2015, the order has been passed on 31.03.2015 in a lightning speed within a narrow span of 33 days and made addition of approximately Rs. 40 crores. There were neither any directions nor reference sought u/s. 144, either by the ITO or suo moto by supervisory authorities. We have seen the action of the AO while making the addition in terms of investigation and enquiry. The AO issued summons on 10.03.2015 and held that most of the summons returned unserved which indicates that the summons have been send by post. Owing to the unserving of the summons, the AO directly came to the conclusion that it is a dummy company which was brought into existence merely for building share capital. (Refer Assessment Order of the AO) At the same time, the AO mentions that the documents have been filed with regard to the shareholders. The AO absolutely did not make any enquiry whatsoever it is to come to a conclusion that it is a case assessed u/s. 68. No field enquiry was conducted nor the Inspector has been deputed nor the help of the Investigation Wing has been requisitioned nor there have been any pre-enquiries conducted by the revenue department to aid the AO to come to conclusion of treating this amounts u/s. 68. This is a classic case of collective failure on the part of the revenue authorities. CIT(A) confirmed the addition solely on the basis of low returned income of the subscribers. On the other hand, the assessee has filed all the documents to prove their case prima facie and thus discharge the primary onus. At this juncture, it is for the revenue to pick up the addresses, names, locations and carry on further investigations to prove the credibility non-creditability of the parties which was abysmally lacking. On going through the entire order of the ld. CIT(A), other than the theoretical rhetoric, no iota of tangible material has been brought on record. The established adages are that the primary onus to prove that the income is non-taxable lies on the assessee whereas the primary onus to prove that the income is taxable lie with the revenue authorities. In the instant case, we find that nothing has been proved to come to a conclusion that the income falls within the ambit of Section 68 - we hold that the action of the ld. CIT(A) cannot be sustained. Decided in favour of assessee.

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• 2022 (1) TMI 931
  Computation of capital gain - slump sale - Long Term Capital Gains - aggregate value of assets for purpose of computing net worth of undertaking in terms of provisions of section 50B - liabilities considered for computing net worth of undertaking - whether calculation of net worth as claimed by the assessee in its computation is as per law - whether CIT(A) ought to have appreciated the fact that when the liabilities are with the assessee and not taken over by the buyer which is contradiction of explanation of net worth as per provision of Sec. 50B - HELD THAT:- We find substance in the arguments of the assessee for simple reason that share application money received pending allotment which was part of long term borrowings has been subsequently converted into equity share capital by allotment of shares which is evident from financial statements filed by the assessee for the financial year 2014-15 - advance sale consideration received from M/s. Micro Therapeutic Research Lab P. Ltd., buyer of the undertaking was received starting from financial year 2009 to 2011 which was shown as long term borrowings in the balance sheet of the assessee. Since advance sale consideration received from buyers of the undertaking is not a liability, but consideration received for sale of undertaking, same cannot be considered as liability for computing net worth of undertaking. Similarly, loans from directors as admitted by the learned DR, said liability is continued with the assessee even after sale of undertaking on slump sale basis, because said liability has not been taken over by the buyer. Once liability was not part of sale arrangement for undertaking, then said liability cannot be considered for computing net worth of undertaking. Deferred tax liability - Assessee has rightly not considered deferred tax liability for computing net worth, because it is only notional entry created in the books of account for timing difference in taxes on income, but not liability which can be paid immediately. Therefore, it cannot be considered as liability for ascertaining net worth of undertaking. CIT(A) after considering relevant facts has rightly held that long time borrowing includes advance sale consideration received from buyer of undertaking, share application money pending allotment is not liability for an undertaking for computing net worth for purpose of computation of capital gain in terms of section 50B - Similarly, as regards deferred tax liability the learned CIT(A) has rightly appreciated arguments of the assessee in not considering deferred tax liability while computing net worth, because it is only notional entry for timing difference in taxes on income by the undertaking. Therefore, we are of the considered view that there is no error or infirmity in the reasoning given by the learned CIT(A) to delete additions made towards computation of short term capital gains on transfer of undertaking in terms of section 50B of the Income Tax Act, 1961. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds raised by the revenue.

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• 2022 (1) TMI 930
  Disallowance made u/s. 36(1)(iii) - assessee had diverted interest bearing funds, without charge of any interest, and such diversion of funds shall be squarely covered by section 36(1)(iii) - CIT-A deleted the addition - HELD THAT:- We find that an identical issue has been considered by the Tribunal for immediately preceding assessment year 2014-15 [ 2019 (7) TMI 1698 - ITAT CHENNAI ] where the Tribunal by following its decision in assessee s own case for assessment year 2013-14 [ 2018 (7) TMI 1476 - ITAT CHENNAI ] deleted additions made by the Assessing Officer towards disallowance of interest expenses u/s. 36(1)(iii) of the Act as held assessee has been considered as an investment company and making investments was part of its business - deduction u/s.36(1) (iii) of the Act had to be allowed in respect of interest paid, if capital was borrowed for the purpose of business or profession. We further noted that the Hon ble Jurisdictional High Court of Madras [ 2020 (10) TMI 1160 - MADRAS HIGH COURT ] has affirmed findings of the Tribunal in deleting additions made by the Assessing Officer towards disallowance of interest expenses u/s. 36(1)(iii) of the Act - Decided in favour of assessee.

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• 2022 (1) TMI 929
  Penalty levied u/s. 271AAA - Addition of unexplained jewellery and unexplained cash - HELD THAT:- As this Tribunal has deleted the additions made by the AO in the quantum [ 2019 (7) TMI 1900 - ITAT DELHI] therefore, the penalty would not survive. - Appeal of the assessee is allowed.

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• 2022 (1) TMI 928
  Disallowance of deduction u/s 80P(2)(d) - co-operative housing society situated in Mumbai - Amount received on account of interest from Co-operative Bank - HELD THAT:- As reading of section 80P nowhere provides that co-operative housing society situated in Mumbai does not satisfy the clause of section 80P. In this regard, query was raised by the Bench to the Ld. DR as to how where section 80P shows that Co-operative Housing Society situated in Mumbai does not satisfy the clauses of section 80P, he could not make any cogent answer and relied upon the Ld.CIT(A) order. Hence, we hold that denial of deduction u/s. 80P for sole reason of its being situated in Mumbai is not legally sustainable. Hence, the order passed by the Ld.CIT(A) is set aside and this appeal by the assessee stands allowed.

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• 2022 (1) TMI 927
  Disallowance u/s 14A read with rule 8D - dividend income - HELD THAT:- We do not see an infirmity in the finding of Ld.CIT(A) that the provision of section 14A of the Act, cannot apply to the dividend income from OMIFCO which is part of the total income. The Grounds raised by the Revenue are devoid of any merit hence, rejected. Disallowance being amortization of lease payment - as argued these are allowable business expenditure for determining the taxable income and should have been allowed - HELD THAT:- The issue has been decided against the assessee by the Hon ble Delhi High Court in the assessee s own case [ 2012 (7) TMI 526 - DELHI HIGH COURT ] Therefore, respectfully following the judgement of the Hon ble Delhi High Court, we do not see any infirmity in the finding of ld.CIT(A), the same is hereby affirmed.- Decided against assessee. Addition u/s 14A - Mandation of recording satisfaction - contention of the assessee is that the assessee had sufficient interest free funds which were used for making additional equity investment in the shares in Gujarat State Energy Generation Ltd. and the AO has not recorded his satisfaction regarding the expenditure sought to be disallowed is related to earning of exempt income - HELD THAT:- authorities below failed to appreciate that Rule 8D r.w.s.14A of the Act can be invoked only when the AO from the books of accounts of assessee placed before him is able to demonstrate that the expenditure sought to be disallowed, has been incurred for earning tax free income. It is stated that Rule 8D has been mechanically invoked by the AO without establishing such nexus. He further submitted that the assessee had demonstrated before the authorities below that the assessee was having sufficient interest free fund available to make investment wherefrom it had earned exempt income. We find merit on this contention of the Ld. Counsel for the assessee. The law is wellsettled that the section 14A would come into play, where the AO gives a clear finding regarding expenditure incurred for earning of income. Where the assessee is able to demonstrate that the investment was made out of own interest free fund in such cases, no disallowance would be called for regarding interest expenditure. Therefore, in the absence of clear finding by AO and disallowance on the basis of guess work cannot be sustained. Hence, we direct the AO to delete the disallowance - Decided in favour of assessee.

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• 2022 (1) TMI 926
  Disallowance of interest expenditure - Corresponding to interest on debit balance of partner - amounts withdrawn by the partner for the payment of income-tax from the partnership firm - AR submitted that undisputedly the assessee had withdrawn the amounts for the purpose of payment of tax and had claimed interest paid on the debit balance on account of excess borrowings, whereas, the firm had shown interest charged from the assessee as its income - only reason for which AO made the impugned disallowance is that the assessee had made withdrawals for the purpose of payment of taxes and had claimed interest such paid as expenditure - HELD THAT:- We agree with the contention of the Ld. AR that since the assessee partner is entitled to interest received on the credit balance of capital, which becomes his income , similarly, the assessee / partner is also liable to pay interest on the debit balance / excess withdrawals from the partnership firm and by the same reasoning and logic it become as expenditure which is to be deducted while computing the taxable income of a partner of the firm. In our view too, once the partner has withdrawn an amount from the firm, it becomes immaterial as to what end it put to use. The amounts withdrawn may be utilised by the assessee / partner for the purpose of meeting house-hold expenses, making investments or even for the purpose of paying tax and it is not within the purview of the Income-tax authorities to determine and dictate as to how the funds so withdrawn are put to use by the assessee / partner. Although, it is a settled proposition that the tax paid in respect of income is not a deductible expense, it is not the case here. Both the lower authorities below to have entirely misconstrued the factual matrix and have proceeded on an assumption that the assessee / partner was claiming expenditure in respect to income tax / advance tax paid, whereas, the assessee has only claimed expenditure in respect of interest on excess withdrawals made, which were utilised for the purpose of paying income tax / advance tax. Therefore, in our considered opinion, both the lower authorities have entirely missed the case in point and have made the impugned disallowance which cannot be sustained - we direct the Assessing officer to delete the impugned disallowance .

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• 2022 (1) TMI 925
  Estimation of profit @8% of the work-in-progress - HELD THAT:- We find that Co-ordinate bench of the Tribunal in the assessee s own case [ 2009 (9) TMI 1060 - ITAT AHMEDABAD] and [ 2019 (1) TMI 1953 - ITAT AHMEDABAD] has examined and discussed at length issue of estimation of net profit at the rate of 8% on the alleged work-in-progress, and came to the conclusion that the assessee was a developer, and the WIP did not belong to it. The assessee is consistently following mercantile system of accounting, where receipts in the form of development fees have been recognized on completion of project. The ld.AO without any basis construed that WIP belonged to the assessee, Accordingly, the Tribunal confirmed claim of the assessee. CIT(A) has reproduced order of the Tribunal in entirety for appreciating the facts in right perspective. In view of this fact, there is no reason for us to deviate from the findings of the ld.CIT(A) based on findings of the ITAT in the assessee s own case cited (supra), and therefore, which we uphold and confirm deletion of additions on account of estimation of work-in-progress for both the years. Thus, ground no.1 of both appeals of the Revenue stand rejected. Addition u/s 14A read with Rule 8D - disallowance of interest expenses - assessee explained that the investment was made out of interest free funds available with the assessee, and therefore, no expenditure was incurred by the assessee towards investment for making such investment which yielded exempt income - HELD THAT:- .AO in making disallowance under section 14A read with Rule 8D was not justified in view of the fact that the assessee has demonstrated that it has sufficient funds for making investment which yielded exempt income. As per the figures demonstrated by the assessee, assessee s interest free funds far exceeded investment made for earning exempt, against which, there is no material with the Department to establish that borrowed funds were utilized by the assessee for the impugned investment. The ld.CIT(A) in the impugned order noticed that the assessee had sufficient interest free funds in excess of investment made for earning tax free income. After examining the explanation of the assessee and based on decision of the Tribunal in assessee s own case for the Asstt.Year 2011-12 cited (supra), the ld.CIT(A) deleted the interest portion of the disallowance and the balance amount was sustained. We do not find any infirmity in the order of the ld.CIT(A) on this issue, which accordingly confirmed, and this ground of the Revenue stands dismissed.

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• 2022 (1) TMI 924
  Gain on sale of land - Nature of land - agricultural land or capital asset or business receipts - main argument of the assessee is that all the purchases of the lands shown in the balance sheet are as a fixed asset and therefore, the same is treating as business income of the assessee is not correct - HELD THAT:- The assessee has performed near about 70 transactions out of which only 20 transactions are not sold and the remaining 50 transactions are completed by the assessee - as gone through the Annexure attached to the assessment order at Page Nos. 1 to 7, it gives entire picture of purchases and sales of the lands from that it is very clear that the intention of the assessee is only to make a profit out of buying and selling of the properties and therefore, the income arising out of the sale of the land rightly treated by the A.O as business income Simply showing the land in the balance sheet as an investment is not sufficient. The activities carried by the assessee i.e., buying and selling of the properties are considered in this case and we are of the opinion that the intention of the assessee is not to carry out agricultural operations only but to earn the profit. Therefore, the A.O has rightly taxed the income arising out of the sale of the lands as income from business. A gricultural income shown by the assessee - total holding of the land by the assessee is 65 acres. The agricultural income shown by the assessee is only Rs. 3,12,500/-. From the above, it is very clear that the agricultural income shown by the assessee is very nominal not only that it can be safely concluded that the assessee has not carrying any major agricultural operations and the return of income is showing some agriculture income claimed as exempt. The assessee is not improving the land purchased but the intention of the assessee has to be seen to assess the income. In this case, by considering the facts and circumstances of the case, we are of the opinion that the frequent buying and selling of the land is to earn the profit and the intention of the assessee is only quick earning of the money and therefore, the income earned by the assessee out of sale of land is a business income. The A.O as well as Ld. CIT(A) has rightly treated the income earned by the assessee is business income. - Decided against assessee.

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• 2022 (1) TMI 923
  Nature of receipt - Sales tax exemption benefit received - whether to be treated as capital receipts not liable to tax - HELD THAT:- This issue has been subject matter of appeal in the assessee s own case from AY 2004-05 onwards and has been decided in favour of the assessee from AY 2004-05 onwards.he facts and circumstances during the year under consideration remain the same and hence following the series of the orders of Coordinate Bench of this Tribunal for earlier years in assessee s own case AND in AY 2010-11[ 2017 (12) TMI 1134 - ITAT MUMBAI] , we confirm the order of the LD CIT(A) and dismiss this ground raised by the Revenue. Disallowance u/s 80IA for Rail Systems and for Power Plants - Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) - HELD THAT:- The coordinate Bench of this tribunal in AY 2010-11[ 2017 (12) TMI 1134 - ITAT MUMBAI] analysed the issue in great detail and allowed the claim of the assessee. It has been held that the Rail undertakings are infrastructure facilities and eligible for deduction u/s.80IA - Since the facts and circumstances with regard to this claim of the assessee remain same in this year, following the orders of Coordinate Bench in assessee s own case for earlier assessment years, especially for AY 2010-11, we uphold the action of the LD CIT(A) and dismiss this ground raised by the Revenue. Disallowance u/s 14A r.w.r. 8D - indirect expenses incurred for earning exempt income - HELD THAT:- The facts in the present case are similar to the facts in the earlier years. For the year under consideration, the disallowance offered by the assessee is in respect of salary cost of the employees looking after the investment activities and the indirect cost relating to such employees. Therefore, following the decision of Coordinate Bench of this Tribunal in assessee s own case for earlier year and the Bombay High Court s ruling for AY 2008-09[ 2017 (2) TMI 1005 - BOMBAY HIGH COURT] against which the SLP filed by the Revenue has been rejected by the Hon ble Apex Court [ 2018 (7) TMI 646 - SC ORDER] we hold that total disallowance for the purpose of section 14A should be restricted to the amount suo moto offered by the assessee and accordingly dismiss the ground raised by the Revenue in this regard. Nature of receipts - treating the receipts on sale of CER certificates as capital receipts instead of revenue receipts - HELD THAT:- We note that this issue has also been decided in favour of the assessee in its own case by the Coordinate Bench of this Tribunal in for AY 2008-09 Since the facts on this issue remains same for the year under consideration, we do not find any reason to interfere with the order of the LD CIT(A). Accordingly, following the decision of the Coordinate Bench of this Tribunal in assessee s own case for AY 2008-09, this ground of the Revenue is dismissed. Deduction u/s 80IA - amalgamating / demerged entity to claim any deduction in the year of amalgamation/ demerger - HELD THAT:- since the provisions of sub-section (12) were disabling in nature, as it disentitled an amalgamating company or a demerged company from claiming deduction in the year of amalgamation or demerger, the insertion of sub-section (12A) merely negated the effect of sub-section (12) and cured the disability created under sub-section (12) of section 80IA of the IT Act. Further, it is also worth noting that the language used in sub-section (12) had another defect. It can be explained with the help of an example: Suppose an entity had 3 eligible undertaking on which tax holiday was claimed and one out of the three was demerged to another entity. By virtue of clause (a) of sub-section (12) which specifies that no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes places, even the other two undertakings which remains with the demerged company could be denied the benefit of tax holiday when only one undertaking is determined. We are, therefore, of the view that the legislature, in all its wisdom, has neutralised the disability enshrined in sub-section (12) by inserting sub-section (12A) in section 80IA of the IT Act. If the intention of tax holiday under section 80IA was to provide incentive to only original investor, the legislature would have never inserted sub-section (12) in the statute. At least, the memorandum explaining the provisions of Finance Bill 2007, regarding insertion of sub-section (12) in Section 80IA should have clarified why the legislature thought fit to deviate from the its basic intent of providing incentive to the original investor and provide benefit to the successor. We have seen earlier, the memorandum explaining the provisions of Finance Bill 2007 has no such reference. It is, therefore, difficult to accept the contention of the Revenue and accept the contents of Circular no. 3 of 2008 to be depicting correct intention. In our view, therefore, the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the specified situations. There cannot be any other meaning to such simple provision of the IT Act We hold that sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of subsection (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. Accordingly, AO is directed to allow the deduction as claimed by the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed. Disallowance of additional depreciation under section 32(1)(iia) of the IT Act in respect to assets installed during the FY 2009-10 (i.e. AY 2010-11) and are used for a period less than 180 days in that year (spill over depreciation) - HELD THAT:- As following decision of the Hon ble jurisdictional High court in the case of Pr.CIT vs. Godrej Industries Ltd.[ 2018 (12) TMI 64 - BOMBAY HIGH COURT] on this issue, we allow the appeal of the assessee and accordingly direct the assessing officer to delete this addition. Denial of claim u/s 35(2AB) in respect of R D expenses incurred on the basis of report received from Department of Scientific and Industrial Research (DSIR) - HELD THAT:- The AO in the present case has not disputed the correctness of the claim made by the assessee. In view of the above discussions and judicial precedents on this issue, we hold that the claim of the assessee must be granted as made in its return of income. It cannot be restricted to the extent of claim as approved in Form No.3CL by DSIR since there was no such requirement either under the Act or in the Rules for the assessment year 2011-12. We accordingly allow the appeal of the assessee Company on this ground and direct the AO to delete the disallowance in this regard. Short grant of TDS / TCS credit claimed by the assessee on the basis of certificates available with the assessee - HELD THAT:- Credit for TDS / TCS should be allowed to the assessee on the basis of TDS/ TCS certificates available although no entry for the same appears in Form 26AS. The mismatch cannot be attributed to the assessee as it has no control over Form 26AS. Accordingly, we direct the AO to grant credit of TDS / TCS credit for certificates produced by the assessee including the certificates which may be in name of Grasim / SCL. The AO can satisfy himself to the effect that the claim in respect of the said certificates are not made by the Grasim / SCL in their ROI. This ground is remitted back to Ld AO and accordingly it is allowed for statistical purpose. Admissibility of the additional grounds - HELD THAT:- We are of the view that a legal plea can be raised by the affected party at any point of time in the matter pending for adjudication. Further, it is settled proposition of law that mere procedural lapse, or omission on the part of the assessee, cannot lead to denial of substantive benefit/eligible claim in the hands of the assessee. Keeping in view, of above discussion and decision of the Hon ble Apex Court, the additional grounds filed by the assessee are accepted and taken up for adjudication Claim of deduction towards the education cess and secondary and higher education cess - HELD THAT:- Education cess, secondary and higher education cess should be allowed as deduction. Their Lordships had held that Section 40a(ii) of the Act applies only to taxes other than cess. This issue is also decided in favour of assessee by Jurisdictional High Court in case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] which has been followed in various Tribunal orders subsequently. We direct the AO to allow deduction towards education cess and secondary and higher education cess to the extent of actual payment made by the assessee. Refund of dividend distribution tax paid in excess of the rate prescribed under DTAA on dividend paid to non-resident shareholders - HELD THAT:- We restore the issue to the AO for examining assessee s claim of applicability of beneficial rate of tax as per the applicable DTAA to the DDT paid under section 115O of the IT Act. If the amount quantified as DDT liability based on the tax treaty rate is lower than the actual DDT paid by the assessee, then the same should be refunded back to the assessee. Accordingly, this ground of appeal is allowed for statistical purposes. Validity of transfer pricing proceedings - original assessment proceedings ceased to exist, and fresh proceedings u/s. 153C r.w.s. 153A was initiated - HELD THAT:- After the issue of notice under section 153C of the IT Act, the AO was required to make a fresh reference under section 92CA(1) of the IT Act. Since no fresh reference has been made the order passed by TPO dated 28 November 2014 is bad in law as it is based on the abated proceedings. The order of the TPO is, therefore treated as non-est. Further, in the present case the notice under section 143(2) of the IT Act pursuant to fresh proceedings under section 153C was issued on 8 January 2015. The order of the TPO has been passed on 28.11.2014 i.e. before the assessment proceedings initiated by issue of notice u/s.143(2). Since in the instant case, the TPO had passed the order even before issuance of notice under section 143(2) of the Act, the order passed under section 92CA(3) of the Act is without jurisdiction. In view of the above, we hold that the transfer pricing order passed by the TPO for the subject year is without jurisdiction and hence invalid. The addition made consequent to TPO order therefore does not hold any ground. Accordingly, this ground of the assessee is allowed. TP Adjustment - corporate guarantee transaction as international transaction within the meaning of section 92B - HELD THAT:- We reject the determination of arm s length price reduced to Nil by the Ld CIT(A) and direct the AO to adopt 0.5% as an arm s length consideration for the corporate guarantee issued by the assessee in favour of its AEs. Entitled to deduction u/s 32AC of the Act on the value of cost of components of plant or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14 confirmed. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act.

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• 2022 (1) TMI 922
  Taxability of the receipt given by way of subsidy - Exemption on account of sales-tax, entry tax and electricity duty in respect of industrial unit at Raigarh, Madhya Pradesh - As submitted that it is a capital receipt not liable to tax - HELD THAT:-Here in this case, the incentives were given in order to encourage the establishment of new industrial units in the private sector to result in development of rural economy and backward areas of the State and creation of employment opportunities. All the Notifications issued by the State Government for different reimbursements/ remissions, are pursuant to the Policy and are in furtherance of the avowed objectives of the State Government in issuing the Policy. Appreciating the objectives of the Policy discussed above, the subsidy being made available to the new units, are clearly in the nature of capital receipt not liable to tax under the Act. The manner in which the concession is given is not material. Even if any concession/ rebate is given in respect of revenue items, the intent of the concession/rebate being the development of the rural economy and upliftment of backward areas, the same would, in our view, be in the nature of capital receipt not liable to tax. Since all the Notifications issued by the State Government for different reimbursements/ remissions, pursuant to the Scheme and in furtherance of the avowed objectives of the State Government in issuing the Scheme, the incentive/ benefit/ subsidy being made available, it has been stated that, it is clearly in the nature of capital receipt not liable to tax under the Act. Even if any concession/rebate is given in respect of revenue items, the intent of the concession/rebate being the development of the rural economy and upliftment of backward areas, the same would still be in the nature of capital receipt not liable to tax. Accordingly, we hold that the subsidy received by the assessee is a capital receipt not allowable for taxable. Accordingly, the ground raised by the assessee is allowed. Disallowing expenditure incurred on aircraft - same was expended for non-business purposes - HELD THAT:- After considering the relevant findings of the impugned orders and perusal of the details of expenditure incurred on air journeys, we find that that all the journeys were related to the business of the assessee and the assessing officer disallowed the expenditure incurred on an ad-hoc basis, by randomly picking some of the journeys made and holding that they were not made for business purposes without bringing on record any iota of evidence to substantiate that the journeys were for non-business purposes. As pointed out before us that this issue stands decided in own case [ 2007 (6) TMI 308 - ITAT DELHI] wherein the Tribunal has held that expenditure relatable to trips to meet the customers and/or prospective customers are directed to be allowed. Since it is purely an ad hoc addition, therefore, we direct to disallow the addition and the ground is accordingly allowed. - Decided in favour of assessee. Addition of commission paid - AO disallowed the aforesaid claim of the assessee on the ground that the assessee was unable to adduce evidence of services having been rendered by the said party - HELD THAT:- In view of relief being allowed to the assessee in the second round, it is respectfully submitted that the present grounds of appeal challenging the disallowance of commission is rendered infructuous, hence dismissed. Addition u/s 80HHC while computing book profits in terms of clause (iv) of Explanation to section 115JB - HELD THAT:- We find that now in the light of the decision of Hon ble Supreme Court in the case of Ajanta Pharma Ltd.[ 2010 (9) TMI 8 - SUPREME COURT] the assessee is eligible for deduction of 100% export profits as computed under section 80HHC while computing book profits in terms of clause (iv) of Explanation to section 115JB of the Act. Further, the aforesaid issue is squarely covered in favour of the assessee [ 2013 (2) TMI 748 - ITAT DELHI] . Additional coal levy - Allowable business deduction - HELD THAT:- We find that additional coal levy relating to assessment year is clearly allowable as business deduction and it is not the case of the assessee that deduction of the same amount should be allowed in two different assessment years. However, we direct the AO to verify that, in case, the assessee has taken the deduction and the amount claimed in the return of income for AY 2015-16 of a sum of Rs. 62,42,42,420/-, the said claim should be withdrawn and the same is allowable deduction in the year under consideration. The assessee is also directed to file an application before the AO to claim the same. Deduction u/s 80IA in respect of profits of the power generating units located at Raigarh - HELD THAT:- We agree with the submissions of the assessee and hold that inter-division of transfer of power from the captive power plants be made at Rs. 3.29/3.72 per unit being the price at which power is sold by the State Electricity Boards to the assessee since the said price was the fair market value of power and hence, in conformity with the provisions of sub-section (8) of section 80-IA of the Act. Accordingly, the order of the ld. CIT (A) is confirmed and the ground raised by the Revenue is dismissed. Depreciation of on the assets of the power generating undertaking viz. Turbine and 220KV transmission lines, at the rates specified in Appendix 1 read with Rule 5(1) of the Income Tax Rules, 1962 - depreciation was claimed on the written down value of the assets - HELD THAT:- In the present case the assessee is bound by the option exercised in the initial assessment year and has, in any case, to claim depreciation only as per sub-rule (1) of Rule 5 of the Rules and there is no choice/ discretion or option left to the assessee to have claimed depreciation on any basis, other than on which depreciation was claimed in the initial year. Thus, the assessee is legally eligible/ entitled to claim depreciation under Rule 5(1) of the Rules since the option of claiming the depreciation under the said sub-rule was availed in the first year of the power generating undertaking. We hold that the assessee is eligible to claim depreciation as per Rule 5(1) and not Rule 5(1A) of the Income-tax Rules, 1962, therefore, the AO is directed to allow the depreciation as per WDV of impugned assets as opposed to straight line method adopted in the assessment order. Accordingly, grounds no.2 3 taken by the Revenue are dismissed. Receipt of preference share application money - assessee credited the said receipt in the capital reserve account as per the provisions of the Companies Act, 1956 - AO treating the said receipt as revenue in nature, taxed the same under the head Income from other sources - HELD THAT:- Hon ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. v. ACIT [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] has also held that money received on account of share capital is capital in nature not chargeable to tax - we do not find any infirmity in the order passed by the ld. CIT (A) in deleting the said addition holding that money received on account of shares is capital in nature and accordingly, the same is confirmed. Consequently, ground no.4 is determined against the Revenue. Disallowance of proportionate interest expenditure - assessee had diverted interest bearing funds as interest free advances to its connected concern - HELD THAT:- The disallowance of interest was clearly not justified. Further, Accounting Standard AS-9 on Effect of Uncertainties on Revenue Recognition, wherein it has been stated that where there is uncertainty regarding ultimate collection of, inter alia, interest, it may be appropriate to recognize revenue only when it is reasonably certain that ultimately collection will be made - The recovery of principal itself was doubtful, the assessee had not accrued any interest on illusionary basis. We find that no interest was accrued by the appellant on the aforesaid loans for immediately two preceding years and the said stand was accepted by the Department.Since there being no change either in facts or in law in this regard, as compared to the earlier years, the position accepted by the Department has to be followed even as per the principle of consistency. There could be no accrual of notional / imputed interest on the given facts and circumstances of the case, and, therefore, disallowance of interest paid to the extent of such notional / imputed interest was rightly been deleted by the CIT(A). Consequently, ground no.5 is determined against the Revenue. Deduction as ESOP expenditure amortized equally over the vesting period - whether expenditure incurred in order to compensate employees in lieu of services rendered in the form of ESOP? - HELD THAT:- This issue now stands covered by the decision of Hon ble Delhi High Court in the case of CIT vs. Lemon Tree Hotels Limited [ 2015 (11) TMI 404 - DELHI HIGH COURT] and the decision of Biocon Limited [ 2013 (8) TMI 629 - ITAT BANGALORE] - This decision of the Tribunal has been affirmed by the Hon ble Karnataka High Court [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT ] holding that employees discount represents consideration of services rendered by the employees and hence it is a deductible business expenditure. There is no dispute that here in this case, it is an ascertainable liability since employees incurred obligation over the distinct period, notwithstanding the fact that exact amount as quantified at the time of exercising the options. Thus, following the aforesaid judgments, ESOP expenses are allowed and consequently, ground no.6 is determined in favour of the assessee. Allowable revenue expenditure u/s 37(1) - expenditure relating to construction of Hospital and School Auditorium respectively in the district of Raigarh, in terms of understanding entered into with the Society owning the same, for the benefits of its employees and their children and also as part of its corporate social responsibility initiatives - HELD THAT:- We find that the expenses incurred are related to employees welfare and for the purpose of employees and hence to be reckoned as expenditure incurred for the purpose of business. The assessee is carrying on the business/manufacturing activities in the backward and small city of Raigarh in the State of Chhattisgarh which does not have the requisite facilities and infrastructure to meet the regular/basic needs of the residents of that city including employees of the assessee company. The city of Raigarh also did not have any good school or hospital. Therefore, in order to attract qualified employees/technicians to work in such situation, the assessee is providing these facilities and created this infrastructure. Thus, it is for the benefit of the employees as well as part of corporate social responsibility, therefore, the same is to be reckoned as wholly and exclusively for the purpose of business and an allowable deduction. Accordingly, the order of the ld. CIT(A) is confirmed and the ground is dismissed. While holding the subsidy as revenue receipt, simultaneously reduced the same from cost of fixed assets - Subsidy was granted to the assessee to incentivize the industries in the backward areas to provide employment and such subsidy was not granted directly or indirectly for compensating the fixed assets, therefore, the same cannot be adjusted against the cost of assets. Disallowance of Expenditure of lease rent towards cost of the aircraft - HELD THAT:- In the present case, the agreement entered into between the appellant and GE, the lessor and owner of the aircraft, is, undoubtedly a lease agreement. During the lease period, the ownership in the aircraft vests with lessor. The assessee only has an option to purchase the aircraft after the expiry of the lease period from lessor. Further, the said option is conditional upon the lessee/ assessee not defaulting in any of the lease payments. In case there is a default in making any of the lease payments the clause granting purchase option cannot be exercised and ownership in the asset shall remain with the lessor. In fact the lessee/ assessee would be required to return back the equipments to the lessor, in case the lessee defaults in making any of the lease rent payment.- Thus, in the present case also if the claim of lease rent has been allowed in the earlier and the subsequent year, but the same has been disallowed in the year under consideration, will lead to an absurd and anomalous situation, hence same is allowed.

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• 2022 (1) TMI 921
  Reopening of assessment u/s 147 - escapement of income from the sale of 2 flats - addition u/s 56 of the Act on account undisclosed income derived from sale of immovable property - HELD THAT:- AO based on the AIR/ITS information came to know that the assessee has sold 2 flats but there was no return filed by him. Accordingly, the proceedings were initiated under section 147 of the Act. Admittedly, the assessee has not filed the return of income for the year under consideration under the provisions of section 139 of the Act. Thus, in such a situation there remains no remedy with the Department except to initiate the proceedings under the provisions of section 147 of the Act on account of escapement of income. Accordingly, we confirm the initiation of the proceedings under section 147 of the Act and dismissed the ground of appeal of the assessee. Addition on account of sale of property and taxing the same as income from other sources without deducting the corresponding expenses - The assessee has produced copy of letter of delivery of title paper of flats, allotment letter, possession letter of flats and no due certificated and the confirmation from the builder. To our understanding, the onus was shifted from the assessee to the revenue to reject the confirmation filed by the assessee based on cogent reasons. The confirmation from the builder is one of the vital piece of evidence which cannot be denied on surmise and conjecture, particularly in the facts where such confirmation was also supported based on the allotment letter, title paper, possession letters and no due certificate. CIT (A) cannot reject these documents without assigning any cogent reasons. Accordingly we hold that, the assessee is entitled for deduction of Rs. 11 lakhs against the amount of sale consideration. Thus, the effective income which is liable to tax is only being the difference in the sale consideration and purchase price of the property. Thus we direct the AO to delete the amount of addition made by him except a sum which we hold that it represents the income of the assessee against the sale of flats.Hence the ground of appeal of the assessee is partly allowed.

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• 2022 (1) TMI 920
  Admission of additional ground of appeal - receipt of the brand Essar by the assessee trust from EIL - whether EIL was the genuine owner of the Essar brand, trademarks and copyrights, and also, as to whether the settlement of the Essar brand, trademarks and copyrights by EIL in favour of the assessee was a bonafide transaction? - HELD THAT:- We are of the considered view, that as stated by the ld. A.R, and rightly so, the aforesaid additional ground of appeal no. 1 raised by the revenue clearly militates against the department s own stand that the assessee had received the brand Essar from EIL. As is discernible from the assessment order, the very genesis of the controversy involved in the present case is the receipt of the brand Essar by the assessee trust from EIL. However, the department by raising the aforesaid additional ground of appeal, and therein questioning as to whether EIL was the genuine owner of the Essar brand, trademarks and copyrights; and as to whether the settlement of the same by EIL in favor of the assessee was a bonafide transaction, is undoubtedly trying to make a complete volte face. Although, we are in agreement with the claim of the ld. A.R that the Tribunal is vested with the jurisdiction to examine a question of law which arises from the facts as found by the authorities below and have a bearing on the tax liability of the assessee, notwithstanding that the same was not raised before the lower authorities, however, the scope and realm of such jurisdiction can by no means be stretched or construed in a manner to change the entire complexion of the case and seek improving upon the assessment, which we are afraid is not permissible under Sec. 254 of the Act. Our aforesaid conviction is fortified by the order of the Special Bench of the ITAT, Mumbai in the case of ACIT Vs. Prakash L. Shah [ 2008 (8) TMI 387 - ITAT BOMBAY-K ] Backed by our aforesaid deliberations, we are of the considered view that as the revenue by raising the additional ground of appeal no.1 is trying to change the entire complexion of the case and improve upon the assessment by canvassing facts which clearly militate against the observations drawn by the A.O while framing the assessment, which as observed by us hereinabove is not permissible as per the mandate of Sec. 254 of the Act, therefore, we decline to admit the same. Unexplained money - whether or not on the facts and circumstances of the case and in law the value of Essar brand, trademarks and copyrights could be brought to tax in the hands of the assessee under Sec. 69A ? - The provisions of Sec. 69A are triggered in the assessment year in which an assessee is found to be the owner of the asset in question. Now, in the case before us, the brand Essar was received by the assessee trust from EIL on 29.03.2012, i.e during the period relevant to A.Y 2012-13 and not during the year under consideration. Accordingly, there is substance in the claim of the ld. A.R that as the facts as regards receipt of the brand Essar are not borne from the records of the assessee for the year under consideration, therefore, on the said count itself the additional ground of appeal no. 2 could not be admitted. Also, we concur with the ld. A.R, that the satisfaction of the A.O that the assessee had failed to prove the nature and source of acquisition of the asset in question is the sine qua non for triggering the provisions of Sec. 69A of the Act. Accordingly, as in the course of the assessment proceedings for the year in question no question was raised by the A.O as regards the applicability of Sec. 69A of the Act, therefore, in the absence of there being any opinion of the A.O qua the explanation of the assessee on the nature and source of acquisition of the asset in question, the applicability of the provisions of Sec. 69A could not be looked into. In sum and substance, we concur with the ld. A.R that as the requisite facts for looking into the applicability of Sec. 69A of the Act qua the asset in question, viz. brand Essar are not borne from the record, therefore, on the said count itself the seeking of admission of the aforesaid additional ground of appeal no. 2 by the revenue is liable to be dismissed. Restoration of the computation of the value of Essar brand, trademarks and copyrights to the file of the A.O, for the reason, that subsequent to the order passed by the CIT(A) it was discovered that there was a mistake in the computation of the value of Essar brand, trademarks, copyrights under the DCF method - Although, the department has sought liberty for admission of the aforesaid additional ground of appeal, imputing a mistake in computation of the value of the Essar brand, trademarks, copyrights under the DCF method, but as pointed out by the ld. A.R, and rightly so, there are no facts available on record regarding the alleged error on the part of the A.O. Apart from that, we also concur with the claim of the ld. A.R that the subject matter of appeal before the Tribunal is not regarding the valuation of the brand received by the assessee trust from EIL. Backed by the aforesaid facts, we are of the considered view that as neither the facts as regards the alleged error on the part of the A.O are discernible from the record, nor the valuation of the Essar brand, trademarks, copyrights is the subject matter of appeal before the Tribunal as the CIT(A) had not decided the question of valuation, therefore, the request of the department for admission of the additional ground of appeal no. 3 cannot be accepted and is accordingly rejected. Whether CIT(A) erred in admitting additional evidences under Rule 46A of the Income-tax Rules, 1962, ignoring that there was no sufficient cause for admitting the same? - HELD THAT:- EIL was the owner of the brand/trademarks since 1996 was a fact that was available in the domain of the A.O even during the course of the assessment proceedings, therefore, the additional documentary evidence filed by the assessee with the CIT(A) vide its letter dated 13th October, 2016 did not bring any new facts on record, but only substantiated the aforesaid factual position. In other words, the exhaustive list of evidence filed by the assessee with the CIT(A) only substantiates that the trademark Essar was registered in the name of EIL, a fact which is borne from the assessment record. Accordingly, as the additional evidence filed by the assessee was not with a purpose or motive of bringing any fresh facts on the record, but with a limited purpose of dispelling all doubts and substantiating to the hilt that EIL was the owner of Essar brand prior to its settlement in the assessee trust, therefore, on the said count also no infirmity can be related to the admission of the same by the CIT(A). We, thus, in terms of our aforesaid observations not finding any infirmity in the admission of the additional evidence by the CIT(A), uphold his order to the said extent. The Ground of appeal No. 1 is dismissed. Value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration, constituted taxable income as per section 56(1) - Whether on facts and circumstances of the case and in law, the Ld. CIT(A) grossly erred in not upholding the AO s finding that the value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration, was income as per section 2(24) of the Act.? - the tax authorities have no role to play or question the validity of the transaction when the shareholders had unanimously passed the resolutions and ratified the transaction, unless it is either illegal or against the national interest. The assessee obviously received the gift in the form of brands, which constituted its profit-making apparatus, and thus, was in the nature of its fixed asset/capital. As observed by us hereinabove, as the brand Essar contributed as a gift by EIL to the corpus of the assessee trust formed the latters profit-making apparatus, that was exploited by it by entering into non-exclusive brand licensing agreements with its group entities and, earning substantial license fees therefrom, thus, the same formed its fixed capital. Accordingly, as the brand Essar (supra) was only a means by which the assessee had entered into non-exclusive brand licensing agreements with its operative group entities, therefore, it could not be anything but its capital asset. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Vazir Sultan and Sons [ 1959 (3) TMI 5 - SUPREME COURT ] The transaction in question does not involve any exchange of consideration between the parties, and is in the nature of a Gift of a profit-making apparatus which has huge potential to generate royalty income, which too is possible only when the group companies are willing to contribute, otherwise, it literally has no value. Therefore, in the backdrop of our aforesaid observations, we are of the considered view that as the transaction under consideration i.e contribution of the brand Essar as a gift by EIL to the corpus of the assessee trust does not fall under any category of income, therefore, we find no reason to interfere with the view taken by the CIT(A), who had rightly concluded that as the contribution of brand Essar as a gift by EIL to the corpus of the assessee trust did not involve any profit element which could be brought within the meaning of Income under Sec. 2(24) of the Act, therefore, it could not be subjected to tax under the residuary head i.e Other sources u/s 56(1) of the Act, thus, uphold his view to the said extent. We neither find any substance in the aforesaid contentions advanced by the ld. D.R as regards the issue in hand, nor any justification to interfere with the reasoned view arrived at by the CIT(A). In our considered view, the CIT(A) had rightly concluded, that as the contribution of brand Essar as a gift by EIL to the corpus of the assessee trust did neither involve any profit element which could be brought within the meaning of Income under Sec. 2(24) of the Act, nor partook the nature of income, therefore, it could not be subjected to tax under the residuary head i.e Other sources u/s 56(1) of the Act, thus, uphold his view to the said extent. The Grounds of appeal Nos. 2 3 are dismissed. Income from other sources - claim of the A.O that as the Essar brand was registered by EIL as an artistic work under the Copyrights Act, 1957, therefore, the same would fall within the realm of the definition of property as contemplated in clause (d) of the Explanation to Sec. 56(2)(vii)(c) - Whether provisions of section 56(2)(vii) of the Act would not apply to the value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration? - HELD THAT:- As the methods specified in Rule 11UA(1)(b) for valuing any work of art does not contain the method adopted by the A.O. In the present case before us, the A.O treating the Essar brand as any work of art , had valued the same by adopting the DCF method, which we are afraid is not the method specified in the aforesaid rule. In the backdrop of our aforesaid observations, we are of the considered view, that though we have held that as the brand Essar is neither an artistic innovation nor possesses any artistic quality for bringing it within the meaning of any work of art as contemplated in the definition of property in Explanation (d) to Sec. 56(2)(vii) of the Act, however, alternatively, as observed by us hereinabove, the very method adopted by the A.O for valuing the same by applying DCF method is not as per the mandate of law. We, thus, in terms of our aforesaid observations concur with the view taken by the CIT(A) that the brand Essar contributed as a gift by EIL to the corpus of the assessee trust could not have been brought within the meaning of any work of art as contemplated in the definition of property in Explanation (d) to Sec. 56(2)(vii) of the Act, and thus, on the said count be subjected to tax under the head Income from other sources . The Ground of appeal No. 4 is dismissed. Income from business - Whether provisions of section 28(iv) of the Act would not apply to the value of the Essar brand, trademarks and copyrights purported to have been settled by EIL to the assessee without any consideration? - HELD THAT:- As assessee is an irrevocable discretionary trust formed on 29thMarch 2012. The brands which are the property of the EIL were gifted to the assessee vide its board resolution and shareholders resolution dated 29th March 2012. In the backdrop of the fact that the assessee trust was formed on the same day when the brands were gifted to it by EIL, it cannot be held that they were generated out of the business carried on by the assessee. As per section 28(iv) of the Act, the value of any benefit or perquisite arising frombusiness or exercise of a profession shall be chargeable to income-tax under the head Profit gains of business or profession. However, as in the case before us, the brand Essar was contributed as a gift by EIL to the assessee trust on the same day on which the assessee trust had commenced its operations, therefore, it cannot be considered that the brands are the benefit which arose from the business carried on by the assessee. Apart from that, as we have categorized the receipt of brand by the assessee from EIL as a profit-making apparatus i.e a capital asset and a capital transaction, therefore, on the said count also we are inclined to reject the arguments of the revenue qua the present ground and, accordingly, dismiss the same. The Ground of appeal No. 5 is dismissed. Method of accounting - non-applicability of the accounting standard 9 - in order to claim the TDS credit for the year, the assessee had offered for tax the aforesaid TDS amount as its income for this year, even though it had not received/collected any part of the aforesaid amount - HELD THAT:- There may be certain difference in the method of accounting adopted by the service receiver and service provider, but then, the same cannot be a reason to conclude that there has been tax avoidance on the part of the assessee trust. In this case, the assessee had not received any funds, though, brand license fees had been credited by the brand licensees i.e the group entities in the account of the assessee as appearing in their respective books of accounts. Technically, the assessee during the year under consideration should not have declared any income, however, since the group companies that were following mercantile system of accounting had claimed the license fees as an expense in their respective books of accounts i.e on accrual basis, and consequently deducted tax at source on the same as per the mandate of law, therefore, the assessee in order to match the tax liability was forced to declare the income to the extent of TDS amount that was deducted and deposited by the group companies i.e as reflected in the Form 26A. We do not see any mistake or any infirmity in the method of accounting adopted by the assessee, which, thus, by no means can be considered as tax avoidance on its part. The difference highlighted by the Ld D.R is due to timing difference. Hence, the argument put forth by the department representative has no force. Accordingly, the Ground of appeal No. 6 is dismissed.

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• 2022 (1) TMI 919
  Addition u/s 68 - unexplained cash credit - Bogus LTCG - disallowance of long term capital gain resulting from sale of equity shares which was claimed as exempt under section 10(38) - HELD THAT:- We find that the assessee has sold 2,88,600 shares of M/s. S.R.K. Industries Ltd. at Bombay Stock Exchange through broker M/s. Vishesh Capital Pvt. Ltd. dated 16.12.2013 and 10.01.2014. The facts qua the purchase of these shares were already discussed hereinabove - assessee has filed before the AO the proofs of purchase and sale of these shares, payment through banking channel, receipt of sale consideration into assessee s bank account, sale through registered brokers on stock exchange and D-mat account regarding the entries of purchase and sale of these shares etc AO has not found any defect in the documents submitted by the assessee, however, primarily relied on the report of investigation wing, Kolkata that the scrip is part of penny stocks and therefore are of bogus in nature - order of Ld. CIT(A) upholding the order of AO is not correct as the conclusion is merely based on the suspicious without bringing on record any concrete evidences to the contrary. As the long term capital gain which was earned through recognized stock exchange and is evidenced by the documentary evidences and mere fact that the scrip price has risen many times can not be sole factor for treating the same as bogus. We also note that the co-ordinate Bench of the Tribunal in the above two cases namely Smt. Geeta Khare vs. ACIT [ 2019 (5) TMI 1846 - ITAT MUMBAI] and Smt. Bhavna B. Kothari vs. ITO [ 2020 (9) TMI 491 - ITAT MUMBAI] the scrip involved was M/s. S.R.K. Industries Ltd. and the co-ordinate Bench of the Tribunal has held the long term capital gain to be genuine and not bogus. - Decided in favour of assessee.

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• Benami Property

• 2022 (1) TMI 918
  Prohibition of benami transactions - plaintiff entitled for the suit property - Whether the settlement deed executed by the 1st defendant in favour of the 3rd defendant is not valid and genuine? - Whether the plaintiff is entitled for the relief of permanent injunction as prayed for?? - HELD THAT:- No person shall enter into any benami transaction and no suit, claim or action to enforce any right in respect of any property held benami shall lie. Appellate Judge also found from the evidence that the Appellant gave a complaint to the police through Ex.A7 on 26.08.2013, subsequent to the filing of the suit. In which the appellant has claimed share in the suit property, thereby appellant admitted that his father is the owner of the property. There is absolutely no evidence produced by the appellant to show that he contributed the money for the purchase of the suit property in his father s name and therefore, this Court finds no reason to interfere with the findings of the Courts below that the Appellant has failed to establish that he contributed money for the purchase of the suit property in his father s name. Appellant submitted that the appellant is in possession and enjoyment of the property and that is admitted by the 1st Respondent. Even in the written statement, the possession of the appellant in the suit property is admitted but it is claimed that it is a forcible possession taken by the Appellant. When there is no legal claim to the title of the suit property, on the basis of forcible possession of the suit property, appellant cannot claim any right. No substantial question of law.

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• Customs

• 2022 (1) TMI 917
  Attachment of bank accounts of the petitioner - Jurisdiction - proper officers within the meaning of Section 234 of the Customs Act - contrary to Section 110(5) of the Customs Act, 1962 inserted with effect from 01.10.2019 or not - HELD THAT:- Though the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel for the first and second respondents appeared equally meritorious, it is noticed that the petitioner s representation dated 22.10.2021 and the legal notice dated 20.12.2021 has not been received adequate attention - It is not clear whether the bank accounts of the petitioner has been attached at the behest of the first and second respondents or by the jurisdictional officers of the customs. Writ petition is disposed off by directing the first respondent to give proper reply/pass appropriate orders on the representation dated 22.10.2021 and legal notice dated 20.12.2021 of the petitioner within a period of fifteen days from the date of receipt of a copy of this order.

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• 2022 (1) TMI 916
  Seeking extension of warehousing period - It is submitted that the application for extension of warehousing under Section 61 of the Act has been made long after the notice under Section 72(1) of the Customs Act, 1962 was issued - HELD THAT:- The petitioner may have a genuine case for extension of time, considering the fact that the petitioner has also applied for setting up of private warehousing facility under Section 58 of the Customs Act, 1962. There are contributing factors on account of two lockdowns imposed in Tamil Nadu due to outbreak of Covid 19 Pandemic. Writ Petitions disposed off without expressing any opinion on merits by directing the first respondent to pass appropriate orders on the representation dated 22.09.2021 of the petitioner filed under Section 61 of the Customs Act, 1962 - Petition disposed off.

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• 2022 (1) TMI 915
  Refund of SAD - mismatch of description of the goods in the bill of entry and in the subsequent sale invoices, through which Sales Tax/VAT payment were acknowledged - no correlation between products imported and product sold - HELD THAT:- It is a common knowledge that while raising invoices short forms are mostly used by the staff to save time and space and to a prudent man it would not appear irrational if Prime Hot Rolled Alloyed Steel in Coils are written as HR Coil cut in to length as its short forms since cut into pieces and Cold Rolled non alloy steel sheet in coil is written as C.R. Coils , that to when a Chartered Accountant/Statutory Auditor Certificate establishing correlation is in existence, which apart from the Clarificatory Circular No. 06/2008-Cus., can also be accepted as a piece of evidence under Section 45 of the Indian Evidence Act as being opinion of export. The decision rendered by the Hon ble High Court of Madras in the case of JOHNSON LIFTS PVT. LTD. VERSUS ASSTT. COMMR. OF CUS. (REFUNDS) , CHENNAI [ 2021 (2) TMI 401 - MADRAS HIGH COURT] that has clearly stipulated that the respondent-department is bound to accept the description of goods in the import documents as well as sale invoice to be one and the same, on the strength of the certificate/correlation statement issued by the Statutory Auditor (Chartered Accountant). Denial of refund of SAD is hereby set aside. The appellant is entitled to get a refund of Rs. 6,48,118/- and Rs. 1,97,740/- respectively with applicable interest and the respondent-department is directed to pay the same within a period of 3 months from the date of receipt of this order - Appeal allowed - decided in favor of appellant.

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• 2022 (1) TMI 914
  Levy of fine and penalty under Section 112(a)/ 114AA on the appellant-assessee and its Partner - appellant had availed zero duty EPCG scheme - denial of benefit under Status Holder Incentive Scheme (SHIS) - HELD THAT:- There is no malafide on the part of the appellant, and further in view of the indulgence / realisation by the Government appreciating the difficulty faced by the trade, there being confusion on the same. The confiscation, fine and penalty imposed on the appellants are set aside - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2022 (1) TMI 913
  Scope of deposits - collection of deposits through various schemes and has defaulted in refund of matured amounts to the depositors - whether the amounts collected by the petitioners for sale of immovable property as advance would come under the purview of deposits or would exempt from the purview of deposits by virtue of Rule 2(1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - HELD THAT:- In the complaint itself the 1st respondent has stated that the 1st petitioner has been intentionally collecting money as advance for sale of property, entering into M.O.U. and paying interest on such advances received without the actual sale of property. Further, none of the persons, who have paid the advance amount for sale of immovable property, have not made any complaint against the petitioners - The proviso to Rule 2 (1) (c) (xii) (b) makes it very clear that only when the amount becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under the respective rules. Admittedly, the 1st petitioner company had purchased the agricultural land and after obtaining the permission from the competent authorities for conversion of agricultural land into non-agricultural land, the 1st petitioner also obtained permission for development of the land into layout of plots for residential/commercial housing. To unlock the funds invested in development of the lay outs etc., the 1st petitioner company had offered to sell the land in its possession and for this purpose entered into written agreement/arrangement - By virtue of proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits. In view of the proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, continuation of proceedings against the petitioners/A-1 to A-5 would amount to abuse of process of the Court - petition allowed.

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• 2022 (1) TMI 912
  Validity of transaction entered into by the applicant with the company in liquidation - transaction of purchase of sale of the assets of the company - in accordance with provisions of section 536(2) of the Act, 1956 or not - HELD THAT:- The sale deed for purchase of the assets, land and building and machineries of the company in liquidation is executed in favour of the applicant prior to the date of admission of the company petition. From the chronology of the events narrated, it is clear that the winding up petition was filed on 11th June, 2012 and thereafter, notice of the petition was issued on 27th July, 2012 and this Court admitted the company petition by order dated 15th January, 2013 and till that date, no one appeared for the company in liquidation before this Court. It cannot be said that the applicant has entered into transaction of purchase of sale of the assets of the company without good faith or bona fide intention, more particularly, when the applicant has deposited the entire sale consideration with DENA bank with whom the property which was purchased by the applicant was mortgaged - It is declared that the transaction in question cannot be said to be hit by the provisions contained in sections 531 and 531-A of the Act, 1956 and therefore, the transaction is validated as per the provisions of section 536(2) of the Act, 1956 as such transaction cannot be said to be a void transaction. Application allowed.

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• 2022 (1) TMI 911
  Seeking restoration of the name of the Appellant Company in the register maintained by the Registrar of Companies, NCT of Delhi and Haryana - Section 252(3) of the Companies Act, 1956 - HELD THAT:- The Appellant Company has failed to produce any Income Tax Returns filed, if any, by the Appellant Company. It has only placed the AS26 Forms towards TDS deposits on record. The same alone cannot be considered to indicate that it was either in operation or carrying out its business at the time of its name was struck off from the register of RoC - As rightly objected by the RoC, the Appellant Company has not filed or placed on record the copies of the Financial Statements for the Financial Years 2015-16 and 2016-17 i.e., for the two years prior to the date of its striking off to depict that the Appellant Company was in operation or carrying out its business. This Bench is of the view that the Appellant Company has failed to bring anything concrete on record, which could demonstrate that the Appellant Company was either in active operation or carrying out its business during the immediately preceding two financial years from the date of striking off or it is otherwise just and fair to restore the name of the Appellant Company in the register of RoC - the striking off action taken by the RoC against the Appellant Company under Section 248(5) of the Companies Act 2013 is upheld. Appeal dismissed.

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• Insolvency & Bankruptcy

• 2022 (1) TMI 910
  Validity of Resolution Plan - Eligibility of Resolution Professional to place the Resolution Plan before the CoC for voting - eligibility of CoC to vote on such plan in the absence of ascertaining compliance with the mandatory provisions of the Code - exclusive security/charge over the trademarks - criteria for FCs category A and B is based on sound principle - Resolution Plan is discriminatory and in violation of the IBC - questioning resolution plan after getting approved - challenge to subsequent order dated 03.06.2019 whereby the Resolution Plan has been approved. Whether the Appellant has an exclusive security/charge over the trademarks? - HELD THAT:- The effective date of the MOU is 30.05.2014 and the validity of this MOU for 12 months means 29.05.2015. It is not pleaded by the Respondents that after 12 months the validity of MOU was extended by the parties. In the MOU there is no condition that all six parties shall share 1/6th of the sale proceeds. Whereas clause (e) provides that Wherein it was decided that the parties can jointly proceed with the sale of trademarks and the sale proceeds so realised shall be deposited into a designated escrow account in the manner as provided in this MOU and then shared amongst the parties based on a mutually agreed sharing ratio - No document on record that pursuant to the aforesaid term it was agreed between the parties that they will share the sale proceeds of trademarks equally i.e. 1/6th. The MOU is valid only for one year i.e. 29.05.2015 whereas the resolution plan was approved by the CoC in the 20th CoC meeting held on 10.12.2018. As per the hypothecation deed dated 03.09.2012 the Appellant has an exclusive charge over the trademarks of the Corporate Debtor. Whether the criteria for FCs category A and B is based on sound principle? - HELD THAT:- Admittedly, the Resolution Applicant has divided the Financial Creditors into two categories i.e. category A and B, this categorization was made on the basis of core-assets and non-core assets of the Corporate Debtor over which the Financial Creditors have got some security interest. Category A are those assets which are required for the Corporate Debtor for running the business and non-core assets are those assets which are not required for running the business - The Resolution Applicant unable to justify the basis of categorization of the Financial Creditors in category A and B. It is undisputed that when this resolution plan was submitted before the CoC at that time the Appellant has raised a serious objection in regard to categorization. The Resolution Applicant is unable to convince us that the categorization is based on sound principle. Whether the Resolution Plan is discriminatory and in violation of the IBC? - HELD THAT:- It is a settled law, the resolution plan cannot discriminate between two sets of creditors similarly situated. The Respondents are unable to convince that on pro-rata basis why the Canara Bank is getting more amount in comparison to the Appellant. Therefore, we hold that the resolution plan is discriminatory between two set of creditors similarly situated and is in violation of the IBC. Whether once the Resolution Plan is approved by the CoC, it cannot be questioned even if it discriminates between two sets of creditors who are similarly situated? - HELD THAT:- The criteria of categorization of the FCs is not based on sound principal. The Appellant has an exclusive security/charge over the trademarks of the Corporate Debtor. The Resolution plan is discriminate between two Financial Creditors who are similarly situated. In such a situation the Appellant can question the Resolution plan even it is approved by the CoC. Whether the Appellant was required to challenge the subsequent order dated 03.06.2019 whereby the Resolution Plan has been approved by the Adjudicating Authority? - HELD THAT:- In this case, the Appellant is a dissenting Financial Creditor and he did not vote in favour of the resolution plan. In the resolution plan, the resolution amount has not been distributed as per the aforesaid amended provisions i.e. the priority and value of the security interest of a secured creditor has not been considered and as per the Regulation 38, the Appellant being a dissenting Financial Creditor shall be paid in priority over the Financial Creditor who voted in favour of the resolution plan - the resolution plan is not in conformity with the amended section 30(4) of the IBC and Regulation 38 (1) of IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016. Therefore, the impugned order is not sustainable in law as well as on facts. The approval of resolution plan by the CoC and subsequently approval of resolution plan by the Adjudicating Authority vide order dated 03.06.2019 is not sustainable in law. The Appellant was not required to challenge the subsequent order dated 03.06.2019. Thus, the impugned order as well as the order dated 03.06.2019 are hereby set aside - matter is remitted back to the CoC with the direction to distribute the resolution amount in conformity with the Section 30(4) r/w Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Appeal allowed by way of remand.

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• Service Tax

• 2022 (1) TMI 909
  Levy of service tax - amounts received or recovered by the employer from its employees for resigning from the service without giving the requisite notice - Declared Service under Section 66E(e) of the Finance Act, 1994 or not - HELD THAT:- Evidently, if none of these are the purpose or the essence of the agreement or if there is no consideration for such an agreement, it does not fall within the ambit of Section 66E(e). If the agreement is for something else and if one of the parties fails to perform as per the agreement and pays to the other a compensation as pre-decided in the agreement, it does not fall under Section 66E(e). The present case deals with contracts of employment. Employment contracts are entered into with the expectation that the employer will continue to keep him employed for the period as agreed and that the employee will perform his duties diligently. They are not entered into so that the employer can remove the employer from service or so that the employee can resign and leave the service. However, often, for various reasons the employer may decide to terminate the services of the employee which puts the employee to inconvenience and he has to find another job - If the employer decides to terminate the services without giving the required notice, the employment contract itself provides for a compensation to be paid. Similarly, if the employee resigns without notice, compensation is paid by the employee or recovered from his dues. Both the notice period and the compensation are incorporated in the employment contact itself but these are not the purpose of the contract. Consequently, any compensation paid is not a consideration for the contract. The compensation for failure under a cannot is NOT consideration for service under the contract and also following the law laid down by Madras High Court in GE T D INDIA LIMITED VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2019 (12) TMI 1566 - MADRAS HIGH COURT] that Notice pay, in lieu of termination, however, does not give rise to the rendition of service either by the employer or the employee, the impugned order upholding confirmation of a demand of service tax on the notice pay received/recovered by the appellant from its employees for premature resignation cannot be sustained and needs to be set aside. The appeal is allowed.

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• 2022 (1) TMI 908
  Refund of Swachh Bharat Cess and Krishi Kalyan Cess - HELD THAT:- The issue is decided in the case of M/S. ESHAKTI. COM PRIVATE LIMITED VERSUS COMMISSIONER OF G.S.T. AND CENTRAL EXCISE CHENNAI [ 2021 (8) TMI 809 - CESTAT CHENNAI] where it was held that It is the settled position of law that these cesses form part of the Service Tax paid on various input services used in or in relation to the export of goods. This is a direct consequence of the issue of refund for want of correlation, which has been remanded by this forum. Appeals are partly allowed and partly remanded.

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• Central Excise

• 2022 (1) TMI 907
  CENVAT Credit - inputs/capital goods - fabrication/ creation/ installation of capital goods falling under chapter 84 - essential activity of manufacture or not - HELD THAT:- Tribunal Chennai, in the case of DALMIA CEMENTS (BHARAT) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [ 2015 (4) TMI 204 - CESTAT CHENNAI] relying upon the decision of Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM COMMISIONERATE VERSUS HINDALCO INDUSTRIES LTD. [ 2012 (11) TMI 201 - KARNATAKA HIGH COURT] , held that credit on cement and steels used in manufacture of storage tank Silos is admissible to the appellant. The Courts and Tribunal have been consistent in holding that inputs which have gone into the manufacture of capital goods are admissible to credit notwithstanding the facts that said capital goods are embedded to the earth. The issue involved in Bharti Airtel is about the credit on Tower parts and pre-fabricated buildings in the case of service provider and as such cannot be applied in the case of credit as inputs used in the manufacture of capital goods which are further used in the manufacture of excisable goods - the appeal stands on merits of the case and that when the appeal survive on merits, other issue like penalty etc. become irrelevant. Appeal allowed.

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• 2022 (1) TMI 906
  Refund of CENVAT credit reversed - Commissioner (Appeals) disregarded the Charted Accountant s Certificates and observed that once amount is shown in the books of account as expenditure, the same is deemed to have been passed to the customers for which no refund can be granted to the appellant - HELD THAT:- The facts covering the accounting rules are mis-represented by the parties during submissions, for which observations that unless the amount is shown as receivable and shown in the books of account as expenditure, the incidence of duty is said to have been passed on to the consumers/customers are accepted as the true rule of accounting procedure and those cannot be treated as ratio discindendi to be followed as judicial precedent and not even an obiter dictum in view of misrepresentation of facts and rules of accounting. It is not understood as to why such Chartered Accountant certificates, which is considered as a certificate of Statutory Auditor, had been thrown out by the Commissioner (Appeals) as unbelievable and not accepted as a piece of documentary evidence though it is in the footing of an Expert Opinion under Section 45 of the Indian Evidence Act so as to outweigh the perception that all expenditure of a company are recovered from the customers, in which event no loss making company would ever exist on earth, though he trusted the unconfirmed data of the internet available in different websites like Wikipedia.org, investopedia.com etc to analyse and elaborate the concept of tax incidence . Appeal allowed.

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• 2022 (1) TMI 905
  Determination of annual production capacity - redetermination of capacity by not taking the rail galleries and taking the length of the chamber as 6231 - HELD THAT:- In the impugned order, the only reason for confirmation of demand is that the appellant has not challenged the order of determination of annual production capacity. The said issue has attained finality as held by the Hon ble High Court of Gujarat in the case of PREMRAJ DYEING PRINTING MILLS PVT. LTD. VERSUS UNION OF INDIA [ 2013 (6) TMI 118 - GUJARAT HIGH COURT] and of the Hon ble High Court of Bombay in OM TEXTILE PVT. LTD. VERSUS COMMR. OF C. EX., BELAPUR, NAVI MUMBAI [ 2006 (3) TMI 726 - BOMBAY HIGH COURT] that there is no requirement to challenge the order of determination of annual production capacity and the assessee is at liberty to challenge the demand of duty as demanded in the show cause notice on the basis of such determination of annual production capacity. Matter remanded back to the adjudicating authority to redetermine the annual production capacity taking the length of chamber as 6231 and not to add the length of rail galleries - appeal allowed by way of remand.

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