TMI Tax Updates - e-Newsletter
October 17, 2023

Case Laws in this Newsletter:

Income Tax Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. What are the ethical issues in accounting & finance faced by accountants?

   By: Ishita Ramani

2. RECENT GST COUNCIL RECOMMENDATIONS

   By: Dr. Sanjiv Agarwal

3. Difference between GSTR 2A and GSTR 3B not a valid ground for disallowing ITC

   By: Bimal jain

4. INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY

   By: DR.MARIAPPAN GOVINDARAJAN

5. Nill Rate of Additional Excise Duty applicable on the day of clearance for yarn

   By: Bimal jain

News

1. Department for Promotion of Industry and Internal Trade implements Special Campaign 3.0 with enthusiasm to achieve targets

2. Income Tax Department conducts searches in Karnataka, Andhra Pradesh and Telangana State region

Notifications

GST - States

1. 1078/XI-2–23-9(47)-17-T. C.-227-U.P. Act-1-2017-Order (281)-2023 - dated 26-7-2023 - Uttar Pradesh SGST

Amendment in Notification No. K.A.NI.-2—188/XI-9(47)-17-U.P. Act-1-2017 Order (06)-2019, dated January 24, 2019

2. 1075/XI-2-23-9(47)-17-T.C.-224-U.P.Act-1-2017-Order (278)-2023 - dated 26-7-2023 - Uttar Pradesh SGST

Amendment in Notification No. KA.NI.-2-842/XI-9(47)-17-U.P. Act-1-2017-Order (9)-2017, dated June 30, 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MIRSD/SECFATF/P/CIR/2023/169 - dated 12-10-2023

Master Circular on Know Your Client (KYC) norms for the securities market

DGFT

2. Policy Circular No. 05/2023-24 - dated 16-10-2023

Clarification regarding subsequent re-import of unsold jewellery, exported under Para 4.79 & 4.92 of Handbook of procedure 2023

Highlights / Catch Notes

Income Tax

• Court Reinstates Assessing Officer's Deduction u/s 80JJA, Overturning Commissioner's Reduction in Income Tax Case.

  Case-Laws - AT : Deduction u/s. 80JJA - Computation of profits - AO allowed the claim - CIT(A) reduced the claim of deduction - In the present appeal AO rightly deducted the depreciation as the amount of depreciation related to eligible ETP unit - The action of ld. CIT(A) further reducing claim is set aside - AT
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• Reopening Tax Assessment u/s 147 Not Justified if Based Solely on Change of Opinion After Full Disclosure.

  Case-Laws - HC : Reopening of assessment u/s 147 - Change of opinion - Once the assessee makes a true and full disclosure of the primary facts at the time of the original assessment and which could have been discovered with due diligence by the Income Tax Officer, drawing an inference which appears subsequently to be alone, is a mere change of opinion - HC
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• Court Rules on Performance Guarantee, Internet Expenses, and Section 69C Additions Under Income Tax Act; Benefit Granted to Assessee.

  Case-Laws - AT : Nature of expenditure - Contingent liability or not - invocation of performance guarantee by the Department of Telecommunication - internet expenses - Additions u/s 69C r.w.s. 115BBE - the benefit of Section 37(1) is allowable to the assessee - Additions deleted - AT
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• Court Rules No Addition Needed for Unexplained Gold Jewelry Due to Wealthy Background and Family Gifts u/s 69A.

  Case-Laws - AT : Addition u/s 69A r.w.s. 115BBE - unexplained gold jewellery of 1627.5 Grams - Stree dhan of women - quantity of gold jewellery in excess as allowed by the CBDT circular - since assessee belonged to a wealthy family and jewellery was received on occasions from relatives, excess jewellery was very much reasonable and, thus, no addition under section 69A was called for. - AT
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• MAT Computation u/s 115JB: Amortization of Intangible Assets Deemed Correct; Assessing Officer's Claim Overturned.

  Case-Laws - AT : MAT computation u/s 115JB - addition of the amortization of Intangibles - The intangible assets are acquired and owned by the assessee company pursuant to the approved Scheme.- There is perpetual and irrevocable transfer of the intangible assets such as Trade Marks to the assessee company. - The contention of the Ld. AO that there was no transfer of ownership of the assets to the assessee company is incorrect - Addition deleted - AT
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• Court Rules ESOP Expenses Not 'Nil' in Transfer Pricing; Appellant's RSU Costs for Employee Motivation Upheld.

  Case-Laws - AT : TP Adjustment - Benefit accruing on account of ESOP plans we find merit in the contention advanced on behalf of the Appellant that for the purpose of granting the RSUs to the employee of the Appellant was to retain and motivate him for continuing his employment with the Appellant. The cost incurred by AE on exercise of the RSUs by the employee of the Appellant is the cost reimbursed by the Appellant which was initially picked up by the AE. - ALP of the ESOP Expenses cannot be taken as ‘Nil’. - Additions deleted - AT
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• Assessee's Squared-Off Loans Scrutinized; CIT(A) Upholds Deletion of AO's Additions u/s 68 of Income Tax Act.

  Case-Laws - AT : Unexplained unsecured loan u/s. 68 - AO inter-alia observed that the assessee has shown squared off unsecured loans allegedly received from an entity - bona fides of credits appearing in the books of assessee on the contours of s. 68 - the onus towards source in the hands of borrower in relation to repayment entries qua preexisting loans is indeed onerous and can seldom be visualized. - CIT(A) rightly deleted the additions - AT
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• DRP Limits Transfer Pricing Adjustment on Interest from SCB India; Pre-March 2009 PNB Rates Not Applicable.

  Case-Laws - AT : TP adjustment - Interest received by the Appellant from SCB India on fixed deposits - DRP noted that the PNB interest rate card adopted by the TPO was effective from 01/03/2009 only and therefore, directed the TPO/Assessing Officer not to adopt the PNB interest rate card for deposits prior to 01/03/2009 and restricting the adjustment to interest on fixed deposit placed thereafter - Order of DRP sustained - AT
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• Assessing Officer Must Justify Dissatisfaction Before Applying Rule 8D for Disallowance u/s 14A of Income Tax.

  Case-Laws - AT : Disallowance u/s 14A r.w.r. 8D(2)(iii) - it is settled legal position that before proceeding to invoke provisions of Rule 8D of the Rules for computing disallowance u/s 14A AO must express his dissatisfaction regarding the computation of disallowance made by the Assessee. - AT
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IBC

• Resolution Applicant Not Liable for Pre-CIRP Electricity Dues in Reconnection Dispute.

  Case-Laws - AT : Successful Resolution applicant - Restoration of electricity connection - pre-CIRP dues - refusal on the ground of electricity dues - The Respondent cannot insist that unless the arrears of the electricity dues which dues were payable by the Corporate Debtor prior to disconnection are paid by the Appellant only then communication can be issued. - AT
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Central Excise

• Export Unit Wins Appeal: Allowed to Use Cenvat Credit for Countervailing Duty Payment During De-bonding Process.

  Case-Laws - AT : 100% EOU - amount of the counter-veiling duty payable at the time of de-bonding 100% EOU can be paid from the accumulated Cenvat credit by an EOU Unit or not - It is found that the appellant unit was right in paying amount of counterveiling duty from the accumulated Cenvat credit and therefore the appeal on merit succeeds. - AT
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Case Laws:

• Income Tax

• 2023 (10) TMI 666
  Employees contribution concerning provident fund and towards insurance fell due on a National Holiday - HELD THAT:- According to us, the submission advanced by Appellant cannot be accepted. Since the due date fell on a date which was a National Holiday, the deposit could have been made by the respondent/assessee only on the date which followed the National Holiday. Revenue as noticed on 12.01.2023, is right that Section 10 of the General Clauses Act would help the respondent/assessee to tide over the objections raised on behalf of the appellant/revenue. Decided in favour of assessee.

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• 2023 (10) TMI 663
  Validity of reopening of assessment - unexplained cash found deposited in Bank Account - HELD THAT:-As decided in the case of Raymond Woolen Mills Ltd. [ 1997 (12) TMI 12 - SUPREME COURT ] has held that in determining whether commencement of re-opening proceedings are valid it has only to be seen whether there was prima facie some material on the basis of which department could re-open the case. In this case, ld AO received AIR information about cash deposit in Saving Bank A/c based on which case was reopened by issue of notice u/s 148 - AO was having sufficient cogent material to form his reason to believe about escapement of income so as to reopen the case and therefore, issue of notice u/s 148 of the Act for re-opening the assessment was valid and legal, hence sustained. Addition u/s 69A - Unexplained cash - cash deposited in the bank account - HELD THAT:- As there is no evidence that assessee does any business. Further, ld. CIT (A) has found that there is no evidence/proof of agricultural income. In these circumstances, the source of cash remains unsubstantiated. Hence, we uphold the order of ld. CIT (A). Appeal decided against assessee.

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• 2023 (10) TMI 662
  Correct head of income - income from sale of shares/securities/PMS/Mutual Funds etc - Capital Gains or Income from Business - period of holding shares - HED THAT:- As assessee rightly drawn a logical conclusion based on CBDT Circular No.6 dated 29.02.2016 that since the assessee was shown shares in the balance sheet as investments and not as stock in trade and he also took cognizance of the fact stated by the assessee that the assessee held the shares sold for a long period ranging from 3301 days to 1352 days. CIT(A) by retrospectively applying the CBDT Circular No.6 rightly held that the action of the AO treating the income as business income instead of long term capital gain is not correct thus, he negated the same. We are unable to see any valid reason to interfere with the findings arrived by the CIT(A) hence, we uphold the same. Grounds of Revenue are dismissed.

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• 2023 (10) TMI 661
  Deduction u/s. 54F - Relinquishment of right in a Partnership Firm - Whether it is not a capital asset, consequently no benefit of deduction can be granted to the assessee? - HELD THAT:- As rightly pointed out by Assessee as per Section 2(14) capital asset means property of any kind held by the assessee, whether or not connected with his business or profession, but does not include stock-in-trade, raw materials held for the purpose of business or profession. A.O. in the computation of income has accepted the receipt on relinquishment of his share from the Partnership Firm as capital gain, but only denied the benefit of Section 54F of the Act, which in our considered opinion legally not correct. As relying on M/S. MANSUKH DYEING AND PRINTING MILLS [ 2022 (11) TMI 1180 - SUPREME COURT] and AN NAIK ASSOCIATES AND ANOTHER, [ 2003 (7) TMI 46 - BOMBAY HIGH COURT] no hesitation in holding the receipt on relinquishment of assessee s share from partnership firm is a capital gain wherein the claim of reinvestment on residential flats is an allowable claim deduction under section 54F of the Act. Therefore the disallowance made by the Lower Authorities are hereby set aside. Thus the grounds raised by the Assessee is hereby allowed.

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• 2023 (10) TMI 660
  Addition to the interest payable u/s 234B and u/s 234C - deemed income from gift - As submitted income being gift of an immovable property was received in the last quarter of the year and the appellant was not liable to pay advance tax in the third quarter of the year - HELD THAT:- The assessee received the immovable property through gift and the conveyance deed is registered on 16.12.2019. The assessee received the same after the due date of third quarter. Therefore, the contentions of the assessee that since the assessee received a gift of an immovable property by way of registered conveyance deed on 16.12.2019, he is required to pay advance tax on such income in the last quarter i.e. on or before 15.03.2020 and the assessee paid advance taxes on such gift income on 09.03.2020, appears to be justifiable and as per the provisions of advance tax payment. Thus, the finding of the CIT(A) that, assessee had defaulted in payment of advance tax is not correct. In fact, as the said income accrued and received by the assessee in the last quarter of F.Y. 2019-20, the assessee has paid more than 90% of the tax payable on 09.03.2020 before the due date of fourth quarter. There is no loss of revenue in this case. Therefore, charging the interest u/s 234C of the Act is not valid. The appeal of the assessee is allowed.

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• 2023 (10) TMI 659
  Deduction u/s. 80JJA - Computation of profits - reduction of profits and gains of the unit eligible for deduction u/s 80JJA by the proportionate indirect expenses and the depreciation of plant and machinery of the whole business in ratio of total turnover of the business and total turnover of the exempt unit as made by the CIT (Appeals) - HELD THAT:- We note that in the case of CIT vs Sterling Food [ 1999 (4) TMI 1 - SUPREME COURT] held that there must by a direct nexus between the profits and gains and the activities of eligible undertaking in the present case there is no dispute regarding turnover claimed by the assessee. In the case of Zandu Pharaceutical Works [ 2012 (9) TMI 620 - BOMBAY HIGH COURT] after following the proposition of Hon ble Supreme Court (supra) held that the principal of direct nexus between the profit and gains of eligible industrial undertaking is equally applicable to the expenses also and there must be direct nexus between the eligible industrial undertaking and the expenses which were sought to be apportioned by the AO. In the present appeal AO rightly deducted the depreciation as the amount of depreciation related to eligible ETP unit and findings recorded in this regard are upheld and the amount of depreciation and proportionate depreciation reduced by the CIT(A) is restricted to the said deduction of depreciation and contention of ld. counsel against action of Assessing Officer reducing depreciation amount from the claim of deduction is dismissed. Other expenses like administrative manufacturing and selling are concerned the CIT(A) could not establish any direct nexus or relation with the eligible ETP unit and the audited accounts of assessee clearly shows that the same are related to eligible distillery unit therefore no apportionment or reduction was required to be made in this regard and the action of the ld. CIT(A) allocating such unrelated expenses with the eligible unit is not correct and justified. Accordingly, findings of AO are upheld and action of ld. CIT(A) further reducing claim is set aside. Amount calculated by the AO eligible for deduction u/s. 80JJA is quite correct and as per mandate of the law and hence, the Assessing Officer is directed to allow the deduction accordingly.

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• 2023 (10) TMI 658
  Non speaking orders - Orders do not bear a Document Identification Number (DIN) - transfer of cases concerning the petitioners to DCIT, Mumbai was proposed for administrative convenience and coordinated investigation carried out qua Suumaya - HELD THAT:- The concerned officer, while passing the impugned order, has not said a word as to what prevailed with her in directing the transfer of the petitioners cases to DCIT, Mumbai. As indicated above, the orders do not bear the DIN as well. Although Respondent [Mr Aseem Chawla] did try to persuade us to sustain the impugned orders, having regard to the fact that coordinated investigation was necessary as Suumaya Group was in Mumbai, we are not inclined to accept the plea as the impugned orders do not even advert to the reasons stated in the letter i.e., search on Suumaya group, administrative convenience, and coordinated investigation. There were several reasons given by the petitioners as to why the transfer ought not to take place. The least the PCIT could have done was to discuss, in the briefest of terms, why these reasons did not prevail with her. It cannot be disputed that Section 127(1) required PCIT to set forth reasons in the order. What compounds the injury is that the impugned orders do not bear a DIN, which is a requirement of the CBDT Circular No. 19/2019 dated 14.08.2019. Thus, for the foregoing reasons, we are inclined to set aside the impugned orders.

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• 2023 (10) TMI 657
  Reopening of assessment u/s 147 - Change of opinion - reasons to believe - large increase in cenvat creditors against reduction in business income as compared to the preceding year and that there was mismatch in the amount paid to related persons under section 40A(2)(b) - HELD THAT:- The petitioner in detail had furnished copies of audited financial accounts, copy of the assessment order of the year 2013-14, details of payments made to persons specified, copy of the ledger, accounts of the loans taken by the company etc. All this material was considered and an assessment order was passed on 26th of August 2016. All these further indicate that after a notice of demand was issued u/s 156 revenue had raised no demand. After a period of five years, the revenue has thought it fit to reopen the assessment proceedings purportedly under the guise of the same records on the ground that the material embedded in the records could not be discovered. This obviously is the stand taken by the revenue based on change of opinion as the return filed by the petitioner for the Assessment Year 2014-15 was scrutinised u/s 143 (3) of the Act. Once the assessee makes a true and full disclosure of the primary facts at the time of the original assessment and which could have been discovered with due diligence by the Income Tax Officer, drawing an inference which appears subsequently to be alone, is a mere change of opinion with regard to that inference which would not justify the action under the Act. One must read the concept of change of opinion as an inbuilt test to check abuse of power by the AO. AO has power to reopen provided there is tangible material to come to the conclusion that there is an escapement of income from assessment. It is a well settled principle of law that reasons must have a live link with the formation of the belief. What is evident from the facts of the cases in absence of a live link between the reasons to believe and the material on record. This court is of the opinion that when all facts were correctly disclosed and were on record during the assessment proceedings for the relevant assessment year and the assessing officer has not consciously taxed the income which is now sought to be looked into, it is a clear case of change of opinion. Decided in favour of assessee.

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• 2023 (10) TMI 656
  Addition u/s 68 - bogus accommodation entry - unexplained commission expenditure - CIT(A) restricting same to only entry found credit in the Bank account of the assessee and bogus expenditures - HELD THAT:- CIT(A) was right in restricting the addition under Section 68 and the second addition u/s 69C as the remand report was clearly revolving the fact that the alleged entry dated 24.09.2008 was not found credited to the Bank account of the assessee. The assessee failed to discharge onus lay on him as per section 68 of the Act regarding entry dated 01.10.2008 hence, AO rightly made addition. Therefore, we reach a logical conclusion that the Ld. CIT(A) has rightly evaluated factual position of the case and thereafter, granted part relief to the assessee partly - Decided against assessee.

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• 2023 (10) TMI 655
  Disallowance u/s 14A r.w.r. 8D - expenditure incurred on earning exempt income - HELD THAT:- From the judgment of Bennett Coleman Co. Ltd. [ 2018 (2) TMI 730 - ITAT MUMBAI] , it is vivid that where assessee had furnished details that it had surplus own funds to make investments in shares and mutual funds and it had not used borrowed funds for such purpose, the disallowance of interest expenses u/s 14A of the Act, is to be deleted. Therefore, delete the addition made by the Assessing Officer in respect of interest disallowance u/s 14A of the Act. However, direct the assessing officer to make the disallowance being 0.50% of average investment. Disallowance u/s 40(a)(ia) - TDS u/s 194A on interest expenses non deducted - HELD THAT:- As during the appellate proceedings, the assessee submitted before CIT(A) that out of the total interest interest partly was paid to M/s Deutsche Bank AG and since the entity was a banking company, the provisions of section 194A were not applicable. This argument of the assessee was accepted by ld CIT(A), and hence the corresponding disallowance was deleted by ld CIT(A). As Counsel stated that despite of this, ld CIT(A) had enhanced the addition without issuing notice to the assessee for enhancement and without giving opportunity to the assessee. Therefore, enhancement made by the CIT(A) is bad in law and needs to be deleted. Reliance can be placed on the judgment in the case of CIT Vs. Lotte India Corporation Ltd [ 2006 (9) TMI 141 - MADRAS HIGH COURT] . Hence, note that ld. CIT(A) without giving an opportunity to the assessee, has enhanced the assessment, therefore addition made by the ld CIT(A) t is hereby deleted.

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• 2023 (10) TMI 654
  TP adjustment - specified domestic transaction of inter-unit transfer of power from the eligible undertaking u/s. 80-IA to other manufacturing undertaking of the assessee which are non-eligible units - price charged by the eligible unit has been compared with the prices charged by Gujarat Electricity Board (GEB) - whether the market value in the price charged by the eligible unit for the sale of electricity to another unit can be benchmarked with the price on which GEB is supplying to the customers? - case of the department is that since assessee is generating electricity and supplying it to the manufacturing unit, therefore, functionally it is similar to entities which are generating electricity and not which are into distribution of electricity. HELD THAT:- Once the market value of such price on which electricity is sold to another unit of the assessee, the same can be compared with the electricity distribution entities for supplying to the customers in the open market. Accordingly, there is no infirmity in the contention of the assessee that per unit electricity sold to the non-eligible unit at Rs. 6.90 per unit is the market value. DRP has taken M/s. Torrent Power Ltd. (TPL) which is the electricity generation entity supplying electricity to GEB - The price fixed for purchasing the electricity by GEB from M/s. Torrent Power Ltd. (TPL) cannot be compared with the prices on which eligible unit of the assessee is selling it to the other. Thus, once only comparable as chosen by the ld. DRP fails, then same loses the comparability for determining the ALP. In view of aforesaid discussion, we hold that the price on which eligible unit is selling the power, i.e., at Rs. 6.90 per unit which is the price available in the open market and also the same manufacturing unit is purchasing it from GEB at the same price, then it can be said to be the market value of the price. Accordingly, addition / disallowance of deduction made by the ld. CIT (A) is deleted and the ground Nos. 1-4 raised by the assessee are allowed. Taxing income under the head income from business and profession thereby levying additional tax in the computation sheet when there is no such additions in the assessment order - Before us the ld. Counsel has submitted a chart pointing out the discrepancy in the computation sheet of the ld. AO. Accordingly, we direct the ld. AO to verify the facts and if there is such error, same should be rectified and relief should be given. Accordingly, this ground is allowed for statistical purposes. Levy of interest u/s. 234B - Counsel submitted that there is no short fall and in fact assessee has paid extra tax more than assessed income. On this issue also we direct the AO to verify the payment of tax and to grant consequential relief in the computation of interest u/s. 234B. Accordingly, appeal of the assessee is partly allowed for statistical purposes.

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• 2023 (10) TMI 653
  Addition u/s 69A r.w.s. 115BBE - unexplained gold jewellery of 1627.5 Grams - Stree dhan of women - HELD THAT:- We hold that CBDT s instruction no. 1916 dated 11.05.1994 and press release dated 01.12.2016 pertains to seizure of jewellery. It postulates that by going through the archetypal Indian family standard, a persons of an Income Tax payee of considerable amount could have had the prescribed amount of jewellery in the circular. As brought into force after a series of due deliberation and its impact on taxation. It is never envisaged that the Assessing Authority should restrict the amount of eligible jewellery to the quantity mentioned in the circular. The assesses were trustee of a medical college and also have the returned income in the range of Rs. 21.27 lacs to 49.34 lacs as per the returns. We hold that CBDT s instruction no. 1916 dated 11.05.1994 and press release dated 01.12.2016 pertains to seizure of jewellery. It postulates that by going through the archetypal Indian family standard, a persons of an Income Tax payee of considerable amount could have had the prescribed amount of jewellery in the circular. It was brought into force after a series of due deliberation and its impact on taxation. It is never envisaged that the Assessing Authority should restrict the amount of eligible jewellery to the quantity mentioned in the circular. The assesses were trustee of a medical college and also have the returned income in the range of Rs. 21.27 lacs to 49.34 lacs as per the returns. As decided in the case of Ashok Chaddha [ 2011 (7) TMI 142 - DELHI HIGH COURT] that collecting jewellery of 906.900 gms by a woman in a married life of 25 years in form of stree dhan or on other occasions is not abnormal. As decided in the case of Vibhu Aggarwal [ 2018 (5) TMI 586 - ITAT DELHI] where AO u/s 69A made addition on account of jewellery found in search of assessee, since assessee belonged to a wealthy family and jewellery was received on occasions from relatives, excess jewellery was very much reasonable and, thus, no addition under section 69A was called for. Thus we direct that the addition made on this account be deleted. Appeal of assessee allowed.

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• 2023 (10) TMI 652
  Disallowance of deduction u/s. 80IB in respect of Dadra unit - HELD THAT:- As identical issue was decided against the Assessee by the Co-ordinate Benches of the Tribunal in Asst. Years 2011-12 to 2013-14 [ 2022 (8) TMI 1443 - ITAT AHMEDABAD] where the coordinate bench held the A.Y. 2002-03 as initial year of claim u/s. 80IB(4) of the Act for Dadra business undertaking instead of initial year as A.Y. 2004-05 claimed by the assessee. The finding of the Amritsar tribunal has been followed in A.Y. 2004-05, 2006-07 to 2010-11. Therefore following the same we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal of the assessee is hereby dismissed. Disallowance of deduction u/s. 80IB/80-IE in respect of interest on staff advances and statutory/ bank deposits - HELD THAT:- As decided in assessee own case Assessee is not entitled for deduction under Section 80-IB/80-IE on loan to employees and bank deposits as such interest income is not income derived from industrial undertaking as held in the case of CIT -Vs- Sterling Foods [ 1999 (4) TMI 1 - SUPREME COURT] and Liberty India [ 2009 (8) TMI 63 - SUPREME COURT] Disallowance u/s 14A r.w. Rule 8D - assessee has claimed exempt income being share of profit from partnership firm and not made any disallowance u/s. 14A - A.O has observed that assessee has debited interest expenditure in profit loss account along with other administrative expenditure and part of such expenditure is attributable to earning of exempt income - HELD THAT:- So far as proportionate interest disallowance is concerned, Counsel contended that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the Ld. CIT(A) has given adverse findings in this regard. Considering these facts, we direct the AO to verify whether the assessee has sufficient interest-free funds or not. Disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, the ground no.5 raised by the assessee is hereby allowed for statistical purpose. Disallowance of Registrar of Company and Stamp Duty charges - HELD THAT:- It is an undisputed fact that assessee was Partner in two Partnership Firms which were converted into Private Limited Companies under Part IX of the Companies Act, 1956 and both the companies were amalgamated with assessee company in the year under consideration. Due to such business re-organization, the authorized share capital of the company has been increased which is not in dispute. The expenditure incurred by the assessee is directly connected with such increase in authorized capital and such expenditure cannot be allowed in view of decision of Punjab State Industrial Development Corporation [ 1996 (12) TMI 6 - SUPREME COURT] and Brooke Bond India Limited [ 1997 (2) TMI 11 - SUPREME COURT] . Thus, the addition made by the Ld.AO is confirmed. This ground no. 6 raised by the of assessee is dismissed. MAT computation - addition of the amortization of Intangibles while computing book profits u/s 115JB - HELD THAT:- We note that the intangible assets are acquired and owned by the assessee company pursuant to the approved Scheme. Furthermore, we note here that there is perpetual and irrevocable transfer of the intangible assets such as Trade Marks to the assessee company. The Bench had called for evidences showing transfer documents of Trade Marks from SPIL to the assessee company by the virtue of the spin off approved by Hon ble HCs. The ld. Sr. Counsel of the assessee placed all these documents during course of hearing which have been perused by us. In light of this fact, we are unable to agree to the contention of the Ld. AO that there was no transfer of ownership of the assets to the assessee company. Thus we set aside the findings of the lower authorities and direct the AO to delete the adjustment made by him to the book profit under section 115JB of the Act. Hence, the ground of the assessee company is allowed. Non-consideration of refund of central excise duty as capital receipt under normal provisions - whether CIT(A) ought to have treated the central excise duty refund granted pursuant to the industrial policy of the State Government as a capital receipt not taxable under the Act? - HELD THAT:- Hon ble Gujarat High court in the case of CIT Vs Tripti Menthol Industries [ 2013 (7) TMI 763 - GUJARAT HIGH COURT] held that Excise duty refund is capital receipt. Similar issue was also considered in the case of Hitachi Home Life Solution (India) Ltd [ 2019 (3) TMI 1741 - ITAT AHMEDABAD] wherein as held that excise duty is capital receipt and application under Rule 27 of ITAT Rules filed by assessee was allowed. Respectfully following the same, refund of excise duty is held as capital receipt. Hence this Addl. Grounds of Appeal no.8 raised by the assessee is allowed. MAT computation - As refund of central excise duty is a capital receipt in nature, this ground of appeal relating to non-taxability of such refund under the book profit u/s 115JB of the Act is allowed consequently. Hence, this Additional Ground No.9 raised by the assessee is allowed. Disallowance of deduction u/s 80IE in respect to Sikkim Unit - Since the eligibility of deduction was upheld in the first year of claim being AY 2010-11, the same cannot disputed in the subsequent year of claim on the same ground of ineligibility. More particularly when the AO himself has observed that there is no change in facts and circumstances of the case during the year under consideration. Before us, no material has been brought on record by the Revenue to demonstrate the above decision of Coordinate bench in earlier year has been reversed or set aside by the higher authorities. Thus, respectfully following the order, we find no infirmity in the findings of Ld. CIT(A). This ground no.2 raised by the revenue is hereby dismissed. Disallowance of deduction u/s 80-IB/80-IE in respect of interest on delayed payments - It is undisputed fact that during the year under consideration, the assessee has claimed deduction u/s. 80IB/80IE in respect of interest received from M/s. Aditya Medisales Ltd. and others being interest due on overdue payments outstanding as a result of trading liability. Similar issue was decided in the case of erstwhile firm M/s Sun Pharma Industries (now merged with the assessee company) for AY 2005-06 to 2009-10 which was subsequently followed in AY 2010-11 and 2011-12 wherein following the decision of Nirma Industries Ltd. [ 2006 (2) TMI 92 - GUJARAT HIGH COURT] and Rane Ltd. [ 1998 (2) TMI 68 - MADRAS HIGH COURT] wherein it has been held that interest received by the assessee from its trade debtor towards late payment of sale consideration is not required to be excluded from the profit of industrial undertaking for the purposes of computation of deduction u/s.80IB/80IE as the same is income derived from business of industrial undertaking. Thus the assessee is entitled to claim deduction u/s. 80IB/80IE in respect of the interest earned on overdue payments being the debts arising from trading liability. Hence ground NO.3 raised by revenue is dismissed. Disallowance of deduction u/s 80IB/80IE in respect of R D expenses incurred by holding company by allocating the same to the eligible units in view of provisions of section 80IB(13)/80IE(6) r.w.s. 80IA(10) - Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of the Co-ordinate Bench of the Tribunal in assessee s own case, deduction u/s 80IB/80IE in respect of R D expenses is allowed to the assessee. Hence this Ground No.4 raised by Revenue is dismissed. Disallowance of selling and distribution expenses - AO has disallowed part of selling and distribution expenses after allocating such expenditure to SPI and SPS who have claimed deduction u/s 80-IB/80-IE - HELD THAT:- As decided in assessee own case [ 2022 (8) TMI 1443 - ITAT AHMEDABAD] assessee company using its network has incurred certain expenditure which according to the revenue authorities are not directly related to earning of income. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee and not for the purposes of earning profit. As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively - it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee s business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition. Appeals filed both by the Assessee and the Revenue are partly allowed.

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• 2023 (10) TMI 651
  TP Adjustment - international transaction of reimbursement of Employee Stock Option Plan (ESOP) Expenses - TPO determined ALP as Nil using Comparable Uncontrolled Price (CUP) Method as according to the TPO the ESOP expenses were notional in nature - HELD THAT:- AO and the TPO had failed to appreciate that the expenses for which deduction has been claimed by the Appellant pertain to RSUs granted in 2015 and exercised in the FY 2017-18. ESOP expenses related to the RSUs granted and exercised were claimed as deduction by the Appellant over the vesting period. During the relevant previous year, the ESOP expenses were also remitted outside India on the basis of invoices raised upon the Appellant by its AE. Deduction for the ESOP expenses was claimed by the Appellant during the relevant previous year. Benefit accruing on account of ESOP plans we find merit in the contention advanced on behalf of the Appellant that for the purpose of granting the RSUs to the employee of the Appellant was to retain and motivate him for continuing his employment with the Appellant. The cost incurred by AE on exercise of the RSUs by the employee of the Appellant is the cost reimbursed by the Appellant which was initially picked up by the AE. ALP of the ESOP Expenses cannot be taken as Nil . The transfer pricing addition of INR. 26,53,078/- is, therefore, set aside and TPO/Assessing Officer is directed to re-compute ALP and the transfer pricing adjustment, if any, by following the method adopted by the Appellant for determination of ALP of the international transaction of reimbursement of ESOP Expenses.

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• 2023 (10) TMI 650
  Unexplained unsecured loan u/s. 68 - AO inter-alia observed that the assessee has shown squared off unsecured loans allegedly received from an entity - bona fides of credits appearing in the books of assessee on the contours of s. 68 - CIT(A) deleted the addition - HELD THAT:- We find ostensible rationale in the view taken by the CIT(A) which is backed by evidences and whole set of speaking circumstances. On the other hand, the reasonings advanced on behalf of revenue lack merits. While the transactions are shown to be impressed with commercial spirit and eventually squared up, the parties to such banking transactions are identifiable on the tax records of the department. Additions made is fundamentally flawed for another reason too i.e. assessing the gross total of all credits disregarding the fact of rotation of money and peak credit being very low in the context. The facts in the present case thus speaks for itself and there appears no need to amplify the findings of CIT(A). Without reiteration of wide ranging observations led by the CIT(A), we are convinced that the onus which lays upon the assessee to explain that the entries made are real and not fictitious, has been duly discharged. Ordinarily, it is difficult to fathom an onus tagged upon the assessee to explain the circumstances as to why third party had needed such funds so long as the transactions are embedded with commercial considerations. Furthermore, the onus towards source in the hands of borrower in relation to repayment entries qua preexisting loans is indeed onerous and can seldom be visualized. We are thus in agreement with the pith and substance of plea advanced on behalf of assessee and endorse the action of the CIT(A) in toto. Appeal of the Revenue is dismissed.

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• 2023 (10) TMI 649
  Addition u/s 69C - Unexplained cash entries - During the course of search in the India Bulls Group, a Cash Transaction Record (CTR) in the form of loosely maintained cash book in Excel format by an employee - assessee submitted that the onus is on the assessing officer to prove that the impugned addition has not been accounted in the books of accounts of the assessee - assessee s contention that the impugned additions are made by the assessing officer based on the CTR which he has extracted from the application made before the settlement commission along with the nature of expenditure and the assessment year and therefore no addition can be made since the issue is settled HELD THAT:- CIT(A) has not given any finding with regard to the assessee as to how the addition made in assessee s hands gets explained with regard to source from the settlement made by M/s. Indiabulls Financial Services Ltd more so when assessee is not an applicant. AO s finding with regard to bank withdrawals recorded in the books of the assessee has also been not discussed by the CIT(A). As from order of the settlement commission we notice that the percentage of expenditure claimed by the applicants has been reduced from 90.32% to 65% and accordingly the amount to be settled is arrived at by the settlement commission. From this settlement whether the additions made based on specific list of expenses submitted before the settlement commission in the hands of the assessee is covered or not is not coming out clearly. In view of these discussions we are of the considered view that the issue should go back to the AO for a fresh examination and accordingly remit the issue to the assessing officer to verify whether the source for the additions made in the hands of the assessee is explained through the settlement made before the settlement commission. Assessee is directed to submit the relevant details before the assessing officer and cooperate with the proceedings. This ground of the revenue is allowed for statistical purposes.

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• 2023 (10) TMI 648
  Nature of expenditure - Contingent liability or not - invocation of performance guarantee by the Department of Telecommunication - internet expenses - Additions u/s 69C r.w.s. 115BBE - CIT(A) confirmed the disallowance on the ground that the said liability was a contingent liability not brought in the books of the Appellant at the time of creation of such contingent liability - HELD THAT:- It is pertinent to note that the bank guarantee was originally for the business purpose with the Department of Telecom which is a mandatory for certain projects. Thus, the observations made by the AO that it is not in respect of business appears to be incurred as the performance guarantee was prior to the period on which the assessee was not fully operationalise his business. Therefore, the benefit of Section 37(1) is allowable to the assessee in light of the decision of Neo Constructo Construction Ltd.[ 2013 (7) TMI 851 - GUJARAT HIGH COURT] Ground No. 1 is allowed. Labour expenses paid to one staff doing administrative / accounting as well as miscellaneous office work - HELD THAT:- D.R. relied upon the assessment order and the order of the CIT(A). It is pertinent to note that there was no closure declared by the assessee of its entire business but certain business activities were going on from 2008 till 2016 and therefore, one staff expenses related to salary component was genuine by the assessee as revenue expenditure. Hence, the Ground No. 2 is allowed. Addition at the rate prescribed in the Section 115BBE - HELD THAT:- From the perusal of the additions it is pertinent to note that the expenditure claimed by the assessee in respect of performance guarantee as well as labour expenses were both explained by the assessee during the assessment proceedings and therefore, applying Section 115BBE in assessee s case is not justifiable. Hence, Ground No. 3 is allowed.

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• 2023 (10) TMI 647
  Territorial Jurisdiction - Transfer of Jurisdiction u/s 127 - Order was challenged on this ground earlier - As submitted AO has to be first vested with appropriate jurisdiction in terms of section 120(1) and (2) which is not so in the present case, since an order u/s 127 had already been passed transferring the jurisdiction from Kolkata to New Delhi, AO in the present case was divested of the jurisdiction to pass the impugned order - HELD THAT:- Admittedly, it is a fact on record that jurisdiction was transferred vide order under Section 127 and the revisionary proceedings under Section 263 and assessment giving effect to the same were of undertaken thereafter by the officer of erstwhile jurisdiction. The chronology of events tabulated above, supported by documentary evidences placed on record and well reasoned finding given by learned Commissioner of Income-Tax (Appeals) persuades us unhesitatingly to uphold the order of learned Commissioner of Income-Tax (Appeals), whereby, the impugned assessment order has been quashed owing to lack of jurisdiction. In respect of reliance placed by the learned CIT (DR) on the decision of Hon ble Delhi High Court in the case of Shyam Sunder Infra-structure Pvt. Ltd.[ 2015 (2) TMI 410 - DELHI HIGH COURT] we note that there is no mention about passing of any order under Section 127 of the Act, hence, is distinguishable on facts. Accordingly, grounds taken by the Revenue are dismissed.

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• 2023 (10) TMI 646
  TP adjustment - interest paid to SCB India on working capital loan taken - Appellant had obtained working capital loans from SCB India for short tenure at prevailing interest rates - HELD THAT:- We find that the transaction of loan taken by the Appellant from SCB India, with the Appellant being a tested party, has been sought to be benchmarked by the transactions undertaken by the SCB India with third parties whereby loan has been granted by SCB India to such third parties. Appellant is not party to the loan transaction identified by the Appellant and therefore, in our view, rate of the interest determined by the Appellant as arm s length rate of interest on the basis of such transactions does not constitute internal CUP. As per the Appellant s own submissions, the interest rate on working capital loans is a function of prevailing market rates, liquidity conditions and other related economic/commercial factors surrounding the transaction However, no such information/details is available on record in relation to the loan transactions identified by the Appellant. We are constraint to remand the issue back to the file of the AO/TPO for determination of arm s length rate of interest and transfer pricing adjustment, if any, in relation to transaction of working capital loan of INR 29 Crores granted by SCB India to the Appellant afresh. With the above direction, Ground No. 1 raised by the Appellant is allowed for statistical purposes. Interest received by the Appellant from SCB India on fixed deposits - TPO had compared the rate of interest charged by the Appellant with the Punjab National Bank ( PNB ) interest rate card and noted that interest rate on fixed deposits exceeding INR 1 Crore was higher by 1%, thus proposed TP adjustment - DRP noted that the PNB interest rate card adopted by the TPO was effective from 01/03/2009 only and therefore, directed the TPO/Assessing Officer not to adopt the PNB interest rate card for deposits prior to 01/03/2009 and restricting the adjustment to interest on fixed deposit placed thereafter - HELD THAT:- Appellant challenge as contending that the PNB interest rate card cannot be adopted to benchmark the interest charged by a private company such as the Appellant as PNB was a nationalized bank is not acceptable - Accordingly, we are not inclined to interfere with the Final Order passed by the Assessing Officer on this issue as per the direction of DRP. Accordingly, Ground No. 2 raised by the Appellant is dismissed. Disallowance u/s 14A r.w.r. 8D(2)(iii) - assessee contended that no addition could have been made in the hands of the Appellant as no expenditure was incurred by the Appellant for earning exempt income - HELD THAT:- We find merit in the contention of the Appellant with the AO has failed the record satisfaction before invoking provisions of Section 14A r.w.r. 8D of the Rules. On perusal of the assessment order we find that the AO has rejected the contention of the Assessee that no disallowance should be made u/s 14A and while doing so, AO as neither referred to any interest cost and/or administrative expenses incurred/claimed by the Assessee for earning the exempt income, nor made any reference to the accounts of the Assessee. Hon ble Supreme Court in the case of Godrej Boyce Mfg. Co. Ltd. [ 2017 (5) TMI 403 - SUPREME COURT] had observed that it was only after the AO had recorded his dissatisfaction as regards the correctness of the claim of the Assessee that the provisions of Section 14A of the Act read with Rule 8D could be invoked. Thus, it is settled legal position that before proceeding to invoke provisions of Rule 8D of the Rules for computing disallowance u/s 14A AO must express his dissatisfaction regarding the computation of disallowance made by the Assessee. Accordingly, addition be deleted - Decided in favour of assessee. Depreciation on routers, connection charges and servers - whether qualify for depreciation at the rate of 60%, being the rate applicable to computers? - HELD THAT:- As relying on BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [ 2010 (8) TMI 58 - DELHI HIGH COURT] appellant is entitled to claim depreciation at the rate of 60%. Accordingly, disallowance of depreciation stands deleted.

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• Insolvency & Bankruptcy

• 2023 (10) TMI 665
  Maintenance of status quo - HELD THAT:- Considering the submission advanced by learned senior counsel for the appellant that e-voting for AGM is scheduled to commence from 26th September, 2023 wherein authorized representative of Orbit Electricals Pvt Ltd/Respondent No.1 may participate as well as the fact that decision taken in the EOGM of Orbit Electricals Pvt Ltd held on 3rd May, 2019 is subject matter of the present appeal, it is proposed to direct the parties to maintain Status Quo as was available prior to EOGM dated 03.05.2019 till the judgement is delivered by this Tribunal. Normally after admission of appeal and at the time of hearing such order is not required to be passed but for the ends of justice once we are reserving judgement and delivery of judgement may take some reasonable time, we feel it is necessary to pass the aforesaid interim order while reserving the judgement. Judgement is reserved.

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• 2023 (10) TMI 645
  Successful Resolution applicant - Restoration of electricity connection - pre-CIRP dues - refusal on the ground of electricity dues - Maintainability of application under Section 60(5) of the IBC - HELD THAT:- What has been laid down by the Hon ble Supreme Court in Gujarat Urja Vikas Nigam Limited [ 2021 (3) TMI 340 - SUPREME COURT] is that the NCLT has jurisdiction to adjudicate dispute which arise solely from or which relate to the insolvency of the Corporate Debtor. Looking into Section 60(5), the provision clearly provides that NCLT shall have jurisdiction to entertain or dispose of any application or proceeding by or against the Corporate Debtor or corporate person or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor. The law is settled that an application can be entertained only when it raises a question which arises or relates to the insolvency of the Corporate Debtor. Judgment of the Hon ble Supreme Court in Embassy Property Developments Pvt. Ltd. [ 2019 (12) TMI 188 - SUPREME COURT] has also been relied upon by the Counsel for the Respondent. Embassy s case was a case where Adjudicating Authority has issued a direction to the Government of Karnataka to execute a supplemental lease deed for extension of mining lease which was held beyond the jurisdiction of the Adjudicating Authority - The judgment of the Embassy was a case where the Adjudicating Authority has issued direction pertaining to exclusion of supplementary lease which was in the jurisdiction of the Government under the MMDR Act, 1957. It was held that directions issued by the NCLT were beyond the jurisdiction vested in the NCLT. The Respondent cannot insist that unless the arrears of the electricity dues which dues were payable by the Corporate Debtor prior to disconnection are paid by the Appellant only then communication can be issued. The application is fully maintainable under Section 60(5) of IBC - Application allowed.

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• Service Tax

• 2023 (10) TMI 664
  Interpretation of statute - incorrect interpretation of section 26(2) and section 58 of Special Economic Zones Act, 2005 - error apparent from the face of record or not - Recovery of Service tax alongwith penalty - Non-consideration by the Tribunal of section 26(2) and section 58 of Special Economic Zones Act, 2005 - HELD THAT:- The exemption from service tax is, unlike goods, not related to place where the service is physically rendered but to the extent of deployment in pursuit of carrying out authorized operations and, that too, in accordance with the Special Economic Zones Rules, 2006. Authorized operations is defined in section 2(c) of Special Economic Zones Act, 2005 and any demand made under section 73 of Finance Act, 1994 without ascertainment of usage for authorized operations , thus defined, lacks authority of law. It has never been the case of Revenue that such exercise had been carried out by the adjudicating authority and found wanting. It is, thus, all too clear that the present application has been made without comprehending of the scope of section 26(2) of Special Economic Zones Act, 2005. There can be no claim that Finance Act, 1994 relates to Special Economic Zone in any manner as there is no reference therein to such expression and a notification, under section 93 of Finance Act, 1994 enabling exemptions generally or to a class of service-providers, can have no pretence to being saved by section 58 of Special Economic Zones Act, 2005. Moreover, such saving is founded on lack of inconsistency in the secondary legislation and it has been held by the Tribunal that it is that very inconsistency which led to discarding of provisions in the impugned notification that insist upon restriction not contemplated in section 26 of Special Economic Zone Act, 2005. The application is devoid of merit and deserves to be rejected.

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• Central Excise

• 2023 (10) TMI 644
  100% EOU - Debonding - Utilization of accumulated Cenvat credit - amount of the counter-veiling duty payable at the time of de-bonding 100% EOU can be paid from the accumulated Cenvat credit by an EOU Unit or not - Extended period of limitation - HELD THAT:- This issue is no longer res-integra as this issue in the case of Dishman Pharmaceuticals and Chemicals Pvt. Limited vs. UOI [ 2015 (12) TMI 1211 - GUJARAT HIGH COURT] where it was held that various assessees, including the assessees situated within the jurisdiction of Ahmedabad Commissionerate have been given benefit of paying the excise duty foregone from the Cenvat credit account. Under the circumstances, prima facie, there appears to be no reason to deny such benefit to the petitioners. It is found that the appellant unit was right in paying amount of counterveiling duty from the accumulated Cenvat credit and therefore the appeal on merit succeeds. Extended period of limitation - HELD THAT:- Since the appellant have made a detailed declaration before the proper officer of the department regarding the facts of payment of various kinds of the dues and utilisation of Cenvat credit in the month of August, 2012 and department has already issued a no-dues certificate on 13.10.2012 to the appellants therefore, making allegation of any suppression of facts, misdeclaration or any other contravention with an intention to evade duty are not present in this case. Since the entire demand is beyond normal period, the same is hit by period of limitation and therefore, unsustainable. The impugned order-in-original is without any merit and we set-aside the same. Appeal allowed.

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