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TMI Tax Updates - e-Newsletter
October 19, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of assessment u/s 144 r.w.s. 144B - As argued assessment order is an exact reproduction of the draft assessment order except one sentence which has been added “Regarding this show cause notice issued to assessee on 22.04.2021 but assessee has not given any justification for non-furnishing of quantitative details in form 3CD" - We wonder how does the affiant know something which the assessment order does not reflect. - There cannot be anything far from truth. - We are, therefore, compelled to set aside the order - HC
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Addition on account of inflation of purchases - suppliers were not maintaining the stock register and their books of accounts were rejected at the time of assessment under section 153C - The AO simply made the addition on ad hoc basis without relying upon any admissible evidence of inflation of purchases by the assessee. The addition was made without any basis and on ad hoc basis only. CIT(A) has rightly deleted the addition. - AT
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Assessment u/s 153A - the concluded assessments cannot be interfered unless there is incriminating material discovered from the seized documents belonging or pertaining to the assessee, and further, no additions can be made where the assessments are framed u/s.153C for unabated year i.e. where no assessment is pending. The seized documents must at least clearly point out that there is some undisclosed income - AT
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Taxability of write back of 'Non-Plan Government Loans' claiming the same to be capital receipts not chargeable to income-tax - it could not be said that the assessee has not obtained or derived benefit from the waiver - assessee is definitely hit by provisions of Section 28(iv) and 41(1) of the 1961 Act - we do not find fault with the assessment order passed by the AO that merely because relevant provision of the 1961 statute is not mentioned in assessment order, will take otherwise taxable receipt out of taxation purview merely on the ground that relevant Section is not mentioned by the AO. - AT
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Loss arising from Inventory write off - disallowance of shortage in the value of inventory - shortfall in inventory - the assessee has engaged the services of a leading professional, who has investigated the matter, found out the methodology adopted for inflating the stock and finally quantified the difference in the value of stock. Hence, we are of the view that the shortage in the value of stock has been ascertained by the assessee in a systematic manner. - AT
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Disallowance of depreciation - no business activity was carried out by the assessee company - The use of individual asset for the purpose of business may be examined only in the first year when the asset was purchased and put to use but not in the subsequent years, when use of block of assets is to be examined, existence of individual asset in block of assets itself amounts to use for the purpose of business. Once an asset is included in the block of assets, it remains in block for its entire line. - AT
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Reopening of assessment u/s 147 - Disallowing claim of weighted deduction of 175% under section 35(l)(ii) on the ground that donation receipt is not submitted - Allegation of providing accommodation entries - upon reopening on the basis of the same information the Assessing Officer made the assessment disallowing the payment. There is no further material brought on record by the Assessing Officer. The assessee has submitted the payment evidence. The same was through banking channel. - Claim cannot be denied - AT
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Exemption u/s 11 - Denial of exemption as assessee is into providing buses on hire for excursion, wedding, pilgrimage etc., to general public and charges for such letting are collected on commercial basis - Prior to the introduction of the proviso to Section 2(15) of the Act, there was no dispute that the Assessee was established for charitable purposes. The stream of traffic revenue and non traffic revenue by itself would demonstrate that the Assessee does not exist for profit. - The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. - AT
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Disallowance u/s 37 (1) on account of 'job charges' - onus to prove - Disallowance of 10% of the expenses - Having accepted the books of accounts, disallowing 10% of the expenses in general without bringing on record as to what and which of the expenses were not allowable. - CIT(A) rightly deleted the additions - AT
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Nature of receipt - money received by the assessee for issue of shares but the shares could not be issued due to contravention of FEMA guidelines - AO treated the same as gift by the assessee company or in terms of Section 28(iv) r.w.s. 2(24)(ix) - Alertpay Quebec was not the Holding Company of assessee company. Hence we hold that the observation made by the ld AO in this regard is factually incorrect. - AT
Customs
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Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - mis-declaration on part of the Exporter - violation of the provisions of regulation 11(d) of CBLR 2013 - This Tribunal was consistently holding though the custom broker is cast upon the responsibility, the mitigation of the same would lie in imposition of penalty and forfeiture of the security deposit and revocation of licence which is agreeably a very harsh punishment, which is not warranted in such circumstances. - AT
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Valuation of imported goods - related party transaction - rejection of declared value - failure of the appellant to submit evidence of identical/contemporary imports - the loading has been applied uniformly without reference either to the base price of each article of import or of the total value of the consignment in each bill of entry. - In the absence of re-assessed bills of entry, we have before us, at best, a piece-meal determination which, being premature, would be inappropriate to dispose off. - AT
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Absolute confiscation - import of Peas (Pisum Satvium) including Yellow Peas, Green Peas, Dun Peas and Kaspa Peas - restricted item or not - The Hon'ble Supreme Court in the case of Raj Grow Impex LLP case, after considering all aspects has granted permission to the importer to re-export. The very same relief cannot be denied to the appellants without cogent reasons. A party who has not been able to cross the miles should not be discriminated only for the reason that they did not join in the litigation. - AT
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Revocation of Customs Broker License - proceedings have taken place without supplying the relied upon documents to the appellant - violation of principles of natural justice - matter is remanded to the original adjudicating authority for fresh decision after supplying the documents to the appellant and giving opportunity to the appellant to defend himself in respect of the charges - AT
Indian Laws
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Removal of names of the petitioners from the list of wilful defaulters - This Court is of the view that the names of the writ petitioners cannot be removed from the list of wilful defaulters merely on the ground that the company is absolved of its liability as the petitioners have furnished personal guarantees to the loan facility extended by the respondent. The order of the Review Committee does not suffer from any infirmity. - HC
IBC
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Admissibility of application filed under CIRP during pendency of the proceeding of SARFAESI Act, 2002 - extension of period of limitation as per section 18 of Limitation Act, 1963 - Non-furnishing of information by the Financial Creditor at the time of filing an Application under Section 7 of the Code need not necessarily entail in dismissal of the Application. Instead, an opportunity can be provided to the Financial Creditor till the admission/rejection of petition to provide additional information required for the satisfaction of the Adjudicating Authority with respect to the occurrence of the default - AT
Service Tax
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Refund of unutilized CENVAT Credit - rejection on the ground that the appellant did not debit the amount of refund claimed at the time of fling the refund claim - the Commissioner (Appeals) have mis-conceived and mis-directed himself by ignoring the ruling of the Hon’ble Supreme Court, which is both judicial indiscipline and also in violation of Article 141 of the Constitution of India. - AT
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Levy of service tax - service to financial institutions in relation to selling of their loan products to their customers - taxability of commission - It is abundantly clear that the appellant was providing taxable service which is chargeable to service tax in terms of section 66B of the Finance Act, 1994. The appellant cannot be allowed to plead ignorance of law. - AT
Case Laws:
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GST
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2021 (10) TMI 752
Seeking grant of anticipatory bail - registration with GST department has been complied with or not - offence punishable u/s 132 of CGST Act, 2017 - HELD THAT:- It is admitted fact that the applicant has given the undertaking to appear before the investigating authority on 08.10.2021 - as the respondent has submitted that as some other facts are also to be taken on the record and therefore, he has prayed for filing a status report. List on 25.10.2021.
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Income Tax
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2021 (10) TMI 751
TP Adjustment - Comparable selection - ITAT directing to exclude Aditya Birla Capital Advisors Pvt. Ltd. as this company performs similar functions as that of the assessee - HELD THAT:- Question of law by the Department is squarely covered in favour of the respondent-assessee vide this Court s order [ 2018 (8) TMI 592 - DELHI HIGH COURT ] for Assessment Year 2011-12 and Assessment Year 2012-13 wherein this Court had dismissed the appeal filed by Income Tax Department/appellant on the exclusion of ABCL from the list of comparables, as functions performed by ABCL as a fund manager were wholly different from that of the respondent and also with a totally different risk profile. Adjustments made on account of interest on receivables - Under no transfer pricing norm, principle or evaluation of any benefit can there be a one-sided adjustment taking into account delayed invoices while at the same time ignoring invoices/payment received in advance. Consequently, factually there can be no notional computation of delayed receivables only ignoring the receivables received in advance. A perusal of paper book reveals that most of the invoices/receivables had been paid significantly in advance. When the period for which the amounts of receivables received in advanced enjoyed by the respondent is seen vis-a-vis the amount receivable beyond sixty days, it is apparent that the respondent has received significantly more advance rather than outstanding receivable beyond sixty days - the notional interest relating to alleged delayed payments in collecting receivables from the AEs is uncalled for as in fact, there are no outstanding receivables as the amount received in advance far outweigh the amount received late. The question as to whether in a given case transfer pricing adjustment on delayed receivables , could apply even to a debt-free company or not, hence does not arise on facts and is left open.
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2021 (10) TMI 750
Validity of assessment u/s 144 r.w.s. 144B - As argued assessment order is an exact reproduction of the draft assessment order except one sentence which has been added Regarding this show cause notice issued to assessee on 22.04.2021 but assessee has not given any justification for non-furnishing of quantitative details in form 3CD - HELD THAT:- As respondents have passed the assessment order without application of mind, without considering the two replies dated 23rd April 2021 and 27th April 2021 filed by petitioner and without considering the request for personal hearing also sought by petitioner. Strangely in the affidavit in reply filed by one Yashpal Singh affirmed on 29th July 2021, it is stated that the noting records show that the submission dated 23rd April 2021 and 27th April 2021 both taken on record and considered . But the assessment order does not reflect this. We wonder how does the affiant know something which the assessment order does not reflect. We have compared the details provided by petitioner and Form 35(b) annexed to the affidavit in rejoinder. We do not find any difference except that in the response dated 27th April 2021 the product manufactured, viz., Wet Grinders, is mentioned. We have to also note that this is not the case in the assessment order which has proceeded on the basis that no response at all has been filed to the notice dated 22nd April 2021. There cannot be anything far from truth. We are, therefore, compelled to set aside the impugned order dated 8th June 2021 and also the consequential notices.
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2021 (10) TMI 749
Deduction claimed u/s 80HHC - AO held that the assessee had no positive income from the export if 90% of incentives and other income are reduced from profit of the business and disallowed the deduction claimed - AO disallowed a sum and brought to tax the said amount under Section 69A (Unexplained money, etc.) after giving a finding that respondent has not been able to satisfactorily explain the acquisition/purchase of goods of this value - HELD THAT:- Question no.1 is no more res-integra in view of the judgment of the Apex Court in the case of ACG Associates Capsules (P.) Ltd. V/s. Commissioner of Income Tax, Central- IV, Mumbai [ 2012 (2) TMI 101 - SUPREME COURT] Whether on the facts and circumstances of the case, when the export income is Nil then whether the assessee is entitled to claim deduction u/s. 80HHC on export incentive? - Calculation by CIT (A) was not correct, still pursuant to this amendment coming into force with retrospective effect, respondent will be entitled to deduction under Section 80HHC even where profits derived from the export of goods was a negative figure, i.e., even where there was a loss. Addition u/s. 69A which is stand alone addition having no connection with the allowance or other wise of deduction u/s. 80HHC - It is not denied anywhere that any purchases were ever made or the entries for cash payments made were bogus entries. The only basis we find, when we read the entire order, for the Assessing Officer to come to the conclusion that he has arrived at that the explanation was unsatisfactory is because in his belief, based on a presumption, in cash purchases full consideration has to be paid before taking delivery. He has also stated that some of the suppliers had stated that they have not supplied to respondent but can that be a substantial question of law whether such supplies were made or otherwise? In our opinion, these are questions of fact. We also have to note that there is a finding that the Assessing Officer has accepted as genuine the payment made to the same suspect parties before the date of purchase. ITAT has not erred in confirming the order of the Ld. CIT (A) wherein it was held that the assessee is liable for disallowance u/s. 40A(3) of the IT Act instead of addition u/s. 69A made by the AO - No substantial question of law.
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2021 (10) TMI 748
Reopening of assessment u/s 147 - unaccounted income - AIR information that the assessee had made cash deposit in his bank a/c - whether the value of sale of agricultural land shown in the unregistered agreements viz~a~viz sale deed duly supported with the affidavit of the assessee is true to explain the source of cash deposit in the ICIC bank account of the assessee? - HELD THAT:- Admittedly the assessee is an agriculturist who had no source of income other than agriculture income. It is also not disputed that the assessee has sold an agricultural land in the joint ownership to his brother under two unregistered agreement and a registered sale deed under the signature of two independent witnesses. The competent authority in this regard is the ld. CIT(A)who had just rejected the evidentiary value of the unregistered sale agreements without examine the facts and rebuttal of AO in terms of apparent may not be real always. He merely held that such a recourse by the appellant is not permitted in law as per provisions contained in chapter VI of the Indian Evidence Act, 1 872, which prohibits admission of oral evidence to contradict the contents of a contract reduced into writing and registered as per law subject to certain exceptions like fraud, misrepresentation, etc. Such approach of the Ld. CIT(A) can not be justified and approved. He was required to examine the veracity of the unregistered documents by way of verification from the witnesses, Sh. Kavar Jeet Singh, Purchaser of Agricultural land, and prevailing market value of the land in the neighborhood/ vicinity. AR, contention that details required by the CIT(A) were submitted but same was not taken on record by him. Considering the ld. AR contentions that the assessee s additional evidence be considered by the CIT(A) with independent application of mind to the facts of the case and verification of the respective witnesses,purchaser of land and factual field verification would reveal the actual sale consideration and in turn the actual amount of sale consideration received by the assessee. Considering the principles of natural justice, in our view, the assessee should get one more chance to prove its case before the Ld. CIT(A) - Assessee appeal is allowed for statistical Purpose.
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2021 (10) TMI 747
Revision u/s 263 by CIT - Case of assessee selected for limited scrutiny - Quantum of capital gain arising to assessee as well as towards eligibility of deduction under section 54F - PCIT has regarded the Assessment Order as erroneous mainly on the ground that construction work has been completed to the extent of 70% only as reported by the DIT (I CI) - construction of the residential house must be completed within three years from the date of transfer of original asset to be eligible for deduction under section 54F - HELD THAT:- The judicial precedents have read down the conditions of the provisions of Section 54F of the Act to align it with its object and observed that the utilisation of the consideration in the construction of residential house is sufficient to be eligible for deduction notwithstanding the fact that the construction of residential house has not been fully completed within three years. The thrust is on utilisation rather than completion of construction of residential house. The view taken by the A.O. to allow deduction under section 54F based on parameters of utilisation made in construction is thus plausible view and cannot be faulted. This being so, the order of the A.O. cannot be held to be erroneous and prejudicial to the interest of the revenue. Consequently, the powers available under section 263 of the Act cannot be exercised in the facts of the case. Plea of the assessee that a fresh information coming to the knowledge of the PCIT after completion of the assessment cannot be relied upon adverse to the assessee without following the basic principles of natural justice - As can be seen from the assessment records, vide letter dated 09.03.2021, requested the Revisional Commissioner to provide a copy of verification report of Inspector of ADIT (I CI). However, the PCIT did not choose to confront the assessee with said report. No reference to the contents of the report is mentioned in the Revisional Order either. Such casual approach of the PCIT while disturbing the completed assessment cannot be endorsed. It is trite that evidence not confronted to the assessee coming to the knowledge of the revenue cannot be relied upon. The so called report thus cannot be taken cognizance of in the absence of such report. When such report is ignored, there is no other material available before the PCIT to condemn the action of the A.O. Hence, looking from any angle, the Revisional Order of the PCIT is unsustainable in law. - Decided in favour of assessee.
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2021 (10) TMI 746
Addition u/s 69 - assessee had purchased immovable property as unexplained - creditworthiness of the company namely M/s Seven Star Developers Township Pvt. Ltd could not be established - HELD THAT:- Revenue authorities were expected to appreciate the reasonable explanation put forth by the assessee and the evidences produced about the nature and source of investment, however, in this case, the revenue authorities made additions merely on the basis of surmises and conjectures as well as without any supporting evidence which they were not entitled to do so. Although, in the remand report, the A.O. has expressed doubts regarding the financial position of the company but be that as it may, the fact still remains that no property was purchased in the name of assessee and no payments were made by the assessee in his personal capacity and the said fact has also been admitted by the A.O. in his remand report that out of total payment of ₹ 1,97,03,295/- claimed to be paid to the land owners namely Sh. Rajendra Singh, Dakh Kanwar and Bheru Singh, the payments to the extent of ₹ 34,50,000/- could only be verified from the two bank accounts and the balance of ₹ 1,62,53,295/- remained unverified - A.O. merely presumed that such payments might have been made/paid by the assessee - no documentary evidence has been placed on record to prove the said contention of the A.O. Thus, the A.O. merely acted on the basis of surmises and conjectures, therefore, the additions made by the A.O. are not tenable in the eyes of law. Therefore we are of the considered view that no liability can be fastened upon the present assessee U/s 69 of the Act. Therefore, we direct the A.O. to delete the said addition. Thus, these grounds of appeal raised by the assessee are allowed. Bogus LTCG - Unexplained cash credit after disallowing claim of the assessee of exemption u/s 10(38) - Penny stock purchases - HELD THAT:- In the present case, the assessee had satisfied all the conditions in respect of claiming exemptions u/s 10(38) of the Act as mentioned for claiming exemption, therefore, the shares sold by the assessee are entitled for long term capital gain. The assessee had furnished all the required evidence for the purchase of shares as well as sale of shares which inter alia included copies of bills for purchase of share and contract notes for sale of share, Demat account and bank statement evidencing payments for purchase of shares and receipts against sale of shares by account payee cheques - As relying on MEENU GOEL VERSUS ITO, WARD-31 (1) , NEW DELHI [ 2018 (3) TMI 1020 - ITAT DELHI] we are of the view that the assessee is entitled for exemption u/s 10(38) of the Act. Accordingly, we set aside the order passed by the ld. CIT(A) and direct the AO to grant exemption to the assessee u/s 10(38) of the Act - Decided in favour of assessee.
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2021 (10) TMI 745
Disallowance u/s 14A r.w.r. 8D - CIT(A) has restricted the disallowance u/s 14A to exempt income of dividend - basic contention of the assessee that although it is entitled to the deduction u/s 80P(2)(a)(i) for whole of the income earned from providing credit facilities to its members out of surplus funds is accepted by the ld. CIT(A) as the provisions of section 14A apply only to the dividend income which is exempt and not to the interest received on FDR and other investments - HELD THAT:- The allegation of the assessee that the Assessing Officer has denied deduction u/s 80P of Income Tax Act, is factually wrong and therefore there could be no grievance of the appellant in respect of claim of deduction u/s 80P. The only disallowance calculated by the Assessing Officer is by applying section 14A read with Rule 8D pertain to dividend income only. No disallowance can be made in view in the case of CIT, Jalandhar-1, Jalandhar vs. Max India Ltd [ 2017 (3) TMI 1254 - PUNJAB AND HARYANA HIGH COURT] where it was held that where an assessee has sufficient interest-free funds to earn exempt income no disallowance can be made under section 14A - No such effort has been made to place on record either before the Ld. CIT(A) nor before us, as to when was the investment made, what was the amount of investment made and what were the interest-free sources. In our view, mere argument that the Balance sheet for the year ending March 2015 contained paid-up share capital and reserve fund which were interest-free source is not sufficient to establish the links of the source of investment with the interest-free sources. Unless and until, the appellant organically links the source of investment with the interest-free sources, the benefit of the aforesaid decision cannot be extended. Following the case of Punjab Tractors Ltd [ 2017 (2) TMI 647 - PUNJAB AND HARYANA HIGH COURT] held that the presumption of using interest free funds would arise only if the assessee shows availability of funds. The case law relied upon by the assessee are distinguished on the peculiar facts of the instant case. In the case of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT] it has been approved that the disallowance cannot be more than total exempt income. Respectfully following the Hon ble Apex Court, the ld. CIT(A) was justified in restricting the disallowance u/s 14A equivalent to exempt income of dividend to the extent of ₹ 5,06,792/- No merit and substance in the contentions of the appellant.
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2021 (10) TMI 744
Registration u/s 12AA denied - Payment of franchisee fee - Denial of exemption u/s 12AA on the issue that the assessee is a franchisees of Zee Learn Ltd. - charitable activities of the school in view of the substantial evidences of concession fee, given to the poor deserving students - HELD THAT:- We understand that as such nothing having been doubted as regard to the aims and activities of the Assessee society being charitable is concerned - if there is complete waver of fee, how the society would run the school and further whatever more evidence was required to be given has not been substantiated by the CIT (E). In our view, if on this issue, no adverse inference have been drawn by the PCIT(E) by accepting main object of the society is to carry-out the object of the education only, then refusal to grant 12 AA to the assessee society was not justified. Nothing has been doubted and for the purpose of 12A only two conditions are to be required to be satisfied that one with regard to the activities of the trust and the second with regard to the aims objects of the society as per the decided case laws on this issue which have been addressed in favor of the assessee by the earlier order of the Coordinate Bench as placed in the paper book. As regards to the issue of profit motive, it had clearly been held that profit motive should not be predominant and for that various decisions have been cited has held that the denial of registration is being made on the issue of the franchise fee paid to M/s. Zee Learn Ltd. and ignoring the finding is already in favor of the assessee in the earlier order of ITAT [ 2018 (9) TMI 954 - ITAT AMRITSAR ] and, therefore, the CIT (E) not following the order of the Hon ble ITAT is against judicial discipline and rejecting the application for registration u/s 12AA, which issue had already attained finality is bad in law and, thus, the PCIT (E) was required to grant registration to the assessee u/s 12AA. The jurisdiction of the PCIT(E) was being limited to verification of two issues, one with regard to the lease hold land and the second about the fee concession and on both accounts, and since, the CIT (E) has not drawn any adverse inference and, therefore, in our view, the order of CIT(E) denying the registration u/s 12AA is bad in law - we direct the PCIT(E), Chandigarh to grant registration to the assessee society from the date of its application. - Decided in favour of assessee.
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2021 (10) TMI 743
Revision u/s 263 by CIT - Assessment was framed by the assessing officer for a limited scrutiny - expansion of scope of limited scrutiny - HELD THAT:- As decided in PARADISE RUBBER INDUSTRIES [ 2021 (10) TMI 444 - ITAT AMRITSAR] revisionary jurisdiction shall not be invoked by the Pr. CIT to look into the issues which were not within the purview of limited scrutiny - thus the appeal filed by the assessee is allowed on legal ground.
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2021 (10) TMI 742
Deduction u/s 80P(2)(a)(i) - interest income / dividend received on investments with co-operative banks - HELD THAT:-The Bangalore Bench of the Tribunal in the case of M/s.Vasavamba Co-operative Society Ltd. [ 2021 (8) TMI 706 - ITAT BANGALORE] had held that the assessee is not entitled to deduction u/s 80P(2)(d) nor u/s 80P(2)(a)(i) of the I. T. Act with regard to the interest income earned from investments made with cooperative banks - Thus we hold that the assessee is not entitled to deduction u/s 80P(2)(d) nor u/s 80P(2)(a)(i) of the I.T.Act in respect of interest income earned from investments with Cooperative Banks. AR had claimed that if interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 - We find an identical issue was considered by the Hon ble jurisdictional High Court in the case of Totagars Co-operative Sale Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income, this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of the Hon ble jurisdictional High Court in the case of Totagars Sale Cooperative Society (Supra). Accordingly, the case is restored to the files of the A.O. A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 - Appeal filed by the assessee is allowed for statistical purposes.
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2021 (10) TMI 741
National Faceless Appeal Centre has passed the ex-parte order - No proper opportunity of being heard to the assessee - HELD THAT:- We find that the CIT(A) has simply recorded in his second para 5.0, different dates of hearing fixed by him and the adjournment sought for by the assessee but he has not recorded categorically with respect to the reason mentioned behind taking adjournment. It is noted that the assessee Sought Adjournment from 21.07.2021 to 05.08.2021 because the Income Tax portal was not fully operational due to technical glitches as per evidence (APB, Pg.9). However, the CIT(Appeals), National Faceless Appeal Centre, Delhi on 28.07.2021 has passed the ex-parte order where there was no reference of the assessee s such request for adjournment made as above. In our view, there seems to be no deliberate attempt on the part of the appellant assessee, not to file the submissions before the National Faceless Centre and in fact, it may be on account of the fact that new Income Tax Portal of the assessee was not working as is apparent from various News items and, thus, the prayer of the assessee has merit that this matter may, please, be set aside to the file of CIT(A) for giving the fresh opportunity of being heard and deciding the issue on merits as per law. We are of the view that CIT(A) has not afforded proper opportunity of being heard to the assessee. We, therefore, set aside the order of the CIT(A) and restore the matter back to his file with the direction to readjudicate the appeal afresh on merit after affording opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes.
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2021 (10) TMI 740
Assessment u/s 153A - satisfaction note of the Assessing Officer for acquiring jurisdiction u/s 153C - addition based on any incriminating material or not? - whether all the documents which form part of satisfaction note were duly recorded and disclosed in the return of income filed prior to recording of satisfaction note or even the date of search? - Whether the documents so referred in the satisfaction note are in nature of incriminating documents, which can lead to an inference that any undisclosed income has escaped assessment or there is any element of undisclosed income so as to be roped in assessment under section 153C for the assessment year which is unabated i.e. final? - HELD THAT:- It is an admitted fact that the documents so referred in the satisfaction note are the only documents which form the basis and edifice for acquiring jurisdiction under section 153C of the Act and there are no other documents which were found and seized. Before adverting to the documents so referred in the satisfaction note and our analysis with regards to the same thereafter, it would be worthwhile to note that it is now a well settled proposition of law that seized documents must be incriminating and must relate to assessment year whose assessment are sought to be reopened u/s.153C. This principle has been settled in the case of Singhad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] . Thus we hold that the concluded assessments cannot be interfered unless there is incriminating material discovered from the seized documents belonging or pertaining to the assessee, and further, no additions can be made where the assessments are framed u/s.153C for unabated year i.e. where no assessment is pending. The seized documents must at least clearly point out that there is some undisclosed income, which here in this case, as is discussed below, are not in the nature of incriminating material so as to warrant any addition - additions made by the Assessing Officer are beyond the scope of Section 153C r.w.s. 153A. - Decided in favour of assessee.
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2021 (10) TMI 739
Reopening of assessment u/s 147 - unaccounted receipts on account of donation - Exemption u/s 11 denied - commercializing the education and thus violating the objects for which it was created - assessee was charging capitation fees from the students seeking admission in MBBS/PG courses - As submitted assessee is a charitable trust carrying on activities in the field of education as a part of Santosh Group, which is also engaged in the field of education in Medical, Dental, Para-medical and other courses - HELD THAT:- Correlation between the underlying material and the information, which was available in the balance sheet and income and expenditure account of the assessee, was clearly not made. Therefore the formation of belief by the Income-tax Officer that income of the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlying information ; something which was discernible from a bare reading of the order recording reasons. AO also failed to correlate the statement of Mr. Mahalingam with the reasons recorded by the learned assessing officer and resultant amount of escapement of income. The facts in this case are similar to the facts decided by the honourable Delhi High Court in case of Sinfonia Tradelinks private limited [ 2021 (3) TMI 1177 - DELHI HIGH COURT] where the honourable Delhi High Court quashed reassessment wherein even the assessment was earlier not made u/s 143 (3) of the act for not correlating the information available in the original return filed by the assessee. In the present case the assessment was already made u/s 143 (3) of the act, therefore, the case of the assessee is on much stronger footing against the facts of the case decided by the honourable Delhi High Court. We do not have any hesitation in holding that the learned assessing officer has not applied his mind at the time of recording of the reason u/s 148 of the act and therefore the reopening is quashed. Exemption u/s 11 - In respect to the allowing the exemption u/s 11 of the income tax act we find that the assessee is registered u/s 12 A of the act as well as u/s 10 (23C) (IV) of the act also. This registration certificate is still valid and not withdrawn. Assessee is also held to wholly exist for the purpose of education. The addition of the donation is not been made in the hence of the assessee u/s 68 of the income tax act but as income of the charitable trust denying the exemption u/s 11 of the act. We find that there is no reason to deny assessee benefit of Section 11 of the act when the assessee is registered u/s 12 A as well as u/s 10 (23C)(iv) of the act. It is the case of the revenue that assessee is not utilizing the sum so received towards educational activities. In view of this, we do not find any reason that assessee should not be allowed exemption u/s 11 is and 12 of the income tax act as assessee is doing a charitable activity. - Decided in favour of assessee. Computing excess of income over the expenditure of the assessee - CIT A has adopted the findings of the settlement commission in case of the assessee for deriving at the set-off of the expenditure. There is no reason to hold that that the reason given by the settlement commission which is adopted by the learned CIT A is not a plausible way of computing excess of income over the expenditure of the assessee. CIT A correct held that a sum of ₹ 2 77,57,629/ after applying the ratio laid down by the settlement commission is an unaccounted excess of income over the expenditure of the assessee. Further, the trustee has disclosed a sum of ₹ 3 crores in his hands has also been granted as a set of against the above addition based on the decision of the coordinate bench in case of the assessee. - Decided against revenue.
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2021 (10) TMI 738
Delay in employee s contribution towards ESI/PF - contribution paid before the due date of filing of return of income u/s 139(1) - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act - CIT(A) has referred to the explanation to section 36(1)(va) and section 43B introduced by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance bill, 2021, however, he has simply failed to consider the express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . The impugned assessment year is assessment year 2019-20 and therefore, the said amendment cannot be applied in the instant case. Thus the addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employee s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
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2021 (10) TMI 737
Disallowance of depreciation - no business activity was carried out by the assessee company - none of the assets were used at any time during the previous year for the purposes of business of the assessee company - as per assessee business was temporarily shut down due to heavy losses - HELD THAT:- We find force in the submissions of assessee that when the AO allowed the assessee's claim of depreciation in AY 2013-14, he could have allowed in the impugned AY by taking into consideration the judicial consistency. We observe from the paper books filed by the assessee that the company has stopped its production/trading activities since 2010 but still in existence. Since in the eyes of law, the company is an artificial jurisdictional entity, it has to maintain its existence unless it gets dissolved under the companies Act. The Fixed Assets are still lying in the control of the assessee and we observe from the paper book that the company is trying to revive its business and gone for one time settlement, it shows that the business was temporarily shut down due to heavy losses The use of individual asset for the purpose of business may be examined only in the first year when the asset was purchased and put to use but not in the subsequent years, when use of block of assets is to be examined, existence of individual asset in block of assets itself amounts to use for the purpose of business. Once an asset is included in the block of assets, it remains in block for its entire line. See INTEGRATED TECHNOLOGIES LTD. [ 2011 (12) TMI 48 - DELHI HIGH COURT] wherein held that the only condition is that the business should not have been closed down once for all and that the assessee should demonstrate that the hopes of the business being revived are alive and real. It is however not a matter that can turn entirely on the assessee's hopes alone. There should be evidence or material to show that the assessee took efforts to keep the business alive in the hope of reviving the same. Maintaining the office and establishment, complying with the statutory formalities, not disposing of the plant and machinery, incurring expenses on the repair of plant and machinery etc., are some of the indications of nurturing the hopes of reviving the business. The above are only illustrative instances and are by no means exhaustive and the question as to whether the assets were kept ready for use in the business is largely to be decided on the facts and circumstances of each case. - Decided in favour of assessee.
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2021 (10) TMI 736
Taxability of write back of 'Non-Plan Government Loans' claiming the same to be capital receipts not chargeable to income-tax - reference to the relevant section to make such addition - CIT(A) rejected the contention of the assessee and held the same to be taxable in the hands of the assessee - loans were earlier granted by Government of India to assessee from time to time from 1993 to 2006 for meeting regular and normal business expenses towards Salary, PF, Gratuity, VRS etc. and to recoup cash losses incurred by assessee in the regular course of business, which now stood waived/written off by Government of India in order to revive and rehabilitate the assessee as it was continuously incurring losses and was referred to BIFR as a sick company - Whether Commissioner of Income Tax (Appeals) has erred in law and on facts to confirm the impugned addition without making any reference to the relevant section of the Income Tax Act, 1961 under which he has made such addition which is a mandatory practice for making any such disallowances or additions? - HELD THAT:- AO has categorically held the said waiving off of Non Plan Government Loan by Government of India, which loans were earlier granted by GOI in favour of assessee to meet regular business expenses, as an income in the hands of the assessee as the said loans were granted for trading purposes and not for acquiring capital assets, and the AO held that the assessee has rightly credited the same to Profit and Loss Account which is to be brought to tax as the assessee did not offer the same for taxation in the return of income filed with Revenue. AO has followed the ratio of judgment in the case of T.V. Sundaram Iyenger and Sons Limited [ 1996 (9) TMI 1 - SUPREME COURT] and case of Solid Containers Limited [ 2008 (8) TMI 156 - BOMBAY HIGH COURT] while bringing to tax the said waiver of Non Plan Government Loan as income from business of the assessee being a revenue receipts. Thus, we do not find fault with the assessment order passed by the AO that merely because relevant provision of the 1961 statute is not mentioned in assessment order, will take otherwise taxable receipt out of taxation purview merely on the ground that relevant Section is not mentioned by the AO. Thus, this contention raised by assessee lacks merit and deserves to be rejected. Thus, Ground No. 1 is adjudicated against the assessee Whether such writebacks are not ordinary trading transactions or revenue receipts either? - Loan was obtained by the assessee from Government of India on revenue field to meet day to day business expenses, its working capital requirements and to recoup cash losses, and its waiver in our considered view will be chargeable to tax within the provisions of Section 28(iv) and 41(1) of the 1961 Act, as the assessee availed deduction of interest expenses on these loans from its income as well normal business expenditure were incurred by assessee from the proceeds of these loans which were claimed as deduction as business expenditure while computing income chargeable to tax. The unabsorbed expenditure were carried forward to subsequent years for being set off against the income of the subsequent years within the provisions of Section 72 of the Act. Thus, it could not be said that the assessee has not obtained or derived benefit from the waiver of these loans which were earlier obtained on revenue field by assessee from GOI from time to time as now the assessee will not be required to repay these loans to GOI and infact it has become its own money which in our considered view is chargeable to tax, and hence the assessee is definitely hit by provisions of Section 28(iv) and 41(1) of the 1961 Act - thus we hold that the waiver of Non Plan Government Loan to the tune of ₹ 72.9272 crores is an income of the assessee for the impugned assessment year chargeable to tax and we decide Ground No. 2 and 3 against the assessee and in favour of Revenue.
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2021 (10) TMI 735
Admitting the assessee's agricultural income without filing the revised return along with un-explained stock - HELD THAT:- CIT(A) has nowhere even dealt with the issue of agricultural income. The Revenue's instant former substantive grievance is rejected therefore. The outcome is no different qua the Revenue's latter substantive ground regarding un-explained stock value as well wherein the Assessing Officer's remand report dt. 25-09-2019 had itself accepted the source of additional capital as on 14-07-2004 and in the return(s) of income filed from 2005-06 to 2016-17. We thus quote case law - CIT Vs. DM Purnesh [ 2020 (9) TMI 731 - KARNATAKA HIGH COURT] and B. Jayalakshmi [ 2018 (8) TMI 208 - MADRAS HIGH COURT] and held that the Revenue cannot be held as an aggrieved party once the Assessing Officer files a favourable remand report before the CIT(A). We thus affirm the CIT(A)'s findings deleting the impugned addition(s) - Decided against revenue.
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2021 (10) TMI 734
Expenses incurred in Russia for realization of contracts in India - deductibility of expenses against income attributable to Indian PE when these expenses are claimed to have been entered in books of accounts of head office in Russia - CIT(A) allowing partially claim of expenses on the ground of additional evidences admitted for the assessment year 2006-07 - AO disallowed these expenses on the ground that no details thereof were furnished and also no TDS was made and therefore these were not to be allowed as deduction u/s. 40(a)(i) - HELD THAT:- Having admitted the additional evidences, the ld. CIT(A) further went ahead in determining whether the expenses are allowable under the provisions of the Income Tax Act and also with specific reference to TDS and Section 40(a)(ia). The ld. CIT(A) examined the various expenses like salary for Russian specialists, cost of equipment transportation, depreciation of equipment deployed in India, supply of spare parts, taxes paid for equipment and other project expenses. Having examined, the ld. CIT(A) allowed/disallowed various heads of expenditure. Hence, the grounds taken up by the revenue that the ld. CIT(A) erred in admitting the additional evidences cannot be held to be valid on facts of the case. Further, the grounds of the revenue that the ld. CIT(A) erred in allowing the claim of the expenses cannot be held to be valid as the ld. CIT(A) has verified each and every expenses claimed by the Assessee before allowing the same. - Decided against revenue.
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2021 (10) TMI 733
Reopening of assessment u/s 147 - Notice u/s. 148 having been issued in the name of a dead person - no notice u/s. 148 has been issued in the name of the legal heir - HELD THAT:- The statement of facts filed before ld. CIT(A) clearly mentions that Shri Ajit Jaiswal had died on 26.05.2010 - AO in his assessment order himself has noted that the assessee had expired and even after having come to know about the fact of having assessee been dead he did not drop the proceedings against him and issued fresh notice u/s. 148 in the name of legal heir but continued the proceedings in the name of his legal heir. During the course of proceedings before us the ld. DR was directed to file a copy of notice u/s. 148 and which he has filed after the hearing. From the copy of notice u/s. 148 find that such notice dated 24.02.2014 has been issued in the name of Shri Ajit Jaiswal who was not in existence at the time of issue of notice u/s. 148 as he had died on 26.05.2010. Such notice issued in the name of a dead person is not enforceable and cannot be said to be valid notice and further I find that no notice u/s. 148 has been issued in the name of the legal heir of the assessee. -Decided in favour of assessee.
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2021 (10) TMI 732
Reopening of assessment u/s 147 - Disallowing claim of weighted deduction of 175% under section 35(l)(ii) on the ground that donation receipt is not submitted - Allegation of providing accommodation entries - AO received information from Directorate of Income Tax (Investigation), Kolkata that an institution approved u/s.35(i) namely M/s. Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF) was providing accommodation entries to beneficiaries in the nature of bogus donation that the modus operandi of HHBHRF was to receive the bogus donations by cheque - HELD THAT:- There is nothing on record that any specific information regarding the assessee was received. Consequently, upon reopening on the basis of the same information the Assessing Officer made the assessment disallowing the payment. There is no further material brought on record by the Assessing Officer. The assessee has submitted the payment evidence. The same was through banking channel. At the time of payment the said entity was very much eligible of the deduction. See SOPARIWALA EXPORTS PVT. LTD. VERSUS DCIT, CC-8 (1) , MUMBAI [ 2021 (7) TMI 442 - ITAT MUMBAI] as held the payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn.the payee was duly approved when the payment was done. - Decided in favour of assessee.
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2021 (10) TMI 731
Cost of improvement claimed by the assessee u/s. 54 - AO came to the conclusion that the assessee has not carried out any improvement at the house purchased by the assessee and accordingly, he disallowed the entire amount - assessee has submitted before us that the repairs carried by the assessee long back, five years ago and therefore, he is not able to produce evidence before the AO - entire repair works/improvements carried out by his relatives and he is not able to collect the bills and vouchers since he is residing at Mumbai - HELD THAT:- We find that the Inspector has enquired with the neighbours and the neighbours has stated before him that they are not aware of the improvements carried out by the assessee. Mainly, based on the enquires made with the neighbours, he came to the conclusion that the assessee has not carried out any improvement work and disallowed the entire expenditure claimed by the assessee. On appeal CIT(A) is of the opinion that if the A.O wanted to know exactly about the improvement works carried out by the assessee, he should have been enquired through a builder who constructed the building inspite of neighbours - CIT(A) keeping in view the above and also by considering all other factors and also take into consideration that the assessee is not residing at Chennai he is only residing at Mumbai, he disallowed an amount of ₹ 5,00,000/- for lack of evidence and directed the A.O to allow the benefit u/s. 54 of the Act to the extent of ₹ 18,00,000/-. We have gone through the entire order of the Ld. CIT(A), we find that the disallowance made by the Ld. CIT(A) to the extent of ₹ 5,00,000/- is fair and reasonable and we find that no interference is called for. In view of the above, the appeal filed by the Revenue is dismissed.
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2021 (10) TMI 730
Nature of expenditure - consultancy expenses - revenue or capital expenditure - AO in the assessment order disallowed the expenses mainly on the ground that no evidences were furnished before him - HELD THAT:- AO has nowhere held that expenses are in the nature of the capital, which results in entering benefit to the assessee. Thus, the ground taken by the revenue itself is not sustainable in absence of any finding of the Assessing Officer, which could support the ground. CIT(A) has deleted the disallowance after observing that genuineness of the expenses was not doubted by the AO in the remand report and the assessee duly deducted tax at source on the impugned payments. In our opinion, there is no infirmity in the finding of the Learned CIT(A) on the issue in dispute, accordingly, we uphold the same - Decided against revenue. Disallowance of advertisement and marketing expenses - no evidences of expenses incurred wholly and exclusively for the purpose of the business, were furnished before the Assessing Officer - HELD THAT:- AO has made disallowance under section 35D of the Act without verifying the requisite condition that said expenses were incurred before commencement of the business or in connection with the expansion or setting up of new unit by the assessee. AO has also not brought on record how the benefit of expenses on advertisement spills out to future years. AO being a quasi-judicial authority cannot disallow merely on presumption basis. CIT(A) has deleted the disallowance following the decision of the Hon ble High Court and holding that even advertisement expenses incurred by the assessee on brand image as revenue in nature. We find that the Tribunal in assessment year 2009-10 [ 2019 (1) TMI 464 - ITAT DELHI] in the case of the assessee itself has held the advertisement expenses as revenue in nature As decided in own case since the genuineness of the expenditure is not in dispute and the dispute is only regarding capital or revenue expenditure in nature decided the issue in favour of the assessee holding that the expenditure incurred by the assessee on glow sign boards and a neon sign boards is revenue in. nature and allowable as deduction under section 37 (1) of the Act. - Decided against revenue. Disallowance on account of cost of equity placement - appointment of agents/dealers for carrying out operation of outlets - As per AO benefit of appointment of agents spill overs to future years and, therefore, expenses are of capital nature. However, he consider the expenses under section 35 D(1)(ii) for incurring market survey in relation to extension of the undertaking and allowed 10% of the expenses and disallowed balance expenses - HELD THAT:- As AO has failed to establish that expenses incurred are before commencement of the business or in connection with extension of or setting up of new unit after commencement of the business, and, therefore disallowance under section 35 D(1)(ii) of the Act by the Assessing Officer is not justified. The order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the finding of the Learned CIT(A) on the issue in dispute. Ground of the appeal of the Revenue is accordingly dismissed. Disallowance on account of employees recruitment expenses - Addition made as assessee fetch benefit of such expenses for longer time - CIT(A) deleted the disallowance holding that payment made to recruitment agencies was revenue in nature - HELD THAT:- We find that assessee has claimed service charges paid to recruitment agencies and charges paid for outsourcing services as revenue expenditure. AO has alleged that these expenses have provided long-term benefit to the assessee, but he has not given any reasoning as how the said expenses give long-term benefit to the assessee. DR also could not explain as how the said expenses give long-term or enduring benefit to the assessee. In view of the failure on the part of the Revenue to establish that expenses incurred are capital in nature, we do not find any error in the finding of the Learned CIT(A). Addition on account of expenses recovered from Oxygen Infovision Private Limited (OIPL) - assessee submitted that amount recovered from OIPL was credited to salary account of Sri Pramod Saxena and deduction of only net salary was claimed by the assessee - CIT-A deleted the addition - HELD THAT:- As before the ld. CIT(A), the assessee has duly explained as why the said recovery of expenses has not been credited to profit and loss account. The assessee has claimed net salary (salary due minus(-) payment recovered from OIPL) paid to Mr Pramod Saxena only. DR did not find any mistake in the accounting entry carried out by the assessee. In the circumstances, we uphold the order of Ld. CIT(A) on the issue. Disallowance on account of the depreciation claimed on POS terminals - assessee claimed the depreciation at the rate of 60% claiming the POS terminals as part of the computer, whereas AO allowed the depreciation at the rate of 15% treating the POS terminals as part of plant and machinery - HELD THAT:- We find that this issue is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2009-10 [ 2019 (1) TMI 464 - ITAT DELHI] wherein Tribunal has allowed the depreciation at the rate of 60% on POS terminals. Depreciation at the rate of 60% percent on UPS - AO treated the UPS as not part of the computer and only part of plant and machinery and allowed the depreciation at the rate of 15% only - CIT(A) allowed the claim of the assessee - HELD THAT:- As issue in dispute is covered in favour of the assessee by the order of the Tribunal in assessment year 2008-09 and 2010-11 [ 2019 (2) TMI 993 - ITAT DELHI] held that UPS forms part of the computer periphery and depreciation at a 60% is allowable. Disallowance under section 14A - investment in shares and mutual funds by the assessee and thus invoking Rule 8D of the Rules made disallowance - HELD THAT:- As relying on case of Chemnivest [ 2015 (9) TMI 238 - DELHI HIGH COURT] the expression does not form part of the total income in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. - Decided in favour of assessee. Late payment of Provident Fund (PF) and Employees State Insurance (ESI) - Addition u/s 36(1)(va) read with section 2(24)(x) for the reason that the assessee did not deposit the provision toward PF and ESI within the limitation stipulated in respective enactments - CIT(A) deleted the addition - HELD THAT:- As relying on case of Bharat Hotels Ltd [ 2018 (9) TMI 798 - DELHI HIGH COURT] . we restore this issue to the file of the Learned Assessing Officer for deciding afresh in accordance with law.
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2021 (10) TMI 729
Loss arising from Inventory write off - disallowance of shortage in the value of inventory - shortfall in inventory - CIT-A deleted the addition - assessee explained that the shortfall in inventory has occurred for the reason that the inventory was overvalued in the past years and the same was found out only when the management carried out physical verification of stock in July, 2010. Hence, it was treated as an exceptional item of loss and accordingly shown separately in the profit and loss account - HELD THAT:- AO has expressed the view that the assessee has failed to explain the reasons for such huge write off and the assessee has not given any evidence as to the nature and reason for the difference. The above said observation of the AO is contrary to the facts available on record. The discussions made in the earlier paragraphs would show that there was shortage in the value of stock due to manipulation done by an earlier employee and the same has resulted in declaration of higher value of stock over the years. Hence, the assessee has engaged the services of a leading professional, who has investigated the matter, found out the methodology adopted for inflating the stock and finally quantified the difference in the value of stock. Hence, we are of the view that the shortage in the value of stock has been ascertained by the assessee in a systematic manner. Whether the treatment given by the assessee in the accounts is justified or not? - In the instant case, the special auditors have reported that the manipulation in the value of stock has happened from FY 2004- 05 onwards. Hence the shortage of stock quantified relate to the conditions existing as on 31.3.2010 and it materially affects the determination of value of assets as on Balance Sheet date. Accordingly, as per AS-4, the effect of the same needs to be given as on 31.3.2010, even though the report of special auditors has been received only in July, 2010. Hence, it cannot be considered as a prior period expenditure as opined by the AO. It should be considered as current year loss only, since effect of shortage could be given in this year only. Accordingly, the assessee was justified in accounting the shortage during the year ending 31.3.2010. Assessee has split the opening stock as on 1.4.2009 into two items, viz., opening stock and exceptional expenditure, i.e., the shortage has not been separately accounted for in the books of accounts. It has been duly disclosed in the Profit and Loss account by making corresponding reduction in the Opening stock value. There should not be any dispute that the closing stock of the preceding year is carried forward as opening stock of the current year. Having accepted the closing stock of preceding year, the opening stock value of current year also requires to be accepted. As relevant for this issue is the valuation of closing stock as on 31.3.2010. As noticed earlier, the assessee has split the opening stock brought forward from 31.3.2009 and disclosed one portion as Opening stock and the remaining portion as exceptional item . It is an undisputed fact that the assessing officer has accepted the value of closing stock as on 31.3.2010 . Even if the above said exercise has not been carried out, the assessee is required to value the actual physical stock at lower of cost or net realisable value , which is the accounting policy followed by the assessee as reported in clause (j) of Note 2 given under Schedule Q: Notes to Accounts in its Annual report. In that case, the shortage in the value of stock shall get subsumed itself, which has actually happened in this case. Hence, the AO, having accepted the value of closing stock, could not have questioned the exceptional item , which was split up figure of opening stock value. Disallowance u/s 36(1)(iii) - assessee contended that the disallowance contemplated under proviso to 36(1)(iii) of the Act is in respect of acquisition of asset for extension of existing business - CIT(A) partially sustaining this disallowance - HELD THAT: - As in order to invoke the proviso, there should be a finding that the acquisition of asset has resulted in extension of business. We have noticed that the Ld CIT(A) has given a finding that the additions made to the capital asset has not resulted in any extension of business. As per cash flow statement furnished in the Annual report, the assessee has generated net cash of ₹ 28.33 crores, while the net investment made in acquisition of capital asset was only ₹ 1.48 crores. Hence, as per the decision rendered by the decision rendered in the case of Micro labs Ltd [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] it can safely be presumed that the acquisition of fixed assets has been funded out of own funds only - we set aside the order passed by Ld CIT(A) and direct the AO to delete entire disallowance. Disallowance of interest expenditure as relatable to interest free loans given to associate concerns - CIT(A) deleted the disallowance - HELD THAT:- As noticed earlier that the own funds available with the assessee as on 31.3.2010 was ₹ 91.30 crores and the interest free loans given to sister concerns was around ₹ 6.43 crores. We notice that the co-ordinate bench has already deleted an identical addition made in AY 2008-09 following the decision rendered in the case of M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] - M/S MICROLABS LTD. - In any case, the binding decision rendered in the case of Micro Labs Ltd [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] also holds that no interest disallowance is called for when the own funds available with the assessee is more the amount of interest free advances given. Under these set of facts, we find no reason to interfere with the decision rendered by Ld CIT(A) on this issue. Disallowance of expenditure claimed on loose tools - As submitted that the loose tools, grinding wheels and cutting wheels purchased by the assessee are written off over a period of 2 years, i.e., 50% of the cost is written off in the year of purchase and the remaining 50% is written off in the succeeding year - HELD THAT:- As decided in own case [ 2012 (12) TMI 1215 - ITAT BANGALORE] Revenue has not disputed the incurring of expenditure by the assessee in purchase of the tools. The only reason for the disallowance is that it is not revenue in nature but is of capital in nature. It is also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as capital in nature and depreciation allowed thereon. Therefore, taking the totality of the facts into consideration, we hold that revenue ought to have allowed the revenue expenditure claimed by the assessee. Disallowance of claim made u/s 35(2AB) - AO took the view that the assessee has not complied with the conditions prescribed in Rule 6(7A) of I T Rules, i.e., it did not furnish the approval to DG (Exemptions) in Form 3CL and audited accounts - HELD THAT:- The assessment year under consideration is AY 2010-11 and hence the decision rendered by the co-ordinate bench in the case of Kumar Organic Products Ltd [ 2019 (7) TMI 1214 - ITAT BANGALORE] shall apply to the assessee for AY 2010-11. Following the same, we hold that Form No.3CL is not mandatory for the year under consideration and hence the weighted deduction claimed by the assessee cannot be rejected. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow weighted deduction as claimed by the assessee. Disallowance of provision made for erection and commissioning work - HELD THAT:- As assessee has furnished the details of machineries whose erection and commissioning is pending on 31.03.2010. The assessee has also submitted that the provision for erection and commissioning is made @ 1% to 3% of the value of machinery, depending upon estimated expenditure. According to Ld A.R, the above percentages were arrived on the basis of past experience. In our view, the above said details furnished by the assessee distinguishes the case of the current year from that of the case prevailed in AY 2009-10. In our view, the terms and conditions of sale of machineries would show that the liability for erection and commissioning is placed upon the shoulders of the assessee - as submitted that the provision rate of 1% to 3% has been determined on the basis of past experience - this claim of the assessee may be allowed after examining relevant sale bills and the computation of provision so created. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of the AO for examining the claim of the assessee by duly considering relevant sales invoices and computation of quantum of provision so made. TDS u/s 195 - Disallowance voluntarily made by the assessee in respect of Exhibition charges u/s 40(a)(i) of the Act for failure to deduct tax at source from the payment - AO initiated proceedings u/s 201(1) of the Act for failure of the assessee to deduct tax at source from the above said payments and held that the assessee is an assessee in default - HELD THAT:- We notice that the Ld CIT(A) has held in the proceedings initiated u/s 201(1) of the Act that the assessee is not liable to deduct tax at source from the payments made towards exhibition charges. In that case, there is no necessity to invoke provisions of sec.40(a)(i) of the Act. Accordingly, we direct the AO to delete the disallowance made by the assessee voluntarily u/s 40(a)(i) of the Act in respect of exhibition charges.
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2021 (10) TMI 728
Exemption u/s 11 - Denial of exemption as assessee is into providing buses on hire for excursion, wedding, pilgrimage etc., to general public and charges for such letting are collected on commercial basis - whether the CIT(A) was justified in coming to the conclusion that the assessee s activities do not fall within the ambit of the proviso to section 2(15)? - As per AO Assessee carries on activities which are akin to business venture rather than charitable organization - Revenue from operations and miscellaneous income and these incomes included income from streams which were commercial in nature - HELD THAT:- Assessee is a statutory corporation established under the RTC Act, 1950. It is not driven b profit motive but is for providing transportation facilities to members of the public. The State Government fixes fares for travel by public. Buses ply in areas even where it is not economically viable. Sec.18 of the RTC Act, 1950 lays down duties of the corporation which is to provide, secure and promote efficient, adequate, economical and properly coordinated system of road transport services in the State of Karnataka. Sec.22 of the RTC Act, 1950 lays down that the corporation should act on business principles in the sense it has to recover the cost of services rendered to the public which means that it cannot provide service free of cost. Sec.30 of the RTC Act, 1950 provides how profits of the corporation shall be disposed and it lays down that the same shall be used only for road development. As seen from the various provisions of the RTC Act, 1950 which we have set out in the earlier part of the order that the dominant and prime objective of the Assessee is not profit making. Prior to the introduction of the proviso to Section 2(15) of the Act, there was no dispute that the Assessee was established for charitable purposes. The stream of traffic revenue and non traffic revenue by itself would demonstrate that the Assessee does not exist for profit. Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore concur with the view of the CIT(A) and hold that the Assessee is entitled to the benefits of Sec.11 - Decided in favour of assessee.
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2021 (10) TMI 727
TP adjustment - rejection of the benchmarking analysis of the assessee - According to the assessee, the comparables chosen by the learned TPO are engaged in manufacturing of non-core components and, therefore those companies are not functionally comparable with the assessee - Scope of safe harbour rules for International Transaction (Rules 10TA to 10G) - HELD THAT:- CBDT has identified difference in operating profit margin of the companies engaged in manufacturing of the core components vis- -vis non-core components. In such circumstances, in principle, the companies engaged in manufacturing of core components cannot be compared on FAR analysis with companies engaged in manufacturing of non-core components. As on perusal of order of the lower authorities, we find that few comparable companies are engaged in manufacturing of core components whereas other are engaged in manufacturing of non-core components. The assessee itself has submitted before the Learned DRP that the company Setco Automotive Ltd is engaged in production of drive transmission and steering parts , which is one of the core components. The Learned DRP has noted that assessee is also engaged in manufacturing of power train components under engine parts. Regarding JBM Auto Systems Private Limited the assessee has claimed before the DRP that it was engaged in manufacturing of sheet metal components and tools and dies for automobiles, which falls in the nature of non-core components. The company India Nippon Electricals Ltd. has been retained as comparable on the ground that it is engaged in manufacturing of electronic ignition system for two wheelers, portable engines for three wheelers, flywheel magneto generator, capacitor discharge ignition unit etc. The company Indo Schottle Auto Parts Private Limited is engaged in manufacturing of collets, Mechatronic, valves, fuel system, turbocharger etc. The company Sakthi Auto Components Ltd. is engaged in manufacturing of iron casting. The company Gajra Gears Private Limited is engaged in manufacturing automotive gears. The company RACL Geartech Ltd. mainly manufacture automotive gears and components. The company has also diversified in the field of industrial gears for electrical switchgears and circuit breaks, winches and cranes etc. We are of the opinion that the decision of the Tribunal in the case of Nissin Brake ( 2020 (5) TMI 305 - ITAT DELHI ) was not available before the learned TPO and therefore he could not examine the comparability on the basis of function of manufacturing of core or non-core auto components. In the circumstances, we feel it appropriate to restore the issue of examining comparability of the assessee with other 10 companies to the file of AO/TPO with the direction to examine product manufactured by comparable companies and verify whether same falls under core component or non-core component and thereafter decide the comparability on verification of components manufactured by the assessee. The Learned AO/TPO may also examine other objections of the assessee of research and development activities carried out by the comparable companies in accordance with law. Denial of capacity utilization/excess depreciation adjustment - As the assessee in his submission has submitted a chart of adjustment on account of capacity utilization on the basis of that depreciation to sales ratio. We direct the learned TPO to examine the claim of the assessee of capacity utilization in view of the data submitted by the assessee. Incorrect computation of operating margin of the assessee in view of considering profit on sale of the tools as non-operative and depreciation of all those tools as operative - Since sale of asset is not part of regular revenue operation in the case of the assessee and, therefore, profit generated on same cannot be part of revenue operation of the assessee - DRP has correctly held the profit on sale of a set as non-operative item. As far as the depreciation on operative expense is concerned, DRP has held to be operative in view of assets used for the purpose of the business, and thus depreciation is part of expenditure connected with business operation of the assessee. The depreciation is also justified as operating expense, because profit earned on employing the tools in the business is part of profit earned on manufacturing process which is part of operating revenue. We do not find any error in the order of the Learned DRP on the issue and accordingly, we reject this contention of the assessee to refer this matter back to the learned TPO. Disallowance made on the basis of low net profit rate of the assessee during the year under consideration as compared to preceding year - lower authorities have sustained the addition mainly due to non-furnishing of documentary evidence in support of claim of increase in cost of material and employee s benefit - HELD THAT:- As before us, the assessee has submitted one new reason of the lower not net profit rate as loss on account of foreign currency transaction, which was not incurred in immediately preceding assessment year. Both the parties agreed that issue need to be examined by the Assessing Officer, accordingly, we set aside the finding of the lower authorities and restore the issue to the file of the Learned Assessing Officer for examination and verification of contentions raised by the assessee of foreign currency transaction loss during the year under consideration. The grounds of the appeal are accordingly allowed for statistical purposes. Non-payment of excise duty liability - AO disallowed the claim of payment of the excise duty in view of the comment of the auditor in tax audit report that it was not possible for him to give the date of payment of excise duty - HELD THAT:- Now, before us, the assessee has submitted that actual payment of excise liability under section 43B of the Act also include adjustment of excise duty from the input credit balance available. The learned Counsel submitted that such adjustment was made before the due date of filing of return under section 139(1) of the Act and, therefore, assessee is entitled to deduction under section 43B of the Act. The assessee has submitted a reconciliation chart of Cenvat Credit taken and utilized to support that excise duty was paid in terms of provision of section 43B of the Act and claimed that deduction is justified. In view of the facts and circumstances of the case and interest of substantial justice, we restore this issue back to the file of the Assessing Officer for deciding afresh after verification of reconciliation chart of Cenvat credit taken and utilized along with supporting documentary evidence in the light of the decision of the Hon ble Supreme Court in the case of Eichers Motors Ltd [ 1999 (1) TMI 34 - SUPREME COURT ] . The grounds of the appeal of the assessee are accordingly allowed for statistical purposes.
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2021 (10) TMI 726
Estimation of income of bogus purchases - purchases from grey market - information received by the A.O from the office of the DGIT(Inv.), Mumbai, that the assessee during the year under consideration as a beneficiary had obtained accommodation purchase bills from 15 parties - HELD THAT:- We are of a strong conviction that in case the impugned purchases formed part of the sales and/or closing stock of the assessee for the year under consideration, then, the addition in the hands of the assessee would be liable to be restricted only to the extent of the profit which the assessee would had made by procuring the goods at a discounted value from the open/grey market. Insofar the quantification of the aforesaid profit element is concerned, the same in our considered view in all fairness can safely be taken @ 12.5% of the value of the impugned purchases. Our aforesaid view qua the quantification of the profit element embedded in bogus/unverified purchases made by an assessee at 12.5% of the value of such purchases is fortified by the judgment of Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] . Accordingly, in all fairness, we herein set-aside the order of the CIT(A) and restore the matter to the file of the A.O. In the course of the set-aside proceedings, if the assessee is able to demonstrate before the A.O that the impugned bogus/unverified purchases in question formed part of its sales and/or closing stock for the year under consideration, then, the A.O shall restrict the addition in the hands of the assessee to the extent of 12.5% of the aggregate value of the impugned purchases - Appeal of the assessee is partly allowed for statistical purposes
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2021 (10) TMI 725
Disallowance u/s 37 (1) on account of 'job charges' - onus to prove - Disallowance of 10% of the expenses - assessee failed to discharge its onus u/s 37 (1) of the Act to prove that the expenses were incurred wholly and exclusively for the purpose of its business - CIT-A deleted the penalty - HELD THAT:- As gone through the record and find that the turnover of the company increased from ₹ 6.74 crores to ₹ 36.53 crores and so as the expenses increased from ₹ 6.45 crores to 24.60 crores. Hence, it can be said that the expenses have been increased proportionately. Further, the ledger and books of accounts have been examined by the Assessing Officer and no discrepancy could be brought out to the fore. Having accepted the books of accounts, disallowing 10% of the expenses in general without bringing on record as to what and which of the expenses were not allowable. Hence, we decline to interfere with the order of the ld. CIT (A). Appeal of the revenue is dismissed.
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2021 (10) TMI 724
Revision u/s 263 - Mismatch in the turnover/ contract receipts - As per assessee there was no undisclosed turnover/ receipts as alleged by the AO on the basis of wrong figures shown in the Service Tax Returns and the turnover as declared in the income tax return was correct - HELD THAT:- As consistent view has been taken by the Courts that undisclosed turnover cannot be achieved without incurring corresponding purchases/expenses and, therefore, what can be treated as the income of the assessee is the profit element embedded in the undisclosed turnover/ receipts and not the entire amount of undisclosed turnover/ receipts. This view consistently taken in the various judicial pronouncements cited by the ld. Counsel for the assessee clearly shows that the view taken by the AO while bringing to tax the profit element embedded in the undisclosed turnover/ receipts in the hands of the assessee was a possible view and it was not permissible for the ld. Principal CIT under section 263 to substitute his own view with the possible view taken by the Assessing Officer. As held by the Hon ble Delhi High Court in the case of CIT vs.- Honda Siel Power Products Limited [ 2010 (7) TMI 38 - HIGH COURT OF DELHI] in cases, where the Assessing Officer adopts one of the courses permissible in law, or where two views are possible and the Assessing Officer has taken one of the possible views, the Commissioner cannot exercise his powers under section 263 to differ with the view of the Assessing Officer. Keeping in view this proposition and having regard to the facts of the case, we hold that there was no error in the order of the Assessing Officer under section 143(3) as alleged by the ld. Principal CIT - Decided in favour of assessee.
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2021 (10) TMI 723
Characterization of receipts - nature of receipt - money received by the assessee for issue of shares but the shares could not be issued due to contravention of FEMA guidelines - AO treated the same as gift by the assessee company or in terms of Section 28(iv) r.w.s. 2(24)(ix) - AO had stated that the assessee company had received this gift from its Holding Company - HELD THAT:- As specifically clarified by the ld AR that at the time of receipt of monies, Alertpay Quebec was not the holding company of the assessee company - on perusal of the Board Resolution dated 21.9.2011 of Alertpay Quebec, that the Canadian Company would send fresh money transfer of 153000 Canadian Dollars to the assessee company for purchasing the shares of the assessee company. Obviously this event happened after the receipt of original gift amount of ₹ 3,46,33,388/-. Only pursuant to this acquisition of shares by investing 153000 Canadian Dollars, the assessee company became the subsidiary company of Alertpay Quebec and not before that. Hence it could be safely concluded that at the time of receipt of monies originally in the sum of ₹ 3,46,33,388/- , which was treated as gift by the assessee company for reasons stated hereinabove, Alertpay Quebec was not the Holding Company of assessee company. Hence we hold that the observation made by the ld AO in this regard is factually incorrect. Applicability of provisions of section 28(iv) read with section 2(24)(ix) - In the instant case, the amounts have been received by the assessee company which is not covered by the provisions of section 56(2)(vii) - provisions of section 56(2)(viia) of the Act applies only to receipt of shares by a firm or company without consideration or for inadequate consideration. In the instant case, the assessee company had only received monies. Hence the said provisions are also not applicable in the instant case. We find that the provisions of section 56(2)(viib) of the Act are applicable only for consideration for issue of shares received by a company from any person who is a resident. Admittedly, the monies have been received in the instant case by the assessee company from a non-resident. Hence the provisions of section 56(2)(viib) of the Act are also not applicable in the instant case. With regard to applicability of provisions of section 28(iv) of the Act, admittedly, the monies were not received by the assessee company in the ordinary course of its business. We further find that in the case of Chetnaben B Seth [ 1992 (9) TMI 34 - GUJARAT HIGH COURT] had held that amount received by an assessee partner of a firm towards valuation of Goodwill and assets of a firm at the time of retirement from the firm does not attract the provisions of section 28(iv) of the Act, since the same cannot be perquisite arising from the business and that even otherwise it would not partake the character of income. Hence the provisions of section 28(iv) of the Act cannot be made applicable to the facts of the instant case. Also in the case of G.S.Homes Hotels (P) Ltd [ 2016 (8) TMI 613 - SC ORDER] had categorically held that the amount received on account of share capital ought not to be treated as business income. It is not in dispute that the amounts originally received by the assessee company from the non-resident was only for issuance of share capital. Since the same was not implemented by the assessee company within the prescribed time, the assessee company as instructed by the concerned remitter from abroad, had chosen to treat the said receipt as gift and accordingly had directly credited the same to reserves and surplus‟ in the balance sheet. Thus we hold that the receipt of monies in the sum cannot be taxed as income in the hands of the assessee company. Accordingly, the grounds raised by the assessee in this regard are allowed. Appeal of the assessee is allowed.
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2021 (10) TMI 722
Addition of cash profit earned on unaccounted sale - Search proceedings - As per AO sales mentioned in loose papers is sales not recorded in books of account - HELD THAT:- We note that various loose papers containing; the data of the monthly profitability of the company are prepared on estimated basis for want of the final accounts due to various variations in purchase, sales, expenses, stock and depreciation. These loose papers are merely prepared for instant information purposes on various dates and time in order to ascertain the current position of the company and to act for future operations of the company. These reports are also prepared to give the management an insight of various unsettled issues relating to RM differences and disputed sales and expenses etc. The figure of production shown in MIS tally with the excise records as well as the disclosure made in the financial accounts because the production figure are readily available from the excise records. These MIS reports by no means can be considered to be the final figure of results disclosed therein. On the contrary if the profit figures as shown in the statement are aggregated, the same are less than the profits disclosed in the accounts. All sales are duly recorded in the books, duly supported by sales bills and delivery challans, reflected in excise records and in monthly excise returns and in RG 1 register. Production is duly supported by production register and monthly production statement by factory and entry in RG 1 register. All purchases are duly supported with GRN, Delivery challan of party and transport LR copy, Purchase bills, Entry in form IV of excise reflecting total purchases for the month. All purchases are recorded in purchase inward register at the time of arrival. In form IV, assessee company provides details of opening stock, purchases, consumption and closing stock on monthly basis to excise department. Assessee is filing monthly excise returns, excise audit and checks are carried, out by the excise department on regular intervals. In all these excise audit and check not a single time it was found out by the excise department that there is any variation in book records and factory records. Therefore, based on this factual position we delete the addition sustained by ld CIT(A) - Decided in favour of assessee. Addition on account of inflation of purchases - suppliers were not maintaining the stock register and their books of accounts were rejected at the time of assessment under section 153C - CIT-A deleted the addition - HELD THAT:- Ad hoc estimated addition of ₹ 2,00,000/- made in assessment year was without verifying the actual purchases from M/s. Mahavir Sales Corporation. The assessee has submitted all the relevant documents, purchase bills, delivery challans and the details of payments made to the supplier M/s Mahavir Sales Corporation. The assessment of M/s Mahavir Sales Corporation was also finalized by the same Assessing Officer. The Assessing Officer simply made the addition on ad hoc basis without relying upon any admissible evidence of inflation of purchases by the assessee. The addition was made without any basis and on ad hoc basis only. CIT(A) has rightly deleted the addition. Addition on account of discrepancy in stock found between physical inventory taken on date of search and stock record - CIT(A) partly deleted the addition - HELD THAT:- As panchnama prepared at the time of search, purchase bills for relevant chemical purchases as well as working of landing cost of such material computed by assessee alongwith supporting evidences shows that there is no difference in quantity of chemical recorded in books of account and stock as per inventory prepared at the time of search. The assessee has submitted reconciliation statement regarding stock of waste paper found during the course of search and stock recoded in books of account and whenever there was difference, it was submitted that while taking the stock, the authorized officer has taken the weight per bale on random bases without considering the variation of weight in each consignment/bale of the same quality. In support of its contention, assessee has filed copy of purchase bill, packing list, bill of entry indicating the weight per bale, Lorry Receipt and Delivery Challan which have been verified. The argument of assessee that in one single consignment, in different containers, the weighment of bales is different which is found correct. In assessee`s case there is no difference in number of bales/bundles found during the course of search and bales already recorded in books of account. CIT(A) has already deleted the addition based on the factual position narrated above. Considering these facts addition on account of discrepancy in stock found between physical inventory taken on date of search and stock recorded in books of accounts should also be deleted. Addition of bogus purchases made on the basis of statements recorded during the course of Search - inflation of purchases - HELD THAT:- As on careful consideration of entire details as well as purchase register produced for relevant months, bank statements and ledger account of Gautam Enterprise, it is found that appellant has not included purchase rom Gautam Enterprise in its Books of Account. Further, in the ledger account of Gautam Enterprise, only financial transaction pertaining to such sum is recorded which suggests that funds received by said party from bank has been transmitted to appellant and after certain period such amount has been paid by appellant through its regular bank account. Thus, argument of appellant regarding accommodation entry, appears to be correct and as appellant has not claimed any purchase from Gautam Enterprise as expenditure while computing Profit Loss Account for current assessment year, purchase shown in bill cannot be added to the total income of appellant as bogus purchase more particularly when entire transaction is settled through cheques. Based on this factual position, we are not inclined to accept the contention of the Assessing Officer in any manner and the addition made by Assessing Officer was rightly deleted by ld CIT(A) - Decided against revenue. Unaccounted expenses and sales realization made on the basis of entries in the seized loose papers - HELD THAT:- As on the loose paper found during the course of search, on the basis of which Assessing Officer has made impugned addition shows fixed expenditure which suggest that this paper is prepared for monthly fixed expenditure. In this loose paper details like payment made in cash, name of the party to whom various payments have been made, date of the transaction has not been mentioned which leads to conclusion that this is a dumb document having no financial implication. These entire loose papers nowhere suggests that appellant has made unexplained expenditure or expenditure are paid in cash nor Assessing Officer has brought any other evidence which can prove that these are notings for payment in cash but addition has been made on presumption basis. CIT-A correctly deleted the addition. Assessment u/s 153A - Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Revenue could not controvert the facts that these assessment years were not pending on the date of search and no incriminating material qua these assessment years were the basis for the additions/disallowances, so we delete the additions made by the assessing officer under section 14A, for assessment yea₹ 2008-09 to 2010-11. Set off of additional income disclosed in the Return of Income having regard to disclosure made under section 132(4) - HELD THAT:- Since we have deleted the entire addition made by the assessing officer therefore, there is no need to provide any telescoping benefit to the assessee, hence, this ground raised by the assessee becomes infructuous and therefore does not require adjudication.
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2021 (10) TMI 697
Validity of the re-assessment proceedings initiated against the individual petitioners - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - extension which was given one final push by the impugned Notification dated 27.04.2021 as it became necessary on account of the spread of the second wave of the pandemic COVID-19 - HELD THAT:- Enabling Act only protected certain proceedings that may have become time barred on 20.03.2020, upto the date 30.06.2021. Correspondingly, by delegated legislation incorporated by the Central Government, it may extend that time limit. That time limit alone stood extended upto 30 June, 2021. Additional Solicitor General of India may not be entirely correct in stating that no extension of time was granted beyond 30.06.2021. Vide Notification No. 3814 dated 17.09.2021, issued under section 3(1) of the Enabling Act, further extension of time has been granted till 31.03.2022. In absence of any specific delegation made, to allow the delegate of the Parliament, to indefinitely extend such limitation, would be to allow the validity of an enacted law i.e. the Finance Act, 2021 to be defeated by a purely colourable exercise of power, by the delegate of the Parliament. Section 3(1) of the Enabling Act does not itself speak of reassessment proceeding or of Section 147 or Section 148 of the Act as it existed prior to 01.04.2021. It only provides a general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19. After enforcement of the Finance Act, 2021, it applies to the substituted provisions and not the pre-existing provisions. Reference to reassessment proceedings with respect to pre-existing and now substituted provisions of Sections 147 and 148 of the Act has been introduced only by the later Notifications issued under the Act - validity of those provisions is also required to be examined. We have concluded as above, that the provisions of Sections 147, 148, 148A, 149, 150 and 151 substituted the old/pre-existing provisions of the Act w.e.f. 01.04.2021.- in absence of any proceeding of reassessment having been initiated prior to the date 01.04.2021, it is the amended law alone that would apply. We do not see how the delegate i.e. Central Government or the CBDT could have issued the Notifications, plainly to over reach the principal legislation. Unless harmonized as above, those Notifications would remain invalid. Unless specifically enabled under any law and unless that burden had been discharged by the respondents, we are unable to accept the further submission advanced by the learned Additional Solicitor General of India that practicality dictates that the reassessment proceedings be protected. Mischief rule has limited application in the present case. Only in case of any doubt existing as to which of the two interpretations may apply or to clear a doubt as to the true interpretation of a provision, the Court may look at the mischief rule to find the correct law - where plain legislative action exists, as in the present case (whereunder the Parliament has substituted the old provisions regarding reassessment with new provisions w.e.f. 01.04.2021), the mischief rule has no application. There is no conflict in the application and enforcement of the Enabling Act and the Finance Act, 2021. Juxtaposed, if the Finance Act, 2021 had not made the substitution to the reassessment procedure, the revenue authorities would have been within their rights to claim extension of time, under the Enabling Act - upon that sweeping amendment made the Parliament, by necessary implication or implied force, it limited the applicability of the Enabling Act and the power to grant time extensions thereunder, to only such reassessment proceedings as had been initiated till 31.03.2021. Consequently, the impugned Notifications have no applicability to the reassessment proceedings initiated from 01.04.2021 onwards. Upon the Finance Act 2021 enforced w.e.f. 1.4.2021 without any saving of the provisions substituted, there is no room to reach a conclusion as to conflict of laws. It was for the assessing authority to act according to the law as existed on and after 1.4.2021. If the rule of limitation permitted, it could initiate, reassessment proceedings in accordance with the new law, after making adequate compliance of the same. That not done, the reassessment proceedings initiated against the petitioners are without jurisdiction. It would be incorrect to look at the delegation legislation i.e. Notification dated 31.03.2021 issued under the Enabling Act, to interpret the principal legislation made by Parliament, being the Finance Act, 2021. A delegated legislation can never overreach any Act of the principal legislature. Second, it would be over simplistic to ignore the provisions of, either the Enabling Act or the Finance Act, 2021 and to read and interpret the provisions of Finance Act, 2021 as inoperative in view of the fact circumstances arising from the spread of the pandemic COVID-19. Practicality of life de hors statutory provisions, may never be a good guiding principle to interpret any taxation law. In absence of any specific clause in Finance Act, 2021, either to save the provisions of the Enabling Act or the Notifications issued thereunder, by no interpretative process can those Notifications be given an extended run of life, beyond 31 March 2020. They may also not infuse any life into a provision that stood obliterated from the statute with effect from 31.03.2021. Inasmuch as the Finance Act, 2021 does not enable the Central Government to issue any notification to reactivate the pre-existing law (which that principal legislature had substituted), the exercise made by the delegate/Central Government would be de hors any statutory basis. In absence of any express saving of the pre-existing laws, the presumption drawn in favour of that saving, is plainly impermissible. Also, no presumption exists that by Notification issued under the Enabling Act, the operation of the pre-existing provision of the Act had been extended and thereby provisions of Section 148A of the Act (introduced by Finance Act 2021) and other provisions had been deferred. Such Notifications did not insulate or save, the pre-existing provisions pertaining to reassessment under the Act. All the writ petitions must succeed and are allowed. It is declared that the Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. It is left open to the respective assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act as amended by Finance Act, 2021, after making all compliances, as required by law. Reassessment notice qaushed - Decided in favour of assessee.
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2021 (10) TMI 696
Validity of assessment u/s 153C read with section 153A - Case was reopened u/s 147 of the Act and re-assessment order was framed u/s 143(3) - Assessment beyond the period of six assessment years - As argued AO has erred in making the addition to the assessment order passed u/s 143(3) read with section 153C of the Act in non abetted assessment order without any incriminating documents found during the course of search - HELD THAT:- Assessments made in respect of assessment year 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. In the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. Assessment year was a concluded assessment on the date of search. This assessment should have been tinkered with , only if there is any incriminating material belonging to the assessee found during the course of search. We find that the ld AO has made an addition only on the basis of perusal of the profit and loss account which was already part of the assessment record earlier. Therefore, it is clear that the addition has not made on the basis of any incriminating material found during the course of search. Thus issue is squarely covered by the decision of the Hon'ble Delhi High Court in PCIT Vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] - the addition could not have been made and hence deserved to be deleted. Even on the merits of the case, the ld CIT(A) has categorically held that the expenditure crystallized during the year and therefore, they are allowable as business expenditure during the year. The decision of the ld CIT(A) is also based on several decisions of the Hon'ble jurisdictional high court. The ld DR did not show us any infirmity in the order of the ld CIT(A) in deleting of the above addition or to state that expenses did not crystallize during this relevant financial year. We also do not find any reason to disturb the order of the ld CIT(A). Accordingly, even on the merits of the case the order of the ld CIT(A) is deserves to be upheld. - Decided in favour of assessee.
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2021 (10) TMI 695
Nature/character of lad sold - gain earned on transfer of agriculture land - whether said land did not fall within the definition of capital assets as defined u/s. 2(14)? - as per AO land was part of notification which was issued by the Forest authorities wherein the plantation etc. were prohibited - HELD THAT:- As per Section 2(14) of the Act the land should not be situated in the area as mentioned therein. Admittedly, the land does not fall within any of the area as mentioned in Section 2(14). In the opinion of the Authorities below the basic agricultural operations were not carried out and no such activity was permissible. It was stated by the Assessing Officer that the land being Gair Mumkin Pahar i.e. banjar land, no agricultural operations could be carried out and permitted by law. Notification No. S.O.46/P.A.-2/1900/S.5/70 dated 11.02.1970 reveals that it was in force for 25 years w.e.f. 11.12.1970 hence, the period of its operation came to an end way back in the year 1995. No. other notification is brought to our notice by the Revenue. Hence, reliance made by the AO on this notification is not justified, coupled with the fact that land notified in that Circular did not include the land under dispute. AO observed that the sale receipts for the sale of agricultural produce were nothing but an arrangement to make a false claim that land was an agricultural land - no evidence is placed on record to substantiate this observation. Undisputedly, no material is placed before us except the statement of one Shri Hemant Chauhan stating that no agricultural activity was carried out by him. It is pointed by the Ld. Senior Counsel for the assessee that statement of Shri Hemant Chauhan pertains to earlier assessment year which is not relevant for the present proceedings. We at this juncture cannot set the clock back and find out by making on spot inspection whether agricultural activity is being carried out or not. We have no option but to adjudicate the issue purely on the basis of material placed before us by the parties. It is observed from the record that the Assessing Officer has grossly failed to verify the veracity of claim of the assessee by making on the spot inquiry. In the case in hand, admittedly it has been recorded by the Revenue official that certain crop was grown by the assessee. The assessee has also placed on record, certain evidences proving the sale of agricultural produces. These two evidences proved that prior to transfer of the land in question was being used for the agricultural purposes. Revenue could not rebut the evidences filed by the assessee. The only basis of non-acceptance of the assessee's plea was that the land was part of notification which was issued by the Forest authorities wherein the plantation etc. were prohibited. As discussed above that the said notification remained in force till the year 1995 - assessee pointed out that the land in question was not part of 1970 notification. This contention is not rebutted by the Revenue. Revenue has not brought any other notification to our notice which has superseded the 1920 notification by further extending the period. AO did not make any enquiry from the Village as well as from other land owners of the surrounding areas. Nothing is placed on record to prove the fact that entry recorded in the Revenue records related to the land was cancelled by the Competent Authority. Further, the Assessing Officer has not brought any material on record suggesting that no agricultural operation was possible on the land in dispute. Assessee has furnished documents in the form of photographs, electricity connection and proof of sale of agricultural produces. There is another aspect of the matter that the and Revenue Authorities had recorded a finding that physical possession was not handed over as the consolidation proceedings were not completed. The ordinary corollary of such findings would be that no transfer of land took place which is self-contradictory for the stand of the Assessing Officer for charging capital gain tax on transfer of land. Therefore, in the absence of any cogent evidences to rebut the claim of the assessee that the land in question was being used for agricultural purposes, and the evidences as supplied by the assessee not being found to be false and fabricated, we are unable to sustain the findings of the Assessing Officer - Respectfully following the judgment in the case of Smt. Sarifabibi Mohmed Ibrahim [ 1993 (9) TMI 10 - SUPREME COURT] and SIDDHARTH J. DESAI [ 1981 (9) TMI 48 - GUJARAT HIGH COURT] held character of land being agriculture did not change by mentioning in revenue records as 'Ghair Mumkin'. We therefore hereby, direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
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Customs
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2021 (10) TMI 721
Valuation of imported goods - related party transaction - rejection of declared value - failure of the appellant to submit evidence of identical/contemporary imports - imports of Rexona antiperspirants, comprising 150 ml units of Free Spirit , Cotton , Icecool , Ionic and 75 ml units Icecool and Power brands - HELD THAT:- The benchmark for ascertainment of assessment is the rate of duty in section 12 of Customs Act, 1962 and, to the extent of ad valorem rate, to be governed by the valuation scheme of section 14 of Customs Act, 1962 - the order disputed before the first appellate authority, and now before us, bears no evidence of such procedural or substantive compliance. Nor is there anything on record to instill confidence in us that such finalization has not been undertaken in the inter regnum with no possibility of our jurisdiction being invoked against those determinations, if any, of differential duty. We are not confronted with determination of differential duty to be recovered in the consignments covered by the three bills of entry. That is yet to be undertaken or, if it has been, would be at some stage in the appellate hierarchy - In the absence of re-assessed bills of entry, we have before us, at best, a piece-meal determination which, being premature, would be inappropriate to dispose off. Order set aside - Matter remanded back.
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2021 (10) TMI 720
Revocation of Customs Broker License - forfeiture of the security deposit - levy of penalty - imports of mobile phones - excess of quantity declared - lacking in mandatory BIS marks - HELD THAT:- The allegations pertaining to breach of obligations and lack of proper supervisory control over employees has been held as proved along with the allegation that the licence had been transferred to Hitesh Ajmera who, admittedly, had been handling of not only the consignments involved in the said investigations but of many other imports and exports for several years. The embargo, in Customs Brokers Licensing Regulations 2018, on transfer of licence and the vicarious responsibilities for acts of omission and commission by employees are intentionally segregated from the obligations that are the essence binding the licensor and licencee vis- -vis clients in the scheme of Customs Brokers Licensing Regulations, 2018. On the finding of the licence having been transferred, the appellant should not have been held accountable for compliance with obligations that devolve on a licencee in the handling of clients. Nor can the licensee on record be proceeded against for acts of employees as the alteration of employee-employer relationship erases the existence of expectation as far as employees are concerned. The substantial reliance placed by the licencing authority on the findings of the adjudicating authority in proceedings under the Customs Act, 1962 not only weakens the conclusion in the light of subsequent developments but is also inconsistent with the principles of natural justice that mandates independent appraisal of the charges framed under the Customs Brokers Licensing Regulations, 2018 on the findings evinced in the enquiry proceedings. In the light of the submissions made by the customs broker on alleged misuse of the licence coupled with the absence of the Director, Frederick D Souza, from day-to-day functions, the sustainability of the charges requires a fresh determination - the matter is remanded back to the licensing authority to cause a fresh enquiry to be conducted and for decision on the proposed revocation and forfeiture to be taken thereafter - Appeal allowed by way of remand.
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2021 (10) TMI 719
Absolute confiscation - import of Peas (Pisum Satvium) including Yellow Peas, Green Peas, Dun Peas and Kaspa Peas - restricted item or not - N/N. 37/2015 2020 dated 18.12.2019 - permission to re-export the subject goods - levy of redemption fine levied for redeeming the goods for the purpose of re-export - HELD THAT:- Undisputably, the appellants were in the path of litigation when the judgment of the Hon'ble Supreme Court was rendered. Immediately on coming to know of the judgment of the Hon'ble Supreme Court in the case of Raj Grow Impex LLP [ 2021 (6) TMI 778 - SUPREME COURT ], they have requested for permission to re-export on 18.6.2021. The request was rejected by department vide letter dated 25.6.2021 stating that the judgment is applicable only to the parties therein. Consequent to the judgment of Hon'ble Supreme Court in the case of Agricas LLP, [ 2020 (8) TMI 705 - SUPREME COURT ] the Hon'ble Bombay High Court vide judgment M/S. HARIHAR COLLECTIONS, M/S. RAJ GROW IMPEX LLP VERSUS UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF COMMERCE AND OTHERS [ 2020 (10) TMI 830 - BOMBAY HIGH COURT ] gave directions for release of the goods. This was appealed before the Hon'ble Supreme Court and the appellants were awaiting the outcome. The Hon'ble Supreme Court in the case of Raj Grow Impex LLP case, after considering all aspects has granted permission to the importer to re-export. The very same relief cannot be denied to the appellants without cogent reasons. A party who has not been able to cross the miles should not be discriminated only for the reason that they did not join in the litigation. The directions are intended to resolve the dispute for importers who are similarly placed. We therefore are of the considered opinion that the appellants have to be granted permission to re-export the goods. We hold that the order of the Commissioner (Appeals) requires modification to this extent. Levy of redemption fine levied for redeeming the goods for the purpose of re-export - HELD THAT:- The appellant has not filed any appeal against such order of levy of redemption fine. This order has attained finality as against the appellant with regard to levy of redemption fine. Penalty - HELD THAT:- The appellant has not challenged the order passed by the adjudicating authority imposing penalty of Rs. One crore. There are no grounds to disturb the said penalty as the same has attained finality. In the present case, the Hon'ble Supreme Court has categorically held that there cannot be any bonafide belief when the importers have taken their chance to import the goods. In such circumstances, we do find that the appellant stands any favourable chance for issue of a certificate of waiver of demurrage charges. This issue is found against the appellant. The impugned order passed by the Commissioner (Appeals) is modified to the limited extent of allowing the appellants to re-export the impugned goods on payment of redemption fine of Rs. Two crores. The imposition of penalty of Rs. One crore is sustained - appeal allowed in part.
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2021 (10) TMI 718
Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - mis-declaration on part of the Exporter - enquiry report was submitted holding that charges were Not Proved - disagreement memo issued, alleging that the Enquiry officer has not properly appreciated the statements and gave report based on assumptions and presumptions - violation of Regulation 10(d) of CBLR, 2018 - HELD THAT:- While the investigation conducted may or may not lead to the confirmation of the offenses by the exporter (which is any way beyond the purview of the present appeal), it would not be a conclusive evidence to establish gross negligence or misconduct on the part of the appellants. No documents whatsoever have been produced by the Adjudicating Authority or the respondents to substantiate the allegation that the appellants were in the knowledge of actual port of discharge. Under the circumstances, negligence or lack of due diligence is not established. It can also be seen that in the instant case the timeline prescribed in the Regulations have not been adhered by the enquiry officer and the adjudicating authority notwithstanding the discussion as to whether the timelines prescribed in the said regulation are mandatory or advisory. In the instant case, the alleged offence took place in 2015 and the custom broker licence was suspended in 2019 after a period of four years. Normally, a punitive action like suspension is to be taken immediately, if the same is taken after four years, the sanctity of the same is vitiated - the custom broker has already suffered a lot. The livelihood of the custom broker and the employees dependent upon is at stake. Even if one concludes only on the basis of contradictory statement of the director of exporter, that the custom broker had initial knowledge of the actual port of discharge to be different from the port of discharge declared in the shipping bills, the punishment suffered by him for two years is enough to mitigate his violation or contravention of Regulation 11D of CBLR 2013 (now Regulation 10D of 2018). This Tribunal was consistently holding though the custom broker is cast upon the responsibility, the mitigation of the same would lie in imposition of penalty and forfeiture of the security deposit and revocation of licence which is agreeably a very harsh punishment, which is not warranted in such circumstances. Therefore, the interest of justice will be met if the revocation of custom broker licence is set aside while upholding the order inasmuch as forfeiture of security deposit and imposition of penalty are concerned. Appeal allowed in part.
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2021 (10) TMI 717
Revocation of Customs Broker License - proceedings have taken place without supplying the relied upon documents to the appellant - violation of principles of natural justice - HELD THAT:- The documents neither have been seen by the adjudicating authority nor have been provided to the appellant. From the show-cause notice, it is apparent that reliance has been placed on these documents, however, these documents have not been included in the relied upon documents list. Only document included in the relied upon documents is a Self-contained note of the Crime Branch of Investigation, Anti-Corruption Branch, Chennai. A perusal of the Self-contained Note indicates that the findings in the note are based on these documents only. Under these circumstances, it is apparent that the principles of natural justice have not been followed and appellant has not been given opportunity to defend himself - matter is remanded to the original adjudicating authority for fresh decision after supplying the documents to the appellant and giving opportunity to the appellant to defend himself in respect of the charges - Appeal allowed by way of remand.
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Corporate Laws
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2021 (10) TMI 716
Reduction of share capital - section 66 of the Companies Act, 2013 - HELD THAT:- The Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi, after receiving the report from the Registrar of Companies, has filed his report dated 12.03.2021. On perusal of the representation, the Regional Director has no objection to the extent of proposed scheme of reduction in share capital of the Applicant company - Notice was duly served on the Income Tax Department; despite several opportunities no one has appeared for the Income Tax Department. This tribunal vide order dated 26.07.2021 directed the applicant company to file an affidavit denoting that they are tax compliant and if any demand is raised by the Income Tax Department, with regard to any dues or arrears of Income Tax, the applicant company will make good the same as per law. That the reduction of the Equity share capital of the above company, as resolved by the resolution passed at the Extra Ordinary General meeting held on the 24.08.2020, is allowed - Application allowed.
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2021 (10) TMI 715
Sanction of Scheme of Arrangement - Sections 230 to 232 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT:- Various directions with regard to holding convening and dispensing with various meetings issued - directions with regard to issuance of various notices also issued. The scheme is approved - application allowed.
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2021 (10) TMI 714
Approval of the Scheme of Amalgamation - Section 230 to 232 of Companies Act, 2013 read with the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Considering the approval accorded by the Members and Creditors of all the Petitioner Companies to the proposed Scheme and no sustainable objections having been raised by the Office of the Regional Director, Income Tax Department or any other interested party, there does not appear to be any impediment in granting sanction to the Scheme. Accordingly, sanction is hereby granted to the Scheme of Amalgamation proposed by the Applicant Companies under Section 230 to 232 of the Companies Act, 2013. The scheme is approved - application allowed.
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2021 (10) TMI 694
Seeking appointment of Company Liquidator - seeking direction to the directors and officers of the Company to submit to the Liquidator, within 30 days from the date of order, the books of accounts of the company completed and audited upto the date of the order - seeking direction to the directors and officers of the Company to submit the statement of affairs of the Company under Section 274(1) - service of notice to the petitioner to whom the order required to be served - seeking order to constitute a winding up committee under Section 277(4) to assist and monitor the progress of liquidation proceedings - seeking permission to the Company Liquidator to submit the report under Section 181(1) read with Rule 25(1) within 60 days from the date of the order in this IA - seeking order to fix the fee of the Provisional Liquidator and the Company Liquidator - Sections 241, 242, 59 read with 447 of the Companies Act, 2013. HELD THAT:- The applicant herein is appointed as the Liquidator. However, this Tribunal issued Form WIN -8 appointing Shri Mukesh K.P applicant herein as the Provisional Liquidator. Without objecting to the appointment as Provisional Liquidator instead of Liquidator the applicant performed his duties and submitted a report on 30.03.2021 and filed Form INC-28 before the RoC Kerala. In the report it is stated that there was no co-operation from the side of the Directors or Officers of the Company. Now stating that he has been appointed as Liquidator by this Tribunal vide its order dated 19.03.2021, an order appointing him as Company Liquidator in Form WIN 11,12 and 13 is necessary to complete the duties assigned to him by this Tribunal. On-going through the relevant rules, it is found that the correct Form to be issued to the applicant is Form WIN 11,12 and 13. Since the Liquidation order has already been passed by this Tribunal vide order dated 19.03.2021, some of the other reliefs sought by the applicant are not to be considered at this stage - this Tribunal is to constitute a Winding Up Committee to assist and monitor the progress of liquidation proceedings by the Company Liquidator. Seeking prayer for further 60 days time - HELD THAT:- Since more than 6 months already taken by the Provisional Liquidator, this Tribunal is of the opinion that 30 days more time can be granted to the Company Liquidator to complete his duties and submit the report. Fees of the Provisional Liquidator and Company Liquidator - HELD THAT:- This Tribunal fix the fee of ₹ 50,000/- for completing the winding up proceedings. This fee shall be paid by the petitioner to the company Liquidator on completion of his duties and submitting the winding up report before this Tribunal. Application disposed off.
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Insolvency & Bankruptcy
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2021 (10) TMI 713
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor to the Corporate Debtor - existence of debt and dispute or not - HELD THAT:- It is pertinent to mention that as per part-III of Form-C, the total debt from the personal Guarantor by way of personal Guarantee given to M/s. RGTL Industries Ltd., including the rate of interest amount to ₹ 20,10,27,358/- - That based on the documents produced and placed on record before this Tribunal and on the submissions made by the Applicant it can be concluded that there is a 'default' on the part of the Personal Guarantor by not fulfilling the debt owed to the Corporate Debtor, i.e., RGTL Industries Ltd. Application admitted - moratorium declared.
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2021 (10) TMI 712
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - application is barred by limitation or not? - HELD THAT:- Admittedly, this application is filed on 16.03.2020, as per demand notice (which is at page 43 relevant page 44 of petition), the date of default is mentioned as 31.12.2016 - In part-IV of the application, the petitioner has also averred the date of default first arose on 31.12.2016, on the ground that the petitioner has claimed his salary for the period of November and December, 2016. The emails exchanged in between the parties do not show the acknowledgement of debt towards the salary for the period of November and December 2016. Rather, it was made clear by the Human Resource Department of Corporate Debtor that as per note, no salary is due. Therefore, on the basis of these emails, the contention of the petitioner, cannot be admitted that these emails are amounts to acknowledgement of debt by the Corporate Debtor - further apart from the emails, there is no other document to show that the Corporate Debtor has ever acknowledged the debt of the petitioner. Hence, the benefit of Section 18 of Limitation Act cannot be allowed. Since, the default as per the averments made in demand notice as well as Part-IV of the application was occurred on 31.12.2016 and the petition is filed on 16.03.2020. Whereas, in view of Article 137 of the Limitation Act, the petition must be filed within three years when right to apply accrues. But it is filed on 16.03.2020 i.e. much after the three years when the default has occurred - the present application is barred by limitation and the same is liable to be dismissed. Application dismissed.
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2021 (10) TMI 711
Admission of various claims - appointment under the category of Contract of Service or Contract for Service - Section 42 of Insolvency Bankruptcy Code, 2016 - HELD THAT:- The appellants filed their claim in Form E even though the Liquidator directed them to file the claim in Form C, stating that they are not Operational Creditors. In this respect the Tribunal consider it necessary to see whether the appellants being consultant doctors of the corporate debtor comes under the purview of workmen? In order to verify whether the appellants are paid salary and whether the T.D.S was made, vide order dated 02.08.2021 the appellants were directed to produce the acknowledgement of IT returns showing the income and the tax paid by them during their engagement with the Corporate Debtor. However, the appellants have not produced the same. The learned counsel appearing for appellants could not properly answer why these documents could not be produced. In the cases on hand, the Appellants could not prove that they are full-time employees of the Corporate Debtor and their names entered in the muster rolls of the Corporate Debtor as Employee . A perusal of the appointment letters annexed with the appeals, it is discernible that the Appellants are appointed as Consultant Doctors for a fixed remuneration and they are acting as Consultants of the Corporate Debtor. In the appointment letter it is agreed between the parties that the tax shall be deducted from the payment of the doctors. It is also seen that the appellants were not registered as a part of corporate debtor s Employee Provident Fund Scheme and no agreement to show that provident fund can be deducted from their professional fees - they cannot be considered as workmen/ employees of the Corporate Debtor, as rightly decided by the Liquidator. There are no error in the impugned order passed by the Liquidator - appeal dismissed.
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2021 (10) TMI 710
Liquidation of the Corporate Debtor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The liquidation has to follow as recommended by the Committee of Creditors in terms of provisions of Section 33(2) of the Code. Adherence to statutory requirement has to be in toto. When the language of the Code is clear and explicit the Adjudicating Authority must give effect to it whatever may be the consequences and in present case the consequence is liquidation of Corporate Debtor. Since there is no resolution plan, and in conformity with the decision of the Committee of Creditors with 100% voting share, the payer for liquidation of the corporate debtor under Section 33 of the Code is hereby allowed. Application allowed.
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2021 (10) TMI 709
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - in terms of allotment letter no Builder Buyer Agreement was executed in between the parties - Financial Creditor or allottee? - HELD THAT:- Since the amount is raised under the real estate project for the allotment of two units, therefore, as per Section 5(8)(f) Explanation (i), the amount having the commercial effect of a borrowing; and the Petition an allottee under the real estate project - the applicant is well advised to file an application in terms of the amendment made in Section 7 of IBC. Since, the application is not in terms of the amendment made in Section 7 of the IBC, we are not inclined to issue notice upon the respondent. Application dismissed.
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2021 (10) TMI 708
Admissibility of application filed under CIRP during pendency of the proceeding of SARFAESI Act, 2002 - extension of period of limitation as per section 18 of Limitation Act, 1963 - HELD THAT:- An Application filed under Section 7 of the IBC would not be barred by limitation on the ground that it had been filed beyond a period of three years from the date of classification of a loan account of the Corporate Debtor as NPA if there were an acknowledgement of the debt by the Corporate Debtor before the expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. Hon'ble Supreme Court in the case of Dena Bank [ 2021 (8) TMI 315 - SUPREME COURT ], while dealing with the pleadings and documents required to be filed at the time of making an Application under Section 7 of the Code, observed that the Financial Creditor could only fill in the particulars as mentioned in Form-1 and there is no scope for elaborate pleadings. An application under Section 7 cannot be compared with a plaint in a suit. Further, there is no bar for filing documents as required under Section 7 until a final order either admitting a dismissing the Application has been passed. Non-furnishing of information by the Financial Creditor at the time of filing an Application under Section 7 of the Code need not necessarily entail in dismissal of the Application. Instead, an opportunity can be provided to the Financial Creditor till the admission/rejection of petition to provide additional information required for the satisfaction of the Adjudicating Authority with respect to the occurrence of the default - in the instant case, the balance sheet that has been brought on record in the instant case before the Adjudicating Authority shall be taken into consideration while deciding the question of limitation and default on the part of the Corporate Debtor. The said documents cannot be ignored simply on the premise that it is not pleaded in the Application filed in Form-1 for initiation of the Corporate Insolvency Process - A reading of the documents reveals that the Corporate Debtor has acknowledged/subsisting liability to attract the provisions of Section 18 of the Limitation Act, 1963. The present Appeal is liable to be dismissed - Appeal dismissed.
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2021 (10) TMI 707
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Applicant filed present Application under section 9 of IBC, 2016 and served the copy of this application at the registered address as well as via email, as reflected on the MCA website, which was duly delivered to the corporate debtor. The affidavit of service has duly been filed - The Corporate Debtor has neither filed any reply nor appeared before the bench. The corporate debtor was proceeded ex-parte on 06.04.2021. As per Form V, Part IV of the application, the corporate debtor is liable to pay an outstanding sum of ₹ 1,14,74,920/-. The date of default as per part IV is 13.01.2020, which is date of invoice. The present application was filed on 01.12.2020, hence the debt is not time barred and the application is filed within the period of limitation - The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application. The present application is complete and the Applicant is entitled to claim its dues, remained uncontroverted, establishing the default in payment of the operational debt beyond doubt. The present application is admitted, in terms of section 9(5) of IBC, 2016 - application allowed - moratorium declared.
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2021 (10) TMI 706
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor/Debtor - existence of debt and dispute or not - Section 95(1) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for IRP for Personal Guarantors to Corporate Debtor) Rules, 2019 - HELD THAT:- Rule 3(f) of the Personal Guarantor Rules 2019 (Supra), which defines the term 'Guarantor', nowhere stipulates that the Corporate Debtor shall be under CIR Process or Liquidation. Hence, the Personal Guarantor herein, is deemed to have been covered under the definition of the Guarantor as defined under Rule 3(f) of the Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors Rules, 2019. While going through the Section 60(1), it is seen that the Adjudicating Authority, in relation to the insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the NCLT having territorial jurisdiction over the place where the registered office of a corporate person is located. Hence, in the case herein, there is a situation where various IB applications for initiation of CIR process against the Corporate Debtor are pending - the moment the IB application in relation to Insolvency resolution of the Corporate Debtor is pending before this Adjudicating Authority, the provisions of Section 60(1) get attracted and the jurisdiction to entertain insolvency process against the personal guarantor would, therefore, lie with the NCLT. Thus, in a situation where Application(s) in relation to the Corporate Debtor for initiation of CIRP is pending at National Company Law Tribunal (NCLT) then, initiation of CIRP of the Corporate Debtor is not a prerequisite for maintainability of an application under Section 95 of the IBC, 2016 filed for initiating IR Process against the Personal Guarantor of that Corporate Debtor before the NCLT - List the matter on 11.10.2021.
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2021 (10) TMI 693
Oppression and mismanagement - owner of leasehold land property - transfer in the shareholding pattern or not - removal of directors of the company - appropriate statutory filing with the Registrar of Companies / Ministry of Corporate Affairs - rectification in the register of numbers of the Respondent No.1 Company - disclosure of all monetary transactions carried out on behalf of Respondent No.1 Company - release of any claim to, or encumbrance by way of claiming the security on the said property of the Respondent No.1 Company.Section 59, 241 and 242 of the Companies Act. HELD THAT:- The petitioners holds the entire shareholding of the Respondent No.1 Company, M/s Vivid Solution Private Limited which owns the leasehold plot in the MIDC Industrial Area in Nashik along with constructed building etc. The Respondent Nos. 2 and 3 are the owners of Respondent No.4 Company which is located at plot adjoining Respondent No.1 Company. The Respondent Nos. 2 to 4 were desirous of expanding their business and therefore petitioners agreed to transfer 100% shareholding in Respondent No.1 to Respondent Nos. 2 to 3 - The Bench notes that a total amount of ₹ 3 Crore was paid by the Respondent Nos. 2 to 4 to the petitioners and MoU was executed between the parties where intention of the parties to sell the entire shareholding of the petitioner in Respondent no.1 Company to Respondent Nos.2 to 4 were agreed. The Respondent Nos. 2 to 4 made a payment in all of ₹ 3 crores as initial amount. The Bench therefore, notes that the property has not been transferred through any agreement/conveyance deed which need to be registered under Section 17 of the Indian Registration Act, 1908 and Section 54 of Transfer of Property Act, 1882. There is no such documents produced before the Bench by the Respondents which would constitute a valid transfer. It is very clear that under no circumstances the said immovable property can be passed to the Respondent No.4 which is the company promoted by Respondent no. 2 and 3 without any conveyance/sale deed - the Bench concludes that the immovable property of Respondent No. 1 Company passing to the Respondent No. 4 namely Ukay Metal Industries Private Limited without any transfer document, under no circumstances can be constituted as a valid transfer and, therefore is illegal, null and void. The petitioner continues to be the 100% shareholder of Respondent no. 1 Company i.e. Vivid Solutions Pvt. Ltd. and alleged transfer of shareholding of the Petitioners in the Respondent no. 1 company in favour of the Respondent Nos. 2 to 4 is illegal, null and void. The ROC is therefore to declare the transfer of shareholding of Respondent no.1 company to Respondent Nos. 2 to 4 as illegal and null and void - The Bench further directs the purported transfer of immovable assets of Respondent No.1 by mere book entries in the filings with ROC without any Registered Conveyance/Agreement under Section 17 of the Indian Registration Act as not a valid transfer. Therefore, the same is declared illegal and null and void. Petition allowed.
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PMLA
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2021 (10) TMI 705
Money Laundering - reasons to believe possession of proceeds of crime or not - attachment of residential properties - sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- We have refrained from delving into the factual narrative as stated in the impugned order of provisional attachment. This is so because we are of the opinion that when the matter is at the stage of adjudication under section 8 of the PMLA Act and adjudication hearing is fixed on 27th October, 2021, we should allow the statutory authority to deal with the matter in accordance with the statute. Of course the point of law raised by Mr.Nankani without adverting to the facts of the present case is an important one and as held by the Punjab and Haryana High Court in Seema Garg [ 2020 (3) TMI 460 - PUNJAB HARYANA HIGH COURT ] is certainly a matter which requires attention of the adjudicating authority. The other aspect which has also caught our attention is that the properties attached are much more valuable than the alleged proceeds of crime stated to have been in possession of the petitioners. Petition disposed off.
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Service Tax
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2021 (10) TMI 704
Refund of unutilized CENVAT Credit - rejection on the ground that the appellant did not debit the amount of refund claimed at the time of fling the refund claim, but have debited such amount subsequent to the filing of the refund claim but before adjudication - Rule 5 of Cenvat Credit Rules read with N/N. 27/2012-CE (NT) - HELD THAT:- The debit of the amount of refund claim in the cenvat credit account suo moto before the adjudication, is sufficient compliance Condition No.2(h) of the Notification No.27/2012-CE. Further relying on the ruling of the Hon ble Supreme Court in the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL [ 2010 (11) TMI 13 - SUPREME COURT ] it is further held that the Commissioner (Appeals) have mis-conceived and mis-directed himself by ignoring the ruling of the Hon ble Supreme Court, which is both judicial indiscipline and also in violation of Article 141 of the Constitution of India. The Adjudicating Authority is directed to grant refund within a period of 45 days from the date of receipt of this order along with interest as per Rules (starting from the end of 3 months from the date of filing of the refund claim till the date of grant of refund claim) - Appeal allowed - decided in favor of appellant.
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2021 (10) TMI 703
Dispute mitigation scheme by enactment of chapter VI in Finance Act, 2013 and notification of Service Tax Voluntary Compliance Encouragement Rules, 2013 - computation of liability undertaken by the competent authority on submission of their declaration dated 13 th December 2013 was in error - incorrect disqualification attached to substantially false declarations for denying the privileges of escapement from interest and penal detriments appended to non-payment/short-payment of tax liability - coverage of exclusion/exemption to maintenance of lifts - HELD THAT:- The catena of decisions cited by Learned Counsel lead to a conclusion that are not in consonance with the findings of the adjudicating authority in the impugned order. Every authority empowered under Finance Act, 1994 is bound by, and required to adhere to, the decisions of appellate authorities. Failure to do so is demonstrative of lack of judicial discipline. Discarding of these decisions, binding as they are, is tantamount to disinclination to be bound by the law as interpreted. It does not behove us, as the appellate authority, to allow such a state of affairs to permeate the system of adjudication. The competent authority is directed to test the applicability of these decisions to the activities covered in the 29 disputed invoices for ascertainment of appropriate taxable service before 1st July 2012 and of appropriate enumeration in the exemption notification for the period thereafter. To enable such conscious and responsible exercise of adjudicatory jurisdiction, we set aside the impugned order and remand the matter back to the original authority for a fresh decision on the correctness of the proposals in the show cause notice - as the genesis of the proceedings lies in an amnesty scheme promulgated by the Central Government as far back as 2013, it is incumbent on the adjudicating authority to decide the matter expeditiously and not later than three months from the receipt of this order. Appeal disposed off.
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2021 (10) TMI 702
Levy of service tax - service to financial institutions in relation to selling of their loan products to their customers - taxability of commission as received by the appellant in terms of sub section 19 of 65 of Finance Act or not - imposition and quantum of penalty - HELD THAT:- The services being rendered by the appellant are defined under section 65(19) of Finance Act, 1994. When the provision is read with section 68 thereof, it becomes clear that service was taxable and the appellant was liable to pay the service tax. There has been a major change in Finance Act with effect from 01.07.2012 by virtue of negative list under section 66B of the Act was provided. It was held that the services which are not covered under the said list are taxable. Apparently, the services of DSA to Financial institute is not mentioned in the said negative list nor any exemption for the same is brought to the notice. The appellant did not get himself registered immediately after 01.07.2012. He applied and got registration only in August, 2016 when the services were under scrutiny by Income Tax department. It is abundantly clear that the appellant was providing taxable service which is chargeable to service tax in terms of section 66B of the Finance Act, 1994. The appellant cannot be allowed to plead ignorance of law. Otherwise also the said liability has not been contested by the appellant as the entire demand stand already deposited that too without protest. Levy of penalty - HELD THAT:- Irrespective of the fact that the appellant has paid the amount demanded along with the interest within 30 days of the issuance of show cause notice but same does not absolve him from imposition of penalty. 15% of the penalty has still to be paid by the appellant in terms of proviso to Section 78 of the Service Tax Act, 1944 - No doubt the said amount also stands already paid. in terms of proviso to section 78 of the Finance Act, proceedings against the appellant be deemed to be concluded - penalty is directed to remain confined to 15% of the total demand instead of it being @ 100% of the amount of demand. Appeal allowed in part.
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Central Excise
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2021 (10) TMI 701
CENVAT Credit - Job-work - exempted service - credit claimed on taxable as well as exempt goods - non-maintenance of separate records - demand of an amount equal to 6% of the value of exempted service - Rule 6(3) of the Cenvat Credit Rules, 2004 - HELD THAT:- Notification No. 214/86-CE (NT) though was effective from April 1996 has been amended extensively vide Notification No. 49/2002 dated 16.09.2002 so as to make the manufacturer accountable for discharging his obligation in respect of goods under Rule 6 of the Cenvat Credit Rules, 2002. As such when the notification was made service was not treated as an taxable incident in India and the said notification has clearly excluded job workers from the purview of payment of excise duty if ultimate manufacturer was to pay the duty at the time of clearance. Therefore, this amendment of 2005 since has only fixed manufacturer liable to comply with Rule 6 of Cenvat Credit Rules, 2004, job worker cannot be asked to comply the same again on the ground that he is also a part of the manufacturing process. There being a clear finding of the adjudicating authority that the processes undertaken by the job worker were incidental and ancillary to manufacturing or production and hence, amounts to manufacture or production of goods that is specifically excluded from the purview of taxable service, which is also found reflected in the written note filed on behalf of the appellant, there is no need to further dwell into the issue with reference to S.No. 30 of the Notification No. 22/2012-ST to interpret the nature of work undertaken by the appellant job worker. When such a finding of the adjudication authority is not appealed against by the respondent department, the work undertaken by the appellant was part of the process of manufacturing and not a services rendered by it to the ultimate manufacturer. The impugned order is hereby set aside exempting the appellant from the liability to pay the amount or interest and penalty confirmed in the adjudication process - appeal allowed.
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2021 (10) TMI 700
CENVAT Credit - Additional duty of Customs (SAD) - credit as per the amount shown in the Bill of Entry, correct or not - excess receipt of raw material volatile in nature - amount of CVD in the bill of entry, is a lower amount - extended period of limitation - HELD THAT:- The appellant is registered with the Department and have maintained proper books of accounts and registers. The issue involved herein is wholly interpretational in nature. Further, the show cause notice is also erroneous, as revenue have sought to recover an amount of ₹ 1,04, 890 + ₹ 7,18,818/- which are been finally dropped by the court below. Further, this Tribunal found that the demand of ₹ 25,705/- is not sustainable and the same have been raised by misconception, as regards treatment of normal loss. Taking of lesser credit due to normal loss - also receipt of marginally excess quantity than that mentioned in the invoices/bill of entry - HELD THAT:- There is no Mala fide on the part of the appellant as they have taken less credit in case of normal loss of the quantity, and have erroneously taken excess credit for the normal gain or excess quantity received. Extended period of limitation is not available to revenue. The impugned order in appeal is set aside so far it have confirmed the demand and penalty - Appeal allowed in part.
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2021 (10) TMI 699
CENVAT Credit - availment of wrong cenvat credit of the same amount twice - returned goods - HELD THAT:- The appellant have not taken wrong credit but rather have rectified the wrong debit made at the time of sales return, instead of taking credit, and accordingly the two entries of cenvat credit made by them on 31.12.2016 are in consonance and the accepted accounting principles. Hence, the impugned order is unsustainable and against the provisions of law. Appeal allowed - decided in favor of appellant.
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Indian Laws
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2021 (10) TMI 698
Removal of names of the petitioners from the list of wilful defaulters - whether the writ petitioners being the promoter / directors of a company as well as guarantors to the loan facility can be classified as wilful defaulters even after the company is absolved of its liability? - HELD THAT:- The Wilful Defaulters Review Committee in its meeting held on August 27, 2020, after considering the written representations submitted by the writ petitions and the department s response thereto, passed an order that the promoters/ directors of TCL i.e. the petitioners herein are fit to be declared as wilful defaulters. It was specifically observed by the said Review Committee that despite the fact that operations of the committee were allowed through TRA account only, the borrower has routed substantial transactions through non TRA accounts which is diversion of funds and violation of CDR terms and falls under the criteria of wilful default - The company operates through its directors. The directors, who are in charge of the affairs of the company are responsible for diversion of funds. Thus, in case a company is held guilty of diversion of funds the company as well as its directors can be classified as Wilful Defaulters. Though the company is absolved of its liability through corporate resolution process and the board of directors are removed from the board of the said company, such directors would still be liable in case they have furnished personal guarantee to the loan facility extended to the company. The directors being at the helm of the affairs of a company are responsible for diversion of funds. Whether the contractual obligations between the financial creditor and the surety are obliterated or modified or suspended by the eventual outcome of a proceeding under Section 7 of the IBC, 2016? - HELD THAT:- It is now well settled that the corporate Debtor in a proceeding under the IBC, 2016 may stand discharged of its liability to its creditors but such discharge does not absolve the surety of its liability - A co-ordinate bench of this Hon ble Court in Gouri Shankar [ 2019 (11) TMI 1169 - CALCUTTA HIGH COURT ] after considering the provisions of Section 31 of the IBC, 2016 observed that the contractual obligations between the financial creditor and the surety are not obliterated or modified or suspended by the eventual outcome of a proceeding under section 7 of the IBC. This Court is of the view that the writ petitioners who were the guarantors to the loan facility extended to the company and have defaulted in repayment can be classified as wilful defaulters even after the company is absolved of its liability. This Court is of the view that the names of the writ petitioners cannot be removed from the list of wilful defaulters merely on the ground that the company is absolved of its liability as the petitioners have furnished personal guarantees to the loan facility extended by the respondent. The order of the Review Committee does not suffer from any infirmity. Appeal dismissed.
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2021 (10) TMI 692
Dishonor of Cheque - insufficiency of funds - conviction and sentence recorded by the courts - compounding of offences - section 147 of the Negotiable Instruments Act - HELD THAT:- Reliance placed in the case of K.M. Ibrahim vs. K.P. Mohammed and Another [ 2009 (12) TMI 903 - SUPREME COURT ] where it was held that It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution. Keeping in view that in the present case, the parties have settled their disputes, this Court finds it appropriate to allow the application and permit the parties to compound the offence - the judgment of the Courts below is set aside, the offence for which the revisionist was tried and convicted has been compounded and the accused/revisionist is acquitted of all the charges levelled against him - revision allowed.
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2021 (10) TMI 691
Imposition of electricity duty and penalty on the electricity - Maintainability of petition - alternate statutory remedy under Section 9A of the Act, present or not - appropriate forum - High Court declined to entertain the writ petition instituted by the appellant on the ground that the dispute between the parties is factual in nature and is suitable for adjudication in terms of the statutory remedy provided in the Bihar Electricity Duty Act 1948, Bihar Electricity Act or the Act - whether dispute involves questions of fact which are not amenable to the writ jurisdiction of the High Court? HELD THAT:- While a High Court would normally not exercise its writ jurisdiction under Article 226 of the Constitution if an effective and efficacious alternate remedy is available, the existence of an alternate remedy does not by itself bar the High Court from exercising its jurisdiction in certain contingencies. This principle has been crystallized by this Court in Whirpool Corporation v. Registrar of Trademarks, Mumbai, [ 1998 (10) TMI 510 - SUPREME COURT ] and Harbanslal Sahni v. Indian Oil Corporation Ltd, [ 2002 (12) TMI 564 - SUPREME COURT ]. The principle of alternate remedies and its exceptions was also reiterated recently in the decision in Assistant Commissioner of State Tax v. M/s Commercial Steel Limited, [ 2021 (9) TMI 480 - SUPREME COURT ] - In State of HP v. Gujarat Ambuja Cement Ltd, [ 2005 (7) TMI 353 - SUPREME COURT ] this Court has held that a writ petition is maintainable before the High Court if the taxing authorities have acted beyond the scope of their jurisdiction. It is not the case of the appellant that the respondents have miscalculated the duty and penalty imposed on it. The appellant contends that the State Government does not have the power to levy tax on its sale of electricity to BSEB. Thus, the plea strikes at the exercise of jurisdiction by the Government. In view of the law discussed above on the rule of alternate remedy, the High Court can exercise its writ jurisdiction if the order of the authority is challenged for want of authority and jurisdiction, which is a pure question of law. The issues raised by the appellant are questions of law which require, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor; and whether the first respondent has the legislative competence to levy duty on the sale of electricity to an intermediary distributor - The question of whether the appellant is liable to file returns under Sections 6B(1) and 5A of the Act is directly related to the issue of whether the sale of electricity by the appellant to BSEB falls under the charging provisions of Section 3(1). The questions raised by the appellant can be adjudicated without delving into any factual dispute. Thus, the present matter is amenable to the writ jurisdiction of the High Court. The High Court made an error in declining to entertain the writ petition and it would be appropriate to restore the proceedings back to the High Court for a fresh disposal - Application disposed off.
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