Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 31, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Effective date of registration certificate - conversion of the provisional registration to a permanent registration - When the provisional registration granted to the petitioner was not cancelled through the procedure contemplated under the Act and Rules, and the respondents had granted a regular registration on 04.01.2020, the permanent registration must relate back to the date of the provisional registration and the petitioner ought to be entitled to upload the returns for the past period between the date of Exts.P1 and P3 and to avail eligible input tax credit based on the returns uploaded by him. - HC
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Interest on late payment of GST - Calculation of Interest - The question has been answered by the Board in the administrative instructions dated 18.09.2020 by categorically stating that the interest would be on the net cash tax liability for the period prior to the amendment i.e., from 01.07.2017 to 31.08.2020. - HC
Income Tax
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Correct head of income - gains arising on cashless exercise of stock options - it was not open for the revenue to take one stand in case of the assessee and to challenge the correctness of the same in case of other assessee. For this reason also, the revenue cannot be permitted to take a different view in this appeal. - HC
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Income recognition - Entitlement to follow accounting standard 9 for revenue recognition in respect of TPA fee received from insurance companies - It is evident that the third party agent and the insurance company are different entities. Therefore, the finding recorded by the tribunal that the assessee's business activities do not fall under the business of insurance company is correct - HC
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Deemed dividend - accumulated profit - admittedly, the reserve and surplus amount does not show any accumulated profit but the amount shown is loss as well as premium on securities. - No addition could be made - HC
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Premium for hedging foreign exchange fluctuations on loans - capital expenditure u/s 43A - depreciation claim - It cannot be said that the loan borrowed in Foreign currency is not even remotely connected with the cost of the asset when it is an admitted position that the loan was borrowed for acquiring a capital asset. Therefore, the assessee cannot be put to disadvantage on both grounds. - HC
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Entitled for deduction u/s 80IA(4) - Container Freight Station constitutes an 'inland port' - the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. Actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places - HC
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Reopening of assessment u/s 147 - Notice issue beyond periods of four years or not - In response to the notice, the assessee itself had withdrawn the claim u/s 80IA - Tribunal erred in holding that the reopening of the assessment under Section 147 of the Act was beyond 4 years and was barred by limitation. - HC
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MAT credit u/s 115JAA - Whether MAT credit includes surcharge and education cess instead of excluding surcharge and education cess - The Hon'ble Supreme Court explained the term 'surcharge' to mean as the charge in addition to or subject to an additional or extra charge. - HC
Customs
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Valuation - Detention of goods - Petitioner contended that, Authorities have raised frivolous queries - Manner in which adjudication order has been passed - If this Writ Petition had not been filed and if this Court had not passed the order dated 06th October 2020, requiring the Officer to clear the confusion of the dates, neither this Court nor the Petitioner would have ever known the manner in which the Revenue- Authority pass orders. - HC
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Request for amendment of Bills of Lading - It is trite law that circulars cannot assume the role of the Principal Act lest the provisions only a binding force. If at all the revenue is facing difficulties in accepting and processing applications for amendment of bills of lading, an amendment to the Principal Act can be suggested in accordance with law and till the pendency of the same, an Ordinance can also be issued. No such stand is taken as evident from Ext.P10 - the action of the respondent cannot be accepted, for, it is an utter violation of statutory provision of Section 149 of the Customs Act. - HC
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Import of Gold from Korea - Valid import or not - it is evident that on the date when the gold granules were imported i.e., on 21.09.2017, there was no restriction on its import and the restriction was imposed subsequently on 18.12.2019 by the DGFT by way of Notification. Thus, when gold medallions and gold granules were imported, they were freely importable and the same was brought under the restricted category subsequently. - Decided against revenue - HC
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Baggage Rules - high value electronic items - the addresses of web sites from where the values are taken are not mentioned. Copies or screenshots of websites displaying the value of the products is not also made available. Similarly, there was no reasoning, for adoption of such values and the Rules under which the same is arrived at, has been given either in the SCN or OIO. - while holding that the good are liable for confiscation and the appellants are liable for penalty under Section 112(b), the request for reducing the penalties can be accepted. - AT
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Grant of Anticipatory Bail - The applicant has not yet been made an accused. But he apprehends arrest. There are no sufficient material to show that he will be arrested. Merely because he was questioned for 60 hours by the Customs Department does not indicate that he is intended to be made an accused - The power of the Customs Department to question the applicant under Section 108 cannot be curtailed by granting anticipatory bail. The relief sought for is undoubtedly premature - HC
Service Tax
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Rejection of application filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - there are no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. - HC
Central Excise
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CENVAT Credit - input services - outward transportation of its finished goods - In the instant case, the availment of credit on outward transportation from factory gate to customer’s place pertains to period prior to April 2008 i.e. prior to period when the definition of input service was amended - credit allowed - AT
Case Laws:
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GST
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2020 (10) TMI 1174
Effective date of registration certificate - conversion of the provisional registration to a permanent registration - HELD THAT:- The procedure that had to be followed by the petitioner for obtaining a registration under the GST, in circumstances where he was already a registered dealer under the erstwhile KVAT Act, is the one prescribed in Rule 24 of the GST Rules. It is not in dispute that the petitioner applied for a registration in accordance with Rule 24 and was in fact granted a provisional registration as evident from Ext.P1 certificate dated 28.06.2017. It is also significant to note that thereafter, the provisional registration granted to the petitioner was not formally cancelled by the respondents by following the procedure envisaged under the Act for cancellation of the provisional registration. Under such circumstances, the petitioner continued to function under the provisional registration granted to him, although the absence of a permanent registration resulted in a situation where he could not upload the returns and other documents enabling him to claim input tax credit in respect of the tax paid stock of material that was available with him. When the provisional registration granted to the petitioner was not cancelled through the procedure contemplated under the Act and Rules, and the respondents had granted a regular registration on 04.01.2020, the permanent registration must relate back to the date of the provisional registration and the petitioner ought to be entitled to upload the returns for the past period between the date of Exts.P1 and P3 and to avail eligible input tax credit based on the returns uploaded by him. This is more so because it is admittedly the case that there was no formal order canceling the provisional registration, that was communicated to the petitioner in terms of the Act and Rules. The respondents are directed to amend the Registration Certificate issued to the petitioner so as to make it valid from 01.07.2017, and the petitioner is permitted to upload the returns for the period covered by Exts. P5, P6 and P7 statements, and to pay tax as well as claim input tax credit based on the returns so uploaded - petition allowed.
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2020 (10) TMI 1173
Interest on late payment of GST - Calculation of Interest - whether the interest could be demanded only on the net liability and not on gross liability? - HELD THAT:- Amendment to section 50 of the Central Goods and Service Tax Act, 2017 was introduced by Finance (No.2) Act, 2019 for charging interest on the net cash tax liability. The said amendment was made effective prospectively from 01.09.2020 vide the Central Government notification No.63/2020-Central Tax dated 25.08.2020. GST Council in its 39th meeting recommended that interest should be charged on the net cash tax liability with effect from 01.07.2017. Recommendation was made for making the amendment to section 50 retrospectively with effect from 01.07.2017. It is stated that retrospective amendment in the GST laws would be carried out in the due course through suitable legislation. After issuance of the notification dated 25.08.2020, views were expressed by tax payers that the said notification is contrary to the recommendation of GST Council to charge interest on the net cash tax liability with effect from 01.07.2017. The central issue raised in the writ petition i.e., whether interest under section 50 of the Central Goods and Service Tax Act, 2017 is to be levied on the gross tax liability or on the next tax liability has been answered by the Board in the administrative instructions dated 18.09.2020 by categorically stating that the interest would be on the net cash tax liability for the period prior to the amendment i.e., from 01.07.2017 to 31.08.2020. Respondents to intimate the petitioner about the quantum of interest payable on account of delayed payment of GST for the period under consideration in terms of the administrative instructions dated 18.09.2020 and the same shall be paid by the petitioner, if not already paid - Petition allowed.
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2020 (10) TMI 1172
Jurisdiction - Time Limitation for availment of Input Tax Credit - HELD THAT:- The instant matter does not fall within the subject matter assigned to this Bench. Therefore, let the matter be listed before the appropriate Division Bench, as per the present distribution of roster.
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Income Tax
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2020 (10) TMI 1171
Validity of reopening of assessment u/s 147 - AO refusal to furnish of reasons for issuing notice under Section 148 - HELD THAT:- In GKN Driveshafts (India) Ltd [2002 (11) TMI 7 - SUPREME COURT] has held that when a notice under Section 148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he desires to seek reasons for issuing notice, the AO is bound to furnish reasons within a reasonable time - On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. Considering the law laid down by the Hon'ble Supreme Court, it was really not open to the AO to refuse furnish of reasons for issuing notice under Section 148 of the IT Act. As a result of such refusal, the Appellant was deprived of the valuable opportunity of filing objections to the reopening of the assessment. The approach of the AO in this case was contrary to the law laid down by the Hon'ble Apex Court in GKN Driveshafts (India) Ltd. [supra] - Decided in favour of the Assessee
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2020 (10) TMI 1170
TP Adjustment - comparable selection - Tribunal adopting turnover filter of ₹ 200 crore - Tribunal holding that KALS Information Systems Ltd., Accel Transmatic Ltd., Tata Elxsi Limited and Lucid Software Ltd., cannot be taken as comparables on the basis of facts of different case for different assessee for different assessment year and directing the TPO to apply RPT filter of 15% - HELD THAT:- As assessee submits that the competent authority of USA and India have reached mutual agreement and on the basis of the aforesaid agreement, the AO has passed an Order giving effect to mutual agreement procedure vide order dated 15.12.2015. It is also pointed out that in view of the order passed by the Assessing Officer dated 15.12.2015, the substantial questions of law involved in this appeal have been rendered academic. As revenue submits that the appeal may be disposed of with liberty to the revenue to revive the same, if occasion so arises. Appeal is disposed of with liberty as prayed for.
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2020 (10) TMI 1169
Correct head of income - gains arising on cashless exercise of stock options - taxable as income under the heads 'income from salaries' and 'short term capital gains' or 'long term capital gains' as claimed by the Appellant - Whether stock options did not constitute a 'capital asset' under Section 2(14) of the Act? - cashless exercise of stock options constitute transfer of a long term capital asset under Section 2(47) or not? - HELD THAT:- Assessee was an independent consultant to SiRF USA and was not an employee of SiRF USA at the relevant time. Thus, there was no relationship of employer and employee between the SiRF USA and the assessee and therefore, the finding recorded by the tribunal that the income from the exercise of stock option has to be treated as income from salaries is perverse as it is trite law that unless the relationship of employer and employee exists, the income cannot be treated as salary. [See: CIT VS. L.W.RUSSEL [ 1964 (4) TMI 4 - SUPREME COURT] Revenue in case of several other assessee's have accepted the fact that on cashless exercise of option, there arises a income in the nature of capital gains. However, in the case of the assessee the aforesaid stand was not taken. It is also pertinent to mention here that nothing was brought to our notice that the view taken by the tribunal in the following cases has been challenged by the revenue. See SHRI KAMLESH BAHEDIA C/O ABOBE SYSTEM INDIA PVT. LTD [ 2014 (8) TMI 843 - ITAT DELHI], N.R. RAVIKRISHNAN [ 2018 (12) TMI 1255 - ITAT BANGALORE] and DR. MUTHIAN SIVATHANU [ 2018 (11) TMI 1112 - ITAT CHENNAI] Thus in view of law laid down by the Supreme Court in Berger paints [ 2004 (2) TMI 4 - SUPREME COURT] it was not open for the revenue to take one stand in case of the assessee and to challenge the correctness of the same in case of other assessee. For this reason also, the revenue cannot be permitted to take a different view in this appeal. - Decided in favour of assessee.
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2020 (10) TMI 1168
Disallowance u/s 14A r.w.r. 8D - Non recording of satisfaction by AO - HELD THAT:- Assessing Officer has not rendered any finding with regard to incorrectness of the claim of the assessee either with regard to its accounts or with regard to the fact that he is not satisfied with the claim of the assessee in respect of such expenditure in relation to exempt income as is required in accordance with Section 14A(2) of the Act for making a disallowance under Rule 8D. Thus, from perusal of the relevant extract of the order passed by the Assessing Officer, the tribunal has rightly concluded that the Assessing Officer has not recorded the satisfaction with regard to the claim of the assessee for disallowance under Section 14A read with Rule 8D(2) - Decided in favour of assessee. Disallowance under Rule 8D(2)(II) while making the disallowance under Section 14A - whether interest expenses incurred cannot be directly attributed to any particular income or receipt, provision of rule 8D(2)(ii) automatically becomes applicable? - HELD THAT:- In The 'CIT VS. RELIANCE UTILITIES AND POWER LTD.', [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where interest free funds exceed the value of investments, it can safely be inferred that investments have been made out of interest free funds and no disallowance under Section 14A towards any interest expenditure can be made. Similar view was taken in CIT VS. HDFC BANK LTD., [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] On perusal of the balance sheet the finding has been recorded that assessee has received an amount of ₹ 146.52 Crores as advances from customers, which are interest free and the reserves and surpluses are to the tune of ₹ 882,67 Crores. Thus, it has been held that all the aforesaid amounts are interest free funds and are sufficient to make tax free investments and therefore, the finding of the Assessing Officer that overdraft facility was directly used for making tax exempt investments have been reversed. The tribunal has affirmed the aforesaid finding. Thus, concurrent findings of fact have been recorded on the aforesaid issue, which could not be demonstrated to be perverse. Therefore, no interference is called with the aforesaid concurrent findings of fact in this appeal under Section 260A - Decided in favour of assessee. Disallowance u/s 36(1)(iii) - tribunal deleted addition holding that the advances to its subsidiaries were in the normal course of business, for business purposes - whether the funds from the overdraft account were utilized to make interest - free advances for acquiring lands, property advances? - HELD THAT:- The assessee had to pay advances to the land owner for the purposes of entering into Joint Development Agreement for development of real estate projects, therefore, the advances are business advances and cannot be treated as non business or capital advances. The tribunal has held that reserves and surplus earned by assessee company is approximately to the extent of ₹ 994.92 Crores as against total advances and deposits of ₹ 248.24 Crores. Thus, the tribunal has found that the assessee's own fund are far in excess of advances and deposits made during the year and has held that CIT (Appeals) has rightly deleted the disallowance of interest. The aforesaid concurrent findings of fact are based on meticulous appreciation of evidence on record and by no stretch of imagination can be said to be perverse. - Decided in favour of assessee.
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2020 (10) TMI 1167
Income recognition - 'unearned income' - scrutiny under Computer Aided Scrutiny Selection (CASS) - Change of accounting method - Accounting Standard - 9 Applicability - as per AO assessee to be an insurance company by treating it as outside the purview of Accounting Standard - 9 - HELD THAT:- Assessee in the instant case has changed invoice method to proportionate completion method. Till 31.03.2007, the assessee used to recognize revenue immediately on raising of invoice, even though, the service under the contract is not completed or substantially completed. The assessee is involved in execution of more than one act i.e., rendering service in the entire year, therefore, it adopted the proportionate completion method. The revenue from service transactions usually recognized as the service is performed either by proportionate completion method or completed service contract method. The assessee is therefore, rightly adopted proportionate completion method as it is engaged in rendering service in the entire year. The assessee in the instant case is covered by Accounting Standard - 9 as it does not deal with revenue of insurance companies arising from insurance contracts. It is open for the assessee to change the method of accounting and the burden is on the department to prove that the method invoked is not correct and that such a method distorts the profits of a particular year. The aforesaid burden has not been discharged by the revenue in the instant case. Besides that, the revenue has accepted the change in the method of accounting in subsequent Assessment Years viz., 2010-11, 2011-12 and 2012-13, therefore, there is no justification on the part of the Assessing Officer to change the method adopted by the assessee and to determine the income on estimate basis. - Decided in favour of assessee. Entitlement to follow accounting standard 9 for revenue recognition in respect of TPA fee received from insurance companies - As held that business of a third party agent is insurance business as third party agent makes payments to the hospital / individuals policy holders, therefore, Accounting Standard - 9 is not applicable in the fact situation of the case - HELD THAT:- Regulation 3 prescribes the health services, which may be provided by a third party agent to an insurer under the agreement in connection with health insurance business. Section 2(9) of the Insurance Act defines the expression 'insurer' which includes insurance company. Thus, it is evident that the third party agent and the insurance company are different entities. Therefore, the finding recorded by the tribunal that the assessee's business activities do not fall under the business of insurance company is correct. - Decided in favour of assessee.
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2020 (10) TMI 1166
Assessment framed u/s 153A - Warrant of Authorization was issued jointly - HELD THAT:- Whether the assessee had produced the Warrant of Authorization or the Panchanama can only be ascertained by the Tribunal. Therefore, in the facts and circumstances of the case, we deem it appropriate to quash the Order passed by the Tribunal and to remit the matter to the Tribunal for decision afresh in accordance with law. All contentions of both the parties are kept open on merits of the matter.
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2020 (10) TMI 1165
Entitled for deduction u/s 10B - whether the assessee in the instant case, has complied with the requirements as laid down in Section 10B(2) ? - Whether assessee is formed by splitting or reconstructing of business - tribunal dismissing the appeal preferred by the revenue by holding that the assessee is entitled for deduction under Section 10-B - HELD THAT:- Question whether or not assessee has complied with the conditions mentioned in Section 10B(2) of the Act in order to enable him to claim deduction under Section 10B of the Act is essentially a question of fact. From close scrutiny of the orders passed by the Commissioner of Income Tax (Appeals) as well as the tribunal, it is evident that the aforesaid findings are based on meticulous appreciation of evidence on record. The tribunal has affirmed the findings of fact recorded by the tribunal on the basis of meticulous appreciation of evidence on record, which by no stretch of imagination can be said to be perverse. Even before the tribunal, the revenue was not able to rebut any of the findings recorded by CIT (Appeals) by adducing any evidence to the contrary. The concurrent findings of fact do not suffer from any perversity warranting interference of this court in exercise of powers under Section 260A. So far as the submission made on behalf of the revenue that the assessee has failed to comply with the condition viz., that it was not formed by transfer of a new business or machinery or plant previously used for any purpose, suffice it to say that Supreme Court in Bajaj Tempo Limited [ 1992 (4) TMI 4 - SUPREME COURT] while interpreting Section 15C of Income Tax Act, 1922, which corresponds to Section 80J of the Act, dealt with the expression 'not formed' and has held that the aforesaid expression means that the undertaking should not be in continuation of old unit but emergence of a new unit. There are concurrent findings of fact that the assessee is a new export oriented unit, therefore, the aforesaid submission does not deserve acceptance. Similarly, the contention that the submission made by the revenue that its contention that assessee had adopted colorable devise for tax evasion has not been dealt with also needs to be stated, to be rejected of the order passed by the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) on the basis of material available on record has negated the aforesaid contention raised on behalf of the revenue and the order passed by the Commissioner of Income Tax (Appeals) has been upheld by the tribunal. Thus, the first two substantial questions of law are answered against the revenue and in favour of the assessee. Deemed dividend - Additional substantial question of law - Reserve and surplus show as accumulated profit - HELD THAT:- tribunal held that the Commissioner of Income Tax (Appeals) rightly directed the Assessing Officer to verify the claim of the assessee in this regard. The tribunal has taken into account the decision of the Supreme Court in Goetz India Ltd., supra and has held that the aforesaid decision does not restrict the powers of the higher authorities to consider the revised claim and the tribunal and has rightly placed reliance on decision of the Supreme Court in 'NATIONAL THERMAL POWER CORPORATION VS. CIT' [ 1996 (12) TMI 7 - SUPREME COURT] . Thus, on the facts of the case and in view of the finding recorded by the tribunal in para 12 of the order, the additional substantial question of law framed does not arise for consideration. The same is answered accordingly. Commissioner of Income Tax (Appeals) has recorded a finding that there are no accumulated profits available in the books of accounts of FFIPL. The aforesaid finding has been affirmed by the tribunal and it has been held that admittedly, the reserve and surplus amount does not show any accumulated profit but the amount shown is loss as well as premium on securities. Thus, the aforesaid issue is also recorded by concurrent findings of fact, which cannot be termed as perverse. - Decided in favour of assessee.
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2020 (10) TMI 1164
Premium for hedging foreign exchange fluctuations on loans - capital expenditure u/s 43A - depreciation claim - appellant's business is a capital loss by treating it as capital expenditure u/s 43A when an asset was purchased in India - Tribunal having held that the premium on forward contract was not liable as Revenue expenditure, the same is to be added to the cost of the capital assets on which depreciation is to be allowed is not a correct proposition, since there is no provision under the Act which allows such expenses - as contended that the assets was purchased in India based on the loan taken in Indian Currency only and the premium paid on forward contract is not even remotely connected with the cost of the asset and therefore, allowing depreciation does not arise - HELD THAT:- Initially the loan was borrowed by the assessee from State Bank of India in Indian Currency, subsequently, the loan was converted into a Foreign Currency loan and the assessee has paid the premium of ₹ 1.9 lakhs and mark the premium paid over a period of three years and one-third of premium to the extent of ₹ 36,33,333/-. It cannot be said that the loan borrowed in Foreign currency is not even remotely connected with the cost of the asset when it is an admitted position that the loan was borrowed for acquiring a capital asset. Therefore, the assessee cannot be put to disadvantage on both grounds. So far as the claim of the assessee that the expenses is Revenue in nature, it was rejected by the Tribunal and we have confirmed the said decision M/S. CONTINUUM WIND ENERGE (INDIA) PVT. LTD. (FORMERLY KNOWN AS M/S. SURAJBARI WINDFARMS DEVELOPMENT PVT. LTD.) [ 2020 (10) TMI 420 - MADRAS HIGH COURT] . So far as the claim for depreciation, the Tribunal rightly took note of the facts of the case and observed that the loss suffered in Foreign Exchange Fluctuations would definitely increase the cost of the project to the extent of loss suffered by the assessee. Tribunal was right in allowing the plea of depreciation raised by the assessee. - Decided against the Revenue.
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2020 (10) TMI 1163
Writ appeal by revenue - Claim of the Assessee was allowed in the writ petition - Revision u/s 264 - CIT rejected the claim for deduction u/s 54 - Assessee deposited partial amount in the capital gain deposit account with State Bank of India, and partial spent on construction activity - Writ Appeal filed by the revenue has become infructuous owing to the fact that the 1st appellant has passed an order u/s 264(7) dated 20.02.2020 and granted relief to the assessee - HELD THAT:- Order passed by the 1st appellant dated 20.02.2020 that it has not been passed without prejudice to the rights of the department in pursuing the Writ Appeal against the order in the writ petition. In fact, the 1st appellant records in the order that taking cognizance of the direction issued by the High Court, assessee was heard and in pursuant to the Court's decision, the additional cost of construction incurred by the assessee for claiming deduction under Section 54 of the Act was allowed and then, relief has been granted. Revenue cannot pursue this appeal after implementing order passed in the writ petition. However, we take note of the argument of Mr. Prabhu Mukunth Arunkumar, learned standing counsel for the appellant with regard to the legal issue, which has been decided by Writ Court by following the decision in K.Ramachandra Rao [ 2015 (4) TMI 620 - KARNATAKA HIGH COURT] . On that issue, we are of the primafacie view that finding rendered in Humayun Suleman Merchant, appears to reflect the correct position of law.
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2020 (10) TMI 1162
Entitled for deduction u/s 80IA(4) - Container Freight Station constitutes an 'inland port' - HELD THAT:- This Court in Assessee's own case [ 2019 (11) TMI 1483 - MADRAS HIGH COURT] has decided the questions of law against the revenue. In M/S CONTAINER CORPORATION OF INDIA LTD. [ 2018 (5) TMI 359 - SUPREME COURT] both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term Inland Ports' is used differently under Section 80-IA. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. Actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places. - Decided against revenue.
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2020 (10) TMI 1161
Deductions u/s 54 - assessee has not completed the construction before 16.05.2014 - Tribunal held that the withdrawals made from the capital gains accounts of the assessee was not used towards construction of a residential house - submission of the appellant / assessee that the said aspect was also not properly appreciated by the Tribunal - HELD THAT:- AO has not given elaborate reasons as to why the assesseee was not entitled for deduction under Section 54 of the Act. It is the submission of the learned counsel that decision of the Division Bench of this Court in Commissioner of Income Tax V. Sardarmal Kothari [ 2008 (6) TMI 15 - MADRAS HIGH COURT ] would come to the aid of the assessee. Order passed by the Tribunal this aspect has not been dealt with in a proper perspective, especially when CITA has given elaborate reasons as to why the assessee is entitled for deduction under Section 54 of the Act. We are inclined to interfere with the order passed by the Tribunal, at the same time, we propose to remand the matter to the assessing officer for fresh consideration since other issues have also been remanded to the assessing officer for re-adjudication. Appeal filed by the assessee is allowed and matter is restored to the file of the assessing officer to decide the claim of the assessee for deduction under Section 54.
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2020 (10) TMI 1160
Disallowance u/s 36(1)(iii) - assessee had advanced interest bearing funds without charging any interest - Whether Tribunal was right in not considering the fact that the matching principle in terms of income and expenditure is not applicable when cash system of accounting is followed as sine qua non for allowability of expenditure there should be nexus between the income and expenditure reported for the year in question as applicable in terms of Sections 36 and 37 ? - HELD THAT:- As decided in own case [ 2019 (4) TMI 570 - MADRAS HIGH COURT] when the cash system of accounting was adopted by the Assessee, an Investment Company, whose business is only to borrow and lend or invest, the same cannot be said to be not in the business interest or commercially expedient for the purpose of business and the concept of 'Matching Principles', which has been applied by the Assessing Authority and the CIT (A) in the present case, was not really applicable. It is not for the Revenue authorities to substitute their own wisdom or notion about the rate of interest agreed to between the parties, including the group companies and, as such, the finding of fact about commercial expediency or absence thereof is a finding of fact, out of which, no substantial question of law can be said to be arising, requiring our consideration under Section 260A of the Act. Moreover, since in the case of Assessee company itself, this Court has only decided on similar facts earlier and dismissed the Revenue's Appeal, we do not find any reason to take a different view of the matter for the Assessment Years in question before us. - Decided against revenue.
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2020 (10) TMI 1159
Discount on issue of debenture - deduction allowed in proportion to which discount has been written off in the books of accounts over a period of five years - Whether discount was required to be spreadover in proportion to the percentage of redeeming of such debenture and to be allowed only to the extent of discount charged off in the relevant year? - as appellant following the mercantile system of accounting has incurred the expenditure of discount on issuance of debenture, was it not liable to be allowed in the same year in full as revenue expenditure - HELD THAT:- Assessee has not incurred an expenditure of ₹ 5 Crores but has merely issued debentures at a discount. The redemption of debenture takes place in stages over a period of time and discount on debenture results in enduring benefit during the period of debentures - expenditure incurred in creating an enduring benefit does not create any asset or add value to existing asset. There was no creation of capital asset, which would result in an advantage of enduring benefit by discount on debentures. Therefore, the assessee is entitled to deduction from the income for the current year only which is liable to be redeemed in the first year as against the entire discounts. The benefit of discount to the assessee is instant as assessee paid lesser amount as against the amount which was actually payable and therefore, the aforesaid benefit has to be offered to tax in the same year. The tribunal therefore, has rightly placed reliance on MADRAS INDUSTRIAL INVESTMENT COPORATION LTD. [ 1997 (4) TMI 5 - SUPREME COURT] Substantial questions of law are answered against the assessee.
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2020 (10) TMI 1158
Benefit of Vivad Se Vishwas Scheme ('VVS Scheme') - resolution of disputed tax and for matters connected therewith - HELD THAT:- We are informed by the learned counsel for the appellant/assessee that the assessee has already filed the declaration under Section 4 of the Act on 25.09.2020 and has also remitted the tax in terms of the computation to be done under the said Act and they are awaiting the orders from the Department. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping this appeal pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, the Tax Case Appeal stands disposed of on the ground that the assessee has already filed a declaration and remitted the tax and the Department shall process the application at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee.
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2020 (10) TMI 1157
Benefit of Vivad Se Vishwas Scheme ('VVS Scheme') - Substantial Questions of Law framed for consideration on account of certain subsequent developments - Option to appeal in case application for settlement is rejected - HELD THAT:- It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. In terms of the said Act, the assessee has been given an option to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. The assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration to be filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. We direct the appellant / assessee to file the Form No.I on or before 09.11.2020 and the competent authority shall process the application / declaration in accordance with the Act and pass appropriate orders as expeditiously as possible preferably within a period of six (6) weeks from the date on which the declaration is filed in the proper form.
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2020 (10) TMI 1156
Reopening of assessment u/s 147 - Notice issue beyond periods of four years or not - claim of deduction under Section 80IA - HELD THAT:- Tribunal, in a cryptic and cavalier manner, has found that during the course of survey u/s 133A no material was found and the reopening of the assessment is not valid in law. It is pertinent to mention here that it was admitted on behalf of the assessee in the statements recorded u/s 131 that the unit at Tumkur was an old unit and the claim of deduction under Section 80IA of the Act was not correct and the assessee itself had withdrawn the claim under Section 80IA of the Act for the Assessment Year 2001- 02. In the proceedings under Section 148 of the Act also, the assessee had filed the return stating that the return filed on 23.02.2004 should be treated as response to the notice under Section 148 of the Act and the assessee had filed revised return withdrawing the claim under Section 80IA of the Act in respect of Tribunal erred in holding that the reopening of the assessment under Section 147 of the Act was beyond 4 years and was barred by limitation. - Decided in favour of the revenue.
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2020 (10) TMI 1155
MAT credit u/s 115JAA - Whether MAT credit includes surcharge and education cess instead of excluding surcharge and education cess - HELD THAT:- Identical question was considered in the case of M/s.Scope International Pvt. Ltd. [ 2019 (7) TMI 185 - MADRAS HIGH COURT ] wherein held Explanation (2)(iii) and (iv) to Section 115JB of the Act states that for the purposes of Clause (a) of Explanation 1 to Section 115JB of the Act, the amount of income tax shall include surcharge as levied by the Central Acts from time to time and education cess on income-tax, if any, as levied by the Central Acts from time to time. In the case of K.Srinivasan [ 1971 (11) TMI 2 - SUPREME COURT ] took note of the legislative history of the Finance Act as also the practice to indicate that the term income tax as employed in Section 2 of the Finance Act, which includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of The Constitution. The Hon'ble Supreme Court took note of the distinction made by the High Court in the case and held that the distinction made by the High Court that the surcharges are levied only under the Finance Act and income tax under the Act may not hold good. The Hon'ble Supreme Court explained the term 'surcharge' to mean as the charge in addition to or subject to an additional or extra charge. The decision of the Hon'ble Supreme Court in the case of K.Srinivasan will apply with full force to the assessee's case. - Decided against revenue.
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2020 (10) TMI 1154
Deemed dividend u/s 2 (22) (e) - Whether for attracting the provisions of Section 2(22)(e) a shareholder has not only to be a beneficial shareholder but also a registered share holder? - to be assessed in the hands of the share holder or in the hands of the firm - share holder of the company had substantial interest in the firm - HELD THAT:- Substantial Questions of Law raised by the Revenue in the instant case was considered by this Court earlier in the case of The Commissioner of Income Tax, Chennai Vs. M/s T.Abdul Wahid Co [ 2020 (9) TMI 977 - MADRAS HIGH COURT ] wherein held records placed before the assessing officer clearly shows the nature of transaction between the firm and the company and it is neither a loan nor an advance, but a deferred liability. These facts have been noted by the assessing officer. Tribunal rightly reversed the order passed by the CIT(A) affirming the order of the assessing officer. - Decided against revenue.
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2020 (10) TMI 1153
Maintainability of appeal on low tax effect - Exemption u/s 11 - granting the registration u/s 12AA over looking the provision to Section 12A[1][a][i] - HELD THAT:- Since the matter pertains to a registration under Section 12AA of the Act, the question of withdrawing the appeal on the ground of low tax effect would not arise. This submission cannot be considered at this juncture because the substantive appeal is no longer on the file of this Court and has been dismissed. The reasons may be many for such dismissal. If at all, the Revenue is of the view that the appeal should not be withdrawn and accordingly, dismissed, then appropriate steps should have been taken immediately in the year 2016 to restore the appeal. There is nothing on record before us today to indicate that such steps have been taken. Therefore, in our view, the Revenue cannot pursue the present appeal, when the appeal filed by the Revenue against the main order passed by the Tribunal was dismissed.
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2020 (10) TMI 1152
Penalty proceedings u/s 271(1) (c) - certain observations made by the AO during the quantum assessment and based upon the statement given by the assessee to the Survey party can solely be a basis for levy of penalty - Defective notice u/s 274 - HELD THAT:- AO did not specifically state under which limb of the penalty provision, the assessee would fall and therefore, the assessee was put to prejudice as regards the allegation which he has to meet. Apart from that, the learned counsel for the appellant would submit that the re-assessment proceedings in the name of the appellant/assessee is erroneous as if at all there was any material, it is only the firm which is to be assessed and not the appellant/assessee. - It would be too late for the assessee to raise such a contention as the re-assessment proceedings stood concluded as of the year 2008. Nevertheless, if it had been raised at the appropriate time, probably it might have been taken note of by the AO. This is not a case, where the assessee had no explanation to offer and the explanation offered was not tested for its correctness in the proper manner to pave way for levy of penalty. Substantial Questions of Law are answered in favour of the appellant/assessee
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2020 (10) TMI 1151
Jurisdiction for initiating prosecution proceedings u/s 276C(1) - competent Authorities as defined in Section 279 - Unaccounted cash seized in search - Show Cause Notice of Prosecution of the Assessee/Petitioner under Section 276C - HELD THAT:- Writ Appeal has been rendered infructuous and we need not decide on the merits of the contentions sought to be raised before us for the simple reason that the assailed Show Cause Notice dated 31.10.2017 since ended in final prosecution order dated 21.6.2018, which was neither under challenge before the learned Single Judge nor before us. Appellant is free to challenge the said order in accordance with law by taking appropriate remedies and lest our observations prejudice the case of the Assessee in any manner since Crl.O.P. filed by the Assessee under Section 482 of the Code of Criminal Procedure is also pending, we are not inclined to pronounce upon the merits of the contentions raised by the learned counsel for the Appellant/Assessee. Writ Appeal is dismissed as having been rendered infructuous in view of the subsequent developments and leaving the Appellant free to assail the impugned sanction order in accordance with law or to raise his defence before the learned Competent Court which is seized of the Trial in the matter.
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2020 (10) TMI 1150
TP Adjustment - comparable selection - excluding Celestial Labs Ltd., Infosys Technologies Ltd, KALS Information Systems Ltd., Tata Elxsi Ltd. Wipro Ltd and Lucid Software Ltd . - HELD THAT:- Issue with regard to functional similarity of the assessee has been examined in detail by the Tribunal. Therefore, we hold that the first substantial question of law framed by a bench of this court in fact, does not arise for consideration in the instant case. Transfer Pricing analysis and the risk adjustment - In second substantial question of law Tribunal has remitted the issue with regard to market risk adjustment to the Assessing Officer in the light of the decision, which have been cited in the order of the Tribunal. We deem it appropriate to modify the aforesaid directions contained in the order of the Tribunal and direct the Assessing Officer to determine the issue with regard to market risk adjustment afresh in accordance with law. Accordingly, the second substantial question of law is answered. Deduction u/s 10B - reimbursement of traveling and technical services charges incurred in foreign currency - The third and fourth substantial questions of law are against the revenue and are covered by the by decision of the Supreme Court in HCL TECHNOLOGIES LTD [ 2018 (5) TMI 357 - SUPREME COURT ]
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2020 (10) TMI 1149
Penalty levied u/s. 271 (1)(c) - bogus purchases - tribunal has directed the AO to restrict the addition on account of bogus purchases estimating at 12.5% of bogus purchases as income of the assessee - HELD THAT:- As in own case [ 2020 (3) TMI 1258 - ITAT MUMBAI] A.O has made disallowance of bogus purchases but has accepted the sales in the books of accounts, and whereas as directed the AO to disallow 12.5% of Bogus purchases. Where the addition is sustained on the estimated basis, no penalty u/s 271(1)(c) can be levied on the estimated income. Accordingly, we, considering the facts and principles of natural justice set aside the order of the CIT(A) and direct the A.O to delete the penalty and allow the grounds of appeal of the assessee.
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2020 (10) TMI 1148
TP Adjustment - comparable selection - application of turn-over filter - HELD THAT:- In absence of vital information of the margins of the various segments, the company could not be considered a good comparable because of the difficulty in bench marking the correct profit margin. In B.C. MANAGEMENT SERVICES PVT. LTD. [ 2017 (12) TMI 255 - DELHI HIGH COURT] noted that the presence of high brand value of the Tata brand also made TCS e- Serve Ltd. not a good comparable. TCS e-Serve cannot be held to be a good comparable for the purposes of bench marking the assessee s PLI. Consedering foreign exchange gain/loss as non-operational - HELD THAT:- As decided in own case foreign exchange fluctuation cannot be seen as independent of the operating income. Respectfully following the same, on identical set of facts, without the Department having pointed out any distinguishing factor on the facts, we direct that the foreign exchange/fluctuation (loss or gain) we treated as being operational in nature and PLI should be computed accordingly after giving effect to the treatment of foreign exchange/loss as operational. Comparable selection - Inclusion of Accentia Technologies Ltd. as a comparable company - As functional profile of the assessee being different from the functional profile of Accentia Technologies Pvt. Ltd., this company cannot be considered a good comparable. Accordingly, we direct the exclusion of this company from the final set of comparables. Inclusion of the company Mastif Tech Pvt. Ltd. - Referring to submission of the assessee that this company is functionally dissimilar to the assessee company - objections of the assessee against inclusion of this company in the final set of comparables has not been dealt with either by the TPO or by the Ld. CIT (A). In such a situation, it is our considered view that in the interest of substantial justice, the TPO should consider the objections of the assessee against the inclusion of this company and thereafter pass a speaking order . Exclusion of the comparable Caliber Point Business Solution Ltd. on the ground that it had a different financial year ending - Respectfully following the order of CIT vs. Mckinsey Knowledge Centre India Pvt. Ltd. [ 2015 (3) TMI 1226 - DELHI HIGH COURT] we direct the TPO to reconsider the inclusion of this comparable after duly considering as to whether the data for the financial year ending can be easily compiled and after duly considering and verifying whether Caliber Point Business Solution Ltd. can be considered functionally similar to the assessee company - assessee s appeal stands allowed for statistical purposes. Exclusion of Cosmic Global Ltd - Exclusion as it fails the export turnover filter of 75% although the TPO has not raised any objection regarding functional similarity - TPO has not specified any reason for applying the export turnover filter of 75% as compared to export turn over filter of 25% applied in Assessment Year 2009-10. Therefore, it is our considered view that this comparable needs to be examined afresh by the TPO and the TPO is directed to do so after considering the arguments of the assessee with respect to the functional similarity of this company as well as after duly considering the objections of the assessee against the application of export turn over filter and also the fact that the ITAT had found the turnover filter of even 25% as inappropriate in assessee s own case in assessment year 2009-10. Exclusion of company Informed Technologies India Ltd. - turnover filter of ₹ 5 Crores cannot be applied in the case of the assessee. What only remains to be seen is whether the company Informed Technologies India Limited is functionally comparable to the assessee or not. Accordingly, this comparable is restored to the file of the TPO for examining the assessee s claim of functional similarity with the company Informed Technologies India Ltd. Department is contesting the direction of the Ld. CIT (A) for including the company Acropetal Technologies Ltd. as a comparable with only the financials of healthcare segment - CIT (A) was correct in directing that only the ITeS Segment of this company be included for the purposes of comparability analysis and that the engineering design services segment to be excluded. Exclusion of eClerx as a comparable for the reason that it was engaged in providing KPO Services and further that it had also returned supernormal profits. ICRA Techno Analytics Ltd. - As no segmental information and bifurcation between ITeS and Software Development Segments. For this reason, this company was directed to be excluded from the final set of comparables. Infosys BPO Ltd. excluded on the ground that it was a giant in the area of software development.
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2020 (10) TMI 1147
TP Adjustment - MAM selection - Comparable selection - Whether turnover as not relevant comparability factor to select the comparable companies? - HELD THAT:- Yuken India Ltd. and WPIL Limited having high economic scale and R D function are not functionally comparable to the assessee, whose turnover is low and is not performing any R D functions. Accordingly, we direct the exclusion of Yuken India Ltd. and WPIL Limited from the final list of comparables. Roto Pumps - major sale turnover of the said concern is in the form of export sales i.e. to the extent of 60.25% as against export turnover of the assessee at 5.18%. Further, Roto Pumps is also having different product segment of spare parts, wherein sale of spares is to the extent of 50% in contrast to the sale of finished products by the assessee. The assessee has filed the details of the break up of the sale of finished goods in Note-6.h of audited financial statement, and in these circumstances, we hold that the concern Roto Pumps is to be excluded from the final list of comparable, both on geographical differences and also on being functionally not comparable to the assessee. Computation of PLI of the comparable - assessee states that the TPO did not provide the calculation of the PLIs of the comparable companies - HELD THAT:- As before DRP, the same along with annual report were filed, which was rejected on the ground that the assessee had not given required data and valid reason for difference in margin. We are of the view that where the annual reports are available in public domain then the PLIs are to be computed based on such annual reports. The AO/TPO is thus directed to verify the correctness of the PLIs from the annual reports and revise the average of the PLIs of the finally selected comparables. Consequently, the ground of appeal no.5 and additional ground of appeal no.14 are allowed. Exclude the foreign exchange fluctuation cost while computing the PLI of the assessee - Case followed MERCEDES-BENZ INDIA PVT. LTD. [ 2019 (8) TMI 443 - ITAT PUNE] Whether TP adjustment is not made in proportion to value of international transaction? - Tribunal in Assessment Year 2013-14 had also given similar directions and the same may be adopted. We find merit in the plea of the assessee and following the ratio laid down by the Tribunal in assessee s own case for Assessment Year 2013-14 [ 2018 (4) TMI 1835 - ITAT DELHI] we direct the Assessing Officer accordingly to recompute if any. Not giving direction regarding carry forward/brought forward losses - HELD THAT:- AO is directed to carry out the necessary verification in this regard and decide the same in accordance with law after affording reasonable opportunity of hearing to the assessee.
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2020 (10) TMI 1146
Penalty u/s 271(1)(c) - bogus purchases - HELD THAT:- As the revenue has failed to disprove to the hilt on the basis of clinching evidence the authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases no penalty u/s 271(1)(c) could have been validly imposed on the assessee. Restriction of the disallowance of entire purchases made by the A.O to 96% of the aggregate value of such purchases by the CIT(A), speaks for itself that the disallowance sustained in the hands of the assessee is merely backed by a process of estimation and not based on any concrete evidence. No clinching material has been brought on record by the revenue which could disprove the authenticity of the purchases claimed by the assessee to have been made from the aforementioned parties, no penalty u/s 271(1)(c) thus could have been validly imposed upon it. We thus not being able to find any infirmity in the view taken by the CIT(A), uphold the deletion of the penalty u/s 271(1)(c) by him. - Decided against revenue.
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2020 (10) TMI 1145
Rectification of mistake u/s 254 - period of limitation of 6 months - Miscellaneous Petitions with regard to deduction u/s. 80P - HELD THAT:- Tribunal is a creature of the statute. It has not having power to read in or read out of a provision of law. The Legislature in its wisdom has laid down the law and the specific provision relating to the powers of rectification of mistakes in the order of the Tribunal is in section 254(2). As per section 254(2) the Tribunal may at any time within six months from the end of the month in which the order was passed, it could amend the same if the mistake apparent on record is brought to its notice by the assessee or by the AO. It shows that the time limit of six months is binding on the hands of the Tribunal. This is in line with the decision of the Bombay High Court in the case of Principal CIT vs. ITAT [ 2020 (2) TMI 129 - BOMBAY HIGH COURT]. As six month period from the end of the month in which the orders were passed has expired, the orders passed by the Tribunal in the above cases cannot be disturbed by the Tribunal. Consequently, the miscellaneous petitions filed by the Revenue stand dismissed.
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2020 (10) TMI 1144
Reopening of assessment - basis of satisfaction recorded by some other authority (i.e. third party) like Sale Tax, Mumbai - Whether No Enquiry by the Assessing officer (AO) - Non recording own satisfaction - bogus purchase of packing materials - HELD THAT:- After going through the judgment passed by the in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [ 2007 (5) TMI 197 - SUPREME COURT] we are of the view that the reopening of the assessment on the basis of the specific information is legally valid. - Decided against assessee. Bogus purchases - Assessee has filed all the documentary evidences for the purchase of packaging material from two parties namely (i) M/s DD Corporation and (ii) M/s Amit Trading Co. The assessee has also filed the copy of the purchase bill with challan of both the parties, party confirmation, registration certificate and statement of payment with bank statement which the assessee has already submitted before the AO as well as before the Ld. CIT(A) in the shape of paper book. Assessee has also filed the documentary evidences before us in the shape of paper book mentioned above. Documentary evidences filed by the assessee for substantiating the claim of assessee and establishing the genuineness of purchase of packing material from the afore-mentioned two parties which has not been falsified by the AO by making any enquiry or producing any documentary evidences contrary to the evidences filed by the assessee. Even otherwise, Ld. DR has not filed any contrary evidences before us to falsify the claim of the assessee. - Decided in favour of assessee.
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2020 (10) TMI 1143
Reopening of assessment - Disallowance u/s. 14A - HELD THAT:- We find that the reasons as recorded by Assessing Officer for reopening of assessment for the A.Y. 2012-13 was also identical for both these Assessment Years in which there was no mention about escapement of income on account of disallowance u/s. 14A of the Act. Facts being identical applying the ratio of the decision of the Hon'ble Jurisdictional High Court in the case of Jet Airways Ltd. [ 2010 (4) TMI 431 - BOMBAY HIGH COURT ] we hold that the reopening of assessments for both these assessment is bad in law. Thus, Ground No.1 is allowed.
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Customs
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2020 (10) TMI 1142
Valuation - Detention of goods - Petitioner contended that, Authorities have raised frivolous queries - Manner in which adjudication order has been passed - Expiry of free time allowed by the shipping line and container freight station for clearance of imported cargo - vires of the Standing Order No.7493/99 dated 3rd December, 1999 and its subsequent amendment in Standing Order No.44/2016 dated 8th July, 2016, regarding PLATT Valuation of the Petitioner s goods as being contrary to the Customs Act, 1962. HELD THAT:- Despite exercising complete restraint, we cannot help but say that the entire conduct of the officer suggests a complete non-application of mind which to say the least must be deprecated. We feel that this entire saga was wholly avoidable. When the Court had issued notice on 10th September, 2020 and had passed the order on 22nd September, 2020 stating that the interim application would be taken up for consideration on 24th September, 2020, the concerned officer ought to have informed the Court about the status of the adjudication process and ought to have sought the leave of the Court for issuance of the order-in-original. Even a bare perusal of the file which has been produced before the Court clearly shows that the order-in-original was signed on 24th September, 2020. It is only the date on which the order is signed, is the date on which the order is passed. Revenue authority cannot at their own whim and fancy, split an order viz. first pass the operative part of the order without any discussion or finding or reasons and then pass the speaking order with discussion and findings and conveniently choose dates such as in this case. If this Writ Petition had not been filed and if this Court had not passed the order dated 06th October 2020, requiring the Officer to clear the confusion of the dates, neither this Court nor the Petitioner would have ever known the manner in which the Revenue- Authority pass orders. We are left with no choice but to set aside the order in original dated 4th September, 2020 signed on 24th September, 2020 and issued on 24th September, 2020 in toto. Also in view of the above discussion, we direct the Respondent No.2 to depute another Officer in place and instead of the present Officer to hear the case of the Petitioner and after giving an opportunity of personal hearing pass a speaking order with reasons in accordance with law within a period of two weeks from the date of this order - Petition disposed off.
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2020 (10) TMI 1141
Advance Authorization Scheme - Doctrine of Estoppel - request for amendment of Bills of Lading - HELD THAT:- For the purpose of issuance of No Objection, provisions of Section 149 of the Customs Act, 1962 envisage the complete procedure for issuance of no objection certificate, ie for the purpose of amendment of a bill of entry or a shipping bill only after fulfilling certain conditions in the proviso. It is trite law that circulars cannot assume the role of the Principal Act lest the provisions only a binding force. If at all the revenue is facing difficulties in accepting and processing applications for amendment of bills of lading, an amendment to the Principal Act can be suggested in accordance with law and till the pendency of the same, an Ordinance can also be issued. No such stand is taken as evident from Ext.P10 - the action of the respondent cannot be accepted, for, it is an utter violation of statutory provision of Section 149 of the Customs Act. Respondents are directed to issue no objection certification seeking amendment of the bill in accordance with law - Petition allowed.
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2020 (10) TMI 1140
Import of Gold from Korea - Valid import or not - case of Revenue is that respondent is neither a nominated bank nor a nominated agency as specified by Directorate General of Foreign Trade (DGFT) or in possession of status of star and premium trading houses and therefore, is not permitted to import the gold - contravention of the import policy envisaged by DGFT based on regulations promulgated by Reserve Bank of India - Confiscation - Penalty. HELD THAT:- The Foreign Trade (Development and Regulation) Act, 1992 is an Act to provide for development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto. Section 3 of the Act deals with Powers of the Central Government to make provisions relating to imports and exports. Section 3(2) empowers the Central Government to make a provision for prohibiting, restricting or otherwise regulating, in all cases or in a specific class of clauses and subject to such exceptions, if any, as may be made by or under the order the import or export of goods or services of technology, by an order published in the official gazette - from perusal of the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade Policy, it is evident that amendments to the Foreign Trade Policy can be made by the Central Government under Section 5 of the Act or by DGFT by issuing a Notification under para 2.07 of the Foreign Trade Policy. The change in categorization from free to restricted can be made in respect of import of goods, only by an amendment and the same cannot be done by DGFT by issuing a Circular. In the instant case, admittedly, the gold medallions and gold granules were imported on 03.07.2017. Thereafter the DGFT by Notification dated 25.08.2017 has restricted the import of gold from South Korea - thus on the date, the gold medallions were imported i.e., 03.07.2017 there was no restriction and the restriction was imposed by the Central Government vide Notification dated 25.08.2017. In other words, there was no restriction with regard to import of gold medallion on the date the same was imported by the respondent - Similarly, the gold granules were imported on 21.09.2017 and thereafter DGFT issued a Notification dated 18.12.2019 by which import policy was amended and gold in any form was allowed only to be imported through nominated agencies as notified by the Reserve Bank of India in case of Banks and for other agencies by the DGFT. Thus, it is evident that on the date when the gold granules were imported i.e., on 21.09.2017, there was no restriction on its import and the restriction was imposed subsequently on 18.12.2019 by the DGFT by way of Notification. Thus, when gold medallions and gold granules were imported, they were freely importable and the same was brought under the restricted category subsequently. Thus, the Reserve Bank of India itself has clarified that regulation of import / export of any item including importing of gold granules is in the domain of Ministry of Commerce / DGFT and is governed by Export-Import Policy / Foreign Trade Policy as prevalent at the relevant point of time. Appeal dismissed.
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2020 (10) TMI 1139
100% EOU - Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- The Central Board of Excise and Customs in exercise of statutory powers under Section 35R of the Central Excise Act, 1962 made applicable to service tax vide Section 83 of the Finance Act, 1994 and Section 131BA of the Customs Act, 1962, the Central Board of Excise and Customs had fixed the monetary limit in respect of filing the appeal at ₹ 10 Lakhs. Subsequently, the aforesaid limit was modified to ₹ 15 Lakhs vide instructions dated 11.12.2015. Thus, it is axiomatic that instructions dated 17.08.2011, 11.12.2015 and instruction dated 22.08.2019 operate in different fields and instruction dated 22.08.2019 does not deal with Customs Act. Therefore, the monetary limit for filing appeal as prescribed in the instruction dated 11.12.2015 in respect of appeals arising under the Customs Act before this court applies to this appeal and since, the amount in dispute is less than ₹ 15,00,000/-, therefore, in view of instruction dated 11.12.2015 issued by Central Board of Excise and Customs, the appeal cannot be entertained. Appeal dismissed.
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2020 (10) TMI 1138
Smuggling - Baggage Rules - high value electronic items, like, Mobile phone sets of different reputed brands, Sandisk pen drives, USB flash drives, RAM cards, Laptops, Watches of foreign origin - Confiscation - Redemption Fine - Penalty - HELD THAT:- The appellants have imported goods in violation of baggage rules and have also accepted the same in their respective statements. However, it is to be seen as to whether the valuation adopted by the Department is in accordance with law and correct and as to whether the penalties were imposed in terms of Section 112 of the Customs Act, 1962. The show-cause notice states that the value of the recovered goods has been ascertained on the basis of reference value found in different product websites as detailed in Annexure A. However, on-going through the said Annexure, it is seen that in fact there are 4 Annexures A, B, C and D, for the goods seized from the 4 appellants respectively. On-going through such Annexure, we do not find that though the Annexures contain details like description, Model, make, country of origin. However, the addresses of web sites from where the values are taken are not mentioned. Copies or screenshots of websites displaying the value of the products is not also made available. Similarly, there was no reasoning, for adoption of such values and the Rules under which the same is arrived at, has been given either in the SCN or OIO. Confiscation - Redemption Fine - Penalty - HELD THAT:- The value adopted by the department is neither logical nor rational and nor on any legal basis. Under the circumstances, we find that while holding that the good are liable for confiscation and the appellants are liable for penalty under Section 112(b), the request for reducing the penalties can be accepted. Accordingly, the redemption fines and personal penalties imposed on the appellants is reduced. Appeal allowed in part.
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2020 (10) TMI 1137
EPCG Scheme - non-fulfilment of export obligation - Customs Notification No.64/2008-C.E., dated 09.05.2008 - HELD THAT:- Since the appellant submits that it had already achieved the export obligation against the goods imported by it, we are of the view that the adjudged demands cannot be confirmed on the appellant on the ground of non-fulfilment of the export obligation - However, since the facts regarding achievement of export obligation are required to be examined at the original stage, the matter should be remanded to the original authority for verification of the documentary evidences for a proper satisfaction of the fact that the export obligation in respect of the imports made under EPCG licence had already been achieved by the appellant. Appeal allowed by way of remand.
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2020 (10) TMI 1136
Grant of Anticipatory Bail - Smuggling Gold - applicant would submit that there is no embargo under the Customs Act from seeking pre-arrest bail - Section 108 of the Customs Act - HELD THAT:- An offence under the Customs Act is undoubtedly an economic offence of grave nature and the Hon'ble Supreme Court has held in a number of cases, including in P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [ 2019 (9) TMI 286 - SUPREME COURT] , wherein it was held that power under Section 438 Cr.PC being an extraordinary remedy has to be exercised sparingly; more so, in cases of economic offences, and that economic offences stand as a different class as they affect the economic fabric of the society. The applicant has not yet been made an accused. But he apprehends arrest. There are no sufficient material to show that he will be arrested. Merely because he was questioned for 60 hours by the Customs Department does not indicate that he is intended to be made an accused - The fact that the applicant was in constant contact with one of the prime witness, namely Swapna Suresh, and that he had even volunteered to help her by contacting his Chartered Accountant and asking him to assist her in managing her finances indicates that there is a fair possibility that applicant knew about the involvement of Swapna Suersh in the alleged smuggling activity. The power of the Customs Department to question the applicant under Section 108 cannot be curtailed by granting anticipatory bail. The relief sought for is undoubtedly premature - the applicant is not entitled to anticipatory bail - Bail application dismissed.
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Corporate Laws
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2020 (10) TMI 1134
Jurisdiction of the Civil Court under Section 9A of the Code of Civil Procedure, 1908 - case in the plaint is that on account of absence of the mandatory notice under S. 286 of the Companies Act, 1956, being served on the petitioner / plaintiff, the meeting convened by the Board of Directors and the so called board resolution dated 2nd February, 2014 is void - Time Limitation. HELD THAT:- Although the respondents herein had raised a ground of limitation in respect of the challenge to the sale-deed of the year 2014 on the basis of S. 242 (2) (g) of the Companies Act, 2013, at this stage it does not appear that the said ground has been accepted by the NCLT. Quite to the contrary, the company petition is admitted, and as noticed earlier the NCLT has also held that if ultimately the transaction is held to be ultra vires, consequential reliefs can be granted. Jurisdiction of the civil court - HELD THAT:- It is a settled position of law that under S. 9 of the Civil Procedure Code, 1908, the civil court can entertain and try all suits of a civil nature, except any suits of which, the cognizance is either expressly or impliedly barred. It is now well settled that the exclusion of the jurisdiction of the civil court cannot be lightly inferred in view of the plenary jurisdiction conferred on the civil court under S. 9 of the CPC and any plea, seeking exclusion of such jurisdiction, has to be jealously guarded. However, at the same time a legal provision creating a bar of jurisdiction of the civil court, are required to be strictly interpreted and given effect to. In other words, although the exclusion of jurisdiction, cannot be lightly inferred, wherever there is a provision excluding such jurisdiction, either expressly or by necessary implication, the same has to be given effect to in its letter and spirit. The writ petition is without any merits and is dismissed.
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Service Tax
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2020 (10) TMI 1135
Principles of Natural Justice - Rejection of application filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - rejection of application without affording any opportunity of hearing to the petitioner - HELD THAT:- The Central Board of Indirect Taxes and Customs had conveyed to all the departmental heads that the scheme is a bold endeavour to unload the baggage relating to the legacy taxes, namely, central excise and service tax which have been subsumed under GST and to allow business to make a new beginning and to focus entirely on GST. It was emphasized that all officers and staff should partner with trade and industry to make the scheme a grand success. It was highlighted that dispute resolution and amnesty are the two components of this scheme. The dispute resolution component is aimed at liquidating the legacy cases whereas the amnesty component gives an opportunity to those who have failed to correctly discharge their tax liability to pay the tax dues. On the one hand there is a letter of respondent No.3 to the petitioner quantifying the service tax liability for the period 1st April, 2016 to 31st March, 2017 at ₹ 47,44,937.00 which quantification is before the cut off date of 30 th June, 2019 and on the other hand for the second period i.e. from 1st April, 2017 to 30th June, 2017 there is a letter dated 18th June, 2019 of the petitioner addressed to respondent No.3 admitting service tax liability for an amount of ₹ 10,74,011.00 which again is before the cut off date of 30th June, 2019. Thus, petitioner s tax dues were quantified on or before 30th June, 2019 - there are no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. Though the scheme has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand, the primary focus as succinctly put across by the Hon ble Finance Minister in her budget speech is to unload the baggage of pending litigations in respect of service tax and central excise from pre-GST regime so that the business can move on. This was also the view expressed by the Board in the circular dated 27th August, 2019 wherein all the officers and staff working under the Board were called upon to partner with trade and industry to make the scheme a grand success which in turn will enable the administrative machinery to fully focus in the smooth implementation of GST. This is the broad picture which the officials must have in mind while considering an application (declaration) seeking amnesty under the scheme. The rejection of the application (declaration) of the Petitioner under the scheme communicated vide email dated 27th January, 2020 is not justified - petition allowed.
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Central Excise
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2020 (10) TMI 1133
CENVAT Credit - input services - outward transportation of its finished goods, i.e. biscuits, which were transported up to the customers premises - place of removal - period from January, 2005 to September, 2007 - suppression of facts or not - HELD THAT:- The issue is no more res-integra in view of the decision of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] . By this judgement, the Hon ble Supreme Court held that that the assessee is legally eligible to avail credit on outward transportation availed from place of removal upto a certain point, whether it is a depot or customer s premises. In the instant case, the availment of credit on outward transportation from factory gate to customer s place pertains to period prior to April 2008 i.e. prior to period when the definition of input service was amended - Since the credit eligibility finally stands decided by the Apex Court in favour of assessee, the impugned order is liable to be sustained. Appeal dismissed - decided against Revenue.
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