TMI Tax Updates - e-Newsletter
November 17, 2021

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. RECTIFICATION OF MISTAKES BY SETTLEMENT COMMISSION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Contours of Economic Recovery (Inaugural Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - Delivered at the 8th SBI Banking & Economics Conclave November 16, 2021, Mumbai)

2. Regulations Review Authority (RRA 2.0) - Interim Recommendations

3. Shri Piyush Goyal says India will be the next investment global hotspot

4. Keynote address delivered by Michael Debabrata Patra, Deputy Governor, Reserve Bank of India in the conference on ‘Growth And Development in the BRICS Economies’ organised by the Delhi School of Economics (DSE) and Indian Statistical Institute (ISI), Delhi

5. Finance Minister Smt. Nirmala Sitharaman interacts with Chief Ministers/ State Finance Ministers and Lt Governors of UTs to step up investment, infrastructure and growth

6. CBIC Chairman inaugurates Customs & GST pavilion at 40th India International Trade Fair

Notifications

Customs

1. 91/2021 - dated 15-11-2021 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MIRSD/MIRSD_IT/P/CIR/2021/0000000658 - dated 16-11-2021

Framework for Regulatory Sandbox

2. SEBI/HO/CFD/DIL2/CIR/P/2021/0000000657 - dated 16-11-2021

Schemes of Arrangement by Listed Entities

FEMA

3. 18 - dated 16-11-2021

Regulations Review Authority (RRA 2.0) – Interim Recommendations – Withdrawal of Circular

DGFT

4. 37/2015-2020 - dated 15-11-2021

Standard Operating Procedures (SOP) for random checking of imported consignments of metal scrap with respect to radioactive contamination

Highlights / Catch Notes

GST

• Court Overturns Penalty for Fake Invoices u/s 122(1)(ii) Amidst Investigation into Misuse of Aadhar and PAN Cards.

  Case-Laws - HC : Levy of penalty u/s 122(1)(ii) of TN-GST and C-GST Acts - offence of issuing invoice without supply of goods - The Impugned order made by second respondent are set aside solely on the ground that alleged misuse of writ petitioner's Aadhar and PAN Cards and obtaining of fraudulent registration is under investigation - Rights of the revenue and petitioner preserved - HC
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• High Court Overturns Order Due to Lack of Hearing and Ignoring Section 30(2) Proviso; Calls for Reconsideration.

  Case-Laws - HC : Revocation of cancellation of registration of petitioner - rejection of registration without fixing any date or time for hearing and without waiting for any reply from the petitioner - There is no consideration of the proviso to sub-section (2) of Section 30 of the Act in the appellate order. - The subsequent order, rejecting the application for revocation of cancellation, of the authority is questionable - Order set aside for fresh consideration - HC
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• Court Denies Bail for Accused in CGST Act Section 132 Case, Citing Risk to Public Trust and Absconding Concerns.

  Case-Laws - DSC : Seeking grant of Bail - active role in commission of crime under Section 132 of CGST Act - A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest. - if accused is released on bail then there are likely chances of him to jump bail - Bail application rejected - DSC
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Income Tax

• Section 43A Income Tax Act: Adjustments for Exchange Rate Fluctuations Affect Asset Costs; High Court Allows Depreciation Claims.

  Case-Laws - HC : Additional Depreciation on increased cost - Adjustments u/s 43A - exchange rate fluctuation - the increase or decrease in liability should be taken into account to modify the figure of actual cost and secondly that such adjustment should be made in the year in which the increase or decrease in liability arises on account of the fluctuation in the rate of exchange - Claim allowed - HC
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• Assessing Officer Challenges Interest-Free Security Deposit as Tax Avoidance u/s 23; Rejects Assessee's Loan Conversion Claim.

  Case-Laws - HC : Computation of annual value under section 23 - The amount determined by the Assessing Officer is less than the monthly rental agreed between the parties for the property in question originally. Moreover, these are the journal entries, no actual payments have been made by the assessee. The loan liability converted into interest free security deposit as contended by the assesse cannot be acceded to. On the other hand, the interest free security deposit disproportionate to the monthly rent is nothing but a device to circumvent the liability to tax. - HC
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• Income Tax Act: Section 153C Assessment Requires Incriminating Evidence from Search, Not Just Presumptions of Liability Cessation.

  Case-Laws - AT : Validity of Assessment u/s 153C - Addition on account of forfeited amount of customers. - Assuming that there is a substantial time gap between the date of advance received and date of cancellation of the bookings, this fact may raise a strong presumption on cessation of liability, but even this presumption cannot justify the assessment u/s 153C of the Act which has to be based upon incriminating material found at the time of search - AT
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• Rental Income from Sub-Leasing Properties Classified as Business Income; Taxable Under Business Income Category.

  Case-Laws - AT : Correct head of income - the major source of income for the assessee is rental income. The assessee obtained long-term lease of the property and sub-leased the same in a regular systematic manner with a view to earn rental income from such activities in a business-like manner. The perusal of financial statements would show that the assessee had obtained loans to procure the properties and business investments were mostly in the nature of various properties - Income is taxable as Business income - AT
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• Tax Deductions Disallowed for Foster's Brand Payments; Additions Deleted by Commissioner u/s 40(a) and 32(1) Ruling.

  Case-Laws - AT : TDS u/s 195 - Disallowance invoking section 40(a) on account of Foster’s Brand - said amount was capitalized by the assessee in the books under Fixed Assets and depreciation on the same was claimed @ of 25% under section 32(1) - following the earlier decisions, no additions can be made - CIT(A) has rightly deleted the additions. - AT
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• Court Invalidates Reopening of Assessment u/s 147 for Lack of "Reason to Believe" by Assessing Officer.

  Case-Laws - AT : Reopening of assessment u/s 147 - bogus purchases - AO having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings for no fault of the assessee and therefore in the facts and circumstances of the case, we are of the considered opinion that ‘reason to believe’ which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the AO to reopen the assessment is null in the eyes of law - AT
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• Taxpayer Denied Expense Deductions Due to Unreported Income; Must Classify Project Costs as Work-in-Progress.

  Case-Laws - AT : Disallowing the expenses on the reasoning that corresponding income was not offered to tax - matching principles of the accounting treatment - part of the activity of the project which has been completed after incurring such expenses, the same should be classified as work-in progress and the same should not be claimed as deduction in pursuance to the principles of matching concept. - However, the assessee should be allowed deduction on the enhanced income on account of the disallowance of the expenses as discussed above. - AT
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• Income Tax Assessment Reopening Valid: Notice Served by Afixation at Last Known Address Per Section 282(1) IT Act 1961.

  Case-Laws - AT : Validity of reopening of assessment - service of notice - Since no one was on behalf of the assessee was available at the given address, therefore, notice was served by affixture according to the provision of sub-section (1) of section 282 of the Income Tax Act, 1961. In the light of the above facts and findings, we do not find any infirmity on this issue in the order of ld. CIT(A) that Assessing Officer has served the notice by affixture on the last known address of the assessee. - AT
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• Depreciation and Expenses for Company-Owned Vehicle Deemed Legitimate; Personal Expense Allegations Unfounded by Assessing Officer.

  Case-Laws - AT : Addition on account of depreciation, interest and running expenses for the vehicle registered in the name of the director - Dominion ownership of the car rest with the company. The company being a body corporate is different from the individuals. In other words in a body corporate there cannot be any element of personal expenses as alleged by the AO. - AT
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• Disallowance of Design Expenses u/s 40(a)(i) for Non-Deduction of TDS on Foreign Technical Services Fees.

  Case-Laws - AT : TDS u/s 195 - disallowance of design expenses u/s.40(a)(i) - it seems that the amount paid by the assessee to the foreign party as fee for technical services is subject to tax in India despite the fact such foreign party does not have any permanent establishment in India. However we find that such explanation whether the services rendered in India or not was brought in the statute by the Finance Act 2010. The financial year before us is 2008-09 and at that relevant point of time such explanation was not available. Admittedly, the services were not rendered by the foreign party in India. Thus, for the purpose of TDS the provisions which are applicable for the relevant year has to be seen. - AT
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• Eligibility for Bad Debt Deduction Hinges on Banking License Verification per Section 36(1)(viia), Says AO.

  Case-Laws - AT : Disallowance of bad debts as claimed u/s 36(1)(viia) - deduction claimed @10% of aggregate average advances - AO is directed to make relevant enquires and verifications , including , inter-alia, making enquiries from RBI to seek relevant information to arrive at decision whether the assessee will be eligible for deduction u/s 36(1)(viia). Thus , if it is found by AO after due verifications and enquiries that the assessee was granted banking license by RBI which covers relevant previous year 2009-10, then in our view the assessee will be eligible for deduction u/s 36(1)(viia) under both the limbs. - AT
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• Counsel's Plea Rejected in Income Tax Case: Failure to Provide Bank Statements u/s 41(1) for 2011-12 Assessment Year.

  Case-Laws - AT : Addition under section 41(1) - Scope of abated assessment - Onus to prove - Even before the Bench, the ld Counsel fails to submit the basic document, bank statement, therefore it is not possible for the Bench to find the fact that whether payment has been made by account payee cheques or non-account payee cheques. The ld Counsel also argues that in assessment year 2011-12, the assessing officer cannot make addition without the aid of incriminating material. We note that assessment year 2011-12 is an abated assessment where assessing officer can do regular scrutiny, hence plea raised by the ld Counsel is not acceptable. - AT
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Customs

• Conversion of Free Shipping Bills to Drawback Denied; Rejection Challenged Due to ARE-1 Verification and 3-Year Filing Rule.

  Case-Laws - AT : Rejection of request for conversion of free shipping bills to drawback shipping bills - one of the reason for rejection is that the documents at the time of exports are not available - The ARE-1 document would show that the goods have been removed from the factory for export after it has been examined / verified by the Superintendent of Central Excise - the rejection of request on the ground that appellants did not furnish documents is factually and legally untenable. - a period of three years would be a reasonable time for filing an application under section 149. - AT
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Indian Laws

• Court Upholds Foreign Arbitral Award: Binding and Enforceable u/ss 46, 47, and 49 of the Act.

  Case-Laws - HC : Enforcement of a foreign Arbitral Award - This court is unable to accept the contention of the respondent that the enforcement of the Award should be refused on the grounds urged. In successfully surmounting the grounds for refusing enforcement, the Award is held to be a binding Award and the court is satisfied that the Foreign Award is enforceable under Sections 46, 47 and 49 of the Act. The Award should hence be enforced in accordance with the enabling provisions under Part II of the Act - HC
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• Court Rules Cash Handling Charges on Stamp Vendors Illegal; Directs No Fees at SBI for Treasury Deposits.

  Case-Laws - HC : Waiver off of fully cash handling charges collected from the stamp vendors by the Bank - The Collection of cash handling charges from the stamp vendors/petitioners by the 2nd and 3rd respondents are declared as illegal and without any authority. Accordingly, the respondents 2 and 3 are directed, not to collect any cash handling charges from the stamp vendors, while depositing cash in Government accounts through Treasury Challans in any of the branches of the State Bank of India. - HC
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• Appellate Court Overturns Trial Court's Conviction Due to Signature Mismatch; Decision Challenged u/s 73 Evidence Act.

  Case-Laws - HC : Dishonor of Cheque - mismatch of signatures - This is a case where the 2nd respondent/accused has not denied the fact that he had entered into a hire purchase agreement with the appellant/complainant. He had also not denied the fact that he had failed to repay the instalments of the loan in time - The trial court on an examination of the signatures on various documents concluded that there was a similarity in the admitted signature and the signature contained in the cheque. Of course, the appellate court has by invoking Section 73 of the Evidence Act come to a different conclusion regarding the similarity in the signatures. - the appellate court went wrong in reversing the conviction and sentence imposed on the 2nd respondent/accused. - HC
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Service Tax

• Service Tax Exemption: Educational and Vocational Training Services in Collaboration with Universities Exempt Until June 30, 2017.

  Case-Laws - AT : Levy of service tax - Commercial Coaching or Training Services - conducting training courses and providing certificates to the students without the approval of UGC or AICTE - Right from beginning till 30.06.2017 the activity of the appellant in providing educational /vocational training to their students, is as per the pre defined curriculum in collaboration with the respective University, is exempt throughout,as they have provided education and training followed by issue of certificate of degree/ diploma which is recognised by law for the time being in force. Further, we find that on completion of the courses conducted by the appellants, the students/ trainees have either received employment and/or are competent to be self employed. - Demand set aside - AT
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VAT

• High Court Rules Tribunal Exceeded Jurisdiction by Denying Benefits for Multi Function Printers under 2007 Notification.

  Case-Laws - HC : Classification of goods - Multi Function Printers - It could not be said gainsaid that this notification has to be given prospective effect. - These aspects though have been analysed by the Tribunal and benefit has been denied under this notification dated 07.07.2007, on different ground altogether, which was not the subject matter of the appeal. Hence, there are no hesitation to hold that the Tribunal has exceeded its jurisdiction in adjudicating upon other issues which were not considered by either the Assessing Authority or Appellate Authority for denying the benefit of notification - HC
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Case Laws:

• GST

• 2021 (11) TMI 551
  Levy of penalty u/s 122(1)(ii) of TN-GST and C-GST Acts - offence of issuing invoice without supply of goods - HELD THAT:- The issue decided in the case of [ 2021 (10) TMI 1122 - MADRAS HIGH COURT ] where it was held that Impugned order made by first respondent and consequential order being order made by second respondent are set aside solely on the ground that alleged misuse of writ petitioner s Aadhar and PAN Cards and obtaining of fraudulent registration is under investigation - petition disposed off.

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• 2021 (11) TMI 542
  Revocation of cancellation of registration of petitioner - rejection of registration without fixing any date or time for hearing and without waiting for any reply from the petitioner and the petitioner had not replied to the notice dated 2.1.2021 within the time specified therein - HELD THAT:- Admittedly, the petitioner did not furnish any reply to the show cause notice dated 2.1.2021. However, what is required to be seen is that whether the mandate of section 30 of the Act was complied with by the authority concerned - the show cause notice is required to mention that the petitioner has to furnish a reply to that notice within 7 working days and that his appearance is required before the notice issuing authority on the specified date and time. The notice dated 2.1.2021 that has been enclosed as Annexure-5 to the writ petition reveals that neither the time to file a reply to the notice has been mentioned and neither is the appointed date and time mentioned in the notice. The reason ascribed in the show cause notice dated 2/1/2021 is only that the revocation application is not within the prescribed time. A perusal of the counter affidavit reveals that contents of para-21 of the writ petition have not been replied at all. There is no consideration of the proviso to sub-section (2) of Section 30 of the Act in the appellate order. It is evident that in the show cause notice for rejection of the application for revocation of cancellation of registration of the petitioner, neither is the period of days specified to furnish its reply to the notice nor is the appointed date and time for personal hearing mentioned in that notice and this fact has not been rebutted in the counter affidavit. Moreover, no opportunity of hearing was provided to the petitioner/applicant - the mandatory requirement of the proviso to sub-section (2) of Section 30 of the Act has not been complied with. As such the show cause notice dated 2.1.2021 is no show cause notice in the eyes of law. The subsequent order dated 30.01.2021, rejecting the application for revocation of cancellation, of the authority is questionable - Petition allowed.

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• 2021 (11) TMI 541
  Seeking grant of Bail - allegation against the accused are that few signed and unsigned documents of the said firms were found in his office - active role in commission of crime under Section 132 of CGST Act - HELD THAT:- This court is of considered view that the present accused does not deserves to be released on bail. It is settled preposition of law that economic offences in itself are considered to be gravest offence against the society at large and hence are required to be treated differently in the matter of bail. It seems that the entire community would aggrieved if the economic offenders who ruin the economy of the State are not brought to book as such offences affects the very fabric of democratic governance and probity in public life. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest. This court is of considered view that if accused is released on bail then there are likely chances of him to jump bail - Bail application dismissed.

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• Income Tax

• 2021 (11) TMI 540
  Additional Depreciation on increased cost - Adjustments u/s 43A - adjustment towards the actual cost of plant and machinery which might get increased due to the exchange rate fluctuation - HELD THAT:- The actual cost in such cases can be quantified at the time of actual payment and not on the accrual basis entirely misses the central issue which is the effect of increase in the cost on account of exchange rate fluctuation. This issue was implicitly acknowledged by the Supreme Court in Arvind Mills Ltd [ 1991 (12) TMI 1 - SUPREME COURT ] where after analyzing Section 43 A of the Act, in the context of development rebate, it was observed that the increase or decrease in liability should be taken into account to modify the figure of actual cost and secondly that such adjustment should be made in the year in which the increase or decrease in liability arises on account of the fluctuation in the rate of exchange. The above conclusion is consistent with the decision of the Calcutta High Court in Kanoria Chemicals and Industries Ltd. [ 1991 (3) TMI 4 - CALCUTTA HIGH COURT ] and in Hindustan Aluminum Corporation Ltd. [ 1993 (8) TMI 56 - BOMBAY HIGH COURT ] There is no decision to the contrary cited before this Court by the Department. The Court answers the question in the affirmative i.e. in favour of the Assessee.

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• 2021 (11) TMI 539
  Validity of reopening of assessment u/s 147 - eligibility of reason to believe - eligible approval u/s 151 - According to petitioner, the reasons, which were given alongwith the impugned notice clearly pertains to some other assessee and not petitioner and approval, which has been issued under Section 151 is based on reasons pertaining to some other assessee and not petitioner - HELD THAT:- The approval, as it appears from the document, has been given by one Dinesh Chander Patwari, Principal Commissioner of Income Tax 2, Mumbai on 30th March 2019. The proposal was submitted by one Abhay Siddharth Deware. The proposal was recommended by Ashutosh Rajhans, who has noted Yes, I am satisfied that this is a fit case to issue notice under Section 148 and Dinesh Chander Patwari has endorsed a remark after considering the reason recorded by AO the approval is granted . The reasons annexed to the said approval pertains to another assessee being M/s. Glance Investment (I) Pvt. Ltd. Mr. Chhotaray submitted that inadvertently wrong annexure was sent alongwith the approval under Section 151. We do not find that statement even in the impugned order rejecting the objections. In our view, there has been total non application of mind while granting the approval. Only approval is dated 30th March 2019 which has been granted relying upon the reasons annexed thereto. Section 151 of the said Act in force at the relevant time, in sub-section (1) provides that no notice shall be issued under Section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the AO, that it is a fit case for the issue of such notice. The only approval on file is one dated 30th March 2019 to which the reasons pertaining to another assessee is relied upon. For the subsequent reasons dated 20th August 2019 and 12th September 2019, no satisfaction has been recorded by a Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner on those reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. - Decided in favour of assessee.

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• 2021 (11) TMI 538
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - AO jurisdiction to issue notice - HELD THAT:- In this case, as we have held that the allegation in the reasons recorded for reopening that petitioner has not disclosed all fully and truly material facts necessary for the assessment is incorrect, one of the condition for reopening the assessment before the Assessing Officer could assume jurisdiction for issuing notice under Section 148 has not been satisfied. On this ground alone, it can be concluded that the notice is issued without jurisdiction. The tangible material to initiate assessment proceedings, as stated in the reasons for reopening, is an agreement dated 6th March 2014 post the period with which the impugned notice is concerned. When the reopening for the Assessment year 2011-2012 was challenged in this Court, this Court, on identical facts, in its order [ 2019 (1) TMI 1146 - BOMBAY HIGH COURT] while setting aside the notice issued under Section 148, held that an agreement post the period with which the impugned notice is concerned by itself could not form the basis for the Assessing Officer to have come to a reasonable belief that income chargeable to tax has escaped assessment for the subject assessment year 2011-2012. Thus the impugned notice is quashed as being without jurisdiction. - Decided in favour of assessee.

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• 2021 (11) TMI 537
  Reopening of assessment u/s 147 - validity of reason to believe - information has been received from the office of the Deputy Commissioner of Income Tax, TDS -2 (1) regarding applicability of Section 40 (a) (ia) for non deduction of TDS on amount paid to stockists for Assessment Year 2012-2013 - HELD THAT:- As on the basis of the said information, an order under Section 201 (1)/201 (1A) of the said Act has been passed on 26th March 2014 by the Deputy Commissioner of Income Tax, TDS 2 (1), Mumbai, deeming petitioner in default within the provisions of Section 201 for not deducting TDS under Section 194H. This itself cannot be accepted because he says on the basis of information dated 27th March 2017 an order has been passed on 26th March 2014. Moreover, this order has been discussed when the original assessment proceedings were held and as noted earlier, during the course of hearing a query was raised by the Assessing Officer and petitioner has given detailed explanation vide its letter dated 30th March 2016. Therefore, there is nothing on record to even indicate that there was any tangible material for reopening the assessment. In the case at hand, the assessment is sought to be reopened after the expiry of a period of four years from the end of relevant year and hence, the proviso to Section 147 applies which stipulates a requirement that there is an escapement of income by reasons of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment of that year. This condition required for reopening has not been satisfied. - Decided in favour of assessee.

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• 2021 (11) TMI 536
  Characterization of receipts - income from other sources as against claim of assessee treating the same as export turnover - HELD THAT:- Substantial question of law No.1 is directly covered by the decision of the Coordinate bench of this Court in Principal Commissioner of Income Tax and another vs. M/s. Tata Elxsi Ltd. [ 2020 (3) TMI 1082 - KARNATAKA HIGH COURT ] arising out of the common order passed by the Tribunal. This Court has dismissed the appeal filed by the Revenue placing reliance on the ruling of the full bench of this Court in the case of CIT vs. M/s. Hewlett Packard Global Soft Ltd., [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT ] observing that the order of the Tribunal does not suffer from any perversity and infirmity, as such no substantial question of law arises for consideration in the appeal. Deduction u/s 10A - HELD THAT:- As perused the judgment of the Coordinate bench of this Court in Wipro Ltd., supra, wherein their lordships have categorically observed that after the period of six months, if foreign exchange remittances are received and credited to the assessee s account through the Reserve Bank of India and in this context, merely because the written approval of extension was not passed by the Reserve Bank of India, the assessee could not be denied benefit of Section 10A. This finding of the Co-ordinate Bench decision would certainly assist the assessee. The Tribunal has rightly dismissed the appeal of the Revenue placing reliance on this judgment. The arguments of the learned counsel for the Revenue inasmuch as no evidence is unsustainable. We do not find any infirmity or perversity in the order impugned herein. Hence, we answer substantial question of law No.2 in favour of the assessee

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• 2021 (11) TMI 535
  Computation of annual value under section 23 - Annual value how determined - HELD THAT:- In terms of Section 23[1][b], the actual value agreed between the parties would have prominence than the municipal value which has to be supported by any guidelines or comparable statistical value. Merely on the assumptions and presumptions, the value certified by the local authority cannot be given primacy. Having regard to these facts, the Tribunal has recorded a finding that while computing the ALV, all surrounding factors should be considered. The amount determined by the Assessing Officer is less than the monthly rental agreed between the parties for the property in question originally. Moreover, these are the journal entries, no actual payments have been made by the assessee. The loan liability converted into interest free security deposit as contended by the assesse cannot be acceded to. On the other hand, the interest free security deposit disproportionate to the monthly rent is nothing but a device to circumvent the liability to tax. We find no infirmity or perversity in the order impugned. Hence, the substantial questions of law are answered in favour of the Revenue and against the assessee.

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• 2021 (11) TMI 534
  Deduction u/s 80IB(10) - Mandation of housing project should be on a plot of land which has a minimum area of 1 acre - Denial of deduction as four housing projects sanctioned by the Mangaluru City Municipal Corporation in the individual name of partners in a size of a plot of land which is more than one acre - tribunal as relying on case of Vandana Properties [ 2012 (4) TMI 54 - BOMBAY HIGH COURT] has held that as long as housing projects are approved by the local authorities, on a plot of land having minimum of one acre, irrespective of the number of housing projects, the assessee is entitled for deduction under Section 80IB (10) of the Act. - HELD THAT:- This ruling of Hon ble High Court of Mumbai is squarely applicable to the facts of the present case. We concur with the said ruling. In the case of Dilip Kumar Company [ 2018 (7) TMI 1826 - SUPREME COURT] referred to by the learned counsel for the revenue, the Hon ble Apex Court has considered the exemption notification and in that context, it has been held that exemption notification should be interpreted strictly and the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption notification. With great respect, this finding of the Hon ble Apex Court would not come to the aid of the revenue to deny the deduction under Section 80IB(10) of the Act for the reasons that four projects of the assessee firm are sanctioned by the local authority in more than one acre. The reading of the provision by the revenue has misdirected itself in giving the narrow meaning to the provision which otherwise would render the provision otiose or redundant. No substantial question of law would arise for consideration, when the matter is adjudicated on the factual aspects which would contain the characteristic of a pure question of facts rather any question of law much less the substantial question of law.

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• 2021 (11) TMI 533
  Validity of Assessment u/s 153C - Addition on account of forfeited amount of customers. - HELD THAT:- The undisputed fact is that return u/s 139 of the Act was filed on 15.10.2010 and notice u/s 153C of the Act was issued on 05.02.2015. This means that the assessment for A.Y 2010-11, which is the year under consideration, has attained finality and did not abate. The ratio laid down by the Hon ble Jurisdictional High Court of Delhi in the cases of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] and Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT ] squarely apply which means that the addition could be made only in respect of the issue in respect of which incriminating material was found. Even if we consider the list of allottees whose bookings were cancelled as mentioned elsewhere, the date of advance received mentioned therein do not pertain to the A.Y under consideration. We are of the considered view that the decision of the Hon ble Supreme Court in the case of Singhad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT ] also apply on the facts of the case wherein it has been held that if there is no incriminating material relating to a particular year, assessment of that year could not be reopened. This view has been reiterated by the Hon ble Jurisdictional High Court in the case of PCIT Vs. SMC Power Generation Ltd. [ 2019 (7) TMI 1393 - DELHI HIGH COURT ] Assuming that there is a substantial time gap between the date of advance received and date of cancellation of the bookings, this fact may raise a strong presumption on cessation of liability, but even this presumption cannot justify the assessment u/s 153C of the Act which has to be based upon incriminating material found at the time of search as per the ration laid down by the Hon ble Supreme Court and the Hon ble Jurisdiction High Court of Delhi [supra]. We, therefore, do not find any error or infirmity to interfere with the findings of the ld. CIT(A). Ground raised by the Revenue stand dismissed.

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• 2021 (11) TMI 532
  Delayed deduction of the employees contribution of PF and ESI - scope of amendment by Finance Act, 2021 to section 36[1][va] and 43B - HELD THAT:- As in view of judgment in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] , the employees contribution paid before the due date of filing of the return u/s 139(1) of the I.T.Act is to be allowed as deduction u/s 43B of the I.T.Act. Therefore, the only issue to be decided in the instant case is whether the amendment to section 36(1)(va) and 43B of the I.T.Act by the Finance Act, 2021 is prospective or not. Since as categorically held that the amendment is prospective and not retrospective in operation, the learned Standing Counsel s plea does not have any merit. In the instant case, the assessment year being 2019- 2020, the amendment by Finance Act, 2021 to section 36(1)(va) and 43B of the I.T.Act does not have application. Therefore, the A.O. is directed to delete the disallowance - Decided in favour of assessee.

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• 2021 (11) TMI 531
  Correct head of income - Lease income as Income from House Property OR Business income - HELD THAT:- As property under consideration was obtained by the assessee on long term lease basis and it was sub-leased to various tenants. The income thus earned was offered as business income . The main object of sub-leasing was to exploit the property in a business-like manner and earn the rental income therefrom. It is also evident that the assessee and his associated entities had business interest in real estate development. We find that the major source of income for the assessee is rental income. The assessee obtained long-term lease of the property and sub-leased the same in a regular systematic manner with a view to earn rental income from such activities in a business-like manner. The perusal of financial statements would show that the assessee had obtained loans to procure the properties and business investments were mostly in the nature of various properties. Therefore, considering the facts of the case, the income was rightly offered as Business Income and the claim of the assessee, in this regard, was to be accepted. We order so. The Ld. AO is directed to recompute the income of the assessee in terms of this order. Resultantly, the appeal stand partly allowed.

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• 2021 (11) TMI 530
  Assessment u/s 153A - unexplained investment - HELD THAT:- As the impugned addition is very much based on the alleged incriminating material in annexure AKR/R/PO/01 (Pages 119 to 121) found and seized during the course of search sufficiently indicating the unexplained investment which carries presumption of correctness u/s 292C - CIT-DR has rightly pinpointed before us while referring to the assessee s corresponding explanation before the Assessing Officer extracted in the preceding paras that he sought to shift the onus on the department despite the fact that the major component herein was claimed to be Rs. 1,50,000/- only. We thus, uphold both the learned lower authorities impugned action to this effect. CIT(A) s directions to AO to initiate Section 147 proceedings - HELD THAT:- The same are found to be against the law since Section 153A is a specific provision applicable in case of search action initiated u/s.132 of the Act. We accordingly direct the Assessing Officer to frame his consequential computation adding the impugned sum(s) of un-explained investment in the corresponding assessment year as per the entries in the seized material. The assessee fails in its instant grievances therefore.

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• 2021 (11) TMI 529
  TDS u/s 195 - Disallowance invoking section 40(a) on account of Foster s Brand - said amount was capitalized by the assessee in the books under Fixed Assets and depreciation on the same was claimed @ of 25% under section 32(1) - CIT(A) directed the Assessing Officer to delete the addition brought by disallowing depreciation - HELD THAT:- No infirmity in the order of the learned CIT(A) which is self explained and speaking order as reproduced above. Before us, during the course of hearing, both the AR for the parties conceded that similar issue has been decided by Anheuser Busch InBev India Ltd. [ 2020 (3) TMI 212 - ITAT MUMBAI ] and Anheuser Busch InBev India Ltd. [ 2020 (3) TMI 212 - ITAT MUMBAI ] wherein the Tribunal has deleted identical addition by holding that the claim of depreciation under section 32 of the Act is not in respect of the amount paid or payable which is subject to TDS, but is a statutory deduction on an asset which is eligible for deduction of depreciation. Consistent view being maintained by the Co ordinate Bench of the Tribunal in assessee s own case cited supra, similar directions are issued on this issue also. Consequently, we have no hesitation in upholding the order of the learned CIT(A) by dismissing the grounds no.1 to 3, raised by the Revenue. Disallowance of grossed up expenses to the extent of taxes withheld u/s 195A - HELD THAT:- We find that identical issue has been decided by the Co ordinate Bench of the Tribunal in assessee s own case in ACIT v/s Anheuser Busch InBev India Ltd. [ 2020 (3) TMI 212 - ITAT MUMBAI ] and Anheuser Busch InBev India Ltd. v/s ACIT. [ 2020 (3) TMI 212 - ITAT MUMBAI ] wherein the Tribunal has decided the issue in favour of the assessee and against the Revenue as held that assessee has computed TDS on a net of tax basis and no tax has been separately debited to the Profit Loss Account. It is also a fact on record that as per the borrowing arrangement, the tax liability, if any, on payment of interest has to be borne by the assessee. Therefore, the tax withheld has to be allowed as expenditure to the assessee. TDS liability on commission payment - CIT(A) did not consider the additional evidences filed by the assessee - HELD THAT:- Assessee during the course of first appellate authority, had filed certain additional evidences in support of its claim which were ignored by the learned CIT(A) consequent to which the order of the learned CIT(A) in the instant case becomes cryptic one which is without deliberating upon the provisions of the Act in disregarding the admissibility of the additional evidences filed by the assessee. Considering the legal proposition, the learned CIT(A) ought to have considered the additional evidences adduced by the assessee and could have decided the issue on merit and since the learned CIT(A) is failed to do so, therefore, we deem it fit and proper to admit the additional evidences filed by the assessee.

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• 2021 (11) TMI 528
  Reopening of assessment u/s 147 - bogus purchases - HELD THAT:- To initiate reopening of the assessment, the Ld. AO must have reason to believe that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Ld. Assessing Officer which may trigger reason to suspect. It must be kept in mind that the reason to believe must have a rational connection with or relevant bearing on the formation of the belief, i.e, there must be direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/items for which the AO has reopened the assessment are ambiguous and vague, as the amount mentioned in the reasons recorded is uncertain and the assessing officer does not know that how much income of the assessee has escaped assessment. AO having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings for no fault of the assessee and therefore in the facts and circumstances of the case, we are of the considered opinion that reason to believe which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the AO to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-initio void. Addition of non-charging of interest on business advances made to suppliers - Proof of sufficiency of own funds - HELD THAT:- As own interest free funds of the assessee is to the tune of Rs. 2,18,18,572/- whereas the assessee has advanced the interest free loan to the tune of Rs. 63,22,457/-, which is less than the own free funds, therefore, based on this factual position, no disallowance on account of interest free advance should be made and hence we delete the addition. Ad-hoc addition on account of office expenses - Estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 - HELD THAT:- Here in this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most, expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for ad hoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Hence we delete the ad-hoc addition

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• 2021 (11) TMI 527
  Disallowance of deduction u/s 80P being interest income - HELD THAT:- The provisions of sub-section 1 of section 80P of the Act provides certain benefits to the co-operative societies. Likewise sub-section 2 of section 80P of the Act puts the restriction on the activities which are eligible for deduction of profit to the co-operative societies. The last para of clause (a) of sub-section 2 of section 80P of the Act uses the expression attributable to which indicates the profit attributable to such activity. The word attributable is wider term than the expression derived from . This has been held in the series of judgments of the Hon ble Courts. But for the sake of brevity, we not inclined to repeat the same. Admittedly, this fact has not been doubted by the authorities below that the impugned income by way of interest was arising from the event attributable to such activity as discussed above. In other words, the assessee was under the obligation to deposit the money with the bank in order to secure the work for the disposal of labours collectively. Accordingly, we are of the view that such income is also eligible for deduction under section 80P(2)(a)(vi) of the Act. Consequentially, we set aside the order of the learned CIT(A) and direct the AO to allow the deduction to the assessee with respect to the interest income under consideration under the provisions of section 80P(2)(a)(vi) of the Act. Hence the ground of appeal of the assessee is allowed. Disallowing the expenses on the reasoning that corresponding income was not offered to tax - HELD THAT:- The income of the current year will get increased by the amount of disallowance whereas the income of the subsequent year will get decreased by the impugned amount. The tax rate of the assessee in the year under consideration viz a viz in the subsequent year is uniform. Thus, there will not be any impact on the revenue except the difference of time in identifying the income and the loss of interest/opportunity cost. Had the revenue been collected by the revenue in the very 1st year, then there would not have been any opportunity cost of such amount on account of deferment of the income to the subsequent year. Assessee under the income tax Act claim the expenses if corresponding income has been booked in the books of accounts. This is the matching principles of the accounting treatment - part of the activity of the project which has been completed after incurring such expenses, the same should be classified as work-in progress and the same should not be claimed as deduction in pursuance to the principles of matching concept. Accordingly, we hold that there is no infirmity in the order of the learned CIT(A) and therefore we decline to interfere in his order up-to this extent. However, it is important to note that the assessee should be allowed deduction on the enhanced income on account of the disallowance of the expenses as discussed above. Thus the ground of appeal of the assessee is allowed in terms of the above. Disallowing the expenditure incurred under the head repair of JCB on account of no corresponding income offered by it - HELD THAT:- As assessee owns certain machineries known as JCB machines which are reflecting in the balance sheet of the assessee as on 31st March 2010. It was contended by the assessee that it has incurred certain expenses on the repairs and maintenance of such JCB machines. However, the learned CIT(A) did not allow the deduction of the expenses on the reasoning that there was no corresponding income shown by the assessee in the books of accounts. In our considered view the finding of the learned CIT(A) is not tenable for the reason that the JCB repairing expenses were not incurred against any project wherefrom some income was expected to arise. These expenses have been incurred by the assessee in a routine manner as wear and tear expenses. As such, there was no necessity for the income to accrue to the assessee against such expenses. Accordingly, we disagree with the finding of the learned CIT(A). Accordingly, the ground of appeal of the assessee is allowed. Disallowing the deduction of the expenses only incurred with respect to the project where the income was earned for Rs. 1,058/- only - HELD THAT:- As the project expenses incurred against the gross project receipt which was outsourced cannot be disallowed. It is for the reason that such project expenses was never claimed by the assessee as deduction under section 80P(2)(a)(vi) of the Act. What has been prohibited under the provisions of section 80P(2)(a)(vi) of the Act is to make the disallowance of the deduction of the income and not the disallowance of the expenses incurred by the assessee with respect to the outsourced project - assessee has shown gross income in its profit and loss account of the outsourced project and therefore the expenses corresponding to such income are eligible for deduction under the provisions of section 37(1) - Accordingly, we are not in agreement with the finding of the learned CIT(A). Thus we direct the AO to allow the expenses incurred by the assessee for Rs. 56,500/-. The income generated by the assessee for Rs. 1,058/- with respect to the outsourced project cannot be allowed as deduction under the provisions of section 80P(2)(a)(vi) of the Act. Hence the ground of appeal of the assessee is partly allowed.

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• 2021 (11) TMI 526
  Nature of expenditure - Treatment of Research Dev. (R D) expenditure - revenue or capital expenditure - AO opined that the same would be capital expenditure in the nature of intangible assets which would be eligible for depreciation - HELD THAT:- The expenditure is mostly in the nature of salaries, contribution to PF, business promotion, web services expenses, consultancy charges and training of employees etc. These are mostly revenue in nature and incurred in the area of testing, shortcuts in coding etc. The expenditure was not incurred on creation of end products being developed by the assessee but to increase expertise in technology to increase the revenue. By incurring such expenditure, the assessee may get enduring benefit in future, nevertheless, the same would not result into creation of any new capital asset. Therefore, such expenditure, in our considered opinion, would be fully allowable being revenue in nature as held by Pune Tribunal in Opus Software Solutions Pvt. Ltd [ 2012 (11) TMI 619 - ITAT PUNE] on similar factual matrix. We order so. The deprecation granted by Ld. AO would stand reversed - Decided in favour of assessee. Remuneration to Directors - the only reason to make impugned addition is the opinion of Ld. AO that reimbursements should have been included in salary component in Form No. 16 - HELD THAT:- Theses reimbursements are part of offer letters issued by the assessee to respective directors - Upon perusal of the same, we find that the directors were reimbursed telephone expenses, petrol/other expenses which are duly reflected in pay-slip issued by the assessee - there are no findings by lower authorities that these reimbursements were taxable. Nevertheless this fact would not jeopardize assessee s claim of expenditure u/s. 37(1) since the assessee has incurred the expenditure. Therefore, the impugned addition is not sustainable - This ground stand allowed.

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• 2021 (11) TMI 525
  Validity of reopening of assessment - assessee contented that notice was not served upon living member of the HUF and the addition made by the Assessing Officer was unjustified - whether assessment in the case of the assessee was made ex-parte u/s. 144 r.w.s. 147 of the act as no compliance was made during the course of assessment in spite of issuing a number of notices? - HELD THAT:- It is undisputed fact that notice u/s. 148 of the act was served on the address available with the Assessing Officer. The assessee has not communicated any alternative address as provided in rule 127 of the I.T. Rule, 1962. Therefore, notice was served on the address for communication available with the income tax department as laid down in the rule 127 of the I.T. Rule, 1962. Since no one was on behalf of the assessee was available at the given address, therefore, notice was served by affixture according to the provision of sub-section (1) of section 282 of the Income Tax Act, 1961. In the light of the above facts and findings, we do not find any infirmity on this issue in the order of ld. CIT(A) that Assessing Officer has served the notice by affixture on the last known address of the assessee. Therefore, this ground of appeal of the assessee stands dismissed. Additions made by AO ex-parte u/s. 144 and time limit for issuing of notice u/s. 148 - HELD THAT:- As observed during the course of assessment these issues could not be addressed because of non-compliance of the assessee on account of reason beyond the control of the assessee as both the members of the HUF were residing at USA. In the interest of justice, we opined that it would be appropriate to restore the issue of time limit for issuing notice to the file of the Assessing Officer to resolve after verification in accordance to the provision of section 149 of the act. We also set aside impugned additions made by the Assessing Officer to the file of the Assessing Officer for deciding de-novo after verification of the submission to be made by the assessee during the course of set aside proceedings upon granting reasonable opportunities to the assessee. The assessee is also directed to communicate if there is any other alternative address to the Assessing Officer during the course of set aside assessment proceedings. Accordingly, this appeal of the assessee is allowed for statistical purposes

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• 2021 (11) TMI 524
  LTCG - assessee sold a joint property appellant of having 50% of share - case of the Revenue that in support of the claim of the appellant of having 50% of share no supporting details and/or evidences have been placed before the authorities below - HELD THAT:- The explanation rendered by the Ld. AO for not been able to submit those documents before the authorities below is this that there was some family disputes particularly between the two brothers, moreso, the accountant of the assessee left the job at the asking of the assessee s brother. Whereas the documents were lying with the said accountant and thus could not be placed before the authorities below at the relevant point of time. Subsequently by the intervention of the father of the assessee the disputes were resolved and the evidences mentioned above could be obtained from the said accountant. Such plea taken by the assessee seems to be genuine and hence we admit those additional documents placed before us. Since the authorities below didn t get the chance to deal with those documents as filed before us the contentions made by the appellant in support of his claim Could not be verified. We find it just and proper to set aside the issue to the file of the Ld. AO to reconsider the matter afresh upon giving a reasonable opportunity of being heard to the assessee and upon considering the evidences as placed before us and any other evidence which the assessee may choose to file at the time of hearing of the matter. Addition of cash deposit to bank on account of unexplained unaccounted income - HELD THAT:- Having regard to the facts and circumstances of the case we find that matter needs a fresh consideration by the Revenue and hence we remit the issue to the file of the Ld. AO to reconsider the same afresh upon providing an opportunity of being heard to the assessee and upon considering the evidence which the assessee may choose to file at the time of hearing of the matter. Hence, assessee s appeal is, therefore, allowed for statistical purposes.

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• 2021 (11) TMI 523
  TDS u/s 195 - disallowance of design expenses u/s.40(a)(i) - Whether purchases of design were purchases of goods on which provisions of Section 9(1)(vii) r.w.s. 195 are not applicable? - it was the contention of the assessee that it has made purchases of the designs from the foreign party which is in the nature of purchase of good - HELD THAT:- We have to see whether the payment made by the assessee to the foreign party was chargeable to tax in India. Admittedly, the services were rendered by the foreign party in its country. Likewise, the foreign party did not had any permanent establishment in India. Thus, the income was accrued and arose to such foreign party in a country outside India. Hence, the same is not taxable in India under the realm of section 9(1)(vii) of the Act being same is provided outside India. Thus, there cannot be any question of deducting the TDS under the provisions of section 195. There was the explanation to section 9 brought under the statute by the Finance Act 2010 retrospectively with effect from 1976. As per this explanation the income of the foreign party shall be chargeable to tax in India if it relates to the fee for technical services irrespective of the fact whether such non-resident has/has not a place of business or business connection in India or non-resident has/has not rendered services in India - it seems that the amount paid by the assessee to the foreign party as fee for technical services is subject to tax in India despite the fact such foreign party does not have any permanent establishment in India. However we find that such explanation whether the services rendered in India or not was brought in the statute by the Finance Act 2010. The financial year before us is 2008-09 and at that relevant point of time such explanation was not available. Admittedly, the services were not rendered by the foreign party in India. Thus, for the purpose of TDS the provisions which are applicable for the relevant year has to be seen. We hold that the assessee was not subject to the provisions of TDS under the provisions of section 195 of the Act. Accordingly we do not find any infirmity in the order of the learned CIT (A). Thus, we decline to interfere in his order. Hence the ground of appeal of the Revenue is dismissed. Non-deduction of TDS with respect to the exhibition expenses - HELD THAT:- For payment made to M/s First Rain Exhibition (India) Pvt Ltd is concerned, we find that assessee has made payment to impugned party after deducting eligible tax at source. In this respect, the assessee has furnished TDS certificate in from 16A. Hence, we hold that the learned CIT (A) rightly deleted the addition under section 40(a)(ia) to this extent. Amount paid to M/s Messe Frankfurt Trade Fair India (P) Ltd. - AR at the time of hearing before us has submitted that the impugned amount represent the reimbursement of the expenses. Thus the provisions of TDS will not be applicable in the case on hand. However, the assessee has not furnished any details in support of his contention. Therefore we are dismissing the contention of the assessee. It is transpired that the assessee can be granted immunity from disallowances of expenses on account of non-deduction of taxes provided that the assessee (payer) furnishes the certificate in the prescribed form. Thus the onus is upon the assessee. However we find that assessee has not furnished the necessary certificate in form 26A prescribed by the CBDT. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Amount paid to M/s Messe Frankfurt Exhibition GMBH(DE) - claim of the assessee was not relied upon by the AO for the reason that the invoice was containing place of exhibition at Mumbai. However this finding of the AO was held factually incorrect by the learned CIT(A). The learned CIT(A) has given categorical finding that the invoice against which payment was made to the impugned party, the place of exhibition is Germany not Mumbai India - CIT(A) in view of above and other documentary evidences such as travelling details deleted the addition made by the AO. From the preceding discussion, we note that the finding given by the learned CIT(A) have not been controverted by the learned DR before us based on documentary evidence - exhibition services were availed by the assessee in Germany i.e. outside India. Hence the same is not taxable in India under the preview of section of section 9(1) of the Act. Accordingly the assessee was not liable to deduct withholding tax u/s 195 - Therefore we do not find any infirmity in the order of the learned CIT (A) and direct to the AO to delete the addition made to this extent. Late payment of employees contribution towards PF/ESI - Addition u/s 36(1)(iv) read with section 43B - HELD THAT:- There is no confusion or ambiguity to the fact that the contribution of employer s contribution and administrative charges are governed under the provisions of section 36(1)(iv) read with section 43B - Admittedly the assessee has made employer s contribution and administrative charges within the due date as specified deduction 139(1) of the Act. Accordingly we do not find any infirmity in the order of the learned CIT (A). Regarding the employee s contribution, we note that there is no ambiguity that the assessee was entitled for making the payment within the grace period as per provided under the Act. No infirmity in the order of the learned CIT (A). However any payment of employee s contribution beyond the grace period is not allowed for deduction. Hence the ground of appeal of the revenue is dismissed and the CO of the assessee is also dismissed. Addition on account of depreciation, interest and running expenses for the vehicle registered in the name of the director - Legal ownership of asset - HELD THAT:- Admittedly, it is necessary for the assessee to own the assets for claiming the depreciation on the assets. But the word own has not been defined under the provisions of the Act whether the ownership refers to the legal ownership or the beneficial ownership. Undoubtedly, the assessee in the present case is not the legal owner of the vehicles but it has made the payment for the acquisition of the cars. Thus it can be inferred that the assessee owns the cars in the capacity of beneficial owner. Thus, in our considered view the assessee is entitled for the depreciation and interest expenses on the car. Other expenses of fuel and maintenance on such cars, we find that the AO has made the disallowance in adhoc manner which are not permitted under the provisions of law. As such, the AO was under the obligation to pinpoint the personal expenses incurred by the assessee but he has not done so. Dominion ownership of the car rest with the company. The company being a body corporate is different from the individuals. In other words in a body corporate there cannot be any element of personal expenses as alleged by the AO. - Decided in favour of assessee. Addition u/s 36(1)(iii) on account of diversion of interest bearing fund - as per AO assessee is paying huge interest on borrowed fund and on the other hand, it has provided loan/ advances to certain parties from where no interest was charged - HELD THAT:- As the own fund of the assessee exceeds the amount of interest free loan and advances there cannot be any disallowance of interest expenses in a situation where the own fund exceeds the amount of investment made by the assessee. As such, there is a presumption that the investment has been made by the assessee out of its own without involving any borrowed fund. - Decided against revenue. Disallowance of expenditure towards scholarship fee - HELD THAT:- Admittedly, the assessee failed to file any supporting evidences with regard to the impugned expenditure. Thus the same was disallowed by the AO in absence of supporting evidences which were subsequently confirmed by the learned CIT(A). We find that that primary onus lies upon the assessee to prove that the claim of deduction is genuine and incurred for the purpose of business based on documentary evidence. But in the case on hand the assessee failed to discharge primary onus cast upon it. Even at the time of hearing the learned AR has not brought anything on record by submitting the supporting evidences. Thus in such facts and circumstances, we do not find any reason to interfere into the finding of the learned CIT (A). Disallowances of commission expenses u/s 40(a)(ia) - HELD THAT:- AR has not brought anything on record evidencing that the TDS has been deducted by the assessee on the impugned amount of commission expenses. Thus, in the absence of supporting documents, we do not find any merit in the argument of assessee - assessee cannot be absolved from the liability of deducting the TDS on the amount of commission merely on the reasoning that such amount was not shown as payable at the end of the financial year. Accordingly, we do not find any reason to interfere in the finding of the authorities below. Hence the ground of appeal raised by the assessee in CO is dismissed.

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• 2021 (11) TMI 522
  Disallowance of bad debts as claimed u/s 36(1)(viia) - allowability of deduction u/s 36(1)(viia) of the 1961 Act under the second limb wherein the deduction claimed @10% of aggregate average advances made by Rural Branches of the assessee, stood disallowed - HELD THAT:- There are certain relaxation periods granted to class of certain cooperative societies who are already carrying on banking business and are brought within the ambit of the 1949 Act from time to time, to seek license from RBI within the prescribed cut-off period and the RBI is empowered to grant such banking license from retrospective effect whence the statutory amendment bringing a class of co-operative society within the ambit of the 1949 Act. The assessee has claimed that RBI granted banking license to it to continue and carry on banking business , vide license dated 10.01.2012 , and although we are seized of ay: 2010- 11 , the assessee has claimed that it will be entitled and eligible for deduction u/s 36(1)(viia) as the said license was granted with retrospective effect to continue and carrying on the banking business. It is the claim of the assessee that it is carrying on banking business since its inception. These aspect has not been exhaustively looked into by the authorities below as the ld. CIT(A) has merely concluded that the assessee is not entitled for deduction u/s 36(1)(viia) also on the grounds that it did not held banking license during the relevant period under consideration. Thus, the matter is to be remanded back to the AO to look into the provisions of Section 56 of the 1949 Act and its applicability to the assessee, as also the application filed by assessee with RBI for seeking banking license and whether on the strength of same , the said license was granted by RBI with retrospective effect so as to entail assessee to seek deduction u/s 36(1)(viia) for the year under consideration , as complete facts are not on record before us. AO is directed to make relevant enquires and verifications , including , inter-alia, making enquiries from RBI to seek relevant information to arrive at decision whether the assessee will be eligible for deduction u/s 36(1)(viia). Thus , if it is found by AO after due verifications and enquiries that the assessee was granted banking license by RBI which covers relevant previous year 2009-10, then in our view the assessee will be eligible for deduction u/s 36(1)(viia) under both the limbs. so far as manner in which Rural Branches are to be determined, we clarify that it will be in the same manner as is specified in Explanation (ia) to Section 36(1)(viia), although the said explanation does not refer to Co-operative Bank specifically , but the said issue is adjudicated by Hon ble Kerala High Court in the case of Kannur District Co-operative Bank Limited [ 2014 (8) TMI 635 - KERALA HIGH COURT] wherein Hon ble High Court held that Rural Branch defined under aforesaid explanation would also include rural branch of a co-operative bank and same terms and conditions as stipulated in explanation (ia) to Section 36(1)(viia) shall apply while determining Rural Branches of Co-operative Bank. Thus,the place referred for identifying the branch of the bank as a rural branch with reference to is location is the revenue village as that the Rural Branch has to be always in rural area and the place referred can be taken as village , and that it cannot be extended beyond the rural unit being village as recognized in the census report and then reference is to the population criteria as specified in Explanation (ia) to Section 36(1)(viia). Thus, the matter is remitted back to the file of the AO for fresh adjudication, as is directed by us in this order. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidences/explanations submitted by assessee in its defense shall be admitted by AO , and adjudicated by AO on merits in accordance with law. We order accordingly. Disallowance of depreciation u/s 32 - assessee could not produce the invoices for purchases purportedly made of the fixed assets during the year under consideration, and secondly the assessee claimed depreciation at full rates on the purchases made of fixed assets although the said fixed assets were purchased after 30th September of the previous year - HELD THAT:- The assessee did not press this issue concerning disallowance of depreciation before ld. CIT(A) as well before us. Since the assessee is not able to produce purchase invoices for fixed assets purported to have been purchased even before us, nor does it has any evidence as to the existence of the said fixed assets and its usage for business of the assessee, we donot find any merit in the claim of the assessee and hence this issue is decided against the assessee and the appellate order passed by ld. CIT(A) stood confirmed. We order accordingly. Further, Reference is drawn to provisions of Section 32 read with proviso , wherein if the asset as specified in the said proviso is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this subsection in respect of such asset shall be restricted to fifty percent of the amount calculated at the percentage prescribed for an asset specified in the said proviso. Thus, clearly the assessee has erroneously claimed depreciation at full rate even though the said asset was put to use for business purposes for less than 180 days, the assessee will be entitled for depreciation @50% of the amount calculated at the percentage prescribed for an asset specified in the said proviso. This issue is also decided against the assessee

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• 2021 (11) TMI 521
  Assessment u/s 153A - determination of correct head of income from sale of shares - whether CIT(A) has erred in law and on facts in confirming the action of the AO wherein the AO has treated the sale of shares of Wipro Ltd., as business income instead of treating the capital gain,in absence of any incriminating material? - HELD THAT: - Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed in these assessment years. Issue decided in favour of assessee. Addition under section 41(1) - Scope of abated assessment - Onus to prove - HELD THAT:- We note that primary onus is on the assessee to prove the genuineness of the transactions supported with evidences. The expression burden of proof really means two different things. It means sometimes that a party is required to prove an allegation before judgment can be given in his favour. It also means that on a contested issue, one of the two contending parties has to introduce evidence. In the first sense, if the burden is not discharged, the party must eventually fail. In the second case, where the parties have jointed issue and have led evidence and the conflicting evidence can be weighed to determine which way to issue can be decided, the question of burden of proof becomes an abstract question and is therefore academic. The section 101 to 114 of Indian Evidence Act, 1872 deals with burden of proof. The section 102 of the Evidence Act provides that the burden of proof lies on that party who would fail if no evidence at all were given on either side. We note that in assessee`s case under consideration, the assessee has failed to discharge his initial burden of proof, as the assessee has failed to submit Bank Statements, Confirmation of creditors, PAN number of creditors, Address of creditors, and the proof that payment has been made by account payee cheques or non-account payee cheques to M.S. Fabrics. Even before the Bench, the ld Counsel fails to submit the basic document, bank statement, therefore it is not possible for the Bench to find the fact that whether payment has been made by account payee cheques or non-account payee cheques. The ld Counsel also argues that in assessment year 2011-12, the assessing officer cannot make addition without the aid of incriminating material. We note that assessment year 2011-12 is an abated assessment where assessing officer can do regular scrutiny, hence plea raised by the ld Counsel is not acceptable. It is well established that res-judicata does not apply to the Income Tax proceedings, which are independent from each other for different years. Therefore, based on the factual position narrated above, we are of the view that one more opportunity should be given to the assessee to plead his case before the assessing officer, hence, the issue should be remitted back to the file of the ld Assessing officer for fresh adjudication, therefore, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer for de-novo adjudication. The assessee is directed to furnish before assessing officer, the necessary documents and evidences, as required by him. Thus, Concise ground No.2 is allowed for statistical purposes. Whether income disclosed during search as under the head income from other sources or under the head income from business - HELD THAT:- We note that before the assessing officer, the assessee took the stand that undisclosed income of Rs. 5,35,75,000/-is out of real estate transactions by way of brokerage or profit as mediator, however, before the Bench, the ld Counsel explained that undisclosed income of Rs. 5,35,75,000/-is pertaining to purchase of land, as noted by us above. During the course of hearing, the Bench asked the ld Counsel to explain the reasons that how and why the assessee has changed his stand to explain the nature of undisclosed income of Rs. 5,35,75,000/-. In response, the Bench did not get any acceptable reply from the ld Counsel. Purchase agreement dated 17-09-2010, has neither been examined by assessing officer nor by ld CIT(A). During the course of search, the search team has found diary, other loose papers, and statement of the assessee was also taken by the search team, all these relevant material would help the assessing officer to decide the nature of said undisclosed income of Rs. 5,35,75,000/-.Therefore, we remit this issue back to the file of the assessing officer to examine the purchase agreement of land, statement of assessee under section 131, and other necessary documents decide the nature of undisclosed income of Rs. 5,35,75,000/-, whether it is business income or income under other sources. Thus, summarized and concise Ground No.3 raised by the assessee is allowed for statistical purposes. Disallowances u/s 14A r.w.r. 8D - HELD THAT:- As if the assessee had enough own funds which was more than the investments which yielded tax free income there can be no disallowance of interest expenses in terms of Rule 8D(2)(ii) of the Rule. The Hon ble Supreme Court in the case of Maxopp Investment,[ 2018 (3) TMI 805 - SUPREME COURT] , wherein it was held that when the shares are held as stock-in-trade , certain dividend is also earned, though incidentally, which is also an income. However, by virtue of section 10(34), this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of section 14A which is based on the theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. AO has not worked out the disallowance as per the above judicial pronouncements. In the light of the judicial pronouncements, as noted above, we are of the view that this issue should also be remitted back to the file of the ld assessing officer to adjudicate the same in the light of the judicial pronouncements. Therefore, we direct the assessing officer to rework the disallowance in the light of the above judicial pronouncements. The assessee is directed to submit the balance sheet, interest received, interest paid details, and details of exempt income before the assessing officer. The Concise ground No.4 raised by the assessee is allowed for statistical purposes.

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• 2021 (11) TMI 511
  Unexplained investments - second round of litigation - whether Tribunal is right in law in deleting the addition made by assessing authority with regard to unexplained investments by erroneous holding that the assessing authority has not furnished its report after verifying the recipient even when the onus/burden is on the assessee to prove the veracity of evidence found against him in the course of search as per section 69C of the Act and without considering the contents of seized materials? - HELD THAT:- It is not in dispute that in the first round prior to remand made by the Tribunal, the assessing officer has recorded the statements of Mr.J.Das. He [Mr.J.Das] had categorically stated that he has received only Rs. 2,00,000/- from the assessee. This has been reiterated by the Commissioner of Income Tax [Appeals]. However, the Commissioner of Income Tax [Appeals] proceeded to sustain the addition of Rs. 2,00,000/- deleting the addition of Rs. 18,00,000/-. The statement of Mr.J.Dass being recorded by the assessing officer, now it cannot be contended by the Revenue that no particulars of Mr.J.Dass was available with the assessing officer to comply with the directions issued by the Tribunal. Thus, it was mandatory for the assessing officer to comply with the directions of the Tribunal. The ground of the Revenue that Mr.J.Das had expired and his particulars were not available with the Department to verify whether Mr.J.Das has been assessed for Rs. 20,00,000/- or the department had accepted that he had received only Rs. 2,00,000/- could not be done, is a lame excuse and cannot be acceded to. It is well settled that the finding given by the Tribunal on pure questions of facts is not exigible to further adjudication while considering the matter relating to substantial question of law. No perversity is found in the findings recorded by the Tribunal. - Decided against revenue.

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• 2021 (11) TMI 510
  Assessment u/s 153A - disallowing the interest - authorities below have held the loan creditors to be bogus and being engaged in the business of providing accommodation entries - HELD THAT:- No material was found during the search indicating therein that such transactions were not genuine. Moreover, we find that the assessee had already repaid the whole of the loan amount during the earlier year and present year. At the time of search i.e. on 31/08/2015, both accounts stood squared up as the assessee had already repaid the loans along with interest after deduction of tax at source. The assessee, during the assessment proceedings, specifically asked the Assessing Officer to provide opportunity of cross examination to the assessee. This is apparent from the reply filed by assessee against the show cause notice for disallowance of such interest. In its reply the assessee filed detailed submissions - In both years besides replying to each allegation of Assessing Officer, the assessee sought to cross examine the witnesses. In the present case, all documentary evidences, for the claim made by the assessee, are available with the authorities for which they have not made any adverse comments. The only reason for making and upholding the disallowance of the interest is the statement recorded by the officers of the Department and that too not by the Assessing Officer himself and that too which were not made available to the assessee for cross examination and therefore, these statements cannot be utilized against the assessee. If we ignore these statements, the rest of documentary evidences well support the claim of the assessee. - Decided in favour of assessee.

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• Benami Property

• 2021 (11) TMI 520
  Benami transaction - sufficient cause of action for continuation of the suit at the instance of respondent Nos. 1 2 . - HELD THAT:- Perusal of clause A(a)(ii)(ibid) clearly reveals that where a property is transferred to or held by a person and the consideration for such property has been provided or paid by another person and it is held by a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity then it is not covered within the ambit of benami transaction and as such, contention to that effect is liable to be rejected. For declaring the transfer of property as benami transaction, proper procedure has been prescribed under the Benami Act and mere assertion at the instance of petitioner would not abort the claim of respondent Nos. 1 2 at the threshold. The plea raised on behalf of the petitioner regarding compulsory registration of property, having value of more than Rs. 100/-, is also not helpful in view of the fact that both the properties were transferred in terms of section 17 of the Registration Act by way of Sale Deeds in name of the petitioner with an oral understanding that same shall be transferred in favor of respondent Nos. 1 2 on attaining the age of 20 years. Again, this is the plea of defence and as such, the same cannot be looked into while deciding the application under Order 7, Rule 11 CPC. It is one thing to say that there is no cause of action for the plaintiffs to file the suit and it is another thing to say that plaint does not disclose any cause of action. Plaint discloses sufficient cause of action for continuation of the suit at the instance of respondent Nos. 1 2.

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• Customs

• 2021 (11) TMI 519
  Levy of Anti-dumping duty - import of Methylene Chloride from China PR - seeking issuance of a direction to the Central Government to issue a notification for imposition of anti-dumping duty, based on the recommendation made by the designated authority - HELD THAT:- In JUBILANT INGREVIA LIMITED VERSUS UNION OF INDIA, DESIGNATED AUTHORITY, DIRECTORATE GENERAL OF TRADE REMEDIES, GHW (VIETNAM) CO. LTD., M/S. GHW HOLDING COMPANY HONG KONG, SHENG LONG BIO-TEC INDIA PVT. LTD. AND UTTARA IMPEX PRIVATE LIMITED PUNE [ 2021 (11) TMI 200 - CESTAT NEW DELHI] , the same issues as have been raised in this appeal were raised. The decision taken by the Central Government not to impose anti-dumping duty, despite a recommendations having been made by the designated authority for an imposition of anti-dumping duty, was set aside and the matter was remitted to the Central Government to take a fresh decision on the recommendation made by the designated authority. The Office Memorandum dated 05.02.2021 is set aside and the matter is remitted to the Central Government to reconsider the recommendation made by the designated authority - Appeal allowed by way of remand.

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• 2021 (11) TMI 518
  Rejection of request for conversion of free shipping bills to drawback shipping bills - one of the reason for rejection is that the documents at the time of exports are not available - time limitation - HELD THAT:- There is no such allegation raised in the Show Cause Notice regarding documents not available, which was issued on the basis of these letters. In the Show Cause Notice, the only ground raised is that the request for conversion is time barred. The only requirement under Sec. 149 to allow amendment is that the exporter has to produce documentary evidence which was in existence at the time of export. The department does not specifically dispute the export of goods. The appellants have furnished copies of Shipping Bills, BRC and ARE-1. These documents are sufficient to prove that goods manufactured by them using imported inputs were exported. The ARE-1 document would show that the goods have been removed from the factory for export after it has been examined / verified by the Superintendent of Central Excise - the rejection of request on the ground that appellants did not furnish documents is factually and legally untenable. Time Limitation - HELD THAT:- It can be seen that law allows amendment of the shipping bill even after the goods have been exported. The only requirement, is that the exporter has to produce documentary evidence which was in existence at the time when goods were exported. The question as to whether the conversion of the shipping bills can be allowed at a later stage after exports has been considered in a plethora of judgments. In the decisions relied by the learned counsel for appellant, this issue has been held in favour of the assessee allowing the conversion of shipping bill and reiterating that section 149 of Customs Act, 1962 does not prescribe any time limit - The jurisdictional High Court in the case of M M/S. HEWLETT PACKARD ENTERPRISE INDIA PRIVATE LIMITED VERSUS JOINT COMMISSIONER OF CUSTOMS, DEPUTY COMMISSIONER OF CUSTOMS, THE PRINCIPAL COMMISSIONER OF CUSTOMS, UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2020 (10) TMI 970 - MADRAS HIGH COURT] observed that the proviso in section 149 permits amendment even after clearance for home consumption, if contemporaneous documents to establish the export are supplied by assessee. In the said case, the writ petitioner imported goods during the period 24.7.2019 to 26.7.2019 by filing 17 bills of entry. The invoices contained an error while mentioning the unit price of the imported products which came to be perpetrated in the Bill of Entry as well. The Customs Act, 1962 being a special law and a complete code in itself it would not be proper to pull in the limitation period under the Limitation Act, 1963 and make it applicable to section 149. More so, because section 149 does not deal with any recovery of duty or refund of duty. It is a section merely to permit amendment in documents. Amendment is purely a procedural requirement. The legislature in its wisdom has not prescribed either in the Act or Rules a time limit to fulfill this procedural requirement - We are unable to refrain ourselves from being not persuaded by these provisions in the Limitation Act to hold that a period of three years would be a reasonable time for filing an application under section 149. The application dated 9.10.2015 contains request for amendment of Shipping Bills for the year 2012 to 2014. It gives details of shipping bills for three years (Jan. 2012 to Dec. 2014) - the rejection of the request for conversion / amendment of Shipping Bills vide letter dated 9.10.2015 (for the period Jan. 2012 to Dec. 2014) is to be set aside - appeal allowed in part.

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• 2021 (11) TMI 517
  Classification of goods - Natural Abrasive - adjudicating authority rejected the declared description of Natural Abrasive and confirmed the classification as Natural Garnet and re classfied the goods under CTH 2513 2030 - Confiscation - penalty - HELD THAT:- The export cargo was detained under panchnama dated 25.5.20 19 and samples were drawn from the live consignment and sent to CECL, Vadodara. Test report received from CECL. Vadodara stated that the sample was pinkish red in colour coarse powder and composed of Silicates of Iron , Aluminium. Calcium and that it had the characteristics of Garnet (natural almandine and Pyrope type). As it appeared that the goods meant for export were natural garnet and not Natural Abrasive as declared by the exporter, the goods were placed under seizure on 31.5.2019. The appellant have relied upon Notification No. SO 2356 (E) dated 11.7.2016 issued under Section 11C of the Mines and Minerals (Development and Regulation) Act, 1957 by the Central Government. Further reliance has been placed on the unstarred question No. 2879 answered on 10.7.20 19 in Lok Sabha by the Minister of State from the PMO. Since these were not covered in the impugned order, comments were called from the adjudicating authority. However no response was received in the matter and therefore a reminder was sent for specific reply in the matter. However the adjudicating authority has not bothered to reply as yet. Hence, remitting of the case has become sine qua non to meet the ends of justice. The appeal is remitted to the proper officer, who shall examine facts, documents submissions as discussed and then pass proper speaking order afresh following principles of natural justice and adhering to the legal provisions - appeal allowed by way of remand.

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• Securities / SEBI

• 2021 (11) TMI 516
  Collective investment scheme without registration and in violation of the SEBI (Collective Investment Schemes) Regulations 1999 - recovery proceedings - Attachment orders - HELD THAT:- Attachment notice which has been issued by SEBI on 1 March 2021 was in order to implement the directions which have been issued by this Court under Article 142 of the Constitution. SEBI in that sense, as an expert statutory body, is exercising powers in pursuance of the mandate of this Court in order to protect the interests of the investors. This Court has created a mechanism by virtue of which, third parties who have objections, including to orders of restraint or attachment are facilitated in having their objections heard through the auspices of an officer appointed by this Court. Shri R S Virk, former District Judge, has been entrusted with the task. Report submitted by Shri R S Virk after hearing the parties is placed before this court to provide a remedy of redress. In the present case, it is not possible to accept the submission that SEBI has attempted to short circuit the process of filing a statutory appeal by taking recourse to an IA in this Court. SEBI has been entrusted with a specific mandate under the directions of this Court. It was duty bound to and has brought the order of this Court to the notice of SAT. The stay on the order of the attachment would effectively obstruct the implementation of the directions of this Court. The entertaining of the appeals by SAT and its interim order are contrary to the directions issued by this Court dated 2 May 2016 in terms of prayer (a) of IA 5 of 2016. As a matter of fact, it was inappropriate for SAT to entertain the appeals. Deference to the order of this Court required that the parties should be permitted to move this Court for appropriate directions. In the above view, we are not, at this stage, expressing any opinion on the merits of the defense which has been raised by DDPL and Unicorn to the order of attachment since that would preclude a hearing before, and a report by Shri R S Virk. ORDER -The order passed by SAT shall stand vacated - DDPL and Unicorn shall be at liberty to submit their objections to the order of attachment dated 1 March 2021 issued by SEBI before Shri R S Virk, former District Judge, who has been appointed pursuant to the orders of this Court. Pending further orders of this Court, the order of attachment which has been levied by SEBI on 1 March 2021 shall continue to remain in operation to the extent of an amount of Rs. 49.67 crores. Alternatively, we grant liberty to DDPL and Unicorn to deposit an amount of Rs. 49.67 crores in an Escrow account to the satisfaction of SEBI. Upon the Escrow account being created in respect of the above amount of Rs. 49.67 crores to the satisfaction of SEBI, SEBI would be at liberty to duly modify the order of attachment dated 1 March 2021, which shall then operate only with respect to the amount which is held in Escrow. SEBI would be at liberty to issue necessary directions to invest the moneys held in Escrow in an interest bearing fixed deposit.

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• Insolvency & Bankruptcy

• 2021 (11) TMI 515
  Maintainability of application - Financial Creditor or Operational Creditor of the Corporate Debtor- Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Admittedly, the Adjudicating Authority vide order dated 18.01.2021 dismissed the Application I.A. No. 135/JPR/2019 of Sach Marketing Pvt. Ltd. and hold that the claim comes within the definition of Operational Debt and not the Financial Debt. The case of the Appellants is squarely covered by the decision in SACH MARKETING PVT. LTD. VERSUS RESOLUTION PROFESSIONAL OF MOUNT SHIVALIK INDUSTRIES LTD., MS. PRATIBHA KHANDELWAL [ 2021 (10) TMI 644 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH, NEW DELHI] . These Appeals are allowed and it is held that the debt owed to the Appellants, is a Financial Debt as defined under Section 5(8) of the IBC.

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• Service Tax

• 2021 (11) TMI 514
  Levy of service tax - Commercial Coaching or Training Services - it appeared to Revenue that the appellants are evading payment of service tax as they are conducting training courses and providing certificates to the students without the approval of either University Grants Commission (UGC in short) or by All India Council of Technical Education (AICTE), therefore, are not recognised by law - period of dispute April, 2009 to 2015-16 (upto March, 2016) - time limitation. W.e.f. 01.07.2012 - HELD THAT:- The coaching or training leading to grant of a certificate or diploma or Degree or any educational qualification, which is recognised by any law for the time being in force, have been kept out of the scope of service tax, as defined under Section 65(105) (zzc), upto the period 30.06.2012 vide Notification No. 10/2003-ST dated 20.06.2003 read with Notification No. 33/2011-ST dated 25.04.2011 - Period 01.04.2009 to 26.02.2010 - HELD THAT:- The Adjudicating Authority has misconceived the scope of taxable and /or chargeability to tax and have erred in coining his own definition of the term vocational training and coaching which is not provided in the statute. The refusal to grant exemption to the appellant, inspite of admission by the learned Commissioner - that appellants are providing education/ vocational training, but the conclusion that such courses shall not qualify as vocational course due to the quantum of fee charged (high). We further find that the learned Commissioner has rejected the benefit of exemption and/or exclusion provided in the statute from tax, by observing that courses provided by the appellants are professional and technical in nature as well as glamorous - such interpretation is wholly misconceived. The Adjudicating Authority has failed to appreciate that there is no such bar (with respect to the quantum of fee), in the statute for grant of exemption. Further, the list of services (enumerated in Circular No. 59/8/2003) being in the nature of vocational courses is by way of example only. Further, the list ends with the word etcetera/etc., the conscious use of the word etc. indicates the wide scope of the exemption notification. Such observation of the learned Commissioner are by way of conjecture and surmises, have no legal sanctity - the Commercial training/ education/ coaching provided by the appellants imparts skills to the students/ trainees to enable them to seek employment or undertake self-employment directly upon completion of the course. Period 27.02.2010 to 30.06.2017 - HELD THAT:- The learned Commissioner have admitted in the show cause notice itself, that MU is sending their students for training/ education with respect to various courses like Mass Communication, acting, etc. to the campus of the appellants. We further find that there is no such requirement as to affiliation from a University. The only requirement is, that the course being taught should be part of a curriculum, leading to grant of degree / diploma, recognised by law. Admittedly, the issue of degree/ diploma by the respective Universities have not been found to be fraudulent - admitted fact is that the appellant s institutions are run by a Charitable Institute namely Asian School of Film and TV , which is recognised and registered under Section 12A/ 12AA of the Income Tax Act. Right from beginning till 30.06.2017 the activity of the appellant in providing educational /vocational training to their students, is as per the pre defined curriculum in collaboration with the respective University, is exempt throughout,as they have provided education and training followed by issue of certificate of degree/ diploma which is recognised by law for the time being in force. Further, we find that on completion of the courses conducted by the appellants, the students/ trainees have either received employment and/or are competent to be self employed. The appellants is not liable to service tax. Time Limitation - HELD THAT:- The appellant(s) were under bonafide belief that their activity is not liable to service tax and further we find that the appellants have maintained proper record of their activity and have been making compliance with various laws including Income Tax Act, as a charitable organisation. The books of accounts have been regularly audited and have been filed with various Government Authorities - Admittedly, the only allegation made in the show cause notice for invoking the extended period of limitation is that the appellants have failed to take registration, assess their tax liability, pay the tax, file the returns etc. Admittedly, the whole demand is based on data and information supplied by the appellant as has been demanded by the Revenue. Accordingly, we hold that extended period of limitation is not attracted and the show cause notice(s) are bad for invocation of extended period of limitation. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (11) TMI 513
  Classification of goods - Best Agri Product(BAP) - Sikko Biostar - Sikko Gold - Sikko Power - Vakil 3D - classifiable under chapter heading 3101/3105 as claimed by the appellant or under 3808 as held by the Adjudicating Authority? - HELD THAT:- The issue involved in the present case is mix of facts and legal issue. In the case of M/S NARMADA BIO CHEM PVT. LTD., RAMESHBHAI PATEL DIRECTOR VERSUS C.C.E. S.T. -VADODARA-I [ 2019 (7) TMI 459 - CESTAT AHMEDABAD] , this Tribunal has considered the test report and the composition of each product. Therefore, since the judgment of Narmada Biochem was not available the the lower authority this matter needs to be reconsidered taking into consideration, the view taken by this Tribunal in the case of Narmada Biochem Pvt. Ltd. also by verifying the facts of the present case vis-a-vis the facts of the Narmada Biochem Pvt. Ltd. case. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2021 (11) TMI 550
  Classification of goods - Multi Function Printers - sale during the period January to March, 2007 - whether liable to tax at 12.5% and not at 4% in spite of amendment by way of substitution of Sl.Nos.28 and 29 in Notification No.FD 116 CLS 2006 (9), Bangalore, dated 31.03.2006 with Sl.Nos.28, 29 and 30 with effect from 1- 1-2007 by Notification No.FD 238 CSL 07, dated 7-7-2007? - falling under Central Excise Tariff Entry 8443.31.00 or under Entry No.8443.32 of Central Exercise Tariff Act? - interpretation of the notifications. HELD THAT:- It is well settled that the substitution in the notifications has two steps. First, the old provision is made seized to exist and next, the new provision is brought into existence in its place. Both these steps are taken simultaneously thereby replacing old provision with the new provision. The notification dated 07.07.2007 would certainly indicate that the substitution has been made to Sl.Nos. 28 and 29 and entries relating thereto, existing in the notification dated 31.03.2006. Thus, it could not be said gainsaid that this notification has to be given prospective effect. However, it is observed that the notification dated 31.03.2006 was amended by notification dated 04.04.2007 by giving effect to the entries at Sl.Nos.28 and 29 with effect from 01.01.2007, this notification dated 07.07.2007 with respect to item Nos. 28 and 29 came into effect from the 01.01.2007. These aspects though have been analysed by the Tribunal and benefit has been denied under this notification dated 07.07.2007, on different ground altogether, which was not the subject matter of the appeal. Hence, there are no hesitation to hold that the Tribunal has exceeded its jurisdiction in adjudicating upon other issues which were not considered by either the Assessing Authority or Appellate Authority for denying the benefit of notification dated 07.07.2007 or in other words, to levy taxes under the residual entry on these MFPs for the periods in question. The questions of law is answered in favour of the assessee and against the revenue - petition allowed.

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• 2021 (11) TMI 543
  Seeking issuance of requisite F Forms to the Petitioner - interstate stock transfers undertaken by the Petitioner - Bullion - period starting from April 2016 until June 2017 - HELD THAT:- A reading of the above provision would clearly show that where the applicant, seeking Form F , has defaulted in making the payment of the amount of the tax assessed, the Commissioner may, after affording the applicant an opportunity of being heard, withhold the issuance of Form F to him for the reasons to be recorded in writing. In the present case, from the chart of tax demands placed by the respondents and not denied by the petitioner, it is evident that the petitioner owes tax demand. Though the same are pending challenge at various stages or forums, for some there is no order of stay on the said demand. This Court in the present proceedings cannot usurp the jurisdiction of the Courts/Authorities hearing such appeals/objections and hazard a guess as to whether the petitioner is entitled to a stay of demands in those proceedings. Compliance with the proviso to Rule 5(4) of the CST (Delhi) Rules - HELD THAT:- Admittedly, the respondents have now passed the Order dated 16.06.2021 giving reasons for refusing the facility of issuance of the F Forms to the petitioner. The said Order is not in challenged. Challenge to Rule 5(4) of the CST (Delhi) Rules - HELD THAT:- Section 13(3) and 13(4)(e) of the CST Act empowers the State Governments to make rules, including specifying the conditions subject to which Form F may be obtained - It cannot therefore, at least at this stage be said that Rule 5(4)(ii) of the CST (Delhi) Rules is ultra vires the CST Act. Application dismissed.

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• Indian Laws

• 2021 (11) TMI 549
  Enforcement of a foreign Arbitral Award - Scope of inquiry for resisting the enforcement of a foreign award under Section 48 (2)(b) in Part II of The Arbitration and Conciliation Act, 1996 - respondent Award debtor opposes the prayer in the execution case on the ground that the enforcement would be contrary to the public policy of India, specifically the fundamental policy of Indian law, since enforcing a Put Option available to the petitioner violates The Foreign Exchange Management Act, 1999 and the Securities Contracts (Regulation) Act, 1956 - HELD THAT:- The Arbitral Tribunal has not only construed the Clauses in the Shareholder s Agreement in the context of the submissions made by the respondents but has also considered the relevant decisions on each of the issues raised by the parties. On a reading of the Award, it is found that the points raised by counsel for the respondent were argued threadbare before the Tribunal. The decisions cited in support of such submissions were also extensively relied on and considered and distinguished by the Tribunal. This court was unable to find any issue which was raised on behalf of the respondent before the Tribunal but was not considered or analyzed by the Tribunal. For an Arbitral Award as complete and comprehensive as the one under consideration, any further inquiry into the transaction documents or the construction of the relevant clauses therein or the events culminating in the dispute or even the provisions of the SCRA or the FEMA would amount to an exercise which has precisely been taken out of the present statutory framework - The subtle distinction between the enforcement of an award being put to the test in Section 48 as opposed to the Award itself having to pass muster under Section 34 further reins in all possible enquiries on the relevant factual matters on the aspect of contravention of fundamental policy of Indian law. Shorn of any statutory framework the crux of the matter is that the parties had intended, through the agreed terms of the transaction documents, to provide multiple modes of exit to the petitioner in the form of a cascading set of alternatives and to secure the exit by commensurate monetary returns. The exit options were central to the agreement as intended and understood by the parties at the time of execution of the Shareholder s Agreement and the investment made by the petitioner in the wholly-owned subsidiary of the respondent. The respondent however sought to plug the exit routes when the conditions precedent for the petitioner to exercise its option fructified. The respondent took recourse to SCRA and FEMA to obstruct the petitioner and repeats such objections even now before this court. This is the basic premise of the dispute. Contrary to the grounds for resisting enforcement of the Foreign Award, this court is of the considered view that the Award in essence is an Award for breach of the obligations of the respondent and its wholly-owned subsidiary. The Arbitral Tribunal found that the failure on the part of the respondent and MSEL to procure a third party purchaser constituted a breach of such obligations with clear consequences as to damages. The Tribunal, accordingly, held that loss of the bargain and the measurement of damages was readily apparent by reference to the value of the Agreements themselves - The Award can therefore also be seen as a money Award simpliciter without having any bearing on the public policy of India in the context of either SCRA or FEMA. This court is unable to accept the contention of the respondent that the enforcement of the Award should be refused on the grounds urged. In successfully surmounting the grounds for refusing enforcement, the Award is held to be a binding Award and the court is satisfied that the Foreign Award is enforceable under Sections 46, 47 and 49 of the Act. The Award should hence be enforced in accordance with the enabling provisions under Part II of the Act - Petition allowed.

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• 2021 (11) TMI 548
  Dishonor of cheque - insufficiency of funds - Legally enforceable debt or not - compounding of offence - HELD THAT:- On going through the cross-examination of D.W. 2, it appears that nothing was suggested on the side of the accused, particularly, about the issuance of the said cheque. In the absence of particular entry in the related document, this Court cannot conclude the case that the alleged cheque was obtained from the petitioner by coercion. Therefore, the stand taken by the accused that the cheque pertains to the case has been obtained in the respondent Police Station, has not been proved by way of examining D.W. 2. On scrutinizing the said witness with the other facts, it is seen that both the petitioner and the respondent are residing in Musiri, which is situated near to Trichy. All are aware the travel time between Trichy and Musiri is about one hour. Therefore, in the said circumstances, it is possible for the accused that after availing loan in the morning hours, he travelled to Trichy and attended duty at 11.15 a.m. Therefore, the evidence given by D.W. 1 to D.W. 3 may be in support of the defence taken by the accused, in order to substantiate the said evidence, the documents relied on by him are not sufficient to hold that the stand taken by the revision petitioner is genuine one. Once the signature found in the cheque is admitted, the trial Court ought to have presumed that the cheque was issued for legally enforceable debt. Without seeing any perversity or gross injustice in the judgments rendered by the trial Court and the first appellate Court, this Court cannot interfere with the findings rendered by the Courts below - Since the prosecution under Section 138 of the Negotiable Instruments Act is quasi civil in nature, the Parliament has thought it fit to permit compounding of the offence under Section 147 of the Negotiable Instruments Act. Instead of sending the accused to prison, this Court is of the view that if the accused deposits Rs. 8,00,000/- towards the cheque amount and another sum of Rs. 1,10,500/- as compensation and costs to the credit of C.C. No. 175 of 2013, before the Judicial Magistrate Court, Musiri, on or before 03.01.2022, the Magistrate shall disburse the amount to the complainant if he is alive or to his legal heirs and compound the offence. If the amount of Rs. 9,10,500/- is not deposited on or before 03.01.2022, the trial Court shall issue warrant of commitment for the accused to undergo the sentence imposed upon him - application disposed off.

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• 2021 (11) TMI 547
  Waiver off of fully cash handling charges collected from the stamp vendors by the Bank / SBI - seeking forbearance on Third Respondent from collecting any cash handling charges forthwith from the Petitioners for purchase of stamp papers - private transaction or not - HELD THAT:- The facts and circumstances were elaborately looked into by the Finance Department, as the Government of Tamil Nadu is an account holder in the State Bank of India and Government accounts are operated with privileges considering various factors and baking regulations. The Government has categorically stated that no cash handling charges have been explicitly provided for Government receipts, which shows that collection of cash handling charges for deposit of cash into Government Account through Treasury Challans has not at all been permitted by the State Bank of India itself. It is, therefore, cash handling charges have been collected by mistake or by misinterpretation of the Circular of the Head Office of the State Bank of India and such collection being made by the Respondent Bank herein is without any authority. Collection of cash handling charges from the Stamp Vendors by the Third Respondent /Bank, while depositing money into Government Account through Treasury Challans is impermissible. Perusal of the Master Circulars relied on by the Second and Third Respondents /State Bank of India dated 01.07.2014 and 01.04.2021 reveals that the Second and Third Respondents are unable to establish that there is a direction / instruction / permission granted by the Reserve Bank of India to collect such cash handling charges on Government transactions. In the absence of any such specific direction or instructions from the Reserve Bank of India, the State Bank of India is not entitled to collect any cash handling charges from stamp vendors. Any such collection must be strictly in accordance with the Reserve Bank of India Regulations or in accordance with the Banking Regulations. Such collection of cash handling charges cannot be assumed or collected based on certain inferences. Any such collection must be made only, if there is a specific direction permitting the bank to collect cash handling charges. On the verification of the Master Circulars relied on by the State Bank of India, issued by the Reserve Bank of India on 01.07.2014 and 01.04.2021, it is seen that both circulars are related to agency commission and there is no specific direction or instruction from the Reserve Bank India. Thus, it is not proper on the part of State Bank of India to collect cash handling charges from the stamp vendors. Accordingly, the Second and Third Respondents have failed to establish that they have the authority to collect cash handling charges from the stamp vendors, who all are depositing money through Treasury Challans for purchase of stamps. The Collection of cash handling charges from the stamp vendors/petitioners by the 2nd and 3rd respondents are declared as illegal and without any authority. Accordingly, the respondents 2 and 3 are directed, not to collect any cash handling charges from the stamp vendors, while depositing cash in Government accounts through Treasury Challans in any of the branches of the State Bank of India. Petition allowed.

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• 2021 (11) TMI 546
  Dishonor of Cheque - petitioner/accused submits that, accused could not of complainant complete the cross examination and also he could not adduce his defence evidence - principles of natural justice - HELD THAT:- In the circumstances of the case, the concept of principles of natural justice would be that, opportunity is to be offered and not that the court shall go on pending opportunity till opportunity is exhausted. It is reasonable that the requisite opportunity provided, it has reasonably utilised. However in the normal aspect of principles of natural justice, one more opportunity may be given to the petitioner/accused to cross examine the complainant and also to adduce his defence evidence before the trial court but not without conditions. Thus, for the purpose of remand, the judgment of the trial court and appellate court in each of the cases deserve to be set aside and the matters deserve to be remanded to the trial court with conditions. The accused in each of the cases shall deposit 50% of the fine amount before the trial court on or before 30th October 2021 or if any amount is already deposited and in case, if it is less than 50%, the deposit shall be completed to meet the quantum of 50% - Petition allowed.

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• 2021 (11) TMI 545
  Dishonor of Cheque - existence of legally enforceable debt or not - defense of the accused/revision petitioner is that she had no transaction with the complainant at any point of time and cheque was issued to one Rajiv and in this regard, she has placed reliance on Ex.D1 - rebuttal of statutory presumption - HELD THAT:- The complainant has not disputed the cheque-Ex.P1 and her signature. Hence, statutory presumption under Section 139 of N.I. Act is in favour of the complainant. The accused is required to rebut the statutory presumption by leading the cogent evidence on the basis of preponderance of probability. But, except asserting the transaction between herself and Rajiv, no other documents have been produced by the accused. This transaction does not establish that the said cheque was taken by the complainant and very interestingly, after receipt of the legal notice, the accused has not choosen to reply and no explanation is offered - the cross-examination of D.W. 1 itself disclose that she is already convicted for the offences punishable under Section 138 of N.I. Act in a different case. She has also admitted that Rajiv has also lodged a complaint against her under Section 138 of N.I. Act as per Ex.D10. Hence, the defense raised by the accused is short of proving her case that the cheque has not been issued towards discharge of legally enforceable debt so as to rebut the statutory presumption in favour of complainant. The other ground urged by the learned counsel that in the complaint there is a specific allegation that an amount of Rs. 5,00,000/- was advanced as a hand loan but in the evidence, it is elicited that it was in respect of payment towards the house warming ceremony, wherein, the complainant has taken contract and he paid the expenses in this regard to labours, but that does not go to the root of the case to suspect the case of the complainant. The accused has not rebutted the presumption available in favour of the complainant. The accused has not made out any grounds for admitting the revision for hearing on merits. The accused/revision petitioner has already suffered two concurrent findings of conviction in both the Courts below and both the Courts have appreciated the evidence on record in detail and conviction order passed by the trial Court and confirmed by the Appellate Court cannot be said to be erroneous or arbitrary so as to call for any interference by this Court. Petition dismissed.

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• 2021 (11) TMI 544
  Dishonor of Cheque - amount to be repaid under the hire purchase agreement - prosecution under Section 138 of the Negotiable Instruments Act - rebuttal of statutory presumption - HELD THAT:- Though the accused had filed an application for sending Ext.P2 cheque to the forensic expert for verifying the signature and handwriting and though that application was allowed by the court, the forensic laboratory had returned the same without comparison and demanding more documents written by the 2nd respondent/ accused during the same period in order to complete the investigation. However, the 2nd respondent/accused did not produce any further document, as a result of which Ext.P2 cheque was not subjected to any forensic examination - The trial court also found that the 2nd respondent/ accused had no case that the appellant/complainant had obtained the cheque from him by unlawful means and had fabricated his signature and handwritting and that no reply was sent by the 2nd respondent/accused to the statutory notice issued by the appellant/complainant. The trial court, therefore, was of the view that the appellant/complainant was entitled to the benefit of the statutory presumption under Section 139 of the Negotiable Instruments Act and therefore found that Ext.P2 cheque had been issued for discharge of a legally enforceable debt and answered that issue in favour of the appellant/complainant - A reading of the appellate court judgment shows that the appellate court was of the opinion that the signature on the cheque had not been proved to be that of the 2nd respondent/accused herein. In particular, the appellate court noticed that the signatures on Ext.D1, the account opening form and Ext.X1 containing the registration particulars of the vehicle were different from the signature contained in Ext.P2 cheque. This is a case where the 2nd respondent/accused has not denied the fact that he had entered into a hire purchase agreement with the appellant/complainant. He had also not denied the fact that he had failed to repay the instalments of the loan in time - The trial court on an examination of the signatures on various documents concluded that there was a similarity in the admitted signature and the signature contained in the cheque. Of course, the appellate court has by invoking Section 73 of the Evidence Act come to a different conclusion regarding the similarity in the signatures. In the facts of the present case, the transaction between the appellant/complainant and the 2nd respondent/accused has not been disputed. The appellate court also found that there was similarity in the signature on the cheque, the hire purchase agreement and in the registration details maintained with the Motor Vehicles Department. That finding by itself is to establish that the statutory presumption under the Negotiable Instruments Act was available to the appellant/complainant. Therefore, the appellate court went wrong in reversing the conviction and sentence imposed on the 2nd respondent/accused. This appeal is allowed.

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• 2021 (11) TMI 512
  Dishonor of Cheque - failure to establish the execution of the cheque by the respondent - rebuttal of presumptions under Sections 118 and 139 of the NI Act - HELD THAT:- Whoever be the person handed over the cheque to the complainant the possession of Ext.P1 being with him, and Ext.P1 having been established by the complainant as drawn from the account of the accused maintained with his banker, in view of Section 20 of the N.I.Act, who authored the writings in it, is immaterial. Such being the context, undoubtedly the presumptions under Sections 118 and 139 of N.I.Act and Sections 103 and 114 of the Act would be attracted in favour of the complainant. Presumptions are rebuttable ones and as stated in the provisions, it is the burden of the accused to rebut those or establish to the contrary. Signature in Ext.P1 is not disputed by the accused. The trial court has found upon evaluation of the evidence and the legal provisions that it is the burden of the accused to adduce cogent evidence to rule out the grab of legal provisions - this Court has no hesitation to hold in the light of the discussions made hereinabove and also on the basis of the dictums of the Apex Court in the cases relied on by the learned counsel for the appellant, the trial court has gone wrong in making observations of the nature. The burden undoubtedly is on the accused to rebut the presumptions available to the complainant under Sections 118 and 139 N.I.Act. This Court on an appreciation of the entire evidence on record, is convinced that the accused was unsuccessful in discharging his burden to rebut the presumptions. Therefore, the prosecution ought not to have been held by the trial court as failed - the trial court shall restore the complaint back to it s file and dispose it of in accordance with law, within two months from the date of receipt of a certified copy of this judgment. Appeal allowed.

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