Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 22, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
GST - States
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ERTS(T) 65/2017/196 - dated
9-11-2017
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Meghalaya SGST
Amendments in the Notification No. ERTS(T) 65/2017/5, dated 29.06.2017.
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ERTS(T) 65/2017/195 - dated
9-11-2017
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Meghalaya SGST
Amendments in the Notifications No. ERTS(T) 65/2017/2, dated 29.6.2017
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ERTS(T) 65/2017/194 - dated
9-11-2017
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Meghalaya SGST
Amendments in the Notification No. ERTS (T) 65/2017/1, dated the 29.06.2017
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ERTS(T) 65/2017/193 - dated
9-11-2017
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Meghalaya SGST
Exempts intra state supply of heavy water and nuclear fuels by the Department of Atomic Energy to the Nuclear Power Corporation of India Ltd.
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ERTS(T) 65/2017/192 - dated
9-11-2017
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Meghalaya SGST
Amendments in the Notification No.11/2017-Central Tax (Rate), dated the 28th June, 2017.
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ERTS(T) 65/2017/Pt/031 - dated
1-11-2017
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Meghalaya SGST
Extends the time limit for furnishing the details or return GSTR-1, GSTR-2, GSTR-3.
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ERTS(T) 65/2017/Pt/030 - dated
1-11-2017
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Meghalaya SGST
Extends the time limit for furnishing the details or return GSTR-1, GSTR-2, GSTR-3 - for the month of August, 2017.
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ERTS(T) 65/2017/Pt/029 - dated
1-11-2017
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Meghalaya SGST
Extends the time limit for furnishing the return by an Input Service Distributor.
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ERTS(T) 65/2017/Pt/028 - dated
1-11-2017
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Meghalaya SGST
Last Date for filing of return in FORM GSTR-3B
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ERTS(T) 65/2017/Pt/027 - dated
1-11-2017
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Meghalaya SGST
Inter-State taxable supplies of handicraft goods.
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ERTS(T) 65/2017/Pt/026 - dated
1-11-2017
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Meghalaya SGST
TDS deduction from the payment made or credited to the supplier of taxable goods or services or both.
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ERTS(T) 65/2017/Pt/025 - dated
1-11-2017
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Meghalaya SGST
Extends the time limit for furnishing the return for the month of July, 2017.
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ERTS(T) 65/2017/Pt/024 - dated
1-11-2017
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Meghalaya SGST
Waiver the late fee payable return in FORM GSTR-3B for the month of July, 2017.
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ERTS(T) 65/2017/Pt I/037 - dated
31-10-2017
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Meghalaya SGST
Amendments in the Notification No. ERTS(T)65/2017/22, dated 29.6.2017
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ERTS(T) 65/2017/Pt I/036 - dated
31-10-2017
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Meghalaya SGST
Extends the time limit for the return FORM GST ITC-01.
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ERTS(T) 65/2017/Pt I/035 - dated
31-10-2017
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Meghalaya SGST
Extends the time limit for furnishing the return by a composition supplier, in FORM GSTR-4.
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ERTS(T) 65/2017/Pt I/034 - dated
31-10-2017
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Meghalaya SGST
Notifies the registered person whose aggregate turnover in the preceding financial year did not exceed one crore and fifty lakh rupees.
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The payment made by the assessee for acquisition of the software as well as right to use the key provided by the supplier for making necessary modification, alteration, amendments or changes which amounts to acquiring the right to use the copy right and therefore the payment will fall in the definition of royalty as defined u/s 9(1)(vi) as well as under Article 13(2) of Indo-US DTAA. - AT
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Depreciation on gym equipments installed in the premises of Managing Director - Simply because it is being used by MD it cannot be held to be for private use so as to warrant disallowance of depreciation. - AT
Customs
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Eligibility of dumpers imported for Coal Mines for benefits under Project Import Regulations- reg. - Order-Instruction
DGFT
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Relief in Average Export Obligation in terms of Para 5.19 of Hand Book of Procedures of FTP 2015-20. - Circular
Central Excise
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SSI Exemption - the purpose of small scale notification is to grant benefit to the SSI and to encourage the small scale industries. Such purpose cannot be defeated on the ground that option was not made separately on a piece of paper but the same was conveyed to the Revenue in the form of ER-3 returns. - Tri (LB)
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Tour operator service - The rationale applicable to Stage Carriage Permits would equally apply to Contract Carriage vehicles covered by the permit under Section 74 of the Motor Vehicles Act - HC
Case Laws:
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Income Tax
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2017 (11) TMI 1087
Stay petition - attachment orders - As learned counsel for the petitioner would submit that the stay petitions dated 15.03.2017 presented before the first respondent on 21.03.2017 do not contain full details and seeks leave of this Court to file additional grounds to the stay petitions and pursue the matter before the first respondent - Held that:- Considering the above factual position, the writ petition is disposed of by directing the petitioner to raise additional grounds before the first respondent in support of their stay petitions dated 15.03.2017 received on 21.03.2017 in the office of the Deputy Commissioner of Income Tax, Central Circle-I, Coimbatore, within a period of one week from the date of receipt of a copy of this order. On receipt of such additional grounds, the first respondent shall afford an opportunity of personal hearing to the authorized representative of the petitioner and pass orders on merits and in accordance with law on the stay petitions as expeditiously as possible, preferably within a period of three weeks from the date, on which, personal hearing is concluded
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2017 (11) TMI 1086
Income derived out of the property licensed - chargeable under the head 'Income from house property' OR 'Income from business or profession' - assessee herein had constructed, established and operated a hotel by name “Hotel Palmshore” but gave the hotel along with its furnishings and equipment on license basis - Held that:- In Article XIV of the agreement, it is specifically provided that during the term of the agreement, the hotel shall be known as and designated by the logo and name Hotel Palmshore, which will be suffixed by the words “An Abad Beach Resort” -along with Abad logo. The provisions of the agreement also indicate that the licensor has the right of supervisory control in the manner in which the hotel is operated. All these, provisions of the agreement would, therefore, indicate that the licence that has been granted is that of a fully established running hotel authorising the licensee to operate the hotel for a specified period subject to the terms and conditions incorporated therein. Therefore, the license granted is that of a business. These facts would, therefore, clearly indicate that the intention of the parties as reflected in the agreement was to grant licence in respect of a running hotel, the income of which can only be income from business. Therefore, the Commissioner of Income Tax was fully justified in setting aside the order of assessment and holding that the income of the assessee was income from business and not income from house property. - Decided in favour of the assessee
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2017 (11) TMI 1085
Reopening of assessment - assessee has not filed its return of income for AY 2010-11 - Held that:- The petitioner has pointed out that the very basis for issuing the notice is invalid since the petitioner had in fact filed the return whereas the reasons proceed on the basis that no return was filed. The petitioner has produced the necessary documents in addition to making such averments on oath. These averments and supporting evidence the respondent is unable to refute. That being the position, the sole ground for issuing the notice for reopening namely of the petitioner not having filed the return of income is proved to be incorrect. Under the circumstances the reasons lack validity. We are, therefore, inclined to quash the notice even though the return filed by the Assessing Officer was processed under section 143(1) of the Act and no scrutiny assessment was framed. - Decided in favour of assessee.
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2017 (11) TMI 1084
Revision u/s 263 - deemed dividend u/s 2(22)(e) - as per CIT-A claim of the assessee that the amount received from M/s. Canon Laminators Pvt. Ltd. is in the nature of trade advance is factually incorrect - Tribunal quashing and setting aside the order passed by CIT u/s. 263 - Held that:- We see no reason to interfere. As noted, the assessee had pointed out that the amount lying in the ledger account of the assessee was not received by a loan from Canon Laminators Pvt. Ltd. but it was only in the nature of a trade advance since the assessee continued to supply goods to the said company. On such advance, the assessee had also paid interest. No question of law arises - Decided against revenue
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2017 (11) TMI 1083
Trading addition - rejection of books of accounts - Held that:- In view of the observations made by the Tribunal with regard to section 145(3), unless the books of accounts which have been found not genuine and the reasons for rejecting the books of account are just and proper, the view taken by the Tribunal is required to be upheld. In that view of the matter, the issue is answered in favour of the assessee. Eligibility to benefit of section 80-IA - Held that:- As decided in CIT v. Bhawani Forge P. Ltd. [2014 (12) TMI 932 - GUJARAT HIGH COURT] Tribunal after considering the material on record has rightly held that the assessee has satisfied all the conditions in order to avail benefit of section 80-IA of the Income-tax Act. Apart from that, learned advocate for the appellant-Revenue is not in a position to show how the findings of the Tribunal are bad in law and on facts. - Decided in favour of the assessee. Loan as advanced by the family members - Held that:- We are convinced with the arguments of the learned authorised representative as to prevailing market rate for the loans of permanent in nature and long-term loans is between 18 per cent. to 24 per cent. whereas the cases compared by the Assessing Officer are pertaining to the loans of temporary in nature. Also the assessee has advanced the money for the purpose of business needs, is not under dispute. Therefore, in such circumstances and facts of the case, the Assessing Officer is not justified in considering the said payment of interest as excessive or unreasonable and the same is directed to be deleted. - Decided in favour of the assessee. Allowance of expenses of insurance relating to earlier year - Decided in favour of the assessee.
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2017 (11) TMI 1082
Addition made on account of suppression of sale after rejecting books of account u/s 145(3) - since the average cost of purchase of saleable land comes to ₹ 364 per square yard and whereas the assessee has sold the plots for ₹ 400 per sq. yard which included a sum of ₹ 165 per sq. yard as development charges, therefore, in effect the selling price of the land was only ₹ 235 per sq. yard. and this position did not reflect true and correct picture of the books of account as selling of plot at a loss in real estate is absurd and not acceptable Held that:- We are of the opinion that the Tribunal while confirming the order passed by the Commissioner of Income-tax (Appeals) has not committed any error as held Assessing Officer has examined two persons who purchased the plots and such persons have confirmed having paid the same price. We have perused the statement of Shri Ram Swaroop Gurjar and Shri Ram Narain Sharma which is submitted at paper book pages 55 to 59. Thus there was no material before the Assessing Officer to hold that the assessee has suppressed the sale of plots, but on the contrary, we find that the Assessing Officer has erroneously assumed wrong facts as aforestated in rejecting the books of account and thereby proceeding to estimate the income of the asses see on account of suppression of sale of plot. We concur with the findings of the Commissioner of Income-tax (Appeals) and hold that the Assessing Officer was not justified in rejecting the books of account and estimating the income of the assessee. Even otherwise, the Assessing Officer was not justified in invoking the provisions of section 145(3) of the Income-tax Act. - Decided in favour of the assessee
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2017 (11) TMI 1081
Reopening of assessment - time-limit for issuance of Notice u/s 148 - Held that:- If there is any specific direction contained in an order passed by the authority in any proceeding under act by way of appeal revision or by a court. In that situation time limit for issuance of notice is indefinite period. But, if at the time when the order which was subject matter of appeal or revision was passed, the time-limit for issuance of Notice u/s 148 of the Act had already expired, the Time limit of indefinite period will not apply. Hence, the assessment order which is the subject-matter of appeal was passed by the Ld ITO on 29/12/2010, and on that date the time limit for issuance of Notice u/s 148 had already expired by reason of provision of section 149 limiting the time limit to six years from the end of the relevant assessment year i.e 31/03/2010. In view of the above, in our considered opinion, the action of the Ld. CIT(A) in directing the ITO, Ward 38(3) to make fresh order u/s. 147 inspite of the facts the notice u/s. 148 was validly issued only after expiry of time limit provided u/s. 149 of the Income Tax Act is not valid, hence, the same is cancelled and appeal of the assessee is accordingly allowed.
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2017 (11) TMI 1080
Reopening of assessment - grant of deduction u/s 35E - Held that:- A plain reading of the reasons recorded for re-opening takes us to a conclusion that the assessee has produced all evidences and filed all the details before the AO during the course of assessment proceedings and the AO had on considering the same granted deduction u/s 35E of the Act and thereafter rectified its claim u/s 154 of the Act vide order 20.12.2006. There is no new material which has come to the possession of the AO based on which the reopening has been made. In fact all the material facts required for grant of deduction u/s 35E are on record and the AO had examined the same. Merely mentioning that there is a failure on the part of the assessee in disclosing fully and truly all material facts in respect of this claim of the claim of deduction u/s 35E of the Act, as were necessary for assessment, in the reasons recorded, cannot per say fulfill the requirement of law when there is full disclosure of all the facts,. The requirement of the proviso to section 147 of the Act are not fulfilled in this case. - Decided in favour of assessee. Allowability of the claim of the assessee for development expenditure - Held that:- The details of the expenditure are given at para 6.2. of the order of the ld. CIT(A). The assessee has filed an application for the admission of additional evidence on this issue. On a careful consideration of this application we are of the considered view that the assessee was prevented by sufficient cause from furnishing these evidences before the First Appellate Authority or AO. Hence we allow this application of the assessee and admit this additional evidence. The additional evidence is in the form of order of exemption passed by D.G.I.T. (Exemption), Kolkata. The claim of the assessee for deduction u/s 80G of the Act, for a sum of ₹ 1 crore paid to West Bengal Family Welfare Samity was disallowed, on the ground that there is no certificate of exemption from Directorate of Exemption, Kolkata. As this alternative claim of the assessee has to be considered by the AO in the light of this new order of Director of Income Tax (Exemption), Kolkata dated 08.05.2006 we set aside this ground to the file of the AO for fresh adjudication in accordance with law.
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2017 (11) TMI 1079
Validity of assessment - non issue of statutory notice u/s 143(2) - filing of the ROI by way of letter by the assessee - Held that:- On perusal of the order sheet entries made from 20.03.2014, it is clear that no notice under section 143(2) of the Income Tax Act, 1961 (Act) was issued to the assessee. The submission of the learned DR that the assessee did not file a return of income and hence no notice is required to be issued under section 143(2) of the Income Tax Act, 1961 (Act) is factually incorrect. The assessee had filed its return of income. - Decided in favour of assessee.
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2017 (11) TMI 1078
Unexplained investment under section 69 - case of the assessee is that he has received ₹ 7 lakhs from Shri P. Surya Prakasa Rao towards advance for sale of assessee’s property, which was utilized for the purpose of deposit in the account of fixed deposit - Held that:- When Assessing Officer asked Shri P. Surya Prakasa Rao, he submitted that he was a retired employee and borrowed money from his friends and pledged his wife’s jewellery and advanced to the assessee, but not able to explain what is the amount borrowed and what is gold pledged, by which, how much amount borrowed, has not given any details before the Assessing Officer and even before the ld. CIT(A). Even before us, the assessee failed to explain creditworthiness of Shri P. Surya Prakasa Rao and genuineness of the transaction also. Under these facts and circumstances of the case, simply filing confirmations, is not a sufficient to discharge burden casted upon him to explain the source in the fixed deposits. Therefore, we are of the opinion that the assessee has failed to discharge the onus in respect of ₹ 7 lakhs received from Shri P. Surya Prakasa Rao and therefore, the Assessing Officer has rightly made an addition and the same is confirmed by the ld. CIT(A). So far as amount received from Shri L. Dileshwara Rao,Shri L. Dileshwara Rao has explained before the Assessing Officer that he has given ₹ 30 lakhs in three installments i.e. ₹ 10 lakh each. When Assessing Officer asked the assessee in respect of amount received from Shri L.Dileshwara Rao and also bank entries, the assessee has failed to explain the same before the Assessing Officer, even before the ld.CIT(A) and even before us also no explanation is given. Under the above facts and circumstances of the case, we are of the opinion that the assessee failed to discharge the burden casted upon him that he has received ₹ 30 lakhs from Shri L.Dileshwara Rao and therefore the ld. CIT(A) rightly confirmed the addition made by the Assessing Officer. Credit in the assessee’s bank account with Shalantri Branch - assessee has stated that this credit represent advance received from one P. Appa Rao for sale of Relliveedhi site - Held that:- Before the ld. CIT(A) it was submitted that Shri P. Appa Rao is a Manson and had given an amount of ₹ 2,96,500/- by way of advance for purchase of acre 2.5 cents of land, and that Shri P.Appa Rao expressed his inability to mobilize further funds, the transaction was cancelled and the amount was returned on 01/07/2009. Before the ld. CIT(A) except stating that advance received in respect of purchase of land from P. Appa Rao, who is not able to mobilize the funds, the amount was returned, no evidence is filed. Even before us, the assessee has not filed any evidence. Under these facts and circumstances of the case, we find that the assessee failed to discharge the burden casted upon him that he has received the said amount as advance and therefore, we find no infirmity in the order passed by the ld.CIT(A) in confirming the addition made by the Assessing Officer. Assessee appeal dismissed.
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2017 (11) TMI 1077
Revision u/s 263 - proof of adequate reasons - Held that:- Commissioner must give reasons to justify the exercise of suo moto revisional powers by him to re-open a concluded assessment. A bare reiteration by him that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue, will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income- tax Officer was not only erroneous but was prejudicial to the interest of the revenue. Thus, while the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo moto revisional powers unless supported by adequate reasons for doing so. In the instant appeal before us, it is not the Department’s case that no information regarding the various issues as enumerated by the Ld. Pr. CIT was called for by the AO. That relevant details and documents were furnished by the assessee during the assessment proceedings is evident from the documents on record. Hence, no inference can be drawn that the AO has not examined the issues although he has not expressed it in as many terms as may be considered appropriate by his superior authority and even if the same is found to be inadequate the same cannot be a ground for revision. As in the case of Infosys Technologies Vs. JCIT (Asst) [2005 (6) TMI 211 - ITAT BANGALORE-B] the Bangalore Bench of the ITAT held that where the A.O has examined and considered and issue, though not mentioned in the assessment order, it cannot be said that the order passed was erroneous. Thus revision order dismissed - Decided in favour of assessee.
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2017 (11) TMI 1076
Revision u/s 263 - some payments were made without making the TDS - Held that:- From the plain reading of order u/s 263 it is clear that the assessee had accepted that some payments were made without making the TDS and assured to pay tax on such amount and the CIT directed to verify all such payments liable for TDS and apply the provisions of section 40(a)(ia) of I.T.Act which shows that the Ld.CIT has not directed the AO to make the addition of the entire sum of ₹ 33,63,840/- and the assessee also did not accept for such addition. In the consequential order, the assessing officer has verified the payments made for binding charges, computer charges and freight charges etc. and given a finding that the provisions of section 40(a)(ia) are not applicable for binding charges, computer maintenance and printing charges and only in the case of freight charges 40(a)(ia) is applicable to the extent of ₹ 2,56,961/- for non deduction of tax at source. Since the assessing officer has followed the instructions correctly, there is no case for making revision u/s 263 and the Ld.Pr.CIT misunderstood the direction given by the Ld.CIT u/s 263. Therefore, the order passed by the AO u/s 143(3) r.w.s. 263 is neither erroneous nor prejudicial to the interest of the revenue - Decided in favour of assessee.
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2017 (11) TMI 1075
Long term capital gains arising out of sale of quoted equity shares assessed as unexplained cash credit u/s 68 - AO assessed the transaction as doubtful high rise in the stock price - Held that:- The transactions of sale of shares by the assessee was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions, the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/evidence to prove that the assessee or any one on his behalf has rigged the stock price. It should be noted that the Stock Exchange and SEBI are the statutory authorities appointed by the Govt. of India to ensure that there is no stock rigging or manipulation. There is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. The assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition. - Decided in favour of assessee.
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2017 (11) TMI 1074
Disallowance of commission payment - Held that:- In the instant case, the primary onus has been duly discharged by the assessee proving the claim of commission payments made by the assessee. There is absolutely no reason for the ld AO to doubt the veracity of the said transactions. Admittedly none of the commission agents were relatives of the assessee or interested parties with the assessee so as to allege some mala fide on the part of the assessee. Hence, in our considered opinion, there is no case made out by the ld AO to treat the commission transactions as ingenuine transactions in these facts and circumstances. We hold that mere nonappearance of the said commission agents in person before the Ld. AO would not make the transaction of payment of commission as ingenuine. Hence, we hold that the Ld. CIT(A) had rightly deleted the disallowance of commission made by the Ld. AO. Accordingly, ground nos. 2 to 4 raised by the Revenue are dismissed. Disallowance of sales promotion expenses - Held that:- The payment to clubs towards usage charges is allowable as deduction. With regard to sales promotion expenses representing purchase of small denomination of assorted gold coins, we hold that the explanation given by the assessee is bona fide and reasonable and the same has been given to various parties for maintaining cordial relationship with the concerned sales executives who contributed for substantial increase in turnover of the assessee. We find that the Ld. CIT(A) had categorically mentioned that the turnover of the assessee had increased from 7 crores to 11 crores during the year which fact remain uncontroverted before us. This goes to prove the services rendered by those persons who are at the realm of affairs of improving the sales of the company and this also proves the business expediency and incurrence of such sales promotion expenses. Admittedly, these gold coins which were purchased were given as gifts to customers of the assessee and hence, becomes allowable deduction thereon. Disallowance of bad debts written off - AO had disallowed the same on the ground that mere making of provision for bad and doubtful debt does not amount to writing off of the debt and further the assessee has not produced any evidence from which it could be established that he has accounted for the sales in computing the income of the previous year in terms of Section 36(2) - Held that:- We find that the assessee submitted that the debt of ₹ 14,90,113/- became bad as back in the year 2005-06. From that year onwards, the assessee has been consistently writing off 10% of the balance as bad debt in his books of accounts every year, so that there is no constraint on the net profit of the business of each year. It was also seen that such bad debts has been consistently allowed by the revenue commencing from assessment year 2005-06 to assessment year 2011-12. Hence, there is no reason for the revenue to take a different stand during this year when same facts and circumstances are permeating. The Ld. CIT(A) had appreciated this fact and by placing reliance on the decision of the Hon'ble Supreme Court in the case of TRF Limited [2010 (2) TMI 211 - SUPREME COURT] and in the case of Madras Industrial Investment Corporation Ltd. [1997 (4) TMI 5 - SUPREME Court] allowed the claim of the assessee. We do not find any justifiable reason to interfere in the order of the Ld. CIT(A).
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2017 (11) TMI 1073
Validity of reopening of assessment - defective notice - notice u/s. 148 issued in the name of amalgamating company - company no more in existence as on the date of service of notice u/s. 148 due to scheme of amalgamation - as per CIT-A the notices issued by AO for reopening assessment u/s. 148 of the Act is not valid and sec. 292B of the Act does not come to the rescue of the AO - Held that:- Since the AO issued notice for reopening u/s. 148 of the Act only against the amalgamating company M/s. NPPL and not against the assessee company which was the amalgamated/successor company, the assessment though made in the name of assessee company is void because, even after the AO came to know that M/s. NPPL got amalgamated with the assessee company did not care to issue 148 and 143(2) notices to the assessee company which is sine qua non and, therefore, the omission in following the law clearly goes to the root of the matter and makes the order ‘null’ in the eyes of law. Also the case of the Assessee Company and issue raised for reopening was before the Hon'ble Settlement Commission, Kolkata for the subject assessment year, it was beyond the jurisdiction of the A.O. to invoke section 147 on the assessee. In the present case, the notice u/s 148 of the Act was issued in the name of a non- existent company which is clearly a case of jurisdictional defect and not a mere procedural irregularity. Provisions of section 292B of the Act are not applicable. The initiation of proceedings against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity or a technical mistake but a jurisdictional defect as there cannot be any assessment against a 'dead person'. - Decided in favour of assessee.
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2017 (11) TMI 1072
Deduction u/s 80HHC and 80IB - assessee had converted its fixed assets [injection moulds] from the Block of assets into Stock-in-Trade - Held that:- As carefully gone through the orders of the authorities below and found from record that the assessee is a Registered Firm with three partners and is involved in the business of manufacturing and marketing of Plastic Moulded Articles. From the record as found that the assessee had during the year converted the moulds reflected as fixed assets in the block of assets in to Stock-in-Trade at its book value amount of ₹ 34,56,581/-. Consequently, the figure of block of assets of the mould does not include the said amount. Besides, the fresh purchase of moulds, effected by the assessee, during the year have been added to the block of assets at the end of the year which has resulted into positive balance in the block of assets of moulds. What the assessee had sold is the Stock-in-Trade and not the fixed assets as held by the Assessing Officer. Therefore, value of export proceeds cannot be taken as the fair market value of the mould for conversion purposes in order to determine Short Term Capital Gains. Therefore, rejecting the stand of the assessee, the Assessing Officer is not justified to determine the Short Term Capital Gains at a figure of ₹ 19,30,779/-. Particularly when the converted price of mould as effected by the assessee is the book value of impugned assets. As the Stock-in-Trade has been exported by the assessee and export realization in foreign exchange has come to India, the claim of the assessee on the profit earned on such export u/s. 80HHC deserves to be allowed. What the assessee had sold is its Stock-in-Trade and not the assets which had been converted from his investment. As it is not a case of investment conversion and the present case being the saleable capacity of the fixed assets which the assessee had commercially exploited to its full extent by finding a suitable market abroad. Therefore, the action of the Assessing Officer to treat the business income of the assessee as Capital Gains and consequently determining Short Term Capital Gains within the meaning of Section 45(2) r.w.s 50 at a figure of ₹ 19,30,779/- is not at all justified. Assessing Officer was not justified to disallow the claim of depreciation with the premise that block of assets of moulds has been reduced to Rs. NIL. The assessee during the relevant year had made fresh purchase of moulds worth ₹ 29,64,000/- which is reflected in its Balance Sheet and the depreciation has been claimed on the fresh purchase of mould forming part of block of assets and not on the mould which had been converted into Stock-in-Trade. Therefore, the disallowance of depreciation u/s. 32 is uncalled for. Also found that the assessee had claimed deduction u/s. 80IB which the Assessing Officer has allowed the reduced claim for ₹ 2,33,741/- as the result of which the difference amount of ₹ 7,40,401/- has been disallowed. The action of the Assessing Officer is not justified since the deduction u/ss.80HHC and 80IB are independent; AO was not justified to deduct the amount of deduction u/s 80HHC from the eligible profits while computing deduction u/s 80IB. - Decided in favour of assessee.
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2017 (11) TMI 1071
Determination of the source of marriage expenditure incurred by the assessee on the marriage of her daughter - explanation to gifts received and gold brick in gift - Held that:- The assessee has explained the source of such expenditure in terms of Kanyadan received from close relatives amounting to ₹ 23.86 lacs, value of gifts received worth ₹ 25.91 lacs and bank withdrawals of ₹ 9 lacs from assessee’s own bank account. The ld CIT(A) has examined the entries in the assessee’s bank account and confirmation and other details received from close relatives and has given a finding that the assessee has discharged the primary onus of explaning the source of kanyadan receipts of ₹ 23.86 lacs from close relatives. The findings of the ld CIT(A) remain uncontroverted before us and the same are hereby confirmed. Similarly, the findings of the ld CIT(A) regarding various gifts (except gold brick) received on the occasion of marriage and gifted to her daughter, given the nature of the gifts, social and family status of the assessee involved, the same was found acceptable by the ld CIT(A) and we hereby confirm the same. Regarding gift of gold brick worth ₹ 11.10 lacs what we find is that the affidavit has been submitted by the assessee and not by either the so called donor (wife of the assessee) or by the donee (daughter of the assessee). Further, nothing has been brought on record in terms of will or gift deed by late Shri Musaddi lal (the original donor). In absence of any will or gift deed by the original donor and the fact that both the donor and the donee as so claimed have not submitted and filed any affirmative statement confirming such transaction as a gift transaction, the assessee’s contentions remain unsubstantiated and therefore, cannot be accepted. In the result, we affirm the findings of the ld CIT(A) and dismiss the ground of appeal taken by the assessee. Regarding estimated expenditure of ₹ 8.25 which the AO assumed to have been incurred on the occasion of the marriage, the AO has accepted the withdrawal of ₹ 9 lakhs from the assessee’s bank account on the occasion of the marriage, it is reasonable to hold that the assessee would have incurred the marriage expenditure out of such withdrawal. Therefore, we donot see any infirmity in the order of the ld CIT(A) who has deleted the addition of ₹ 8.25 lakhs in the hands of the assessee. - Decided against assessee Unexplained advances - Held that:- Regarding advance of ₹ 30 lacs, merely the fact that the transaction has happened through banking channel and a confirmation has been filed is not sufficient to discharge the initial onus cast on the assessee to establish the identity, genuineness of the transaction and creditworthiness of the person from whom the money has been received during the year. The AO has specifically asked the assessee to furnish a copy of agreement to sell or sale deed that has been executed during the course of assessment proceedings to examine the genuineness of the transaction so claimed by the assessee by way of advance against land, however, nothing has been brought on record in this regard either during the assessment or the appellate proceedings. Further, nothing has been brought on record to demonstrate the creditworthiness of the person who has advanced the money to the assessee. We therefore set-aside the findings of the ld CIT(A) and confirm the addition of ₹ 30 lacs so made by the AO in this regard. Regarding addition of 41.52 lacs, the ld CIT(A) has returned a finding that an amount of ₹ 40,38,162/- pertains to earlier years and is brought forward from the previous years and the same cannot be brought to tax under section 68 of the Act. The remaining amount of ₹ 3.5 lakh was received from Smt. Deepmalika, who is daughter of the assessee and an existing income tax assessee and ₹ 1,64,093/- was received from M/s Shankar & Co which is proprietary concern of the appellant himself. We donot see any infirmity in the said findings of the ld CIT(A) and the same are hereby confirmed. In the result, ground no. 2 of revenue’s appeal is partly allowed.
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2017 (11) TMI 1070
Disallowance u/s 40(a)(ia) - non deduction of tax at source on purchase of software - CIT(A) have held that the payment made by the assessee for purchase of software is royalty and therefore the income in the hands of the none resident is chargeable to tax in India - Held that:- The assessee purchase a copy righted software along with the right to resale export the said software with or without modification, alteration, amendments or changes by using the key provided by the US supplier. The terms and conditions of the agreement clearly manifest that it is not a mere purchase and sale of a copy righted product but the assessee purchase the master copy of the software with the right to use the key provided by the supplier for modification, alteration, amendment or changes. The assessee is undisputedly exporting the software by using the master copy and with necessary modification, alteration, amendment or changes as per the requirement of the clients. Thus it is not the purchase of software by the assessee for its own internal use but the software was purchased along with the copy rights to be used by the assessee for development of a new software as per customized requirement of the clients. As far as the decisions relied upon by the assessee there is no quarrel on the point that the purchase of copy righted product being a software will not fall in the category of the royalty in the absence of any transfer of acquiring of any right to use the copy right. However, in the case of the assessee the assessee is using the copy right as well as the software for development of the new software with the necessary modifications. Hon’ble High Court in case of Tata Consultancy Services Vs. State of Andhra Pradesh (2004 (11) TMI 11 - Supreme Court) has held that it is necessary to make a distinction between the cases where the consideration is paid to acquire the right to use patented or a copy right and cases were payment is made to acquire patented or copy righted product/goods. In the case of the assessee it is not an acquisition of copy righted product being software but the assessee has acquired the software along with the right to use it for further development/production. Accordingly, in the facts and circumstances of the case the payment made by the assessee for acquisition of the software as well as right to use the key provided by the supplier for making necessary modification, alteration, amendments or changes which amounts to acquiring the right to use the copy right and therefore the payment will fall in the definition of royalty as defined u/s 9(1)(vi) as well as under Article 13(2) of Indo-US DTAA. Disallowance u/s 40(a)(ia) would result enhanced of business income of the assessee derived from export of software eligible for deduction u/s 10A - Held that:- CBDT vide circular No. 37 of 2016 has accepted this position that the disallowance made u/s 32, 40(a)(ia), 40A(3), 43B etc. of the Act relates to the business activity against which chapter VI-A deduction has been claimed, resulting in enhancement of the profits of eligible business and that deduction under chapter VI-A is admissible on the profits so enhanced by the disallowance. Following the decision of Coordinate Benchs as well as the Hon’ble High Court on this issue and further in view of the Circular no. 37 of 2016 we hold that the disallowance u/s 40(a)(ia) would result enhancement of profit of the eligible business of the assessee for deduction u/s 10A and accordingly the assessee would be entitled for the claim of deduction on enhanced profit. The AO is directed to allowed the claim of the assessee.
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2017 (11) TMI 1069
Allowability of provision made under the head “late delivery charges” - Held that:- Provision has been recognized by the assessee on the basis of obligation stipulated in the contract which ranges from 1 to 10% and assessee has given a detailed working for making the provision @ 2% which also gets ratified by the actual payments in the subsequent year. Here the obligation of the assessee is a result of an event which is probably outflow of resources required to settle the obligation and based on this, a reasonable estimate has been made. Thus, it cannot be held that provision made by the assessee is not proper and it is some kind of unascertained liability. In any case, actual event happening in the subsequent year that assessee did incur expenditure of approximately ₹ 19.47 lakhs and also offered the income of excess provision of ₹ 5.54 lakhs, such disallowance of provision is uncalled for. Accordingly, the ground raised by the assessee is allowed. Disallowance under section 14A - Held that:- Assessing Officer, without examining the accounts maintained by the assessee and also nature of expenditure debited, held that employee who is looking after the investment must have incurred transport, telephone and other administrative expenses and, therefore, he justified application of Rule 8D. Section 14A(2) read with Rule 8D(1)(a) requires that the Assessing Officer before invoking the provision of Rule 8D having regard to the account of the assessee about correctness of the claim of expenditure made by the assessee has to record his satisfaction that such a claim made by the assessee is not correct and such a satisfaction can only be discernible once he has examined the nature of accounts and expenditure debited qua earning of exempt income. If the Assessing Officer does not apply with the mandatory requirement of section 14A(2) and Rule 8D(1), then disallowance under section 14A cannot be triggered and thereby proceed with disallowance in accordance with formula laid down in Rule 8D(2). The mandatory requirement of proceedings under section 8D(2) has to rout through provisions enshrined in rule 8D(1) and section 14A(2). Once that is not so, then he cannot proceed with the disallowance. Accordingly, the ground raised by the assessee is allowed.
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2017 (11) TMI 1068
Addition u/s 41 - assessee had not written back the said amount and had still shown as advance received in its books, the Ld. AO and CIT (A) still held that it amounts to cessation/ remission of liability within the scope of section 41(1), therefore, the same has to be taxed - Held that:- Provisions of section 41(1) has been specifically incorporated in the Act to cover a particular fact or situation where a trading liability was allowed in earlier year in computing the business income of the assessee and assessee has obtained benefit in respect of such trading liability in later year by way of remission or cessation of the liability, then whatever benefit has arisen to the assessee in the later year by way of remission or cessation of the liability will be brought to tax in that year. The apprehension as intended by the Legislature by incorporating the said provision is to ensure that assessee does not get away with a double benefit, once by way of deduction in an earlier assessment year and again by not being taxed on the benefit received by him in later year with a reference to the liability earlier allowed as deduction. The section does not envisage this situation when there is no allowance or deduction and that to be in the nature of loss, expenditure or trading liability. Here in this case we have already held that no such allowance or deduction of trading liability has been allowed in earlier year in the case of the assessee while computing the business income and such a writing off by Air India cannot be reckoned as any benefit to the assessee within the terms and scope of section 41(1), because there is no question of any double deduction or double benefit derived to the assessee. Thus, we hold that no amount can be taxed under section 41(1) and therefore, the amount is directed to be deleted. - Decided in favour of assessee.
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2017 (11) TMI 1067
Disallowance u/s 14A - Held that:- As assessee has not earned any exempt income, then no disallowance u/s 14A can be made in this year in view of the ratio and principle laid down by the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. ACIT (2015 (9) TMI 238 - DELHI HIGH COURT). Thus, on this ground alone, we hold that the disallowance u/s 14A read with Rule 8D cannot be sustained and is directed to be deleted. Disallowance of depreciation and car running expenses - personal use of assets - Held that:- There is no dispute that these cars are assets of the assessee company which have been shown as part of the fixed assets in the balance sheet. Most of the cars are appearing as WDV in the schedule of fixed assets and depreciation has been claimed. Once the cars are owned by the assessee company and is found to part of fixed assets then, ostensibly depreciation has to be allowed. The assessee before the AO as well as before the Ld. CIT (A) has categorically submitted that since renovation work was carried out at hotel premises, therefore, these cars were parked at the residence of Shri Suresh Nanda and his son Shri Sanjeev Nanda who held majority stake directly or indirectly in the assessee company. Mere parking of cars at the premises of these persons, cannot ipso facto lead to an inference that the depreciation has to be disallowed which otherwise are the assets of the assessee company. Assessee had also submitted that these cars were used purely and wholly for the purpose of hotel business and in absence of rebuttal of this explanation, depreciation cannot be disallowed and accordingly, we held Ld. CIT (A) has rightly allowed depreciation.- Decided in favour of assessee. Disallowance of bad debts - Held that:- The amount written off as bad debt has been admitted to be offered to tax in the earlier years and it has been written off from the books of accounts in this year and hence, the conditions as laid down u/s 36(2) read with section 36(1)(vii) stands satisfied and therefore, the bad debt written off has to be allowed as deduction.- Decided in favour of assessee. Allowability of trade advance written off - Held that:- It is not in dispute that the amount of ₹ 11,05,058/- is a trade advance given during the course of business and for business purpose which had become irrecoverable. In this situation, ostensibly such an amount has to be allowed either as business expenditure u/s 37(1) or as a business loss while computing the profit and gains u/s 28 read with section 29, because such a trade advance was given during the course of the running of the business. Thus, the said amount though may not be allowed as bad debt but has to be allowed as business loss. Accordingly, we hold that the amount of trade advance written off in this year has to be allowed and consequently, ground No. 3 is allowed. Adhoc disallowance in respect of expenses of running and maintenance of cars - Held that:- AO while making the disallowance has made purely adhoc disallowance without pin pointing any specific nature of expenditure which can be said to be not for the purpose of business. In the case of the company, which is running a five star hotel and using cars for its hotel business and maintaining all the records, the AO has to point out as to which part of the expenditure debited are not been verifiable. Simply because cars were parked for temporary period at the premises of promoters, it does not mean it were used for non-business purpose. Such an adhoc disallowance cannot be sustained. Ld. CIT (A) has not examined this issue at all and gave a wrong finding of fact that AO has not made any such disallowance. Accordingly, we direct the deletion of such adhoc disallowance made by the A.0. - Decided in favour of assessee. Depreciation on gym equipments installed in the premises of Managing Director - Held that:- Simply because it is being used by Managing Director it cannot be held to be for private use so as to warrant disallowance of depreciation. At the most if any equipment has been placed for exclusive use of Managing Director the same should be added as perquisite in the hands of the said Director but cannot be disallowed in the hands of the assessee company when this asset already forms part of the block of the assets and depreciation has been allowed earlier. Accordingly, we do not find any reason to sustain such disallowance and the same is directed to be deleted. - Decided in favour of assessee.
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2017 (11) TMI 1066
Validity of assessment order by invoking the provisions of Sec. 144 - Held that:- CIT(A) while deciding this grounds have taken into consideration the facts of the present case and had rightly held that in the assessment order, the AO has already narrated in detail the various opportunities given to the assessee and non-compliance on the part of the assessee. Even before Ld. CIT(A) the necessary opportunity was granted to the assessee and the written submissions as well as additional evidence was also considered by Ld. CIT(A). The Ld. CIT(A) also called for the remand report from the AO and assessee was further provided opportunity to file rejoinder to the remand report, therefore in our view, sufficient opportunities have already been availed by the assessee at every stage, therefore this ground raised by the assessee contains no merits. Rejecting the book results u/s 145(3) - Held that:- CIT(A) while deciding this grounds have taken into consideration the facts of the present case had rightly decided this ground on merits. The Ld. CIT(A) has rightly conclude that during the search, purchase bills and other papers found were verified against the records as per books maintained. The Ld. CIT(A) had sought remand report from the AO and found that in the remand proceedings, the details filed by the assessee were examined. The Ld. CIT(A) after relying upon the judgments of different judicial authority had rightly concluded that section 145(3) of the I.T. Act applies. Disallowance being 15% of the total purchases - Held that:- Considering the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that restricting the additions @ 15% of purchases by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 12.5 % of purchased. Consequently orders passed by Ld. CIT(A) are set aside and hence we direct the AO to restrict the additions to the extent of 12.5% of the bogus purchases made from the parties. Accordingly this ground raised by the assessee is partly allowed. Addition on account of unsecured loans - assessee has not explained the purpose of loans taken and complete information like copy of IT returns, Balance-sheet or bank statement of the lenders were not filed - CIT- A deleted the addition - Held that:- AO had made the additions on the ground that only loan confirmations were filed but copy of ITR, bank statements of the lenders were not furnished. However, during the appellate proceedings, the assessee furnished all the details regarding which remand report was sought by the CIT(A) from the AO and the AO in the remand report had accepted the said facts and nothing adverse had pointed out. Therefore, the Ld. CIT(A) while relying upon the remand reports submitted by the AO had deleted the additions. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A).- Decided against revenue Addition on account of sundry creditors - major creditors for the year are Bright Global Paper Limited and Paper Plus Technologies Private Limited and it has been established that there has been no genuine purchase from these parties - CIT-A deleted the addition - Held that:- CIT(A) while deciding this grounds have taken into consideration the facts of the present case and also considered the remand report wherein the AO has not found anything adverse in respect of documents submitted by the assessee in the remand report. Therefore Ld. CIT(A) deleted the additions. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). - Decided against revenue
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2017 (11) TMI 1065
Levy of penalty u/s 271(1)(c) - additions made on account of ALV of the property - Held that:- It is not the case of the Assessing Officer here that the notional interest on interest free security deposit can be taken as determinative factor to arrive at the fair rent though there is slight whisper in the penalty order, which has not been taken into a logical conclusion, because ultimately the Assessing Officer has taken the figure of ALV as determined by the approved valuer, which has been accepted by the assessee in its revised computation filed before the Assessing Officer during the course of assessment proceedings. Such an estimate made by the Registered Valuer cannot be held to be correct fair rental value in accordance to the provisions of section 23, because the Assessing Officer has simply accepted the valuation given by the assessee in the revised computation. This does not entail that the assessee has either furnished inaccurate particulars of income or has concealed any income, because no enquiry has been done by the AO to ascertain that actual rent received is less than the fair market value. How the ALV disclosed in return of income filed in response to notice to notice u/s 148 is not correct. Thus, on this addition, no penalty can be levied; especially on the difference between the ALV shown by the assessee in the return of income as well as the value adopted by the Registered Valuer, which again is purely based on estimate. Disallowance claim of set off of loss both under the head “income from house property” and “business income” Held that:- As in the assessment order, Assessing Officer has noted that assessee itself has filed a revised computation of its income on 29/9/2009 wherein such a claim was withdrawn or was not claimed which has been accepted by the Assessing Officer also. After accepting assessee’s claim, the Assessing Officer has nowhere recorded his satisfaction or has stated, as to whether the assessee has furnished any inaccurate particulars of income, albeit at the end of the assessment order, he frames a charge both under concealment of income as well as furnishing of inaccurate particulars of income which, in our opinion is not correct, because the Assessing Officer has to specify the charge while initiating penalty proceedings under section 271(1)(c) qua each addition as to on which limb of section 271(1)(c) he is initiating penalty proceedings. We find that while levying penalty, he has again held that penalty is to be imposed under both the charges which is evident from para 12 of the impugned penalty order. Penalty under this section can be imposed only on the ground or charge upon which assessee has been called upon to answer or has been confronted and not on vague and unspecified ground in the notice. t the assessment order must clearly indicate as to under which part of section 271(1) (c) the Assessing Officer chooses to initiate the penalty proceedings against the assessee - Decided in favour of assessee. On the issue of disallowance under section 14A read with rule 8D, admittedly rule 8D is not applicable prior to assessment year 2008-09 and, therefore, such a disallowance will not attract levy of penalty and the same is directed to be deleted.
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2017 (11) TMI 1064
Penalty u/s 271(1)(c) - loss incurred in trading of shares treated as speculation loss on the basis that delivery of shares was not taken - Held that:- As in the present case there is neither allegation of the assessee attempting to defraud the revenue nor is there any allegation that the loss in question was not actually sustained by the assessee, there is no point imposing penalty. See Dy. CIT vs. Shree Ram Electrocast [2017 (8) TMI 653 - ITAT KOLKATA] - Decided in favour of assessee.
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2017 (11) TMI 1063
Disallowance of expenses made in the transport business of the assessee by applying net profit of 5% - Held that:- There is no illegality in the action of the AO in disallowing the claim of expenditure under each head. The CIT(A) after considering the previous history of declared total income estimated the income @ 5%. We find that the estimation of income may be adopted in the case when the assessee has not produced any supporting evidence and to bring the controversy to an end. There is no dispute that the income of the assessee was assessed to tax as a result of disallowance made by the AO is equal to 12.70% of the turnover which is on the higher side in transport business and therefore a reasonable and proper estimate was required to be made in this case of the assessee. The ld. CIT(A) has estimated the income of the assessee at 5% thereby restricted the disallowance of ₹ 10,01,460/- as against the total disallowance made by the AO of ₹ 34,00,216. Having regard to the facts and circumstances of the case where the assessee has failed to produce any supporting evidence as well as proper books of accounts in support of the claim we are of the considered view that the proper and just estimation of the income. The impugned order is accordingly modified. Accordingly this ground of the Revenue is partly allowed. Disallowance expenditure in the liquor expenses - assessee failed to produce any supporting evidence as well as books of accounts - CIT(A) restricted the disallowance by estimating the net profit of the assessee at 4% in the liquor business - Held that:- This issue is identical as raised in the ground no. (i), therefore, having regard to the facts and circumstances of the case and our finding in respect of the ground no. (i). We think it proper and reasonable to estimate the income in the liquor business @ 5%. The impugned order of the ld CIT(A) is accordingly modified. This ground is Revenue is party allowed. Addition u/s 68 - unexplained cash deposit - Held that:- We find that when the Assessing Officer has made the addition on various heads and part of which was sustained by the CIT(A) amounting to many times more than this deposit made in the bank account then the assessee is entitled for the benefit of telescopic to the extent of the other addition sustained by that appeal. Hence, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Unexplained loan account to various persons - addition deleted by the ld. CIT(A) by giving the benefit of telescopic - Held that:- Once the Assessing Officer has accepted the agricultural income of more than ₹ 50 lacs then accepting the claim by the ld. CIT(A) to the tune of ₹ 34 lacs in bank deposit which is specifically shown as sale proceed of food soyabin cannot be found fault with. Hence, to the extent of sources of deposit of ₹ 34 lacs we do not find any error or illegality in the order of the ld. CIT(A). As regards the balance amount of ₹ 63 lacs the ld. CIT(A) has deleted the said addition by considering the fact that the turnover of assessee from the transport and liquor business is ₹ 8.22 crores, therefore, the said amount of ₹ 63 lacs can be sourced from the receipt of wine and transport business. He further noted that the closing balance in the account of the assessee was only ₹ 3,13,001/- and therefore the deposit were made by the assessee throughout the year under consideration. Since this deposit was not in lump sum but spread over during the year therefore, we do not find any reason to interfere with the order of the ld. CIT(A) by accepting the source of the deposit as receipt from the wine and transport business. As regards the benefit of telescopic of ₹ 12,01,000/- when the addition sustained by the ld. CIT(A) exceeds the cumulative amount of deposits in the bank and advance given to the party then we do not find any error or illegality in granting the said benefit of telescopic.
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2017 (11) TMI 1062
Disallowance of interest - Held that:- Revenue has not disputed the fact that the assessee is having unsecured interest free advances. Under these facts, the Assessing Officer ought not to have made disallowance of interest. Accordingly, we hereby direct the AO to delete the disallowance. - Decided in favour of assessee Disallowance made by invoking the provision of Section 40A(3) - Held that:- The Hon’ble High Court in the case of Anupam Tele Service vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT) under the identical facts decided the issue in favour of the assessee held that payment between the assessee and the Tata Teleservice Ltd. were genuine. The Tata TeleServices Ltd. had insisted that such payments be made in cash, which Tata Teleservices Ltd. in turn assured and deposited the amount in a bank account. In the facts of the case of assessee, rigors of Section 40A(3) must be lifted. Since, the facts are identical and the assessee has demonstrated that the assessee made payment in cash at the instances of the finance company, therefore rigors of section 40A(3) must be lifted.- Decided in favour of assessee
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2017 (11) TMI 1061
Invocation of jurisdiction under section 263 - Reopening of assessment already initiated - addition u/s 40A(3) - Held that:- We are of the considered opinion the Ld. Pr. CIT could not have sought to revise an order passed under section 147 read with 143 (3) of the Act on an issue which was not a subject matter of the reassessment proceedings under section 147 in the first place and the of assumption of jurisdiction under section 263 of the Act loses its validity on this count itself. Further, the fact of the matter remains that the assessee had not claimed any expenditure towards purchase of land during the year under consideration and, therefore, the provisions of section 40A (3) of the Act could not have been legally invoked as they come into play only when an amount, which has been claimed as an expenditure, has been paid in cash. It is our considered opinion that the Ld. Pr. Commissioner of Income Tax was also not justified in setting aside the re-assessment order and directing the framing of an assessment by applying provisions of section 40A (3) of the Act in a situation when the provision could not be invoked and the same would be contrary to the provisions of law, if so invoked. It is our considered opinion that the Ld. Pr. CIT does not have the power to direct the AO to do something which the Act itself does not permit. The invocation of jurisdiction under section 263 of the Act loses its validity on this count also. Accordingly, we hold that the Commissioner of Income Tax had no jurisdiction or power to invoke provisions of section 263 of the Act on the facts and circumstances of the case and we deem it fit to quash the order passed under section 263 of the Act. Appeal of the assessee is allowed.
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2017 (11) TMI 1060
Taxability of the transaction with the builder - Capital gain computation - transfer u/s 2(47) - three flats stated in the agreement have yet not been given by the builder and the likelihood of getting it is also doubtful - LR has pointed out that there does not appear to be a ‘transfer’ u/s 2(47) inasmuch as the absence of taking possession by the Transferee is quite significant, and shows that the transferee is not performing his part of the contract, and thus there is no transfer to workout capital gains; and the amount received is merely in the nature of advance - Held that:- The aforesaid plea being set-up by the assessee requires a factual appreciation of the affairs, which could appropriately be undertaken at the level of the Assessing Officer. Notably, in the orders of the authorities below, there are significant gaps in culling out the proper fact-situation. For instance, the entire terms and conditions of the Conveyance Deed dated 10.08.2008 between the assessee and her family members and M/s. Saroj Associate, the builder on the other hand have also not been culled out and to compound the matters further, even before the Tribunal the copy of the agreement has not being filed. Therefore, in my view, it would be appropriate if the matter is revisited by the Assessing Officer who shall consider all the facts which have a bearing on the tax liability of the assessee vis-a-vis the transaction with the builder with respect to the Deonar property, and decide afresh. There is another fallacy which is quite apparent and needs to be examined. Pertinently, assessee had pointed out that the three flats have not been received and, therefore, the stated value of consideration was not crystallized. At this stage, the stated consideration was required to be crystallized, and only then it could be compared with the value adopted by the Stamp Duty Valuation authority for the purposes of section 50C of the Act. However, the Assessing Officer adopted the Stamp Duty valuation of the entire property; and, the same ought to have been appropriately dealt with by the lower authorities. However, I find that it has also been given a go-by and the CIT(A)who has upheld the action of the Assessing Officer in adopting the Stamp Duty valuation as the full value of the consideration for the purposes of computing Capital Gains. For all the above reasons, deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to consider the issue
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2017 (11) TMI 1059
Levying penalty u/s 271(1)(c) - addition made of unexplained investment under section 69 - defective notice - Held that:- The perusal of the notice reveals that the AO has not strike out the irrelevant portion of the notice. Further, we have also perused the Assessment Order passed under section 153A rws 143(3) dated 08.06.2012. The perusal of Assessment Order reveals that the AO has not specified under which limb of section 271(1)(c), the penalty is initiated. The AO simply noted “therefor penalty proceeding under section 271(1)(c) is hereby initiated.” Hon’ble Gujarat High Court in Manu Engineering (1978 (9) TMI 18 - GUJARAT High Court) and Delhi High Court in CIT Vs Virgo Marketing (2008 (1) TMI 885 - DELHI HIGH COURT) held that where from a reading of assessment order, it was not clear as to why Assessing Officer chose to initiate penalty proceedings against assessee and under which part of section 271(1)(c), penalty imposed under section 271(1)(c) is liable to be set aside. - Decided in favour of assessee.
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2017 (11) TMI 1058
Validity of reopening of assessment - eligible reasons to believe - Held that:- AO issued notice u/s 148 of the I.T. Act after receiving information from the Sales Tax Department that some of the parties from whom the assessee had made purchases were bogus and they are engaged in the business of providing bills without actual delivery of goods and thus there was escapement of income from assessment. This information received from the Investigation wing construed ‘tangible material’ for the purpose of reopening the assessment. Hence reopening of the assessment by the AO and upheld by Ld. CIT(A) is valid. Hence this ground raised by the assessee is dismissed. Confirmation of disallowance @ 12.5% of the bogus purchases - Held that:- Facts and circumstances of the case clearly prove that assessee has booked bogus purchases. The assessee has made purchase from grey market. Making purchases from the grey market gives the assessee selling on account of non-payment of tax and others at the expense of the exchequer. In such circumstances, following the precedent from Hon’ble Gujarat High Court decision in the case of Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) we are of the considered opinion that 12.5% disallowance in this case would serve the interest of justice. - Decided against assessee.
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2017 (11) TMI 1057
Transfer pricing adjustment - Held that:- The issue of transfer pricing is required to be restored back to the Commissioner of Income-tax (Appeals) with a direction that he should decide the issue afresh by applying the RPT filter of 25 per cent. or 15 per cent. as the case may be and examine the aspect of high profit margin and high turnover in the light of the judgment of the hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisers India P. Ltd. (2015 (4) TMI 949 - DELHI HIGH COURT). Computation of deduction 10A - Held that:- In view of section 10A, freight charges, telecommunication charges and insurance charges which are attributable to export of computer software are not required to be taken into account for export turnover. Since the assessee has not been able to demonstrate that the entire insurance cover is relatable to export turnover for computer software, therefore, we deem it appropriate to remand this issue back to the file of the Commissioner of Income-tax (Appeals) for fresh examination on this aspect of insurance charges i.e., how much of insurance charges were attributable to export of computer software. The Commissioner of Income-tax (Appeals) is directed to adjudicate this issue afresh after affording opportunity of hearing to the assessee as well as the Assessing Officer. This ground is allowed for statistical purposes.
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2017 (11) TMI 1056
Penalty u/s 271(1)(c) - disallowance made on ad-hoc basis and the assessee to buy peace with the Department made the surrender - Held that:- Since, the assessee was in custody during the relevant period, when the assessee was asked to produce the necessary documents, to substantiate its claim, it may not be possible to furnish the same. The assessee to buy peace with the Department made a surrender and paid the taxes thereupon. In such a situation, the decision in CIT v. SDV Chandru (2003 (12) TMI 40 - MADRAS High Court ) wherein it was held by the Hon'ble High Court that where the assessee has not disclosed his income in the returns filed for the previous years which have ended prior to the date of search and in the statement given u/s 132(4), the assessee admits the receipt of undisclosed income for those years and therefore pays taxes on the undisclosed income, such undisclosed income would be immunized from the levy of penalty. Quantum and penalty additions are all together different and since ad-hoc disallowance was made by the assessee and during the relevant period, the assessee, being in judicial custody, could not file the necessary evidence and made surrender to buy peace with the Department and paid taxed thereupon, therefore, at least, the penalty u/s 271(1)(c) will not survive. Thus, this appeal of the assessee is allowed.
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2017 (11) TMI 1055
Penalty u/s 271(1)(c) - defective notice - non deletion of inappropriate words and parts of the notice - Held that:- AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i.e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. Therefore, respectfully following the decision in the case of Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) we hold that the notice issued under section 274 r.w.s. 271 of the Act dated 29.11.2007 for A.Y. 2005-06 for initiating penalty proceedings under section 271(1)(c) of the Act in the case on hand is invalid and consequently, the penalty proceedings are also invalid. - Decided in favour of assessee.
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2017 (11) TMI 1054
Addition made on account of on money cash payment for purchase of property at Delhi - incriminating documents/evidences received from DRI, Mumbai as the assessee was unable to explain the transaction or rebut the presumption that on money was paid for the purchase of the property - Held that:- Totality of facts clearly indicates that the Ld. Assessing Officer could not collect any evidence to substantiate that in fact any cash was transacted for purchase of property. The case of the assessee is further fortified by the facts that the demand drafts issued for purchase of property were reflected in the documents, no statement was recorded by DRI either of Ms. Zaver Cyrus Dadina or of any other person during the course of search in respect of the details contained in the hard disc. Even, the information received from the investigation wing was never corroborated with any evidence, statement that any cash changed hands for the transaction. When the Ld. Assessing Officer recorded the statement of Shri Atul Sud, Director of the assessee company, though he admitted the transaction to be made through demand draft but he never tendered that any cash was transacted. Ms. Zaver Cyrus Dadina completely expressed or ignorance with regard to details of land dealings as has been alleged. The efforts of Assessing Officer to record the statement of Miss Damini Vadhwa, and Miss Reeta Bhatia also could not provide any information leading to the addition. The seized material/print out was not in the handwriting of the assessee and even there is no material to suggest that the seized material was maintained either by the assessee or it’s of or employees. Even the statement of Rajaratanam was discarded by the Ld. Commissioner of Income Tax (Appeal) as the floor price, fixed by the authorities, for such property was found much lower than the value. Considering the factual matrix and the judicial pronouncements, discussed hereinabove, we find no infirmity in the conclusion of the Ld. First Appellate Authority. Our view is further fortified by the fact that the concerned data was even not found from the premises of the assessee and further the assessee has not started any substantial business activity and for acquisition of the land to inter corporate loan of ₹ 40 lakh from Strategic Capital Corporation. Thus, the presumption of the Ld. Assessing Officer for making the addition on presumptive basis was rightly deleted by the Ld. Commissioner of Income Tax (Appeal). - Decided against revenue Deemed dividend addition u/s 2(22)(e) - loan by the assessee from sister concern - Director of the assessee company was holding more than 10% of the voting power in the company which advance loan to the assessee - Held that:- Addition made by the Assessing Officer is on the assumption that the common director hold more than 10% in SCCPL, which is factually incorrect. Both companies have common directory namely Shri Atul Sud, who is having 9% stakes in SCCPL (sister concern) which has given loan to the assessee to bring this amount within the ambit of deemed dividend u/s 2(22)(e) it has to be established that the same has to be given to shareholders out of the accumulated profit and further it was in the nature of loan or advance. Assessing Officer made the addition u/s 2(22)(e) of the Act of ₹ 40 lakh, taken as a loan by the assessee from sister concern, SCCPL by holding that the shareholding is more than 10%. It is undisputed fact that the assessee is not a shareholder in the sister concern (SCCPL). However, before invoking section 2(22)(e) of the Act, it has to be established that the same was given to the shareholder out of the accumulated profit and further it was in the nature of loan or advance. This issue has been elaborately dealt with by Hon'ble jurisdictional High Court in CIT vs Universal Medicare Pvt. Ltd.(2010 (3) TMI 323 - BOMBAY HIGH COURT ). Thus, the deemed dividend cannot be invoked in the hands of the present assessee, resultantly, we affirm the stand of the Ld. Commissioner of Income Tax (Appeal). - Decided against revenue
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2017 (11) TMI 1053
Bogus purchases - addition made u/s 69C - profit estimation - Held that:- Disallowance were made by the assessee on the plea that the quantitative details were not furnished by the assessee on the plea that the purchases made from nine tainted parties were in fact sold. Admittedly, there cannot be sale without purchases and the G.P. ratio for Financial Year 2008-09 (@ 15.38%), the G.P. of Assessment Year 2007-08 (@ 15.53%) and of Assessment Year 2009-10 (@ 15.59%), clearly indicates that the First Appellate Authority has justifiably, under the facts and the circumstances of the case adopted the disallowance at the rate of 15% of the alleged bogus purchases. Even otherwise, the case of the assessee/Revenue is also covered by the decision from Hon'ble jurisdictional High Court in the case of M/s Nikunj Exim Enterprises Pvt. Ltd.(2013 (1) TMI 88 - BOMBAY HIGH COURT) and CIT vs Smit P. Seth (2013 (10) TMI 1028 - GUJARAT HIGH COURT). This view of the Ld. Commissioner of Income Tax (Appeal) will plug the revenue leakage, therefore, we affirm the stand of the Ld. Commissioner of Income Tax (Appeal), resulting into dismissal of appeal, filed by the Revenue.
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2017 (11) TMI 1052
Assessment of waiver of principle amount of loans - assessee's claim that the waiver of loan cannot be construed to be income under Section 28(iv) and it is also not an income under Section 41(1) - Held that:- As gone through the judgment of Madras High Court in Iskraemeco Regent Ltd. (2010 (11) TMI 43 - Madras High Court) found that the loan was borrowed for purchase of a capital asset, hence, the waiver of loan is not an income assessable to tax. The High Court further found that it cannot be treated as income either under Section 28(iv) of the Act or under Section 41(1) of the Act. The High Court further found that since the loan borrowed was used for purchase of capital asset, it is a capital receipt. Thus this Tribunal is of the considered opinion that the loan amount waived by ICICI Bank has to be necessarily considered as revenue receipt, hence, it is taxable. Therefore, this Tribunal do not find any reason to interfere with the orders of the lower authority and accordingly the same are confirmed. Allowance of pre-operative expenses - Held that:- CIT(Appeals) found that the assessee showed the pre-operative expenses to the extent of ₹ 2,36,27,733/- in the balance sheet as on 31.03.2003. However, what was written off is only ₹ 1,81,54,653/- as per the Profit & Loss account for the financial year 2003-04. The CIT(Appeals) further found that the commercial business operation was not commenced. The CIT(Appeals) has found that the business operation of the assessee was suspended since September, 1999 and no activity was undertaken thereafter. There is no material available on record to suggest that the assessee has commenced the business operation. Hence, the business operation was not commenced and hence, the expenditure like interest, losses due to exchange rate fluctuation cannot be allowed. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.
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2017 (11) TMI 1051
Nature and genuineness of the expenditure - addition prior period expenditure - system of accounting - Held that:- AO has not examined the nature and genuineness of the impugned expenditure. He has simply disallowed for the reason that the assessee is following mercantile system of accounting and the deduction can be allowed in respect of only those expenses which are incurred in the relevant accounting year of computing the profits and gains. Thus, he had not examined the nature and genuineness of the expenditure at all. In the view of that we are of the considered opinion that the AO has to examine the nature and genuineness of the expenditure and decide the issue in accordance with law following the ratio CIT vs. Jagatjit Industries Limited [2010 (9) TMI 58 - DELHI HIGH COURT]. To that extent, the revenue’s appeal is treated as allowed.
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2017 (11) TMI 1050
Disallowance under section 40(a)(ia) - assessee in default - Insertion of second proviso w.e.f. 01.04.2013 to section 40(a)(ia) - prospectivity OR retrospectivity - Held that:- As in the case of Aditya Construction Company India Pvt. Ltd. [2014 (11) TMI 1150 - ITAT HYDERABAD] the Tribunal has considered the decision of the hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA ] wherein it was held that if the payees have admitted the receipt of income, there is no need for the payee to deduct the TDS and in such circumstances, the assessee cannot be treated as "as assessee-in-default" and consequently the second proviso to section 40(a)(ia) also comes into operation even though the said proviso was introduced from April 1, 2013. Thus we deem it fit and proper to admit the additional ground of appeal and remand the issue to the file of the Assessing Officer for verification as to whether the recipient of the legal fee has offered the income in its return of income for the respective financial year. Thus, grounds of appeal 5, 9 and 10 are treated as allowed for statistical purposes. Whether the provisions of section 40(a)(ia) would apply to the expenditure which is payable as on 31st March of every year and not to the amounts which is already paid during the previous year? - Held that:- This Ground is rejected in view of the judgment of the hon'ble Supreme Court in the case of Palam Gas Service v. CIT [2017 (5) TMI 242 - SUPREME COURT] dated May 3, 2017 wherein, the hon'ble court has held that section 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid.
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2017 (11) TMI 1049
Application under section 10(23C)(iv) rejected - Held that:- After recording all the facts and the contentions of the assessee in the light of the orders referred and held that the activities of the assessee are covered under section 2(15) of the Act under the sixth limb and that the assessee is eligible for exemption under section 11(1) of the Act. There is no change of circumstances since the date of the order of the hon'ble High Court and also from the facts relevant to the assessment years 2009-10 and 2010-11. In the circumstances, while respectfully following the order of the hon'ble jurisdictional High Court and also in view of the fact that the learned Commissioner of Income-tax (Appeals) granted relief in respect of the assessment years 2009-10 and 2010-11 also, we find no legal infirmity in the order of the learned Commissioner of Income-tax (Appeals) and we confirm the same - Decided against revenue.
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2017 (11) TMI 1048
Levy of penalty under section 271(1)(c) - non application of mind by AO - Held that:- It is apparent from the documents on record that there is inconsistency with respect to charge for levy of penalty at all the three stages i.e.,(i) recording of satisfaction ;(ii) issuance of notice ; and(iii) levy of penalty. There is ambiguity in recording of satisfaction and notice issued for the levy of penalty under section 274 read with section 271(1)(c) of the Act. Since the charge for levy of penalty is not explicitly clear from the notice, the same is held to be bad in law and hence, the penalty proceedings are liable to be set aside on this ground alone. Since the additional ground raised by the assessee has been allowed, the grounds raised by the assessee challenging the levy of penalty on the merits have become academic and thus, are not dealt with. Levy of penalty by the Assessing Officer in a mechanical manner without proper application of mind is fatal. Ambiguity in the notice issued under section 274 read with section 271(1)(c) would itself vitiate the entire penalty proceedings. - Decided in favour of assessee.
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2017 (11) TMI 1047
Deduction u/s 10A - Held that:- In the nature of the order we propose to pass, it is not necessary to issue notice to the respondent, since this court has rendered its judgment in the relied upon matter CIT v. Yokogawa India Limited [2016 (12) TMI 881 - SUPREME COURT] Therefore, this appeal is disposed of in terms of the said judgment. Since, notice is not issued to the respondent before this court, we make it clear that the Assessing Officer will issue notice to the respondent.
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Customs
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2017 (11) TMI 1046
Penalty - Whether on the facts and circumstances of the case, the Tribunal was justified in reducing the penalty imposed u/s 114(iii) of the CA, 1962 when the suppression by the appellant has been established during adjudication proceedings? - Held that: - When the adjudicating authority is empowered to impose lesser penalty than the maximum provided it cannot be said that the Tribunal is not vested with the same power. The Tribunal having exercised the above discretion for the reasons recorded which do not appear to be arbitrary or whimsical, in any way, the said discretion is not liable to be interfered with and the Tribunal was justified in reducing the penalty imposed u/s 114(iii) of CA - appeal dismissed - decided against appellant.
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Insolvency & Bankruptcy
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2017 (11) TMI 1045
Non-production of Banker’s Certificate - section 9(5) of IBC, 2016 - Held that: - failure to abide by the statutory mandate would result in rejection of the Application as filed by the Petitioner/Creditor by virtue of provision 9(5) of IBC, 2016 - denial of liability and raising a dispute coupled with inaction on the part of Operational Creditor in diligently prosecuting for the recovery of amounts alleged to be due to it since 2012 - petition dismissed - decided against petitioner.
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Service Tax
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2017 (11) TMI 1044
Renting of immovable property service - Reimbursement of expenses - the decision in the case of M/s Mohan Goldwater Breweries Limited Versus Commissioner of Central Excise & Service Tax, Lucknow [2017 (5) TMI 1252 - CESTAT ALLAHABAD] contested - Held that: - delay condoned - appeal admitted.
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2017 (11) TMI 1043
Business Support Services - Revenue entertained a view that the arrangement between the appellant and the CSIDC, for such supply of water, will be covered for service tax purpose under the category of “Support Services of Business or Commerce” - the decision in the case of Radius Water Ltd. Versus Commissioner of Central Excise & S.T., Raipur [2017 (9) TMI 83 - CESTAT NEW DELHI] contested - Held that: - Application for exemption from filing certified copy of the impugned order is allowed - delay condoned - issue notice.
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2017 (11) TMI 1042
Tour operator service - petitioner's contention is that the petitioner's vehicle, which is a contract carriage does not satisfy the ingredients of tourists vehicle, and the demand made by the respondent is illegal - Held that: - the interpretation sought to be given to the observations of the Court does not, in any manner, advance the case of the petitioner. The rationale applicable to Stage Carriage Permits would equally apply to Contract Carriage vehicles covered by the permit under Section 74 of the Motor Vehicles Act - the respondent was bound to consider the specific plea raised by the petitioner that, he is not a tour operator, undertaking tour in respect of a tourist vehicle, as contemplated under Section 2 (43) of the Act read with Section Rule 85 (A) (7) of the Motor Vehicles Act and Rule 128 of the Central Motor Vehicle Rules - for consideration of this plea the matter has to be remanded to the respondent for fresh consideration - petition allowed by way of remand.
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Central Excise
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2017 (11) TMI 1041
100% EOU - CENVAT credit - input service distribution - Held that: - I have perused the invoice and it is in the name of Gokuldas Images Pvt. Ltd. (GI) Division and service tax has been paid on the advance amount and therefore, this finding of the Commissioner (A) is wrong that the service has not been provided to Gokuldas Images Pvt. Ltd. (GI) Division. Moreover, appellant is the division of Gokuldas Images Pvt. Ltd., who is working as ISD and this credit has been distributed to the appellant by ISD - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1040
Manufacture - food flavours - valuation - royalty - includibility - appellant was of the view that the food flavours were prepared by them by mixing different odoriferous substances purchased by them from different suppliers. They claimed that this process did not amount to manufacture - department is of the view that the amounts received by way of royalty by the appellant was required to be added to the consideration received for food flavours - Time limitation - Held that: - the issue before us is an intricate mixture of the question whether manufacture is involved in the preparation of food flavours by the appellant as well as valuation of the same for payment of excise duty. It goes without saying that if the process of making food flavours does not amount to manufacture then there is no question of payment of excise duty. In such a scenario, the dispute on valuation becomes irrelevant - the question of manufacture taken at the outset. Held that: - In the absence of detailed explanation of the processes involved, we are unable to entirely appreciate the same. Moreover, we find that the details were not considered by the adjudicating authority and in the absence of detailed discussions by the adjudicating authority on the processes involved, we are unable to take a firm view in the matter. In the absence of the details of the processes employed by the appellant on record, we are not in a position to give due consideration to all the factors and come to a judicious conclusion - we deem it necessary to remand the matter to the adjudicating authority to consider in detail the process of manufacture after ascertaining the same and decide the question whether it is a process of manufacture. In the event a view is taken that the processes amount to manufacture, the adjudicating authority will re-examine the issue of valuation of such food flavour for payment of duty. Appeal allowed by way of remand.
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2017 (11) TMI 1039
100% EOU - Liability of duty - by-products - neem cake and neem oil obtained from extracted kernel - job-work - Held that: - Clearly the product is manufactured within the scope of LOP and the appellants have been put to liability of account for it. The products manufactured by EOU by themselves or with the help of the job worker are to be disposed of in terms of the policy. In the present case, the disposal of two of their products is not in terms of the policy. Hence, the rate and the quantification of duty liability have to be arrived at in terms of the policy and applicable notification - These products are recognized for manufacture in the LOP. By demarcation of byproducts, the obligation cast on the appellants cannot be waived. These are not scrap or waste. Admittedly, these valuable products have been cleared to domestic market in violation of Foreign Trade Policy - the appellants are liable to duty as confirmed in terms of Section 3 (1) of CEA, 44. Extended period of limitation - penalty - Held that: - The question that all the facts are taken from the records of the appellants by itself will not take away the sustainability of the demands for longer period - extended period and penalty rightly imposed. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1038
Penalty on Managing Director of M/s. Reliance Engineers Ltd. - recovery of CENVAT credit - Held that: - the delayed payment of duty/reversal of credit in terms of Rule 3(5) and 3(5A) of the CCR, 2004 was due to the fact that the company was not in the possession of any of the records to pay the dues/reverse the credit and immediately after the receipt of the records from the Bench the company has paid/reversed the credit in terms of Rule 3(5) and 3(5A) of the CCR, 2004 - the clearance of goods was not at all in the hands of the appellant to invoke Rule 26 - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1037
SSI Exemption - rejection on the ground of not filing of prescribed declarations - N/N. 9/2003-CE dated 01.03.2003 - case of appellant is that mere non-filing of declarations by the appellant cannot be fatal for the appellant to deny exemption under the notification in question - in case the appellant has not filed declaration as required under N/N. 9/2003-CE dated 01.03.2003, whether the appellant is entitled for the benefit of exemption notification or not? Held that: - Admittedly, the appellant is an small scale industry and is otherwise entitled to the benefit of notification. In terms of SI.No.2 of the notification, a manufacturer intended to avail the benefit of notification is required to file his option in writing to their jurisdictional Central Excise authority - The declaration requires an assessee to give various informations about them to their jurisdictional Central Excise authority. Such information is regarding name and address of the manufacturer, location of the factory, description of inputs and final products, the date from which option has been exercised and aggregate value of clearances. It is also seen that legislative intent in issuing the said notification is to grant concessional rate of duty to the SSI unit. The appellant had admittedly satisfied all substantial conditions of the notification so as to earn the benefit. Denial of benefit on the ground that the option was not filed separately, if the same is otherwise available to the assessee, would defeat the legislative intent. It is well settled that an interpretation which defeats the purpose, for which a particular notification stands issued by Government, is not required to be adopted - Admittedly, in the present case, the purpose of small scale notification is to grant benefit to the SSI and to encourage the small scale industries. Such purpose cannot be defeated on the ground that option was not made separately on a piece of paper but the same was conveyed to the Revenue in the form of ER-3 returns. The benefit of notification in question is based upon the fulfilment of other conditions, like assessee being a small scale manufacture, the quantum of clearances effected in a particular year and the use of brand name etc. Filing of declaration has to be held as procedural conditions. Some conditions are substantive, mandatory and based on considerations of policy and some other merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes, which they were intended to serve. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (11) TMI 1036
Principles of Natural Justice - validity of assessment order - Held that: - in the impugned assessment orders, there is no reference to the petitioner's objections dated 23.3.2017, which were received by the officer himself. In the written instructions given to the learned Special Government Pleader, the respondent accepted that he had received the objections. If the respondent received the objections, he should have afforded an opportunity of personal hearing to the petitioner, considered the documents that they may produce and then completed the assessment. Having not done so, the failure of the respondent would render the impugned orders unsustainable and are in violation of the principles of natural justice - the matters are remitted back to the respondent for a fresh consideration - petition allowed by way of remand.
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2017 (11) TMI 1035
Payment of tax on compounded basis - ice cream - the petitioner applied for payment of tax on compounded basis, by taking the view that the ice cream that was manufactured and sold by it, was an item of cooked food which was one of the items in respect of which an assessee could discharge tax on compounded basis u/s 8 of the KVAT Act - reassessment order - whether it was open to the respondent to propose a rejection of an application submitted by an assessee for payment of tax on compounded basis, at the fag end of the assessment year, in respect of which the compounding application was preferred? Held that: - when the statutory provisions detailing the procedure to be followed by an assessee, for the purpose of payment of tax on compounded basis, contemplate the consideration, by the department, of an application preferred by an assessee, and an intimation to be given to the assessee as to whether or not his application was accepted, for the purposes of enabling the assessee to discharge his liability on compounded basis, the respondent cannot, by a delayed action on its part, prevent an assessee from discharging the liability on compounded basis - In the instant case, since the assessee, after opting to pay tax on compounded basis, had to commence payment of tax on the said basis in the first quarter of the assessment year in question, any communication rejecting the request of the assessee for payment of tax on compounded basis ought to have been served on the assessee before the expiry of the said quarter. Only in such an event, would the assessee have had an opportunity to pay tax in accordance with the regular provisions of tax, as against the provisions of Section 8 of the KVAT Act - The non communication of any such rejection order by the respondent, effectively estopped it from subsequently issuing an order rejecting the application, since by that time the assessee was justified in discharging its liability in accordance with Section 8 of the KVAT Act, for which he had opted. The assessment orders impugned in these writ petitions cannot be legally sustained. The delayed action on the part of the respondent would, under the circumstances, amount to a mere change of opinion by the assessing officer and, it is trite, that in exercise of powers under Section 25(1) of the KVAT Act, a change of opinion by an assessing officer cannot be the basis of a reassessment against the assessee. The proposal to reject the application submitted by the assessee was served on the assessee only on 06.02.2017, which is in the last quarter of the assessment year 2016-17. This amounts to a serious lapse on the part of the department in the matter of issuing notices to an assessee, who in their opinion, was not entitled to opt for payment of tax on compounded basis, in respect of the product dealt with by him during the previous assessment year - It is for the Commercial Tax Department in the State to look into this lapse on the part of the officers under the department and take appropriate action against the said officers, in the event of a finding that there was negligent conduct on the part of the officers in permitting the assessee to pay tax on compounded basis. Petition allowed - decided in favor of petitioner.
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