TMI Tax Updates - e-Newsletter
November 25, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. The Changing Sea Landscapes in India

   By: Prasanna CP

2. APPLICATION OF REVIEW IS MOST RESTRICTED THAN THAT OF AN APPEAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. One more arrested in Hisar for issuing fake invoices of ITC

2. Shri Piyush Goyal has called upon the Indian industry to focus on improving Quality and Productivity

3. Finance Minister Smt. Nirmala Sitharaman says momentum of reforms continues during the pandemic and will continue; Economy is facing a reset exercise

4. Auction for Sale (Re-issue) of ‘3.96 GS 2022’, Auction for Sale (Re-issue) of ‘5.15% GS 2025’, Auction for Sale (Issue) of ‘New GS 2030’, and Auction for Sale (Re-issue) of ‘ 6.80% GS 2060’

Notifications

Customs

1. 61/2020-Customs (N.T./CAA/DRI) - dated 19-11-2020 - Cus (NT)

Appointment of CAA by DGRI

2. 60/2020-Customs (N.T./CAA/DRI) - dated 19-11-2020 - Cus (NT)

Appointment of CAA by DGRI

3. 59/2020-Customs (N.T./CAA/DRI) - dated 19-11-2020 - Cus (NT)

Appointment of CAA by DGRI

4. 58/2020-Customs (N.T./CAA/DRI) - dated 17-11-2020 - Cus (NT)

Appointment of CAA by DGRI

GST - States

5. 43/2020-State Tax - dated 18-11-2020 - Himachal Pradesh SGST

Appoint the 18th day of May, 2020, as the date on which the provisions of clause 12 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2020, shall come into force

6. 55/2020-State Tax - dated 13-11-2020 - Himachal Pradesh SGST

Seeks to amend Notification No. 35/2020-State Tax, dated the 23rd June, 2020

7. 80/2020-State Tax - dated 12-11-2020 - Himachal Pradesh SGST

Amendment in Notification No. 41/2020-State Tax, dated the 14th July, 2020

8. 60/2020-State Tax - dated 12-11-2020 - Himachal Pradesh SGST

Himachal Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2020

9. 49/2020-State Tax - dated 12-11-2020 - Himachal Pradesh SGST

Appoint the 30th day of June, 2020, as the date on which the provisions of section 13 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2020, shall come into force

10. 47/2020-State Tax - dated 12-11-2020 - Himachal Pradesh SGST

Seeks to amend Notification No. 35/2020-State Tax, dated the 23rd day of June, 2020

11. 46/2020-State Tax - dated 12-11-2020 - Himachal Pradesh SGST

Seeks to extend period to pass order under Section 54(7) of HPGST Act

12. 30110-FIN-CT 1-TAX-0072/2017 - dated 12-11-2020 - Orissa SGST

Amendment notification on Odisha State Authority for Advance ruling

SEZ

13. S.O. 4202 (E) - dated 18-11-2020 - SEZ

Rescinds Notification No. S.O. 344(E) dated 15th, February 2008

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD1/DSAP/CIR/P/2020/234 - dated 24-11-2020

Testing of software used in or related to Trading and Risk Management

Highlights / Catch Notes

GST

• High Court Dismisses Challenge to Rule 117 of CGST Rules; No Evidence of Filing Errors in TRAN-1 Forms.

  Case-Laws - HC : Carry forward of transitional credit - vires of Rule 117 of the CGST Rules, 2017 - no evidence of error of submission/filing of TRAN-1 by the petitioner - There is nothing on record to show that petitioner has ever attempted to file TRAN-1 during the extended period - Petition dismissed - HC
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• High Court Invalidates GST Demand Due to Lack of Show Cause Notice and Improper Communication Procedure.

  Case-Laws - HC : Demand/Recovery of GST - Failure to issue Show Cause Notice before passing summary of order in the prescribed manner - Revenue conceded that the SCN/order was communicated to petitioner by Email and was not uploaded on website of the revenue - t is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein. - Demand notice struck down - HC
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• Court Denies Bail for Accused in Fake Firm and GST Evasion Case Due to Ongoing Investigations and Evidence.

  Case-Laws - DSC : Grant of Bail - creation of bogus firm - GST Evasion - The investigation is still pending and, there, has been material recovered reflecting connivance/participation of the accused in the commission of offence and receiving cash from the bogus firms in the form of cash entries in the record. In these circumstances, this court is of the opinion that granting concession of bail to the accused at this stage will definitely prejudice the fair investigation into the matter. - DSC
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Income Tax

• Interest Capitalization Allowed for Long-Term Capital Gains Calculation on Property Purchased with Borrowed Capital per Assessing Officer.

  Case-Laws - AT : Long Term Capital gain computation - interest capitalized to cost of asset - It is not in dispute that the property was acquired by a borrowed capital initially borrowed from the relatives of the Directors. Thereafter, the loan taken from such persons was repaid out of the loan received from ICICI bank. - it cannot be construed that there is no nexus between the acquisition of the property and the utilization of the capital so borrowed. - AO hereby directed to allow capitalization of interest - AT
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• Assessing Officer Must Verify Claims Before Adding Transactions from AIR if Assessee Denies Involvement.

  Case-Laws - AT : Addition on the basis of Annual Information Return (AIR) - When the assessee claims that he has not entered into any transaction with the concerned parties, the least the Assessing Officer could have done is to ascertain the correctness of assessee's claim by making enquiry with the concern parties. AO having not done so, the addition cannot be sustained. - AT
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• Reopening Tax Assessment After 4 Years Requires Valid Reason u/s 147, Mere Suspicion Insufficient.

  Case-Laws - AT : Reopening of assessment u/s 147 - assessment after 4 years - reason to suspect OR reason to believe - Reopening of assessment which is already concluded under Section 143(3) of the Act of the assessment cannot be reopened without any allegation by the Assessing Officer that there was non-disclosure of true and correct facts by the assessee while framing the original assessment. Hence, we are inclined to annul the assessment. - AT
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• Assessing Officer Misinterprets Section 40A(2)(a), Wrongly Disallows Directors' Remuneration; Not Deemed Excessive by Assessee.

  Case-Laws - AT : Disallowance of directors remuneration u/s 40A(2)(a) - A.O by misconstruing the scope and gamut of Sec. 40A(2)(a) had disallowed the entire amount of the directors remuneration. - remuneration paid by the assessee to its directors can by no means be stamped as exorbitant, and therein disallowed by invoking the provisions of Sec. 40A(2)(a) - AT
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• India-UK Tax Treaty: No Permanent Establishment in India if Services Rendered Less Than 90 Days; Income Not Taxed as Business Profits.

  Case-Laws - AT : Income accrued in India - Benefit of India-UK Tax Treaty - Whether the assessee has PE in India and the receipts are liable to be taxed as ‘Business Profits’? - if the employees/personnel of the assessee have not rendered services in India for a period exceeding 90 days during the relevant period then it has to be held that the assessee did not have a PE in India during the year under consideration. - AT
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• Goods Lost in Fire Not Deductible u/s 29 of Income Tax Act Despite Insurance Compensation.

  Case-Laws - AT : Disallowance of goods lost due to fire - addition invoking section 29 - Moment the insurance Co determines the loss in terms of the insurance policy obtained by the assessee from the insurance company, naturally the assessee would be reimbursed or compensated for the same. - It does not mean that assessee has not incurred the losses. The accident of fire at the premises of the assessee in which it has lost goods due to the fire is one incident. The action of the assessee of obtaining the insurance is altogether a different act to mitigate the loss incurred by the assessee. - AT
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• Foreign Exchange Loss from Year-End Revaluation of Business Advances is Deductible for Tax Purposes.

  Case-Laws - AT : Disallowance being the amount of exchange fluctuation loss provided at the year end on business advance received in foreign exchange - the exchange fluctuation loss arising on account of the revaluation of business advances on the close of the year by the assessee is allowable as deduction in the hands of the assessee - AT
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• Appeal Filed Timely Despite Missing Receipt Date in Form 35; Technicality Shouldn't Lead to Dismissal.

  Case-Laws - AT : Defect in appeal - The very object of mentioning the date of receipt of the assessment order is to compute the period of limitation. In this case, admittedly, the appeal is filed within the period of limitation. Therefore, there is no justification for dismissing the appeal on technicality on the ground that the date of receipt of the assessment order was not mentioned in Form 35. - AT
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Customs

• COVID-19 Delays: High Court Supports Provisional Payment of Cargo Detention Fees Pending Further Orders in Writ Petitions.

  Case-Laws - HC : Deadlocks/inordinate delays for clearance of import cargo. due to COVID-19 pandemic lockdown - the Learned Single Judge ordered that the payment of container detention charges or other penal charges by the petitioners for release of the cargo covered by Bills of Lading shall be provisional and subject to further orders in the writ petitions. - there is no error in the interim order dated 30-6-2020, warranting interference in the instant appeals. - HC
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IBC

• Creditors Must Submit Claims Before NCLT Approval; Late Claims Not Allowed Post-Resolution Plan Approval.

  Case-Laws - Tri : Entertainment of claims made by creditors after approval of Resolution Plan - A stakeholder cannot afford to sleep over his claims and fail to submit it on time and come forward after the approval of Resolution Plan by the Adjudicating Authority. - The approved Resolution Plan approved vide order dated 23rd January, 2019 by the NCLT, Chennai Bench is binding on the stakeholders including the statutory authorities who failed to file claims before the said approval - Tri
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Central Excise

• Interest Denied on Refund Claim; Statutory Interest Should Start if Refund Delayed Beyond Three Months per Section 11BB.

  Case-Laws - SC : Interest on refund claim - interest denied on the finding that the adjudication of the claim attained finality only after dismissal of the proceedings before the High Court - the statutory interest ought to commence after non-payment within three months from the date of application, being the starting point envisaged by Section 11BB of the Act. - SC
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• Court Questions Fraudulent CENVAT Credit Claims; Authenticity of Railway Receipts Unverified, Department's Conclusion Challenged.

  Case-Laws - AT : CENVAT Credit - fake invoices without supply of goods - The appellants had provided the Railway Receipts (RR’s) under cover of which the inputs had come. The disputed invoices have crossreferences of the corresponding RR’s. The department made no efforts to verify the genuineness of the RR’s - Hence, it cannot be said that the invoices received in the appellants’ factory were not accompanied by duty paid goods. - AT
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• Refund Claim Valid: Limitation Period Calculated from Goods Clearance to Claim Presentation Date; Rejection Overturned.

  Case-Laws - AT : Refund claim - Period of limitation - The time-limit has to be computed from the date of clearance of the goods to the date of first presentation of the claim. The refund would be then well within time. The rejection of refund claim on the ground of being time-barred is set aside. - AT
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Case Laws:

• GST

• 2020 (11) TMI 751
  Validity of Summon Order - High Court refused to entertain the request that there is power to issue summons but the partner of the petitioner be exempted from personal appearance - HELD THAT:- The SLP need not be interfered with. - However, it will be open to the petitioner to request the concerned authority to defer the recording of statement of the petitioner until the lockdown period is over. SLP dismissed.

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• 2020 (11) TMI 750
  Carry forward of transitional credit - vires of Rule 117 of the CGST Rules, 2017 - no evidence of error of submission/filing of TRAN-1 by the petitioner - HELD THAT:- Sri C.B. Tripathi, learned special counsel for the respondent no.1 states on instruction of the Commissioner, Income Tax, Lucknow dated 19.11.2020 that time was extended under Rules 117 (1A) of UPGST Rules, firstly by order dated 17.09.2018, upto 31.01.2019, thereafter by order dated 31.01.2019, upto 31.03.2019 and lastly by order dated 07.02.2020, upto 31.03.2020. There is nothing on record to show that petitioner has ever attempted to file TRAN-1 during the extended period. There are no good reason to entertain the writ petition - writ petition is dismissed.

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• 2020 (11) TMI 749
  Violation of principles of Natural Justice - Grievance of the petitioner is that while raising the demand of tax vide summary of order dated 18.09.2020 vide Annexure P/2, the foundational show-cause notice/order No.12 dated 10.06.2020 qua financial year 2018-2019 and tax period April, 2018 to March, 2019, was never communicated to the petitioner who is an individual registered under GST Act - Rule 142 of Central Goods and Services Tax Act, 2017 - HELD THAT:- A bare perusal of the aforesaid provision reveals that the only mode prescribed for communicating the show-cause notice/order is by way of uploading the same on website of the revenue. The State in its reply has provided no material to show that show-cause notice/order No.12 dated 10.06.2020 was uploaded on website of revenue. In fact, learned AAG, Shri Mody, fairly concedes that the show-cause notice/order was communicated to petitioner by Email and was not uploaded on website of the revenue - It is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein. This Court has no manner of doubt that statutory procedure prescribed for communicating show-cause notice/order under Rule 142(1) of CGST Act having not been followed by the revenue, the impugned demand dated 18.09.2020 vide Annexure P/2 pertaining to financial year 2018-2019 and tax period April, 2018 to March, 2019 deserves to be and is struck down - Petition allowed.

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• 2020 (11) TMI 748
  Principles of Natural Justice - no prior opportunity of hearing was given to the petitioner - Rejection of Refund application of IGST - HELD THAT:- Since refund in similar facts and circumstances has been allowed for the period December, 2017 to March, 2018, this Court sets aside the impugned order and remands the matter to the respondent No.3 for fresh consideration/determination in accordance with law within six weeks. All the rights and contentions of the parties are left open. Petition allowed by way of remand.

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• 2020 (11) TMI 747
  Grant of Bail - creation of bogus firms in the name of various persons - vicarious liability - case of applicant is that he has been falsely implicated in this matter and has also been illegally arrested - HELD THAT:- It is a case where the allegation against the present applicant/accused is that he, being the mastermind behind establishing and registering bogus firms in the name of various persons, was also involved in the issuance of invoices without the actual movement of the goods. In this manner, such transactions were carried out to earn commission out of them. The investigation so far points out that such transactions have caused loss to the tune of Rs. 13.08 Crores to the Government Exchequer. The contention of the applicant that there is nothing on record to show that he had received or obtained any kind of benefit from the aforesaid bogus firms is not sustainable at this stage because not only the investigation is pending but the investigating team has received documents/records showing cash entries in the name of the applicant. It is a matter of common understanding that no prudent person would derive any benefit directly from a bogus firm/entity as it would easily bring out his guilt. Such transactions are naturally done in a clandestine and discreet manner, and, therefore, discovering the direct/tangible evidence may not be possible in each and every case. Since the transactions in questions have been carried out for the last few years, it is natural that investigating agency needs more time to dig out all the relevant record in the case. The entire manner of commission of offence clearly points towards an economic offence squarely covered under Section 132 of CGST Act. The investigation is still pending and, there, has been material recovered reflecting connivance/participation of the accused in the commission of offence and receiving cash from the bogus firms in the form of cash entries in the record. In these circumstances, this court is of the opinion that granting concession of bail to the accused at this stage will definitely prejudice the fair investigation into the matter.

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• Income Tax

• 2020 (11) TMI 746
  Territorial jurisdiction of high court - settlement application - Second Respondent is a resident of Hyderabad in the State of Telangana and aggrieved by the action taken against him by the Petitioner, whose office is also situated at Hyderabad in the State of Telangana, he made an application in Settlement Application in Madras high court - HELD THAT:- Reason stated by the Petitioner for having approached this Court instead of High Court of Telangana at Hyderabad is that the seat of authority of the First Respondent is situated at Chennai within the territorial limits of jurisdiction of this Court. Even if it is assumed that in addition to the High Court of Telangana, this Court would also have territorial jurisdiction, the principle of forum conveniens would come into play as held by the decision of the Division Bench of this Court in C. Ramesh E, [ 2013 (6) TMI 888 - MADRAS HIGH COURT] . There does not appear to be any justification to entertain the Writ Petition in this Court, which would not, however, preclude the Petitioner from filing fresh Writ Petition for the same relief before the High Court of Telangana. See M/S. ZEENATH INTERNATIONAL SUPPLIES [ 2014 (3) TMI 676 - MADRAS HIGH COURT] and M/S. MULBERRY SILKS LTD.[ 2020 (9) TMI 771 - MADRAS HIGH COURT] .

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• 2020 (11) TMI 745
  Rejection of accounts - estimation of income - failure on the part of the assessee to provide site wise expenses, labour, proof of address identity of labourers, the genuineness of the labour expenses was not established - reduction of Net Profit rate @ 6.5% on the total receipt by CIT-A instead of 12% applied by the A.O.- HELD THAT:- In the present case it is not in dispute that the A.O. rejected the books of account by pointing out various discrepancies in the books of account mentioned by the assessee. It is well settled that in case the books of accounts are rejected the only way to work out the income is the application of gross / net profit rate on the turnover or receipts of the assessee. Net profit rate to be applied should be reasonable and the past history of assessee s own case is to be considered. Assessee had shown net profit rate of 6.36% for the year under consideration and in the earlier assessment year i.e; assessment year 2012-13 and 2013-14 it was at 5.87% and 6.01% respectively. Since the net profit rate was progressive and was higher in the year under consideration. Ld. CIT(A) was fair enough and fully justified in estimating the net profit rate of 6.5%. We do not see any valid ground to interfere with the findings given by the Ld. CIT(A) on this issue. Application of net profit rate of 12% by the A.O. based on the judgment of Shri Prabhat Kumar Contractor [ 2008 (11) TMI 723 - PUNJAB AND HARYANA HIGH COURT] is concerned the Ld. CIT(A) clearly mentioned that in the case of CIT Vs. Shri Praveen Mittal [ 2011 (10) TMI 458 - PUNJAB AND HARYANA HIGH COURT] after considering the earlier judgment in the case of Shri Prabhat Kumar Contractor(supra) upheld the application of net profit rate of 4%. We therefore do not see any merit in the submissions of the Ld. CIT DR that the net profit rate of 12% applied by the A.O. was based upon the judgment of the Hon ble Jurisdictional High Court in the case of Shri Prabhat Kumar Contractor(supra) and the same to be upheld, particularly when the Hon ble Jurisdictional High Court had considered the said judgment in its later decision in the case of CIT Vs. Praveen Kumar Mittal(supra) which has been considered by the Ld. CIT(A) while directing the A.O. to apply the net profit rate of 6.5% in the assessee s case. Depreciation after applying the net profit rate - HELD THAT:- The present case it is not in dispute that the income of the assessee was worked out by applying the net profit rate and rejecting the books of accounts. we deem it appropriate to restore this issue to the file of the A.O. to verify as to whether the claim of the assessee for depreciation was allowed by him or not, as was claimed by the Ld. CIT DR during the course of hearing. Accordingly this issue is restored to the file of the A.O. for the limited purpose i.e; to verify as to whether the depreciation was already allowed to the assessee or not and if not allowed then by considering the ratio laid down by the Hon ble Jurisdictional High Court, the claim of the assessee for depreciation is to be allowed from the income determined by applying the net profit rate of 6.5%. Addition u/s 69C - HELD THAT:- As already pointed out that the books of accounts maintained by the assessee were rejected by the AO and the said rejection was upheld by the Ld. CIT(A). The income of the assessee was determined by applying the net profit rate, therefore in view of the ratio laid down in the aforesaid referred to cases by the Hon ble Allahabad High Court and Hon ble Andhra Pradesh High Court, no separate addition on account of expenditure was called for when the income was determined by applying the net profit rate. Accordingly we do not see any infirmity in the impugned order passed by the Ld. CIT(A) on this issue.

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• 2020 (11) TMI 744
  Long Term Capital gain recomputation - not allowing deduction towards cost on account of interest capitalized to cost of asset - no nexus between the capital borrowed and its utilization for acquisition of the property - assessee was selected for scrutiny assessment under CASS - HELD THAT:- AO did not assign any reason as to why the explanation of the assessee was not acceptable when under the similar facts and circumstances, claim of the assessee regarding capitalization of interest was allowed in the earlier year. This approach of the AO is contrary to the settled principles of law. It is incumbent upon the assessing officer at least assign the reason as to why he was adopting a different view then the adopted by its predecessor in earlier years. CIT(A) recorded the finding that the issue of capitalization was not examined by AO as the assessee capitalized the interest without routing through its profit and loss account and the case as relied by the Ld. DR is on a different set of facts are not applicable on the facts and circumstances of the present case. We cannot affirm this view of the Ld. CIT(A) where he made guesswork by using word it appears that means the finding is not based upon correct appreciation of the facts. There is no dispute so far issue regarding allowability of interest paid on the borrowed capital used for acquisition of property. Hence cost of acquisition would also include the interest paid on such borrowed capital. Both the authorities below have disallowed the claim of the assessee, on the ground that there is no nexus between the capital borrowed and its utilization for acquisition of the property. It is not in dispute that the property was acquired by a borrowed capital initially borrowed from the relatives of the Directors. Thereafter, the loan taken from such persons was repaid out of the loan received from ICICI bank. Therefore, it cannot be construed that there is no nexus between the acquisition of the property and the utilization of the capital so borrowed. Authorities below were not justified in disallowing the claim of the assesseee - interest paid on the capital utilized for repayment of loan, we allow as cost of acquisition. AO hereby directed to allow capitalization of interest to the extent that the assessee had utilized borrowed funds for repayment of loan taken from directors and other relatives. - Decided in favour of assessee.

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• 2020 (11) TMI 743
  Provision of exgratia expenses - allowable expenses OR contingent liability - HELD THAT:- In the case of the assessee, on finalization of accounts for the year ended 31.3.2009, the matter of appropriation of the net profit was considered by the Board of Directors of the assessee bank at its Board meeting held on 26.5.2009, wherein resolution was passed to the effect of recommending payment for exgratia to employees. Pursuant to such approval, the exgratia payment becomes due to the employees and the said amount was credited to Provision for Ex-gratia Payment Account in the books of accounts of assessee bank for the year ending 31.3.2010. Said exgratia to employees were actually paid by the assessee bank on 17.8.2009 and hence we hold that the same cannot by any stretch of imagination, could be held as contingent liability - provision for ex-gratia amount was debited to profit and loss account in the earlier assessment year i.e Asst Year 2009-10 and during the Asst Year 2010-11, the said liability account was debited while making the actual payment on 17.8.2009. Hence it could be safely concluded that there was no debit to profit and loss account and consequential claim of deduction during the year under consideration and accordingly, there cannot be any disallowance of any deduction thereon by the ld AO. In any case, we also find that this claim of deduction was upheld by this tribunal for the Asst Year 2007-08 [ 2017 (7) TMI 1372 - BOMBAY HIGH COURT] in assessee s own case which had been subsequently upheld by the Hon ble Jurisdictional High Court vide. We also find that this tribunal in assessee s own case for the Asst Year 2014-15 [ 2018 (12) TMI 1844 - ITAT MUMBAI] had allowed the similar claim of the assessee. Hence on all counts, this amount cannot be disallowed by the ld AO - Decided in favour of assessee.

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• 2020 (11) TMI 742
  TP Adjustment - comparable selection - HELD THAT:- Functional profile of the assessee as described in the transfer pricing documentation, in respect of the ITES segment, shows that the assessee being a subsidiary of Steria UK Corporate Limited, a software service company in the United Kingdom ( UK ), provides IT enabled services (ITES) to the clients of its associated enterprises; that the marketing function including client acquisition is performed by the associated enterprise and the assessee performs ITES activity in relation to work outsourced /sub-contracted by the associated enterprise to the assessee; that it provides back office process outsourcing and inbound and outbound voice-based services; and that the delivery centers of the assessee are located in Noida, Chennai and Pune, from where Steria India delivers work on behalf of Seteria UK for Clients., companies functionally dissimilar with that of assessee need to be deselected. Volume of Related Party Transactions, Extra-ordinary year of operation and Functional profile of the assessee as spoken need to be taken care while selecting comparable.

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• 2020 (11) TMI 741
  Relief u/s 90 - Disallowance u/s 40(a)(ii) - payment of State Taxes - HELD THAT:- In Reliance Infrastructure Ltd. [ 2016 (12) TMI 1293 - BOMBAY HIGH COURT] has held that the assessee was entitled to deduction for foreign taxes paid on income accrued or arisen in India in computing its income, to the extent that such tax was not entitled to the benefit of section 91 of the Act. Facts being identical, we follow the said judgement and also the above order of the Co-ordinate Bench and direct the AO to verify whether the State taxes paid by the assessee overseas are eligible for any relief u/s 90 of the Act and if it is not found to be so, assessee s claim of deduction should be allowed. Disallowance u/s 40(a)(ia) - business expenditure being deduction towards interest, which is compensatory in nature, paid on account of delayed payment / shortfall of overseas taxes - HELD THAT:- A perusal of the records indicate that the assessee has not filed the details with supporting documents on the penal interest. It is not possible to decipher whether the penal interest is compensatory in nature or not. In view of the above, we set aside the order of the Ld. CIT(A) on the above ground and restore it to the file of the AO for deciding it afresh. TDS u/s 195 - payment to non-resident vendors for purchasing standard software products - HELD THAT:- We hold that the Ld. CIT(A), following the order of the Tribunal in assessee s own case for AY 2005-06, has rightly held that the expenditure on software acquired for internal use is a capital expenditure and the assessee is entitled to depreciation on this amount. In the context of payments made on software for resale, having examined the relevant documents and rival submissions, we arrive at a finding that the facts in the impugned year on the above matter are identical to the AY 2009-10 in assessee s own case [ 2019 (11) TMI 408 - ITAT MUMBAI] . Facts being identical, we follow the above order of the Co-ordinate Bench and restore the matter to the file of the AO for fresh adjudication in terms of the observations made therein. The AO would decide the issue after providing reasonable opportunity of being heard to the assessee. Disallowing foreign tax relief as per the provisions of section 90(1)(a)(ii) of the Act read with provisions of the applicable Double Tax Avoidance Agreements - income taxes paid in overseas jurisdiction in relation to income eligible for deduction under section 10A/10AA - HELD THAT:- Foreign tax credit would be available to the assessee in view of treaties India is having with USA, Denmark, Hungary, Norway, Oman, Saudi Arabia and Taiwan. The assessee is directed to file before the AO the relevant provisions of India- South Africa Treaty. TP Adjustment - PLI determination - HELD THAT:- As relying on own case [ 2019 (11) TMI 408 - ITAT MUMBAI] affirmed the order of the Ld.CIT(A) on the matter that GP/sales is the appropriate PLI, . Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. Interest free loans outstanding/provided during the year by the appellant to its AEs - whether not at ALP? - whether the loans given by the appellant are in substance quasi-equity in nature and as a part of shareholder s activity on which returns are not expected in the form of interest? - HELD THAT:- In assessee s own case [ 2019 (11) TMI 408 - ITAT MUMBAI] primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder s activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid down in the relevant case laws. It also requires deliberation whether it can be considered as an international transaction under section 92B r/w Explanation-1(c). Since, the aforesaid legal and factual aspects have not been considered properly, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. Guarantees by the appellant to third parties on behalf of its AEs - international transactions or not? - upward adjustment - HELD THAT:- As relying on own case [ 2019 (11) TMI 408 - ITAT MUMBAI] we direct the AO to charge guarantee commission @0.5% per annum both on performance / lease guarantee as well as financial guarantee. In this context , we direct the AO to examine the contentions of the assessee that (i)part of the activity with respective performance guarantee, was performed by the assessee itself, while the remaining services are rendered by the AE and thus, if the performance guarantee is treated a chargeable services, the charges should be levied only on the component of services performed by the AE (ii) part of the premises i.e. 40% during the year under consideration was occupied by the assessee and thus, if lease guarantee is treated as chargeable services, the charge should be levied only for the balance i.e. 60% during the year under consideration. Adopt guarantee fee rate @0.5% per annum for the performance guarantee. Addition u/s 40(a)(ia) on education cess - HELD THAT:- It is held in Sesa Goa Limited v. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] that education cess and higher and secondary education cess are liable for deduction in computing income chargeable under the head profits and gains of business or profession.

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• 2020 (11) TMI 740
  TP adjustment - payment made towards field supervision services - assessee had rendered certain services to its AE termed as field services and received after providing discount @15% - TPO, while determining the ALP of such services rendered to AE held that the discount allowed is not at arm s length and accordingly made adjustment - HELD THAT:- We find, while considering identical issue in assessee s own case in Assessment Year 2006-07, the Tribunal [ 2011 (9) TMI 261 - ITAT MUMBAI] has accepted the price charged by the assessee to the AEs towards provision of field services after allowing discount to be at arm s length. We delete the addition which is not covered under the MAP proceedings. These grounds are partly allowed. Disallowance of cost contribution charges u/s. 37(1), section 40A(2)(b) and section 40A(i) - HELD THAT:- No separate disallowance on the issues raised in the present ground has been made by the Assessing Officer, the ground raised by the assessee has become redundant, hence dismissed. Addition on account of adjustment of unutilized CENVAT credit to closing stock by invoking the provision of Section 145A - HELD THAT:- Remitted the matter back to the file of Ld. AO for redoing the computation in accordance with order for AY 2001-02. Addition on the basis of Annual Information Return (AIR) - AO on the basis of information available on record found that the assessee has not offered income - HELD THAT:- Aforesaid claim of the assessee has not at all been enquired into by the Assessing Officer by making enquiry with the concerned parties. Further, assessee s contention that during the year under consideration invoices of Rs. 51,050/- was raised on Eastern Electrolysers Ltd. has not at all been enquired into by the Assessing Officer. When the assessee has furnished evidence to reconcile the difference and claims that there is no such income was earned by it, the Assessing Officer was duty bound to make proper enquiry to ascertain the correctness of assessee s claim. Without making any enquiry, the Assessing Officer cannot make the additions. More so, when the assessee has disclosed huge turnover and has also offered substantially high income. That being the case, it cannot be expected that the assessee would not disclose such a petty amount. However, it is a fact on record that the assessee was unable to reconcile the difference of Rs. 449/- on account of income received from Hindustan Petroleum Corporation Ltd. In view of the above, we sustain addition only to the extent of Rs. 449/- and delete the balance amount. This ground is partly allowed. Disallowance of depreciation claimed on Uninterrupted Power Supply (UPS) by treating it as plant and machinery - @15% or 60% - HELD THAT:- As noticed, in the case of PCIT vs Goa Tourism Development Ltd. [ 2019 (3) TMI 287 - BOMBAY HIGH COURT] has held that UPS being a part/accessory of computer is eligible for depreciation at 60%. The same view has been expressed by the Hon ble Delhi High court in case of CIT vs Orient Ceramics and Industries Ltd. [ 2011 (1) TMI 26 - DELHI HIGH COURT] and in case of DCIT vs M/s. Sarswath Infotech Ltd [ 2014 (1) TMI 1888 - ITAT MUMBAI] . In view of the ratio laid down in the judicial precedents referred to above, we allow assessee s claim of depreciation on UPS @ 60%. This ground is allowed. Addition on account of AIR information - HELD THAT:- Without making any enquiry the Assessing Officer has added back the amount. When the assessee claims that he has not entered into any transaction with the concerned parties, the least the Assessing Officer could have done is to ascertain the correctness of assessee s claim by making enquiry with the concern parties. AO having not done so, the addition cannot be sustained. Further, looking at the huge turnover and substantially high income declared by the assessee, it is not at all believable that the assessee would suppress such a small amount. Accordingly, we delete the addition.

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• 2020 (11) TMI 739
  Estimation of income - Bogus purchases - CIT-A restricted addition being 12. 5% of the purchases made from the said suspicious dealers - HELD THAT:- As decided in own case [ 2020 (6) TMI 718 - ITAT MUMBAI] we direct the AO to restrict the estimation of profit to 8% of the disputed purchases.

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• 2020 (11) TMI 738
  Reopening of assessment u/s 147 - assessment after 4 years - reason to suspect OR reason to believe - violation of the provisions of section 13(1)(c) r.w.s. 13(2)(g) - A.O. has not disposed off the objections filed by the appellant by passing a separate speaking order - HELD THAT:- In the present case, the original assessment for the assessment year 2009-10 was completed u/s. 143(3) of the I.T. Act on 25/11/2011 and notice for re-opening of assessment was issued to the assessee on 13/04/2015. As per the provisions of section 147 of the I.T. Act if in any assessment year and if after expiry of four years from the end of the relevant assessment year, action sought to be taken u/s. 147 of the I.T. Act, such action can be only in cases where income chargeable to tax has escaped assessment in such assessment year by reason of failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment in such assessment year. It is seen from the reasons recorded for re-opening of assessment that it does not show that there was escapement of income due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of income of the assessee for the assessment year 2009-10. Under the circumstances, the conditions stipulated under first proviso to section 147 are not satisfied and therefore, on the aforesaid ground alone, the impugned notice deserves to be quashed and set aside. Reopening of assessment which is already concluded under Section 143(3) of the Act of the assessment cannot be reopened without any allegation by the Assessing Officer that there was non-disclosure of true and correct facts by the assessee while framing the original assessment. Hence, we are inclined to annul the assessment. - Decided in favour of assessee. Assessment of trust - Exemption u/s 11 - method of computation of the income and application followed by the A.O., excluding the loans recovered by the appellant from Self Help Groups [SHG] that was regarded as income - Repayment of debt incurred for purposes of trust/loans advanced by educational trusts to students for higher studies - Whether amounts to application of income - HELD THAT:- The assessee s case on hand is squarely covered by theCBDT Circular No.100 Dt.24.01.1973. Accordingly, the assessee s claim that extending loan to Self Help Groups (SHGs) is in application of income and direct the Assessing Officer to grant the benefit as claimed by the assessee in this ground. The assessee s appeal is allowed.

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• 2020 (11) TMI 737
  Disallowance of club services and facilities used for entertaining the customers and to promote the business interests of the company - expenses allowable u/s 37(1) - HELD THAT:- The assessee has incurred the expenses on account of club membership fees for the employees and to entertain customers, so, these were business expenses under section 37(1) of the Act. We therefore by following the ratio laid down in UNITED GLASS MFG CO. LTD. [ 2012 (9) TMI 914 - SUPREME COURT] , delete the disallowance made by the A.O. and sustained by the Ld. CIT(A). - Decided in favour of assessee.

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• 2020 (11) TMI 736
  Non filing of appeal electronically - Penalty proceedings u/s. 271(1)(c) - Exemption u/s. 11 (1)(d) denied - voluntary contributions received in the name of various funds and is considered as the corpus donation - HELD THAT:- In this case, Ld. CIT(A) dismissed the appeal because assessee could not file its appeal electronically and appeal was dismissed as non-est and on merit appeal of the assessee was not heard. Assessee should have been given a chance to rectify his omission for filing physical appeal instead of e-appeal and Ld. CIT(A) should have decided the matter on merit instead of dismissing assessee s appeal in limine. We accept the plea of the assessee and assessee shall file e-appeal before the Ld. CIT(A) and intervening period of delay is condoned and Ld. CIT(A) is directed to decide assessee s appeal on merit. Appeal filed by the Assessee is allowed.

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• 2020 (11) TMI 735
  Disallowance of interest on borrowed capital - HELD THAT:- ICDS II issued on valuation of inventories (though relevant to the subsequent years) also supports the aforesaid claim of deduction of the assessee. As the interest bearing borrowed funds had been raised by the assessee for the purpose of its business, and used for the said purpose, therefore, the interest expenditure pertaining to such borrowed funds was rightly claimed by the assessee and allowed as a deduction by the CIT(A).No infirmity in the view taken by the CIT(A) in context of the aforesaid issue under consideration uphold his order to the said extent. The Ground of appeal No. 2 is dismissed. Disallowance of directors remuneration u/s 40A(2)(a) - HELD THAT:- Basis for gauging the excessiveness or unreasonableness of such expenditure incurred by the assessee in respect of related parties has to be carried out in the backdrop of the fair market value of the goods, services or facilities for which the payment is made. We find that the A.O by misconstruing the scope and gamut of Sec. 40A(2)(a) had disallowed the entire amount of the directors remuneration. Aforesaid disallowance carried out by the A.O by pressing into service the provisions of Sec. 40A(2)(a), therein principally suffer from two serious infirmities, viz. (i). that the A.O had lost sight of the fact that the disallowance of the related party expenditure u/s 40A(2)(a) could have been made only to the extent the same was found to be excessive or unreasonable; and (ii). that as per the mandate of Sec. 40A(2)(a) the A.O remained under a statutory obligation to benchmark the excessiveness or unreasonableness of the expenditure keeping in view the fair market value of the goods, services or facilities for which the payment was made or was to be made to the specified related party. In the backdrop of our aforesaid observations, we are of the considered view that the A.O had traversed beyond the jurisdiction that was vested with him u/s 40A(2)(a) - remuneration paid by the assessee to its directors can by no means be stamped as exorbitant, and therein disallowed by invoking the provisions of Sec. 40A(2)(a) . As such, finding no infirmity in the view taken by the CIT(A) in context of the aforesaid issue under consideration, we uphold his order therein vacating the disallowance of Rs. 3.63 crores made by the A.O u/s 40A(2)(A) of the Act. The Ground of appeal No. 1 is dismissed.

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• 2020 (11) TMI 734
  Penalty u/s 271(1)(c) - exemption u/s 11 and 12 disallowed - benefit of section 11(1A) is not available to assessee because of investment in shares of Tata sons Ltd as per section 11(1) and investment in shares of Tata Sons Ltd is not held as Corpus fund - AO held that the assessee is hit by the provisions of section 13(1)(d)(i) and 13(1)(d)(iii) - Assessee argued that the penalty notice nowhere speaks about specific limb to levy the penalty because the particular charge was not tick off in the notice - HELD THAT:- It is not in dispute that the penalty u/s 271(c) of the Act is leviable on account of the concealment of particular of income and on account of furnishing the inaccurate particulars of income. Both have different connotations. In this regard, the Hon ble Supreme Court has appreciated the distinction between both the limb in the case Dilip N. Shroff [ 2007 (5) TMI 198 - SUPREME COURT] . As per the record, the assessment order speaks about levying the penalty on account of furnishing the inaccurate particulars of income but the notice nowhere specify any limb to levy the penalty. The notice is not justifiable in view of the law settled by the Bombay High Court in the case of CIT-11 Vs. Samson Perinchery. [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] . It is quite clear that the penalty is not leviable in accordance with law. Since the penalty is not sustainable on the issue of defective notice, therefore, we are not inclined to decide the matter of controversy on merits. Declining the claim of the assessee by the AO nowhere attracted the penalty being it is not a case of furnishing the inaccurate particulars of income and concealment of particulars of income, the assessee has fully disclosed each and every facts and thereafter claimed exemption u/s 11 12 of the Act. However, the same was declined. No penalty is leviable in the said circumstances and in this regard, we also find support of the decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.

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• 2020 (11) TMI 733
  Income accrued in India - Benefit of India-UK Tax Treaty - remunerations received by the assessee for rendering legal services - Whether assessee is having PE in India within the meaning of Article-5 of India UK DTAA? - o that the income of the assessee is taxable under Article-15 of India UK DTAA - HELD THAT:- Tribunal in a very categoric manner has held that the provisions of section -9 relating to Fee for Technical Services does not apply to the case of assesse, hence, the assessee is entitled to the benefit of DTAA. The Revenue has not been able to place on record any contrary material. No material has been placed before us to show that the nature of transaction in the assessment year under appeal is different from the transactions in assessment year 2013-14. Respectfully following the decision of the Co-ordinate Bench, we hold that the provisions of India-UK DTAA would override the provisions of the Act in the instant case and the remuneration received by the assessee for providing legal services do not fall within the ambit of Fee for Technical Services as defined in DTAA. Thus, ground No.13 to 15 and 19 to 25 read with ground nos. 8 to 12 of the grounds of appeal are decided in favour of the assessee. Whether the assessee has PE in India and the receipts are liable to be taxed as Business Profits ? - HELD THAT:- A perusal of the draft assessment order and the assessment order shows that the assessee had furnished the details before the AO. However, the same were not examined by the Assessing Officer. The Co-ordinate Bench in assessment year 2013-14 in principle has accepted the contention of the assessee that if the employees/personnel of the assessee have not rendered services in India for a period exceeding 90 days during the relevant period then it has to be held that the assessee did not have a PE in India during the year under consideration. In principle we are inclined to decide the issue in favour of the assessee. However, for the purpose of factual verification of the employees stay in India during the relevant period, the matter is remanded to the Assessing Officer. The Assessing Officer after asserting the same shall decide the issue, accordingly. Applicability of Article 15 of India-UK DTAA - Provisions of Article 15 of India-UK DTAA would not apply to the assessee. Since, the facts in the assessment year under appeal are similar, we see no reason to take a divergent view. Following the order of Tribunal in assessee s own case in the preceding assessment years, grounds of the appeal are allowed.

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• 2020 (11) TMI 732
  Disallowance of goods lost due to fire - addition invoking section 29 - assessee has claimed that the impugned loss of stock is revenue loss which occurred during the year and was thus ascertained and confirmed loss and therefore same should be allowed as a deduction - as per AO assessee stocks were insured against damages including damage by fire by the National insurance Co Ltd and therefore the loss incurred by the assessee on account of fire is recoverable under a contract of indemnity i.e. insurance, against the damage from insurance Co and the claim of the assessee has not been decided till date by the insurance Co. Therefore the loss claimed by the assessee is a contingent loss - HELD THAT:- Merely because the assessee has an insurance, it does not mean that assessee has not incurred the loss during the year. Moment the insurance Co determines the loss in terms of the insurance policy obtained by the assessee from the insurance company, naturally the assessee would be reimbursed or compensated for the same. It does not mean that assessee has not incurred the losses. The accident of fire at the premises of the assessee in which it has lost goods due to the fire is one incident. The action of the assessee of obtaining the insurance is altogether a different act to mitigate the loss incurred by the assessee. The claim of the insurance of the assessee from insurance Co would also be subject to many conditions. Merely because the goods of the assessee are insured against the accident of fire, it cannot be said that assessee has not lost goods due to fire - loss of the assessee would be compensated in subsequent year later on, at that particular time such insurance claim received would be chargeable to tax under section 41 (1) of the act as it is against the traded goods. Even otherwise, the trading loss incurred by the assessee is allowable to the assessee in the year in which it is incurred. The case of the assessee is also supported by the decision of MOTAMAL JETHUMAL [ 1946 (12) TMI 2 - PATNA HIGH COURT] wherein it has been held that loss of/in trade or to fire is allowable as a trading loss irrespective of fact whether any sum is received from insurance Co or not - Decided in favour of assessee.

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• 2020 (11) TMI 731
  Disallowance being the amount of exchange fluctuation loss provided at the year end on business advance received in foreign exchange - HELD THAT:- The Hon ble Delhi High Court in the case of Taiko Chander Nagar Chemicals P.Ltd.[ 2007 (10) TMI 282 - DELHI HIGH COURT] has held that exchange fluctuation loss in respect of business advances received in the course of business on account of reinstatement of outstanding balance at the year end is allowable as business loss. Also see OIL NATURAL GAS CORPORATION LTD. VERSUS COMMISSIONER OF INCOME TAX [ 2010 (3) TMI 81 - SUPREME COURT] and M/S WOODWARD GOVERNOR INDIA P. LTD. M/S HONDA SIEL POWER PRODUCTS LTD. [ 2009 (4) TMI 4 - SUPREME COURT] Applying the said principle to the facts and circumstances of the case, we hold that the exchange fluctuation loss arising on account of the revaluation of business advances on the close of the year by the assessee is allowable as deduction in the hands of the assessee. Appeal of the assessee is allowed.

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• 2020 (11) TMI 730
  Defect in appeal - date of service of the order appealed against was not mentioned in Form 35 - CIT(A) dismissed the appeal of the assessee on the ground that Form 35 was verified on 28.12.2011 and the demand notice was served on the assessee on 03.01.2012 - HELD THAT:- Income tax proceeding being judicial proceeding, the CIT(A) is expected to dispose the appeal on merit rather than technicality. In this case, for the assessment year 2005-06, admittedly the assessment order was passed on 31.12.2010 and the appeal was filed on 28.01.2011. Therefore the appeal is filed within the time. Even if Form 35 was not filed in, in respect of the date of receipt of assessment order, this Tribunal is of the considered opinion that defect memo ought to have been issued so that the assessee might have rectified the defect. The very object of mentioning the date of receipt of the assessment order is to compute the period of limitation. In this case, admittedly, the appeal is filed within the period of limitation. Therefore, there is no justification for dismissing the appeal on technicality on the ground that the date of receipt of the assessment order was not mentioned in Form 35. Moreover, the appeal was admittedly filed on 28.01.2011. The appeal is pending for the last 8 years. After keeping the matter for last 8 years, dismissing the appeal on the ground that date of receipt of assessment order was not filled in Form 35 is not correct. In the opinion of this Tribunal, the CIT(A) ought to have disposed the appeal on merit after considering the grounds of appeal of appeal and other material on record. Since such an exercise was not done, the matter needs to be reconsidered by the CIT(A).

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• Customs

• 2020 (11) TMI 729
  Deadlocks/inordinate delays for clearance of import cargo. due to COVID-19 pandemic lockdown - the Learned Single Judge ordered that the payment of container detention charges or other penal charges by the petitioners for release of the cargo covered by Bills of Lading shall be provisional and subject to further orders in the writ petitions. - HELD THAT:- True, at the time of considering the interim relief, the Court is bound to consider whether, (1) there is prima facie case, (2) balance of convenience, and (3) likelihood of irreparable hardship. Writ court though not specifically adverted to the above, reading of the impugned order reflects the same. On the aspect of violation of Article 14 of the Constitution of India, that the earlier interim order in W.P. (C) No. 10177/2020, dated 25-5-2020 has not been followed, it could be deduced that the earlier order has been passed at the stage of admission of that writ petition, but subsequently, writ court has taken note of the interim order passed by the Hon ble High Court of Delhi. Going through the pleadings, submissions of the contesting parties, the order, which was taken note of by the Learned Single Judge in the impugned order, and the decisions on interim relief vis-a-vis main relief considered by us, we are of the considered view that there is no error in the interim order dated 30-6-2020, warranting interference in the instant appeals. Appeal dismissed.

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• 2020 (11) TMI 728
  Absolute Confiscation - quantum of penalty - import of Adult Toy - prohibited goods or not - Obscene Item or not - HELD THAT:- The appraiser/AA has to give his justification how he has to come to conclusion that it was an adult toy. As per Notification No. 1/1964-Cus. only an article with respect to any obscenity is restricted. The imported item massager cannot be connected with any obscenity. As held by the Hon ble Supreme Court in the case of AJAY GOSWAMI VERSUS UNION OF INDIA AND OTHERS [ 2006 (12) TMI 500 - SUPREME COURT] the definition of obscenity differs from culture to culture, between communities within a single culture and also individuals within those communities. Moreover, this is imported for personal use and a single piece. Without any evidence the impugned order has been passed. Therefore, the contention of the department that it is an obscene item to be detained and liable for confiscation is not tenable. Confiscation - penalty - HELD THAT:- As the impugned goods is not a prohibited one, obviously it would not be liable for confiscation U/Sec. 111(d) of Customs Act, 1962. It is also observed that the principles of natural justice was not followed in this case by not giving a proper PH before deciding the matter. The AA has to follow the principles of natural justice as envisaged in the provisions of Customs Act. Otherwise, it would make liable the order for setting aside. As it has been held that the impugned item is freely importable, consequently it won t attract penalty. The order of the adjudicating authority is set aside with a direction to release the impugned goods on payment of appropriate duty. - Appeal allowed.

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• Insolvency & Bankruptcy

• 2020 (11) TMI 727
  Entertainment of claims made by creditors after approval of Resolution Plan - whether after approval of Resolution Plan by the Adjudicating Authority, the claims made by the creditors can be entertained? - HELD THAT:- Once the Resolution Plan is finalized and approved, it shall be binding upon all the stakeholders and nobody shall have the power to change it. Even the Adjudicating Authority will not have a binding say on the approval of the Resolution Plan or on the commercial wisdom of the COC. The dues and liability as mentioned in the Resolution Plan as on the commencement of the Corporate Insolvency Resolution Process (CIRP), which is the day on which the Plan is approved by the Adjudicating Authority, shall be binding on every stakeholder and the Resolution Applicant shall be bound to pay only those which are mentioned in the Resolution Plan. The reason for invitation of the claims as on the date of commencement of CIRP is that the claims of any of the creditors are not left out while making of the Resolution Plan and hence claiming of the money after the passing of the Resolution Plan seems unjustifiable and unreasonable as sufficient opportunity has already been provided to submit the claims earlier, after admission of the application and ordered Corporate Insolvency Resolution Process - This was done to ensure that no further such of this kind of dispute would arise in the future. Hence, in a situation where the claims submitted by the creditors, inclusive of the operational creditors, have been duly met by the applicant, no question of reclaiming the full amount or a part of it or some different amount arises which pertains to a period prior to commencement of CIRP. A Successful Resolution Applicant is not to be burdened with undecided claims at the stage of implementation of the Resolution Plan. The Successful Resolution Applicant is to be provided with a company free from past liabilities. It has been rightly understood that a Successful Resolution Applicant cannot be saddled with past liabilities indefinitely. Such an act will make it impossible for the Successful Resolution Applicant to run the business of the Corporate Debtor effectively. In fact, saddling a Resolution Applicant with past claims will defeat the entire purpose and mechanism set out under the I B Code, mainly when all claims have been appropriately dealt under the Resolution Plan itself - Further, Section 32A of the Code grants immunity to a Corporate Debtor from the liabilities arising out of the acts committed prior to the CIRP once the Resolution Plan is approved. Hence, drawing an analogy, one can very well presume that the restructured company will not be forced or liable for paying out the dues of the period prior to CIRP which have already been taken care of in the Resolution Plan. This will make the revamped company do its business effectively and efficiently and will achieve the objective for which the Code was enacted. From a plain reading of Sub-Section (21) of Section 5, this Tribunal finds that there is no ambiguity in the said provision and the legislature has not used the word and but chose the word or between goods or services including employment and before a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, and State Government or any local authority . Operational Debt in normal course means a debt arising during the operation of the Company ( Corporate Debtor ). The goods and services including employment are required to keep the Company ( Corporate Debtor ) operational as a going concern. If the Company ( Corporate Debtor ) is operational and remains a going concern, only in a such case, the statutory liability, such as payment of Income Tax, Land Tax etc., will arise. As the Income Tax , Value Added Tax and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. All statutory dues including Water Charge , Electricity Charge , Commercial Taxes , Land Revenue etc. come within the meaning of Operational Debt . The other contention raised by the respondents is that the impugned order dated 23.01.2019 protects the interest of these respondents, as the relevant demands raised by Merchem against these respondents were not accepted, for the reason that they were not provided any individual notice of the insolvency proceedings commenced against the Corporate Debtor by the RP, and therefore, the statutory liabilities are bound to be paid - it is evident that the Resolution Plan as approved by the Committee of Creditors is by and large sanctioned by the Order dated 23.01.2019. It has been held that the Adjudicating Authority is not required to go into the merits or reasoning of the decision taken by the COC for approval or rejection of a Resolution Plan. The only benchmark which is set up to be determined by the Adjudicating Authority is to see whether the plan has been approved by 75% voting of the COC or not? Therefore, it is clear that the commercial wisdom of CoC is not allowed to be interfered with. The Central Government , State Government and local authority , who are entitled for dues arising out of the existing law are Operational Creditor within the meaning of Section 5(20) of the I B Code . As the statutory dues are operational debts, and once a Resolution Plan has been approved by the Adjudicating Authority, the treatment of all stakeholders, including Operational Creditors, is to be determined as per the terms of the CoC approved Resolution Plan. A stakeholder cannot afford to sleep over his claims and fail to submit it on time and come forward after the approval of Resolution Plan by the Adjudicating Authority. The approved Resolution Plan approved vide order dated 23rd January, 2019 by the NCLT, Chennai Bench is binding on the stakeholders including the statutory authorities who failed to file claims before the said approval - The amounts shown in the books of the respective Respondents, antecedent to the date of approval of Resolution Plan, still being shown as on date as due and payable by the Respondents in their books of account, stands discharged in full and consequently be reversed or written off in the books of the respective Respondents in accordance with the approved Resolution Plan. Application rejected.

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• Central Excise

• 2020 (11) TMI 726
  Interest on refund claim - Section 11BB of the Central Excise Act, 1944 - interest denied on the finding that the adjudication of the claim attained finality only after dismissal of the proceedings before the High Court on 18-7-2005; whereas the Department had already paid refund amount to the appellant on 26-6-2005 - Circular No. 670/61/2002-CX.8, dated 1-10-2002 - HELD THAT:- The approval of the dictum of the Rajasthan High Court in JK. CEMENT WORKS VERSUS ASSTT. COMMISSIONER OF CENTRAL EXCISE CUSTOMS [ 2004 (2) TMI 78 - RAJASTHAN HIGH COURT ] , which directly deals with the claim of the appellant before this Court who had made application for refund on 30-12-1999 and, therefore, the statutory interest ought to commence after non-payment within three months from the date of application, being the starting point envisaged by Section 11BB of the Act. The claim of the appellant regarding statutory interest under Section 11BB of the Act is allowed - appeal allowed - decided in favor of appellant.

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• 2020 (11) TMI 725
  CENVAT Credit - LAM ( Low Ash Metallurgical) COKE - fake invoices without supply of goods - time limitation - main basis of denying the Cenvat credit to the appellants are the two letters received by the department, one from the Municipal Commissioner and the other from the Postal authorities - HELD THAT:- The best evidence would have been for departmental officers to physically visit the place and draw a panchnama after making enquiries from the locality. No such documentary evidence is there on record - The department has not denied that the dealer, M/s Dankuni Steel Ltd was registered with the jurisdictional Central Excise formation. As per extant departmental instructions the premises were required to be physically inspected within 5 days of granting registration. It has to be presumed that these instructions were duly followed. In that case it has to be assumed that during the relevant period the dealer was operating from the registered premises. The dealer has clarified that their head office was at Bentinck Street and this was duly indicated in all the disputed invoices. The department has not denied the existence of the dealer at the Bentinck Street address - Hence, the material available on record can at most arouse suspicion, but suspicion, however strong, cannot replace proof/evidence. The department has made no enquiries to ascertain whether the disputed quantity of LAM Coke had been received in the appellants factory or not. A proper stock-taking would have revealed the true picture. But no such evidence is there. Hence, it has to be accepted that the disputed quantity of LAM Coke was actually received in the factory - The department did not also make any enquiry to determine whether the quantity of finished goods manufactured by the appellants was consistent with the consumption of the disputed quantity of inputs. The appellants had provided the Railway Receipts (RR s) under cover of which the inputs had come. The disputed invoices have crossreferences of the corresponding RR s. The department made no efforts to verify the genuineness of the RR s - Hence, it cannot be said that the invoices received in the appellants factory were not accompanied by duty paid goods. It is also established law now that duty paid goods can be consigned directly to a buyer by the manufacturer/supplier without the goods first going to the dealer s premises - Once it is held that the disputed quantity of goods have been duly received in the appellants factory, the cenvat credit on input service of transportation cannot also be denied. The department has not been able to make out a case for denial of Cenvat Credit - Appeal allowed - decided in favor of appellant.

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• 2020 (11) TMI 724
  Duplication of appeal filed - against one impugned order two appeals were filed - HELD THAT:- Only one appeal needs to be filed against impugned order therefore, the second appeal No. E/12975/2019 and Cross Objection No. E/CO/10114/2020 are dismissed as infructuous.

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• 2020 (11) TMI 723
  Refund claim - rejection of refund claim as being time-barred by computing the period upto the date of second presentation before the Tiruchirapalli Commissionerate - HELD THAT:- The refund claim has been first presented on 31-3-2010, the refund sanctioning authority has erred in computing the time-limit reckoning 16-8-2011 as the date of filing refund claim. The time-limit has to be computed from the date of clearance of the goods to the date of first presentation of the claim. The refund would be then well within time. The rejection of refund claim on the ground of being time-barred is set aside. The refund sanctioning authority is directed to look into the merits of the claim. The matter is remanded back to the refund sanctioning authority, who is directed to consider the claim on merits - Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2020 (11) TMI 722
  Maintainability of petition - availability of alternate remedy of appeal - Redetermination of tax liability of petitioner - HELD THAT:- There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute. This Court does not express any view on the correctness or otherwise on the merits of the controversy involved in the matter- Petition dismissed.

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• 2020 (11) TMI 721
  Reversal of ITC - reopening of assessment - Payment of the differential amount of tax due and penalty - HELD THAT:- Similar issue decided in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT] where it was held that In the instant case, there is no challenge to the statutory provisions and the complaint of all the dealer is largely on the procedure adopted by the respective Assessing Officers. The Principal Secretary and Commissioner of Commercial Taxes was conscious of the problems faced by the dealers as complaints were received which had lead to issuance of a circular as early as on 01.04.2015. The concerned assessing officer shall issue fresh show cause notice with all required details in respect of levy of tax for mismatch invoices and the Petitioner shall be entitled to submit its explanation within the prescribed time - impugned order set aside - petition allowed.

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• Indian Laws

• 2020 (11) TMI 720
  Dishonor of Cheque - offence under Section 138 of the Negotiable Instruments Act - direction for suspension of sentence imposed on him by the trial court - HELD THAT:- When it is noted the appellate court is justified in directing the petitioner/accused to deposit 20% of the compensation amount imposed by the trial court pending appeal as provided under Section 148 of the Negotiable Instruments Act and thereby ordering suspension of the sentence imposed on the petitioner and when the order passed by the appellate court is in conformity with the provisions of Section 148 of the Negotiable Instruments Act read with 389(1) of Cr.PC, I do not find any infirmity or error in the abovesaid condition imposed by the appellate court directing the petitioner to deposit 20% of the compensation amount imposed on him by the trial court. There is no merit in the Criminal original petition - Petition dismissed.

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