TMI Tax Updates - e-Newsletter
November 26, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Service Tax Indian Laws

News

1. Shareholding of GSTN

2. Auction for Sale (Re-Issue) of ‘6.18% GS 2024’,

3. MCA initiatives to reduce cost of compliance by various small private limited companies

4. Sabka Vishwas – Legacy Dispute Resolution Scheme

5. Several measures taken to ensure timely payments to Micro, Small & Medium Enterprises

6. Taxation Laws (Amendment) Bill, 2019 - As Introduced in Lok Sabha

Notifications

GST - States

1. G.O.Ms.No.470 - dated 21-11-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Sixth Amendment) Rules, 2019

2. G.O.Ms.No.469 - dated 21-11-2019 - Andhra Pradesh SGST

Filling of annual return under section 44 (1) of APGST Act for the financial years 2017-18 and 2018-19 - option for small taxpayers whose aggregate turnover is less than rs. 2 crores and who have not filed the said return before the due date.

3. G.O.Ms.No.468 - dated 21-11-2019 - Andhra Pradesh SGST

Time period for furnishing details in form GSTR-1 in respect of certain category of tax payers

4. G.O.Ms.No.467 - dated 20-11-2019 - Andhra Pradesh SGST

Constitution of the state level screening committee on anti-profiteering for the state of Andhra Pradesh - re-constitution of screening committee on anti-profiteering

5. 50/2019 - State Tax - dated 30-10-2019 - Chhattisgarh SGST

Amendment in Notification No. 21/2019-State Tax, No. F-10-19/2019/CT/V(46), dated the 23rd April, 2019

6. F-A-3-36-2019-1-V-(71) - dated 6-11-2019 - Madhya Pradesh SGST

Amendment in this department Notification No. F A-3-05-2019-1-V(50), dated the 29th June, 2019.

7. F-A-3-31-2019-1-V-(72) - dated 6-11-2019 - Madhya Pradesh SGST

Amendments in this department Notification No. FA 3-31-2019-1-V (58) dated the 21st August, 2019.

8. KA.NI-2-1647/XI-9(42)/17 - dated 7-11-2019 - Uttar Pradesh SGST

Governor, appoints the 24th day of September, 2019, as the date on which the provisions of rules 10, 11, 12 and 26 of the Uttar Pradesh Goods and Services Tax (Thirtieth Amendment) Rules, 2019 shall come into force.

9. 951/2019/10(120)/XXVII(8)/2019/CTR-43 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 284/2019/4(120)/XXVII(8)/2019/CT-14 dated 09th April, 2019

10. 946/2019/10(120)/XXVII(8)/2019/CTR-16 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 516/2017/9(120)/ (8)2017 dated 29th June, 2017

Circulars / Instructions / Orders

SEZ

1. Instruction No. 102 - dated 18-11-2019

Compliance of Contiguity Condition of SEZ in terms of Rules 5 & 7

GST - States

2. 53T of 2019 - dated 21-11-2019

Participation of Taxpayers and GST Practitioners in User Acceptance Testing of New Returns Offline Tool and online version of Form GST ANX-1 and Form GST ANX-2.

3. Internal Circular No. 35A of 2019 - dated 19-10-2019

Verification of TRAN-1 credits.

Highlights / Catch Notes

GST

• Government to Review Supreme Court's Rojer Mathew Decision; Possible Amendments to CGST Act for Tribunal Compliance.

  Case-Laws - HC : Constitution of GST Appellate Tribunal - Government directed to examine the position as emerging from the decision of the Apex Court in Rojer Mathew and to consider formulation of appropriate amendments in the CGST Act so that the provisions of the said Act do not continue to fall foul of the said decision.
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Income Tax

• Appeal Allowed for Tax Liability on Share Buybacks; Petition Under Article 226 Dismissed per Section 115QA.

  Case-Laws - SC : Tax on distributed income to shareholders u/s 115QA - Buy back of shares - availability of appellate remedy - an appeal would be maintainable against the determination of liability under Section 115QA - petition under Article 226 of the Constitution dismissed.
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• Interest Costs Post-Renovation to be Treated as Revenue u/s 36(1)(iii) of Income Tax Act.

  Case-Laws - AT : Addition on account of renovation and modernization of projects - interest expenses incurred subsequent to completion of renovation of projects was to be treated as Revenue in nature as per section 36(l)(iii)
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• Payment for services not taxable as technical fees under Article 12(4) treaty; treaty provisions take precedence over Income Tax Act.

  Case-Laws - AT : Once we come to the conclusion that the payment for these services is not taxable as fees for technical services under article 12(4), it is immaterial whether it could be taxable under section 9(1)(vii) for the simple reason that this being a treaty situation, the provisions of the Income Tax Act, 1961, could come into play only when favourable to the assessee.
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• Amendment clarifies no set off of losses allowed u/s 68, but permits set off against unabsorbed depreciation.

  Case-Laws - HC : The intention of the legislature in introducing the amendment, as stated in the explanatory note, is to avoid unnecessary litigation and to expressly provide that no set off of any loss shall be allowable in respect of income u/s 68. Therefore, it has to be held that, as on the relevant date of the assessment, there was no bar existed with respect to allowing set off against the carried forward unabsorbed depreciation on fixed assets, with respect to income u/s 68.
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• Assessee Must Prove Genuine Manufacturing Activity for Section 10AA Deductions; Consistency Rule Needs Unchanged Facts Over Years.

  Case-Laws - AT : Deduction u/s 10AA - genuineness of the manufacturing activity - The assessee is expected to substantiate its claim in each of the year. The rule of consistency would be applicable only in cases where the factual matrix is demonstrated to be substantially the same.
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• Denial of Approval u/s 10(23C)(vi) Lacks Legal Basis for Entities Registered u/s 12AA.

  Case-Laws - AT : Approval u/s 10(23C)(vi) denied - there is no provision of law which shows that if the assessee is registered u/s 12AA it cannot be granted claim u/s 10(23C)(vi) of the Act or vice versa.
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• Penalty u/s 271AAB Deleted Due to Defective Notice Lacking Specific Default and Clause Details.

  Case-Laws - AT : Penalty u/s 271AAB - admission of undisclosed income - assessment u/s 153B - defective notice - initiation of penalty proceedings u/s 271AAB without specifying the default as well as the particular clause of section 271AB(1) under which the penalty was proposed to be levied, the same is very vague and silent - Penalty deleted.
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• Property Value Must Match Official Classification, Residential Cannot Be Valued as Commercial Despite Location Benefits.

  Case-Laws - AT : Valuation of the property - determining the fair market value (FMV) - Property which is otherwise residential as per the record cannot be treated as a commercial property for the purpose of determining the FMV though the locational advantage being a factor, influence the value of the property.
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Indian Laws

• Taxation Laws (Amendment) Bill, 2019: Lower Corporate Tax Rates to Boost Economic Growth and Attract Foreign Investments in India.

  News : Taxation Laws (Amendment) Bill, 2019 - As Introduced in Lok Sabha
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Service Tax

• Amendment to Section 35F: Automatic Waiver of 92.5% Tax Demand & Penalty; No More Waiver Applications Needed.

  Case-Laws - HC : After the amendment brought in Section 35F of the Central Excise Act, 1944, the statute has already waived 92.5% of the demand of the tax and the penalty. Thus, after the said amendment there is no question whatsoever arises of preferring “waiver application” to deposit the pre-deposit amount @ 7.5% of the total amount of duty
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Case Laws:

• GST

• 2019 (11) TMI 1109
  Constitution of GST Appellate Tribunal - Constitutional validity of Section 109 of the Central Goods and Services Tax Act (CGST) and Section 109 of the Delhi Goods and Services Tax Act (DGST) - Constitutional vires of Section 110 of the CGST and Section 110 of the DGST Act - appointment of members and constitution of Benches - HELD THAT:- Very recently i.e. on 13.11.2019, the Supreme Court has rendered its Constitution Bench Judgment in ROJER MATHEW VERSUS SOUTH INDIAN BANK LTD. OTHERS [ 2019 (11) TMI 716 - SUPREME COURT] . In this decision, the Supreme Court considered the Constitutionality of Part XIV of the Finance Act, 2017 and of the rules framed in consonance therewith - So far as the first issue is concerned, the same stands referred to a Larger Bench of Seven Hon ble Judges of SC The issue regarding the constitution of Appellate Tribunal under the CGST Act was not before the Supreme Court, since the Supreme Court was dealing with several issues arising before it in the context of the Finance Act, 2017, whereas the CGST Act was passed by the Parliament on 12.04.2017 w.e.f. 01.07.2017. However, a perusal of the decision of the Supreme Court clearly shows that the said decision would have a serious bearing on the challenge raised by the petitioner in the present case as well. The respondents and particularly respondent Nos. 2,3 and 4 are directed to examine the position as emerging from the decision in Rojer Mathew and to consider formulation of appropriate amendments in the CGST Act so that the provisions of the said Act do not continue to fall foul of the said decision. List on 05.02.2020.

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• 2019 (11) TMI 1108
  Maintainability of petition - Detention of goods alongwith vehicle - alternative remedy of appeal - Territorial Jurisdiction - appealable order or not - case of petitioner is that the petitioner being the owner of the goods detained by the respondent No.2 has made the payment equal to 100% of the tax payable on such goods. Hence, the respondent No.2/Authority ought to have passed the order under section 129(1)(a) of the CGST Act and KGST Act - Circular No.76/50/2018-GST dated 31.12.2018. HELD THAT:- The invoice accompanying the goods in the present case indicates the consignor as the petitioner. In terms of the investigation report, the goods are loaded in the State of Karnataka near Aldur, Chikkmagalur District and the conveyance in question has not entered into the State of Tamil Nadu. These factual aspects which are disputed and challenged by the petitioner cannot be adjudicated in the writ jurisdiction. Though an attempt has been made by the learned counsel for the petitioner to contend that the order impugned is not appealable under the provisions of the Act, the same requires to be negated for the reason that section 107 of the Act explicitly makes it clear that, any person aggrieved by any decision or order passed under the Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person. Hence, without going into the merits or demerits of the case, this court finds it appropriate to relegate the petitioner to the Appellate Authority to avail the alternative remedy of appeal - petition disposed off.

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• Income Tax

• 2019 (11) TMI 1119
  Charitable activities u/s 2(15) - Cancellation of registration u/s (3) of Section 12AA - Secretary of the Society was getting lease rent for the land given to the Society for running the School or his wife who had requisite qualification was teaching in the school - HELD THAT:- SLP Dismissed.

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• 2019 (11) TMI 1118
  Tax on distributed income to shareholders u/s 115QA - Buy back of shares - availability of appellate remedy - HC refused to exercise Jurisdiction under Article 226 because of availability of an alternate efficacious remedy - Dividend distribution tax (DDT) - HELD THAT:- The computation and extent of liability is determined under the provisions of Section 115QA of the Act. Such determination under the Act would squarely get covered under said expression. There is no reason why the scope of the such expression be restricted and confined to issues arising out of or touching upon assessment proceedings either under Section 143 or Section 144 of the Act. If the submission of the appellant is accepted and the concerned expression as stated hereinabove in Section 246(1)(a) or in Section 246A(1)(a) is to be considered as relatable to the liability of an assessee to be assessed under Section 143(3) as contended, there would be no appellate remedy in case of any determination under Section 115QA. The issues may arise not just confined to the question whether the company is liable at all but may also relate to other facets including the extent of liability and also with regard to computation. If the submission is accepted, every time the dispute will be required to be taken up in proceedings such as a petition under Article 226 of the Constitution, which normally would not be entertained in case of any disputed questions of fact or concerning factual aspects of the matter. The assessee may thus, not only lose a remedy of having the matter considered on factual facets of the matter but would also stand deprived of regular channels of challenges available to it under the hierarchy of fora available under the Act. We, therefore, reject the submissions advanced by the appellant and hold that an appeal would be maintainable against the determination of liability under Section 115QA of the Act. Whether the High Court was justified in refusing to entertain the writ petition because of availability of adequate appellate remedy ? - No infirmity in the approach adopted by the High Court in refusing to entertain the Writ Petition. The submission that once the threshold was crossed despite the preliminary objection being raised, the High Court ought not to have considered the issue regarding alternate remedy, may not be correct. The first order dated 25.01.2017 passed by the High Court did record the preliminary objection but was prima facie of the view that the transactions defined in Section 115QA were initially confined only to those covered by Section 77A of the Companies Act. Therefore, without rejecting the preliminary objection, notice was issued in the matter. The subsequent order undoubtedly made the earlier interim order absolute. However, the preliminary objection having not been dealt with and disposed of, the matter was still at large. No error in the approach of and conclusion arrived at by the High Court. It is relevant to mention that the concessions given on behalf of the Revenue as recorded in the directions issued by the High Court also take care of matters of prejudice, if any. Consequently, the appellant, as a matter of fact, will have a fuller, adequate and efficacious remedy by way of appeal before the appellate authority. It has been so held even by this Court in several cases that even if alternative remedy is available, it cannot be held that a writ petition is not maintainable. In our judgment, however, it cannot be laid down as a proposition of law that once a petition is admitted, it could never be dismissed on the ground of alternative remedy. If such bald contention is upheld, even this Court cannot order dismissal of a writ petition which ought not to have been entertained by the High Court under Article 226 of the Constitution in view of availability of alternative and equally efficacious remedy to the aggrieved party, once the High Court has entertained a writ petition albeit wrongly and granted the relief to the petitioner. Certain issues raised during the course of hearing touching upon the aspects whether the appellant is liable under Section 115QA of the Act or whether the transaction of buy back of shares in the present matter would come within the statutory contours of said Section 115QA or not, are issues which will be gone into at the appropriate stages by the concerned authorities; and as such we have refrained from dealing with those issues.

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• 2019 (11) TMI 1117
  Under-valuation of closing work-in-progress - Method of accounting followed by the assessee to recognize the income from its real estate development business - additions made by the Assessing Officer on account of the alleged undervaluation of closing work-in-progress and undisclosed closing stock - HELD THAT:- The income of the Projects completed during the year under consideration was accordingly recognized by the assessee to the extent of flats sold during the year under consideration as per the method of accounting followed by it and corresponding expenses proportionate to such sale booked under work-in-progress were debited to the Profit Loss Account. In Parijat Project, the assessee-company had constructed 150 flats having total area of 80141 sq.ft., out of which 138 flats having area of 70912 sq.ft. were sold during the year under consideration. The total sale consideration of the 138 flats sold was recognized by the assessee-company as its income during the year under consideration and the corresponding cost attributable to the said sale amounting to Rs. 6,02,38,280/- out of the total cost of Rs. 6,53,15,103/- on proportionate basis was transferred from work-in-progress and debited to the profit loss account. Similarly 64,610 sq.ft. of the total constructed area of Pratyee Project having been sold during the year under consideration, the sale consideration of 64,610 sq.ft. was recognized by the assessee-company as its income of the said Project and corresponding cost of Rs. 6,94,55,750/- out of the total cost of the said Project of Rs. 14,67,04,702/- was transferred from the work-in-progress and debited to the Profit Loss Account. As evident from the details furnished by the assessee before the AO as well as before the ld. CIT(Appeals), cost of construction incurred by the assessee during the year under consideration on all the Projects was Rs. 11,31,63,423/- while the general expenses incurred were Rs. 1,25,33,241/-. These two amounts were added to the opening work-in-progress and after transferring the general expenses to the extent of 10% amounting to Rs. 12,53,324/- and the corresponding cost attributable to the sale of flats of the completed two Projects amounting to Rs. 6,02,38,280/- and Rs. 6,94,55,750/-, the balance amount of Rs. 17,49,74,366/- was shown as closing work-in-progress. The amount of closing work-in-progress reflected in the balance-sheet of the assessee-company at Rs. 17,49,74,366/- thus was correctly shown as per the method of accounting consistently followed by the assessee to recognize the income of its real estate development business. It appears that the AO did not appreciate the working of closing work-in-progress as done by the assessee-company by following the method of accounting consistently followed and proceeded to determine the closing work-in progress by taking the unsold flats to the extent of 35% on adhoc basis, which as rightly held by the ld. CIT(Appeals) was totally untenable. CIT(Appeals), in our opinion, properly understood the working of closing work-in-progress as made by the assessee and deleted the addition made by the Assessing Officer on account of the alleged under valuation of closing work-in-progress. We, therefore, uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Ground No. 1 of the Revenue s appeal. Undisclosed closing stock - As already noted that the total cost of construction incurred during the year under consideration was included by the assessee company in work-in-progress. Since the entire material purchased for the construction was included in the cost of construction and thereby in the work-in-progress, there was no question of showing any material purchased at the fag end of the year which was not utilized for construction in the closing stock separately. As rightly contended on behalf of the assessee and accepted by the CIT(Appeals), the material purchased at the fag end of the year, which had remained un-utilized for construction was duly reflected in the value of closing work-in-progress and there was no case of any closing stock of material that had remained to be disclosed by the assessee as alleged by the AO. The addition made by the Assessing Officer on account of such alleged undisclosed closing stock thus was not sustainable and the ld. CIT(Appeals), in our opinion, was fully justified in deleting the same. Ground No. 2 of the Revenue s appeal. Addition on account of the profit of the assessee attributable to the unsold flats of the completed two Project - method of accounting followed by the assessee to recognize the income from its real estate development business, whereby the income was recognized in respect of the completed Projects to the extent of area sold during the relevant year. Since the said method of accounting was consistently followed by the assessee-company, the income attributable to the flats sold of the completed two Projects was recognized by the assessee company during the year under consideration, while the income from unsold flats of the said Projects was recognized in the subsequent years as and when the said flats were sold. This position was accepted by the CIT(Appeals) himself and the details of sale of such unsold flats during the subsequent years as furnished by the assessee were also taken note of by the ld. CIT(Appeals). As per the accounting method followed by the assessee, the income from the real estate development was recognized on Project Completion Method to the extent of sale of the completed project and there was no justification to disturb this method followed by the assessee to recognize the income from the real estate development business consistently. Secondly, since the flats had remained unsold during the year under consideration, the profit attributable to the said flats could not be said to be realized or accrued to the assessee during the year under consideration so as to bring it to tax during the year under consideration. Thirdly, the sale price of the unsold flats was ascertainable only on the actual sale, which happened in the subsequent year and, therefore, determination of profit of the said flats during the year under consideration on any estimate basis involved assumptions and presumptions. Moreover, the profit of such unsold flats of the completed project was offered to tax by the assessee in the subsequent year as and when the same were sold on actual basis by following the method of accounting consistently adopted by it and addition of such profit from the said flats on estimated basis by the ld. CIT(Appeals) during the year under consideration clearly resulted into double addition. Keeping in view all these facts and circumstances of the case, we are of the view that the addition made by the ld. CIT(Appeals) on account of estimated profit on the estimated sale of unsold flats of the completed Projects is not sustainable and the same is liable to be deleted. We accordingly delete the said addition made by the ld. CIT(Appeals) and allow the appeal of the assessee.

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• 2019 (11) TMI 1116
  Proceedings u/s 201(1)/201(1A) - Non deduction of TDS on the discounts offered by the Appellant to its distributor as in the nature of commission u/s 194H - appeal is against not getting proper opportunity before the AO treating the assessee to be in default for non-deduction of TDS - HELD THAT:- We note that assessee consistently pleaded that it had Principal to principal relationship between it (assessee) and its distributor in respect of prepaid SIM cards. So we are of the prima-facie view that the documents mentioned need to be considered by the AO for adjudicating the issue. And since there is a failure on the part of the earlier AR to produce the aforesaid documents before the authorities below which is an essential document to decide the issue, we are of the view that justice should not be denied to assessee for the failure on the part of the Ld. AR of the assessee. Also the endeavor of the AO should be the Quest for Truth which he should undertake while assessing an assessee and the AO to adjudicate the lis before him de novo and even he is at liberty to look into the authenticity/genuinity of the agreements which the Ld. CIT(DR) had expressed his reservations and doubts and in case the AO finds the agreements mentioned in para7 (a) to (d) supra are authentic and genuine, he shall admit the additional documents and decide the issues. So the impugned order of Ld CIT(A) is set aside and the matters are remanded back to AO and the AO is directed to decide de novo the issue/issues after hearing the assessee - Appeals of the assessee are allowed for statistical purposes.

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• 2019 (11) TMI 1115
  Admission of additional ground regarding chargeable of interest u/s.234B/C - HELD THAT:- Additional ground is being legal one, hence, same is admitted in the light of decision of Hon ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT [ 1996 (12) TMI 7 - SUPREME COURT] wherein it was held that the additional ground of appeal can be admitted where the issue involved is pure question of law, not involving any investigation of facts. Interest u/s.234B/C - HELD THAT:- Counsel has placed reliance on the decision in the case of DIT(IT) Vs. G.E.Packaged Power Ink [ 2015 (1) TMI 1168 - DELHI HIGH COURT] wherein it was held that where the assessee were non-resident companies, entire tax was to be deducted at source of payments made by payer to it then there was no question of payment of advance tax by the assessee, therefore, Revenue could not charge any interest u/s.234B from the assessee. Interest u/s.234B/C is not chargeable, if the entire income of the assessee was subjected to TDS. However, this issue has not been examined by the AO as to whether payer was to deduct TDS or assessee s income was subjected to TDS. Therefore, we deem it fit to remit back this issue to the file of the AO to verify where the entire income of the assessee was liable to TDS on the payments made from the payer, if so then there was no question of payment of advance tax by the assessee and the Revenue could not charge the interest u/s.234B of the Act. In view of this, additional ground is set-aside for limited purpose to the file of the AO. Disallowance being interest debited to the Profit and Loss Account and the balance amount appearing in RA bills - Disallowance u/s.40(a)(ia) in respect of expenses on account of nonpayment of TDS - HELD THAT:- We find that the assessee has debited interest in the Profit and Loss Account which itself states that the interest was paid by the assessee of which TDS was required to be made as per provisions of section 194A r.w. 2(28A) of the Act. We find that the interest is defined u/s.2(28)(A) which says that interest payable on any-money borrowed or that debt incurred this means that the assessee as borrowed and mobilize as mobilization advance and debt was incurred. Therefore, the transactions are duly covered by the provisions of section 2(28A) of the Act, therefore the ld.CIT(A) has rightly held that the interest payment was subjected to TDS. Considering the alternative ground of the assessee, we find that the ITAT in the case of Neena Kaul [ 2019 (5) TMI 1697 - ITAT MUMBAI] and Tripura State Electricity Corporation Ltd., [ 2019 (11) TMI 858 - ITAT GUWAHATI] held that the amendment made by Finance Act [2014] w.e.f. 01.04.2015 restricting disallowance made u/s.40(a)(ia) from 100% to 30% is curative in nature and therefore having retrospective effect. We, therefore direct the AO to restrict the impugned disallowance to the extent of 30% only, accordingly the ground no.1 to 4 are partly allowed.

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• 2019 (11) TMI 1114
  Disallowance of 50% of the outstanding wages - CIT-A by rejecting the books of accounts and adopting the net profit rate of the earlier years - HELD THAT:- In this case the learned CIT A did not look at the books of accounts as it were not produced before him or neither had he asked assessee to produce them. For the purpose of rejection of the books of accounts, the assessing officer/CIT A is required to show some latent, patent and glaring defects in the books of accounts. When the books of accounts produced before the learned assessing officer, even he did not mention any defects in the books of accounts and accepted the book results and made ad hoc addition of 50% of the outstanding wages, then we fail to understand that how the learned CIT A estimated the net profit of the assessee rejecting the books of accounts. Assessee has produced the complete muster roll, attendance register and the Ledger accounts before the assessing officer. AO has not seen details of discharge of the above liability on account of the outstanding labour wages in subsequent year. According to us to decide about the allowability of the outstanding the wages payable it is necessary for AO to examine whether this liability exist or not, as the learned assessing officer himself has allowed the labour expenditure debited to the profit and loss account, this option is now not available with him. Therefore, only option left with AO is to verify whether such liability has been discharged by the assessee in subsequent year or not. As AO has not given his comments on this aspect, then questioned by the bench to the learned authorised representative, he readily agreed that such an evidences can be produced before the assessing officer. DR also agreed that if such outstanding wages is paid in subsequent year, it could not be disallowed. Therefore, to determine the allowability with respect to the genuineness of the outstanding wages it is necessary to verify whether such expenditure have been paid in the subsequent month or not. We set aside the whole issue back to the file of the learned assessing officer to examine payment of such wages in the subsequent month. The assessee is directed to produce the relevant information before the learned assessing officer. AO may examine such detail and if found in accordance with the law, to delete the addition. If such payments are not made in the subsequent year, he may give an adequate opportunity to the assessee to prove its case. After that, the AO may decide in accordance with the law. Accordingly, ground number 1 3 of the appeal of the assessee is allowed for statistical purposes with above direction. Grant of credit of tax deduction at source on mobilization advances - HELD THAT:- On careful consideration of the above issue it is apparent that the amount of tax deduction at source is eligible for credit to the assessee in the year in which the income pertaining to such tax deduction at source is offered for taxation. Admittedly mobilization advances not been shown by the assessee as its income therefore we do not find any infirmity in the order of the learned CIT A to that extent.

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• 2019 (11) TMI 1113
  Characterization of income - gain on sale of plots of land - capital gain or business income - HELD THAT:- No documentary evidence placed before us which could show that the assessee has been carrying out the business of purchase and sale of land in the past. Not proved that the alleged land was held as stock-in-trade in books by the assessee in the preceding year. No tax audit report has been filed demonstrating the system of accounting and valuation of stock. Audited Profit Loss Account and Balance sheet also do not indicate about the preceding year details and only the single transaction of sale of land has been claimed to have been completed in the course of business. In our considered view it is not figuring out that the assessee is into the business of purchase and sale of land. Computation of income for Assessment Year 2011-12 shows that the assessee had earned Long Term Capital Gain from sale of plots of land at Piplia and they were not shown as part of business activity. Assessee could not throw any light on this aspect that when the assessee was engaged in business why some other transaction have not shown under the head Capital Gain.Claim of the assessee made before the A.O that it is carrying out the business of purchase and sale of land has no merit and the alleged gain from transaction of sale of land needs to be taxed as capital gain. Thus this issue is decided against the assessee. Capital gain to be taxed in Assessment Year 2010- 11 or Assessment year 2011-12 - HELD THAT:- Alleged sale deed was executed on 31.03.2010. This fact is not disputed by both the parties. Though the document has been registered subsequently during the financial year 2010-11 but the sale deed has been signed by both the parties on 31.03.2010. In the course of hearing when assessee was confronted with this aspect, he was fair enough to accept that 31.03.2010 may be taken as the date of sale of the plots of land. In these given facts and circumstances, we are of the view that the sale transaction was completed on 31.03.2010 and thus the incidence of tax falls in Assessment Year 2010-11. Whether the gain from the transaction from sale of land is to be taxed as Short Term Capital Gain or Long Term Capital Gain during Assessment Year 2010-11 - Relevant dates of purchase and sale of land and the handing over of the possession will be crucial. As far as the date of sale is concerned the date of sale is 31.03.2010 and in the sale deed itself the handing over of the possession is on 31.03.2010 has been accepted by the seller and buyer. So the date of handing over of the possession and the date executing the sale deed is 31.03.2010 and part of the sale consideration was received by the assessee on and before these dates. So we can safely conclude that the date of sale is 31.03.2010 for the purpose of computing the capital gain. Other limb is the date of purchase. The purchase deed is executed on 31.03.2007. The possession of the land was taken by the assessee on 26.03.2007 since the total purchase consideration was paid on and before 26.03.2007. Taking the same analogy which we have adopted for accepting the date of sale i.e. the date of execution of the deed, the date of purchase in this case is 31.03.2007. Though the revenue authorities have adopted the date of registration of the purchase date of 12.07.2007 as the date of purchase, we do not find any merit in the finding of CIT(A). Taking a step forward, we find that the date of taking possession i.e. 26.03.2007 is also not disputed before us. For the purpose of Section 2(47) of the Income Tax Act the transfer was completed in favour of the assessee on 26.03.2007 itself. So the date of purchase to be adopted is 26.03.2007 and counting from this date till 31.03.2010, the period is more than 36 months. Since the assessee has sold the plot of land after holding it for more than 36 months the gain raising from sale of the impugned land needs to be taxed as Long Term Capital Gain for Assessment Year 2010-11 after giving benefit of cost indexed of acquisition and other transfer expenses. This issue is thus decided in favour of the assessee. The additional Ground No.2 is allowed. Justification for applying the value of property as per Section 50C without referring it to the Valuation - HELD THAT:- Sub Section 1 of Section 50C primarily applies on the instant case. However if the assessee challenges the value adopted by the Stamp Valuation Authority and subsequently adopted by the A.O to compute the Capital Gain then the A.O may refer the valuation of the capital asset to Valuation Officer as provided in Section 50C(2). Since this issue never came up for consideration before the lower authorities, we being fair to both the parties and in the interest of justice set aside this issue to the file of Ld. A.O with the direction that necessary reference may be made to the Departmental Valuation Officer for valuation of the impugned capital asset and if the same is less than alleged fair market value then apply the same for computation of Long Term Capital Gain. Whether the assessee is eligible to get the claim of expenses for stamp duty, registration and brokerage by computing income of AY 2010-11 even though the amount have been incurred during AY 2011-12? - These expenses were claimed as business expenditure during Assessment Year 2011-12 which were appearing in the audited financial statements. Since we have already decided the issue that the incidence of tax will fall in Assessment Year 2010-11 the alleged expenses of registration and stamp duty and brokerage which very much relates to the transaction taken place during Assessment Year 2010-11 and the quantum was ascertainable as on 31.03.2010, the assessee needs to be given the benefit of deduction of the Stamp duty and Registration expenses of Rs. 1,72,67,070/- and brokerage expenses of Rs. 28 lakhs in the computation of Long Term Capital Gain for Assessment Year 2010-11 irrespective of the fact that the alleged amount has been paid during Assessment Year 2011-12. Ld. A.O is directed to give the deduction as decided above. In the result additional Ground No.4 is allowed in favour of assessee. Whether the assessee is eligible to get the benefit of tax credited during the year 2010-11 for the tax paid for the income from alleged transaction shown for Assessment Year 2011-12? - In the preceding paras we have decided that the alleged gain from sale of land needs to be taxed under the head Long Term Capital Gain to be computed after adopting the valuation of the impugned property at lower of the value computed by the Departmental Valuation Officer or the value adopted by Stamp Valuation Authority and after giving deduction for cost of acquisition, stamp duty, registration charges and brokerage expenses, same transaction cannot be taxed twice i.e. during Assessment Year 2010-11 and Assessment Year 2011-12. The assessee is required to pay tax on Long Term Capital Gain for Assessment Year 2010-11 as indicated above. In our considered view the assessee is eligible to get the credit of tax paid on the net profit of Rs. 8,75,86,752/- shown in the return of income for Assessment Year 2011-12 against the tax liability arising in Assessment year 2010-11. Ld. A.O is accordingly directed to do the needful. This issue raised by the assessee in Additional Ground No.6 is allowed.

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• 2019 (11) TMI 1112
  TDS credit - Whether assessee was eligible for TDS credit of the amalgamating company ? - HELD THAT:- We admit this ground and since we find that this issue needs verification by the AO as to whether the TDS reported in the revised return of income also contained the TDS made by M/s CTIPL, we deem it fit and proper to remand the issue to the file of the AO with a direction to verify the claim of assessee and allow the same if it is in accordance with law. Allowance of MAT credit - HELD THAT:- Remand the issue to the file of AO for verification and allowance of MAT credit to the assessee in accordance with law. Disallowance u/s 14A - AO has disallowed interest expenditure - HELD THAT:- We find that this issue is covered in favour of the assessee by various decisions of the Tribunal and also the judgement of Chemivest Pvt. Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] wherein it was held that no disallowance u/s 14A is called for when there is no exempt income earned by assessee during respective FY. Respectfully following the same, the disallowance made u/s 14A of the Act is directed to be deleted. Disallowance of bad debts - HELD THAT:- Sum of Rs. 28,22,76,596/- was undoubtedly the outstanding trade receivables from CTE Inc. as on 31st March, 2013. The Board Resolution dated 28th December, 2012 is placed at page 630 of the paper book, which stated that it is resolved to sell the equity shares of Smart Shift Group Ltd. Mauritius to Smart Shift Group Inc. and also to write off trade receivables/bad debts due from the Subsidiary company i.e. CTE Inc. USA with respect to services provided by the company during the period October, 2011 to September, 2012 . The balance of the trade receivables were received by assessee company, apparently after sale of the shares. However, the date of sale of shares is not on record. Since what is written off as bad debts is trade receivables, we agree with the contention of the Ld.Counsel for the assessee that the nature of the transaction would not change and it is a bad debt which is not recoverable from CTE Inc. which has been written off and has to be allowed as a deduction. TP Adjustment - provision of software development services - HELD THAT:- Insertion of Explanation to Sec.92B of the I.T.Act, interest on receivables has become international transaction with retrospective effect from 1.4.2002. However, even if the said insertion is to be considered as prospective in nature, since it is inserted by Finance Act, 2012, it is very much applicable to the A.Y. before us i.e. A.Y. 2013-14. The argument that the assessee has not charged interest on receivables from both AEs and Non-AEs and, therefore, no adjustment on interest receivables should be made by the TPO cannot be accepted. Both the interest on receivables as well as interest on payables are to be considered as international transactions, the AO is required to refer to the TPO for determining the ALP. As regards the argument that the working capital adjustment takes into account the impact of interest on receivables and accordingly no separate adjustment is required, we find that in the case of the assessee the working capital adjustment is not annexed to the assessment order. Therefore we are not able to come to any conclusion whether working capital adjustment has taken into consideration, the interest on receivables Argument of the DR is at the trade receivables at the beginning and end of the year are only taken into consideration while computing working capital adjustment but not outstanding receivables during the relevant F.Y. As pointed out by the Ld.DR and also from the agreement, the credit period as agreed to between the parties is only 1 to 3 months, but the period of delay in the receivables is not given either by the TPO or by the DRP or even by the assessee before the authorities below. Period of realisation is also not given by assessee, therefore, we are not able to give any finding on the delay in realisation and we hold that when there is mentioned a Clause the agreement for credit period, it will apply and any period after that period has to be taken into consideration for determining the interest on receivables. Therefore, AO/TPO has to compute the interest on receivables only of such receivables which have exceeded the credit period agreed to by the parties in the agreement and not on the entire outstanding receivables at the end of the year. Assessee s contention that the assessee is not paying interest on trade payables or advances from non-AE customers also cannot hold water after amendment by the Finance Act, 2002. Further, we also agree with the contention of the assessee that even if notional interest is to be charged, the same has to be charged at Libor+ interest rates as the receivables are in foreign currency. Therefore, we set aside the issue of computing interest on outstanding receivables with a direction to the TPO to consider only such receivables which are beyond the credit period agreed to by the parties in the agreement and only if such outstanding receivables have not been taken into consideration while computing the working capital adjustment and interest on such outstanding receivables shall be calculated at Libor+ interest rate only. Grounds allowed for statistical purposes. Adjustment on account of reimbursement of expenses received - assessee has not received any reimbursement of expenses - HELD THAT:- We find that the TPO has made ALP adjustment of 23.77% to arrive at adjustment of Rs. 51,71,659/-. DR also agreed that if it is reimbursement of expenses by assessee and not receipt by the assessee, then, adjustment cannot be made but however he submitted that this needs verification by the AO. Therefore, regarding the submissions of assessee that there are no receipts of reimbursement expenses but are paid by the assessee to its AE, we deem it fit and proper to remit the issue to the file of AO to verify whether this amount is payment by assessee to its AE and if it is found to be so, no adjustment shall be made on this account. TP adjustment on account of provision of SDS - Assessee has adopted TNMM as the most appropriate method for its TP study and has arrived at 3.06% margin of a comparable companies against its own margin of 20% and, therefore, treated the transaction to be at ALP - HELD THAT:- We find that the employee cost of the assessee 65:20 against the employee cost of comparables of 54.45%. We find that the assessee had taken this objection before the TPO but the TPO had rejected the same without making any comments on merits. Even before the DRP the assessee had raised objection no.4b, but the DRP held that extra employee cost is normal instant in this type of business and is necessitated by business dynamics. It was also held that the assessee has not furnished robust documentation to justify such claim and that there is no difference in FAR analysis as to such unusual additional cost to be met to perform its functions. The DRP therefore, rejected the claim of the assessee. As in the case of Petro Eraldite Pvt. Ltd. . [ 2018 (6) TMI 452 - BOMBAY HIGH COURT] also has held that capacity adjustment was required as per Rule 10b in case of difference in capacity utilisation by assessee. In view of the same, we deem it fit and proper to set aside the issue to the file of AO/TPO with the direction to the assessee to furnish relevant documents in support of its claim and the AO/TPO shall make necessary adjustment on account of employee filter to the assessee s margin or the margin of the comparables according to the information available with the TPO. Comparable selection - HELD THAT:- We find that assessee is seeking exclusion of comparable companies by relying upon various decisions of this Coordinate Bench to which we both are signatories and he is also seeking inclusion of some comparables by relying on certain decisions wherein they have been directed to be included. For A.Y. 2013-14, wherein under similar circumstances, we have directed exclusion and inclusion of these companies, we find that there would be very few companies or rather no companies at all left for the T.P. analysis subsequent to such exclusions. Under these circumstances we deem it fit and proper to remand the issue to the file of TPO with a direction to consider the precedents on this issue

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• 2019 (11) TMI 1111
  Addition on account of fuel related losses - CIT-A deleted the addition - HELD THAT:- In the present case the A.O. while accepting the 50% of the loss as genuine and remaining 50% as non genuine, had not given any cogent reason or basis and even in the past such losses were accepted by the Department. In the present case the findings given by the CIT(A) that the coal loss varies from year to year and it was dependent on various factors such as weather condition, moisture content, travel forces etc. which were variable from time to time had not been rebutted. Moreover the transit of coal was not insurable and the assessee had claimed actual loss which was on account of difference in weight of coal recorded first in the SMB Register, thereafter in the stock register and the books of accounts. CIT(A) categorically stated in the impugned order that the AO verified from the record related to the loss suffered by Panipat Unit of assessee corporation while completing the assessment proceedings for the year under consideration and no adverse comment / discrepancy as regards to the record maintained by the Assessee for fuel loss was observed by the AO while passing the assessment order. This observation of the Ld. CIT(A) has not been rebutted by bringing any cogent material on record. We therefore by considering the totality of the facts as discussed hereinabove do not see any valid ground to interfere with the findings of the Ld. CIT(A) and do not see any merit in this ground of the Departmental appeal. Addition on account of renovation and modernization of projects - CIT-A deleted the addition -HELD THAT:- As noticed that a similar issue having identical facts has been adjudicated by this Bench of ITAT in assessee s own case factual findings of the Ld. CIT(A) that the interest expenses claimed, pertained to loans taken for projects which had already been commissioned prior to the impugned year have not been controverted by the Revenue. Nor has the Revenue pointed out any any infirmity in the conclusion drawn by the Ld. C1T(A) , from the said factual position of the assessee, that interest expenses incurred subsequent to completion of renovation of projects was to be treated as Revenue in nature as per section 36(l)(iii) of the Act. The Revenue has also not controverted the finding of the C1T(A) that such claim has been allowed in the past too u / s 36(l)(iii) of the Act. We, therefore, see no reason to interfere in the order of the Ld. C1T(A) - Decided against revenue

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• 2019 (11) TMI 1110
  TDS u/s 195 - royalty - fees for technical services (FTS) - payment made by the assessee to Reliance Jio Infocomm Pte Limited, Singapore (RJIPL) for availing bandwidth services - whether it did not amount to income of the payee by way of royalty u/s 9(1)(vi) of the IT Act, 1961 read with Article 12 of India-Singapore DTAA? - definition of the terms use of or right to use and process in Article 12 of the India-Singapore DTAA in relation to royalty - CIT-A held that tax was not required to be deducted at source - HELD THAT:- When the expression royalty is a defined expression under the applicable tax treaty, there cannot be any occasion to invoke article 3(2) for further dissecting the issue and explore the domestic law meaning of each expression used in this definition for coming at the conclusions about connotations of royalty. It cannot, therefore, be open to invoke article 3(2) to import domestic law meaning, even partly, when the treaty term has received a definition under the treaty. It is for this reason that Explanation 6 to Section 9(1)(vi), in our humble understanding, has no role, under article 3(2) of the treaty, in explaining the expression process , in the context of defining royalty under the Indo Singaporean tax treaty. This statutory provision, under the domestic law, is relevant only when the definition of royalty under section 9(1)(vi) of the Income Tax Act, 1961, is subject matter of consideration, as it specifically states that said definition is for the purpose of for the purpose of this clause [i.e. Section 9(i)(v)] . Additional test that is required to be put, while adopting the ambulatory interpretation in such a situation, is whether the amendment is domestic law ends up unsettling a conclusion arrived at under the pre domestic law amendment position i.e. reversing the judicial rulings in favour of the residence jurisdiction, and, if the answer is in the positive, the ambulatory interpretation is to be discarded because that approach would patronise, and legitimise, a unilateral treaty override, and the outcome of ambulatory interpretation in such a case will be incompatible with the fundamental principles of treaty interpretation under the Vienna Convention. The approach is justified on the first principles on the ground that when two approaches are possible for incorporation of domestic law provisions in the tax treaties and one of these approaches is compatible with Article 26 of the VCLT while the other is incompatible with the same, the approach compatible with the VCLT provisions is to be adopted. In view of these discussions, and bearing in mind entirety of the case, we find no legally sustainable merits in the grievances raised before us. The arguments raised before us do not lead us to a different conclusion either. Concurring with the coordinate bench decisions, therefore, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. As we hold so, we may add that these observations regarding ambulatory or dynamic approach being inappropriate in the context of article 3(2) is confined to the peculiar facts discussed above, and, are not, therefore, of general application. Payments made by assessee to RJIPL Singapore for providing Operations and Maintenance (O M) services - whether is not in the nature of fees for technical services under section 9(1)(vii) of the Act read with Article 12 of the India-Singapore DTAA? - HELD THAT:- As regards the scope of article 12(4)(b) is concerned, it can indeed be invoked for the payments for fees of technical services but, even it is a condition precedent that the services should enable the person acquiring the services to apply technology contained therein, but then it is nobody s case that services rendered by RJ-S were such that the assessee was enabled to apply technology contained therein. The services were simply maintenance services which did not involve any transfer of technology. In response to our specific question, learned DR could not enlighten us about what was the nature of technology transferred under these arrangements. The amounts received by RJ-S could not, therefore, be taxed as fees for technical services either. There are at least two non-jurisdictional High Court decisions DIT Vs Guy Carpenter Co Ltd [ 2012 (5) TMI 31 - DELHI HIGH COURT] and CIT Vs De Beers India Pvt Ltd [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT] , in favour of the assessee, and there is no contrary decision by Hon ble jurisdictional High Court or by Hon ble Supreme Court. We bow before higher wisdom of Hon ble Courts above and hold that unless there is a transfer of technology involved in technical services extended by Singapore company, the make available clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under Article 12(4)(b) of India Singapore tax treaty. As regards the taxability under article 12(4)(c), it is nobody s case that there is any development and transfer of a technical plan or technical design, and, therefore, this provision does no come into play either. Once we come to the conclusion that the payment for these services is not taxable as fees for technical services under article 12(4), it is immaterial whether it could be taxable under section 9(1)(vii) for the simple reason that this being a treaty situation, the provisions of the Income Tax Act, 1961, could come into play only when favourable to the assessee. We approve the conclusions arrived at by the learned CIT(A) on this issue as well. We, therefore, confirm the stand of the learned CIT(A) and decline to interfere in the matter. - Revenue appeal dismissed.

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• 2019 (11) TMI 1107
  Reopening of assessment u/s 147 - addition u/s 68 - approval of the Chief Commissioner of Income Tax taken or not? - proposal placed on record shows that it bears Inward Stamp of the Additional Commissioner of Income Tax, Mumbai - HELD THAT:- Whether the communication dated 13 February 2019 accords a final approval. This question we answer in the negative. Though the words I feel that this is a fit case are used in the communication, the further part of the communication seeks an approval of the Chief Commissioner of Income Tax, Therefore, this opinion was subject to the approval of the Chief Commissioner of Income Tax. The communication dated 13 February 2019 cannot, therefore, be considered as a final sanction. Whether the sanction granted by the Chief Commissioner of Income Tax would fulfill the requirement of section 151 - whether the sanction granted by the Chief Commissioner of Income Tax would fulfill the requirement of section 151? - HELD THAT:- It is long been settled that when the statute mandates the satisfaction of a particular authority for the exercise of power then it has to be done in that manner only. Adopting this principle, the Division Benches of this Court in the case of Ghanshyam K. Khabrani v. Asst. CIT [ 2012 (3) TMI 266 - BOMBAY HIGH COURT] and CIT v. Aquatic Remedies P.Ltd. [ 2018 (8) TMI 135 - BOMBAY HIGH COURT] have held that sanction for issuance of reopening notice has to be obtained from the Authority mentioned in Section 151 and not from any other officer including a superior officer. In the present case the Chief Commissioner of Income tax is not the officer specified in section 151 of the Act. There is thus a breach of requirement of section 151(2) of the Act regarding sanction for issuance of notice under section 148 of the Act. Consequently, the impugned notice and the impugned order cannot be sustained in law. The Petitioner, therefore, is entitled to succeed.

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• 2019 (11) TMI 1106
  Revision u/s 263 - set off of any loss against the undisclosed income - addition u/s 68 - HELD THAT:- Undisclosed income assessed under Section 68 need not be treated as an income falling totally outside the ambit of the classifications contained in Section 14 of the Act. Even assuming for the sake of argument that, it will not fall within the classifications contained in Section 14, it is evident that, as on the date of the assessment such income was included under a special classification by virtue of Section 115BBE. It is pertinent to note that, 115BBE had prohibited allowance of deductions alone, as it stood unamended as on the relevant date of the assessment. The explanatory notes to the provisions of the Finance Act, 2016 enumerates the reasons for introduction of the further amendment barring the set off, with effect from 1.4.2017. The intention of the legislature in introducing the amendment, as stated in the explanatory note, is to avoid unnecessary litigation and to expressly provide that no set off of any loss shall be allowable in respect of income under Section 68. Therefore, it has to be held that, as on the relevant date of the assessment, there was no bar existed with respect to allowing set off against the carried forward unabsorbed depreciation on fixed assets, with respect to income under Section 68. Therefore, we are of the view that, Tribunal had committed an illegality in coming to the conclusion that the deemed income will not fall even under the head of income from other sources and therefore the deductions and set off applicable to income under other heads will not be attracted in the case of deemed income covered under the provisions of Section 68 - Decided in favour of assessee

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• 2019 (11) TMI 1105
  Reopening of assessment u/s 147 - action u/s.147 taken in the hands of the Appellant based on such seized material - HELD THAT:- If, one reads the Explanation-2 to section 147 of the Act including the proviso thereto, then it is clear that where the AO reopens assessment within a period of four years, it can do so on the ground of income having escaped assessment. Even, if there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The information of aforesaid modus-operandi has been received by the AO after post search enquiries conducted by the Department in the group cases, hence this information was not available at the time of assessment order. Moreover, there is no reference of modus-operandi or any search in the original assessment record. Therefore, the contention of the ld.Counsel that proviso to section 147 is applicable and there was no failure on the part on the assessee to disclose all material facts necessary for the assessment is without any basis and not applicable as the assessment has been reopened within four years from the end of relevant assessment year. We find that in group cases of the assessee, it has been categorically established the modus-operandi followed by the group companies and the assessee was also found indulging in land purchases. The sufficiency or correctness of the material is not a thing to be considered at such stage. Therefore, considering these facts on record,we are of the considered opinion that AO was justified in reopening assessment. Addition on account of PDC interest - HELD THAT:- We find that the modus operandi adopted by the Group has been established from the findings as given in the number of group concern. We find that Ld. CIT (A) has found that wherever the date of post dated cheque was extended, interest was being paid at 15% p.a. in cash out of books of account as was evident from the seized material, therefore, the interest on PDC to the extent of extension period was logical. Ld. CIT (A), therefore, directed the AO to re-compute the interest on PDC either on the sale consideration or additional payment to the extent of extended period of PDCs by the AO and in case the working out of the same is not possible, to re-compute the interest on PDCs after six months from the date of issue of PDCs i.e. date of sale, as six months is taken as reasonable period for giving PDC as per sale deed. The Ld. CIT(A) has above relied on the statement of Shri Chhoturam as mentioned above. - As relying on M/S IAG PROMOTER DEVELOPERS (P) LTD. [ 2014 (12) TMI 216 - ITAT DELHI] we upheld findings of Ld. CIT(A) in sustaining the addition - Decided against assessee.

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• 2019 (11) TMI 1104
  Revision u/s 263 - Addition u/s 68 - CIT was of the opinion that the genuineness of the creditors remained unverified to the extent of Rs. 96,46,987/- and he was pleased to set aside the order of the AO with a direction to the AO to verify the identity and genuineness, inter-alia, of the creditors to the extent of Rs. 96,46,987/- and to pass a fresh assessment order recomputing the income - HELD THAT:- We note that the main reason given by the Ld. Pr. CIT to interfere with the assessment order dated 30.12.2016, while issuing SCN proposing to initiate revisional jurisdiction was started with the assumption of fact that the AO without making enquiries and verification in respect of sundry creditors to the tune of Rs. 2,11,05,222/- (as per the Balance Sheet) has framed the assessment order and however, while concluding the Ld. Pr. CIT found that the verification need to be restricted to only Rs. 96,46,987/- after hearing the assessee during the revisional proceedings. Since the assessee had complied with the queries on the issue and filed details of sundry creditors and the AO has made enquiries in respect of the sundry creditors then in such a scenario, the ld Pr CIT in order to find that there is any fault/deficiency in the enquiry conducted by the AO while framing assessment order, then it was incumbent upon the Ld. Pr. CIT to have conducted an enquiry by himself on the issue and record his finding of fact that could show that AO order is un-sustainable in law, which he did not do. So, the AO s action/enquiry in respect of the sundry creditors cannot be held to be erroneous as well as prejudicial to the interest of the revenue. For that we rely on the order of the Hon ble Delhi High Court in the case of Pr. CIT Vs. Delhi Airport Metro Pvt. Ltd. [ 2017 (9) TMI 529 - DELHI HIGH COURT] and, therefore, respectfully following the ratio of the Hon ble Delhi High Court and in view of the enquiry made by the AO the order passed by the Ld. Pr. CIT u/s. 263 of the Act cannot be sustained and quashed for want of jurisdiction. Appeal of the assessee is allowed.

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• 2019 (11) TMI 1103
  Addition made on account of excess provision of gratuity and leave encashment - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. We find that CIT(A) has given a finding on fact that all the payments have been actually made. This fact is not controverted by the revenue, therefore, we do not see any reason to interfere with the finding of the Ld. CIT(A). Ground raised by the revenue is rejected. Addition u/s 40(a)(ia) - CIT(A) justification in reducing the addition - HELD THAT:- We find that Ld. CIT(A) has followed the judicial pronouncements applicable on the facts of the present case, therefore, the view of the Ld. CIT(A) is affirmed as the revenue failed to bring any judgement of the Hon ble jurisdictional High Court on this issue. Addition on account of provision of gratuity and leave encashment - HELD THAT:- CIT(A) has given a finding on fact that the payments were actually made in the year under appeal, therefore, in view of the aforesaid provision, we do not see any infirmity in to the finding of CIT(A) and the same is hereby affirmed. This ground of the revenue s appeal is rejected.

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• 2019 (11) TMI 1102
  Reopening of assessment u/s 147 - Reopening on the basis of the information received from Addl. Director Income Tax (Inv.) that the assessee has deposited cash and made unexplained investment - HELD THAT:- Reasons given by the AO in notice u/s 148 are merely mechanical and have not given any concrete reasons as to why the re-opening is justified. As regards addition u/s 69, the assessee has given a detail of investments and the fact that the addition of the said amount is already made in the hands of the father of the assessee does not sustain in the hands of the assessee. As regards addition u/s 68 in respect of cash deposits, the Assessing Officer himself admitted that the cheque of Rs. 10,00,000/- has been returned back which was not at all considered by the CIT(A). The reasons are mechanical as all the investment as well as the loans were demonstrated by the assessee as per the audited balance sheet itself. Therefore, the Assessing Officer was not right in reopening the assessment which is bad in law and without any justified reasons for the additions. Thus, the appeal of the assessee is allowed.

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• 2019 (11) TMI 1101
  Exemption u/s. 10(37) - Capital Gain on compulsory acquisition of urban Agricultural Land - Assessee contended that interest awarded u/s. 28 of the Land Acquisition Act, 1894 partook the character of compensation for land acquired and fell within the ambit of section 10(37) of the Act and to that exempt was exempt - assessee provisions of section 57(iv) r.w.s. 56(2)(viii) r.w.s. 145A(b) of the Act were not applicable for interest on enhanced compensation as interest was in the nature of enhanced compensation and not interest - HELD THAT:- As decided in MOVALIYA BHIKHUBHAI BALABHAI VERSUS INCOME TAX OFFICER - TDS - 1 - SURAT 1 [ 2016 (5) TMI 488 - GUJARAT HIGH COURT] interest under section 28 of the Act of 1894 is an accretion to compensation and forms part of the compensation and, therefore, exigible to tax under section 45(5) of the Act. In coming to the aforesaid conclusion, the Hon ble Gujarat High Court followed the decision of Hon ble Supreme Court in the case of CIT v. Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT] wherein it was held that interest under section 28 of the Act of 1894 is part of the amount of compensation whereas interest under section 34 thereof is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of the enhanced value of the land which is not the case in the matter of payment of interest under section Assessee is entitled to exemption u/s. 10(37) of the Act on the interest received u/s. 28 of the Land Acquisition Act, 1894. We therefore direct the AO to allow the claim of the Assessee in this regard. Appeal of the Assessee is allowed.

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• 2019 (11) TMI 1100
  Deduction u/s 10AA - genuineness of the manufacturing activity - principle of res-judicate - assessee failed to discharge the onus of proving that it carried out any manufacturing activity at its SEZ unit situated at Surat - HELD THAT:- Complete onus to demonstrate fulfilment of primary conditions of Sec. 10AA was on the assessee and it was obligatory on the part of the assessee to substantiate the fact that his claim squarely fall within four corners of Sec.10AA. However, upon perusal of findings of AO with respect to time taken in manufacturing process, explanation for abnormal profits, discrepancies in bank accounts, non-realization of export proceeds even beyond 3 years, evidence of labor operations, machineries used by the assessee to carry out manufacturing operations, electricity consumption, stamping die etc., we find that the assessee remained unsuccessful to controvert the same and failed to discharge the primary onus casted upon him, in this regard. FAA while observing that Ld. AO doubted the genuineness of the manufacturing activity but made no comment or made no discussion about trading activity, granted relief to the assessee and the same, under the circumstances, could not be stated to be correct approach in the matter. We are of the considered opinion that Ld. CIT(A) had plenary powers in disposing off an appeal and the powers of first appellate authority were coterminous and coextensive with that of Ld. AO and nothing prevented Ld. CIT(A) to conduct further inquiry in this direction. No such exercise is shown to have been carried by learned first appellate authority and therefore, we are not convinced with the approach of Ld. CIT(A) in granting relief merely because Ld. AO failed to carry out the desired investigations. In AY 2011-12, the main focus of Ld. AO was on electricity consumption and labor charges as against the facts of the present year wherein Ld. AO has brought on record specific facts of time taken in manufacturing process, fact of abnormal profits, discrepancies in bank accounts, non-realization of export proceeds even beyond 3 years, evidence of labor operations, machineries used by the assessee to carry out manufacturing operations, electricity consumption, stamping die etc. which remained to be controverted by the assessee. More so, the principle of res-judicate is not applicable to Income Tax proceedings and each year is independent unit of assessment. The assessee is expected to substantiate its claim in each of the year. The rule of consistency would be applicable only in cases where the factual matrix is demonstrated to be substantially the same. Keeping in view the entirety of facts and circumstances, we deem it fit to set-aside the order of Ld. first appellate authority on this issue and restore the issue of deduction u/s 10AA to the file of Ld. AO for readjudication de-novo with a direction to the assessee to substantiate his claim of deduction u/s 10AA. Appeal stands allowed for statistical purposes.

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• 2019 (11) TMI 1099
  Approval u/s 10(23C)(vi) denied - registration under section 12AA has already granted to the assessee - HELD THAT:- Assessee society is having the object both in the nature of performing charitable activities and also running for educational purpose without any purpose of earning profits. Claiming exemption for the profits earned from performing educational activities is provided in Section 10(23C)(vi) and the benefit of claim of exemption for receipts/income from charitable activities is provided u/s 11. For getting both the exemptions assessee needs to be separately registered u/s 10(23C)(vi) and registration u/s 12AA. Both the provisions work independently and there is no provision of law which shows that if the assessee is registered u/s 12AA it cannot be granted claim u/s 10(23C)(vi) of the Act or vice versa. CIT (Exemption) should have focused on examining the activities undertaken by the assessee and if assessee society fulfill the conditions for getting the registration u/s 10(23C)(vi) it should not be denied merely because the assessee society enjoys registration u/s 12AA of the Act. Set aside the issue of approval u/s 10(23C)(vi) to CIT (Exemption) for afresh examination after giving reasonable opportunity of being heard to the assessee as per the terms indicated above. Appeal of the assessee is allowed for statistical purpose.

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• 2019 (11) TMI 1098
  Revision u/s 263 - claim of deduction u/s 80IC - HELD THAT:- In the present case, Pr. CIT simply stated that the A.O. during the course of assessment proceedings for the A.Y. 2015-16 noticed various discrepancies/infirmities vis- -vis the claim of deduction u/s 80IC inspite thereof, the A.O. had allowed the deduction under section 80IC in the case of the assessee for the relevant A.Y. 2012-13. However the Ld. Pr. CIT has set aside the order passed by the A.O. under section 143(3) of the Act for the year under consideration i.e. A.Y. 2014-15 but no observation relating to claim for deduction under section 80IC of the Act has been given for the said A.Y. On the contrary the A.O. passed the assessment order dt. 30/11/2016 by mentioning that the notice under section 142(1) of the Act alongwith questionnaire was issued to the assessee on 16/06/2016 requiring the assessee to furnish detail/information. He also stated that the assessee was engaged in the business of manufacturing data card to be used in inverters as well as UPS and furnished all the relevant documents which had been examined and taken on record. A.O after due verification of available facts and records allowed the claim of the assessee and accepted the returned income. We therefore are of the view that the Ld. Pr. CIT was not justified in holding that the assessment order dt. 30/11/2016 passed by the A.O. was erroneous or prejudicial to the interest of the Revenue particularly when there is no such discussion for the said assessment year in the impugned order, the only discussion was relating to the A.Y. 2012-13. Accordingly, we do not see any justification on the part of the Ld. Pr. CIT in setting aside the assessment order passed by the A.O. - Appeal of the Assessee is allowed.

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• 2019 (11) TMI 1097
  Admission of additional evidence by the CIT(A) - grievance of the Revenue in this regard is that the said evidence on which reliance was placed by the CIT(A), was not filed before the Assessing Officer and was also not confronted by the CIT(A) to the AO - Addition of royalty expenses - HELD THAT:- AO denied the claim of the assessee on the ground that the addresses of the parties to whom the aforesaid payment has been made, was not available. First of all, no such query was raised by the Assessing Officer during the assessment proceedings and hence non-compliance by the assessee. However, details were filed by the assessee before the CIT(A), who in turn forwarded the same to the Assessing Officer for Remand Report, which was never filed by the Assessing Officer. In such scenario, the CIT(A) verified the details filed by the assessee Findings of the CIT(A) reflect that though several reminders were issued to the Assessing Officer but he failed to file the Remand Report. Even on merits, the issue has been considered elaborately by the CIT(A) as to the number of books dealt in and has noted that the average royalty expense per book title works out to Rs. 3,640/-. The average royalty expense per author works out to Rs. 6,240/-. The aforesaid payments were made by cheque and wherever applicable TDS was deducted and deposited. The said expenditure is thus allowed in the hands of assessee. In such circumstances, we find no merit in the Ground No.1 of appeal raised by the Revenue and the same is dismissed. Estimating the work in progress of the journals - HELD THAT:- The assessee claims to have shown the value of work in progress on the basis of actual expense incurred for the unfinished journals. In the absence of any evidence found on the contrary, there is no merit in estimating the value of work in progress. Upholding the order of CIT(A), we dismiss Ground No.2 of the appeal raised by the Revenue. Addition on account of foreign travelling expenses - allowable business expenses - HELD THAT:- adhoc disallowance out of foreign travel expenses is not warranted in the case of the assessee. The aforesaid expenditure was incurred by the assessee for attending the annual meets and other business conferences and hence, were undertaken for business purposes. Accordingly, we uphold the order of the CIT(A) and dismiss the Ground No.3 of the appeal raised by the Revenue. Transfer pricing adjustment made on account of export of services - assessee had applied Transactional Net Margin Method and compared its margins with the mean margins of the comparables selected by it - AO observed the allocation of cost was not correctly made by the assessee and he re-worked cost and doubled the cost, in the garb applying cost plus method and made an addition - HELD THAT:- There is no basis in the exercise carried out by the Assessing Officer as the Cost Plus method has not been correctly applied. Even otherwise, where the assessee had provided the segmentals at the behest of the Assessing Officer, which in turn were worked out after allocating the cost either on actual or on turn over basis, then the same cannot be rejected. First of all, there is no merit in segregating one transaction of provisions of services to AE and separately benchmarking the same. Secondly, AO had not disturbed the aggregated margins shown by the assessee in respect of various international transactions undertaken by the assessee. In any case, the segmental for this transaction of provision of services were filed at the behest of the AO, under which the assessee had allocated the expenses majorly on actual basis and some on turn over basis. The methodology adopted by the assessee cannot be faulted with; even otherwise there is no merit in allocating the selling and distribution cost to the segment of provision of services. The allocation of rent was higher by the assessee and even the administration and journal expenses were allocated on turn over basis. In such facts and circumstances, the margins shown by the assessee on standalone basis also need to be accepted. Accordingly, we find no merit in the order of the Assessing Officer in this regard. Thus, Ground No.4 raised by the Revenue in this appeal is dismissed.

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• 2019 (11) TMI 1096
  TP Adjustment - adjustment made to the arm s length price of software development services provided to the overseas Associated Enterprises (AEs) - comparable selection - HELD THAT:- The assessee basically is engaged in providing software development services to the AE thus companies functionally dissimilar with that of assessee need to be deselected from final list. Company excluded who exceeds more than 25% RPT filter applied by the Transfer Pricing Officer.

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• 2019 (11) TMI 1095
  Disallowance u/s 14A r.w.r. 8D - HELD THAT:- The perusal of the audited Balance-Sheet of the assessee for year ending 31st March, 2012 which is placed in Paper Book reveals that the availability of interest free funds in the form of Share Capital, Reserves and Surplus as on 31.03.2012 is in excess of Rs. 181 crore as against the closing investments considered by the AO at Rs. 131 crore meaning thereby that the availability of interest free funds to be more than the investments. We therefore relying on the aforesaid decision of Hon ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] hold that no disallowance of interest expenses u/s 14A r.w. Rule 8D(2)(ii) of I.T. Rules is called for in the present case. Disallowance of indirect expenses u/s 14A r.w. 8D(2)(iii) - in the case of ACIT Vs. Vireet Investments (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] has held that only those investments are to be considered while computing the average value of the investments which yield exempt income during the year for working out disallowance u/s 14A r.w. Rule 8D. The aforesaid decision of the Special Bench of the Tribunal has also been relied upon by the Co-ordinate Bench of the Tribunal in the case of M/s. Quick Heal Technologies Ltd [ 2019 (3) TMI 699 - ITAT PUNE] . Before us, Revenue has not placed any contrary binding decision in its support. We therefore relying on the aforesaid decisions restore the issue back to the file of AO to re-work the disallowance u/s 14A r.w. Rule 8D(2)(iii) of I.T. Rules in line with the decision of Special Bench of the Tribunal in the case of ACIT Vs. Vireet Investments Pvt Ltd. (supra) Disallowance u/s 14A r.w. 8D - A.Y. 2013-14 - HELD THAT:- Disallowance u/s 14A r.w Rule 8D(2)(ii) on account of interest expenses on account of availability of sufficient interest free funds and Rule 8D(2)(iii) with respect to indirect expenses from the investments from which no exempt income being earned respectively is concerned, in view of the submission of both the parties and the fact being similar to A.Y. 2012-13, we for the reasons stated hereinabove while deciding the issue in A.Y. 2012-13 and for similar reasons and directions, restore the issue back to the file of AO to recomputed the disallowance. Excluding the investments which are held as stock-in-trade for working out the disallowance u/s 14A r.w. 8D - HELD THAT:- In view of the aforesaid decision of Hon ble Apex Court in the case of Maxopp Investment Ltd., Vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] , we do not find any reason to interfere with the order of Ld.CIT(A) as far as the disallowance of expenditure u/s 14A r.w. Rule 8D(2)(iii) by considering the shares held as stock-in-trade for working out the disallowance is concerned. However before us, none of the parties have placed any material on record to demonstrate the exempt income earned u/s 10(34) of the Act by the assessee from the shares which are held as stock-in-trade . In such a situation, since on the other aspect of Sec.14A of the Act, we are restoring the issue to the file of AO for determining the disallowance, on this aspect also (where the shares are held as stock-in-trade), the issue is restored to the file of AO

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• 2019 (11) TMI 1094
  TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee provides who Engineering services (including preparation of engineering packages, equipment designs, etc.) and Technical assistance services (including providing engineers for supervision) to HTAS for their global projects (including projects in India) need to be deselected from final list. Adjustment in the margin due to different risk profile of the comparable companies - HELD THAT:- AR as well as Ld. DR for the revenue brought to notice of the Bench that in AY 2009-10 and 2010-11, this issue has been restored back to the TPO/AO by the Tribunal vide order [ 2017 (5) TMI 1648 - ITAT DELHI] AND [ 2018 (12) TMI 1563 - ITAT DELHI] . We are of the considered view that identical issue of this year is also required to be remanded back to the TPO/AO to decide afresh after providing an opportunity of being heard to the assessee.

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• 2019 (11) TMI 1093
  Penalty u/s 271AAB - admission of undisclosed income - assessment u/s 153B - defective notice - whether penalty is mandatory in nature and not discretionary - as challenged show cause notice issued u/s 274 r.w.s 271AAB the AO has not specified the default of the assessee and the limb under which the penalty was proposed to be levied - HELD THAT:- In view of the decision of the Coordinate Bench as well as various other judgments including the judgment of Seveta Constructions Co. Pvt. Ltd. [ 2016 (12) TMI 1603 - RAJASTHAN HIGH COURT] and CIT vs. Manjunatha Cotton Ginning Factory Ltd. [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] hold that the initiation of penalty proceedings under section 271AAB without specifying the default as well as the particular clause of section 271AB(1) under which the penalty was proposed to be levied, the same is very vague and silent, not making the assessee known about the charge attracting the penalty under section 271AB of the Act. Hence the initiation of penalty proceedings is not valid and consequently the penalty order passed under section 271AAB is liable to be quashed. - Decided in favour of assessee.

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• 2019 (11) TMI 1092
  Valuation of the property - determining the fair market value - valuation determined by the DVO - determining the fair market value on the basis of the comparable sale instances of the similarly situated property - residential property v/s commercial property - DVO has determined the fair market value of the property, the AO has to consider the same for the purpose of section 56(2)(vii) - HELD THAT:- Property which is otherwise residential as per the record cannot be treated as a commercial property for the purpose of determining the fair market value though the locational advantage being a factor, influence the value of the property. However, so long the property is a residential property it cannot be treated as commercial property. Fair market value determined by the DVO and considered by the AO is not sustainable in law as an arbitrary exercise without considering the relevant factors. The assessee has already brought on record the comparable sale instances and, therefore, instead of going by the DLC rates of the area and that too for commercial property, the fair market value has to be determined based on the actual character of the property and the sale instances of the similarly situated property. In the case in hand, when the sale instances are available and which support the case of the assessee that the fair market value of the property cannot be more than the purchase consideration, then no addition is called for under section 56(2)(viii) of the Act. The addition by the AO and sustained by the ld. CIT (A) is deleted.

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• Customs

• 2019 (11) TMI 1091
  Absolute confiscation of imported goods - prohibited goods or not - old and used digital multifunction devices with standard accessories and attachments of various models - enhancement of assessable value - imposition of redemption fine and penalty as well - Assessable value of the said goods was revised on the strength of Chartered Engineer certificate - alleged violation of Hazardous and Other Waste (Management and Trans-boundary Movement) Rules, 2016 notified by MOEF, Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012 notified by the Ministry of Electronics Information Technology and Para 2.31 of Foreign Trade Policy, 2015-2020 notified by the Director General of Foreign Trade. HELD THAT:- Hon ble Apex Court in the case of Atul Automation Pvt. Limited [ 2019 (1) TMI 1324 - SUPREME COURT ] has approved the decision of the Tribunal passed vide Order No. 21592-21594/2017 dated 08 August 2017. The tribunal order specifically covers all the issues raised and disputed in the present appeal and it was held that there was no absolute confiscation and approximately 10% of the value of the goods was imposed as redemption fine in the similar facts and circumstances. Penalty of 5% of assessable value was imposed in the similar facts and circumstances - The said decision of Tribunal was approved by the Hon ble Apex Court. Changes made in the policy vide Notification No. 5/2015-2020 dated 07 May 2019 - HELD THAT:- It is seen that the said changes are subsequent to the date of import thus, have no impact on the present proceedings. Consequently, the appeal filed by Revenue seeking confiscation of goods absolutely is dismissed. Revision of assessable value on the strength of Chartered Engineer certificate - HELD THAT:- There are no merit in the above observation. The impugned order itself finds flaws in the Chartered Engineer certificate as the Chartered Engineer failed to obtain current market value of the said goods. The impugned order also does not indicate the Rule under which the value was revised. In these circumstances, revision of value by the lower authorities is not sustainable for want of evidence. The declared value is accepted. The redemption fine and penalty under Section 112(a) of the Customs Act, are reduced to 10% and 5% of the assessable value, respectively. Appeal allowed in part.

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• Securities / SEBI

• 2019 (11) TMI 1090
  Legality and veracity of the order passed by the Whole Time Member ( WTM ) of SEBI under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 which empowers SEBI to issue directions in the nature of remedies in the interest of the securities market and investors in securities - whether SEBI as a market regulator could be said to have jurisdiction to pass any of the directions as contained in the SCN? - HELD THAT:- Appearing on behalf of the respondents, accepts notice. Reply to the appeal, if any, be filed within two weeks. The observations made in Paragraph 78 of the impugned Judgment and Order as to powers and jurisdiction of SEBI shall remain stayed till the next date of hearing. List the matter in the second week of December, 2019.

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• Service Tax

• 2019 (11) TMI 1089
  Compliance with the pre-deposit - time limit for making pre-deposit - HELD THAT:- Nothing has been pointed out in this application by way of any annexure to show the financial difficulty of the petitioner to pay the aforesaid pre-deposit amount. No Balance Sheet, Financial Statement has been annexed with the application. Bare assertion has been made that there is a financial difficulty to pay the aforesaid pre-deposit amount. It ought to be kept in mind that after the amendment brought in Section 35F of the Central Excise Act, 1944, the statute has already waived 92.5% of the demand of the tax and the penalty. Thus, after the said amendment there is no question whatsoever arises of preferring waiver application to deposit the pre-deposit amount @ 7.5% of the total amount of duty - In fact, the waiver applications were generating more litigation and therefore, the amendment has been brought into force so as to reduce or curtail the discretionary power vested with the CESTAT. Moreover, validity of this Section has also been upheld. Application dismissed.

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• Indian Laws

• 2019 (11) TMI 1088
  Release of detenue on bail - Smuggling of Gold - COFEPOSA Act - High Court has set aside the respective orders of detention and released the detenus, namely, Ashok Kumar Jalan and Amit Jalan under the provisions of COFEPOSA - HELD THAT:- The orders of detention are set aside by the High Court mainly, inter alia, on the ground that there was a clear lapse and failure on the part of the Detaining Authority, to examine and consider the germane and relevant question relating to the imminent possibility of the detenus being granted bail, while recording its subjective satisfaction and passing the detention orders and also on the ground that non-placement of the relevant material in the form of Anand s retraction petition and its non-consideration by the Detaining Authority, also vitiates the detention orders. Therefore, it is evident that the Detaining Authority while passing the detention orders was aware of the fact that the detenus are actually in custody; that there is a real possibility of their being released on bail; and that on being so released they would in all probability indulge in prejudicial activities and therefore it is essential to prevent them from smuggling of gold and foreign currency in future. A Constitution Bench of this Court in the case of RAMESHWAR SHAW VERSUS DISTRICT MAGISTRATE BURDWAN [ 1963 (9) TMI 55 - SUPREME COURT ] has observed and held that the detention of the said person would be necessary after he is released from jail, and if the authority is bona fide satisfied that such detention is necessary, he can make a valid order of detention a few days before the person is likely to be released. It is further observed that therefore the question as to whether an order of detention can be passed against a person who is in detention or in jail, will always have to be determined in the circumstances of each case. The High Court has committed a grave error in quashing and setting aside the detention orders and interfering with the subjective satisfaction of the Detaining Authority - The detenus, i.e., Ashok Kumar Jalan and Amit Jalan shall be taken into custody forthwith by the Detaining Authority - SLP dismissed.

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