TMI Tax Updates - e-Newsletter
December 10, 2020

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Insolvency & Bankruptcy Law of Competition Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Service of Notices & Orders on “Common Portal”- But where is the “Common Portal?"

   By: Yash Dhadda

2. CALCULATION OF RELIEF UNDER SABKHA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. 6th Instalment of ₹ 6,000 crore released to the States as back to back loan to meet the GST compensation shortfall

2. India and UN-Based Better Than Cash Alliance organized a joint Peer learning exchange on fintech solutions for responsible digital payments at the last mile

3. Cabinet approves the proposal of Securities & Exchange Board of India (SEBI) tosign Bilateral Memorandum of Understanding between India and Luxembourg

4. Reform linked borrowing permissions lead to various citizen centric reforms in the States

5. Meeting of Shri Piyush Goyal with the Swiss Trade Minister H.E. Mr. Guy Parmelin

6. Shri Piyush Goyal says the Government, in its role as an enabler, has introduced several benefits to encourage & boost startups

Notifications

Customs

1. 63/2020-Customs (N.T./CAA/DRI) - dated 27-11-2020 - Cus (NT)

Seeks to amend Notification No. 53/2016-Customs (N.T.) dated 13.04.2016

2. 62/2020-Customs (N.T./CAA/DRI) - dated 25-11-2020 - Cus (NT)

Appointment of CAA by DGRI

GST - States

3. 99/GST-2 - dated 8-12-2020 - Haryana SGST

Notification to notify special procedure for making payment of 35% as tax liability in first two month under the HGST Act, 2017

4. 98/GST-2 - dated 8-12-2020 - Haryana SGST

Notification to notify class of persons under proviso to section 39(1) under the HGST Act, 2017

5. 96/GST-2 - dated 8-12-2020 - Haryana SGST

Notification to notify section 7 of the Haryana Goods and Services Tax (Amendment) Act, 2019 under the HGST Act, 2017

6. 100/GST-2 - dated 8-12-2020 - Haryana SGST

Notification to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 100 Cr from 01st January 2021 by amending notification no.17/GST-2, dated the 31st March, 2020 under the HGST Act, 2017

7. (47/2020)-FD 03 CSL 2020 - dated 8-12-2020 - Karnataka SGST

Seeks to waive penalty payable for non compliance of the provisions of notification No.08/2020 FD 03 CSL 2020(e), dated the 27th March, 2020

8. 05/2020- State Tax (Rate) - dated 3-12-2020 - Tripura SGST

Amendment in Notification No. 12/2017- State Tax (Rate), dated the 29th June, 2017

9. 04/2020- State Tax (Rate) - dated 6-11-2020 - Tripura SGST

Amendment in Notification No. 12/2017- State Tax (Rate), dated the 29th June, 2017

10. 939-F.T. - dated 2-12-2020 - West Bengal SGST

Seeks to notify special procedure for making payment of 35% as tax liability in first two months of a quarter for quarterly return filers w.e.f. 01.01.2021

11. 938-F.T. - dated 2-12-2020 - West Bengal SGST

Seeks to notify class of persons under proviso to section 39(1) who shall file quarterly return w.e.f. 01.01.2021

12. 936-F.T. - dated 2-12-2020 - West Bengal SGST

Seeks to notify amendment carried out in sub-section (6) of section 7 of the West Bengal Finance Act, 2020 (West Ben. Act II of 2020) regarding amendment of sub-sections (1) , (2) and (7) of section 39 of the WBGST Act

13. 13/2020–C.T./GST - dated 2-12-2020 - West Bengal SGST

Seeks to extend the due date for FORM GSTR-1

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/CMD/CIR/P/2020/242 - dated 9-12-2020

e-Voting Facility Provided by Listed Entities

Customs

2. PUBLIC NOTICE No. 67/2020 - dated 11-11-2020

Policy of Guidelines for setting up of Inland Container Depots(ICDs), Container Freight Stations (CFSs) and Air Freight Stations (AFSs)

3. PUBLIC NOTICE No. 45/2020 - dated 19-10-2020

Faceless Assessment- Measures for timely assessment of Bills of Entry and clarification on defacement of physical documents

4. PUBLIC NOTICE: 62/2020 - dated 18-9-2020

ICES Advisory 33/2020 - Manufacturing and other operations in a Warehouse Regulations (MOOWR) and waiver of interest - Changes in ICES and ICES Advisory 34/2020 Capturing additional details for Certificate of Origin (COO) as per Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 in Bill of Entry

Highlights / Catch Notes

GST

• Court Orders Release of Goods and Vehicle with Bank Guarantee Despite Invoice and E-Way Bill Discrepancies.

  Case-Laws - HC : Detention of goods alongwith the vehicle - errors in the dates of invoice and the date shown in the e-way bill - The petitioner is permitted to clear the goods and the vehicle on furnishing a bank guarantee for the amount demanded - HC
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• Court Upholds Provisional Attachment of Goods; No Legal Error Found as Petitioners Didn't Object.

  Case-Laws - HC : Release of provisionally attached goods u/s 83 - show cause notice u/s 70 have been issued - the petitioners have not filed any objection against the impugned provisional attachment dated 22.07.2020. Therefore, the impugned orders cannot be said to suffer from any manifest error of law. - HC
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Income Tax

• Assessing Authority Must Allow Verified Business Expenditure; Audit Report Confirms Compliance with Companies Act Requirements.

  Case-Laws - HC : Genuineness of business expenditure - Audit of the Books of Accounts of the Limited Companies is mandatorily provided for in the Companies Act also and therefore, if the Audit Report and Audited Balance Sheet is available on the record, the expenditure in question can safely be presumed to have been verified by the Auditors as well. The Books of Accounts regularly maintained by the Assessee in the ordinary course of business have neither been rejected by the Assessing Authority in the present case nor have been otherwise disbelieved. Therefore, such Expenditure in the hands of the Assessee was required to be allowed by the Assessing Authority. - HC
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• Revenue Must Consistently Apply Depreciation Claims for Leased Assets u/s 32 for 2002-05 Tax Years.

  Case-Laws - HC : Depreciation on leased assets u/s 32 - In the instant case, the revenue has accepted the claim of the assessee for depreciation under Section 32 of the Act for the Assessment Year 2002-03 and 2003-04. Therefore, the revenue cannot be allowed to take a different stand for the Assessment Year 2004-05 - HC
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• Section 10B(8) Declaration Mandatory; Deadline Flexible, No Penalties for Late Filing, Affects Loss Carry Forward u/s 72.

  Case-Laws - HC : Exemption under Section 10B - Carry forward of losses under section 72 - the requirement of submission of declaration in terms of Section 10B(8) of the Act has to be treated as mandatory whereas, the requirement of submission of declaration by a time limit has to be treated as directory as the provision does not provide for any consequence by non filing of the declaration by the time limit. - HC
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• Court Deletes Revenue's Claim on Undisclosed Profits from Futures and Options; Assessee Provided Confirmatory Client Letters.

  Case-Laws - AT : Additions on account of Client-code modification (CCM) - undisclosed profit on future and option transaction in shares - Whole basis of making additions in the hands of the assessee is information of DIT (Inv.) wherein it was alleged that the profits were shifted by client code modification. To substantiate these allegations was the onus of revenue. The assessee had filed confirmatory letters of all category-3 clients wherein all these clients owned up the transactions and also confirmed that the profits so earned by them on these transactions were duly reflected in their respective returns of income. - Addition deleted - AT
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• PCIT's Disagreement with Assessing Officer on Fixed Deposits Not Grounds for Erroneous Order if Legally Permissible View Taken.

  Case-Laws - AT : Revision u/s 263 - PCIT is incorrect in coming to the conclusion that Assessing Officer has not examined the issue and applied his mind insofar as investments in fixed deposits - once the Assessing Officer has taken one of the two views permissible in law on which the PCIT does not agree and which resulted in loss of revenue, it cannot be treated as erroneous order prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. - AT
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• Assessing Officer's Error: Double Addition of Rs. 81 Lakhs u/s 69A for Director and Company Income.

  Case-Laws - AT : Addition u/s 69A - unaccounted income of the assessee company - Double addition - AO was under the obligation to reduce the sum of 81 lakhs from the income of the director in the situation where he proposed to add the same in the hands of the assessee. But the AO has not done so despite having sufficient information in his hand. As such the action of the AO has resulted the double addition of the same income. - AT
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• Court Rules Capital Gains from Land Sale Attributed to Individual, Not Hindu Undivided Family (HUF.

  Case-Laws - AT : Capital Gains - Whether land belonged to the ''HUF'' and not to the assessee? - there was no mentioned that the land was being sold by the assessee as Karta of 'HUF' - proceeds of the sale were also deposited/retained by the assessee in his individual capacity and further the land so purchased out of the proceeds of the sale was also in the name of the assessee in individual capacity - plea that the income/capital gains should have been assessed in the name of the 'HUF' seems to be an afterthought. - AT
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• Salaries of Urban Estates employees, now with HUDA, qualify as business expenses for tax purposes due to essential roles.

  Case-Laws - AT : Allowable expenditure - salaries paid to the employees of the Department of Urban Estates on account of transfer of functions overtaken by the HUDA - In the absence of diversion of employees from Department of Estates, HUDA would have to hire outside manpower and also require to pay them accordingly. Keeping in view the functions performed by the employees for HUDA the expenses out of salary cannot be treated as non business expenditure. - AT
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Corporate Law

• IBC Petition Admission: CIRP Ends with Resolution or Liquidation; Companies Act Sections 241-242 Petitions Shouldn't Be Delayed.

  Case-Laws - Tri : Maintainability of petition - Once it is admitted under IB Code initiating CIRP, which may end, either in approval of a resolution plan or an order for liquidation of the Corporate Debtor. Thus, under both situation, the management will never come again in the hands of the Suspended Management. - Even if the petition filed under Section 241-242 is kept in abeyance, then even it is not going to fulfil the objective of Section 241-242 of the Companies Act. Therefore, there is no reason for keeping the application filed under Section 241-242 be pending till the final outcome of the IB petition - Tri
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IBC

• Appellants barred from reopening Corporate Insolvency Resolution Process after approval of Shri Dutt India Pvt. Ltd. plan.

  Case-Laws - AT : Fresh claim after the approval of Resolution Plan - Since the CIRP has crossed the culminating point with approval of the Resolution Plan of ‘Shri Dutt India Pvt. Ltd.’, the Appellants cannot be allowed to reopen the CIRP and direct de novo exercise after the CIRP period has come to an end. - AT
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Service Tax

• Assessee Validly Discharged Service Tax u/s 67 of Finance Act, 1994; Revenue's Contest Dismissed.

  Case-Laws - AT : Whether the assessee is correct in discharging service tax on gross amount charged under Section 67 of the Finance Act, 1994 after availing CENVAT credit on inputs or whether they have to pay service tax under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 as assessed by the department? - the discharge of service tax liability at full rate by the appellant by applying the provisions of section 67 of the Finance Act, 1994 cannot be called in question by the Revenue - AT
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• CENVAT Credit Reversal: Single Taxable Transaction Under Works Contract Exemption, Rule 6 Not Applicable Due to Lack of Distinct Services.

  Case-Laws - AT : Reversal of CENVAT Credit - works contract service - there is only one transaction of Works Contract Service which is taxable service of which certain portion has been exempted. There are no distinct transactions for two services involved. In such a situation, Rule 6 doesn't become applicable, it is only one distinct service. - AT
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Central Excise

• Court Dismisses Challenge to Rule 17(2) of Pan Masala Packing Machines Rules; Deems Pre-Deposit Argument Unconvincing.

  Case-Laws - HC : Maintainability of petition - Validity of Rule 17(2) of the Pan Masala Packing Machines (Capacity, Determination and Collection of Duty) Rules, 2008 - The reason that the pre-deposit being burdensome does not appeal to us - The challenge to the vires of Rule 17(2) of the Pan Masala Rules is rather without substance and therefore we do not consider it necessary to deal with the same in this case. - HC
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VAT

• Assessing Authority's Best Judgment Assessment Overturned Due to Lack of Evidence and Rational Basis in Ex-Parte Order.

  Case-Laws - HC : Principles of natural justice - best judgement assessment done by ex-parte order - The Assessing Authority is bound to act in a rational manner while resorting to best judgement assessment in view of the facts on record it is clear that only one bill of ₹ 11,570/- was available as material to assess the evaded sales. There was nothing more before the Assessing Authority to form an opinion that sales equal to the declared sales should be determined as evaded sales - HC
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Case Laws:

• GST

• 2020 (12) TMI 312
  Detention of goods alongwith the vehicle - no valid document carried along with the vehicle while transporting it - petitioner seeks permission to clear the vehicle on furnishing a bank guarantee for the amounts demanded in Ext.P4 without prejudice to his right to contest the computation of the tax and penalty in proceedings under Section 129 (3) of the GST Act - HELD THAT:- The Writ Petition is disposed off by permitting the petitioner to clear the vehicle on furnishing a bank guarantee for the amounts demanded in Ext.P4 notice. It is made clear that after the clearance of the vehicle, the respondent shall pass the adjudication order in Form GST MOV 09 after considering the contentions of the petitioner with regard to the computation of the tax and penalty.

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• 2020 (12) TMI 311
  Detention of goods alongwith the vehicle - errors in the dates of invoice - invoice that accompanied the transportation of the goods did not contain any date thereon - while the shipping date was shown as 15.11.2020, the date shown in the e-way bill was 25.11.2020 - Part-B of the e-way bill was not updated with the relevant railway RR number - HELD THAT:- Taking note of the said findings, the detention cannot be said to be unjustified. The petitioner is permitted to clear the goods and the vehicle on furnishing a bank guarantee for the amount demanded in Ext.P8 notice - petition disposed off.

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• 2020 (12) TMI 310
  Grant of Bail - allegation of creation of 26 firms to facilitate availment and utilization of input Tax Credit - It is contended that in similar type of cases, bail have been granted - the matter is still at the stage of pre-charge evidence - HELD THAT:- Union of India have opposed the bail application. It is contended that petitioner has created 26 firms to facilitate availment and utilization of input Tax Credit to the tune of Rs. 108.36 crores. Considering the contentions put forth by counsel for Union of India, the third bail application cannot be entertained - Bail application dismissed.

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• 2020 (12) TMI 309
  Release of provisionally attached goods - petitioners submits that as only show cause notice under Section 70 of the Central Goods and Services Tax Act, 2017 has been issued, the attachment under Section 83 of CGST Act can not be made - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The impugned Provisional attachment order has been issued by the competent authority under Section 83 of the Act for the purpose of protecting interest of the Government revenue. Against the order of Provisional attachment under Section 83(1) of the Act, the petitioners have an opportunity to file an objection under sub-Rule 5 of Rule 159 of the Rules. It has been admitted before us by learned counsel for the petitioners that the petitioners have not filed any objection against the impugned provisional attachment dated 22.07.2020. Therefore, the impugned orders cannot be said to suffer from any manifest error of law. Petition dismissed.

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• Income Tax

• 2020 (12) TMI 308
  Reopening of assessment u/s 147 - non filing of the returns - petitioner was not given any opportunity to seek the reasons for reopening the assessment or submit his objections to the reopening of the assessment - HELD THAT:- It is the case of the petitioner that they were unable to submit the returns due to the fact that the e-system portal of the respondents does not enable a company, which has been merged with another company pursuant to an amalgamation order passed by a Court, to file its income tax returns manually. The petitioner having produced the error report of the respondents will clearly establish that the attempts made by the petitioner to submit the returns for M/s.OAS Digital Infrastructure Private Limited, due to the fact that the e-portal system of the respondents does not enable the said report to be filed electronically, was a genuine one. Respondents vehemently argued that the reasons for non filing of the returns by the petitioner cannot be believed in view of the fact that the petitioner had contended before the respondents through their communication that they need not file returns on behalf of M/s.OAS Digital Infrastructure Private Limited, the same cannot be accepted by this Court, as there is no conclusive proof to show that the attempts made by the petitioner to file the returns was not a genuine one - the benefit of doubt must also be given to the assessee. Therefore, this Court is of the considered view that principles of natural justice has been violated by the respondents while passing the impugned assessment order, as no opportunity has been given to the petitioner to file their returns pursuant to the notice issued by the respondents under Section 148 of the Income Tax Act, 1961, for reopening of assessment. The impugned assessment order passed by the second respondent against the petitioner for the assessment year 2012-13 is hereby quashed and the matter is remanded back to the second respondent for fresh consideration and the second respondent shall pass final assessment orders after permitting the petitioner to file the returns under Section 147 on merits.

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• 2020 (12) TMI 307
  Loss suffered on the sale of the Assets on which it claimed depreciation u/s 32 - assessee entitled to invoke Section 41(2) or not?- Capital asset - assessee entitlement to claim the same as the business loss incurred and reflect the same in the assessee s Income Tax returns? - HELD THAT:- Tribunal has erred in disallowing the loss suffered by the Assessee on the sale of the Assets on which it claimed depreciation under Section 32 of the Act. Section 41(2) falls under Part D of Chapter IV which provides for Computation of Total Income . The provisions under Section 28 to 44DB of the Act are relating to Computation of Profits and Gains of Business or Profession . Part D of the said Chapter deals with Capital Gains and Sections 45 to 55A deals with Capital Gains . Though both these provisions talk of only deemed income and deemed Capital Gains where depreciable assets are sold by the Assessee, they do not clearly spell out the treatment of loss occurring at the stage of sale of such depreciated assets. We are of the opinion that even if these provisions talk only of taxability on the excess received by the Assessee over the written down value of the assets, it cannot exclude or ignore the minus figure or loss occurring on such sale transactions. Since the sale of those Assets of the Block of Assets, not being immovable property of the Assessee, were sold during the regular course of business, before it was wound up during the relevant previous year, the loss occurring on such sale at a figure less than the written down value of the assets should be treated as Business Loss under Section 41(2) - treatment of such losses as Capital Gains either as Short Term Capital Gains or Long Term Capital Gains would depend upon the period for which assets are held by the Assessee. In either case, Section 70 of the Act provides for Carry Forward and set off of such Business Loss or Short Term Capital Loss in the hands of the Assessee, as Section 70 clearly spells about set off of loss from one source against income from another source under the same head of income. Since in the present case, the business of the Assessee was closed during the relevant previous year itself therefore, the other situation of Carrying Forward such Business Loss is not really relevant but, such loss suffered actually by the Assessee could not have been disallowed by misconstruing both these provisions. Assessment of income in the hands of the Assessee implies Assessment of loss also and it is a question of fact depending upon the sale value realised by the Assessee on the sale of assets. Therefore, the first question deserves to be answered in favour of the Assessee and against the Revenue. Business Expenditure incurred by the Assessee in the form of Postage, Courier and Stationery Charges disallowed - HELD THAT:- Incurring of those Expenditures was not doubted or disproved by the Revenue Authorities in the hands of the Assessee. No such finding of such Expenditure not having been incurred by the Assessee is available on record. Therefore, merely because the Assessee could not recover the whole or part of the said expenditure incurred in the course of business, particularly to comply with the guidelines laid down by SEBI and claim such unrecovered expenditure as deduction from its income, the same could not have been disallowed by the Authorities below. Audit of the Books of Accounts of the Limited Companies is mandatorily provided for in the Companies Act also and therefore, if the Audit Report and Audited Balance Sheet is available on the record, the expenditure in question can safely be presumed to have been verified by the Auditors as well. The Books of Accounts regularly maintained by the Assessee in the ordinary course of business have neither been rejected by the Assessing Authority in the present case nor have been otherwise disbelieved. Therefore, such Expenditure in the hands of the Assessee was required to be allowed by the Assessing Authority. The learned Tribunal also fell in error in disallowing the same. Therefore, the second question also deserves to be answered in favour of the Assessee and against the Revenue.

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• 2020 (12) TMI 306
  Depreciation on leased assets u/s 32 - HELD THAT:- The clauses of the agreement in the case before the Supreme Court in I.C.D.S Ltd. supra and in the case of the assessee with regard to ownership, inspection, re possession of the vehicle of the equipment on default, delivery of equipment on expiration of lease and ownership at the end of the lease period are similar. The assessee alone can claim the depreciation allowance. The aforesaid clauses have been interpreted by the Supreme Court in I.C.D.S. Ltd.[ 2013 (1) TMI 344 - SUPREME COURT] and it has been held that the assessee is entitled to benefit of depreciation on leased assets under Section 32 of the Act. Thus, the questions of law involved in the appeal are no longer res integra and are squarely covered by the decision of the Supreme Court in I.C.D.S. The Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX [ 1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. In the instant case, the revenue has accepted the claim of the assessee for depreciation under Section 32 of the Act for the Assessment Year 2002-03 and 2003-04. Therefore, the revenue cannot be allowed to take a different stand for the Assessment Year 2004-05 - Rejection of the claim of the assessee for depreciation in respect of leased assets under Section 32 of the Act is hereby quashed - Decided in favour of assessee.

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• 2020 (12) TMI 305
  Exemption under Section 10B - Carry forward of losses under section 72 - assessee had filed declaration as required under section 10B(8) of Act after due date of filing original return of income date is over - assessee cannot claim the benefit of carry forward of losses and provisions of section 10B(8) are contravened - HELD THAT:- Section 10B of the Act deals with special provisions in respect of newly established 100% export oriented undertakings. It contains twin requirements viz., the filing of a declaration and submission of such a declaration. The constitution bench of the Supreme Court in SARDAR AMRJIT SING KALARA VS. PRAMOD GUPTA [ 2002 (12) TMI 607 - SUPREME COURT] has held that procedural laws have always been viewed as handmaid of justice and not to hamper the cause of justice. It has further been held that technical objection which tend to be stumbling blocks to defeat and delay substantial and effective justice should be viewed strictly for being discouraged except when mandate of law inevitably necessitates it. In the instant case, Section 10B of the Act does not provide for non compliance of submission of declaration. Therefore, the requirement of submission of declaration in terms of Section 10B(8) of the Act has to be treated as mandatory whereas, the requirement of submission of declaration by a time limit has to be treated as directory as the provision does not provide for any consequence by non filing of the declaration by the time limit. In any case, in the instant case, the declaration has been filed before the completion of assessment. Similar view has been taken by High Court of Delhi In Moser Baer India Ltd. [ 2007 (9) TMI 268 - DELHI HIGH COURT] with which we respectfully concur. - Decided against the revenue.

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• 2020 (12) TMI 304
  Deduction u/s 10B - Manufacturing activities - Assessee, engaged in the activity of Manufacturing and Processing of Crabs, a Sea Product - whether processing, preservation and packaging of marine products would not amount to manufacture or production of article or thing? - HELD THAT:- Fundamental mistake committed by both the authorities and the Tribunal is in not examining the nature of activity of the assessee before referring to the various decisions, which according to the Tribunal would result in the assessee s appeal being dismissed. The first and foremost job entrusted to a Central Excise Officer is to examine the nature of activity done by the assessee, when he claims that the activity is a manufacturing process. The Central Excise authorities invariably visit the facility established by the assessee to gain first hand knowledge about the claim made by the assessee that they are into manufacture. In the present case taken a step in the direction as would normally be done by the Central Excise Officers, probably, the finding might have been wholly different or slightly different or it could have been a well reasoned order. The Tribunal as a last fact finding authority, was bound to examine the full facts. Tribunal holds that there is no change in substance used in live crab or used it as by extracting as it meat from the same live crab. The crab meat is crab meat only. The Tribunal concludes by saying that the input and output is the same, which is crab only. There is no dispute to the fact that what is canned is crab meat, but the assessee s case is that activity undertaken by them produces a distinct product, which is not the same as the raw material which is a live crab. Tax Case Appeals are allowed and the order passed by the Tribunal, CIT(A) and the Assessment orders are set aside and the matter is remanded to the Assessing Officer to take a fresh decision in the matter.- Decided in favour of assessee for statistical purposes.

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• 2020 (12) TMI 303
  Additions on account of Client-code modification (CCM) - undisclosed profit on future and option transaction in shares - HELD THAT:- Practice of client-code modification is permissible as per the rules of stock exchanges since the possibility of punching errors could not be ruled out at the time of carrying out the transactions and human error was inevitable. The modifications to the extent of 1% could be done without any penalty and even the modification of 5% would attract meager penalty of Rs. 500/-. The same would support the fact that due to large volume of transactions, the punching errors could not be ruled out while carrying out the trades and therefore, a facility was given to the stock-brokers to modify the same within certain norms. No such norms have been shown to have been violated by the assessee while carrying out the modification. No penalty is shown to have been imposed on the assessee since the modification done by the assessee was only to the extent of 1.15% of total trades which could not be termed as abnormal on the given facts and circumstances. Whole basis of making additions in the hands of the assessee is information of DIT (Inv.) wherein it was alleged that the profits were shifted by client code modification. To substantiate these allegations was the onus of revenue. The assessee had filed confirmatory letters of all category-3 clients wherein all these clients owned up the transactions and also confirmed that the profits so earned by them on these transactions were duly reflected in their respective returns of income. These confirmations could not be controverted by the revenue. By filing these documentary evidences, the assessee had duly discharged its onus to prove the genuineness of the modifications. AO, despite being provided with another opportunity by way of remand proceedings, could not rebut the evidences filed by the assessee and failed to bring on record any adverse material against the assessee to dislodge the assessee s claims. No additions are sustainable in law on mere doubts, conjectures or surmises. The onus was on revenue to substantiate the allegations with corroborative evidences. However, this onus has remained un-discharged. Decided in favour of assessee.

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• 2020 (12) TMI 302
  E stimation of income - addition of gross profit of 1% on local sales - HELD THAT:- On perusal of the submissions made before the A.O and CIT(A),no evidence was filed in spite of providing opportunities of hearing to substantiate the sale price and the goods which were sold are only waste and un-useable material. CIT(A) has dealt on the disputed issues and has confirmed the action of the A.O. We find the CIT(A) has granted relief to the assessee on the alternative ground of appeal but in respect of addition he has sustained the action of the A.O. Considering the overall facts and observations of the CIT(A), we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the assessee.

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• 2020 (12) TMI 301
  Rectification of mistake u/s 254 - enhancement on the valuation difference of securities by CIT-A holding that the said valuation was not done in accordance with RBI guidelines - HELD THAT:- Tribunal categorically held that assessee had fully complied with RBI Circular dated 01/07/2011 with regard to valuation of securities at the time of shifting of securities from AFS to HTM category and this Tribunal had also held that the shifting loss incurred would be squarely allowable as deduction - enhancement made by CIT(A) should have been deleted by this Tribunal which was not done. Workings for valuation difference was furnished by the assessee on without prejudice basis but complied with the directions of the ld. CIT(A) by filling up the data in the prescribed format given by the ld. CIT(A). Hence, there is no need for the assessee to file any evidence before us to counter the said workings as admittedly the assessee has only complied with the directions of ld. CIT(A) by furnishing the requisite details on without prejudice basis. Observation made by this Tribunalthat assessee has not provided any evidence before us to counter the said workings given before the ld. CIT(A) is incorrect. This constitutes mistake apparent on record within the meaning of Section 254(2) - we accordingly, deem it fit to modify para 6.3 of our order as under:- 6.3.- We find that in the instant case, the depreciation of investments at the time of shifting from AFS to HTM category had been debited by the assessee as an expenditure in consonance with RBI Circular dated 01/07/2011 referred to supra. The said shifting loss is squarely allowable as deduction.

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• 2020 (12) TMI 300
  Revision u/s 263 by CIT - Addition u/s 68 - HELD THAT:- Main source of income of the assessee was from Services/Commission in respect of RTO services to transporters and in the bank accounts, there are various debit entries in terms of payments in relation to such services which can be duly explained and therefore whole cash deposit cannot be assessed as undisclosed income, we direct the AO to verify such debit entries and consider the explanation of the assessee as may be submitted besides the credit entries in the bank accounts, and taking into consideration the income already disclosed in the return of income, arrive at the taxable income afresh as per law after providing reasonable opportunity to the assessee. Accordingly, the order so passed by the ld Pr CIT is modified to this extent. Appeal has been preferred against the assessment order before the ld CIT(A) and therefore, the matter is beyond the jurisdiction of the ld Pr CIT u/s 263 - Though there is no dispute that the assessee has preferred an appeal before the ld CIT(A), however, such an appeal has been delayed filed and there is nothing on record that the delay has been condoned and the appeal has been admitted for adjudication and in such a situation, it cannot be held that mere filing an appeal where such appeal has not even been admitted for adjudication act as an estoppel in exercise of jurisdiction by the Pr. CIT u/s 263 of the Act. In any case, the ld AR has stated at the Bar that the assessee didn t wish to press ground no. 3 relating to clause (c) to explanation 1 to section 263 where it has been clearly spelt out that powers of the Pr CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. In the instant case, where the appeal has not even been admitted for adjudication by the ld CIT(A), the question of subject matter of appeal been considered and decided in such appeal doesn t arise and therefore, the doctrine of merger of the assessment order with that of the appellate order doesn t arise for consideration and thus, in the instant case, there is no bar on exercise of jurisdiction of ld. Pr CIT u/s 263

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• 2020 (12) TMI 299
  Revision u/s 263 - whether the order passed by the Assessing Officer is erroneous, insofar as prejudicial to the interests of the revenue? - PCIT has first questioned the issue of agricultural income declared by the assessee and came to the conclusion that although the Assessing Officer has rejected the claim of agricultural income, but failed to make additions to returned income as unaccounted income of the assessee - second issue questioned by the PCIT is unaccounted investments in fixed deposits and according to him, the assessee has failed to explain source of income for investments in fixed deposits - HELD THAT:- AO has considered the issue of agricultural income declared by the assessee and discussed the issue in light of various evidences furnished by the assessee during the course of assessment, and came to the conclusion that agricultural income claimed by the assessee is incorrect. However, chose not to make any addition to returned income on the ground that the assessee has not filed statement of affairs considering the agricultural income, as source of income to explain any asset / investments. Assessing Officer, in our considered view, taken one of the possible view - once an issue has been examined by the AO during the course of assessment proceedings and called for necessary details from the assesse, it is presumed that the AO has examined the issue and has applied his mind to relevant facts in light of relevant provisions of the Act. Similarly, once the Assessing Officer has taken one of the possible view, which may not be acceptable to PCIT, then also PCIT cannot hold the order to be erroneous, insofar as it is prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is unsustainable in law. In this case, the view taken by the Assessing Officer, insofar as the claim of agricultural income is one of the possible view and such view may not be acceptable to the PCIT, but the same cannot be a reason for PCIT to revise the assessment order u/s.263 . Unaccounted investments in fixed deposits - AO has discussed the issue of unaccounted investments in fixed deposits in his assessment order and has recorded categorical finding to the effect that the assessee has explained source of income for investments in FDR. The Assessing Officer after accepting the source of income for investments has verified the fixed deposits and consequent interest on said FDR and has made additions towards accrued interest on the said fixed deposits, wherever the assessee has not offered the accrued interest for taxation - Assessing Officer has examined the issue of investments in fixed deposits and after considering necessary evidences filed by the assessee has accepted the source of income for investments - PCIT is incorrect in coming to the conclusion that Assessing Officer has not examined the issue and applied his mind insofar as investments in fixed deposits - once the Assessing Officer has taken one of the two views permissible in law on which the PCIT does not agree and which resulted in loss of revenue, it cannot be treated as erroneous order prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. PCIT has erred in revising the assessment order u/s.263 of the Act as erroneous, insofar as it is prejudicial to the interests of revenue. Hence, we set aside the order passed by the PCIT under section 263 of the Act and restore the assessment order passed by the Assessing Officer u/s.153A r.w.s.143(3) - Decided in favour of assessee.

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• 2020 (12) TMI 298
  Unsecured loans u/s.68, ad-hoc disallowance of expenses, disallowance of interest for non-deduction of TDS, difference in gross receipts as per books of accounts and as per statement of receipts filed during the course of assessment proceedings, disallowance of sales tax and disallowance of ROC fees - Whether CIT (Appeals) failed to give an opportunity to the AO as envisaged in rule 46A of I.T.Rules, 1962 for examination of evidence furnished by the assessee company during the appellate proceedings ? - HELD THAT:- It is a well settled principle of law that when additional evidences are filed before the appellate authority, it is the duty of the appellate authority to confront those additional evidences to the AO for his comments and obtain necessary reports from the AO on admissibility of the additional evidences and veracity of such additional evidences filed before deciding the issues. No doubt, the appellate authority had powers to examine issue on its own but when the appellate authority has decided the issue on its own without calling for remand report from the AO then the appellate authority should give detailed reasons in support of its conclusions, otherwise it amounts to violation of Rule 46A of I.T.Rules, 1962. In this case, on perusal of the order of CIT(A),we find that although the assessee has filed additional evidences in support of its case, but the learned CIT(A) has decided the issues without confronting those documents to the Assessing Officer for his comments in violation of Rule 46A of I.T.Rules, 1962 - Appeal filed by the Revenue is treated as allowed for statistical purposes.

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• 2020 (12) TMI 297
  Addition u/s 69A - unaccounted income of the assessee company - Double addition - whether the receipt of Rs.81 lakhs against the sale of shops needs to be taxed in the hands of the assessee? - HELD THAT:- Firstly, in the hands of director of the company namely, Shri Dhirajlal Sanghvi has included the impugned amount for working out the undisclosed income based on search documents in his individual capacity. Secondly, the AO has added the sum of Rs.81 lakhs representing the receipt against the sale of shops in the hands of the assessee. Thus, the inference drawn is this that the receipt of Rs.81 lakhs has suffered tax 2 times which is not desirable under the provisions of law until and unless it is specifically provided. In our considered view, once the AO has reached to the conclusion that the impugned income belongs to the assessee than he was under the obligation to reduce the same from the income of the director. But the AO has not done so despite the fact that the receipt of 81 lakhs was included in the cash flow statement of the director was also admitted by him (the AO) in his order AO was under the obligation to reduce the sum of 81 lakhs from the income of the director in the situation where he proposed to add the same in the hands of the assessee. But the AO has not done so despite having sufficient information in his hand. As such the action of the AO has resulted the double addition of the same income. In the case on hand, the assessee has claimed that receipt of Rs.81 lakhs has already been considered in the hands of the director which was not disputed by the authorities below. It implies that owner of the receipt of Rs.81 lakhs was the director of the company and not the assessee. Accordingly, the assessee cannot be held the owner of the receipts of Rs.81 lakhs and consequently the impugned receipt cannot be made subject to tax in the hands of the assessee under the provisions of section 69A of the Act. - Decided in favour of assessee.

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• 2020 (12) TMI 296
  Penalty u/s 27IB - assessee has maintained proper books of account and accounts are also Audited by Chartered Accountant - HELD THAT:- CIT(A) has not given any categorical finding on merit of the case and dismissed the appeal on the ground of non-prosecution of appeal. It is also observed that the CIT(A) did not give sufficient opportunity of hearing to the assessee. CIT(A) was not right in dismissing the appeal of the assessee without giving proper opportunity of hearing. We are remanding back the entire issue to the file of the CIT(A) to be decided on merit. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. The appeal of the assessee is partly allowed for statistical purpose.

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• 2020 (12) TMI 295
  TP Adjustment - MAM selection - assessee had adopted Comparable Un-controlled Price method (CUP method) for arriving at the ALP on the ground that the A.E. had entered into similar transactions with unrelated parties in India, and, therefore, the internal CUP method is applicable and should be adopted - TPO rejected the CUP method adopted by the assessee and has adopted Transactional Net Margin Method (TNMM) as the most appropriate method (MAM) - HELD THAT:- We find that there is no change in the nature of activity carried on by the assessee since A.Y. 2011-12 till the previous year relevant to the A.Y. before us. The modification of the agreements appears to be relating to the terms and conditions of payment. Assessee submitted that there is no change whatsoever with regard to transactions of the assessee with the A.E. and the transactions of the AE with other unrelated parties. If that is so, then, the CUP method has to be adopted. We deem it fit and proper to set aside the assessment order and direct the AO to refer the matter to the TPO with a direction to adopt CUP method if the nature of activity between the assessee and the A.E. and between the A.E. and the unrelated parties who are providing similar services to the A.E. is the same and if there is a difference in the nature of activity which would affect the determination of the ALP, then the TPO is free to examine and adopt the MAM in accordance with law after giving the ass a fair opportunity of hearing. Assessee s appeal is treated as allowed for statistical purposes.

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• 2020 (12) TMI 294
  TP Adjustment - Addition relating to Arm s Length Price Adjustment towards interest on receivables from AE s - Finding on the No.of days delay in receivables - HELD THAT:- Coordinate bench of this tribunal in the case of Infor (India) Pvt. Ltd [ 2020 (12) TMI 235 - ITAT HYDERABAD] held that with the introduction of Explanation to section 92B, interest on receivables constitute international transaction and separate adjustment is required to be made on account of interest on delayed payments. Therefore we, hold that the Ld. DRP/TPO/AO is justified in imputing the interest on deferred receivable as international transaction accordingly we, uphold the order of the DRP/AO and dismiss the assessee s appeal in these grounds. Interest on receivables - receivables represent the trade receipts and the same are required to be received in foreign exchange - The Tribunal in the case of M/s. Value Labs Technologies [ 2020 (9) TMI 1149 - ITAT HYDERABAD] has held that in the case of export turnover, which required to be received in foreign exchange, the international transaction shall be considered at LIBOR + 200 basis points rate after the expiry of credit period. Also in the case of Cambridge Technology Enterprises Ltd [ 2019 (11) TMI 1112 - ITAT HYDERABAD] Tribunal held that notional interest has to be charged at LIBOR + interest rates as the receivables are in foreign exchange - we hold that interest rate should be charged on receivables at LIBOR + 200 points. Accordingly, we direct the AO/TPO to charge interest at LIBOR + 200 basis points. Credit period - TPO has allowed 30 days and no agreement was placed by the assessee before us. However, in the case of M/s. Value Labs(Supra), on which reliance was placed by the assessee, this Tribunal held that interest to be charged in the case of delay between 90 to 120 days and in the case of Infor (India) Pvt. Ltd., ITAT allowed 90 days. Considering the facts and merits of the case, we hold that 120 days is reasonable period in this case, hence, we direct the AO/TPO to allow 120 days credit period and charge interest over and above the outstanding period of 120 days. Netting of interest - counsel argued that interest on payables is to be netted against the outstanding receivables - HELD THAT:- This issue has been considered by the DRP and in the absence of details, the assessee s request for adjustment was rejected. No details are furnished by the assessee even before us with regard to netting of payables against receivables. We, therefore, reject the ground of the assessee on this issue of netting out of payables against the receivables.

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• 2020 (12) TMI 293
  Bogus purchases - estimation of income - assessee had failed to substantiate the genuineness and veracity of the purchase transactions under consideration - CIT-A estimated a G.P rate of 12% as a yardstick in respect of the unverified purchases made by the assessee in his garden maintenance and development segment of business - HELD THAT:- No infirmity either in confirming of the addition by the CIT(A) to the extent of the profit which the assessee would had made by procuring the goods from unverified parties, nor the methodology adopted by him for quantification of such profit element. In fact, we find no reason to take a view different from that arrived at by the Tribunal while disposing off the appeal in the assessee s own case for A.Y. 2010-11 [ 2017 (8) TMI 1623 - ITAT MUMBAI] As observed by us hereinabove, the CIT(A) while disposing off the assessee s appeal for A.Y.2010-11 had after analyzing all the facts of the case had estimated a G.P rate of 12% in respect of the garden maintenance and development segment. The aforesaid order of the CIT(A) was thereafter upheld by the Tribunal. As in the case before us the assessee had already declared a G.P rate of 14.23% which is already more than the rate 12% as had been approved by the Tribunal in the assessee s own case for A.Y. 2010-11, we, therefore, finding no reason to take a different view respectfully follow the same. Accordingly, finding no infirmity in the view taken by the CIT(A) we uphold his order. Appeal of the revenue is dismissed.

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• 2020 (12) TMI 292
  Long term capital gain on sale of agriculture land - transfer of land in the year under consideration - only 10% of the sale consideration was received during the year and balance 90% consideration was received on 30.06.2008 i.e. AY 2009-10 - eligible for grant of deduction u/s. 54B - HELD THAT:- Issue involved in this appeal is squarely covered by the decision of the Tribunal dated 9.4.2018 in the case of Shri Sheo Ram, Jagadhari vs ITO [ 2018 (4) TMI 1842 - ITAT CHANDIGARH] sellers/farmers who had sold the land to the purchasers, as named above, had received only part payment of 10% of the entire consideration in the financial year 2007-08 and the remaining consideration was withheld by the builder. The sellers so duped by the builder, had approached the Hon ble Punjab Haryana High Court and the Hon ble High Court vide order [ 2009 (2) TMI 900 - PUNJAB AND HARYANA HIGH COURT] had ordered an investigation into the matter and after considering the report of the Inspector had directed the builder to make the payment of the balance arrears to the sellers/farmers which was paid by the builder in the subsequent years. The Tribunal considering the aforesaid facts in the said case has restored the matter to the file of the Assessing Officer for the limited purpose of enabling the assessee to establish the similarity of the facts of the case with that of the case of Shri Rajiv Kumar [ 2016 (7) TMI 184 - ITAT CHANDIGARH] and directed AO to verify the claim of the assessee in this regard and thereafter to pass and order in accordance with law. The issue relating to the claim of deduction u/s. 54B and 54F of the Act was also restored to the file of the Assessing Officer to be adjudicated upon afresh. Whether land belonged to the HUF and not to the assessee? - We are not convinced with the said contention of the assessee. The land was in the name assessee in individual capacity and the same was sold to the builder by the assessee in his individual capacity as there was no mentioned that the land was being sold by the assessee as Karta of HUF - proceeds of the sale were also deposited/retained by the assessee in his individual capacity and further the land so purchased out of the proceeds of the sale was also in the name of the assessee in individual capacity - plea that the income/capital gains should have been assessed in the name of the HUF seems to be an afterthought. Moreover, the issue relating to the HUF has not been pressed before the Ld. CIT(A). This issue is accordingly decided against the assessee.

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• 2020 (12) TMI 291
  Nature of expenses - demarcation/survey expenses - revenue or capital expenditure - CIT-A deleted the disallowance - HELD THAT:- This issue is, thus, squarely covered by the decision of the Tribunal vide common order [ 2018 (2) TMI 2013 - ITAT CHANDIGARH] wherein held plots have to be physically marked before handing over to the allottees which requires proper survey and lining of contours. Since the allotment of plots is a regular and recurring activity so as the expenses incurred hence the expenses are to be allowed as revenue expenditure. Addition on account of administrative expenses paid as salary etc. to the employees of Department of Urban Estate s. - AO disallowed the said expenditure holding that the employees to whom the salary was paid were not employees of the assessee, rather, those were the employees of the Department of Urban Estates - HELD THAT:- The employees of the Department of Estates have been working owing to the reasons of transfer of functions overtaken by the HUDA. Since these employees are certainly working for HUDA fully and wholly it cannot be said that the salaries paid to the employees is not for business purpose. In the absence of diversion of employees from Department of Estates, HUDA would have to hire outside manpower and also require to pay them accordingly. Keeping in view the functions performed by the employees for HUDA the expenses out of salary cannot be treated as non business expenditure. The principle whether to allow these expenditure are not when the profits are estimated and the arguments taken by both the parties on this aspect are found to be not applicable in the peculiarities of the facts emerging out of the issue of drafting of employees of Department of Estates to work for HUDA. The addition confirmed by the Ld. CIT(A) is hereby directed to be deleted. Expenditure on account of payment to Delhi Metro Corporation on account of expansion of metro services from Delhi to Gurgaon - Whether an allowable expenditure made wholly and exclusively for the business purposes of the assessee - HELD THAT:- The contribution to Delhi Metro can be treated as step in furtherance of the business of the assessee as it improves the accessibility and facilities for the public at large and increases the demand of the land and plots of the assessee. Certainly the connectivity by the metro line will certainly enhanced the business of the assessee and increases the marketability of the plots. The contribution to the metro is akin to construction of the road which will be used by the residents approaching through the road hence the expenditure can be treated as an allowable expenditure laid down for wholly and exclusively for the business purpose. Disallowance of expenditure on account of payment of sale tax - HELD THAT:- Irrespective of the reasons the amount paid as taxes (in this particular instance sales tax) is undisputedly eligible for deduction. There is neither any factual nor legal in congruency. By no stretch of imagination the sales tax paid can be treated as capital expenditure in the facts of this case. Hence we decline to interfere in the well reasoned order of the Ld. CIT(A) in deleting the addition.

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• 2020 (12) TMI 290
  Disallowance u/s 14A read with Rule 8D - assessee has incurred huge expenses in relation to the huge investments in shares and mutual funds - HELD THAT:- It is clear from the records that that there was no exempt income attributable in the hands of the assessee. Therefore, applying Section 14A read with Rule 8D is not appropriate on part of Assessing Officer. CIT(A) rightly held that no expenditure can be disallowed against Nil exempt income and this view is also supported by the decision of the Jurisdictional High Court of Delhi in case of CIT Vs. Holcim India Pvt. Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] and Chemnvest Investment Ltd.[ 2015 (9) TMI 238 - DELHI HIGH COURT] . The Hon ble Apex Court has clearly set out in Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT] that the expenditure should be actually incurred and there should be exempt income. But in assessee case there is a clear finding by Assessing Officer as well as by the CIT(A) that there is no exempt income. Therefore, the appeal of the Revenue is dismissed.

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• 2020 (12) TMI 289
  Condonation of delay in filing appeal - delay of 14 to 20 days - adjustment on accounts of late fee levy u/s 234E - processing quarterly TDS statement filed by the assessee for the financial year 2012-13 and 2015-16 respectively U/s 200A(1)- HELD THAT:- As perused of the application for condonation of delay we find that the assessee has explained the cause of delay of 14, 17 20 days in filing the appeals as respective offices of the assessee are situated in rural areas far from the head office at Ajmer as well as the tax consultant of the assessee also available in Ajmer. The assessee has explained that while taking the advice of the tax consultant as well as approval of the headquarter it took some times which has resulted the delay in filing these appeals. So far as the appeals pertaining to the financial year 2012-13 the assessee has a prima facie good case due to the reason that those cases pertains to pre-amendment of Section 200A(1) of the Act w.e.f. 01.06.2015 whereby the AO is given the power to make the adjustment on accounts of late fee levy U/s 234E of the Act. Hence, in the facts and circumstances of the case and in the interest of justice we condone the delay of 14, 17 20 days in filing these appeals by the assessee.

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• Corporate Laws

• 2020 (12) TMI 288
  Exemption from Stamp Duty - G.O.Ms.No.1224 - whether the Petitioner is entitled to the benefit of exemption from stamp duty in respect of the Sale Deed? - HELD THAT:- Upon perusal of the Annual Return of VIL, which was made up to 23.09.1997, it is clear that the total issued, subscribed and paid-up share capital of VIL was 6,00,000 shares of which the Petitioner held 5,99,994 shares as on 23.09.1997. An annual return is required to disclose all share transfers that took place between the date of the previous annual return and the current one. The aforesaid Annual Return does not disclose that any share transfers were effected between 05.08.1997 (the date of Sale Deed) and 23.09.1997. Therefore, it is clear that the share holding of the Petitioner in VIL was 5,99,994 shares as on the date of execution of the Sale Deed, and this would constitute more than 99% of the issued share capital of VIL. Whether the proviso imposes additional conditions and whether the Petitioner s claim for exemption is liable to be rejected on account of the proviso? - HELD THAT:- The scope, ambit and implications of the proviso should be gleaned from the text thereof, including any necessary implications, and not from unstated intentions. The text of the proviso prescribes that a certified copy of the relevant records of the companies from the Office of the Registrar of Companies, Madras should be produced to prove that the conditions specified in the principal clause are fulfilled. Upon consideration of this proviso, it is clear that the production of the records of the companies is required for purposes of proving that Voltas Limited held at least 90% of the issued share capital of VIL. In view of the fact that neither Voltas Limited nor VIL were incorporated by the Registrar of Companies, Madras, it is not possible to produce any records from the Registrar of Companies, Madras in order to prove the above. To put it differently, the Registrar of Companies, Madras, would not possess records relating to two companies that were incorporated in the State of Maharashtra. Whether the inability of the Petitioner to produce records from the Office of the Registrar of Companies, Madras, would justify rejection of its claims for exemption? - HELD THAT:- The position that emerges is that the text of the proviso concerned should be subjected to close scrutiny so as to understand the scope and implications thereof. The proviso to entry 38 of G.O. Ms. No.1224 clearly does not impose conditions for availing the exemption. This is clear from the fact that it calls for the production of the records of the companies concerned so as to prove fulfilment of the conditions in the enacting clause. Method of proof prescribed therein of the essence of the exemption notification - HELD THAT:- As regards the proviso to entry 38 of G.O.Ms.No.1224, I find that the proviso does not prescribe conditions to be fulfilled in order to avail the exemption. Instead, the proviso specifies a method of proving that such conditions have been satisfied. As stated earlier, the method of proof provided in the proviso is the production of the relevant records of the companies kept in the office of the Registrar of Companies, Madras. Given the fact that both Voltas Limited and VIL were incorporated in the State of Maharashtra, it is not possible to produce records from the Registrar of Companies, Madras in order to prove the entitlement of the Petitioner. Instead, the Petitioner produced certified copies of the balance sheet and annual returns from the records of the Registrar of Companies, Bombay. Whether the Petitioner has fulfilled all conditions and requirements, wholly or substantially, to avail the exemption? - HELD THAT:- As regards fulfillment of conditions, entry 38 of G.O.Ms.No.1224 prescribed three circumstances in which there would be entitlement to exemption. Upon perusal of the Annual Return of VIL, there is no doubt at all that Voltas Limited held more than 99% of the issued share capital of VIL as on the date of the Sale Deed. In effect, the Petitioner undoubtedly fulfilled the condition prescribed in the principal clause. More significantly, the text of entry 38 of G.O. Ms.No.1224 does not disclose the intention to restrict the exemption to companies which were incorporated by the Registrar of Companies, Madras, or have their registered offices in Tamil Nadu. The production of the relevant records of the companies concerned from the Registrar of Companies, Madras is not a condition for availing the exemption, and, on the contrary, is merely a method of proving that the conditions specified in the principal clause are fulfilled. The Petitioner produced the records from the office of the Registrar of Companies, Mumbai, Maharashtra, to prove the fulfillment of the condition. Both the Registrar of Companies, Mumbai, and the Registrar of Companies, Madras/Chennai are statutory authorities functioning under the Ministry of Corporate Affairs, Government of India. As a corollary, the production of records from the office of the Registrar of Companies, Mumbai to establish compliance with the condition is an acceptable near substitute and clearly qualifies as a reasonable alternative method of proving compliance with the condition. Accordingly, the impugned order dated 31.12.2009 is liable to be quashed because the said order has been passed on the basis that the Petitioner could not produce records from the Registrar of Companies, Madras as prescribed in G.O.Ms.No.1224 - the Petitioner is entitled to the benefit of G.O.Ms.No.1224 as regards the Deed of Conveyance dated 05.08.1997 - Petition allowed - decided in favor of petitioner.

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• 2020 (12) TMI 287
  Maintainability of petition - Section 241-242 of the Companies Act, 2013 - whether upon admission of the insolvency application against the Company, the pending application under Section 241-242 r.w. Section 62, 75, 447, 448 and 449 of the Companies Act would be rendered infructuous or would be kept in abeyance till the conclusion of the CIRP? - HELD THAT:- It is a matter of record that one IB Petition filed under Section 7 of the IB Code is admitted on 16.03.2020 against M/s. Polygold Pre-cured Systems Pvt. Ltd. and accordingly the management is suspended and is vested upon IRP for all intent and purposes - Thus, when the Corporate Debtor is under CIRP, under such circumstances, the dispute with regard to the oppression and mismanagement cannot be dealt with as the management itself is suspended and now the Company is under the control of IRP/RP. Once it is admitted under IB Code initiating CIRP, which may end, either in approval of a resolution plan or an order for liquidation of the Corporate Debtor. Thus, under both situation, the management will never come again in the hands of the Suspended Management. Further, the decision to approve a resolution plan or to send the Company for liquidation rests with the commercial wisdom of the COC, which consists of the FCs as voting members. The commercial decision of the COC are not generally open to any analysis, evaluation or judicial review by the Adjudicating Authority. Even if the petition filed under Section 241-242 is kept in abeyance, then even it is not going to fulfil the objective of Section 241-242 of the Companies Act. Therefore, there is no reason for keeping the application filed under Section 241-242 be pending till the final outcome of the IB petition - Application dismissed.

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• Law of Competition

• 2020 (12) TMI 286
  Approval of the Scheme of Merger - Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- In view of absence of any objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Composite Scheme of Arrangement, annexed as Annexure A7 with the Company Petitions as well as the prayer made therein. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the persons concerned and directors and officials of the petitioners. While approving the Scheme, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law - Petition allowed.

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• Insolvency & Bankruptcy

• 2020 (12) TMI 285
  Maintainability of application - initiation of CIRP - Guarantor - review of application on the ground that this Appellate Tribunal has made an inadvertent error in Para 14 of the Judgment ignoring various documents placed on record by both the parties which included the Deed of Guarantee executed by Chamber Constructions in favour of Respondent No. 1 on 9th December, 2013 - HELD THAT:- Admittedly, power of review has not been expressly conferred on this Appellate Tribunal and the power vested in this Appellate Tribunal under Rule 11 can only be exercised for correction of a mistake. This Appellate Tribunal does not enjoy power of review under Rule 11. The power of review is not an inherent power which cannot be exercised unless conferred specifically or by necessary implication. Exercise of inherent powers under Rule 11 has limitations and same cannot be enlarged to review the decisions and substitute a view. The error apparent on the face of record must be manifest and self-evident and it is impermissible to travel beyond record to see whether the judgment is correct or not. The inherent power cannot be exercised in a manner that it would amount to sitting in appeal over the findings recorded on appreciation of evidence. Reappraisal of evidence for examining correctness or otherwise of the finding would amount to sitting in appeal in disguise. Applicant cannot be permitted to seek rehearing of the appeal or reconsideration of the judgment in regard to a finding, even when the same is erroneous. It would be appropriate to refer to provisions of Section 420 of the Companies Act, 2013 dealing with orders of the Tribunal as this Appellate Tribunal is a creation of the statute. In the instant case, Applicant is primarily aggrieved of the finding recorded by this Appellate Tribunal in para 14 of the judgment that there was nothing on record to suggest that with regard to the very same debt M/s Chamber Constructions Pvt. Ltd. had issued any Guarantee. Assuming that such finding is erroneous and there is material in the form of Deed of Guarantee, admission of Respondent No. 1 and other material on record to justify a finding contrary to the one recorded by this Appellate Tribunal in para 14 of the judgment, it would be impermissible for this Appellate Tribunal to substitute the finding within the scope of powers exercisable under Rule 11 of NCLAT Rules, 2016. Application dismissed.

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• 2020 (12) TMI 284
  Fresh claim after the approval of Resolution Plan - appeals suffered rejection of their claims during Corporate Insolvency Resolution Process - only grievance projected on behalf of the Appellants is that the delay was occasioned due to financial crisis on account of non-payment of money by the Appellants to their lenders - HELD THAT:- The Appellants have failed to adhere to the timelines prescribed under the I B Code and the relevant Regulations as regards filing of claims. With reference to Page 65 of appeal paper book in Company Appeal (AT) (Insolvency) No. 1021 of 2020, it appears that the IRP has rejected the claim of Appellant which was not substantiated by documentary evidence. This was done on 21st May, 2019. Page 66 of the same appeal paper book is the copy of order passed by the Adjudicating Authority extending CIRP period by 90 days. This happened on 11th September, 2019. Subsequently, the prayer of Appellant seeking direction from the Adjudicating Authority in the name of Resolution Professional to accept the supporting document in support of the claim came to be turned down in the face of delay and latches on the part of Appellant. The fact that the CIRP period was extended by 90 days by the Adjudicating Authority at the instance of Resolution Professional would not clothe the Appellants with a right to claim consideration of their claims which stage admittedly was over. Moreover, subsequent rejection of I.As declining to allow proof to be adduced in support of claims at the hugely belated stage leaves no room for contending that opportunity of submitting the claims and adducing proof in support thereof was not provided to the Appellants. Since the CIRP has crossed the culminating point with approval of the Resolution Plan of Shri Dutt India Pvt. Ltd. , the Appellants cannot be allowed to reopen the CIRP and direct de novo exercise after the CIRP period has come to an end. Appeal dismissed.

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• Service Tax

• 2020 (12) TMI 283
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Grant of remission - grant of deduction of pre-deposit - validity of Paragraph 2(iv) of the impugned circular dated 25.09.2019 - vires of provisions of sub-section (2) of Section 124 of The Finance (No.2) Act, 2019 or not - breach of provisions of Section 124 (2) of the Finance (No.2) Act, 2019 or not - HELD THAT:- Perusal of the provisions of the Scheme, shows that the Scheme is a complete Code in itself. In substance, it is a scheme for recovery of duty/indirect tax to unlock the frozen assets and to recover the tax arrears at a discounted amount. Thus, Sabka Vishwas Scheme , although a beneficial scheme for a declarant, is statutory in nature, which has been enacted with the object and purpose to minimise the litigation and to realise the arrears of tax by way of settlement at discounted amount in an expeditious manner. In other words the scheme is a step towards the settlement of outstanding disputed tax liability. Facts of the present case are that an order in original dated 29.03.2019 was passed by the Respondent No.3 against the petitioner confirming a demand of service tax of Rs. 4,53,63,720/-, Rs. 2,84,02,508/- and Rs. 85,84,024. The amount already deposited by the petitioner i.e. Rs. 3,64,81,370/- + Rs. 2,18,84,061/-, were appropriated by the order in original itself. Thus as per aforesaid order in original dated 29.03.2019 the amount of tax in arrear was Rs. 1,74,66,374/-. This amount was recoverable as arrears of duty under the indirect tax enactment. Thus, the aforesaid amount of Rs. 1,74,66,374/- is the amount in arrears under Section 121(c) of the Act - The words amount payable has been defined in Section 121 (e) of the Act. It means the amount calculated by the authority as the amount of tax dues less the tax relief. Thus, the amount of tax dues being the amount in arrears in terms of provisions of Section 124(1)(c) read with Section 121(c) of the Finance (No.2) Act, 2019 is the amount of duty which is in arrears as per order in original dated 29.03.2019 i.e. Rs. 1,74,66,374/-. Accordingly, it has been reflected in the SVLDRS-3, by the designated authority who computed the amount of tax relief under Section 124(1)(c) at Rs. 69,86,549.60. Thus, the balance amount as estimated amount payable has been determined at Rs. 1,04,79,824.40. The Tax relief under Section 124(1)(c) has been given to the petitioner for Rs. 69,86,549.60. The balance amount of Rs. 1,04,79,824.40 determined by the designated authority and payable by the petitioner under Section 127, is in accordance with the provisions of Section 124(1)(c) read with Section 121(c)/(d) and (e) of the Act which does not suffer from any error of law - From the facts and the legal provisions as aforenoted neither the circular is in breach of the provisions of Section 124(1)(c) or sub-section (2) of Section 124 nor the amount estimated as per SVLDRS-3 dated 01.02.2020 suffers from any error of law. Petition dismissed - decided against petitioner.

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• 2020 (12) TMI 282
  Valuation - Paying service tax at full value instead of at concessional value - whether the assessee is correct in discharging service tax on gross amount charged under Section 67 of the Finance Act, 1994 after availing CENVAT credit on inputs or whether they have to pay service tax under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 as assessed by the department? - HELD THAT:- The taxable service in the works contract is only the service portion and not the value of the goods involved. Since there is an element of transfer of property of goods involved (sale) while providing the works contract service which may always not be easy to segregate. Service tax (Determination of Value) Rules, 2006 would help to determine the value of service portion in the execution of works contract. On bare perusal of the provisions of law, it would show that section 67 is the charging section which lays down the liability to pay service tax on the consideration received for providing taxable service. Rule 2A provides for a mechanism to chalk out that part of the consideration in a WCS which can be subjected to service tax. - the discharge of service tax liability at full rate by the appellant by applying the provisions of section 67 of the Finance Act, 1994 cannot be called in question by the Revenue The issue with regard to whether assessee is eligible to avail CENVAT credit by discharging service tax under section 67 having been held in favour of the assessee, consequently, the appeal filed by the department alleging wrong availment of credit is without any merits. Time Limitation - HELD THAT:- The issue is in the nature of interpretation of provisions of law. The very same issue was under litigation and issue is held in favour of assessee which has been accepted by department. The assessee has indeed discharged service tax as determined under section 67. There is no evidence of deliberate act of intention to evade service tax - the demand raised invoking extended period cannot sustain. The assessee succeeds on the issue of limitation also. Appeal allowed - decided in favor of appellant.

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• 2020 (12) TMI 281
  Reversal of CENVAT Credit - works contract service - case of revenue is that the the service provided is partly exempted services which is the part of works contract service to be treated as exempt service in view of Rule 2(e) of the Cenvat Credit Rules, 2004 and as such the appellant was required to pay an amount under Rule 6(3)(i) of cenvat credit availed by them - HELD THAT:- As the facts of the case similar to the facts of the case of M/S SURYA CONTRACTORS PVT. LTD. VERSUS CCE ST- JALANDHAR [ 2020 (3) TMI 756 - CESTAT CHANDIGARH ], which is not disputed by any side. It was held in the said case that there is only one transaction of Works Contract Service which is taxable service of which certain portion has been exempted. There are no distinct transactions for two services involved. In such a situation, Rule 6 doesn t become applicable, it is only one distinct service. It is not even the case of the department that the appellant was providing two different services when it is one service where exemption has been provided to certain value would not mean that the appellant was providing exempted service which otherwise is taxable. As Rule 6 (3) was not applicable, the demand made under Rule 6(3) cannot be sustained. As the issue has already dealt with this Tribunal, the provisions of Rule 6(3) of CCR, 2004 are not applicable to the facts of the case, consequently no demand is sustainable against the appellant. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (12) TMI 279
  Maintainability of petition - availability of alternative remedy of appeal - Principles of Natural Justice - Rule 17(2) of the Pan Masala Packing Machines (Capacity, Determination and Collection of Duty) Rules, 2008 - HELD THAT:- The alternative remedy of appeal is efficacious and the reason given for not invoking the same i.e. pre-deposit being burdensome does not appeal to us. Accordingly, we relegate the petitioners to the remedy available under the CGST Act by way of appeal. The challenge to the vires of Rule 17(2) of the Pan Masala Rules is rather without substance and therefore we do not consider it necessary to deal with the same in this case. Petition dismissed.

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• CST, VAT & Sales Tax

• 2020 (12) TMI 280
  Principles of natural justice - best judgement assessment done by ex-parte order - case of revisionist is that the manner of best judgement assessment was wholly arbitrary and illegal inasmuch as only one bill recovered or produced by the Mobile Squad was found to be non-genuine - Enhancement of taxable turnover - whether determination of turn over is commensurate to the material and evidence available on the record? - inclusion of Inter State Sales - benefit of input tax credit - HELD THAT:- The jurisdiction of the Assessing Authority while taking recourse to the best judgement assessment is well settled. The Supreme Court in the case of S.M. HASAN, S.T.O., JHANSI VERSUS NEW GRAMOPHONE HOUSE, JHANSI [ 1975 (9) TMI 177 - SUPREME COURT ] has categorically held that while assessing, on the basis of best judgement , the Assessing Authority has to make the assessment honestly and on the basis of an intelligent well-grounded estimate rather than upon pure surmises. The assessment so made while taking recourse to the best judgement assessment should not be speculative or fanciful but on reasonable guess based upon the material available before the Assessing Authority. In the present case, admittedly, the one tax invoice, which was found to be fake, was of Rs. 11,970/- and solely on the basis of the said invoice, the evaded sales has been assessed at Rs. 26,15,000/- i.e. 100% of the disclosed sales. The Assessing Authority is bound to act in a rational manner while resorting to best judgement assessment in view of the facts on record it is clear that only one bill of Rs. 11,570/- was available as material to assess the evaded sales. There was nothing more before the Assessing Authority to form an opinion that sales equal to the declared sales should be determined as evaded sales - the evaded sales should be quantified as Rs. 2,61,500/- that is the 10% of the total disclosed sales for the purposes of determining in the tax liability - The liability of payment of tax shall be calculated for the year 2014-15 treating evaded sales at Rs. 2,61,500/-. Revision allowed in part.

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• 2020 (12) TMI 278
  Levy of Entertainment Tax - Online Booking Charges - Tamil Nadu Entertainment Tax Act, 1939 - HELD THAT:- The present Appeals are squarely covered by the decision of this Court in PVR LTD., (FORMERLY KNOWN AS SPI CINEMAS PVT. LTD.) NEW DELHI VERSUS COMMERCIAL TAX OFFICER [ 2020 (10) TMI 778 - MADRAS HIGH COURT] which dealt with the question of taxability of the Entertainment Tax on the Online Booking Charges and this Court held that the same are not subject to tax under the provisions of the the Tamil Nadu Entertainment Tax Act, 1939. These Appeals are squarely covered by the above judgment - Appeal allowed - decided in favor of appellant.

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• 2020 (12) TMI 277
  Cancellation of assessments made by the Commercial Tax Officer - Assessment Circle for the years 1996-97, 1997-98 and 1998-99 under the Tamil Nadu General Sales Tax Act, 1999 - HELD THAT:- On a bare perusal of the impugned orders, it is apparent on the face of the record that there has not been any reference to the order dated 20.02.2012 in W.A. Nos. 2089 to 2091 of 2011 passed by the Division Bench of this Court and the contention relating to the limitation raised by the Petitioner has not even been considered. In that view of the matter, it is not possible to sustain the impugned orders, which are set aside and the matters are remitted for fresh consideration. The Petitioner shall raise all their objections in writing by a comprehensive reply which shall be submitted by 31.12.2020. The Second Respondent shall thereafter afford full opportunity of personal hearing to the Petitioner, deal with each of the objections raised including the question of limitation, and pass reasoned orders on merits and in accordance with law following the prescribed procedure in consonance with the principles of natural justice and communicate the decision taken to the Petitioner on or before 31.03.2021 under written acknowledgment. Petition disposed off.

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• 2020 (12) TMI 276
  Condonation of inordinate delay in filing the petition - transportation of fertilizers, food grains etc. at various places for and on behalf of the State of Tripura - stand of petitioner is that there was no sale or transfer of the right to use the goods or execution of work order and that therefore; this transaction did not invite Value Added Tax - HELD THAT:- Though, exercise of writ jurisdiction under Article 226 of the Constitution of India is not governed by any statutory provision of limitation, the Courts proceed on the basis that such discretionary exercise of power would not be done in favour of a person who is not vigilant in pursuing his rights and remedies. The Court would not favour a litigant who is tardy, has approached the Court after gross delay that too without any explanation for inordinately long time consumed. In this context, thus, the Courts while exercising writ jurisdiction, invoke the principle of delay and laches, though not limitation. One of the guiding principles that may persuade the Court to exercise or not to exercise writ jurisdiction is, what is the period of limitation prescribed for filing the suit, if the petitioner had to file such a civil proceeding. If the petitioner has missed the limitation for filing a suit, the Court would be reluctant to exercise the writ jurisdiction, unless of course either there is a valid explanation for delay or there are some special or extraordinary reasons for entertaining petition at such a late stage. This preamble was necessary because in the present cases the taxes were collected during the period between the financial year 2013-2014 to 2015-2016. Present petitions came to be filed on or around 21st August, 2020. There is, thus, minimum delay of only five years in raising the demands. All that the petitioner has offered by way of explanation for such delay is that the petitioner first approached the authorities under RTI Act for collecting information and then made a request for refund of the taxes. The decision in case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT ] was distinguished on the ground that the said case arose in the backdrop of the Customs Act and Central Excise and Salt Act. The question of delay and laches was not involved in the said petition. Petition dismissed.

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