TMI Tax Updates - e-Newsletter
December 14, 2018

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Insolvency & Bankruptcy

Articles

1. CORPORATE SOCIAL RESPONSIBILITY IN INDIA

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. The Government of India and the Asian Development Bank (ADB) sign a $60 Million Loan Agreement to reduce floods and the riverbank erosion in Assam

2. National Mission on Government e-Market (GeM) portal

3. GeM to soon onboard start-ups

Notifications

Customs

1. 57/2018 - dated 13-12-2018 - ADD

Seeks to levy definitive anti-dumping duty on the imports of "Uncoated Copier Paper" originating in or exported from Indonesia, Thailand and Singapore

SEZ

2. S.O. 6064 (E) - dated 3-12-2018 - SEZ

Central Government de-notifies an area of 3.963 hectares, thereby making resultant area as 146.921 hectares at SIPCOT Industrial Area, Sriperumbudur in the State of Tamil Nadu

Circulars / Instructions / Orders

DGFT

1. 59/2015-20 - dated 12-12-2018

Inclusion of Paragraph 2.79 E in the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 to lay down the procedure for re-export/return of imported SCOMET items

Highlights / Catch Notes

GST

• Disc Brake Pads for Cars and SUVs Classified Under Chapter 8708, Subject to 28% Tax Rate.

  Case-Laws - AAR : Classification of an item - Friction Material Based Brake Lining and Pad - Disc Brake Pads are being used in Braking System of passenger cars and SUV Vehicles - The Product i.e. Disc Brake Pads falls under chapter heading 8708 and would be liable to tax @28%
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• Transportation Services Part of Composite Supply, Classified as Works Contract u/s 2(119), Taxed at 18% GST.

  Case-Laws - AAR : Levy of GST - rate of tax - transportation charges - The impugned supply of transportation service is not supply of standalone service but integral component of composite supply in the nature of works contract as defined u/s 2(119) - Liable to GST @18%
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• GST Applied to Diamond Photography Services: Not Zero-Rated Export Due to Unmet Conditions, Subject to Interstate Supply Rules.

  Case-Laws - AAR : Levy of GST - zero rated export supply or not - export of service - photography service of diamonds - Performance based service - interstate supply or intrastate supply - since all the conditions of export not satisfied, liable to GST
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• Tea Storage Services Not GST Exempt: Tea Not Classified as Agricultural Produce Under Relevant Tax Regulations.

  Case-Laws - AAAR : Agricultural Produce or not? - Nature of warehoused goods - tea produce - The products stored in the warehouse of the appellant are not the agricultural produce - the supply of warehouse services used for packing & storage of tea is not eligible of exemption under GST.
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Income Tax

• Deemed Dividend u/s 2(22)(e) Confirmed Taxable Despite Assessee's Capital Reserve Argument Based on Land Sale Profits.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - assessee contended that accumulated profit was arising out of sale of its land and therefore it is a capital reserve which cannot be distributed as dividend - commercial exigencies - additions confirmed.
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• Capital Gains Tax Liability Only When Income Accrues; No Tax Due Without Completed Development or Compensation.

  Case-Laws - AT : Liability to pay capital gain tax - hypothetical income - accrual of income - activity of development was not completed and assessee received nothing in lieu of execution of the development agreement - capital gain is liable to be assessed when the income will accrued to the assessee.
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• Receipts in warranty period must follow revenue cost matching; no change needed in taxpayer's accounting method.

  Case-Laws - AT : Receipts allocated towards Warranty period - Revenue cost matching principle - there is no requirement to disturb the methodology adopted by the assessee in accounting for Warranty period receipts.
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• Sale of Property Under Rs. 50L Per Person Avoids TDS u/s 194IA of Income Tax Act.

  Case-Laws - AT : TDS u/s 194IA - transfer of an immovable property - the amount as per sale deed is ₹ 1,50,00,000/- - Single purchase deed for four persons - in each case purchase consideration was less then fifty lakhs rupees - No TDS liability.
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• Tax Authorities Reject Business Loss Claim Due to Lack of Proof on Advances Written Off for Business Purposes.

  Case-Laws - AT : Disallowing “amounts written off” as business loss - the assessee has failed to discharge his onus in substantiating that the advances written off were made wholly and exclusively for the purpose of the business.
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• Collaboration with BSNL doesn't affect eligibility for tax deductions u/s 80IA for basic telecommunication services.

  Case-Laws - HC : Deduction u/s 80IA - merely because the services are provided in association with BSNL, it does not mean that the assessee is not providing the 'basic telecommunication services'.
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• Partners Only Entitled to Profit Shares; No Gift Tax Implications Under Gift Tax Act for Additional Benefits.

  Case-Laws - HC : Gift assessable under the GT Act - During the subsistence of the firm, the right of the partners is only to claim their share of the profits, in accordance with their respective shares and nothing more
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• Rectification Error in TDS u/s 194A: NOIDA's Interest Income Exemption Misjudged by Commissioner of Income Tax (Appeals.

  Case-Laws - HC : Rectification of mistake u/s 154 - TDS u/s 194A - interest income of NOIDA to be eligible to exemption under Section 194A(3)(iii)(f) - CIT(A) has wrongly exercised his jurisdiction.
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Customs

• Anti-Dumping Duty Imposed on Uncoated Copier Paper from Indonesia, Thailand, and Singapore to Protect Local Industries.

  Notifications : Definitive anti-dumping duty levied on the imports of "Uncoated Copier Paper" originating in or exported from Indonesia, Thailand and Singapore
  Visit to Get Source

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DGFT

• New Procedure for Re-export or Return of SCOMET Items Added to Foreign Trade Policy Handbook 2015-20.

  Circulars : Inclusion of Paragraph 2.79 E in the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 to lay down the procedure for re-export/return of imported SCOMET items
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SEBI

• New SOP for Suspension and Revocation of Trading Shares for Non-Compliance with Listing Conditions Introduced in Stock Exchange Bye-laws.

  Circulars : Amendment to bye-laws of recognised stock exchanges with respect to non-compliance of certain listing conditions and adopting Standard Operating Procedure for suspension and revocation of trading of shares of listed entities for such non compliances
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Case Laws:

• GST

• 2018 (12) TMI 651
  Agricultural Produce or not? - Nature of warehoused goods - tea produce - Circular No. 16/16/2017-GST dated 15.11.2017 - whether the tea leaves of the various qualities, which is precisely black tea, procured in bulk either from public tea auctions or directly from manufacturers of tea in 50 Kg bags, after undergoing various stages of the processing as detailed above, by the appellant s client i.e. Unilever, for storage in the warehouse owned by the appellant are agricultural produce or otherwise? Held that:- The product being stored in the warehouse has got different name, character and uses from the green tea leaves which are cultivated in the tea gardens. Thus, the tea procured by Unilever is the manufactured product obtained from the different manufacturers - Thus, there is absolutely no doubt that the processes or treatments which are performed upon the green tea leaves amounts to manufacture as per the definition provided in the clause 72 of Section 2 of the CGST Act, 2017. Whether this manufactured product i.e. the black tea can be construed as agricultural produce or not? - Held that:- Though the product is a produce out of cultivation of the plants, the same is obtained as a result of the specific manufacturing processes, carried out by the manufacturers on the original agricultural produce i.e. green tea leaves for making them suitable for consumption by imparting the desired flavor and colour - All these processes, which change the characteristics of the green tea leaves, are carried out by the manufacturers and not the cultivators or the producers of the green tea leaves as envisaged under the definition of the agricultural produce. Thus, the manufactured products do not fulfill the prescribed criteria of the agricultural produce, and thus cannot be considered as agricultural produce. The said processes carried out on the green tea leaves do have bearing on the taste and colour of the tea, the appellant s contention that the above discussed processes carried out on the green tea leaves does not alter the characteristics of the tea is devoid of any merit and thus is not sustainable. In the said warehouses rented out by the appellant, the appellant s client Unilever have also been blending the tea of the various qualities and packing the same in the packets of specified quantity as per the order received from their overseas buyers of the tea product. The blending of tea of various qualities into different proportion depending upon the requirements of their overseas customers may be construed as manufacturing process as the said process imparts different flavour, colour to suit the need for their customers. Thus, the appellant s client Unilever is undertaking the said manufacturing process, thus changing the essential characteristics of agricultural produce further, in the warehouse rented out by the appellant. Further, these processes of the blending and packaging are being performed by the appellant s client, which is certainly not the cultivator or producers of the tea. Thus, the blended and packaged product, which are to sold to the overseas markets, which are definitely not the primary markets as envisaged in the definition of the agricultural markets. Thus, the stored products are not the agricultural produce as being projected by the appellant. Ruling:- The products stored in the warehouse of the appellant are not the agricultural produce - the supply of warehouse services used for packing storage of tea, under above mentioned facts circumstances was/is not exempted vide Serial No 54(e) of Notification No. 12/2017- Central tax (rate) - the said exemption granted vide the above notification is provided to the storage and warehousing services when provided in relation to the agricultural produce.

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• 2018 (12) TMI 650
  Levy of GST - zero rated export supply or not - export of service - photography service of diamonds - diamonds received on returnable basis - interstate supply or intrastate supply - Held that:- There is no doubt that the supply of service in the present case satisfies conditions at (i) and (ii) of Section 2(6) of the IGST Act. However, to qualify as an export of services all the conditions must be satisfied simultaneously As per condition at (iii) above, which pertains to place of supply of service and that the place of supply of service shall be outside India. Section 13 of the IGST Act contains provisions for determining the place of supply of services where the location of the supplier of the services or the location of the recipient of services is outside India - The place of supply of service shall be determined as per the provision contained in section 13 of the IGST Act. The said section has been divided into two parts. The subsections (3) to (13) provides for determination of place of supply of service, for service other than those listed in sub-sections (3) to (13) - In the instant case and from the perusal of transactions, except subsection (3) all other subsections are irrelevant for the purpose of determination of place of supply. The main contention of the applicant for non-applicability of section 13 (3) (a) of the IGST Act regarding determination of place of supply is that the goods which are required to be made physically available must be owned or made available only by the recipient of services. This line of argument in this respect is hard to accept and is not tenable. However from the plain reading of subsection (a) of subsection 3 of Section 13 of the IGST Act, we do not agree with the contention of the applicant that the goods that are required for rendering service by the supplier must be owned or made available only by the recipient of services. As per above clause, recipient of service who want to avail services has to make goods physically available on direct or indirect directions to the service provider and it does not matter who owned the goods. It is the cordial rule of interpretation that where the language used by the legislature is clear and unambiguous then the plain and natural meaning of the words should be supplied to the language used and resort to any rule of interpretation to unfold the intention is permissible only where there is any ambiguity. There is no need that the goods physically required for rendering services must be owned by the recipient of the services, on the other hand it is sufficient for the recipient to make them physically available to the service provider for rendering services - Thus in this case the event of photography services pertaining to diamonds made physically available by the recipient of services to the provider of services is over and the service is clearly provided in India where the services are actually performed. In the case before us it is seen that the location of the supplier of service is in Mumbai and the place of supply as determined as per provisions of section 13(3) (a) of the IGST Act is also in Mumbai, a place where the services are actually performed. And therefore as per section 8(2) of IGST Act, the services shall be treated as intrastate supply and would be liable to tax under the provisions of MGST Act and CGST Act. Ruling:- The supply of photography service is liable to SGST under the Maharashtra Goods and Service Tax Act, 2017 (MGST Act, 2017) and CGST under Central Goods and Service Tax Act, 2017 (CGST Act) or IGST under Integrated Goods and Service Tax Act, 2017 (IGST Act, 2017). It is not a zero rated export supply within the meaning of Section 2(23) r/w Section 2(6) of the IGST Act, 2017.

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• 2018 (12) TMI 649
  Levy of GST - rate of tax - transportation charges levied by the Applicant on PGCIL - supply contract/service contract - composite supply - Held that:- The Applicant is registered under Goods and Services Tax (GST) Act 2017 and is engaged in the business of manufacturing and selling various products and solutions as required in Power Transmission and Distribution Sector. The Company has two divisions namely (i) Transformer division and (ii) Project division. The Applicant, as part of its activities has entered into following contracts with Power Grid Corporation of India Limited - As per second contract entered into with PGCIL in respect of various services to be undertaken upto successful commissioning of the project which includes planning, transportation of goods, loading and unloading etc for which seprate invoices and consideration has been stipulated. For the purpose of transportation of goods applicant avails the services of Goods Transport Agency Who transports the goods. Applicant also pays tax under reverse charge basis. Further applicant on back to back basis issues invoices and charges separate consideration for transportation services to PGCIL. It is this transportation charges/freight recovered by the applicant from PGCIL which is the subject matter of present application. It can be safely concluded that the agreement for setting up Tower Package TW05 for +800KV transmission Line Project is a single indivisible contract. As the contract consists of two or more taxable supplies of goods and services and their combination, is a composite supply as defined u/s 2(30) of the GST Act - the first contract and the second contract is one single individual contract. Whether this composite supplies constitute works contract as defined u/s 2(119) of the GST Act? - Held that:- The subject contracts are for commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of said contracts. The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act - The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act - further, composite supplies in the nature works of contract as defined u/s 2(119) is declared as supply of services as per section 7 r/w entry 6(a) Of Schedule Il of the GST Act. The impugned supply of transportation service is not supply of standalone service but integral component of composite supply in the nature of works contract as defined u/s 2 (119) and the entire contract is a supply of services as per entry 6(a) of schedule II of the GST Act and liable to pay GST as per entry at Sr. no. 3(ii) of the Notification No. 1/2017 of Central Tax (Rate) dt. 28/06/2017 and corresponding notification under the MGST Act. GST is leviable on the transportation charges Levied by the Applicant on PGCIL. GST in the present case would be liable at 18% as per entry at Sr. no. 3(ii) of the Notification No. 1/2017 of Central Tax (Rate) dt. 28/06/2017 and corresponding notification under the MGST Act.

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• 2018 (12) TMI 648
  Classification of an item - Friction Material Based Brake Lining and Pad - whether classified under CTH 6813 @ 18% List and Motor Vehicle Brakes and Parts classified under head 8708 comes under 28% List or otherwise? Held that:- From Explanatory Notes, it is evident that only friction material in different shape is classifiable under heading 6813 and that those mounted are specifically excluded from the purview of said heading. Applicant is a manufacturer of Disc Brake Pads which are used in Braking System of Passenger cars. From the manufacturing process flow chart we find that functional part on baking, grinding, machining and powder coating fitted on steel plate. This finished product is ready for being fixed in the brake system of cars - the impugned product is not covered by chapter Heading 6813. The undisputed fact of the present case is that Disc Brake Pads are being used in Braking System of passenger cars and SUV Vehicles - further, DBP is not excluded from the aforesaid chapter Notes and are exclusively used as parts of motor vehicles of heading 8701 to 8707 and as such merit classification chapter heading 8707. Ruling:- The Product i.e. Disc Brake Pads falls under chapter heading 8708 and would be liable to tax @28% (14% each under CGST and MGST Act).

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• Income Tax

• 2018 (12) TMI 647
  Rectification of mistake u/s 154 - TDS u/s 194A - interest income of NOIDA to be eligible to exemption under Section 194A(3)(iii)(f) - whether NOIDA is a corporation formed by a State enactment (which is a precondition for claiming exemption under section 194A(3)(iii)(f) - Held that:- Tribunal having dealt with the issue of interest income of NOIDA being eligible to exemption under section 194A(3)(iii)(f) of the Act, the provision of section 154(1-A) of the Act also did not come into play, to any extent. Even on merits, as on date, the matter had been carried to the Supreme Court, by the revenue, and the Supreme Court had also held the interest income of NOIDA to be eligible to exemption under Section 194A(3)(iii)(f). No contrary decision is permissible to be reached by any revenue authority, on any reasoning. The revenue authorities are solemnly obliged to efficiently and promptly apply that law without offering the least resistance to the decision reached by the Supreme Court. That being the necessary and unavoidable obligation. As to the second aspect, whether even otherwise such an issue may have been permitted to be raised by way of rectification, it is seen even if the submissions advanced by Shri Goyal could be examined to any extent so as to draw a point of distinction in the decision of the Supreme Court, even then, certainly a wholly new and debatable issue would be involved in such a scenario. One opinion having been formed by the CIT(Appeals) in his order dated 02.12.2013, it no longer remained open to him to engage in a fresh exercise to determine whether another opinion could be formed on the same issue. The position in law is fairly settled in view of the decision of the Supreme Court in the case of T.S. Balram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay (1971 (8) TMI 3 - SUPREME COURT). Even if any point of debate may ever arise, then in absence of any legislative action preceding, the forum for that debate, would remain only before the highest Court of the land and before no other authority, Tribunal or Court.

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• 2018 (12) TMI 646
  Accrual of income - Surcharge levied but not realized - Surcharge for delayed payment contemplated in the bills raised by the assessee and its accounts - whether it would invite payment of tax dehors recovery/payment/receipt of surcharge? - assessee following the mercantile system of accounting - Held that:- This Court in a similar matter in The Commissioner of Income Tax, Hisar v. Dakshin Haryana Bijli Vitran Nigam Ltd. Hisar [2014 (11) TMI 58 - PUNJAB HARYANA HIGH COURT] while dismissing the appeal of the revenue had recorded that as and when the assessee receives payment of surcharge, it would be obliged to pay tax on such amount. In view of the above, no illegality or perversity could be pointed out by the learned counsel for the appellant in the aforesaid findings recorded by the CIT(A) and the Tribunal which may warrant interference by this Court. However, it is recorded that as and when the assessee receives payment of surcharge, it would be obliged to pay tax on such amount. - decided against revenue

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• 2018 (12) TMI 645
  Gift assessable under the GT Act - Whether on the proprietorship being converted into a partnership firm, the shares allotted to the sons of the appellant/assessee could be treated as a gift assessable under the GT Act? - Whether there would be a gift and the difference between the market value and the book value could be assessed under Section 4(1)(a) of the GT Act? - Held that:- Question arose would be answered in favour of the assessee. Though there was a transfer of the asset in favour of the firm, there cannot be any gift tax assessed on the differential value between the market value and book value. The value shown in the capital account of the firm is only the notional value and as long as the firm holds the property, there cannot be said to be any surrender of rights in the property by the assessee, in favour of the firm, since as a partner, she holds the properties along with the others. As long as the partnership subsists, there cannot be any claim raised by either of the partners as to separate right in the property in accordance with their respective shares. During the subsistence of the firm, the right of the partners is only to claim their share of the profits, in accordance with their respective shares and nothing more. We, having found that there is no gift, though there is a transfer of property, do not see any necessity to set aside the order of the Tribunal which only finds that there is a transfer of property in the name of the firm, which we have found to be not capable of being assessed under the GT Act. The Income Tax Appeal also would stand disposed of, since we have already found that there can be no gift found in the transaction.

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• 2018 (12) TMI 644
  Entitled for deduction u/s 80IA - assessee is not a basic telecommunication service provider as per Section 80IA(4)(ii) or not - Held that:- We find that the definition of 'telecommunication service', as defined under Section 2(k) of the TRAI Act, is a very wide and comprehensive definition, which includes services of any description, which is made available to users by means of any transmission or reception of signs, signals etc. Thus, the definition being very wide and inclusive definition, it would encompass all types of services regardless of the description and definitely it would encompass the type of service rendered by the assessee and therefore, we have no hesitation to hold that the type of service rendered by the assessee is a 'basic telecommunication service'. Furthermore, the official website of the BSNL also shows EPABX as one of the enterprises services provided by BSNL. The official website of BSNL also states that it permits telephone subscribers to use their own PABX/EPABX connected to the BSNL network under certain commercial/technical conditions. Thus, this type of service done by the assessee is an authorised 'telecommunication service' in association with BSNL. Income Tax Officer v. Quick Telecom, Mumbai [2011 (1) TMI 1537 - ITAT MUMBAI] also examined an identical agreement as that of the agreement entered into by the assessee with BSNL and held that merely because the services are provided in association with MTNL (in that case), it does not mean that the assessee is not providing the 'basic telecommunication services'. - decided in favour of assessee.

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• 2018 (12) TMI 643
  Fixing the cost of construction - reliance on the Departmental Valuation Officer s report - Held that:- Valuers report as well as the cost mentioned in the agreement entered into between the assessee and the contractor and ultimately after granting rebate for self supervision and procurement of materials at 5%, estimated the cost of construction at Rs. 55,99,821/-, as against the cost admitted by the assessee at Rs. 38,00,000/-. The Tribunal without assigning any reasons has fixed the cost of construction at Rs. 20,00,000/- by stating that it would be fair and reasonable to determine the value at that rate. The Tribunal failed to consider the correctness of the order passed by CIT(A) but faulted the AO. Tribunal ought to have assigned reasons as to why it was of the opinion that Rs. 70,00,000/- should be fixed as the construction of the hotel building. It is not sufficient to just state that it would be fair and reasonable. Why such value is fair and reasonable should be disclosed and it should be manifest on the face of the order. Faced with this situation, we may have to remand the matter for fresh consideration before the Tribunal. Appeals filed by the assessee are partly allowed and the cost of construction fixed by the CIT(A) is rounded off and fixed at Rs. 60,00,000/- and the Substantial Question of Law is left open

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• 2018 (12) TMI 642
  Disallowing exemption u/s 10(38) for capital gain - assessment made erroneously in an assessment order passed under section 153A r.w.s. 143(3) because no incriminating material was found during the course of search - Held that:- As on the date of search, assessments already stood completed and no incriminating material was unearthed during the search, therefore, no addition should have been made to the income of the assessee. AO has not made reference to any seized material found during the course of search while considering this issue. Therefore, disallowance under section 10(38) is beyond the scope of section 153A and not sustainable. We allow this ground and delete impugned disallowance - Decided in favour of assessee

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• 2018 (12) TMI 641
  Unexplained money addition u/s. 69A - addition made on statement made under oath u/s. 132(4) and 131(1A) - Held that:- It is clear that there is no material or corroborative evidence to support the statement made under section 132(4) of the Act in respect of the addition of Rs. 30 lakh against unexplained investment in stock and Rs. 23.20 Lacs against the unexplained expenditure. The assessee did not admit the addition, which means, he retracted the said surrender in the return of income filed. We find that the Tribunal in the case of best infrastructure (India) Private Limited [2016 (5) TMI 1298 - ITAT DELHI] and the Hon’ble Jurisdictional High Court in the case of Harjeev Aggarwal [2016 (3) TMI 329 - DELHI HIGH COURT] have in the similar facts and circumstances, held that no addition can be made merely on the statement recorded under search and seizure proceedings on a standalone basis without any supporting or corroborative material. - Decided in favour of assessee

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• 2018 (12) TMI 640
  Eligible deduction u/s 10B - Ownership of the firm is 100% EOU Unit - Held that:- In view of the CBDT Circular dated 17.01.2013, wherein it clearly held that the vital factor in determining the issue would be facts such as how a slump sale is made and what is its nature. It will also be important to ensure that the slump sale would not result into any splitting or reconstruction of existing business. These are factual issues requiring verification of facts. It is, however, clarified that on the sole ground of change in ownership of an undertaking, the claim of exemption cannot be denied to an otherwise eligible undertaking an the tax holiday can be availed of for the unexpired period at the rates as applicable for the remaining years, subject to fulfillment of prescribed conditions. In the present case, the ownership of the firm is 100% EOU Unit is not disputed. It is undisputed fact that the claim made by the assessee for deduction under Section 10B of the Act for the assessment year 2009-2010 after the merger of two firms with effect from 26.12.2011. It is also undisputed that in view of the deletion of the provision of sub-section 9 of Section 10B was omitted from the statute with effect from 01.04.2004 and in view of the dictum in MKU (ARMOURS) PVT. LTD. [2015 (4) TMI 638 - ALLAHABAD HIGH COURT] and Renuga Textiles Mills Ltd.(2012 (7) TMI 589 - MADRAS HIGH COURT) the appellant has not made out any substantial questions of law as raised at para 5 of the appeal memorandum. The appeal upholding the deduction u/s 10B of the Act by the Income Tax Appellate Tribunal is just and proper. The revenue has not made out any ground to interfere with the impugned order passed by the Income Tax Appellate Tribunal exercising powers under Section 260A

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• 2018 (12) TMI 639
  Capital Gain computation - rejecting the valuation report and estimating Fair Market Value(FMV) as on 01.04.1981 at Rs. 1750 per sq.ft. as against value considered at 2200 by the assessee based on the Registered Valuer valuation report, and directing the AO to adopt such value in respect of 1675 sq.ft. of carpet area - Held that:- The assessee has shown FMV as on 01.04.1981 @2200 per sq.ft., on the basis of registered valuers report it is more than the FMV estimated by the AO. Therefore, the AO is not entitled to make a reference to DVO u/s.55A. AO can make a reference in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the registered value, is less than the FMV, in the opinion of the AO. The estimated value considered by the AO @1750 per sq.ft. is less than the FMV computed by the assessee by taking the rate of 2200. AO is not a technical person, as held by the various decision cited to compute fair market value his own. Therefore, he cannot determine the valuation of property, hence, in the light of these facts, we direct the AO to consider the rate at 2200 per sq.ft. for considering the FMV as on 01.04.1981 in respect of built-up area 1675 sq.ft as considered in the valuation report and as shown in the sale deed. This ground of appeal of the assessee is allowed. Therefore, the direction of the CIT(A) to the AO to consider the area at 1675 sq.ft. are upheld department’s ground No.1 of appeal is dismissed. Disallowance in respect of cost of improvement - Held that:- Assessee has not been able to furnish any details of cost of renovation carried out in respect of the properties sold under consideration. Therefore, the CIT(A) has rightly disallowed the same, accordingly this ground of appeal is therefore dismissed. Disallowance of deduction u/s.54 on alleged ground that house boat is not a residential property within the meaning of section 54 - Held that:- We find that the assessee has not produced the registered sale deed for purchase of house boat, therefore it cannot be said that the assessee has purchased a residential house. Further, there is a ban in purchase of immovable property as well as boat by the non-sate subject of the J & K State. Therefore, the assessee is not legally entitled to purchase house boat, which is a movable property, but held to be land by J & K Land Revenue Act, 1939. Hence, same cannot be equated with the residential house which is an immovable property. Therefore, in these circumstances and considering the letter of the Assistant Commissioner (C), Government of Jammu & Kashmir dated 05.07.2013 we are inclined to hold the findings of the Lower Authorities are correct, accordingly this ground of assessee is dismissed. Consider the value 1675 sq.ft against 1340 sq.ft and then take rate of 1750 per sq.ft. - Held that:- As regards, the contention of the Revenue that 25% increase in carpet area to line at built-up area is without any basis, however, we find that assessee has sold the property by taking the carpe area, which has been mentioned in the sale deed as well as registered valuers report. Therefore, we do not find any merit in the contention of the Revenue. This ground of appeal of the Revenue is dismissed.

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• 2018 (12) TMI 638
  Addition on account of interest u/s 36(1)(iii) - deposits given by the assessee so as to acquire the right to collect the maintenance charges from various licensees and the same were inextricably linked with the contractual terms entered into by the assessee - Held that:- The quantum as well as periodicity of deposits was provided by the contractual terms and the terms also provided for refund of the same in certain eventuality. AO has disallowed the interest on the premise that the deposit was excessive in nature keeping in view the deposits sought by other entities under similar circumstances. AO was not justified in sitting on the armchair of a businessman so as to adjudge the sufficiency of the deposits given by the assessee which was duly authorized by the contractual terms. This is further fortified by the fact that deposits were given by the assessee out of commercial expediency so as to get the right to collect the maintenance charges from the licensees which generated business income for the assessee. The same was inextricably linked with contract generating business income for the assessee - tax planning is legitimate provided it fell within the four corners of law and it is permissible under the law provided the same is not a colorable device and not done so as to merely defraud the exchequer - no such attempt by the assessee in the present case - the genuineness of the unsecured loans or interest expenditure was not under doubt. The only condition envisaged by Section 36(1)(iii) to grant deduction of interest expenditure is that the funds were used by the assessee for the purpose of business and nothing more - no infirmity in the stand of first appellate authority. Our view is fully supported by the analogy of the decision rendered in S.A.Builders Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] - Decided in favour of assessee.

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• 2018 (12) TMI 637
  Disallowing “amounts written off” as business loss - Held that:- No agreement of settlement of dispute in respect of the amount involved between the assessee and the producers has been filed by the assessee. The Ld. counsel has reiterated that business of agriculture trade is highly fragile and risky and the assessee company was helping in the growth of the agriculture economy, but mentioning those general trend of the business and economy may not be sufficient to discharge onus of the assessee that it was a business loss. The assessee was required to show the correspondence between the assessee and the producers regarding damage of the particular crops along with quantity, evidence in support of the claim of inability of the farmers in providing the agriculture produces, but no such evidences have been furnished by the assessee either before the lower authorities or before us. For claiming any expenses as deduction under section 37(1) it is incumbent upon the assessee to substantiate that those expenses are being incurred wholly and exclusively for the purpose of the business. In our opinion, the assessee has failed to discharge his onus in substantiating that the advances written off were made wholly and exclusively for the purpose of the business. The finding of the Ld. CIT(A) on the issue in dispute that write off cannot be considered as allowable expenditure under section 37 of the Act, are well reasoned and we do not find any error in the same. We accordingly uphold the same and dismiss the appeal of the assessee.

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• 2018 (12) TMI 636
  TDS u/s 194IA - threshold limit for non deduction of TDS - transfer of an immovable property - single purchase deed for four persons - Held that:- Section 194-IA was introduced by Finance Act, 2013 effective from 1.6.2013. It is also noted from the Memorandum explaining the provisions brought out alongwith the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small tax payers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakhs rupees.” The main reason by the AO is that the amount as per sale deed is Rs. 1,50,00,000/-. The law cannot be interpreted and applied differently for the same transaction, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deed for four persons separately, Section 194-IA was not applicable, and in case of a single purchase deed for four persons Section 194-IA will be applicable. It is noted that AO has passed a common order u/s. 201(1) for all the four transferees. In order to justify his action since in case of separate orders for each transferee separately, apparently, provisions of section 194IA could not had been made applicable since in each case purchase consideration is only Rs. 37,50,000/-. This action of AO shows that he was also clear in his mind that with reference to each transferee Section 194IA was not applicable. The addition made by the AO and confirmed by the CIT(A) is not sustainable in the eyes of law, thus the same is deleted. As far as issue of charging interest is concerned, the same is consequential in nature, hence, need not be adjudicated. - Decided in favour of assessee.

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• 2018 (12) TMI 635
  Revision u/s 263 - profit earned by the assessee from the sale of shares not considered by AO - Held that:- AO as already noted by us, had not made any enquiry on the issue of profit earned by the assessee from the sale of shares and taxability of the same in the hands of the assessee. There is also nothing on record to show that there was any basis, which resulted in giving an impression to the AO that the claim of the assessee for exemption as per the sanctioned scheme of BIFR was likely to be allowed. AO passed under section 143(3) allowing the claim of the assessee for exemption on this issue was erroneous as well as prejudicial to the interest of the revenue and the Principal CIT was fully justified in setting aside the same vide her impugned order passed under section 263. We, therefore, uphold the said order of the Principal CIT and dismiss this appeal of the assessee.

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• 2018 (12) TMI 634
  Reopening of assessment - Estimation of income on the suppressed turnover - Held that:- Having assured the department should not resort for reopening of earlier assessments. Though reopening is legal but not ethical and it damages the image of the department in the eye of public. In the instant case as stated in the statement recorded on 05. 03. 2015, the profit and loss account was prepared to boost the turnover figures for the purpose of bank loan. AO instead of taking the net profit adopted the turnover figures and estimated the gross profit on the difference of the turnover. The details of turnover found during the course of survey the contents of the statements recorded were not made available at the time of appeal hearing. For a query from the Bench, DR replied that there is no material available with regard to the details found at the time of survey. In the absence of any information from the revenue, we have no option except to believe that profit and loss account was found which was prepared for bank loan and net profit required to be brought to tax, but not the gross profit. Having admitted the additional income of Rs. 11,04,500/- for an aggregate turnover of Rs. 3. 84 crores on the suppressed turnover at 3. 23% which the AO has accepted, we find no reason to tax the gross profit once again. At the cost of repetition we observe that the AO failed to establish that the turnover found was pertaining to the assessee and did not bring any material to support the contention, Therefore we hold that estimation of income on the suppressed turnover as per the net profit at 3. 23% is reasonable and meets the ends of justice. The estimation of profit at 3. 23% each year is in addition to the income already admitted by the assessee for the A. Y. 2011-12. Accordingly, we direct the AO to compute the income estimating the net profit @3. 23% on the difference of turnover each year independently - decided partly in favour of assessee.

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• 2018 (12) TMI 633
  Reopening of assessment - change of opinion - validity of reasons to believe - proof of escapement of income - Held that:- In the case of CIT vs Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT OF INDIA] as held that after the amendment made with effect from 1st April, 1989 in the relevant provisions, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on the mere change of opinion. Explaining further, as observed the concept of 'change of opinion' must be treated as in-built test to check the abuse of power and hence the Assessing Officer, even after the amendment made in the relevant provisions from April 1, 1989, has the power to reopen an assessment provided that there is tangible material to come to the conclusion that there was escapement of income from assessment - we find ourselves in agreement with the ld. CIT(Appeals) that the reopening of assessment made by the Assessing Officer in the present case was bad in law as the same was based merely on the change of opinion and the assessment completed by him under section 143(3)/147 in pursuance thereof was liable to be cancelled being invalid. - Decided in favour of assessee.

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• 2018 (12) TMI 632
  Receipts allocated towards Warranty period - contention of the assessee is that the method of accounting followed by the assessee complies with the accounting principle of “Revenue cost matching principle”, i.e., the revenue is being spread by the assessee over the warranty period, since warranty expenditure shall be incurred by the assessee during the warranty period - Held that:- It is well settled proposition of law that the genuine change in the method of accounting to comply with the requirement of the accounting principles and accounting standards should be accepted. As regards the methodology adopted by the AO, we notice the same only shifts the year of assessing the income, whereas the methodology adopted by the assessee would comply with the requirement of the accounting principles and the accounting standards. Accordingly we are of the view that there is no requirement to disturb the methodology adopted by the assessee in accounting for Warranty period receipts. Accordingly we set aside the order passed by the CIT(A) on this issue and direct the Assessing Officer to delete the addition made by him on this issue. Seduction claimed u/s 80HHE - Held that:- As earlier restored the issue relating to Grants in aid to the file of the AO for examining its taxability afresh by duly considering the agreement entered by the assessee with the Government. Hence the claim of the assessee for deduction u/s 80HHE in respect of this income would depend upon the view that will be taken by the AO in the set aside proceedings. As contended by D.R, if it is found that the Government has given grant in aid to meet the expenses incurred in development and implementation of government programs and accordingly if it was held that the same is taxable, then we are of the view that the grant in aid shall form part of operating income and would be eligible for deduction u/s 80HHE of the Act. Provisions written back - Held that:- We agree with the said submission of the assessee. It is quite normal in any business to create provisions for known liabilities and to write back the same when the liability is no longer payable. The amount so written back is usually treated as income of the year in which it is so written back. Hence, we do not find any merit in the apprehension of Ld CIT(A). Accordingly we agree with the contentions of the assessee that the amount so written back should be treated as part of operating profit of the assessee, as it is not an independent source of income. Accordingly we direct the AO to include the amount written back by the assessee in “Profits of business” and allow deduction u/s 80HHE of the Act. Miscellaneous income - Held that:- There is some merit in the submission of the assessee that the miscellaneous income consisted of receipts arising during the course of carrying on of business. However, in the absence of actual details, in our view, it would be difficult to accept the claim of the assessee. Hence, in order to put this issue at rest, we direct the AO to take 50% of the miscellaneous income as income eligible for deduction u/s 80HHE of the Act and allow deduction accordingly. Levy of interest u/s 234D - Held that:- CIT(A) has decided this issue against the assessee. However, he has directed the AO to verify the computational error pointed by the assessee. In view of the above said binding decision, we confirm the order passed by Ld CIT(A). Addition of lease rentals claimed by the assessee - Held that:- CIT(A) has considered the issue in detail in AY 1997-98 and has given a finding that the lessor is the owner of the assets. It was not shown to us that the above said finding of CIT(A) was reversed by the Tribunal or High Court, meaning thereby, the said finding shall hold the field. During the year under consideration, the assessee has not entered into any fresh lease transactions and has paid only the lease rentals on the lease agreement entered in the earlier years. Hence the CIT(A) was justified in following his order passed in the earlier years on the very same issue. Accordingly we uphold the order passed by Ld CIT(A) on this issue.

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• 2018 (12) TMI 631
  Revision u/s 263 - employees' contribution towards provident fund amounting and towards ESIC were paid by Company beyond the prescribed due date and yet were allowed by the Assessing Officer in computation of income - Held that:- The issue of allowance of provident fund and ESIC dues are concerned, the same issue is covered in favour of the assessee in the case of CIT vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT]. Revision u/s 263 - Depreciation on non compute fee - Held that:- We find that the claim was duly made by the assessee in the computation of income. Hence, it cannot be said that the A.O. has not applied his mind on this issue. In this regard, we place reliance upon the case law in the case of State Bank of India vs. ACIT (2018 (6) TMI 1326 - BOMBAY HIGH COURT) for the proposition that when the A.O. allows a claim on the basis of computation of income, it cannot be said that the same has been done without application of mind. Furthermore, we find that the issue of depreciation on intangible assets in the nature of goodwill has been decided in favour of the assessee by the decision in the case of CIT vs. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT]. Hence, the claim of the deprecation on non compete fee can be considered on the anvil of these case laws. Hence, the view adopted by the A.O. cannot be said to be not a possible one. Hence for the proposition that if there are two views possible and the A.O. has adopted one view, with which the ld. CIT is not in agreement, with the order cannot be said to be liable to be visited with the revisionary order by the ld. CIT u/s. 263. Accordingly, the order under 263 passed by the ld. CIT is hereby quashed. Decided in favour of the assessee.

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• 2018 (12) TMI 630
  Liability to pay capital gain tax - hypothetical income - accrual of income - activity of development was not completed and assessee received nothing in lieu of execution of the development agreement - Held that:- The assessee in pursuance of execution development agreement dated 07.07.2009 received no consideration if any. In view of law mentioned above the long term/short term capital gain is liable to be assessed when the income will accrued to the assessee. It is settled law that it is the real income that is to be taxed and not the hypothetical income. Therefore, in the said circumstances of the case, the finding of the CIT(A) is not justifiable on this issue, therefore, we set aside the finding of the CIT(A) on this issue and delete the said addition. - decided in favour of assessee.

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• 2018 (12) TMI 629
  Taxability of subsidy in the nature of refund of sales tax on raw materials, machineries and finished goods - Held that:- In the instant case, the main objective of the scheme was to intensify and accelerate the process of dispersal of industries from developed areas and for development of under-developed regions of Maharashtra. It is clear from the scheme that IPS incentive was granted not for carrying on day-to-day business of the unit more profitably but to provide impetus to the process of dispersal of industries to backward areas. The plant of the assessee falls in Group C, which also includes Khed, which is outside the Pune Metropolitan Region. In the present case the sales tax payment is only an yardstick to determine the quantum of incentive and cannot be construed as to mitigate the operational cost of the business. In view of the above factual scenario we uphold the order of the CIT(A). Facts being identical and the grounds of appeal being same, our decision for AY 2011-12 applies mutatis mutandis to AY 2012-13.

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• 2018 (12) TMI 628
  Disallowance of excess depreciation and additional depreciation - Held that:- Expenses have been incurred on power charges paid to Gujarat electricity board, engineering design and labour cost for electrical work. On perusal of page 39 to 40 of the paper book, we find that assessee has paid Rs. 5,59,899/- for false ceiling, Rs. 5,54,490/- paid for electricity cost during plant commissioning and trial, Rs. 45,486/- for boundary and leveling of electric post etc. Thus, from these details, it cannot be ascertained that expenses have been incurred specific to any plant and machinery and the electric installation is integral part of the Plant and Machinery. In view of the above facts and circumstances and considering the alternative prayer of the assessee, we feel it appropriate to restore this issue to the file of the Ld. Assessing Officer, to verify each item of expenditure claimed under the category of “electrical installation” along with bills and vouchers and if required, commission may be issued to an “Electrical Engineer” for verifying whether the items of electrical installation constitute integral part of plant and machinery, and then the issue in dispute may be decided in accordance with law. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The sole ground of the appeal of the assessee is accordingly allowed for statistical purposes. Disallowance of seed development or agronomic expenditure - revenue or capital expenditure - Held that:- As decided in assessee's own case for assessment year 2007-08 second question relates to seed development/agronomy expenditure which was treated as capital in nature by the AO. The CIT(A) took a contrary position; that was endorsed by the ITAT being pure finding of fact. Disallowance of depreciation on building by relying on the additional evidences submitted by the assessee - admission of additional evidence - Held that:- The matter required to be restored to the file of the Ld. CIT(A) for complying the requirements of Rule 46A(3) and provide opportunity to the Assessing Officer. However, while dealing with the earlier ground, we have restored the issue in dispute involved in that ground to the file of the Assessing Officer. Thus, to avoid simultaneous proceedings at multiple levels, we feel it appropriate to restore this issue also to the file of the Assessing Officer along with direction to the assessee to produce all evidences on the issue in dispute before the Assessing Officer. AO, thereafter may decide the issue in dispute in accordance with law after providing adequate opportunity of being heard to the assessee. The ground No. 2 of the appeal of the Revenue

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• 2018 (12) TMI 627
  Deemed dividend u/s 2(22)(e) - assessee contended that accumulated profit was arising out of sale of its land and therefore it is a capital reserve which cannot be distributed as dividend - commercial exigencies - Held that:- It is abundantly clear that even if the company advancing loan has capital reserve, provisions of Section 2(22)(e) can be invoked. - Moreover the AR has not brought out any convincing materials / explanation before us to establish that the advance made by M/s. Tuticorin Power Company Ltd. to M/s. Aben Ventures Pvt. Ltd. was out of commercial exigencies. In this situation we do not find it necessary to interfere in the orders of the Ld. Revenue Authorities. Hence the appeal of the assessee is devoid of merits and the order of the Ld.AO is hereby confirmed on this issue. Addition u/s 68 - Held that:- Since the submission of the assessee was not backed with any concrete evidence, the Ld.AO added an amount of Rs. 10,91,34,125/- (Rs.11,65,43,082/- less income offered Rs. 74,08,957/-) as the income of the assessee by invoking the provisions of Section 68 of the Act. 9.1 On appeal, the Ld.CIT(A) also confirmed the order of the Ld.AO because even before her, the assessee had not explained the transaction with sufficient evidence.Even before us, the assessee has not furnished any materials to substantiate his claim. Therefore we do not find any reason to interfere with the orders of the Ld.Revenue Authorities. - Decided against assessee.

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• 2018 (12) TMI 626
  Validity of re-opening proceedings u/s 147 - addition towards interest income on loan advanced to Six Sigma Gases Pvt. Ltd. on notional basis - Held that:- When a regular assessment u/s 143(3) has been made earlier, a presumption can be raised that such an order has been passed on due application of mind. It is well known that a presumption can also be raised to the effect that in terms of section 114(e) of the Indian Evidence Act and judicial and official acts have been regularly performed. In the case of Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] had held in similar circumstance that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceedings without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. The necessary ingredients of section 147 in the form of tangible material post completion of assessment proceedings are conspicuously absent. Hence the reopening of assessment does not survive. The assessee was not able to realize interest income offered by it on amount advanced to Six Sigma Gases Pvt. Ltd. in the earlier two assessment years. During the year under consideration, the assessee had duly taken note of the poor financial condition of Six Sigma Gases Pvt. Ltd. and had taken a conscious call of not recognizing the interest income on accrual basis and had even further taken a call for not charging any interest on the said loan for which a separate Board Resolution had also been passed. The poor financial condition of Six Sigma Gases Pvt Ltd had not been disputed by the revenue. The poor financial condition of Six Sigma Gases Pvt Ltd had not been disputed by the revenue. It would not serve any purpose by the assessee having unnecessarily fastened with a tax liability on notional interest income which would never be realized and in future eventually result in claim of bad debt. We hereby quash the reassessment proceedings framed by the ld. AO both on law as well as on facts. - Decided in favour of assessee.

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• 2018 (12) TMI 625
  Disallowance of preoperative expenses - AO disallowed the same as allowable expenditure and added back to the income of the assessee - CIT(A) confirmed the order of Ld.AO because the assessee had not furnished the complete break-up of the expenditure with supporting documents claimed as deduction - Held that:- No merits in the arguments advanced by the Ld.AR. The assessee and its Ld.AR have grossly failed to furnish the details sought by the Revenue at the time of assessment proceedings as well as first appellate proceedings. This lethargic attitude of the assessee is not appreciable. However in the interest of justice, we hereby remit the matter back to the file of AO, thereby offering the assessee with one more opportunity to furnish the requisite materials to justify its stand before the Revenue. We also caution the assessee to cooperate promptly before the Revenue in their proceedings failing which the Ld.Revenue Authorities are at liberty to pass appropriate orders in accordance with merit and law based on the materials on record.

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• 2018 (12) TMI 624
  Addition made towards gross profit - undisclosed sales of the assessee - Held that:- Admittedly, the taxes paid thereon were out of inflated stocks. It is not the case of the revenue that the assessee had maintained two sets of accounts i.e. one for bank loan purposes and one for the purpose of income tax. Hence it could be safely concluded that the stocks were shown at a higher figure in the earlier years which were the same as submitted to the bank on a periodical basis. The assessee on realizing the shortage of 3093 MT of stock value at Rs. 16,10,67,387/- , had no other option but to recast the opening stock value as on 01.04.2011 or alternatively could have claimed the same as loss of stock which would be allowable as a regular trading loss u/s 28. AR has made an alternative submissions before us stating that from the profit & loss account of the assessee, it could be seen that the assessee had credited a sum of Rs. 3,53,50,000/- in his trading account towards sundry balances written off. This sundry balance written off obviously cannot be part of trading results of the assessee and accordingly the same requires to be ignored while computing gross profit. According to the ld. AR, the said sum of Rs. 3,53,50,000/-, if ignored, would only result in a gross loss of Rs. 2,04,00,547/-. Hence there cannot be any adoption of gross profit percentage thereon on the alleged undisclosed sales of the assessee for the year. We find lot of force in this argument of the AR and hold that in any case there cannot be any addition towards gross profit during the year by adopting the average gross profit rate of 6.48%. Accordingly, grounds raised by the assessee are allowed.

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• 2018 (12) TMI 623
  Bogus purchases addition - notices u/s 133(6) and local inquiries were conducted after 3 to 5 years from the year of purchases - Held that:- Nothing is left for the AO to make any addition against the assessee. It may also be noted here, that the AO recorded in the Assessment order when notice u/s 133(6) have been issued against the aforesaid parties but the notice return un-served with the remarks “left without address”. The parties existed at the address given by the assessee and that such enquiry letters have been issued after about 5 years of end of the assessment year. Therefore, same should not be considered adverse in nature against the assessee. Further, such reports and report of the Inspector for making local enquiry, according to the assessee have not been confronted to the assessee. Therefore, such material cannot be used in evidence against the assessee. AO did not make any further efforts to locate the seller parties for their appearance to examine the issue. The GP/NP rate is reasonably declared by the assessee. If the purchases are excluded, the Profit Rate would be very abnormal and would not be according to the norms of the industry. AO did not bring any evidence on record, if any heavy cash or heavy cash transactions are conducted by assessee. The AO merely on presumption noted that Sh. Vinod Parashar has made cash withdrawals which were returned to the assessee. There is no basis for making such an allegation against the assessee. It is well settled law that presumptions howsoever may be high but it cannot take placed on legal proof. Decided in favour of the assessee.

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• 2018 (12) TMI 622
  Addition u/s. 68 - assessee in the garb of earnest money introduced his own unaccounted money - Held that:- If a credit from (or attributed to) a trade debtor is not excluded from the purview of s.68, how could that from a trade creditor be? That is, per se. Where the credit is in respect of money received, the account, be it of a trade creditor or trade debtor, is, essentially, only of a person – the stated source of the credit, which is to be established on facts. Reference in this context may be with profit made to the decision in CIT v. Varinder Rawlley[2014 (8) TMI 679 - PUNJAB AND HARYANA HIGH COURT]. No doubt, the Hon’ble High Courts in V.I.S.P. (P.) Ltd. vs. CIT [ [2003 (7) TMI 43 - MADHYA PRADESH HIGH COURT]; Indian Woollen Carpet Factory vs. Income-tax Appellate Tribunal [2002 (7) TMI 39 - RAJASTHAN HIGH COURT] clarified that sec. 68 would apply to a credit transaction of purchase as well, even as, as aforenoted, the present case is not of a purchase (of goods/services). Section 68 stands rightly invoked by the AO in the facts and circumstances the case. The impugned order is accordingly set aside on this ground, and the impugned addition upheld. Unexplained investment toward purchase of agricultural land - Held that:- After considering the AO’s report as well as the assessee’s reply thereto, he concluded that an AOP was in existence since the year 2004, which had carried out agricultural operations on 178 acres of land during the relevant year, earning as much as Rs. 50 lacs. There was accordingly no case to doubt the receipt of funds attributed by the assessee to the AOP. The addition of Rs. 15 lacs was therefore deleted (pg. 116 of the IO). The finding stands issued upon an exhaustive analysis by the CIT(A). No contrary material, or otherwise any infirmity therein, stands shown to us during hearing. Rather, we compliment the first appellate authority for the painstaking effort made by him to ascertain the facts. Agricultural income - Held that:- The assessee has 9 acres of land, stated to be drip irrigated, yielding an annual return of Rs. 57,500 per acre, apart from 19 acres purchased during the year, which was therefore cultivated only for a part of the year, besides being admittedly not drip irrigated, stated to have fetched Rs. 20,000 per acre. No evidence toward the land purchased during the year being put to agricultural use, much less the period for which it is, or of that already owned being drip irrigated, being produced, the AO estimated the assessee’s income from agriculture at Rs. 6.50 lacs, making an addition for Rs. 2.50 lacs. CIT(A) regarded the assessee’s estimate as reasonable, and deleted the addition. We find the assessee’s case as wholly unsubstantiated. The AO’s estimate is, under the circumstances, in our view, only reasonable. We, therefore, decline interference therein, and the Revenue succeeds in result.

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• Corporate Laws

• 2018 (12) TMI 621
  Valid pledge of shares of a company as created by mere deposit of shares certificates - possession of shares - Held that:- The respondents are in possession of the shares certificates and it is not a case that they have on their own taken any action with regard to the transfer of shares. In the present matter, especially when civil proceedings in the High Court are pending we need not enter into these disputes whether or not the pledge is there. We find that appellant failed to make out case under Section 46 or 56 of the Act and has not approached with clean hands. He suppressed the earlier litigation and wanted us to believe that he had reason to say that the shares were lost and that later he had reason to claim theft. Facts show that these claims were not true. We find that Respondents No.1 and 2 have justifiable reasons to show how they are in possession of the shares and that, in the facts of the present matter they may not be directed to hand over the shares. We agree with the reasons recorded by NCLT in impugned orders. No case is made out for us to interfere in the impugned order in this appeal. In equity and in law we have no reason to interfere in the matter to aid appellant like the present one.

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• Insolvency & Bankruptcy

• 2018 (12) TMI 654
  Operational creditors under the IBC - Claim of the workmen and ex-workmen of the third respondent - whether and if any amount is due and payable by the third respondent to the workmen/ex-workmen? - Held that:- An ambiguous stand was taken that workmen or ex-workmen could be classified as operational creditors provided and subject to their claims being genuine. The question whether the workers’ Union can raise the claim of the ex-workmen/workmen as operational creditors under the IBC is pending before the Supreme Court as NCLT and NCLAT have both rejected their locus. It is, therefore, clear to us that the issue of workers’ dues etc. have to be examined in an appropriate forum. As per the third respondent, this claim should be examined by the Labour Court/Tribunal. Even if we accept the statement to be correct (indeed this could be a viable solution), interim order against transfer of immovable and capital assets till adjudication is made may be required and necessary to protect interest of the workmen/ex-workmen. On being questioned, why the capital assets and immoveable properties of the third respondent was transferred, the candid and frank answer of the counsel for the third respondent was that the transfers were authorized by the management and there were no stay or interim orders in operation on the dates when transfers were made. Given these facts, we have to express our concern for the ex-workmen/workmen, whose claims have not been decided and adjudicated upon. It is in this context that the order passed by the Supreme Court on 13th November, 2014 and the directions given therein assume importance, for if the ex-workmen/workmen have not been paid their dues, the transfer made by the third respondent to the fourth respondent vide sale deed registered on 2nd July, 2014 would require scrutiny and examination. Of course, any answer would require consideration of the findings recorded in the contempt proceedings vide order dated 18th November, 2016. Thus, even if the ex-workmen/workmen or the Labour Union initiate proceedings under the Industrial Disputes Act, interim protection may be required and necessary against sale, transfer and creation of third party interest in respect of the capital assets and immoveable properties. The Supreme Court has already granted stay of alienation and creation of third party interest of capital assets belonging to and owned by the third respondent. However, the third respondent has already transferred most of its assets to its subsidiaries and hence, protection and restraint orders are required against the subsidiaries. The statute, be it the Companies Act or the IBC, does give primacy to the claims of ex-workmen/workmen. There is urgency and need for determining and deciding the claim and issues raised by ex-workmen/workmen given the fact that the third respondent has transferred and alienated capital assets and immoveable properties to third persons and subsidiary companies, which in turn have again transferred their assets to third persons. There are allegations that true and full transfer considerations have not been recorded and accounted for in the books. The allegation is denied, albeit this issue and contention has to be examined and decided on merits to form a firm and final opinion. This adjudication is to be made in proceedings in accordance with law etc. At present, the question of locus and appropriate jurisdiction/forum having jurisdiction is pending consideration before the Supreme Court, in this writ petition, before the NCLT and also before NCLAT. The writ petition is disposed of in view of the statement made by the counsel for the petitioner, who seeks permission to withdraw the present writ petition with liberty to approach the Supreme Court. In the meanwhile, the statements made by the counsel for the respondent Nos.4, 9 and 10 would continue to operate and apply. These respondents would abide by the statements made for a period of twenty one (21) days from 2nd November, 2018. We are also inclined to extend the stay order restraining the subsidiaries of the third respondent from alienating, transferring or creating third party interests in respect of the capital assets for a period of 21 days from 2nd November, 2018.

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• 2018 (12) TMI 653
  Upfront payment of at least one third of the total payment to the Financial Creditors as per the approved Resolution Plan - Resolution Applicant not infused any funds into the company despite the Resolution Plan contemplation - Held that:- If at all this company is to be saved from falling into the liquidation, it is very much essential on the part of the Resolution Applicant to deposit the amount as prayed by the Resolution Professional, therefore, this Bench hereby directs the Resolution Applicant to deposit, within five days from hereof, an amount of Rs. 334 Crores, which is one third of payment that has to be paid to the financial creditors into the Corporate Debtor Account which will lie in Escrow as Security for performance of the obligations of the Respondents in implementing the approved Resolution Plan and will be adjusted against the total payment of Rs. 1060crore to be paid by R1 within 30 days from 17.09.2018 as per the Resolution Plan, or else, the RP is at liberty to take up further course of action in accordance with law.

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• 2018 (12) TMI 652
  Initiation of Corporate Insolvency Resolution Process - territorial and the derivative/contingent jurisdiction vested with NCLT u/s. 60(4) of the Code to initiate insolvency/bankruptcy proceedings against Persona Guarantors (individuals), arrogates subject matter jurisdiction having regard to proceedings against individuals (in this case personal guarantors) supposed to be conferred upon DRT and then to be vested in NCLT on the footing that CIRP against the corporate debtor/principal borrower pending before this NCLT - Held that:- As to insolvency proceeding either under Presidency Towns Insolvency Act or under the Provincial Insolvency Act, the jurisdiction is conferred upon a Civil Court and the same is still in force, in case this Bench initiates insolvency proceedings under any of the insolvency Acts aforementioned, it will become nothing but usurpation into the jurisdiction of some other forum. Whenever any judgment is read and the ratio is culled out from the judgment, every sentence of the judgment has to be read in the context of the remaining portion of the judgment, reader shall not fork out a sentence, and spin another story disregarding the ratio decided and the context of that sentence, which is not the spirit of understanding the ratio of a judgment. Moreover as to jurisdiction is concerned, no court will confer jurisdiction upon somebody to whom legislature has not given such jurisdiction, moreover judges declare law, they do not make law. Therefore if the sentence referred by the Applicant Counsel from the judgement of Honourable Supreme Court is read along with the remaining portion of the judgment, it would be clear to understand that the Honourable Supreme Court has not held that the parties can initiate insolvency proceedings against personal guarantors before NCLT under either Presidency Towns Insolvency Act or Provincial Insolvency Act. As I said earlier, in the judgment supra, the Hon'ble Supreme Court has only held that actions against the personal guarantors are not covered by moratorium granted under Section 14 of the Code. In view of the reasons, we have not found any merit in the applications, henceforth these Applications are dismissed as misconceived

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