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TMI Tax Updates - e-Newsletter
December 15, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
GST - States
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S.O. 196 - dated
11-12-2020
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Bihar SGST
Amendment in Notification No. S.O. 110, dated the 6th May, 2020
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S.O. 195 - dated
11-12-2020
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Bihar SGST
Seeks to notify special procedure for making payment of 35% as tax liability in first two month
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S.O. 194 - dated
11-12-2020
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Bihar SGST
Seeks to notify class of persons under proviso to section 39(1)
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CCT/26-2/2018-19/67/1984 - dated
10-12-2020
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Goa SGST
Amendment in Notification No. CCT/26-2/2017-18/2/1241, dated 30th June, 2017
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61/2020 - STATE TAX - dated
7-12-2020
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Jharkhand SGST
Amendment in Notification No. 13/2020 – State Tax, dated the 25th June, 2020
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60/2020 – STATE TAX - dated
7-12-2020
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Jharkhand SGST
Jharkhand Goods and Services Tax (Ninth Amendment) Rules, 2020
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59/2020 – State Tax - dated
7-12-2020
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Jharkhand SGST
Amendment in Notification No. 21/2019- State Tax, dated the 28th June, 2019
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04/2020 – STATE TAX (RATE) - dated
7-12-2020
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Jharkhand SGST
Amendment in Notification No. 12/2017- State Tax (Rate), dated the 29th June, 2017
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32713- FIN-CT1-TAX-0002/2020 - dated
9-12-2020
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Orissa SGST
Notification to waive penalty payable for non-compliance of the provisions of notification No. 10654 dated 31.03.2020 bearing S.R.O. No. 91/2020
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952-F.T. - dated
7-12-2020
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West Bengal SGST
Seeks to waive penalty payable for noncompliance of the provisions of notification No. 442-F.T., dated the 3rd April, 2020 regarding QR Code.
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Profiteering - Restaurant Services - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of the CGST Act, 2017 - Respondent had increased the base prices of the items supplied by him to neutralise the effect of ITC of 9.11% which was not available to him after the rate reduction w.e.f. 15.11.2017. - Respondent had increased the average output taxable value i.e. the base price by 10.45% to offset the denial of input tax credit of 9.11% - the Respondent liable for profiteering under Section 171 (1) of the above Act and directed him to deposit the profiteered amount vide order dated 16.11.2018. - The time limit prescribed under Rule 133 (1) is not mandatory and it is only directory. - NAPA
Income Tax
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Addition made under the head claims, receivables, debts, shortages etc. written off - the coal is not an evaporated item, rather it is solid items for which, the quantity dispatched from the weighbridge at the loading point should be received with the same weight at the weighbridge of the destination point. As per our considered opinion and looking to the facts of the case, the assessee must have claimed to the responsible transporters which is lack in this case - The supplier of the coal is also government of India enterprises, therefore, there should not be any difference in the supply of coal. therefore, the ld. CIT(A) is not justified deleting the addition made by the AO. - AT
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TP Adjustment - interest on outstanding receivables - The realization of invoices were made with abnormal delay. This, in our considered opinion, tantamount to indirect funding made by the assessee to its AEs by allowing the AE to utilize funds of the assessee as per its whims and fancies. Merely because the assessee is a debt free company, it cannot allow its funds to be utilized by its AE for an indefinite period of time beyond the agreed credit period. - the outstanding receivables from AE constitute a separate international transaction and on which interest is to be imputed thereon and consequently ALP adjustment to be made. - AT
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Exemption u/s 11 - applicant society has been established and registered abroad under the religious educational and charitable institution Act of 1861 in Australia and has not been registered in India - application filed under section 12AA and 80G for grant of registration, which was rejected - Assessee could not show any change in the objects of the society, any change in the source of establishment of the society and also could not controvert that the activities of the society are still being controlled by the head office located at abroad in Australia. - Order of rejection confirmed - AT
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Revision u/s 263 - Since the assessment has already been set aside and the AO has been directed by the ld PCIT to re-frame it afresh after giving opportunity to the Assessee and after considering assessee’s explanation and all relevant material in accordance with law, therefore, we agree with the CIT and in our opinion, no interference is called for in the order of ld Pr. CIT. - AT
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Contingent liability - provision for software expenses - the accounts of the assessee have been audited by the statutory auditors and they did not find any fault with the quantum of provision for software expenses created by the assessee. Hence it is not a case that there was no basis for creating the Provision for software purchases. - claim of expenditure allowed - AT
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Validity of Search and seizure action - The Court can examine whether the reasons to believe have a rational connection or are relevant bearing to the formation of such belief, and are not extraneous or irrelevant to the purpose of the Section. But, as at the Court cannot sit in appeal or test the adequacy of the opinion formed by the Assessing Officer under Section 132 - having regard to the settled legal position on the subject, we are of the view that the action initiated by the Respondents under Section 132(1) of the Act qua the Petitioners does not call for any interference by this Court. - HC
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TDS liabiity on Award and decree passed by Motor Accident Claim Tribunal - Learned Judge has lost sight of the fact that the deceased left behind him five legal representatives when he passed away. The amount has to be distributed amongst all the five of them and it cannot be that the income tax would be payable on the total sum amount awarded. - the amount of compensation will have to be divided between the persons who got money and this amount has to be spread over to the coming years. It is not one time income to them. It is compensation spread over as per the system prevailing. - HC
Customs
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Permission for clearance of light melting scrap - The relief sought for in this writ petition cannot be granted by this Court as he seeks for a positive direction. It is for the respondent to consider the request of the petitioner to segregate the PET bottles from light melting scrap, which was imported by the petitioner - HC
Corporate Law
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Deactivation of DIN of the Directors - The RoC is directed to, reactivate the DIN of the Director forthwith, by collecting fine/ penalty, if any, for the lapse of the Director. The Company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by Registrar of Companies within 30 days from the date on which the DIN of the director is reactivated - Tri
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Non-compliance of Section 203 of a whole-time Company Secretary - The petitioners have been permitted to file e-form ACTIVE, INC-22A without insisting the appointment of a whole-time Company Secretary, on a provisional basis - It is evident that the petitioner-Companies have not adhered to the provisions of the Companies Act, especially Section 203 thereof. In such circumstances, the respondents (UOI/ROC) are empowered to proceed against the petitioner-Companies, in accordance with law. - HC
IBC
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Initiation of CIRP - Section 10(4)(b) of IBC, 2016 contemplates that this Adjudicating Authority has the right to reject the Application if it is incomplete. As already stated supra, inspite of opportunity being granted, the Form - VI as filed by the Applicant is incomplete in all respects. Further, this Adjudicating Authority also cannot pass an order of CIRP as against M/s. Prithviraj Spinning Mills Private Limited since the name of the Company is not in existence as on date. - Tri
Case Laws:
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GST
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2020 (12) TMI 487
Profiteering - Restaurant Services - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- The Respondent is a company registered under the Companies Act, 1956 and is engaged in the business of operating quick service restaurants under the brand name of Mcdonalds under a franchisee agreement with the multi-national company Mcdonalds India Private Limited. The Respondent is operating about 300 restaurants in the 10 States of Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Tamilnadu and Telangana. He was selling 1844 products as on 15.11.2017 when the rate of GST on the restaurant services being provided by him was reduced from 18% to 5% by the Central and the State Governments vide Notification No. 26/2017-Central Tax (Rate) dated 14.11.2017 with the stipulation that the Respondent would not be entitled to the benefit of ITC on the above service w.e.f. 15.11.2017. Accordingly, the Respondent was required to pass on the benefit of tax reduction to his recipients as per the provisions of Section 171 of the CGST Act, 2017 and its consequences if he did not pass on the benefit. On the basis of the analysis of the details of the product-wise outward taxable supplies made during the period between 15.11.2017 to31.01.2018, the DGAP had found that the Respondent had increased the base prices of the items supplied by him to neutralise the effect of ITC of 9.11% which was not available to him after the rate reduction w.e.f. 15.11.2017. The DGAP had compared the pre and post GST rate reduction average prices of the items sold during the period between 15.11.2017 to 31.01.2018 and after taking into account the entire quantity of the products sold during the above period, he had found that the Respondent had increased the average output taxable value i.e. the base price by 10.45% to offset the denial of input tax credit of 9.11% as was evident from Annexure-36 of the Report. Therefore, the DGAP had concluded that the Respondent had not passed on the benefit of reduction in the rate of tax from 18% to 5% as he had increased the base prices by more than 9.11% to 100.09% in respect of 1,730 items out of total 1,844 items i.e. 93.82% of the total items supplied by him after 15.11.2017. The DGAP had also stated that on the basis of the pre and post reduction GST rates, the impact of the denial of ITC and the details of the outward supplies made during the period between 15.11.2017 to 31.01.2018, as per the GSTR-I or GSTR-3B Returns of the Respondent, the amount of net higher sale realization due to increase in the base prices of the products, despite the reduction in the GST rate from 18% to 5%, with denial of ITC, the profiteered amount came to Rs. in respect of the above 10 States as per Annexures-37 of the Report. Accordingly, after careful consideration of the Report of the DGAP and the submissions of the Respondent, this Authority had held the Respondent liable for profiteering under Section 171 (1) of the above Act and directed him to deposit the profiteered amount vide order dated 16.11.2018. The time limit prescribed under Rule 133 (1) is not mandatory and it is only directory. Therefore, the contention of the Respondent that Notification No. 31/2019-Central Tax dated 28 June 2019 which extended time from 3 months to 6 months by amending the Rule 133 (1) would become redundant is untenable. Also, no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of tax reduction and computation of the profiteered amount. This Authority was under no obligation to provide the same to the Respondent. The Respondent cannot deny the benefit of tax reduction to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. The Respondent cannot claim violation of Article 14 on the ground that he has not been allowed to include his costs in the prices on the date of reduction in the rate of tax as such a claim would be against the provisions of Section 171 (1). The Respondent had enough time from 01.07.2017 to 14.11.2017 to increase his prices due to increase in his cost however, sudden increase in his cost on 15.11.2017 is a deliberate attempt not to pass on the benefit of tax reduction and appropriate the amount of benefit. Therefore, the above contention of the Respondent is not maintainable. There are several statutory bodies which exercise quasi-judicial functions but they are not required to be composed of Judicial Members. There is no Judicial Member in the SEBI which has been constituted under the Securities and Exchange Board of India Act, 1992. Neither the statute nor any decision of the Court requires the SEBI to be composed of a Judicial Member simply because it also performs quasi-judicial functions under the Act apart from its other roles - the TRAI which also performs quasi-judicial functions has been constituted under the Telecom Regulatory Authority Act, 1997 but does not have a Judicial Member. Section 3 of the said Act provides for the composition of the Authority. Again, the Medical Council of India has been constituted under the Indian Medical Council Act, 1956. The various disciplinary powers which it exercises under the Act can be said to be quasi-judicial in nature but it does not require a Judicial Member in its Council. The constitution and composition of the Council is provided in Section 3 of the said Act. The Institute of Chartered Accountants of India has been constituted under the Chartered Accountants Act, 1949. The ICAI also exercises quasi-judicial functions over its registered members and can pass orders which have far reaching consequences affecting the rights of Chartered Accountants but even its composition does not require a Judicial Member s presence. Its composition is provided in Section 9(2) of the above Act and the same does not include a mandatory Judicial Member. Similarly, the Assessing Officers, Commissioners of Appeal under the Income Tax Act, 1961 and the CGST Act, 2017, the Authorities on Advance Rulings under both the above Acts and the Dispute Resolution Panel under the Income Tax Act, 1961 all perform quasi- judicial functions but there is no requirement that such persons who must be possessing either a law degree or have had judicial experience. Such a requirement is not only impractical but would also render several statutory authorities unworkable - it can be concluded that this Authority has not having replaced any Courts, cannot be equated to a Court or a Tribunal and hence the mandate of having a Judicial Member cannot be said to apply to this Authority. The benefits of tax reduction and ITC are to be passed on by each registered person by commensurate reduction in prices on each supply to every recipient and this Authority is empowered to examine whether these benefits have been passed on or not. To assist this Authority while making such examination an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules. The Respondent has further stated that the DGAP has wrongly computed the amount of profiteering. The Respondent has computed the net incremental revenue as 9.43% on the Restaurant service by comparing the revenue at the pre rate change prices and the post rate change prices after reducing the incremental costs from it. In this regard it can be noted that in case the incremental revenue is taken to be 9.43% then it is more than the denial of ITC of 9.11% and hence the Respondent has profit margin of 0.32% as per his own admission which proves that he has profiteered to the extent of 0.32%. Therefore, the Respondent cannot claim that he was not required to pass on the benefit of tax reduction. Power to frame methodology and procedure is generally and widely available to all the judicial, quasi-judicial and other statutory bodies and no favour has been shown to this Authority by granting it power to frame its own methodology and procedure under Rule 126. Such a power has been conferred on the GST Tribunal under Section 111 (1) of the CGST Act, 2017 and the Competition Commission under Section 36 of the Competition Act, 2002. This Authority has similarly framed its methodology and procedure under Rule 126 vide Notification dated 28.03.2018. The Respondent does not have the power of legislature to frame the methodology and procedure and hence any such methodology and procedure suggested by him cannot be accepted being illogical, arbitrary, inequitable and being ultra vires of Section 171 and Article 14 of the Constitution. The Respondent had wrongly claimed that he had passed on the benefit at the entity level whereas the evidence on record shows otherwise. The Respondent is liable to pass on the benefit of GST rate reduction from 18% to 5% with denial of benefit of ITC, as was notified by the Central and the State Governments vide Notification No. 41/2017-Central tax (Rate) dated 14.11.2017 w.e.f. 15.11.2017. It is also established that the Respondent has not passed on the benefit of above tax reduction to his customers in terms of Section 171 (1) w.e.f. 15.11.2017 to 31.01.2018. On the basis of the pre rate reduction GST rate of 18% and the post rate reduction GST rate of 5% with denial of ITC of 9.11% of the turnover and the details of the product wise supplies made during the period from 15.11.2017 to 31.01.2018, as have been supplied by the Respondent himself, the amount of net higher sales realization due to increase in the base prices of the impacted products after comparing the average pre and post rate reduction prices of the products, despite the reduction in the GST rate from 18% to 5% or the profiteered amount is determined as ₹ 7,49.27,786/- as per the provisions of Section 171(1) (2) of the CGST Act, 2017 read with Rule 133 (1) of the CGST Rules, 2017. Penalty - HELD THAT:- The Respondent has denied benefit of rate reduction to the buyers of his products in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 15.11.2017 to 31.01.2018 and therefore, he is apparently liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01 2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 15.11 2017 to 31.01.2018 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively - notice for imposition of penalty is not required to be issued to the Respondents.
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2020 (12) TMI 485
Provisional attachment of the bank accounts - Section 83 of the Gujarat Goods and Services Tax Act - HELD THAT:- By way of an interim order, it is directed that the provisional attachment of the cash credit account referred to above maintained with the AMCO Bank, Ahmedabad, shall no longer operate. The provisional attachment is ordered to be lifted. The AMCO Bank shall permit the writ applicant to operate the Cash Credit Account. So far as other two accounts maintained with HDFC Bank Ltd. are concerned, appropriate order shall be passed on the next date of hearing. Let Notice be issued to the respondents, returnable on 23.12.2020. No further notice now be issued to the respondents as Mr. Chintan Dave, the learned AGP has already entered his appearance.
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2020 (12) TMI 482
Maintainability of appeal - alternative remedy of petition - Assessment of GST - HELD THAT:- This Court disposes of the instant writ petition, with a direction to the writ petitioner, to, avail the statutory remedy of its appealing against the orders of assessment. Further more, it is also directed that the bank concerned shall forthwith release into the accounts of the statutory authority concerned, 10% of the disputed sums of tax. Further more, it is also directed that the writ petitioner shall deposit the entire quantum of admitted liabilities towards tax, before the statutory authority concerned, in contemporaneity, of, its maintaining the statutory appeal. It is open for the writ petitioner, to, agitate before the statutory authority concerned, the validity of the order, if any, made orally or in writing, to the Bank concerned, and, wherethrough the bank(s) account of the writ petitioner stand(s) frozen, for therethroughs hence ensuring realizations of sums of tax determined against it, under the afore Annexures - Petition disposed off.
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2020 (12) TMI 476
Status of Rule 117 of the CGST Rules - whether it is intra vires or it is ultra vires or if it could be read down which issue is engaging the attention of the Supreme Court in UNION OF INDIA VERSUS BRAND EQUITY TREATIES LIMITED AND ORS. ETC. ETC. [ 2020 (6) TMI 517 - SC ORDER] ? HELD THAT:- Let this group of matters be listed after the judgment of the Supreme court in UNION OF INDIA VERSUS BRAND EQUITY TREATIES LIMITED AND ORS. ETC. ETC. [ 2020 (6) TMI 517 - SC ORDER] as also M/S SIDDHARTH ENTERPRISES THROUGH PARTNER MAHESH LILADHAR TIBDEWAL VERSUS THE NODAL OFFICER [ 2019 (9) TMI 319 - GUJARAT HIGH COURT] , upon appropriate application being filed by either of the parties.
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Income Tax
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2020 (12) TMI 489
Refund claim - Officer feels sorry that TDS was deducted as they were under the impression that the amount has to be counted in this year - HELD THAT:- The litigation is of the year 2005. The appeal has to be spread over these 20 years as petition was numbered. The petitioner may file a refund application, which shall be considered on merit by the Income-tax department as prima facie TDS should not have been deducted. It is observed that in future the Officer shall be more vigil. This Court cannot pass order of release as the lis is over between the parties before the court concerned. The Tribunal shall release the amount. It is conveyed to this Court that the Tribunal has passed orders whereby the entire amount is kept in Fixed Deposit. The petitioners are not illiterate people. Hence, as per the judgment of the Apex Court in A.V. Padma others Vs. R.Venugopal and others, [ 2012 (1) TMI 389 - SUPREME COURT ] no amount be kept in FD as the appeals are now over. The application is allowed.
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2020 (12) TMI 488
Disallowance of interest on disputed Govt. duty (Electricity Duty and water charges) - AO in the assessment order stated that the payments of interest on such dispute of electricity duty and water charges are not ascertained liabilities hence not allowable as business expenditure - HELD THAT:- As decided in own case[ 2019 (10) TMI 124 - ITAT CUTTACK] we direct the AO to delete the disallowance made on account of interest on disputed Govt. duty (Electricity duty and Water Charges. Increasing the additions/disallowance under Peripheral Development Expenses - expenses not incurred wholly and exclusively for the business purpose and disallowed the claim - HELD THAT:- AR referred to the paper book and submitted that assessee has complete information of the expenditure incurred in peripheral area of various districts and the area includes Taluka and villages where company's activities are carried out and this expenditure is incurred on the order of the Government of Odisha. It is wholly and exclusively used for the purpose of business. AR referred to the nature of the expenditure incurred through the corporate office at Bhubaneswar and further submitted that the assessee has evidence to prove the claim. Considering the above facts and submission put forth by the ld. AR and findings recorded by the CIT(A) in details, it would be pertinent to reconsider the matter at the level of AO. Therefore, the issue is remitted back to the file of Assessing Officer for re-examination and the assessee is also given liberty to produce supporting evidence with regard to peripheral expenditure before the AO. Also assessee has taken alternative plea before the CIT(A) that if the peripheral development expenses incurred in the corporate office are not allowed as not incurred for the purpose of business, then it should be allowed the benefit u/s. 80G of the Act for the donations included in the peripheral development expenses which are eligible for such deduction. In this regard, we direct the AO to considering the above alternative plea of the assessee on production of supporting documents. Disallowance u/s. 40(a)(i) - assessee failed to make TDS from the payment in foreign currency - HELD THAT:- we are of the opinion that the matter needs to be examined by the AO and, thus we remit this issue to the file of the AO to examine as to whether the assessee has deducted appropriate TDS from the payment in foreign currency as per Section 195 read with Section 9(1)(i) and 9 (1)(ii) of the Income Tax Act, 1961. In this regard, the assessee is directed to submit the relevant documents relating to foreign remittance and TDS and cooperate with the AO for early disposal of the case. Needless to say, the assessee shall be provided a reasonable opportunity of being heard. Disallowance of provision for Leave Encashment u/s. 43B(f) - AO observed that the provision for leave encashment has not been added back to the income as per the provisions of Section 43B ad added the unpaid liabilities to the total income of the assessee - HELD THAT:- As relying on assessee own case [ 2019 (10) TMI 124 - ITAT CUTTACK] we remit the issue to the file of AO to examine and allow the claim of the assessee as per Section 43B(f) of the Act in terms of the observations made by the Hon'ble Supreme Court in the case of Exide Industries Ltd [ 2020 (4) TMI 792 - SUPREME COURT] i n this regard. Additional Depreciation u/s. 32(i)(iia) - AO disallowed the claim on account of the fact that the assessee could not produce the particulars/details of actual cost during the course of assessment proceedings - HELD THAT:- CIT(A) has already remitted the issue to the file of AO to allow the claim of the assessee after verification of necessary details. Therefore, any order/direction by us, at this stage, on this issue, would be futile exercise. However, a reasonable order is expected from the AO on the above observations of CIT(A). Thus, groundis allowed for statistical purposes. Disallowance u/s. 43B of the Act-Under 'Electricity Duty' water charges - HELD THAT:- We find that the liability under the provisions of Section 43B of the Act disallowed by the AO has already been decided by the coordinate bench of the Tribunal in assessee's own case and matter is pending before the Hon'ble High Court - Respectfully following the decision of the coordinate bench of the Tribunal in assessee's own case for earlier year, we dismiss the ground of assessee. Disallowance of the loss claimed on account of re-valuation of non-moving stores and spares - HELD THAT:- We found that the Tribunal in assessee's own case [ 2019 (10) TMI 124 - ITAT CUTTACK] has already decided the issue against the Revenue confirming the observations made by the CIT(A) thereby deleting the addition made on account of loss on revaluation of non-moving stores and spares. TDS u/s 194I - Non deduction of TDS on the payment to GRIDCO - HELD THAT:- CIT(A) has decided the issue and deleted the addition made by the AO u/s. 40(a)(ia) of the Act considering the decision of coordinate bench of the Tribunal in the case of GRIDCO [ 2011 (11) TMI 77 - ITAT, CUTTACK ] , Madhyanchal Vidyut Vitran Nagam Ltd { 2015 (5) TMI 788 - ITAT LUCKNOW} and the case of Maharashtra State Electricity Distribution Co. Ltd. [ 2015 (5) TMI 396 - BOMBAY HIGH COURT] wherein held that no tax is deductible u/s. 1941 in the case of payment for wheeling or transmission charges. Addition made under the head claims, receivables, debts, shortages etc. written off - HELD THAT:- Assessee has purchased coal from Mahanadi Coal Field Limited which is Government of India Enterprises and the assessee after purchasing coal it is transported upto the destination where the coal measurements are taken by the assessee and shortages are also properly recorded but the CIT(A) has not observed as to whether the shortage are claimed by the assessee to the transporters and without examining the above facts the CIT(A) deleted the addition made by the AO, which in our opinion is not plausible The assessee has just explained before us that the shortage of coal worked out to 0.498% of the total coal purchased and simply accepted that the above percentage of shortage is very reasonable nor the auditors have made any adverse comments. Stating this fact, the assessee company has kept itself mum. It is also a fact that the coal is not an evaporated item, rather it is solid items for which, the quantity dispatched from the weighbridge at the loading point should be received with the same weight at the weighbridge of the destination point. As per our considered opinion and looking to the facts of the case, the assessee must have claimed to the responsible transporters which is lack in this case - The supplier of the coal is also government of India enterprises, therefore, there should not be any difference in the supply of coal. therefore, the ld. CIT(A) is not justified deleting the addition made by the AO. Disallowance of claim of investment allowance u/s. 32AC - HELD THAT:- As per our considered opinion, this new incentive section have been inserted in the Income Tax Act to encourage substantially investment in plant and machinery which will result in a increased capital flow to the manufacturing sector for acquired and installed during the period from 01.04.2013 to 31.03.2015. While introducing this section the decision of Hon'ble coordinate bench of ITAT Delhi in case of International Cars Motors Ltd. [ 2013 (2) TMI 347 - ITAT DELHI] - Respectfully following the above decision of the Tribunal, and the commentaries of the Finance Act as reproduced hereinabove, we think it fit to send back to the file of AO for re-examination of the claim made by the assessee u/s. 32AC of the I.T. Act after considering the above commentaries of the Finance Act and the decision of the coordinate bench of the Tribunal.
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2020 (12) TMI 483
TDS liabiity on Award and decree passed by Motor Accident Claim Tribuna l - Whether Insurance Company could not also have deducted the amount of income tax which has been deducted by the Tribunal on its own? - HELD THAT:- When the Income Tax Act and the decisions referred hereinabove do not permit the Insurance Company to deduct TDS, could the Tribunal deduct what is known as tax on the compensation. With utmost respect, the answer is same cannot be. Tax has to be levied each yea Compensation is awarded in lump sum which has to be spread over as it was an aggregate amount. Income even if we consider apart from the interest, it has to be spread over relevant financial year from the period when the amount would accrue. The claimants normally are not given the entire amount and are subjected to deposit the amount. The amount awarded by the Tribunal cannot be subjected to tax on the flat rate as decided by the Tribunal. The legislation being a social welfare legislation and in fact there is no conflict between the social welfare legislation and tax legislation even if there is conflict the social welfare legislation would prevail as it would subserve larger public interest. Learned Judge has lost sight of the fact that the deceased left behind him five legal representatives when he passed away. The amount has to be distributed amongst all the five of them and it cannot be that the income tax would be payable on the total sum amount awarded. Even if we look at the order, amounts are bifurcated which goes to show that the amounts are again kept in fixed deposits. In that view of the matter, the amount of compensation will have to be divided between the persons who got money and this amount has to be spread over to the coming years. It is not one time income to them. It is compensation spread over as per the system prevailing. The amount cannot, therefore, be held to be income in one particular year, namely, 2019 when the award came to be passed even if we consider that the period during which the matter remained pending before the Tribunal, the amount has to be bifurcated amongst the legal heirs. Thereafter, the Income Tax Department will have to consider the slabs as they are applicable. Fresh decree will be drawn by the Tribunal on receipt of the order of this Court. The Insurance Company, if has not deposited the amount as of yet despite the order dated 23.11.2019, shall immediately deposit the entire amount. It goes without saying that no TDS shall be deducted in view of New India Assurance Co. Ltd. Vs. Hussain Babulal Shaikh and others [ 2017 (4) TMI 183 - BOMBAY HIGH COURT]
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2020 (12) TMI 481
Validity of Search and seizure action - No acceptable explanation in respect of the valuables kept in the locker - search operations of the Primary Persons - whether Competent Authority did not apply its mind while issuing the impugned WoA against the Petitioners or in conducting the search? - Whether petition is barred by delay and laches? - HELD THAT:- The undisputed fact is that the present petitions are predicated on the search action which served as a cause of action for the Petitioners to file the present petition. There is no convincing explanation for the delay, nevertheless, since we have extensively heard the arguments on the merits of the case, we are not inclined accept the preliminary objection raised by the Revenue Warrant of Authorization - whether impugned warrant is issued u/s 132(1) OR 132(1A) - Revenue thus suspected that the Petitioner s Premises was a location where undisclosed income/assets/documents/other incriminating evidence relating to the Kochar Group was likely to be found - HELD THAT:- In the case of the Petitioner, as explained above, the WoA u/s 132(1) in the case of Kochar Group pertained to the Petitioner s Premises wherein the Issuing Authority had reasons to suspect that the undisclosed income, books of account and documents of the Kochar Group were kept or to be found. Accordingly, the search and seizure under Section 132(1) in respect of the Kochar Group was carried out at the premises of Vikas Chowdhary on 06.02.2019.Also perused the WoAs issued by Respondent No. 2 under which the searches were initiated. As shown to us, both have been issued in Form No. 45, under Section 132 r/w Rule 112(1) of the Income Tax Rules 1962. WoA No. 7257 dated 05.02.2019 was issued to the Primary Persons i.e. the Kochar Group, and was in respect of the Petitioner s Premises. WoA No. 7275 dated 12.02.2019 was issued to the Petitioners Shilpa and Vikas Chowdhary, and was in respect of their Locker No. 150F. Thus, the distinction sought to be drawn by Mr. Shrivastava is wholly irrelevant. Further the assumption and contention that, since Vikas Chowdhary was not the searched person under the WoA dated 05.02.2019, his premises could only be searched under Section 132(1A) of the Act, is entirely misconceived and is rejected. Validity of search carried out at the Petitioner s Premises - declaration that the search and seizure, conducted on them is illegal, void and without authority of law, and the exercise is without jurisdiction - HELD THAT:- The search action between 06.02.2019 to 09.02.2019, was therefore, not against the Petitioners but against the Primary Persons. The Petitioner s Premises was searched not for Vikas or Shilpa Chowdhary s income/books of account/etc., but for the books of accounts/documents/money/bullion/jewellery/etc. belonging to the Primary Persons who were the subject of the search. The Respondents, on physical surveillance, observed movement of cash from the Petitioner s Premises by motorcycle borne couriers. Therefore, the premises was identified to likely have incriminating evidence. The connection and link between the persons subjected to search (i.e. the Primary Persons) and the Petitioner s Premises was thus established. We cannot ignore the fact that documents/articles/valuables etc. belonging to Primary Persons can be kept with third parties and concealed anywhere in different places and locations - authorised officer can subject any such premises to search if there are reasons to suspect that such location could be accommodating such document/articles/valuables, etc . Therefore, the jurisdictional precondition or the threshold for justifying such action qua the premises, was satisfied. As argued that such an action is unlawful, however the entire premise of the Petitioner s case is essentially founded on the plea that such action qua the Petitioners was under Section 132(1A) and not under Section 132(1) - This factual affirmation is incorrect and has been clarified for the reasons stated hereinafter. Thus, there is no credible foundation laid out by the Petitioners to challenge such an action. Even otherwise, this action of search and the consequences thereof are qua the Primary Persons i.e. the Kochar Group. Petitioners have no locus to challenge the same and we are not concerned with this search and consequent proceedings against the Kochar Group. Validity of search action under WOA - The satisfaction arrived at by the authority meets the conditions stipulated in Clauses (b) / (c) of Section 132(1) of the Act. The factual background noted above demonstrates that the impugned WoA against the Petitioners has been issued not merely on the ground of recovery of locker key, as Mr. Srivastava has sought to project. The formation of belief by the authorities is also based on the statements of the Petitioners. The officers made an attempt to ascertain and verify the facts, post the discovery of the locker key. The satisfaction note also records that Petitioners were asked to furnish details of the contents of the locker, but did not provide satisfactory explanation. In these circumstances, we believe that the Revenue was well within its right to proceed to search the Petitioner s locker under section 132(1). Court to not evaluate the adequacy of reason to believe - foundation for having reasons to believe in terms of the statute - The principle, as reiterated time and again by the Courts, necessary to be borne in mind is that the words reason to believe mean that the reason should exist. The existence of such a belief can be challenged by the assessee, but not its sufficiency. The Court can examine whether the reasons to believe have a rational connection or are relevant bearing to the formation of such belief, and are not extraneous or irrelevant to the purpose of the Section. But, as at the Court cannot sit in appeal or test the adequacy of the opinion formed by the Assessing Officer under Section 132 - having regard to the settled legal position on the subject, we are of the view that the action initiated by the Respondents under Section 132(1) of the Act qua the Petitioners does not call for any interference by this Court. Shah-E-Naaz Judge judgment reliance [ 2019 (7) TMI 1502 - DELHI HIGH COURT] - Revenue contended that the consequential WoA dated 27.06.2014 issued to inspect the Petitioner s lockers, was issued by under Section 132(1A) or under Section 132(1)(i) - Petitioners, under their statements on oath failed to provide acceptable explanation in respect of the valuables kept in the said locker. And as the proceeding is under a new and separate WoA in the case of the Petitioners where they are the party being searched, and not a consequential warrant issued during the search operations of the Primary Persons, therefore any business connection, link and association between the petitioners and the primary search party is prima facie not required to be established. Thus, the said case is distinguishable on facts and does not assist the case of the Petitioner.
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2020 (12) TMI 470
Deduction u/s 10A - whether expenses that were reduced from export turnover should also be reduced from the total turnover or not? - HELD THAT:- CIT(A) allowed the claim of the assessee by following the decision rendered in the case of CIT Vs. Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] upheld by HCL TECHNOLOGIES LTD. [ 2018 (5) TMI 357 - SUPREME COURT] held when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from export turnover must also be excluded from total turnover , since one of the components of total'. Disallowance of provision towards software expenses - above said amount included provision for software expenses - whether the provision for software expenses is a contingent liability or not? - addition u/s 40(a)(i) of the Act for non-deduction of tax at source - HELD THAT:- There is no dispute with regard to the fact that the assessee is following mercantile system of accounting. The assessee being a company, it is required to follow accounting standards prescribed by ICAI and also by the Central Government under the Income Tax Act. As per accounting standard-1 prescribed by the Central Government, the assessee is required to make provision for all known liabilities and losses even though the amount cannot be determined with certainty. Assessee has explained the basis for creating the provision for expenses. The Ld. A.R. also submitted that the accounts of the assessee have been audited by the statutory auditors and they did not find any fault with the quantum of provision for software expenses created by the assessee. Hence it is not a case that there was no basis for creating the Provision for software purchases. Accordingly, we are of the view that the provision for software expenses created by the assessee cannot be considered as contingent liability. Disallowance u/s 40(a)(i) is liable to be deleted for the year under consideration. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Disallowance of Software expenses u/s 40(a)(i) - HELD THAT:- Since the year under consideration falls prior to the date of decision rendered by Hon ble Karnataka High Court in the case of Samsung Electronics Ltd [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] following the decision rendered by the co-ordinate bench in the case of Infineon Technologies India Pvt. Ltd [ 2020 (8) TMI 808 - ITAT BANGALORE] we hold that no disallowance u/s 40(a)(i) is required to be made during the year under consideration. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Disallowance of software expenses treating the same as capital in nature - HELD THAT:- We notice that in the case of Toyota Kirloskar Motors (P) Ltd [ 2008 (9) TMI 254 - CESTAT BANGALORE] has held that, when the life of a computer or software is less than two years and the right to use it is for a limited period, the fee paid for acquisition of right is allowable as revenue expenditure and if the software is licensed for a particular period, fresh license fee is to be paid for utilizing it for subsequent years - Accordingly, we are of the view that the nature of software expenses, i.e., whether it is capital or revenue in nature, has to be determined by following the decision above - we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh.
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2020 (12) TMI 469
TP Adjustment - Comparable selection - HELD THAT:- As regards exclusion of comparables, the assessee has demonstrated that Accentia Technologies Ltd. and Fortune Infotech Ltd. both are functionally dissimilar to assessee s ITeS Segment. In fact in Accentia Technologies Ltd. there is an influence to the pricing policy because of its possession of Brand Value/IPRs. Accentia Technologies Ltd. has also made acquisition/amalgamation which depicts that the company had plans to grow through tie-ups and acquisitions of other companies. As regards to Fortune InfoTech Ltd., there is a product development element which cannot be compared to the assessee s functioning. Therefore, both comparables selected by the TPO i.e. Accentia Technologies Ltd. and Fortune InfoTech Ltd. should be excluded. We direct the TPO to exclude these two companies from the final set of comparables. As regards inclusion of R Systems International Ltd., this comparable company appears to be functionally comparable with the assessee company. The only point which TPO raised is related to different Financial Year ending. This cannot be the sole reason for rejecting any comparable.Therefore, we direct the TPO to include this comparable i.e. R Systems International Ltd. Accentia Technologies Ltd. and ICRA Online Ltd. (seg.) both are functionally dissimilar to assessee s ITeS Segment. In fact in Accentia Technologies Ltd. there is an influence to the pricing policy because of its possession of Brand Value/IPRs. Accentia Technologies Ltd. has also made acquisition/amalgamation which depicts that the company had plans to grow through tie-ups and acquisitions of other companies. As regards to ICRA Online Ltd. (seg.), this company is functionally different and has three segment in which TPO has taken into account outsourced service segment which cannot be compared to the assessee s functioning. Therefore, both comparables selected by the TPO i.e. Accentia Technologies Ltd. and ICRA Online Ltd. (seg.) Ltd. should be excluded. We direct the TPO to exclude these two companies from the final set of comparables. Jindal Intellicom Ltd. the Ld. AR pointed out that incorrect margin was taken by the TPO and prima facie it appears that the margin taken by the TPO is not proper. Therefore, we direct the TPO to take appropriate margin for taking this comparable i.e. Jindal Intellicom Ltd. in final list of comparables. Direct the TPO to include this comparable i.e. Microgenetics Systems Ltd.
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2020 (12) TMI 468
Revision u/s 263 - AO had not carried out any enquiry to verify three issues unsecured loan, rent paid to M/s. Kwality Confronts Pvt Ltd. and professional fees paid in excess of ₹ 20,000/- and that the submissions made by the assessee had been accepted by the AO without verification and proper enquiry - HELD THAT:- As regards to loan of ₹ 10,00,000/-, the ld Pr. CIT has observed that the assessee has failed to furnish the necessary details regarding the creditworthiness of the loan creditor and, the AO has overlooked this aspect while completing the assessment. From the ledger copy furnished by the assessee in its book, we observe that the assessee has shown closing balance of ₹ 10,00,000/- as on 31.3.2013, meaning thereby that the entire loan of ₹ 10,00,000/- has been refunded to the loan creditor. When the loan receiving and repaying is reflected in the assessee s book, the transaction between the assessee and loan creditor is proved. Hence, it cannot be said the AO has not enquired the matter. As regards to security deposit of ₹ 80,000/- and professional fees of ₹ 2,35,000/- towards cash payment, we observe that the AO has not made proper enquiry into the matter and, therefore, the Pr. CIT is justified in directing the AO to revise the assessment order. This omission by the AO tagged the impugned assessment order as erroneous and prejudicial to the interest of the revenue. Since the assessment has already been set aside and the AO has been directed by the ld PCIT to re-frame it afresh after giving opportunity to the Assessee and after considering assessee s explanation and all relevant material in accordance with law, therefore, we agree with the CIT and in our opinion, no interference is called for in the order of ld Pr. CIT. We dismiss the appeal filed by the assessee by upholding the order passed u/s 263. However, we may note that while passing the fresh assessment order, the AO should take into consideration the repayment of loan of ₹ 10,00,000/- by the assessee to the loan creditor, as is reflected in the ledger copy furnished by the assessee. Regarding other two addition, the AO will enquiry into the matter and pass order accordingly.
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2020 (12) TMI 467
Income from share transaction - short term capital gain OR business income - assessee maintains two separate accounts one for investment another for stock-in-trade - HELD THAT:- On hearing both the parties and considering the facts, we find that the need of honouring the entries in the books of account. No case is made out for disturbing the claim of the assessee. This is the case where only 55 transactions are involved and separate account for investment is maintained. Therefore, applying judgment in the case of Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - Therefore, in our view, the order of the CIT(A) is required to be reversed on this issue and in favour of the assessee. Accordingly, the ground raised by the assessee is allowed. Addition u/s 40(a)(ii) - Education Cess under Finance Act while computing the taxable income under normal provision of the IT Act. - HELD THAT:- From the legal perspective, the issue of education cess is an allowable expenditure as per provisions of Section 40(a)(ii). Deduction u/s.80IA(5) - wind mills located at Sangli and Dhule - HELD THAT:- In the case of Velayudhaswamy Spinning Mills (P) Ltd. [ 2010 (3) TMI 860 - MADRAS HIGH COURT] and held that the initial assessment year in respect to claim deduction u/s.80IA of the Act would mean the first year opted for by the assessee for claiming such deduction and is allowable for 10 years from the initial assessment year chosen by the assessee out of the 15 years beginning from the year in which undertaking commences the operations. It is settled law with regard to the claim of deduction u/s.80IA of the Act, initial assessment year to be considered would be the year in which the assessee first exercises his option to claim deduction u/s.80IA of the Act.
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2020 (12) TMI 466
Exemption u/s 11 - application filed under section 12AA and 80G for grant of registration, which was rejected - assessee society has been denying registration u/s.12A of the Act by observing that applicant society has been established and registered abroad under the religious educational and charitable institution Act of 1861 in Australia and has not been registered in India - HELD THAT:- As observed that the applicant society is controlled by head office located abroad and thus, having regard to the provisions of section 11(1) r.w.s 12A(a) of the Income tax Act, 1961 read with Rule 17A of the income tax Rules, 1962, the society is not eligible for desired certificate of registration u./s.12A(a) of the Act. Ld CIT (E) observed that since the applicant society is governed not in Indian Regulation and is subject to regulations under that of foreign Act in Australia, therefore, it is not permissible to grant necessary certificate sought u./s.12A(a) of the Act. From the copy of previous order dated 27.9.2013 passed by ld CIT (E) denying registration u/s.12A of the Act to the assessee society, it is ample clear that the assessee society was denied registration as application for grant of registration u/s.12A(a) was rejected Assessee could not show any change in the objects of the society, any change in the source of establishment of the society and also could not controvert that the activities of the society are still being controlled by the head office located at abroad in Australia. We also clearly observed that issue is covered by the decision of the Tribunal dated 13.6.2014 (supra) in favour of the revenue. Therefore, we have no alternative but to uphold the order of the ld CIT(E) denying registration u/s.12A of the Act. Appeal of the assessee society is dismissed.
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2020 (12) TMI 465
Penalty u/s 272A(2)(k) - Order was passed by the AO ex parte when nobody has appeared or attended the proceedings - payment and deduction of TDS in terms of Section 204 - assessee has challenged the validity of the order on the ground that the Principal of the college is not the responsible person against whom the AO has initiated the penalty proceedings and passed the impugned order but the Manager of the school is the person who is responsible for payments of salary and other dues to the employees as well as deduction of TDS - HELD THAT:- Delay / default in filing of TDS return is not attributable to the Principal of the college. Since this issue raised by the assessee in the additional ground is taken first time before the Tribunal and was not raised before the authorities below therefore, the relevant record on this aspect is required to be properly verified. Assessee has also sought to produce the additional evidence to show that the Manager of the college is the responsible officer under section 204 of the Income Tax Act. It is pertinent to note that when the assessee has not appeared before the AO and allowed the impugned order to be passed under section u/s 272A(2)(k) of the Income Tax Act and thereafter the appeals of the assessee were also dismissed by the CIT(A) ex parte, then this ground raised by the assessee at this stage raises the question whether without bringing this fact on record during the penalty proceedings, the issue raised by the assessee can be conclusively decided at this stage. Accordingly, in the facts and circumstances of the case and in the interest of justice these appeals are set aside to the record of the Assessing Officer to verify all the facts as alleged by the assessee in the additional ground and then pass a fresh order under u/s 272A(2)(k) of the Act. Needless to say the assessee be given an appropriate opportunity of hearing. All the appeals are allowed for statistical purposes.
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2020 (12) TMI 462
Addition u/s. 40A(3) - payments were made in cash in contravention of provisions of section 40A(3) - HELD THAT:- DR has initially raised an objection for sending the matter back to the Assessing Officer again for verification on the ground that sufficient opportunity was already offered to the assessee in this regard, he has finally submitted the matter can be sent back to the AO for proper verification if the assessee undertakes to produce the cash book and other evidence to support and substantiate his explanation in the matter. Since the ld. counsel for the assessee has undertaken to produce the cash book and other evidence to support and substantiate the case of assessee on this issue, consider it fair and proper and in the interest of justice to set aside the impugned order of ld. CIT(A) on this issue and remit the matter to the file of Assessing Officer for deciding the same afresh after verifying the explanation of the assessee from the relevant record including especially the cash book and other evidences which the assessee is directed to produce. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes. Disallowance of 15% of the wages - Addition sustained by the ld. CIT(A) to the extent of 7% - HELD THAT:- As rightly noted by CIT(A) in this regard, there was a mistake in the working made by the Assessing Officer in as much as the substantial increase in work-in-progress during the year under consideration was not taken into consideration by the Assessing Officer while working the percentage of wages at 31.36%. Since the wages as correctly worked out by the ld. CIT(A) at 22.73% was fair and reasonable, disallowance of 7% of the wages sustained by the ld. CIT(A) for the unverifiable element involved in the wages is slightly on the higher side and it would be fair and reasonable to restrict the same to 5%. Accordingly, modify the impugned order of ld. CIT(A) on this issue and direct the Assessing Officer to re-compute the disallowance out of wages to the extent of 5%. Ground No. 2 is thus, partly allowed.
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2020 (12) TMI 461
Excess stock found during the course of survey - HELD THAT:- Since no specific finding has been recorded by the Assessing Officer on verification of the said books of account, the ld. DR has submitted that the matter may be sent back to the AO for such verification which is relevant to decide the issue involved in the present case relating to the excess stock allegedly found during the course of survey. Even the assessee has not raised any objection for sending the matter back to the Assessing Officer for such verification. Accordingly, set aside the impugned order passed by the ld. CIT(A) on this issue and restore the matter to the file of Assessing Officer for deciding the same afresh after verifying the claim of assessee as regards the closing stock as on 31-03-2012 from the books of account stated to be prepared by the assessee. The assessee is directed to produce the said books of account along with supporting documentary evidence for verification of the Assessing Officer. AO is also directed to verify another contention raised by the ld. counsel for the assessee that the stock during the course of survey was wrongly valued at selling price instead of cost price. Appeal of assessee is treated as allowed for statistical purposes.
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2020 (12) TMI 460
TP Adjustment - international transaction of Rendering of software development and support services' - Comparable selection - HELD THAT:- Cybermate Infotek Limited - this company has its own intangible assets worth ₹ 4.95 crore at the end of the year. Segmental reporting of this company given at page 41 of the Report records that the entire operations of the company relate only to one segment i.e. Computer Segment . This deciphers that albeit the company is engaged in rendering software development services as well but it has a mixed bag of financial statements comprising results not only of software development services but also software products dealt with by it. There is no information available on record to demonstrate the revenue from software development services and corresponding operating costs, which part of its activity is analogous to the operations carried out by the assessee-company. In the absence of such a vital information, Cybermate Infotek Limited cannot be considered, on an entity level, as comparable to the assessee company. We, therefore, direct to exclude Cybermate Infotek Limited from the list of comparables. Acropetal Technologies Limited (Segmental) - There is no choice with the AO to follow or not to follow the direction rendered by the DRP u/s 144C(5). Such a direction is binding in nature upon the AO, who is supposed to follow the same in letter and spirit. Since in the instant case, the DRP categorically directed to include the amount of operating profit of Acropetal Technologies Limited at ₹ 11.83 crore, in our considered opinion, the AO/TPO went on a wrong premise in tinkering with such a figure and substituting it with a different figure. In view of the fact that the AO was bound by the directions of the DRP, we vacate the impugned order to this extent in substituting the amount of operating profit of Acropetal Technologies Limited at ₹ 22.26 crores, which is hereby ordered to be adopted as ₹ 11.83 crore as was directed by the DRP. Comp-u-Learn Tech India Limited (CTIL) - We find that the DRP was conscious of the purview of its power u/s 144C(8). That is why it directed 'satisfaction of other filters applied by him'. Such direction refers to past tense qua the application of filters and did not empower the AO/TPO to resort to new filters, a course of action which would not have satisfied the command of sub-section (8). We, ergo, hold that the direction of the DRP is clear that CTIL Ltd. was functionally comparable but its inclusion was left to be decided on the basis of the filters already applied by the TPO. Since the filter of Employee cost to sales was not applied by the TPO at the time of passing his order u/s 92CA(3) of the Act, we hold that the AO/TPO were not justified in applying it and ex consequenti jeopardising the direction of the DRP that found CTIL Ltd. to be functionally comparable. This company is ergo directed to be included in the list of comparables. We therefore, set aside the order and remit the matter to the file of the AO for a fresh determination of arm's length price of the international transaction of Rendering of software development and support services' in the light of our observations on the three companies discussed above.
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2020 (12) TMI 459
Validity of reopening of assessment - Eligibility of reasons to believe - reliance on same set of facts - Whether no new tangible material that had come to the possession of the Assessing Officer on the basis of which the assessment was re-opened? - HELD THAT:- A perusal of the reasons recorded by the Assessing Officer also clearly shows that the assessment was re-opened by him on the basis of same set of facts and the material which was available on record and there was no new tangible material that had come to his possession which formed the basis of re-opening. Even the Ld. D.R. has not been able to dispute this possession which is clearly evident from the reasons recorded by the Assessing Officer. He has also not been able to point out any such fresh tangible material that had come to the possession of the Assessing Officer which formed the basis of reopening. CIT(A) was fully justified in holding the re-assessment proceedings to be invalid by relying on the said decision Sandvik System Development [ 2017 (12) TMI 571 - ITAT PUNE ] since there was no fresh tangible material which had come to the possession of the Assessing Officer and which formed the basis of reopening. Therefore uphold the impugned order of the Ld. CIT(A) on this issue and dismiss this appeal filed by the Revenue.
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2020 (12) TMI 458
TP Adjustment - software development services undertaken by the Appellant - Rejection of transfer pricing documentation maintained - comparable selection - HELD THAT:- Referring to software development and related support services in the field of unified data storage solutions of assessee L T Infotech Ltd. generates revenue from three clusters namely service cluster, industrials cluster and telecom cluster and also develops products like Unitrax, AccuRASI. From the perusal of the annual report of the said comparable, we also find that the said company has got high risk profile, intangibles and huge brand value unlike the assessee company.. We also find that the said comparable is having huge turnover of ₹ 3613 Crores. Even on this aspect, the said comparable cannot be held to a valid comparable with that of the assessee engaged in software development having turnover of ₹ 29.84 crores. Exclusion of Persistent Systems Ltd. - The said comparable is functionally not comparable with the assessee engaged in software development services. We also find that the turnover of the assessee company is ₹ 29.84 Crores which is very low when compared to that of Persistent Systems. We find that the turnover of Persistent Systems is more than 10 times higher than the turnover of the assessee company, so even on the aspect of huge turnover, this comparable cannot be held as valid comparable and hence not comparable with the assessee. Exclusion of CG-VAK Software and Exports Ltd.- Said comparable is to be excluded due to non-availability of segmental information and hence, not comparable to the assessee engaged in software development. Computation Error in Segmental Margin in the case of Mind Tree Ltd. - TPO erroneously applied the incorrect margin computation in the case of Mind Tree Ltd., while passing the order pursuant to the directions of the ld. DRP. The ld. AR before us furnished the workings of the correct net margins to be adopted for Mind Tree Ltd., after allocating unallocated expenses and pleaded that the said working be restored to the file of the ld. TPO for his verification. The ld. DR also fairly agreed for restoration of the same. Hence, we deem it fit and appropriate to remand inclusion of Mind Tree Ltd., in the list of comparable for the limited purpose of verification of the margins. The workings furnished by the assessee before us should be placed before the ld. TPO for his verification and the ld. TPO is hereby directed to examine the same and arrive at the correct margins thereon. After exclusion of the aforesaid three comparables i.e. Persistent Systems Ltd., to L T Infotech Ltd., and CG-VAK Software and Exports Ltd., from the final list of comparables and after considering the correct margins of Mind Tree Ltd.,rithmetic mean of comparables would work out to 15.19% as against assessee s margin at 15.21% and therefore, the entire transactions would be at arm s length. We direct the ld. TPO to delete the adjustment made in the software distribution segment. Adjustment made by imputing interest on outstanding receivables - DRP rejected the plea of the assessee that working capital adjustment would take into account the impact of outstanding receivables - HELD THAT:- It is not in dispute that assessee in the instant case had realized invoices on its AEs beyond the agreed credit period as per the service agreement. The realization of invoices were made with abnormal delay. This, in our considered opinion, tantamount to indirect funding made by the assessee to its AEs by allowing the AE to utilize funds of the assessee as per its whims and fancies. Merely because the assessee is a debt free company, it cannot allow its funds to be utilized by its AE for an indefinite period of time beyond the agreed credit period. Manifestly, in the instant case, the deferred receivables falls squarely within the ambit of debt arising during the course of business which is included in the category of expression capital financing under clause C of Explanation of Section 92B of the Act. Hence, we hold that the outstanding receivables from AE constitute a separate international transaction and on which interest is to be imputed thereon and consequently ALP adjustment to be made. Hence, the primary argument made by the ld. AR that the adjustment made on account of outstanding receivables cannot be construed as an international transactions is hereby rejected and dismissed. Rate of interest to be applied for the purpose of imputation and calculation of arm s length price adjustment account - Since, the assessee had to receive its outstanding receivables from its AE in foreign currency, it would be just and fair to adopt LIBOR rate + 200 basis points for the purpose of imputation of interest beyond the agreed credit period as per the agreement till the date of realization or till the end of the Financial year, whichever is earlier. Any understanding or arrangement between the assessee and its AE which is detrimental to revenue or against the principles of scheme of Chapter X of the Income Tax Act, 1961, cannot come to the rescue of the assessee. Hence, merely because, there is no provision for chargeability of interest in the agreement entered with AEs for delayed realization and merely because assessee does not pay any interest to its AEs on the payables, the revenue cannot be deprived of its legitimate share in accordance with the scheme of Chapter X of the Act and the purpose behind the provisions of Chapter X. Outstanding receivables from AEs would constitute a separate international transaction on which imputation of interest is to be made by applying LIBOR + 200 basis points
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2020 (12) TMI 456
Disallowance of foreign exchange fluctuation loss as notional loss - forex loss were emanated due to fluctuation in the value of foreign currency in relation to Indian currency - Assessee submitted that the forex loss includes both realized and unrealized loss and the accounting treated for the same was in line with the accounting standard 11 as mandated by Schedule VI of the Companies Act and therefore, the claim of forex loss should be allowed - HELD THAT:- In the present case, even though the assessee may be following mercantile system of accounting, but, the parameters as envisaged in the case of CIT v. Woodward Governor India (P) Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] have been fulfilled or not was not emanating from the appellate order since the assessee has heavily relied on the decision in the case of Oil Natural Gas Corporation Ltd. [ 2010 (3) TMI 81 - SUPREME COURT] . Moreover, the assessee has not filed any detailed explanation in support of material evidence. In view of the above, we set aside the orders of authorities below and remit the matter back to the file of the Assessing Officer to examine the facts of the case in line with the decision of the Hon'ble Supreme Court in the case of Oil Natural Gas Corporation Ltd. v. CIT [ 2010 (3) TMI 81 - SUPREME COURT] as well as CIT v. Woodward Governor India (P) Ltd [ 2009 (4) TMI 4 - SUPREME COURT] and decide the issue afresh - Appeal of the assessee is allowed for statistical purposes.
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2020 (12) TMI 455
Validity of reopening of assessment - service of notice on the wrong address - Correct ITO Jurisdiction over the assessee by issuing notice u/s 148 - HELD THAT:- No valid service of notice u/s 148 of the Act in terms of section 282 of the Act at the correct address of the assessee within a reasonable period of time by the revenue. When the assessee is assessed to tax by ITO, Ward 13(3), Hyderabad and has been having regular correspondence with that Officer and returns of income for AYs, 2013-14, 2014-15, 2015-16 and 2016-17 were duly filed mentioning new address of the assessee with ITO, Ward 13(3), Hyderabad, there is no reason as to why ITO, Ward 10(1), Hyderabad should exercise jurisdiction over the assessee by issuing notice u/s 148 of the Act. In any case, ITO, Ward 10(1), Hyderabad does not have jurisdiction over the assessee to trigger the initiation of the reassessment proceedings after recording of reasons for reopening of assessment. Hence, the reassessment framed by the ld. AO in the instant case deserves to be quashed as void ab-initio for want of jurisdiction of the ld. AO and for want of proper service of notice at the correct address of the assessee within the reasonable time. Accordingly, we hold that the reassessment framed by the AO is hereby quashed as void ab-initio. - Decided in favour of assessee.
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Customs
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2020 (12) TMI 484
Maintainability of appeal - violation of principles of natural justice - cross-examination of witnesses not allowed - Section 130 of the Customs Act, 1962 and Section 35 G of the Central Excise Act, 1944 - HELD THAT:- The appeal is admitted on various substantial questions of law. Issue Notice to the respondent.
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2020 (12) TMI 480
Maintainability of appeal - alternative remedy of appeal is available - Petitioner did not prefer any such appeal before that Appellate Authority, but has instead filed this Writ Petition challenging the order passed by the Respondent - HELD THAT:- There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute. Hon'ble Supreme Court of India in ASSISTANT COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR VERSUS DUNLOP INDIA LIMITED AND OTHER [ 1984 (11) TMI 63 - SUPREME COURT ] has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction where it was held that It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article226 of the Constitution. Petition dismissed.
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2020 (12) TMI 477
Permission for clearance of light melting scrap - permission to dispose the plastic cans, PET bottles to the plastic recycling Industrial Units after segregating the same from the light melting scrap imported - it is contended that the PET bottles if allowed to be retained in India, it will cause pollution - case of respondent is that respondents cannot grant permission for the petitioner to dispose of the PET bottles which is a banned imported item to be disposed of in India - HELD THAT:- The relief sought for in this writ petition cannot be granted by this Court as he seeks for a positive direction. It is for the respondent to consider the request of the petitioner to segregate the PET bottles from light melting scrap, which was imported by the petitioner under bill of entry No.6208313 dated 23.07.2014. No prejudice will be caused to the respondents, if the petitioner's representations dated 25.08.2014 15.09.2014 is considered by them on merits and in accordance with law. This Court directs the second respondent to consider the petitioner's representations dated 25.08.2014 15.09.2014 is seeking permission to segregate the PET bottles from the light melting scrap and also seeking permission to dispose of the PET bottles in India itself instead of re-exporting the same to the country of origin and pass final orders on merits and in accordance with law - Petition disposed off.
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2020 (12) TMI 472
Maintainability of appeal - availability of alternative remedy of appeal - Petitioner did not prefer any such appeal before that Appellate Authority, but has instead filed this Writ Petition challenging the order passed by the Respondent - HELD THAT:- There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute. Hon'ble Supreme Court of India in ASSISTANT COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR VERSUS DUNLOP INDIA LIMITED AND OTHER [ 1984 (11) TMI 63 - SUPREME COURT ] has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction where it was held that It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article226 of the Constitution. Petition dismissed.
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Corporate Laws
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2020 (12) TMI 471
Direction to respondents to permit them to file e-form ACTIVE, INC-22A without insisting on appointment of a whole-time Company Secretary - declaration that the restriction imposed in filing e-form ACTIVE, INC-22A with regard to non-compliance of Section 203 of a whole-time Company Secretary or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 - HELD THAT:- The petitioners have been permitted to file e-form ACTIVE, INC-22A without insisting the appointment of a whole-time Company Secretary, on a provisional basis - Section 203(5) of the Companies Act provides that if any Company makes any default in complying with the provisions of Section 203 relating to appointment of Key Managerial Personnel, such Company shall be liable to a penalty of ₹ 5 lakhs and every Directors and Key Managerial Personnel of the Company, who is in default, shall be liable to a penalty of ₹ 50,000/- and where the default is a continuing one, with further penalty of ₹ 1,000/- for each day after the first during which such default continues but not exceeding ₹ 5 lakhs. It is evident that the petitioner-Companies have not adhered to the provisions of the Companies Act, especially Section 203 thereof. In such circumstances, the respondents are empowered to proceed against the petitioner-Companies, in accordance with law. The writ petitions are disposed of granting liberty to the respondents to proceed against the petitioner-Companies for violating Section 203 of the Companies Act, if they are so advised.
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2020 (12) TMI 463
Approval of scheme of amalgamation - section 230-232 of Companies Act - HELD THAT:- Various directions regarding convening and holding of various meetings issued - various directions regarding issuance of notices for the meeting also issued. The scheme is approved.
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2020 (12) TMI 457
Deactivation of DIN of the Directors - Filing of defaulted Annual Returns and Financial Statements of the Appellant Company - Sections 164 and 167 of Companies Act, 2013 - HELD THAT:- The learned counsel quoted the decision in Mukut Pathak Ors Vs Union of India Ors [ 2019 (11) TMI 319 - DELHI HIGH COURT ] a settled case law of the Hon ble High Court of Delhi to show that this Bench have power to order activation of DIN of the Directors of the Appellant Company. As regards the activation of DIN of the Director, having satisfied with the submissions made by the Appellant, this Tribunal come to the conclusion that it would be just and proper to order reactivation of the DIN of the Director, namely, Mr. P. I. Stanley to enable the Applicant company to file the Annual Returns and Financial Statements or other applications contemplated under the Companies Act, 2013. The RoC is directed to, reactivate the DIN of the Director forthwith, by collecting fine/ penalty, if any, for the lapse of the Director. The Company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by Registrar of Companies within 30 days from the date on which the DIN of the director is reactivated - the Registrar of Companies, Kochi is directed to, update their system records with correct status in respect of the Applicant Company and its Directors. Application disposed off.
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Insolvency & Bankruptcy
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2020 (12) TMI 464
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - concealment and suppression of the material fact by the Applicant Company - the name of the Corporate Applicant is changed, however has failed to state or disclose such fact in Form - VI - HELD THAT:- It is seen that as per the records of this Adjudicating Authority, the name of the Corporate Applicant is M/s. Prithviraj Spinning Mills Private Limited. As per the Companies Act 2013, when the name of the company is changed the erstwhile name should also be reflecting for a period of two years. However, when the order of the Hon'ble NCLAT was placed before us, it is seen that the name of the Corporate Debtor is reflected as M/s. Marappar Textiles Private Limited, but the erstwhile name has not been reflected in the said order. In the said circumstances, this Tribunal is nor apprised of the fact as to whether the Applicant in the application has mentioned the erstwhile name of the company. Since the name of the Corporate Debtor in the order of Hon'ble NCLAT was reflected only as M/s. Marappar Textiles Private Limited, considerable time was spent in tracing out this application, since no application is pending before this Adjudicating Authority in the name of M/s. Marappar Textiles Private Limited . Further, Form-VI of the Application stands in the name of M/s. Prithviraj Spinning Mills Private Limited and the registered office does not match with the Master Data of the Ministry of Company Affairs. The Applicant after deciding to submit itself for initiation of CIRP under Section 10 of IBC, 2016, has decided to change its name, thereafter obtaining a fresh Certificate of Incorporation, decided to go another step to change the Registered Office address and also pending adjudication has settled the dues of the 2nd Respondent alone. Whether a fresh liability was incurred or paid out of its own sources is not available. However, since the Applicant is under huge debt, it might have incurred fresh debt, on the verge of going into CIRP. From the flow of event as to the present case, it is necessary to relook at the provisions of Section 10 of IBC, 2016 and tighten the same to avoid misuse as done in the present case - Section 10(4)(b) of IBC, 2016 contemplates that this Adjudicating Authority has the right to reject the Application if it is incomplete. As already stated supra, inspite of opportunity being granted, the Form - VI as filed by the Applicant is incomplete in all respects. Further, this Adjudicating Authority also cannot pass an order of CIRP as against M/s. Prithviraj Spinning Mills Private Limited since the name of the Company is not in existence as on date. Application dismissed.
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FEMA
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2020 (12) TMI 486
Interest liability u/s 42(3) of FERA - main ground on which the Petitioner claims interest is that Section 42(3) of FERA stipulates that interest is payable at 6% p.a. in all cases other than cases relating to confiscation either under Section 63 of FERA or under the Customs Act, 1962 - HELD THAT:- In present writ petition claiming interest was filed on or about 28.08.2009. It is clear that the writ petition was filed more than 9 years after receiving the rupee equivalent of UK Pounds 1800. Upon perusal of the affidavit, find that the Petitioner stated that she and her counsel visited the office of the 1st Respondent to request for the payment of interest and that she was constrained to file the writ petition on account of non-payment thereof. Apart from this statement, no explanation is offered for the delay and no written reminders are on record. If the Petitioner had filed a suit to recover interest, such suit would have been rejected in limine on the ground of limitation. A public law remedy is discretionary and, in the overall facts and circumstances, including the complete failure to provide a reasonable explanation for the delay not inclined to exercise discretion in favour of the Petitioner who has approached the Court rather belatedly. Thus, writ petition is liable to be rejected solely on the ground of laches. In addition, as stated earlier, the Petitioner did not seek a modification of or challenge the order so as to claim interest.
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2020 (12) TMI 479
Holding of inquiry against the petitioner in the manner provided in Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - HELD THAT:- Impugned Show Cause Notice is at the first stage wherein the Adjudicating Authority on receiving a reply to the Impugned Show Cause Notice is to form an opinion whether an inquiry at all should be held against the petitioner. At this stage we do not deem it appropriate to entertain this present petition. The petitioner shall be at liberty to raise all its contentions before the Adjudicating Authority. Needless to say, if the petitioner is aggrieved of the decision taken by the Adjudicating Authority, it shall always be open to the petitioner to challenge the same in accordance with law.
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Service Tax
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2020 (12) TMI 474
Condonation of delay in filing appeal - Petitioner had presented the appeal which was beyond the maximum limitation period of three months from the date of receipt of the copy of the order passed by the First Respondent - HELD THAT:- The Hon'ble Supreme Court of India in ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT] has emphatically laid down that the High Court in the exercise of powers under Article 226 of the Constitution of India ought not to entertain Writ Petition assailing the order passed by a Statutory Authority which was not appealed against within the maximum period of limitation before the concerned Appellate Authority. It is not possible for this Court to express any view on the correctness or otherwise on the merits of the controversy involved in the matter - Petition dismissed.
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Central Excise
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2020 (12) TMI 475
Maintainability of appeal - availability of alternative remedy of appeal - Petitioner did not prefer any such appeal before that Appellate Authority, but has instead filed this Writ Petition on 01.03.2017 challenging the order passed by the Respondent - HELD THAT:- There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute. Hon'ble Supreme Court of India in ASSISTANT COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR VERSUS DUNLOP INDIA LIMITED AND OTHER [ 1984 (11) TMI 63 - SUPREME COURT ] has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction where it was held that It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article226 of the Constitution. Petition dismissed.
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CST, VAT & Sales Tax
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2020 (12) TMI 473
Maintainability of petition - remedy of appeal available - time limitation - Petitioner did not prefer any appeal before the Appellate Authority, but has instead filed these Writ Petitions challenging the orders passed by the Respondent beyond the maximum limitation period of 60 days from the date of receipt of copy of those orders - HELD THAT:- Though in the order dated 01.09.2006 in the earlier Writ Petitions in W.P. Nos. 15355 and 15356 of 2005 filed by the Petitioner challenging the notices to re-assess the tax, this Court had permitted to proceed further in accordance with law, the assessing authority was unable to do so on account of another order of interim stay passed by this Court in the Writ Petition in W.P. No. 21601 of 2004 filed by Dyers Association of Tirupur, till it had been finally decided by order dated 21.07.2017 in favour of the Respondent. This would go to show that the Respondent could not be faulted for the time taken for the finalization of the proceedings. The Division Bench of this Court in State of Tamil nadu -vs- Tex-in-Printers [ 2013 (10) TMI 1279 - MADRAS HIGH COURT ] has reiterated that after introduction of Section 3-B and the amendment made to the definition of 'sale' in Section 2(n)(ii) of the TNGST Act, the transfer of goods involved in works contract would amount to 'sale' and the entire turnover has become assessable to tax and that the same view has been expressed by another Division Bench of this Court in S tate of Tamil Nadu -vs- Tvl. Tamil Nadu Co-operative Textile Processing Mills Limited [ 2019 (6) TMI 1510 - MADRAS HIGH COURT ], meaning thereby that the Petitioner cannot have any grievance for the re-assessment of tax liability based on that settled question of law. Petition dismissed.
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Indian Laws
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2020 (12) TMI 478
Grant of anticipatory bail - Recovery of embezzled amount - issuance of false and forged passports by the petitioner - Sections 406 and 420 of IPC - HELD THAT:- It appears that the petitioner is trying to muddle up his personal transaction with Narinder Kumar Sharma with that of the complainant. A dispute arising out of partnership in M/s Arihant Filling Station in first appearance has nothing to do with the present allegations, however, complicity of the petitioner would be subject to custodial interrogation. Second son of the petitioner i.e. Tijinder also filed complaint against the petitioner in respect of his own transactions and that has no relevance with the present allegations arising out of FIR in question. In entirety of facts and circumstances of the case, the 4 of 5 custodial interrogation of the petitioner is required in order to effect recoveries of the amount and other incriminating record. Petition dismissed.
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