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TMI Tax Updates - e-Newsletter December 15, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles MANUAL REFUND APPLICATION UNDER GST LAWS Remanded GST refund matter where supply made as inter-State was subsequently held as intra-State to decide in light of Circular No. 162/18/2021-GST News INDIA’S FOREIGN TRADE: November 2021 Over 32.11 crore loans of ₹ 17 lakh crore with disbursement of ₹ 16.50 lakh crore extended under Pradhan Mantri Mudra Yojana IBBI organises a Workshop on “Committee of Creditors: An Institution of Public Faith” More than 7 lakh companies incorporated after announcement of Make in India programme 12,892 companies removed from Registrar of Companies in 2020-21 Income Tax Department conducts searches in Karnataka Shri Piyush Goyal urges fellow Ministers of neighbouring countries to work together to transform the subcontinent India and the UAE to wrap up the Comprehensive Economic Partnership Agreement (CEPA) by next month, says Shri Piyush Goyal Shri Piyush Goyal calls for Partnerships among countries for achieving Sustainable Growth Notifications Customs 69/2021 - dated 13-12-2021 - ADD Seeks to impose Anti-Dumping duty on the imports of Axle for Trailers in CKD/SKD form originating in or exported from the Peoples Republic of China. Income Tax 137/2021 - dated 13-12-2021 - IT e-Verification Scheme, 2021 Circulars / Instructions / Orders SEBI SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/687 - dated 14-12-2021 Clarifications with respect to Circular dated November 03, 2021, on ‘Common and simplified norms for processing investor’s service request by RTAs and norms for furnishing PAN, KYC details and Nomination’ SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0685 - dated 13-12-2021 Publishing of Investor Charter and disclosure of Investor Complaints by Research Analysts on their websites/mobile applications SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0686 - dated 13-12-2021 Publishing Investor Charter and disclosure of Investor Complaints by Investment Advisers on their websites/mobile applications Highlights / Catch Notes GST Classification of goods - Pure supply of goods or not - rate of tax on supply of goods - parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy - parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy are chargeable to 5% IGST or 2.5% CGST + 2.5% SGST as 'parts of heading of 8902, 8904,8905, 8906 and 8907', only if they are used in diesel marine engine or genset which are further used in ships and vessels falling under chapter headings 8902, 8904, 8905, 8906 and 8907 of the GST Tariff. - AAR Visit to Get Source Income Tax Income accrued in India - royalty receipts - transfer of copyright in the software - India-UK DTAA - The Impugned Rulings passed by the learned AAR are set aside and it is held that the payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), does not amount to “royalty” liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA. - HC Visit to Get Source Levy of penalty u/s 269T read with 271E - Tribunal deleted the penalty levy - In normal course, the findings recorded by the Tribunal would have been examined by this Court to the extent permissible in law and answered the questions. The additional documents now brought on record, it is possible, may invite fresh examination of bona fide belief or reasonable cause relied on by the assessee. - Matter remitted to the Tribunal for disposal in accordance with law.- HC Visit to Get Source Correct head of income - income from infrastructure support services - the action of the authorities below not to permit the assessee to arrange their business in the way which is beneficial to them, within the permissible limits of law, is impermissible. Then it goes without saying that the assessee is entitled to claim the business expenses in respect of the income from the services provided and hiring of equipment, and statutory deductions under section 24 (a) of the Act insofar as the income from the house property is concerned. - AT Visit to Get Source Condonation of delay - delay of nine months on the part of the assessee in filing the appeal before the CIT(A) - Delay of nine months in filing the appeal before the Ld. CIT(A) was a result of the fair and reasonable attempt made by the assessee to avail one remedy available to him by filing an application u/s 154 for rectification before the AO and the same, in my opinion, constituted a reasonable cause. - AT Visit to Get Source Levy of penalty u/s 272A(2)(e) - returns of income was filed belatedly after the due date specified u/s. 139(4A) and 139(4C) - Illness of Managing Trustee of the trust during the relevant period will definitely comes under reasonable cause as provided u/s. 273B of the Act for not filing return of income within due date specified under the Act. - AT Visit to Get Source Deductibility of the amount of service tax paid under VCES, 2013 - contention of the assessee is that the amount paid was a discharge of liability which got crystallized during the year and hence was an expenditure deductible for the year - Such payment during the year is nothing but, in a way, reversal of the original entry of receipt passed in the earlier years. Once receipt of the amount of service tax was included in the total income in earlier years, the obvious corollary is that its payment in the year in question will also qualify for deduction from the total income. - AT Visit to Get Source Penalty order u/s 271(1)(b) - non-compliance of the notices - nonappearance before the learned assessing officer - There is a sufficient and reasonable cause with the assessee, irrespective of the addition made in the assessment order, for failure to comply with the notices to appear before the learned assessing officer. - AT Visit to Get Source Disallowance of deduction claimed u/s 80IB(10) - assessee had offered additional income in the proceedings initiated under section 153C of the Act - Restriction on claim of deduction in view of provisions contained in section 80A(5) - The prohibitory conditions of section 80A(5) would not be applicable. In any case of the matter, the revenue does not dispute the fact that the assessee is otherwise eligible to claim deduction under section 80IB(10) of the Act in respect of the profit earned from the subject project. The additional income offered by the assessee because of receipt of on-money, undoubtedly, forms part of the profit earned from the subject housing project. - AT Visit to Get Source Exemption u/s 11 - Payment of salary to certain members of the society - no adverse material has been brought on record by the AO to hold that services have not been rendered by these persons and payments made to these specified persons are excessive and unreasonable. We hold that there is no justification in the action of the AO for making a disallowance under this head. - AT Visit to Get Source Assessment u/s 153C/153A - Addition u/s 68 - Seized incriminating material has to pertain to the assessment year in question and have co-relation, document-wise, with the assessment year. This requirement u/s 153C is essential and becomes a jurisdictional fact. - No addition can be made where the assessment have not abated and were pending at the time of search, no addition can be made without any incriminating material. - AT Visit to Get Source Validity of reopening of assessment u/s 147 - In the instant case the primary facts were already disclosed in the Notes to Accounts filed along with the balance-sheet which is the subject matter of reopening of the assessment and since the original assessment was completed under section 143(3) and since there is no allegation by the A.O. of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment - reassessment proceedings initiated by the A.O. in the instant case after a period of four years from the relevant assessment year are not in accordance with Law. - AT Visit to Get Source Customs Obligations of Authorised Courier - Revocation of suspension under censure of warning and imposition of penalty of ₹ 50,000/- - The appellant has exercised reasonable and requisite due diligence while ascertaining and even while furnishing the information with the proper officer in reference to filing the impugned three courier EWBs and thus has abide by all the provisions of the Act and the rules regulations and orders issued thereunder. The compliance of 12(1)(x) CIER by appellant has already been held by Commissioner Customs in an order dated 25.11.2020 - even Regulation 12(i)(v) and 12(i) (x) have not be violated by the appellant. The findings against the appellant in the order under challenge are therefore incorrect. - AT Visit to Get Source Service Tax Interpretation of statute - scope of Support Services of Business or Commerce - The Tribunal which is the last fact finding authority in the hierarchy of authorities under the provisions of the Act had examined the facts and concluded that the nature of activity cannot be construed within the ambit of service tax. Thus, there is no error in the order passed by the Tribunal. - HC Visit to Get Source VAT Right to cross-examine - The crucial aspect of the matter at this stage is, these books have been recovered behind the back of the dealer. On this either aspect, the argument of Mr. Anil D Nair is contextual to be noted to wit that there is no prohibition for the Revenue to collect or gather information against the dealer, but any material relied on by the Department must be put to the dealer and if the material is contested, the semblance of fair play and procedure are followed before accepting material gathered behind the back of the dealer as constituting the basis for imposition of penalty. The test here is not only the procedural impropriety but the real prejudice in accepting extraneous and other relevant material constituting the basis for imposing penalty. - HC Visit to Get Source Interpretation of proviso to Section 8(a) of the Kerala Value Added Tax Act, 2003 - Constitutional validity of proviso to Section 8(a) - recovery of compounded tax - The argument of the appellants, though not intended to import something into the enacting part, is definitely attempting to delete what is expressly provided by the proviso. The Court cannot read anything into a statutory provision that is plain and unambiguous. Similarly, a statute is an edict of the Legislature, the language employed in a statute is the determinative factor of legislative intent. - HC Visit to Get Source Case Laws: GST 2021 (12) TMI 573 Classification of goods - Pure supply of goods or not - rate of tax on supply of goods - parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy - chargeable to 5% IGST or 2.5% CGST + 2.5% SGST as 'parts of heading of 8902, 8904, 8905, 8906 and 8907'? - applicability of Sr. No. 252 of Notification No. 11/2017-Central Tax (Rate), dated 28 6-2017 - HELD THAT:- The applicant referred to documents produced at Annexure B to Annexure F of the application, and referred to goods as mentioned therein. The applicant has produced the tender documents; Standard sourcing process; Purchase order raised by the customer i.e. Indian Navy; Chartered Engineer's certificate which specifies that the parts supplied by the Applicant to the Indian Navy are capable of being used as part of the ships or vessels and Declaration-Certificate from the Indian Navy certifying that goods supplied by the Applicant are for the exclusive use of the Indian Navy, and fall under entry at Sr. No. 252 of Notification No. 1/2017-C.T.(R), dated 28th June, 2017. By mainly and only placing the reliance on these documents, the applicant argued the case during final hearing. Hence, present decision shall apply to the situation or transaction where the said transaction is supported by such documents or similar documents and not to the any other transaction. The present ruling shall not apply to transactions where the documents similar to described above are absent. Parts of goods of headings 8901, 8902, 8904 to 8907 of any chapter are chargeable to CGST/SGST @ of 2.5% each. The Applicant has submitted that they supply parts of marine diesel engines and gensets to the Indian Navy, for application/ use in ships or vessels and the parts supplied by / to be supplied by the Applicant, includes numerous and diverse parts, intended for use in marine engines or gensets, of ships or vessels (of the Indian Navy) failing under Chapter No. 89 of Customs Tariff Act, 1975, typically under tariff heading number 8901,8902,8904,8905, 8906 and 8907 - in the case of IN RE: M/S. MAN ENERGY SOLUTIONS INDIA PRIVATE LIMITED (FORMERLY KNOWN AS MAN DIESEL TURBO INDIA PRIVATE LIMITED) [ 2021 (8) TMI 49 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA] , it was held that Marine Engines and parts thereof are essential requirements in manufacture of ship, vessels, boats, floating structures etc., falling under Tariff headings 8901, 8902, 8904, 8905, 8906, 8907, and therefore the said goods can be considered as parts of ship, boat, vessels etc. and accordingly, the said goods would be covered under Sr. No.252 of the above mentioned Notification. Thus, parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy are chargeable to 5% IGST or 2.5% CGST + 2.5% SGST as 'parts of heading of 8902, 8904,8905, 8906 and 8907' in terms of Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28 6-2017, only if they are used in diesel marine engine or genset which are further used in ships and vessels falling under chapter headings 8902, 8904, 8905, 8906 and 8907 of the GST Tariff. 2021 (12) TMI 572 Cancellation of GST registration - non filing of statuary 'returns for three consecutive periods - continuous period of six months under clause (b) or clause (c) of sub-section (2) of section 29 of the CGST Act, 2017 - HELD THAT:- The appellants within the time limit as prescribed under Section 107(1)/(4) of the CGST Act, 2017. Further it is found that Hon'ble Supreme Court in continuation of the Order dated 08.03.2021 in the case of Re Cognizance of Extension of Limitation, [ 2021 (3) TMI 497 - SC ORDER ] restored its earlier order dated 23.03.2020 and suo motu extended the general periods of limitation vide its Order dated 27th April 2021 till further orders, due to the raging 2nd wave of the pandemic. The registration of the appellants have been cancelled under clause (b) or (c) of sub-section (2) of section 29 of the said Act and the time limit for making an application of revocation of cancellation of registration under sub-section (1) of section 30 of the said Act, also falls during the period from the 1st day of March, 2020 to 31 st day of August, 2021. It is also found that the time limit for making such application has been extended upto the 30th day of September, 2021 - the applicants may file a fresh application for revocation and the officer shall process the application for revocation considering the extended timelines as provided vide notification supra read with Circular No. 158/14/2021-GST dated 06.09.2021. In view of the notification No. 34/2021 dated 29.08.2021 and Circular No. 158/14/2021-GST dated 06.09.2021, the registration of appellants may be considered for revocation by the proper officer - Appeal disposed off. Income Tax 2021 (12) TMI 571 Income accrued in India - royalty receipts - transfer of copyright in the software - I ndia-UK DTAA - payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India payment received by EYGSL (UK) from EYGBS (India) to be taxed as royalty - HELD THAT:- As it is essential to show a transfer of copyright in the software to do any of the acts mentioned in Section 14 of the Copyright Act, 1957. A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a transaction is to authorise the end-user to have access to and make use of the licenced software over which the licencee has no exclusive rights, no copyright is parted with and therefore, the payment received cannot be termed as royalty . In the present case, the EYGBS (India), in terms of the Service Agreement and the MOU, merely receives the right to use the software procured by the EYGSL (UK) from third-party vendors. The consideration paid for the use of the same therefore, cannot be termed as royalty as held by the Supreme Court in Engineering Analysis Centre [ 2021 (3) TMI 138 - SUPREME COURT] In determining the same, the rights acquired by the EYGSL (UK) from the third-party software vendors are not relevant. What is relevant is the Agreement between the EYGSL (UK) and the EYGBS (India). As the same does not create any right to transfer the copyright in the software, the same would not fall within the ambit of the term royalty as held by the Supreme Court in Engineering Analysis Centre The submission of the learned counsel for the Revenue that the judgment of the Supreme Court in Engineering Analysis Centre (supra) cannot be applied because it confines itself only to the four categories mentioned in paragraph 4, also cannot be accepted. Though the Supreme Court was on facts considering the four categories of cases that arose in the appeals before it, it has laid down the law for general application. The law, as laid down by the Supreme Court, when applied to facts of the present case, squarely covers the same in favour of the petitioners. The submission made by the learned counsel for the revenue relying upon the amendment to Section 9(1)(vi) of the Income Tax Act, 1961 has also been specifically considered and rejected by the Supreme Court. The Impugned Rulings passed by the learned AAR are set aside and it is held that the payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), does not amount to royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA. - Decided in favour of assessee. 2021 (12) TMI 570 Reopening of assessment u/s 148 - scope of section u/s 148A - period of limitation in respect of issuance of notice under section 148 - HELD THAT:- As the prima facie opinion of the Court, for the purpose of interim order, is that by virtue of notifications dated 27.02.2021 and 31.03.2021 issued by the Central Board of Direct Taxes, as referred herein before, though extends the period of limitation in respect of issuance of notice under section 148 of the Income Tax, Act, but the said notification is not found to empower the Central Board of Direct Taxes to put into oblivion the provision of section 148A of the Income Tax Act, which was inserted by virtue of the Finance Act, 2021 and was notified w.e.f. 01.04.2021, as if the said section 148A would not apply till limitation prescribed under section 148 does not lapse or expire. The implementation of the effective date of section 148A which is notified to be 01.04.2021, was certainly not extended by virtue of notification dated 27.02.2021 and 31.03.2021 and therefore, the Court finds that the decision rendered by the Allahabad High Court [ 2021 (10) TMI 517 - ALLAHABAD HIGH COURT] as well as Rajasthan High Court [ 2021 (12) TMI 207 - RAJASTHAN HIGH COURT] to have more persuasive value in respect of the issue raised by the petitioner with all respect to the decision rendered by the Chhattisgarh High Court[ 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] . The opinion expressed herein before is only for the purpose of granting interim relief to the petitioner and is not a conclusive opinion of the Court on the merit of the writ petition. Accordingly, the Court is inclined to stay the operation of the impugned notice issued under section 148 of the Income Tax Act bearing DIN Notice issued by the ACIT/DCIT CIR1 DIB dated 30.06.2021 (Annexure XV). 2021 (12) TMI 569 Stay on recovery proceedings - outstanding demand for second quarter of Financial Year 2021-22 - HELD THAT:- Revenue accepts notice. He admits that there has been an error on the part of the Assessing Officer in not deciding the petitioner s request/application dated 22 nd November, 2021. He assures this Court that the jurisdictional Assessing Officer shall decide the petitioner s request/application in accordance with the judgment passed by this Court in Concentrix Services Netherlands B V [ 2021 (4) TMI 1051 - DELHI HIGH COURT] as well as petitioner s own case [ 2021 (6) TMI 379 - DELHI HIGH COURT] within four weeks. The assurance/undertaking given by learned counsel for Revenue/Respondents is accepted by this Court and the Revenue/Respondents are held bound by the same. Till the order is passed by the Assessing Officer, the impugned demand shall not be given effect to. 2021 (12) TMI 568 Reopening of assessment u/s 147 - Period of limitation - scope of procedure prescribed under Section 148A - according to the petitioners notice is barred by limitation and that the respondent before issuing the notice under Section 148 of the Act has not followed the mandatory procedure prescribed under Section 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 before issuance of notice under Section 148 - HELD THAT:- The issue involved in the present writ petitions is squarely covered by the decision of the Allahabad High Court in the matter of Ashok Kumar [ 2021 (10) TMI 517 - ALLAHABAD HIGH COURT] which in my view is a correct view and has been taken after considering the judgment passed by the Single Bench of Chhatisgarh High Court in the matter of Palak Khatuja [ 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] which has been relied upon by respondents counsel and therefore the present petitions deserve to succeed. Accordingly, the writ petitions are allowed. The reassessment notice issued to the petitioners under Section 148 of the Income Tax Act is quashed. 2021 (12) TMI 567 Reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - petitioners are aggrieved of issuance of the re-assessment notice u/s.148 which according to the petitioners is barred by limitation and that the respondent before issuing the notice under Section 148 of the Act has not followed the mandatory procedure prescribed u/s 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 - HELD THAT:- The issue involved in these writ petitions has been considered and decided in ASHOK KUMAR AGARWAL VERSUS UNION OF INDIA THROUGH ITS REVENUE SECRETARY NORTH BLOCK AND 2 OTHERS [ 2021 (10) TMI 517 - ALLAHABAD HIGH COURT] considering case of PALAK KHATUJA [ 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] decided in favour of assessee. 2021 (12) TMI 566 Levy of penalty u/s 269T read with 271E - Tribunal deleted the penalty levy - HELD THAT:- In the case on hand, the Joint Commissioner and the Commissioner of Income Tax (Appeals) have referred to a few reasons as cogent reasons warranting levy of penalty on the assessee - Tribunal, in our considered view, has recorded a finding in favour of the assessee which is not impugnable. In normal course, the findings recorded by the Tribunal would have been examined by this Court to the extent permissible in law and answered the questions. The additional documents now brought on record, it is possible, may invite fresh examination of bona fide belief or reasonable cause relied on by the assessee. We refrain from undertaking the responsibility of examining the case of assessee that the assessee had reasonable cause for not following the requirement of law. But we are of the view that the matter, if remitted to the Tribunal, the parties would have reasonable opportunity and thereupon the claim/explanation of the assessee considered by the Tribunal. Substantial questions accordingly are answered in favour of the Revenue and against the assessee. The order of Tribunal is set aside. Matter remitted to the Tribunal for disposal in accordance with law. 2021 (12) TMI 565 Exemption u/s 80P(2)(a)(vi) - whether the assessee was engaged in the collective disposal labour of its members? - HELD THAT:- Society s functions are based upon its bye laws. The bye laws itself would have thrown light upon the question that arises for consideration in the instant case. On an examination of the bye laws, the Tribunal could have easily come to a conclusion whether the income derived by the society was through collective disposal of the labour of its members. Materials like the bye laws were already on record for the Tribunal to appreciate the claim of the assessee. We find on a consideration of the order of the Tribunal that the remand to the assessing officer was not necessary in the peculiar facts of the case and on the other hand, as a final fact finding authority Tribunal itself could have appreciated the facts by itself. The assessment relates to the assessment year 2008-09 and at this distance of time, it is not in the interests of all to remand it to the assessing officer. We set aside the order of the Tribunal and remand the same for fresh consideration by the Tribunal itself. The Tribunal shall examine the issue arising under Section 80P(2)(6)(a) of the Act, as expeditiously as possible, preferably within six months. 2021 (12) TMI 564 Eligibility of profits and deductibility of profits arising under Section 115JB - whether the assessee is entitled to claim deduction under Section 80HHC - HELD THAT:- As per reported judgments in Ajanta Pharma Ltd. v. Commissioner of Income-Tax [ 2010 (9) TMI 8 - SUPREME COURT] order of the Supreme Court in Kerala Chemicals and Proteins Ltd v. Commissioner of Income Tax [ 2012 (9) TMI 1214 - SUPREME COURT] AND BHARI INFORMATION TECH SYSTEMS (P) LTD. [ 2011 (10) TMI 19 - SUPREME COURT] to state that the issue is concluded by these judgments in favour of assessee. Depreciation at 40% on commercial vehicles used for assessee's own business - whether the percentage of depreciation accepted by the CIT (Appeals) and Tribunal at 40% is correct or not? - HELD THAT:- Old appendix I applicable for the Assessment Year 2003-04 deals with different slabs of depreciation applicable to vehicles used for different purposes. After juxtaposing the schedule with the nature of activity carried on by the assessee, we are of the view that the finding of fact recorded by the Tribunal is in accordance with the said schedule and the substantial question of law in the facts and circumstances of this case does not arise for consideration under Section 260A of the Act. 2021 (12) TMI 563 Deduction u/s 80P(2)(a)(i) and 80P(2)(d) - AO denied the benefit of deduction u/s 80P(2)(a)(i) for the reason that the assessee was also dealing with associate / nominal members - CIT(A) upheld the view taken by the A.O. that the assessee has violated the principle of mutuality, and hence, it was concluded that assessee was not entitled to deduction u/s 80P(2)a)(i) and 80P(2)(d) - HELD THAT:- The Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors [ 2021 (1) TMI 488 - SUPREME COURT] had held that the expression members is not defined under the Income-tax Act. Hence, it is necessary to construe the term members in section 80P(2)(a)(i) of the I.T.Act as it is contained in the respective State Co-operative Act. The Hon ble Apex Court had held that providing credit facilities to associate or nominal members would be entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act unless they are not considered as members of the co-operative societies under the respective State Act. The Hon ble Apex Court has also considered the judgment in case of Citizen Co-operative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT] - A.O. has merely denied the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act for the reason that the assessee was also dealing with associate / nominal members, which is against the dictum laid down by the Hon ble Apex Court in case of Mavilayi Service Co-operative Bank Ltd. Ors. (supra). The Hon ble Apex Court has settled many issues We are of the view that the issue of deduction u/s 80P(2)(a)(i) of the Act, needs to be examined by the A.O., in the light of the principles enunciated by the Hon ble Apex Court in case of Mavilayi Service Co-operative Bank Ltd. Ors. (supra). Accordingly, the CIT(A) order on this issue is set aside and the same is restored to the files of the A.O. for examination of the case in the light of the principles laid down. Rejection of claim of deduction u/s 80P(2)(a)(i) of the Act with regard to interest income earned from fixed deposits kept with co-operative banks - Insofar as deduction u/s 80P(2)(d) we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction. Deduction u/s 57 - Assessee s claim that if interest income is to be assessed income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 of the I.T.Act, we find an identical issue was considered by the Hon ble jurisdictional High Court in the case of Totgars Co-operative Sales Society Ltd [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed (i.e., gross receipt minus allowable expenditure), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of in the case of Totagars Sale Co-operative Society Limited [supra] - Accordingly, the issue of deduction u/s 57 of the I.T.Act is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 - Appeal filed by the assessee is allowed for statistical purposes. 2021 (12) TMI 562 Benefit of deduction u/s 80P(2)(a)(i) - AO held that the assessee is primarily engaged in the business of banking and in view of the insertion of sub- section (4) to section 80P of the Act with effect from 001.04.2007, the assessee is not entitled to the benefit of deduction u/s 80P(2)(a)(i) - HELD THAT:- The recent order of the Tribunal in the case of M/s.Vasavamba Co-operative Society Ltd. [ 2021 (8) TMI 706 - ITAT BANGALORE] by following the judgment of Totagars Co-operative Sale Society v.ITO [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] held that interest income earned out of investments made from surplus funds would be taxable under the head `income from other sources and would not be eligible for deduction u/s 80P(2)(a)(i) of the Act. It was further held by the Tribunal insofar as the deduction u/s 80P(2)(d) of the Act is concerned, only those interest received from investment with co-operative societies alone would be entitled to deduction. CIT(A) had allowed the deduction u/s 80P(2)(a)(i) of the Act by holding that interest arising from investments made in compliance with the statutory provisions is exempt u/s 80P(2)(a)(i) of the Act. From the records, we noticed that the assessee has received interest income even from other Scheduled Banks, such as, IDBI Bank, Yes Bank etc. Therefore, the reasoning of the CIT(A) that the investments are made in compliance with the statutory provision of the Karnataka State Co-operative Societies Act, 1959, may not be fully correct. Therefore, we are of the view that the matter has to be examined by the Assessing Officer. Deduction u/s 80P(2)(d) - We make it clear that the interest income received out of investments with co-operative societies alone is to be allowed as deduction. Deduction u/s 57 - alternate contention of the assessee that if interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 - The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed (i.e., gross receipt minus allowable expenditure), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of Totagars Sale Co-operative Society Limited [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] - Accordingly, the issue of deduction u/s 57 of the I.T.Act is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 of the I.T.Act. In the recent judgment of The Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] had held that the expression members is not defined under the Income-tax Act. Hence, it is necessary to construe the term members in section 80P(2)(a)(i) of the I.T.Act as it is contained in the respective State Co-operative Act. The Hon ble Apex Court had held that providing credit facilities to associate or nominal members would be entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act unless they are not considered as members of the co-operative societies under the respective State Act. The Hon ble Apex Court has also considered the judgment in case of Citizen Co-operative Society Ltd. Thus we are of the view that the matter needs to be considered afresh by the Assessing Officer. Accordingly, we set aside the order of the CIT(A) and direct the A.O. to verify the claim made by the assessee u/s 80P(2)(a)(i) and 80P(2)(d) of the Act, keeping in view the dictum laid down in the judicial pronouncements referred supra. 2021 (12) TMI 561 Rectification of mistake u/s 154 - deduction on account of depreciation separately while computing its income by applying the net profit rate - HELD THAT:- We find merit in the contention of assessee that there was a mistake in the order passed by the Assessing Officer under section 143(3) of the Act on 04.03.2015 in not allowing depreciation allowance separately when the income of the assessee from the business of contracting was computed by the AO by applying the net profit rate. Since the said mistake was apparent from record, it was correctly rectified by the AO in the first order passed under section 154 of the Act since the said order passed by the Assessing Officer under section 154 in allowing deduction on account of depreciation allowance separately when the income of the assessee was computed by applying the net profit rate was duly supported by the decision of Shyam Bihari [ 2012 (8) TMI 420 - PATNA HIGH COURT] as well as the CBDT Circular dated August 31, 1965 - We also find merit in the contention raised by the ld. Counsel for the assessee that there was no mistake in the said order much less the mistake apparent from record, which could be rectified under section 154 as done by the Assessing Officer vide his second order dated 26.11.2015 passed under section 154. The ld. CIT(Appeals), in our opinion, therefore, was not justified in upholding the order of the Assessing Officer passed under section 154 dated 26.11.2015 on the issue of disallowance of depreciation. Addition made on account of interest on FDR - We are of the view that there being nothing on record to establish that the investment in the FDR made by the assessee was for the purpose of its business, the interest earned on the said FDR was liable to be added separately while computing the total income of the assessee by applying the net profit rate. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue vide his order dated 26.11.2015 passed under section 154 of the Act. Rate of net profit to be adopted for estimating the income of the assessee - As observed that the net profit rate of 6% adopted in the assessment originally completed under section 143(3) of the Act was increased by the Assessing Officer vide the first order dated 27.04.2015 passed under section 154 of the Act while allowing the depreciation allowance separately and since the said order was accepted by the Assessing Officer and no appeal against the same was filed by the assessee before the ld. CIT(Appeals), we are of the view that the net profit rate of 6.5% applied by the Assessing Officer had become final and the same having been not disturbed by the Assessing Officer even in the second order dated 26.11.2015 passed under section 154, we are of the view that this issue was not arising from the second order passed by the Assessing Officer under section 154 and the ld. CIT(Appeals) was not justified in disturbing the same while disposing of the appeal of the assessee against the second order passed by the Assessing Officer under section 154. We accordingly modify the impugned order of the ld. CIT(Appeals) and allow this appeal of the assessee partly. 2021 (12) TMI 560 Correct head of income - income from infrastructure support services - taxable under the head profits and gains from business or profession or under the head income from house property - HELD THAT:- Existence of two agreements is concerned, absolutely, there is no dispute. It is also not in dispute that for the assessment year 2011-12, 2012-13 and 2015-16 also, the assessee offered the receipts under the two streams, namely, rental income earned from leasing out the space within the mall to the tenants and offering the same under the head income from house property and the other is income from business activities of maintaining, operating and providing equipments essential for operation of mall, i.e., infrastructure support services under the head profit and gain from business or profession . It is also not in dispute that for the assessment year 2011-12 and 2012-13, by order dated 16.12.2015 and 18.02.2015, the Assessing Officer accepted the same; whereas for the assessment year 2015-16, ld. CIT(A) in first appeal granted relief to the assessee by holding that the income from infrastructure support services is taxable under the head profits and gains from business or profession and not under the head income from house property . As decided in CHANDER NAGAR CHEMICALS AND MINERAL PRIVATE LIMITED VERSUS ITO, WARD-3 (3) , NEW DELHI. [ 2020 (9) TMI 342 - ITAT DELHI] When the assessee had chosen to bifurcate the transaction and to charge separately towards the rent of the demised premises and for the services provided and hire charges, in our considered opinion the Revenue cannot prevent the same on the ground that such process would result in loss to the Revenue. In the circumstances, we hold that the action of the authorities below not to permit the assessee to arrange their business in the way which is beneficial to them, within the permissible limits of law, is impermissible. Then it goes without saying that the assessee is entitled to claim the business expenses in respect of the income from the services provided and hiring of equipment, and statutory deductions under section 24 (a) of the Act insofar as the income from the house property is concerned. With this view of the matter, we direct the learned Assessing Officer to allow the statutory deduction under section 24 (a) of the Act also and the interest incurred in respect of the house property - Appeal of the Revenue is dismissed. 2021 (12) TMI 559 Condonation of delay - delay of nine months on the part of the assessee in filing the appeal before the CIT(A) against the order passed by the AO u/s 143(1) - Short Term Capital Loss set off disallowed against the Short Term Capital Gain - HELD THAT:- It is well settled that the term sufficient cause is to be construed liberally in order to advance the substantial cause of justice and not to shut the door on the assessee to avail the remedial measure provided under the statute. When the claim of the assessee for set of off for brought forward Short Term Capital Loss of the earlier years against the Short Term Capital Gain of the year under consideration was disallowed by the AO vide an order u/s 143(1), two remedies were available to the assessee i.e. to move the application u/s 154 for rectification before the AO or to file an appeal before the Ld. CIT(A). In the present case, the assessee availed the first remedy by filing an application u/s 154 before the AO and since no relief was forthcoming by availing the said remedy in as much as the application filed u/s 154 remained to be disposed of by the AO, the assessee after waiting for a reasonable time availed the second remedy which was available by filing the appeal before the Ld. CIT(A) - assessee cannot be said to have not acted diligently and is guilty of negligence. Delay of nine months in filing the appeal before the Ld. CIT(A) was a result of the fair and reasonable attempt made by the assessee to avail one remedy available to him by filing an application u/s 154 for rectification before the AO and the same, in my opinion, constituted a reasonable cause. We therefore, condone the delay of nine months on the part of the assessee in filing an appeal before the Ld. CIT(A) and setting aside the impugned order passed by the Ld. CIT(A), we remit the matter back to him for disposing of the appeal of the assessee afresh on merit in accordance with law after giving a proper and sufficient opportunity of being heard to the assessee. 2021 (12) TMI 558 Disallowance of deduction claimed on account of Employees contribution to PF ESI by invoking the amended provisions of Section 36(1)(va) r.w.s. 43B - Whether the payment to employees contribution to PF ESI is well within the due date of filing of return of income by the assessee u/s.139(1) ? - HELD THAT:- There are series of decisions of various High Courts on this issue and even Hon ble Jurisdictional High Court in the case of M/s. Industrial Security Intelligence India P Ltd. [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B. Scope of amendment - Whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause? - As before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees contribution on account of provident fund and ESI, whether the due date is as per the respective acts or up to the due date of filing of return of income of the assessee. As noted by Hon ble Supreme Court an amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would be caused undue hardship and for that reason Parliament specifically chose to make the proviso affective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22 of Explanation-2 to s. 36(1)(va) of the Act and not retrospectively. Thus, from the above, it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed. 2021 (12) TMI 557 Additions towards excess share premium u/s.56(2)(viib) - issue of shares over and above fair market value of such shares - share price determined by the assessee by adopting discounted cash flow method - HELD THAT:- If at all, the Assessing Officer is not satisfied with price determined by the assessee in any method, then he can verify methodology followed by the assessee for arriving at share price, but he cannot change different method altogether without any valid reasons. In this case, although the assessee has followed discounted free cash flow method, but the AO has changed to net asset method contrary to position of law. At the same time, although, the assessee claims that it has justified issue of shares at ₹ 430/- per equity share, but on perusal of details filed by the assessee before the learned CIT(A), we find that learned CIT(A) has deleted additions made by the Assessing Officer by following his predecessor CIT(A) order for assessment year 2014-15, where the assessee has issued share at premium of ₹ 90/- per equity share.Since there is abnormal increase in premium charged by the assessee when compared to previous assessment year, we are of the considered view that the learned CIT(A) has completely erred by following his predecessor CIT(A) order, without examining share price arrived at by the assessee at ₹ 430/- per equity share. The issue needs to go back to the file of the Assessing Officer to verify share price determined by the assessee by adopting discounted cash flow method. Hence, we set aside the appeal to file of the Assessing Officer and direct him to reconsider the issue de-novo in accordance with law - Appeal filed by the Revenue is treated as allowed for statistical purposes. 2021 (12) TMI 556 Levy of penalty u/s 272A(2)(e) - returns of income was filed belatedly after the due date specified u/s. 139(4A) and 139(4C) - reasonable cause as provided u/s. 273B - Delay due to Illness of Managing Trustee of the trust - HELD THAT:- The assessee has explained reasons for delay in filing return of income, as per which, the Managing Trustee Smt. Chitra Ganapathy, was falling ill from the year 2006 and was hospitalized for treatment to various illness. In her absence, no one was in a position to take care day to day affairs of the assessee which resulted in delay in finalization of accounts and filing return of income for all these assessment years. But, the delay in filing of return of income was neither intentional nor to derive any undue benefit. Illness of Managing Trustee of the trust during the relevant period will definitely comes under reasonable cause as provided u/s. 273B of the Act for not filing return of income within due date specified under the Act. We further noted that the assessee neither intentionally filed return of income belatedly, nor derived any benefit by filing belated return. In fact, the assessee was having excess of expenditure over income for all these years and thus, by not filing return of income within due date specified under the Act, there is no loss of revenue to the Government - reasons given by the assessee for not filing return of income within due date specified u/s. 139(4A) of the Act comes under reasonable cause as provided under the Act for not levying penalty u/s. 272A(2)(e) - Decided in favour of assessee. 2021 (12) TMI 555 Disallowance u/s 36(1)(va) - late remittance of employees contribution to PF and ESI under the respective Acts - scope of amended provisions of section 43B as well as 36(1)(va) - As contended that assessee has paid the employees contribution prior to the due date of filing of return under section 139(1) - HELD THAT:- On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE ] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT ] had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee 2021 (12) TMI 554 Revision u/s 263 by CIT - interest income received from investments with Cooperative banks is entitled to deduction u/s 80P(2)(a)(i) - Alternatively as contended that if interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income ought to be allowed as deduction u/s 57 - HELD THAT:- As we find in the case of Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] had categorically held that interest income received on investment of surplus funds with Co-operative banks is to be assessed as income from other sources and not income from business (Thereby denying the claim of deduction u/s 80P(2)(a)(i) of the Act) - as further held by the Hon ble High Court that only those interest income received from Co-operative Societies alone (not from Co-operative Banks) is entitled to deduction u/s 80P(2)(d) of the Act. For alternative claim of the assessee, we find an identical issue was considered by the Hon ble jurisdictional High Court in the case of Totagars Co-operative Sale Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the Act prescribes for taxing only the net income (i.e. total income minus the expenses incurred for earning such income), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of the Hon ble jurisdictional High Court in the case of Totagars Sale Co-operative Society[supra]. Claim of deduction u/s 80P(2)(c) - W e noticed that the assessee is having income from distribution of food grains and kerosene under PDS scheme. The net profit arrived from PDS scheme is ₹ 1,08,554, which does not qualify for deduction u/s 80P(2)(a)(i) of the Act. However, the said income is allowable for deduction u/s 80P(2)(c) of the Act (u/s 80P(2)(c) the amount of deduction is restricted to ₹ 50,000). In the instant case, the A.O. had granted deduction u/s 80P(2)(c) of the Act by restricting it to ₹ 50,000. Therefore, the CIT(A) is not justified in directing the A.O. to deny the benefit of deduction u/s 80P(2)(c) of the Act (which the A.O. correctly granted deduction of ₹ 50,000). Appeal filed by the assessee is allowed for statistical purposes. 2021 (12) TMI 553 Disallowance of ESOP expenses - CIT-A deleted addition holding the notional discount on shares issued under ESOP scheme as revenue expenditure allowable u/s 37(1) - Whether allowability of expenditure u/s 37(1) of the Act cannot be determined on the basis of SEBI guidelines? - HELD THAT:- The issue of allowability of ESOP discount being the difference between the market value of shares and the value at which employees had been given the shares is covered, not only by the decision of Hon ble jurisdictional High Court in CIT Vs. Lemon Tree Hotels Ltd [ 2015 (11) TMI 404 - DELHI HIGH COURT ], but also by the judgement of the Special Bench in the case of Biocon Ltd. [ 2014 (12) TMI 838 - ITAT BANGALORE ] also approved by the Hon ble Karnataka High Court [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT ] and held that employees discount represents consideration for services rendered by employees and hence it is a deductible business expenditure and it cannot be equated with share premium and it is to be intended towards profit by securing employees consistent services. As it is an ascertain liability since employees incurred obligation over the distinct period, notwithstanding the fact that exact amount as quantified at the time of exercising options - Decided against revenue. 2021 (12) TMI 552 Validity of assessment - mandation of service of notice under Section 143(2) - Period of limitation to issue notice - non-service of notice under Section 143(2) on time - HELD THAT:- As notice u/s 143(2) has to be served on the assessee within the statutory time limit if he considers that there is any under-statement of income etc. in the return filed by the assessee. Thus, the Assistant Commissioner of Income Tax, Circle : 1, New Delhi, if he is scrutinizing the return of income then, if he considers necessary to vary the return income then he is suppose to send the notice and it is on the address mentioned in the return of income and that to be within the time prescribed under the first provision. If such a statutory requirement is not complied with, then the resultant effect is that assessment order itself is bad in law. This has been held so by the Hon ble Jurisdictional High Court in the case of CIT Vs. Hotline International Pvt. Ltd. [ 2007 (4) TMI 44 - DELHI HIGH COURT] and in CIT V. Lunar Diamonds Ltd. [ 2005 (3) TMI 33 - DELHI HIGH COURT] The Hon ble Delhi High Court in the case of CIT Vs. Lunar Diamonds Ltd. (supra) held that the burden is on the revenue to prove that notice was served within time and when assessee has filed an affidavit stating that it had not received the notice, then the burden was on the revenue to prove that notice was served upon the assessee within the prescribed limit. Here the revenue has failed to prove service on the assessee as stated above. Accordingly, we hold that failure to serve the notice on the assessee within the prescribed statutory time limit, assessment proceedings become void ab initio and consequently the assessment order is quashed - Decided in favour of assessee. 2021 (12) TMI 551 Addition of payment made to subsidiary company - Whether profit earned by Hongkong Subsidiary of the assessee in fact is the profit of the assessee as the it was 100% subsidiary and this legal fa ade was created by the assessee and effective management and control of the subsidiary company was in India? - HELD THAT:- As it is evident that Hongkong entity was a separate legal entity and was registered in Hong Kong. There are enough evidences which show that the Hongkong entity was doing the business and was subject to Hongkong laws. Transfer Pricing Officer has found the transactions between the assessee company and Hongkong entity at arms-length which also establish that the transactions between the assessee company and Hongkong entity were genuine business transactions. There is no evidence brought on record to prove that the control and management of Hongkong entity was being done wholly from India. Reading of the assessment order suggests that it was the finding of DDI that Hong Kong entity was not doing any actual activity which unfortunately has been followed by the assessing officer without adverting to the facts available on record which prove that exports were made by the assessee company to Hong Kong entity. Even the finding of Transfer Pricing Officer in AY 2010-11 cannot be ignored when he records that exports executed by the assessee company to its associated enterprise was short of arms length price by ₹ 3,64,43,842/-. Had there been no activity done by Hong Kong Entity, how could such finding be arrived at by TPO in the first place? Exports were made under the government policies and as per Import Export regulations and this cannot be ignored. There is nothing on record to suggest that the statement of Ms. Chanchal Bhutani was given to the assessee even. Thus, there is nothing before us to take a view different from the view taken by Commissioner of Income Tax (Appeal) and thus we dismiss all these grounds raised by Revenue in this regard. Addition u/s 69C - unexplained purchases - addition based on document found in search from third party - HELD THAT:- Addition was made on the basis of the documents not found from the assessee s possession and control but were made on the basis of the documents founds from Shri R.P.Yadav and these documents were owned up by him. This admission that these documents were owned and belonged to him only was admitted by Shri Yadav during the course of search and also in his statement recorded in the assessment. Name of another entity namely Jas Impex too is appearing on these documents and thus merely on some papers the name of the assessee is appearing does not mean that these documents or contents of these documents relate to the assessee. Statement of Vice President of the assessee company reproduced in the assessment order also mentions that 90% of the total purchases of the assessee company are through Jas Impex. No enquiry has been made from M/s Jas Impex and nothing has been shown to that effect to us. Statement of the son of Mr. R P Yadav has also been reproduced by the AO in the assessment order and there is nothing that he was made available for assessee s cross examination. To rely on the statement of the son of Mr. Yadav more than on the statement of Mr. Yadav him self is quite strange. In our considered opinion, the addition made on the basis of the notings on the loose documents of Mr. R P Yadav in the hands of the assessee company cannot be sustained and was rightly deleted by the learned first appellate authority. Addition as prior period expense - Assessment u/s 153C - HELD THAT:- We do not have any good reason to deviate from the decision of the learned first appellate authority, more particularly the smallness of the among involved and the tax rate being identical. Also, there is nothing which was found in this regard as a result of search as can be seen from the reading of the assessment order and hence in view of Hon ble Delhi High Court s decision in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] also, the disallowance made by the assessing officer could not be sustained and was rightly deleted by CIT(A). We therefore dismiss this ground of appeal of the revenue. 2021 (12) TMI 550 Assessment u/s 153C - Mandation of recording satisfaction - Whether satisfaction note recorded by the AO has not brought out any seized material belonging to the assessee-company, in fact, there is no incriminating document? - HELD THAT:- It is an admitted fact that, firstly, the satisfaction note recorded by the AO does not mention or is based on any seized material belonging to the assessee company and consequently, the additions made by the AO has no co-relation with any seized material. The aforesaid finding of the CIT(A) has not been rebutted by any material placed on record. Therefore, the aforesaid findings of CIT(A) is based on legal principles upheld by the Hon ble Jurisdictional High Court as well as Supreme Court in the case of PCIT vs. Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT ] - Thus the ground of Revenue is dismissed. 2021 (12) TMI 549 Addition on account of scrap - difference in valuation of scrap - Rejection of books of accounts - HELD THAT:- In the present case, having rejected the books of accounts maintained by assessee, Assessing Officer cannot rely upon on the same books of account for the purpose of making addition in respect of sale of scrap etc. Thus, in the light of the above settled legal position, the approach of both the authorities is totally flawed and cannot be sustained in the eyes of law. Thus, the addition made by the Assessing Officer under the normal provisions of the I.T. Act as confirmed by the ld. CIT(A) cannot be sustained under the law. Accordingly, ground of appeal no.1 raised by the assessee stands allowed. MAT computation u/s 115JB - income disclosed on account misclassification of scrap from excluding the book profits for the purpose of computing the tax liability u/s 115JB - whether the income surrendered to tax under the normal provisions of the I.T. Act/addition made to returned income is required to be added back to book profits for the purpose of computing the tax liability under the provisions of section 115JB of the Act or not? - HELD THAT:- Admittedly, in the present case, the additional income disclosed for the purpose of computing the tax liability under the normal provisions of the I.T. Act does not fall any of the items mentioned in clauses (a) to (j) of the Explanation. We have carefully perused the audited financial statements wherein we find no qualification by statutory auditors on financial statements. Further, we note that financial statements were duly approved in Annual body of the company. Therefore, the Assessing Officer is not justified in adding back the additional income offered to tax under normal provision of Act to book profits for the purpose of computing the tax liability u/s 115JB of the Act. There is yet another reason to hold that mere admission in the statement recorded u/s 132(4) cannot form the basis of addition - addition of income disclosed under normal provisions of Act to book profits for the purpose of computing tax liability u/s 115JB is a pure question of law. The Hon ble Supreme Court in the case of CIT vs. V. Mr. P. Firm, Muar [ 1964 (10) TMI 13 - SUPREME COURT] laid down that if a particular income is not taxable under the Act, it cannot be taxed on the basis of doctrine of estoppels, i.e. there is no estoppels against law/provisions of Statute. Therefore, in the light of settled position of law that mere admission of assessee cannot form the basis of assessment, addition of income disclosed under normal provisions of the Act, cannot be added back to book profits for the purpose of computing tax liability u/s 115JB of the Act. Thus, the ground of appeal no.2 raised by the assessee stands allowed. 2021 (12) TMI 548 Disallowance of late remittance of employees contribution to PF and ESI under the respective Acts - difference between the returned income and the assessed income u/s 143(1) - as contended that assessee has paid the employees contribution prior to the due date of filing of return under section 139(1) - HELD THAT:- As decided in M/S SHAKUNTALA AGARBATHI [ 2021 (10) TMI 1196 - ITAT BANGALORE] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1). The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] the em ployees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee 2021 (12) TMI 547 Deduction u/s 37 in respect of 15% of sale proceeds retained by the CEC [ Central Empowered Committee] - sale proceeds of iron ore extractions as a compensatory payment towards damages caused to the environment and forest degradation on account of mining - assessee firm has credited an amount as iron ore sales through e-auction - HELD THAT:- ITAT in assessee s own case [ 2021 (2) TMI 1145 - ITAT BANGALORE] had rejected the plea of the assessee that 15% of the sale proceeds retained by the CEC is to be excluded from the total turnover on the principle of diversion of income by way of overriding title. The Tribunal had categorically held that 15% of sale proceeds was payable to SPV account after it accrued to the assessee. However, the ITAT held that 15% of the sale proceeds constitute an allowable business expenditure u/s 37 Observation of the AO and the CIT(A) (ground No.5) that the contribution to SPV is nothing but CSR - As we find that the assessee is a partnership firm, which is not under the statutory obligation for complying with CSR provisions. The Bangalore Bench of the Tribunal in the case of Shri B.Rudragouda [ 2021 (4) TMI 1249 - ITAT BANGALORE] had held that the assessee being an individual and not a company, is not governed by section 135 of the Companies Act, 2013 and the impugned expenditure incurred by the assessee is not in the nature of CSR expenditure as mentioned in that section and it cannot be disallowed by invoking the provisions of Explanation 2 to section 37 We hold that the assessee is entitled to deduction u/s 37 of the I.T.Act in respect of 15% of sale proceeds retained by the CEC. It is ordered accordingly. 2021 (12) TMI 546 Deductibility of the amount of service tax paid under VCES, 2013 - contention of the assessee is that the amount paid was a discharge of liability which got crystallized during the year and hence was an expenditure deductible for the year - AR raised an alternative argument that the amount of service tax should be allowed in terms of section 43B of the Income-tax Act, 1961 - HELD THAT:- A cumulative reading of the main part of the provision along with its proviso deciphers that if any tax, duty, cess or fee etc. is received, say, on 31st March of the financial year X, but is actually deposited on 5th of April of the financial year X +1, then going with the main provision, the deduction should be allowed in the year of payment that is X+1, but the proviso intervenes to provide for deduction of such an amount in the financial year X - there is a clear cut mandate that incurring of liability to pay tax, duty, cess or fee etc. in a particular previous year is not a relevant criterion for granting deduction. Rather it is only when the amount of such tax etc. is actually paid by the assessee that the deduction follows. The position which ergo emerges is that an assessee is otherwise eligible for claiming deduction, in law, in the financial year of raising the invoice, even if the service tax is neither received nor deposited in such a year. If however, the assessee suo motu does not claim deduction of service tax in the financial year of raising invoice for not having received and deposited the amount of service tax, he can validly claim deduction u/s 43B in the later year on realizing the amount and paying the service tax. Reverting to the facts of the case, it is seen that the amount of service tax has actually been paid in the year under consideration but no deduction was claimed by the assessee in the earlier financial years when Incentives, impliedly including the amount of service tax, were received. As such, the same has to be allowed as deduction in the year in question in terms of the main provision of section 43B granting deduction at the time of actual payment. When the assessee incurred liability in respect of service tax in earlier years for which deduction was otherwise allowable under this Act, the deduction will be allowed in computing the income of the year in which the amount is actually paid which is the year under consideration as no such deduction was claimed in earlier years. On a relative reading of section 43B(a) in juxtaposition to section 145A(ii), it becomes explicitly unambiguous that any sum payable by way of tax, under any law for the time being in force, which essentially includes service tax also, is required to be considered for the purposes of section 43B. The fortiori is that the amount of service tax is includible in the total income in the first instance, which then qualifies for deduction or non-deduction u/s 43B of the Act. Thus, the contention of the Revenue that the amount of service tax is not includible in the total income at the time of collection is devoid of merits and hence jettisoned. Once it is held that the amount of service tax is includible in the total income of the assessee, the inevitable conclusion which follows is that its deduction will also result, which may be otherwise allowable or disallowable as per the facts and circumstances of a case. Such payment during the year is nothing but, in a way, reversal of the original entry of receipt passed in the earlier years. Once receipt of the amount of service tax was included in the total income in earlier years, the obvious corollary is that its payment in the year in question will also qualify for deduction from the total income. In view of the foregoing discussion thus hold that the sum paid by the assessee during the year as service tax relatable to earlier years should be allowed as deduction in the year under consideration. The impugned order is, therefore, overturned on this score. Appeal allowed. 2021 (12) TMI 545 Revision u/s 263 by CIT - Assessment in the case of the appellant for the captioned Assessment Years so completed was on the basis of cost plus method on the salary of expat employees, wherein 25% of salary is attributable to operation in India and cost of 20% of salary was applied on the same to determine the profit taxable in India - HELD THAT:- As it is mandatory to follow the directions of the DRP by the Assessing Officer failing which the assessment order would become nonest. In our considered view, the Assessing Officer passed the impugned final assessment orders not carrying out the binding directions of the DRP which is a clear violation of the binding provisions of section 144C(13) of the Act. Therefore, in our humble opinion, the impugned assessment orders are non-est. We are of the further opinion that once the assessment orders have been held to be non-est, the ld. CIT could not have assumed jurisdiction u/s 263 of the Act over a non assessment order which can never be erroneous and prejudicial to the interest of the Revenue. The contention of the ld. DR that the Assessing Officer has followed the directions of the DRP but somehow over looked the directions issued. We are of the considered view that there is no choice given to the Assessing Officer to follow one part of the directions of the DRP and not to follow the other part. Whether the assessee can challenge the validity of the assessment order in collateral proceedings u/s 263? - In our considered opinion, the assessee can challenge the validity of the assessment order in the collateral proceedings u/s 263 of the Act since the assessment order itself is bad in law. Therefore, such an order cannot be revised u/s 263 of the Act. Our view is fortified by the decision of Krishna Kumar Saraf [ 2015 (10) TMI 2168 - ITAT DELHI] AND Super Sonic Technologies [ 2018 (12) TMI 912 - ITAT DELHI] - Considering all we are of the considered opinion that the ld. CIT has erroneously assumed jurisdiction u/s 263 of the Act when the impugned assessment orders were non-est. - Decided in favour of assessee. 2021 (12) TMI 544 Penalty order u/s 271(1)(b) - non-compliance of the notices - nonappearance before the learned assessing officer - Unexplained deposits to bank account - HELD THAT:- Assessee has made representation before the assessing officer in the month of February 2014 that the bank account for which the reopening of the assessment has been made in case of the assessee has not operated by the assessee but was lying dormant for almost 3 years - As stated that somebody is misusing the bank account of the assessee. It was further informed to the assessing officer that assessee has filed a complaint in police about the fraud conducted on the assessee. These facts were stated before the assessing officer. The fact also shows that assessee is an individual is about 63 years and having a very meagre sources of the income. AO has mentioned in the penalty order that notices were issued to the assessee on 2 May 2013, 2 August 2013, 10 September 2013, 1 October 2013 and 17 October 2013 however it is disputed by the assessee that no such notices have been received by the assessee. Even otherwise the assessment order has been passed by AO u/s 144 of the income tax act - as the assessee itself has denied that he has entered into any such transaction of depositing some in cash or through clearing in his bank account for last two years naturally, assessee looking at his age as well as the smallness of the business, first approached the police authorities by making a complaint. In view of this we find that t There is a sufficient and reasonable cause with the assessee, irrespective of the addition made in the assessment order, for failure to comply with the notices to appear before the learned assessing officer. In view of the above facts we allow the appeal of the assessee and direct the learned assessing officer to delete the penalty u/s 271 (1) (b) - Decided in favour of assessee. 2021 (12) TMI 543 TDS u/s 195 - disallowance of non deduction of TDS on net profit charges and administrative support charges as well as addition on account of cash discount given to related parties - HELD THAT:- As in assessee own case [ 2021 (10) TMI 1005 - ITAT DELHI] Assessee availed IT Network facility from its non-resident group companies and third party domestic companies. The services/facility consists of internet proxy services and access charges. The services are standard services/facility provided to the assessee which do not require any human intervention. In fact, the assessee has given detailed description of the flow of services thereby substantiating that no human intervention was involved before the Assessing Officer. The assessee had entered into the agreements with the foreign group companies to promote sale of its products. The discounts were offered to increase the sales of certain category of products of the assessee and were in line with the regular business practices. These facts are identical to that of A.Y. 2011-12. No new or distinguishing facts were pointed out by the Ld. DR at the time of hearing. Hence, both the appeals of the assessee are allowed. 2021 (12) TMI 542 Income from house property - determination of ALV of the property - HELD THAT:- As after considering the ALV of ₹ 35,000/- per month which was the benchmark value for FY 2009-10 after the order of the CIT(A) and after considering the incremental rise in rent. We find, the CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding para - as submission of the ld. Counsel for the assessee that certain additional evidences have not been considered either by the AO or by the CIT(A) which have subsequently come to light and which have a bearing on the facts of the case - we find there is nothing on record to suggest as to what is the fate of the case after the ld. CIT(A) upheld the issue of annual letting value (ALV) of the property during FY 2009-10 by reducing the same to ₹ 35,000/- as against ₹ 40,000/- determined by the AO. Thus finality of such order could not be explained by either side. Further, the fate of the case for AY 2012-13 and prior to that are also not available before us and the ld. Counsel for the assessee could not throw any light on the same. We deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh and after giving due opportunity of hearing to the assessee. He shall verify the record for the past years and also the various evidences filed by the assessee which were not considered by the CIT(A) as well as the AO and decide the issues as per fact and law - The grounds raised by the assessee are accordingly allowed for statistical purposes. 2021 (12) TMI 541 Benefit of exemption u/s 10(23C)(iiiac) to the assessee society - when the society is not substantially financed by the government in view of Rule 2BBB of the Income Tax Rules, 1962 - HELD THAT:- As in the light of the decision rendered in the case of CIT, Bangalore vs. Indian Institute of Management [ 2015 (2) TMI 360 - KARNATAKA HIGH COURT] and Rule 2BBB inserted by the IT (Thirteenth Amendment) Rules, 2014 prescribing the said percentage at 50% and by referring to the Rule 230(8) of the General Financial Rules, 2017. As passed by the ld. CIT (A) by applying the relevant Rules and law laid down in case of CIT vs. Indian Institute of Management [ 2015 (2) TMI 360 - KARNATAKA HIGH COURT] as the percentage of grant-in-aid to the assessee to the year under consideration is at 50.85% (which is inclusive of interest). Even otherwise, Hon ble High Court has held that the word wholly and substantially financed by the Government cannot be confined only to annual grants, apart from providing annual grant, if Government granted land and invested money in building and infrastructure etc. all that has to be taken into consideration. So, the case of the assessee is clearly covered under Rule 2BBB of IT (Thirteenth Amendment) Rules, 2014 having total grant-in-aid to the tune of 50.85% - in view of the matter, we find no infirmity or perversity in the impugned order passed by the ld. CIT (A), hence the appeal filed by the Revenue is hereby dismissed. 2021 (12) TMI 540 Disallowance of packing expenses and loading and unloading, cartage outward, general expenses and staff welfare expenses - HELD THAT:- There is no dispute that the additions confirmed by the ld. CIT(A) are on adhoc basis. It was incumbent upon the Assessing Officer/ld. CIT(A) to point out particular expenses which were not verifiable or which were not supported by bills and vouchers, which he has failed. Further, there is no dispute that the books of accounts are duly audited and no adverse remarks have been made by the auditors. The books of account have been accepted by the AO - Therefore, in our considered opinion, adhoc disallowances confirmed by the ld. CIT(A) are without merits and deserve to be deleted. We direct the Assessing Officer to delete the additions so made - Decided in favour of assessee. 2021 (12) TMI 539 Disallowance u/s 14A read with rule 8D - assessee company has made suo motu disallowance - HELD THAT:- When we examine impugned order passed by the ld. CIT (A) it does not lead to any conclusive findings as per grounds raised by the assessee company that disallowance cannot be more than exempt dividend income earned by the assessee during the year under consideration. Rather ld. CIT (A) has confused the entire controversy sought to be decided by the assessee by partly following his own order passed in AY 2012-13 but has lost sight of all the facts brought on record by the assessee. Thus, the entire findings are cryptic and incomprehensible. In these circumstances, we are of the considered view that the issue has not been examined by ld. CIT(A) by thrashing the facts in the light of the law applicable thereto. Consequently, this issue is remitted back to the ld. CIT(A) to decide afresh in the light of the decisions rendered by Hon ble Delhi High Court in the cases of as Joint Investments (P.) Ltd. [ 2015 (3) TMI 155 - DELHI HIGH COURT] AND MAXOPP INVESTMENT LTD., CHEMINVEST OTHERS [ 2011 (11) TMI 267 - DELHI HIGH COURT] . Payment to its Associated Enterprise, M/s. Hero Global Design Ltd., for providing engineering services - HELD THAT:- The issue is identical and services have been rendered by M/s. Hero Global Design Limited, and since then business model has not been changed, and whose engineers were constantly available within the factory of the assessee company and have been regularly being paid for their services. So, following the order passed by the coordinate Bench of the Tribunal in assessee s own case for AY 2012-13 [ 2020 (4) TMI 51 - ITAT DELHI] we find no infirmity or illegality in the impugned deletion made by the ld. CIT (A), hence grounds no.3 4 are determined against the Revenue. 2021 (12) TMI 538 Disallowance of ESOP expenses - AO disallowed the claim holding that it is a notional loss - HELD THAT:-This issue is squarely covered in favour of the assessee by the decision of Biocon Ltd [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] as held assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. Disallowance of interest on advance - interest free loan granted to a joint venture company - HELD THAT:- As the assessee has huge non-interest-bearing funds available with it against the amount advanced interest free to a joint-venture company, the issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of CIT versus Reliance Industries Ltd [ 2019 (1) TMI 757 - SUPREME COURT] - thus we direct the learned assessing officer to delete the disallowance of interest expenditure. Addition being provision of the gratuity expenditure Provision for gratuity liability - Provision being created in compliance with revised Accounting Standard-15 issued by the Institute of Chartered Accountants of India (ICAI), relating to accounting of employee benefits - HELD THAT:- The incremental provision on account of post-retirement gratuity to employees has been made in respect of liability in presenti, viz., entitlement earned by the employee while in service until the end of the relevant previous year, on the basis of actuarial valuation Since the aforesaid liability was quantified and recognized on a scientific and rational basis based on report of the actuarial valuer, the liability therefore crystallized and accrued in the relevant assessment year itself and was allowable deduction in that year. As relying on M/S HEWLETT PACKARD INDIA (P) LTD. [ 2008 (3) TMI 23 - HIGH COURT OF DELHI] liability is considered as ascertained if the same is determined on actuarial valuation. The court held that the provision made for contingent liability was entitled to deduction if the provision was determined accurately and scientifically. In view of this we hold that provision of gratuity made in accordance with AS 15 and backed by actuarial valuation is an ascertained and current liability which cannot be added to the book profit while working MAT . Thus Ground is allowed. 2021 (12) TMI 537 Disallowance of deduction claimed u/s 80IB(10) - assessee had offered additional income in the proceedings initiated under section 153C of the Act - Restriction on claim of deduction in view of provisions contained in section 80A(5) - receipt of on-money has also been accepted by the assessee as would be evident from additional income offered by the assessee in the returns of income filed in pursuance to notices issued under 153C - whether against the receipt of such on-money, the assessee can claim deduction under section 80IB(10)? - HELD THAT:- The departmental authorities have not disputed the fact that the receipt of on-money is in respect of the very same project from which the assessee has not only declared income in the original return of income but has also claimed deduction under section 80IB(10) - assessee s claim of deduction under section 80IB(10) in respect of the very same project has been allowed in the original assessment proceedings. Therefore, the deduction claimed under section 80IB(10) of the Act in the returns filed under section 153C of the Act is in continuation to the claim made in the original returns of income. The prohibitory conditions of section 80A(5) would not be applicable. In any case of the matter, the revenue does not dispute the fact that the assessee is otherwise eligible to claim deduction under section 80IB(10) of the Act in respect of the profit earned from the subject project. The additional income offered by the assessee because of receipt of on-money, undoubtedly, forms part of the profit earned from the subject housing project. Therefore, merely because the additional income is offered in a search related assessment proceeding under section 153C of the Act, assessee s claim of deduction cannot be disallowed. See Malpani Estates vs ACIT [ 2014 (2) TMI 944 - ITAT PUNE ] Since the additional income offered by the assessee goes to enhance the business income derived from the eligible housing project, the assessee would be entitled for deduction under section 80IB(10) - Decided in favour of assessee. 2021 (12) TMI 536 Levy of penalty u/s. 272A(2)(e) - assessee did not voluntarily file its return of income within the time limit prescribed under the Income Tax Act - Proof of deliberateness or deceptiveness in not filing the return of income - HELD THAT:- We find that assessee has submitted reasonable cause for the delay and placed reliance upon several case laws in support of these both before the AO as well as CIT(A). None of them have been dealt with by the AO or CIT(A). This is complete disregard of judicial discipline. It is noted that in the case of HTSL community Service Trust [ 2012 (4) TMI 152 - ITAT BANGALORE] has held that an attempt of deliberateness or deceptiveness is the associated with word failure - also in the case of Vatavaran Trust [ 2006 (2) TMI 225 - ITAT DELHI-I] and held that there was excess of expenditure over income in all assessment years, assessee s belief that it was not obliged to file return of income u/s. 139(4A) was bona fide and this constituted reasonable cause, hence penalty u/s. 272(A)(2) (e) is not leviable. We are of the considered opinion, there was a reasonable cause for the assessee for the delay and the case laws referred above are duly applicable. Hence, in the background of aforesaid discussion and precedent, we set aside the orders of the authorities below and delete the penalty. We find that assessee s plea in the present case duly falls under the ken of aforesaid case laws wherein similar penalty has been deleted. No contrary decision has been produced before us. As held by Hon ble Supreme Court in Motilal Padampat Sugar Mills' [ 1978 (12) TMI 45 - SUPREME COURT] that there is no presumption that everyone known law. - Decided in favour of assessee. 2021 (12) TMI 535 Benefit of deduction u/s 54 v/s 54F - CIT(A) allowed the Claim U/s 54F instead of Section 54 - HELD THAT:- The sale deed was executed for sale of residential plot on 28/10/2009 and the assessee had given contract for construction of the house on 12/11/2009. It is a trite law that the benefit of Section 54 is available only to an individual or HUF when the asset transferred should be a long-term capital asset, being a residential house property and sold within a period of one year before or two years after the date of - transfer of old house, the -taxpayer should - acquire- another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional). In the present case, the sale deed was executed on 28/10/2009 and the construction was started within one year from the date of sell. Therefore, considering the totality of facts and circumstances of the case, the assessee is entitled to get benefit of deduction u/s 54 and we allow the claim u/s 54 of the Act to the assessee 2021 (12) TMI 534 Exemption u/s 11 - Denial of exemption as assessee society had made the interest free advances to its Members which transaction was covered under the provisions of Section 13(1)(c) and 13(1)(d) read with Section 13(3) and the assessee Society had paid excessive salary to its Members having contravened the provisions of Section 13(2)(c) - CIT(A) deleted the disallowance so made by the AO - HELD THAT:- In our view, it is not a case of any undue favour by the assessee to its members. In this case, the ld. CIT(A) has discussed that the Members of the Society had already offered their land for the construction of building for technical activities of the assessee Society. The assessee Society, as per its convenience, paid the sale consideration in installments, which were spread over a period and ultimately the Sale Deeds have been executed at the Collector rate. We, therefore, do not find any infirmity in the order of the ld. CIT(A) on this issue - in the case in hand, it is duly proved on the file that the payments were made to the members for the purchase of land and such payments were made at arms length price. Therefore, in view of the above, we do not find any infirmity in the order of the CIT(A) and the same is upheld on this issue. Payment of salary to certain members of the society - only objection by the AO was that the payment during the year was increased to large extent as compared to the payments made in earlier years - The total percentage of expenses incurred by the society on account of payments made to these persons constitute less then 1% of the total expenses incurred by the society. Further the total payments made by the society on account of salaries to these persons are less then 2.5% of the total expenditure incurred on account of salaries. These facts and figures have not been considered by the AO before making the disallowance. Also, find that no adverse material has been brought on record by the AO to hold that services have not been rendered by these persons and payments made to these specified persons are excessive and unreasonable. We hold that there is no justification in the action of the AO for making a disallowance under this head. Accordingly, this ground of appeal is allowed. - Decided against revenue. 2021 (12) TMI 533 Assessment u/s 153C/153A - Addition u/s 68 - HELD THAT:- Whatever document which has been mentioned in the seized document, are ROC, TDS returns banks cheque books for payment of taxes, fees, etc. pertaining to the assessee. Ostensibly, such documents cannot be held to be incriminating and ld. CIT(A) has already noted that none of these documents are the basis or premise of the impugned additions. Another fact noted in the appellate order is that the AO himself has concurrently assessed all the investor companies right from the Assessment Year 2009-10 to 2012-13 and similar additions have been made in respect of the same amount in their hands which again does not warrant any addition in the hands of the assessee company. The documents as mentioned in the seized document has already been held to be not incriminating in nature which has been duly explained by the assessee and appreciated by the ld. CIT(A) in the foregoing paragraphs as noted above. Apart from that, even before us there has been no rebuttal that the impugned additions are based on any incriminating seized documents which is also evident from the grounds raised by the Revenue wherein it has been stated that SLP has been filed against the decision of Hon ble Delhi High Court in the case of Kabul Chawla ( 2015 (9) TMI 80 - DELHI HIGH COURT] - any statement recorded of a different person in the case of another search cannot be held to be incriminating material for the purpose of assessment within the scope of Section 153A and Section 153C has held by the Ld. CIT (A) following the decision of Hon ble Jurisdictional High Court. Hon ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] wherein the Hon ble Apex Court upheld the order of the Tribunal that addition cannot be made for the assessment years for which there are no incriminating documents found during the course of search in the assessments framed u/s 153C. Seized incriminating material has to pertain to the assessment year in question and have co-relation, document-wise, with the assessment year. This requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S. 153A. No addition can be made where the assessment have not abated and were pending at the time of search, no addition can be made without any incriminating material. Thus, the finding by the ld. CIT (A) which is based on various judicial principles and on the facts of the case cannot be tinkered with without any contrary material or rebuttal by the Department, therefore same is confirmed. Appeal of the Revenue is dismissed. 2021 (12) TMI 532 Validity of reopening of assessment u/s 147 - reopening beyond period of four years - A.O. in the instant case completed the assessment under section 143(3) determining the total income of assessee more than returned income - HELD THAT:- We find the assessment in the instant case was completed under section 143(3) on 15.12.2009 and the assessment year involved is A.Y. 2007-2008. We find the assessee had given sufficient information of all the primary facts regarding the amount of ₹ 1.07 crores subsidised by Sharecap Exchange, Chicago, USA towards Risk Management, Strengthening Middle Management and Business Process Reengineering of the company operations which have already been reproduced in the preceding paragraph. Further a perusal of the reasons recorded shows that there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. In the instant case the primary facts were already disclosed in the Notes to Accounts filed along with the balance-sheet which is the subject matter of reopening of the assessment and since the original assessment was completed under section 143(3) and since there is no allegation by the A.O. of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and since there is no tangible material for belief that income chargeable to tax has escaped assessment, therefore,we hold that the reassessment proceedings initiated by the A.O. in the instant case after a period of four years from the relevant assessment year are not in accordance with Law. - Decided in favour of assessee. Customs 2021 (12) TMI 531 Revocation of suspension under censure of warning and imposition of penalty of ₹ 50,000/- - Obligations of Authorised Courier - allegation of undervaluation and misdeclaration of imported consignments - HELD THAT:- As a matter of fact proceedings against the appellant under Customs Act, 1962 have been dropped holding that no violation had been made. Breach alleged is on the basis of hyper and self serving interpretation leveled against the appellant and is contrary to establish practice followed all over the ports by all the courier which was in full knowledge of the department at all the time. It is also relevant that necessity of G Card Holder being employed as courier against as courier to F card for Customs Broker, the level of compliance by courier is brought down to the extent of procedural compliance only and not substantive compliance expected from F Card. There is no mention in the finding as to which of the information had been withheld from the department by the appellant. All 21 BEs for respective HAWBs were filed simultaneously and back to back in close time proximity. There is no allegation that the Bill of Entries were filed in staggered manner to avoid spotting of multiple Bill of Entries in the system. All these multiple Bill of Entries simultaneously residing in the system and were open to Assessing Officer for satisfying himself. The appellant has exercised reasonable and requisite due diligence while ascertaining and even while furnishing the information with the proper officer in reference to filing the impugned three courier EWBs and thus has abide by all the provisions of the Act and the rules regulations and orders issued thereunder. The compliance of 12(1)(x) CIER by appellant has already been held by Commissioner Customs in an order dated 25.11.2020 - even Regulation 12(i)(v) and 12(i) (x) have not be violated by the appellant. The findings against the appellant in the order under challenge are therefore incorrect. Appeal allowed - decided in favor of appellant. Corporate Laws 2021 (12) TMI 530 Seeking a direction to the respondent to fill up the vacancies of Chairman, NCLAT and President of NCLT without any further delay - seeking issuance of letters of appointment to the candidates pursuant to the Selection procedure initiated in 2019 and to fill up the remaining vacancies of Members of NCLT and NCLAT - HELD THAT:- As the Government has already initiated the process of reappointment by writing to the Hon ble Chief Justice, we trust and hope that the reappointment process should be completed expeditiously, as there is no necessity of issuance of any advertisement for participation of other eligible candidates. Reappointment of members can be considered separately without waiting for the process of fresh appointments to commence. As the strength of the members of the NCLT and NCLAT is depleting which would be detrimental to the smooth functioning of the Tribunals, it is directed that the Government to complete the process at the earliest and not later than two months. Petition disposed off. 2021 (12) TMI 529 Approval of the Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and the National Company Law Tribunal Rules, 2016 - HELD THAT:- Certificates of respective Statutory auditors of all the petitioner companies, have been placed on record to the effect that Accounting Treatment proposed in the Scheme of Amalgamation is in conformity with the Accounting Standard notified by the Central Government as specified under the provisions of Section 133 of the Companies Act, 2013. The shareholders of the applicant companies are the best Judges of their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well settled that the Tribunal evaluating the Scheme, of which sanction is sought under Section 230-232 of the Companies Act of 2013, will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors. Upon considering the approval accorded by the members and creditors of the Petitioner companies to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the report of official liquidator, there appears to be no impediment in sanctioning the present Scheme - sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013. Application allowed. Insolvency & Bankruptcy 2021 (12) TMI 528 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - Whether the relevant column in Section 7 Application having not been amended by Respondent No.1, other materials can be looked into for the purposes of finding an acknowledgement within the meaning of Section 18 of the Limitation Act? - HELD THAT:- The filing of an Application under Section 7 in Form-1 is procedural requirement. The requirement in procedural rule has not to read in a manner, which may preclude an affected party from bringing other materials on record to bring home his point. The procedure prescribed in the Rules are with an intent to capsule the relevant information in prescribed column. But that is not to shut out any other relevant information, if brought subsequently. The Hon ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. [ 2021 (8) TMI 315 - SUPREME COURT ] has laid down that IBC Rules and Regulations have to be construed liberally, in a purposive manner to further the objects of enactment. Without amending the relevant column in Section 7 Application, a Financial Creditor can bring relevant materials on record before the Adjudicating Authority by way of supplementary affidavit, rejoinder affidavit and the additional affidavit, which materials can be looked into and non-amending of relevant column in Form-1 shall not preclude the admissibility of the materials brought subsequently by way of supplementary affidavit or additional affidavit. Whether the balance sheet as on 31st March, 2017, which was filed along with supplementary affidavit before the NCLT, can only be looked into and balance sheets for the year 2015 and 2016 cannot be looked into? - HELD THAT:- The balance sheets as on 31st March, 2015 and 31st March, 2016, which have been filed along with the reply affidavit of Respondent No.1 before this Appellate Tribunal, can be looked into along with the balance sheet as on 31st March, 2017, which was already on record before the Adjudicating Authority. Whether balance sheets for the years 2015, 2016, 2017 contain an unequivocal acknowledgement of debt by the Corporate Debtor, which is a sufficient acknowledgement within the meaning of Section 18 of the Limitation Act? - HELD THAT:- Upon a reasonable construction of the language used by the debtor in writing the relation of debtor and creditor must appear to be distinctly admitted, that it must be admitted also to be a subsisting jural relation, and then an intention to continue it until it is lawfully determined must also be evident. The Application filed by Financial Creditor under Section 7 of the IBC mentions in detail of the Rupee Term Loans taken from the Bank and Financial Institutions. The details as mentioned in the financial statement clearly indicate that Rupee Term Loans were taken with regard to power project of units of 270 MW each aggregating to 540 MW and for security of which loan mortgage, charge of immovable properties of the Company for present and future as well as hypothecation of all movable properties of the Company including movable plant and machinery, spares, tools and accessories was made. Balance sheets as on 31st March, 2015, 31st March, 2016 and 31st March, 2017 contain the acknowledgement within the meaning of the Section 18 of the Limitation Act and Respondent No.1 is entitled to claim that fresh period of limitation started after the acknowledgement. The date of default being 31st July, 2013 and balance sheet as on 31st March, 2015 having signed on 2nd September, 2015, the acknowledgement was made within expiry of three years period of limitation from 31st July, 2013. The acknowledgement continues in balance sheets as on 31st March, 2016 and 31st March, 2017. Hence, the Application under Section 7 of the IBC filed in 26th December 2018 is well within limitation and has rightly been admitted by the Adjudicating Authority. 2021 (12) TMI 527 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- As per Form V, Part IV, the Corporate Debtor is liable to pay an outstanding sum of ₹ 35,32,674/- for the period from 01.04.2015 to 31.12.2018. The date of default occurred on the last date of payment made by the Corporate Debtor on 21.07.2018 and the present application was filed on 28.01.2019, hence the debt is not time barred and the application is filed within the period of limitation - The Applicant has filed an affidavit under section 9(3)(b) dated 25.01.2019 affirming that no notice of dispute has been given by the corporate debtor relating to dispute of the unpaid operational debt - the registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application. The present application is complete and the Applicant is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. The present application is admitted, in terms of section 9 (5) of IBC, 2016 - Moratorium declared. Service Tax 2021 (12) TMI 526 Interpretation of statute - scope of Support Services of Business or Commerce - Applicability of 15/2006-ST dated 24th April, 2006 effective from 1st May, 2006 or the amendment to the Finance Act, 1994 with effect from 16th May, 2008 - whether the adjudicating authority was right in trying to import the fact of the definition which was inserted with effect from 2008 09 in sub-clause (zzzzj) in clause 105 of section 65 of the Act which, admittedly, came into effect only from 16th May, 2008? HELD THAT:- The said sub-clause has newly been inserted in the statute. The settled legal interpretation which has been given by the Hon ble Supreme Court in several decisions when amendment brought about to a statute by insertion of a new definition or a clause, such insertion will always be prospective in nature. In this regard, guidance provided by the decision of the Hon ble Supreme Court in BALAJI ENTERPRISES VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS [ 1997 (5) TMI 108 - SUPREME COURT] . In the said decision the Court noted that waste and scrap could not be brought to tax as aluminium in crude form as waste and scrap was already included in item no.27(A) of the Tariff and if that is so there would not have been any need for making the entry (aa) and the amendment left sub-item (A) of item 27 untouched. Thus, it was held that the sub-item (aa) was not clarificatory of sub-item (A) of item 27 and, therefore, it cannot be held to be retrospective. Thus, this aspect was rightly noted by the Tribunal. The Tribunal which is the last fact finding authority in the hierarchy of authorities under the provisions of the Act had examined the facts and concluded that the nature of activity cannot be construed within the ambit of service tax. Thus, there is no error in the order passed by the Tribunal. The appeal filed by the Revenue is dismissed and the substantial questions of law are answered against the Revenue. Central Excise 2021 (12) TMI 525 Refund for the 100% payment of duty made under N/N. 39/01-CE from PLA or to the extent of 75% in terms of amended N/N. 16/08-CE and 36/08-CE - HELD THAT:- The appellant have not filed any appeal against the rejection of refund of differential basic excise duty consequently the Learned Commissioner (Appeals) has not given any finding. The appellant have filed the appeal before Commissioner (Appeals) exclusively in respect of Education Cess and Secondary Higher Education Cess which has been allowed, therefore, there is nothing left in the impugned order to challenge before this Tribunal. Hence the appeal is not maintainable on this ground itself. The Hon ble Supreme Court in the case of UNION OF INDIA ANOTHER ETC. ETC. VERSUS M/S V.V.F LIMITED ANOTHER ETC. ETC. [ 2020 (4) TMI 669 - SUPREME COURT] held that the amemdment Notification whereby the refund was restricted to 75% is valid and legal, therefore, the appellant is entitled for the refund in respect of Basic Excise Duty only to the extent of percentage prescribed therein and not for the full amount of duty paid from PLA. The appellant is not entitled for the refund of differential basic excise duty - Appeal dismissed. CST, VAT & Sales Tax 2021 (12) TMI 524 Right to cross-examine - whether the imposition of penalty subsequent to and by referring to the statement/material/Books recovered on 13.09.2010 from the house of K. Ravindran and in the circumstances of these cases, whether the right of the dealer to cross-examine K.Ravindran is tenable or not? - HELD THAT:- The Revenue has categorized the recoveries of books under the 3 categories: 1) from Mrs.Rekha Pharmaceuticals, Palakkad, 2) from the residence of the proprietrix of the registered dealer, 3) from Mr.K.Ravindran from Palakkad, an employee of the dealer. The analysis in the show-cause notice refers to the books of account recovered from the house of Ravindran. Variation between the figures shown in the returns filed by the dealer and the details noticed from the books of accounts recovered from the house of Ravindran constituted the basis for penalty proceedings. The reply of the dealer is excerpted above and on material facts and accusations made against the dealer, the dealer has not only denied the veracity of the statement and books of account relied on by the Revenue but requested an opportunity of cross-examination if the Revenue desires to proceed on the statement of Ravindran or the books of account recovered from the house of Ravindran. The order dated 10.03.2014 in Annexure-D imposes a penalty by completely accepting details noted from the books of account recovered from the house of Ravindran. The broad test in matters of present nature is the nature of the interest affected by the decision, and whether the decision relates to the imposition of a detriment on an individual e.g. penalty, sanction or cancellation, then the requirement to follow minimum procedure while making such decision is required. The paradigm situation in which the duty to act fairly will apply, is where a decision-maker is taking a decision that will or may have an adverse impact on the dealer. Ultimately the right is dependant on nature of the proceeding, or of the function exercised; the conduct of the party and the circumstances of the case. So now we have to examine whether the circumstances of the case are persuasive enough to consider whether the denial of right to cross examine Ravindran has resulted in prejudice to the Dealer. The crucial aspect of the matter at this stage is, these books have been recovered behind the back of the dealer. On this either aspect, the argument of Mr. Anil D Nair is contextual to be noted to wit that there is no prohibition for the Revenue to collect or gather information against the dealer, but any material relied on by the Department must be put to the dealer and if the material is contested, the semblance of fair play and procedure are followed before accepting material gathered behind the back of the dealer as constituting the basis for imposition of penalty. The test here is not only the procedural impropriety but the real prejudice in accepting extraneous and other relevant material constituting the basis for imposing penalty. We are not convinced with the reasoning recorded by the Tribunal. We appreciate the objection raised by Mr. Muhammed Raffiq that the Appellate Authority, if had a reason to hold in the case on hand that the denial of the right of cross-examination resulted in prejudice to the dealer, the Appellate Authority ought to have remitted the matter to the Intelligence Officer for disposal afresh. Therefore, allowing the appeal in its entirety on merits, in our view by the Appellate Authority is equally unsustainable and illegal. The matter remitted to the Intelligence Officer for consideration and disposal afresh in accordance with law - Appeal disposed off. 2021 (12) TMI 523 Interpretation of proviso to Section 8(a) of the Kerala Value Added Tax Act, 2003 - Constitutional validity of proviso to Section 8(a) - recovery of compounded tax - proviso challenged on the ground that the proviso, as it stands upon amendment to sub-clause (ii) to Section 8(a) of the KVAT Act through Finance Act 2009, is discriminatory and unconstitutional, for the reason that, by giving effect to the amendment, the works executed by the appellant awarded by the State Government, Kerala Water Authority (KWA) or local authorities pay tax higher than the tax payable by the other works contractors under sub-clause (ii). HELD THAT:- This Court is of the view that the judgments relied on by both the counsel need not be referred to in extenso and burden the judgment with all the citations. Reference to the judgment of the Supreme Court in UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [ 2021 (9) TMI 626 - SUPREME COURT] would be sufficient to appreciate the law on constitution of a proviso in different circumstances. Proviso was dealing with the contractors executing works contracts of government, KWA and the local bodies. The contractors covered by the proviso, in the considered view of this Court, would continue to be relevant inasmuch as subclause (ii) does not include the contractors who are before the Court in the batch of appeals. The proviso, in the case on hand, could be interpreted both as a situation providing for the excepting of the application of subclause (ii) and/or, as noted by the Supreme Court, can also be treated as an independent provision. Either way, if it is construed as excepting something out of the enactment or qualify something enacted in subclause (ii) then the proviso is independently having scope and applicability in respect of contractors executing government works. The argument of the appellants, though not intended to import something into the enacting part, is definitely attempting to delete what is expressly provided by the proviso. The Court cannot read anything into a statutory provision that is plain and unambiguous. Similarly, a statute is an edict of the Legislature, the language employed in a statute is the determinative factor of legislative intent. The learned Senior Counsel appearing for appellants has submitted that the writ petitions were filed challenging the show cause notice issued by the authority. The challenge of the appellants since is not accepted, it is made clear that the appellants are subjected only to the tax payable under the proviso but not at any other rate. Special Government Pleader Mr Mohammed Rafiq submits that it is always open to the dealer to file a reply/explanation to the show cause notice and the issue would be considered in accordance with law. The challenge is, to some extent, on account of the contribution by the draftsman and to some extent in understanding the scope and area of operation of proviso by the appellants. Appeal dismissed. Indian Laws 2021 (12) TMI 522 Suit for recovery of loan amount - Effect of the statements made under Order X Rule 1 and 2 CPC - effect of the TDS Certificates produced by the Defendant before the Trial Court - HELD THAT:- This Court is of the opinion that a statement under Order X CPC when recorded, has to be read in the context of Order X Rule 1 CPC and Order X Rule 2 CPC. If there are any allegations of facts, which are either admitted or denied, there has to be an oral examination of the parties or any person, to elucidate the matter in controversy in the suit. - In the present case, the Chartered Accountant of the Defendant firm has stated in his statement that Section 194A of the Income Tax Act, 1961 relates to the payment of interest. This, in any event, is a provision of law, which can be clearly deciphered from a perusal of the said provision itself. The effect of a TDS Certificate being issued, and whether the same can be construed as an admission or not is a question that would arise in this case. The Statement of the Chartered Accountant of the Defendant firm, who stated that TDS was deducted, and deposited for the payment of interest also has to be considered. At the stage of final adjudication, the Trial Court shall bear in mind the statements made under Order X CPC read along with the pleadings of the parties. If the case of the Defendant, that the amount was advanced as a means of investment and not as a loan, is not made out, the Trial Court would proceed further, in accordance with law, on the basis of the evidence adduced by the Plaintiffs and the statements recorded under Order X CPC. Application disposed off.
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