Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 22, 2022
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Recovery of the outstanding dues of the private limited company - Liability of directors of private company u/s 179 - only because the petitioners have been unable to deposit 20% of the demand raised in the assessment order to get stay from the appellate authority, the petitioners cannot be said to be negligent and Revenue (ITO) cannot therefore, invoke jurisdiction under section 179.- HC
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Assessment u/s 153A - Prior approval - In the instant case, the draft assessment order in 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30.12.2017 was approved on same day i.e. 30.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 85 cases in one day to apply independent mind to appraise the material before the Approving Authority - HC
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Revision u/s 263 by CIT - nature of compensation received for cancellation of the plot - the character of payment received as compensation by the transferee bears the character of capital receipt. The payment of interest in the facts of the present case is compensatory in nature and therefore, does not bear the character of revenue receipt. We hold that the AO’s order was correct and it did not suffer from any error, justifying the invocation of the PCIT’s powers under Section 263 - HC
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Non issuance of a notice u/s 143(2) on the revised return - filing of revised return on the last day - Can assessment order would be declared nullity for not issuing 143(2) notice on such return, because it is quite impossible at the end of the ld. Assessing Officer to take cognizance of such a fact in such a short period of time. This type of step can be taken at the end of an assessee for frustrating the whole assessment machinery. - AT
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Revision u/s 263 by CIT - Merely because the AO did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order "erroneous and prejudicial to the interest of the revenue". - AT
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Disallowance made by the CPC in an intimation issued u/s. 143(1) denying the exemption claimed u/s. 11 - where a claim has been made which requires further inquiry, it cannot be disallowed without hearing the parties and/or giving the party an opportunity to submit proof in support of its claim. In the absence of section 143(1)(a) being read in the above manner i.e. debatable issues cannot be adjusted by way of intimation under section 143(1)(a), would lead to arbitrary and unreasonable intimations being issued, leading to chaos. - AT
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MAT - Adjustment of bad debts for the purpose of book profits u/s.115JB - the bad debts which is reduced from the asset side of the debts which amounts to actual write off cannot be adjusted for the purpose of book profits u/s.115JB. - AT
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Exemption u/s 11 - deemed registration u/s 12AA - there is no specific provision in the Income Tax Act that non-deciding the registration application under Section 12AA within a period of six months there shall be a deemed registration. - AT
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Deduction u/s 40(b) - disallowance on account of interest paid to partners and on account of salary paid to partners - In the instant case, instead of allowing the "admissible amount", the AO on the contrary disallowed the amount without any justification and without looking into the reality of the facts of the case as the assesee was legally entitled for deduction - AT
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Short Credit for TDS - since the law is clear on the issue as to allow the carry forward of the credit TDS in subsequent year and the credit for TDS is required to be matched with the income declared by the assessee. - AT
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Disallowance of advertisement expenses paid - the assessee is running a dealership business and incurring of advertisement expenses does not arise. CIT(A) after considering relevant facts has rightly sustained net advertisement expenditure debited into the profit and loss account - AT
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Disallowance u/s 14A r.w.r. 8D - since AO has mechanically applied the provisions of Rule 8D while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year, such disallowance is not sustainable in law. Accordingly, Ld. AO is directed to delete the additional disallowance while computing income under normal provisions as well as while computing Book profits u/s 115JB. - AT
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Disallowances of bogus trading loss in penny stock as well as commission expenses - admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of Regency Trust Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. - the trading loss incurred by the assessee cannot be held bogus merely on the basis of some modus operandi unearthed in case of third party/parties - AT
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Royalty receipts - subscription to cloud base service - The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through internet to the provider’s system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software - Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications. - AT
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Long term capital gain - allowable expenditure u/s. 48(i) - The same land has been sold in the year under consideration giving rise to long term capital gains to the three co-owners who have attempted to minimize their taxability on the said gains by resorting to the two arrangements relating to the impugned land - Claims by the assessee under the arrangements made tantamount to diversion of sale proceeds - Thus we set aside the order of ld. CIT(A) and uphold the disallowance made by the ld. AO in respect of claim of deduction - AT
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TP Adjustment - segmental profitability consideration for benchmarking analysis - The segmental accounting prepared cannot be rejected without pointing out defects in the allocation done by the assessee. Moreover, it is also noted that accounts are duly audited. There is also no rule that if segmental accounts are certified by CA. the AO should stop application of mind and follow it as a gospel truth. - AT
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TP Adjustment - MAM selection - Selection of CPM or TNMM as MAM - the assessee has followed CPM for benchmarking the domestic transactions between eligible unit and non-eligible unit. We also observe that OECD guidelines, UNTP manual & ICAI guidance Note also refer to CPM to be applicable where the semi-finished goods are transferred & job work is done. Appeal of revenue dismissed.- AT
Corporate Law
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Initiation of prosecution proceedings - Period of limitation from the date of knowledge of offense - the violation alleged in the complaint is punishable only with a fine as per Section 233 of the Companies Act. - As per sub-Section (2) (a) of Section 468 of the Cr.P.C., the period of limitation for the offence punishable with a fine is only six months. - HC
Indian Laws
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Seeking grant of Anticipatory Bail - conspiracy - huge loss to Revenue - during the pendency of the CIT appeals at Kolkata, the revision petitions have been filed to obtain favourable orders - All the petitioners are in conspiracy of transferring the PAN to the PCIT, Ranchi, Hazaribag and Koderma. - Bail petition dismissed - HC
IBC
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Approval of the resolution plan of the Corporate Debtor - Recovery of property tax demand - public announcement for inviting claim was made on 07.12.2018 much after the amendment in Regulation 12 of the Regulations which now provides that a creditor shall submit a claim with proof. - Meaning thereby, after the amendment in Regulation 12 filing of the claim has become a sine quo non. It is pertinent to mention that being a statutory authority, it cannot feign ignorance about the necessity to file claim after having been informed by the RP of the CIRP proceedings vide letter dated 11.12.2018. - AT
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Approval of resolution plan - Seeking a direction to the Resolution Professional (RP) to call for a Meeting at the CoC - It is reiterated that the ‘Maximisation of Value of Assets’ ought to be ‘within the specified timelines’ and if it is not a ‘timebound process’, the entire scope and objective of the Code would fail merely because there is another higher offer made by a third party, the CoC cannot consider another Plan of a third party who did not participate in the CIRP Proceedings. - AT
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Initiation of CIRP - Jurisiction of NCLT to admit the application u/s 7 - Registration of the applicant, non-banking financial institution (NBFC), was cancelled during the pendency of the proceedings - Financial Creditors or not - The finding of a Court or Tribunal becomes irrelevant and unenforceable/ inexecutable once the forum is found to have no jurisdiction. Similarly, if a Court/Tribunal inherently lacks jurisdiction, acquiescence of party equally should not be permitted to perpetuate and perpetrate, defeating the legislative animation. The Court cannot derive jurisdiction apart from the Statute. - AT
Case Laws:
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Income Tax
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2022 (12) TMI 888
Recovery of the outstanding dues of the private limited company - Liability of directors of private company u/s 179 - HELD THAT:- On perusal of the above provisions, it is clear that the Assessing Officer is required to make efforts for recovery of the outstanding dues from the assessee private limited company which has committed default in payment of the outstanding demand. The petitioners have prima facie shown that non recovery cannot be attributed to any gross negligence, misfeasance or breach of duty as Directors of the assessee company. AO has failed to consider the fact that the petitioners have tendered their explanation and contended that the petitioners have challenged the order of assessment before the appellate authority and the petitioners have not remained negligent nor there is any misfeasance or beach of trust on part of the petitioners and only because the petitioners have been unable to deposit 20% of the demand raised in the assessment order to get stay from the appellate authority, the petitioners cannot be said to be negligent and respondent no.1 cannot therefore, invoke jurisdiction under section 179.
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2022 (12) TMI 887
Assessment u/s 153A - Prior approval necessary for assessment in cases of search or requisition - Necessity to get approval to the draft assessment order was granted u/s 153D - HELD THAT:- Section 153D requires that the AO shall obtain prior approval of the Joint Commissioner in respect of each assessment year referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to each assessment year is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A. In the instant case, the draft assessment order in 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30.12.2017 was approved on same day i.e. 30.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 85 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. The questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeal being in the nature of second appeal.
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2022 (12) TMI 886
Assessment u/s 153C - one or more seized document, books of accounts or asset should belong to the assessee - HELD THAT:- A plain reading of the provision of Section 153C of the Act, as it stood at the relevant point in time, would demonstrate that the AO of the searched person i.e. Mr Satya Prakash, should have generated a note that the documents, books of account or assets belonging to the other person had been found. We may also note that Mr Zoheb Hossain has, fairly, put before us the satisfaction note dated 02.02.2012, generated by the AO of the respondent/assessee, which discloses that there is no reference to any material or assets which belonged to the respondent/assessee. For completion of the record, the satisfaction note concerning the respondent/assessee as generated by his AO.
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2022 (12) TMI 885
Revision u/s 263 by CIT - compensation received for cancellation of the plot to be in the nature of a capital receipt and not a revenue receipt - HED THAT:- A reading of the aforesaid Sections of the Act of 2012, evidences that the payment calculated @ 10% per annum over and above the premium by Government of Goa was not by way of interest but was statutorily in the nature of compensation and therefore, the said receipt cannot be treated as Assessee s Income from other sources . We also agree that the finding of the ITAT that in the present case, since the plot allotted to the Assessee was to be used by the Assessee for carrying on its business and was an income producing asset for this company, since the Assessee who is a real estate developer, intended to construct a building and further sub-lease or transfer such a building to third parties to earn income, it would constitute a capital asset as held by in the case of C.I.T., Bombay City v. Bombay Burmah Trading Corpn., Bombay,[ 1986 (7) TMI 8 - SUPREME COURT] The reference to a Power of an Attorney transaction in the grounds of appeal is incorrect since there was no Power of Attorney executed in favour of the Assessee as noted in the order of the PCIT. The leasehold rights held by the Assessee in the plot was a Capital Asset and that the compensation received by the Assessee from the Government of Goa on the cancellation of the plot was a capital receipt and not a revenue receipt. It is trite law that if an agreement for transfer of rights in an immovable property is not performed by the transferor, the transferee is entitled for compensation as he/she is deprived of the price of escalation. Therefore, the character of payment received as compensation by the transferee bears the character of capital receipt. The payment of interest in the facts of the present case is compensatory in nature and therefore, does not bear the character of revenue receipt. We hold that the AO s order was correct and it did not suffer from any error, justifying the invocation of the PCIT s powers under Section 263 of the Act.
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2022 (12) TMI 884
Non issuance of a notice u/s 143(2) on the revised return - filing of revised return on the last date - HELD THAT:- The assessment proceedings were set into motion. Now section 139(5) provides two situations to an assessee for revising its return of income, namely if an assessee after furnishing the return under section 139(1) or in response to notice under section 142(1) discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of relevant assessment year or before the completion of the assessment, whichever is earlier. The assessee has filed the revised return no doubt within one year from the end of the assessment year 2013-14 as well as before the end of the completion of the assessment proceedings. The judgments, which are being referred by the ld. Counsel for the assessee are concerned, they propound that when revised return is being filed, then original return would obliterate. In other words, the original return would become redundant and the determination of taxable income is to be made on the basis of revised return. In none of the cases, it has been propounded that 143(2) notice was must on the revised return, otherwise whole assessment proceeding would vitiate. Let us explain the situation in a different manner also. Section 139(5) authorizes the assessee to file the return before completion of the assessment order. In the present case, assessment order has been passed on 18.03.2016. Hearing must have been concluded 2-3 days prior to this date because AO has to draft the assessment order. On 17th March, assessee filed a revised return without the knowledge of the AO because such return in A.Y. 2013-14 would be filed at the receipt counter. Can assessment order would be declared nullity for not issuing 143(2) notice on such return, because it is quite impossible at the end of the ld. Assessing Officer to take cognizance of such a fact in such a short period of time. This type of step can be taken at the end of an assessee for frustrating the whole assessment machinery. Yes, once a revised return is being filed, certainly its figure can be taken into consideration as propounded in the various decisions cited by the ld. Counsel for the assessee. Therefore, in our opinion, it was only an irregularity and not an illegality. It could have been cured by the ld. 1st Appellate Authority by calling a remand report from the ld. Assessing Officer after re-determination of the income on the basis of revised return, but to declare the assessment order as a null and void is not in accordance with law. On due consideration of all these facts and circumstances, we set aside the impugned order of the ld. CIT(Appeals) and restore this issue to the file of the ld. Assessing Officer.
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2022 (12) TMI 883
Revision u/s 263 - prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue - As per CIT AO Failed to verify the sources of cash deposits made and bring the unexplained deposit therein to tax AND Failed to examine the low profits/income declared from the liquor business and accepting without proper enquiry - HELD THAT:- There is no dispute that u/s. 263 of the Act, the PCIT does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary and the assessment order is prejudicial to the interests of the Revenue. However, in doing so, the PCIT must have some material which would enable to form a prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue. In the present case of the assessee it is clear from the order of the AO which is extracted above, the AO has verified all these details as submitted by the assessee and has applied his mind while concluding the assessment accepting the income returned by the assessee. We see merit in the submission of the ld AR that the license is given to P S Associates vide partnership deed and there was no requirement for a separate license deed to be entered in this regard. The entire premise on which the PCIT has exercised the revisionary power is that the AO should have conducted further enquiries. PCIT has not brought anything on record to shown adverse effect of the lack of enquiry or any material to show that there been an error in the order that is prejudicial to the interest of the revenue. The views of the ld. PCIT as given in the order u/s.263, in our opinion, is not the right reason for exercising revisionary powers u/s. 263 as the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law. PCIT is not justified in setting aside the order of the AO and accordingly we hold that the order of the PCIT u/s. 263 is without jurisdiction and liable to be quashed. Appeal of the assessee is allowed.
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2022 (12) TMI 882
Long term capital gain - cost price for cost inflation index - HELD THAT:- As per the provision of section 45 any profits or gain arising from the transfer of capital asset effected in the previous year shall be deemed to the income of the previous year in which transfer took place. Since in the case of the appellant transfer took place during the year therefore AO has correctly taxed the capital gain for the year under consideration and addition made by the AO is hereby confirmed. Disallowance of production expenses - CIT (A) confirmed the addition by noting that it is an admitted fact that assessee was unable to produce any evidence in respect of expenses - HELD THAT:- Upon careful consideration and going through the assessment order ld. CIT (A) s order, we find that the impugned additions and disallowances are made on cogent footings. Nothing has been brought to our notice to controvert the finding of AO and CIT (A). Hence, we do not find any infirmity in the order of ld. CIT (A) and we affirm the same. As we find that the impugned additions and disallowances are made on cogent footings. Nothing has been brought to our notice to controvert the finding of AO and ld. CIT (A). Hence, we do not find any infirmity in the order of ld. CIT (A) and we affirm the same. Appeal filed by the assessee stands dismissed.
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2022 (12) TMI 881
Income deemed to accrue or arise in India - Taxability of amount received for Consulting and Engineering services as Fees for technical services (FTS) - India-UK Double Taxation Avoidance Agreement - Management Fees Common Cost recharge - HELD THAT:- As decided in own [ 2019 (4) TMI 605 - ITAT MUMBAI] held the amount received towards consulting engineering services to be not in the nature of fees for technical services, the reasoning of the departmental authorities with regard to cost recharge would also fail, since, they have treated it as ancillary and incidental to consulting engineering services. The, contention of the learned Departmental Representative that the cost recharge fails various tests, such as, need test, benefit test etc. is unacceptable, it is contrary to the finding of the Departmental Authorities. Once, the Departmental Authorities have treated the amount received towards cost recharge to be in the nature fees for technical services, it implies rendering of service by the assessee. Therefore, applying the very same reason on the basis of which we have held the amount received towards consulting engineering services to be not in the nature of fees for technical services as discussed above, we hold that the amount received towards cost recharge cannot be brought to tax in India in the absence of PE. Therefore, the additions made by the Assessing Officer are hereby deleted. - Decided in favour of assessee.
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2022 (12) TMI 880
Adjustment of bad debts for the purpose of book profits u/s.115JB - HELD THAT:- If the provision for bad and doubtful debts which is debited to the P L account would constitute actual write off if the same is reduced from loans dvances / debtors to reflect the net balance in the statement of financials. In assessee s case, in the financials for the year ended 31.3.2012 [pg. 30 57 of PB], we notice that the assessee had shown the net amount for trade receivables after adjusting the provision for doubtful debts. Considering the ratio laid down by the Hon ble Supreme Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] in our view the assessee has actually written off the bad debts as of 31.03.2012. Assessee has written of the debts which is an asset and therefore the CIT(A) has correctly considered the issue under clause (i) and not under clause (c). The plain reading of the above provisions make it clear that the provision made towards diminution in the value of asset has to be added. In assessee s has we have already held that the bad debts have been actually written of and is not a provision following the decision of the Apex Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] . Accordingly, the actual write off of the asset cannot be considered as an addition under clause (i) of Explanation 1 to section 115JB. With regard to the contention of the ld DR that the decision of the jurisdictional High Court in the case of Yokogawa India Ltd [ 2011 (8) TMI 766 - KARNATAKA HIGH COURT] is not applicable, in our view though the question of law relates to whether the Appellate Authorities were correct in holding that the provisions made for bad and doubtful debts cannot be added back in accordance with the Explanation (c) to Section 115JB(1) of the Act, the ratio laid down by the Hon ble High Court is that the if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. We therefore hold that the bad debts which is reduced from the asset side of the debts which amounts to actual write off cannot be adjusted for the purpose of book profits u/s.115JB. - Decided in favour of assessee.
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2022 (12) TMI 879
Exemption u/s 11 - deemed registration u/s 12AA - assessee has not filed copy of application filed in Form- 10A for registration u/s 12AA, nor any evidence that the assessee made any request before ld CIT(E) for claiming registration from alleged earlier application file in 2011 - HELD THAT:- We find that though, the assessee is claiming to have filed application for registration u/s 12AA in the year 2011 and also furnished copy of such application - Assessee failed to furnish any evidence whether such application was registered in the office of CIT(E) or not or any further query was raised by the ld. CIT(E). One sided correspondence, unless it is acknowledged by other party would not be considered as the application of assessee was pending or not for similar registration. As recorded above, the assessee was allowed registration u/s 12AA from the date of application, which we find in order. The ratio of decisions of various case laws relied by the ld. AR of the assessee are not helpful to him. The ratio of all those case laws are altogether different. In none of the case law, the assessee was allowed registration form retrospective date. The case law relied by ld. CIT-DR for the revenue in Harshit Foundation [ 2022 (5) TMI 179 - SC ORDER] wherein as held that there is no specific provision in the Income Tax Act that non-deciding the registration application under Section 12AA within a period of six months there shall be a deemed registration. Thus, the ratio of this decision is directly applicable on the facts of the present case. Even otherwise, the law declared by the Hon ble Apex Court is a binding precedent by virtue of Article 141 of the Constitution of India. Thus, we do not find any merit in various grounds of appeal raised by assessee - Appeal of assessee is dismissed.
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2022 (12) TMI 878
Penalty us/ 271(1)(c) - assessee understated its income by claiming excessive depreciation on dumpers, tata 207, truck, excavator, drilling machine water Tank - HELD THAT:- Penalty confirmed by the ld. CIT(A) holding that the assessee had deliberately and intentionally not disclosed the true and correct income and had furnished inaccurate particulars of income with the intention to evade tax. Thus the ld. CIT(A) sustained the penalty u/s 271(1)(c) of the Act. The Bench has gone through the entire case of the assessee but found that the assessee could neither substantiate its case nor controvert the findings of the lower authorities. In this situation, we have no other alternative except to concur with the findings of the ld. CIT(A). Thus the appeal of the assessee is dismissed
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2022 (12) TMI 877
Deduction u/s 40b - disallowance on account of interest paid to partners and on account of salary paid to partners - admissible amount - HELD THAT:- The certificate of C.A. is also placed on record at PBP 34 who conducted the Audit u/s 44AB of the Act alongwith computation of total income. Thus from these documents, it becomes clear that no addition could have been made by the AO. Revenue Authorities rejected the rectification application in a mechanical manner without going into the facts of the case. The Bench has also perused the CBDT Circular No. 14 (XL 35) of 1955 dated 11-04-1955 which is relevant in the present case as it has been categorically mentioned in that Circular that taxpayer should be guided by the AO to file the correct return and to allow him to the deductions which he is entitled under the Income Tax Act, 1961. In the instant case, instead of allowing the admissible amount , the AO on the contrary disallowed the amount without any justification and without looking into the reality of the facts of the case as the assesee was legally entitled for deduction. The Bench finds that Hon ble Supreme Court in number of cases has held that real income should be assessed which in the Bench view has not been done in this case. Therefore, considering the totality of the facts and circumstances of the case, the Bench feels that the assessee is entitled to deduction u/s 40b of the Act and thus the AO is directed to delete the addition which has been made while relying upon the amount wrongly mentioned by the assessee in the column of inadmissible . Thus the appeal of the assessee is allowed.
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2022 (12) TMI 876
Short Credit for TDS - Whether TDS credit to be given in the year under consideration based on the evidence in the form of ITR filed by the ld. AR of the assessee claiming that the same is already disclosed in the ITR-6 filed ? - HELD THAT:- DR fairly accepting the contention of the assessee not objected to the factual aspects of the case. Based on these arguments supported by the evidences which was fairly accepted by the revenue we are of the considered view that since the law is clear on the issue as to allow the carry forward of the credit TDS in subsequent year and the credit for TDS is required to be matched with the income declared by the assessee. Since the ld. AR demonstrated us that the assessee has followed the applicable method permitted under the law and therefore, he has not objected to the propositions of ld. DR to get this factual aspect be verified by the jurisdictional AO. Based on these set of facts and arguments advanced before us we are of the considered view that the credit for prepared taxes carry forward for A.Y 2017-18 as claimed by the assessee in A.Y 2081-19 is required to be allowed subject to verification of the amount carry forward with that of the income offered in the year under consideration. Addition of the sales promotion expenses - Allowable business expenses u/s 37(1) - HELD THAT:- It is not disputed by both the parties that the assessee is engaged in the business of Business Support Services. Therefore, the expenditure is required to be incurred by the assessee as per instructions of the client. We have also gone through the orders of the lower authorities and details submitted by the assessee. The contentions as raised by the Revenue are factual and based on the inadequate details filed by the assessee and revenue argued that why the missing details is required which the assessee has not submitted to the satisfaction of the assessing officer and therefore, we are of the considered view that the Assessing Officer was not in a position to verify various aspect on account of the on account of non-submission of the various details by the assessee called for by the ld. AO. All these details will facilitate the ld. AO to decided so as to allowability of the claim of the assessee as per provision of section 37(1) of the Act. In the light of these observations, we set aside this issue and the ld. AO is directed to verify all these aspects as raised by the Revenue and at the same time, the assessee is directed to submit all the details that has been called for by the Revenue so as to decide on the expenses claimed in accordance with the law. With these observations, the solitary ground raised by the Revenue is allowed.
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2022 (12) TMI 875
Disallowance of rent paid to M/s. DRS Industries Ltd - question of assessee making payment to land owner towards rent - HELD THAT:- The undisputed facts are that the agreement between the assessee and M/s. DRS Industries Ltd did not materialize and consequently, the dealership of Skoda cars sales services has not been transferred to the assessee. Rent agreement in respect of premises where the business was carried out by M/s. DRS Industries Ltd., was also in the name of M/s. DRS Industries Ltd., and the land lord. Therefore, the question of assessee making rent payment directly to land owner does not arise. It is not case of the assessee that it has paid rent to M/s. DRS Industries Ltd., in pursuance of an agreement and in turn M/s. DRS Industries Ltd., has paid rent to land lord. In absence of any agreement between the appellant and land lord, the AO has rightly disallowed rent expenses debited into the profit and loss account. CIT(A), after considering relevant facts has rightly sustained additions made by the AO and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the assessee. Disallowance of advertisement expenses paid - AO has disallowed advertisement expenses incurred by the assessee, on the ground that there is no valid agreement between the assessee and M/s. DRS Industries Ltd., for incurring advertisement expenses - HELD THAT:- We find that there is no valid agreement between the appellant and M/s. DRS Industries Ltd., and further the so called agreement is not acted upon, and as claimed by the assessee for various reasons, the dealership of Skoda cars sales services has not been transferred in the name of the assessee. Therefore, the assessee is running a dealership business and incurring of advertisement expenses does not arise. CIT(A) after considering relevant facts has rightly sustained net advertisement expenditure debited into the profit and loss account and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the grounds taken by the assessee.
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2022 (12) TMI 874
Correct head of income - Addition on account of income from house property or business income - As argued assessee has granted the lease and earns rent income and thus the same cannot be treated as income from business - assessee is engaged in the business of construction and only profit on sale of constructed unit are shown as business income whereas unsold units which are shown as stock in trade forms the part of business of the assessee - HELD THAT:- It is pertinent to note that the assessee has shown closing stock and received building use permission in respect of the same. As undisputed fact that the assessee is engaged in the business of construction and only profit on sale of constructed unit are shown as business income whereas unsold units which are shown as stock in trade forms the part of business of the assessee. CIT(A) has rightly held that since the assessee was a developer and held the unit in questions income from such unit can be taxed as only business income and not as income from house property. It is pertinent to note there is no concept of deemed rent while computing business income and the CIT(A) has rightly deleted the addition. In the case of Ansal Housing Finance and Leasing Co. Ltd. [ 2012 (11) TMI 323 - DELHI HIGH COURT] will not be applicable in the present case as the assessee has already treated the said unsold unit as stock in trade. The decision of Hon ble Gujarat High Court in the case of CIT vs. Neha Builders [ 2006 (8) TMI 105 - GUJARAT HIGH COURT] in fact is applicable in the present case as the issues herein are identical to the present case. If property is used as stock in trade then such property would become or partake the character of stock and any income from stock would be income from business and not income from property. CIT(A) was right in deleting the addition. Appeal of the Revenue is dismissed.
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2022 (12) TMI 873
Disallowance u/s 14A r.w.r. 8D - determination of expenditure incurred in relation to exempt income - HELD THAT:- Hon ble Apex Court in the case of Godrej Boyce Manufacturing Co. Ltd. [ 2017 (5) TMI 403 - SUPREME COURT] held that subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the AO is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the AO, what the law postulates is the requirement of a satisfaction in the AO that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. The said principle has been reiterated in the case of Marg Limited [ 2020 (10) TMI 102 - MADRAS HIGH COURT] - Further in Maxopp Investment Limited [ 2018 (3) TMI 805 - SUPREME COURT] observed that it is that expenditure alone which has been incurred in relation to the income which is not includible in total income, is to be disallowed. If expenditure has no casual connection with the exempt income, such expenditure would be an allowable expenditure. Applying the ratio of aforesaid principles as well as the consistent view of Tribunal in assessee s own case as cited before us, we would hold that since AO has mechanically applied the provisions of Rule 8D while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year, such disallowance is not sustainable in law. Accordingly, Ld. AO is directed to delete the additional disallowance while computing income under normal provisions as well as while computing Book profits u/s 115JB.
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2022 (12) TMI 872
Exemption u/s 11 - application of registration made by the appellant u/s 12A rejected - In the books of account nothing is shown to have spent on charity by the Trust which is also evident from Income Expenditure accounts - HELD THAT:- Income and expenditure account indicates free medical camps, treating the patient at concessional rates being organised by the assessee. We further find that the photographs along with the bills and vouchers produced before the learned CIT(E) of the Act have not been properly considered by the learned CIT(E). Further, the return filed with Charity Commissioner has also not been doubted by the learned CIT(E) of the Act. Thus we are of the considered view that the details filed by the assessee have not been properly examined by the learned CIT(E) of the Act while denying the registration to the assessee under section 12AA of the Act. Therefore, we deem it appropriate to set aside the impugned order and direct the learned CIT(E) to de novo adjudicate upon the application for registration filed by the assessee under section 12A - Appeal by the assessee is allowed for statistical purposes.
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2022 (12) TMI 871
Additions towards difference between guideline value of the property and sale consideration u/s. 50C - difference between stated consideration for sale of property and guideline value fixed for payment of stamp duty - arguments of the assessee is that as per 3rd proviso to section 50C(1) of the Act, inserted by the Financial Act, 2018 w.e.f. 01.04.2019, if difference between stated consideration and guideline value does not exceed 10% of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of consideration - HELD THAT:- Although said amendment came into statue by Finance Act, 2018 w.e.f. 01.04.2019, but the co-ordinate bench of the Tribunal in the case of Amrapalli Cinema [ 2021 (4) TMI 1160 - ITAT DELHI] held that amendment made in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis- -vis stamp duty valuation from 5% to 10% are effective from date on which section 50C, itself was introduced in the statue. A series of Tribunal decisions have reiterated said legal position and held that amendment in section 50C(1) is curative in nature and must be held to relate back to the date of introduction of section 50C i.e., 01.04.2003 onwards. The ITAT, Chennai benches in the case of Doraisamy Suresh, (HUF) [ 2022 (4) TMI 743 - ITAT CHENNAI] had also considered an identical issue and held that if difference between stated consideration and guideline value is less than 10% as prescribed under 3rd proviso to section 50C(1), then there cannot be any addition by substituting full value of consideration. In this case, there is no dispute with regard to the fact that difference between stated consideration and guideline value of the property is less than 10% and thus, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete additions made towards difference between consideration received for sale of property and guideline value of the property and thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the revenue.
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2022 (12) TMI 870
Deduction u/s.80P - Savings and Fixed Deposits with Co-operative Bank - whether the assessee is eligible for deduction u/s 80P(2)(d) where the deposits were made in the co-operative banks? - assessee contends that the co-operative bank is akin to that of the co-operative society which is registered under the Co-operative Society s Act or under any other law for the time being enforce - HELD THAT:- The assessee has relied on the decision of co-ordinate bench in the case of Kaliandas Udyog Bhavan Premises Cooperative Soceity [ 2018 (4) TMI 1678 - ITAT MUMBAI ] which has considered the decision of the Totgars Co-operative Sales Society Ltd. [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT ] and also the decision of State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT ] wherein it was observed that the interest income earned by a cooperative society on its investments held with a co- operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. The assessee s case is similar to the above mentioned decision of the co-ordinate bench which has distinguished the facts with the decision of Totagars Co-operative Sales Society (supra) case. For the foregoing reasons, we are of the view that the ld. CIT(A) was not justified in confirming the action of the A.O. From the above observation and by respectfully following the above said decision, we are inclined to allow the appeal filed by the assessee which is on identical facts as that of the above cited decision. Appeal filed by the assessee is allowed.
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2022 (12) TMI 869
Revision u/s 263 by CIT - deduction of interest income has been claimed u/s. 80(P)(2)(d) - As per CIT cooperative bank is not cooperative society for claiming of deduction u/s 80P(2)(d) - interest on FDR received from Sikar Kendriya Sahakari Bank Limited has been claimed and the same was allowed by the AO, which is not allowable u/s.80(P)(2)(d) and PCIT found that it is factually apparent that the AO has not verified the issue while completing the assessment - HELD THAT:- As the A.O while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2of Section 263 order passed by the AO could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. As long as the action of the AO cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation without appropriate evidence , there is nothing to question the bonfides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the AO did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263 , and non-mentioning of these reasons do not render the assessment order erroneous and prejudicial to the interest of the revenue . Appeal of the assessee is allowed.
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2022 (12) TMI 868
Disallowances of bogus trading loss in penny stock as well as commission expenses - whether the script Regency Trust Ltd is penny stock and appearing in the investigation report carried out by Kolkata investigation wing? - HELD THAT:- The trading loss generated by the assessee cannot be held as bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold, the income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. The case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. Whether a person who genuinely involved in the trading of scrip of certain company and in the process incurred loss can be disallowed under provision of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties ? - Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before me, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of Regency Trust Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. Respectfully following the judgment of Smt. Krishna Devi [ 2021 (1) TMI 1008 - DELHI HIGH COURT] hold that the trading loss incurred by the assessee cannot be held bogus merely on the basis of some modus operandi unearthed in case of third party/parties unless some cogent materials are brought against particular assessee on record. Therefore, no reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue s appeal are dismissed.
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2022 (12) TMI 867
Exemption u/s 11 and 12 - Appellant is a separate and independent entity which is not registered u/s 10(23C) (iiiad) - HELD THAT:- AR before us vehemently pleaded that up to AY 2014-15, it is a fact that assessee had erroneously treated itself as an independent entity and filed its returns. However, the assessee would still be entitled for exemption u/s 10(23C) (iiiab) and not u/s 10(23C)(iiiad) of the Act as the assessee is an educational institution wholly and substantially financed by Government. This is a fresh claim made by the assessee before us. Considering all we deem it fit and appropriate to remand this entire appeal to the file of the ld.AO for denovo adjudication in accordance with law. All the arguments of the assessee could be made before ld.AO in the set aside proceedings. The assessee is at liberty to furnish fresh evidences, if any, in support of all its exempts. Needless to mention that the assessee be given reasonable opportunity of being heard. AO is hereby directed to frame fresh assessment for the year under consideration in accordance with law by considering the aforesaid observations and the evidences filed by the assessee on record. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
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2022 (12) TMI 866
Disallowance made by the CPC in an intimation issued u/s. 143(1) denying the exemption claimed u/s. 11 - Assessee plea as entitled for exemption u/s. 10(23C)(vi) as per the deemed approval - CIT-A dismissed the appeal of the assessee by observing that as there is no order granting approval u/s. 10(23C)(vi) i.e. produced by the assessee from the competent authority, the appeal filed by assessee against the CPC intimation dated 04/02/2019 was rejected - HELD THAT:- In the mechanism of application of Section 143(1) for the relevant assessment year, we find that, the first proviso to Section 143 (1) mandates that no adjustments except for arithmetical mistakes and/or an incorrect claim that is apparent from any information in the return. The scope of permissible adjustments under section 143(1)(a) for the relevant year is much narrower. Hon ble Bombay High Court in case of Khatau Junkar Ltd. v. K.S. Pathania [ 1992 (2) TMI 67 - BOMBAY HIGH COURT] has observed that, where a claim has been made which requires further inquiry, it cannot be disallowed without hearing the parties and/or giving the party an opportunity to submit proof in support of its claim. In the absence of section 143(1)(a) being read in the above manner i.e. debatable issues cannot be adjusted by way of intimation under section 143(1)(a), would lead to arbitrary and unreasonable intimations being issued, leading to chaos. In the instant case we also note that no opportunity was granted to the assessee to put forth its stand before disallowing the deduction claimed. The issue in the present appeal is debatable and therefore the revenue was not right on their part to unilaterally proceed by disallowing the claim. In the interest of justice, we remand this issue back to Ld.AO to grant opportunity of being heard to assessee in a physical hearing and to consider the claim in accordance with law.
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2022 (12) TMI 865
TP Adjustment - rejecting the audited segmental accounts furnished by the Assessee by arbitrary allocating operating specific expenses on the basis of revenue earned by the assessee in each segment which were originally allocatd by the assessee on sound allocation keys - Whether AO/Ld. TPO erred in considering the margin of the assessee in contract manufacturing segment as 1.79% as against the actual margin of 7.70%? - HELD THAT:- As there was no specific finding by Ld. DRP on this issue. Hence, in the interest of justice, it is appropriate to remit this issue to the file of Ld. DRP to give specific direction on the above issue raised by the assessee before Ld. DRP as well as before us. Inclusion and exclusion of certain comparables - HELD THAT:- We remit this issue to the file of Ld. DRP to specify the specific comparables which are to be included or excluded before the lower authorities. The lower authorities has to decide the issue afresh giving opportunity of hearing to the assessee. Corrected margins of comparable companies submitted by the Appellant - HELD THAT:- We have remitted the issue relating to the rejection of segmental financials and selection of comparables to the file of Ld. DRP for fresh consideration. This issue is also remitted to Ld. DRP to consider the correct margin of the comparables. Disallowance of expenditure towards Corporate Social Responsibility ( CSR ) u/s 80G - HELD THAT:- After hearing both the parties, we are of the opinion that the claim of the assessee has to be examined by the Ld. DRP on production of the requisite details by the assessee. DRP also directed to consider the order of the Tribunal in the case of First America (India) Pvt. Ltd. [ 2020 (5) TMI 187 - ITAT BANGALORE ] wherein held that assessee cannot be denied benefit of claim of deduction under Chapter VIA of the Act in relation to payments, which form part of CSR expenses since that would lead to double disallowance, which is not the intention of legislature. Accordingly, this issue is remitted to the file of Ld. DRP for fresh consideration. Expenditure incurred on Voluntary Retirement Scheme - HELD THAT:- The assessee has not furnished the full details other than name of the person to whom the payment has been made in accordance with Voluntary Retirement Scheme and not produced the terms and conditions of this scheme and documentary evidence. Hence, the claim of the assessee is rejected. In view of the above findings, we remit this issue to the file of Ld. DRP with the direction to the assessee to produce necessary details as sought by the Ld. DRP. Disallowance u/s 14A - HELD THAT:- If there is no exempted income, there cannot be any disallowance u/s 14A read with Rule 8D of the I.T. Rules. Accordingly, we remit this issue to the file of Ld. DRP to examine the file of financials of the assessee and if there is no exempted income, there cannot be any disallowance u/s 14A read with Rule 8D of the I.T. Rules or if there is no exempted income, there cannot be any disallowance. Disallowance in respect of Indian Accounting Standard adjustment of preference shares - HELD THAT:- The assessee has made claim on this count in revised return. The Ld. DRP has directed the AO to verify the validity of revised return so claimed to have been filed by the assessee and consider the same if the revised return is valid return as per the provisions of the Act for computing total income of the assessee. In our opinion, appellate authority could entertain the claim of assessee, even though no revised return is filed. Hence, we direct the Ld. DRP to examine this issue afresh.
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2022 (12) TMI 864
Taxability of revenue from sale of software - DRP/AO held that receipt earned by the Appellant outside India from sale of Microsoft Retail Software Products to distributors belonging to India is taxable under the Act/ DTAA - HELD THAT:- As in assessee s own case for AY 2012-13 [ 2022 (5) TMI 246 - ITAT DELHI ] the issue has culminated in favour of assessee conclusion based on the principles of law that sale of software products does not give rise to royalty income as laid down by the Hon ble Delhi High Court in Infrasoft Ltd. case [ 2013 (11) TMI 1382 - DELHI HIGH COURT] which have now further been affirmed in the case of Engineering Analysis Centre of Excellence P. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] Royalty receipts - subscription to cloud base service - whether income from cloud services cannot be taxed as royalty in the hands of distributor? - HELD THAT:- As cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer. The assessee s cloud base services are though based on patents / copyright but the subscriber does not get any right of reproduction. The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through internet to the provider s system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (para 10.5 of the Ld. AO order). Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications. While dealing with similar question in regard to the case of M/s. Salesforce.com Singapore Pte. [ 2022 (4) TMI 327 - ITAT DELHI ] where the said assessee was provider of comprehensive customer relationship management servicing to its customer by using Cloud Computing Services / Web Casting Services held that all the equipments and machines relating to the service provided by the assessee are under its control and are outside India and the subscribers do not have any physical access to the equipment providing system service which means that the subscribers are only using the services provided by the assessee. Chennai Tribunal in the case of ACIT v Vishwak Solutions Pvt. Ltd. [ 2015 (4) TMI 794 - ITAT CHENNAI ] has upheld the findings of CIT(A) that the amount paid to the non-resident is towards hiring of storage space. The aforesaid squarely covers the controversy in regard to the present assessee also. In the light aforesaid, the Bench is of considered view that the ld. Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty income. No distinction on facts or law could be pointed by Ld. DR. Therefore, following aforesaid findings in favor of the assessee these grounds are determined in favour of the assessee.
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2022 (12) TMI 863
Long term capital gain - allowable expenditure u/s. 48(i) for the purpose of computing the taxable component of long term capital gain - interest payment on security deposit towards clearance of encumbrance with Ramaniyam and payment of compensation to SAE BJT for vacating the land and obtaining its peaceful possession for the purpose of completing the sale transaction - HELD THAT:- As conclusions flowing from the explanations and evidences furnished by the assessee in the present case are leading us to consider the doctrine of preponderance of human probabilities and the surrounding circumstances in respect of the claims made. Instead of adopting superficial approach, claim of the assessee is to be examined in the light of real life probabilities which have been so done by the ld. AO. In respect of impugned land on which computation of long term capital gain is the subject matter of this appeal, on one hand it has been said to be used under lease arrangement for the business operations of two concerns (SAE and BJT) wherein the co-owners including assessee have substantive holding/controlling interest and on the other hand the same land is said to be developed under a JDA with one party Ramanaiyam. The same land has been sold in the year under consideration giving rise to long term capital gains to the three co-owners who have attempted to minimize their taxability on the said gains by resorting to the two arrangements relating to the impugned land with SAE BJT and Ramanaiyam, respectively. Claims by the assessee under the arrangements made tantamount to diversion of sale proceeds to which we do not ascribe our views favorably considering the facts and circumstances of the case as discussed above. Thus we set aside the order of ld. CIT(A) and uphold the disallowance made by the ld. AO in respect of claim of deduction made by the assessee towards payment of compensation to SAE and BJT and to Ramanaiyam towards interest for clearance of encumbrance.Appeal of the revenue is allowed.
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2022 (12) TMI 862
TP Adjustment - segmental profitability consideration for benchmarking analysis - preparations of segmental accounting were not accepted by the DRP - HELD THAT:- The segmental accounting prepared cannot be rejected without pointing out defects in the allocation done by the assessee. Moreover, it is also noted that accounts are duly audited. There is also no rule that if segmental accounts are certified by CA. the AO should stop application of mind and follow it as a gospel truth. Hence, we are of the opinion that the segmental accounting prepared by assessee should be accepted and the consequence shall accordingly follow. Hence, to be fair to the parties, we are remitting the issue to the file of Assessing Officer once again to review the segment account prepared by the assessee and unless he can rebut the same with cogent reasoning, he shall accept the same. Assessee s appeal is allowed for statistical purposes.
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2022 (12) TMI 861
TP Adjustment - comparable selection - selection of comparables for benchmarking the international transaction pertaining to Provision of Investment Advisory Services - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list. Transfer pricing adjustment - international transaction of Payment of Interest on Fully Convertible Debentures (FCDs) - HELD THAT:- As there is no change in facts and the methodology adopted by the assessee for benchmarking the international transaction of Payment of Interest on FCDs‟ has been accepted in the prior years, we see no reason to deviate from the view so taken by the coordinate bench of Tribunal in assessee‟s own case cited supra. Further, the learned DR could not show us any reason to deviate from the aforesaid order. Thus, respectfully following the order passed by the coordinate bench of Tribunal in assessee‟s own case cited supra, we uphold the plea of the assessee and delete the impugned adjustment in respect of international transaction of Payment of Interest on FCDs‟. Accordingly, grounds No. 1 and 2 aised in assessee's appeal are allowed.
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2022 (12) TMI 860
TP Adjustment - MAM selection - Selection of CPM or TNMM as MAM - HELD THAT:- Undisputedly the assessee has maintained cost records CAS-4 which were duly certified by the CA in respect of direct and indirect cost and the gross profit margin is also available. Therefore the CPM has to be the most appropriate method which is inconsonance the provisions of Section 92B read with Rule 10B(1), 10C(1) (2) as the eligible unit is a contract manufacturer and procuring semi-finished goods from Faridabad unit besides doing contractual job for the said non eligible unit. We also note that assessee s net profit as a whole of 19.99% during the year which is better and much higher than other comparables namely M/s Bharat Gears Ltd. 12.29%, M/s JMT Auto Ltd. 18.68% and M/s Hi-Tech Gears Ltd. 17.84%. Therefore considering these facts which show the net margin of the assessee being better than the comparable industries, we are of the view that price as determined by the assessee is at ALP. No merit of the submissions of the ld DR that the assessee is not a contract manufacturer which are incorrect observations on the part of the TPO/AO. Argument of the ld DR that the assessee itself followed TNMM method as mentioned in Form 3CEB, we observe the same was a mistake as the assessee in the TPSR mentioned CPM as MAM correctly and also placed the documents justifying and corroborating the fact that the assessee has followed CPM for benchmarking the domestic transactions between eligible unit and non-eligible unit. We also observe that OECD guidelines, UNTP manual ICAI guidance Note also refer to CPM to be applicable where the semi-finished goods are transferred job work is done. Appeal of revenue dismissed. Additional depreciation u/s 32(1)(iia) - assessee had made some additions to fixed asset in the latter half of F.Y. 2012-13 and consequently the assets were put to use for less than 180 days - additional depreciation has been denied by the AO on the ground that there was no provision in the Statute granting additional depreciation to the assessee which has not been allowed in the preceding assessment year in which the conditions were made on the ground that the provision of Section 32(1)(iia) provides that the assessee is entitled to claim depreciation @ 50% of the of the normal rates as prescribed under clause (iia) and the said benefit has been specially granted w.e.f. 1.4.2016 by Finance Act,2015 from AY 2016-17 - HELD THAT:- The issue has been decided by the coordinate bench in M/s Birla corporation Ltd. [ 2014 (12) TMI 436 - ITAT KOLKATA] by holding that assessee is entitled to remaining 50% of the depreciation in the subsequent year where the said depreciation could not be claimed in preceding assessment year because of the reason that the asset was put to use for less than 180 days in terms of provision of Section 32(1)(ii). Foreign currency loss - Claim denied by the AO on the ground that being notional and contingent in nature - alternative argument of the ld Counsel for the assessee that the assessee is entitled to depreciation on this amount of loss after it is capitalized in asset cost - HELD THAT:- As perused Section 43A which begins with non-obstante clause and provides that where assessee has acquired any asset during the previous year from outside the country for the purpose of business or profession and in consequence of forex fluctuations in the rate of exchange after acquisition of asset there is an increase or reduction in the liability of the assessee as expressed in Indian currency as compared to the liability existing at the time of making payment towards the whole or a part of the cost of the asset or towards the repayment of the whole or a part of the moneys borrowed by the assessee from any person, directly or indirectly in any foreign currency specifically for the purpose of acquiring asset along with interest if any, the amount by which the liability as aforesaid is so increased or reduced during previous year and which is taken into account at the time of making the payment irrespective of the method of accounting adopted by the assessee shall be added to or deducted from the actual cost of the asset. Therefore the arguments of assessee can not be accepted on this issue. In view of this we are not in agreement with the conclusion drawn by the ld CIT(A) on this issue and are inclined to reverse the appellate order by restoring the order of AO. We find force in the alternative argument of assessee that the assessee is entitled to depreciation on this amount of loss after it is capitalized in asset cost. Accordingly the AO is directed to allow depreciation on this amount at the applicable rate of depreciation after capitalizing the loss. The ground no. 6 raised by the revenue is partly with the above observations.
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2022 (12) TMI 858
Addition u/s 68 - unexplained credit - sale of penny stock company - bogus Long-Term Capital Gain - ITAT deleted the addition - HELD THAT:- Revenue has mentioned in the present appeal that the issue involved is covered by the judgment of this Court in Suman Poddar [ 2019 (9) TMI 1089 - DELHI HIGH COURT] wherein appeal of the Assessee was dismissed taking judicial notice of the fact that there was an astronomical increase in the share price of a company which was not commensurate with the financial parameters of the said company, yet this Court finds that a Coordinate Bench of this Court in PCIT vs. Smt. Krishna Devi [ 2021 (1) TMI 1008 - DELHI HIGH COURT] connected ITAs has upheld the ITAT order which is impugned in the present appeal. ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order - no substantial question of law arises.
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Customs
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2022 (12) TMI 898
Applicability of BCD exemption - import of 94.93 CBM of Plantation Teak Logs from Malaysia - inadvertent non-claiming BCD exemption available for import of goods under CTH 4401 to 4410 from Malaysia, under Serial number 574 of Notification No. 53/2011-Cus. dated 01.07.2022 - It is the case of the appellant that by mistake Serial number was mentioned as 577 and accordingly the system did not allow the exemption - HELD THAT:- The first appellate authority has clearly recorded that the appellant did not submit the Country of Origin Certificate as prescribed, either during the assessment stage or appellate stage. Against this, the learned Consultant would contend that the Bill of Entry itself contains country of Origin as Malaysia, the same is also supported by the filing of supporting document details which mentions the details like IRN Nos. etc., which only required a simple verification by the concerned authorities. But, however, without going into or looking into the Bill of Entry, the first appellate authority has given a wrong finding as to the non-filing of the Country of Origin Certificate. The impugned order has to be set aside but however, with a direction to the first appellate authority to pass a speaking order after considering the Bill of Entry and other supporting documents if any that may be filed by the appellant - Appeal allowed by way of remand.
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2022 (12) TMI 897
Penalty under Section 112(a), 112(b) 114AA of the Customs Act, 1962 - fraudulent import of vehicles declared as brand new vehicles of foreign origin through Kolkata Port on different dates and cleared against Bills of Entry - benefit of Notification No.21/2002-CUS dated 01.03.2002 - importers availed the exemption wrongly with the help of various persons - HELD THAT:- It was alleged that the cars were old and used (secondhand) and the importers were not traceable. It is further alleged that the imported cars were not new cars and therefore cars were subsequently seized. The imported cars were old and used (secondhand cars) and therefore the benefit of exemption is denied. The allegation of abetment charged upon on the Appellant are totally false and baseless in nature. The Appellant submits that Section 114AA is not applicable in charging the Appellant for penalty when documents on the basis of which Appellant is charged are not in the manner laid down under Section 138C. The same should be authenticated in the manner which is prescribed under Section 138C. As Section 138C is not proved then the penalty levied under Section 114AA will not be attracted - the authorities below had discussed in detail in respect of imposition of penalty on the Appellant. It is evident from the record that in some of the cases, the Appellant s involvement cannot be denied. It is also observed that the proceeding is hit by the bar of limitation. Availing of benefit of Notification, which the Revenue subsequently formed an opinion was not available, cannot lead to the charge of misdeclaration or mis-statement, etc. and even if an importer has wrongly claimed the benefit of the exemption, it is for the department to find out the correct legal position and to allow or disallow the same - the quantum of penalty is reduced @10% of the penalty imposed in each case. Appeal allowed in part.
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Corporate Laws
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2022 (12) TMI 896
Seeking restoration of name of the company in the Register of Companies - it is alleged that the Company is not an active company and not carrying on any business for which it was incorporated - Section 252(3) of the Companies Act, 2013 - HELD THAT:- From the records, it is seen that the Appellant Company filed its statutory compliances as per law. Whilst the NCLT though in its order at para 3 observed that the Appellant Company enclosed/annexed with the Appeal the copies of the Annual Returns, Balance Sheet and Income Tax Returns for the Financial Years 2015-16, 2016-17 and 2017-18 and 2018-19. Despite sufficient evidence placed before it, the NCLT failed to consider the same on merits. Even though the law provides for striking off the name of the Company for non-complying the statutory requirement as stipulated under Section 248 Companies Act, 2013, the statute also provides Section 252 of the Act to prefer an Appeal to the Tribunal by the aggrieved person against such dissolution of the Company. The Appellant rightly exercised its jurisdiction under Section 252 of the Companies Act, 2013 before the NCLT. This Tribunal is of the opinion that the removal of the name of the company from the Register of Companies is not justified. There is no other ground except as mentioned in the notice dated 29.06.2018 for striking the name of the Appellant Company suo motu. The reasons for not restoring the company and dismissing the application of the Applicant is in our view not a sound ground - The ROC, West Bengal is hereby directed to restore the name of the Appellant Company to the Register of Companies, West Bengal subject to the compliances mentioned. Application allowed.
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2022 (12) TMI 895
Seeking restoration of the name of the Appellant Company in the Register maintained by the Registrar of Companies (RoC), Chhattisgarh - failure to file Financial Statements Annual Returns for the period 2016-17 to 2017-18 - whether the Appellant Company is carrying on any business or operations or not? - HELD THAT:- In view of the fact that the sale deeds executed in favour of the Appellant Company and Audited Balance sheet from Financial Year 2015-16 to 2018-19 as also Income Tax Return of the Appellant Company shows that the Appellant Company is having substantial movable as well as immovable assets. Therefore, it cannot be said that the Appellant Company is not carrying on any business or operations. Hence, we are of the view that the order passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) as well as Registrar of Companies, Chhattisgarh is not sustainable in law. The impugned order passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) is set aside. The name of the Appellant Company be restored to the Register of Companies subject to the compliances mentioned - Appellant shall pay costs of Rs. 50,000/- to the Registrar of Companies, Chhattisgarh within 08 (Eight) weeks from passing of this Judgment - appeal allowed.
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2022 (12) TMI 859
Initiation of prosecution proceedings - Period of limitation from the date of knowledge of offense - Statutory Auditors (CA) under the Companies act - offence under Section 233 read with Sections 227(2) and 227(3)(d) of the Companies Act - petitioner by profession is a Chartered Accountant - It is contended that, the offence is punishable only with a fine, therefore, from the date of knowledge of the offence i.e., 24.06.2013, the complaint should have been filed within six months, however, in the instant case, it was filed on 10.07.2014, hence, it is barred by limitation. HELD THAT:- In the instant case, the violation alleged in the complaint is punishable only with a fine as per Section 233 of the Companies Act. As per Section 468 of the Cr.P.C., there is a bar in taking cognizance of an offence specified in sub-Section 2 of Section 468 of the Cr.P.C., after the expiry of the period of limitation. As per sub-Section (2) (a) of Section 468 of the Cr.P.C., the period of limitation for the offence punishable with a fine is only six months. In the decision of Kavi Arora [ 2015 (9) TMI 1742 - DELHI HIGH COURT] it has been decided that , The offences in the present case are not continuing in nature, limitation commenced as per Section 469(1)(b) Cr.P.C. when actionable knowledge was gained by the competent authority i.e. when the Registrar of Companies had knowledge of the commission of the alleged offences, i.e. 24th June, 2013 when the Registrar of Companies received the report of the Inspector and ran out on 23rd June, 2014 and thus the complaint, which was admittedly filed on 18th September, 2014 was hopelessly barred by limitation. There is no provision under the Act whereby any consent/sanction of the Central Government is required for prosecution of the offences under Section 211(7), 211(3A), (3B) and (3C) of the Act. The controversy involved in the instant case has already been settled. Arguments similar to the ones made in the present case have been rejected by the co-ordinate Bench of this court in its decision in Kavi Arora [ 2015 (9) TMI 1742 - DELHI HIGH COURT] To that extent this court is bound, therefore, there is no reason to take a different view and hence, the submission made by learned counsel for the respondents to refer the matter to the Division Bench is also liable to be rejected. Accordingly, the petition is allowed. The impugned summoning order dated 10.07.2014 and other consequential proceedings emanating thereto are accordingly quashed.
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Insolvency & Bankruptcy
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2022 (12) TMI 894
Approval of the resolution plan of the Corporate Debtor - Recovery of property tax demand - HELD THAT:- It is clear that CIRP of the Corporate Debtor was initiated on 27.11.2018 and the RP made the public announcement, inviting the claims of all the creditors of the Corporate Debtor by publication in Marathi (i.e.Navshakti) as well as in English (i.e The Free Press Journal) and also published notice on the website of the Corporate Debtor. It has also come on record that the RP sent a letter dated 11.12.2018 to the Appellant intimating about its appointment as IRP of the Corporate Debtor and that he has taken over the charge of the entire asset of the Corporate Debtor w.e.f.15.12.2018 but despite that the Appellant did not choose to put up any claim before the RP whereas according to the RP the claim received from Financial Creditors and Operational Creditors including the Govt. bodies and authorities were duly collated and IM was prepared on 25.03.2019 and as per IM, the claim of the various Govt. agencies was approximately Rs. 2.26 Crores. In the case of Rainbow Paper Limited [ 2022 (9) TMI 317 - SUPREME COURT] , the application filed by the State Tax Officer (1) was dismissed holding that the Government cannot claim first charge over the property of the Corporate Debtor, as Section 48 of the Gujarat Value Added Tax, 2003 (GVAT Act) which provides for first charge on the property of a dealer in respect of any amount payable by the dealer on account of tax, interest, penalty etc. cannot prevail over Section 53 of the Code and thus the question which was raised in the said appeal was as to whether the provision of the IBC and, in particular, Section 53 thereof, overrides Section 48 of the GVAT Act? - It was observed that under the unamended provisions of Regulation 12(1), the Appellant therein was not required to file any claim. Read with Regulation 10, the Appellant would only be required to substantiate the claim by production of such material as might be called for. It was also held therein that the Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of the IBC. Under Section 53(1)(b)(ii), the debts owed to a secure creditor, which would include the State under the GVAT Act, are to rank equally with other specified debts including debts on account of workman s dues for a period of 24 months preceding the liquidation commencement date and that the State is a secured creditor under the GVAT Act. Section 3(30) of the Code defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The aforesaid decision, solely relied upon by the Appellant is not at all applicable to the facts arising out of the case in hand because, firstly, the Appellant did not file any claim, whereas in the case of Rainbow Papers Limited the claim was filed though belatedly. Secondly, the last date for submission of claim in the case of Rainbow was 05.10.2017 and till then unamended provisions of Regulation 12 were in operation as per which the creditor was to submit proof of claim whereas in the present case public announcement for inviting claim was made on 07.12.2018 much after the amendment in Regulation 12 of the Regulations which now provides that a creditor shall submit a claim with proof. Meaning thereby, after the amendment in Regulation 12 filing of the claim has become a sine quo non. It is pertinent to mention that being a statutory authority, it cannot feign ignorance about the necessity to file claim after having been informed by the RP of the CIRP proceedings vide letter dated 11.12.2018. As a matter of fact, the Appellant is to be blamed for not initiating the steps to set up its claim before the RP. Moreover, it has now been settled that if the claims are not submitted to the RP and are not part of the resolution plan then the same shall be deemed to have been extinguished. There are no merit in this appeal for the purpose of interference - appeal dismissed.
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2022 (12) TMI 893
Approval of resolution plan - Seeking a direction to the Resolution Professional (RP) to call for a Meeting at the CoC - requirement to follow the timelines - seeking consideration of Resolution Plan of M/s. Hindustan Coils Limited, (HCL) M/s. Kalinga Enterprises Private Limited (KEPL) and M/s. New Lakshmi Steel Power Private Limited or any other entity and sought for additional 30 days to consider and approve the most suitable Plan - whether the CoC after having approved the Resolution Plan on 11.11.2019 can seek direction to consider the new Resolution Plan of a third party who was not a part of the CIRP Proceedings, and seek to withdraw their approval after more than two years of the approval of the first Resolution Plan? HELD THAT:- Though the main issue raised in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. [ 2021 (9) TMI 672 - SUPREME COURT] is with respect to withdrawal/modification of a Resolution Plan by an SRA, the Hon ble Supreme Court has clearly laid down that the NCLT is Residuary Jurisdiction [under Section 60(5)(c)] though vide, is nonetheless defined by the text of the Code. Specifically, the NCLT cannot do what the IBC consciously did not provide it the power to do . Further, the Court observed that this Court must adopt an interpretation of the NCLT is Residuary Jurisdiction which concurs with the broader goals of the Code . Ebix Singapore Pvt. Ltd. has observed that strict timelines have to be adhered to and that the Adjudicating Authority lacks the authority to allow the withdrawal/modification of the Resolution Plan by an SRA, as this would defeat the very objective of the statute. In the instant case, though it is not the SRA which is seeking withdrawal, the effect of the CoC seeking withdrawal of an already approved Resolution Plan would have identical repercussions with respect to timelines as the same would have the effect of restarting the CIRP Process from the valuation stage when all the statutory timelines have long since been exhausted - The principle with respect to timelines is applicable to the facts of this case. This Order has attained finality and no fresh consideration of any Resolution Plan at this stage can be entertained. It is reiterated that the Maximisation of Value of Assets ought to be within the specified timelines and if it is not a timebound process , the entire scope and objective of the Code would fail merely because there is another higher offer made by a third party, the CoC cannot consider another Plan of a third party who did not participate in the CIRP Proceedings. This Tribunal is of the earnest view that once Plan is submitted for approval, it is binding between the CoC and the SRA, unless there is any material irregularity or is against the provisions of Section 30(2) of the Code the Adjudicating Authority cannot, in its limited jurisdiction, interfere - Appeal allowed.
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2022 (12) TMI 892
Initiation of CIRP - Jurisiction of NCLT to admit the application u/s 7 - Registration of the applicant, non-banking financial institution (NBFC), was cancelled during the pendency of the proceedings - Financial Creditors or not - HELD THAT:- Admittedly, the present proceedings have been initiated against Sungrowth as a corporate guarantor. Section 5A defines Corporate Guarantor which means a corporate person. Corporate person, we have already explained that it would not include a financial service provider. Thus, looking from any angle, Sungrowth having the registration in terms of Section 3(17) as financial service provider by the financial service regulator in terms of Section 3(18) by RBI as on 28.03.2001 which continued up to 09.07.2018/11.07.2018 cannot in any case be called a banking institution. It has to be called a non-baking financial institution and in such scenario the application filed under Section 7 of the Code on 08.06.2018 was not maintainable on that date and therefore, the Adjudicating Authority had no jurisdiction to invoke its power for the purpose of initiation of CIRP proceedings. The finding of a Court or Tribunal becomes irrelevant and unenforceable/ inexecutable once the forum is found to have no jurisdiction. Similarly, if a Court/Tribunal inherently lacks jurisdiction, acquiescence of party equally should not be permitted to perpetuate and perpetrate, defeating the legislative animation. The Court cannot derive jurisdiction apart from the Statute. Regard is to be had to the decision of Hon ble Supreme Court in the case of Jagmittar Sain Bhagat Vs. Health Services, Haryana, [ 2013 (7) TMI 988 - SUPREME COURT ] , in which it has been held that if the Adjudicating Authority does not have the jurisdiction to initiate the proceedings then the said proceedings are nonest in the eyes of law and such an issue can be raised even in appeal also. There is a merit in the appeal and the same is hereby allowed.
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CST, VAT & Sales Tax
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2022 (12) TMI 891
Validity of assessment order - concessional rate of tax in respect of inter-State sales on the strength of C Form - mismatch of products - Section 32 of the Delhi Value Added Tax Act, 2004 - HELD THAT:- A perusal of the impugned assessment orders indicates that the benefit of C Forms has been denied to the petitioner in respect of certain inter-State sales on the ground that the C Forms could not be verified. The concerned VATO had noted that whereas the petitioner deals with kirana items soap and detergents, cosmetics/shampoo/hair oils and tooth brush/paste/powder etc the concerned authorities of Rajasthan have confirmed that the C Forms have been issued in respect of different items such as gitti, grit cotton seed cake. It is material to note that the VATO did not consider the judgements relied upon by the petitioner. Whether the petitioner could be denied the benefit of the C Forms on the ground that the same have not been verified, or on the basis of the mismatch of the products? - HELD THAT:- In Pentex Sales Corporation v. Commissioner of Sales Tax, Delhi [ 2013 (5) TMI 566 - DELHI HIGH COURT] , this court had referred to the decision in the case of State of Madras v. M/s Radio and Electrical Ltd Anr. [ 1966 (4) TMI 59 - SUPREME COURT] and held that the dealer claiming the benefit of ST-I Form was required to verify that the purchasing dealer was a registered dealer and holds a registration certificate in respect of the said goods sold to him. Once the said dealer had complied with the same, his duty did not extend any further. In the present case, there is no dispute that the purchasing dealers are duly registered with the concerned authority as the registered dealers. Their registration certificates also indicate that they are registered in respect of the goods sold by the petitioner. There is no dispute that the petitioner had produced invoices and other material to establish that he had sold the concerned goods to the purchasing dealers. Under the scheme of taxation, the point of further taxation shifts to the purchasing dealer and the tax on the goods in question have to be recovered from those dealers. Petition allowed.
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2022 (12) TMI 890
Seeking rectification of returns for the tax periods 2nd, 3rd and 4th Quarter, 2015-2016 - section 74B of the DVAT Act - HELD THAT:- The writ petition is disposed of with a direction to the respondents/revenue to issue the rectified C and F-Forms to the petitioner subject to the verification of entitlement on merits, without being burdened with the issue concerning limitation, in line with the direction issued in other cases, including the judgment of the coordinate bench in M/S SAMSUNG C T PVT. LTD. VERSUS THE COMMISSIONER, TRADE TAXES, ANR. [ 2019 (2) TMI 1772 - DELHI HIGH COURT] . Application disposed off.
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Indian Laws
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2022 (12) TMI 889
Seeking grant of Anticipatory Bail - conspiracy - huge loss to Revenue - during the pendency of the CIT appeals at Kolkata, the revision petitions have been filed to obtain favourable orders - offences punishable under Section 120-B of the Indian Penal Code and Sections 7, 8, 11, 12 and 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act - HELD THAT:- The court has gone through the materials available on record as well as rival submissions of the learned counsel appearing for the parties and finds that it has been alleged that the petitioner Bishal Agarwal has prepared Section 264 petitions and represented the companies before the PCIT. The petitioners Satyanarayan Sarawagi and Uday Shankar Mahawar are concerned, they are the directors / controllers of the respective companies, as disclosed in the submission of learned D.S.G.I. appearing for the CBI and the huge loss has occurred to the Government. The petitioner Binod Kumar Agarwal is concerned, he has made his son Bishal Agarwal as authorized representative for most of the above mentioned Assessee companies with the active involvement, he himself along with the controller of the Assessee companies were able to evade taxes and had obtained wrongful gain and so far as petitioner Deepak Kumar is concerned, he was also the director / controller of the company mentioned in the submission of learned A.S.G.I. and huge loss has occurred to the Government due to his active conspiracy with the then PCIT. All the petitioners are in conspiracy of transferring the PAN to the PCIT, Ranchi, Hazaribag and Koderma. It has also come that during the pendency of the CIT appeals at Kolkata, such revision petitions have been filed to obtain favourable orders in connivance with Sri Tapas Kumar Dutta, the then PCIT. Regard being had to the facts and circumstances of the cases and considering that the economic offence is a serious offence against the society, I am not inclined to grant the privilege of anticipatory bail to the petitioners - petition dismissed.
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