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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter December 23, 2020 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Articles DISPUTE OVER SERVICE TAX ON DISCOUNTS / INCENTIVES IN AUTOMOBILE SECTOR CARO, 2020 Applicable w.e.f. 01.04.2021 – MCA Notification News APEDA organizes virtual Buyer Seller Meeting with Thailand for expanding exports of agricultural and processed food products exports to South-East Asian country Shri Piyush Goyal assures Bangladesh India's complete cooperation in ensuring barrier-free trade between the two countries DPIIT invites applications for National Startup Awards 2021 Notifications Companies Law S.O. 4646 (E) - dated 21-12-2020 - Co. Law Central Government appoints the 21st day of December, 2020 as the date on which the Various provision of the Companies (Amendment) Act, 2020 shall come into force DGFT 48/2015-2020 - dated 22-12-2020 - FTP Syncing of HS codes in ITC (HS) 2017- Schedule-I (Import Policy) with the Finance Act, 2020 47/2015-2020 - dated 22-12-2020 - FTP Amendment in Export Policy of Medical Goggles and Nitrile/NBR Gloves 46/2015-2020 - dated 21-12-2020 - FTP Amendment in Import Policy Condition for de – notifying STC as an STE for import of Copra and Coconut Oil under Chapter 12 and 15 of ITC (HS), 2017, Schedule – I (Import Policy) GST - States 19/2019 – State Tax (Rate) - dated 21-12-2020 - Delhi SGST Seeks to exempt supply of goods for specified projects under FAO (48/2020)-FD 03 CSL 2020 - dated 19-12-2020 - Karnataka SGST Seeks to extend the due dates for compliances and actions in respect of anti-profiteering measures under GST till 31.03.2021. 34073- FIN-CT1-TAX-0002/2020 - dated 21-12-2020 - Orissa SGST Notification to extend the due dates for compliances and actions in respect of anti-profiteering measures under GST till 31.03.2021 34069- FIN-CT1-TAX-0038/2020 - dated 21-12-2020 - Orissa SGST Notification on commencement of section 2 of the Odisha Goods and Services Tax (Amendment) Act, 2020 w.e.f. 22nd December, 2020 943/2020/7(120)/XXVII(8)/2020/CT-81 - dated 11-12-2020 - Uttarakhand SGST Appoint the 10th day of November, 2020, as the date on which the provisions of Section 8 of the Uttarakhand Goods and Services Tax (Amendment) Act, 2019, shall come into force. SEZ S.O. 4633 (E) - dated 17-12-2020 - SEZ Seeks to recind Notification No. S.O. 277(E) dated 7th, February 2008 Highlights / Catch Notes GST Cancellation of GST registration - It is very sad to note the manner in which the show-cause notices came to be issued - The show-cause notices, are absolutely bereft of any material particulars or information, and it is but obvious that in the absence of the same, how does the authority expect the writ-applicant to respond to the same in an effective and meaningful manner. - HC Visit to Get Source Supply of services or not - as per the agreement, applicant has consented/agreed to do some acts and as per clause 5 of Schedule II appended to GST Act, 'an agreement to do an act' will be considered as supply of services. Hence in the subject case, we hold that the applicant is rendering supply of services for which it is receiving consideration in the form of “financial assistance”. - The subject transaction does not satisfy the condition mentioned in clauses (iii) of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and therefore the said transaction cannot be considered as Export of Services under the GST Laws. - AAR Visit to Get Source Benefit of exemption - Training programme - Services provided by them under the category of Information and Communication Technology)ICT @ School Project - Challenge to AAR decision - the Appellant have failed to meet the primary requirement of the conditions of the notification i.e., the supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration - AAAR Visit to Get Source Income Tax Correct head on income - Income from trees - Any compensation received in lieu of loss thereof would form part of assessee’s trading operations. The same is evident from the fact that cut trees sold by the assessee constituted its trading income and the same were accepted to be agricultural income. Similar treatment was to be given to the compensation received for loss of trees. - AT Visit to Get Source TP Adjustment - Naturally when sales price consists of price for warranty and After sales services, which are promised at the time of sales, naturally corresponding expenses are also to be considered while computing the margin of the assessee. After sale support services, training to customers and local staff for troubleshooting and service coordination expenses are thus, required to be included for determining the gross profit margin in resale price method. - AT Visit to Get Source TP adjustment - We are unable to concur with the aforesaid manner in which the TPO had determined the ALP of the referral services rendered by the AE, viz. CLSA, Hong Kong to the assessee at Rs.nil. - Under no circumstances the TPO can benchmark the transactions at nil or in an ad hoc manner by dispensing with the statutory obligation cast upon him to take recourse to and therein determine the ALP by applying any one of the methods prescribed under Sec. 92C(1) of the Act. - AT Visit to Get Source Deduction of bad debts - The customers of the assessee refused to make payment and therefore, the assessee had written off the amount as not recoverable. It is pertinent to mention that Section 36(1)(vii) of the Act mandates that in order to claim bad debts, the assessee has to write off the same in its books of accounts and assessee is not required to prove that the debt as irrecoverable. - HC Visit to Get Source Withholding certificates u/s 197 issued at lower rate tax - Respondents are required to pass an order u/s 197 either rejecting the application for such certificate or allowing such application resulting in issuance of certificates which may be at rates higher than nil rate sought for by the assessee, such an order must be supported by reasons. - In the instant case, we do not know the reasons for not granting nil rate certificates to the petitioner u/s 197 - The contemporaneous order required to be passed under section 197 of the Act is also not available - Matter restored back - HC Visit to Get Source AO had no jurisdiction to frame the final assessment order on 27.01.2020 u/s. 144(3) of the Act, since he was divested of jurisdiction to pass final order between 27.01.2020 to 31.01.2020. Even the AO could not have framed the final order u/s. 144C(3) on 27.01.2020 because the assessee had filed its objection before the DRP on 24.01.2020, the DRP is in seisn of the case of assessee and between 24.01.2020 and till the DRP gives direction as per section 144C(5) AO does not enjoy jurisdiction over the assessee’s case for AY 2016-17. - AT Visit to Get Source TP adjustment - AMP expenses - the existence of an international transaction will have to be established de hors the BLT, the burden is on the Revenue to first show the existence of an international transaction. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. - AT Visit to Get Source Customs Eligibility of SAD exemption - “Blanks” cleared from the “SEZ Unit” of the Appellant by way of stock transfers to its “DTA Unit” - The adjudicating Authority has himself accepted that such blanks attract VAT @ 5% as Ball Pen parts and the same is also evident from a sample Tax Invoice dated 20 April 2014 enclosed as part of the Appeal Paper Book. Therefore, the proviso is not attracted at all - AT Visit to Get Source Principles of natural justice - gist of submissions by the learned counsel for the appellants are that the department did not consider their submissions in entirety - the case needs to go back to the original authority for a proper examination of all the facts of the case, the submissions of the appellants including case law in this regard and to pass a speaking and reasoned order as per law. - AT Visit to Get Source Service Tax Reversal of CENVAT Credit - When the mistake was pointed, the appellant reversed the proportionate common credit taken on input services used in the provision of exempt services. Therefore, Rule 6(3) (i) will not have any application, when a credit is taken wrongly and the same is reversed as it tantamount to nonavailment of the credit. - AT Visit to Get Source Central Excise Clandestine removal - finished goods found short during the stock taking - since these were captively consumed they were exempt from duty under notification 67/95-CE dated 16.03.1995. The Commissioner’s finding that the exemption does not apply to ‘finished goods’ is legally not sustainable because of the specific definition of ‘inputs’ in the said notification which covers virtually all excisable goods including the goods manufactured by the appellants. - AT Visit to Get Source CENVAT Credit - Capital goods - Inputs - Cement and Steel items - There is no blanket or absolute bar in claiming credit on the disputed items, unless used for the purposes specifically excluded in Explanation 2 to the definition of inputs. The Appellant had placed a Certificate from the Chartered Engineer, in support of their contention that the disputed items were used in the fabrication of the storage tanks within the factory premises. - Credit allowed as inputs - AT Visit to Get Source Case Laws: GST 2020 (12) TMI 837 Benefit of exemption - Training programme - Services provided by them under the category of Information and Communication Technology)ICT @ School Project - Challenge to AAR decision - Applicability of Entry No. 72 of Notification No.12/2017-Central Tax(Rate), dated 28.06.2017, read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department, Government of Odisha - HELD THAT:- As per notification, it is noticed that the following three pre-requisite are to be satisfied in order for the supply to qualify for the notified exemption, under Entry No.72 of Notification No.12/2017-Central Tax(Rate): (a) The supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration; (b) Such service must be under any training programme; (c) The total expenditure of such service is borne by the Central Government, State Government or Union Territory Administration. In terms of Section 2(53) of the CGST Act, 2017 and in terms of Section 2(53) of the SGST Act, 2017, Government means the Central Government or Government of Odisha respectively. There is no denying of the fact that the Appellant is providing service to Odisha Knowledge Corporation Limited (here-in-after referred to as OKCL ) which is a body corporate. The Appellant has failed to produce any documentary evidence as to how the provision of service to OKCL qualifies to be a provision of service to the Central Government, State Government or Union Territory Administration - The argument put forth by the Appellant that they are the implementing agency on behalf of the Government is not correct, as they are not providing any services to Government. In terms of para-8 of the agreement between OKCL and the Appellant, it is noticed that the Appellant is required to supply and install the specified goods and provide specified services in the ICT Labs of the Govt. and Govt. Schools located in the specified zones. Therefore, it is evident that the Appellant made supplies to OKCL which is a body corporate and registered under the Companies Act, 1956 as a Company. Appellant have clearly admitted that the funds for implementation of project are being provided by OMSM to OKCL, for further release to the Appellant.. The Appellant has cited the agreement copy of OMSM and OKCL, where it is provided that if OKCL fails to discharge the obligation under the agreement, OMSM would discharge all the responsibilities. The agreement cited between OMSM and OKCL is not relevant to the present issue - The Appellant themselves have admitted that OKCL will release the money for the supplies made by the Appellant. The contention/pleading of the Appellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct. The consideration received by the Appellant is in respect of provision of supplies, taxability of which has been discussed in the foregoing paragraphs. Moreover, under Schedule-II (1) (c) of the CGST Act, 2017/SGST Act, 2017, it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods - On plain reading of the job carried out by the appellant includes supply of goods, installation commissioning of hardware, repair maintenance equipment and computer education service. Under 4.1 of the agreement, it is clearly mentioned that the payment is for goods and service. But the Appellant claims that they have rendered only computer training service, it is not correct at all. The consideration received by the Appellant in respect of provision of supply could not be treated as the consideration for only service rendered. Moreover, under Schedule II of Para 1(c) of the CGST Act, 2017/SGST Act, 2017, it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. Having held that the Appellant have failed to meet the primary requirement of the conditions of the notification i.e., the supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration; we refrain from discussing the other aspects of the notification and pass the following order. The decision of Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017, is upheld. 2020 (12) TMI 836 Supply of services or not - supply of electric transformers, static converters, electric wires/ cables for transmission of electricity, equipment for spark ignition, installation and commissioning services - Applicant's holding company, desires to join the 'develoPPP.de programme' (said program) run by the German Federal Ministry for Economic Cooperation and Development. Pretti GmbH desires to provide financial assistance of 540,000 Euro to the Applicant under the said program - financial assistance to be received by the Applicant is a consideration for supply or not - Section 7 of the Central Goods and Services Tax Act, 2017 / Maharashtra Goods and Services Tax Act, 2017 - exempted supply or on taxable supply - Zero Rated Supply or not - export of services or not - reversal of input tax credit - classifiable under SAC 9997 or otherwise?. Whether the financial assistance to be received by the Applicant is a consideration for supply and whether their activity is covered under the meaning of supply of services in terms of Section 7 of the GST Act? - HELD THAT:- We agree with the applicant that, the charging event under GST law is supply of goods or services for consideration. Any payment will be treated as 'consideration' only if it is made against supply of goods and services. We will therefore discuss, whether the activities undertaken by applicant, in terms of the service contract, constitutes a supply' or not - This argument of the applicant that, the financial assistance to be received, is a mere transaction in money and not against supply of goods or services, is not acceptable. The `develoPPP.de project' intends to promote investments of German companies in India. Accordingly, Prettl Gmbh has asked the applicant to undertake some activities for which financial assistance is provided. Applicant contends that, there is no supply flowing from them to Prettl Gmbh. We do not agree with this view. The activities undertaken by the applicant are in pursuance of a service agreement with Prettl Gmbh and the amount received/to be received is also in pursuance of the same agreement. Further, activities undertaken by the applicant are to promote the investments of German companies in India and are undertaken only on the directions of Prettl Gmbh. In the entire agreement it is seen that, the said agreement is for provision of services. Prettl Gmbh is treated as a Service Recipient and the applicant is treated as a service provider. We also find, from the agreement that, applicant has agreed to provide certain services for which they will be paid some amounts. The applicant is terming these amounts as financial assistance whereas it is very clear from the agreement that the said amounts must be treated as consideration since they are being given to the applicant in lieu of certain supply of services to be effected by the applicant on the directions of Prettl Gmbh, i.e. the holding company - Hence, as per the agreement, applicant has consented/agreed to do some acts and as per clause 5 of Schedule II appended to GST Act, 'an agreement to do an act' will be considered as supply of services. Hence in the subject case, we hold that the applicant is rendering supply of services for which it is receiving consideration in the form of financial assistance . We do not agree with the jurisdictional office that, there is no supply in the subject case. If the above activity is considered as supply of service, then whether the same is classifiable under SAC 9997 as other services nowhere else classified under Sr. no 35 of the Notification-11/2017- C.T. (Rate) dated 28th June 2017 / Sr. no 35 of the Notification-11/2017-S.T. (Rate) dated 29th June 2017 / sr. no 35 of the Notification 8/2017-I.T. (Rate) dated 28th June 2017? - HELD THAT:- In the subject case it cannot be said that the applicant is involved in education per se since the element of normal schooling is absent. Further, the Applicant has also agreed that it is not imparting any classroom training, knowledge lessons thereby not running any educational institution also not issuing any degree or diploma certificate to students beneficiaries. In fact, the applicant has submitted that they are not providing any Education services to anyone - the entire activities undertaken by the applicant are only as per the impugned contract, implying that, in the absence of such contract, the applicant would not undertake the said activities. Hence it is clear that, the applicant is obliged to perform the subject activity, i.e. to do an act, under the terms of the impugned agreement. We do not agree with the submissions made by the applicant with respect to classification of services rendered by applicant - the applicant has agreed to do acts under the impugned contract and therefore their supply is to be classified under SAC Heading 999792 which pertains to Agreeing to do an Act . Whether the said activity, if considered as supply of service, is covered as Zero Rated Supply and qualifies as export of service under the provisions of IGST Act, 2017 and can be exported without payment of IGST? - HELD THAT:- The clause (e) of Section 97 (2) of the CGST Act, 2017 has got a very wide connotation and would cover all sorts of transactions, where the Advance Ruling on the questions related to the determination of the liability to pay tax can be sought by the Applicant - The subject transaction satisfies the conditions mentioned in clauses (i), (ii), (iv) and (v) of Section 2 (6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). However to be considered as Export of Services as per the GST Laws clause number (iii) with respect to Place of Supply of Services should be outside India. Whether the subject transaction is taxable or otherwise can be decided only by discussing the place of supply. Place of supply - HELD THAT:- The impugned Service Contract requires the applicant to; construct a training center; implement training measures for trainers, apprentices, unskilled workers, students or college graduates as well as integration of teaching content at four educational institutes; train vocational students from the Industrial Training Institute Pune and Don Bosco; train unskilled workers to become mechanics, electricians, technicians; etc. As per Section 13 (5) of the IGST Act, the place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held - the entire gamut of supply as per the agreement between the applicant and Prettl GMBH, will be performed in India and therefore we have no hesitation in holding that the place of supply, being event based in the subject case, is in India. The subject transaction does not satisfy the condition mentioned in clauses (iii) of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and therefore the said transaction cannot be considered as Export of Services under the GST Laws. 2020 (12) TMI 835 Manpower Supply services - providing of staff to Government, to carry out work entrusted to it as per the 12th Schedule to Article 243W of the Indian Constitution - Services covered under Clause 1 2 of Twelfth Schedule of Article 243W? or not - benefit of Exemption Notification No. 12/2017 dated 28th June, 2017 (Entry No. 3 of Exemption Notification) - pure labour services or not - Government Works Contract Services or not - rate of GST. HELD THAT:- Applicant has received work orders for supply of goods or services or both, from the Municipal Corporation of Amravati, Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) and Maharashtra Jeevan Pradhikaran (Water Supply) for the period 2019-20 - On perusal of the work orders, it is seen that applicant is only supplying manpower to Municipal Corporation and Maharashtra Jeevan Pradhikaran (water supply) whereas in respect of MSEDCL, in some cases they are supplying only manpower whereas in other cases, in addition to supply of manpower, they are supplying materials as well. Thus, in most cases pure services, in the form of manpower supply, are rendered by the applicant and only in a couple of cases, there is an element of composite supply of goods and services being provided. Whether their subject activities are covered under Clause 1 2 of 12th Schedule of Article 243W of the Indian Constitution? - HELD THAT:- In the subject case, as per the work orders submitted by the applicant we find that, for the services to fall under Article 243W of the Constitution, the said services should be supplied to Municipalities as and when outsourced to the applicant. Out of the three recipients mentioned by the applicant we find that only the Amravati Municipal Corporation, Amravati (AMC), is a municipality, established and set up as per the provisions of Article 243 P of Constitution of India and they are also performing the functions entrusted under Article 243W in public interest. Applicant is specially supplying services like providing manpower for cleaning, providing manpower for collecting of rent from hawkers and providing manpower for collecting of parking fees to Amravati Municipal Corporation, which satisfies the definition of a local authority as provided under Section 2 (69) (b) of the CGST Act. MSEDCL is not a municipality. It is an electricity distributing company and therefore supply of goods and services to MSEDCL cannot be considered as related falling under Clause 1 2 of Article 243W of the Constitution. Similarly, since Maharashtra Jeevan Pradhikaran (water supply) is not a municipality, supply of services to it, by the applicant, are also not related to Urban planning including town planning or Planning of land- use and construction of buildings. Therefore the said supply does not fall under Clause 1 2 of Article 243W of the Constitution - subject activities undertaken by the applicant will not fall under Clause 1 2 of the 12th Schedule to Article 243 W of the Constitution. Whether the services provided by it falls under Entry No. 3 of Exemption Notification No. 12/2017 dated 28th June, 2017 as amended from time to time as the services are in the nature of pure labour services? - HELD THAT:- Maharashtra State Electricity Board (or MSEB), a state-owned electricity regulation board operating within the State of Maharashtra, was formed on 20 June 1960 under Section 5 of the Electricity (Supply) Act, 1948. In accordance with Electricity Act 2003 of the Government of India, the Maharashtra State Electricity Board was restructured into 4 companies in 2005, one of which was MSEDCL, a public sector undertaking (PSU) controlled by the Government of Maharashtra. MSEDCL distributes electricity to the entire Maharashtra state except some parts of Mumbai city - MSEDCL is constituted and established by the State Government of Maharashtra to carry out the function of distribution of electricity and is therefore clearly covered under the definition of 'Government Entity'. Whether Maharashtra Jeevan Pradhikaran falls under the definition of Government Entity? - HELD THAT:- The Principal responsibilities of Maharashtra Jeevan Pradhikaran according to MWSSB Act 1976 are : Planning, designing and implementation of water supply and sewerage schemes including facilitation for necessary financial provisions, As directed by the Government of Maharashtra (Government of Maharashtra), taking over any water supply as well as sewerage scheme for operation and maintenance, To establish service level bench marks for water supply and sewerage sector, To extend relevant support, regarding water sector, to Government of Maharashtra as well as Local Self Governments, To support Government of Maharashtra to prepare Annual Plan and to establish / modify tariff / tax / cess structure in water sector. Therefore, the Maharashtra Jeevan Pradhikaran is also under the control of the Government of Maharashtra and can be considered as a Government Entity'. Whether the supply of Pure services by the applicant can be considered as any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- Providing manpower for cleaning of public washrooms and restrooms, if provided Municipal Corporations, will be covered under Public health, sanitation conservancy and solid waste management /Public amenities including street lighting, parking lots, bus stops and public conveniences since these functions are entrusted to the Municipalities under Article 243 W of the Constitution. Since it is not forthcoming from the applicant's submissions that, they are providing such services of providing staff for cleaning of public washrooms/restrooms to the Amravati Municipal Corporation, the applicant will not be eligible for exemption under Entry No. 3 of Exemption Notification No. 12/2017 dated 28.06.2017. Whether the services provided by it fall within the Government Works Contract Services on which GST rate was amended to 12% in the Notification No. 20/2017? - HELD THAT:- In only two situations, the applicant is supplying goods as well as services to MSEDCL. Firstly, it provides labour and material for the supply, test, transport, construction, erection, testing and commissioning of HVDS (high voltage distribution systems) Distribution Transformer Centres of varying capacities, release of Agricultural Pumps, Residential and Street light connections Manpower for Setting up new connections. Secondly the applicant provides labour and material for electrical installation in government staff quarters - the composite supply undertaken by the applicant as mentioned in para 5.7.3 above does not fall in any of the categories of (iii) (iv) and (v) of Notification no. 20/2017 - C.T. (Rate), as mentioned by them because there is no Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017. In the subject case as seen from their submissions in respect of the supply carried out by the applicant, there is no works contract since there is no contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. Therefore the question of availing the reduced rate of 12% GST does not arise at all. 2020 (12) TMI 833 Constitutional validity of sub-section (4) of the Section 16 of the Central Goods and Services Tax Acts, 2017 - Vires of Articles 14, 19 and 300A respectively of the Constitution of India - HELD THAT:- Let Notice be issued to the respondents, returnable on 24.02.2021 - Notice shall also be issued to the Attorney General of India. Prima facie, it appears that the impugned recovery order / Notice dated 20.10.2020 is without any show-cause or assessment proceedings. Till the next date of hearing, there shall not be any coercive recovery proceedings towards the dues pursuant to the recovery order dated 20.10.2020 - Application disposed off. 2020 (12) TMI 828 Cancellation of GST registration - Rule 22(1) of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- As the writ-applicant was not in receipt of any attachment along with the show-cause notice, vide letter dated 5th February 2020, he requested the authority to supply the attachment sheet to the show-cause notice dated 4th February 2020 - It appears that despite the specific request for furnishing the attached sheet, the request was not paid heed to, and ultimately, the writ-applicant had to file his reply dated 13th February 2020 to the show-cause notice dated 4th February 2020. Mr.Pandya, the learned counsel appearing for the writ-applicant has raised manifold contentions questioning the legality and validity of the very action on the part of the respondents in initiating the proceedings and also the final order passed cancelling the registration. We are inclined to quash the impugned order dated 25th February 2020 passed by the Commercial Tax Officer on the short ground that the same is a non-speaking order passed without any application of mind. It is very sad to note the manner in which the show-cause notices came to be issued - The show-cause notices, are absolutely bereft of any material particulars or information, and it is but obvious that in the absence of the same, how does the authority expect the writ-applicant to respond to the same in an effective and meaningful manner. The impugned order passed by the respondent no.3 dated 25th February 2020 (Annexure-A to this petition) is hereby quashed and set-aside - Application allowed - decided in favor of appellant. Income Tax 2020 (12) TMI 831 Withholding certificates u/s 197 issued at lower rate tax - Certificate for deduction at lower rates or no deduction of tax from income other than dividends - revision u/s 264 - whether respondents were justified in issuing lower rate tax certificates to the petitioner under section 197 of the Act for the assessment year 2021-22 corresponding to the financial year 2020-21 as against the request for such certificate at nil rate? - HELD THAT:- Before issuance of certificates u/s 197 the same must be preceded by an order. That order must disclose reasons and is an order passed in exercise of quasi-judicial powers. Such an order can be assailed in revision under section 264 - Therefore, an order under section 197 must not only contain reasons but the same has also to be provided to the assessee who seeks a certificate under section 197. Otherwise, how will such an assessee assail the order in revision under section 264? In the course of hearing, learned standing counsel submitted that respondent No.1 might have recorded reasons for issuance of certificates not at nil rate but learned counsel for the petitioner submits that petitioner has not been served with copy of any such order. The same has also not been annexed to the reply affidavit filed on behalf of the respondents. Respondents are required to pass an order u/s 197 either rejecting the application for such certificate or allowing such application resulting in issuance of certificates which may be at rates higher than nil rate sought for by the assessee, such an order must be supported by reasons. In the instant case, we do not know the reasons for not granting nil rate certificates to the petitioner under section 197 of the Act. The contemporaneous order required to be passed under section 197 of the Act is also not available. Referring to law laid down by this Court in Larsen Toubro [ 2010 (4) TMI 414 - BOMBAY HIGH COURT] as well as in Tata Teleservices (Maharashtra) Limited [ 2018 (2) TMI 192 - BOMBAY HIGH COURT ] we have no other alternative but to set aside and quash the impugned certificates dated 07.08.2020. Matter is remanded back to respondent No.1 for passing fresh order and issuing consequential certificates under section 197 of the Act by complying with the requirements of Rule 28AA of the Rules and after giving due opportunity of hearing to the petitioner. 2020 (12) TMI 830 Deduction of bad debts - Tribunal denying the benefit of claim of Bad debts when the amounts which has been claimed by the appellant as bad debts have been offered and assessed to tax in earlier assessment years and the claim is after fulfilling the conditions as envisaged under the provisions of section 36 (1)(vii) r.w.s. 36(2) - HELD THAT:- The assessee had exported bags to foreign customers in the past and had incurred unforeseen additional costs on certain imported raw material. In order to recover the additional costs incurred, the assessee had raised debit notes on the foreign customers and credited the amount due from them, raised by way of debit notes as income in its books of accounts and had offered the same to tax in earlier years. The customers of the assessee refused to make payment and therefore, the assessee had written off the amount as not recoverable. It is pertinent to mention that Section 36(1)(vii) of the Act mandates that in order to claim bad debts, the assessee has to write off the same in its books of accounts and assessee is not required to prove that the debt as irrecoverable. See VIJAYA BANK [ 2010 (4) TMI 46 - SUPREME COURT ] The Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX [ 1991 (11) TMI 2 - SUPREME COURT ] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. For this reason also, in the facts of the case, a different view cannot be taken. - Decided in favour of the assessee. 2020 (12) TMI 827 Depreciation on dumpers - @30% or 15% - HELD THAT:- Very same question of law as proposed in the present appeal was taken into consideration by a coordinate Bench of this Court in Durga Construction Company [ 2018 (5) TMI 1172 - GUJARAT HIGH COURT] . All the appeals failed on the proposed question of law. In case on hand, it appears that the Assessing Officer granted depreciation on the dumpers at the rate of 15%. The assessee being dissatisfied, went in appeal before the Commissioner of Income Tax (Appeals)(for short CIT (A) ). The CIT(A) deleted the addition made on account of excess depreciation. The Revenue being dissatisfied with the order passed by the CIT(A) went in appeal before the Appellate Tribunal. The Appellate Tribunal has affirmed the order passed by the CIT(A). No substantial question of law. 2020 (12) TMI 826 Assessment u/s 153A - Whether the Appellate Tribunal has erred in law and on facts in holding that the addition and/or disallowance made during assessment under section 153A should be based on incriminating documents or evidences gathered during a search or from a requisition when the only requirement in section 153A is initiation of a search or making a requisition and not presence of relevant evidences/documents? - Tribunal has placed reliance on the decision of this High Court in the case of PCIT Vs. Saumya Construction [2016 (7) TMI 911 - GUJARAT HIGH COURT] for the purpose of addressing the preliminary issue whether the assessment could have been framed under Section 153A in respect of the concluded proceedings in the absence of incriminating materials found during the course of search HELD THAT:- We are of the view that having regard to the facts of this particular case, the reliance placed on the decision of this Court in the case of Saumya Construction could be said to be justified. In such circumstances, this Tax Appeal fails and is hereby dismissed. Revenue invited our attention to certain observation made by the Appellate Tribunal wherein as observed that there is no differentiation found in the intent of the Legislature to discriminate whether the assessments were originally framed under Section 143(1) or Section 143(3) or Section 147 of the Act. According to Mr. Bhatt, this observation made by the Appellate Tribunal is not the correct proposition of law. Mr. Bhatt tried to explain fine distinction between the nature of the assessment under Section 143(1) and Section 143(3) respectively of the Act. Prima facie, we find substance in what has been pointed out by Mr. Bhatt to us. Section 143(1) and Section 143(3) are quite independent, the nature of assessment also differs. In such circumstances, we may only say that we do not agree with such observation made by the Tribunal. 2020 (12) TMI 825 Correct head on income - Income from trees - addition as income from other sources - Assessee prays that such an addition be deleted as the same being Agricultural income or a capital receipt - HELD THAT:- Certain trees lying on assessee s land were cut since the same were obstructing the hire tension wires of the Electricity Company. Assessee was compensated during the year. We observe that the assessee was engaged in the business of manufacturing and trading of essential oil, plantations extraction of essential oils. The trees so cut by the assessee would form part of its trading operations since the assessee would be earning revenue by utilizing these trees. Had the trees not been cut, the assessee would have earned more revenue from the trees. Any compensation received in lieu of loss thereof would form part of assessee s trading operations. The same is evident from the fact that cut trees sold by the assessee constituted its trading income and the same were accepted to be agricultural income. Similar treatment was to be given to the compensation received for loss of trees. It would akin to a situation where the assessee lost its trading stock and received compensation for loss of the stock. The same would certainly be trading income for the assessee. Since, the income was earned from trees; the same would constitute agricultural income in the hands of the assessee. 2020 (12) TMI 824 Addition u/s.68 - assessee failed to submit names, address and PAN of the parties regarding the trade payables along with confirmation letters as instructed - HELD THAT:- As noted that even before the Tribunal also, on the given dates of hearing, the assessee has evaded the process of law by non appearance. Considering the fact that Income Tax Legislations are within the purview of welfare legislations and the tax payer‟s interest should be protected, therefore, we are of the considered view, one final opportunity should be provided to the assessee. In view thereof, we set aside the order of the Ld. CIT(Appeals) on this issue and restore the matter back to his file for re-adjudication while complying with the principles of natural justice. At the same time, we direct the assessee to furnish relevant details/evidences in order to substantiate their case on merits. Thus, Ground No.1 raised in appeal by the assessee is allowed for statistical purposes. Additions made on account of statutory payment in respect of service tax etc. payable - HELD THAT:- As our observations with regard to Ground No.1 in the aforesaid Paragraph (Para No.6) and the same findings shall be applicable for this ground also since the Ld. CIT(Appeals) has upheld the disallowance for absence of evidences which the assessee was supposed to file before him. Thus, Ground No.2 raised in appeal by the assessee is allowed for statistical purposes. Disallowance on certain expenses on account of rent, advertisement and legal professional fees - HELD THAT:- We set aside the order of the Ld. CIT(Appeals) on this issue and restore the same to his file for re-adjudication and our findings given in respect of other two grounds. 2020 (12) TMI 823 Validity of reopening of assessment u/s 147 - recording reasons for reopening of assessment based on the same seized material found during the course of search against the assessee - HELD THAT:- It is not a denying fact that during the course of search several material was found against the assessee which clearly indicated that there was an escapement of income in the case of the assessee. A.O. framed the original assessment on the basis of the same seized material found during the course of search, but, such assessment order under section 143(3) was quashed by the Ld. CIT(A) because of non-service of notice under section 143(2) therefore, the same seized material found during the course of search could be the basis for reopening of the assessment under section 147/148 - There is no illegality in the action of the A.O. in recording reasons for reopening of assessment based on the same seized material found during the course of search against the assessee. Following the above decisions in the case of Krishna Developers Co [ 2018 (2) TMI 607 - SC ORDER] we do not find any reason to quash the reopening of the assessment in the matter merely because the Departmental appeal was pending before the Tribunal when reasons for reopening of the assessment were recorded. If the A.O. would not have recorded reasons for reopening of the assessment on 28.03.2013, then, the period of limitation in favour of the Revenue would have expired to initiate re-assessment proceedings. Thus, the A.O. was justified in reopening of the assessment in the matter. Unrecorded sales from business of sale of gold jewellery - gross profit rate determination - unrecorded sales by applying the gross profit rate of 18% - HELD THAT:- Since the assessee from the beginning have denied the contents of the seized Diary that he did not deal in trading of gold jewellery, therefore, onus was upon the A.O. to prove that assessee actually deal in gold jewellery. The assessee has shown the business income and income from other sources which have not been doubted by the authorities below. Since this similar seized document have been considered in earlier A.Y. 2005-2006 and similar addition have been deleted, therefore, the issue is covered in favour of the assessee by the aforesaid decision of the Tribunal in favour of the assessee. In the absence of any corroborative evidence to suggest that assessee dealt with trading of gold jewellery, there were no justification to presume from the contents of the Diary that assessee was in fact dealing in gold jewellery - No justification to sustain any addition against the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Addition on the basis of loose paper found during the course of search - assessee had incurred a sum on the birthday party function of his grand-son at Soubhagya Banquet, Preet Vihar, New Delhi - HELD THAT:- Addition is not warranted in the hands of the assessee. The seized paper do not indicate the name of the assessee if he has incurred any expenditure. The assessee is grand father of Mr. Ayush, therefore, presumption would be that father of the boy must have incurred the expenditure. Otherwise, there is no liability of the grand father to incur any expenditure on the occasion of birthday of his grandson. There is no evidence available on record to suggest that the assessee has incurred any expenditure on the birthday of his grand-son. No further enquiries have been made from the owner of the Banquet Hall or any other person whose name is appearing in the seized paper to verify as to who has incurred the expenditure for the party of the grand-son of the assessee - addition is made merely on presumption and as such, there is no justification to make addition in the hands of the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee. Addition towards bank deposits - assessee claimed before A.O. that deposits are made out of assessee s brokerage income - HELD THAT:- The authorities below failed to note that assessee has filed return of income showing business income and income from other sources - whatever income is declared in the return of income + some amount accumulated in earlier year could have been available to the assessee so that entire addition is unjustified. We accept the alternative claim of assessee and whatever business income is declared by assessee on account of brokerage, available to the assessee. Addition could be sustained to the extent of ₹ 1,58,859/- only considering the income declared in the return of income and other income available to the assessee on account of accumulation of income - we set aside the Orders of the authorities below and restrict the addition to ₹ 1,58,859/- only. 2020 (12) TMI 822 Deduction u/s 54F - assessee has executed Joint Development Agreement with the builder - contention of the ld.AR is that since the assessee got allotted flats and it should be considered as investment in terms of 54F of the Act and it is to be granted - HELD THAT:- In principle, we are in agreement with the contention of the learned Authorised Representative that the assessee is entitled for exemption u/s. 54F of the Act and all flats situated in single building to be considered as one residential house and deduction u/s. 54F is to be granted. This issue was considered by this Tribunal in the case of Chandrashekar Veerabhadraiah [ 2020 (12) TMI 348 - ITAT BANGALORE ]. In principle, the assessee is entitled for deduction u/s.54F of the Act in respect of investment made in multiple flats subject to production of relevant evidence by the a. before the Assessing Officer. Accordingly, the assessee shall furnish all the evidence in support of the claim of deduction u/s. 54F of the Act. The Assessing Officer has to satisfy himself the fulflment of other conditions laid down in Section 54F of the Act for granting the deduction u/s. 54F of the Act and ordered accordingly. 2020 (12) TMI 821 Scrutiny assessment u/s 143(2) - no valid and legal notice u/s. 143(2) being issued by assessee s Assessing Officer as defined in Section 2(7A) - transfer of case u/s 127 - Jurisdiction of AO to issue notice - HELD THAT:- We find that assessee filed its return of income u/s. 139(1) of the Act on 29.8.2013 and the AO i.e. DCIT, Circle 3(1), New Delhi issued notice u/s. 143(2) of the Act on 04.9.2014. Thereafter by transfer memo, AO stated the reason for transfer the case from DCIT, Circle 3(1) to ITO, Ward 5(1), New Delhi is returned income before ₹ 30 lacs which correlates to CBDT Instruction NO. 1/2011 dated 31.1.2011. The correct AO i.e. ITO, Ward 5(1), New Delhi has issued noticed u/s. 143(2) of the Act dated 08.9.2015 which is time barred, hence, the assessment order dated 27.1.2016 passed by the ITO, Ward 5(1), New Delhi is without jurisdiction and void ab initio. The impugned order passed by the Ld. CIT(A) deserve to be cancelled, because it is based upon the illegal assessment order. We find that similar issue has been dealt and adjudicated by the ITAT, SMC Bench, Delhi in the case of Manish Kumar Sons HUF vs. ITO Ward 1(5), New Delhi [ 2018 (11) TMI 1417 - ITAT DELHI] and decided the similar issue in favour of the assessee. 2020 (12) TMI 820 Reference to dispute resolution panel u/s 144C - time period prescribed within which only the AO can frame the final order u/s. 144C(3) - final assessment order u/s 144C(3) only within the time period as prescribed in section 144C(4) - jurisdiction of AO to frame the final assessment order u/s. 144(3) - HELD THAT:- In this case the draft assessment order as per section 144C (1) of the Act was passed on 28.12.2019 and the assessee had time of 30 days from the date of receipt of draft order to file objection before the DRP as per sub-section (2)(b) of the Act or acceptance of the draft assessment order as per sub-section (2)(a) - In any case, this period of time i.e. 30 days gets over on 27.01.2020. We note that the assessee had preferred an objection before the DRP (Delhi) within 30 days of receipt as per sub-section (2)(b) of section 144C on 24.01.2020 which fact was intimated to the AO by physically filing the letter dated 27.01.2020 at the office of AO (On query the Ld. AR explained that the reference/objection had to be filed before DRP (Delhi) on 24.01.2020 which was Friday and 25th January 26th January being Saturday and Sunday, the assessee physically filed the acknowledgment of filing objection at DRP before AO on 27.01.2020). AO ought to have awaited the decision of the DRP as envisaged under sub-section (5) of section 144C of the Act and which direction of DRP was binding on the AO as per sub-section (13) of section 144 and it is to be noted that after the direction of DRP, the AO could have framed the assessment without providing any opportunity to the assessee as envisaged in sub-section (13) of section 144C. In this case, the AO failed to await for the direction of the DRP and has arbitrarily framed the final assessment order which vitiates the final assessment order passed by him. AO had no jurisdiction to frame the final assessment order on 27.01.2020 u/s. 144(3) of the Act, since he was divested of jurisdiction to pass final order between 27.01.2020 to 31.01.2020. Even the AO could not have framed the final order u/s. 144C(3) on 27.01.2020 because the assessee had filed its objection before the DRP on 24.01.2020, the DRP is in seisn of the case of assessee and between 24.01.2020 and till the DRP gives direction as per section 144C(5) AO does not enjoy jurisdiction over the assessee s case for AY 2016-17. Therefore, the assessee succeeds in its challenge which it has raised against the jurisdiction of AO to frame the final assessment order u/s. 144(3) dated 27.01.2020 along with demand notice u/s. 156 of the Act is therefore, null in the eyes of law and is quashed. - Decided in favour of assessee. 2020 (12) TMI 815 Disallowance of deduction of SEBI Merchant License fee - HELD THAT:- Clear and unequivocal direction given by the CIT(A) while disposing off the assessee s appeal for A.Y 2001-02, we are of the considered view that there was no justification on the part of the lower authorities in not allowing the assessee s claim for deduction of ₹ 1,66,666/- (i.e 1/3rd of ₹ 5,00,000/-). Accordingly, we direct the A.O to allow the assessee s claim for deduction of ₹ 1,66,666/- i.e 1/3rd of the registration fees of ₹ 5 lac that was paid by it towards merchant banking license fees to SEBI in the period relevant to A.Y. 2001-02. We thus in terms of our aforesaid observations set aside the order of the CIT(A) in context of the aforesaid issue under consideration and vacate the disallowance. Disallowing claim for deduction of loss from error trades of equity shares on account of dealing in securities in the ordinary course of its share and stock broking business - disallowance of the proportionate expenditure made by the A.O by attributing the said amount on an ad hoc basis to carrying on of speculation business by the assessee - HELD THAT:- As the assessee had carried out the transactions of purchase and sale of shares on account of a business exigency and not with an intention to earn profit, therefore, the same would not come within the purview of Explanation to Sec.73 - We thus not being able to persuade ourselves to subscribe to the view taken to the contrary by the lower authorities that the loss on account of transactions in shares incurred by the assessee was to be held as speculation loss within the meaning of Explanation to Sec. 73 therein, set aside the same and direct the A.O to allow the assessee s claim for deduction of business loss on account of transactions in shares. As concluded that the loss on account of transaction in shares cannot be held to be speculation loss, therefore, disallowance of the proportionate expenditure that had been attributed by the lower authorities to the aforesaid speculative transactions also cannot be sustained and is consequentially deleted. TP adjustment - Royalty/branding fees paid by the assessee to its AE - AO/TPO determining the ALP of the royalty/branding fees paid by the assessee to its AE viz. CLSA, Netherland at Rs.nil, as against that claimed by the assesseeat ₹ 49,38,615/- - HELD THAT:- International transactions of payment of royalty/brand fee by the assessee to its AE, viz. CLSA BV, Netherland was to be held as being at arm s length. Our aforesaid view is fortified by the CBDT Circular No. 6-P, dated 06.07.1968, wherein, in context of the provisions of Sec. 40A(2)(b) it was therein clarified that where the scale of remuneration of a director of a company had been approved by the Company Law Administration, there would be no question of disallowance of any part thereof in the income tax assessment of the company, on the ground, that the remuneration was unreasonable or excessive. Now when the payment of the royalty/brand fees by the assessee to its AE viz. CLSA BV, Netherlands had been approved by the RBI, the same, thus, on the said ground also could safely be held to be at arm s length. In fact, the aforesaid CBDT Circular had been pressed into service in the case of Kinetic Honda Motor Limited Vs. JCIT, [ 2000 (3) TMI 201 - ITAT PUNE] . In the aforesaid case, the Tribunal while dislodging the view taken by the A.O and the CIT(A), had observed, that when the payments made by an assessee are approved by one wing of the government, then, there would be no question of treating such payment as excessive or unreasonable having regard to the legitimate business needs. Thus determining of the ALP of the royalty/brand fee paid by the assessee to its AE viz. CLSA BV, Netherland at Rs.nil by the TPO, as against that shown by the assessee at ₹ 49,38,615/- cannot be sustained and is liable to be vacated. Non substantiate receipt of referral services from its the AE, viz. CLSA Ltd., Hong Kong - documents filed by the assessee as additional evidence in two parts before the CIT(A) - HELD THAT:- As is discernible from the records, we find, that the TPO on being confronted with the aforesaid additional evidence , had however, in neither of his three remand reports been able to place on record any such material which would dislodge the factum of rendition of referral services by the AE, viz. CLSA Ltd., Hong to the assessee during the year under consideration and therein prove to the contrary that no such referral services were therein factually rendered. Except for claiming that the documents filed by the assessee did not demonstrate that any actual referrals were made by the AE, viz. CLSA Ltd., Hong Kong, to the assessee, we find, that the said hollow claim of the TPO is not backed by any concrete material which would support the same. On the basis of the aforesaid observations, we are unable to concur with the view taken by the lower authorities that the assessee had failed to substantiate receipt of referral services from its the AE, viz. CLSA Ltd., Hong Kong during the year under consideration on the basis of any supporting documentary evidence. We have given a thoughtful consideration to the contentions of the ld. A.R as regards the invalid assumption of jurisdiction by the TPO for determining the ALP of the referral services rendered by the AE, viz. CLSA Ltd., Hong Kong at RS. Nil i.e without adopting any one of the prescribed method contemplated in Sec. 92C(1) of the Act, and are persuaded to subscribe to the same. We are unable to concur with the aforesaid manner in which the TPO had determined the ALP of the referral services rendered by the AE, viz. CLSA, Hong Kong to the assessee at Rs.nil. In our considered view, on a reference made under Sec. 92CA(1) of the Act to the TPO, the latter therein is obligated to benchmark the international transactions of the assessee only after applying any one of the prescribed methods provided in Sec. 92C(1) of the Act. Under no circumstances the TPO can benchmark the transactions at nil or in an ad hoc manner by dispensing with the statutory obligation cast upon him to take recourse to and therein determine the ALP by applying any one of the methods prescribed under Sec. 92C(1) of the Act. We are unable to sustain the determination of the ALP of the aforesaid international transaction of rendering of referral fees by the AE, viz. CLSA Ltd., Hong Kong to the assessee at Rs.nil, i.e without following any one of the prescribed methods provided in Sec.92C(1) - Decided in favour of assessee. 2020 (12) TMI 814 Notice u/s 143 to non existing company - scheme or merger adopted - notice in the name of company being merged - HELD THAT:- In the present facts of case, notice under section 143(2) was issued to M/s. Serendipity Infolabs Pvt. Ltd., much prior to date of approval of merger by Hon'ble NCLT, and that, the merger was approved during pendency of assessment before Ld.AO. One more fact brought to our notice by Ld. Sr. DR is that, replies to 143(2) notice are filed by assessee much after the date of approval of merger, and assessee never intimated the same to Ld.AO. She submitted that in final reply dated 21/12/2017 in an internal paragraph assessee intimated it the form of passing reference. Assessment order passed is passed within 4 days of filing of reply dated 21/12/2017. We also note that, even when subsequently assessee filed rectification application before Ld.AO, the same has not been brought to the notice of Ld.AO for correcting the name. We fail to understand the reason, why assessee never brought to notice of Ld.AO regarding the merger and non-existence of M/s. Serendipity Infolabs Pvt. Ltd., immediately after 31/07/2017 in accordance with law. We find the assessment order being passed by Ld.AO in the name of M/s. Serendipity Infolabs Pvt. Ltd., is mere irregularity, which is rectifiable under 292B of the Act. Ld.AO is directed to take necessary steps to rectify the same. Addition u/s 56 (2)(viib) - As submitted by Ld.AR that assessee is a venture capital Undertaking receiving monies from other Venture Capital Funds - as assessee is governed by Regulation 2 of the Venture Capital Regulations as per section 10(23FB) and that provisions of section 56(viib) do not apply to assessee as the funds are received from non resident Venture Capital Funds - HELD THAT:- Authorities below have not considered the materials available on record to decide the issue on merits. We are therefore remanding the issue back to Ld.AO. Assessee is directed to file all necessary documents and evidences in support of its claim and to establish itself to be a Venture Capital Company. Ld.AO shall then consider the issue afresh in light of evidences/documents filed in accordance with law. Needless to say that, proper opportunity shall be granted to assessee in accordance with law. 2020 (12) TMI 813 TP Adjustment - how to compute PLI when RSP Method is applied in this peculiar case - computation of the profit level indicator as directed by the learned CIT-A - as submitted by AR job profile of three expatriates employees and stated that cost of these employees cannot be reduced while computing the profit level indicator when resale price method is to be applied - HELD THAT:- According to the provisions of rule 10 B for the determination of the arm's-length price u/s. 92C, the resale price method computation shall be determined according to sub-rule (1) (b) of the income tax rules. Mostly looking at the profile of the expatriates provided by the ld AR, it is apparent that either those are for providing Warranty services or after sales services. When the goods are sold all the price of these items/services are already embedded in the sales price. Naturally when sales price consists of price for warranty and After sales services, which are promised at the time of sales, naturally corresponding expenses are also to be considered while computing the margin of the assessee. After sale support services, training to customers and local staff for troubleshooting and service coordination expenses are thus, required to be included for determining the gross profit margin in resale price method. In view of this, we do not find any infirmity in the order of the ld TPO and CIT(A). Accordingly Ground no. 3 to 5 of the appeal are dismissed. 2020 (12) TMI 812 Penalty u/s 271(1)(c) - defective notice - non specification of charge - SC does not specify the fault/charge on which he proposed to levy penalty against the assessee u/s. 271(1)(c) - Held that:- As decided in JEETMAL CHORARIA [ 2017 (12) TMI 883 - ITAT, KOLKATA ] show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee. 2020 (12) TMI 809 Requirement of issuing notice u/s. 143(2) in response to the revised return of income filed - HELD THAT:- Under the scheme of the Act, the assessing officer is entitled to assume jurisdiction to scrutinize the return of income filed by assessee only after the issue of notice u/s. 143(2) of the Act within the prescribed time limit. If the A.O. has validly assumed jurisdiction over the original return of income filed by the assessee by issuing notice u/s. 143(2) of the Act and if the assessee files any revised return of income after so assuming the jurisdiction, in our view, there is no requirement of issuing another notice u/s. 143(2) of the Act in response to the revised return of income, since there is no requirement of assuming jurisdiction again. It is well established proposition of law that the revised return of income filed within the prescribed time limit replaces the original return of income. In present case has issued notice u/s. 143(2) of the Act only after filing of revised return of income. As noticed earlier, the revised return of replaces the original return of income and hence, in the facts of the present case, the notice issued by the AO has to be treated as having been issued against the revised return of income only, since the revised return of income was only surviving return of income when the AO issued the notice u/s. 143(2) - No merit in the contentions of the assessee that the A.O. should have issued another notice u/s. 143(2) of the Act against the revised return of income - contention of the assessee that the interest free funds/own funds available with the assessee is more than the value of investment made in the partnership firm - HELD THAT:- Disallowance u/s 14A r.w.r. 8D - contention of the assessee that the interest free funds/own funds available with the assessee is more than the value of investment made in the partnership firm - HELD THAT:- As per decision rendered in the case of Micro Labs Limited [ 2011 (7) TMI 1152 - KARNATAKA HIGH COURT] no disallowance out of interest expenditure is called for. However, as rightly pointed by Ld. D.R., the above said contention of the assessee requires to be examined on the basis of financial statements of the assessee. Hence, we are of the view that this issue may be restored to the file of the A.O. for examining the same afresh by duly considering the decision rendered by Hon'ble Karnataka High Court in the case of Micro Labs Ltd. (supra). Accordingly, we set aside the order passed by Ld. CIT(A) on the issue of disallowance made out of interest expenditure under rule 8D(ii) and restore the same to the file of the A.O. for examining it afresh. 2020 (12) TMI 801 TP adjustment - AMP expenses - main contention of the assessee is that the AMP expenditure do not constitute an international transaction - Bright Line Test ( BLT ) application - HELD THAT:- Regarding the BLT, the Hon ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd.[ 2015 (3) TMI 580 - DELHI HIGH COURT] held that BLT could not be applied for either determining the existence of an international transaction involving AMP expenses or for determining ALP of such transaction. Thus, the decision of the Special Bench of ITAT in LG Electronics [ 2013 (6) TMI 217 - ITAT DELHI] relied upon by the revenue was rendered non-existent. The instant assessee is not engaged in distribution and marketing of branded products but selling its own manufacturing goods to the extent of 95% and paying royalty to the AE. This also proves that the AMP has not helped the parent company in anyway. The incurring the AMP expenses by the assessee was a function performed by it and this cannot be regarded as an international transaction u/s 92B. The basic purpose of introducing the various provisions of chapter X, was to prevent tax evasion in the transactions undertaken between an Indian entity and its overseas AE. In our opinion, a perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. It is a fact that the payment under the head AMP expenditure was made to third parties and that those parties were located in India. In the cases of Bausch Lomb Eyecare (India) Pvt. Ltd. [ 2015 (12) TMI 1332 - DELHI HIGH COURT] (HC), the issue of AMP expenses had been deliberated upon extensively and each and every argument raised by the departmental authorities have been analysed thread bare. The Courts held that the existence of an international transaction will have to be established de hors the BLT, the burden is on the Revenue to first show the existence of an international transaction. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. Since a quantitative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. AMP expenditure is not an international transaction in the case of instant assessee for the instant year and hence no adjustment to ALP need to be made thereon. Accordingly, the grounds raised by the assessed are allowed. Interest on FCDs - Adjustment on account of interest payment - assessee stated that it paid interest on foreign convertible debentures - HELD THAT:- This issue has been adjudicated by the Coordinate Bench of ITAT for the assessment 2011-12 wherein the Tribunal held that the adjustment is not required based on the judgment of Hon ble Delhi High Court in the case of Cotton NatuRals India Pvt. Ltd. [ 2015 (3) TMI 1031 - DELHI HIGH COURT] . Since, the matter stands adjudicated by the earlier order of the Tribunal in the absence of any material change, we hold that no adjustment on account of interest payment is required. Payment of Royalty - assessee has paid royalty payment to its AE - this was based on royalty @5% on net domestic sales and 8% on the net sales outside India - HELD THAT:- As gone through the issue and we are unable to accept with the contention of the revenue that the waiver of the royalty by the AE would not give any perpetual right to the assessee. Since, the revenue could not bring anything on record as to why the royalty is not payable when the assessee is manufacturing with the technical know-how from the AE and an agreement stipulates payment of royalty. Hence, the appeal of the assessee on this ground is allowed. 2020 (12) TMI 800 Rectification of mistake u/s 254 - disallowance of interest to partner not adjudicated - revision in the estimation of the net profit of the assessee s contract business from 5% (of the gross receipt) to 8%, as there was no direction by the revisional authority for the same - as contended by assessee tribunal, while concluding its order had omitted to consider the disallowance of interest to partners, claimed in the sum which had therefore remained to be adjudicated, so that the same be rectified accordingly - HELD THAT:- We are, with respect, afraid to say that neither the assessee nor the Revenue has properly understood the Tribunal s order. The claim of interest to partners (on their capital), at ₹ 2,49,557, forms part of the sum of ₹ 5,69,330 directed to the examined afresh by the ld. CIT, and indeed disallowed per the impugned assessment u/s. 143(3) r/w s. 263. No adjustment to the returned income on account of interest and remuneration to partners, it held, is called for. As order accordingly clarifies that the business income will remain the same, i.e., as originally assessed (at ₹ 14,47,620), which is after deduction of both interest and remuneration to partners, so that the only adjustment that obtains, post its order, is for ₹ 1,77,273, assessable u/s. 56. The reference to salary to partners is in view of section 40(b)(v), which limits the extent thereof with reference to book profit. In this context, it stands clarified that inasmuch as the enhanced estimation of business income (by applying the rate of 5 percent of the gross receipt, as against the returned 2.4%), would not impact the book profit (as defined in Explanation (v) to section 40(b)(v)), the remuneration to the partners allowable with reference to the assessee s book profit is not breached on the claimed sum of ₹ 1,30,000. No rectification, even as clarified during hearing is called for; the order passed, as would be apparent, being with a view to set at rest the controversy arising on account of the misreading of Tribunals order, even as assured during hearing. 2020 (12) TMI 799 Characterization of income - income of assessee from operation and maintenance of Information Technology Park - as income under the head Profits and Gains of business or profession or Income from house property - HELD THAT:- As decided in own case [ 2019 (8) TMI 1619 - ITAT MUMBAI] Assessee is engaged in the business of developing properties and specially developed Information Technology Park in Chennai. The assessee has leased out the building to M/s. Amazon Development Centre India Private Limited and others by way of lease agreements and also entered into a special agreement for providing for amenities and facilities, which have been treated as business income . We further observe from the perusal of Object Clause in the Memorandum of Association and Articles of Association that it has been clearly stated that it is the business of assessee to buy, sell, construct and lease-out the properties. Ld.CIT(A) has passed a very reasoned order after following the orders of coordinate benches. We therefore do not find any infirmity in the order of CIT(A) and the same is affirmed by dismissing the ground of Revenue. This Ground of appeal raised by Revenue is dismissed. Customs 2020 (12) TMI 834 Warehousing of the said imported goods - imported yellow peas - direction to respondent to take on record the bills of entry for warehousing of the cargo covered by 11 bills of lading of imported yellow peas and to pass orders thereon for warehousing of the said imported goods - Grievance of the petitioners is that their attempt to electronically present the bills of entry was not accepted by the customs automated system on account of suspension of importer exporter code. HELD THAT:- Section 48 lays down the procedure in case of goods not cleared, warehoused or transshipped within 30 days after unloading. It says that if any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transshipped within thirty days from the date of unloading at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is reliquished, such goods may after notice to the importer and with the permission of the proper officer be sold by the person having custody thereof - Under section 48, if the imported goods are not cleared or warehoused etc. within the stipulated period which may be extended, then the person having the custody of such goods has the discretion to sell the goods. A decision has to be taken by the authority under section 46 of the Customs Act. Without such decision being taken, it would not be just and proper to allow the custodian to sell the goods - respondent Nos.2 and 3 are directed to take a decision on the prayer of the petitioners for warehousing of the consignments in terms of section 46(1) of the Customs Act after granting due opportunity of hearing to the petitioners. Let such decision be taken within a period of 7 days from the date of receipt of a copy of this order. Petition disposed off. 2020 (12) TMI 832 Refund of Customs duty - N/N. 52/2016- Customs dt 23.09.2020 and Public Notice No. 30/2015(DGFT) dt 08.09.2016 - HELD THAT:- We direct the concerned authority, that is, Joint/Additional Commissioner of Customs, Customs Commissionerate, Noida to adjudicate upon the show cause notice dated 31st December, 2014 (Annexure P-15 to the memo of this writ petition) in accordance with law, rules, regulations and Government policies applicable to the facts of the case and based on the evidence on record as expeditiously as possible and practicable, preferably within a period of 12 weeks from the date of receipt of this order - In case the petitioner is aggrieved by the order passed by the Adjudicating Authority while adjudicating upon the aforesaid show cause notice, liberty is reserved with the petitioner to file appropriate proceedings before the appropriate forum in accordance with law, rules and regulations applicable to the facts of the case. Petition disposed off. 2020 (12) TMI 805 Eligibility of SAD exemption - Blanks cleared from the SEZ Unit of the Appellant by way of stock transfers to its DTA Unit - benefit of Notification No.45/2005 as amended - time limitation - HELD THAT:- The Notification exempts all goods cleared from a SEZ and brought to any other place in India . The nature of clearance, whether by way of sale or otherwise, is not qualified in any manner in the body of the Notification. The proviso which embodies the condition/test governing the exemption gets attracted only if the goods which are the subject matter of clearance, when sold in the DTA, are exempted from the payment of Sales Tax/VAT - In the instant case, it is undisputed that the clearance of blanks to the DTA is not by way of sale and that the underlying goods are not exempted by the State Government from the levy of VAT. The adjudicating Authority has himself accepted that such blanks attract VAT @ 5% as Ball Pen parts and the same is also evident from a sample Tax Invoice dated 20 April 2014 enclosed as part of the Appeal Paper Book. Therefore, the proviso is not attracted at all. There is no exemption from VAT/Sales Tax but just a deferral of the VAT/Sales Tax liability until the sale takes place. We are in complete agreement with the contention of the Appellant that the Circular cannot curtail the scope of an exemption notification which deserves to be interpreted strictly and on its own terms as held by the Hon'ble Supreme Court in the Tata Tele Services case [ 2005 (12) TMI 96 - SUPREME COURT ]. The impugned Order in the garb of recovering SAD also seeks to recover the CVD of ₹ 1,99,17,645/- by relying upon the proviso to Section 5A of the Central Excise Act and to that extent does travel beyond the scope of the Notice dated 3 October 2016 - In the present case, the impugned order itself records at para 12.11 that the subject goods as ball pen parts were generally exempted from central excise duty under S. No. 325(ii) of Notification No.12/2012 dated 17 March 2012. Even on the point of limitation the demand has to fail as the BOE‟s were countersigned by the customs official prior to clearance of goods from the Falta, SEZ. Therefore, the department was aware that the goods were cleared by way of stock transfers not attracting any VAT/Sales Tax. The Notice was issued only after the expiry of the normal period of limitation of 1 year and could not revive the demand, which had got time barred. The decision of the Tribunal in Baccarose Perfumes and Aveco Technologies case [ 2018 (2) TMI 1269 - CESTAT HYDERABAD ] fully supports the case of the Appellant. Time Limitation - HELD THAT:- The bills of entry were filed and assessed by customs officers in charge of the SEZ; the issue involves interpretation of a notification; therefore, we find that no suppression and wilful misstatement etc with intent to evade payment of duty can be alleged and extended period cannot be invoked. In the instance case, the imports being undertaken for the period April-December 2014, normal period, as per the provision of law existing on that day, ends in October, 2015. Therefore, the issue is beyond normal period by the time the amendment came in to force - the department cannot issue Show cause notices for the normal period, of two years also, in the instant case. The appeal is allowed on merits and limitation. 2020 (12) TMI 804 Principles of natural justice - gist of submissions by the learned counsel for the appellants are that the department did not consider their submissions in entirety - Valuation of imported goods - related party or not - time limitation - HELD THAT:- The original authority as well as the appellate authority have gone only on the basis that the buy and seller are related in terms of Rule 2(2) of CVR, 1988 and proceed to judge transactions in terms of 4(3)(a) and 4(3)(b) ibid. The original authority has given a finding that that the onus to prove that their relationship has not affected the pricing lies on the importer in terms of the rules cited above. This is not the correct proportion of law - In terms of Rule 3(a) of CVR, 1988, where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price. Neither the original authority nor the appellate authority have given reasons to hold that the relation has indeed affected the price. In case, the department did the same, then the onus would have been transferred to the importer - proviso under Rule 3(a)(b) states that provided that in applying the values used for comparison, due account shall be taken of demonstrate a difference in commercial levels, quantity levels, adjustments in accordance to provision of Rule 9 of these Rules and cost incurred by the seller in sales in which he and the buyer are not related. The submissions of the appellants were required to be considered and reasons, if any, for rejecting the same should have been recorded. It was found that no discussion and findings have been given by both the authorities on the Annexures-B, C, D submitted by the appellants. Time Limitation - HELD THAT:- The appellants have taken inordinate time to submit reply to the questionnaire given by Revenue to them in 2003. Department has also not adhered to the time frame given vide CBEC circular 11/2001. In the end there was rush to complete the proceedings. Learned counsel for the appellants submits that no clarification whatsoever was sought from the Appellant as to the relevance (or otherwise) of the Chemical Weekly Report before proceeding to rely on the Report; no opportunity of hearing in this regard was given to the Appellants - the submissions of the appellant have not been considered. Under the circumstances, the case needs to go back to the original authority for a proper examination of all the facts of the case, the submissions of the appellants including case law in this regard and to pass a speaking and reasoned order as per law. Appeal allowed by way of remand. Corporate Laws 2020 (12) TMI 818 Approval of Scheme of Amalgamation - Sections 230 to 232, and other applicable provisions of the Companies Act, 2013 - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, Company Petition is made absolute in terms of the prayer clauses (a) to (e) in the said Company Petition. The Scheme is hereby sanctioned, with the Appointed Date fixed as 1st April, 2019. The Transferor Companies be dissolved without winding up - Application allowed. 2020 (12) TMI 817 Amendment of Scheme by amending clause 22 therein - direction to Petitioner Companies to file revised Affidavits from the shareholders of the respective Petitioner Companies - direction to convening and holding meeting of the equity shareholders of the Petitioner Companies to seek their approval to the Scheme - HELD THAT:- From the compliance report dated 18.08.2020 and other documents filed by the Petitioner Companies, the Bench observed that although the Petitioner Companies chose to send notices to all Statutory Authorities through Registered Post, notices to Secured and Unsecured Creditor have been sent by private courier Blue Dart . A certificate from the courier company has been attached of paying ₹ 57 for each such notice sent to the Secured and Unsecured creditors. Given the stage of progress made by the Petitioner Companies, the Bench is of the considered view that a fresh notice alongwith a copy of proposed scheme be given by the Petitioner Companies by Hand Delivery and acknowledgement of respective secured creditors be obtained clearly mentioning the name, designation, email id and correspondence address of the concerned dealing officer of secured creditor concerned who received the notice. This may be complied within 10 days from the uploading of the order. Further, the Petitioner companies will file an affidavit in this regard that the notices have been served upon the respective secured creditors and consents from secured creditors have been obtained by it for the proposed scheme, wherever the terms and conditions of the loan agreement, mortgage/hypothecation deed etc. provide for such condition of obtaining NOC is stipulated by the secured creditor concerned. This is to be complied at least 3 days in advance, before the next date of hearing i.e. 20th January 2021. Ld. Counsel for the Petitioner Companies states that as directed by this Tribunal the notice of the filing of the Company Application has been published in Free Press Journal and Loksatta i.e. in vernacular language Marathi both vide circulations at Maharashtra, Mumbai, stating therein that the present Company Application has been filed in this Tribunal, and any person concerned may file their representations, if any, to the Scheme in this Tribunal within 30 (Thirty) days from the date of publication of the said notice in the newspapers. The Petitioner Companies are directed to publish the notice of the date of hearing of the Company Scheme Petition, at least 10 (Ten) clear days before the hearing of the said Company Scheme Petition, in the same newspapers i.e. Free Press Journal and Loksatta i.e. in vernacular language Marathi both vide circulations at Maharashtra, Mumbai. In addition to the said direction, the Petitioner Companies are also directed to upload the said notice on the website of the respective Petitioner Companies, if any. The Petitioner Companies are directed to file an affidavit attaching acknowledgement of secured creditors and confirming that the consents have been obtained from their respective secured creditors, wherever applicable, for the scheme along with proving publication of the said notice in the newspapers, as directed herein at least 3 (Three) days before the date fixed for hearing of the Company Petition. 2020 (12) TMI 808 Approval of Composite Scheme of Arrangement - Sections 230 to 232 read with other applicable provisions of the Companies Act, 2013 - HELD THAT:- Various directions regarding convening and holding of various meetings, issued - various directions regarding issuenace of various notices for the meetings to be held, also issued. The scheme is approved - Application allowed. 2020 (12) TMI 802 Seeking direction to the suspended directors of Corporate Debtor to provide and make available to the Liquidator the complete set of books of accounts of the CD for the past 4 years - Seeking direction to make available to the Liquidator the complete set of books of accounts of the subsidiary Company - HELD THAT:- No serious effort has been taken by the suspended directors of CD to provide the entire documents to the Liquidator. The attempt to put blame on the designated employee and the auditor of the Company with regard to the Books of Accounts of the Company is an excuse of the Suspended Director of the Corporate Debtor not to give the documents sought by the Liquidator. On going through the application, it is seen that adequate co-operation has not been extended by the Corporate Debtor to the Liquidator in completing the liquidator process. The absence of books of accounts of the Corporate Debtor as well as their Subsidiary Company M/s. Sabkaa Payments Ltd will ultimately result into hampering of the process of liquidation. The suspended directors of the CD are bound to extend all assistance to the Liquidator in his efforts to collect the whole documents including the books of accounts of the CD as well as the subsidiary Company of CD. Application disposed off. Insolvency & Bankruptcy 2020 (12) TMI 807 Maintainability of Application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Since the dispute has been settled between the parties and in view of the withdrawal memo along with Memorandum of Understanding filed by the Operational Creditor to withdraw the IBA, nothing survives for further consideration. Application stands dismissed as withdrawn. 2020 (12) TMI 803 Principles of res judicata - seeking direction of this Tribunal against the Respondents to make payment of ₹ 9,64,94,779/- towards salary, provident fund, gratuity and proportionate shares towards the outstanding loan to the applicant - HELD THAT:- It is clear that it is limited to only two aspects- (i) payment of license fee, and (ii) issue of setting up off losses in relation to Income Tax and that it is clear that all the claims and contentions raised by the applicant herein in the above-mentioned Appeals were rejected and the only argument allowed was that the Resolution Plan should be in compliance with the law of the land. It was mentioned in the order in the Appeal that the applicant has not been paid dues over ₹ 2.65 Crores towards his salary and unsecured loan of over ₹ 16 Crores and that he is both Financial Creditor as well as Operational Creditor. However, the Hon ble NCLAT passed an order for getting an affidavit from the Resolution Applicant (Respondent No.3) that the Resolution Applicant will be successfully completing the Resolution Plan whether Resolution Applicant gets set off under Income Tax or not. It is also found from the records that in compliance with the said order, the Resolution Applicant has filed the Affidavit before this Tribunal, which was taken on record on 09.09.2020. This Tribunal finds that the reliefs sought by the applicant in this Application are not within the scope of directions issued by the Hon ble NCLAT, which requires the compliance of this Tribunal, as the Resolution Applicant has filed the affidavit as per the directions of the Hon ble NCLAT. It is presumed that the issue involved in the MA has already been raised before the Hon ble NCLAT and the same was rejected by the Hon ble NCLAT. Hence, the applicant is barred from filing any further application for the same cause of action, as it will hit by res judicata. Application dismissed. PMLA 2020 (12) TMI 816 Money Laundering - continuation of attachment order passed under PMLA Act - section 32A(2) of the IBC - HELD THAT:- Since in the present case there was no resolution plan covering the assets of the Corporate Debtor as attached by the ED vide Provisional Attachment Order ED cannot be precluded from proceeding against the assets of the Corporate Debtor in accordance with law, merely because the CIRP has been initiated against the accused/Corporate Debtor. That, it is well settled law that the Legislature is presumed to know all existing laws as well as the needs of the society, while enacting a legislation. Therefore, it will be presumed that after considering all possible scenarios when the Ordinance has dealt with only one situation where the powers of ED under PMLA are being curtailed then it will be presumed in law that the powers of ED under PMLA qua all other situations remain untouched and are to be governed by the extant law under PMLA. Therefore, prior to approval of a resolution plan, the ED s power to attach property under Section 5 cannot sought to be trammelled upon merely because CIRP process is underway or because moratorium has been imposed. That, once the amended IBC has expressly laid down that only after the approval of a resolution plan under section 31 of the IBC, would the ED be precluded from proceeding against the assets of the Corporate Debtor for the commission of offences prior to the CIRP, it cannot be argued that merely because a moratorium period under section 14 of the IBC is active, the ED is precluded from proceeding against the assets of the Corporate Debtor. If the Applicant s arguments are accepted, it would lead to whittling down the provision of section 32A as well as reading into section 32A which is not there. Whether, after the appointment of the Liquidator, without hearing him any order could be passed in the appeal/application? - HELD THAT:- On being asked by this Tribunal as to whether the Liquidator appointed by the NCLT is a necessary party, it is replied by the learned counsel for the appellant that no relief has been sought against the Liquidator and that the present appellant/applicant is not going to sale the attached properties mortgaged with it, if released from attachment and that the present application has been filed only to decide the question of law raised in the application i.e. applicability of amended provisions as incorporated as Section 32A(2) in the I BC by the Insolvency and Bankruptcy Code (Amendment) Act, 2020 dated 13.03.2020 enforced with effect from 28.12.2019. The Liquidator has no role to play in deciding the present application and that liquidator is not a necessary party. Admittedly, the Corporate Debtor is not made a party to the proceedings when the properties in the present proceedings are involved, so the Liquidator who has been appointed by the NCLT is necessary to be heard before passing any order. Not impleading the Liquidator as a party to the present proceeding to decide the present question of law is detrimental to the proper adjudication to the present application particulars when the question of law which has bearing on disposal of the appeal then all the necessary parties to be heard. List the appeal on 26th February, 2021. Service Tax 2020 (12) TMI 829 Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - inability to make payment within the due date i.e. 05.03.2020 in terms of the Rule 7 of the Rules, 2019 - according to Mr. Tripathi, although his client was able to generate the challan for the payment having CIN No.2006259744, yet the portal reflected an error on the ICEGATE and therefore, the writ applicant was unable to make the payment and the fact is that, the amount as on date remains unpaid - HELD THAT:- Let Notice be issued to the respondents, returnable on 18.12.2020. Mr. Tripathi, the learned counsel appearing for the appellant shall ensure that one set of the entire paper-book is furnished to Mr. Devang Vyas, the learned Additional Solicitor General of India at the earliest, so that, by the next returnable date, Mr. Devang Vyas can seek appropriate instructions as to whether it is possible at this point of time to extend the benefit of the Scheme, 2019. The respondents shall take notice of the fact that the writ applicant has pointed out some technical error reflecting on the ICEGATE portal. On the returnable date, notify the matter in the first 10 matters. 2020 (12) TMI 806 Reversal of CENVAT Credit - provision of exempted services and provision of taxable service - period from 2010-11 to 2013-2014 - whether appellant is required to pay 5%/6% of exempted services provided by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the exempted services in terms of Rule 6(3A) along with interest following the option available under Rule 6(3)(ii)? - HELD THAT:- In the present case, it is an admitted fact that the appellant did not maintain separate accounts for the input services used in or in relation to the provision of taxable service as well as exempt service. Therefore, two options were available to them, i.e., either to pay 6% of value of the exempted service or pay an amount equal to the credit attributable to the input services used in or in relation to exempt services subject to the provisions of Sub-rule (3A). When the mistake was pointed, the appellant reversed the proportionate common credit taken on input services used in the provision of exempt services. Therefore, Rule 6(3) (i) will not have any application, when a credit is taken wrongly and the same is reversed as it tantamount to nonavailment of the credit. Appeal allowed - decided in favor of appellant. Central Excise 2020 (12) TMI 819 CENVAT Credit - Capital goods - Inputs - Cement and Steel items such as Angles, Channels, Joist etc. - period from 2010-11 to 2012-13 - applicability of Explanation 2 to the definition of inputs inserted with effect from 7 July 2009 - HELD THAT:- The Appellant has taken us through the sample invoices, which can be traced to the line item wise details and wherefrom it is evident that the credit in respect of goods classifiable under Chapter 84, 85 90 of the CETA is also included within the disputed amount. The Appellant has also enclosed a Chartered Accountant Certificate dated 23 August 2016 certifying that the credit of ₹ 2,42,79,485/- pertains directly in respect of the plant, machinery, equipments and other goods squarely covered by the definition of capital goods. Therefore, cenvat credit of ₹ 2,42,79,485/- does not at all pertain to cement and steel items falling under Chapter 72/73 but explicitly covered by the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules and the demand to that extent does not survive. Applicability of Explanation 2 to the definition of inputs inserted with effect from 7 July 2009 - HELD THAT:- There is no blanket or absolute bar in claiming credit on the disputed items, unless used for the purposes specifically excluded in Explanation 2 to the definition of inputs. The Appellant had placed a Certificate dated 1 June 2015 from the Chartered Engineer, M/s. Associated Services in support of their contention that the disputed items were used in the fabrication of the storage tanks within the factory premises. The adjudicating authority has not disputed the said Certificate from an expert and does not disclose any basis either to come to the conclusion that the disputed items were used for the specifically excluded purposes. Infact, no independent enquiry has been made by the adjudicating authority while blindly following the contested audit objection for the period 2010-11 - the Certificate of the Chartered Engineer could not have been disregarded and it was incumbent upon the adjudicating authority to either contradict the Chartered Engineer s Certificate or accept the same and the glossing over of the said Certificate was not in consonance with law. That Cement and Steel items when used in the fabrication of storage tanks is eligible for credit as inputs even after insertion of the Explanation 2 in July 2009 as has already been decided in favour of the assessee. The credit on the disputed items is available as inputs having been used in the fabrication of storage tanks - Appeal allowed - decided in favor of appellant. 2020 (12) TMI 811 Clandestine removal - finished goods found short during the stock taking - Department was also of the view that N/N. 67/95CE dated 16-03-1995 was not applicable to the Appellants since it applied only to inputs which are captively consumed and not to finished goods as was the case of the appellants - demand is time barred as the show cause notice has been issued on 15.09.2016 for the alleged clearances in 2012 - time limitation - HELD THAT:- The charge of clandestine clearance cannot stand as the department has not been able to provide clinching evidence in support of the same. Clandestine clearance is a serious charge and has to be proved with positive evidence which is lacking in this case - It may be noted that not even one buyer of the clandestinely cleared goods has been identified by the department. Shortages detected during stock-taking - whether the shortages detected were real or only notional. The appellants have doubted the manner of stock taking itself as it was not done in the presence of any panchas and no panchnama was drawn? - HELD THAT:- The appellants have been saying right from the investigation stage itself that the shortages were because of minor weighment errors which had accumulated over the years since no stocktaking had been done right from the date of production of those items. The shortage, when compared to the total production over the years, comes to a very nominal percentage as indicated in para 6.3 above. This has not been contested by the department. Such nominal percentage differences are to be expected while weighing, keeping the nature of the products in mind which are not amenable to precise weighment - the shortages noticed are not actual but only notional and, hence, no differential duty is payable. DI pipes - appellant s consistent stand has been that the shortages were because of damaged pipes which were reissued for re-melting in the factory itself but inadvertently not reduced from the recorded stock of DI Pipes - HELD THAT:- These damaged pipes were all recorded in the Daily Stock Account of Scrap and also reflected in the ER-1 returns. Further, since these were captively consumed they were exempt from duty under notification 67/95-CE dated 16.03.1995. The Commissioner s finding that the exemption does not apply to finished goods is legally not sustainable because of the specific definition of inputs in the said notification which covers virtually all excisable goods including the goods manufactured by the appellants. Time Limitation - HELD THAT:- The whole demand is time-barred as the shortages were noticed in December, 2012, and the show cause notice has been issued on 15.09.2016. There is no ground made out by the department to justify invoking the extended time period. Appeal allowed - decided in favor of appellant. 2020 (12) TMI 810 Reversal of CENVAT Credit - certain activities carried out by it on imported China pipes and cleared after making payment of excise duty - process amounting to manufacture or trading of goods - Rule 6(3) of the CCR, 2004 - time limitation - HELD THAT:- The issue is no longer res integra after the judgment of the Tribunal in the case of SUYASH AUTO-PRESS COMPONENTS ASSEMBLIES P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2018 (5) TMI 208 - CESTAT MUMBAI] where it was held that the removal of input under Rule 3(5) was made admittedly on payment of duty. Therefore, there is no case of trading activity which is an exempted service. Accordingly, there is no application of Rule 6(3) of the Cenvat Credit Rules, 2004. In the instant case of the Appellant also, there is no dispute that the goods where cleared after payment of excise duty and thus once the duty has been paid on such goods and accepted by the department, the same cannot be treated as a trading activity to trigger the mis chive under Rule 6(3) of the CCR, 2004. Extended period of limitation - HELD THAT:- Further, it is also on record that the Appellant s activities were known to the department since inception as earlier also a SCN dated 01/04/2015 was served on the Appellants for recovery of Cenvat credit availed on imported china pipes which were cleared after payment of duty. Thus, the current proceedings are on the same foot. By treating the activities of the Appellant as trading of goods cannot be sustained by invoking extended period of limitation as the department was very well in knowledge of the entire proceedings since inception. Thus, the demand cannot sustain on limitation ground as well. Appeal allowed - decided in favor of appellant. 2020 (12) TMI 798 Application for early hearing - HELD THAT:- Application for Early hearing is allowed. Registry is directed to list the appeal for hearing on 02/12/2020.
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