Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 30, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Wealth tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - HSN code - rate of GST - In the instant case the assessee have themselves declared their product to be “a packing material used for packing of goods as a cushioning material, separators or edge protector to make shipping cartons of goods and as pallets and pallet boxes” - Hence the eco-friendly expandable paper wrap (honeycomb paper for wrapping) merits to be classified under heading 48239013. - AAR
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Benefit of concessional rate of GST - Supply of works contract to the Indian Railways - construction services - The supply provided by the applicant does not fall under the category of 'new construction' as the applicant is not doing any work relating to new construction. Even in case of work relating to 'construction lines' wherein new railway tracks are constructed, the applicant is not constructing new railway line and only supplying completion and finishing services in respect of 'construction lines' wherein the applicant has to provide welding work and painting work - AAR
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Composite works contract services - Local authority or not - As the UPJN does not qualify as a local authority and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN - AAR
Income Tax
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Reopening of assessment u/s 147 - AO issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment under section 143(3) of the Act. It appears that the Assessing Officer now wants to re-verify the facts which is not permissible to be an acceptable ground for exercising powers to reopen the assessment. - HC
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Claim of deduction - lease equalization charge - After referring to the Guidance Note on Accounting for Leases, revised in the year 1995, Supreme Court held that method of accounting followed as derived from ICAI Guidance Note is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting. - Respondent is entitled for bifurcation of lease rental as per the accounting standards prescribed by the ICAI - HC
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Reopening of assessment u/s 147 - transactions in question were in the nature of partners’ capital withdrawal - As in the communication whereby the reasons recorded were supplied, no satisfaction was recorded by the assessing officer that the income chargeable to tax has escaped assessment. Not only the said requirement was not satisfied, but as seen above, there was no actual escapment of income as well. - HC
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TDS credit treated as income of the assessee - Nature of income - essentially the TDS credit now claimed by the assessee is in the nature of an additional income over and above the RPC fee the assessee was entitled to receive under the contract. Thus, it is an additional item of income which has not suffered tax at the hands of the assessee. Therefore, the issue arising for consideration is, what is the nature of such income at the hands of the assessee. - AT
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Revision u/s 263 - Scope of Explanation 2 to section 263 - the said Explanation does not give unfettered power to the PCIT to assume revisional-jurisdiction to revise every order of the AO to re-examine the issues already examined during assessment-proceeding. It is judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms - AT
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TDS u/s 195 - Scope of “make available” - The concept of make available which requires that fruits of services should remain unavailable to the service recipients in some concrete shape such as technical knowledge, experience, skill, etc and service recipient has to make use of such technical knowledge, skill, etc by himself in his business and for his own benefit. - Whereas the facts of the case in hand show that the assessee does not gain any technical knowledge, experience or skill as it is not involved in the process that service provider is following while rendering the services. - AT
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Revision u/s 263 - As on date that in an unabated year the addition can only be made on the basis of incriminating material. Therefore having regards to the legal position, the AO framed the assessment u/s 143(3) r.w.s. 153A of the Act without making any addition in respect of claim u/s 35(2AB) of the Act or with regard to the unabsorbed depreciation in consonance with provisions of the Act as interpreted by various judicial forums discussed hereunder. - Therefore the order passed by the AO u/s 143(3) r.w.s. 153A of the Act is neither erroneous nor prejudicial to the interest of the revenue - AT
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MAT computation u/s 115JB - Adjustments to book profit - excise duty exemptions as capital receipt - the alleged sum of excise duty exemption is a capital receipt not chargeable to tax and even for the purpose of computing MAT u/s 115JB the said sum needs to be reduced from the net profit shown in the audited profit and loss account. - AT
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Investment allowance u/s. 32AC(1A) - Investment in new plant or machinery. - A.O. in the present case has only relied on the audited P & L account, balance sheet and the return of income of the assessee and has not gone beyond to enquire into the credibility of the documentary evidences furnished by the assessee to substantiate its claim. - Claim allowed - AT
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Addition u/s 68 - unexplained loan - unexplained cash credit - once the amount of loan received through banking channel and repayment of the same along with interest also made through banking channel then the genuineness cannot be doubted. - AT
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Capital Gains - property was transferred by the assessee to his mother by way of sale deed - addition u/s 50C - the impugned property transferred by the assessee to his mother for consideration of Rs. 5 Lakh is liable to be brought under the ambit of capital gain. - AT
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Levy of interest for delay of 1 day in deposit of TDS - the assessee had deposited the amount with the authorized bank within the due date, however, due to technical glitch the bank could not remit the amount immediately to the account of the department and there occurred a delay of one day because of which the assessee cannot be burdened with levy of interest u/s 201(1A) - assessee cannot be burdened because of not doing an act which was beyond his control. - AT
Customs
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Suspension of Customs Broker License - propriety of the deprivation - The continuation of suspension in the impugned order, sought to be justified by relying on confessional statements, does not go beyond that allegation at this stage. The individual concerned does not possess any status under the Regulations and act of his, in any capacity whatsoever, is beyond the scope of retribution under the Regulations. To foist deprivation of livelihood as licencee merely on inference, lacking legal foundation and devoid of procedural sanctity, is improper and our countenance of such will be approval of misadventure. - AT
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Duty Drawback - Redetermination of export value - rejection of declared value of the goods in the 13 shipping bills - The adjudicating authority had to first examine the correctness of the declared value of the export goods and after recording a finding that they were not correctly valued re-determine the value, but this was not done. - AT
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Recovery of Differential duty - rejection of declared value - The appellant accepted the test report which determined the level of tungsten in the imported good at 75.3% and also accepted that the value of the goods would be 46.50 US$ per kg instead of 12 US$ per kg. Such being the position, the Commissioner (Appeals) committed no illegality in confirming the demand of differential duty. - AT
Corporate Law
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Maintainability of suit - exclusive jurisdiction of the National Company Law Tribunal - The specific case of the plaintiff is fraud and the said fraud is to be adjudicated upon adducing evidence by both the parties before the Civil Court only. Section 65 of the Insolvency and Bankruptcy Code, 2016 has no manner of application in the instant case as the challenge is against issuance of shares by the auditor of a company in derogation of his fiduciary with the company and whether the said act of the auditor is in contravention of the provisions of Company Act, 2013 is on act of fraud or not is to be decided by the Civil Court. - NCLT is not competent to enquire into the allegation of fraud - HC
IBC
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Claim of applicant rejected by RP - the amount has been disbursed to the Corporate Debtor, however the Applicant has miserably failed to establish that the said debt would qualify as 'financial debt' - there is no dispute between the parties that the amount was received through banking channel. In the said circumstances, we hereby direct the Respondent to admit the claim of the Applicant without interest, under the category of other creditors - Tri
PMLA
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Offence of money laundering is a contining offence and relevance of the date of commission of the scheduled offence is irrelevant for the reason that as long as one is in possession of the proceeds of crime, he would be liable to be prosecuted for the offence under Section 3/4 of the PMLA - HC
Case Laws:
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GST
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2022 (12) TMI 1293
Cancellation of registration of petitioner - non filing of returns for a period of six months - It is the case of the petitioner that the petitioner had filed returns for the defaulted period but did not file any appeal under Section 107 against Ext.P3 order of cancellation - HELD THAT:- This writ petition is liable to be allowed. The show cause notice issued to the petitioner in this case is produced as Ext.P2. A perusal of Ext.P2 shows that the same has been issued in Form GST Reg 31. The said form is one for suspension of revocation and not for cancellation of registration. The notice is absolutely vague and it is not clearly specified with any clarity, the reasons for proposing cancellation even the period for which there was alleged failure to file returns is not specified. The quashing of the impugned order of cancellation will not have the effect of absolving the petitioner of any fiscal liability. The petitioner will be required to file all defaulted returns together with tax, late fee, interest, penalty etc., within a period of two weeks from the date on which the registration of the petitioner is restored in compliance with this judgment - Petition allowed.
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2022 (12) TMI 1292
Maintainability of petition - availability of alternative remedy of appeal - Refund claim - Intermediary services - Circular bearing No.159/15/2021-GST dated 20.09.2021 - learned counsel for the respondents submits that in view of availability of equitable and alternative remedy by way of an appeal to the Appellate Authority as well as the Tribunal, the present petition is not maintainable - HELD THAT:- In the light of the submission and the Circular dated 20.09.2021 which has come into effect during the pendency of the present writ petition, it is opined that the impugned orders as well as the refund orders at Annexure-K dated 11.02.2019, Annexure-L dated 22.05.2019, Annexure-M dated 25.05.2019 and Annexure-N dated 14.12.2019 deserve to be set aside and the matter deserves to be remitted back to the concerned respondents for reconsideration afresh in accordance with law. Petition allowed by way of remand.
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2022 (12) TMI 1291
Confiscation and detention of goods and conveyance - interaction, interplay and inter se application of Section 129 and Section 130 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- As could be seen from the impugned order, the penalty amount is Rs. 2,14,690/-. The fine and other charges are demanded to the extent of Rs.11,92,726/- and the tax is demanded of Rs.2,14,690/-. By way of interim relief, it is directed that the respondents shall release the goods and conveyance of the petitioner, confiscated and detained pursuant to the aforementioned order No. 8 dated 21.04.2022 passed in FORM GST MOV-11, subject to the following conditions imposed - application disposed off.
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2022 (12) TMI 1290
Classification of goods - HSN code - rate of GST - eco-friendly expandable paper wrap (honeycomb paper for wrapping) - to be classifiable under 48239013 or 48084090? - HELD THAT:- It is observed that the Tariff Item 4823 covers articles of paper and Tariff Item 48239013 has description as Packing and Wrapping Paper and all type of packing and wrapping paper will fall in 48239013 which is a specific tariff item for packing and wrapping paper - As per Rule 3(a) of General Rules for the Interpretation of Import Tariff, the heading which provides the most specific description shall be preferred to headings providing general description. The Tariff item 48239013 contains specific description of Packing and wrapping paper. The product eco-friendly expandable paper wrap (honeycomb paper for wrapping)' is manufactured from the kraft paper and adhesives and the same is used in wrapping/packing as such Rule 3(a) of General Rules for the Interpretation of Import Tariff will apply and the same merits classification under HSN 48239013. In the landmark judgement of RAMESWARLAL MURLIDHAR VERSUS STATE OF ORISSA [ 1981 (4) TMI 254 - SC ORDER ], Hon'ble Supreme Court has observed that , Paper may be presented in plain sheets or in exercise books or in big rolls. It may be thick or thin, light to heavy, bleached or coloured, according to the requirement of purchasers. The form in which the paper is presented or sold is not a conclusive test, but the use to which it is put would furnish a guiding principle. Although, there is no specific entry for the product 'eco-friendly expandable paper wrap (honeycomb paper for wrapping) in Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, there is an entry most akin to the product and process ( at Sr. No. 157 of Schedule III of Notification No.1/2017 CENTRAL TAX (Rate) Dated 28-6-2017 and attracts 9% CGST and 9% SGST or 18% IGST. In the instant case the assessee have themselves declared their product to be a packing material used for packing of goods as a cushioning material, separators or edge protector to make shipping cartons of goods and as pallets and pallet boxes - Hence the eco-friendly expandable paper wrap (honeycomb paper for wrapping) merits to be classified under heading 48239013.
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2022 (12) TMI 1289
Benefit of concessional rate of GST - Supply of works contract to the Indian Railways - construction services - classified under Entry 3(v)(a) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 or not - HELD THAT:- The entry 3(v)(a) of Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017 prescribes the rate of 12% for Composite supply of works contract {as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017}, other than that covered by items (I), (ia), (ib), (ic), (id), (ie) and (if) of the above notification supplied by way of construction, erection, commissioning, or installation of original works pertaining to railways, including monorail and metro. Immovable property has not been defined in the CGST Act. Definition of Immovable Property is given in Clause 3 (26) of General Clauses Act, 1897 which says that immovable property shall include land, benefits arising out of land and things attached to earth, or permanently fastened to anything attached to earth. - As per Section 3 of the Transfer of Property Act 1882, the phrase attached to earth means- (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. The goods involved in repair and maintenance of 'open line' as well as in 'construction line' are welding material and paints are consumed purely during the execution of contract and hence the same shall not be treated as 'transfer of property in goods', as lawful convey and absolute transfer of ownership of the said property i.e. consumable goods does not take place. The supply provided by the applicant does not fall under the category of 'new construction' as the applicant is not doing any work relating to new construction. Even in case of work relating to 'construction lines' wherein new railway tracks are constructed, the applicant is not constructing new railway line and only supplying completion and finishing services in respect of 'construction lines' wherein the applicant has to provide welding work and painting work - The supply provided by the applicant do not fall under the category of ' all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable' in case of construction lines. Even in case of Open Lines, the railway lines which are replaced on completion of shelf life are not abandoned or damaged structures. Further, there is no erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise during execution of contracts by the applicant. As such, the applicant is not entitled to benefit of entry 3(v)(a) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 because- (i) 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, (ii) there is no transfer of property in goods (whether as goods or in some other form) involved in the execution of contracts and (iii) The supply is not by way of construction, erection, commissioning, or installation of original works. The appropriate rate of IGST payable by the applicant on services provided on 'construction line' as well as 'open line' is 18%.
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2022 (12) TMI 1288
Composite works contract services - Local authority or not - Governmental Authority or not - services supplied to Uttar Pradesh Jal Nigam involving construction design of prestressed concrete cylinder pipelines (PCCP) and pumping plant for the purpose of supplying water to the Khurja Sewerage Treatment Plant Project from the Mundakhera Reservoir to the pond of Khurja STPP - ancillary works such as development of roads/paths, drain septic Tanks, sewer line, water supply system, external electrification, service connection to building, etc - Entry 3(iii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. HELD THAT:- The definition of local authority in the CGST Act includes within its ambit any other authority legally entitled to or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund. Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a local authority. The Apex court in the UNION OF INDIA ORS. VERSUS RC. JAIN ORS. [ 1981 (2) TMI 200 - SUPREME COURT] has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN - Apex court in the RC Jain case has held that that the authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy. Whether the UPJN is Governmental Authority? - HELD THAT:- The UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per Section 3 of the UPWSS Act, UPJN is a body corporate established by the Government of U.P., as such, the second requirement of governmental authority has also been fulfilled in the present case. Moreover, the UPJN is constituted for the development and regulation of water supply and sewerage services in the State of U.P. Under the Section 14 of UPWSS Act, UPJN is inter alia entrusted with the function to operate, run, and maintain any waterworks and sewerage system. As per Article 243W read with Twelfth Schedule of the Constitution of India, water supply for domestic, industrial and commercial purposes and public health, sanitation conservancy and solid waste management is a function of municipality. In view of the above, the requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the Constitution has also been fulfilled in the present case. Thus, the UPJN is a governmental authority. By way of Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017, was restricted to works contract supplied to Central Government, State Government, Union territory and a local authority only. As the UPJN does not qualify as a local authority and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017.
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Income Tax
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2022 (12) TMI 1287
Reopening of assessment u/s 147 - Reasons to believe - accommodation entry receipts - HELD THAT:- On perusal of the reasons recorded, the assessment is sought to be reopened for verification of the facts which are already on record as to whether the amount received by the assessee and reflected in the regular books of accounts pertains to any accommodation entry or not. It is not in dispute that the assessee returned that amount within a short span of two months. Therefore, it appears that under the guise of reopening the assessment, AO wants to have a roving inquiry. Under the circumstances, it cannot be said that AO had any tangible material to form an opinion that the income chargeable to tax has escaped the assessment. In case of Inductotherm (India) (P.) Ltd. v. M. Gopalan, Deputy CIT [ 2012 (9) TMI 16 - GUJARAT HIGH COURT ] the Division Bench of this Court observed that for a mere verification of the claim, the power of reopening of assessment could not be exercised and the AO cannot seek to undertake a fishing or a roving inquiry and seek to verify the facts which are already on record, as if it were a scrutiny assessment. Thus from reasons recorded to reopen the assessment, we are of the opinion that under the guise of reopening the assessment, the AO wants to have a roving inquiry. In absence of any tangible material to form an opinion that the income chargeable to tax has escaped assessment and in absence of any satisfaction recorded by the Assessing Officer by merely relying upon the information received from the Office of DCIT Central Circle 2(2), Mumbai, the impugned action of reopening the assessment while exercising power under section 148 of the Act cannot be sustained. - Decided in favour of assessee.
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2022 (12) TMI 1286
Reopening of assessment u/s 147 - new tangible material available on record - reasons to believe - reopening based upon the audit objection - necessity of independent application of mind - HELD THAT:- In the present case, the entire material was available with the Assessing Officer during the original assessment and therefore, there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment and based upon such material supplied by the petitioner, the Assessing Officer passed the original assessment order. It appears that the notice for reopening is based upon the audit objection and there is nothing on record to suggest that such reopening is made on account of new tangible material available on record. It is therefore, apparent that there is change of opinion by the AO to reopen the assessment for the Assessment Year 2011- 2012, more particularly, when the issue raised in the reopening assessment is already considered during the original assessment proceedings. AO cannot have any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] AO issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment under section 143(3) of the Act. It appears that the Assessing Officer now wants to re-verify the facts which is not permissible to be an acceptable ground for exercising powers to reopen the assessment. The impugned notice issued u/s 148 by the respondent exercising the powers to reopen the assessment for the Assessment Year 2011-2012 is illegal and liable to be set aside. Appeal of assessee allowed.
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2022 (12) TMI 1285
Disallowing lease equalization charge claimed as a deduction from gross lease rentals received by the assessee in respect of finance lease of assets - difference between cost of asset leased minus the depreciation claim and the lease deposit received - Tribunal held that the amount taken to the lease equalisation fund was not an allowable business expenditure as it was an appropriation of profit - HELD THAT:- This issue is no longer res integra as the same has been answered by the Supreme Court in Commissioner of Income Tax-VI v. Virtual Soft Systems Limited [ 2018 (4) TMI 1472 - SUPREME COURT] as examined the guidelines issued by the Institute of Chartered Accountants of India (briefly referred to hereinafter as ICAI ) and also referred to Section 211 of the Companies Act, 1956 to emphasize that Accounting Standards prescribed by ICAI shall prevail until Accounting Standards are prescribed by the Central Government. Method of accounting followed as derived from ICAI Guidance Note is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting. No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. Bifurcation of lease rental as per the accounting standards prescribed by the ICAI allowed. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards - Decided in favour of assessee.
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2022 (12) TMI 1284
Validity of Order of Assessment passed u/s 143(3) r/w. Section 144B - as argued Show Cause Notice issued in terms of Section 144B sub-section (6), clause (vii) of the Act, did not provide to the petitioner a reasonable opportunity of filing a response to the said show cause notice - HELD THAT:- In our opinion, the time that was made available to the petitioner to file its response to the show cause notice was quite inadequate and illusory and therefore, the principles of natural justice can be said to have been violated in the case of the petitioner. Be that as it may, we allow the petition and accordingly pass the following order :- (i) Order of Assessment dated 18th September 2022, passed under Section 143(3), r/w. Section 144B, of the Income Tax Act, 1961, relevant to the Assessment Year 2020-21, is set aside and the matter is remanded back to the Assessing Officer, who shall consider the objections to the Show Cause Notice dated 13th September 2022, which shall be filed within two weeks from today, for which the system be enabled accordingly. (ii) Petitioner be also given an opportunity of being heard in terms of Section 144(6)(vii) of the Income Tax Act, and thereafter proceed to pass appropriate orders in accordance with the law.
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2022 (12) TMI 1283
Validity of Reopening of assessment u/s 147 - whether personal hearing a condition precedent before an order is made under Section 148 A (d)? - HELD THAT: - As in the light of the Circulars which has prescribed the procedure to be followed if a request for personal hearing is made and which expressly provides for grant of personal hearing vide Clause viii of the Department circular in F.No.299/10/2022-Dir(Inv.III)/611, dated 01.08.2022 - the above Circular is binding and it may not be open to the Revenue to contend to the contrary. In view of the fact that the Circular which is binding has provided for personal hearing, we do not propose to examine Section 148 A to find if personal hearing is mandatory or otherwise. Writ Petition is allowed and it is held that personal hearing is necessary in terms of the Circular.
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2022 (12) TMI 1282
Reopening of assessment u/s 147 - Reason to believe - short disallowance u/s 14A - HELD THAT:- There shall be no gainsaying that the issue about the allowable expenditure u/s 14A was gone into by the AO at the time of scrutiny assessment on the basis of material and the information supplied and available with it. Notice u/s 148 was issued in respect of assessment year 2014-2015, after four years from the end of the year consideration. The pre-requisite was to show that there was failure on part of the petitioner assessee in fully and truly disclosing the facts as per the first proviso to section 147 of the Act. In the facts of the case, there was full and true disclosure in the year under consideration on the part of the assessee. The submission could not be brushed aside lightly that on the said ground alone, the notice issued by the respondent under section 148 of the Act was liable to be set aside. As could be seen AO had acted to undertake the assessment, which ended up with the assessment order under section 143(3) of the Act, in which the aspect of allowability of interest under section 14A was considered alolngwith the other aspects on the basis of the material and conscious decision was taken reflected in the assessment order. It is on the basis of the very facts that the assessing officer wanted to reopen the concluded assessment proceedings. It amounted to change of opinion. It is well settled that mere change of opinion could not be a ground for the AO to reopen the concluded assessment. In Commissioner of Income Tax vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] the supreme court observed that concept of change of opinion was an inbuilt test and it did not stand obliterated after substitution of section 147 in the Act by the Direct Tax Laws (Amendment) Act, 1987 and 1989. AO issued notice u/s148 only to make a roving inquiry into the facts which were already considered and which had gone into his consideration and decision. It appeared that the assessing officer wanted to re-verify the facts, which is not an acceptable ground for exercising powers to reopen the assessment. - Decided in favour of assessee.
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2022 (12) TMI 1281
Reopening of assessment u/s 147 - transactions in question were in the nature of partners capital withdrawal - HELD THAT:- In response to the summons under section 131(1A) the petitioner explained that there was a development agreement entered into between M/s. Sarthak Enterprise and M/s. Savy Unispace Pvt. Ltd. M/s. Sarthak Enterprise received certain amountg as advances from M/s. Savy Unispace Pvt. Ltd. which was partially withdrawn by the petitioner who was partner in the firm M/s. Sarthak Enterprise. The petitioner produced copy of the account from M/s. Sarthak Enterprise alongwith copies of acknowledgment of the returns filed by the firm, copies of accounts of M/s. Savy Unispace Pvt. Ltd was also produced and the bank account of M/s. Savy Unispace Pvt. Ltd was also shown duly reflecting the source of M/s. Sarthak Enterprise for made to the petitioner. The above facts show that the amount was received by the petitioner as partners capital. The amount received had a valid source. The petitioner utilised the amount for repayment of loan obtained from Munjal B. Shah. Therefore, the account reflected that there was an element of income in the transaction. The question of escapment of income chargeable to tax did not arise. The assessing officer misdirected himself in invoking powers to reopen the assessment Undisputedly powers to reopen the assessment were exercised beyond four years from the end of the relevant assessment year. Therefore the First Proviso to section 147 of the Act would require the assessing officer to establish that the assessee had failed to fully and truly disclose all material facts. As in the communication whereby the reasons recorded were supplied, no satisfaction was recorded by the assessing officer that the income chargeable to tax has escaped assessment. Not only the said requirement was not satisfied, but as seen above, there was no actual escapment of income as well. The formation of opinion by the assessing officer for the purpose of exercise of powers to reopen the assessment could be said to have been vitiated to be rendered bad in law. For all the aforesaid reasons, the petitioner is entitled to succeed.
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2022 (12) TMI 1280
Revision u/s 263 - assessee had claimed exemption u/s.54F of the Act against the long term capital gain arising on sale of shares and the said claim had been accepted by the Assessing Officer - HELD THAT:- We notice that the assessee has specifically state that the sale deed is not registered and the AO was very much aware of it. From the queries and replies mentioned above, we are of the view that the AO has conducted proper enquiries and taken a decision. Whether the decision taken by the AO can be considered as a plausible view? - As in case SURESHCHANDRA AGARWAL VERSUS INCOME-TAX OFFICER, WARD 20 (3) (3) [ 2011 (9) TMI 243 - ITAT MUMBAI] Tribunal has expressed the view that the requirement of registration is not there for construing the meaning of transfer u/s 2(47)(v) of the Act. Thus the above said decision is contrary to the view expressed by Ld PCIT in the impugned revision order, meaning thereby, the view taken by the AO should be considered as one of the possible views. In the case of Malabar Industrial Company [ 2000 (2) TMI 10 - SUPREME COURT] has held that, if the AO has taken one of the possible views, then the assessment order cannot be considered to be prejudicial to the interests of revenue merely for the reason that the Ld PCIT has got different view on the very same matter. Hence the impugned revision order is liable to be quashed on this ground alone. Thus we are unable to sustain the impugned revision order passed by Ld PCIT - Decided in favour of assessee.
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2022 (12) TMI 1279
TDS Credit - AO issued notice u/s 139(2) for the reason that credit of TDS has been claimed, but the corresponding receipts/income has been omitted to be offered for taxation - HELD THAT:- If the assessee has offered income to tax in either in the current year or any earlier year and TDS has been deducted on the same in the current year at the time of execution of sale deed, credit for the TDS so deducted should be allowed to the assessee in the current year, subject to the assessee producing the necessary supporting to show that corresponding income has been offered in tax either during the current year or any of the earlier previous years. The buyer/purchase of property deducted tax only at the time of execution of sale deed, while the corresponding income has been offered to tax by the assessee either during the current year or in any of the prior years by the assessee following the percentage completion method. Accordingly, in the above facts, the matter is being restored to the file of AO to carry out the necessary verification in respect of income offered to tax and the corresponding TDS for which credit is being claimed and TDS credit may be allowed after carrying out the necessary verification in the year when TDS has been deducted - subject to the assessee producing the correlation that such income has been offered to tax either during the current year or any of the earlier previous years. Appeal of the assessee is allowed for statistical purposes.
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2022 (12) TMI 1278
TDS credit treated as income of the assessee - Nature of income - Jaypee Associates Limited ( JAL ) liability to withhold taxes in respect of payment made to the Appellant - assessee is the commercial rights holder of Formula One World Championship as exclusively entitled to award event promoters with the right to host, stage and promote Grand Prix on various Circuits worldwide and in that capacity entered into a Race Promotion Contract (RPC) with Jaypee Sports International Ltd. [now merged with Jaiprakash Associates Limited (JAL)] granting right to host the Indian Grand Prix - TDS credit claimed by the assessee is over and above the actual RPC fee paid to the assessee by JAL - TDS u/s 195 - existence of fixed place PE and liability of JAL to deduct tax at source on the RPC fee paid to the assessee - while computing the tax demand AO did not grant credit for TDS by JAL, though, the TDS amounts were reflected in Form 26AS of the assessee - In the final assessment orders the Assessing Officer held that the consideration received by the assessee with the Indian Grand Prix represented its profit with 56% of the said profit being attributable to the PE in India HELD THAT:- Credit/actual payment of RPC fee to the assessee, JAL had not deducted any amount of tax at source in terms of section 195 of the Act. This is, probably by entertaining a view that RPC fee is not taxable in India. However, on an application filed by the assessee before the AAR, a Ruling was delivered holding that RPC fee is in the nature of royalty in terms of Article 13 of India UK Tax Treaty. Thus, AAR held that JAL was obliged to deduct tax at source on the RPC fee paid to the assessee. Being aggrieved with the AAR Ruling, both the assessee and JAL filed Writ Application before the Hon ble Delhi High Court. In their judgment, the Hon ble Delhi High Court overruled the decision of AAR by holding that RPC fee is not in the nature of royalty. However, the Hon ble High Court held that the assessee had a fixed placed PE in India; hence, the RPC fee is taxable in India. Thus, the Hon ble High Court held that the JAL was bound to make appropriate deduction under section 195 of the Act from the RPC fee paid to the assessee. Admittedly, by the time, the decision of the Hon ble Delhi High Court came, which ultimately got confirmed by Hon ble Supreme Court, JAL has paid the RPC fee to the assessee without withholding tax under section 195 of the Act. Thus, it is a fact on record that the RPC fee received by the assessee was the full amount without suffering any withholding of tax at source. This is the reason, why the assessee did not claim credit for TDS in return of income. Subsequently, as a consequence of the judgment of the Hon ble Delhi High Court, proceedings under section 201 of the Act was initiated against JAL on account of failure to deduct tax at source under section 195 of the Act and basis demand raised under section 201(1) and 201(1A) of the Act, JAL deposited the amount of tax which should have been withheld under section 195 of the Act while paying RPC fee to the assessee. Of course, it is a fact on record that TDS credit of Rs.35.68 crores appears in favour of assessee in Form 26AS. Subsequently, JAL has also issued TDS certificates in Form 16A in favour of the assessee in respect of TDS deposits. However, it is a fact on record that the TDS credit claimed by the assessee is not a part of the income offered to tax in the returns of income. The TDS credit claimed by the assessee is over and above the actual RPC fee paid to the assessee by JAL. Thus, essentially the TDS credit now claimed by the assessee is in the nature of an additional income over and above the RPC fee the assessee was entitled to receive under the contract. Thus, it is an additional item of income which has not suffered tax at the hands of the assessee. Therefore, the issue arising for consideration is, what is the nature of such income at the hands of the assessee. In this regard, we accept the submission of learned counsel for the assessee that the TDS credit partakes the character of original income, i.e., the RPC fee and has to be taxed in the same manner in which the Assessing Officer taxed the RPC fee. We direct the AO to factually verify the actual amount of TDS credit by matching figures in Form 26AS and TDS certificates issued in Form 16A and thereafter treat the TDS credit as income of the assessee partaking the character of RPC fee and tax it in the same manner in which RPC fee was brought to tax in the final assessment order. At this stage, we make it clear that the mandate given to the Assessing Officer in this order is only for taxation of the TDS credit and no other item of income. Needless to mention, before deciding the issue, the Assessing Officer must provide a reasonable opportunity of being heard to the assessee.
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2022 (12) TMI 1277
Addition on account of creditors - assessee had failed to establish the genuineness of the creditors - AO made the addition against 13 creditors only by taking view that either they have no response or the notices under section 133(6) were not complied - CIT-A deleted the addition - HELD THAT:- AO has not segregated the parties who have not complied with or the notice of which parties were returned back with the remarks of Postal Authorities incomplete addresses, or not found . AO made addition by taking view that assessee has not furnished complete details. We find that the AO added the addition of sundry creditors under section 68 instead of section 69C - As noted above, before the Ld. CIT(A) assessee filed detailed written submission. The submission of assessee also consider by Ld. CIT(A) that assessee have shown WIP of Rs. 9.31 Crore. CIT(A) further noted that the assessee claimed that all the details of creditors were furnished before assessing officer and that in subsequent year all most of the payments were made, which is not doubted by the assessing officer. We find that once the payment in subsequent assessment year has been accepted in the scrutiny assessment as genuine, the same cannot he left as treated in-genuine. Moreover, the assessee has made TDS against such payment of labour contractors wherever applicable. In view of the aforesaid discussion, we do not find any reason to devoid the findings of Ld. CIT(A). This ground of Revenue s appeal is dismissed. Nature of expenses - Loan Processing Charges - CIT-A deleted the addition - HELD THAT:- CIT(A) accepted the contention that such expenses were revenue in nature and allowable under section 37(1) of the Act. Such expenditure was paid through account payee cheque and expenditure were incurred for the purpose of assessees good business. We find that the contention of assessee throughout the proceedings that loan processing charges were borne by assessee to attract the buyers book flats and Assessing Officer has not investigated the fact either bank or financial institutions or from the buyers whether the loan processing charges borne by assessee. The details fact alleged buyers and bank may have been available with the AO. No investigation is made either from the buyer or from other bank or financial institute by assessing officer. AO made addition / disallowance without making thorough investigation of fact and disbelieve the contention of assessee. CIT(A) granted relief on appreciation of fact that loan processing charges were born by assessee-firm to attract the buyers for booking flats of assessee as in the nature of revenue expenditure allowable under section 37(1) of the Act. Such view of Ld. CIT(A) does not warrant any inference. Appeal of the Revenue is dismissed.
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2022 (12) TMI 1276
Revision u/s 263 by CIT - assessee company has not made any submission to substantiate that it had submitted complete details pertaining to the expenses charged to the P L account under the head other advertisement and sales promotion expenses - HELD THAT:- A perusal of the assessment order clearly shows that the AO during the course of assessment proceedings had called for the details of advertisement and sales promotion expenses. As held in various decisions that for invoking jurisdiction u/s 263 of the I.T. Act, the twin conditions namely, (a) the order is erroneous and (b) the order is prejudicial to the interest of the Revenue must be satisfied. However, in the instant case, the order may be prejudicial to the interest of the Revenue, but it cannot be said to be erroneous since the AO after conducting necessary inquiries by calling for information and having gone through the details furnished by the assessee has taken a possible view. Merely because the learned PCIT does not agree with the view taken by the Assessing Officer, the order cannot be said to be erroneous or not a possible one. Under these circumstances, since one of the twin conditions i.e. the order is not erroneous is not satisfied, therefore, we hold that the learned PCIT is not justified in invoking jurisdiction u/s 263 - Accordingly, the order of the PCIT passed u/s 263 of the I.T. Act is set aside and the grounds raised by the assessee are allowed.
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2022 (12) TMI 1275
Levy of penalty u/s. 271(1)(c) - transfer pricing adjustment that were initially suggested by TPO but were subsequently enhanced by Ld. CIT(A) - HELD THAT:- We find that the enhancement to transfer pricing adjustments directed by Ld. CIT(A), was challenged by the assessee before the Tribunal. The co-ordinate Bench of Tribunal vide order [ 2019 (8) TMI 184 - ITAT DELHI] had directed the inclusion/exclusion of certain comparables. Assessee has also made correspondence with the A.O. wherein assessee has inter alia requested him to carry out the appeal effect consequent to the directions of Tribunal, which is yet to be carried out by the A.O. It is the contention of the assessee that if the directions of the Tribunal for inclusion/exclusion of comparables are carried out by the A.O. then there would remain no basis for making any TPA. The aforesaid factual contention of the Ld.AR has not been controverted by the Revenue. In such a situation, considering the totality of the aforesaid facts we find force in the contentions of the Ld.AR that no adjustment on transfer pricing issue would subsist and therefore there is no question of penalty u/s. 271(1)(c) on such addition. We therefore direct the deletion of penalty u/s. 271(1)(c) - grounds of assessee are allowed.
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2022 (12) TMI 1274
Reopening of assessment u/s 147 - Reason to believe - as argued CIT had granted his approval u/s.151 of the Act in a mechanical manner i.e., without any application of mind - validity of the jurisdiction that was assumed by the A.O for initiating proceedings u/s 147 and framing the consequential assessment - validity of the addition made by the A.O u/s 68 of the Act of the simpliciter cash deposits in the assessee s bank accounts - sustainability of the addition made by the A.O in the backdrop of the merits of the case - HELD THAT:- We are unable to find favor with the same. On a perusal of the approval/sanction granted by the Pr. CIT, Raipur, find that the latter after duly recording his satisfaction had granted the sanction to the A.O for issuing notice u/s.148 of the Act to the assessee - the challenge thrown by the Ld. AR to the validity of jurisdiction assumed by the A.O on the basis of his multi-facet contentions being grossly misconceived and misplaced cannot be accepted and are accordingly rejected. Addition of simplicitor cash deposits in his bank accounts as unexplained cash credit u/s.68 - We find substance in the contentions advanced by the Ld. AR. As stated by the Ld. AR, and, rightly so, as the bank account statement/bank passbook cannot be treated as books of accounts of the assessee, hence, no addition in respect of the cash deposits could be validly made u/s.68. As the bank accounts of the assessee could not have been held to be the books of account of the assessee maintained for any business or profession, therefore, no addition u/s.68 of the Act could have been made in respect of the simplictor cash deposits made in the said bank accounts. Disallowance made u/s.14A - Both the lower authorities had grossly erred in law and the facts of the case in disallowing/sustaining the disallowance of the interest expenditure u/s.14A of the Act. As held in the case of CIT Vs. Sociedade De Fomento Industrial (P). Ltd. [ 2020 (11) TMI 277 - BOMBAY HIGH COURT ] the A.O before rejecting the disallowance offered by the assessee remains under a statutory obligation to give a clear finding with reference to the accounts of the assessee that the other expenditure which were being claimed to have been incurred in respect of the non-exempt income, were in fact related to its exempt income. As in the case of the present assessee neither of the lower authorities had demonstrated that as to how any part of the interest expenditure as was claimed by the assessee as a deduction, was not relatable to any part of its taxable income - disallowance made by the A.O u/s.14A cannot be sustained and is accordingly vacated.
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2022 (12) TMI 1273
Revision u/s 263 - As per CIT, AO has not examined corpus donations and AO has wrongly allowed exemption u/s 11 / 12 despite the fact that the assessee was not registered u/s 12AA and hence not eligible for exemption - HELD THAT:- We find that during the course of assessment-proceeding, there were specific queries raised by Ld. AO with regard to the corpus donation and the assessee too made detailed replies / submissions. To this extent, there is no dispute or rebuttal by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions. Regarding non-registration of assessee u/s 12A, we are convinced with the legal provisions of section 12A(2) as well as CBDT Circular according to which the Ld. AO has rightly allowed the exemption u/s 11 / 12 to assessee. Regarding introduction of Explanation 2 to section 263, as claimed by Ld. PCIT in his order, we only need to state that it is by now well-settled in several decisions that the said Explanation does not give unfettered power to the PCIT to assume revisional-jurisdiction to revise every order of the AO to re-examine the issues already examined during assessment-proceeding. It is judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms, since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. Hon ble ITAT, Rajkot in M/s Pramukh Realty, Junagadh [ 2022 (7) TMI 384 - ITAT RAJKOT] has extensively dealt a case where the AO raised queries during assessment-proceeding and the assessee filed details / documents. After a thorough analysis, the Hon ble Bench has held that in such circumstances, revision u/s 263 cannot be done. Thus we are persuaded to hold that the facts of the present case do not warrant application of section 263. - Decided in favour of assessee.
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2022 (12) TMI 1272
LTCG - year of assessment - as argued by assessee that once the amount is brought to tax in A.Y 2014-15, therefore, the addition of the same in this year amounts to double addition of the same amount - whether the income on sale of 23 flats has been brought to tax during the A.Y 2015-16 correctly or not? - HELD THAT:- The various other decisions relied on by assessee support the arguments of assessee that the same amount cannot be taxed twice in two different A.Ys. Under these circumstances, we deem it proper to restore the issue to the file of the AO with a direction to verify the record and if the amount of Rs.2,91,07,000/- has been brought to tax in A.Y 2014-15, then the same should be deleted from A.Y 2015-16. We hold and direct accordingly. Needless to say, the AO shall give due opportunity of being heard to the assessee while deciding the issue. The first issue raised by the assessee in the grounds of appeal are accordingly allowed for statistical purposes. Deduction of indexed cost of acquisition wherein the assessee has challenged the order of the Assessing Officer in not granting indexed cost of acquisition - DRP has directed the AO to reduce the indexed cost of acquisition from the sale consideration and arrive at the correct LTCG. A perusal of the assessment order shows that the Assessing Officer has not granted the benefit of indexed cost of acquisition from the sale consideration to arrive at the correct LTCG. We, therefore, direct the Assessing Officer to follow the direction of the DRP and allow indexed cost of acquisition from the sale consideration. Ground raised by the assessee on this issue is accordingly allowed. Reversing 54F deduction granted in A.Y 2012-13 - HELD THAT:- A perusal of the order of the DRP at para 2.4.5 shows that the Assessing Officer in the draft order for A.Y 2014-15 has already brought to tax the amount of Rs.6,77,04,992/- as LTCG which was allowed u/s 54F in A.Y 2012-13. However, the DRP at Para 2.4.6 of the order sustained the addition made by the Assessing Officer on the ground that the same is made on protective basis. Since in the instant case, the flats were allotted to the assessee as per the JDA on 13.01.2012 and the flats were sold on 24.3.2015, therefore, the new asset was sold after a period of 3 years and therefore, the provisions of section 54F(3), in our opinion, shall not apply. Further, when the entire sum of Rs.6,77,04,992/- was reversed in A.Y 2014-15, therefore, again addition of the same, under protective basis, in A.Y 2015-16, in our opinion, is also not justified. We, therefore, direct the AO to verify the record and if the amount of Rs.2,99,46,438/- has already been brought to tax in A.Y 2014-15 or the transactions for the year under consideration is beyond a period of 3 years, then not to make any addition by reversing the deduction already allowed u/s 54F in A.Y 2012-13. Needless to say, that the AO while verifying the record shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. Grounds of appeal are accordingly allowed for statistical purposes. Credit of tax paid in A.Y 2016-17 to A.Y 2015-16 - HELD THAT:- Respectfully following the decision of M/S. INTERGLOBE ENTREPRISES PVT. LTD. [ 2022 (8) TMI 98 - ITAT DELHI] we restore the issue to the file of the Assessing Officer with a direction to verify the record and if any other benefit is not claimed by the assessee in respect of the amount of tax of Rs.1,00,07,393/- paid in A.Y 2016-17, in respect of the income then allow the credit of the same for the A.Y 2015-16. Ground of appeal No.4 raised by the assessee is accordingly allowed for statistical purposes.
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2022 (12) TMI 1271
Penalty u/s. 271(1)(c) - disallowance of depreciation on land, disallowance u/s. 14A r.w.r 8D and addition on account of income from house property shown under the head income from other sources - HELD THAT:- The issue in the present appeal is with respect to levy of penalty u/s. 271(1)(c) - We find that identical issue of levy of penalty was before the coordinate bench of Tribunal for A.Y. 2015-16 in assessee s own case [ 2022 (10) TMI 1137 - ITAT DELHI] - no penalty u/s. 271(1)(c) of the Act, is leviable in the present case. Thus the ground of assessee is allowed.
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2022 (12) TMI 1270
Levy of penalty u/s 271(1)(c) - addition on account of short term capital gains on sale of Helicopter - addition made u/s 50 - Disallowance of excess depreciation and disallowance of Helicopter expenses - HELD THAT:- The addition was made based on the information provided by the appellant during the course of assessment proceedings and on the basis of information contained in the Return of Income. Therefore, the appellant cannot be held guilty of furnishing of inaccurate particulars of income nor concealing of particulars of income. Since the information filed along with return of income, unequivocally stated that the Helicopter was sold for a consideration but, the appellant had failed to reduce the entire consideration received on sale of Helicopter from opening WDV of the block of assets under which the Helicopter falls and offered to tax the excess of sale consideration over opening value WDV of block of the assets. It is not even a case of wrong claim made by the assessee in the return of income. The fact that the entire information regarding the sale of the Helicopter was available in the return of income, an accompanied document, would go to show that it is bona-fide inadvertent error and the ratio of the decision of Price Waterhouse Coopers (P.) Ltd [ 2012 (9) TMI 775 - SUPREME COURT] is squarely applicable. The mere fact that the assessee had chosen not to contest the addition in the appellate forum, cannot automatically entail levy of penalty as held by the Hon ble Supreme Court in the case of Sir Shadi Lal Sugar General Mills Ltd.[ 1987 (7) TMI 3 - SUPREME COURT] The appellant cannot be held guilty of furnishing inaccurate particulars of income or concealing the particulars of income and it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. Hence, we reverse the orders passed by the lower authorities and quash the penalty order. Thus, the grounds of appeal filed by the assessee stand allowed.
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2022 (12) TMI 1269
TDS u/s 195 - Scope of make available - payment made by the assessee to its non-resident group company as Fees for Technical Services [FTS] by concluding that services make available , technology, knowledge, skill, know-how or processes to the assessee as per Article 13 of India-UK DTAA [DTAA] - AO noticed that the assessee has paid an amount to its holding company CPP Limited, UK but has not deducted tax at source claiming that Information Support System Services availed by the assessee company do not fall under the definition of FTS under Article 13 of the DTAA - HELD THAT:- As in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Intellectual property is with the supplier [UK based company]. Facts of the case in hand clearly show that there is no transfer of skill or technical services. The recipient [assessee] has not been enriched by receiving the services and making it capable to face similar challenges in future on its own and acquiring skills to deal with the issues. Rendition of these services by the UK company does not enable the recipient [assessee] to provide similar services without recourse to the service provider in future. Merely incidental benefit or enrichment is not sufficient. Assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the UK company. We find that neither the AO nor the ld. CIT(A) has made any attempt to discuss the judicial decisions relied upon by the assessee but has only referred to a single decision of the co-ordinate bench in the case of HJ Heinz [supra] wherein the assessee was availing support services from group company in the area of human resources, strategic planning and marketing, finance and information systems. The concept of make available which requires that fruits of services should remain unavailable to the service recipients in some concrete shape such as technical knowledge, experience, skill, etc and service recipient has to make use of such technical knowledge, skill, etc by himself in his business and for his own benefit. Whereas the facts of the case in hand show that the assessee does not gain any technical knowledge, experience or skill as it is not involved in the process that service provider is following while rendering the services. The IT support services are rendered by CPP UK from UK itself and these services are rendered for the entire group and not just for CPP India. The agreement between CPP group services and the assessee is perpetual and such services are provided by CPP group on recurring basis to the assessee and if the technical knowledge, skill etc. is being made available to the assessee, then there would be no need for the assessee to take recourse to the CPP UK for these services. Thus IT support services do not satisfy the make available test as no technical know-how, skill etc were transferred to the assessee. Considering the facts of the case in totality, in light of judicial decisions discussed hereinabove, we direct the Assessing Officer to delete the disallowance - Appeal of assessee allowed.
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2022 (12) TMI 1268
Unsecured loans - assessee is not able to prove loans taken from certain persons and thus, out of unsecured loans - HELD THAT:- Assessee has satisfactorily explained the identity, genuineness of transaction and creditworthiness of loan creditors. AO without appreciating the fact simply made additions to part of loan taken from creditors, even though, he has accepted the fact that the assessee has filed all evidences to prove identity of the creditors. It is a well settled principle of law by the decision of various courts, including the decision in the case of CIT v. Lovely Exports Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER] that once name and address of creditors are furnished to the AO, then, it for the AO to proceed in accordance with law to re-open the assessment of creditors, but sum received from creditors cannot be regarded as unexplained credit/ income of the assessee. In this case, the assessee has furnished all evidences to prove the identity of creditors and also satisfactorily explained the genuineness of transactions and creditworthiness of creditors. Therefore, we are of the considered view that the AO is erred in making additions towards unsecured loans from 7 parties and thus, we direct the AO to delete the additions made towards loans.Appeal filed by the assessee is allowed.
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2022 (12) TMI 1267
Revision u/s 263 - AO in the instant case rejected the claim of exemption u/s. 11 and 12 on the ground that assessee trust has advanced loan to trustees in violation of provisions of section 13(1)(c) - as per CIT AO has not taken into consideration the income from business and income from other sources to arrive at the income to be assessed, the order has become erroneous as well as prejudicial to the interest of the revenue - HELD THAT:- As undisputed fact that the AO while completing the assessment did not consider the income form business and income from other sources to arrive at the income to be assessed. It is not the case of the assessee that the assessee trust has not earned the business income and income from other sources - Thus, the AO while completing the assessment u/s. 143(3) and denying the exemption u/s. 11 of the I.T.Act has failed to consider the above two items to arrive at the correct income to be assessed and taxed at Maximum Marginal Rate. Under these circumstances, the order passed by the AO in our opinion has become erroneous as well as prejudicial to the interest of the revenue and therefore, the ld.CIT(E), in our opinion was fully justified in invoking the provisions of section 263 of the I.T.Act. Accordingly, the order passed by the ld.CIT(E) is upheld and the grounds raised by the assessee are dismissed.
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2022 (12) TMI 1266
Revision u/s 263 - CIT setting aside the assessment framed u/s 143(3) read with 153A of the Act in which the AO has not made any addition because there was no incriminating evidences found during the course of search - claim of deduction u/s 35(2AB) of the Act and also in respect of excess allowance of unabsorbed depreciation - HELD THAT:- Undisputedly the instant year is an unabated assessment year and there was no incriminating documents/ materials found during search with respect to claim of deduction u/s 35(2AB) of the Act and also in respect of excess allowance of unabsorbed depreciation. As on date that in an unabated year the addition can only be made on the basis of incriminating material. Therefore having regards to the legal position, the AO framed the assessment u/s 143(3) r.w.s. 153A of the Act without making any addition in respect of claim u/s 35(2AB) of the Act or with regard to the unabsorbed depreciation in consonance with provisions of the Act as interpreted by various judicial forums discussed hereunder. The case of the assessee is squarely covered by the decision of Continental Warehousing Corporation (Nhava Sheva) Ltd.[ 2015 (5) TMI 656 - BOMBAY HIGH COURT] and in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] wherein it has been held that in case of unabated assessment year on the date of search the addition can only be made on the basis of search material and not otherwise. Therefore the order passed by the AO u/s 143(3) r.w.s. 153A of the Act is neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction invoked by the ld. PCIT as not in consonance with the provisions of section 263 - Before exercise of jurisdiction u/s263 of the Act the AO has to satisfy the twin conditions as provided in section 263 of the Act .i.e. the order purported to be revised has to erroneous as well as prejudicial to the interest of the revenue and even if first conditions is satisfied or vice versa , the jurisdiction is not available to the ld PCIT as has been held in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] - Accordingly, we quash the order passed u/s 263 of the Act by the Ld. PCIT. The appeal of the assessee is allowed on legal issue.
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2022 (12) TMI 1265
Amortization of leasehold land and land development expenses - On the lands taken on lease are ranging for periods from 21 years to 99 years AO was of the view that the purpose of the expenditure made by the assessee does not satisfy the conditions laid down under the provisions of the act - HELD THAT:- From perusal of the above finding of this Tribunal in case of Greenply Industries Limited [ 2022 (7) TMI 1045 - ITAT GUWAHATI] we find that the same is squarely applicable on the issue raised before us in the instant appeal and therefore, taking a consistent view, the expenditure claimed by the assessee on account of amortization of leasehold land and land development charges deserves to be allowed. Therefore, ground no. 1 raised by the assessee is allowed. MAT computation u/s 115JB - excise duty exemptions as capital receipt - whether they are to be excluded for the purpose of computing book profit u/s 115JB? - HELD THAT:- Decision of this Tribunal in assessee s parent company case of Greenply Industries Limited [ 2022 (7) TMI 1045 - ITAT GUWAHATI] we find that they are squarely applicable on the issues raised in the instant appeal and there remains no dispute that the alleged sum of excise duty exemption received by the assessee is a capital receipt not chargeable to tax and it is to be excluded for the purpose of computing book profit u/s 115JB - We also find that this Tribunal after considering the settled judicial pronouncements has clearly held that the excise duty exemption received by the assessee during the course of running manufacturing units in the backward areas, notified by the Ministry of Commerce and Industry are to be considered as capital receipt not chargeable to tax and they also need to be excluded from the book profit for the purpose of computing MAT u/s 115JB of the Act. We, therefore, are of the considered view that the alleged sum of excise duty exemption is a capital receipt not chargeable to tax and even for the purpose of computing MAT u/s 115JB the said sum needs to be reduced from the net profit shown in the audited profit and loss account. Therefore, ground nos. 2 3 raised by the assessee are allowed.
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2022 (12) TMI 1264
Exemption u/s 11 - grant of registration u/s.12A(1) denied - Charitable object u/s 2(15) - HELD THAT:- The law requires a conjunctive test whereby objects of the applicant society have to be charitable and genuineness of charitable activities should be established for registration of application u/s. 12A. Mere recital of objects or activities without cogent or corroborative evidence is not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. In the instant case, the documents on record do not suffice to establish the genuineness of activities. As such the findings of fact regarding its charitable activities or rather the lack thereof arrived at on the basis of the evidence filed and arguments addressed stand uncontroverted. This is fatal to the claim of the applicant. It is clear that applicant has failed to provide sufficient material to corroborate the charitable nature of the objects and genuineness of the activities. Despite being provided timely opportunity the applicant has not been able to substantiate its claim. We are unable to accept the applicants claim in absence of sufficient material required for formation of satisfaction. Therefore, no case fit for grant of registration u/s.12A(1) of the Income-tax Act, 1961. Accordingly, the registration sought by the applicant u/s. 12A(1) of the Income-tax Act, 1961 is hereby rejected. Appeal of the assessee is dismissed.
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2022 (12) TMI 1263
Investment allowance u/s. 32AC(1A) - Investment in new plant or machinery. - AO has disallowed the claim of the assessee on the ground that the assessee has not furnished any explanation nor has it provided any supporting evidence to substantiate its claim - A.O. has disallowed the same on the ground that the assessee company has not earned any trading and manufacturing activity for the year ending 31.03.2017 and that the income from manufacturing and sale of sweets and namkeen is declared as Nil - Also assessee has shown fixed asset under capital work-in-progress and has not claimed any depreciation on fixed assets for the impugned year - HELD THAT:- The pre condition for claiming deduction as per the provision of section 32AC of the Act is that the assessee ought to have acquired and installed new assets during any previous year which exceeds Rs.25 crores on or before 31.03.2017. The assessee has in fact furnished copy of certificate of M/s. Khedkar and Associates Consultant P. Ltd. indicating that the said plant and machinery was installed by the assessee on or before 31.03.2017, along with supporting documents. This facts has not been denied by the lower authorities. The assessee company has commenced sale on 29.04.2017 and state that the said fact is sufficient to prove that the plant and machineries were installed prior to this as it was impossible to commence the sale without preliminary work such as trial production of run, training of personnel, etc. much before the commencement of sale. The A.O. has only relied on the audited profit and loss account which disclosed loss due to excess of expenses and also the audited balance sheet and the return of income. It is pertinent to point out that the provision of section 32AC is a beneficial provision inserted vide Finance Act, 2014 to promote and encourage business of manufacture or production of any article or a thing by way of investment allowance for plant or machinery and for this purpose even the threshold limit of investment was reduced from Rs.100 crores to Rs.25 crores. This clearly implies that the said beneficiary provision is to be construed so as to entitle the assessee with the benefit of additional deduction. A.O. in the present case has only relied on the audited P L account, balance sheet and the return of income of the assessee and has not gone beyond to enquire into the credibility of the documentary evidences furnished by the assessee to substantiate its claim. We would also like to place our reliance on the decision of the co-ordinate bench in the case of SNJ Distillers Pvt. Ltd. (supra) which has dealt with the similar issues and has held in favour of the assessee.
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2022 (12) TMI 1262
Penalty imposed u/s 271(1)(c) - addition to the capital of the assessee firm - CIT-A deleted the addition - HELD THAT:- CIT (A) has considered that fact that the first proviso was inserted by the Finance Act 2012 w.e.f 01/04/2013 i.e. A. Y. 2013-14 and therefore, prior to the insertion of first proviso to section 68, the liability of the assesses was limited to establish the identity of the Creditor/Lender/Investor, the creditworthiness and genuineness of transaction, and further the proviso is not applicable to the appellant assessee being a partnership Firm. (Not a company in which the public are substantially interested). According we find no perversity in the order of the CIT(A) to the facts on record inasmuch as the appellant firm succeeded in proving the three essential ingredients u/s 68 of the act to prove the identity, credit worthiness and the genuineness of the transactions. According, the order of the CIT(A), deleing the impugned addition of Rs.9,80,000/-, is sustained. Addition on account of transfer of interest-bearing borrowed funds at lesser rate of interest - CIT(A) has rightly followed case of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] wherein it is held that if assessee possesses sufficient interest free funds as against investment in tax free securities, then, there is a presumption that investment which has been made in tax free securities were out of interest free funds owned by the assessee. The case of Principal Commissioner of Income Tax (Central) - 1 vs. NRA Iron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] relied by the Department is distinguished of peculiar fact of the instant case. Accordingly, we find no infirmity in finding of the Ld. CIT(A) in deleting Addition. Since the assessee gets relief in quantum appeal, the consequential penalty levied u/s 271(1)(c) is deleted. - Decided in favour of assessee.
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2022 (12) TMI 1261
Addition u/s 68 - unexplained loan - unexplained cash credit - liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties - HELD THAT:- We find that during the remand proceedings, the details such copy PAN, ledger account and confirmation and other detail such as bank statement, audited books were made available before the AO. However, the AO without considering and pointing any deficiency in the above primary document held that the assessee failed to prove the identity of the creditor, explain the genuineness of transaction and establish the credit worthiness of the creditor. Be that as it may be, the undisputed fact that the loan were received through banking channel and loan has been repaid by the assessee in the subsequent year through banking channel. Also undisputed that the assessee has also paid interest on such loan after deducting eligible tax at source as per the provision of section 194A - Therefore, in our considered view once the amount of loan received through banking channel and repayment of the same along with interest also made through banking channel then the genuineness cannot be doubted. We hereby held that the assessee discharged the onus cast under section 68 of the Act. Hence, we do not find any reason to interfere in the finding of the learned CIT(A). Thus, the ground of appeal of the Revenue on merit is hereby dismissed. Unexplained purchases - AO in absence of necessary details and supporting evidences disallowed 50% of purchases - CIT-A sustained part addition of Rs. 1 lakh only - HELD THAT:- Undeniably, the sales cannot be effected without the purchases. In other words the transactions of purchase and sale are contemporary to each other. In the event, if the purchases are doubted then the corresponding sale cannot be assumed to correct which is arising against the purchases. Gross profit ratio and the net profit ratio of the assessee was improved in comparison to the earlier years. In other words, the revenue in the earlier years was pleased to accept the profitability of the assessee declared by it in the income tax return. Likewise the facts of the year in dispute as well as of the earlier assessment years are identical and no major difference has been pointed out by the AO. Thus, if we disallow the purchases by the amount i.e. 50% of total purchases which will eventually result better profitability but the same will not be acceptable as the gross profit ratio and GP ratio will increase manifold despite the fact that there was no change in the facts and circumstances for the year under consideration as well as in the earlier year. Assessee has furnished the details of the suppliers and extract 7/12 form of the farmers from whom the purchases of the materials were made. Thus to our mind, the AO before pointing out any defect in the address of supplier furnished by the assessee should have issued at least notices on sample basis in order to verify the veracity of the transactions. But we note that no such power has been exercise by the AO during the remand proceeding. In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT(A). Accordingly, we uphold the same. Hence the ground of appeal of the revenue is hereby dismissed.
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2022 (12) TMI 1260
Reopening of assessment u/s 147 - addition u/s 50C - as argued AO relied only on the information received from third party without having any other material on record - HELD THAT:- As submitted that the AO was not having any material other than an information that the assessee has transferred immovable property, hence the reason to believe of the AO for escapement of income was based on borrowed satisfaction. It is pertinent to note that the assessee had not filed the return of income for the year under consideration. Subsequently the AO received an information from the land Revenue authority that assessee has transferred immovable property. Thus, in the absence of the return of income, the AO had no alternate to verify the veracity of the information received from the land revenue authority whether the assessee has disclosed any income on the transfer of the property. Accordingly, we are of the considered opinion that it cannot be said that the reopening proceedings were initiated on borrowed satisfaction. Thus on this count, the assessee fails. No valid service of notice u/s 148 - We note that the notice under section 148 of the Act was issued well in time at the address available on record with the revenue Department. The fact that the assessment proceeding initiated was known to the assessee s father. Merely for the fact that the assessee left home without informing anyone to unknown location the notices issued and duly served on last given address cannot held as illegal/invalid service of notice. See ATULBHAI HIRALAL SHAH [ 2016 (6) TMI 564 - GUJARAT HIGH COURT] . Thus we hold that the service of notice under section 148 of Act and other subsequent notices cannot held as invalid service of notice, for the reason that the revenue has issue notices on last known address of the assessee. Revenue cannot be held guilty for the fact the assessee has left that place without informing anyone for unknown location. Thus on this count also, the assessee fails. Capital gain - We note that the property was transferred by the assessee to his mother by way of sale deed no. 3852 dated 13-04-2006 wherein the consideration on the transfer of the property in dispute was duly recorded. There was nothing mention in the sale deed justifying the stand of the assessee i.e. the transfer was in the nature of the gift or without consideration. Accordingly, we hold that there was a valid transfer of the property in the given facts and circumstances within the meaning of the provisions of section 45 of the Act. See PARAMJIT SINGH VERSUS INCOME-TAX OFFICER [ 2010 (2) TMI 262 - PUNJAB HARYANA HIGH COURT] Thus remain no ambiguity that the impugned property transferred by the assessee to his mother for consideration of Rs. 5 Lakh is liable to be brought under the ambit of capital gain. However, the question arise for determination of sales consideration. As the AO has taken consideration as per section 50C of the Act whereas the AR before us has challenged the value adopted by the AO and subsequently sustained by the learned CIT(A). In the interest of justice and fair play, we set aside the issue to the file of the AO to refer the matter to the DVO to determine the value of the property in pursuance to the provisions of section 50C of the Act. Hence the ground of appeal of the assessee is partly allowed.
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2022 (12) TMI 1259
Levy of interest for delay of 1 day in deposit of TDS - Levy of Fee u/s 234E - due to technical glitch the bank could not remit the amount immediately to the account of the department - HELD THAT:- Income Tax Department has authorized certain banks to collect TDS on their behalf. The Bank of Baroda being one of the authorized banks, thus, has acted as an agent of the Income Tax Department. In our view, the moment, the assessee deposited the TDS with the bank, the bank being an agent of the Income Tax Department, the amount is deemed to have been received by the principal i.e. Income Tax Department. The bank has issued letter in this respect that the amount was duly deposited by the assessee before the due date and that there was no default on the part of the assessee. Though the Income Tax Department and other Government Organisations have shifted to the online system, however, the said system is in the developing stage and often there are technical glitches faced due to which certain acts of uploading of forms etc and as in the present case, the remittance of the amount by the bank to the account of the department are being faced, which are beyond the control of the concerned assessee or the person who is supposed to upload such information, form or to remit the amount, as the case may be. This type of technical glitches is beyond the control of concerned assessee/person for which the concerned assessee cannot be penalised. The facts in this case are apparent that the assessee had deposited the amount with the authorized bank within the due date, however, due to technical glitch the bank could not remit the amount immediately to the account of the department and there occurred a delay of one day because of which the assessee cannot be burdened with levy of interest u/s 201(1A) - assessee cannot be burdened because of not doing an act which was beyond his control. Even otherwise, as observed above, the Bank has accepted the payment being agent of the Income Tax Department, and the assessee has deposited the payment with the bank before the due date.The impugned levy of interest by the lower authorities is set aside. Appeal of the assessee stands allowed.
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2022 (12) TMI 1258
TP Adjustment - comparable selection - HELD THAT:- We exclude the companies whose turnover is not within the range of Rs.200 crores to 2000 crores. Exclusion of companies as functionally dissimilar with that of assessee engaged in the provision of software development services to its Associated Enterprise [AE] RPT filter has to be applied adopting the threshold limit of 15%.
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2022 (12) TMI 1257
TP Adjustment - benchmarking qua AMP expenditure - HELD THAT:- Similar views have also been taken in previous years by this Tribunal [ 2019 (4) TMI 1774 - ITAT DELHI] , wherein this Tribunal has also looked into the all the records and materials including memorandum of understanding for basic transaction entered into between the assessee and its AE dated 01/06/2009 . Therefore, the contention of the Ld. DR that, the Tribunal has not looked into the memorandum of understanding for basic transaction rules is not correct. In view of the above binding decisions of this Tribunal mentioned supra and in the light of the discussion made above, we are of the opinion that, when there is no international transaction, no separate benchmarking qua AMP expenditure can be made; hence the adjustments are liable to be deleted. Appeal of the assessee is allowed.
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2022 (12) TMI 1256
TP Adjustment - working capital adjustment to be considered for the difference in working capital levels between the comparable companies and the assessee - HELD THAT:- With regard to international transaction of provision of marketing services to Red Hat US, the assessee is seeking for working capital adjustment. We find that the Co-ordinate Bench of this Tribunal in assessee s own case for A.Y.2016-17 [ 2022 (2) TMI 1283 - ITAT MUMBAI] had indeed accepted to the plea that working capital adjustment shall be eligible to the assessee and the same shall be reckoned for the difference in working capital levels between the comparable companies and the assessee. Admittedly, the assessee had indeed furnished the workings for working capital adjustments before the ld. TPO as is evident - We direct the ld. TPO to grant working capital adjustment while determining the ALP of provision of marketing support related services to Red Hat US. The ground No.18 raised by the assessee for A.Y.2012-13 is allowed for statistical purposes. Inclusion and exclusion of certain comparables - Exclusion of Infobeans Technologies Ltd. from the final list of comparables as it is into diversified services but its segmental financials are not available without which it is difficult to compute the correct profit margin of the relevant segment. So Infobeans is also ordered to be excluded as a comparable being not a comparable to the assessee. Exclusion of Ingenuinity Gaming Solutions - In absence of segmental data for the software development segment alone, the same cannot be held to be comparable with the assessee in IT segment. Accordingly, we direct the ld. TPO to exclude the same from the list of comparables. The segmental data for software development services segment alone also was not available in respect of this comparable. Hence, we direct the ld. TPO to exclude this company from the final list of comparables. As stated earlier, once the aforesaid two comparables are excluded and working capital adjustments are given, the ld. AR submitted that it would not be required to go into other grounds as the assessee would be well within the tolerance band of +/-5% range. Hence, the ground Nos.5-7 are not hereby adjudicated and they are left open.
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2022 (12) TMI 1237
Reopening of assessment u/s 147 - Necessity of taking approval from the appropriate authority u/s 151 before issuance of such notice - petitioner has challenged the impugned notice u/s 148A(b) on the ground that the impugned notice was issued in contravention of Section 151(ii) by not taking approval from the appropriate authority before issuance of such notice - HELD THAT:- Mr. Dutt, learned advocate appearing for the respondent shall take appropriate instruction in the aforesaid regard. List this matter on 08.12.2022.
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Customs
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2022 (12) TMI 1255
Provisional release of the goods - alleged large scale scam involving expensive higher vehicles - HELD THAT:- In the case of SHRI. SURIYA, S/O ARJUNAN VERSUS THE INTELLIGENCE OFFICER, DIRECTORATE OF REVENUE INTELLIGENCE, MUMBAI; THE DEPUTY DIRECTOR, DIRECTORATE OF REVENUE INTELLIGENCE, BENGALURU AND THE COMMISSIONER OF CUSTOMS, JAWAHARLAL NEHRU CUSTOM HOUSE, MAHARASHTRA [ 2022 (6) TMI 1342 - KARNATAKA HIGH COURT] , the High Court of Karnataka has directed the Petitioner therein to deposit 50% of differential duty and execute bank guarantee in respect of other 50%, and execute a bond - In the case of SHRI MURALI B S/O R BHASKAR VERSUS THE INTELLIGENCE OFFICER DIRECTORATE OF REVENUE INTELLIGENCE NHAVA MUMBAI; THE DEPUTY DIRECTOR DIRECTORATE OF REVENUE INTELLIGENCE MANGALORE THE COMMISSIONER OF CUSTOMS JAWAHARLAL NEHRU CUSTOM HOUSE, MAHARASHTRA AND THE DEPUTY COMMISSIONER OF CUSTOMS (SIIB) MANGALURU [ 2022 (9) TMI 1404 - KARNATAKA HIGH COURT] , the High Court of Karnataka has modified the condition of execution of bank guarantee, which is referable to clause 3 in the case at hand. When the petition was heard yesterday, since the learned Counsel for the Petitioner sought parity with the orders passed by the High Courts of Karnataka and Kerala, the petition was adjourned for the Respondents to take instructions whether these orders have been challenged by the Respondents higher - the Petitioner in this petition has placed on record the details of the vehicle. Nothing is placed on record before us that the Petitioner is involved in the scam. The Petitioner has asserted that the Petitioner is a bonafide purchaser of the vehicle and this assertion has gone uncontroverted. There are no reason as to why the same view adopted by the High Courts of Karnataka and Kerala should not be adopted for the purpose of granting ad-interim order in this petition. In fact, we are retaining the deposit of differential duty in the first clause and not bifurcating for 50% of the bank guarantee - by way ad-interim order, we direct that clause 3 of the impugned order shall stand suspended if the Petitioner complies with clause nos. 1 and 2 of the impugned order, subject to further order. Stand over to 9 January 2023.
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2022 (12) TMI 1254
Seeking benefits of the Merchandise Export from India Scheme (MEIS) in respect of 69 (sixty-nine) shipping bills pertaining to shipments made during the period 06.04.2018 to 31.05.2020 - submission of online declaration indicating that it would not avail the benefits of MEIS. In the online form, against the query whether it would avail benefits under the MEIS - It is the petitioner s case that the Handbook of Procedure is the only procedural guide and would not disentitle the petitioner from availing the substantive benefits of MEIS in terms of the Foreign Trade Policy. HELD THAT:- This Court is informed that in compliance with the aforesaid order, a meeting of concerned officers was held on 08.12.2022. A copy of the minutes of the said meeting had been handed over to this Court - respondent no.4 shall transmit the corrected bills as decided in terms of paragraph no. 5 of the minutes, as stated above, within a period of two weeks from today. The petitioner s claim for benefits under MEIS shall be decided within a period of six weeks thereafter. The petitioner s grievance in the present petition stands addressed. No further orders are required to be passed in this petition - Petition disposed off.
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2022 (12) TMI 1253
Seeking provisional release of detained goods - Light Melting Iron and Steel Scrap for melting imported at the port of CFS M/s Star Track Terminal Pvt. Ltd. ICD Dadri - prohibited goods or not - stand of the department is that the petitioner is required to deposit the demurage charges and other charges for removal of goods and storage of them in the warehouse in accordance with Section 49 of Customs Act, 1962 - HELD THAT:- In the rejoinder affidavit, the dispute has again been raised with regard to the validity of the order of seizure and action of the respondent authority in seizure of the goods. But nothing has been stated about the process of removal of goods from the container and its storage in the warehouse or inclination to deposit the demurage charges. We, therefore, find that the writ petition is wholly misconceived and hence dismissed. It is made clear that the dismissal of the present writ petition will not come in the way of the petitioner, in any manner, in case its representative appears before the competent authority to discharge its liability for removal of goods from the containers or any other dispute pending before the investigating authority or adjudicating authority.
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2022 (12) TMI 1252
Revocation of Customs Broker License - rejection of cross-examination - existence of corroborative evidences or not - principles of natural justice - HELD THAT:- This Court finds that insofar as the request for keeping the CBLR proceedings in abeyance until the disposal of the criminal proceedings may not be justified. It is trite law that criminal proceeding, departmental proceeding and civil proceeding are independent, the purpose of each of the proceeding are distinct. The standard of proof, the objectives of the two proceedings are different. Thus the above contention of the Petitioner is liable to be rejected. The departmental proceedings initiated under CBLR need not be kept in abeyance until the disposal of the criminal proceedings - It appears that the request for cross examination has been rejected by giving reasons that are vague in terms of Regulation 17 of CBLR, which sets out the procedure for revoking licence or imposing penalty. The impugned proceedings rejects the request on the premise that there is no absolute right of cross-examination as there is corroborative evidence, the same appears to be vague inasmuch as what is the corroborative evidence that is available has not been set out, except for a mere assertion, there is no details set out in support thereof - this Court is of the view that Petitioner shall make a request for cross-examination within a period of two weeks from the date of receipt of copy of this order. On receipt of such request, the Inquiry Officer shall examine and dispose of the request keeping in mind Regulation 17(3) and 17(4) of CBLR. The writ petition stands disposed of.
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2022 (12) TMI 1251
Suspension of Customs Broker License - propriety of the deprivation - Clearance of PVC coated fabric width 54 packed in 917 rolls - HELD THAT:- From the statutory prescription, it is abundantly clear that there is no procedural fetter on ordering suspension of licence except for determination of immediacy when enquiry is pending or contemplated against a customs broker; however, continuation of suspension will be maintainable only upon affording opportunity for post-decisional hearing in compliance thereof with stipulated timelines. The mandate of process is, invariably, observed in letter but, as it happens all too often, disregarding the harmonious construct of the provision as a whole: that, if inquiry has been only contemplated at the time of suspension, continuation of suspension is contingent upon crystallizing intention to take recourse to regulation 17 of Customs Broker Licencing Regulations, 2018 and that, either during pendency or mere contemplation of enquiry, the consequence of non-suspension outweighs deprivation caused by suspension. The latitude, and restraint, inherent in the design of regulation 16 of Customs Broker Licencing Regulations, 2018 thus revealed upon careful perusal is made more conspicuous by the appending of the non obstante clause: suspension is not a necessary pre-requisite for initiation of inquiry with intent to revoke licence or impose penalty and, while intention so to do has no bearing on suspension, decision to proceed with enquiry is inevitable precursor for continuation of suspension. It is the latter that we are concerned with in resolving this dispute - The allegation of substitution of samples has not attained final determination as fact and there is no evidence, as yet, linking the appellant to the allegation except by way of vicarious responsibility for misconduct of employee. It may not appear unreasonable for the appellant, as licencee, to be considered as accountable for acts of omission and commission on the part of its employees. The involvement of an individual, remunerated by the appellant, in alleged substitution of samples drawn by customs authorities was the cause for suspension. The continuation of suspension in the impugned order, sought to be justified by relying on confessional statements, does not go beyond that allegation at this stage. The individual concerned does not possess any status under the Regulations and act of his, in any capacity whatsoever, is beyond the scope of retribution under the Regulations. To foist deprivation of livelihood as licencee merely on inference, lacking legal foundation and devoid of procedural sanctity, is improper and our countenance of such will be approval of misadventure. The ends of justice can be met only by restoration of the license to the appellant while making it abundantly clear that this restoration will not have any impact on further investigations or further proceedings under the appropriate provisions in Customs Broker Licensing Regulations, 2018 that lies within the empowerment conferred on the licencing authority upon completion of investigation - Appeal allowed.
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2022 (12) TMI 1250
Duty Drawback - Redetermination of export value - rejection of declared value of the goods in the 13 shipping bills - seizure of goods under section 110 of the Customs Act, 1962 - HELD THAT:- It cannot be doubted that under rule 12 of the 2007 Valuation Rules, the adjudicating authority has to first give cogent reasons to reject the declared value and thereafter re-determine it. In the instant case, the adjudicating authority noted only two questions to be answered, namely, re-determination of value of the export goods for drawback purpose and whether the exporter was liable to penalty under section 114 of the Customs Act. The adjudicating authority, after observing that the export goods were over-valued by the exporter with an intent to avail higher drawback, observed that the declared value of the goods attempted to be exported should, therefore, should be rejected under rule 8 of the 2007 Valuation Rules. The adjudicating authority had to first examine the correctness of the declared value of the export goods and after recording a finding that they were not correctly valued re-determine the value, but this was not done. This mistake has been noticed by the Commissioner (Appeals) in the impugned order. Appeal dismissed.
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2022 (12) TMI 1249
Recovery of Differential duty - rejection of declared value - levy of penalty under section 112 (a) of the Customs Act - tungsten level in the Steel Bounded Cemented Carbide was mentioned as 8% in the Bill of Entry - HELD THAT:- It is not in dispute that the tungsten level in the Steel Bounded Cemented Carbide was shown by the appellant in Bill of Entry at 8% instead of 75.3%. It is also not in dispute that the level of tungsten in Steel Bounded Cemented Carbide would determine its value. The appellant accepted the test report which determined the level of tungsten in the imported good at 75.3% and also accepted that the value of the goods would be 46.50 US$ per kg instead of 12 US$ per kg. Such being the position, the Commissioner (Appeals) committed no illegality in confirming the demand of differential duty. There is, therefore, no good reason, and indeed none could be pointed out by learned counsel for the appellant, to reduce the penalty imposed upon the appellant under section 114AA of the Customs Act or reduce the redemption fine under section 125 of the Customs Act. Appeal dismissed.
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Corporate Laws
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2022 (12) TMI 1248
Maintainability of suit - exclusive jurisdiction of the National Company Law Tribunal - fraudulent transactions - seeking declaration that the recordings of the names of the defendant as holders of shares of and in the defendant no. 4 respectively in the books and the register of the defendant no. 4 are illegal - decree for delivery up and cancellation of the share certificates issued in favour of the defendant - perpetual injunction restraining the defendant and each one of them by themselves or through their respective servants, agents or assigns from exercising any ownership right in respect of the said shares - perpetual injunction restraining the defendant and each one of them either by themselves or through their respective servants, agents or assigns from exercising any voting right in respect of the said shares. HELD THAT:- The plaintiff has categorically pointed out the fraudulent act of the defendants in paragraph 28 of the plaint and the said fraudulent act is not committed while initiating proceeding before the NCLT. The plaintiff has also prayed for other relief with regard to perpetual injunction relates to the title of share of the plaintiff. Section 58 and 59 of the companies Act, 2013 deals with refusal by company to transfer of shares but in this case before transfer of share it is to be declared that the recording of share in the name of the defendants have been made fraudulently. The specific case of the plaintiff is fraud and the said fraud is to be adjudicated upon adducing evidence by both the parties before the Civil Court only. Section 65 of the Insolvency and Bankruptcy Code, 2016 has no manner of application in the instant case as the challenge is against issuance of shares by the auditor of a company in derogation of his fiduciary with the company and whether the said act of the auditor is in contravention of the provisions of Company Act, 2013 is on act of fraud or not is to be decided by the Civil Court. This Court finds that NCLT is not competent to enquire into the allegation of fraud specifically when the plaintiff has prayed for declaration of recording the names of defendant no. 2 and 3 as share holders in the books and the register of defendant no. 4 fraudulently and also prayed for perpetual injunction against the defendant nos.1 to 3. Accordingly, the suit filed by the plaintiff is maintainable. Application dismissed.
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2022 (12) TMI 1247
Seeking dissolution of the company - Section 481 of the Companies Act, 1956 - HELD THAT:- The Official Liquidator, relying upon the auditor's certificate dated 22.02.2022 submitted that no balance is available in the Bank Account of the Company. Moreover, no assets of the Company in liquidation are available. It was submitted that the report may be accepted and appropriate order of dissolution of the Company in liquidation may be passed as prayed for. Considering the ratio laid down by the Apex Court in the case of Meghal Homes Pvt. Ltd. [ 2007 (8) TMI 447 - SUPREME COURT ], the report deserves to be accepted. The Company, named, M/s. Arya Silk Mills Pvt. Ltd. (In Liquidation) is hereby dissolved under Section 481 of the Act and the Official Liquidator attached to this Court stands discharged and is relieved as liquidator of M/s. M/s. Arya Silk Mills Pvt. Ltd.(In Liquidation) - the official liquidator is also permitted to make payment towards professional fees of Rs.1,500/- to M/s. Naimish N. Shah Co., Chartered Accountants towards preparation of Auditor s Certificate from the Common Pool Account maintained by the Office of the Official Liquidator. The report is allowed.
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2022 (12) TMI 1246
Misuse of own personal purpose and benefit funds of the company and became liable and accountable for money or property of the Company - guilty of misfeasance - breach of the trust - breach of duties - gross negligence - contribution to the assets of the company in liquidation by way of compensation - contribution to the assets of the company in liquidation and to pay official liquidator of the company in liquidation - section 478 read with section 543 of the Companies Act, 1956 - HELD THAT:- Considering the progress of the matter since 2007 till date, it appears that the Official Liquidator is not keen to proceed with the matter and the matter is being adjourned from time to time on one pretext or another. The Income Tax department has already instituted the prosecution which is pending as stated in the aforesaid affidavit filed on 28.11.2022. The Official Liquidator has also not pursued the matter after filing further report dated 15.09.2011 pursuant to the order dated 20.07.2011 passed by this Court - the application is disposed of due to sheer negligence on part of the Official Liquidator to pursue the same in accordance with law and keeping it pending for more than 15 years on one pretext or another and permitting the respondent to take advantage of delay tactics to see that entire cause of action is frustrated, this Court has no other option but to dispose of this matter because keeping such stale matters pending in the Court would not result into any fruitful action on part of the Official Liquidator. Application disposed off.
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Insolvency & Bankruptcy
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2022 (12) TMI 1245
Claim of applicant rejected by RP - rejection on the ground that the claim amount is not based on any valid loan agreement - main bone of contention of the Respondent is that there was no payment received by the Corporate Debtor form the Applicant and the books of accounts do not have ledger Account in the name of the applicant, Tulip Trade Link - HELD THAT:- It could be seen that the Applicant has not placed on record any financial contract in order to substantiate the claim filed before the RP. Further, from the submissions made it could be seen that there is no contract/agreement entered into between the parties for the disbursement of the said loan to the Corporate Debtor. It could be seen that the term financial debt denotes a 'debt' along with interest, which is disbursed against the consideration for the time value of money. In the present case, the amount has been disbursed to the Corporate Debtor, however there is no document placed on record to show as to what is the interest which is agreed between the parties - it could be seen that the Applicant himself has left it to the discretion of this Tribunal to fix the rate of interest, which itself shows that there is no rate of interest agreed between the parties. Further, the Applicant has also not attached the Form 26AS in order to prove that they have deducted TDS. It could be seen that the Applicant has placed on record a letter from its banker viz. Bank of Baroda which states that a sum of Rs. 26,00,000/- has been transferred by way of RTGS to the Corporate Debtor. Thus, the amount has been disbursed to the Corporate Debtor, however the Applicant has miserably failed to establish that the said debt would qualify as financial debt. It could be seen that there is no dispute between the parties that the amount was received through banking channel. In the said circumstances, we hereby direct the Respondent to admit the claim of the Applicant to the tune of Rs. 26,00,000/- without interest, under the category of other creditors - application disposed off.
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FEMA
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2022 (12) TMI 1244
Offence under FERA - sentence on economic offence - petitioner was found involved in huge transaction of foreign exchange and was dealing in prohibited items i.e. gold biscuits of foreign origin - judgment of enhancement of sentence - order of sentence holding petitioner guilty of offence u/s 8(1) 8(2) of FERA and sentencing him to undergo imprisonment for a period of six months and to pay a fine of Rs.5,000/- and in default of payment of fine, to further undergo R.I. for a period of three months - appeal filed by the complainant for enhancement of the sentence was allowed and the petitioner was directed to undergo R.I. for a period of two years and to pay a fine of Rs.5,000/-. In default of payment of fine, to further undergo R.I. for a period of two months under Section 56 of FERA. HELD THAT:- Present revision petition is partly allowed to the extent that impugned judgment passed by the lower appellate Court, enhancing six months R.I. and fine of Rs.5,000/-, as awarded by the trial Court, to 02 years R.I. and to pay a fine of Rs.5,000/- and in default thereof, to further undergo R.I. for two months, is set aside and that of the trial Court is restored. As the fine has already been paid and the petitioner, as per the custody certificate, has already undergone 07 months of sentence i.e. over and above 06 months R.I. awarded by the trial Court, no further action is called for, as he has already undergone the entire sentence. With the aforesaid modifications, present revision petition is disposed of.
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PMLA
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2022 (12) TMI 1243
Criminal conspiracy - scheduled offences - predicate offences - Large scale bungling - misappropriation and cheating of public funds, while implementing the NRHM by the government officials, in active connivance and conspiracy with private persons - HELD THAT:- Offence of money laundering is clearly a distinct and distinguishable from predicate offence. The FIR could be triggering point for initiation of proceedings under the PMLA. If it is found that the accused have also committed an offence which is punishable under the PMLA, the prosecution under the PMLA will be initiated by filing complaint under Section 45 of the PMLA. The scheduled offence and offence of money laundering are mutually exclusive and independent of each other. The offence under Section 3 of the PMLA does not prescribe any limit of proceeds of crime for initiating the proceedings under the PMLA. Section 4 of the PMLA also does not provide that the offence under Section 3 of the PMLA would be punishable when the proceeds of crime is Rs. 1 Crore or more. The offence of money laundering is made punishable for activities related to money laundering but not the quantum of money. The attachment proceedings are associated with civil proceedings mentioned in the PMLA. Even for the civil action i.e. attachment of proceeds of crime and property under the PMLA, it is not a condition precedent that against such a person, there should existing proceedings under scheduled offences. The definition of proceeds of crime and property under the PMLA would allow for confiscation of property derived or obtained directly or indirectly from proceeds of crime relating to a scheduled (predicate) offence, including income, profit and other benefits from the proceeds of crime. Offence of money laundering is a contining offence and relevance of the date of commission of the scheduled offence is irrelevant for the reason that as long as one is in possession of the proceeds of crime, he would be liable to be prosecuted for the offence under Section 3/4 of the PMLA - application dismissed.
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2022 (12) TMI 1242
Money laundering - misappropriated the loan amount - company has misappropriated the money lent by the bank and there was clear cut diversion of funds by the company - HELD THAT:- Money laundering often involves a complex series of transactions and it generally includes placement i.e. introduction of the proceeds of crime into the financial system. The proceeds of crime is layered in several financial transactions to distance the illicit proceeds from their source and to disguise the audit trail. In this process, a series of conversions or transactions are involved for moving the funds and places such as offshore financial centers operating in a liberal regulatory regime. The proceeds of crime is invested in the legitimate economy, so that the money may get the colour of legitimacy and this is achieved by techniques such as lending the money through front companies, etc. Prima facie the offence of money laundering is made out against the petitioner, he being the Chief Executive Officer of the company when the corporate loans were obtained and which were diverted for the purposes other than for which the loans were sanctioned to the company. No ground to quash the impugned proceedings. Thus, the present petition has no merit and substance, which is hereby dismissed. As provided that if the petitioner surrenders before the PMLA Court and applies for regular bail, his bail application should be considered expeditiously in accordance with law.
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Service Tax
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2022 (12) TMI 1241
Maintainability of appeal - requirement of pre-deposit has not been complied with before filing of the appeal - HELD THAT:- Learned Commissioner (Appeals) vide paragraph 4 and 5 in the impugned order has acknowledged the fact that the pre-deposit of 7.5% was made by the appellant under the CGST Act in form DRC-03. However, such payment was not considered by the first appellate authority for the purpose of entertaining the appeal and accordingly, the appeal filed by the appellant was dismissed by him. On perusal of the case records, it is found that the Learned Commissioner (Appeals) has not discussed the merits of the case and simply rejected the appeal on the ground of noncompliance with the requirement of pre-deposit. Since merits of the case have to be decided by Commissioner (Appeals), the matter is remanded to him for deciding the appeal afresh on the basis of available records and submissions to be made by the appellant. Needless to say, that opportunity of hearing should be granted to the appellant before deciding the issue afresh - appeal allowed by way of remand.
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Wealth tax
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2022 (12) TMI 1240
Wealth tax assessment - Nature of land - urban land - land was converted for non-agricultural purpose - whether sanction of conversion of land for non agricultural purposes would change the nature of land when the land is continued to be held as agricultural land by the appellant as on the valuation date? - urban land as classified as agricultural land in the record of the Government and used for agricultural purposes - HELD THAT:- Records of Right placed before us prima facie demonstrate that name of Shri. A.R. Narendranath is found in the Government Record. So far as use of the land for agricultural purposes is concerned, it is recorded in the Valuation Report dated November 28, 2014 prepared by Shri. V. Vellaichamy, District Valuation Officer of the Income Tax Department. Thus, according to the Valuation Officer, there were several trees in the entire land in Sy. No.11/3. It also shows that the access to the said land is through Sy. No.14/1 owned by Shri. A.N. Narendranath. The Report does not clearly indicate whether standing trees were in Sy. No.11/3 or 14/1. Therefore, it requires reconsideration in the hands of the ITAT, which is the last fact finding authority
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Indian Laws
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2022 (12) TMI 1239
Seeking exemption from filing the impugned order - Order VII Rule 11 of the Code of Civil Procedure, 1908 - HELD THAT:- Apart from the statutory requirements Under Section 86(7) of the Act of 1951, of expeditious proceedings and conclusion of trial of the election petition within six months from the date of presentation, it is even otherwise indisputable that this litigation, by its very nature, calls for expeditious proceedings while being assigned a specific priority by the Court dealing with the same. In the present matter, we do not find it necessary to refer to or dilate upon the previous proceedings, including the order passed by this Court on 21.03.2021 but, find it difficult to countenance the position that even after pronouncement of the result on the application Under Order VII Rule 11 Code of Civil Procedure on 15.06.2022, the reasoned order is not available to the parties until this date. In the present case, the position obtaining at present is that even after more than three months from pronouncement of the order by the High Court, the reasons are not forthcoming and are not available with either of the parties. Looking to the nature of litigation and the overall circumstances, we find it difficult to countenance this position - Even if we take into consideration the submissions made on behalf of the Respondents about availability of the remedy of appeal to this Court, in our view, such an appeal, which could be preferred on the question/s of law or fact, would also remain an empty formality for the simple reason that neither determination of question of law nor determination of any question of fact by the High Court for the purpose of dealing with the application Under Order VII Rule 11 Code of Civil Procedure is available to the parties. It is deemed appropriate that this order and the entire matter be placed for necessary orders before the Chief Justice of the High Court, who may issue appropriate assigning orders for dealing with the matter pursuant to this order and in accordance with law - appeal allowed.
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2022 (12) TMI 1238
Seeking re-instatement of the respondent workman in service with continuity of service along with 20% backwages - workman within the meaning of Section 2(S) of the Industrial Dispute Act, 1947 - HELD THAT:- It is relevant to note that it is the case of the petitioner company in the statement of claim that he was working in Spinning Department of the Santram Spinners Ltd. - present petitioner as a Technical Maintenance In-charge and was earning Rs.9,000/- per month and the petitioner company has terminated his services on 18.04.1997 by oral order, without any genuine reason and without giving any notice or paying any salary towards notice as well as without following any required procedure for terminating his services. He has further pleaded in the statement of claim that he has issued notice to the petitioner company by registered post AD and the petitioner company has not responded to that notice. It is also relevant to note that in the written statement filed by the present petitioner before the learned Labour Court that the petitioner company has specifically disputed that the respondent company is not covered within the definition of workman with a view to Section 2(S) of the Industrial Dispute Act, 1947. The petitioner has successfully established its defence by producing cogent and convincing evidence in view of the vouchers, TDS certificate, etc., and has also proved its case by cross-examining the respondent workman and also examining the manager at Exh.16, therefore, in view of that the learned Labour Court has committed gross error in drawing adverse inference that the petitioner company has not produced attendance register or payment register before the learned Labour Court, therefore, adverse inference should be drawn by inferring that the respondent is working as a workman in the petitioner company, as pleaded by the respondent in the statement of claim, this finding is also perverse and erroneous and the citations, which are cited at Bar by the learned advocate for the petitioner, are helpful in the facts and circumstances of the present case. In view of the findings given by the learned Labour Court are found perverse, illegal and improper and the same is against the materials available on record, therefore, it is found that this is a fit case where the supervisory powers, under Article 227 of the Constitution of India are required to be exercised, by interfering in the impugned judgment and award passed by the learned Labour Court. Accordingly, if judgment and award passed by the learned Labour Court is required to be quashed and set aside, the ends of justice would be met. Petition allowed.
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