TMI Tax Updates - e-Newsletter
December 31, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. Applicability of GST on ROYALTY paid to the Govt. for MINING Lease

   By: ANAND MOHANSINGH

2. Major amendments in GST Law w.e.f 1st January 2022

   By: Ashwarya Agarwal

3. No GST payable on accommodation service provided below INR 1000/-

   By: Bimal jain

4. GST not applicable on payment of notice pay and allowed ITC on canteen services

   By: Bimal jain

5. New Goverment Scheme

   By: Chandan Tiwary

News

1. Guidelines for CWF provided to Board under rule 97(7A) of CGST Rules, 2017

2. DGGI refutes multiple speculative media reports in case of M/s Odochem Industries; sets the record straight on facts

3. Sale of Electoral Bonds at Authorised Branches of State Bank of India (SBI)

4. Finance Minister Smt. Nirmala Sitharaman chairs Pre-Budget consultation with Finance Ministers of States

5. Year End Review 2021 for Department of Commerce, Ministry of Commerce and Industry

6. Year End Review – 2021 for Department for Promotion of Industry & Internal Trade, Ministry of Commerce and Industry

Notifications

Central Excise

1. 10/2021 - dated 29-12-2021 - CE

Seeks to amend notification no. 03/2019-Central Excise to align with HSN 2022 w.e.f. 1.1.2022

Customs

2. 78/2021 - dated 29-12-2021 - ADD

Seeks to amend various anti-dumping duty notifications to align with HSN 2022 w.e.f. 1.1.2022

3. 59/2021 - dated 29-12-2021 - Cus

Seeks to amend notification no. 53/2017-Customs to align with HSN 2022 w.e.f. 1.1.2022

4. 58/2021 - dated 29-12-2021 - Cus

Seeks to amend notification no. 11/2018-Customs to align with HSN 2022 w.e.f. 1.1.2022

5. 57/2021 - dated 29-12-2021 - Cus

Seeks to amend various notifications giving exemption to electronic and defense equipment to align with HSN 2022 w.e.f. 1.1.2022

6. 56/2021 - dated 29-12-2021 - Cus

Seeks to amend notification no. 82/2017-Customs to align with HSN 2022 w.e.f. 1.1.2022

7. 55/2021 - dated 29-12-2021 - Cus

Seeks to amend notification no. 50/2017-Customs to align with HSN 2022 w.e.f. 1.1.2022

GST

8. 40/2021 - dated 29-12-2021 - CGST

Central Goods and Services Tax (Tenth Amendment) Rules, 2021.

GST - States

9. 71/GST-2. - dated 29-12-2021 - Haryana SGST

Notification to amend notification No.52/ST-2, dated 30.06.2017 under the HGST Act.

10. 70/GST-2 - dated 29-12-2021 - Haryana SGST

Notification to amend notification No.47/ST-2, dated 30.06.2017 under the HGST Act.

11. 69/GST-2 - dated 29-12-2021 - Haryana SGST

Notification to amend notification No.46/ST-2, dated 30.06.2017 under the HGST Act.

12. 68/GST-2 - dated 29-12-2021 - Haryana SGST

Notification to amend notification No.35/ST-2, dated 30.06.2017 under the HGST Act.

13. 36/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Seeks to amend Notification No. 03/2021-State Tax, dated the 12th April, 2021

14. 35/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Jharkhand Goods and Services Tax (Eighth Amendment) Rules, 2021.

15. 34/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Extend timelines for filing of application for revocation of cancellation of registration to 30.09.2021, where due date for filing such application falls between 01.03.2020 to 31.08.2021, in cases where registration has been canceled under clause (b) or clause (c) of section 29(2) of the JGST Act

16. 33/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Seeks to amend Notification No. 76/2018– State Tax, dated the 24th January, 2019

17. 32/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Jharkhand Goods and Services Tax (Seventh Amendment) Rules, 2021.

18. S.O. 133/P.A.5/2017/S.44/2021 - dated 12-11-2021 - Punjab SGST

Under the first proviso to section 44 to exempt taxpayers having AATO upto ₹ 2 Crores from the requirement of furnishing annual return for FY 2020-21 under the PGST Act, 2017

Income Tax

19. 140/2021 - dated 29-12-2021 - IT

Income-tax (35th Amendment) Rules, 2021 - Form of particulars to be furnished along with return of income for claiming deduction under clause (b) of sub-section (1B) of section 10A

Indian Laws

20. CORRIGENDA - dated 29-12-2021 - Indian Law

CORRIGENDUM - FINANCE ACT, 2021 (13 OF 2021)

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/700 - dated 30-12-2021

Extension of timeline for modified reporting requirements for AIFs.

GST

2. 168/24/2021 - dated 30-12-2021

Mechanism for filing of refund claim by the taxpayers registered in erstwhile Union Territory of Daman & Diu for period prior to merger with U.T. of Dadra & Nagar Haveli.

Customs

3. D.O. F. No. 524/11/2021-STO(TU) - dated 20-12-2021

CBIC issued Guidance Note on Correlation of Customs Tariff between 2021-2022

Highlights / Catch Notes

GST

• IGST Not Applicable on High Sea Sales or FTWZ Transactions; Place of Supply Defined by Delivery End Location (Sec 10(1)(a)).

  Case-Laws - AAR : Levy of IGST - supply of imported goods on High Sea sale basis or supply of goods from FTWZ facilities by the Applicant to the Indian customers - such transactions by virtue of Entry 8 of Schedule III do not attract tax under CGST or SGST or IGST Acts. - However, the applicant directs the FTWZ warehouse keeper to deliver the goods to a customer chosen by the applicant. Under Section 10(1)(a) of the IGST Act the place of supply in such case shall be the location of goods at the time of which the movement of goods terminates for the delivery to the recipient. - AAR
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• Court Denies Anticipatory Bail for Alleged Rs. 6 Crore Fraud in Input Tax Credit Transfer Between Fake Firms.

  Case-Laws - DSC : Seeking grant of anticipatory bail - allegation of passing the ineligible input tax credit from and to non existing firms - This Court is not inclined to grant anticipatory bail to the applicant as the investigation is at initial stage and apparently at this stage as per the contention of respondent No. 2 the amount of availament of input tax credit is more than ₹ 6 Crores which may rise up in further inquiry - anticipatory bail cannot be accepted. - DSC
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Income Tax

• Tax Authority Violated Section 245: Adjusted Refunds Without Notice, Exceeding 20% Limit, Entitling Petitioner to Refund.

  Case-Laws - HC : Refund claim - Adjustment of amount against outstanding demand - Refunds have been adjusted against the outstanding tax demand by the Authority without following the procedure prescribed under Section 245 of the Act, inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the Petitioner prior to such adjustment of refund in excess of 20% - the Petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands. - HC
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• High Court Orders Reassessment u/s 153C After Notices Sent to Wrong Email Address; Fresh Adjudication Needed.

  Case-Laws - HC : Assessment u/s 153C - non issue of notice u/s 142 - it becomes evident that the notices were sent by the respondent to the earlier e-mail address of the petitioner, which has now become defunct. - Petitioner has now a new e-mail account being ‘[email protected]’, which was duly informed to the Income Tax Department on 15.08.2019. - Matter restored back for fresh adjudication - HC
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• Assessee denied carry forward of losses benefit due to late income return filing; Form 3CEB lacked crucial details.

  Case-Laws - AT : Benefit of carry forward losses - Return of income has been filed by assessee on 22.11.2013 meaning thereby that the Form 3CEB has been obtained after the filing of return of income - the perusal of the Form 3CEB also reveals that there is no mention of the amount received on capital account nor does it state any reason for not reporting the receipt amount on capital account in the Form 3CEB. Considering the totality of the aforesaid facts, we find that the CIT(A) was fully justified in holding that since assessee has filed its return of income beyond the stipulated due of 30.09.2013, the assessee was not eligible to claim the carry forward of the losses. - AT
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• Penalty u/s 271B Not Imposed Due to Reasonable Cause for Non-Audit u/s 44AB.

  Case-Laws - AT : Penalty levied u/s 271B - assessee not got her accounts audited u/s 44AB - The assessee follows project completion method. Therefore, the claim of the assessee was that she was under a bonafide belief that provisions of section 44AB of the Act does not apply and hence, no audit under section 44AB of the Act was got done. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law - penalty under section 271B of the Act cannot be levied - AT
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• Consultancy Fees Disclosed in Original Tax Return Not Considered Escaped Income; Error Lies in 2010 Assessment Order.

  Case-Laws - AT : Revision u/s 263 - In the instant case, the receipt of consultancy fee does not fall within the ambit of expression “income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of proceedings under this Section”, as the consultancy receipts was very much disclosed by the assessee in the income and expenditure account which was filed along with the original return of income itself. If at all there is any error in the assessment order framed by the ld. AO, it can only be in the original scrutiny assessment order u/s.143(3) of the Act dated 13/12/2010 and not in the re-assessment order framed u/s.143(3) r.w.s. 147 of the Act dated 22/02/2016. - AT
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• Assessing Officer's 25% Bonus Disallowance Overturned; Bonuses Allowed as Deductions Under Income Tax Act Section 37.

  Case-Laws - AT : Disallowance of bonus paid to employees including the key management persons - the disallowance was made by the ld. AO only on an adhoc basis at the rate of 25% without rejection of books of accounts by pointing out some defects thereof. None of these factual observations controverted by the Revenue before us. We hold that the bonus was paid to the employees including the key management personnel only in the ordinary course of business and the same are squarely allowable as deduction u/s. 37 - AT
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• Late Tax Return Filing Denies Set-Off for Carried Forward Losses u/s 139(1) of Income Tax Act.

  Case-Laws - AT : Disallowance of setting off of the carried forward loss - return filed beyond the due date specified under subsection (1) of section 139 - It was argued that the delay has happened for the first time in the last 25 years for a situation totally beyond his control. - The statute is very clear on this issue that for claiming the benefit of setting off of carried forward loss against the income of the subsequent year, the return for the assessment year in which loss was incurred has to be filed in time as specified u/s 139(1) - claim of set off of carried forward loss rejected - AT
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• Temporary Business Lull Not Permanent Closure; Maintain Corporate Status for Potential Rs. 460 Crore Litigation Income.

  Case-Laws - AT : Disallowance of Administrative Expenses - Closure of business activities - The temporary lull in the business during the lean period of transaction cannot be mistaken to be the permanent close down of the business. The clear indication is that the assessee has to maintain its status as company till the end comes and it has to perform certain legal obligations by incurring certain expenditure and more particularly to pursue the litigation as a result of which it has to receive ₹ 460 crores approximately which shall form part of the income of the assessee in the year in which it will be received. - AT
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• No Penalty for Non-Disclosure of Capital Gain on Land Sale Due to Deeming Provisions u/s 50C.

  Case-Laws - AT : Penalty u/s 271(1)(c) - non disclosure of capital gain on sale of land in the income tax return - Sale consideration by applying the provisions of section 50C (i.e deeming fiction) - It is an admitted fact that there cannot be any penalty on the profit calculated for the assessee based on deeming section/fiction. - the revenue is not expected to derive any benefit out of the ignorance of the assessee. - there was no deliberate act on part of the assessee to conceal/furnish inaccurate particulars of income - No penalty - AT
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Customs

• Customs House Agent's Employee Penalized Rs. 5,00,000 for Misusing License in Red Sandalwood Smuggling Under Customs Act.

  Case-Laws - HC : Enhancement of penalty, levied on Employee of CHA - appellant was reckless and negligent in using the Customs House Agent Licence of his Employer. - Smuggling - red Sander Woods - it is incorrect to say that the Appellant is liable only under the Regulations for any violation and contravention and if the action under the Regulations is not sufficient for the grave offence, there is no legal impediment to proceed against the employee / appellant of the Customs House Agent under the Customs Act besides action under the Regulations. - There is no mala fide or infirmity in the order of imposition penalty at ₹ 5,00,000/ - HC
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• Imported Hankook Off-Road Mining Tyres Classified as Special-Purpose for Tractors & Dumpers, Not On-Road Use.

  Case-Laws - AT : Classification of imported goods - Hankook off the road mining tyres 31 x 10.5 R 15 - The impugned tyres are used for replacing the existing tyres whenever the vehicle is used in muddy or off terrain. It can be seen that even Tractors, Dumpers etc. which are primarily designated for off the road used also travel some distances on the road till they reach the place of their use. By no stretch of imagination such vehicles and the tyres thereof can be regarded to be for on-road purposes. - the impugned tyres are required to be considered as special purpose tyres for off-road purposes - AT
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Indian Laws

• Cheque Dishonor Case Dismissed; Continuing Section 174A Proceedings Deemed Court Process Abuse Despite Amicable Settlement.

  Case-Laws - HC : Dishonor of Cheque - proclaimed offender or not - amicable settlement between the parties- continuation of proceedings under Section 174A I.P.C. - Where the main case was dismissed for want of prosecution, it was observed that the continuation of proceedings under Section 174-A of the IPC shall be an abuse of the process of court. - HC
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• Court Acquits Accused in Cheque Bounce Case: Debt Unenforceable Due to Invalid Money Lending Business u/s 138.

  Case-Laws - HC : Dishonor of Cheque - The Explanation to Section 138 of N.I.Act clearly states that the dishonoured cheque shall relate to a legally enforceable debt or liability. In the instant case, since the complainant had no valid money lending business, he cannot legally enforce such a debt of liability. Under these circumstances, the Court below rightly concluded that the complainant is not entitled to prosecute the accused for the offence under Section 138 of N.I.Act and therefore, the accused is entitled for acquittal. - HC
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PMLA

• Bail Denied in Money Laundering Case: Court Cites Risk to Trial Integrity, Applies CrPC Section 439 & PMLA Section 45.

  Case-Laws - DSC : Money laundering - scheduled offence - Siphoning of funds - Once the applicant is released on bail, both of them are likely to take fate of the case in their hands by frustrating all the efforts of the ED. Certainly, none of the parameters including tripod test prescribed under Sec.439 of Cr.P.C. is applicable to the case of the applicant. It has to be noted that, if the application is allowed there will be no safe trial - even if the rigors of twin conditions under Sec. 45 of PML Act are not existing and even if the application is dealt with under Sec. 439 of Cr.P.C. with remaining part of Sec.45 of PML Act, the applicant is not entitled to be released on bail. - DSC
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Service Tax

• Refund Claims Timely if Filed Within One Year of Order Cancellation u/s 11B (5) Explanation B (eb.

  Case-Laws - AT : Refund claim - time limitation - Service tax was paid on advance received - later the order was cancelled - The relevant date for filing the refund claim is the cancellation of the purchase orders in terms of Section 11B (5) Explanation B (eb) of the Act - If the refund claims are filed within one year from the date of cancellation of the purchase orders, the same shall be entertained as the refund claim are filed in time. - AT
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Central Excise

• Natural Justice Case: Unrecorded Cash Transactions in Seized Notebooks Lead to Duty Demand and Penalty Confirmation.

  Case-Laws - AT : Principles of natural justice - Clandestine removal - want of corroborative evidence - There is no retraction of the statements - The statements recorded rather have clear admission that entries in the note books as were seized are with respect to such transactions which were not regularly entered in books of accounts and for which the transactions generally were in cash. - Demand of duty with penalty confirmed - AT
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Case Laws:

• GST

• 2021 (12) TMI 1266
  Requirement of GSTR 9 and 9C for FY 2017-18 as both the GSTN turnover is above Two Crore - under which GSTN the Income Tax returns must be reconciled as Part of the turnover i.e., July to Nov 17 is shown under old GSTN and from Dec to Mar 18 turnover is shown under new GSTN - claiming of Credits reflected in old GSTN 2A from Dec 2017 to till date which are not rectified by the suppliers - HELD THAT:- That this state of things came into being at the time of migration from the earlier tax regime to GST regime - That they have stopped business in one GSTIN and continuing in the other only. However certain credits are lying unutilized in the GSTIN where they have stopped business and would like to carry the credits into the active GSTIN. Therefore they have approached the AAR regarding the matter. It is observed by the AAR that the question raised by the applicant does not fall within the scope of Section 97 of Chapter XVII of the CGST Act, 2017 - the application is not admitted.

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• 2021 (12) TMI 1265
  Levy of IGST - supply of imported goods on High Sea sale basis or supply of goods from FTWZ facilities by the Applicant to the Indian customers - input tax credit already taken will have to be reversed or not - discharge of obligation in terms of Sec 31 of the CGST Act, 2017 - whether the Applicant ought to obtain registration in the States of Maharashtra and Tamil Nadu (location of the FTWZ facilities) for sale of such goods from the FTWZ facilities belonging to the logistic service provider namely DHL? HELD THAT:- The transactions proposed to be made by the applicant are covered by Entry 8 of Schedule III of CGST/SGST Acts inserted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019, i.e., supply of goods by the consignee to any other person, by endorsement of document of title of the goods, after the goods have been dispatched from the port of origin located outside India but before the clearance for home consumption; or supply of warehoused goods to any person before clearance for home consumption. And such transactions by virtue of Entry 8 of Schedule III do not attract tax under CGST or SGST or IGST Acts. Further, according to the explanation to section 17(3) of CGST Act inserted vide CGST (Amendment) Act 2018, w.e.f. 1-2-2019 all transactions falling under Schedule III except Entry 5 will not be considered as value of exempted supply for purpose of reversal of ITC of common input services. Therefore the value of the transaction referred will not form part of value of the exempt supply. The applicant directs the FTWZ warehouse keeper to deliver the goods to a customer chosen by the applicant. Under Section 10(1)(a) of the IGST Act the place of supply in such case shall be the location of goods at the time of which the movement of goods terminates for the delivery to the recipient - the applicant i.e. supplier in this case is situated at Hyderabad, Telangana State whereas the goods are delivered in Other States. That is the supplier of the goods and the place of supply of goods are in two different states. Therefore it is an inter-state supply. Hence the applicant need not obtain any registration in the Other State in order to effect such inter-state transactions.

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• 2021 (12) TMI 1264
  Seeking grant of anticipatory Bail - availment and passing of inadmissible Input Tax Credit - using fake invoices or bills - offences punishable under Sections 132(1)(b) and (c) of the CGST Act - HELD THAT:- There is prima facie material showing involvement of the applicant in commission of the offences alleged. The investigation is in progress. If released on bail the applicant may destroy the evidence likely to be collected and may influence the witnesses. Considering same circumstances in the background that the offence is economical affecting national economy and has to be dealt with sensitively, it is not just and proper at this stage to grant bail to the applicant. The bail application is dismissed.

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• 2021 (12) TMI 1263
  Seeking grant of anticipatory bail - allegation is that the applicant availed as well as passed on ineligible input tax credit from and to non existing firms - HELD THAT:- In the case in hand, on perusal of material on record and the investigation papers it appears that the applicant s Swara Jewels had dealt with Arihant Traders and M/s. Sandeep Trading. The ITC availed in connection with these two firms is difinitely below Rs. 5 crores. However, the matter does not end here. Dealing with golden Bullion and Gajmukhi Bullion and Mumbadevi also, the applicant availed ITC. The total amount of availment of ineligible ITC is more than Rs. 6 Crores. It may be noted here that respondent No.2 had inputs that Gautam Joshi has created fake entities, and the applicant Swara Jewels has paper transaction with the same entities. Respondent No. 2 has recorded the statement of Gautam Joshi where he admitted that he has created fake entities as Mumbadevi Jwellers and Arihant Traders. The statement of the applicant as recorded by respondent No.2 also reveals that the applicant has dealt with these entities i.e. Arihant Trading, M/s. Sandeep Traders, Gajmukhi and Mumbadevi Bullion in connection with Guatam Joshi. At this infant stage of investigaion, this much material is sufficient to make out prima facie case against the applicant. Since apparantly, these entities do not exist, if anticipatory bail is granted, the applicant is likely to destroy the evidence regarding the matter. This Court is not inclined to grant anticipatory bail to the applicant as the investigation is at initial stage and apparently at this stage as per the contention of respondent No. 2 the amount of availament of input tax credit is more than Rs. 6 Crores which may rise up in further inquiry - anticipatory bail cannot be accepted. Application rejected.

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• Income Tax

• 2021 (12) TMI 1262
  Refund claim - Adjustment of amount against outstanding demand - stay on recovery of outstanding tax demand subject to fulfillment of appropriate conditions - HELD THAT:- Refunds have been adjusted against the outstanding tax demand by the Authority without following the procedure prescribed under Section 245 of the Act, inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the Petitioner prior to such adjustment of refund in excess of 20%, this Court is of the opinion that the Petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands. (See: Glaxo Smith Kline Asia Pvt. Ltd. vs. The Commissioner of Income Tax Ors.,[ 2007 (1) TMI 113 - DELHI HIGH COURT] and The Oriental Insurance Co. Ltd. vs. Deputy Commissioner of Income Tax Anr. [ 2014 (10) TMI 746 - DELHI HIGH COURT] This Court directs the Respondents to verify the facts stated in the writ petition and if they find them to be true and correct then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2016-17 to the Petitioner within six weeks.

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• 2021 (12) TMI 1261
  Assessment u/s 153C - non issue of notice u/s 142 - notices under Sections 142(1) and 143(3), were in all probability sent to the earlier e-mail address of the petitioner, which had become defunct - violation of the principles of natural justice, as he was not served with the requisite statutory notices, leading to passing of the assessment order - HELD THAT:- Though respondent No.1 has stated that he had sent the notice under Section 142(1) of the Act, firstly on 30.08.2021, and thereafter on 17.09.2021 with corrigendum on 27.09.2021, nothing has been stated regarding service of notice. All that is stated is that the assessee did not respond to any of the notices. If this is read in conjunction with the averments made in paragraph No.4 of the counter affidavit filed by the respondents, it becomes evident that the notices were sent by the respondent to the earlier e-mail address of the petitioner, which has now become defunct. Petitioner has now a new e-mail account being [email protected] , which was duly informed to the Income Tax Department on 15.08.2019. That being the position, we are of the view that petitioner was not heard before passing the impugned order of assessment. There is thus violation of the principles of natural justice. The impugned assessment order should be set aside with a direction to respondent No.1 to pass fresh assessment order for the assessment year 2019-20 in accordance with law,

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• 2021 (12) TMI 1260
  Benefit of carry forward losses - assessee has filed its return of income beyond the stipulated due of 30.09.2013 - HELD THAT:- It is an undisputed fact that assessee had filed the return of income for A.Y. 2013-14 on 22.11.2013 whereas as per Explanation 2(a) to Section 139, the last date for filing the return of income was 30.09.2013. It is also an undisputed fact that assessee had filed Form 3CEB. The perusal of Form 3CEB placed in the paper book reveals that it has been certified by the Chartered Accountant on 30.11.2013 and further as per the aforesaid form, the value of international transactions or specified domestic transactions is reported at Rs. Nil. Return of income has been filed by assessee on 22.11.2013 meaning thereby that the Form 3CEB has been obtained after the filing of return of income - the perusal of the Form 3CEB also reveals that there is no mention of the amount received on capital account nor does it state any reason for not reporting the receipt amount on capital account in the Form 3CEB. Considering the totality of the aforesaid facts, we find that the CIT(A) was fully justified in holding that since assessee has filed its return of income beyond the stipulated due of 30.09.2013, the assessee was not eligible to claim the carry forward of the losses. We thus find no infirmity in the order of CIT(A) and therefore we uphold the order of CIT(A). Thus the grounds of assessee are dismissed.

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• 2021 (12) TMI 1259
  Exemption u/s. 80P(2)(a)(i) in respect of interest on fixed deposits with Bank of Baroda - AO denied the exemption of interest treating it under the head income from other sources not as income from business - CIT(A) upheld the contention that the said interest income should be assessed as income from business , however he denied the claim of exemption u/s. 80P(2)(a)(i) on the ground that the assessee lends money to nominal members - AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non-members does not quality for exemption u/s.80P - HELD THAT:- It is an admitted position that the interest so earned should be taxed as income from other sources There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon ble Punjab Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. [ 2016 (12) TMI 560 - PUNJAB AND HARYANA HIGH COURT] took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit [ 2018 (12) TMI 1926 - ITAT PUNE] has taken view in favour of the assessee following the judgment of Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 2 stands allowed. Claim for exemption of interest earned on the securities held with RBI - We allow these grounds in favour of the assessee and direct the AO to exempt the interest earned on securities held with RBI under the provisions of section 80P(2)(a)(i) of the Act Denial of exemption u/s.80P(2)(a)(i) - whether the nominal members are also the members of the Cooperative societies or not? - HELD THAT:- The term members is not defined in the Income Tax Act, 1961. Under the provisions of Maharashtra Cooperative Societies Act, 1960, the term members include nominal members and extraordinary members and in the circumstances, we hold that the CIT(A) was not justified in denying the exemption u/s.80P(2)(a)(i) of the Act. This ground is also allowed.

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• 2021 (12) TMI 1258
  Reopening of assessment u/s 147 - addition on account doubtful debt while computing the book profits u/s 115JB - rectification proceedings u/s 154 initated - HELD THAT:- We find that during the original assessment proceedings, vide query letter dated 20.10.2015 at Point No. 23, the Assessing Officer raised a specific query asking the assessee to furnish a detailed note on book profit as per section 115JB of the Act and vide query No. 24, details in respect of exempt income earned, alongwith details of expenses incurred for earning such income and quantify the disallowance u/s 14A r.w.r 8D of the Rules was asked by the AO. Issuing notice u/s 148 of the Act, the Assessing Officer had already initiated rectification proceedings u/s 154 of the Act and the assessee had furnished detailed reply as mentioned elsewhere. We find that no rectification order has been framed by the Assessing Officer u/s 154 of the Act and yet, for the same reasons, reassessment proceedings were initiated. Once rectification proceedings have been initiated, then for identical reasons, reassessment proceedings cannot be initiated unless the rectification proceedings culminate into an order, duly framed as per the provisions of law - there is no evidence brought on record by the Revenue that the proceedings initiated u/s 154 of the Act are concluded or communication to that effect has been sent to the assessee. Therefore, under these circumstances, it cannot be said that the assessment proceedings were completed as the order passed u/s 154 is also an order which can be subjected to appeal and revision and as the proceedings have not been completed on record, it cannot be said that income has escaped assessment. Similar view has been taken by the co-ordinate bench at Mumbai in the case of Jet Speed Audio Pvt Ltd [ 2012 (8) TMI 332 - ITAT, MUMBAI] and Yasmin Texturing Pvt Ltd I [ 2012 (5) TMI 724 - ITAT MUMBAI] - Considering the totality of the facts as mentioned elsewhere, notice u/s 148 of the Act is bad in law and deserves to be quashed.- Decided in favour of assessee.

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• 2021 (12) TMI 1257
  Penalty levied u/s 271B - assessee not got her accounts audited u/s 44AB - HELD THAT:- We do not find any discussion on the aspect of provisions of section 273B of the Act which provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure to comply with the law. In the present case, we find that the profit loss account of the assessee submitted before us does not have any gross receipts, turnover. The cost of the project is shown as work-in-progress. The assessee follows project completion method. Therefore, the claim of the assessee was that she was under a bonafide belief that provisions of section 44AB of the Act does not apply and hence, no audit under section 44AB of the Act was got done. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law - we find that penalty under section 271B of the Act cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report because of a bonafide belief that there is no turnover, gross receipts, etc. The revenue could not show that the belief of the assessee was malafide. We find that in the present case, the assessee has shown the cost of the project as work-in-progress. Therefore, whenever the assessing officer would like to examine the income earned by the assessee, naturally, he will have to examine the composition of total work in progress also. He would be entitled to further considering the allowability or disallowability of expenses included in work in progress for the reason that the assessee would be claiming deduction of the same in the year in which project is complete. In view of this, we reverse the orders of the lower authorities and direct the learned assessing officer to delete the penalty levied under section 271B - Decided in favour of assessee.

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• 2021 (12) TMI 1256
  Revision u/s 263 - period of limitation - reopening of assessment u/s 147 - assessee had claimed accumulation u/s.11(2) for which the assessee had not submitted Form No.10 and hence, the said accumulation should be disallowed - receipt of consultancy fees - HELD THAT:- Admittedly, the receipt of consultancy fees has been duly reflected in the income and expenditure filed by the assessee along with the original return of income filed on 25/03/2009. So, the Assessing Officer had two innings - once during the original scrutiny assessment proceedings and again during the re-assessment proceedings to examine the aspect of receipt of consultancy fees. In the re-assessment proceedings whatever that was sought to be verified by the ld. AO had been duly verified in the final re-assessment order. Hence, there cannot be any error that could be attributed in the order of re-assessment of the ld. AO. In the instant case, the receipt of consultancy fee does not fall within the ambit of expression income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of proceedings under this Section , as the consultancy receipts was very much disclosed by the assessee in the income and expenditure account which was filed along with the original return of income itself. If at all there is any error in the assessment order framed by the ld. AO, it can only be in the original scrutiny assessment order u/s.143(3) of the Act dated 13/12/2010 and not in the re-assessment order framed u/s.143(3) r.w.s. 147 of the Act dated 22/02/2016. Hence, the show-cause notice issued by the ld. CIT(Exemptions) dated 28/02/2017 is squarely beyond the period of two years from the end of the financial year in which the 143(3) assessment was completed as per Section 263(2) of the Act. Hence, it could be safely concluded that the re-assessment framed by the ld. CIT(Exemptions) on 21/03/2018 is squarely barred by limitation. See ALAGENDRAN FINANCE LTD. [ 2007 (7) TMI 304 - SUPREME COURT] - Decided in favour of assessee.

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• 2021 (12) TMI 1255
  Non-apportionment of expenses in respect of its share with holding company - CIT-A deleted the addition - assessee is a public limited company engaged in the business of merchant banking - HELD THAT:- As the assessee had only parted the net profit from the collaboration project with its holding company. We find that the ld. AO had wrongly misunderstood the fact by stating that assessee had only shared the gross revenue and had claimed the entire expenses as deduction in its books. This is factually incorrect. Accordingly, the disallowance of Rs. 3,44,24,282/- ( being 50% of expenses incurred on collaboration project of Rs. 6,88,48,564/-) on account of non-apportionment of expenses is hereby directed to be deleted as the ld. CIT(A) had rightly understood the fact and modus operandi adopted by the assessee. Accordingly, the ground No.1 raised by the Revenue is dismissed. Disallowance on account of apportionment of bad debts - CIT-A deleted the addition - HELD THAT:- As categorical factual finding of the ld. CIT(A) has not been controverted by the Revenue before us. Hence, we hold that there is no question of sharing of bad debts written off with the holding company. Once, it is found that assessee had indeed offered the fee income in earlier years in its entirety, any non-realisation of the said fee which resulted in bad debt would be eligible for deduction if the same is written off in the books of accounts. In the instant case a sum of Rs. 1,79,66,908/- remain irrecoverable and the same was duly written off by the assessee in its books in A.Y.2011-12, which becomes squarely eligible for deduction in the hands of the assessee company. There is no question of sharing the same with the holding company. This fact has been duly appreciated by the ld. CIT(A). Accordingly, the ground No.2 raised by the Revenue is dismissed. Disallowance of bonus paid to employees including the key management persons - HELD THAT:- Certain employees who have been made Director or Managing Director of specific department inside the company. They are not the Directors of the assessee company as per the Companies Act. The assessee also furnished the list of Directors of the assessee company to justify this contention. Hence, the entire reliance placed on the provisions of Section 40A(2)(b) of the Act was totally unjustified. The ld. CIT(A) also observed that on perusal of the tax audit report, only one person namely Shri Tapasije Mishra, Group CEO, to whom bonus was paid figures in the list of related party transactions, specified u/s.40A(2)(b) - CIT(A) also observed that there is no tax arbitrage involved in the same as the said employee also suffers tax at the maximum marginal rate of 30%. In any case, the disallowance was made by the ld. AO only on an adhoc basis at the rate of 25% without rejection of books of accounts by pointing out some defects thereof. None of these factual observations controverted by the Revenue before us. We hold that the bonus was paid to the employees including the key management personnel only in the ordinary course of business and the same are squarely allowable as deduction u/s. 37 - ground No.3 raised by the Revenue is dismissed.

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• 2021 (12) TMI 1254
  Disallowance u/s 14A r.w.r. 8D - Mandation of recording satisfaction - HELD THAT:- Section 14A(2), read with rule 8D of the Rules provides that before applying the theory of apportionment in form of Rule 8D. Assessing Officer needs to record his satisfaction that having regard to the kind of the assessee, it is incorrect that assessee has not incurred any expenditure in relation to exempt income. Unless that satisfaction is shown from the assessment order, the ld AO cannot jump to the stage of apportionment by applying Rule 8 D. As in present case Id AO has considered all the expenses debited in the profit and loss account including depreciation allowance for disallowance u/s 14A of the Act. In view of our finding that the learned assessing officer has failed to record any satisfaction about the correctness of the claim of the assessee, orders of lower authorities are reversed. Therefore, we direct the learned assessing officer to delete the disallowance made under section 14A of the Act. Accordingly, we reverse the order of the lower authorities and allow the appeal of the assessee.

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• 2021 (12) TMI 1253
  Income from house property - recognized basis for determination of the ALV - AO did not accept the declaration of ALV of Greater Kailash-II property as according to him the Municipal Corporation value did not represent the true market value of the property as per the section 23(1)(a) - HELD THAT:- The submission of the assessee that she was declaring income from business/profession during the Assessment Year 2014-15 and 2016-17, could not be controverted by the Ld. DR. - also that because of loss during the year, the same was ignored. Further, it is held in various decisions that municipal lettable value is recognized basis for determination of the ALV. Identical issue had come up before the Mumbai Bench of the Tribunal in the case of Pankaj Wadhwa [ 2019 (1) TMI 937 - ITAT MUMBAI] wherein, the Tribunal held that where the assessee declared annual lettable value from house property having regard to municipal rateable value, in view of the fact that municipal rateable value is recognised for determination of ALV, there was no justification for action of Assessing Officer in disregarding the municipal rateable value for determination of ALV and substitution thereof by some expected rent to be received by the assessee. Since, the assessee in the instant case has declared the deemed income from the ground and first floor on the bases of municipal rateable value and the basement was used for her profession/business activity, therefore, respectfully following the decision of the Mumbai Bench of the Tribunal in the case of Pankaj Wadhwa vs ITO cited (supra), hold that the ld. CIT(A) was not justified in confirming the action of the Assessing Officer - Decided in favour of assessee.

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• 2021 (12) TMI 1252
  Disallowance of setting off of the carried forward loss - return filed beyond the due date specified under subsection (1) of section 139 - It was argued that the delay has happened for the first time in the last 25 years for a situation totally beyond his control. - HELD THAT:- Assessee was not able to enter into the terrace portion of his flat in Vasant Kunj where all his business and financial documents were kept due to the restraint order passed by the court, in my opinion, cannot be a ground to enable the assessee to claim the benefit of set off of carried forward loss of AY 2017-18 since the said return was not filed on or before the specified date. The statute is very clear on this issue that for claiming the benefit of setting off of carried forward loss against the income of the subsequent year, the return for the assessment year in which loss was incurred has to be filed in time as specified u/s 139(1). If the assessee was prevented from filing the return within the due date, the remedy lies elsewhere, but, definitely not before the Tribunal. Since the assessee, in the instant case, has not filed the return of income for AY 2017-18 within the due date returning the loss of Rs. 8,67,803, therefore, the same cannot be carried forward to the subsequent assessment year to be set off against the income of AY 2018-19. We not find any infirmity in the order of the CIT(A) upholding the intimation issued by the CPC, Bangalore rejecting the claim of set off of carried forward loss of Rs. 8,67,803/- pertaining to AY 2017-18 from the income of AY 2018-19. The order of the CIT(A) is accordingly upheld and the grounds raised by the assessee are dismissed.

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• 2021 (12) TMI 1251
  Delayed payment of employees contribution to Provident Fund (PF) and Employees State Insurance (ESI) - Scope amendment made to section 36(1)(va) by Finance Act 2021 w.e.f. 1.4.2021 and the corresponding amendment made to section 43B by inserting Explanation 5 - HELD THAT:- As per the settled legal principle, delayed payment of contribution to PF and ESI including employee s contribution, is allowable as deduction under section 43B r.w.s 36(1)(va) of the Act if it is paid before the due date of return of income prescribed under section 139 (1) of the Act. Undisputedly, in the facts of the present appeal the employees contribution to PF and ESI were paid before the due date of return of income prescribed under section 139(1) of the Act. However, assessee s claim has been disallowed by applying the amended provisions of section 36(1)(va) and 43B of the Act. Though, the amendment to the aforesaid provisions restricting the applicability of section 43B to employee s contribution to PF and ESI as well as explaining the due date of payment of the aforesaid dues have been brought into the statute by Finance Act 2021 w.e.f. 1.4.2021, however, Commissioner (Appeals) has applied them to the impugned assessment year by stating that the amendments will have retrospective operation as they are clarificatory in nature. However, as find this issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in case of Mr. Vansh Jain vs DCIT [ 2021 (10) TMI 620 - ITAT DELHI] wherein as held that the amended provisions would apply prospectively w.e.f. assessment year 2021-2022. Thus as assessee s claim of deduction has to be allowed. - Decided in favour of assessee.

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• 2021 (12) TMI 1250
  TP adjustment to the Arm s Length Price (ALP) of business support services - HELD THAT:- Based on materials available on record, we are not in a position to render a conclusive finding that the invoice raised by the assessee on AE also includes mark-up of 12% on business support cost. Thus, in absence of complete details to substantiate the aforesaid claim, we are unable to accept assessee s claim at this stage - we are of the view that assessee s claim cannot also be outrightly rejected. In case, the assessee, through a proper working and supporting evidence, establishes on record that all costs incurred by the assessee, whether direct or business support, has been remunerated with mark-up of 12%, no adjustment can be made. Onus is entirely on the assessee to prove such fact. In view of the aforesaid, to provide an opportunity to the assessee to bring material on record in support of its claim that the invoice raised also includes mark-up of 12% on all types of cost, including business support cost, we restore the issue to the file of learned Commissioner (Appeals) for de novo adjudication after affording due opportunity of being heard to the assessee.

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• 2021 (12) TMI 1249
  Disallowance of Administrative Expenses - Closure of business activities - HELD THAT:- We find that in the earlier years, on similar facts and circumstances wherein there was no revenue from operations and assessee had incurred similar nature of expenditure debited to the profit loss account, mostly under the heads, viz., salary and wages, employees benefit expenses and other expenses including statutory expenses and audit fees, were held to be allowable. One important fact noted by the Tribunal in the earlier years is that the fixed assets of the assessee company were subject matter of litigation u/s 18 of Land Acquisition Act and assessee was due to receive compensation of Rs. 460 crores which would be the income of the assessee in the year to receive. Assessee was maintaining this establishment and corporate set up for which it had incurred certain expenditure. Tribunal allowed the expenditure stating when the possibility of the revival of the business activities or operation of the assessee are not ruled out once for all, it cannot be said that the assessee company had closed down its operations permanently so as to disallow the business expenditure. The temporary lull in the business during the lean period of transaction cannot be mistaken to be the permanent close down of the business. The clear indication is that the assessee has to maintain its status as company till the end comes and it has to perform certain legal obligations by incurring certain expenditure and more particularly to pursue the litigation as a result of which it has to receive Rs. 460 crores approximately which shall form part of the income of the assessee in the year in which it will be received. In this year also, the aforesaid decision of the Tribunal will apply mutatis mutandis. Respectfully following the same, we direct AO to allow expenditure claimed in the profit loss account. Ground No.1 raised by the assessee is allowed. Depreciation of Fixed Assets - It is sufficient that on similar facts, asset s depreciation was allowed in the earlier years, therefore, this year no different treatment can be given simply because the business could not be carried out in this year. Accordingly, depreciation amount of Rs. 7,93,830/- is also allowed.

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• 2021 (12) TMI 1248
  Addition u/s 36(1)(iii) - disallowance of interest expenses mainly on the basis that total available interest free funds in the hands of the Assessee as on 31st March, 2015 were less as the Assessee has invested in non-business assets - Assessee do not have available interest-free funds and/or not to the extent of investment then the addition can be made under Section 36(1)(iii) of the Act on account of disallowance of interest expenses - HELD THAT:- Hon ble Apex Court in S. A. Builders Ltd. Case [ 2006 (12) TMI 82 - SUPREME COURT] dealt with the identical issue in broader terms and observed that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the Assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. Coming to the contention of the Ld. D R that the Assessee was not having sufficient interest-free funds available to the extent of investment and therefore the addition made under Section 36(1)(iii) of the Act on account of disallowance of interest expenses is liable to be sustained. We find the Hon ble Apex Court in S. A. Builders Ltd. Case (supra) itself dealt with deduction of interest on borrowed funds given to subsidiary company and held that where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the Assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. Even Hon ble Madras High Court in CIT Vs. Spencers Co. Ltd. Co. Ltd. [ 2014 (2) TMI 237 - MADRAS HIGH COURT] and in CIT Vs. Phil Corporation Ltd. Anr. [ 2011 (6) TMI 187 - BOMBAY HIGH COURT] has allowed deduction of interest u/s 36(1)(iii) of the Act, paid on borrowings and overdraft which were utilized for investment in subsidiary company. Hence in view of the aforesaid judgments of the Hon ble High Courts also,the contention of the Ld. DR is untenable. - Decided against revenue. TP Adjustment on account of providing corporate guarantee by the Assessee to its overseas associated enterprises companies - International Transaction or not - treating the interest rate of 1.3% based on average fees charged by State Bank of India - HELD THAT:- In identical issue in hand in the case of Pr. CIT Vs. M/s. Redington (India) Ltd.[ 2020 (12) TMI 516 - MADRAS HIGH COURT] and has clearly held that the corporate guarantee is covered within the definition of International Transaction . The Hon ble High Court in the said case has also considered the Explanation introduced in Section 92B of the Act with effect from 1st April, 2002 by the Finance Act (2012) wherein it is clarified that the expression International Transaction shall include guarantee and held the same as retrospective.As per judgment of the Hon ble Madras High Court, the addition can be made qua corporate and bank guarantee . Considering the undisputed fact to the effect that Hon ble Bombay and Madras high Court in the cases referred above held the Corporate Guarantee as International Transaction , we do not find any reason to interfere with the findings of the Ld. Commissioner for partly sustaining the addition under consideration and therefore the same is upheld. Consequently the Appeal of the Assessee is dismissed.

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• 2021 (12) TMI 1247
  Disallowance u/s 14A - interest from the partnership firm - HELD THAT:- We note that assessee has invested in partnership firm out of own funds alongwith some borrowed funds. These amounts have been invested in the partnership firm as a capital contribution. The assessee is getting interest from the partnership firm on his contribution @ 12% and such interest is assessable u/s. 28 of the Act, as a business income. Therefore, it should not be brought in the ambit of the provision of 14A of the Act, for that reliance can be placed on the judgment of the Co-ordinate Bench of Mumbai in the case of Asstt. Commissioner of Income-tax, Circle-19(2) Mumbai vs. Shri Harish P Shah [ 2011 (6) TMI 1009 - ITAT MUMBAI] - thus we allow ground no. 1 raised by the assessee. Unexplained cash credits u/s. 68 - HELD THAT:- The assessee has received fresh loans from these two persons in the year. Both the lenders are assessed to tax. One of the two lenders (Shri Shailesh Savani) is since deceased, another lender, Smt. Sonalben Shah is alive. Smt. Sonalben Shah appeared before Ld. AO u/s. 131 and deposed that she has advanced the said amount to the assessee - AO found that there were cash deposits of exact amount in bank accounts of the two lenders just prior to the cheques being issued to the assessee. It is also seen that the existing bank balance prior to these deposits are kept as it is. One of the lender Smt. Sonalben Shah explained this cash deposits as loans received in cash from 6 persons. All loans are just below Rs. 20,000/- (the permissible limit) and all 6 are not income tax assessees. So Ld. AO arrived at conclusion that the creditworthiness of lender and genuineness of transaction is not established. In case of late Shailesh Savani, the cash deposits were not explained by his legal heir. We note that assessee has failed to discharge his onus of establishing creditworthiness and genuineness, therefore, we confirm the order of ld. CIT(A).- Decided against assessee.

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• 2021 (12) TMI 1246
  Delayed employee s contribution to the employee welfare funds u/s. 2(24)(x) r/w s. 36(va) - rectification of mistake - amount being deposited before the due date of filing the return of income u/s. 139 (1) - Scope of amendment - HELD THAT:- In view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified. See SAURASHTRA KUTCH STOCK EXCHANGE LTD [ 2008 (9) TMI 11 - SUPREME COURT] and SMT. ARUNA LUTHRA. [ 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT] No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine [ 2021 (11) TMI 927 - ITAT JABALPUR] Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. the impugned additions, therefore, could not have been made under the given facts and circumstances of the case, and are directed for deletion. Decided in favour of assessee.

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• 2021 (12) TMI 1245
  Penalty u/s 271(1)(c) - non disclosure of capital gain on sale of land in the income tax return - Land sold by co-owners - HELD THAT:- Admittedly, the capital gain was not shown by the assessee in the income tax return. The land was sold by the assessee along with the co-owners. The impugned land was sold by the assessee along with the co-owners for Rs. 56 Lacs but the same was valued for the purpose of the stamp duty at Rs. 58.55 Lacs. The share of income of the assessee under the head capital gain was worked out by the authorities below taking the sale consideration of Rs. 58.55 Lacs under the provisions of section 50C of the Act which is a deeming provision. Thus the amount of profit worked out, as attributable to the assessee, was containing 2 elements. One of the element was the actual sale consideration as per the sale deed i.e. Rs. 14 Lacs (56 Lacs/4) and deemed sale consideration of Rs. 63750 (2.55 Lacs/4) only. It is an admitted fact that there cannot be any penalty on the profit calculated for the assessee based on deeming section/fiction. The land in dispute was acquired dated 25 April 1977 at Rs. 36,915.00 which was taken as the cost of acquisition for the purpose of computing the capital gain capital gain whereas the assessee was given option to take the fair market value of the impugned land as on 1 April 1981 as the cost of acquisition under the provisions of section 55(2)(b) of the Act. However we find that none of the authority below has pointed out in their respective orders whether the assessee was given the opportunity to take the value as on 1 April 1981 as the cost of requisition for the purpose of the capital gain. Generally, the rate of the land increases year after year. Thus, the value of the property in dispute, acquired in the year 1977, should have increased as on 1 April 1981 which should have been taken as the cost of acquisition. Thus, no prudent assessee will take the cost of requisition as applicable for the year 1977 when the property was acquired until and unless the facts and circumstances suggest otherwise. But nothing is available on record, neither the revenue has carried out any exercise to find out the actual value of the property as on 1st April 1981. Thus, the revenue is not expected to derive any benefit out of the ignorance of the assessee. We are of the view that there was no deliberate act on part of the assessee to conceal/furnish inaccurate particulars of income. Therefore, we are of the view that the penalty levied by the AO and sustained by the ld. CIT(A) is not maintainable. Hence we direct the AO to delete the penalty imposed u/s. 271(1)(c) - Decided in favour of assessee.

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• 2021 (12) TMI 1244
  Rectification of mistake u/s 154 - Addition u/s 14A determining the book profit under the provisions of section 115JB - HELD THAT:- We hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the I.T. Rules, cannot be applied to the provisions of Sec. 115JB of the Act as per the direction of the Hon ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] From the above it is revealed that there is no ambiguity to the fact that no disallowance can be made while computing the book profit under the provisions of section 115JB of the Act in the manner as provided under section 14A read with rule 8D of income tax rules. Thus, the issue on hand cannot be rectified in the proceedings initiated under section 154 of the Act being a debatable issue. Hence, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.

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• Customs

• 2021 (12) TMI 1243
  Enhancement of penalty, levied on Employee of CHA - appellant was reckless and negligent in using the Customs House Agent Licence of his Employer. - Smuggling - red Sander Woods - liability of Customs House Agent for mis-declaration or misuse of the licence - HELD THAT:- From the records and the admission of the appellant and his Employer, it is clear that the appellant had not discharged these obligations, which cast on him. It is a case where under the guise of Coco Peats, prohibited goods namely, Red Sanders weighing 10.760 MTs. has been transported. The DRI based on the intelligence gathered, had rescued the goods and found the Cargo was transported based on the Annexure-A, prepared by the Appellant herein, containing the signature of the employer of the appellant. Therefore, mis-declaration of goods and attempt to export such goods is punishable under Section 114 of the Customs Act. A person, who is a party to the mis-declaration, is liable to pay penalty not exceeding three times of the value of the goods mis-declared. The first respondent Tribunal is empowered to enhance the penalty imposed, if the penalty imposed is not adequate. Section 117 of the Customs Act is a residuary provision for imposing penalty for contravention. When penalty is prescribed elsewhere in the Act, the maximum cap of Rs.One Lakh fixed under Section 117 is not applicable. The submission of the Appellant that penalty of Rs. 5,00,000/- is excessive and beyond power is ex facie untenable. Further, the provisions under the Regulations to punish a person for violation and contravention of the Regulations is in addition to the penal provisions prescribed under the parent act, namely, the Customs Act. Therefore, it is incorrect to say that the Appellant is liable only under the Regulations for any violation and contravention and if the action under the Regulations is not sufficient for the grave offence, there is no legal impediment to proceed against the employee / appellant of the Customs House Agent under the Customs Act besides action under the Regulations. There is no mala fide or infirmity in the order of imposition penalty at Rs. 5,00,000/- - appeal dismissed.

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• 2021 (12) TMI 1242
  Classification of imported goods - Hankook off the road mining tyres 31 x 10.5 R 15 - to be classified under CTH 40118080 or under CTH 40111010? - restricted item or not - DGFT Notification No.12/2015-2020 dated 12.06.2020 - crux of the Department s argument is that the impugned tyres are not a kind used in mining etc. and are usable in on-road conditions - HELD THAT:- The impugned tyres are not normal tyres. This fact is also not disputed by the Department. It is the contention of the Department that the tyres are claimed to be used in in vehicles like Gorkha Force Thar etc. which are vehicles for on-road use only and moreover vehicles used for racing etc. are also classified under motor vehicles and therefore, the impugned tyres are rightly classifiable under CTH 40111010. On perusal of the literature made available on record and the clarifications given by some purchasers, it is clear that the impugned tyres are of a different kind from normal tyres notwithstanding the fact that they are also usable for on-road purposes. The impugned tyres are used for replacing the existing tyres whenever the vehicle is used in muddy or off terrain. It can be seen that even Tractors, Dumpers etc. which are primarily designated for off the road used also travel some distances on the road till they reach the place of their use. By no stretch of imagination such vehicles and the tyres thereof can be regarded to be for on-road purposes. The Department opines that the impugned tyres are not of a kind used in vehicles which are used for mining etc - Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2021 (12) TMI 1241
  Sanction of Scheme of Arrangement - Section 230-232 of Companies Act, 2013 and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of notices also issued. The scheme is approved - application allowed.

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• 2021 (12) TMI 1240
  Sanction of Scheme of Amalgamation - Sections 230-232 of the Companies Act, 2013 - HELD THAT:- The meetings of the Members/ Equity Shareholders of both the Applicant Companies and the Creditors of both the Applicant Companies are hereby dispensed with - directions with regard to issuance of various notices also issued. The scheme is approved - application allowed.

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• Insolvency & Bankruptcy

• 2021 (12) TMI 1239
  Seeking directions to be issued to the Respondents to make contributions to the corpus fund as approved by the Committee of Creditors (CoC) to meet and support the Applicant to keep the Corporate Debtor Company as a going concern - HELD THAT:- It is seen from the records that the corpus was created and unanimously approved in the meetings of the CoC held on 14.12.2018, 16.12.2019 and 07.09.2020 respectively. The said corpus was created to keep the Corporate Debtor Company as a going concern, to protect and preserve the assets and to meet the costs and expenses incurred in the CIRP. Further the instalments of corpus had been approved and created by the requisite majority of the CoC members. It is seen that there are pending contributions from the Respondents towards the said approved corpus. Therefore, in view of the urgent need for the funds and in absence of any alternate source of funds for running of the Consolidated CIRP of the Corporate Debtor Company and to keep the Corporate Debtor Company as a going concern, this Bench hereby directs the Respondents as mentioned in paragraph no. 17 to make payments towards their respective share of pending contributions to the corpus as approved by the CoC, within 15 days from receiving the Certified copy of the Order, to enable the Applicant to operate the business of the Corporate Debtor as a going concern to preserve and protect the assets during the CIRP and meet the costs and expenses incurred during the CIRP of the Corporate Debtor. Application allowed.

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• 2021 (12) TMI 1238
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The petitioner has filed its bank statement (Annexure 5) that the amount claimed or any part thereof, the petitioner has neither received nor had any person, on its behalf who received in any manner the amount due towards Corporate Debtor as required under Section 9(3)(c) of I B Code nor received any notice of dispute raised by the corporate debtor under Section 9(3)(b) of the IBC, 2016 - The registered office of corporate debtor is situated in Bathinda, Punjab and therefore this Tribunal has jurisdiction to entertain and try this petition. The default occurred from 24.08.2017 and the petition is filed on 06.06.2019, hence the debt is not time barred and the petition is filed within the period of limitation - the present petition is complete and the petitioner is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. Petition admitted - moratorium declared.

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• 2021 (12) TMI 1237
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial contract - financial creditors - existence of debt and dispute or not - HELD THAT:- It is well settled now, for an Application under Section 7 of IBC, 2016 to be admitted by the Adjudicating Authority, (i) there must be a debt and (ii) the said debt must be due and payable either in law or on facts and (iii) the said debt should partake the character of a Financial Debt and (iv) upon non-payment of the said debt would amount to default. Only if the above conditions are satisfied then this Adjudicating Authority can admit an Application filed by the Financial Creditor under Section 7 of IBC, 2016. It becomes clear that it is incumbent upon the Financial Creditor while filing this petition to place on record before this Authority, the Financial Contract and demonstrate without any ambiguity from the financial contract, the amount disbursed as per the loan/debt, the tenure of the loan/debt, the interest payable and the conditions of repayment - the Applicant herein failed to demonstrate that the debt has become due and payable and there s default, due to the lack of a Financial contract in consonance to the present case and as such the Applicant does not qualify to be the Financial Creditor in relation to the Corporate Debtor. Application dismissed.

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• 2021 (12) TMI 1236
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Financial Creditor produced on record the certificate of default of the financial debt by the Corporate Debtor issued by National E-Governance Services Limited. Even otherwise, the Corporate Debtor did not dispute that financial debt more than Rs. 1 Crore is due and payable by it to the Financial Creditor and it has committed default in paying the same. These are only relevant facts for the consideration of this Adjudicating Authority in an inquiry of this application under Section 7 of IBC, 2016 - Financial Creditor has established both facts. This application is defect-free. Application admitted - moratorium declared.

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• 2021 (12) TMI 1235
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - maintainability of application filed without authorisation - application is barred by limitation or not? - HELD THAT:- When the respondent itself admitted the fact that the amount of Rs. 63,25,464 was shown in the balance-sheets till July 19, 2018 and written-off on July 20, 2018. When the fact is admitted by the respondent there is no need to prove the said fact by the petitioner in view of section 58 of Indian Evidence Act, 1872. For the reasons discussed above it is concluded that the application is not barred by limitation. Whether genuine pre-existing dispute is there between the parties? - HELD THAT:- It is not known how long the track report available on the public domine, further it is stated that the letters were sent by private courier so the presumption available under section 27 of the General Clauses Act, 1897 cannot be invoked. In this situation petitioner side not proved that the said letters were sent as averred in the petition. Thus, on the respondent side raised the acceptable dispute regarding the entitlement of petitioner for the amount claimed in the petition and the interest - The respondent in its reply notice dated September 6, 2019 denies its liability, the dispute raised by the respondent is substantial in nature it needs further investigation. Thus, this point is answered. Whether the application filed without authorisation of the applicant-company is maintainable? - HELD THAT:- The operation creditor is a company registered under Companies Act, 1956. In the application there is no averments how the person who filed this application is competent to file the application on behalf of company. Even though he is designated as managing director would have no authority to file the application on behalf of company. There is no board resolution passed authorising the person who filed this application on behalf of the company. In form 5, Chapter II serial No. 6 specifically requires to enclose authorisation. The non-filing of board resolution goes to the root of the case. In this situation it is answered that the application filed on behalf of operational creditor without the authorisation is not maintainable. As per section 9(5)(ii)(a) if the petition is incomplete same shall be rejected, provided seven days time shall be granted to rectify the defect - Petition dismissed.

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• PMLA

• 2021 (12) TMI 1234
  Money laundering - scheduled offence - Siphoning of funds - ED has jurisdiction to investigate the scheduled offence or not - forged documents - HELD THAT:- It is material to note that, there is absolutely on justification for withdrawal of Rs. 1 Crore, that too when accounts were freeze as a part of conversion process. Even there is nothing before the Court to indicate that, Deepak Kumar Prajapati is any legal entity or holding any legal character. Even there is absolutely nothing before the Court to indicate any jural relation between applicant and Deepak Kumar Prajapati. Also there is no explanation nor any justification how cash amount was given to Deepak Kumar Prajapati (A4) and the same came to the applicant by way of loan or otherwise - there is a clear case which prima-facie indicates all the material stages of process of money laundering i.e, generation of proceeds of crime, layering, placement and integration thereof. These statements coupled with documents prima-facie indicate an offence under Sec.3 of PML Act. It is material to note that statement of Chartered Accountant Mr. Upendra G. Muley, Aurangabad prima-facie indicates the conduct of the applicant. It cannot be ignored that, once the said C.A. refused to go ahead with the plot of the applicant and Ms. Bhawana Gawali, his office was attacked and report thereof was lodged at Mukundwadi Police Station, Aurangabad. It cannot be ignored that, some of the documents were procured from the office of Assistant Charity Commissioner and all this was done to materialize the connivance with a goal of money laundering - Considering the conduct of the applicant and the investigation is still pending, if he is released on bail certainly there is every possibility that he would take law in his hands to mould the prosecution case as per their goal. Once the applicant is released on bail, both of them are likely to take fate of the case in their hands by frustrating all the efforts of the ED. Certainly, none of the parameters including tripod test prescribed under Sec.439 of Cr.P.C. is applicable to the case of the applicant. It has to be noted that, if the application is allowed there will be no safe trial - even if the rigors of twin conditions under Sec. 45 of PML Act are not existing and even if the application is dealt with under Sec. 439 of Cr.P.C. with remaining part of Sec.45 of PML Act, the applicant is not entitled to be released on bail. Bail application dismissed.

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• Service Tax

• 2021 (12) TMI 1233
  Extended period of limitation - input service credit - it is alleged that the service has been used for construction of properties which do not attract output service tax - HELD THAT:- The instant issue can be decided on limitation itself. The appellant has informed the entire facts relating to availment of credit to the Department. The Appellant has duly informed to the Department with regard to the above disclosure at the time of adjudication as well as in the first appeal, which has not been dealt by both the authorities below. In the said letters, they have categorically stated that they are availing Cenvat credit of input and input services and that the same would be utilised for payment of output liability arising at the time of Renting of properties and in case the properties are sold out, they would reverse the portion of credit attributable to such sale. The authorities below have not disputed the fact of disclosures made by the Appellant vide the above letters. The Ld. Commissioner (Appeals) in the impugned appeal order has merely reiterated the findings of the original authority without specifically dealing with the submissions made by the Appellant on limitation - there are no positive evidence has been adduced in the SCN dated 16.04.2015 to show any wilful suppression of fact on the part of the Appellant with an intent to evade payment of tax. The entire period in dispute in the instant case is covered under the extended period of limitation, which is not available to the Department in the absence of any element of fraud or wilful suppression - the impugned demand cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 1232
  Refund claim - time limitation - Service tax was paid on advance received - later the order was cancelled - refund claim was rejected holding that the same is filed beyond one year of the date of payment of service tax - Section 11B of the Central Excise Act, 1944 - principles of unjust enrichment - HELD THAT:- In this case, the appellant was required to pay service tax in terms of Rule 3 of Point of Taxation Rules, 2011 on advances received in respect of any services to be provided. The said advances so received is required to be adjusted against the amount of service provided by the appellant. Admitted, in this case, no such service has been provided by the appellant. The service tax paid by the appellant is only a provision for payment of service tax on the services which were to be provided later. Therefore, in terms of Section 11B (5) Explanation B (eb) which provides that in case where the duty of excise is paid provisionally under this Act or the Rules made there under, the date of adjustment of duty after the finalization of assessment thereof is the relevant date. Admittedly, the service tax paid by the appellant was provisionally for the services to be provided later on, but later on, no service has been provided by the appellant and the purchase orders were cancelled. In those circumstances, the amount so paid provisionally is required to be adjusted when the purchase orders were cancelled and the date of which the purchase orders were cancelled is the relevant date for filing the refund claim - it is clear that the refund claims were required to be filed within one year from the date of cancellation of the purchase orders in terms of Section 11B (5) Explanation B (eb) of the ACT, 1944. The relevant date for filing the refund claim is the cancellation of the purchase orders in terms of Section 11B (5) Explanation B (eb) of the Act - If the refund claims are filed within one year from the date of cancellation of the purchase orders, the same shall be entertained as the refund claim are filed in time. The issue of passing the bar of unjust enrichment shall be examined by the adjudicating authority based on documents placed by the appellants - matter remanded back to the adjudicating authority who shall entertain their refund claims. Appeal allowed by way of remand.

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• Central Excise

• 2021 (12) TMI 1231
  Principles of natural justice - Clandestine removal - want of corroborative evidence - non-compliance of Section 9D of Central Excise Act - main contention of the appellant is the denial of opportunity of hearing and denial to cross examine Shri Brajesh Singh - HELD THAT:- Pursuant to the directions of remand vide Final Order No. 57092/2017 dated 12.9.2017, the original adjudicating authority had given the opportunity to cross examine Shri Brajesh Singh. The notice was served to the parties on three different occasions. It was served on available address but were returned by the postal authorities as undelivered. The appellant himself at the time of personal hearing on December 13 had acknowledged that said Shri Brajesh Singh was untraceable. The said Brajesh Singh was the appellants ex-employee but got untraceable due to which the appellant were neither able to contact him nor were in position to provide his alternative address. The department also reflected its inability to trace said Brajesh Singh. It is under said circumstances that the Original Adjudicating Authority proceeded to decide the matter on merits, in compliance of the directions of remand. In the given circumstances, it was the duty of the appellant to make said Shri Brajesh Singh available or at least Shri Abhishek Nandwani and Shri H K Nandwani for their cross examination. But the appellant, apparently had not taken any such step. These circumstances, in my considered opinion, amounts to sufficient compliance of the aforesaid provision on the part of the authorities. The absence of the cross examination of the person from whom the incriminating documents were recorded and those whose statements were recorded cannot diminish the evidentiary value in the given circumstances, thus has to read against the appellant. Evidentiary value of the notebooks recovered at the time of search, these being prepared by Shri Brajesh Singh and Shri H K Nandwani therefore, cannot be denied. There is no apparent denial for the entries on those private note books to not to have been accounted in the books of accounts of the appellants nor any other such document is produced by the appellants which may prove that the entries of those Notebooks do not pertain to the appellant s day today business. There is no retraction of the statements by Shri Abhishek Nandwani and Shri H K Nandwani. The statements recorded rather have clear admission that entries in the note books as were seized are with respect to such transactions which were not regularly entered in books of accounts and for which the transactions generally were in cash. Appeal dismissed.

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• Indian Laws

• 2021 (12) TMI 1230
  Dishonor of Cheque - acquittal of accused from the charge under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - HELD THAT:- The Appellate Court shall be slow in interfering with the order of acquittal passed by the trial Court. If the evaluation of the evidence and the findings recorded by the trial Court do not suffer from any illegality or perversity and the grounds on which the trial Court has based its conclusion are reasonable and possible. The High Court should not disturb the order of acquittal if another view is possible merely because an Appellate Court on re-appreciation and re-evaluation of the evidence is inclined to take a different view, interference with the judgment of acquittal is not justified if the view taken by the trial Court is a possible view. However, the High Court in an appeal under Section 378 has full power to review at large the evidence on which the order of acquittal was founded and to reach the conclusion that upon the evidence on record, the order of acquittal should be reversed when the trial Court fails to appreciate the evidence on record lawfully in its true perspective or the order of acquittal suffers from patent legality and mala fide, the High Court has every authority to reverse the judgment of acquittal. In the instant appeal, it is found on proper appreciation of evidence that the learned Magistrate erred in appreciating the evidence on record. She also fails to ascertain the fact of the complainant s case and illegally held that the complainant failed to prove that the cheque in question was issued by D.W.1 in discharge of a legally enforceable debt. She also failed to consider the law of presumption enunciated in Section 139 of the Negotiable Instruments Act in its true perspective. Appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 1229
  Dishonor of Cheque - proclaimed offender or not - amicable settlement between the parties- continuation of proceedings under Section 174A I.P.C. - HELD THAT:- It is apparent that the present FIR in question had been registered on account of the petitioner having been declared as proclaimed person vide order dated 17.09.2019 passed by the SDJM in the proceedings under Section 138 of the Act of 1881 which were instituted in pursuance of the complaint filed by Satish Kumar and the said Satish Kumar had given a statement on 16.03.2020 (Annexure P- 4) to the effect that the matter has been compromised and there is nothing due towards the present petitioner and accordingly, vide order dated 16.03.2020, the complaint filed under Section 138 of the Act of 1881 was withdrawn. Where the main case was dismissed for want of prosecution, it was observed that the continuation of proceedings under Section 174-A of the IPC shall be an abuse of the process of court. Petition allowed.

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• 2021 (12) TMI 1228
  Dishonor of Cheque - legally enforceable debt or not - acquittal of the accused - Section 138 of Negotiable Instruments Act, 1881 - HELD THAT:- The trial Court rightly held that the cheque was not drafted by the accused and that the accused is not a rustic man or an illiterate and that if at all the accused issued the subject cheque towards discharge of legally enforceable debt, it should be for Rs. 1,24,000/- since the interest on the amount alleged to be borrowed was 24% per annum and that the circumstances reveal that Ex.P.1 cheque was not issued by the accused towards legally enforceable debt. Further, the admissions of the complainant in his evidence as P.W.1 clearly reveals that the complainant is doing money lending business without license in Telangana area. He did not file a single document to show that he was having a valid license to do money lending business. The Explanation to Section 138 of N.I.Act clearly states that the dishonoured cheque shall relate to a legally enforceable debt or liability. In the instant case, since the complainant had no valid money lending business, he cannot legally enforce such a debt of liability. Under these circumstances, the Court below rightly concluded that the complainant is not entitled to prosecute the accused for the offence under Section 138 of N.I.Act and therefore, the accused is entitled for acquittal. The conclusions reached by the trial Court are based on evidence on record. There is nothing to take a different view. The accusations against the accused under Section 138 of N.I.Act are not proved beyond reasonable doubt. The contentions raised on behalf of the complainant do not merit consideration. Criminal Appeal is dismissed.

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