TMI Tax Updates - e-Newsletter
December 4, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax Indian Laws

Articles

1. PROFITEERING ON SUPPLY OF USED OFFSET PRESS UPHELD

   By: Dr. Sanjiv Agarwal

2. OPTIONAL RELIEF AS PER PROVISO TO S.43B PROBLEMS DUE TO GAP OF ONE MONTH IN DUE DATES FOR TAR AND ITR

   By: DEVKUMAR KOTHARI

News

1. All States except Jharkhand choose Option-1 to meet the GST implementation shortfall

2. APEDA strategizes Action Plan for the promotion of Millets and Millet products with IIMR

3. APEDA and NABARD sign MoU to work together to synergize the activities in the interest of agriculture and allied sectors for bringing better value to the stakeholders

4. India, USA sign MoU on Intellectual Property cooperation

5. Meeting of the Board of Trade held

6. INDIA’S MERCHANDISE TRADE: Preliminary Data, November 2020

7. IFSCA obtains Membership of International Association of Insurance Supervisors (IAIS)

Notifications

Customs

1. 45/2020 - dated 3-12-2020 - ADD

Seeks to rescind notification No. 30/2015-Customs (ADD), dated 12th June 2015 to revoke the levy of ADD on imports of "Nylon Tyre Cord Fabric " originating in or exported from China PR

2. 43/2020 - dated 2-12-2020 - ADD

Seeks to impose provisional anti-dumping duty on imports of Toluene Di-isocyanate (TDI) having isomer content in the ratio of 80:20, originating in or exported from European Union, Saudi Arabia, Chinese Taipei and UAE, for a period of six months

3. 110/2020 - dated 3-12-2020 - Cus (NT)

Exchange rate Notification No.110/2020-Cus (NT) dated 03.12.2020

GST - States

4. 73/2020 - State Tax - dated 13-10-2020 - Chhattisgarh SGST

Notify a special procedure for taxpayers for issuance of e-Invoices in the period 01.10.2020 - 31.10.2020

5. 72/2020 - State Tax - dated 13-10-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Eleventh Amendment) Rules, 2020

6. 71/2020 - State Tax - dated 13-10-2020 - Chhattisgarh SGST

Amendment in Notification No. 14/2020-State Tax, No. F-1035/2020/CT/V(38) dated the 31st March, 2020

7. 38/1/2017-Fin(R&C)(185) - dated 30-11-2020 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C)(133), dated 30th March, 2020

8. 38/1/2017-Fin(R&C)(184) - dated 30-11-2020 - Goa SGST

Seeks to notify special procedure for making payment of 35% as tax liability in first two month

9. 38/1/2017-Fin(R&C)(183) - dated 30-11-2020 - Goa SGST

Notification of class of persons under proviso to section 39(1) of the GGST Act,2017

10. 38/1/2017-Fin(R&C)(182) - dated 30-11-2020 - Goa SGST

Goa Goods and Services Tax (Thirteenth Amendment) Rules, 2020

11. 38/1/2017-Fin(R&C)(181) - dated 30-11-2020 - Goa SGST

Government of Goa appoints the 10th day of November, 2020 as the date on which the provisions of section 7 of the Goa Goods and Service Tax (Amendment) Act, 2020 shall come into force

12. (4-H/2020)-FD 05 CSL 2020 - dated 11-11-2020 - Karnataka SGST

Karnataka Goods and Services Tax (Ninth Amendment) Rules, 2020

13. POL-41/1/2017-Policy-10219/CT - dated 3-11-2020 - Orissa SGST

Extension of time limit for furnishing of the annual return.

14. POL-41/1/2017-Policy-9781/CT - dated 20-10-2020 - Orissa SGST

Notification on Form GSTR-3B

15. F.12(46)FD/Taxl2017-III-260 - dated 2-12-2020 - Rajasthan SGST

Seeks to waive penalty payable for noncompliance of the provisions of Notification No. F.12(46)FD/Tax/2017-Pt.V-153 dated 30th March, 2020

16. F.1-11(19)-TAX/GST/2020 - dated 9-11-2020 - Tripura SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 by such class of registered persons having aggregate turnover of more than 1.5 crore rupees in the preceding financial year or the current financial year, for each of the months from October, 2020 to March, 2021

Highlights / Catch Notes

GST

• Investigation Confirms No Legal Limits on Product Scope; Benefits Must Reach Consumers, Not Retained by Supplier.

  Case-Laws - NAPA : Profiteering - Scope of the Investigation - supply of Monitors and TVs of screen size up to 32 inches - There is no provision in the above Act or the Rules which provides that the investigation shall be limited to the products against which complaint has been received - The Respondent cannot get away by appropriating the benefit which he is legally bound to pass, on the ground that no complaint has been made in respect of the other products, as the benefit is not to be paid by him out of his own pocket, since it has been granted from the public exchequer to benefit the common customers. - NAPA
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Income Tax

• Tribunal's Order on Transfer Pricing Method Lacks Clarity; Case Remanded to ITAT for Further Review.

  Case-Laws - HC : TP Adjustment - Selection of MAM - Perusal of para 5 of the order giving alleged reasons by the learned Tribunal leaves more confusion than clarity. We are also satisfied that the learned Tribunal has not dealt with all the grounds of Appeal raised by the Assessee in a proper perspective and after detailed discussion a cogent findings have not been returned by the learned Tribunal insofar as the method of determining the Arms Length Price is concerned. - Matter restored back to the ITAT - HC
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• Limitation Period for Rectification u/s 254 Starts When Assessee Learns of Order, Not Issuance Date.

  Case-Laws - HC : Rectification of mistake u/s 254 - Period of limitation would begin to run from the date the assessee got knowledge of the order or from the date of passing of the order - The period of limitation would thus commence only from 19.11.2019 which is the date of obtaining knowledge of the order dated 01.02.2013. The period spent by the assessee after it got knowledge of the dismissal of its appeals in limine from November 2019 to March-2020 is the period spent in prosecuting the remedy provided under the said Act. From the aforesaid we are satisfied that the time spent from 19.11.2019 till filing of the present appeals has been sufficiently explained by the applicants. - HC
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• Assessment Order Valid u/s 144: Assessee Missed Multiple Opportunities to Respond, Revenue Acted Correctly.

  Case-Laws - AT : Validity of Assessment order - void ab-initio or not - assessment u/s.144 - despite many opportunities, the assessee did not respond to the AO. That even before making best judgment assessment, the AO had also communicated the said intention of framing assessment u/s.144 of the Act to the assessee. Then also the assessee did not avail this final opportunity. In such scenario, we are of the considered view that the Revenue Authorities have absolutely done correct thing as per process of law enshrined in the Act. - AT
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• Penalty u/s 271(1)(b) Waived for Non-Willful Non-Compliance; Compliance During Assessment Considered Satisfactory.

  Case-Laws - AT : Penalty u/s 271(1)(b) - non-compliance to statutory notices - The order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful. - AT
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• Tax Deduction Dispute: Non-deduction u/s 195 leads to addition u/s 40(a)(i) for Facebook Ireland Payments.

  Case-Laws - AT : TDS u/s 195 - addition u/s 40(a)(i) - non-deduction of taxes from payment made to Facebook Ireland Limited - Section 40(a)(i) acts as a restriction on the deductibility of expenses under section 30 to 38, and, as a corollary to this legal position, when the related expenditure is not claimed as deduction under section 30 to 38, this disallowance cannot be pressed into service at all. - AT
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• Authorities Scrutinize Short-Term Capital Gains from Unadjusted Property Sale Advance; Question Transaction's Authenticity u/s 68.

  Case-Laws - AT : Addition of short term capital gain - Non-adjustment of adavance received with the sale consideration of property - It is unbelievable that, the advance received was adjusted towards cost of said property in a proposed sale, which has not been materialised till date. This argument does not hold waters in the eyes of law. In our view, this is an arranged transaction which cannot be ignored. In a matter of such description, the authorities are entitled to pierce the veil of corporate entity and look at the reality of the transaction. - AT
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• Assessment Reopening Invalid: Trust Registration Active, AO Misinterpreted CBDT Circular on Section 12A(2) Provisos' Retrospective Application.

  Case-Laws - AT : Validity of reopening of assessment - non-registration of trust - registration certificate was in operation at the time the notices u/s 148 were issued - AO has not properly understood the binding circular issued by CBDT, which clearly explains the meaning of provisos inserted in sec.12A(2) of the Act. Accordingly these provisos shall have retrospective operation. - AT
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• Income from royalties and technical service fees in India taxed only upon receipt per DTAA, not on accrual.

  Case-Laws - AT : Income accrued in India - Royalty receipt - Fees for Technical Services on accrual basis - the FTS is taxable only in the year of receipt as per the provisions of DTAA. - Tax authorities are not justified in assessing the impugned income on accrual basis. - AT
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• Interest on Funds for Non-Business Use Not Allowable; Partner Withdrawals from Current Account Exempt from Interest Charges.

  Case-Laws - AT : Disallowance of proportionate bank interest and drawings made by the Managing Partner of the firm - Interest payment attributable to interest paid on funds diverted for non business purposes viz. gifts made - Withdrawal of money by the partner from his current account does not carry any interest and he is at liberty to draw the same from his current account. - No proportionate disallowance of interest could be made - AT
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• Brokerage on Borrowed Loan Allowed as Deduction for Interest Income from Partnership Investment u/s 57(iii) of Income Tax Act.

  Case-Laws - AT : Disallowance of brokerage on borrowed loan in the hands of partner - There is no dispute that the borrowings made by the assessee were utilised for the purpose of investment in partnership firm from where interest has been received by the assessee and taxed under the head income from other sources. Hence, the brokerage paid becomes an expenditure incurred for the purpose of earning interest income in terms of Section 57(iii) and is squarely allowable as deduction. - AT
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Corporate Law

• DIN Deactivation Not Authorized by ROC Under AQD Rules; Conflicts with Companies Act Sections 164(2) & 167(1).

  Case-Laws - HC : Activation of Director Identification Number - apart from the fact that the AQD Rules do not empower the ROC to deactivate the DIN, we find that such deactivation would also be contrary to Section 164(2) read with 167(1) of CA 2013 inasmuch as the person concerned would continue to be a director of the Defaulting Company. - HC
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IBC

• Corporate Insolvency Resolution Process can be initiated against guarantors independently of borrowers; res judicata misapplied in this context.

  Case-Laws - Tri : Maintainability of application - initiation of CIRP - As such invocation of res judicata seems only an ignorance of the provisions of law. Insolvency proceedings can be initiated even against the guarantor alone even before initiating action against the borrower - there is no bar under the statute for initiating two separate Applications simultaneously against the borrower and the guarantor. - Tri
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Service Tax

• Court Urges Tax Board to Revise Guidelines on Show Cause Notices to Overcome Delays in Constitutional Courts.

  Case-Laws - HC : Principles of Natural Justice - The Assessee, fully being aware that the Constitutional Courts may not find easy time to dispose of such matters quickly, the proceedings in pursuance of such Show Cause Notices or even issuance of Show Cause Notices are successfully delayed for years together, defeating the very purpose for which such Show Cause Notices are issued and possible revenue which can be gathered out of Adjudication Orders passed in pursuance of such Show Cause Notices. This other side of the coin was perhaps not envisaged by the Board when it laid down guidelines - Therefore, the Board should re-look into this aspect of the matter. - HC
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VAT

• Court Upholds Assessment Order Validity; Tax Levy on Import Sale Corrected u/s 69(1) of the Act.

  Case-Laws - HC : Validity of assessment order - Since, the levy of tax under the Act on the sale of goods during the course of import was an error apparent on the face of the record, the Assessing Officer in purported exercise of powers under Section 69(1) of the Act has rightly rectified the same. It is trite law that from the tenor of the order, the source of power can be traced. Therefore, merely because the Assessing Officer has referred to Section 39(1) of the Act, the same would not invalidate the order passed by the Assessing Officer. - HC
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Case Laws:

• GST

• 2020 (12) TMI 93
  Maintainability of petition - availability of alternative remedy - Confiscation of goods and conveyance - inter-state transaction - contravention of Sub-Sections (i) and (v) of the provisions of Section 130(1) of the KGST Act/CGST Act - HELD THAT:- This Court is of the considered view that the petitioner must avail the alternative remedy under Section 107 of the CGST Act. At this point of time, Sri Hema Kumar, learned Additional Government Advocate points out that the authorities have not taken any precipitous action because the appeal time has not lapsed. If this be so, it would be just and reasonable to dispose of this writ petition with liberty to the petitioner to avail alternative remedy under Section 107 of the CGST Act, while directing the authorities not to take precipitous action in the limitation period within which appropriate appeal could be filed by the petitioner. Petition disposed off.

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• 2020 (12) TMI 92
  Profiteering - supply of Services by way of admission to exhibition of cinematograph films where the price of admission ticket is above one hundred rupees - despite a reduction in the rate of GST from 28% to 18% w.e.f. 01.01.2019. Applicant has alleged that the Respondent increased the base price of his movie tickets - benefit of reduction in the GST rate not passed on to his customers/ recipients - contravention of section 171 of CGST Act - HELD THAT:- The report of the DGAP dated 12.06.2019, is acceptable, not only because it has been agreed to by both, the applicant No. 1 and the respondent, but also because the main issue of profiteering by the Respondent has already been addressed and settled by this PRINCIPAL COMMISSIONER, CENTRAL TAX CENTRAL EXCISE HYDERABAD, DIRECTOR-GENERAL OF ANTI-PROFITEERING, INDIRECT TAXES CUSTOMS. VERSUS PRASAD MEDIA CORPORATION PVT. LTD., [ 2020 (7) TMI 286 - NATIONAL ANTI-PROFITEERING AUTHORITY] on the same matter, whereby the Respondent was found to have profiteered in terms of Section 171 of the CGST Act 2017. It is pertinent that the above Order was passed in pursuance of an earlier complaint filed by Principal Commissioner, Central Tax Central Excise Hyderabad, GST Commissionerate, GST Bhavan, LB Stadium Road, Basheerbagh, Hyderabad-500004 and the resultant investigation Report of the DGAP dated 25.10.2019 which covered the period from 01.01.2019 to 30.06.2019. The Respondent had therefore been directed to reduce the prices of his tickets as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit was passed on to the recipients. Further, the Respondent had been directed to deposit the profiteered amount of Rs. 30,13,058/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount was deposited, Since the recipients, in this case, were not identifiable, the Respondent had been directed to deposit the amount of profiteering of Rs. 15,06,529/-(along with interest thereon at the applicable rate) in the Central Consumer Welfare Fund (CWF) and Rs. 15,06,529/- (along with interest thereon at the applicable rate) in the Telangana State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. In the present case, the investigation by the DGAP had revealed that the Application filed by Applicant No. 1 against the Respondent also covers the same issue and the same period as the previous case and that the Respondent had realized an additional amount of Rs. 11.73/- from Applicant No. 1 (inclusive of GST). It is also clear to us that this amount of Rs. 11.73/- stands already included in the total profiteering amount of Rs. 30,13,058/- determined against the Respondent vide its order PRINCIPAL COMMISSIONER, CENTRAL TAX CENTRAL EXCISE HYDERABAD, DIRECTOR-GENERAL OF ANTI-PROFITEERING, INDIRECT TAXES CUSTOMS. VERSUS PRASAD MEDIA CORPORATION PVT. LTD., [ 2020 (7) TMI 286 - NATIONAL ANTI-PROFITEERING AUTHORITY] which had been ordered to be deposited in the CWFs because, at that time, no recipient could be identified for receiving the benefit. However, now that the entitlement of Applicant No.1 has been established, we hold that Applicant No. 1 is entitled to be passed on an amount of Rs. 11.73/- along with interest as applicable thereon. This Order is being passed today i.e. 27.11.2020 in terms of the Notification No. 65/2020-Central Tax dated 01.09.2020 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes Customs under Section 168 A of the CGST Act, 2017 - Application disposed off.

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• 2020 (12) TMI 91
  Profiteering - supply of Monitors and TVs of screen size up to 32 inches - allegation that the product LG LED TV was sold at a lower price after the reduction in the GST rate from 28% to 18% but without commensurate reduction in the price - also allegation that the Respondent had not passed on the benefit of reduction in the rate of tax in respect of the impugned product to the extent of 10% (28%-18%) by commensurate reduction in price - contravention of provisions of Section 171 (1) of the CGST Act, 2017 - penalty. HELD THAT:- The excess GST charged from the recipients has also been included in the profiteered amount. The place of supply-wise break-up of the total profiteered amount of Rs. 37,89,550/- has been furnished vide Table-D supra in respect of 2 States. The above profiteered amount has been reduced to Rs. 34,34,008/- vide subsequent Report dated 01.06.2020 of the DGAP. The above methodology employed by the DGAP for computing the profiteered amount appears to be correct, reasonable, justifiable and in consonance with the provisions of Section 171 of the CGST Act, 2017. The above mathematical methodology has also been approved by this Authority in respect of all such cases of reduction in the rate of tax. Therefore, the above mathematical methodology can be safely relied upon. The price charged from different customer may vary but it cannot be below the price paid by him to the manufacturer plus his profit margin. Since, the Respondent has himself admitted that he was charging different prices from his customers there was no other alternative available to the DGAP except to compute the average base prices of the products being sold by him in the pre rate reduction period and then to compare them with the actual base prices so as to assess whether the Respondent has passed on the benefit of tax reduction or not. Therefore, the above claim of the Respondent is incorrect. The Respondent is directed to reduce his prices commensurately, as indicated in the above mentioned Annexure, in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of Rs. 34,34,008/- in two equal parts each in the Central Consumer Welfare Fund and the Consumer Welfare Funds (CWFs) of the States mentioned supra as per the provisions of Rule 133 (3) (c) of the above Rules, since the recipients are not identifiable. Scope of the Investigation - HELD THAT:- There is no provision in the above Act or the Rules which provides that the investigation shall be limited to the products against which complaint has been received - The Respondent cannot get away by appropriating the benefit which he is legally bound to pass, on the ground that no complaint has been made in respect of the other products, as the benefit is not to be paid by him out of his own pocket, since it has been granted from the public exchequer to benefit the common customers. Therefore, the above claim of the Respondent is not correct and hence the same cannot be accepted. Penalty - HELD THAT:- Perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.01.2019 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent. Application disposed off.

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• Income Tax

• 2020 (12) TMI 90
  Deductions u/s 80IB(10) - certain flats of the project were sold to the same person/family - whether there was no such bar in law as on the date of the commencement of the project as also on the date of relevant transactions? - assessee s alternative claim of prorata/ proportionate deduction - HELD THAT:- The first substantial question of law is answered partly in favour of the assessee and against the Revenue and it is held that there was no justification in disallowing deductions under Section 80IB (10) in respect of the assessee s housing project Kamat Riviera except on pro-rata basis in respect of Flat No.103 therein. Second substantial question of law is answered in favour of the assessee and against the Revenue and it is held that the assessee is entitled to pro-rata deduction in respect of the entire housing project Kamat Riviera , including in respect of Flat Nos.401, 402 and 104 therein but not in respect of Flat No.103 which was allotted only on 10.10.2009. The impugned Order is set aside and the Revenue is directed to allow a deduction to the assessee in respect of its housing project Kamat Riviera except, on pro-rata basis in respect of Flat No.103 therein.

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• 2020 (12) TMI 89
  Validity of Revision u/s 263 by CIT - ITAT rejecting the appeal of the Appellant u/s 263 and confirming the assumption of jurisdiction as well as the merits of the issues raised therein - HELD THAT:- CIT, in exercising its revisional jurisdiction, has satisfied the twin requirements as prescribed in Section 263 of the ITAT Act. There was material before the ITAT to at least prima facie infer that there was under-invoicing and that this aspect of under-invoicing was not considered by the AO in making his assessment order. The CIT, in exercising its revisional jurisdiction, has not shut out any of the defences open to the Assessee, but has directed the AO to pass a fresh assessment order after verifying and examining all the relevant facts of the case, legal position and giving adequate opportunity of being heard to the Assessee. In Malabar Industrial Co. Ltd . [ 2000 (2) TMI 10 - SUPREME COURT] has held that the CIT can pass an order under Section 263 of the IT Act even on debatable issues. Similarly, it is clear where the assessment was completed without proper inquiries which circumstances necessitated, it is competent for the CIT to invoke the revisional jurisdiction and direct fresh assessment, after verifying and examining all relevant facts, as well as legal position as may be involved. Both, the CIT, as well as the ITAT, have already made clear that adequate opportunity of being heard is required to be extended to the Assessee in the fresh assessment proceedings to be undertaken by the AO. Therefore, no liberty or clarification is necessary. In any case, it is clarified that the Assessee will be entitled to rely upon all legally permissible material, including the decision of this Court in Sesa Sterlite Limited [ 2019 (8) TMI 16 - BOMBAY HIGH COURT] and there is no doubt that the AO, in undertaking the fresh assessment, will take into account all such contentions of the Assessee and make a fresh order in accordance with law, on its own merits. Substantial questions of law answered against the Assessee.

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• 2020 (12) TMI 88
  Deductions u/s 80 IB (10) - AO disallowed deductions in respect of its housing project Models Legacy inter alia on the ground of breach of the provisions of Section 80IB(10)(e) in respect of 5 of the residential units in the said project, which otherwise comprised of a total of 352 residential units - Whether ITAT has erred in failing to recognise that Sub- Clause(e)to Section 80IB(10) came into effect only on 1st April, 2010 and not 19th August 2009 as presumed? - HELD THAT:- The reasoning of the ITAT that the exclusion of the 5 residential units from out of the 352 residential units in the entire housing project might affect the condition about the size of the plot which is required to have a minimum area of 1 Acre deserves no acceptance. Even if the area proportionate to the 5 residential units is excluded, the size of the plot which admeasures 28,014 sq. meters. i.e. almost about 7 Acres or thereabouts, will, in no manner, stand reduced to below 1 Acre. Therefore, this could not have been a ground to deny pro-rata deduction as was granted by the Commissioner (Appeals) in his Order dated 26.08.2015. Pro-rata deductions can be granted under Section 80IB(10) - The impugned Order made by the ITAT is set aside to the extent it denies the benefit of pro-rata deductions to the assessee.

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• 2020 (12) TMI 87
  TP Adjustment - Selection of MAM - Whether ITAT justification in holding that Berry Ratio is the MAM for computation of ALP, when the Appellant as a trader of UPS, sells the same without any value addition? - HELD THAT:- While dealing with the complex issue of Transfer Pricing and the method to be adopted in the Arms Length Price (ALP), firstly the final fact finding Body is expected to give its own reasons for the method to be adopted for ALP and if the Transfer Pricing given by the Assessee is not acceptable to the Revenue Authorities, cogent reasons have to be clearly spelt in the order. Secondly, if the Tribunal directs the Revenue Authorities for adopting any one of the methods as prescribed under Rule 10B of the IT Rules, the reasons therefor have to be clearly spelt by the learned Tribunal in its order. Perusal of para 5 of the order giving alleged reasons by the learned Tribunal leaves more confusion than clarity. We are also satisfied that the learned Tribunal has not dealt with all the grounds of Appeal raised by the Assessee in a proper perspective and after detailed discussion a cogent findings have not been returned by the learned Tribunal insofar as the method of determining the Arms Length Price is concerned. Matter restored back to the ITAT.

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• 2020 (12) TMI 86
  TDS u/s 195 - gross sales commission paid to the foreign parties / non-residents - payments made to the foreign parties for the services rendered outside India - ITAT held that the assessee despite opportunity being afforded, failed to place on record any material to controvert the finding recorded by CIT (Appeals) that the assessee has failed to establish that no material evidence are brought on record to show that the payments to were made to the foreign parties for the services rendered by them outside India - HELD THAT:- Both the aforesaid Courts have concurrently held that the assessee has failed to place any material evidence on record to show that the payment made by the assessee to the foreign firms was for the services rendered by them to the assessee outside India. It is pertinent to mention here that the revenue has not disputed the payments made by the assessee to the foreign firms.It is the case of the revenue that the assessee has failed to prove that the aforesaid expenditure was incurred by the assessee in connection with its business so as to entitle it to claim deduction under Section 37(1) of the Act. Substantial questions of law framed by this Court do not arise for consideration in this appeal. Therefore, it is not necessary for us to answer the same.

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• 2020 (12) TMI 85
  Deduction u/s 80IA - captive power consumption - whether the benefit of such deduction under Section 80IA of the Act to the new Industrial Undertaking is available to the Assessee to the extent of power charges realised by it from the Group Company situated within the same premises where the Assessee manufactures or produces Electricity energy? - HELD THAT:- The controversy is no longer res integra and the Assessee is clearly entitled to the benefit under Section 80IA of the Act on the Power Charges realised by it from their Sister Companies or Group Companies though situated in the same premises for the Electricity energy produced by it. See TAMILNADU PETRO PRODUCTS LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2010 (11) TMI 645 - MADRAS HIGH COURT] - Decided against revenue.

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• 2020 (12) TMI 84
  Rectification of mistake u/s 254 - period of limitation prescribed in Section 254(2) - Condonation of delay - Dismissal of appeal by ITAT - Tax Recovery Officer proceeded to attach the immovable properties of the assessee - Limitation for seeking restoration of the proceedings - applications under Section 254(2) of the said Act as well as the applications for condonation of delay in seeking restoration of the appeals -Tribunal has refused to condone this delay by holding that it was not so empowered to do so under Section 254(2) - Whether Tribunal was not justified in dismissing the appeals for absence of any representation on behalf of the assessee and such dismissal in limine was without jurisdiction - HELD THAT:- In view of the provisions of Rule 24 of the Rules of 1963 the Tribunal was not justified in dismissing the appeals filed by the assessee in limine in absence of either the appellant or its authorized representative. This aspect has been examined as it has bearing on the prayer for condonation of delay. Rectification of mistake u/s 254 - Period of limitation would begin to run from the date the assessee got knowledge of the order or from the date of passing of the order - provisions of Section 254(2) of the said Act, it is seen that Tribunal could at any time within four years from the date of its order rectify any mistake that was apparent from the record. As per the statutory position prevalent when the Tribunal dismissed the appeals in default on 01.02.2013 the period prescribed for exercise of such jurisdiction was four years. The period of four years stipulated in Section 254 (2) was substituted by the period of six months by virtue of the Finance Act, 2016 that came into force on 01.06.2016. The statutory position as prevalent on 01.02.2013 thus indicates that within a period of four years from the end of the month in which the order was passed, the Tribunal under Section 254 (2) of the said Act was empowered to rectify its mistake. In the present case, the applicant got knowledge of the order dated 01.02.2013 on 30.12.2019 and thereafter the applicant moved the Tribunal -Tribunal thereafter considered the applications on merits. It is thus found that the period from 01.02.2013 to 30.12.2019 is required to be considered in the light of the law as laid down in Golden Times Services (P) Limited [ 2020 (1) TMI 971 - DELHI HIGH COURT ] by considering the aspect that the applicant got knowledge of the order dated 01.02.2013 only when its assets were sought to be attached in November-2019 Accepting the second the second contention, the period from 01.02.2013 till 19.11.2019 therefore cannot be treated as the period of delay. The period of limitation would thus commence only from 19.11.2019 which is the date of obtaining knowledge of the order dated 01.02.2013. The period spent by the assessee after it got knowledge of the dismissal of its appeals in limine from November 2019 to March-2020 is the period spent in prosecuting the remedy provided under the said Act. From the aforesaid we are satisfied that the time spent from 19.11.2019 till filing of the present appeals has been sufficiently explained by the applicants. To reiterate, the applicants got knowledge of the order dated 01.02.2013 dismissing their appeals in limine by ignoring Rule 24 of the Rules of 1963 only in November 2019 when the Tax Recovery Officer issued the notice of attachment. From December 2019 till March 2020, the applicant had taken various steps in its attempt to have the appeals restored. The present appeals have been filed on 22.06.2020 in the midst of the lockdown. The aforesaid events are thus found sufficient to condone the delay subject to imposing costs on the applicant.

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• 2020 (12) TMI 83
  Validity of Assessment order - void ab-initio or not - assessment u/s.144 - case was selected for scrutiny and notices u/s.143(2) and 142(1) - HELD THAT:- AO had given reasonable opportunities to the assessee for explaining the return and substantiating his claim made in the return of income with respect to expenditure. However, the assessee did not attend and avail opportunities of explaining the return before the AO - despite many opportunities, the assessee did not respond to the AO. That even before making best judgment assessment, the AO had also communicated the said intention of framing assessment u/s.144 of the Act to the assessee. Then also the assessee did not avail this final opportunity. In such scenario, we are of the considered view that the Revenue Authorities have absolutely done correct thing as per process of law enshrined in the Act. Lack of opportunity in final notice served on wife - HELD THAT:- Since even after providing several opportunities of hearing to the assessee, the assessee neither availed those opportunities and as evident from the order of the Ld. CIT(Appeal) before making the best judgment assessment, the said intention was conveyed to the assessee by the Assessing Officer still then the assessee has not bothered to appear before the Revenue Authorities. The assessee has not brought on record any evidence to show that notices have not reached at his registered address given to the Department. On the contrary, it is on record of the Department that the notices were duly served appropriately as per law and was received by the assessee. Therefore, observation of the Ld. CIT(Appeal) is upheld on this issue and Ground No.2 raised in appeal by the assessee is dismissed. Disallowance of cash deposit in IDBI Bank u/s.68 - HELD THAT:- Revenue Authorities has not brought out any definite case in this regard against the assessee nor has brought out any evidence that such deposits were from some other source of income, not disclosed by the assessee. When the Revenue is admitting the earlier withdrawals of cash by the assessee, when the Revenue is also admitting the assessee having enough cash balance, in such scenario, there cannot be any addition on this ground. It is well explained that the amount of Rs. 2,00,000/- was deposited from earlier withdrawals of the assessee. We, accordingly, set aside the order of the Ld. CIT(Appeal) and allow this ground of appeal of the assessee Disallowance of u/s.69C of expenditure claimed by us @ 10% - HELD THAT:- Assessee has failed to bring on record anything to support that the payments claimed to have actually incurred for the purpose of assessee s business. That there were no corroborating evidence or confirmations filed by the assessee to show that these were in relation to assessee s business purpose. There was also remand report called for by the Ld. CIT(Appeal) from concerned Assessing Officer and therein, it is stated that about 70% expenditures were made in cash and through self made vouchers. These were not refuted before the Ld. CIT(Appeal) by the assessee through proper evidences as evident from record. In such scenario, the disallowance being restricted to 10% of direct expenses as held by the Ld. Ld. CIT(Appeal) needs no further interference and is upheld. - Decided against assessee.

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• 2020 (12) TMI 82
  Penalty u/s 271(1)(b) - non-compliance to statutory notices - HELD THAT:- Default of non-attendance to notices was not the subject-matter in the quantum appeal and it in no way depended upon the outcome in the appeal. The penalty depends upon whether the default was willful or not. Therefore, we are of the view that the ratio of the case of Hissaria Bros. [ 2006 (7) TMI 163 - RAJASTHAN HIGH COURT] will be applicable in this case also. Recording of satisfaction - It may be mentioned that mere initiation of penalty does not amount to satisfaction as held in the case of CIT v. Ram Commercial Enterprises Ltd. [ 1998 (10) TMI 13 - DELHI HIGH COURT] . In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty. The order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful. See AKHIL BHARTIYA PRATHMIK SHIKSHAK SANGH BHAWAN TRUST. VERSUS ASSISTANT DIRECTOR OF INCOME-TAX. [ 2007 (8) TMI 386 - ITAT DELHI-G] - Decided in favour of assessee.

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• 2020 (12) TMI 81
  TDS u/s 195 - addition u/s 40(a)(i) - non-deduction of taxes from payment made to Facebook Ireland Limited - HELD THAT:- The assessee before us is an advertisement agency, and, as such, advertisements are placed by the assessee on behalf of its clients. There is thus ordinarily no occasion to claim the costs of advertisements as deduction in computation of its business income, and, so far as the advertisement agencies are concerned, their revenues consist of only the commission received in respect of the advertisements so placed. Section 40(a)(i) acts as a restriction on the deductibility of expenses under section 30 to 38, and, as a corollary to this legal position, when the related expenditure is not claimed as deduction under section 30 to 38, this disallowance cannot be pressed into service at all. To that extent, we uphold the plea of the assessee in principle- subject to factual verification about no such claim having been made in the computation of business income i.e. in the profit and loss account filed by the assessee alongwith computation of business income. In case the assessee has indeed accounted for the agency commission on these advertisement revenues, rather than taking entire billing revenues as billing revenues of the assessee and claiming deduction for the advertisement paid to Facebook Ireland Limited in its profit and loss account, the assessee will succeed in its claim on this point. For this limited purpose, the matter is remitted to the file of the Assessing Officer. Ordered, accordingly. As we remit the matter back to the file of the Assessing Officer in the terms indicated above, we make it clear, as learned senior counsel has also fairly accepted, that is without any prejudice to the assessee being visited with other consequences for non-deduction of tax at source from payments made to non-residents. Appeal is allowed for statistical purposes.

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• 2020 (12) TMI 80
  Denial of natural justice - CIT(A) dismissed the appeal ex-parte - Invalid Dismissal of Appeal - HELD THAT:- We are unable to sustain the stand of the learned CIT(A). As learned counsel rightly contends it was not open to the learned CIT(A) to dismiss the appeal ex-parte, without furnishing any opportunity of hearing to the assessee, on a hyper-technical ground. The assessee had no opportunity whatsoever to explain it s stand or to rectify the alleged mistake. Such a course of action is clearly violative or the principles of natural justice. - vacate the impugned ex-parte order, and remit the matter to the file of the CIT(A) for fresh adjudication in accordance with the law after furnishing a reasonable opportunity of hearing to the assessee.

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• 2020 (12) TMI 79
  Capital gains on sale of property - invoking 50C of the Act for year under consideration and computing capital gains by taking guidance value for year under consideration - AO reworked LTCG based on the guidance value in the year of sale being 04/10/2004 as assessee has shown sale proceeds of sale of property, which is much lesser than, guidance value, and accordingly as per provisions of section 50C - HELD THAT:- In the present case, at the time of registration in the year 2004, assessee was represented by the original purchase through general power of attorney executed by assessee in 1993 - at the time of registering the sale deed the said property stands transferred in the name of another person who is submitted to be the brother of Director in the company being original purchaser. The recitals in the registered sale agreement placed at page 94-104 mentions details of the sale consideration having received by assessee under Memorandum of Agreement of Transfer and Assignment entered into on 17/03/1993 between assessee and the company. Provisions of section 50C has been inserted in the form of clarification to the section and accordingly is retrospectively applicable. In our view provisions of section 50C should be looked into from the date of Memorandum of Agreement of Transfer and Assignment entered into by assessee with M/s Shantha Exports Pvt.Ltd through its Director. Nothing has been placed on record to show why the subsequent sale has been registered in the name of an individual who is alleged to be the brother of the Director of M/s Shantha Exports Pvt Ltd. It also has been recorded by Ld.CIT(A) that assessee did not disclose the capital gain - Nothing has been brought to record how the loss if any is allowable during the year under consideration. We therefore set aside the issue back to the file of Ld.AO to consider it de novo in the light of various evidences filed by assessee. Assessee is directed to establish all relevant links and reply to queries raised by Ld.AO in order to complete the assessment in accordance with law - Decided in favour of assessee for statistical purposes.

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• 2020 (12) TMI 78
  Addition of short term capital gain - Non-adjustment of adavance received with the sale consideration of property - lifting of corporate veil - transfer of the appellant s property in terms of the Memorandum of Understanding [MOU] - Whether none of the conditions mentioned u/s. 2[47][v] of the Act were attracted especially since the MOU was an unregistered document and no possession of the said property was delivered by the appellant to M/s. Synergia Consultants Pvt. Ltd., during the year pursuant to the said unregistered MOU ? - HELD THAT:- Assessee has been submitting that there was a loan transaction amounting to Rs. 3,50,00,000/- between assessee and M/s Synergy Consultants Pvt. Ltd. Subsequently, Rs. 3,50,00,000/- was shown as advance towards purchase of land by an agreement dated 15/06/2009 entered into between assessee and M/s Synergy Consultants Pvt. Ltd. Towards proposed sale of 4156 sft. built up area on the 1st floor of No.34, Embassy Diamanate, Vithal Malya Road (hereinafter referred to as said property). Admitedly, asessee, is also the owner of said property and is 50% Director in M/s Synergy Consultants Pvt. Ltd. A transaction of loan or proposed sale does not depend merely on the terms of the document, but has got to be judged from the intention of the parties and all the circumstances of the case. As per the MOU dated 15/06/2009, the sale was to take place by December, 2012, however, admittedly, the same has not materialised till date. During the period Rs. 3,50,00,000/- was received, out of total consideration of Rs. 4,50,00,000/- from M/s Synergy Consultants Pvt. Ltd. It is unbelievable that, the advance received was adjusted towards cost of said property in a proposed sale, which has not been materialised till date. This argument does not hold waters in the eyes of law. In our view, this is an arranged transaction which cannot be ignored. In a matter of such description, the authorities are entitled to pierce the veil of corporate entity and look at the reality of the transaction. We therefore remand this issue to Ld.AO to consider it afresh in accordance with law. - Decided in favour of assessee for statistical purposes.

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• 2020 (12) TMI 77
  Assessment u/s. 153C r.w.s. 153A - cash was deposited by assessee in two bank accounts maintained by assessee with Punjab National Bank and the assessee has not submitted any personal books or cash flow statement in respect of deposit - HELD THAT:- Assessee has claimed before the AO that the amounts had been deposited in cash in the bank accounts maintained with the Punjab National Bank out of cash withdrawals from other bank accounts. Before the ld. CIT(A), the assessee has claimed that there was an opening cash balance of Rs. 405800/- as at 01.04.2005 which is primarily used for deposit of cash in bank accounts in previous year 2005-06. Assessee has submitted before us that the said opening cash balance of Rs. 4,05,800/- as at 01.04.2005 was the closing cash balance of the earlier year as at 31.03.2005 and the cash flow of the earlier year has been accepted by the Revenue, but the said facts are not emanating from the record before us. It is also not clear that the said bank accounts with PNB were declared by the assessee in the return of income regularly filed with the Revenue from year to year for the earlier years and also whether the said cash in hand of Rs. 4,05,800/- was accepted by Revenue in the earlier year and under these circumstances in the interest of justice and fair play, we are of the considered view that the matter be set aside and restored to the file of AO for afresh consideration for both the assessment years viz. ay: 2006-07 and 2008-09 for denovo adjudication of the matter on merits in accordance with law - Decided in favour of assessee for statistical purposes.

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• 2020 (12) TMI 76
  Validity of reopening of assessment - non-registration of trust - HELD THAT:- In the instant case, the registration u/s 12A of the Act was granted to the assessee on 23-09-2014. As per the first proviso, where the registration has been granted to the trust u/s 12AA, then the provisions of sec.11 and 12 shall apply in respect of any income derived from properly held under trust of any assessment year preceding year of granting registration and which are pending before the AO as on the date of such registration and the objects and activities of such trust remain the same for such preceding assessment year. As per the second proviso, no action u/s 147 shall be taken by the AO for any assessment year preceding the aforesaid assessment year only for non-registration of such trust. It can be noticed that the second proviso to sec.12A(2) specifically bars the AO from taking action u/s 147 of the Act only for the reason of non-registration of such trust or institution for the said assessment year. However, in the instant case, the AO has reopened the assessment only for the reason of non-registration the assessee u/s 12A of the Act and consequently to tax the surplus earned by the assessee during the years under consideration. AO has not properly understood the binding circular issued by CBDT, which clearly explains the meaning of provisos inserted in sec.12A(2) of the Act. Accordingly these provisos shall have retrospective operation. Thus reasons recorded by the AO that the assessing officer has reopened the assessments of the years under consideration only for the reason that the assessee does not have registration for the years under consideration, even though the assessee had been granted registration from AY 2014-15 and further the registration certificate was in operation at the time the notices u/s 148 were issued. Accordingly, we are of the view that the action of the AO is in violation of the second proviso to sec.12A(2) of the Act. - Decided in favour of assessee.

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• 2020 (12) TMI 75
  Reopening of assessment - unexplained deposits - Commissioner (Appeals) upheld the addition made by assessing officer by taking view that he has no alternative except to accept the findings given by assessing officer on both the additions - assessee vehemently submitted that the learned Commissioner (Appeals) passed the impugned order in ex parte proceeding - HELD THAT:- As noted that in the application for additional ground of appeal was duly acknowledged by the officer of Commissioner (Appeals), the assessee referred the reasons recorded by assessing officer. The assessee specifically pleaded that bank account, wherein the deposit of Rs. 1.16 Crore stated to be deposited does not belong to assessee. Commissioner (Appeals) neither considered those facts not give any finding while passing the impugned order. Considering the submission of learned AR of the assessee and the contents of the impugned order passed by Commissioner (Appeals), we are of the view that the order is passed without affording fair and reasonable possibility to the assessee. Therefore, we deem it appropriate to restore all the grounds of appeal to the file of learned Commissioner (Appeals) to decide all the issue de novo including the additional ground of appeal raised by assessee. - Decided in favour of assessee for statistical purposes.

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• 2020 (12) TMI 74
  Income accrued in India - Royalty receipt - Fees for Technical Services on accrual basis - A.O. noticed that the assessee has not offered the same as income - assessee is a company incorporated and operating in Germany - India has entered into a Double Taxation Avoidance Treaty with Federal Germany Republic - HELD THAT:- As settled proposition of law that the DTAA provisions shall override the Income tax provisions unless the provisions of Income tax Act is beneficial to the assessee. There is merit in the submissions of the assessee that the FTS is taxable only in the year of receipt as per the provisions of DTAA. Accordingly, we are of the view that the tax authorities are not justified in assessing the impugned income on accrual basis. Accordingly, we set aside the order passed by Ld. CIT(A) and direct the A.O. to delete the impugned addition. A.R submission that the impugned income has been offered to tax in the year relevant to the assessment year 2015-16 but no material was placed either before the A.O. or before us to substantiate the above said submission. In fact, the AO has specifically mentioned in the assessment order that the assessee has not proved its submissions - Since the Ld. A.R. also could not also exactly pinpoint with evidence that the impugned income was offered to tax in assessment year 2015-16, he agreed that this fact may be verified by the assessing officer. Accordingly, we restore this issue to the file of A.O. for limited purpose of satisfying himself that the impugned amount has been offered to tax by the assessee in A.Y. 2015-16 or in any other assessment year - Appeal filed by the assessee is treated as allowed.

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• 2020 (12) TMI 73
  Benefit of Vivad se Vishwas Scheme-2020 (VSV scheme) - HELD THAT:- Since, the assessee had already filed an application under direct tax Vivad Se Viswas Scheme Act 2020 , there is no need to keep these appeals pending before us in view of the decision of Hon ble Madras High Court in the case of Nannusamy Mohan (HUF) vs. ACIT [ 2020 (11) TMI 484 - MADRAS HIGH COURT] We give liberty to the assessee to get the appeal restored in the event that the assessee does not succeed on the declaration filed by the assessee under direct tax Vivad Se Viswas Scheme-2020 . In other words if the assessee s declaration to be filed is not accepted by the Revenue for any reason whatsoever, the assessee can make a prayer before the Bench for recalling of the order by filing a miscellaneous application for restoration of appeal. The Registry will place such petition before the Bench concerned. We dismiss these cross appeals with a liberty to get them recalled in the eventuality of assessee s declaration not getting accepted by the Revenue.

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• 2020 (12) TMI 72
  Unexplained cash credit u/s 68 - burden of proving identity and creditworthiness of the lender - HELD THAT:- As furnished the copy of return of income for the AY 2009-10, balance sheet for the AY 2009-10, loan confirmation documents, copy of bank statements, reflecting transaction during the period 01.04.2008 to 31.03.2009 and copy of bank statement reflecting the said transaction during the relevant period. DCIT has asked for rejection of assessee s contention on the ground that Mr. Cyrus Nallaseth has stated that balance sheet for the AY 2009-10 is not relevant in the present case. We do not find any substance in the observation of the AO, as there is no evidence on record to show that Shri Cyrus Nallaseth was asked by the AO to furnish the relevant balance sheet. Since, the AO has admitted in the remand report that Shri Cyrus Nallaseth had advanced loan to the assessee there is no justification in making addition on account of unexplained cash credit u/s 68 - assessee has established the genuineness of the transaction by discharging the burden of proving identity and creditworthiness of the lender - Decided in favour of assessee. Disallowance of vehicle expenses, salary expenses and purchase expenses - Whether AO had made these disallowances on ad-hoc basis, which is not permissible under the law? - HELD THAT:- CIT(A) has confirmed/restricted the disallowances in question inter alia on the ground that the assessee has shown more business loss as compared to the earlier year - authorities below have not given any cogent reason for making/confirming disallowance in question. Hence, respectfully following the ratio laid down in WALCHAND AND COMPANY PVT. LIMITED. [ 1967 (3) TMI 2 - SUPREME COURT] we hold that the ad-hoc disallowance made/sustained on the ground of increase of business loss is not sustainable. Hence, we delete the additions made on account of vehicle expenses, salary expenses and purchase expenses. - Decided in favour of assessee.

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• 2020 (12) TMI 71
  Disallowance of proportionate bank interest and drawings made by the Managing Partner of the firm - Interest payment attributable to interest paid on funds diverted for non business purposes viz. gifts made - AO proposed to disallow a portion of bank interest on the ground that interest bearing funds had been diverted for non business purposes and the purpose of making the gift was not explained by the assessee and the assessee has also not proved that the gift was made by the assessee out of commercial expediency - HELD THAT:- The partner has withdrawn his own funds from his current account with the firm. It cannot be said that the assessee s funds should be used for business purposes only and the partners cannot withdraw their money which leads to the firm borrowing interest bearing funds. In our opinion, this issue is squarely covered by the decision of this Tribunal in the case of S. Jameela vs. ACIT [ 2012 (7) TMI 1117 - ITAT COCHIN ] As gone through the reconstituted partnership deed dated 31st March, 1994 and 28th June, 2018. As per the latest reconstituted partnership deed dated 28th June 2018, clause 6 specifically mentions that the partners are at liberty to withdraw any amount from the partnership against the amount outstanding in his credit in the firm. Being so, withdrawal of money by the partner from his current account does not carry any interest and he is at liberty to draw the same from his current account. Accordingly, we find force in the argument of the Ld. AR that no proportionate disallowance of interest could be made - Decided in favour of assessee.

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• 2020 (12) TMI 70
  Addition u/s 68 - unsecured loans from individuals, HUF and companies - CIT-A deleted addition holding that the assessee has proved the genuineness of transaction by filing confirmation, PAN, return of income, bank statements etc. - Whether assessee has failed to establish the genuineness of the transactions in question? - HELD THAT:- In the present case, there is no evidence on record, to conclude that the amounts of loans in question actually belonged to the assessee and were introduced in the books of account in the name of the creditors. In our considered view, the assessee has discharged the onus of establishing identity and creditworthiness of the lenders and the genuineness of transactions. AO has not pointed out any evidence to rebut the contention of the assessee that the transactions are genuine. In our considered view, the facts of cases relied upon by the revenue are different from the facts of the present case, therefore not applicable to the present case. Hence, we do not find any infirmity in the order passed by the Ld. CIT (A) to interfere with - Decided against revenue.

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• 2020 (12) TMI 69
  Addition made u/s. 68 - share capital/share premium received from shareholders - HELD THAT:- As in assessee s group concerns case on identical facts the Tribunal deleted the addition as the assessee has discharged its initial onus to prove identity, genuineness of the transaction and creditworthiness of the parties by filing numerous documents. The addition was made without carrying out further enquiries in order to ascertain the claim of the assessee, AO jumped into conclusion on the basis of financial statements of subscribers that none of them had enough sources of income to establish creditworthiness, thus, the Tribunal deleted the additions. As assessee has discharged its initial onus to prove the identity, genuineness of the transaction and creditworthiness of the parties by filing all these documents direct the AO to delete the additions made towards share capital u/s. 68 - Decided in favour of assessee. Assessment u/s 153A - Disallowance u/s 14A - HELD THAT:- We delete the disallowance in the absence of any seized materials for making the disallowance u/s. 14A while completing the assessment u/s.143(3) r.w.s. 153A -AO was erred in making additions towards disallowances of expenditure, in relation to exempt income u/s 14A r.w.Rule 8D(2), in absence of seized materials - Decided in favour of assessee.

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• 2020 (12) TMI 68
  Disallowance of interest made u/s.57(iii) - assessee had made borrowings from parties @15% p.a and had invested the same in the partnership firm where assessee is a partner, wherein he earned interest @12% pa - AO sought to disallow the difference in interest rates @3% (15%-12%) u/s.57(iii) under the head income from other sources while completing the assessment - HELD THAT:- Certain borrowings were made by the assessee at reduced rate of interest. We find that once the borrowings were accepted as genuine and one to one nexus is found to have been proved that the said borrowings were indeed utilised for investment in a partnership firm wherein assessee was a partner, there cannot be any question of disallowance of interest on the borrowings. As relying on RAJENDRA PRASAD MOODY [ 1978 (10) TMI 133 - SUPREME COURT] we direct the ld. AO to delete the disallowance of interest under the head income from other sources . Disallowance of brokerage on borrowed loan - AO observed that the said expenditure is not incurred for the purpose of earning income under the head income from other sources and accordingly sought to disallow the same - HELD THAT:- There is no dispute that the borrowings made by the assessee were utilised for the purpose of investment in partnership firm from where interest has been received by the assessee and taxed under the head income from other sources. Hence, the brokerage paid becomes an expenditure incurred for the purpose of earning interest income in terms of Section 57(iii) and is squarely allowable as deduction. We find that the ld CIT(A) had deleted Rs. 73,392/- and sustained an adhoc disallowance on account of brokerage to the tune of Rs. 1,00,000/-. We direct the ld. AO to allow deduction towards brokerage for the remaining sum of Rs. 1,00,000/-. Addition made on account of annual value of house property in respect of property situated in a small village - HELD THAT:- CIT(A) had restricted the addition towards annual value of house property @Rs. 20,000/- as against Rs. 30,000/- determined by the ld. AO. We find that both the AO as well as ld. CIT(A) had only estimated the fair rental value of the house property without disputing the submissions made by the assessee before them. At the same time, we find that the rental income stated by the assessee @5,000/- per annum seems to be on the lower side. Hence in order to meet the ends of justice, we direct the ld. AO to determine the fair market value of property @Rs. 10,000/- supra and from that statutory deduction of 30% should be given to the assessee and accordingly remaining sum of Rs. 7,000/- should be taxed as income from house property . Accordingly, the ground No.3 raised by the assessee is partly allowed.

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• 2020 (12) TMI 67
  Maintainability of appeal - low tax effect - Unexplained money u/s 69A - undisclosed foreign income / undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account - HELD THAT:- Assessee has received certain credits in ICICI Bank Account maintained in India. The said credit, inter-alia, represented transfer from assessee s own NRE account as well as reimbursement of expenses on behalf of certain corporate entities. As such, there was no undisclosed foreign income / undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account in terms of clause (d) of para 10 of circular no. 3/2018 dated 11/07/2018 as amended vide circular dated 20/08/2018. The bank account under question was maintained in India in which remittances were received from abroad. Therefore, the plea raised by the revenue could not be accepted. No other exception could be pointed out by revenue which would preclude it to withdraw the appeal under question. Therefore, we concur with the submissions of Ld. AR that the tax effect of quantum additions being contested by the Revenue is, prima-facie, below threshold monetary limit of Rs. 50 Lacs and the appeal is not maintainable in terms of recently issued low tax effect Circular No. 17/2019 dated 08/08/2019 [F.No.279/Misc. 142/2007- TTJ(Pt.) issued by CBDT. The appeal is not maintainable. The investigation arm of the Income Tax Department is an internal organ of the department and therefore, the same would not fall under the category of external sources in the nature of law enforcement agencies as envisaged by clause 10(e) of the said circular.

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• 2020 (12) TMI 59
  Entitlement for exemption u/s 80IB(10) on proportionate basis - ITAT allowed exemption on proportionate basis - whether ITAT was justified in not holding that all the units of the Appellant - assessee s housing project were compliant with Section 80IB(10), particularly in view of the fact that prior to 1/4/2010, there was no bar on adjacent units being sold to members of the same family? - HELD THAT:- In this case the approvals were obtained by the assessee from the Local Authorities and the planning Authorities for putting up a housing project having residential units of less than 1500 square feet. If thereafter the allottees combined two residential units, the deduction under Section 80IB(10) can never be denied to the assessee. The view taken by the Commissioner (Appeals ) and the ITAT is quite consistent with the view taken by the High Courts of Madras, Delhi, and Karnataka. It was pointed out that even the Special Leave Petition against the Madras High Court s decision was dismissed by the Hon ble Supreme Court. Accordingly, there is no good ground to interfere with the view taken by the Commissioner (Appeals ) and the ITAT on the issue of proportionate deduction, at the instance of the Revenue, in these matters.

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• Customs

• 2020 (12) TMI 66
  Restraint from dealing of imported goods - import of 35,900 kilograms (kgs.) of Inositol NF 12 (Not for Medicinal Use) - restraint from selling, distributing and disposing of the said stock in their possession - it is stated that the petitioner was intimated that the respondents 1 and 2 had reason to believe that the said goods in the possession of the petitioner concern had contravened the provisions under the DC Act - applicability of Rule 43 of the DC Rules. HELD THAT:- A perusal of Schedule D at Sl.No.1 mentions that the substance not intended for medicinal use are exempt from all provisions of Chapter III and Rules thereunder, subject to the condition that if the substance is imported in bulk, the importer shall certify that the substance is imported for non-medicinal use, and if imported otherwise than in bulk, each container shall bear a label indicating that the substance is not intended for medicinal use or is intended for some other purposes other than medicinal use or is of commercial quality - If rule 43 read with Schedule D exempting the substance not intended for medical use are applied to the instant case, it is clear that the fourth respondent had imported the above quantity of Inositol NF 12 mentioning that it is Not for Medicinal Use from the Overseas supplier and their sale in favour of the petitioner also indicates that it was not intended for medicinal use. Thus, a reading of Rule 43 of the DC Rules along with Schedule D shows that where the substance is not intended for medicinal use, which was imported in bulk, the importer shall certify that the substance is imported for non-medicinal use. The requirement of an import licence in Form 10-A assumes importance depending on the usage for which the imported item is intended for. In the instant case, after this Form 15 was issued to the petitioner, the fourth respondent also had applied to the Drug Authorities seeking Form 10-A exemption. However, the same was rejected as the fourth respondent had already parted with the imported goods or sold the goods to the petitioner, without mentioning whether the import of Inositol NF 12 is exempted or not - Considering the fact that the even the test reports indicated that the samples of standard as defined under the DC Act and the Rules framed thereunder stating that the samples conform the USP and when the provisions and the rules of the DC Act and Rules provide for efficient protection in the matters of import, obtaining of Form 10-A in terms of Rule 23 need not be insisted upon. The petitioner was constrained to move this Court even for getting the reports of the lab test conducted in this regard, as he was issued with Form 15. When the fourth respondent is entitled for import without a licence by reason of exemption granted under the Rules and the DC Act, the import being one for manufacture and use of non-medicinal substances, by way of retaining the same for the purpose of penalty on the ground that the import is not supported by licence under Form 10A is unsustainable - the plea of the respondents that the fourth respondent had imported Inositol NF 12 without Form 10A licence and consequently, retaining the goods in the premises of the petitioner, who is a subsequent purchaser, is patently erroneous cannot be accepted. The respondents 1 and 2 are directed to release the goods, which were locally procured by the petitioner, namely, Inositol NF 12 (Not for Medicinal Use), after obtaining necessary undertaking, within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off.

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• Corporate Laws

• 2020 (12) TMI 65
  Activation of Director Identification Number and Digital Signature of the petitioners - get appointed or reappointed as Directors of any Company without any hindrance - HELD THAT:- The Hon ble Division Bench in MEETHELAVEETIL KAITHERI MURALIDHARAN, KAMAL ANEESMOHAMED, SATHISH KUMAR GOPAL, GOVINDASAMY BALASUBRAMANIAM, PAARI SENTHIL KUMAR, PAARI DHANALAKSHMI, VERSUS UNION OF INDIA, THE REGISTRAR OF COMPANIES TAMIL NADU, CHENNAI [2020 (10) TMI 595 - MADRAS HIGH COURT] dealt with the powers of the RoC in the light of Sections 164 and 167(1) of the Companies Act, 2013 and Rule 14 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and also has elaborately considered as to whether the RoC is entitled to deactivate the Director Identification Number (DIN) by referring to the Rules 19, 10 and 11 of the said 2014 Rules and held that apart from the fact that the AQD Rules do not empower the ROC to deactivate the DIN, we find that such deactivation would also be contrary to Section 164(2) read with 167(1) of CA 2013 inasmuch as the person concerned would continue to be a director of the Defaulting Company. Petition allowed.

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• Insolvency & Bankruptcy

• 2020 (12) TMI 60
  Maintainability of application - initiation of CIRP - person authorised to file application - time limitation - principles of res-judicata - default on the part of Corporate Debtor or not. Whether the Application has been filed by an Authorized person? - HELD THAT:- This Tribunal found that the Chief Manager of the Financial Creditor is competent to file this Application and the objection raised by the Corporate Debtor is merely incongruous, and therefore, holds no water. Moreover, the Chief Manager of the Financial Creditor had signed the application as an authorised person of the Financial Creditor in the specific authorization to file the Insolvency Application before this Bench. Moreover, since the amalgamation of the Banks were carried out by order of the Government of India, the question of signing the Application by the Union Bank of India officers will not arise. Hence, the technical objection raised on the ground of maintainability rejected. Whether this Application is barred by the law of limitation? - HELD THAT:- The existence of debt and default is reasonably established by the Financial Creditor as a major constituent for admission of a petition under Section 7(4) of the I B Code.To get further clarity on this issue, this Tribunal had gone through Annexures A41, A44, A45 and found that the OA No. 407/2012 was filed before the DRT within a period of 3 years, after the accounts were classified as NPA on 31.12.2010, wherein the Corporate Debtor had admitted the financial facilities availed and the debt due. Before that, SARFAESI Demand Notice dated 08.11.2011 was issued to the Corporate Debtor, which resulted in filing SA No. 104/2012 before the Debts Recovery Tribunal by the Corporate Debtor - the claim is not barred by law of limitation as contended by the Corporate Debtor. Whether the Application is bad for non-joinder of necessary parties and hit by res judicata? - HELD THAT:- This Tribunal is not agreeable with the submissions made by the Corporate Debtor, that the Application is bad for non-joinder of necessary parties and that application is hit by res-judicata. Those contentions are made without any application of mind as those defences are not applicable to IBC proceedings for the reason that the provisions of the Code of Civil Procedure are not applicable to IBC proceedings. Insolvency proceedings against Corporate Debtor can be initiated only under the provisions of IBC and not by any other statute. As such invocation of res judicata seems only an ignorance of the provisions of law. Insolvency proceedings can be initiated even against the guarantor alone even before initiating action against the borrower - there is no bar under the statute for initiating two separate Applications simultaneously against the borrower and the guarantor. Whether there is default on the part of the Corporate Debtor and whether there is scope for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor? - HELD THAT:- This Tribunal found that this is a fit case to initiate CIRP against the Corporate Debtor as there is default on the part of Corporate Debtor in owning their commitment under the provision of IBC to the Financial Creditor and that the Financial Creditor approached this Tribunal within the period prescribed under the IBC - This application is filed by the Financial Creditor under the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor to protect the interests of the stakeholders. Application admitted - moratorium declared.

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• Service Tax

• 2020 (12) TMI 64
  Principles of Natural Justice - non-compliance with the requirement of pre-consultation before issuance of Show Cause Notice where the demand against the Assessee is likely to be above Rs. 50.00 Lakhs - Board s Instruction No.1053/2/2017-CX dated 10.03.2017 - HELD THAT:- The Show Cause Notice itself is a procedure known to the Excise Law and other Tax Laws where the Assessee is called upon to show cause against the issues raised in the Show Cause Notice in terms of principles of natural justice or Audi Alteram Partem and the Assessee is expected to raise his objections and points in the form of reply to the Show Cause Notice before the Assessing Authority. Then, the Adjudicating Authority or the Assessing Authority is expected to decide those issues and objections and pass appropriate Adjudication Order. If the Assessee feels aggrieved by the same, further two appellate forums are available under the law, namely first appeal before the Commissioner (Appeals) and second appeal before the Tribunal. Even thereafter, on the questions of law, the Assessee has a remedy before the High Court and further appeal to the Supreme Court. Therefore, such a series of hierarchical alternative remedial procedures and measures are already envisaged and provided for in the Central Excise Act and similar provisions are available in almost all the taxing statutes. The pre-consultation procedure provided by the Board in its Circular dated 10.03.2017, even though there is no such statutory requirement or provision in the Central Excise Act itself, perhaps was issued with a pious objective of cutting short the controversy before the Show Cause Notice stage itself, is and has been abused by the Assessees in the manner like the present case being illustrative one of that. The Assessee, fully being aware that the Constitutional Courts may not find easy time to dispose of such matters quickly, the proceedings in pursuance of such Show Cause Notices or even issuance of Show Cause Notices are successfully delayed for years together, defeating the very purpose for which such Show Cause Notices are issued and possible revenue which can be gathered out of Adjudication Orders passed in pursuance of such Show Cause Notices. This other side of the coin was perhaps not envisaged by the Board when it laid down guidelines - Therefore, the Board should re-look into this aspect of the matter. The learned Single Judge was more than benevolent in granting this opportunity to the Assessee in terms of the Board s Circular even post facto Show Cause Notice and allow him an oppotunity to raise his preliminary objections before the Adjudicating Authority who is supposed to decide the objections and either sustain the said Show Cause Notice or curtail or set aside the same. Once the order thereon was passed, we are of the opinion, as rightly pointed out by the learned counsel for the Revenue, that it is something like upholding the issuance of re-assessment notice under Section 148 of the Income Tax Act and under the Excise Law to justify the issuance of Show Cause Notice itself - Nothing more can be done in such cases by the writ Court and therefore, we feel that the Assessee ought to have approached the concerned Assessing Authority by raising his objections on the merits of the case, so that the proceedings under the Act could have proceeded further. The appeal cannot be entertained and is dismissed.

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• CST, VAT & Sales Tax

• 2020 (12) TMI 63
  Validity of assessment order - Forfeiture of sales tax charged erroneously - error apparent on the face of record or not - appeal dismissed on the ground that there is neither any illegality nor any impropriety in the order passed by the revisional authority and invoking powers under Section 63-A of the Act - HELD THAT:- Admittedly, the sales have been made in the course of import and therefore, the transaction in question is not exigible to tax under the Act as the same is covered under Section 5(2) of the CST Act. Article 286(1)(b) of the Constitution of India provides that no law for State shall impose or authorize the imposition of tax on supply of goods or of services or both where such supply takes place in the course of import of goods or services or both into, or export of goods or services or both out of territory of India. Thus, the levy of Value Added Tax under the Act on the goods which were sold during the course of import was clearly outside the purview of the Act. This was an error apparent on the face of the record. Even though, the assessing officer has referred to Section 39(1) of the Act, however, in substance, the Assessing Officer has exercised the powers under Section 69(1) of the Act, which deals with rectification of the mistake. Section 69(1) of the Act empowers the prescribed authority, assessing authority or revisional authority to rectify any mistake apparent from the record. Since, the levy of tax under the Act on the sale of goods during the course of import was an error apparent on the face of the record, the Assessing Officer in purported exercise of powers under Section 69(1) of the Act has rightly rectified the same. It is trite law that from the tenor of the order, the source of power can be traced. Therefore, merely because the Assessing Officer has referred to Section 39(1) of the Act, the same would not invalidate the order passed by the Assessing Officer. However, the revisional authority as the tribunal has failed to appreciate the aforesaid aspect of the matter. The tribunal has decided the question of law involved in the revision before it erroneously. The order of AO is restored - revision disposed off.

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• Indian Laws

• 2020 (12) TMI 62
  Dishonor of Cheque - insufficiency of funds - offence punishable under Section 138 of the NI Act or not - existence of debt and liability or not - rebuttal of presumptions - Sections 118 and 139 of the NI Act - HELD THAT:- It is well settled law that when concurrent findings of facts rendered by the trial court and the appellate court are sought to be set aside in revision, the High Court does not, in the absence of perversity, upset factual findings arrived at by the two courts below. It is not for the revisional court to re-analyse and reinterpret the evidence on record in a case, where the trial court has come to a probable conclusion. Unless the contrary is proved, it is presumed that the holder of a cheque received the cheque of the nature referred to in Section 138 of the NI Act for the discharge, in whole or in part, of any debt or other liability. In the case at hand, the accused has no case that she has not signed the cheque or parted with under any threat or coercion. That apart, the accused has no case that unfilled cheque had been lost irrecoverably or stolen. The accused failed to prove in the trial by leading cogent evidence that there was no debt or liability. Both the trial court and the appellate court rightly held that the burden was on the accused to disprove the initial presumption under Sections 118 and 139 of the NI Act. The burden is not discharged rightly. The complaint was filed before the trial court in 2006. The complainant has been prosecuting this case for the last 14 years. The accused has not adduced rebuttal evidence before the trial court. It is not just and proper to remand the case for retrial on the strength of the additional documents produced. The accused has been conducting this criminal case for the last 14 years. Considering the facts and circumstances, it is just and proper to modify the sentence awarded by the two courts below by sustaining the conviction imposed - criminal revision petition is partly allowed.

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• 2020 (12) TMI 61
  Grant of Bail - bail was granted on the condition of deposit 35% of the amount imposed as fine by the learned Magistrate - entire conspiracy to grab the agricultural land of father of applicant against which a civil suit is also pending - HELD THAT:- Identical issue decided in the case of Yatendra Bharadwaj [ 2018 (5) TMI 2027 - ALLAHABAD HIGH COURT ] where it was held that The benefit of the said order may be extended to the applicant also - order passed by learned Sessions Judge Agra are hereby modified to the extent that the applicant shall deposit only 10% of the amount of fine of Rs. 75,00,000/- imposed by the appellate Court as a pre-condition for being released on bail and on furnishing a personal bond of Rs. 20,000/- and two sureties of the like amount to the satisfaction of the court concerned till the disposal of the appeal - application allowed in part.

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