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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter December 7, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Securities / SEBI Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles RIGHT TO INFORMATION ACT IS NOT THE PROPER LAW FOR REDRESSAL OF GRIEVANCES/DISPUTES News India must strive to become the global capital of millets: Shri Piyush Goyal Notifications GST - States F. No. 3(10)/Fin(Exp-I)/2022-23/DS-I/934 - dated 5-12-2022 - Delhi SGST Supersession Notification No. F.3 (17)/Fin (RevI)/2017-18/DS-IV/602 dated 27th July, 2021 62/GST-2 - dated 29-11-2022 - Haryana SGST Haryana Goods and Services Tax (Sixth Amendment) Rules, 2022. 61/GST-2 - dated 7-10-2022 - Haryana SGST Haryana Goods and Services Tax (Fifth Amendment) Rules, 2022. 60/GST-2 - dated 7-10-2022 - Haryana SGST Haryana Goods and Services Tax (Fourth Amendment) Rules, 2022 S.O. 654 - dated 5-12-2022 - Jammu & Kashmir SGST Supersession of Notification SRO 534 dated 29.12.2017 S.O. 87/P.A.18/2022/S.1/2022 - dated 21-11-2022 - Punjab SGST Seeks to bring in force provisions of sections 2 to 15, except section 13, of the Punjab Goods and Services Tax (Amendment) Act, 2022 S.O. 86/P.A.18/2022/S.1/2022 - dated 21-11-2022 - Punjab SGST Seeks to bring in force provisions of section 13 of the Punjab Goods and Services Tax (Amendment) Act, 2022 F.1-11(91)-TAX/GST/2022/Part - dated 2-12-2022 - Tripura SGST Seeks to appoints the 1st day of October, 2022 notify provisions of sections 2 to 15 except clause (c) of section 12 & 13 of the TSGST (5th Amendment) Act, 2022 F.1-11(91)-TAX/GST/2022/Part - dated 2-12-2022 - Tripura SGST Appoints 5th day of July, 2022 notify provisions of sections 2 to 15 except clause (c) of section 12 & 13 of the TSGST (5th Amendment) Act, 2022 SEBI SEBI/LAD-NRO/GN/2022/109 - dated 5-12-2022 - SEBI Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Seventh Amendment) Regulations, 2022 Highlights / Catch Notes GST Violation of principles of natural justice - pre-show cause notice consultation - notice based on audit observation - insufficient time to respond - HC restored the SCN with direction to the assessing officer to consider and discuss the case with assessee - order of HC sustained - SC Visit to Get Source Rate of GST on services relating to setting up of solar power projects - 18% or 5% - Determination of value of services involved - GST Council has given clarity on specified Renewable Energy Projects that GST can be paid in terms of 70:30 ratio, for the goods and services - Appellate Authority directed to consider the issue afresh in terms of the above Circular. - HC Visit to Get Source Maintainability of Advance Ruling application - In the instant case the questions, on which the applicant seeks advance ruling, are not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the said applicant, but in relation to a completed supply, provided by them. - Application rejected - AAR Visit to Get Source Classification of goods - Satin Rolls and Taffeta Rolls - The tariff heading 5806 covers the woven fabrics that are not covered under heading 5807 consisting of warp without weft assembled by means of an adhesive (Bolducs). It is an admitted fact that the impugned products are woven products consisting of warp and weft and are not assembled by means of an adhesive. Thus the impugned products are not covered under tariff heading 5806. - AAR Visit to Get Source Income Tax Supremacy of decision division bench of a non-jurisdictional High Court and a single judge bench of a non-jurisdictional High Court - judicial hierarchy - Applicability of the provisions of section 144C - division bench decision of Hon’ble non-jurisdictional High Court, is required to be followed even if it is contrary to a single bench judgment of another High Court - AT Visit to Get Source TP adjustment - MAM selection - method used for benchmarking the royalty transaction - It may be true that the assessee aggregated payment of royalty with the transaction of manufacturing as it was closely linked and adopted transactional net marginal method but that does not mean that the transactions are so interrelated that they cannot be evaluated separately for applying profit split method. Further, the assessee does not make any unique contribution to the transaction, hence profit split method in this case cannot be applied. - transactional net marginal method is the most appropriate method - AT Visit to Get Source Rectification of mistake u/s 154 - TP Adjustment - arm's length price adjustment - even after holding that there was no apparent mistake in the DRP directions, whereas a finding of the mistake being a mistake apparent in the DRP directions was a sine qua non for invoking the jurisdiction under rule 13. - AT Visit to Get Source Addition u/s. 69A on account of unexplained jewellery - search & seizure - There is no logic for enhancing the quantity of gold by the weight of stones and diamonds. There was no loose stones/diamonds found during the search. What was found was jewellery studded with stones/diamonds. They have neither been valued nor any Expert Valuer's report is available on record. Such an action cannot be supported. Even if it is considered even then alongwith the gold reflected in the books of accounts of the assessee and the explanation on record that credit for the jewellery held by late father and mother-in-law is also considered the occasion to sustain the addition even then does not arise. - AT Visit to Get Source Rectification u/s 154 - There was material on record to support the claim of relief u/s 11 of the Act. It is not the case where the record in the form of Computation, being part of Return, did not contain any material to show there was claim of exemption. Thus acutully it cannot be said that a new or fresh claim was being raised without revising the return. - the primarily the mistake was one which was in the personal information of the assessee. Such a mistake is always rectifiable at any stage. - AT Visit to Get Source Reopening of assessment u/s 147 - Sufficient time between the disposal of Objection against reopening and passing assessment order - Assessee received said with letter rejecting the objection on 10.03.2015 and the AO passed the re-assessment order on 20.03.2015 which is against the binding direction of Hon’ble High Court - order of re-assessment cancelled - AT Visit to Get Source Reopening of assessment u/s 147 - assessment is in pursuance of an order on appeal, etc. u/s 150 - Already order of the Tribunal has been given effect to by the assessing officer for the assessment year 1995-96 by the consequential order dated 21.12.2005. That being the position, it was not open to the assessing officer to have once again issued a notice under Section 148 r.w.s. 150 of the Act to reopen the assessment for the assessment year 1995-96, that too, on a different issue unconnected with the order of the Tribunal. - HC Visit to Get Source Long term capital loss on sale of equity shares - Approved Amalgamation Scheme - This is a classic case where the Ld.AO had denied the benefit which is statutorily available to the assessee as per the Act. In any case, the scheme of merger had already contemplated these transactions of loss on shares by including the same in the scheme and had also considered the loss incurred by the transferor company getting vested with the transferee company pursuant to the scheme of amalgamation. - AT Visit to Get Source Addition u/s 68/69 - undisclosed income - absence of source of purchase of the property - Merely, because the assessee’s PAN number was mentioned as he was the Director of one of the company, the purchase cannot be said to be made by him when the purchase has been shown in the P&L account by the said company itself as well as part of the closing stock of the said company - AT Visit to Get Source Exemption u/s 10 (1) - agriculture income - contract farming - Merely because the assessee took the land on lease for conducting their research operations to produce the foundation seeds of the hybrid varieties, such a lease cannot ipso facto make the operations of the assessee as contract farming. Contract farming in the context of this case would be that if the assessee outsources the agricultural operations which they are doing for themselves now, to some other third party. - AT Visit to Get Source Revision u/s 263 - set off of loss in speculation business against business income - In the present case, the principle business of the assessee is trading in shares. Hence, deemed speculative loss from trading in shares is to be set off of against the business income of the assessee. This ground of the assessee is allowed. - AT Visit to Get Source TP adjustment - Comparability - Functional dissimilarity - there is wide difference in the functions of a manufacturer and assembler. It is further stated that the assessee’s hydraulic products used fluids for movement of parts of a system. M/s Asco (India) Ltd. manufacturers Nuematic products which use Air as a medium for movement of parts of a system. - Asco (India) Ltd. could not be functionally comparable with the assessee and hence it cannot be considered as comparable company in the hands of the assessee. - AT Visit to Get Source Unexplained expenditure on the basis of unreconciled AIR statement - Naturally, if the assessee has not entered into such transaction, the learned AO should have examined the above claim of the assessee of consistent denial through external sources. The assessee has also given the name of employee whose credit card transactions are found with the bank. Further, with respect to another party also assessee denied having entered into any such transactions. - AO directed to reconsider the issue - AT Visit to Get Source Unexplained Credit u/s 68 - Statement of a witness who has no knowledge of relevant facts towards receipt of cash from assessee is not entitled to any weight and is not pertinent in so far as assessee is concerned. Inexplicably, while implicating a third party with grave charges, no enquiry has been made by AO from key persons to elicit any credible information, despite specific request & suggestion from the assessee - AT Visit to Get Source Corporate Law Winding up of company - Operation of a company also generates employment. But, for the fact that the appellant was set ex parte there was no substantial material to show that the financial position of the appellant was so poor there was no other option but to windup the company. As it now stands the appellant has settled its accounts with the petitioner and the secured creditor bank and assert that there are no other liabilities. It is not disputed by the Official Liquidator that there are no other claims received by his Office. - Winding up order set aside - HC Visit to Get Source Indian Laws Dishonor of Cheque - It is the solemn duty of the Courts to separate the grain from the chaff. As per Section 142(1)(a) of the Act, the sole criteria being that the complaint must be filed by the payee or the holder of the cheque in due course, is duly satisfied in the present case - this Court is persuaded to hold that the complaint against petitioner no.2 is maintainable. - HC Visit to Get Source Service Tax Pre-show cause notice consultation - notice based on audit observation - insufficient time to respond - The view of the learned Single Judge that there has been violation of principles of natural justice is agreed upon - however, quashing of the said show cause notice-cum-demand would not be necessary in the facts and circumstances of the case and if the order passed in the writ petition is slightly modified, it will not only protect the interest of the assessee but also the interest of the revenue. - HC Visit to Get Source Case Laws: GST 2022 (12) TMI 263 Seeking grant of bail - clandestine manufacture and supply of chewing tobacco without payment of leviable duties and tax - offence alleged against him under Section 132(1)(a),(h),(k) and (l) read with Section 132(5) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- It is no doubt true, that an allegation is made with regard to the transportation of unmanufactured tobacco and it is alleged that such procurement of unmanufactured tobacco is for clandestine manufacture and supply of zarda without payment of leviable duties and taxes. Though it is further contended that in the process of the investigation, the transportation of a larger quantity of unmanufactured tobacco weighing about 35,57,450 kgs. is detected, these are all matters to be established based on the evidence, in the trial. In considering the application for bail, it is noted that the petitioner was arrested on 21.07.2022 and while in custody, the investigation has been completed and the charge sheet has been filed. Even if it is taken note that the alleged evasion of tax by the petitioner is to the extent as provided under Section 132(1)(l)(i), the punishment provided is, imprisonment which may extend to 5 years and fine. The petitioner has already undergone incarceration for more than four months and completion of trial, in any event, would take some time. Needless to mention that the petitioner if released on bail, is required to adhere to the conditions to be imposed and diligently participate in the trial. Hence, it is directed that the petitioner be released on bail subject to the conditions to be imposed by the trial Court, which among others, shall also include the condition to direct the petitioner to deposit his passport - SLP allowed. 2022 (12) TMI 262 Violation of principles of natural justice - pre-show cause notice consultation - notice based on audit observation - insufficient time to respond - HC restored the SCN with direction to the assessing officer to consider and discuss the case with assessee - HELD THAT:- There is a substantial compliance to the principle of natural justice and the petitioner has sufficient opportunities to satisfy the Authorities that there is no reason to proceed against it on the basis of show cause notice, which was issued without pre-consultation process. SLP disposed off. 2022 (12) TMI 261 Cancellation of registration of the petitioner - petitioner has not commenced his business within six months and he has taken voluntary registration - HELD THAT:- This Court after hearing the respective counsel finds that the petitioner has not preferred any reply before respondent no. 3 to the show-cause notice, as such, the order dated 19.09.2019 passed by the authority cancelling the registration as well as the appellate order dated 25.08.2021 passed by the appellate authority are hereby quashed and the matter is remitted back to respondent no. 3 to decide the matter giving an opportunity to petitioner to move his reply within 15 days from today. Petition allowed in part. 2022 (12) TMI 260 Rate of GST on services relating to setting up of solar power projects - 18% or 5% - Determination of value of services involved - Violation of principles of natural justice - contention of the Petitioner that the impugned order is not legal and proper and is in violation of principles of natural justice, as the impugned order communicated is without any preamble intimating the method and procedure - demand of GST with interest and penalties - HELD THAT:- A perusal of Circular No.163/19/2021-GST dated 06.10.2021 issued by the Department of Revenue, Ministry of Finance, Government of India, which is now placed on record, would show that GST Council has given clarity on specified Renewable Energy Projects that GST can be paid in terms of 70:30 ratio, for the goods and services, for the period 1st July, 2017 to 31st December, 2018, in the same manner prescribed for the period on or after 01.01.2019, as per the explanation in the Notification No.24/2018 dated 31st December, 2018. In view of the Circular No.163/19/2021-GST, dated 06.10.2021, we deem it appropriate to remand the matter back to the 1st respondent/Appellate Authority to consider the issue afresh in terms of the above Circular. Appeal allowed by way of remand. 2022 (12) TMI 259 Cancellation of the Registration Certificate of petitioner - failure to file Goods and Services Tax monthly returns for a continuous period of six months - HELD THAT:- In view of the fact that this Court has been consistently following the directions issued in the case of TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR. [ 2022 (2) TMI 933 - MADRAS HIGH COURT] and the Revenue/Department has also accepted the said view as evident from the fact that no appeal has been filed in any of the matters, this Court intends to follow the above order of this Court - It was held in the above case that Since, no useful will be served by not allowing persons like the petitioners to revive their registration and integrate them back into the main stream, the impugned orders are liable to be quashed and with few safeguards - these petitioners deserve a chance and therefore should be allowed to revive their registration so that they can proceed to regularize the defaults. In view of the same, this Court feels that the benefit extended by this Court in Suguna Cutpiece Centre's case cited supra, may be extended to the Petitioner - petition allowed. 2022 (12) TMI 258 Cancellation of registration of petitioner - several opportunities that were extended to them post-cancellation of the registrations by way of Amnesty Schemes was missed - HELD THAT:- Identical issue decided in the case of M. MALLIKA MAHAL, REPRESENTED BY ITS PROPRIETOR, MANTHIRAM, S/O. SUNMUGAVEL VERSUS THE COMMISSIONER OF CENTRAL GST AND CENTRAL EXCISE, THE DEPUTY COMMISSIONER, GST-APPEAL, CHENNAI-II, THE ASSISTANT COMMISSIONER, CIRCLE OFFICER, (ST AND GST) [ 2022 (9) TMI 1106 - MADRAS HIGH COURT] where it was held that The petitioners are permitted to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid. Since all learned counsels for the petitioners and the respondents concur on the position that the above order will be applicable on all fours in the present writ petitions, the same order is taken to be passed in these matters as well. Petition allowed. 2022 (12) TMI 257 Seeking grant of Regular Bail - fraudulent transfer of Input Tax Credit (ITC) without actual supply of corresponding goods - HELD THAT:- In the facts of the present case, during search proceedings, the incriminating material relevant for the investigation purpose have been seized and recovered by the department. The applicant is in custody since 24.02.2022 and after filing the complaint before the Magesterial Court, there is no progress in the trial and it will take considerable time. The entire case is based on documentary evidence. The department failed to point out that further custody of the applicant is necessary. The department has already recovered and seized Rs.64 lakhs and the applicant has shown his bonafide to deposit amount of 10%. In such circumstances, considering the facts and circumstances of the present case and the role attributed to the present applicant, when investigation qua him is virtually over, keeping him behind bar would not serve any further purpose. The present application is allowed and the applicant is ordered to be released on regular bail on executing a personal bond of Rs.10,000/-, with one surety of the like amount to the satisfaction of the learned Trial Court and subject to the conditions imposed. 2022 (12) TMI 256 Maintainability of Advance Ruling application - application filed after the completion of O M work, as the tax amount was withheld by the contractee BWSSB - HELD THAT:- In the instant case the questions, on which the applicant seeks advance ruling, are not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the said applicant, but in relation to a completed supply, provided by them. Therefore the instant application is beyond the jurisdiction of this Authority and hence is liable for rejection. Application rejected. 2022 (12) TMI 255 Classification of goods - Satin Rolls and Taffeta Rolls with sizes between 19mm to 40mm - to be classified under HSN 5806, which attracts GST rate of 5% or under HSN 5807 that attracts GST rate of 12% - HELD THAT:- In the instant case, the impugned products, as per the applicant, are woven fabrics having width less than 30 cm; Taffeta rolls made up of polyester yam with acrylic coating to protect from raveling or fraying and also to have better printing quality; Satin rolls made up of polyester yam, with optical or non-optical coating for brightening and to remove impurities, having plain selvedges on both sides of the fabric; cut with hot blades to arrest fabric fraying. Thus the impugned products qualify to get covered under Narrow Woven Fabrics . The tariff heading 5806 covers the woven fabrics that are not covered under heading 5807 consisting of warp without weft assembled by means of an adhesive (Bolducs). It is an admitted fact that the impugned products are woven products consisting of warp and weft and are not assembled by means of an adhesive. Thus the impugned products are not covered under tariff heading 5806. The impugned products are narrow woven fabrics, made up of manmade fibres i.e. Polyester yarn and thus are squarely covered under tariff heading 5807 10 20. Therefore the impugned products merit classification under tariff heading 5807 10 20. Income Tax 2022 (12) TMI 254 TDS u/s 194C - disallowance made u/s.40(a) - non-deduction of TDS on the freight charges - assessee in default and tax liability u/s. 201(1)was determined along with interest u/s. 201(1A) - HELD THAT:- As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Dilip C. Palany [ 2022 (10) TMI 1130 - ITAT AHMEDABAD] we respectfully follow the decision rendered by the Co-ordinate Bench of this Tribunal in the said case and delete the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) under Section 40(a)(ia) - Decided in favour of assessee. 2022 (12) TMI 253 Unexplained cash credits u/s 68 - assessee had failed to furnish satisfactory explanation with regard to the identity of the parties, sources thereof, and genuineness of the transactions - CIT-A restricted addition to 0.15% - HELD THAT:- AO has taken note of the information received from the sales tax/DGIT(Inv.) as well as the statement of Shri Abhishek Morarka (director of assessee s group of companies) to the sales tax department, wherein he admitted that the assessee company is also engaged as an entry operator for beneficiaries in lieu of commission (not into genuine purchase/sales of any goods/products). Based on this information and the infirmities pointed out elaborately (point wise) by AO at para 10 and relying on judicial precedents V Pinto Co. [ 2005 (2) TMI 751 - ITAT BANGALORE ] and the ratio of case law of Hon ble Jurisdiction High Court in Ratanlal Omprakash [ 1981 (4) TMI 82 - ORISSA HIGH COURT ] AO found fault with the accounts maintained by the assessee and held it to be incorrect and incomplete. And for the elaborate reason AO rejected the books of accounts for AY. 2011-12 which action has been confirmed by the CIT(A) cannot be faulted since we completely agree with the reasoning given by AO to have rejected the books. So no separate reasons of our own are not given (refer Hon ble Supreme Court order in CIT Banglore Vs. K. Y. Pilliah and Sons [ 1966 (10) TMI 35 - SUPREME COURT ]. Therefore, ground no. 1 of the assessee s (CO) fails. Coming to the action of the CIT(A) restricting the commission at 0.15% of the sales rather than 1% of the total purchases we find the action to be a plausible view and so we uphold the same. Therefore, the ground no. 1 of the revenue fails and ground no. 2 of the assessee to further restrict the commission at 0.10% is rejected. Addition by estimating the commission earned @ 1% on purchase and sales of investment transaction made during the year by treating the said transaction as accommodation entry - HELD THAT:- CIT(A) noted that the assessee failed to prove the correctness of the transactions in the purchases and sale of shares. So he confirmed the action of AO. Before us even though the assessee has filed the CO, it has not been filed any material to take a different view other than the view taken by AO/Ld. CIT(A). Therefore, we uphold the action of the Ld. CIT(A) and dismiss this ground of appeal of the assessee s CO. Disallowance of expenditure treated to the profit and loss account - books of the accounts has been rejected and the AO has resorted to estimate the income, [one percent of sales purchases] - HELD THAT:- CIT(A) has dismissed this ground of appeal of the assessee because once the books of the accounts has been rejected and the AO has resorted to estimate the income, [one percent of sales purchases] according to him, the AO has rightly not separately allowed the expenditure claimed in the P L Account which impugned action of the Ld. CIT(A) is in consonance with settled position of law; and on the very same reasoning, we uphold the action of AO in not separately allowing this expenditure because he rejected the books and resorted to estimation of income; and therefore Ld CIT(A) rightly confirmed the AO s action on this issue, which does not merit any interference from our side. So we uphold the impugned action of Ld. CIT(A) and therefore this ground of assessee is dismissed. 2022 (12) TMI 252 Addition u/s 68 - unexplained cash credit - bogus gain on sale of shares - HELD THAT:- It is not in dispute that assessee had sold the shares in piecemeal spreading over two assessment years that too at a price ranging from Rs.41 to 70/- per share. We find that assessee was selling the shares only from 16/02/2013 onwards in piecemeal. Even according to the ld. AO, the price rigging of shares of ACEL had happened only during the period 29/11/2010 to 26/12/2012. Assessee had not sold the shares during this period. Hence, the entire basis of rigging of prices, manipulation of prices, role of the assesee thereon, completely falls flat and fails. In any case, one of the main grievance of the ld. AO is that there were 47 investors to whom preferential allotment of shares were made on 02/03/2012 by ACEL. Admittedly, the assessee s name does not figure in those 47 investors. On this ground also, the case of the ld. AO fails. Despite all these strong points, the assessee has come forward to buy mental peace and to avoid protracted litigation pursuant to the survey by offering gain arising on sale of shares of ACEL as business income instead of short term capital gains offered at special rates of tax. Assessee has actually paid excess tax to the Government. It is not in dispute that assessee had duly paid the differential taxes together with interest thereon along with revised return filed by the assessee on 22/03/2016. It is also pertinent to note that in the various statements recorded by the AO from various persons, the name of the assessee was never mentioned by any of them. Hence, it could be safely concluded that the assessee herein has got absolutely no link with either promoters of the company, entry providers, exit providers, 47 individuals to whom preferrential allotment of shares were made and other private individuals. Hence, we have no hesitation to uphold the order passed by the ld CIT(A) in this regard. Hence, we direct the ld. AO to accept the gain arising on sale of shares to be taxed only under the head income from business and not as unexplained cash credit u/s.68 of the Act. Accordingy, the grounds 1-3 raised by the Revenue are dismissed. Speculative transaction - Deduction for loss claimed by the assessee in respect of commodity transactions of National Spot Exchange Ltd., (NSEL) treating it as not speculative in nature - HELD THAT:- It is a fact that assessee had made payment for purchase of commodities during the regular course of commodity trading activity carried out by it. These payments are made through regular registered brokers to NSEL. Pursuant to the said payment, the assessee would be issued warehousing receipt evidencing the storage of commodities in the designated warehouse. Pursuant to the scam broke down in NSEL wherein it revealed that they were involved in issuing fake warehousing receipts to various investors like assessee without storing physical commodities in such warehouse, the investors like assessee could not subequently sell those goods in view of the fact that there were no commodities that were actually stored in the warehouse. Accordingly, the assessee being an investor had to file the case alongwith other investors before competent authority. All these facts are in public domain and NSEL was able to pay part of the amount back to various investors from time to time. The assessee after reducing the amount recovered thereon, had claimed balance amount as normal business loss incurred by it in the regular course of carrying out its business transactions. As corectly stated by the ld. CIT(A), as per the provisions of Section 43(5)(d) of the Act, transactions carried out by the assessee cannot be treated as a speculative transaction. Hence, it should be considered as regular business transaction and in case it resulted in a loss, it should be construed as normal business loss. Hence, no infirmity in the order of the ld. CIT(A) granting relief to this extent. Accordingly, the ground raised by the Revenue are dismissed. Allowaibility of other regular business expenses, warehouse rent, brokerage and commission and stamp charges - HELD THAT:- As already held that the commodity transactions were carried out in the regular course of its business and the same cannot be treated as a speculative business carried on by the assessee. Once, it is held that these are regular business transactions, the aforesaid business expenditure also would become squarely allowable as deduction u/s.37 of the Act. Hence, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly,the ground raised by the Revenue are dismissed. 2022 (12) TMI 251 Disallowance of deduction u/s 80IB (10) - AO noted that certain residential units of C wing of the housing project exceeded the limit of 1000 Sq. ft. as per definition of built up area given in section 80IB (14)(a) - whether the areas of the flats in some of the floors were not more than 1000Sq. ft.? - main contention of the assessee before the AO was that the project is not situated within 25 kms of outer limit of city of Mumbai and therefore, the benefit of eligible/allowable maximum built up area of 1500 Sq. ft. is not available to the assessee - AO had noted that certain flats measured slightly more than 1000 sq. ft. but less than 1100 Sq. ft. and therefore according to him, assessee was not eligible for any deduction u/s 80IB(10) - HELD THAT:- Statue has used the words within 25 kms from the municipal limits of city of Delhi or Mumbai. The section uses the words limits of the city with the prefix of municipal limit . The municipal limit refers to municipality and municipality of Mumbai is known as Brihanmumbai Muncipal Corporation which is the governing civic body of the city known as BMC . Further, the statue has provided in clause (c) the residential unit must be of maximum built up area of 1000 Sq. ft. if such residential unit is situated within the municipal limit of city of Delhi or Mumbai. It is only when the residential unit is outside 25 Kms from the municipal limits of Delhi or Mumbai, the maximum built up area eligible for deduction is 1500 Sq. ft. The enactments which has been referred by the learned counsel before us mainly envisages about the area of city of Mumbai which extend from Colaba in the South, Mahim on the western side and Sion on the eastern side. And Mumbai Suburban extends from Kurla to Dahisar on western side and Mulund on the eastern side. These are two administrative districts but it does not refer that this is the municipal limit and these are two Municipal Corporation or there are two municipal limits, one for city of Mumbai and one for Mumbai Suburban district. Though, in colloquial terms the Mumbai is divided into town area is referred as Mumbai city and suburban area as suburbs . However, there is only one municipal corporation known as BMC and the entire Mumbai is covered under BMC and within its municipal limit lies both the administrative zones, city and suburban. What the statue has provided is the municipal limit of the city and not the limit of any administrative limit. In Mumbai there is only one Municipal Corporation and therefore the limit has to be seen from the municipal limit of BMC and not city of Mumbai as understood under the various enactments for the purpose of district division. Thus, we agree with the contention of the learned DR as incorporated above and we are tandem with his reasoning given by him. Moreover, this issue is also squarely covered by the decision of Laukik Developers [ 2006 (7) TMI 534 - ITAT MUMBAI] as incorporated in the submissions of the DR - Thus, this issue is resided against the assessee. Whether the terrace is part of the built up area or the flower bed area is to be excluded from the built up floor area? - Even the learned counsel at the time of hearing has not rebutted the findings of the Assessing Officer as described by him in detail in the assessment order. Though, it is bit harsh an interpretation that if this flower bed and terrace is included the built up area marginally crosses the 1000 Sq. ft. limit and may not be used for the purpose of internal flat, however, Assessing Officer has analyzed the designs and has measured the entire exact built up area, therefore, we don t find any reason to deviate from such a finding of the AO and accordingly same is confirmed. We hold that deduction of 80IB (10) will not be allowed on the units/flats which have exceeded 1000 Sq. ft. even marginally. Accordingly, appeal of the assessee is dismissed. Deduction 80IB (10) on pro-rata basis on the units which are less than 1000 sq. ft. - We find that it is undisputed fact in so far as the units in wing A wing B are concerned they are undisputedly below 1000 Sq. ft. and therefore learned CIT(A) has rightly allowed the deduction for claim made u/s 80IB(10) which is in conformity with the various judgment of Hon ble Bombay High Court and series of ITAT order as incorporated in the earlier part of order dealing with the submissions of the learned counsel for the assessee. It is not borne out from the record, whether there is any flat or unit in wing C which is slightly less than 1000 Sq. ft.; and incase if there is any such unit, then AO is directed to allow the proportionate deduction on pro-rata basis and allow the deduction of u/s 80IB(10). Thus, the revenue appeal is dismissed. 2022 (12) TMI 250 Supremacy of decision division bench of a non-jurisdictional High Court and a single judge bench of a non-jurisdictional High Court - judicial hierarchy - Applicability of the provisions of section 144C inserted vide Finance (No 2) Act 2009 to the assessment year 2010-11 - Diversified views - Reopening of assessment u/s 147 beyond the time limit u/s 153 - HELD THAT:- So far as choice between a division bench decision of a non-jurisdictional High Court and a single judge bench of a non-jurisdictional High Court is concerned, it is clear that a simple objective criterion of choice will require the division bench decision to be preferred over the single judge bench decision. Therefore, even though the decision of the Hon ble Madras High Court, in Vedanta Ltd s case [ 2020 (1) TMI 168 - MADRAS HIGH COURT] cannot be said to per incuriam, for the simple reason that a Hon ble High Court judgment does not constitute a binding precedent for any other Hon ble High Court other than the Hon ble High rendering such a judgment, division bench decision of Hon ble non-jurisdictional High Court, is required to be followed even if it is contrary to a single bench judgment of another High Court in the case of Vedanta Ltd (supra). The impugned assessment order thus cannot be said to be barred by limitation. We uphold the impugned assessment order on this count, and decline to interfere in the matter on this jurisdictional ground. As we are deciding this issue on this short ground alone, all other contentions on merits remain open. The additional ground of appeal is dismissed. As no arguments were advanced by the parties on the remaining grounds of appeal, we deem it fit and proper to direct the Registry to fix the matter for hearing on the other grounds of appeal taken by the parties. 2022 (12) TMI 249 Disallowance of Interest expenses u/s 36(1)(iii) - HELD THAT:- We direct the AO to work out the figure of interest disallowance considering the figure being assessee s own fund. For this we relied on the decision of Hon ble jurisdictional High Court in the case of Reliance Utility and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - We further direct the AO to delete the addition of interest expenses u/s 36(1)(iii) after considering assessee s own funds as mentioned above. As directed in clear terms no addition to income on this ground can be made, the only effect of this working to be done by AO will be on the amount of Interest capitalised by the assessee and carried to Balance-Sheet. Appeal filed by the assessee is partly allowed. 2022 (12) TMI 248 Reopening of assessment u/s 147 - Reason to believe - assessment was reopened after 4 years from the end of relevant assessment years - HELD THAT:- As seen from the reasons recorded by AO for reopening the assessment, there was no allegation by AO that there was any failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. It is also noted that assessment for the assessment year 2008-09 has been originally completed u/s 143(3) of the Act vide order dated 3.12.2010. Similarly, the assessment for 2009-10 has been completed vide assessment order passed u/s 143(3) dated 23.12.2011. At the time of completion of original assessment, the assessee furnished all the details and there was no failure on the part of the assessee to disclose all material facts fully and truly for the purpose of assessment and even in the reasons recorded for reassessment, there was no allegation by AO that assessee has failed to disclose all material facts fully and truly. In this situation, it cannot be said that the assessee had failed to disclose all material facts fully and truly required for the assessment. Therefore, we are of the opinion that there is no negligence on the part of the assessee in furnishing the required details for completing the original assessment. Being so, by placing the decision of coordinate bench in the case of Kochaniyan Unnithan and Anr[ 2019 (3) TMI 2001 - ITAT COCHIN] we quash the assessment for assessment year 2008-09 and 2009-10. Receipt of corpus donation - A.Y. 2010-11 - In this case, the original assessment has been completed u/s 143(3) of the Act on 27.3.20123. Later, it was found that there was a difference between opening and closing balance of the general fund amounting to Rs.64.22 lakhs, which has not been verified in the assessment order made u/s 143(3) of the Act. For that reason, the AO has reopened the assessment by issuing notice u/s 148 and added back the difference in general fund which had been claimed by assessee as corpus donation. In our opinion, all the material already available on record at the time of completion of original assessment and there was no material to come to the conclusion that income escaped assessment - In our opinion, since there was no material brought on record by to come to the conclusion that income escaped assessment while recording the reasons for reopening of assessment and it is only a change of opinion. Quantum of accumulation and carry forward - amount that can be accumulated and carried forward should be ascertained at 15% of gross receipts of the appellant for the year - HELD THAT:- After hearing both the parties, we are of the opinion that this issue came for consideration before the coordinate bench in the case of Divine Trust, Chalakudy [ 2016 (1) TMI 1492 - ITAT COCHIN] held on a plain reading of section 11(1)(a) of the Act, it can be seen that 85% of the income of the trust to be applied for charitable/religious purposes and upto15% is permitted for accumulation in order to avail full exemption. There is no condition stated/s 11(1 )(a) of the act to invest the 15% accumulated income in the modes specified as per section 11(5) of the Act. Section 11(2) of the Act is for giving relief to unapplied income which is short of 85% with a condition of keeping such surplus in the specified mode as per section 11(5) of the Act. Voluntary contributions OR corpus donations - HELD THAT:- After hearing both the parties, we are of the opinion that this issue is squarely covered by the decision of DIT Vs. Sri Ramakrishna Seva Ashram [ 2011 (10) TMI 369 - KARNATAKA HIGH COURT] held centres were started in the year 1992 with due registration and had been working since then for the welfare of needy people and the first project of it was leprosy eradication project. Likewise, they had 14 projects, which were started in rural areas. The contributions received were kept in fixed deposit. It showed that the intention of the assessee was to treat these contributions as corpus and the income derived from the corpus was used for carrying on the activities. The assessee was entitled to renewal of registration - thus we allow the ground taken by the assessee and direct the AO to consider the contribution of Corpus donations. Setoff of excess of application of earlier years - excess application of the appellant over 85% of the gross receipts during the earlier years was eligible to be carried forward and set off during this year against the gross receipts - HELD THAT:- The Hon ble Supreme Court in the case of CIT(Exemption) Vs. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER] has decided the similar issue, wherein held any excess expenditure incurred by trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking section 11 - In view of the above, we allow the ground taken by the assessee. 2022 (12) TMI 247 TP Adjustment - selection of profit level indicator ( PLI'') for benchmarking the international transaction - HELD THAT:- Even TPO has also accepted cash profit/cost as PLI for benchmarking the international transaction pertaining to ITeS in assessment years 2007 08 and 2008 09, in assessee s own case. DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decisions cited supra. Thus, respectfully following the decision rendered by Hon ble jurisdictional High Court in assessee s own case [ 2016 (5) TMI 796 - BOMBAY HIGH COURT] . we uphold the plea of the assessee and direct the TPO/Assessing Officer to consider profit before depreciation (PBDIT) as PLI for transfer pricing analysis. Accordingly, ground raised in assessee s appeal is allowed. Reallocation of certain expenses between 10A unit and non-10A unit - HELD THAT:- We find that the lower authorities on the basis that the functions performed, services and products supplied by both the units are identical, allocated the impugned expenditure to STP unit, without considering whether such expenditure was in fact incurred in relation to the STP unit. The assessee has also filed an application dated 29/04/2014 seeking admission of additional evidence, inter-alia, in support of its claim. Thus, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after examination of all the details, including the details filed before us by way of additional evidence, in respect of impugned expenditures incurred by the assessee. We further direct that if upon examination it is found that the expenditure pertains to the places where assessee has no STP unit then said expenditure should be excluded while computing profit of STP unit. Further, the assessee shall be at liberty to file any other detail in support of its claim vis- -vis the impugned expenditures before the Assessing Officer for necessary examination.Assessee s appeal is allowed for statistical purpose. Exclusion of communication expenses from both export turnover as well as the total turnover, while computing deduction u/s 10A - HELD THAT:- We find that this issue is now decided in favour of the taxpayer by the Hon ble Supreme Court in CIT vs HCL technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] . Accordingly, we direct the AO to exclude communication expenditure from the total turnover also to the extent it was excluded from the export turnover. Thus, ground raised in assessee s appeal is allowed. Consideration of servers as computers instead of plant and machinery for the non-STP unit - plea of the assessee that servers in non-STP units should be given similar treatment as was given in case of STP units and depreciation on the same should be charged at 60% - HELD THAT:- We find that the lower authorities denied the claim of the assessee on the basis that the relevant details were not submitted by the assessee. In view of the above, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after examination of all the details in respect of addition to fixed assets in non-STP units. Direct that upon examination, if it is found that servers are forming part of the fixed assets in non-STP units then depreciation on same should be charged at 60% in parity with approach adopted in case of STP units. Assessee is also directed to submit all the details in support of its claim. As a result, ground raised in assessee s appeal is allowed for statistical purpose. Computation of income of the STP unit - HELD THAT:- Since, the issue is regarding the correct computation of deduction under section 10A of the Act and regarding same assessee s rectification application under section 154 of the Act is still pending, therefore, we deem it appropriate to remand this issue to the file of AO for necessary adjudication after consideration of all the details. Needless to mention that no order shall be passed without granting opportunity of hearing to the assessee. As a result, ground raised in assessee s appeal is allowed for statistical purpose. Disallowance u/s 40(a)(ia) - non-deduction of tax at source while making the payment - disallowance of expenditure, inter-alia, in the nature of training, office renovation, office equipment and property maintenance - HELD THAT:- The assessee also incurred certain expenses, in nature of reimbursement of office expenses. As per the assessee, some of these expenditures have been capitalised for Income Tax purpose and debited to the profit and loss account. Assessee has also filed an application seeking admission of additional evidence, whereby the assessee has provided the sample copy of invoices in respect of these expenses as well as the details regarding the expenditure which has been capitalised and debited to the profit and loss account. Since, these details were not examined by the lower authorities, therefore, we considered it appropriate to remand this issue to the file of AO for de novo adjudication, by way of speaking order, after examination of all details, including the details filed before us by way of additional evidence. We further direct that upon examination, if it is found that any expenditure has already been capitalised by the assessee then said expenditure should be excluded. Assessee shall be at liberty to file any other detail in support of its claim. Disallowance of employees contribution to superannuation fund - HELD THAT:- As per the assessee, employees contribution to superannuation fund was deposited on or before the due date of filing of return of income. However, the Revenue disallowed the claim of the assessee on the basis that said deposit was made after the due date prescribed in the relevant statute. We find that in CIT v/s Ghatge Patil Transports Ltd. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] held that both employee s and employer s contributions are covered under the amendment to section 43B of the Act, relying upon the decision of the Hon ble Supreme Court in CIT v/s Alom Extrusions [ 2009 (11) TMI 27 - SUPREME COURT] and therefore payment of employee s contribution on or before the due date of filing of return of income is allowable. We direct the Assessing Officer to delete the disallowance made under section 2(24)(x) read with section 36(1)(va) of the Act. As a result, ground raised in assessee s appeal is allowed. Grant of credit of tax deducted at source - rectification application u/s 154 is still pending - HELD THAT:- Therefore, we direct the AO to grant the credit of tax deducted at source after necessary verification and as per law. Accordingly, ground raised in assessee s appeal is allowed for statistical purpose. 2022 (12) TMI 246 TP Adjustemnt - TPO included 10% addition of the total quantum on import of machinery and tools without any supporting documents and had asked for standard deduction +/- 5% - Assessee prayed that the matter may be remanded back to TPO with a direction to deal the arbitrary addition of 10% - net loss on the foreign currency transactions - whether it is only the notional loss or paper loss and it was not a crystallized loss? - HELD THAT:- We considered the issues and relied on the documents available on record. All the issues together are remanded back to the learned AO for de novo adjudication. AO should consider afresh on the basis of the above mentioned discussion. Assessee pointed out that the foreign exchange loss is a genuine loss which is not at all a notional loss. The Assessee was also directed to submit all relevant documents before the learned Assessing Officer to substantiate its claim. Nonetheless, a reasonable opportunity should be allowed to the Assessee for redressal of its grievances. Disallowance payment of profit which is of the Employees State Insurance - HELD THAT:- The issues were highly discussed in different orders in the Co-ordinate Benches. He mentioned that the payment was made before the due date of filing the return u/s.139(1) of the Act. But at this moment, we are unable to verify the payment details. So, the issue is remanded back to the learned Assessing Officer for further adjudication. Disallwoance u/s 14A r.w.r. 8D - HELD THAT:- Assessee mentioned that no expenditure was incurred for the Assessment Year 2013 2014, the controversial situation on the fact between the Revenue and parties. The issue is further remanded back to the learned Assessing Officer for further verification in the light of the Assessee s payment. The Assessee should be given a reasonable opportunity to substantiate his claim. Disallowance u/s.40(ia) - non-deduction of TDS and Royalty and Guarantee Fees and Professional Charges - HELD THAT:- Assessee mentioned about the CBDT Circular No.5/2015 dated 15.07.2005 and mentioned that the TDS deduction in the previous year but paid in the subsequent year after the time limit prescribed u/s.200(1) of the Income Tax Act, 1961 shall be allowed for deduction. The amount was remitted for the Assessment Year 2011 2012 and 2012 2013. The other issue related to the disallowance of expenses in relation to the scientific research and all the issues are remanded back to the learned AO for further adjudication as because at this stage as there is no such sufficient documentation for adjudicating the issue under factual matrix. 2022 (12) TMI 245 Royalty receipt - FTS/ FIS - HELD THAT:- It is engaged in the business of providing hotel related services in several countries around the world. Assessee is group entity of Starwood. In India the assessee has entered into agreements with various Indian hotels for provision of hotel related services interalia worldwide publicity, marketing and advertising services through its system of sales, advertising, promotion, public relations and reservations. During the course of scrutiny assessment proceedings and taking leaf out of the earlier assessment years in respect of the payments received by the assessee for such services - Thus as relying in assessee s own case [ 2022 (7) TMI 781 - ITAT DELHI] . we direct the AO to delete the impugned additions. The appeal of the assessee is accordingly allowed. 2022 (12) TMI 244 TP adjustment - MAM selection - arm's length price of the appellant's international transaction of payment of royalty - method used for benchmarking the royalty transaction by separately benchmarking it under profit split method - HELD THAT:- The facts in the present assessment year 2016-17 are identical with issue covered by the decision of co-ordinate Bench in the assessee's own case for the assessment year 2013-14 [ 2022 (4) TMI 1443 - ITAT BANGALORE] it is clear from the above OECD guidelines that in order to determine the profits to be split, the crux is to understand the functional profile of the entities under consideration. Although the comparability analysis is at the 'heart of the application of the arm's length principle', likewise, a functional analysis has always been a cornerstone of the comparability analysis. In the present case the assessee leverages on the use of technology from the associated enterprises and does not contribute any unique intangibles to the transaction. It may be true that the assessee aggregated payment of royalty with the transaction of manufacturing as it was closely linked and adopted transactional net marginal method but that does not mean that the transactions are so interrelated that they cannot be evaluated separately for applying profit split method. Further, the assessee does not make any unique contribution to the transaction, hence profit split method in this case cannot be applied. Therefore, we are of the view that transactional net marginal method is the most appropriate method in the case of the assessee.The Tribunal has upheld transactional net marginal method as most appropriate method from the assessment years 2007-08 to 2011-12. In those assessment years the dispute was whether transactional net marginal method or comparable uncontrolled price was the most appropriate method. It is for the first time in the assessment year 2013-14 that the Revenue has sought to apply profit split method as most appropriate method. In the given facts and circumstances, we are of the view that transactional net marginal method is the most appropriate method and the learned Assessing Officer is directed to apply the said method in determining the arm's length price, after affording opportunity of being heard to the assessee. The grounds of appeal of the assessee are treated as allowed. TDS u/s 195 - disallowance of reimbursement of salary of seconded employees on account of non-deduction of tax at source - HELD THAT:- Respectfully following the above views expressed in cases Abbey Business Services India Pvt. Ltd. [ 2020 (12) TMI 570 - KARNATAKA HIGH COURT] , Advance Rulings in Cholamandalam MS General Insurance Co. Ltd.[ 2009 (1) TMI 19 - AUTHORITY FOR ADVANCE RULINGS] , Marks and Spencer Reliance India P. Ltd. [ 2013 (11) TMI 317 - ITAT MUMBAI] , HCL Info systems Ltd. [ 2004 (1) TMI 16 - DELHI HIGH COURT] , IDS Software Solutions India P. Ltd.[ 2009 (1) TMI 363 - ITAT BANGALORE-A] , Faurecia Automative Holding [ 2019 (7) TMI 402 - ITAT PUNE] and Burt Hill Design (P.) Ltd. [ 2017 (3) TMI 1515 - ITAT AHMEDABAD] we are of the view that the reimbursement made by the assessee in India to Toyota Corporation, Japan, towards the seconded employees cannot be regarded as 'Fees for technical services' and therefore not taxable under section 195 - We therefore direct the AO to delete the disallowance made under section 40(a)(i). Nature of expenditure - treatment of payment towards plant layout charges - revenue or capital in nature - HELD THAT:- We note that the alleged expenditure has been claimed as plant layout charges to improve utilisation of resources, besides improvement in quality and safety. AR however alternatively prayed that, in the event the said expenditure is upheld to be capitalised, depreciation may be granted. We note that the assessee has not provided any details in respect of the expenditure incurred towards layout of plant, and why was it necessary to be incurred. In our view this issue needs to be revisited based on the evidence filed by the assessee having regard to the principles laid down by the hon'ble Supreme Court in the case of Ballimal Naval Kishore [ 1997 (1) TMI 3 - SUPREME COURT] of Dispute Resolution Panel order. Accordingly, we direct the assessee to file all relevant details in support of the claim which would be verified by the Assessing Officer in accordance with law. Non-granting of credit for advance tax paid - HELD THAT:- The assessee is directed to furnish requisite evidences in respect of the advance tax paid. The learned Assessing Officer is directed verify the same and to grant credit for the advance tax paid by the assessee. 2022 (12) TMI 243 Addition u/s 68 - Bogus Long Term Capital Gain on the scrip - Exemption u/s 10(38) denied - HELD THAT:- Where the assessees have filed all documentary evidences which have not been adversely commented by the authorities below, coupled with the fact that the authorities below have made and sustained the additions on the basis of statements of third parties which has not been made available to the assessees for cross examination despite the assessees specific request for the same, the addition sustained is not justified. Above all, similar additions on the same scrip, which were made in the hands of Smt. Anita Singhania, on the basis of statements of certain persons, have been deleted by Kolkata Tribunal. Therefore, in view of the above, we hold that assessees are eligible for exemption of Long Term Capital Gain u/s 10(38) of the Act and we direct the Assessing Officer to allow the same and also direct Assessing Officer to delete the assumed commission, the addition of which has been made on presumptions only and therefore, ground of assessee are allowed. 2022 (12) TMI 242 Deduction u/s. 36(1)(viia) - disallowance pertaining to bad and doubtful debts - HELD THAT:- We find no force in the Revenue's supportive arguments as there is no material in principle which has been rejected by the AO while dealing with the assessee's crystallization plea. That being the case, we allow the assessee's impugned claim in principle and direct the Assessing Officer to examine its supportive evidence of crystallization of the corresponding expenditure items in the relevant previous year by quoting CIT Vs. Indian Petrochemicals Corporation Ltd [ 2016 (9) TMI 110 - GUJARAT HIGH COURT] and case law CIT vs. Adani Enterprises Ltd. [ 2016 (7) TMI 1250 - GUJARAT HIGH COURT] also holds that such prior period expenditure items ought not to be disallowed where the taxpayer concerned is assessed at the same rate all along. The second substantive ground is accepted for statistical purposes in foregoing terms. Disallowance of interest paid on TDS on the ground that the same is 'penal' in nature - HELD THAT:- We find no merit in its arguments in light of Lachmandas Mathuradas [ 1997 (12) TMI 16 - SUPREME COURT] , Rungta Mines Ltd. [ 2018 (10) TMI 672 - ITAT KOLKATA] and M/s. M.L. Reality [ 2021 (9) TMI 877 - ITAT MUMBAI] holding such interest payment on delayed remittances of tax items as an allowable revenue expenditure u/s. 37 of the Act. The impugned disallowance accordingly stands deleted. Disallowing its claim of expenditure regarding education, secondary and higher education cess - HELD THAT:- Learned counsel fails to dispute that the legislature has amended section 40(h) of the Act vide Finance Act 2022 w.e.f. 01.04.2005 that such education cess is not an allowable expenditure item. We take note thereof to hold that the impugned claim of preceding cess(es) items is not allowable in law. The same stands rejected. Invoking section 115JB MAT computation on a public sector banking company - HELD THAT:- Both the parties are fair enough in not pinpointing any distinction on facts or law qua the instant issue of applicability of section 115JB in assessee's case. There is further hardly any dispute as we have restored the assessee's foregoing second substantive grievance of prior period expenditure back to the AO. Faced with the situation, we set aside the instant MAT issue as well back to the Assessing Officer for his afresh adjudication in light of CIT(A)'s findings in the preceding assessment year (s) 2013-14 and 2014-15, as the case may be, as per law. Claim of loss on valuation of Held to Maturity (HTM) securities - allowable revenue item - HELD THAT:- Revenue is fair enough in not pinpointing any distinction on facts or law before us. We adopt judicial consistency to uphold the CIT(A)'s findings allowing the impugned loss on sale of Held to Maturity (HTM) securities to the assessee. Revenue's sole substantive grievance as well as main appeal stand rejected accordingly. 2022 (12) TMI 241 Rectification of mistake u/s 154 - TP Adjustment - arm's length price adjustment - DRP directions no ALP adjustment was made by the Assessing Officer - DRP is of the considered view that, after examining the transaction in payment of hire/lease charges to the AE by the assessee on the parameters narrated the transaction is at arm‟s length and does not require any upward adjustment - whether the Dispute Resolution Panel was justified in passing the impugned order ? - whether the TPO was justified in given effect, vide his order to the directions contained in the said order? whether, based on this rectification order passed by the Dispute Resolution Panel and based on the TPO's resultant order giving effect thereto? and, whether the AO was justified in, based on these order, passing the impugned order making an addition as an arm‟s length price adjustmen? - HELD THAT:- As a plain and careful reading of rule 13 makes it unambiguous, the rectification powers, under rule 13, by the Dispute Resolution Panel can be exercised only in one of the three circumstances namely, (a) suo motu, i.e. on its own by the DRP; (b) on an application made by the eligible assessee, or (c) on an application made by the Assessing Officer. The scheme of rule 13 does not visualize any rectification of mistake, by the Dispute Resolution Panel, on an application by the TPO. The application filed by the Transfer Pricing Officer before the Dispute Resolution Panel, irrespective of its nomenclature, was liable to be dismissed for this short reason itself. As for the observations of the Dispute Resolution Panel on the nomenclature of the application filed by the Transfer Pricing Officer, whatever be the nomenclature, it was unambiguously a petition seeking rectification of mistake as evident from his opening words in the first paragraph to the effect (t)his MA is being filed for rectifying various mistakes apparent on record in the order of the learned DRP which are being delineated in the following paragraphs . When the object and purpose of the application is unambiguous, nothing really turns on the terminology used to describe the said application. We have noted that the Dispute Resolution Panel, having rejected the rectification application filed by the Transfer Pricing Officer and having held that there is no mistake apparent in the direction dated 3rd November 2020, have proceeded to rectify these DRP directions nevertheless. Undoubtedly, if the DRP was of the opinion that there are mistakes apparent in the directions issued by the DRP, they could have taken a suo motu cognizance of the same and initiated the proceedings by the issuance of show-cause notice, setting out clearly the reasons as to why such proceedings not be initiated, but that exercise has not been carried out. Whatever rectification has been carried out is on the basis of an application made by the Transfer Pricing Officer- an application which was not maintainable at all, and even after holding that there was no apparent mistake in the DRP directions, whereas a finding of the mistake being a mistake apparent in the DRP directions was a sine qua non for invoking the jurisdiction under rule 13. We are of the considered view that the directions dated 22nd April 2021 passed by the Dispute Resolution Panel are unsustainable in law, and we must quash the same. Once the directions passed by the DRP stand quashed, the order passed by the Transfer Pricing Officer to give effect to these directions and the impugned rectification order passed by the Assessing Officer to give effect to the TPO's order, must also stand quashed. Ordered, accordingly. All other related grievances with respect to the ALP adjustment as raised in this appeal, in view of the above findings, are rendered infructuous and academic, and do not call for any specific adjudication. We may,however, add that this order is without prejudice to any such order as the DRP may, within the permissible framework of the law- including on the limitation aspect, pass under rule 13 on its own or on an application by such parties as are permitted to file such an application. 2022 (12) TMI 240 Addition u/s. 69A on account of unexplained jewellery - search seizure operation u/s. 132(1) - AO by not allowing the benefit of gold jewellery inherited from mother in law and father in law of assessee and also joint holder of locker - AO by not allowing the credit of gold jewellery of 538.33 gms as per books of accounts of Sanjay Aggarwal prop. M/s. S.K. Jewellers - HELD THAT:- It is a matter of fact that search was conducted on the business premises of the assessee and the residence of the assessee was also covered therein. It is a matter of fact that the business was run by Shri Sanjay Aggarwal alongwith his wife. AR has repeatedly submitted before us that in the case of the husband, no addition has been made. He has questioned that if it was unexplained gold, then the repeated submissions of the assessee before the AO and before the CIT(A) was that it pertained to the stock in trade of assessee's business. We find on a perusal of the respective orders of the authorities that there is no rebuttal on any of these submissions. The argument of the Revenue that no such statements were given at the time of the search cannot have any meaning in the present case. Hence, the occasion for requiring the assessee to substantiate its case relying on the statement recorded during the search would arise only if a relevant question is put to the assessee. The questions put to the assessee cannot be dictated to by the assessee and if in the statement recorded, certain facts subsequently repeatedly pleaded on record are not discussed, then absence of any discussion in the statement recorded of those facts by itself cannot be allowed to be given advantage to the Revenue justifying the ignoring of the repeated submission on record. The submission has to be dealt with facts on record. No such effort has been done. Also seen that repeatedly the argument on facts that the assessee's husband was the only child of late Shri Santosh Kumar Aggarwal and late Smt. Janak Aggarwal. The assessee as per record had been married for almost 29 years and Mrs. Janak Aggarwal died on 31.03.2010 i.e. just before the search period and Shri Santosh Aggarwal died on 21.05.2015. Thus, for this specific period, the benefit of 500 grams of jewellery in the hands of Shri Santosh Kumar Aggarwal on account of jewellery held by his wife and 100 grams of jewellery in his own hand was very much available to the family of the assessee. The fact available on record that the locker was maintained in the name of Shri Santosh Kumar Aggarwal alongwith his daughter-in-law i.e. the assessee is a fact also available on record. We find no logic for enhancing the quantity of gold by the weight of stones and diamonds. There was no loose stones/diamonds found during the search. What was found was jewellery studded with stones/diamonds. They have neither been valued nor any Expert Valuer's report is available on record. Such an action cannot be supported. Even if it is considered even then alongwith the gold reflected in the books of accounts of the assessee and the explanation on record that credit for the jewellery held by late father and mother-in-law is also considered the occasion to sustain the addition even then does not arise. We find that the addition made cannot be sustained. Appeal of assessee allowed. 2022 (12) TMI 239 TP Adjustment - use of BLT approach by the TPO - Benchmarking of AMP expenditure - Bright line concept (Protective Adjustment) - addition in respect of ALP adjustment made on protective basis by applying BLT - HELD THAT:- d. DR could not cite any factual distinction or different proposition of law then followed in the assessee s own case [ 2019 (10) TMI 1536 - DELHI HIGH COURT] for aforesaid previous years as relying on Sony Ericsson case [ 2015 (3) TMI 580 - DELHI HIGH COURT] . Consequently the grounds pressed are sustained and appeal is allowed and the adjustment proposed on BLT approach is set aside. 2022 (12) TMI 238 TP Adjustment - addition made towards AMP expenses - HELD THAT:- It is not the case of the revenue that assessee is mandated to incur such expenditure as per any agreement between the assessee and a. It is also not disputed that these expenditures incurred by assessee or towards its own business promotion in India as assessee is a distributor further from the transfer pricing study report we note that assessee operates in limited risk environment in respect of the distribution and marketing segment. As per the TP study the description of activities carried on by the assessee that has been allegedly characterised by the Ld.TPO towards the promotion of brand. On an identical situation, Coordinate Bench of this Tribunal in case of Essilor India Pvt.Ltd [ 2016 (3) TMI 959 - ITAT BANGALORE] to hold as no basis to hold that there was in fact an international transaction in the matter of incurring of AMP expenses by the Assessee. No exercise of determining the ALP of the AMP expenses by comparing the expenses incurred by the Assessee with comparable companies. No reasons whatsoever to take a different view. Respectfully following the above view, we redirect the Ld.AO/TPO to delete the addition made towards AMP expenses. Comparable selection - Persistent Systems Ltd. and L T Infotech Ltd. - HELD THAT:- As in assessee s own case for preceding assessment year [ 2020 (11) TMI 1082 - ITAT BANGALORE] we direct the Ld.AO/TPO to exclude Persistent Systems Ltd and L T Infotech Ltd from the final list. 2022 (12) TMI 232 Rectification u/s 154 - mistake was apparent or fresh claim of exemption u/s 11 - Mistake in personal details / information - HELD THAT:- CIT(A) were both of view that as revised return is not filed the claim of exemption u/s 10 read with section 12A cannot be sustained. A distinction needs to be made here between a revised return which is filed, before the Department completes assessment. A rectification, on the other hand, can be filed only after assessee receives an intimation Section 143(1) or assessment order is passed and intimated to the assessee. So rectification application is more appropriate a remedy when assessment is complete and assessee claims on the basis of the assessment record available with the AO, that there is a mistake apparent in the order arising from the assessment record and same be rectified. What is important here in the case in hand is that the mistake was in the Part A of the return which calls for personal information of the assessee. Assessee was supposed to submit YES in the column in point B to Part A-GEN of the Return meant to disclose date of approval/ registrations etc, to claim of benefit of exemption u/s 10 read with 12A of the Act. It seems that mistakenly NO was mentioned by the assessee and relevant information about registration etc. was shown as NO . In Part B of the return under the head statement of income for the period ended on 31/3/2013 income from other sources is shown and in deductions at relevant places amount applied for charitable/ religious places and amount accumulated or set apart have been disclosed, with total deduction claim shown. At the same time in computation of income, which was part of the Return, as available at Page no 34 of PB, Amount applied to charitable purposes, amount deemed to be applied and accumulated amount has been shown at Rs 3,74,58,598/- and accordingly Gross Total Income is shown as NIL. The matter of fact is that the CPC while considering the return of the assessee had issued an notice dated 13.08.2019 for payment of outstanding demand for Assessment Year 2013-14 in which it was mentioned that there was an outstanding demand. At the same time it was mentioned that if the assessee does not agree with the computation of the income he can seek online rectification by providing the correct data. Reminders issued by CPC are available where demand identification No. 2014201337066018840T is mentioned and outstanding demand of Rs. 1,42,46,510/- is shown. The assessee has placed intimation wherein reason for the demand raised has been mentioned that the assessee has not provided details of 12A/ 12AA registration and other details, but exemption u/s 11 is claimed. It mentioned that this can be resolved by filing an online rectification and correcting the details. The aforesaid discussion has helped this bench to reach a conclusion that the primarily the mistake was one which was in the personal information of the assessee. Such a mistake is always rectifiable at any stage. Then it can be observed that computation of income and return filed together form part of the assessment record. It is not so that the assessee has not claimed exemption at all. The claim was there in the computation of income, with complete details available with regard to nature of income earned and how the income was utilized in accordance with the law to claim the exemption. There was material on record to support the claim of relief u/s 11 of the Act. It is not the case where the record in the form of Computation, being part of Return, did not contain any material to show there was claim of exemption. Thus acutully it cannot be said that a new or fresh claim was being raised without revising the return. Even the intimation issued calling for payment of demand and it s annexure A, as discussed, above establish that the nature of mistake was such that it could have been rectified u/s 154 of the Act itself. There is no doubt in the mind of the bench that the ld Tax Authorities below have fallen in error in not taking into consideration the rectification application. The nature of mistake, as discussed, is one which falls into the definition of mistake apparent from the record and was liable to corrected without any requirement of a revised return. Consequently, the ground No. 1 deserves to be allowed. 2022 (12) TMI 231 Reopening of assessment u/s 147 - reasons recorded for reopening - disposal Objection against reopening - according to the Ld. AR, the AO did not follow the binding order Asian Paint Ltd.[ 2007 (1) TMI 159 - BOMBAY HIGH COURT] wherein held that if the assessee objects to AO regarding his action of reopening the assessment, and if the AO over-rules the objection, then the AO should not proceed further in the matter for a period of four (4) weeks from the date of receipt of service of the said order [rejecting the objections] - HELD THAT:- Pursuant to a request by assessee the reasons recorded [for re-opening] was given to assessee wherein there was apparent mistake on face of the letter in the reasons recorded spells out the figure/sum escaped is alleged as Rs.5,20,00,200/- whereas at page 19-20 PB, another reasons recorded (no date) it alleges escapement of income to the tune of Rs.2,87,50,000/- which mistakes according to Ld AR exposes the non-application of mind of AO while recording reasons about the escapement of income. Four (4) weeks time, after AO disposes of the objection raised by assessee against re-opening - One of the other issue brought to our notice is regarding violation of the order of the Hon ble High Court s binding direction (supra) to give assessee at least four (4) weeks time, after AO disposes of the objection raised by assesse against re-opening of assessment. In this case, we note that AO has disposed/rejected the objection raised by assessee by order dated 05.03.2015 (refer page 35 PB) and passed the re-assessment order dated 20.03.2015, which clearly shows that AO did not give time of four (4) weeks for assessee to avail the extra-ordinary jurisdiction under Article 226 of the Constitution of India. It is noted that Assessee received said with letter rejecting the objection on 10.03.2015 and the AO passed the re-assessment order on 20.03.2015 which is against the binding direction of Hon ble High Court in Asian Paints [ 2007 (1) TMI 159 - BOMBAY HIGH COURT] . Therefore on this score alone, we cancel the order of re-assessment passed by AO. - Decided in favour of assessee. 2022 (12) TMI 230 Reopening of assessment u/s 147 - Suspicion of Revenue - Bogus LTCG - HELD THAT:- Tribunal Delhi bench in decision dated 29/09/2021 the case of Dove Consultants Pvt. Ltd. [ 2021 (12) TMI 797 - ITAT DELHI] held that reopening has to be based on the reliable material and not on the basis of reason to suspect, accordingly, the Tribunal quashed the reassessment proceeding. In judgment case of PCIT Vs M/s. Shodiman Investments Pvt. Ltd. [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] held that reassessment proceeding cannot be initiated based on suspicious transactions in the bank account of Mahasagar Securities Ltd. In the instant case also according to the AO he found the long term capital gain declared by the assessee as suspicious transactions and not as reliable information and for ascertaining, he needed the investigation. In our opinion, in view of the decision of the Hon ble Bombay High Court in the case of Shodiman Investments P. Ltd. [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] AO is not permitted to reopen assessment based on the reason to suspicion. The reassessment proceedings completed in the case of the assessee are held to be invalid and accordingly same are quashed. The additional ground raised by the assessee is allowed. 2022 (12) TMI 229 Deduction u/s 80IB(10) - proportionate deduction - AO was of the opinion that since the project was not completed in its entirety till 31.03.2012, the condition stipulated u/s 80IB(10) has been violated - CIT(A) allowed the claim - HELD THAT:- Issue is squarely covered by the judgment delivered by the Jurisdictional High Court in the case of CIT vs. B.M. Bros., [ 2013 (10) TMI 290 - GUJARAT HIGH COURT] wherein the identical situation of the assessee's claimed u/s 80IB(10) was allowed with respect to only those units of the 'housing project', which were approved and construction have been completed prior to 31.03.2008. No justification in interfering with the order passed by the Ld. CIT(A) in allowing the claim of deduction under Section 80IB(10) on the units which are mentioned in the permissions issued by BU certifying completion as made by the assessee without any ambiguity so as to warrant interference. Hence, the Revenue's appeal is, thus, dismissed. 2022 (12) TMI 225 Reopening of assessment u/s 147 - Provision for cases where assessment is in pursuance of an order on appeal, etc. u/s 150 - AO proposed to assess/re-assess the loss/depreciation allowance - HELD THAT:- The provisions of sub- section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. From a perusal of sub-section (1) of Section 150 of the Act, we find that the said provision is basically to be employed along with Section 148 of the Act to give effect to orders passed in appeal, reference or revision. It is not intended to re-open an assessment. Already order of the Tribunal has been given effect to by the assessing officer for the assessment year 1995-96 by the consequential order dated 21.12.2005. That being the position, it was not open to the assessing officer to have once again issued a notice under Section 148 r.w.s. 150 of the Act to reopen the assessment for the assessment year 1995-96, that too, on a different issue unconnected with the order of the Tribunal. We further find that the impugned notice has been issued after almost a period of nine years from the date of passing of the assessment order - That being the position, we are of the view that the impugned notice dated 20.03.2007 issued by respondent No.1 is without jurisdiction. The same is hereby set aside and quashed. WP allowed. 2022 (12) TMI 224 Intimation u/s 143(1)(a) - Adjustment of interest on deposits by the respondent/assessee at the stage of issuance of intimation u/s 143(1)(a) - HELD THAT:- CIT(A) held that in the guise of prima facie adjustment, assessing officer cannot adjudicate upon debatable issues. CIT(A) noted that the decision of this Court in Godavari Fertilizers and Chemicals Limited [ 1991 (6) TMI 13 - ANDHRA PRADESH HIGH COURT] on which heavy reliance is placed by the revenue was appealed against before the Supreme Court and the appeal was pending. CIT(A) held that the issue was highly debatable on which two opinions were clearly possible and on such a highly debatable issue, prima facie adjustment ought not to have been carried out by the assessing officer. Taking the view that interest payments sought to be set off against interest receipts having the same origin namely borrowed funds, CIT(A) set aside the prima facie adjustment made by the assessing officer. Tribunal held that order passed by the CIT(A) was a well reasoned one which did not warrant interference in further appeal. Tribunal further noted that decision of the Supreme Court in CIT v. Tuticorn Alkaline Chemicals and Fertilisers Ltd. [ 1997 (7) TMI 4 - SUPREME COURT] was not available at the time of making prima facie adjustment by the assessing officer. Supreme Court had pronounced the decision in CIT v. Tuticorn Alkaline Chemicals and Fertilisers Ltd. (supra) on 08.07.1997 whereas the intimation was issued by the Assessing Officer much earlier on 27.03.1996. Adjustment can be carried out u/s 143(1)(a) - The prima facie adjustment sought to be carried out by the assessing officer in the instant case does not fall within any of the illustrations mentioned above. We do not find any error or infirmity in the view taken by the CIT(A) as affirmed by the Tribunal. That being the position, the substantial question of law as framed above, is answered in the affirmative and in favour of the respondent. 2022 (12) TMI 223 Long term capital loss on sale of equity shares - Approved Amalgamation Scheme - merged entity to have the benefit of carry forward of loss - HELD THAT:- it is not in dispute that assessee had sold the shares @ Rs.200/- per share being the purchase cost. The sale price of Rs.200 per share has not been disputed by the Revenue at all. In fact, the market price as per the Bombay Stock Exchange on the date of sale was only Rs.58/- per share whereas the assessee has sold the shares at much higher price of Rs.200/- per share. Merely because this transaction had resulted in long term capital loss which had also admittedly arose only due to the benefit of indexation which is statutorily available to the assessee, the Revenue in the instant case is trying to treat the entire transaction as a colourable device and making the assessee act as a conduit to enable the merged entity to have the benefit of carry forward of loss. All these allegations are made by the Ld.AO absolutely without any basis. This is a classic case where the Ld.AO had denied the benefit which is statutorily available to the assessee as per the Act. In any case, the scheme of merger had already contemplated these transactions of loss on shares by including the same in the scheme and had also considered the loss incurred by the transferor company getting vested with the transferee company pursuant to the scheme of amalgamation. This scheme of amalgamation has been approved by the Hon ble Bombay High Court vide its order dated 5/3/2013 with effective date of 7/7/2011. Now once the scheme of amalgamation has been approved by the Hon ble High Court, all the assets and liabilities of the transferor company including the losses would get automatically vested with the transferee company. The same cannot be disturbed or disputed by the Ld.AO at the time of implementation of the scheme of amalgamation. Hon ble Jurisdictional High Court in the case of Sadanand S Varde Ors vs State of Maharashtra Ors [ 2000 (6) TMI 16 - BOMBAY HIGH COURT] had categorically held that order of the Company Court sanctioning the scheme of amalgamation would be binding and the same cannot be permitted to be challenged in a collateral proceeding. We do not find any infirmity in the order of Ld.CIT(A) allowing the claim of long term capital loss in the hands of the assessee company. Accordingly, grounds raised by the Revenue are dismissed. 2022 (12) TMI 222 Addition u/s 68 - assessee had deposited the cash in the Bank A/c - genuineness and creditworthiness of the transaction not proved - as submitted that the amounts received towards construction of Flats and not as income. Since the assessee cannot do any business and was not doing any business, the amount cannot be treated as income of the society - HELD THAT:- Since the amounts in question are not cash credits, the creditworthiness of the creditors is not required to be established. We find force in the submissions of the Learned Counsel for the Assessee. Assessee discharged its onus by proving the genuineness of the Members by filing confirmations before the Ld. CIT(A). Once the assessee furnishes sufficient documents and explanations, it is on the onus of Department to verify the same and act accordingly. Authorities below can summon the Members if they are not appeared on the request of assessee society, but, the authorities below cannot demand the assessee society to prove the source of the source which is one of the conditions stipulated under section 68 itself. There are plethora of judicial decisions on this issue. We, therefore, set aside the orders of the authorities below and delete the addition made by the A.O. and confirmed by the Ld. CIT(A). Appeal of assessee are allowed. 2022 (12) TMI 221 Delayed payment made to ESI/PF being employees share of contribution under section 36(1)(va) - employee's OR employers contribution - scope of Section 36(1)(va) and Section 43B(b) - HELD THAT:- Hon ble Supreme Court in the case of CHECKMATE SERVICES PVT LTD [ 2022 (10) TMI 617 - SUPREME COURT] Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of Income Tax Act, 1961.The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. Thus we hold Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of Income Tax Act, 1961.The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). Decided in favour of the Revenue. 2022 (12) TMI 220 Unexplained cash deposit u/s 68 - As per CIT unexplained cash credit as sustained - HELD THAT:- As carefully gone through the assessment order, remand report, assessee s rejoinder in objecting the findings of the Assessing Officer submitted before the ld. CIT(A) as well as observations of the ld. CIT(A) and find no reason to interfere with the order passed by the ld. CIT(A). Accordingly, the grounds raised by the assessee are dismissed. 2022 (12) TMI 219 Disallowance of interest u/s 36(1)(iii) - assessee advanced interest free loan to director / relativeswhereas the assessee borrowed funds and debited interest at less amount - HELD THAT:- No commercial expediency of advancing loan could be established by the assessee. Accordingly, Ld. AO computed proportionate interest disallowance u/s 36(1)(iii) for Rs.40.47 Lacs. The Ld. CIT(A) confirmed the same. Aggrieved, the assessee is in further appeal before us. The limited argument of Ld. AR is that own interest free funds far exceed the interest free advances granted by the assessee and therefore, it would be presumed that the loans were advanced out of own funds. Concurring with the same, we remit this matter back to the file of Ld. AO for fresh adjudication in the light of aforesaid argument. The assessee is directed to substantiate its claim. This ground stand allowed for statistical purposes. The appeal of the assessee for AY 2015-16 stands partly allowed. Addition made u/s 2(22)(e) - assessee received interest free advances entities who had common shareholders - HELD THAT:- We find that the fact that the assessee is not a shareholder in the two entities, remain undisturbed before us and therefore, no such addition could have been made in the hands of the assessee as per the cited decision of Hon ble Supreme Court Madhur Housing Development Co [ 2017 (10) TMI 1279 - SUPREME COURT] . Therefore, no fault could be found in the impugned order. The appeal stands dismissed. 2022 (12) TMI 218 Unexplained cash deposits - income from undisclosed sources - assessee has submitted that the details of cash deposits which were made to pass the cheques issued by the assessee which was in an accommodative nature have been provided to the Assessing Officer as well as the CIT(A) - CIT(A) estimated and adopted 80% of effective interest rate i.e., 42% (52 x 0.8) of gross cash deposited is considered as income of the assessee. Balance 20% of estimated interest has been given as relief to the assessee and would include therein any claims on account of peak credit - HELD THAT:- Considering the complete details furnished before the authorities below, we are of the considered opinion that the CIT(A) has estimated and adopted the effective interest rate at an higher side. Accordingly, we direct the AO to adopt 50% of effective interest rate i.e., 26% (52x0.5) of gross cash deposited shall be considered as income and 50% of estimated interest has been given as relief to the assessee and would include therein any claims on account of peak credit. As a result, out of the cash deposit of ₹.2,17,49,200/-, 26% being ₹.56,54,792/- is sustained as income in the hands of the assessee and the assessee get a relief of ₹.1,60,94,408/-. Appeal filed by the assessee is partly allowed. 2022 (12) TMI 217 Best Judgment Assessment u/s 144 - Verification of documents produced by the Assessee - HELD THAT:- AO has asked the assessee to file remaining information/details on 02/11/2018. On 02/11/2018, again a part reply has been filed. A.O. has once again asked the representative of the assessee to file remaining reply and ultimately on 20/12/2018 the representative of the assessee stated that share broker is not providing any information regarding turnover/sales etc., thus it cannot be submitted . Since the assessee has submitted his inability to produce the details and has not filed the details sought by the A.O., the Ld. A.O rightly invoked the Section 144 of the Act and passed the Best Judgment Assessment and the said action of the A.O. cannot be found fault with. Assessee has vehemently submitted that he has sent an e-mail to the A.O. comprising of 2000 pages attaching all the documents regarding turnover/sales etc of the share transaction which has not been verified by the A.O. But the said fact cannot be corroborated with any of the documents on record and even before us the assessee has not produced any such documents to verify. We are of the considered opinion that if the matter is remanded to the file of A.O. to verify the documents produced by the Assessee and passed appropriate fresh Assessment order after hearing the assessee, the substantial justice would be rendered. Accordingly, we direct the A.O. to consider the documents produced by the Assessee and pass the Assessment Order in accordance with law after hearing the Assessee. Appeal of the assessee is allowed for statistical purpose. 2022 (12) TMI 216 Revision u/s 263 - assessee had earned interest income on investments made with co-operative bank - PCIT directed the A.O. to bring to tax the aforesaid interest income by denying the claim u/s 80P - submission of the learned AR is that when income is sought to be assessed on the said interest income, the expenses incurred for earning such income would be entitled to deduction u/s 57 - HELD THAT:- The Hon ble jurisdictional High Court in the case of Totagars Co-operative Sale Society Ltd. v. ITO[ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] had held when the assessee-co-operative society earned interest on deposits kept with scheduled banks only the net interest, i.e., the interest income reduced by the administrative expenses and other proportionate expenditure to earn the said income had to be brought to tax u/s 56. The assessee has not raised the plea before the PCIT that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the PCIT, we are of the view that since the Act prescribes for taxing only the net income (i.e. total income minus the expenses incurred for earning such income), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of Totagars Sale Co-operative Society [Supra} - Accordingly, the case is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 of the I.T.Act. The A.O. shall examine the aforesaid issue untrammeled by the direction of the PCIT in the impugned order passed u/s 263 - Appeal filed by the assessee is partly allowed for statistical purposes. 2022 (12) TMI 215 Addition u/s 68/69 - undisclosed income - absence of source of purchase of the property - AO has made addition of 50% of the total value of the land as the appellant has not been able to explain the source of payment made in respect of purchase of land - HELD THAT:- As it appears from the detailed submissions made by the assessee supported by the sufficient documents, particularly, the cash book of the company, namely, Iscon Procon Pvt. Ltd. showing the source of investment made for such purchase of land situated at Ambapur, Gandhinagar, with another company, namely, Chehar Realty Pvt. Ltd., which establishes the fact of purchase of land by both the companies. Merely, because the assessee s PAN number was mentioned as he was the Director of one of the company, the purchase cannot be said to be made by him when the purchase has been shown in the P L account by the said company itself as well as part of the closing stock of the said company, namely, Iscon Procon Pvt. Ltd. In that view of the matter, the addition made by the Ld.AO has been rightly found to be not justified and deleted by the Ld.CIT (A), which, in our considered opinion is just and proper so as to warrant interference. In that view of the matter, the Revenue s ground of the appeal is found to be devoid of any merit and thus dismissed. Revenue s appeal is dismissed. 2022 (12) TMI 214 Rectification of mistake u/s 154 - Validity of subsequent revised return - return of income was not filed before the due date for filing u/s.139(1) - carry forward of 'long-term capital loss' - HELD THAT:- As per the language used in subsection (3) to section 139, it is contemplated that when the assessee files the original return, at that time, there should be loss and the assessee desires to claim said loss to be carried forward and set off in future assessment years. Sub-section (1) of section 139 cast statutory obligation on the assessee when there is positive income. In the present case, admittedly, the assessee filed the return of income declaring the positive income and even in the revised return, the assessee has declared the positive income as the loss in respect of the sale of shares, which could not be set off, inter-source or inter-head under section 70 or 71 - As per the provisions of sub-section (5) to section 139, in both the situations where the assessee has filed the return of positive income as well as return of loss at the first instance as per the time limit prescribed and subsequently, files the revised return then the revised return is treated as valid return. In the present case, as the assessee filed its original return declaring the positive income and hence, in our opinion, subsequent revised return is valid return also and the assessee is entitled to carry forward of 'long-term capital loss'. Sub-sections (1) and (3) of section 139 provides for the different situations and in our opinion, there is no conflict in applicability of both the provisions as both the provisions are applicable in the different situations. Issue with regard to carry forward of short term capital loss claimed by the assessee should be directed to be examined by the AO afresh in the light of the observations made above. Accordingly, we allow the appeal of the assessee for statistical purposes. 2022 (12) TMI 213 Exemption u/s 10 (1) - description of agriculture as contemplated in section 2 (1A) - As per revenue assessee is engaged in the production of foundation seeds as well as the hybrid seeds, as against the submission of the assessee that they are in the business of producing foundation seeds only by conducting agricultural operations on the agricultural lands and selling such seeds to the seed Companies like Godrej seeds, Nath Seeds, Super Agri Seeds etc. - HELD THAT:- As referred to the terms of the agreement between the assessee and the farmers who let out their lands to the assessee, and having noticed that during the period of lease the assessee shall have all the rights to possession, cultivation and harvesting of hybrid seeds on the land and during such period the farmers shall not have any rights to lease, license, mortgage or sell the land to the others etc., learned Assessing Officer erroneously jumped to the conclusion that the nature of work conducted by the assessee falls under the category of contract. We do not know the basis for reaching this conclusion by the learned Assessing Officer. There is no dispute that the assessee took the agricultural lands on lease and conducting normal agricultural operations to produce the hybrid variety of foundation seeds in order to sell them in the open market to the seed industries, and in that pursuit they engaged the labour, supervisors etc. Assessee produced voluminous record to show the engagement of labour and the payment of salaries to the supervisors apart from producing the agreements with the landowners. We have already referred to the contents of the agreements with the landowners which the learned Assessing Officer failed to appreciate in proper perspective. Merely because the assessee took the land on lease for conducting their research operations to produce the foundation seeds of the hybrid varieties, such a lease cannot ipso facto make the operations of the assessee as contract farming. Contract farming in the context of this case would be that if the assessee outsources the agricultural operations which they are doing for themselves now, to some other third party. As could be seen from the record that vide letter dated 30/3/2016 the assessee, while explaining the modus operandi of their agricultural operations, invited the learned AO to visit their farm and look at their activities so that the learned Assessing Officer can get the clarity on the issue and differentiate the operations conducted by the assessee with those conducted by other seed companies in the industry. AO does not think it fit to accept this request of the assessee to get the things clarified - assessment order in its entirety is an academic exercise, without any material on record to connect such things with the operations conducted by the assessee on the lands took by them on lease. Having regard to the circumstances in their entirety and appreciating the facts in the light of the decision of the Hon ble High Court in assessee s own case for the assessment year 2008-09 [ 2014 (2) TMI 1197 - ANDHRA PRADESH HIGH COURT] relied upon by the Ld. CIT(A), we do not find anything illegality or irregularity in the conclusions reached by the Ld. CIT(A) and accordingly uphold the same. Grounds of appeal of the Revenue are accordingly dismissed. Addition towards delay in remittance of provident fund - AO noted the due date for payment and the actual date of payment and thereby demonstrated that the remittance was beyond the due date specified in the Provident Fund Act - HELD THAT:- What all the Ld. AR said is that all the payments were made before the due date of filing of return of income under section 139(1) of the Act. This issue is, however, squarely covered by the decision of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd., [ 2022 (10) TMI 617 - SUPREME COURT] against the assessee. Respectfully following the same, dismiss ground No. 3 of appeal of assessee. Addition u/s 40(a)(ia) - Director s remuneration and audit fee - TDS was effected beyond the due date, learned Assessing Officer disallowed both - HELD THAT:- In view of the fact that prior to 1/4/2015 the amount payable towards the salaries is not covered by the provisions of section 40(a)(ia) of the Act, the addition of Rs. 24 lakhs on account of non-deduction of TDS on the remuneration paid to the Director cannot be sustained. Learned Assessing Officer is, therefore, directed to delete the same. The addition on account of audit fee is justified by the provisions of section 40(a)(ia) of the Act and, therefore, does not warrant any interference. 2022 (12) TMI 212 Net profit estimation - adopting 3% of receipts from civil contract as net profit by stating that his volume of work was more and due to heavy competitions - HELD THAT:- In the assessment year 2014-15, the assessee has estimated the net profit at 3% and the AO determined the net profit at 3.50% u/s 143(3) of the Act. In the assessment year under consideration, the assessee has declared the net profit at 3% and the AO has estimated the net profit at 8%. On appeal, CIT(A) scale it down to 4% without depreciation. We find that by referring to various case law and after considering earlier assessment years estimation of the AO, CIT(A) has reduced the net profit to 4%. Thus, we find no infirmity in the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue is dismissed. 2022 (12) TMI 211 TDS u/s 194A - Addition u/s 40(a)(ia) interest payment - disallowance non-deduction of TDS regarding payments made to members /non-members - distinction between members and nominal-members - HELD THAT:- We find no merit in the Revenue s instant arguments as we are in assessment year 2010-11 whereas a cooperative bank has been excluded from the purview of section 194(A)(3)(v) vide Finance Act 2015 w.e.f. 01.06.2015 only. This tribunal s Special Bench decision is The Virudhunagar Central District Co-Operative Bank Ltd. [ 2018 (10) TMI 1170 - ITAT CHENNAI] has followed hon ble Madras high court s judgment M/s. Coimbatore District Central Co-Operative Bank Ltd. [ 2016 (1) TMI 370 - MADRAS HIGH COURT] while adjudicating the very issue against the department. This is coupled with the fact that hon ble jurisdictional high court in Central Co-operative Bank Ltd., V/s Union Of India [ 2003 (9) TMI 56 - BOMBAY HIGH COURT] has quashed the CBDT s circular dated 11.09.2002 as ultra vires violating section 119 of the Act. Their lordship s further decisions in The Bailhongal Urban Cooperative Bank Ltd., V/s. CIT [ 2015 (12) TMI 1659 - KARNATAKA HIGH COURT] and in Saraswat co-operative Bank [ 2017 (3) TMI 741 - BOMBAY HIGH COURT] take note of forgoing legislation developments to hold that a co-operative bank/ assessee has no liability to deduct TDS on interest payments made to members. We thus delete the impugned section 194A r.w.s. 40 (a)(ia) disallowance of Rs. 2,00,095/- in very terms therefore. The assessee s sole substantive grievance is accepted therefore. 2022 (12) TMI 210 Validity of assessment - Period of limitation for issuance of notice u/s 143(2) - HELD THAT:- It is beyond doubt that the issuance of notice u/s 143(2) was not within time prescribed under the statute. On this aspect, we have further relied upon the judgment in case of Alpine Electronics Asia Pvt. Ltd [ 2012 (1) TMI 100 - DELHI HIGH COURT] Ld. AR wherein it has been held that the service of notice u/s 143(2) within the statutory time limit is mandatory one and not a procedural requirement. Since, there is admittedly a violation of mandatory provision, the assessment order passed was found to be illegal and liable to be set aside. In that view of the matter, respectfully relying upon the same, we find that the issuance of notice and the service of the same is beyond time as prescribed under the statutory provision and the proceeding, therefore, itself became void-ab-initio and hence quashed. Appeal of the assessee is allowed. 2022 (12) TMI 209 Exemption u/s. 11 - Denial of said exemption for non-filing of Form 10 within time - HELD THAT:- As on-line Form 10 on 28-04-2017 as it required to be filed before due date of furnishing Income Tax Return u/s. 139(1) of the Act. It is noted from the said chart that the assessee filed return of income on 31-10-2015. Since, the Rule 17 came into force for A.Y. 2016-17 and it is not applicable to the year under consideration. There is no dispute with regard to availability of Resolution on Form 10 with the assessee manually on 22- 08-2015 which is noted by the CIT(A) in para 5 of the impugned order. Admittedly, the availability of Form 10 manually with the assessee is before due date of filing of return of income u/s. 139(1) as the assessee filed return of income on 31-10-2015. The availability of manual Form 10 with the assessee on 22-08-2015/20-09-2015 was not disputed by the ld. DR. Assessee filed Form 10 manually with the return of income and it is very much within time. Therefore, the order of CIT(A) is not justified in confirming the order of CPC in denying the exemption u/s. 11 of the Act for non-filing of Form 10 on on-line and it is set aside. Thus, the ground raised by the assessee is allowed. Condonation of delay in filing Form 10 for the relevant assessment year - Appeal for A.Y. 2015-16 - Admittedly no application was filed with the CIT(A) to condone the delay in filing Form 10 on-line by the assessee which is required to file before due date of fling of return of income. We note that the Hon ble High Court of Bombay Little Angels Education Society [ 2021 (3) TMI 1088 - BOMBAY HIGH COURT] was pleased to grant opportunity to the assessee under writ proceedings having exercising special original extraordinary jurisdiction u/s. 226 of the constitution. Thus conclusion of the fact no such direction or whatsoever could be granted by this Tribunal. It is open to the assessee to seek remedy available under law to its benefit. Thus, no infirmity in the order of CIT(A) and it is justified. Thus, the ground raised by the assessee fails and it is dismissed. 2022 (12) TMI 208 Late deposit of Provident Fund and ESI - Scope of amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B - HELD THAT:- As far as the present forum is concerned, there are consistent orders of the ITAT Chandigarh Benches interpreting the relevant provisions wherein it has held that the amendments carried out in the relevant provisions is prospective in nature and not retrospective. Finance Act, 2021 has added Explanation 5 to Section 43B and Explanation 2 to Section 36(1)(va). The tax authorities have consistently held these to be clarificatory in nature and hence its applicability is retrospective. However, consistently by various orders Co-ordinate Benches have repeatedly held the amendments to be prospective in nature. While so holding, decisions of the jurisdictional High Court in the case of CIT Vs. Nuchem Limited. [ 2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] and CIT Vs. Hemla Embroidery Mills Pvt. Ltd. [ 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT] have been considered. It has been held that additions by way of disallowance cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear - Decided in favour of assessee. 2022 (12) TMI 207 Revision u/s 263 - set off of loss in speculation business against business income as against the provisions contained in Explanation to section 73 - as per CIT, assessment order u/s 147 was erroneous since the assessing officer accepted the argument of the appellant that the amendment to explanation to section 73 by Finance Act (No.2) of 2014 was retrospective and hence applied to assessment year 2014-15 - HELD THAT:- As rightly pointed out by the Ld. A.R., the issue relating to applicability of Explanation to section 73 of the Act, which would operate retrospectively from 1.4.1997 though the amendment was made w.e.f. 1.4.2015 as this issue has been considered by this Tribunal in assessee s own case in assessment year 2013-14 [ 2018 (9) TMI 2104 - ITAT COCHIN] wherein assessee filed appeal against the order passed by Ld. Principal CIT u/s 263 of the Act as held amendment inserted to Explanation to section 73 by Finance (No. 2) Act, 2014 is to be applied retrospectively from the date of insertion to Explanation to section 73 of the Act. In coming to this view, we take support from the judgment of the Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] wherein Their Lordships were considering the amendment made by the Finance Act, 2003 by omitting the second proviso to section 43B of the Act w.e.f. 01/04/2004 and bringing about uniformity in the first proviso by equating tax, duty cess and fees with contribution to welfare funds viz. Provident Fund, etc. The Supreme Court held that the aforesaid amendment in section 43B of the Act by Finance Act, 2003 is curative in nature and would therefore apply retrospectively w.e.f. 01/04/1988. In the present case, the principle business of the assessee is trading in shares. Hence, deemed speculative loss from trading in shares is to be set off of against the business income of the assessee. This ground of the assessee is allowed. Being so, same issue cannot be taken up by Ld. Principal CIT in assessment year 2014-15 as this issue was already decided by the Tribunal in assessment year 2013-14. Hence, we decide this issue in favour of the assessee and against the revenue. 2022 (12) TMI 206 Disallowance for 80IC deduction - fulfilling necessary conditions for claiming deduction - AO observed that, there was no proof that the new unit is an independent separate unit from the old one - Reliance on the statement of two employees one being a brand new employee and the other too low level employee and definitely not authorized to convey information in regard to the assessee - HELD THAT:- As seen that the employees whose statements have been relied upon were admittedly not the authorized personnel, hence not competent to comment. The report, accordingly, is a meaningless exercise. The fact that it was carried out on 29.03.2013 and the Report was filed on 30.03.2013 and was made available to the assessee also on the very same day and was somehow replied to scantily by the assessee also on 31.03.2013 leading to the passing of the order also on 31.03.2013, we find does not inspire any confidence in the fairness of the decision making process and hence is questionable. Effective and a fair hearing on the issues was denied to the assessee by the AB. The facts as thrashed out by the CIT(A) referring to the supporting evidences culled out from the assessment order itself taken into consideration by the CIT(A), we find are not rebutted by the Revenue. We find that the unrebutted facts on record are that the unit has duly been set up in the leased premises, electricity usage demonstrates the claim of the assessee, machinery has been purchased by the new unit. These facts are not disputed by the Revenue, ACs have been manufactured and sold. These have also been accepted by the AO Excise Tax records and all contemporaneous evidence remains unassailed on record. Accordingly, in the facts as they stand, we find that the facts as available on record cannot be faulted with. Being satisfied by the reasoning and conclusion drawn by the ld. CIT(A), the ground No. 2 raised by the Revenue is dismissed. Disallowance u/s. 36(1)(iii) - investment was made in the sister concern - HELD THAT:- The facts taken into consideration available on record namely that the assessee had sufficient interest free funds available sources in the year under consideration and the availability also in the year when the amount was advanced to M/s. Amber Enterprises which advance admittedly was not in the year under consideration are all relevant and cogent facts. These we find have not been assailed. Being satisfied with the detailed finding on facts based on evidences available on record, which have been considered by the First Appellate Authority. In the absence of any infirmity in the conclusion arrived at we find no good reason to interfere with the order. Ordered accordingly. Accordingly, the ground of the Revenue is dismissed. 2022 (12) TMI 205 Exemption u/s 11 - rejecting the application for registration u/s 12AA - Non compliance with the provisions of rule 17A - applicant being a new trust - HELD THAT:- We have been through the objects of the applicant, the trust shall be wholly and exclusively for any one or more objects and the purposes mentioned in clause (15) of section 2 of the Income-tax Act, 1961 and they shall always be known as charitable objects. The learned Commissioner of Income-tax (Exemption), it is seen, has not taken into consideration the trust deed filed by the applicant along with the original application for registration, e-filed on March 19, 2020. The objects of the applicant-trust were to be considered by the learned Commissioner of Income-tax (Exemption) while considering the application for grant of registration to this newly formed trust, there being no activities having been hitherto undertaken by the applicant. What has been held by the hon'ble Supreme Court in Ananda [ 2020 (2) TMI 1293 - SUPREME COURT] . Post passing of the impugned order, to reiterate, the applicant has been granted registration vide order dated December 31, 2021, on the very same objects as e-filed by the applicant along with the original application for registration. In view of the mandate of Ananda (supra), in the case of a newly formed trust, in the absence of activities, the trust deed ought to have satisfied the learned Commissioner of Income-tax (Exemption) for grant of registration. We have seen the trust deed, which remains unchanged. We are satisfied with the trust deed. The requirement of filing of evidence under rule 17A of the Rules are not relevant for consideration of the application for registration. The applicant being a new trust, no activities have been carried out by it hitherto. In fact, while granting registration to the applicant vide order dated December 31, 2021, the very same trust deed had been taken into consideration. Commissioner of Income-tax (Exemption) is directed to grant registration to the applicant from the date of the first application, i. e., March 19, 2020. Appeal of assessee allowed. 2022 (12) TMI 204 Cessation of liability of Foreign Currency Convertible Bond on the date of buy-back - Applicability of provisions of section 28(iv) and section 41(1) - differential amount between the cost price of the Foreign Currency Convertible Bond bonds minus the buy-back price of the Foreign Currency Convertible Bonds credited to the capital reserve by the assessee - amount collected by the company was shown under the head Loan funds as Unsecured loan - As submitted that as far as the issue of Foreign Currency Convertible Bond was concerned, neither provisions of section 41(1) of the Act nor section 28(iv) of the Act were applicable to the case of the assessee - HELD THAT:- As decided by CIT-A assessee has demonstrated with ample evidence that no part of the proceeds were utilised towards non-capital expenditure. The learned Commissioner of Income-tax (Appeals) has sustained the proportionate disallowance on an incorrect assumption of facts and he has simply discarded the certificate of the chartered accountant without any cogent reasons. Therefore, part sustenance by the learned Commissioner of Income-tax (Appeals), i. e., of Rs. 19.03 crores also needs to be deleted. The same is ordered accordingly. Therefore, in view of the detailed reasons as given in the preceding paragraphs no addition of account of Foreign Currency Convertible Bonds survives and the grounds of appeal filed by the assessee stand allowed whereas the grounds preferred by the Department stand dismissed. 2022 (12) TMI 203 TP Adjustment - international transaction of the Information Technology Enabled Services (ITeS) provided to its Associated Enterprises (AEs) - comparable selection - HELD THAT:- Exclusion of comparable as functionally dissimilar with that of assessee. Disallowance of marked to market loss under normal provisions as well as the Minimum Alternative Tax [MAT] provisions, i.e. Section 115 JB of its book-profit - HELD THAT:- It is clear that the Assessee has reversed the loss claimed in the next year and offered to tax. On this very count, the addition cannot be made. Secondly, this issue is squarely covered by the decision of the Hon ble Supreme Court in the case of Woodward Governor India Private Limited [ 2009 (4) TMI 4 - SUPREME COURT] As the Assessee is consistently adopting the policy as and when loses arises, the same is disclosed as loss earned and is a claimed deduction. Hence, we allow the claim of the Assessee. Since we have allowed the claim of the Assessee on merits on regular assessment, similar to the decision on computing the book-profit u/s.115JB of the Act, the appeal of the Assessee is partly allowed. 2022 (12) TMI 202 Assessment u/s 153A - search seizure operation took place in the premises of the assessee and certain incriminating documents were found and seized - HELD THAT:- We find the AO in the order passed u/s 143(3) r.w.s. 153A of the Act determined the total income as against the returned income - We find the CIT (A) on the basis of the arguments advanced by the assessee held that the initiation of proceedings u/s 153A is not valid, the reasons of which have already been reproduced in the preceding paragraph. As the submission of the DR that the learned CIT (A) without considering the incriminating material found during the course of search has held that 153A proceedings are not valid and he has not decided the issue on merit. A perusal of the order of the CIT (A) shows that neither he has decided the appeal on merit, nor has he passed any comments regarding the various incriminating material found during the course of search and he has simply accepted the contention of the assessee that no incriminating material was found during the course of search. We deem it fit and proper to restore the issue to the file of the learned CIT (A) with a direction to give his finding regarding the nature of incriminating material found during the course of search and decide the issue keeping in mind the decision of Gopal Lal Badruka Vs. DCIT [ 2012 (6) TMI 657 - ANDHRA PRADESH HIGH COURT ] - The grounds raised by the Revenue are accordingly allowed for statistical purposes. 2022 (12) TMI 201 TP adjustment - Comparability - Functional dissimilarity - functions of a manufacturer and assembler - HELD THAT:- Assessee is mainly engaged in the assembling of Hydraulic accessories. From the table furnished above, we noticed that Asco (India) Ltd. is fullfledged manufacturer and it manufactures Solenoid Valves involving high technology and it constitute 74% of the turnover. This is evident from the fact that the average selling price of Solenoid Valves manufactured by Asco (India) Ltd. is Rs. 4,492/- per piece, while selling price of product assembled by the assessee ranges from Rs. 288/- to Rs. 1802/- per piece. Asco (India) Ltd. has got a technical collaboration for manufacture of valves and accordingly owned intellectual property right therein. Hence there is wide difference in the functions of a manufacturer and assembler. It is further stated that the assessee s hydraulic products used fluids for movement of parts of a system. M/s Asco (India) Ltd. manufacturers Nuematic products which use Air as a medium for movement of parts of a system. Thus we are of the view that Asco (India) Ltd. could not be functionally comparable with the assessee and hence it cannot be considered as comparable company in the hands of the assessee. Accordingly, we direct the Assessing Officer/TPO to exclude Asco (India) Ltd. from the list of comparable companies and rework arm s length price accordingly. Appeal filed by the assessee is treated as allowed. 2022 (12) TMI 200 TP Adjustment - reimbursement of pocket expenses incurred by the Appellant on behalf of its AEs - TPO has included in cost base of the assessee and made an adjustment of 12 % thereof - As submitted by the assessee that it is operating margin from software development services 19.45%, even if the out-of-pocket expenses incurred by the appellant on behalf of its associated enterprise are also treated as part of the cost base of the appellant - margins so computed are also higher than the arithmetic mean of the margins of the comparable companies computed at 8.69% selected by the assessee - HELD THAT:- To examine this alternative argument it is necessary to examine the order passed by the learned transfer pricing Officer u/s 92CA (3) of the act that whether the learned transfer pricing officer has objected to the any of the comparable companies selected by the assessee. On going through the transfer pricing officer s order, we do not find that learned transfer-pricing officer has disputed any of the comparable selected by the assessee. Therefore, the set of comparable selected by the assessee for computation of the arm s-length price deserves to be accepted as it has become final for the AY. On going through the same, we find that the computation of the margin considering the reimbursement as cost base is 19.45%, which is also accepted by the learned transfer-pricing officer. Therefore, there cannot be any dispute on the same. It is also fact that margin of the comparable companies selected by the assessee, which has become final, now is 8.69%. This argument was raised by assessee before the learned CIT-A however it was not at all considered. Therefore, we do not find any reason to sustain addition on account of adjustment of markup on pass through cost claimed by the assessee. Accordingly ground number 3 of the appeal of the assessee is allowed which deletes the transfer pricing adjustment - In view of this, ground treated as allowed. Loss incurred by eligible unit u/s 10 A set-off against the profits of other eligible units - HELD THAT:- We find that identical issue has been decided by the honourable Bombay High Court in the case of the assessee [ 2011 (5) TMI 509 - ITAT, MUMBAI] wherein the order of the coordinate bench dated 25th of may 2011 for assessment year 2006 2007 is upheld. While deciding the above issue the honourable High Court also considered its own decision in case of Hindustan Unilever Ltd [ 2010 (4) TMI 206 - BOMBAY HIGH COURT] The issue also reached before the honourable Supreme Court in assessee s own case for assessment year 2005 06 known as CIT V Yokogawa India Limited [ 2016 (12) TMI 881 - SUPREME COURT] wherein it was decided in favour of the assessee. The learned departmental representative could not controvert the above fact. AO is directed to allow the loss of Chennai unit accordingly. Computation of deduction u/s 10A - telecommunication expenses of eligible units should be reduced from the export turnover of the eligible unit - HELD THAT:- As decided in [ 2014 (4) TMI 1224 - BOMBAY HIGH COURT] assessee is in business of software development and the charges, which are claimed to have been incurred, are in relation to the business of software development within India. Therefore, there could not be said to be cost deductible from the export turnover for the purposes of Section 10 A of the act. Therefore, ground number 8 and 9 of the appeal of the assessee is allowed directing the learned assessing officer to not to reduce the above sum from the export turnover of the eligible units. Equal treatment is required to be given to the above expenditure in view of the decision of the honourable Supreme Court in case of CIT versus HCL technologies Ltd [ 2018 (5) TMI 357 - SUPREME COURT] Accordingly, the learned assessing officer is directed to give the treatment of dental and cost i.e. telecommunication expenditure for the purpose of computation of export turnover as well as total turnover. Accordingly, ground number 8, 9, and 13 of the appeal are allowed. Consideration of the foreign exchange expenditure while computing deduction u/s 10 A - In view of the above decision of CIT versus HCL technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] we direct the learned assessing officer to give the treatment to the expenditure while computing export turnover and the total turnover of the eligible unit. Unexplained expenditure on the basis of unreconciled AIR statement - HELD THAT:- Assessee has denied any such transactions entered into with the bank. Assessee has also written to the bank and subsequent reminders also. In view of this we find that there is no infirmity in the direction of the learned CIT A to give opportunity to the assessee as well as direction to the learned assessing officer to verify the claim of the assessee from external sources. Naturally, if the assessee has not entered into such transaction, the learned AO should have examined the above claim of the assessee of consistent denial through external sources. The assessee has also given the name of employee whose credit card transactions are found with the bank. Further, with respect to another party also assessee denied having entered into any such transactions. In view of this, we direct the learned assessing officer to carry out detailed examination of the above transactions whether they have been entered into by the assessee or not. If it is found that assessee has not entered into such transactions, the additions deserve to be deleted. In the result ground of the appeal of the assessee is allowed. 2022 (12) TMI 199 Unexplained Credit u/s 68 - unexplained transaction entered into by the assessee - onus to prove - sham transaction and an accommodation entry against payment of unaccounted income - Reliance on statement recorded under s.131 - CIT-A deleted the addition - HELD THAT:- We notice that the allegation of alleged accommodation entry of receipt/repayment of existing loans receivable by assessee from M/s. Sunderdeep Builders is largely centered around a statement recorded under s.131 of the Act of Accountant, Deepak M. Gajjar of Venus Group in which he has merely deposed that the unaccounted cash books were written by him as per the direction of Ashok Sunderdas Vaswani and such day cash book was handed over to one Vasibhai at Crystal Archade as per directions of Ashok Sunderdas Vaswani/Venus Group. The signatures on the unaccounted day cash book were stated to be put by Shri Deepak Budharmal Vaswani and / or Ashok Sunderdas Vaswani of Venus Group. The documents seized were eventually linked by AO to the assessee read with the statement of Mr. Gajjar and the impugned additions were carried out. Statement of a witness who has no knowledge of relevant facts towards receipt of cash from assessee is not entitled to any weight and is not pertinent in so far as assessee is concerned. Inexplicably, while implicating a third party with grave charges, no enquiry has been made by AO from key persons i.e. Vaswani brothers to elicit any credible information, despite specific request suggestion from the assessee as recorded in para 8.3 of the assessment order. In the absence of any examination of the key persons, the contest by way of cross examination thereon by assessee was also stonewalled. Primary onus in the instant case, squarely lied upon the Revenue and that to justify it with direct or circumstantial evidences. The onus rested upon the revenue has not been discharged at all and thus did not shift on to assessee. Consequently, in the absence of any credible proof of receipt of cash from assessee, the apparent has to be taken as real i.e. Sunderdeep Builders have repaid Rs.4 Crore through banking channel in discharge of its existing outstanding liability as a matter of course. CIT(A) has correctly appreciated the facts and circumstances in its entirety and has come to a rightful conclusion in this regard and thus exonerating the assessee from unvouched and unsupported tax liability. CIT(A) has rightly observed that the allegation of accommodation entry is not sustainable by appreciating the fact that during the F.Y. 2008-09 relevant to AY 2009-10, there was opening receivable by the assessee from M/s. Sunderdeep Builders (Prop.-Rajesh Sunderdas Vaswani) pegged at Rs.1 Crore which was given as a loan / advances by the assessee company through regular books of accounts prior to F.Y. 2008-09. To summarise, a loan of Rs.7 Crore was squared off by the borrower by way of repayment in F.Y. 2008-09. When seen in conjunction with the so called unaccounted day cash book wherein unaccounted cash transactions allegedly recorded continuously spanning over Jan. 2007 to March 2015, no reference has been found to be made in respect any underhand dealing of cash in exchange of square off of Rs. 7 crores. This fact also overshadows the allegation of the revenue and casts serious doubt on the tacit involvement of cash as a quid pro quo against banking transactions qua the assessee. Hence, a normal inference that remaining outstanding amount of Rs.4 Crore paid back to assessee by borrower through banking channel without corresponding receipt of cash, has to be given primacy and cannot be disturbed. On holistic appreciation of factual position, we see no error in the conclusion drawn by the CIT(A). The CIT(A), in our view, has rightfully deleted the addition made u/s 68 holding the act of AO to be without any rational basis and thus unsustainable in law. We entirely agree with the conclusion drawn by the CIT(A) on the aspects of the merits and hence, we decline to interfere therewith. - Decided in favour of assessee. Customs 2022 (12) TMI 228 Refund of additional duty of Customs (SAD) paid through DEPB scrip/license - rejection only on the ground that the duty was paid through debit from the relevant DEPB License - HELD THAT:- The Notification dated 14/09/2007 as amended by Notification dated 01/08/2008 nowhere denied the refund when the same was paid by debiting DEPB scripts. The said notification laid down certain conditions and the exemption under Notifications has to be upon fulfilment of those conditions only and nothing else. It is not disputed that the appellant have fulfilled the conditions therein and that is why the refund has been sanctioned of that part of the duty which has been paid in cash. Had those the condition were not fulfilled then there was no question of Adjudicating Authority s sanctioning the refund. In a series of decisions it is held that debit of any amount under the DEPB scheme, is a mode of payment of duty of exported goods and it cannot be treated as exempted goods - An identical issue came up for consideration before the Hon ble High Court of Delhi of ALLEN DIESELS INDIA PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2016 (2) TMI 247 - DELHI HIGH COURT] wherein the importers were paying duty of Custom including SAD by using DEPB scrips but the department was not refunding the SAD on the ground that SAD had not been paid in cash but by utilizing DEPB scrips and the Hon ble High Court vide order dated 01/02/2016 allowed the petitions filed by the importers and held that since the petitioner therein have fulfilled the conditions set out in Notification No. 10/2007-CUS for availing the refund, the department is directed to issue orders granting refund to the petitioner therein. Undisputedly, the Revenue has failed to establish through any kind of documents or case laws that debit of any amount under the DEPB scheme is not a mode of payment of duty, therefore the benefit cannot be denied to the appellant. Appeal allowed - decided in favor of appellant. Corporate Laws 2022 (12) TMI 227 Winding up of company - Default in payment of value of the goods - statutory notices not responded - matter later on settled between the petition creditor and the appellant company - HELD THAT:- The company Court ordered winding up of the company only on the ground that the Company Petition was not contested and that the liability with the petitioner was proved. There was no other material to hold that the company was in doldrums and there was no other option but to windup. As required by Section 434 (1) (c) of the Act, there was no occasion to learned single Judge to take into account the contingent and prospective liabilities of the company. Since the matter is settled between the petition creditor and the appellant company and that settlement has been placed on record and no one has raised objection against recalling the windup order and since dues of the secured creditor have already been satisfied, no useful purpose would be served keeping alive the winding up order. Winding up a company is a last resort. Every effort should be made to ensure that the company revives and business of a company continues in accordance with law. Operation of a company also generates employment. But, for the fact that the appellant was set ex parte there was no substantial material to show that the financial position of the appellant was so poor there was no other option but to windup the company. As it now stands the appellant has settled its accounts with the petitioner and the secured creditor bank and assert that there are no other liabilities. It is not disputed by the Official Liquidator that there are no other claims received by his Office. The appellant made out a strong case to set aside winding up order - Application allowed. Securities / SEBI 2022 (12) TMI 237 Public Interest Litigation - Regulations seeked to Time Share Companies as Collective Investment Scheme (CIS) under SEBI Act and the Collective Investment Schemes Regulations, 1999 ( CIS Regulations ) - scheme or arrangement to be qualified as a CIS as defined under the SEBI Act - substantial public interest for entertaining this petition - this petition has been instituted is that the rights of several million residents of India are adversely affected due to malfunctioning, fraud, misrepresentation and other wrongful and/or illegal activities of various Time Share Companies - as submitted since Time Share Companies were not included in the exempted categories and considering their mention in the interim report, they would be covered under the definition of CIS as a scheme or arrangement in section 11AA(1) of the SEBI Act HELD THAT:- Once the Parliament has included the provisions with respect to CIS after considering the Dave Committee report and which provisions have been held to be intra vires in the decision of Rose Valley Kolkata [ 2013 (9) TMI 623 - CALCUTTA HIGH COURT] as quoted above, it would not be necessary for us to dwell any further on this aspect. In view of the above discussion, in our considered view, the reliance by the Learned Counsel for the Petitioners on the decision of Rose Valley Kolkata (supra) does not advance the case of the Petitioners. Petitioner s reliance on the Securities Appellate Tribunal decision in the case of Chandrasen Ganpatrao Bhise Vs. Securities and Exchange Board of India [ 2022 (3) TMI 1449 - SECURITIES APPELLATE TRIBUNAL MUMBAI] in support of the contention to bring all time share schemes within the ambit of CIS also appears to be misplaced in as much as in the specific facts of that case a reference has been made to the finding of the Tribunal that the time sharing business of the company was a CIS. Moreover that was a case filed by one of the directors of a company namely Pancard Clubs Limited on whom a penalty had been levied under Section 15HA for fraudulent and unfair trade practice for violation by the company of not registering the CIS under Section 12(1B). In the said case the Tribunal quashed the imposition of penalty on the director holding that the penalty for non-registration was under Section 15D(a) and not under Section 15HA as the director had not indulged in fraudulent and unfair trade practice. In our view, the finding that the time sharing scheme that is selling of rooms for a fixed duration of nights / days depending upon the scheme opted by its customers was held to be a collective investment scheme by the Tribunal itself demonstrates that on a case to case basis after due examination of the facts, the Tribunal may come to a conclusion that a particular scheme is a Collective Investment Scheme. However, that does not mean that every time sharing scheme of selling rooms for a fixed duration of nights and days would be a collective investment scheme, as submitted by the Learned Counsel for SEBI. True that the innocent and gullible investors need to be protected against the abuse in the name of Time shares. However as mentioned above, SEBI the Regulator being fully empowered to do so, it would therefore not be necessary for us to give any such directions to the Regulator. The purposes for which a public interest litigation can be instituted has been very succinctly elucidated by the Supreme Court in the case of State of Uttaranchal Vs. Balwant Sing Chaufal Ors [ 2010 (1) TMI 1095 - SUPREME COURT] where it has been clearly observed that PIL can be filed only for the following three purposes and not otherwise: (i) for enforcement of fundamental rights of marginalized and deprived sections of the society; (ii) for preservation of ecology and environment; (iii) for purity in public administration and probity in governance Having said so, even if such companies, keeping in mind the complex nature of the schemes and the arrangements by which people contribute monies into pools under promises of rights to holidays and the segment of the population that they may touch, require a separate regulation as canvassed by the Learned Counsel for the Petitioners, that clearly in our view is not the job of the Courts. The Supreme Court in the case of Mallikarjuna Rao and Ors v. State of Andhra Pradesh Ors [ 1990 (4) TMI 307 - SUPREME COURT] , has categorically held that the High Courts or the Administrative Tribunals cannot issue a mandate to the Government to legislate nor recommend / advise / direct legislation on a subject nor even require the executive to exercise its rule making power in any manner. Applying the aforesaid principles, the present petition, in our considered view, does not fall within any of the aforesaid categories and cannot be styled or filed as a Public Interest Litigation as it is neither for enforcement of fundamental rights of marginalized and deprived sections of the society nor for preservation of ecology and environment nor for purity in public administration and probity in governance but seeking directions to the Respondents to either enforce the provisions pertaining to CIS Regulations against Timeshare companies, which we have found to be without any merit or in the alternate, issue directions to formulate legislation / guidelines / regulations, which we have already held to be de hors the scope of our constitutional mandate under Article 226. Petition deserves to be dismissed and is hereby dismissed with costs of Rs. 25,000/- to be paid by the Petitioner to the SEBI, within a period of two weeks. Service Tax 2022 (12) TMI 236 Violation of principles of natural justice - petitioner was ready to pay the amount under SVLDR Scheme - respondent No.3 have proceeded to issue the impugned Communication rejecting the claim of the petitioner for the benefit under the SVLDR Scheme - non-speaking order - HELD THAT:- A perusal of the impugned Communication at Annexure A will clearly indicate that the same is violative of principles of natural justice, in as much as no reason or sufficient opportunity was granted to the petitioner before issuing the said Communication. The impugned Communication is also unreasoned, non-speaking, laconic and cryptic order without any application of mind and consequently, on this ground alone, the impugned Communication deserves to be quashed. So also, a perusal of the impugned Communication will indicate that the same is contrary to the Circular dated 12.12.2019, issued regarding applicability and maintainability of the aforesaid SVLDR scheme. The impugned Communication at Annexure A deserves to be quashed and necessary directions are to be issued to the respondents to grant the benefit of SVLDR Scheme in favour of the petitioner - Petition allowed. 2022 (12) TMI 235 Levy of equal amount of penalty u/s 78 of FA - availment of irregular CENVAT Credit was accepted by the appellant, the CENVAT Credit was reversed by them and the amount of interest was paid for such delayed reversal of credit - suppression of facts or not - HELD THAT:- In this case, both taking of CENVAT Credit and reversal thereof was within the knowledge of the Department, which is evident from the audit objection report issued to the appellant. It is an admitted fact on record that both the Service Tax along with interest was deposited by the appellant in the year 2016 and thereafter, show-cause proceedings were initiated against the appellant on 17.07.2018. Both the adjudication as well as the first appellate authority have not specifically discussed with the issue of involvement of the appellant in the fraudulent activities, concerning fraud, collusion, suppression of facts etc., with intent to evade payment of Service Tax. The proviso clause appended to Section 78 ibid cannot be invoked in the case of the appellant for imposition of penalty - Even otherwise also, the benefit provided under sub-section (3) of Section 73 ibid should be available to the appellant inasmuch as before issuance of show-cause notice, the appellant had deposited the disputed amount of Service Tax along with interest and also informed the Department regarding such payment. Hence, as per the mandates under statute, no action was required to be taken for imposition of penalty. Hence, on this count also, appellant s case succeed on merit. Penalty set aside - appeal allowed - decided in favor of appellant. Central Excise 2022 (12) TMI 226 Rectification of mistake - error apparent on the face of record or not - factum of deposit of duty prior issuance of the Show Cause Notice was never brought to the notice of this Tribunal - delay in filing recitication application - Time Limitation - HELD THAT:- The fact of deposit has not been recorded in the final order. In fact, even the acknowledgement of the Department of the deposit was not recorded in the said order. We further observe that the appellant had not challenged the aforesaid order prior to 18th July, 2018 when the appeal against the said order was filed before Hon ble High Court of Rajasthan. It is apparent that this application itself was filed much beyond the period prescribed for the same i.e. after more than six months of the aforesaid final order. The statute i.e. Section 35 D of Central Excise Act/ Section 129 of Customs Act, 1962 prescribes a period of six months from the date of the order rectification whereof is prayed. In the present case, we do accept that date of order of Hon ble Rajasthan High Court is the relevant date for the said period of limitation to begin with. But we fail to understand as to how the said period can be allowed to be extended beyond the said period of six months. The application for rectification of mistake, to our opinion, is beyond the period of limitation as per the generic law on the aspect of limitation - The words 'sufficient cause' in Section 5 of Limitation Act should receive a liberal construction so as to advance substantial justice, only when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the appellant as was held by Hon ble Supreme Court in the case of PERUMON BHAGVATHY DEVASWOM, PERINADU VILLAGE VERSUS BHARGAVI AMMA (DEAD) BY LRS ORS. [ 2008 (7) TMI 836 - SUPREME COURT] . There has been a substantial delay on part of the applicant firstly in challenging the final order of 22.12.2017 before Hon ble High Court of Rajasthan and subsequently, a substantial delay in filing this application pursuant to the order of Rajasthan High Court dated 25.08.2021. The only explanation for such delay at every stage is the time taken by applicant in consultation with his Counsel. Even the name of the Counsels engaged for those consultations is not mentioned in the application. The reason given reflects the negligent and casual attitude of the applicant. Though Tribunal can take suo moto action for rectification of mistake and the application for the same can be filed at any time but it should reflect the reasons for causing the delay - The application in hand in both the appeals is hereby dismissed. CST, VAT & Sales Tax 2022 (12) TMI 234 Cheating the government and evading tax - bringing furnace oil made from tyres from Haryana and using secret/abandoned passages for the purposes of entry into Punjab in order to evade tax - HELD THAT:- A perusal of the judgments in Pritpal Singh Versus State of Punjab another [ 2012 (3) TMI 576 - PUNJAB AND HARYANA HIGH COURT ] and Rakesh Kumar Versus State of Punjab another [ 2013 (4) TMI 993 - PUNJAB AND HARYANA HIGH COURT ] would show that there is no provision for registration of an FIR in such like matters of alleged evasion of tax. The provisions of the Act only provide for mandatory penalty. It is well-settled proposition of law that if a special provision has been made qua a particular subject (in the present case Value Added Tax), the said subject is excluded from the general provisions (in the present case Indian Penal Code). Since the provisions of the VAT Act do not provide for the registration of the FIR and the said Act is a Code in itself, the provisions of the IPC also cannot be invoked. Therefore, quite apparently an FIR could not have been registered against a person who was said to have evaded tax. The FIR No.123 dated 05.12.2013 registered under Sections 420/120-B IPC and Section 4 of Punjab Tax on Entry of Goods into Local Areas Act, 2000 at Police Station City-II Mansa, the report under Section 173(2) Cr.P.C. and all subsequent proceedings arising therefrom are hereby quashed - Petition allowed. Indian Laws 2022 (12) TMI 233 Dishonor of Cheque - legally enforceable debt or not - rebuttal of presumption - issuance and signature on the cheque not disputed - liability of signatory of cheque - Instead of filing a complaint against the firm, the same has been filed against petitioner No.1- private limited company - deemed service of notice, once refused to accept - HELD THAT:- A person who is the signatory to the cheque which is drawn by that person on an account maintained by him and the same has been issued for the discharge, in whole or in part, of any debt or other liability, which has been returned by the bank unpaid, such person can be said to have committed an offence. Pertinently, a reference to the dictum by Hon ble The Supreme Court of India, in the cases RANGAPPA VERSUS SRI MOHAN [ 2010 (5) TMI 391 - SUPREME COURT] and TRIYAMBAK S. HEGDE VERSUS SRIPAD [ 2021 (9) TMI 1159 - SUPREME COURT] is made, wherein it has been held that once issuance of a cheque and signature hereon are admitted, presumption as envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption. The presumptions raised under Section 118(b) and Section 139 of the Act are rebuttable. A reverse onus is cast on the accused, who has to establish a probable defence on the standard of preponderance of probabilities to prove that either there was no legally enforceable debtor other liability - cheques not having been drawn on the account of petitioner No.1- private limited company, which is a separate legal entity, the complaint qua it, is not maintainable. Liability in so far as petitioner No.2, sole proprietor - HELD THAT:- In absence of the firm being not arrayed as an accused, is concerned, the exposition of law as settled by Hon'ble The Supreme Court in the case of RAGHU LAKSHMINARAYANAN VERSUS FINE TUBES [ 2007 (4) TMI 367 - SUPREME COURT] , draws a clear distinction emerging therefrom that only the proprietor can be held liable under Section 138 of the Act, as the proprietorship concern has no separate legal identity, it means and includes sole proprietor and vice versa. Thus, a sole proprietorship firm would not fall within the ambit and scope of Section 141 of the Act, the proprietor and the firm being one and the same. The sine qua non for an offence under Section 138 of the Act is that the cheque must be drawn on an account maintained by the accused and admittedly, it is the case of the petitioners themselves that in the present case, cheques were drawn on the account of the proprietorship concern on the account on which the cheques in question were drawn on the account maintained by the sole proprietor of sole proprietorship firm- M/s Royal Pressing and Components, who signed the same - There is no denial that he is not the sole proprietor of the aforesaid firm or that he did not sign the cheques in question, the legal notice of demand was sent by registered AD post at the address as mentioned in Annexure P-5, which is the Central Excise registration certificate as appended and relied upon by the petitioners themselves and is the same address as that of petitioner No.2, mentioned in this petition and in the complaint, but was refused to be accepted by him, which as per Section 27 of the General Clause Act gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post, unless and until the contrary is proved by the addressee. It is the solemn duty of the Courts to separate the grain from the chaff. As per Section 142(1)(a) of the Act, the sole criteria being that the complaint must be filed by the payee or the holder of the cheque in due course, is duly satisfied in the present case - this Court is persuaded to hold that the complaint against petitioner no.2 is maintainable. The present petition is allowed in part. The complaint, Annexure P-1, and the summoning order 14.7.2016, Annexure P-3 are set aside only qua petitioner No.1. However, the complaint and impugned summoning order qua petitioner No.2 are maintained.
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