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TMI Tax Updates - e-Newsletter
December 8, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Exemption u/s 10(10D) - addition of the surrender value of the assigned keyman insurance policy - On the basis of Section 10(10D) of the Act, with its Explanation 1, the clear position of law which emerges is that the character of the Keyman Insurance Policy does not get converted into ordinary Life Insurance Policy despite its assignment and therefore, any benefit accruing to the employee upon its surrender or encashment will be taxable in the hands of the Employee as "perquisite". - HC
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Deduction u/s 36 or 37 - provisions for claims and compensation - A developer of a building could claim it as an expenditure in the year in which such expenditure is actually incurred or the advance is written off and its right to claim the refund of such security is completely waived off. Nothing of this sort has happened in the present case and merely by making a book entry for creating a provision for future expenditure or compensation, the Assessee cannot be permitted to claim deduction under Section 36 or 37 of the Act. - HC
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Penalty u/s 271(1)(c) - The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income or (ii) filing of inaccurate particulars by Assessee, are required to be satisfied and the burden of proving that lies upon the revenue authority and not on the Assessee. - HC
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Disallowance on account of interest on the capital account - The withdrawals made by the assessee from the other partnership firms on which interest was paid by him, thus, were not utilized for non-business purpose and interest paid thereon in my opinion, cannot be disallowed on the ground that there was utilization of corresponding funds for non-business purpose as alleged by the authorities below. - AT
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Income accrued in India - interest income and commitment fees earned by DZ Bank from its Indian clients - PE in India - Once entire interest revenues earned in India in the hands of the foreign enterprise is taxed in its hands under article 11- as is the undisputed position in this case, nothing survives for taxation under article 7, and, given the fact that entire related revenues are taxed in the hands of the assessee on gross basis under article 11, directly or indirectly, nothing more than entire business receipts can be brought to tax in India. - AT
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Disallowance of stock written off - Books of accounts of the assessee were not rejected by AO in the instant case. It is pertinent to note that no benefit has been derived by the assessee by this write off of stocks during the year under consideration. Due to exceptional circumstances that had prevailed during this year, the Directors of the assessee company had decided to write off the stocks that were more than two years old. - No additions - AT
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Deduction u/s 80IB - Whether Ld.CIT(A) can re-estimate average profit @ 38.40%? - The powers given to assessing officer under sub-section 8 of section 80IA or 80IA(10) should not be used to restrict the benefit given to assessee under section 80IB(10) of the Act, as schemes of these sections are different. We also note that the Assessing Officer has estimated the assessee’s average profit @16.02%. On appeal, Ld.CIT(A) reestimated the assessee’s average profit @38.40% and computed the eligible amount of deduction u/s.80IB(10) of the Act, without rejecting books of accounts. - AT
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Capital gain on tenancy rights - transfer u/s 2(47) - Even if the assessee has not paid any amount for purchase of tenancy rights, the nature of rights would remain tenancy right and this is a capital asset. Section 55(2)(a) of the Act clearly stipulates that in case no price is paid for acquisition of an asset mentioned in clause (a) to Section 55(2) of the Act, then the cost shall be taken as Nil. Hence the Assessing Officer was legally incorrect in his view. - AT
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Disallowance being commission paid to Directors - expenses were incurred in accordance with the provisions of Companies Act. - The commission expenses were paid by passing the Board’s resolution. And in earlier years such commission expenses were claimed and allow to the assessee. The assessing officer made disallowance on ad- dock basis which is not sustainable. - AT
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Capital gain - Land (asset) held as stock-in-trade in the partnership firm - Considering the legal position as explained by us in the relevant provisions of subsection (2) of Section 45, sub-section (3) of section 45 and sub-section (14) of section 2 of the Income Tax Act 1961 and taking into account the facts of the assessee`s case, we hold that Land (asset) held as stock-in-trade in the partnership firm is not a capital asset and would not attract the provisions of section 45(3) - AT
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Addition u/s 40A(3) - Bogus purchases - there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against the same were made in cash as alleged by the Ld. DR. In our opinion, this case is therefore not a fit case where the provision of section 40A(3) can be invoked and that too for the first time at this stage before the Tribunal. - AT
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Penalty u/s 271AAB - Section 271AAB of the Act, contemplates imposition of a penalty pursuant to the disclosure of income in statement recorded u/s. 132(4) of the Act by the assessee. It is an admitted fact that no such statement has been recorded from the assessee. Thus, on this ground also, the levy of penalty fails. - AT
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Revision u/s 263 - the notice u/s. 143(2) of the Act, was issued much prior to the assessee filing his return of income. This is not in accordance with law. Hence the order passed u/s. 148 of the Act without issuing valid notice u/s. 143(2) of the Act, makes the reassessment order dt. 20/05/2016, passed u/s. 143(3)/147 of the Act, bad in law - Consequently, the revision of the assessment u/s. 263, revising such illegal assessment order is also bad in law. - AT
Customs
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Non renewal /extension of the Warehouse License - Demand of customs duty - goods were moved from one warehouse to another - There are no reason for the appellant/ petitioner to have invoked the writ jurisdiction of this Court on the basis of a status quo order granted by the trial Court in a civil Suit in which Customs Department was not at all a party. Nothing prevented him to even implead Customs Department also as Defendant in that very suit, so that all related issues could be adjudicated by one Court. This is what, the abuse of process of law is and if an observation of a learned single Judge in this process is given against the appellant/petitioner, he cannot be permitted to raise a plea against that in the intra court appeal. - HC
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Refusal to issue Certificate of Origin to the petitioner for export of red sanders - permission to petitioner to export - The attitude of the Principal Chief Conservator of Forests, Telangana at Hyderabad to be wholly vexatious considering the above background and arbitrary too having regard to her decision to grant Certificate of Origin - HC
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Refund of the Extra Duty Deposit (EDD) - Provisional Assessment not finalised - No such material has been placed before this court to justify the action of the Customs Department not to finalise the Provisional Assessment for 16 years and even by now to keep the EDD a mere Security Deposit by Importer/Petitioner with them like this. - HC
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Release of confiscated goods - condition of re-export imposed on the importer while redeeming the goods - the imposition of condition of re-export under Section 125 of the Act was not justified and the imposition of such a condition is not envisaged in law and therefore, the order imposing such condition is liable to be set aside. The same is accordingly set aside. - HC
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Classification of imported goods - ‘catalytic converter assembly’ which is attached with an inlet and an outlet pipe - The appellant has wilfully suppressed as well as mis-stated the actual/complete description of the impugned goods under import, etc., thereby claiming the benefit of concessional rate of duty, to justify the invoking of extended period of limitation in terms of Section 28 (1) / 28 (4) of the Customs Act, 1962, as applicable during the period. - AT
Service Tax
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Benefit of SVLDRS scheme - due date of quantification of liability - The amount had been wrongly quantified for no fault of the petitioners. It was an apparent mistake made by the Department. The Department thus ought not to have rejected the application of the petitioners by alleging that the quantification had been made after the cut off date. - HC
Case Laws:
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GST
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2020 (12) TMI 233
Maintainability of petition - availability of alternative remedy of appeal - petitioners were issued summon and simultaneously subjected to intimation by Assistant Commissioner of State Tax wherein the amount payable by the petitioner was determined - Section 107 of CGST Act - HELD THAT:- It being not disputed that the order is appealable under Section 107 of the Central Goods and Services Tax Act, 2017 and merely because the petitioner has to pre-deposit, therefore, instead of appeal present petition is filed, we are not inclined to cause indulgence. Petition dismissed.
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Income Tax
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2020 (12) TMI 232
Exemption u/s 10(10D) - addition of the surrender value of the assigned keyman insurance policy as income of the appellant - Whether Tribunal is correct in law in not taking notice of the amendment introduced by the Finance Act, 2013, to include the assigned policies also within the ambit of keyman insurance policy for the purpose of taxation with effect from 01.04.2014 which clearly go to prove that the surrender value of the assigned keyman insurance policy was not taxable up to 31.03.2014? - HELD THAT:- In the present facts, the Keyman Insurance Policy was taken out by the Company and was assigned in favour of the Managing Director on 31.03.2006. To the extent of surrender value accrued as on 31.03.2006, namely ₹ 58,74,752/-, was offered for taxation as perquisite in the hands of the Assessee. The character of Insurance Policies does not change after assignment. The Assessee himself has never paid any premium on the said Keyman Insurance Policy from his own resources. Therefore, even if the assignment is endorsed by the Insurance Company as on 31.03.2006, the character of the Policy does not convert into an ordinary Life Insurance Policy in the hands of the Assessee. The Keyman Insurance Policy is a Life Insurance Policy taken by the employer company in favour of its employee Managing Director. Its character continues to be the same. In RAJAN NANDA AND NARESH KUMAR TREHAN [ 2011 (12) TMI 392 - DELHI HIGH COURT ] clearly expresses that the character of the Insurance Policy gets converted into an ordinary policy. Because Section 10(10D) of the Act does not make any such distinction, it cannot be said to be a case of tax evasion, but rather a case of tax planning, even if huge benefit of these provisions are taken by both company as well as individual. It is this caveat, along with the pronouncement of Delhi High Court, led to the insertion of aforesaid Explanation 1 to Section 10(10D) of the Act and therefore, after such amendment, which in our opinion applies retrospectively to all the previous years, including the Assessment Year 2007-08 in the present case - the reliance placed by the learned counsel for the Assessee of Delhi High Court decision is misplaced and cannot enure to the benefit of the Assessee. On the basis of Section 10(10D) of the Act, with its Explanation 1, the clear position of law which emerges is that the character of the Keyman Insurance Policy does not get converted into ordinary Life Insurance Policy despite its assignment and therefore, any benefit accruing to the employee upon its surrender or encashment will be taxable in the hands of the Employee as perquisite . Appeal filed by the Assessee, therefore, deserves to be dismissed
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2020 (12) TMI 231
Deduction u/s 36 or 37 - provisions for claims and compensation - Security deposits given under development agreement - assessee is under obligation to construct a pent house but due to non-approval of the permission from local authorities, the assessee could not construct the pent house but the landlord did not return the deposit as the assessee failed to satisfy the terms of the agreement - Revenue as well as the Tribunal disallowing the same as provisions for claims and compensation on the ground that it was not written off in the Books of Accounts of the Assessee - HELD THAT:- Claim of creation of provision for such expenditure, which is not yet incurred and is only intended to be written off as compensation paid to the land owner for the admitted failure of the Assessee to complete the contract in the manner as agreed between the parties, does not entitle the Assessee to claim the same either as Bad Debts under Section 36(1)(vii) of the Act or as Business Expenditure under Section 37 Either the Assessee admits this liability and pays the said amount to the land owner or the advance given thereafter is written off in its Book of Accounts to conclusively express its intention not to claim anything back from the land owner only could have been a reasonable conclusion of such expenditure being claimed as Compensation or a Business Expenditure under Section 37 of the Act. It is not a question of such advance turning to be a bad debt but the more relevant provision applicable to such facts would be Section 37 of the Act. A developer of a building could claim it as an expenditure in the year in which such expenditure is actually incurred or the advance is written off and its right to claim the refund of such security is completely waived off. Nothing of this sort has happened in the present case and merely by making a book entry for creating a provision for future expenditure or compensation, the Assessee cannot be permitted to claim deduction under Section 36 or 37 of the Act. The provision as such, cannot be allowed as Business Expenditure in the hands of the Assessee.The appeal filed by the Assessee is liable to be dismissed.
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2020 (12) TMI 230
Higher rate of depreciation on dumpers @ 30% OR @ 15% - Tribunal has affirmed the order passed by the CIT(A) granting higher rate of depreciation at the rate of 30% on the dumpers - HELD THAT:- Having regard to the order passed by the coordinate Bench of this Court referred to above and even otherwise, we are of the view that the question of law as proposed cannot be termed as substantial question of law. In the result, this appeal fails and is hereby dismissed.
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2020 (12) TMI 229
Penalty u/s 271(1)(c) - Revised return filed - expenditure being operating and administrative expenses and finance charges being interest on loan taken by the Assessee claimed by the Assessee were not allowable expenditure, because the Assessee had not yet commenced its regular business operations - HELD THAT:- If the Assessee had declared Nil income in its original return of income, as it had not commenced the business, but filed revised return of income to fairly disclose its foreign exchange gain made during the year, even prior to commencement of business, but, at the same time bona fide claimed the expenditure incurred during that year in the form of interest or finance charges or administrative expenses against such income, and disclosed all these facts in audited Balance Sheet filed with the Return of Income and filed a Loss Return before the authority, the authority concerned was entitled to take a different view of the matter that such expenditure was not allowable, as the Assessee had not commenced its business operations and on that issue, there was no serious dispute from the side of the learned counsel for the Assessee before us also and that is why, the Assessee seems to have accepted the income tax liability fixed upon him and paid the said tax without a demur. The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income or (ii) filing of inaccurate particulars by Assessee, are required to be satisfied and the burden of proving that lies upon the revenue authority and not on the Assessee. Merely because the claim of expenditure made by the Assessee is found to be a wrong claim and is disallowed, it does not per se attract imposition of penalty under Section 271(1)(c). One fails to understand how the reduction of loss in the Assessment order would amount to income on which tax payment could have been evaded by Assessee. No positive income could result by such disallowance and therefore, no tax in fact could ever be imposed on such assumed reduction of loss considered by the Assessing Authority. This is just a hypothetical figure of income taken by the authority concerned in order to impose somehow penalty under Section 271(1)(c) upon the Assessee. In the present case, we are of very clear and firm view that it was not at all a fit case for the imposition of penalty under Section 271(1)(c) of the Act as the basic requirement for invoking that provision are not at all satisfied in the present case and the appeal of the Assessee therefore deserves to be allowed.
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2020 (12) TMI 228
Exemption u/s 11 - Whether AO and appellate forums have jurisdiction to adjudicate the genuineness of the receipts by the trust which is vested with the Commissioner u/s 12A and 12AA especially when Sections 12(1) and 2(24)(iia) deems all income received by the assessee Trust to the rigor of Sections 11, 12 and 13 - voluntary contributions received by the appellant are in the nature of capitation fees - HELD THAT:- As assessee submitted that the aforesaid substantial questions of law have already been answered against the revenue by a Bench of this Court in 'COMMISSIONER OF INCOME-TAX Vs. ADICHUNCHANGIRI MASAMSTANA MUTT' [ 2019 (1) TMI 1832 - KARNATAKA HIGH COURT] AND [ 2019 (1) TMI 1829 - KARNATAKA HIGH COURT] - The aforesaid submission could not be disputed by the learned counsel for the revenue. - Decided in favour of assessee.
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2020 (12) TMI 227
Direct Tax Vivad Se Vishwas Act, 2020 - procedure to avail the said Scheme - Payment of taxes and withdrawal of appeal - HELD THAT:- As already noted, the assessee has duly filed the declarations in Form 1 and Form 2 and the Designated Authority has also issued the certificate in Form 3 as per section 5(1) of the Scheme determining the tax payable by the assessee under the Scheme. On receipt of the said certificate in Form 3, the assessee is now seeking to withdraw the appeal as required under the Scheme and keeping in view that the assessee has duly complied with the necessary requirements under the Scheme, permit the withdrawal of the appeal filed by the assessee and dismiss the same as withdrawn.
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2020 (12) TMI 226
Disallowance on account of interest on the capital account - Withdrawal from one partnership firm and investment in other partnership firm - Whether addition with the partnership firm M/s. Sai Prestige Development is not sustainable as the same is clearly made on notional basis in the absence of any such interest paid or payable to the assessee by partnership firm of M/s. Sai Prestige Development - HELD THAT:- As per clause (v) of section 28 any income inter-alia, on account of interest on the capital account of a partnership firm is chargeable to tax under the head Profits and gains of business or profession in the hands of partner only when it is due or received by him from such partnership firm. In the present case, no such interest was due to the assessee or received by him from the partnership firm of M/s. Sai Prestige Development on the capital account as a partner and the same therefore, could not be brought to tax as the business income of the assessee. As noticed that such interest on notional basis was not added by the Assessing Officer to the total income of the assessee but the deduction claimed by the assessee on account of interest paid on the debit balances of capital account with other firms was disallowed by him to the extent of interest attributable to the credit balance of capital accounts / with M/s. Sai Prestige Development on the basis that there was diversion of interest bearing capital for making investment in the capital of M/s. Sai Prestige Development. This basis adopted by the authorities below to make the impugned addition on account of disallowance of interest is not sustainable. Even if it is assumed for the sake of arguments that the entire capital in the partnership firm of M/s. Sai Prestige Development was invested by the assessee from the capital withdrawn from other partnership firms, the said investment in the capital of M/s. Sai Prestige Development was made by the assessee for the purpose of business in as much as income received from the partnership firm of M/s. Sai Prestige Development in the form of profit, remuneration or interest was chargeable in his hands under the head Profits and gains of business or profession . The withdrawals made by the assessee from the other partnership firms on which interest was paid by him, thus, were not utilized for non-business purpose and interest paid thereon in my opinion, cannot be disallowed on the ground that there was utilization of corresponding funds for non-business purpose as alleged by the authorities below. Disallowance made by the Assessing Officer on account of interest and deleting the said disallowance
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2020 (12) TMI 225
Rectification u/s 154 - AO states that the assessee has violated the provisions of Section 197(1B) as he did not deduct TDS from the payment of interest to loan creditors and hence she is liable for disallowance u/s 40(a)(ia) - this disallowance was not done in the assessment order passed u/s 143(3) of the Act on 29.12.2009, the same requires rectification u/s 154 - HELD THAT:- The issue is highly debatable. Hence, no disallowance can be made in this case without verification. This is not a mistake apparent on record. Thus we agree with the submission of the assessee that the issue is highly debatable and that an order could not have been passed under those circumstances u/s 154 of the Act on the ground that, a mistake apparent on record has crept into the assessment order and the same is being rectified. A mistake apparent on record should be one which is on the face of the record and which does not require consideration of fresh facts. In this case the ld. CIT(A) has directed the AO to take into account a number of facts and then arrive at the question of disallowance. This cannot be done in a proceeding u/s 154.
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2020 (12) TMI 224
Income accrued in India - interest income and commitment fees earned by DZ Bank from its Indian clients - PE in India - whether can be taxed in the hands of the assessee under article 7 of the India German Double Taxation Avoidance Agreement - Indo German tax treaty? - HELD THAT:- Interest income is specifically covered by article 11 which, inter alia, provides that interest income arising in a contracting state and paid to a resident of the other contracting state may be taxed in the other contracting state and restricts the taxability of such interest income, in the cases in which recipient of the interest income is beneficial owner thereof, to 10% of the gross amount of interest. There is also no dispute that the interest revenues relating to the India operations of the DZ Bank AG have been offered to tax under article 11, and the matter has reached finality as such. In the assessment order itself, that aspect of the matter has been categorically noted by the Assessing Officer. Interest income is taxable on gross basis, in the source jurisdiction- subject to, of course, certain exemptions which are not relevant in the present context as on now. Even if there is a real relation between the business carried on by the assessee for which it receives interest and processing charges abroad and activities of its representative office in India which contribute directly or indirectly to the earning of income of the assessee , as is stated in the assessment order, that relationship per se will not make it taxable in India. Conditions laid down under article 11(5) are not satisfied on the facts of this case, and, the entire interest income, therefore, is required to be taxed under article 11. For this reason alone, the interest income cannot be brought to tax under article 7 because the condition precedent for an interest income being brought to tax under article 7, i.e. fulfilling the twin conditions set out in article 7, are not satisfied. It is an undisputed fact that the entire related interest income has been brought to tax in the hands of the foreign enterprise, even though on gross basis under article 11. In case any income is brought to tax on account of ALP adjustment, and bearing in mind the fact that such an income will also be relatable to earning the same interest income, it will indeed result in a situation that for revenue of x amount earned from India, what will become taxable in India will be an amount more than x amount- something which is clearly incongruous. The taxable amount in a tax jurisdiction cannot, under any circumstances, be more than the entire revenue itself in that jurisdiction. In this view of the matter, even an income on account of ALP adjustment for free rendition of services by the Indian representative office to the foreign enterprise itself- even if that be treated as an associated enterprise and a hypothetically independent entity, in the cases of banks where entire interest revenues are taxed on gross basis, is ruled out. Once entire interest revenues earned in India in the hands of the foreign enterprise is taxed in its hands under article 11- as is the undisputed position in this case, nothing survives for taxation under article 7, and, given the fact that entire related revenues are taxed in the hands of the assessee on gross basis under article 11, directly or indirectly, nothing more than entire business receipts can be brought to tax in India. Taxability of interest income and commitment fees - It is clear that, on the facts and in the circumstances of this case and in law, there is no income, other than the interest income of DZ Bank AG from its clients in India, on which tax liability under article 11 has already been discharged, taxable in the hands of the assessee bank - this taxability is concerned, the assessee did not have any obligations to file the income tax return under section 115A(5) as it existed at the relevant point of time. It is difficult not to miss the fact that we are looking at a situation in which an income, which has already been brought to tax in the hands of the assessee under a treaty provision, is being sought to be taxed again in the hands of the same assessee, in the same assessment year but only under a different provision in the same tax treaty. We cannot, and donot, approve such an approach. The impugned demands are, thus, also devoid of legally sustainable merits from this point of view as well. We, therefore, uphold the plea of the assessee against taxability of interest income and commitment fees in the hands of the assessee bank, additionally under article 7 of the Indo German tax treaty also. That finding is, however, without prejudice to the taxability of the interest income under article 11 of the Indo German tax treaty. We make it clear that the income in question could only be taxed under article 11, and not additionally under article 7 also, but the income is taxable nevertheless, subject to the exemptions set out in and under the scheme of article 11, on gross basis. Given our line of reasoning, as above, it is wholly academic issue as to whether or not the assessee had a permanent establishment in India, because PE or no PE, the debt claim in question could not be said to be effectively connected to the alleged PE, and, therefore, neither the exclusion article 11(5) could have been triggered, nor the taxability under article 7 could not have come into play.
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2020 (12) TMI 223
Addition of share capital including premium u/s 68 - HELD THAT:- Transactions were entered into in its books of account by the partnership firm through cash book by debiting the investment in shares and crediting the loan amount of the proprietary concern. This credit appearing in the books of account of the partnership firm, M/s. Jatia Investment Co. was treated by the AO as unexplained cash credit u/s 68. As held by their Lordship that when the cash did not pass at any stage and since neither the respective parties received any cash nor paid any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. In the case of Jatia Investment Co.[ 1992 (8) TMI 16 - CALCUTTA HIGH COURT] is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in relying on this decision for deleting the addition made by the AO u/s 68 by holding that the said provision was not applicable. - Decided against revenue.
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2020 (12) TMI 222
Revision u/s 263 - as per CIT Section 80P deduction has not been correctly granted by the AO - HELD THAT:- In Hon ble High Court in CIT vs. Baroda Peoples Co-operative Bank [ 2005 (7) TMI 33 - GUJARAT HIGH COURT] we find merit in the submission of the ld. A.R that the Ld PCIT has erred in relying on the decision of Hon ble Supreme Court in Totgar s Co-operative Sales Society Ltd.[ 2010 (2) TMI 3 - SUPREME COURT] since it was in respect of society providing credit facilities to its members and not an assessee which is a bank. In the light of judicial precedence laid down by the Hon ble Apex Court in Malabar Industries Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 by the CIT. In this case, we note that the view of Assessing Officer cannot be held to be erroneous, since Section 80P deduction has been correctly granted by the AO in consonance with the ratio of the decision of Hon ble Gujrat High Court in CIT vs. Baroda Peoples Co-operative Bank Ltd. (supra), so the view of AO is a plausible view and therefore Ld. PCIT erred in invoking the revisional jurisdiction u/s 263 without satisfying the condition precedent essential to invoke revisional jurisdiction. PCIT ought not to have invoked the power u/s 263 and therefore, the invoking of the revisional jurisdiction itself is held to be bad in law and therefore quashed. - Appeal of the assessee is allowed.
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2020 (12) TMI 221
Reopening of assessment u/s 147 - Non issue of notice u/s 143 - contention of the Revenue that since the assessee did not file return of income pursuant to notice u/s. 148 AO was justified in not issuing notice under sub-section (2) of section 143 of the Act - HELD THAT:- Since assessee pursuant to the section 148 notice has replied to the AO to treat the original return filed by it, as return pursuant to notice under section 148 which fact has been admitted/acknowledged by the AO in the first paragraph of the impugned re-assessment order dated 28.03.2016. AO was not justified in not issuing notice u/s 143(2) of the Act before framing reassessment order u/s 147/143(3) of the Act, therefore we find no merit in the contention of the revenue. The revenue has cited the decision in Areva T D India Ltd. [ 2006 (11) TMI 166 - MADRAS HIGH COURT] to support their ground on this legal issue - in the light of the Hon ble Supreme Court s decision in the case of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] as well as in the case of Oberoi Hotels Pvt. Ltd. [ 2018 (6) TMI 1472 - CALCUTTA HIGH COURT] we are bound by the decisions of the Hon ble Supreme Court and jurisdictional High Court, therefore, we are not further going into the merit of this contention of the revenue. Therefore no merit in the contention of the revenue and, therefore, we confirm the action of Ld CIT(A) on this legal issue and consequently, the ground nos. 2 and 3 of revenue stand dismissed. Original assessment was completed u/s. 143(3) - more than four years have elapsed after passing the order - Whether failure of the assessee to disclose fully and truly all material facts necessary for the assessment for the assessment year ? - HELD THAT:- In this case original assessment was completed under Section 143(3) of the Act and such concluded assessment when sought to be reopened beyond four years, it is not only necessary for the AO to form reasonable belief that income had escaped assessment as envisaged in Section 147 of the Act but additionally he has to show that such escapement occurred as a result or consequence of assessee s failure to disclose truly and fully all facts necessary for assessment. It is to be kept in mind that the AO after obtaining information and documents from the assessee cannot supplement/supplant his conclusion about assessee s failure to disclose truly and fully material facts, if the recorded reasons do not refer to such failure. Where the AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year, then the AO is duty bound to demonstrate in his reasons recorded prior to issue of notice, the failure on the assessee s part to truly and fully disclose all material facts in the course of original assessment, which in this case, the AO has not made even a whisper to that effect, therefore, the essential condition precedent as stipulated in first proviso to section 147 of the Act has not been satisfied, therefore, the AO could not have usurped the jurisdiction without satisfying the same, therefore, we find no infirmity in the order of Ld. CIT(A) on this issue also, so we confirm the impugned action of Ld CIT(A) on this legal issue and so revenue s ground no. 1 fails.
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2020 (12) TMI 220
Disallowance of stock written off - assessee is engaged in the business of manufacturing of pickles, spices, pastes and chutneys declared total income of Rs. Nil - assessee during the year had written off stock worth on the ground that the said stock had become stale - Assessee had already treated the said stock as obsolete and had accordingly, reduced the same from the valuation of closing stock made at the end of the year - DR before us said that stock written off by the assessee during the year had become perishable in nature and that the same should have been written off in earlier years itself and argued that the conduct of the assessee by its decision to decide to write off the same during this year to offset the net profit earned by the assessee during the year is not appreciable - no expert committee report was made available for writing off the stock during the year under consideration - HELD THAT:- Assessee had chosen to write off the said stock to present a realistic picture of its financial statements to the tune of ₹ 11.99 Crores. With regard to the argument advanced by the ld. DR about the conduct of the assessee of having decided to write off the said stock during this year is concerned, we find that no ulterior motive in any manner whatsoever could be attributed to the assessee in view of the fact that even after disallowance of stock write off to the tune of ₹ 11.99 Crores is made by the AO there was no taxable income for the assessee in view of the set off of loss brought forward from earlier years which had also been duly granted by the ld. AO in the assessment. Even if these stale stocks had been written off in any earlier years as accepted by the ld. AO in his assessment order and by the ld. DR before us, the same would have only enabled the brought forward losses to get increased. In any case it will have no impact in the computation of total income for the year under consideration. One more observation made by the AO that assessee had not offered any income in respect of these stocks. This observation is factually incorrect in as much as the stocks worth ₹ 11.99 crores was included in the closing stock valuation upto 31.3.2011 and hence income was duly offered for the same. The crucial point to be understood is there is absolutely no dispute that the stock to the tune of ₹ 11.99 Crores falls into the category of stale stock. Since this stale stock has been written off to the tune of ₹ 11.99 Crores, the assessee rightly had shown as an exceptional or extraordinary item in its profit and loss account as a separate line item in consonance with the requirement prescribed in accounting standards issued by ICAI. Even after this write off of the stock to the tune of ₹ 11.99 Crores, the assessee is still left with stock of ₹ 11.84 Crores as on 31/03/2012 as is evident from the aforesaid table. This shows the scientific basis of determination of stocks to be written off by the assessee. Books of accounts of the assessee were not rejected by AO in the instant case. It is pertinent to note that no benefit has been derived by the assessee by this write off of stocks during the year under consideration. Due to exceptional circumstances that had prevailed during this year, the Directors of the assessee company had decided to write off the stocks that were more than two years old. The details of the same are already on records and hence, not reiterated herein.Ground raised by the revenue is dismissed.
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2020 (12) TMI 219
Unexplained deposit in the bank account with Standard Chartered Bank - CIT(A) deleting the substantial addition held that the AO failed to controvert with evidence that the amount deposited in cash in the bank accounts of the assessee was not received from sale of paintings - HELD THAT:- Differential amount Ld. CIT(A) has accepted that assessee sold the paintings genuinely to these two parties. Therefore, on the same set of documentary evidences when CIT(A) deleted the substantial addition in respect of two parties for sale of paintings to them, there were no justifiable reason for CIT(A) to sustain part addition against the assessee. The documentary evidences brought on record and examined by the AO at appellate stage and not controverted by the AO would lead to the conclusion that assessee received the impugned amount on account of sale of paintings from the above two purchasers and the evidences brought on record have not been controverted by the AO through any evidence or material on record. For sale of paintings by assessee, strictly the provisions of section 68 may not apply in the case of the assessee. Onus upon assessee to explain the source of the cash deposit in the bank account is duly discharged and, as such, there was no justification to make or sustain even part addition against the assessee. In view of the above discussion, we set aside the orders of the authorities below and delete the entire addition. AO is also directed to grant benefit of section 54F to the assessee on account of deletion of this addition as per law. - Decided in favour of assessee.
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2020 (12) TMI 218
Deduction u/s 80IB - Power to AO to restrict the benefit given to assessee under section 80IB(10) - estimating the average profit for the purpose of partly denial of deduction under section 80IB(10) - AO was of the view that assessee has shown excess profit to claim more deduction under section 80IB(10) therefore, he proceeded to estimate average profit of the assessee without rejecting books of accounts of the assessee - CIT(A) reestimated the assessee s average profit @38.40% and computed the eligible amount of deduction u/s.80IB(10) - HELD THAT:- AO has not challenged the correctness of the opening stock of the assessee. The closing stock of the previous year of the assessee becomes opening stock in the current year i.e. (assessment year under consideration), which is sold by the assessee during the assessment year under consideration - AO did not find any defect in the opening stock of the assessee. In order to ascertain the veracity of profit declared by the assessee, the assessing officer should have examined the correctness of the opening stock, which is sold by the assessee during the assessment year under consideration. To estimate the average profit, the opening stock plays an important role in assessee`s case, as the profit earned by the assessee is because of selling the opening stock, as explained above. We note that Assessing officer worked out the unreasonable profit without pointing out any defect in the opening stock, which was sold during the year, hence estimation of average profit by the Assessing Officer without having noticed any defect in the opening stock, is not justifiable. As provisions of sub-section 10 of section 80IA should not be used for the purpose of sub-section 10 section 80IB of the Act, unless expressly provided by the statute. The view taken by the Ld.CIT(A) to the effect that section 80IA(10) itself empowers the Assessing Officer to take the amount of profit as may be reasonable deemed to have been derived is not acceptable, as the purpose and object of both the sections are different, as explained above. AO has held that assessee is not eligible to claim deduction u/s 80IB(10) and therefore has disallowed the entire deduction claimed by assessee u/s.80IB(10) at ₹ 39,62,791/-. Besides, over and above, without prejudice, the Assessing Officer estimated average profit @16.02% and thus rejected the unreasonable profits from 80IB(10) business at ₹ 28,76,770/-. Assessing Officer has not added ₹ 28,76,770/- to the total income of the assessee. On appeal, the Ld.CIT(A) held that assessee is eligible and entitled to claim deduction u/s.80IB(10) of the Act. -CIT(A) made self-contradictory statement and restricted the deduction under section 80IB of the Act at ₹ 24,00,000/- (38.40% at ₹ 62,50,000/-) by re-computing estimated average profit @38.40%, as against average profit computed by the Assessing Officer @16.02%. Whether Ld.CIT(A) can re-estimate average profit @ 38.40%? - Neither the Assessing Officer nor Ld.CIT(A) has disputed any of the qualifying conditions specified under section 80IB(10) of the Act. The powers given to assessing officer under sub-section 8 of section 80IA or 80IA(10) should not be used to restrict the benefit given to assessee under section 80IB(10) of the Act, as schemes of these sections are different. We also note that the Assessing Officer has estimated the assessee s average profit @16.02%. On appeal, Ld.CIT(A) reestimated the assessee s average profit @38.40% and computed the eligible amount of deduction u/s.80IB(10) of the Act, without rejecting books of accounts. Thus this is a case where the Assessing Officer and ld CIT(A) has estimated average profit without any base. Taking a holistic view in the matter on considering both sides, we are of the view that assessee is entitled to take deduction u/s.80IB(10) of the Act. The estimation of average profit by assessing officer and re-estimation of average profit by ld CIT(A) are not in accordance with law, as narrated above, hence we delete the addition - Decided in favour of assessee.
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2020 (12) TMI 217
Capital gain on tenancy rights - transfer u/s 2(47) - whether the assessee has rightly offered the income from the surrender of tenancy rights, under the head Capital Gains ? - HELD THAT:- We have to necessarily uphold the order of the ld. CIT(A) that the assessee had acquired a capital asset in the form of tenancy rights and the transfer of this capital asset results in capital gains, which is taxable under the head Capital Gains . AO rejected the claim of the assessee that transfer of tenancy rights will be assessed under the head capital gains on the ground that no purchase price was paid for the tenancy - A loan of ₹ 8,00,000/- was given as construction loan which was refundable. This loan is directly linked to the tenancy rights and it is, in a way, consideration for obtaining the rights. Even if the assessee has not paid any amount for purchase of tenancy rights, the nature of rights would remain tenancy right and this is a capital asset. Section 55(2)(a) of the Act clearly stipulates that in case no price is paid for acquisition of an asset mentioned in clause (a) to Section 55(2) of the Act, then the cost shall be taken as Nil. Hence the Assessing Officer was legally incorrect in his view. Thus, we uphold the finding of the ld. CIT(A) on this issue. Deduction u/s. 54EC and 54F - As the main question as to whether the assessee has rightly offered the income from the surrender of tenancy rights, under the head Capital Gains has been held in favour of the assessee and as all the conditions prescribed for grant of claim of deduction u/s. 54EC and u/s. 54 of the Act, are met, in our view, the ld. CIT(A) has rightly granted relief to the assessee. Appeal of the revenue is dismissed.
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2020 (12) TMI 216
Penalty u/s 271(1)(c) - defective Notice - Non specification of charge - HELD THAT:- while issuing notice u/s. 274 r.w.s. 271(1)(c) of the Act the Assessing Officer has not made charge clear as to whether he proposed to levy penalty for either concealing particulars of income or furnishing inaccurate particulars of income. Therefore, in our view when there is no mention in the Assessment Order for which the penalty proceedings are initiated, penalty cannot be levied for both the charges i.e. for concealment of particulars and also for furnishing inaccurate particulars of income. See VENTURA TEXTILES LTD. [ 2020 (6) TMI 305 - BOMBAY HIGH COURT] As AO failed to record any satisfaction in the Assessment Order by specifying the charge for which penalty was initiated and even in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act failed to specify the charge for which the said notice was issued and since penalty was levied for both the limbs i.e. for concealment of particulars of income and also for furnishing inaccurate particulars of income, the levy of penalty is on account of non-application of mind and therefore the very initiation of proceedings are bad in law. - Decided in favour of assessee.
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2020 (12) TMI 215
Addition made on account of Social Forestry Expenses and Amortization of social forestry expenses - HELD THAT:- Considering the consistent decision of Tribunal on similar set of fact, we are in agreement with the submission of learned AR of the assessee that this ground of appeal is covered in favour of the assessee by the decision of Tribunal in earlier years. Hence, we affirm the order of ld. CIT (A). No contrary facts or law is brought to our notice to take the other view. Addition on account of sundry creditors - assessee failed to file the confirmation for verification and the genuineness of transaction - assessee failed to explain the creditors of standing for more than 3 years with supporting evidence - HELD THAT:- CIT (A) the deleted additions correctly by following the order of earlier year and taking view that creditors are old in respect of which the purchases were made in the earlier years. There is no much variation in facts for the year under consideration. Addition of excess process stock - HELD THAT:- On almost similar fact on similar ground of appeal in appeal for assessment year 2005- 06,this ground of appeal is covered by the decision of Tribunal in earlier years. Hence, we affirms the order of ld CIT(A). No contrary facts or law is brought to our notice to take the other view. Respectfully following the same, this ground of appeal raised by revenue is dismissed. Exclusion of expenses of Orisha unit on the basis of turnover of the whole company and TG-3 unit for which assessee claimed deduction under section 80IA - HELD THAT:- while allocating the expenses for power generation unit considered the overall cost of employee and other expenses , which consist of employee cost and other expenses of Orisha unit. CIT (A) after considering the submission of assessee that the Orisha unit has no connection with the generation of power by TG-3 unit, directed the assessing officer to reallocate the expenses by excluding the expenses of Orisha unit. No contrary fact or evidence is brought to our notice that the expenses incurred in Odis are unit have any casual connection with the cost incurred in power production in TG-3 unit, therefore, we do not find any justification to interfere with the order of learned CIT(A) thus, we affirm the same. In the result this ground of appeal is dismissed. Disallowance being commission paid to Directors - AO was of the view that passing of resolution by board is not sufficient to prove the genuineness of the commission paid to the Directors other than the Managing or whole time Directors of the assessee - HELD THAT:- AO made ad-hock disallowances on the doubt of genuineness of the commission expenses. The assessing officer not accepted the contention of the assessee. The learned CIT(A) granted relief to the assessee by taking view that expenses were incurred in accordance with the provisions of Companies Act. The commission expenses were paid by passing the Board s resolution. And in earlier years such commission expenses were claimed and allow to the assessee. The assessing officer made disallowance on ad- dock basis which is not sustainable. Before us, no contrary fact or law is brought to our notice, therefore, we do not find any justification to interfere with the order of learned CIT(A), which we affirm. In the result this ground of appeal is also dismissed. Disallowance of commission paid to the agents - assessee failed to produce copy of any agreement with the commission agent to whom the commission was paid and the nature of services rendered by them - AO reasonably disallowed 10% of such commission - HELD THAT:- The assessee provided the complete details regarding sale and the commission paid to the dealers as recorded by learned CIT(A) in para 12.2 of his order. The genuineness of the expenses was not doubted by the assessing officer. Considering the fact that genuine business expenses are allowable, and the learned CIT(A) after considering the fact that in earlier years similar commission expenses were allowed, allowed relief to the assessee. Before us no contrary fact or evidence is brought to take other view. Therefore, we do not find any reason to interfere with the order of learned CIT(A), which we affirm. In the result this ground of appeal is dismissed. Disallowance of 5% of various expenses - HELD THAT:- AO has not brought any adverse evidence against the expenses incurred by the assessee. The assessing officer has not doubted that the expenses are not genuine. And without specifying any reason made disallowance @ 5% of the total expenses. The assessing officer simply concluded that the arguments of the assessee company are considered in but the same are not acceptable without specifying any reason - CIT(A) while granting relief to the assessee noted that assessing officer has not even try to deal with the expenses under different head and merely made ad-hock disallowance which is not sustainable. We have noted that like other ad-hock disallowances which were ultimately deleted by learned CIT(A), no contrary fact or evidence is brought to our notice to take other view. Disallowance of 5% of employee welfare expenses and other benefits - HELD THAT:- has not examined the details furnished by the assessee. AO has not find any defects in the books of account maintained by assessee. The assessing officer has not specified even a single discrepancy either in the documents or in the reply furnished by assessee. CIT(A) while granting relief to the assessee recorded that the assessing officer has not doubted that these expenses were not genuine. Even before us no contrary fact or law is shown to take other view except to raise the plea that the disallowances were made on reasonable basis. Therefore, we do not find any infirmity in the order passed by learned CIT(A), which we affirm. In the result this ground of appeal is also failed. Disallowances on account of adjustment of MAT credit entitlement while computing book profit - HELD THAT:- No disallowance can be made beyond the adjustment provided under section 115JB. Further we have noted that similar adjustment while computing book profit was made in AY 2006-07 and 2008-09, however, on appeal before Tribunal the same was deleted. Disallowance being expenses incurred for the purpose of exempt income while computing book profit - HELD THAT:- The Special Bench of Delhi Tribunal Vireet investment [ 2017 (6) TMI 1124 - ITAT DELHI ] held that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A. Considering the aforesaid discussions, we do not find any merit in this ground of appeal. Disallowance on account of bad debts - HELD THAT:- AO made addition by taking that assessee failed to punish any evidence which established that the debts have become irrevocable. The learned CIT(A) granted relief to the assessee by following the decision of honourable Supreme Court in CIT versus TRF Ltd [ 2010 (2) TMI 211 - SUPREME COURT ] wherein it has been held that assessee is not required to establish that debts s has become irrevocable in that particular year and it is enough if the bad debts written off as irrevocable in the accounts of the assessee. No contrary fact or law is brought to notice to take any other view, therefore we affirm the order of learned CIT. In the result this ground of appeal is dismissed. TDS u/s 195 - assessee made foreign remittance to non-resident on account of export commission, on which no tax was deducted at source - HELD THAT:- The non-resident to whom such commissions were paid in the year under consideration does not have any business connection or permanent establishment in India and therefore, no income accrue or arise or deem to arise in India in terms of section 9(1)(i) of the Act. Such income is not chargeable to tax India as per section 195 - CIT(A)following the decision of honorable Supreme Court in CIT versus Toshoku Limited [ 1980 (8) TMI 2 - SUPREME COURT ] deleted the entire disallowance. Club expenses allowed - as decided in Otis Elevator Co. Ltd. [ 1991 (4) TMI 53 - BOMBAY HIGH COURT ] TDS u/s 195 - disallowance under section 40 a (i) - seminar fees paid to London School of Economics -assessee submits that assessee paid fee for attending seminars and recipient has no business connection in India, thus no income accrues or arise to them in India within the meaning of section 9(1)(i) - The services for which the assessee made payment were rendered outside India. - HELD THAT:- In absence business connection in India, no income accrues or arise to them in India within the meaning of section 9(1)(i) of Income Tax Act. Therefore, on the services for which the assessee made payment were rendered outside India, the assessee was not required to deduct tax at source. However, the ld CIT(A) has categorically held that no that no details about the payment was made to London School of Economics was furnished the veracity of claim could not be verifiable. Hence, we direct the assessing officer to verify the details of the expenses and grant the relief to the assessee. In the result this ground of appeal is allowed for statistical purpose.
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2020 (12) TMI 214
Capital gain - whether or not Land (asset) held as stock-in-trade in the partnership firm is a capital asset and would attract the provisions of section 45(3)? - HELD THAT:- We note that sub-section (2) of section 45 deals with the situation where capital asset is converted into stock-in-trade. Where the owner of a capital asset converts the capital asset into or treats it as, stock-in trade of his business, there is no transfer and no gain under the general law, for a man cannot transfer his property to himself or to make gain out of himself. Section 2(47) (iv)[ as amended by the Taxation Laws (Amendment) Act, 1984 with effect from April 1, 1985], deems such conversion as transfer and section 45(2) [inserted by the same Act with effect from the same date], brings to tax in a singularly ill-suited language, stating that, the profits or gains arising from such transfer in the accounting year in which the stock-in-trade is sold or otherwise transferred. We note that as per provisions of sub-section (2) of section 45, where capital asset is converted into stock-in-trade, till that point of time, there is no charge of capital gain. The charge of capital gain arises when such stock-in- trade is sold by the assessee. Sub-section (2) of section 45 carves out an exception to the above and deals with the situation where capital asset is converted into stock-in-trade, that is, there is exception in sub-section (2) of section 45 - The exception is that the Capital gain shall be computed on the assumption that the capital asset is transferred in assessment year 2013-14. By virtue of sub-section (2) of section 45 such capital gain will be taxable in the subsequent assessment year in which such stock-intrade is sold. In the assessee`s case, the stock-in-trade is not sold in the assessment year 2013-14 therefore, there is no any liability on the assessee to pay tax in the assessment year 2013-14, the liability to pay tax will arise in subsequent year in which such stock-in-trade would be sold. Considering the legal position as explained by us in the relevant provisions of subsection (2) of Section 45, sub-section (3) of section 45 and sub-section (14) of section 2 of the Income Tax Act 1961 and taking into account the facts of the assessee`s case, we hold that Land (asset) held as stock-in-trade in the partnership firm is not a capital asset and would not attract the provisions of section 45(3) - Decided in favour of assessee.
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2020 (12) TMI 213
TP Adjustment - application of on-site revenue filter and selectively rejecting certain comparables - HELD THAT:- Assessee engaged in the development of VLSI, software, embedded software and hardware design solutions to support broadband wireless access. We agree with contention raised by Ld. CIT. DR that a filter cannot be applied once TP analysis has been concluded by Ld. TPO However, on perusal of observations recorded by DRP, Acropetal Technologies Ltd., L T Infotech Ltd., was primarily excluded on basis of functional dissimilarities and that segmental information not being available Acropetal Technologies has been held to be into products and that L T Infotech Ltd. has observed that RPT is at 18.66% which is beyond the marginal limit of 15% for year under consideration, by this Tribunal, in case of Electronics for Imaging India Pvt. Ltd. [ 2017 (7) TMI 1335 - ITAT BANGALORE] . We therefore do not find any infirmity in the view taken by DRP as these comparables are even otherwise functionally not similar with assessee - we direct exclusion of Acropetal Technologies and L T Infotech Ltd. Excluding M/s. E-Infochips, by DRP on the ground that it fails service income filter - This Tribunal consistently in various decisions for A.Y.: 2011-12 held that, this company does not satisfy service income filter being 75%. We therefore, do not see any reason to set aside this company to Ld. TPO. Therefore, respectfully following view taken by coordinate bench of this Tribunal in DCIT vs. M/s. CGI Information Systems and Management Consultations Pvt. Ltd. [ 2018 (4) TMI 567 - ITAT BANGALORE] we direct Ld. TPO to exclude this company. ICRA Techno Analytics Ltd., E-Zhest Solutions Ltd., M/s. Infosys Technologies Ltd. and M/s. Tata Elxsi Ltd., have been consistently excluded by this Tribunal in case of a captive service provider like assessee. Further Ld. CIT DR could not establish anything contrary to observations of this Tribunal reproduced hereinabove. Deduction u/s 10A - excluding communication expenses for computing total turnover and export turnover and excluding loss earned from non-eligible unit for purposes of 10 A deduction - HELD THAT:- DRP by following decision in the case of CIT v. Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] held that, if any expenditure is excluded from export turnover, then the same needs to be excluded from total turnover as well, accordingly, directing Ld. AO to exclude expenses deducted from export turnover from total turnover for computing deduction u/s. 10A of the Income-tax Act, 1961. Further in respect of exclusion of loss earned from non-eligible unit for computing profits of eligible unit under section 10 A, DRP relied on decision of Hon'ble Karnataka High Court in case of and CIT v. Yokogava India Ltd. [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT] - No infirmity in the view taken by DRP - Grounds raised by revenue stands dismissed.
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2020 (12) TMI 212
Estimation of income - Bogus purchases - CIT-A sustaining addition to the tune of 3% of alleged disputed purchase by applying average Gross Profit Ratio in the appellant s case - HELD THAT:- Unverifiable element involved in the purchases in question called for addition and the same can be to the extent of percentage of purchases which can be estimated by a reference to the gross profit rates. The resultant net profit, in our opinion, is not relevant in this context. In so far as the gross profit rate is concerned, it is observed that the assessee for the immediately succeeding three years that is A.Y. 2015-16, 2016-17 and 2017-18 wherein the turnover shown by the assessee was comparable to the four years under consideration was 6.14% as against the average GP rate of 3.17% declared by the assessee for all the four years under consideration. The average GP rate declared by the assessee for all the four years under consideration thus was less by about 3% than the average GP rate declared by the assessee for the immediately succeeding three years - additional GP rate of 3% adopted by the Ld. CIT(A) as the profit element embedded in the disputed purchases for all the four years under consideration was quite fair and reasonable - Decided against assessee. Addition u/s 40A(3) - HELD THAT:- It is observed that even though a possibility was expressed by the Ld. CIT(A) about the purchases in question having been made by the assessee from the grey market, there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against the same were made in cash as alleged by the Ld. DR. In our opinion, this case is therefore not a fit case where the provision of section 40A(3) can be invoked and that too for the first time at this stage before the Tribunal. We, therefore, find no merit in the appeals of the Revenue
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2020 (12) TMI 211
Penalty u/s 271AAB - assessee had failed to substantiate the manner of having actually derived the undisclosed income during the course of search - Defective notice as per assessee - HELD THAT:- As decided in Smt. Rashmi Jalan [ 2020 (10) TMI 353 - ITAT KOLKATA] Penalty in question is bad in law as the show-cause notice issued by the Assessing Officer does not specify the charge/s against the assessee for levy of penalty, as required by law. Thus, on this ground, the penalty is quashed. Even otherwise, Section 271AAB of the Act, contemplates imposition of a penalty pursuant to the disclosure of income in statement recorded u/s. 132(4) of the Act by the assessee. It is an admitted fact that no such statement has been recorded from the assessee. Thus, on this ground also, the levy of penalty fails. Nowhere in the assessment order it is stated that undisclosed income has been assessed. The assessment was made u/s. 143(3) of the Act and the returned income was accepted. Thus, for all these reasons, we quash the penalty levied u/s. 271AAB of the Act and allow this appeal of the assessee.
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2020 (12) TMI 210
Revision u/s 263 - PCIT's revision action on the ground that the AO had wrongly treated not as a works contractor under 80IA(4) Explanation as per the corresponding show-cause notice - HELD THAT:- We find no reason to sustain the PCIT's revision order under challenge. It has sufficiently been highlighted in the preceding paragraphs that this assessee is a company engaged in road infrastructure development and maintenance business from assessment year 2005-06 onwards. It has developed at least 17 projects (supra) from assessment year 2010-11 out of which some of the projects i.e. Shivgunj has formed part of tribunal's adjudication on the very issue from assessment year 2010-11 and 2011-12 vide order dated 23.12.19 holding it as a entity for similar section 80IA relief. Learned coordinate bench holds in very clear terms that it is the assessee only who has not only employed plant and machinery and to other assets along with the staff but also it had been bearing all the risks involved in the said infrastructure projects and therefore, it could not have been treated a mere works contractor. The corresponding twin infrastructure development agreements involving identical project stipulations to be performed at the assessee's behest which sufficiently reveal that there has not been any deviation vis- -vis all other similar projects in the impugned assessment year. AO has also accepted assessee's section 80IA deduction in succeeding assessment years 2013-14 and 2014-15 as well and the corresponding preceding assessment years since assessment orders to this effect. No disallowance has been made qua section 80IA deduction claim in any of these assessments which have attained finality. We conclude that the Assessing Officer had taken only the plausible view in accepting the assessee's section 80IA deduction claim in his assessment dated 30.03.2015 u/s. 143(3) of the Act. The PCIT exercise of impugned revision jurisdiction is held as not sustainable in the eyes of law going by the foregoing settled legal proposition (supra). The same is accordingly reversed. PCIT's revision show-cause notice had treated the section 143(3) assessment herein as a case of Assessing Officer having erroneously accepted the assessee's section 80IA deduction claim whereas his section 263 order under challenge has merely restored the issue back to the Assessing Officer for afresh adjudication. We adopt the foregoing detailed reasoning mutatis mutandis to accept the assessee's above-stated arguments on this latter aspect as well to set aside and reverse the PCIT's revision order under challenge dated 20.03.2017. - Decided in favour of assessee.
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2020 (12) TMI 209
Addition u/s 68 - unexplained cash credits - HELD THAT:- The clinching fact, that has remained unrebutted from the Revenue side, is that the assessee had credited the impugned sum in lieu of share allotment issued to its three group concerns not only having common directors and shareholders but also they have the same address and assessed in the same jurisdiction. Three sister concerns' copy of master data details available in the Ministry of Corporate Affairs Portal, regular audited accounts for financial year 2010-11, IT Acknowledgements for assessment year 2011-12, audited accounts not only of the said assessment year but for the succeeding assessment year 2012-13 as well as 2013-14, bank statements as well as the three directors' affidavits confirming the impugned allotment followed by the very details regarding the tax-payer itself before the Assessing Officer during the course of scrutiny. All this sufficiently indicates that the Assessing Officer's action holding the assessee to have failed in filing the necessary details in support of the impugned share allotment money goes against the case records. Coming the Revenue's argument that the assessee had never produced any of the three investor parties, we find no merit since there was no such direction from the Assessing Officer's side to this effect. Be that as it may, we make it clear that the impugned share capital has come from the three group concerns only having the common directors/shareholders, address as well as assessment jurisdiction. We hold in view of these overwhelming facts and circumstances supporting the assessee's case that the CIT(A) has rightly deleted the impugned addition. - Decided in favour of assessee.
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2020 (12) TMI 208
Disallowance u/s 14A r.w.r 8D - As per assessee before making disallowance AO has not recorded any satisfaction - HELD THAT:- No merit in the contentions of the assessee. It is evident, the assessee suo-motu has not computed any disallowance under section 14A r.w.r 8D, though she had earned exempt income during the year. Therefore, in absence of any suo-motu disallowance made by the assessee in the return of income, the Assessing Officer has rightly proceeded for making disallowance under section 14A. Disallowance made under section 14A r.w.r 8D cannot exceed the exempt income earned during the year - We find substantial force in the contention of the assessee. Undisputedly, during the year under consideration the assessee had earned an amount of ₹ 1,302/- as exempt income, whereas, the Assessing Officer has disallowed an amount of ₹ 2,03,746/-. Now, it is fairly well-settled, by virtue of ratio laid down in a plethora of judicial precedents that disallowance under section 14A r.w.r 8D cannot exceed the quantum of exempt income earned during the year. We direct the Assessing Officer to restrict the disallowance under section 14A r.w.r 8D to ₹ 1,302/-. Disallowance being expenses incurred towards salary paid to Peons, Sweepers, Cleaners etc .- HELD THAT:- The payment made to the sweeper and the person supplying water is reasonable, hence, needs to be allowed. However, payment made to the florist at ₹ 3000/-p.m. appears to be on the higher side. In my view, payment to the florist can reasonably be estimated at ₹ 2000/- p.m. working out to ₹ 24,000/- p.a. Therefore, the balance amount of ₹ 12,000/- out of the payment made to the Florist has to be disallowed. Disallowance of conveyance Expenses - As assessee was unable to establish that the entire expenditure was wholly and exclusively incurred for the purpose of business. Alleging involvement of personal factor, the Assessing Officer disallowed 25% out of the expenditure claimed - HELD THAT:- As could be seen from the submissions made by the assessee before the Departmental Authorities, the conveyance expenditure was incurred for travelling in Taxi, Auto, Bus etc. by the assessee as well as the staff members for official work. It is also evident, the disallowance made by the Assessing Officer is only for the reason that a part of the expenditure might have been for personal purpose of the assessee. Though, involvement of personal element cannot be completely ruled out, however, disallowance of 25% for that purpose is certainly on the higher side. Accordingly, direct the Assessing Officer to restrict the disallowance to 10% of the expenditure claimed. Hence, this ground is partly allowed. Part disallowance of expenditure incurred on entertainment - disputed expenditure was incurred mostly for hotel/restaurant bills - HELD THAT:- We agree that some amount of personal element may be involved considering the nature of expenditure, however, the disallowance at 20% is on the higher side. Accordingly, direct the Assessing Officer to restrict the disallowance to 10% of the expenditure claimed. Hence, this ground is partly allowed.
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2020 (12) TMI 207
Revision u/s 263 - Validity of original assessment order since the notice u/s 143(2) was issued prior to issue of notice u/s 148 - unsecured loans received by the assessee from various companies - HELD THAT:- We hold that the order passed u/s. 263 19/03/2019, as bad in law. It is wrong both on facts as well as law. Enquiries were made by the AO and the AO on such enquiries has taken a possible view. The very reason for reopening is the ground for proposing the revision. This is not permissible in law. As regards the arguments of the assessee that the validity of the reassessment proceedings can be challenged during the course of challenging the revisionary order u/s. 263 we are of the opinion that law is in the favour of such arguments. Jurisdictional issue, can be raised even in collateral proceedings. At the same time, we are unable to uphold the contention of the assessee that the reassessment order itself would become bad in law, if the reason recorded for reopening does not ultimately result in an addition being made by the Assessing Officer. No addition has been made in this case. What the Courts of law have said on this issue is that, if an addition is not made for the reasons which are recorded for reopening of the assessment, no other addition can be made on some other grounds which do not form part of the reasons recorded for reopening. If an Assessing Officer accepts the return of income of the assessee on reopening of an assessment, such assessment order does not become an illegal assessment order. The Courts never said that the reassessment order would be bad in law. Thus, this argument of the assessee is dismissed as devoid of merit. Notice u/s. 148 of the Act has been issued to the assessee on 24/02/2016 as is evident from the copy of the notice place at page 6 of the paper book. From the order sheet entry it is clear that the assessee, on 24/03/2016, requested the Assessing Officer to treat the original return of income filed by it for the Assessment Year 2009-10, as that return of income which is filed in response to notice u/s. 148 of the Act. From the order sheet entries, it is clear that notice u/s. 143(2) of the Act was issued on 24/02/2016. This fact is also mentioned by the Assessing Officer at para 5 of his order. This proves that the notice u/s. 143(2) of the Act, was issued much prior to the assessee filing his return of income. This is not in accordance with law. Hence the order passed u/s. 148 of the Act without issuing valid notice u/s. 143(2) of the Act, makes the reassessment order dt. 20/05/2016, passed u/s. 143(3)/147 of the Act, bad in law. Consequently, the revision of the assessment u/s. 263 of the Act dt. 19/03/2019, revising such illegal assessment order is also bad in law. Thus, for all these reasons we quash the order passed by the ld. Pr. CIT u/s. 263 of the Act as bad in law and allow the appeal of the assessee.
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2020 (12) TMI 206
Estimation of income - bogus purchases - CIT(A) directing the ld. AO to tax only the profit element embedded in the bogus purchases @12.5% - HELD THAT:- The fact of consumption of materials are not disputed by the revenue. We find that the ld. CIT(A) had categorically recorded a finding that the assessee could have made only purchases from the grey market by way of inflation of some purchase price so as to suppress the true profits. By this process, the profit embedded thereof in the entire transaction was assumed to be 12.5% by the ld. CIT(A). Tribunal in series of decisions had held that profit percentage of 12.5% would meet the ends of justice on the alleged bogus purchases in the similar industries in which assessee is engaged into. No infirmity in the order of the ld. CIT(A) granting relief to the assessee. - Appeal of the revenue is dismissed.
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2020 (12) TMI 205
Violation of principle of natural justice - CIT(Appeals) passed an ex-parte order relying on the material available on record specifically Form-35 - DR conceded to the fact that the cases were decided not on merits - Specific ground raised that the Assessing Officer has not given proper opportunity of hearing to the assessee and also before us in Form 36 of grounds of appeal memo - HELD THAT:- Assessee did not respond to any of the notices and has not made any submission for adjournment and also there were no written submissions on the merits of the case before the First Appellate Authority. Maintaining the balance of natural justice and also that the Income Tax Act is a welfare legislation and also for the fact that the rights and liabilities of the parties herein are yet to be decided on merits by the Ld. CIT(Appeals), the assessee has not filed any written submission on record before the Ld. CIT(Appeals) regarding the grounds of appeal and therefore, we are of the considered opinion that all these cases should travel back to the file of the Ld. CIT(Appeals) for proper adjudication on merits. We, therefore, set aside the respective orders of the Ld. CIT(Appeals) for each of the assessment years in appeals before us and remit the matter back to respective files of the Ld. CIT(Appeals) for determination of rights and liabilities of the parties herein.
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Customs
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2020 (12) TMI 204
Non renewal /extension of the Warehouse License - Demand of customs duty - goods were moved from one warehouse to another - injunction sought against the third respondent/defendant from interfering with the peaceful possession during the period of the lease - HELD THAT:- Section 58 enjoins upon the licensee a duty to clear off the goods after cancellation of the license within seven days. There is no case of extension of period under Sub-section (4) of Section 58B of the Act in the present case. Therefore, in the eye of law, the possession of the vacant licensed warehouse, after seven days of the impugned order passed by the Customs Authority on 29.05.2020, should be deemed to be with its owner only. Even assuming for argument sake that this observation may affect the right of the appellant/petitioner in the pending suit before the Civil Court, it is the appellant/petitioner who is to be blamed for this, because it is the appellant/petitioner who has invoked the extraordinary jurisdiction of this Court based upon an interim order passed by the trial Court. The said suit was filed much before the expiry of the lease period on 31.03.2020 and the interim order of status quo granted by the trial Court on 26.04.2019 also cannot extend beyond the extent of the period of lease itself nor it can validate the possession of the licensee beyond the period of lease. We do not see any reason to extend the scope of the civil suit, which may be so if the contention of the appellant/petitioner before us is to be accepted. There are no reason for the appellant/ petitioner to have invoked the writ jurisdiction of this Court on the basis of a status quo order granted by the trial Court in a civil Suit in which Customs Department was not at all a party. Nothing prevented him to even implead Customs Department also as Defendant in that very suit, so that all related issues could be adjudicated by one Court. This is what, the abuse of process of law is and if an observation of a learned single Judge in this process is given against the appellant/petitioner, he cannot be permitted to raise a plea against that in the intra court appeal. Appeal dismissed.
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2020 (12) TMI 203
Refusal to issue Certificate of Origin to the petitioner for export of red sanders - permission to petitioner to export the same after obtaining permission/export licence for such export from the Directorate General of Foreign Trade, Ministry of Commerce and Industry, Union of India - HELD THAT:- In the instant case, the Principal Chief Conservator of Forests of both States had certified in para-18 of the impugned order dt.06.12.2019 itself that the Red Sanders wood stacked in the Depot of the petitioner is genuine and the permits through which the said logs were transported by the petitioner to his Depot are also genuine - There is no dispute thus about how the petitioner procured the stock in its custody and its genuineness. So they cannot now create new grounds, not within their purview , for refusing to issue the Certificate of Origin. It is not within the jurisdiction of the Principal Chief Conservator of Forests of both States to decide whether or not petitioner, who seeks such Certificate of Origin, when the stock is in log form, would get an export licence from the DGFT/Union of India . Neither the State of Telangana nor the State of Andhra Pradesh have any business to intrude into the field occupied by the Union of India in relation to foreign trade and interfere with exercise of discretionary power by the Union of India and the Director General of Foreign Trade in matters of export policy. The issuance of Certificate of Origin to another business entity by the Principal Chief Conservator of Forests of State of Telangana, who also, like the petitioner,wanted to export in log form after allotment on condition of export in value added form the discriminatory treatment given to petitioner. Thus notwithstanding that the applicant M/s.Rocky Red Sanders Wood Musical Instruments Exports Limited had also been allotted Red Sanders for export in value added products form, its application for Certificate of Origin of stock in log form was approved and was issued by the Principal Chief Conservator of Forests, State of Telangana - We are unable to understand why the Principal Chief Conservator of Forests of the States of Telangana and the State of Andhra Pradesh have applied a different standard when it comes to the request of the petitioner for issuance of a Certificate of Origin by insisting that they will consider such request only after the petitioner agrees to convert the logs into value added product form. They cannot discriminate against the petitioner and apply a different rule to the petitioner, which was not applied by them to M/s.Rocky Red Sanders Wood Musical Instruments Exports Limited. Since the export is to take place from the State of Telangana, where the stock of Red Sanders purchased by the petitioner is stored, it has to issue the Certificate of Origin - Other than that, when the stock is genuine, its transport to the State of Telangana is validly made (as is admitted in para 18 of the impugned order dt.06.12.2019 by the Principal Chief Conservator of Forests of both States), the State of Telangana has no choice but to issue the Certificate of Origin - It cannot raise irrelevant objections about conversion into value added product form because the stock was not purchased from the said State at all. The attitude of the Principal Chief Conservator of Forests, Telangana at Hyderabad to be wholly vexatious considering the above background and arbitrary too having regard to her decision to grant Certificate of Origin to M/s. Rocky Red Sandal Wood Musical Instruments Exports vide Proceedings R.C.No.63/2020/PROD.1 dt.13.11.2020, who had also purchased Red Sanders Wood for export in value added product form and had retained it in log form and had applied for the said Certificate of Origin without changing the same into value added product form, mentioned above. No valid explanation is offered by the Government Pleader for Forest, State of Telangana for the conduct while showing discrimination to the petitioner, who is also similarly placed. The Writ Petition is allowed with costs of ₹ 10,000/- each to be paid to the petitioner by respondent nos.3 and 4; proceedings jointly issued by respondent nos.3 and 4 is declared as arbitrary and violative of Article 14 of the Constitution of India; and a consequential direction is issued to respondent nos.3 and 4 to forthwith issue Certificate of Origin to the petitioner in respect of stock of Red Sanders Wood of 1067.751 M.T. stored in the licensed godown - petition closed.
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2020 (12) TMI 202
Refund of the Extra Duty Deposit (EDD) - Provisional Assessment not finalised - no justifiable cause to delay the refund for all these years merely on the ground that some investigation is pending - HELD THAT:- There is absolutely no merit in the present Writ Appeal and we fail to understand the bona fide of the Customs Department to challenge even this kind of innocuous direction of the learned Single Judge while disposing of the Writ Petition and why the Department should file intra-court Appeals just for the sake of litigation. It is not at all justified and strong action deserves to be taken in this regard as the Government Department cannot be permitted to be a voluntary litigant in the Constitutional Courts especially to challenge the orders of the learned Single Judge without any valid rhyme or reason. The alleged reason assigned by the Department that there was some investigation pending of which no details are placed on record, is not at all a justifiable reason in the light of Board's own Circular as quoted by the learned Single Judge. No such material has been placed before this court to justify the action of the Customs Department not to finalise the Provisional Assessment for 16 years and even by now to keep the EDD a mere Security Deposit by Importer/Petitioner with them like this. Refund is directed alongwith interest - appeal of Revenue dismissed.
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2020 (12) TMI 201
Release of confiscated goods - condition of re-export imposed on the importer while redeeming the goods - demand of demurrage from the Assessee/importer - Section 125 of Customs Act - HELD THAT:- An apologetic Affidavit has been filed by the said authority and the learned Additional Solicitor General Mr. Sankaranarayanan has appeared in the matter. The learned ASG fairly submitted that there seems to be no merit in the contention of the Revenue that demurrage charges were so leviable in the present case and therefore, the Court may set aside the levy of demurrage charges and the goods in question may be released to the importer without any condition. However, a lenient view with regard to the conduct of the said officer may be taken by the Court, in view of Court order dated 24.09.2020 Upon a fair request made by the learned ASG, we dismiss the present appeal of the Revenue and taking a lenient view of the matter against the officer concerned, we do not take any further action against him in the matter. We hold that the imposition of condition of re-export under Section 125 of the Act was not justified and the imposition of such a condition is not envisaged in law and therefore, the order imposing such condition is liable to be set aside. The same is accordingly set aside. Appeal of Revenue dismissed.
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2020 (12) TMI 200
Classification of imported goods - catalytic converter assembly which is attached with an inlet and an outlet pipe - classified under tariff item 8421 3990 or not - benefit of concessional rate of duty - extended period of limitation - HELD THAT:- As per the impugned Notification, the concessional rate of duty is for a particular item/goods; a perusal of the Bills-of-Entry placed along with the Appeal Memorandum reflects piece price for the relevant item under description column which would only mean that the price charged was for the described assembly and other than this, we do not see any breakup and nor is it relevant for us now. Further, we also do not dispute the classification of the disputed item under CTH 8421 duly supported by GIR 2 (b), but however, mere classification ipso facto does not decide the eligibility or otherwise to a beneficial Notification since Notification No. 21/2002(supra) does not grant concession based on a mere classification, rather on individual items. A perusal of the Show Cause Notice reveals that the DRI had entertained a doubt that the appellant was claiming ineligible concession of duty under Customs Notification No. 21/2002 dated 01.03.2002. In this background, the Revenue considered Bills-of-Entry No. 5747602, 5747715 and 5749760 all dated 17.01.2012 and conducted a thorough verification of the goods described in the above Bills-of-Entry. These are the invoices furnished by the appellant. From the Bills-of-Entry it is seen that for the goods imported and declared as Catalytic Converter Asy vide said three Bills-of-Entry all dated 17.01.2012, the appellant has claimed benefit of concessional rate of duty vide Notification ibid. and has paid Basic Customs Duty at 5% as against tariff rate of 7.5% Basic Customs Duty: the benefit is apparently claimed on the amount reflected which represents the cumulative value for Catalytic Converter Asy . Extended period of limitation - HELD THAT:- The appellant has wilfully suppressed as well as mis-stated the actual/complete description of the impugned goods under import, etc., thereby claiming the benefit of concessional rate of duty, to justify the invoking of extended period of limitation in terms of Section 28 (1) / 28 (4) of the Customs Act, 1962, as applicable during the period. Matter remitted back to the file of the Original Authority to pass a de novo Order-in-Original, giving a logical finding on the allegations raised in the Show Cause Notice after considering the plea of the appellant, on merits - appeal is treated as partly allowed by way of remand on merits, but however, partly dismissed on the ground of limitation.
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Corporate Laws
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2020 (12) TMI 199
Approval of Scheme of Arrangement by way of Amalgamation - section 230-232 of Companies Act, 2013, and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Directions with respect to calling, convening and holding of the meetings of the Shareholders, Secured and Unsecured Creditors or dispensing with the same as well as issue of notices including by way of paper publication, issued. Application allowed.
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2020 (12) TMI 198
Rejection/adjudication of ITNL Claim - reinstate and admit the claim relating to the loan granted by IL FS Transport Networks Ltd - restraint R1 from in any manner communicating the rejection and/or adjudication of the claim relating to the loan granted by IL FS Transportation Networks Limited - exempting the Applicant from affixing the affidavit annexed to this application on stamp paper and notarizing the present Application - HELD THAT:- It is a settled proposition in law that the role of Resolution Professional (RP) in the IBC proceedings when admitting the claim, the RP is only acting as Administrator and have to collate and determine the claim based on the Claim Form submitted by the Creditors. Here, in this case, the financial debt of the Applicant is clearly established from the balance sheets of the R3, Subordination Agreement and DTD. Based on these factors, R1 determined the claim of the Applicant for ₹ 354.73 crores. Subsequently, on the intervention of the Debenture Holders, the R1/Claim Management Consultant whose functions are akin to that of a Resolution Professional, revised the claim based on Clause 2.2 of the Subordination Agreement. Clause 2.1(ii) of the Agreement clearly provides that the subordinated debt shall remain irrespective of occurrence of bankruptcy, insolvency, liquidation of the company, however, fully subordinated to the debt of the debenture holders and shall not be due and payable until all and any rights and claims of the debenture holders against the Company in respect of the debt have been irrevocably paid and discharged in full. This tripartite Subordination Agreement does not and will not be applicable to other creditors of R3. So, the logical corollary of the subordination agreement is that till the debenture holders are satisfied in full, the Applicant will not get anything from R3. This contract when interpreted gives the abovesaid meaning. The debt of the Applicant only become subordinated to the debt of the Debenture Holders as far as R3 is concerned. R1 being a Claim Management Consultant who is playing the role of Resolution Professional, after the determination of claim, should not have ventured into the business of interpreting the Subordination Agreement on the intervention of the debenture holders - Since this Asset Resolution process of IL FS companies is almost treated as per IBC proceedings, we feel that R1 has exceeded its jurisdiction and in exercise of wrong jurisdiction reversed the earlier decision of admitting the claim. In the case on hand, in fact, a situation as envisaged under Clause 2.1(ii) of the Agreement has occurred, and even assuming that the resolution process being worked out to the group companies of IL FS including R3 is taken as an event of default, the provisions of Clause 2.1(ii) prevails over Clause 2.2 and hence there is no cessation of the debt of the Applicant. Application allowed in part.
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2020 (12) TMI 197
Approval of Scheme of Arrangement by way of Amalgamation - Sections 230-232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Directions with respect to convening/holding or dispensing with the meetings of the Shareholders, Secured and Unsecured Creditors as well as issue of notices including by way of paper publication, issued. Application allowed.
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2020 (12) TMI 196
Restoration of name of company in the Register of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- ROC has filed its reply and stating that they have no objection if the name of company is restored in the Register of Companies, subject to appellant filing all its pending statutory documents with the Registrar of Companies till date along with the requisite late filing fee as prescribed under the Companies Act, 2013 - The Income Tax Department has not filed any reply. The grounds contemplated under Section 252 of Companies Act, 2013, are that the company was carrying on business or was in operation at the time of striking off its name or where it appears just to the Adjudicating Authority that the name of the company is to be restored to the Register of Companies and the Section 252(1) further contemplates that one of the above three conditions are required to be satisfied before exercising jurisdiction to restore the company to its original name on the register of the Registrar of Companies - The Appellant has submitted sufficient evidence that it has been in operation during the period preceding strike off, therefore it could not be termed as a defunct company as per Section 252 of the Act. Thus, taking into consideration the provisions of Section 252(1) of the Companies Act, 2013, which vests this Tribunal with a discretion where the Company, whose name has been struck off, and such Company is able to demonstrate that it is just to do so, can restore the name of the Company, in the Register and in the interest of all stakeholders, including the Appellant itself, who seeks restoration of the name of the Company in the register maintained by Registrar of Companies, the company deserve to be restored. Appeal allowed.
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2020 (12) TMI 195
Approval of scheme of Merger - Section 230-232 of the Companies Act, 2013 - HELD THAT:- Directions regarding convening and holding of various meetings issued - directions regarding issuance of various notices issued. The scheme is approved.
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Insolvency & Bankruptcy
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2020 (12) TMI 193
Approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Resolution Applicant proposes to appoint suitably qualified and experienced persons, key personnel and other officer for operations of the Corporate Debtor in terms of Section 30(2)(c). The Plan also provides for implementation of provision of the Resolution Plan as stated above as per Section 30(2)(d). The Resolution Applicant has given a declaration that the Resolution Plan does not contravene any provisions of the law for the time being in force. The Resolution Plan is in compliance of the Regulation 38 of the Regulations in terms of Section 30(2)(f): a) Payment to Operational Creditor will be made in priority over Financial Creditor (Regulation 38(1)(a)). b) Since the plan has been approved by 100% voting share of the CoC, provision of dissenting financial creditor does not arise. This is in compliance of Regulation 38(1)(b) of the Regulations. c) Declaration by the Resolution Applicant that the Resolution Plan has considered the interest of all the stakeholders of the Corporate Debtor, keeping in view the objectives of the Code (Regulation 38(1A)). d) Declaration by the Resolution Applicant that neither the Resolution Applicant nor any of his related party has either failed or contributed to the failure of the implementation of any other approved Resolution Plan. The instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39(4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved. Application allowed.
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2020 (12) TMI 192
Maintainability of Application for initiation of CIRP - mandatory period of 10 days to object to the notice or repay the alleged debt had not elapsed - Section 9 of the Companies Act, 2013 - HELD THAT:- It is seen that the Notification dated 24.03.2020 does not save the Applicant/ Corporate Debtor from the initiation of insolvency especially in cases where defaults towards creditors have taken place before the pandemic and the resultant financial crisis. Such an interpretation would be contrary to the intention of the executive in exercise of its power of delegated legislation. Thus, if the intention was to provide for a blanket protection to Corporate Debtors from being dragged to the NCLT irrespective of when or what extent a default has taken place, it would necessarily require a legislative amendment, and that a mere issuance of the notification would not suffice. In the instant application filed under Section 9 of IBC, the debt has become due on 06.07.2019. That on 25.02.2020, the Demand Notice in Form 3 under Rule 5 of the Insolvency and Bankruptcy Code, 2016 demanding payment of ₹ 31,33,595/- was sent to the Corporate Debtor at its Registered Office through speed post. However, no reply raising any dispute has been received by the Respondent/Operational Creditor within the stipulated period of ten days from 25.02.2020. It is therefore, evident that despite the expiry of 10 days from the date of service of the demand notice, neither dispute nor repayment of the due amount has been brought to the notice of the Operational Creditor. This would clearly show that Applicant/Corporate Debtor is not able to pay its debts taken in the normal course of business. Since, the Demand Notice in Form 3 has been sent by the Operational Creditor to the Corporate Debtor and after waiting for 10 days form that date only, Operational Creditor filed the application, the contention of the Applicant/ Corporate Debtor has no legs to stand. Application challenging the maintainability of the Application is dismissed.
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Service Tax
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2020 (12) TMI 234
Tax Relief as per Section 124 (1) (c) of Finance Act - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - (SVLDRS) - whether as per Section 124(2) of the Act, relief should be calculated after adjustment of tax already deposited or before adjustment of tax already deposited? - HELD THAT:- The case on hand falls under Section 123(e) of the Act. It means Where an amount in arrears relating to the declarant is due, the amount in arrears . The petitioner had already paid a sum of ₹ 3,59,73,729/-. The balance amount originally payable by the petitioner was only ₹ 1,51,17,635/-. That alone can be called as the amount in arrears. The petitioner's counsel would contend that the amount already paid should be considered as a deposit and it should be deducted only after relief is calculated on the entire tax liability of ₹ 5,10,91,364/-. It is true that the provision talks of deposit or pre-deposit . That expression can only refer to those payments made by the declarant even while he is still contesting his liability. If an amount has already been deposited in respect of the duty without demur, then it cannot be called as deposit or pre-deposit. Appropriation had already taken place. In fact, the petitioner's grievance before the original authority was that without taking into account the payment of ₹ 3,59,73,729/-, the order had been passed. The original authority had in fact directed the recovery officers to take into account the said claim. Having cleared his liability in part, now for the purpose of availing the benefit under the scheme, the petitioner cannot turn around and claim that what was paid by him was only deposit and not the tax amount. Petition dismissed.
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2020 (12) TMI 194
Benefit of SVLDRS scheme - due date of quantification of liability - Demand of Differential Service Tax - allegation against petitioners is that petitioner had shown lesser taxable value in the service tax returns to evade tax liability - Whether the quantification of the petitioners liability as communicated vide letter dated 27.12.2019 should be deemed to be quantification relating back to the earlier quantification dated 20.05.2019 or not? HELD THAT:- In the present case, the admitted position is that the original quantification made on 20.05.2019 was incorrect. A huge demand of more than ₹ 82 crores came to be raised towards the service tax and at that stage there was no Scheme in existence. The Scheme came into existence only w.e.f. 01.09.2019 and its benefit was available till 30.12.2019 for the assessees to apply. During this period from September to December, 2019, the petitioners noticed the mistake committed by the Department and accordingly represented vide letter dated 23.11.2019. The Department realized its mistake and ultimately corrected the demand raised from ₹ 82,26,42,852/- and reduced it to ₹ 4,99,03,524/-. 10 The petitioners may not have been in a position to deposit ₹ 41 crore and odd (being 50% of the initial demand) to avail the benefit of the Scheme, but having received the communication of an amount which was almost 6% of the earlier demand raised, thought it proper and in their interest to apply under the Scheme. The petitioners applied within the time on 31.12.2019. The amount had been wrongly quantified for no fault of the petitioners. It was an apparent mistake made by the Department. The Department thus ought not to have rejected the application of the petitioners by alleging that the quantification had been made after the cut off date. The quantification had been made much prior to the cut off date on 20.05.2019 and according to the Department that was the final quantification and not provisional quantification, but definitely it was an erroneous quantification. The Department realized its mistake, but much later and accordingly corrected it, therefore, in all fairness the Department ought to have treated the quantification made on 27.12.2019 to be substituting the figure communicated vide communication dated 20.05.2019. If this had been done, apparently the application of the petitioners under the Scheme would be entertained and the petitioners would be entitled to claim its benefit. The quantification communicated on 27.12.2019 to be a quantification substituting the figures in the communication dated 20.05.2019 thus the quantification being prior to 30.06.2019. The reason for rejecting / not entertaining the application of the petitioners under the Scheme deserves to be set aside - petition allowed.
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Central Excise
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2020 (12) TMI 191
Clandestine Removal - Resins - misdeclaration of goods - substantial evidences or not - dummy firms - it is argued that entire case has been built on assumptions and presumptions - clearance of resins clandestinely in the guise of orthoxylene - evidentiary value of any statement made before the Central Excise officer under section 14 of Central Excise Act - Difference of Opinion - matter referred to third member - HELD THAT:- In view of the difference of opinion, the following questions arise for consideration by learned third Member:- 1. There is lack of sufficient evidence, as evidence being the statement of some of the persons given in the course of investigation is not reliable, as such persons have not stood by their earlier statement at the time of cross examination or not appeared for crossexamination, as held by learned Member (Technical) Or The statements of the persons recorded at the time of investigation is based or co-relatable with documentary evidence. Such documentary evidence having not been denied, the denial of clandestinely removed goods in cross-examination is of no avail to the appellant and such evidence is reliable for the purpose of adjudication as held by Member (Judicial). 2. The case of Revenue is not proved on the principle of preponderance of probability and accordingly the appeals are fit to be allowed as held by learned Member (Technical) Or In view of the documentary evidence brought on record in the course of investigation and duly supported by oral evidence of several persons and also supported by some of the key persons involved in the transaction, including in the course of cross-examination, the allegation of Revenue is established and accordingly the appeals are fit to be dismissed as held by Member (Judicial). The Registry is directed to put up the appeal record before the Hon ble President for nomination of learned third Member to consider the aforementioned questions and difference of opinion, for his opinion.
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