TMI Tax Updates - e-Newsletter
February 16, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Service Tax Indian Laws

TMI SMS

• No TDS liability u/s 194H as assessee has not paid any amount to the dealers/ distributors, but amount spent for organizing the trip directly - Tri

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Articles

1. Budget 2021 Employee’s welfare funds- S.36.1.va – drafting of proposed amendment need to be modified.

   By: DEVKUMAR KOTHARI

2. PROFITEERING TOO GRINDED IN SUPPLY OF MIXER GRINDER GST LAW

   By: Dr. Sanjiv Agarwal

News

1. 16th Instalment of ₹ 5,000 crore released to the States to meet the GST compensation shortfall.

2. APEDA upgrades the GrapeNet to ensure secured, scalable and cost effective interface in the exports value chain

3. INDIA’S FOREIGN TRADE FOR JANUARY 2021

4. Index Numbers of Wholesale Price in India for the month of January, 2021

5. Rice shipment flagged off from Kakinada deep-water port

Notifications

Customs

1. 16/2021 - dated 15-2-2021 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver

Circulars / Instructions / Orders

FEMA

1. 10 - dated 15-2-2021

Margin for Derivative Contracts

DGFT

2. Trade Notice No. 41/2020-21 - dated 15-2-2021

Introduction of online e-Certificate Management System for Imports

Highlights / Catch Notes

GST

• Court Denies Writ of Mandamus for GST Portal Access Due to Lack of IT Grievance Redressal Complaint.

  Case-Laws - HC : Seeking directions to have access to the GST common portal to enable him to upload the returns for the period from the date of implementation of the GST Act - He failed to raise any complaint with the IT Grievance Redressal Portal. In such circumstances, the appellant cannot seek the remedy of a writ of mandamus from this Court. - HC
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• Court Recommends Section 73 Proceedings for Input Tax Credit Blockage Due to Vendor's GSTR-3B Non-Filing.

  Case-Laws - HC : Input Tax Credit - blocking of its electronic credit ledger due to non-filing of GSTR-3B by its vendor though GSTR-I was filed by him - the petitioner should subject himself to the proceedings initiated u/s 73 - It would not be proper for the Writ Court to enter into the merits of the controversy at this stage in such circumstances - HC
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Income Tax

• High Court rules Section 50C of Income Tax Act doesn't apply to rights in land, only to land sales.

  Case-Laws - HC : Loss arising from sale of subject land - Section 50C applicability - the assessee had certain rights under the agreement - from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land. - HC
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• Court Rules Error in Penalty Order Not Covered by Section 292B; Financial Incapacity Considered in Decision.

  Case-Laws - HC : Levy of penalty u/s 221 - Error / Mentioning of wrong AY in the penalty order - Financial incapacity of an assessee to pay the tax - Year of assessment - The aforesaid mistake, if any, is not same under Section 292B of the Act under which only clerical error or accidental omissions can be protected. Therefore, the decisions on which reliance has been placed by the learned counsel for the revenue, has no application to the factual matrix of the case. - HC
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• High Court Upholds Reopening of Venus Group Assessment u/s 147 Due to Unaccounted Cash Transactions.

  Case-Laws - HC : Validity of Reopening of assessment u/s 147 - unaccounted cash transactions - It can thus be seen that the Assessing Officer had analyzed the voluminous material collected by the Revenue during the search operations in connection with the Venus Group - Based on seized material, though AO could not have initiated proceedings u/s 153(C) but based on the information, could be said to be justified in reopening the assessment for the reasons assigned and referred to above. - HC
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• Investment, Not Completion, Key for LTCG Exemption u/s 54 of Income Tax Act.

  Case-Laws - AT : LTCG - Exemption u/s 54 - booking of flat with private builders - The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period. - AT
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• Assessee's Trip Expenditure Deductible; No TDS Liability u/s 194H for Payments to Travel Company.

  Case-Laws - AT : TDS u/s 194H - Disallowance of expenditure incurred on trip scheme - the scheme is closely linked to assessee's business activity. It is also a fact that the assessee has not paid any amount to the dealers and distributors, but amount spent has been paid to SOTC for organizing the trip. - Deduction of expenditure cannot be denied as there is no TDS liability - AT
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• Assessee's Non-Divestment of Shares Isn't a Guarantee; No Financial Implications u/s 92B Explanation 1(c.

  Case-Laws - AT : TP Adjustment - International transaction - The only promise made by the assessee is, it will not make any divestment of the shares during the currency of the loan. In our view, in no way it makes the letter of comfort/support a guarantee of any kind as there is no financial implication on the assessee - Reading of section 92B Explanation 1(c), we are of the considered opinion that provision of letter of comfort/support cannot be termed as an international transaction - AT
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• Foreign Exchange Losses Must Be Included in Transfer Pricing Calculations for Cost-Plus Entities, Rules Panel.

  Case-Laws - AT : TP Adjustment - When foreign exchange loss is to form part of the total base of the taxpayer for the purpose of charging a mark up to its AEs as it drives income from its overseas AEs and it being a cost plus entity, the taxpayer earns foreign exchange loss incurred if any, foreign exchange fluctuation is operating in nature in order to compute margins, hence ld. DRP/TPO/AO has erred in treating foreign exchange loss as non-operating item. - AT
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• Penalty u/s 271(1)(c) for inaccurate income particulars not imposed due to lack of prior proceedings.

  Case-Laws - AT : Penalty u/s 271(1)(c) - a case of furnishing of inaccurate particulars of income has not been made out against the assessee. - Though, similar disallowances were made by the Assessing Officer in preceding assessment years and accepted by the assessee, however, no penalty proceedings for imposition of penalty u/s 271(1)(c) of the Act was initiated by the Assessing Officer - No penalty - AT
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• CSR Expenditure Allowed as Amendment Effective from AY 2015-16 Doesn't Apply to Current Year Assessment.

  Case-Laws - AT : Disallowance expenditure debited under the head “Can-viroment Expenses A/c” as “Corporate Social responsibilities” expenditure - amendment being effective from assessment year 2015-16, is not applicable in the instant assessment year. - Claim allowed - AT
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• Reassessment of Land Purchase Valid u/s 147; Initiated by District Registrar Report, Complies with Section 148 Provisions.

  Case-Laws - HC : Reopening of assessment u/s 147 - Undisclosed purchase of land - the fact was discovered by the Assessing Officer on the basis of the report of District Registrar - the ingredients of first proviso to section 147 appear to be made out on the basis of materials on records. If that is so, the initiation of reassessment proceedings under section 148 beyond the limitation of four years, as prescribed under the first proviso to section 147 and also under section 149(1) (b) is not in breach of the statutory provisions - HC
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Customs

• Misclassification of Goods Not Considered Misdeclaration for Confiscation u/s 111(m) of the Customs Act, 1962.

  Case-Laws - AT : Are Goods liable for confiscation and penalty on the importer justified? - Time and again it has been held by various authorities that mere misclassification of goods, is not misdeclaration for which the goods can be held liable for confiscation under Section 111 (m) of the Customs Act, 1962. - AT
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• Court Orders Prompt Resolution of Refund Claim for Special Additional Duty of Customs, Criticizes Unnecessary Delays.

  Case-Laws - HC : Refund of special additional duty of customs - It is unfathomable as to why the litigant be tossed from one office to another and wait for their legitimate dues only because, there was initial uncertainty in the minds of officers. - The respondents are directed to decide refund claim of the petitioner without any further delay within six weeks - HC
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Service Tax

• Court Rules Free Supply Diesel Cost Excluded from Taxable Service Value u/r 3(b) of 2006 Valuation Rules.

  Case-Laws - AT : Valuation - scope of the term 'consideration' - inclusion of cost of free supply diesel made by M/s ONGC in the value of taxable service for running the drilling vessel - ONGC was not required to make payment of fuel to the appellant - it cannot be said that it was not properly able to determine the value of taxable service, in order to attract the provisions of Rule 3 (b) of the Service Tax (Determination of Value) Rules, 2006. - Demand set aside - AT
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Case Laws:

• GST

• 2021 (2) TMI 596
  Seeking permission to operate the bank accounts - the attachment orders passed against the petitioners ceased to be operative in terms of Section 83(2) of the Punjab Goods and Service Tax Act, 2017 - HELD THAT:- As Section 83(2) of the Act of 2017 manifests that an attachment order passed under Section 83(1) thereof would cease to have effect after expiry of a period of one year from the date of the order, the learned State Counsel was asked to ascertain the factual position. Attachment orders were to be lifted the next day - application allowed.

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• 2021 (2) TMI 595
  Refund of IGST paid on goods exported / supplied to Nepal - HELD THAT:- This writ application is disposed off without expressing any opinion on the merits of the case directing the respondent No.3 to take a decision on the applications dated 1st July 2020, Annexure : H and 22nd August 2020, Annexure : I respectively preferred by the writ applicant in accordance with law by passing a speaking order after affording an opportunity of hearing to the writ applicant within a period of one month from the date of receipt of the certified copy of this order. It is further directed that in case the writ applicant is entitled to the refund of the amount, the same be released within next one month in accordance with law. Application disposed off.

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• 2021 (2) TMI 594
  Seeking a writ in the nature of mandamus for credit of Cess - HELD THAT:- Issue decided in the case of ASSISTANT COMMISSIONER OF CGST AND CENTRAL EXCISE, COMMISSIONER CGST AND CENTRAL EXCISE, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS VERSUS SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED, GOVERNMENT OF TAMIL NADU, THE CHAIRMAN GSTN [ 2020 (10) TMI 804 - MADRAS HIGH COURT] where it was held that Assessee was not entitled to carry forward and set off of unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess against the GST Output Liability with reference to Section 140 of the CGST Act, 2017. Petition dismissed.

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• 2021 (2) TMI 593
  Classification of the entry under which the transaction made by the petitioner no.1 with the State of West Bengal - whether fall under serial no.3A of Chapter 99 or under entry 26 of Heading 9988 - HELD THAT:- At this stage, the only order that can be passed is directing the petitioners to cooperate with the Inquiry Officer by producing the documents as required for the purpose of inquiry. The petitioners are directed to produce those documents in terms of the two summons mentioned hereinabove which are under the possession and control of the petitioners on 10th February, 2021 at 10 a.m. The petitioners should clearly indicate which are the documents out of the said list that are not in their possession or control. The production of the documents may be by the Director/Controller of M/s. Akash Foods Products Pvt. Ltd. or through any other responsible officer of the petitioner no.1. The person who will produce the document shall be released after prima facie scrutiny of the documents on the date of production. The writ petition is adjourned till 31st March, 2021, with liberty to the parties to mention in case of any difficulty.

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• 2021 (2) TMI 592
  Detention of goods alongwith the vehicle - expired E-way bill - goods transported for a distances up to 50 kms only, within the State - applicability of proviso clause to Rule 138 of the Central Goods and Services Rules, 2017, where there was no necessity to update the e-way bill, for such distance - HELD THAT:- Perusal of the order at Ext.P7 detaining the goods makes it clear that the goods were detained while in transit because, validity of the e-way bill had expired and it was not re-validated within the prescribed time. As a consequence, notice under Section 129(3) of the GST Act came to be issued with a direction to the petitioner authority to appear before the respondent authority on 24.01.2021 for showing cause as to why necessary action as contemplated under Section 129 of the GST Act should not be taken. Considering the fact that goods were being transported from one State, ie, Karnataka to another State ie, Kerala, Rule 138(5) relied by the petitioner has no application to the fact situation in the instant case. Rule 138(8) of the said Rules makes copy of the e-way bill mandatory during the course of conveyance of goods. The scheme 129 of the GST Act 2017 makes it clear that the petitioner is having opportunity of hearing before the authority under the GST Act in the wake of receipt of notice under Section 129(3) by him. Petition dismissed.

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• 2021 (2) TMI 591
  Seeking directions to have access to the GST common portal to enable him to upload the returns for the period from the date of implementation of the GST Act - seeking to get acceptance of the revised return from 2017 to enable filing of regular returns ended up in rejection through the impugned judgment of the learned Single Judge - HELD THAT:- After the coming into force of the GST regime, the Government, on the basis of recommendations of the GST Council, notified that a Common Goods and Services Tax Electronic Portal be maintained. The said portal is maintained as www.gst.gov.in by the Goods and Services Tax Network, which is a company incorporated under the Companies Act, 2013. If the appellant had any grievance, nothing prevented him from taking up the issue in the appropriate manner with the IT Grievance Redressal Portal so as to avail the remedy from the Goods and Services Tax Network. He failed to raise any complaint with the IT Grievance Redressal Portal. In such circumstances, the appellant cannot seek the remedy of a writ of mandamus from this Court. In the absence of any attempt on the part of the appellant to seek recourse to the remedy available with the establishment that maintains the portal, the impugned judgment of the learned single Judge is perfectly justified and warrants no interference. Appeal dismissed.

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• 2021 (2) TMI 590
  Input Tax Credit - blocking of its electronic credit ledger due to non-filing of GSTR-3B by its vendor though GSTR-I was filed by him - Rule 86A(1)(a)(i) of the Jharkhand Goods and Service Tax Rules, 2017 - HELD THAT:- This Court is also of the view that the petitioner should subject himself to the proceedings initiated under Section 73 of the JGST Act before the respondentno.3Deputy Commissioner of State Taxes, Adityapur Circle, Jamshedpurand produce all relevant documents, invoices, records, etc. for proper adjudication thereupon. It would not be proper for the Writ Court to enter into the merits of the controversy at this stage in such circumstances. Petitioner should appear before the respondent no.3 on 8thFebruary 2021. Respondent no.3 would endeavour to conclude the proceedings preferably within a period of 12 weeks thereof. Petition disposed off.

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• 2021 (2) TMI 589
  Refund of input tax credit accumulated on account of Inverted Tax Structure - rejection of refund on the ground that the said ITC have been availed on input services and capital goods which is not included in Net ITC for the purpose of refund amount as per Rule 89(5) of the CGST Rules, 2017 as amended vide Notification No. 26/2018-C.T., dated 13-6-2018 - appellant had declared that refund of input tax credit on account of input services and capital goods has not been claimed in their revised computation whereas, the adjudicating authority has treated the items as capital goods and rejected the claim - Section 54(3) of the CGST Act, 2017 - HELD THAT:- As per provisions of Section 2(59) of CGST Act input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus any goods which are not capital goods will be considered as inputs - As per provisions of Section 2(19) of the CGST Act, 2017 capital goods means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business Thus any goods which is not capitalized in the books of accounts of the person claiming ITC shall not be treated as capital goods. Circular No. 79/53/2018-GST, dated 31-12-2018 has clarified that if the goods whose value is not capitalized in the books of accounts and the expenditure which has been charged as revenue expenditure in the books of accounts cannot be treated as capital goods and is to be treated as inputs. These facts has to be verified from the books of accounts. Looking to the nature of business of the appellant i.e. mining and selling of silica sand, it is found that various tools and parts/spares of the machinery are required replacement on frequent basis and as long as these are not capitalized in their books of accounts and has been charged as revenue expenditure in their books of accounts will be treated as inputs in terms of Section 2(59) of the CGST Act, 2017. The appellant has also submitted declaration dated 27-6-2018 that the claim does not include any amount of goods and service tax paid on procurement of inputs, which has been capitalized or treated as expense in their books of accounts - further, the definition of inputs as provided under Section 2(59) of CGST Act, 2017 and the definition of capital goods as provided under Section 2(19) of CGST Act, 2017 and clarification issued by the Board vide Circular No. 79/53/2018-GST, dated 31-12-2018 and Circular No. 125/44/2019-GST, dated 18-11-2019, the goods on which the credit is accumulated and the refund is claimed by the appellant is to be treated as inputs subject to verification of the invoices and books of accounts by the adjudicating authority. Appeal allowed.

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• Income Tax

• 2021 (2) TMI 588
  Disallowance u/s 14A - whether assessee has not determined the expenditure incurred in relation to exempt income and Assessing Authority has rightly held that even though there is no dividend income from the investment? - HELD THAT:- As an admitted position that no dividend or exempt income was claimed by the assessee during the relevant previous year. It is well settled in law that if no exempt income has accrued to the assessee, the provisions of Section 14A do not apply to the fact situation of the case. The aforesaid view has been taken by this Court in PRL. COMMISSIONER OF INCOME TAX AND ANOTHER Vs. M/s. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. [ 2021 (2) TMI 145 - KARNATAKA HIGH COURT ] - substantial question of law framed in this appeal is answered against the revenue and in favour of the assessee.

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• 2021 (2) TMI 587
  Loss arising from sale of subject land - Capital gain OR profit and gains from business or profession - Section 50C applicability - assessee had entered into an unregistered agreement i.e., an agreement to sale with M/s Namaste Exports Ltd. for purchase of land measuring 3639.60 square meters for a consideration of Rs. 4.25 Crores - HELD THAT:- Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property. Undoubtedly, the assessee had certain rights under the agreement, however, from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land. It is equally well settled rule of statutory interpretation with regard to taxing statute that an assessee cannot be taxed without clear words for that purpose and every Act of the Parliament has to be read as per its natural construction of words. For the aforementioned reasons, in our considered opinion, the provisions of Section 50(c) are not applicable to the case of the assessee. In the result, the first substantial question of law is answered in the negative and in favour of the assessee.

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• 2021 (2) TMI 586
  Levy of penalty u/s 221 - Error / Mentioning of wrong AY in the penalty order - Financial incapacity of an assessee to pay the tax - Year of assessment - HELD THAT:- From perusal of Annexure-B annexed with the memorandum of appeal, it is evident that the assessee has paid tax in respect of Assessment Year 2008-09. It is also not in dispute that admittedly the assessee has committed a default in respect of Assessment Year 2007-08 and did not pay the tax on account of financial hardship. However, the authorities under the Act have taken into account the fact in respect of the Assessment Year 2007-08 and have held the assessee to be in default in respect of Assessment Year 2008-09 and have created the penalty under Section 221 of the Act in respect of Assessment Year 2008-09. The aforesaid mistake, if any, is not same under Section 292B of the Act under which only clerical error or accidental omissions can be protected. Therefore, the decisions on which reliance has been placed by the learned counsel for the revenue, has no application to the factual matrix of the case. We have no option but to quash the order dated 14.03.2011 passed by the Tribunal and remit the matter to the Tribunal. Needless to state that it will be open for the parties to urge their contentions before the Tribunal and all questions of law are kept open to be raised before the Tribunal

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• 2021 (2) TMI 585
  Validity of Reopening of assessment u/s 147 - unaccounted cash transactions - Whether non-application of mind on the part of the Assessing Officer? - Whether in a case where the return filed by the assessee is accepted under Section 143 [1] of the Act without scrutiny, since the Assessing Officer had not formed any opinion, the principle of change of opinion would not apply? - HELD THAT:- It cannot be said that there is total non-application of mind on the part of the Assessing Officer while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on some documents seized in the course of search undertaken at the premises of the Venus Group under Section 132 - AO cannot be said to have merely concluded without verifying the fact that it is a case of reopening of the assessment. It is not in dispute, as evident from the reply filed by the department that the search and survey proceedings were carried out under Section 132 and documents were seized under Section 133A of the Act from the various premises of the Venus Group During the course of the search, various documents related to the unaccounted cash transactions of the Venus Group were seized. Upon due verification of all such seized documents, it was found that the unaccounted cash transactions were first recorded on the vouchers and thereafter in the day cash book. The seized documents reflected the unaccounted cash transactions for the period between January, 2007 to March, 2015. The cash book was written in the coded form. Further details and documents were obtained from the office of the Sub-Registrar for the purpose of identifying the beneficiaries in the transactions with the Venus Group. It can thus be seen that the Assessing Officer had analyzed the voluminous material collected by the Revenue during the search operations in connection with the Venus Group. This material, prima facie suggested huge cash transactions in connection with sale of lands against the total declared sale consideration of Rs. 5.38 Crore [rounded off]. The material prima facie suggests that the total cash transactions of Rs. 9,07,26,000/- had taken place. When we are concerned with the re-opening of the assessment, that too, in the case of Heval Navinbhai Patel, where the return was not filed for the assessment year and in the case of Navinbhai Patel, where the return filed by him was accepted without scrutiny, the material at the command of the Assessing Officer is sufficient to permit the process of reopening - As held in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited [ 2007 (5) TMI 197 - SUPREME COURT] and Raymond Woolen Mills Limited[ 1997 (12) TMI 12 - SUPREME COURT] , the reason to believe cannot be equated with finally established fact that the income chargeable to tax having escaped assessment additions will invariably be made and further, the sufficiency of reasons enabling the Assessing Officer to form such a belief would not be gone into. Whether proceedings under Section 148 of the Act are not tenable in law, as the case falls within the ambit of Section 153(C)? - Indisputably in the case on hand, the search was undertaken prior to 01.06.2015. If that be so then, it is clear that before issuing the notice under Section 153(C) of the Act, the primary condition has to be fulfilled and which is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken u/s. 153C of the Act. The seized documents do not belong to the two writ applicants herein but were seized from the premises of the Venus Group. It is not the case of the revenue that the seized documents are in handwriting of the two writ applicants. In such circumstances, the Assessing Officer could not have initiated proceedings under Section 153(C) of the Act but based on the information, could be said to be justified in reopening the assessment for the reasons assigned and referred to above. We are not impressed with the submissions canveassed by Mr. Shah that the proceedings under Section 147 are not tenable in law, as the case is covered by Section 153(C) of the Act.

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• 2021 (2) TMI 584
  Disallowance u/s 14A - AO has worked the disallowance under section 14A which included interest expenses required to be allocated under section 14A read with Rule 8D - HELD THAT:- Issue in dispute is squarely covered by the decision of Hon ble jurisdictional high Court in the case of CIT Vs. Corrtech Energy Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] wherein it was held that maximum disallowance under section 14A could be made equivalent to exempt income earned by the assessee in the absence of any expenses being incurred to earn such income. Therefore, in the present case, disallowance cannot exceed the dividend income earned by the assessee. Considering this proposition, the ld.CIT(A) has already restricted the disallowance to Rs. 4,87,675/-, hence, no interference is called for on this issue. This ground of revenue dismissed.

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• 2021 (2) TMI 583
  Exemption u/s 11 - Disallow statutory allowance of 15% u/s 11(1)(a) of the I.T.Act on the ground that there was no surplus left after deducting the application of income - HELD THAT:- It is settled law that 15% allowance u/s 11(1)(a) of the I.T.Act has to be allowed on the gross receipts. The Tribunal in assessee s own case for assessment year 2011- 2012 [ 2015 (11) TMI 1295 - ITAT BANGALORE] had decided the identical issue in favour of the assessee. In view of the co-ordinate Bench order of the Tribunal in assessee s own case, we hold that accumulation u/s 11(1)(a) of the I.T.Act should be allowed as claimed by the assessee. - Decided in favour of assessee.

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• 2021 (2) TMI 582
  Undisclosed investment in land - addition on the basis of statement made during the course of search and seizure proceedings - basis of analysis of the seized documents a diary in the handwriting of Sh Tushar Kumar which was found from the office premises of the company and some other connected documents thereof - HELD THAT:- Total consideration for purchase of land at Dehradun was Rs. 20, 30, 27, 000/-. Hence, it cannot be said that the amount of Rs. 3.01 Cr. has been paid in cash. Had Rs. 3.01 Cr. been paid in cash, the total cost of purchase paid in cheque as per the four sale deed should be Rs. 17,47,71,637/- whereas in reality the total amount of Rs. 20,30,27,000/- has been paid in cheque. Hence, there is no scope to treat the amount as paid in cash to be brought under unexplained investment u/s 69. Regarding the addition made by the AO of Rs. 3, 84, 00, 000 /-, we find no material to come to such a conclusion. The AO has merely subtracted the amount of Rs. 27, 14,20,134/- mentioned in the seized material which are the estimates of cost of lands and cost of sale value area, average rate, car parking and mall from Rs. 20, 30,27,000/- paid by the assessee in cheque to the farmers for purchase of the land. There was no material to corroborate such an addition, the Assessing Officer merely went back the Annexure A 21 page no. 1 to make such addition. Hence, the action of the Assessing Officer cannot be supported. The appeal of the assessee on this ground is allowed and appeal of the revenue is dismissed. Unexplained Investment in Kashipur Land - HELD THAT:- Addition has been made on a presumptive basis. There was no evidence on record reflecting any payment of cash. Further, while the land has been purchased that Sargam Estate Pvt. Ltd. and reflected in the balance sheet of Sargam Estate pvt. Ltd., no addition is called for in the case of the assessee. It cannot be said that while the cheque has been paid on behalf of Sargam Estate Pvt. Ltd. cash has been paid by the assessee. The nature and contents of the seized material do not reflect any unexplained investment in the land purchased in Kashipur. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. The appeal of the revenue on this ground is dismissed. Amount received from Harayana Citizen CHS - HELD THAT:- Shri K. G. Rastogi was a construction supervisor at the site. The AO held that from the diary of Shri K.G. Rastogi, the order payments appear to be made in cash . There was no evidence that cash has been paid to the assessee company or to the Director of the assessee company. Even the cheque entries were not proved to be encashed in the bank account of the assessee or the Director. The presence of share certificate, application forms and correspondence at the premises of Shri Tushar Kumar and Shri Mohan Vohra swerved the Assessing Officer to make the addition. The society clearly submitted before the AO that he was neither a member nor office bearer of the society. He was a work supervisor for few contractors of HCCGHS and also to other societies. No link with the society has been found as per the statement of the society. The allegation of the revenue that the HCCGH society is a benami of the assessee company cannot be held to be a valid statement as the society is a separate distinct entity and registered with Registrar of Cooperative Societies, Chandigarh. There was no proof that the society has given money in cash to the company or is Director. In the absence of any material depicting or indicating payment of cash to the assessee, no addition is called for. Hence, we decline to interfere with the order of the ld. CIT (A) on this ground. The appeal of the revenue on this ground is dismissed. Undisclosed expenditure in Wings CGHS - AO made addition by holding that the MoU mentions about payment of amount by Shri Tushar Kumar to Shri Ajay Jain whereas the facts speak otherwise - HELD THAT:- During the search itself, it was conveyed that Shri Tushar Kumar did not want to enter into an agreement with Shri Ajay Jain as per the MoU. The said MoU was also not signed by Shri Tushar Kumar. MoU cannot be treated as executed. There was no evidence of payment of cash. The seized material did not mention any payment of cash. Hence, it cannot be held that the assessee has paid an amount of Rs. 1.80 Cr. for taking the control of the WCGHS which is a Co-operative Society registered with Registrar of Cooperatives. Hence, we decline to interfere with the order of the ld. CIT (A). The appeal of the revenue on this ground is dismissed. Undisclosed investment in M/s Sargam Estate Pvt. Ltd - HELD THAT:- As gone through the facts on record and balance sheet of M/s Sargam Estate Pvt. Ltd., the share capital of Rs. 1, 00, 000 /- remained constant as at 31.03.2007 and as at 31.03.2006. The share application money as at 31.03.2006 was Rs. 32, 18, 000 /- which was refunded to the assessee company after receipt of fresh share application money of Rs. 53, 86, 000 /- by M/s Sargam Estate Pvt. Ltd. Instead of enquiring, the source of application money, the AO brought to tax the amount of share application money refunded to the assessee by M/s Sargam Estate Pvt. Ltd. Hence, the addition made has been rightly deleted by the ld. CIT (A). Unexplained advertisement expenses - HELD THAT:- CIT (A) has rightly deleted the addition as the total expenditure debited on account of advertisement Unexplained investment in stock of jewellery - Addition on account of GP - HELD THAT:- Since there is a panchnama drawn in the case of M/s GTM Jewellery Mart Pvt. Ltd., stock inventory was made in the said company and keeping in view the fact that M/s GTM Jewellery Mart Pvt. Ltd. is a separate assessable entity, keeping in view the fact that the difference is due to difference in price but not in quantity, we hold that the addition cannot be made in the hands of the assessee in the instant year.

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• 2021 (2) TMI 581
  Disallowance u/s 36(1)(iii) - funds borrowed have been utilized for giving interest free advances to related parties for purchase of property and these properties are in the nature of capital assets - as argued assessee is having capital and reserves and other interest free funds - HELD THAT:- Interest paid on capital borrowed for acquisition of an asset for any period beginning from the date on which the capital was borrowed for acquisition of the asset till date on which such an asset was put to use shall not be allowed as deduction only from AY 2016-17. For the period prior to AY 2016-17, the disallowance can be made only if the interest paid is in respect of capital borrowed for acquisition of an asset for extension of existing business or profession. Admittedly, the acquisition of capital asset is not for extension of existing business of the Assessee. Hence, the disallowance of interest cannot be sustained as otherwise the interest paid is regarded even by the AO as for the purpose of business of the Assessee. Therefore the disallowance made by the AO and the action of the CIT(A) in sustaining part out of the disallowance made by the AO, cannot be sustained and the same is directed to be deleted. Computation of deduction u/s 36(1)((iii) - HELD THAT:- Contention of AR is that the assessee is having interest free funds to give advances to Related Parties and no disallowance u/s. 36(1)(iii) of the Act to be made, however, the assessee has not placed necessary details of availability of interest free funds in the form of reserves and surplus so as to make interest free advance to Related Parties. The assessee has to prove that it is having own funds to make advances to Related Parties for which the assessee has to furnish the fund/cash flow statements as on date of making such advance to Related Parties. The Assessing Officer on examining these statements has to decide whether the assessee is having enough interest free funds so as to make advance to Related Parties. The assessee shall prove its case of having interest free funds for making advance to Related Parties. Accordingly, this issue is remitted to the file of Assessing Officer for fresh consideration, as per law. Disallowance u/s. 14A - Assessee disallowance u/s. 14A submitted that the assessee has not earned any exempt income and disallowance u/s. 14A is not attracted - HELD THAT:- As it prevails today and flowing from the judgments of various High Courts set out above that in the absence of exempt income having been earned by the Assessee there can be no disallowance of expenses u/s.14A of the Act. Consequently, we delete the disallowance. Validity of the order of assessment passed by the AO - no notice u/s.143(2) issued - HELD THAT:- Since in the present case no valid notice u/s 143(2) was issued by the AO who held jurisdiction over the case of the Assessee the consequent order passed u/s 143(3) dated 7.12.2017 was legally unsustainable and therefore is null in the eyes of law and therefore quashed. The assessee accordingly succeeds on the preliminary legal issue raised before us - Decided in favour of assessee.

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• 2021 (2) TMI 580
  LTCG - exemption u/s 54 - Non deposit of the sale consideration in capital gain scheme account prior to due date of filing of return under section 139(1) - Whether booking of flat is to be considered as a case of construction for the purpose of section 54? - AO Rejected the claim of the deduction as amount of capital gain has neither been invested in purchase or construction of residential house within the stipulated period, nor deposited in capital gain scheme account within limit provided section 139(1) and booking of flat is not purchase of flat because as per agreement to sale, construction of the flat was to be carried out and it was not completed till completion of assessment. HELD THAT:- As payment have been cleared from the bank account of the assessee before the due date of the filing of return under section 139(4) of the Act which was 31/03/2013 in the case of the assessee. As the investment in property has been made prior to due date of filing of return of income under section 139 (4) of the Act i.e 31/03/2013, therefore Respectfully following the decision of SHRI JAGTAR SINGH CHAWLA [ 2013 (4) TMI 499 - PUNJAB AND HARYANA HIGH COURT] , we are of the opinion that the assessee cannot be denied deduction on the ground that amount of sale consideration has not been invested in capital gain account scheme before the due date of the filing of return under section 139(1) of the Act. Eligibility of deduction 54 of the Act for booking of flat with private builders - The assessee has made entire payment within the period of three years from the date of the transfer of original asset, and therefore, the amount has to be treated as invested in purchase/construction. The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period. Thus, respectfully following the Tribunal in the case of Ramprakash Miyav Bazaz[ 2014 (6) TMI 40 - ITAT JAIPUR] we are of the opinion that the assessee has complied the provision of section 54 of the Act in substance and therefore Ld. CIT(A) is not justified in confirming rejection of deduction under section 54 of the Act. We set aside the finding of the Learned CIT(A) on the issue in dispute and direct the Assessing Officer to allow the deduction claim under section 54 of the Act. The grounds of the appeal of the assessee are accordingly allowed.

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• 2021 (2) TMI 579
  TP Adjustment - aggregate figure to be adopted between the assessee and its overseas associate enterprise(s) pertaining to the international transactions in the nature of container line income/container line expenses, reimbursement of expenses paid, liner agency services, slot hire income slot expenses disclosed in Form 3-CEB report - HELD THAT:- We notice that neither the TPO s order dated 29.01.2015 nor the DRP s above extracted directions under challenge have specified as to whether they have adopted cost/revenues of the international transactions in issue only or that of the entire activities involving the twin entities gross transactions. We quote CIT Vs. Firestone International [P.] Ltd. [ 2015 (6) TMI 1123 - BOMBAY HIGH COURT] and restore the instant issue of the correct arm s length price of the assessee s international transactions with its A.Es. which deserves to be adjudicated afresh keeping in mind the said international transactions between them only. It is made abundantly clear before parting that there is no other dispute between the parties regarding the method adopted as well the book results before us. As already indicated in the preceding paragraph, the clinching issue of the entity level or International transaction level s gross receipts/incomes pertaining to this issue still stands unresolved. We thus reiterate our foregoing directions and restore the Revenue s sole substantive grievance back to the TPO for his fresh adjudication to this limited extent. It shall be open for the assessee to place on record all the relevant data in consequential proceedings to be concluded within three effective opportunities of hearing.

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• 2021 (2) TMI 578
  Disallowance of deduction u/s. 80P(2)(d) - adjustment done to the returned income filed by the appellant without giving any intimation for making any adjustments either in writing or in electronic mode as per the provisions of Section 143(1)(a) - CIT(A) rejected the contention regarding disallowance made u/s. 80P(2)(d) being interest receipt from cooperative bank - HELD THAT:- The adjustment done by denial of deduction u/s. 80P(2)(d) and 80P(2)(c)(ii) in this case does not fall in any of the above. That a cooperative society will not get exemption on the interest earned on deposits in cooperative bank is not something which is a subject matter of adjustment under section 143(1)(a) - despite noting that there are tribunal decisions in favour of assessee, the learned CIT(A) has chosen not to follow the same by referring to some other decisions.Further find that learned CIT(A) has completely erred in treating the assessee as cooperative bank and invoking the provisions of section 80P(4). Honourable Supreme Court in the case of Citizen Cooperative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT ] has settled the law that for being considered as a cooperative bank licence from RBI in this regard is a sine qua non. In absence of the RBI licence as such the assessee cannot be treated as cooperative bank. Hence disallowing the deduction by referring to the provisions of section 80P(4) is completely unsustainable. Moreover section 80P(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies. It is nobody s case that cooperative bank are not cooperative societies. Hence on merits also the order of learned CIT(A) denying the deduction u/s. 80P(2)(d) is not sustainable. As regards the statutory deduction u/s. 80P(2)(c)(ii) of the Act, there is no reason why the same should be denied. Moreover, the said adjustment is not falling in any of the adjustment permitted by 143(1)(a) of the Act. Hence, assessee s claim of deduction u/s. 80P(2)(c)(ii) has also been wrongly denied in the processing done u/s. 143(1)(a) of the Act. The learned CIT(A) has failed to decide the same despite assessee s ground in this regard. The same is directed to be allowed in favour of assessee.

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• 2021 (2) TMI 577
  Addition u/s. 14A r.w.r. 8D - HELD THAT:- It is undisputed fact that the assessee has not received any exempt income during the year under consideration. The Hon ble Gujarat High Court in the case of the assessee itself vide CIT vs. Corrteck Engineering Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] has held that in absence of exempt income disallowance u/s. 14A is unwarranted. Taking into consideration we do not find any infirmity in the finding of ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed. Addition on interest expenses u/s. 36(1)(iii) - AO noticed that assessee company has given interest free advances to its related company - HELD THAT:- As demonstrated from the account of the assessee that it was having interest free fund of Rs. 29,15,05,249/- as against interest free loan of Rs. 26,96,648/-. We have also considered the judicial pronouncements referred by the ld. counsel in the case of CIT vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] and RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] particularly on the issue that when assessee has substantial interest free funds disallowance u/s. 36(1) (iii) is unwarranted. In the light of the above facts and findings, we do not find any error in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed. Deemed dividend u/s. 2(22)(e) - assessee company was a subsidiary of Corrteck Energy Ltd. and Crosstown Power India Pvt. Ltd. was a subsidiary of Corrteck International Pvt. Ltd - HELD THAT:- The identical issue on similar fact has been adjudicated by the Co-ordinate Bench of the ITAT in the case of M/s. Precimetal Casts Pvt. Ltd. vs. ITO [ 2020 (12) TMI 1152 - ITAT AHMEDABAD] after following the decision of Jurisdictional High Court in the case of MAHAVIR INDUCTOMELT PVT. LTD. [ 2017 (1) TMI 1159 - GUJARAT HIGH COURT] holding that for the applicability of section 2(22)(e) it is required that the assessee company must be a share holder in the company from whom the loan or advances has been taken and it does not provide that any share holders in the assessee company who had taken any loan or advance from another company in which such share holder is also a share holder having substantial interest. - Decided against revenue.

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• 2021 (2) TMI 576
  TP Adjustment - International transaction - transaction relating to provision of letter of comfort/support with AEs, is not at arm s length - Commissioner (Appeals) held that provision of letter of comfort to the AE is an international transaction - Equating the letter of comfort/support to corporate guarantee, learned Commissioner (Appeals) determined the arm s length price of provision of letter of comfort/support at 20% of 0.20% which is the arm s length price determined for provision of corporate guarantee - HELD THAT:- After going through sample copy of letter of comfort/support given to the bank towards loan availed by the AE, we have noticed that there is no liability or responsibility fastened with the assessee for making good the liability of the AE in case of any default. There is nothing on record to suggest that in case of any default by the AE, the outstanding loan will be recovered from the assessee. Pertinently, while sustaining a part of the adjustment made by the TPO, learned Commissioner (Appeals) has equated the letter of comfort/support to corporate guarantee - on perusal of the letter of comfort/support, it cannot be construed to be in the nature of any sort of guarantee in respect of the loan liability of the AE. The only promise made by the assessee is, it will not make any divestment of the shares during the currency of the loan. In our view, in no way it makes the letter of comfort/support a guarantee of any kind as there is no financial implication on the assessee - Reading of section 92B Explanation 1(c), we are of the considered opinion that provision of letter of comfort/support cannot be termed as an international transaction within the meaning of the aforesaid provision. Our aforesaid view is well supported by the decisions cited by the learned Counsel for the assessee. Accordingly, we delete the addition. Disallowance u/s. 14A of the Act r.w.r. 8D - Mandation of recording proper satisfaction by AO before making addition - HELD THAT:- Without recording a proper satisfaction to the effect that the computation made by the assessee is incorrect having regard to the books of account maintained, has proceeded to compute the disallowance simply on the reasoning that disallowance under section 14A of the Act has to be made by applying the methodology of Rule 8D. In our view, the aforesaid reasoning of the Assessing Officer is contrary to the mandate of section 14A(2) - no reason to uphold the disallowance made. Hence, we delete the same. This ground is allowed. Taxability of royalty income received from a subsidiary in Egypt - assessee has claimed that the royalty income is not taxable in India in view of Article 13 of India-Egypt tax treaty - HELD THAT:- No doubt, this is a purely legal issue. Further, we find that identical issue raised by the assessee through additional ground in Assessment Years 2008-09 and 2006-07 has been restored back to the Assessing Officer for fresh adjudication, keeping in view the provisions of the tax treaty between India and Egypt. We have also noted that while completing the assessment for Assessment Year 2012-13, the Assessing Officer has accepted assessee s claim that royalty income is not taxable in view of Article 13 of India-Egypt tax treaty. In view of the above, we are inclined to restore this issue to the Assessing Officer for fresh adjudication keeping in view Article 13 of the India Egypt tax . Deduction of education cess paid on income-tax as allowable expenditure - HELD THAT:- We find that the issue is squarely covered by the decision of the Hon ble jurisdictional High Court in case of Sesa Goa Ltd. vs. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] wherein, it is held that education cess not being in the nature of rate or tax will not be covered u/s. 40(a)(ii). Even, different benches of the Tribunal have expressed identical view. In view of the above, we are unable to accept the submissions of learned Departmental Representative. Respectfully following the decision of the Hon ble jurisdictional High Court (supra) and other decisions cited before us by the learned Counsel for the assessee, we hold that the assessee is eligible to claim deduction of education cess. This ground is allowed Applicability of beneficial rate as per the applicable DTAA to the dividend distribution tax (DDT) paid under section 115-O of the Act and has claimed refund of the excess amount - HELD THAT:- We restore the issue to the Assessing Officer for examining assessee s claim of applicability of beneficial rate of tax as per the applicable DTAA to the DDT paid under section 115-O. Adjustment of corporate guarantee to 0.2% p.a - HELD THAT:- In assessee s own case Tribunal in separate orders has accepted commission on corporate guarantee provided to AEs charged at 0.20% to be at arm s length. The aforesaid decisions of the Tribunal have been upheld by the jurisdictional High Court while dismissing the appeals of the revenue. The latest order passed by the Hon ble High Court in this regard is for the assessment year 2008-09 [ 2019 (2) TMI 819 - BOMBAY HIGH COURT ], in Income Tax Appeal No. 1564 of 2016 order dated 06-02-2019. Therefore, following the consistent view of the co-ordinate benches and the Hon ble jurisdictional High Court, we uphold the decision of learned Commissioner (Appeals) on this issue. Ground of the revenue is dismissed. Deduction under section 35(2AB) - HELD THAT:- As decided in own case [ 2014 (1) TMI 16 - ITAT MUMBAI ] as directed the Assessing Officer to allow assessee s claim of deduction, if, on verification it is found that the expenditure claimed was actually incurred on research and development activity irrespective of the fact whether the entire amount was approved by DSIR or not. Since, learned Commissioner (Appeals) has decided the issue keeping in view the aforesaid direction of the Tribunal, in our view, there is no infirmity in such decision. Accordingly, ground raised is dismissed. Disallowance made on account of expenditure incurred on television advertisement in relation to corporate advertisement - HELD THAT: As could be seen, this is a recurring dispute between the parties since assessment year 2006-07 onwards. While deciding the issue in assessment years 2006-07 and 2007-08, the Tribunal has deleted similar disallowance made by the Assessing Officer. The aforesaid decision of the Tribunal has also been upheld by the Hon ble jurisdictional High Court. In the latest order passed by the Tribunal for the assessment year 2008-09 [ 2015 (11) TMI 1745 - ITAT MUMBAI ], the Tribunal has reiterated its earlier view. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground is dismissed. Additional depreciation - use of asset less than 180 days - HELD THAT:- As assessee had purchased and installed new plant and machinery in the preceding assessment year which is eligible for additional depreciation @20%. However, since the new assets were put to use for less than 180 days in the preceding assessment year, the claim of additional depreciation allowable at 20% was restricted to half of it, i.e. 50%. Thus, in effect, the assessee was allowed additional depreciation of 10%. Now, it is well settled by a number of judicial precedents that if for use of new plant and machinery for a period of less than 180 days the entire amount of additional depreciation cannot be claimed in the subject assessment year, the balance unclaimed amount can be claimed in the subsequent assessment year. It is also a fact on record, against similar claim allowed by learned Commissioner (Appeals) in assessee s own case in Assessment Year 2008-09, the revenue has not preferred any appeal before the Tribunal. In view of the above, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed. TDS u/s 194H - Disallowance of expenditure incurred on trip scheme - expenditure incurred by the assessee for trip scheme is - Whether in the nature of commission paid to dealers and distributors; hence, subject to deduction of tax - HELD THAT:- As the entire trip scheme is for the purpose of expanding assessee s business by encouraging the dealers and distributors to achieve a specific target of purchase. Thus, the scheme is closely linked to assessee s business activity. It is also a fact that the assessee has not paid any amount to the dealers and distributors, but amount spent has been paid to SOTC for organizing the trip. It is also a fact on record that the amounts paid to SOTC has been subjected to TDS as per the relevant provision. Therefore, the allegation of the Assessing Officer that the amount has not been subjected to deduction of tax is without any basis. As regards the applicability of section 194H of the Act, by no means, the Assessing Officer has established on record that dealers/distributors are agents of the assessee. Further, as we find, the trip scheme has been introduced by the assessee from past 20 years and the deduction claimed by the assessee on account of such trip scheme has never been disallowed by the Assessing Officer except for the impugned assessment year. Therefore, even applying the rule of consistency, the expenditure claimed by the assessee has to be allowed.

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• 2021 (2) TMI 575
  TP Adjustment - Comparable selection - functional dissimilarity - HELD THAT:- Assessee is into rendering Information Technology Enabled Services (ITES) related to IP administration/renewal and data management services to its group companies including renewal support services, proof reading support, customer support services etc.. The taxpayer functions as a captive off-shore centre in India and supports its Associated Enterprises (AEs) in servicing customer contracts, thus companies functinally dissimilar with that of assessee need to be deselected from list of comparability. ECLERX SERVICES LIMITED (ECLERX) - Functional profile of Eclerx shows that it is a Knowledge Process Outsourcing (KPO) company and is providing domain specific reengineering expertise in partnership with financial services firms to increase control and execute ongoing functions.Thus is functionally dissimilar; that it is also outsourcing substantial amounts of work to outsider and that Eclerx has unreliable data. TCS E-SERVE LIMITED (TCS E-SERVE) - Keeping in view the functional dissimilarity, related party transactions, high turnover and payment for brand fee to Tata and abnormal profitability trend discussed in the preceding paras, we are of the considered view that TCS E-Serve is not a suitable comparable vis- -vis the taxpayer who is a BPO/ITES service provider, hence ordered to be excluded. EXCEL INFOWAYS LTD. (EXCEL) - Excel has been rejected by the Tribunal in taxpayer s own case of earlier years. So, in these circumstances, we are of the considered view that Excel is not a suitable comparable vis- -vis the taxpayer as it fails employee cost/net sales ratio filter applied by the TPO and segmental financials are not available, which is into new infrastructure activities, real estate, etc.. So, we order to exclude Excel from the final set of comparables. BNR UDYOG LTD. (BNR) - It is engaged in medical transcription and medical coding which is different from the taxpayer who is a routine ITES service provider working on cost plus mark-up business model. So, we are of the considered view that since BNR fails RPT filter of 25% applied by the TPO himself, having super normal growth, having functional dissimilarity vis- -vis taxpayer is not a suitable comparable, hence ordered to be excluded. Treating foreign exchange loss as a non-operating item - taxpayer invoices its AEs for its services in US Dollars and bears foreign exchange risk qua movement in the exchange rate between US Dollar and INR - HELD THAT:- When foreign exchange loss is to form part of the total base of the taxpayer for the purpose of charging a mark up to its AEs as it drives income from its overseas AEs and it being a cost plus entity, the taxpayer earns foreign exchange loss incurred if any, foreign exchange fluctuation is operating in nature in order to compute margins, hence ld. DRP/TPO/AO has erred in treating foreign exchange loss as non-operating item. So, we direct to treat foreign exchange loss as operating in nature, hence ground no. 8 is determined in favour of the taxpayer.

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• 2021 (2) TMI 574
  Penalty u/s 271(1)(c) - Disallowance u/s 14A - HELD THAT:- When the disallowance under rule 8D(2)(i) r.w.s. 14A has been made on a purely estimate basis, that too, without establishing any direct/proximate nexus with the exempt income earned, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income. Merely because the assessee has not contested the disallowance in appeal, for that reason alone assessee cannot be automatically visited with penalty under section 271(1)(c). In case of CIT vs. Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] while dealing with the issue of imposition of penalty on the basis of disallowance made under section 14A of the Act has observed that when the assessee had furnished all the details of its expenditure as well as income in its return which were not found to be inaccurate, it cannot lead to furnishing of inaccurate particulars of income merely because the claim made by the assessee was not accepted by the department. In case of Sir Shadilal Sugar General Mills Ltd. vs. CIT [ 1987 (7) TMI 3 - SUPREME COURT] has held that merely because the assessee agreed to certain addition, it will not follow that the assessee concealed income relating to such addition. At this stage, we must observe, irrespective of the fact whether or not the assessee has accepted the disallowance, in our considered view, the validity of the disallowance made under rule 8D(2)(i) is a highly debatable one on which more than one view is possible. In the present case, we hold that a case of furnishing of inaccurate particulars of income has not been made out against the assessee. As pointed out by the learned Counsel for the assessee and noted by us, though, similar disallowances were made by the Assessing Officer in preceding assessment years and accepted by the assessee, however, no penalty proceedings for imposition of penalty under section 271(1)(c) of the Act was initiated by the Assessing Officer. - Decided in favour of assessee.

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• 2021 (2) TMI 573
  Disallowance of Claim of reduction of bad debt - in the case of assessee the bad debt in respect of inter corporate despot was not allowable as the main business activity of the assessee was not money lending business - CIT(A) has allowed the appeal of the assessee - HELD THAT:- Similar issue on identical fact has been adjudicated in favour of the assessee by the Co-ordinate Bench of the ITAT after referring the decision of Mumbai High Court rendered in the case of Shreyas S. Morakhia [ 2012 (3) TMI 103 - BOMBAY HIGH COURT] and Bonanza Portfolio Ltd. [ 2009 (8) TMI 636 - DELHI HIGH COURT] With the assistance of ld. representatives we have also perused the decision of ld. CIT(A) as cited above in this order demonstrating that assessee has shown income from bill discounting and inter corporate deposit in its P L A/c for the year under consideration and for the preceding year. - Decided in favour of assessee.

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• 2021 (2) TMI 572
  Enhancement of income u/s 251(1)(a) by CIT-A - Enhancement of disallowance @ 100% of the alleged bogus purchases - HELD THAT:- We notice that Ld. CIT(A) has adjudicated the issue on merit and also enhanced the income without giving proper opportunity to the assessee. Ld. CIT(A) should not have enhanced the income without hearing to the assessee. Since the issue was decided ex-parte and now assessee is in appeal before us raising the grounds of appeal, therefore for the sake of natural justice, we remit the issues raised by the assessee to the file of Ld. CIT(A) to adjudicate the issue on merit as per law after giving proper opportunity of being heard to the assessee and we also direct the assessee to properly represent the case before first appellate authority. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

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• 2021 (2) TMI 571
  Disallowance expenditure debited under the head Can-viroment Expenses A/c as Corporate Social responsibilities expenditure - As per AO Expenditure being not incurred directly related to earning of the income, it was not incurred wholly and exclusively for the purpose of the business, and accordingly disallowed the same - HELD THAT:- The Explanation -2 has been inserted below the section 37 (1) of the Act with effect from 01/04/2015 i.e. assessment year 2015-16. According to the said Explanation, corporate social responsibility expenditure incurred shall not be deemed to be incurred wholly and exclusively for the purpose of business or profession. This amendment being effective from assessment year 2015-16, is not applicable in the instant assessment year. Thus, respectfully following the order of the Tribunal in [ 2019 (8) TMI 1642 - ITAT DELHI] we delete the addition in dispute in the year under consideration. The grounds of the appeal accordingly allowed.

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• 2021 (2) TMI 566
  Reopening of assessment u/s 147 - Undisclosed purchase of land - validity of reasons to believe - reopening after period of four years - HELD THAT:- From statement of investment in the land / purchase of lands made in the F.Y. 2013-14 and the table furnished by the Assessing Officer in his reply dated 14.09.2020 (Annexure-9) containing the recorded reasons in terms of section 147, it is clear that the assessee had not made full disclosure of the purchase of lands made in the year 2012-13. Assessee failed to disclose that on 26.02.2013 he had purchased lands in the district of Seraikella-Kharsawan from certain persons named therein, as also pointed out by the Revenue. After the assessment was over, on cross verification from the report of the District Registrar, Seraikella-Kharsawan, it was revealed that the Company had actually purchased lands of Rs. 30.04 crores from 11 different persons on 26.02.2013. The balance sheet for the year ending 31.03.2013 revealed that the Company had incurred Rs. 18.39 crores more than the declared expenses on land which appear to have escaped assessment for the A.Y. 2013-14. This fact was discovered by the Assessing Officer on the basis of the report of District Registrar, Seraikella-Kharsawan after the assessment was complete and not on re-examining the materials and documents already on record filed by the assessee along with the return or subsequently brought on record during the assessment proceedings. This is the basis on which the Assessing Officer formed a reasonable belief that the assessee had failed to truly and fully disclose his income. As such, this income of the assessee had escaped assessment. Thus, the ingredients of first proviso to section 147 appear to be made out on the basis of materials on records. If that is so, the initiation of reassessment proceedings under section 148 beyond the limitation of four years, as prescribed under the first proviso to section 147 and also under section 149(1) (b) is not in breach of the statutory provisions. - Decided against assessee.

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• Customs

• 2021 (2) TMI 567
  Refund of special additional duty of customs - Delay due to confusion in Jurisdiction - sale of imported materials into the domestic tariff area by the unit of petitioner company in the Surat Special Economic Zone - HELD THAT:- It is quite apparent from the material, which has been produced that it is not the merit which is being questioned by the authority as the claim is of the refund of special additional duty of customs in respect of goods imported through 6 bills of entries by preferring refund application before the Specified Officer of the Surat Special Economic Zone. We notice that the Order in Original denied it on the ground that there were no provisions in the Special Economic Zone Act, 2005 and the Special Economic Zone Rules, 2006. Attempt was made by the petitioner to prefer an appeal so that in a pending appeal before CESTAT, it can throw some light. However, this was decided in absence of the petitioner. Thereafter also, it made all possible attempts to once again reiterate its request for refund on 1.11.2018 and that too, has not been responded. Attention is drawn to the Circular No.11/2017-Cus. dated 31.3.2017 of Government of India, Ministry of Finance, regarding the amendment in Special Economic Zone Rules, 2006 in Rule 47, which clarifies that representations have been received from field formations requesting clarification regarding amendments made in the Special Economic Zone Rules, 2006 by way of inserting a new Rule 47(5) brought vide Department of Commerce (DoC) Notification No. GSR 772(E) dated 5.8.2016, wherein the functional operations like Refund, Demand, Adjudication, Review and Appeal are directed to be made by jurisdictional Customs and Central Excise authorities in accordance with the relevant provisions contained in the Customs Act, 1962 Central Excise Act, 1944 and the Finance Act, 1994. Certain doubts raised regarding operationalization of these functions, appropriate authority and time limitation in respect of these functional operations, especially refund claims filed prior to the date of coming into effect of the said notification, i.e. 5.8.2016 it clarified the same. Since it was asked as to who would be the appropriate authority it names, the Development Commissioner or the jurisdictional Customs Authority to raise the demand of duty, if need arises, in respect of unutilized capital goods by a unit in case it exits. From March 31, 2017 even this issue as to who could adjudicate in the matter of refund, also had been unequivocally clarified without any semblance of doubt. There was no earthly reason as to why thereafter also, when the request was made in the year 2018, the same has not been considered by the authority concerned, when the officer had been provided with the legal backing they needed for discharging their statutory obligations. It is unfathomable as to why the litigant be tossed from one office to another and wait for their legitimate dues only because, there was initial uncertainty in the minds of officers. The respondents are directed to decide refund claim of the petitioner without any further delay within six weeks of receipt of copy of this order and the same shall be once decided, paid with interest. It shall also regard disbursement by electronic mode through NEFT - petition allowed.

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• 2021 (2) TMI 565
  Classification of imported goods - Winches (stage Lighting Equipment) and LED Balls of different sizes - winches classified under Custom Tariff Heading 84253100 and those of LED Ball under 85395000 or otherwise? - correct Classification of the imported good under the heading 84253100 or 94054090? - requirement of registration with BIS, in view of the provision of the Electronics and IT Goods (Requirements for Compulsory Registration) Order, 2012 - confiscation - penalty. Correct Classification of the imported good under the heading 84253100 or 94054090? - HELD THAT:- In the present case, both the authorities below have determined the essential character of the impugned goods as lighting fixture after considering the product catalogue (literature) and the Chartered Engineer Certificate. Appellants have not produced anything before us to disturb the said findings of lower authority, and establish that impugned goods are simple handling/ lifting equipment to merit classification under heading 84253100 - When both authorities have determined the essential character of the impugned goods as Lighting Fixture, then the classification as determined by them under heading 94054090 cannot be faulted with. Whether the goods are required to be compulsorily registered with BIS, in view of the provision of the Electronics and IT Goods (Requirements for Compulsory Registration) Order, 2012? - HELD THAT:- From the Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012, it is quite evident that the said order is applicable in respect of the Goods, as defined and specified in the schedule. Further the goods should be conformity with specified Indian Standard as per the schedule. Both the authorities below have failed to specify the Indian Standard as per the Schedule, to which these imported goods, i.e. LED Winches should have been in conformity before proceeding to hold them to be imported in contravention of the provisions of Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012. In absence of any determination of the Indian Standard, which would be applicable in respect of these goods the impugned order holding that goods have been imported in contravention of the provisions of the Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012, cannot be sustained. The order holding that the goods are prohibited and liable for absolute confiscation needs to be reconsidered by the authorities below in terms of the provisions of the Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012. Hence the matter needs to be remanded back to the original authority for determination of Indian Standard as per the column (3) of the Schedule to the Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012. Are Goods liable for confiscation and penalty on the importer justified? - HELD THAT:- Time and again it has been held by various authorities that mere misclassification of goods, is not misdeclaration for which the goods can be held liable for confiscation under Section 111 (m) of the Customs Act, 1962. However it is found that the Assistant Commissioner has for confiscation not only invoked Section 111 (m) but has also held that the goods are prohibited goods and are liable for confiscation under section 111 (d) too. Since the goods have been held as prohibited for the reason of failure to comply with the requirements of compulsory registration of the goods as per Electronics and IT Goods (Requirements for Compulsory Registration) Order 2012, and we are remanding the matter for consideration of applicability of the said order to the impugned goods, the issue of confiscation in terms of this Section 111 (d) and penalty under Section 112 (a) also is remanded back to the original authority. Appeal allowed by way of remand.

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• Securities / SEBI

• 2021 (2) TMI 570
  Winding up proceedings of Mutual fund scheme - objections to the e-voting results - HELD THAT:- As learned senior counsel appearing for some of the objectors, who prays for some time to place on record the new facts, which have come to their knowledge today, by way of an application. She is permitted to file an application within three days. Response/reply thereto, if any, could be filed within three days thereafter. List on 01.02.2021 at 2:00 p.m. - on the said date we would first examine the objections to the e-voting results and the issue/question whether or not disbursal/payment to the unit holders should be made. Interpretation of the Regulations and other aspects would be be examined and decided thereafter.

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• 2021 (2) TMI 569
  Winding up proceedings of Mutual fund scheme - objections to the e-voting results - HELD THAT:- E-voting results have been recorded in paragraph 36 of the said report and have been read out. The Registry would scan the report of the observer and make e-copy available to the counsel for the parties, including Advocates on Record who have filed application for intervention/impalement. Objections, if any, to the observer s report/e-voting/result would be filed within three days. Response/reply of the same could be filed within three days hereinafter. On the next date of hearing, we would decide on the objections, if any; further procedure to be followed, and whether procedure under Regulation 41(1) in the facts of the present case is mandated. List the matters on 25.01.2021 at 2:00 p.m.

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• Service Tax

• 2021 (2) TMI 564
  Valuation - scope of the term consideration - inclusion of cost of free supply diesel made by M/s ONGC in the value of taxable service for running the drilling vessel - HELD THAT:- The period of dispute involved in this case is from December 2010 to December 2015. The provisions of valuation of taxable services for charging service tax are contained in Section 67 ibid. The said statutory provision has defined the term consideration , to include any amount that is payable for the taxable services provided or to be provided for provision of taxable service. Section 67 ibid was amended by the Finance Act, 2015 (20 of 2015), w.e.f. 14.05.2015. The effect of amendment was that subclauses (ii) and (iii) were inserted in clause (a) in the definition of consideration contained in the explanation part appended to Section 67 ibid. The amended provisions include inter alia, any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, subject to the fulfilment of the prescribed conditions. In the present case, it is an admitted fact on record that the appellant had never charged any cost of fuel to M/s. ONGC over and above the amount claimed by it for providing the taxable service. Since, M/s. ONGC was not required to make payment of fuel to the appellant, its value cannot be added to the taxable value both under the un-amended and amended provisions of Section 67 ibid - Further, the appellant herein had received the entire consideration for provision of service in monetary terms. Hence, it cannot be said that it was not properly able to determine the value of taxable service, in order to attract the provisions of Rule 3 (b) of the Service Tax (Determination of Value) Rules, 2006. Similarly, the provisions of Rule 5 ibid also would not attract in this case inasmuch as no cost of fuel was charged or billed by the appellant to the recipient of service. Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2021 (2) TMI 568
  Seeking Petitioners to undertake a comprehensive and heightened judicial scrutiny regarding the permissibility of the Central Vista Project of the Government of India - challenge is premised on high principles of democratic values as applicable in India and not limited to mere infringement of statutory provisions of the governing enactments - nature of project-being of high political significance and eminence for our democratic republic; and for upholding the Rule of Law , which is on a higher pedestal than the governance by Rule by Law - HELD THAT:- The contentions of the Petitioners and Respondents have been referred in some detail but would not comment on merits. These are complex and esoteric issues which have to be at first stage considered and decided by the specialised authorities like the Heritage Conservation Committee. If we consider and examine the merits of the pleas, we would be directly encroaching their jurisdiction and exceeding the power of judicial review. It is the reasoning and discussion in the orders by the statutory/quasi-judicial that are subjected to judicial scrutiny and review. Further, matters pertaining to heritage, architectural, functionality etc are for the experts and specialists in the field like Architects, town planers, historians, urbanists, engineers etc. to examine and guide. Suffice it would be to observe that the stands on merits reflect different perceptions and beliefs. The Respondents without doubt do verily believe that redevelopment of Central Vista and new Parliament building is an imperative necessity. Central Vista requires a makeover. The hutments and some of the non-heritage buildings like Shashtri Bhawan, Nirman Bhawan, Udyog Bhawan etc. which it is stated occupy more than 90 acres of land require re-development. Similarly, if new parliament building is required and being a must, it should be constructed. Several former and the present Speaker have expressed the need for construction of a new Parliament. Some of the Petitioners do not oppose partial and regulated redevelopment for functionality, while maintaining and preserving the heritage, ethos and visual look. Central Vista and Parliament House is an heritage and belongs to the Nation and the people. Their primary grievance is lack of information and details. They submit that experts and specialists can provide acceptable solutions to conserve and make historical buildings functional, as it has happened elsewhere. The issues raised by the Petitioners along with the stand of the Respondents have to be taken into consideration by the statutory authorities in terms of and as per the statutory mandate. Ultimately, the issue has to be decided as per law after ascertain details by professional experts. Our interference does not reflect on merits of the stands, but is on account of procedural illegalities and failure to abide the statutory provisions and mandate. Following directions are issued: A) The Central Government/Authority would put on public domain on the web, intelligible and adequate information along with drawings, layout plans, with explanatory memorandum etc. within a period of 7 days. B) Public Advertisement on the website of the Authority and the Central Government along with appropriate publication in the print media would be made within 7 days. C) Anyone desirous of filing suggestions/objections may do so within 4 weeks from the date of publication. Objections/suggestions can be sent by email or to the postal address which would be indicated/mentioned in the public notice. D) The public notice would also notify the date, time and place when public hearing, which would be given by the Heritage Conservation Committee to the persons desirous of appearing before the said Committee. No adjournment or request for postponement would be entertained. However, the Heritage Conservation Committee may if required fix additional date for hearing. E) Objections/suggestions received by the Authority along with the records of BoEH and other records would be sent to the Heritage Conservation Committee. These objections etc. would also be taken into consideration while deciding the question of approval/permission. F) Heritage Conservation Committee would decide all contentions in accordance with the Unified Building Bye Laws and the Master Plan of Delhi. G) Heritage Conservation Committee would be at liberty to also undertaken the public participation exercise if it feels appropriate and necessary in terms of paragraph 1.3 or other paragraphs of the Unified Building Bye Laws for consultation, hearing etc. It would also examine the dispute regarding the boundaries of the Central Vista Precincts at Rajpath. H) The report of the Heritage Conservation Committee would be then along with the records sent to the Central Government, which would then pass an order in accordance with law and in terms of Section 11A of the Development Act and applicable Development Rules, read with the Unified Building Bye-laws. I) Heritage Conservation Committee would also simultaneously examine the issue of grant of prior permission/approval in respect of building/permit of new parliament on Plot No. 118. However, its final decision or outcome will be communicated to the local body viz., NDMC, after and only if, the modifications in the master plan were notified. J) Heritage Conservation Committee would pass a speaking order setting out reasons for the conclusions. Case is remitted to the EAC with a request that they may decide the question on environment clearance within a period of 30 days from the date copy of this order received, without awaiting the decision on the question of change/modification of land use.

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