TMI Tax Updates - e-Newsletter
February 22, 2021

Case Laws in this Newsletter:

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

Articles

1. PRODUCER COMPANY RULES, 2021 – AN OVERVIEW

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. GST compensation shortfall released to States reaches ₹ 1 lakh crore

2. Know more about “QRMP scheme and how to furnish details in IFF” and Answers to Frequently Asked Questions

3. PM’s opening remarks at the 6th Governing Council Meeting of NITI Aayog

4. IFSCA issues framework for Aircraft Operating Lease

Notifications

Companies Law

1. G.S.R. 123 (E) - dated 19-2-2021 - Co. Law

Companies (Specification of definitions details) Second Amendment Rules, 2021

Customs

2. 08/2021 - dated 19-2-2021 - ADD

Seeks to impose definitive anti-dumping duty on imports of Aniline originating in or exported from China PR for a period of five years from the date of levy of provisional anti-dumping duty, i.e. 29th July, 2020.

GST - States

3. 43/2020– State Tax - dated 16-2-2021 - Delhi SGST

Seeks to bring force Sections of Delhi Goods and Services Tax (Amendment) Act, 2020

4. 94/2020 – State Tax - dated 9-2-2021 - Jharkhand SGST

Jharkhand Goods and Services Tax (Fourteenth Amendment) Rules, 2020.

5. 92/2020 – State Tax - dated 9-2-2021 - Jharkhand SGST

Seeks to bring in force various section of the Jharkhand Goods and Services Tax (Amendment) Act, 2020

6. 91/2020 – State Tax - dated 9-2-2021 - Jharkhand SGST

Amendment in Notification No. 35/2020- State Tax, dated the 17th August, 2020

7. 82/2020 – State Tax - dated 29-1-2021 - Jharkhand SGST

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

8. 81/2020 – State Tax - dated 29-1-2021 - Jharkhand SGST

Seeks to bring in force section 7 of Jharkhand Goods and Services Tax (Amendment) Ordinance, 2019

9. 80/2020 – State Tax - dated 29-1-2021 - Jharkhand SGST

Amendment in Notification No. 41/2020 - State Tax, dated the 15th September, 2020

10. S.O. 08/P.A.5/2017/Ss. 9, 11, 15 and 148/2021 - dated 8-1-2021 - Punjab SGST

Amendment in Notification No. 37/P.A5/2017/S.11/2017, dated the 30th June, 2017

Money Laundering

11. S.O. 779 (E) - dated 19-2-2021 - PMLA

Amendment in Notification S.O. 372(E), dated 5th February 2016

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 42/2020-21 - dated 19-2-2021

Issuance of Certificate of Origins (Non-Preferential) [CoOs(NP)] through Common Digital Platform(CDP)

Highlights / Catch Notes

GST

• Advance Ruling Authority Hearings Stalled Since 2020 Due to Incomplete Quorum; Urgent Action Requested from Lieutenant Governor.

  Case-Laws - HC : Functioning of Advance Ruling Authority - quorum of two members not complete - having regard to the fact that since November, 2020, the Advance Ruling Authority has not been conducting the hearings, we make a request to the Hon’ble Lieutenant Governor to take up the matter on priority basis and process the nomination received from the CBIC at the earliest. - HC
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• Provisional Attachment Under CGST Act Section 83(2) Must Be Lifted After One-Year Validity Expires.

  Case-Laws - HC : Provisional attachment - the requirement of the statute as provided for u/s 83(2) of the CGST Act, which limits the operation of order of provisional attachment for one year having elapsed, the competent authority is required to pass an order, withdrawing the provisional attachment as ordered on 13.08.2019 - HC
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Income Tax

• High Court upholds ITAT's decision; cash seized during a search added u/s 69A, no reassessment needed.

  Case-Laws - HC : Addition u/s 69A - Cash found and seized during the course of search - the findings are purely findings of fact which have been concurrently accepted by the CIT(A) as well as the ITAT. We cannot reappreciate the evidence, particularly when we see no perversity in the findings of the ITAT. - HC
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• Tribunal Allows Deduction of Marketing and Transaction Support Fees u/s 37(1) of Income Tax Act.

  Case-Laws - HC : Deduction in respect of expenditure incurred under the head of marketing support fee and transaction support fee - every activity which gives an enduring benefit to the assessee would not get the character of capital in nature - the tribunal has rightly allowed the expenditure incurred towards marketing support fee and transit support fee under Section 37(1) of the Act. - HC
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• Court Rejects Re-Assessment Proposal on Processing Fee; Petitioner Met Full Disclosure u/ss 147 and 148.

  Case-Laws - HC : Re-assessment of processing fee - Recognition of income - Method of accounting - Assessments for previous and later years following this consistent method of accounting have been accepted. The details in relation to the entirety of the processing fee received and the component recognised as income in this year are also available. - disclosure made by the petitioner in regard to the assessment of processing fee is a full and true disclosure for the purposes of Section 147/148. The proposal for re-assessment on this issue fails - HC
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• Exemption Denied: Assessee Fails to Secure Approval u/s 10(23C)(v) Due to Insufficient Evidence.

  Case-Laws - AT : Approval u/s 10(23C)(v) - Assessee does not have any approval under section 10(23C)(v) of the I.T. Act for the assessment year under appeal, therefore, there is no question of assessee getting any exemption under the same provision. The burden upon assessee to claim exemption under such provision have not been discharged by assessee by producing any adequate evidence on record. The authorities below were, therefore, justified in rejecting the claim of assessee for denial of exemption under section 10(23C)(v) - AT
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• Expatriate Employee Salaries: TDS Confirmed u/s 192, Not Section 195, with Proper Documentation Provided.

  Case-Laws - AT : TDS u/s 192 or 195 - salary and other allowances of expatriate employees - As perused the TDS certificates, Forms 15CA and 15CB, tax deducted by the assessee and all these documents are part of the paper book. There is no dispute that the assessee has deducted tax at source u/s 192 of the Act. On the given facts of the case, we are of the considered opinion that the provisions of Section 195 of the Act do not apply. - AT
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• Assessment Reopening Invalid: Unrelated Party's Statement Used Without Assessee's Knowledge, No Evidence of Undisclosed Sale Value.

  Case-Laws - AT : Validity of the reopening of the assessment - Merely because some unrelated party in her statement has stated that the assessee and his wife have paid consideration over and above the transaction value would not justify the reopening and the impugned addition, firstly because the said statement was recorded behind the back of the assessee for which no opportunity of cross examination was given and secondly, there is no evidence brought on record to show that the actual sale consideration was much higher than that mentioned in the sale deed. - AT
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• Interest Income from FDRs Before Business Start Considered Capital Receipt, Offset Against Preoperative Expenses.

  Case-Laws - AT : Correct head of income - Interest income on FDRs - since the business of the assessee had not commenced, the interest received in the period prior to the commencement of business was in the nature of capital receipt and was required to be set off against the preoperative expenses. - AT
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• Non-Resident Software Payment Before Oct 15, 2011, Not Disallowed u/s 40(a)(ia) for Non-Deduction of TDS.

  Case-Laws - AT : Addition u/s 40(a)(ia) - non deduction of tds - payments to non-resident for purchase of software prior to 15.10.2011 cannot be disallowed u/s.40(a)(ia) of the Act for non deduction of tax at source as on the date of payment to non-resident, there was no such obligation. - AT
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• TPO's Transfer Pricing Adjustment Overturned for Incorrectly Valuing Regional Management Services; Section 92C Methods Ignored.

  Case-Laws - AT : TP Adjustment - regional management services received by the assessee - incorrect factual observations and invalid of assumption of jurisdiction by the TPO who without following any of the methods provided in Sec.92C had determined the arm‟s length price of the transaction of receipt of regional management services by the assessee from its domestic AE at Nil - pricing adjustment made by the TPO vacated - AT
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Indian Laws

• Cheque Dishonor: Complainant Need Not Produce Financial Records if Accused Fails to Rebut Claims.

  Case-Laws - HC : Dishonor of Cheque - burden of proof on complainant to establish his case - rebuttal of presumption - In the present case non filing or production of books of accounts and income tax returns would not be fatal to the case of complainant as no rebuttal is made by accused, shifting the burden necessitating the complainant to produce these documents to prove the case. Therefore there cannot be any adverse inference drawn on complainant for non production of these documents of books of accounts and income tax returns. - HC
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Service Tax

• Eligibility Under SVLDRS Shouldn't Be Denied for Procedural Errors; Focus on Meeting Eligibility Conditions per Finance Act 2019.

  Case-Laws - HC : Benefit of SVLDRS - It is settled law even under taxation that if a person is eligible to one or another benefit, he should not be denied said benefit on procedural or technical grounds. The requirement of strict compliance of conditions is necessary to ascertain eligibility, however procedural formalities need not to be strictly complied with. Filing of one or more declarations has been prescribed by Rules whereas conditions of eligibility have been prescribed by Finance Act, 2019. The filing of separate declaration is not even condition whereas it is sort of procedure. - HC
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• Court Orders Petitioner to Pay Pending Amount Within 30 Days After Dispute Over SVLDRS Interest Credit Apportionment.

  Case-Laws - HC : Benefit of SVLDRS - Credit of amount deposited prior to SCN towards Interest - Interestingly, had the declaration filed by the petitioner been accepted, there would have been a total waiver of interest liability, as per the Scheme. - It is the apportionment that has given rise to the present situation and the petitioner must not be made to suffer on account of this, irrelevant fact - Learned counsel for the petitioner points out that the amount pending payment under the declaration is liable to be paid within 30 days of receipt of the declaration. Since the petitioner has enjoyed an order of interim stay during the pendency of this writ petition, the period of 30 days for effecting payment will start today. - HC
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• Penalty u/s 78 Removed Due to Misunderstanding; No Evidence of Tax Evasion or Wilful Non-Compliance Found.

  Case-Laws - AT : Levy of penalty u/s 78 - entire facts were available on record and on this there is no dispute; nor is there any contrary finding by the adjudicating authority. The entire dispute arose, as pleaded by the appellant, on account of wrong interpretation/understanding of the provisions of the Act and the lower authority has not disputed the bona fide pleadings of the appellant. But the penalty is levied as if it is automatic. However, it can hardly be said that there was evasion, much less wilful evasion, to pay tax or not to comply with the provisions of the Act - Penalty deleted - AT
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Central Excise

• H.R. Plates/Coils Confirmed as Capital Goods for Conveyor Gallery Platforms; Revenue Appeal Dismissed, Cenvat/Modvat Credit Affirmed.

  Case-Laws - HC : Cenvat / Modavt Credit - Capital goods or not - H.R. Plates/Coils - The Commissioner in the present case considered the use of H.R.Plates/Coils by the Respondent-Assessee and has recorded a finding that these H.R.Plates/Coils used as a component for platform of conveyor gallery in the aid of completion of manufacturing process. Therefore, the present manufacturing process is held to be used for producing the goods. The Commissioner has found that the Capital Goods in question are utilized for the purpose of manufacturing of final products - Revenue appeal dismissed - HC
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• High Court Confirms Penalty on Dealer for Violating Rule 25 of Central Excise Rules with Improper Invoices.

  Case-Laws - HC : Imposition of penalty u/r 25 of CER - Second stage Dealer - Violation in respect of issuing Invoice - proper invoices were not issued and consequently, there is contravention of Rule 25(a) in respect of duty paid goods supplied to units not availing CENVAT credit - in respect of non-duty paid goods, cleared to the manufacturers, under invoice showing duty payment, there is a clear violation of the Rules with intent to evade payment of excise duty - Levy of penalty confirmed - HC
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VAT

• Court Rules No Extension of Limitation Period in January 2020 Order; Actions Must Follow Existing Laws and Judgments.

  Case-Laws - HC : Period of limitation in remand case - The impugned order has not been passed in consequence of, or to give effect to, any decision of this court which requires the re-assessment of the Assessee/Petitioner. Further, it may be noted that this Court, while disposing of the miscellaneous application vide order dated 17th January, 2020, could not have extended the period of limitation contrary to the statute. On a plain reading of the same, it is evident that this Court only permitted the Respondents to take recourse to further proceedings consistent with the extant laws and the law laid down by this Court in the judgment noted therein. This liberty cannot be construed to mean that the limitation period was extended beyond statutory confines. - HC
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• Tribunal Rules Section 5(3) Central Sales Tax Act Applies; Dealer-Exporter Transactions Linked, "Same Goods" Theory Inapplicable.

  Case-Laws - HC : Benefit of Section 5(3) of the Central Sales Tax Act, 1956 - Non-fulfilment of export obligation - In the instant case, the transaction between the dealers and the exporter and the transaction between the exporter and the foreign buyer are inextricably connected and this has been clearly brought out by the Tribunal after examining the documents, which were placed by the dealers before it. - the 'same goods' theory would have no application to the case on hand. - HC
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Case Laws:

• GST

• 2021 (2) TMI 820
  Functioning of Advance Ruling Authority - quorum of two members not complete - HELD THAT:- It is considered appropriate to dispose of the present petition by directing that as and when the quorum of Advance Ruling Authority is complete and functioning, the application of the Petitioner be decided expeditiously, and preferably within a period of four weeks from the date of completion of the quorum - Also having regard to the fact that since November, 2020, the Advance Ruling Authority has not been conducting the hearings, we make a request to the Hon ble Lieutenant Governor to take up the matter on priority basis and process the nomination received from the CBIC at the earliest. The registry is directed to transmit a copy of this order to the Office of the Hon ble Lt. Governor of Delhi. Additionally, Mr. Farasat shall also communicate the order.

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• 2021 (2) TMI 819
  Reimbursement of GST - change in tax regime from Value Added Tax (VAT) to Goods and Service Tax (GST) - grievance of the Petitioner is that in view of the introduction of the GST, Petitioner is required to pay tax which was not envisaged while entering into the agreement - HELD THAT:- The Government has now come out with a revised guidelines in this respect in supersession of the guidelines issued vide Finance Department letter dated 7th December, 2017. Additional Counter Affidavit of Opposite Party-authority has been filed in similar cases annexing the revised guidelines relating to works contract under GST issued by the Government of Odisha, Finance Department vide Office memorandum No. FIN-CTI-TAX-0045-2017/38535/F Dated 10th December, 2018. In that view of the matter, the Petitioner shall make a comprehensive representation before the appropriate authority within four weeks from today ventilating the grievance. If such a representation is filed, the authority will consider and dispose of the same, in the light of the aforesaid revised guidelines dated 10th December, 2018 issued by the Finance Department, Government of Odisha, as expeditiously as possible, preferably by 31st March, 2021 - If the Petitioner will be aggrieved by the decision of the authority, it will be open for him to challenge the same. No coercive action shall be taken against the Petitioner till 31st March, 2021 - The writ petition is disposed off.

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• 2021 (2) TMI 818
  Provisional attachment - wrongful availment of input tax credit - prayer for a short adjournment to seek instructions with regard to the assertion as has been made by the petitioner that its account was attached provisionally on 13.08.2019 which could continue only upto 12.08.2020 - applicability of Section 83(2) of the Central Goods and Service Tax Act which limits the operation of such order of provisional attachment for one year - HELD THAT:- The fact remains that the requirement of the statute as provided for under Section 83(2) of the Central Goods and Service Tax Act, which limits the operation of order of provisional attachment for one year having elapsed, the competent authority is required to pass an order, withdrawing the provisional attachment as ordered on 13.08.2019 (Annexure P-1). Liberty shall, however, be available to the respondents to proceed against the petitioner as permissible in law. Petition allowed by way of remand.

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• 2021 (2) TMI 817
  Search proceedings - serious allegations of harassment, coercion, threats, etc. have been alleged against the respondents - HELD THAT:- It appears that the search was undertaken under Section 67 of the Act at the premises of the writ applicant, and in the course of the search, the respondents Nos.4 and 5 are alleged to have caused undue harassment to the writ applicant. It is alleged that the writ applicant was forced and threatened to transfer an amount of Rs. 2.68 Crore by way of the DRC 03. Let Notice be issued to the respondents, returnable on 16 th February 2021. The respondents shall be served directly through Email. Ordinary Direct Service is also permitted.

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• 2021 (2) TMI 816
  Principles of Natural Justice - non-speaking order - rejection of refund claim - HELD THAT:- The orders impugned passed by the Adjudicating Authority/Appellate Authority, are cryptic and non-speaking and the reasons assigned for holding the petitioners to be intermediaries, do not sustain as they do not pass the test of law as has been laid down in the judgments. Reliance can be placed in the case of VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV ANR. [ 2017 (9) TMI 632 - DELHI HIGH COURT ] where it was held that denial of the refund of the Cenvat credit to Verizon India and the raising of a demand of service tax on the consideration received by it for export of telecommunication services to Verizon US are not sustainable in law. The matter needs to be remanded back to the Appellate Authority, for fresh decision, we have not referred to the merits of the case, lest prejudice is caused to any of the parties - Petition allowed by way of remand.

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• Income Tax

• 2021 (2) TMI 815
  Registration u/s 12AA - Rectification/amendments made to the bye-laws of the Society - Operate prospectively OR retorspectively while granting registration under Section 12AA - HELD THAT:- CIT, after remand, after taking into consideration the case of both sides, rejected the case of the assessee following the judgment of the Hon ble Supreme Court of India in the case of Commissioner of Income-Tax Vs. Kamla Town Trust [ 1995 (11) TMI 1 - SUPREME COURT] and held that the rectification shall not have retrospective effect and would operate prospectively from the date when the rectification saw the light of the day - Tribunal erroneously allowed the appeal observing that the order passed by the Hon ble Supreme Court pertains to a Trust and the same is not applicable to the assessee s case which is a Society. The finding of the Tribunal cannot be sustained for the reason that the Tribunal should have only followed the principle laid down by the Hon ble Supreme Court to the effect that the rectification shall not have retrospective effect and would operate prospectively from the date on which such rectification saw the light of the day. The ratio laid down by the Hon ble Supreme Court squarely applies to the facts and circumstances of the present case. The rectification/amendments made to the bye-laws of the Society would only operate prospectively while granting registration under Section 12AA of the Income Tax Act. Following the ratio laid down by the Hon ble Supreme Court in the judgment reported in Commissioner of Income-Tax Vs. Kamla Town Trust], cited supra, the order passed by the Income Tax Appellate Tribunal is liable to be set aside and the questions of law 1 and 2 are decided in favour of the Revenue appellant.

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• 2021 (2) TMI 804
  Addition u/s 69A - Cash found and seized during the course of search - no explanation about the nature and source of the acquisition of money, or in case the explanation offered by assessee is not satisfactory in the opinion of the Assessing Officer, then the value of the money may be deemed to be the income of the assessee - As per assessee amount of cash recovered was advance money received by him for sale of so called land at Faridabad - HELD THAT:- The concurrent and consistent findings of fact recorded by the tax authorities rejecting the explanation given by the assessee has resulted in adding the amount in question to the income of the assessee under Section 69A and we do not find any perversity in the same in order to entertain the present appeal. The test of human probabilities applied by the tax authorities buttresses the conclusion drawn by them and justifies the denunciation of the incredulous story portrayed by the Appellant. In Sukh Ram v. ACIT, [ 2006 (6) TMI 77 - DELHI HIGH COURT] this Court has taken the view that for an addition under Section 69A, possession is evidence of ownership, and the presumption of ownership is the strongest in case of cash, because its title can be transferred by mere delivery of possession, and thus onus is on the Assessee to prove that he is not the owner of the currency in his possession. The aforesaid findings are purely findings of fact which have been concurrently accepted by the CIT(A) as well as the ITAT. We cannot reappreciate the evidence, particularly when we see no perversity in the findings of the ITAT. As regards the contention of Mr. Vohra, that the finding recorded by the Assessing Officer that the amount of Rs. 2 crores was for an illegal gratification, contradicts the conclusion drawn by him, we would say that firstly, we perceive no such contradiction. Secondly, on a pointed query raised by the Court, Mr. Vohra refutes that the amount in question was illegal gratification. Thus, the plea of being a conduit is a pretext to evade tax. Thirdly, to our mind, the observations of the tax authorities are on independent examination of the case and not entirely resting on the case which has been set up by the CBI. As far as the Income Tax proceedings are concerned, since the explanation offered by the Appellant has not been found to be satisfactory, the addition is in accordance of law - Decided against assessee.

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• 2021 (2) TMI 803
  Provision of warranty - utilization of the provision is ranging from as low as 22% to 72% which shows that the provision is not quantified on scientific basis - HELD THAT:- The tribunal while dealing with the claim of the assessee for deduction on account of provision for warranty has placed reliance on the order passed in the assessee s own case for AY 2011-12 dated 21.10.2016 and has held that the assessee had taken over the business from IBM which had substantial experience in such business and if the assessee has relied on the methodology adopted by the IBM for working out the warranty provision, the same cannot be said to be incorrect. It has further been held that assessee had made provision for warranty based on machine months and the aforesaid method cannot be held to be not scientific. It has also been held that the assessee has fulfilled the three conditions set out by the Supreme Court in ROTORK CONTROLS INDIA (P) LTD.[ 2009 (5) TMI 16 - SUPREME COURT] - Thus, on the aforesaid basis the tribunal has recorded a finding that the provision for warranty made by the assessee is on scientific basis and method and has allowed the claim for deduction on account of warranty. The aforesaid finding of fact has not been demonstrated to be perverse by the learned counsel for the revenue. Neither any averment has been made in the memo of appeal with regard to perversity of the finding recorded by the tribunal nor the same could be demonstrated at the time of hearing of the appeal. The tribunal has rightly relied on the decision rendered by the Supreme Court in ROTORK CONTROLS INDIA PVT. LTD. supra. Similar view has been taken by a division bench of this court in IBM LTD. [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT] Therefore, the first and second substantial questions of law are answered against the revenue and in favour of the assessee. Deduction in respect of expenditure incurred under the head of marketing support fee and transaction support fee - HELD THAT:- Tribunal has held that the services rendered by the IBM are for smooth carrying of business for a period of five years and it might give an enduring benefit to the assessee but every activity which gives an enduring benefit to the assessee would not get the character of capital in nature. It was further held that enduring benefit is not the only criteria to decide the nature and character of expenditure. The necessary test is whether it is for acquisition of any capital asset or for the purpose of carrying on the business deriving revenue from it. It has been held that the fees paid by the assessee for marketing support services rendered by IBM is revenue in nature and is allowable under Section 37 of the Act. - In has held that in order to ascertain whether the expenditure is revenue or capital in nature one has to look at the expenditure from commercial point of view and even saving in expenditure was held to be saving in revenue expenditure. In respect of the expenditure incurred by the assessee for getting marketing support services, the assessee cannot claim any depreciation. It has further been held in EMPIRE JUTE CO. LTD. [ 1980 (5) TMI 1 - SUPREME COURT] that test of enduring benefit is not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to particular facts and circumstances of a given case. Therefore, in the fact situation of the case, the tribunal has rightly allowed the expenditure incurred towards marketing support fee and transit support fee under Section 37(1) of the Act. - Decided in favour of assessee.

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• 2021 (2) TMI 800
  Claim of refund including interest on refund calculated upto September 2020 due to the petitioner(s) - HELD THAT:- Petitioner was informed verbally that refunds were processed by AO seeking approval of ACIT and refund is now pending with Central Processing Centre for its release, but till date no refund was actually released244 the petitioner filed its grievance with the online portal requesting to direct the department to take immediate action for release of tax refunds but the said grievance was closed stating that separate applications are required to be filed for each of the assessment year. The petitioner again filed separate grievance letters seeking same relief and vide order dated 06.07.2020, CPGRAM ordered refund amounting to INR 3,50,35,301 instead of INR 8,20,49,885 (excluding interest). The huge amount of refund, despite having been determined by the AO vide order dated 04.12.2018 passed under Section 154 read with Section 143(3) of the Act, have subsequently been reduced vide the CPGRAM disposal order dated 06.07.2020, without giving any reasons/intimation to the petitioner. Even the amount of refund agreed to be paid to the petitioner vide CPGRAM disposal order dated 06.07.2020 has not been credited to the bank account of the petitioner till date. During the course of arguments, it has been brought to the notice of this Court that the principal amount and due interest upto November 2019 has already been processed and released in favour of the petitioner(s). It is fairly conceded by the learned counsel for the respondent

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• 2021 (2) TMI 799
  Reopening of assessment u/s 147 - payment of tax on Provident Fund and ESI contributions - HELD THAT:- The issue stands covered by a decision of this Court in the case of Industrial Securities and Intelligence India [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] Hence, the reassessment initiated on this score would not be pursued. Refund claim - Refund was granted to the assessee while processing the return under Section 143(1) which was omitted to be added back in the regular assessment. The amount is sought to be added back now. The question of re-assessment would not arise in such a situation, insofar as there is no escapement of income per se. The Assessing Authority could well have addressed this issue under Section 154 of the Act. The proposal for re-assessment on this score fails. Re-assessment of processing fee - There is no dispute on the position that the petitioner has been following a consistent method of accounting over the years and has been recognising income following a uniform system. The accounts of the petitioner would reveal the receipt of processing fee in advance and recognition of the amount quantified in that year in relation to deliveries is that have taken place within the financial year in question as income. The remaining fee is carried over to the subsequent financial year. Assessments for previous and later years following this consistent method of accounting have been accepted. The details in relation to the entirety of the processing fee received and the component recognised as income in this year are also available. In this case, admittedly, there is no change in the method of accounting followed. The methodology followed for recognition of revenue is the same, both prior and subsequent to this assessment. Thus there appears no justification for the present proposal to re-assess the income, seen in the light of the fact that for previous years, the accounts of the petitioner have been accepted by the Department. Proceedings for re-assessment have been initiated beyond a period of four years from the end of the relevant financial year - petitioner has made a disclosure of i) revenue from all income streams including processing fee ii) the portion of processing fee recognised as income for the purpose of taxation and (iii) balance is carried over to the subsequent year. It is true that there is no note in the financials or in the audited report explaining the method of accounting in detail, that is, to clarify the position that only the processing fee relating to the deliveries occasioned prior to 31.03.2012 had been recognised an income and the balance carried forward to the next year. Petitioner has been following a consistent method of revenue recognition over the years and it is not the revenue s case that the financials for the later years were more elaborate for the purposes of Explanation (1) when compared to the present year. What constitutes primary facts for the purposes of full and true disclosure must be seen in the context of the assessment of a source of income over the years as the Assessing Officer has understood it. In fact, if one were to take a different view of the matter for this one intervening year, it would distort the overall assessments over the years and this cannot be the intention of Section 147. Thus applying the judgment of the Supreme Court in the case of Calcutta Discount [ 1960 (11) TMI 8 - SUPREME COURT] , disclosure made by the petitioner in regard to the assessment of processing fee is a full and true disclosure for the purposes of Section 147/148. The proposal for re-assessment on this issue also fails. Deduction under Section 35 (2AB) - The approval for this deduction in Form 3 CM has been duly filed and, is admittedly, available on record. The only reason for which the present proceedings have been initiated is that Form 3 CM is not available on record. However, this appears to be a form to be exchanged inter se the Assessing Authority of the entity claiming deduction and the Prescribed Authority and it is thus for the Officer to have sought and obtained the same. In the light of there being no dispute on the position that Form 3 CM is admittedly available on file see no justification for the re-assessment initiated on this score.

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• 2021 (2) TMI 797
  Exemption u/s 10(23C)(iiiae) denied - assessee has not proved any nexus from his source of income of running of the hospital - assessee submitted that the assessee Trust has been claiming exemption u/s 10(23C)(iiiae) of the Act for the last several years and has also claimed the same for the subsequent years and that the Department has been, in various orders passed u/s 143(3) of the Act accepted the claim of the assessee - HELD THAT:- As admittedly the expenditure is incurred by the assessee for the purpose of payment to doctors, nurses and other medical staffs as well as for medicine etc. The mobile medical vans are owned, equipped, maintained, run and controlled totally by the assessee. If any organization has incurred expenditure on behalf of the assessee, they claim reimbursement of such expenses from the assessee. The term reimbursement means that the expenditure is that of the assessee and has been incurred on behalf of the assessee. Even otherwise, even if it to be assumed that the assessee is not running a hospital, any other institution which undertakes reception and treatment of persons suffering from illness etc., is also entitled to claim exemption u/s 10(23C)(iiiae) of the Act. On facts, the assessee is an institution which undertakes reception and treatment of persons suffering from illness. On this fact also the assessee s claim has to be upheld. On these facts and also keeping in view that the Revenue has been granting exemption to the assessee under this Section for earlier assessment years as well as for the subsequent years, we hold that the assessee is eligible for deduction u/s 10(23C)(iiiae) of the Act. - Decided in favour of assessee.

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• 2021 (2) TMI 796
  Disallowance u/s 14A - Suo moto disallowance by assessee - DR submitted that the main purpose for which the investment into shares is made by the assessee may not be relating as Section 14A applies irrespective of whether share are held to gain control or as stock-in-trade. Expenditure which is in relation to earning dividends can be disallowed u/s 14A and Rule 8D - HELD THAT:- The investments were out of assessee s own funds and no borrowed funds were used to acquire investments. There was no interest expenditure which could be directly or indirectly attributable to the exempt income. CIT(A) further observed that the investments were strategic investment as per the assessee and the same should be excluded for calculating disallowance under Rule 8D. As per Rule 8D(2)(i), the assessee made disallowance of Rs. 16,05,000/- under the head strategic investment and has taken 20% of employee cost and 5% of administrative cost. Thus, the findings given by the CIT (A) is just and proper. Therefore, Ground No. 1 is dismissed. Disallowance of depreciation claimed a wind mills - CIT-A deleted the addition admitting fresh evidence in violation of Rules 46(3) of the Income Tax Rules - HELD THAT:- As details were submitted by the assessee during the assessment proceedings as per the reply/submissions dated 11.12.2012 which is mentioned on page 1 of the Assessment Order itself. There was no new evidence brought on record by the assessee and after the verification of the evidence the CIT(A) has rightly deleted the addition. In fact, the Assessing Officer has totally ignored the reply dated 11.12.2012 submitted by the Assessee. CIT(A) has given a categorical finding that the assets were owned by the assessee and were put to use for the purposes of its business during the year. Hence, there is no need to interfere with the detailed findings of the CIT(A). Hence, Ground No. 2 is dismissed. Addition u/s 36(1)(3) by holding that the assessee had borrowed funds which was used for business purposes and was paying interest on these funds - HELD THAT:- Assessee had borrowed funds which was used for business purposes and was paying interest on these funds and this fact was not controverted through any of the documents on the record by the Assessing Officer as well as by the Revenue at the time of hearing before us. Hence, the findings given by the CIT(A) is proper and there is no need to interfere with the findings of the CIT(A). Ground No. 3 is dismissed.

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• 2021 (2) TMI 795
  Approval u/s 10(23C)(v) - No approval of Prescribed Authority under section 10(23C)(v) - Assessee contended before the Ld. CIT(A) that the requirement of approval under section 10(23C)(v) of the I.T. Act was provided by Rule 2C of I.T. Rules, 1962, w.e.f. 15.11.2014 and hence, there were no requirement for approval by the Prescribed Authority - HELD THAT:- We do not subscribe to such a view because even Section 10(23C)(v) was applicable for the assessment year under appeal and it was necessary to get approval of the Prescribed Authority before claiming exemption under such provision. It is only on 15.11.2014 the Prescribed Authority was designated to be the Commissioner of Income Tax (Exemptions) as per Board s Notification Dated 05.03.2015. Therefore, contention of Learned Counsel for the Assessee has no merit and is accordingly rejected. Assessee also contended that as per Section 115BBC(2) the assessee need not to get approval under section 10(23C)(v) of the I.T. Act because in case anonymous donations is received by the Trust/Institution created or established wholly for religious purposes. However, it is not a case of the Revenue that assessee received any anonymous donations or if any addition have been made on that account under section 115BBC of the I.T. Act, 1961. Therefore, this contention of the Learned Counsel for the Assessee is also rejected. Assessee does not have any approval under section 10(23C)(v) of the I.T. Act for the assessment year under appeal, therefore, there is no question of assessee getting any exemption under the same provision. The burden upon assessee to claim exemption under such provision have not been discharged by assessee by producing any adequate evidence on record. The authorities below were, therefore, justified in rejecting the claim of assessee for denial of exemption under section 10(23C)(v) - Appeal of the Assessee dismissed.

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• 2021 (2) TMI 794
  Addition of various expenses - non rejection of books of accounts - HELD THAT:- Admittedly. the assessee has maintained regular books of accounts in the course of its business activities and the same has not been rejected and no other additions have been made by the AO barring this disallowance - no addition or disallowance out of expenses under this head has ever been made in any of the assessment years by the AO. Assessment order for the assessment year 2013-14 was framed u/s 143(3) and the AO has accepted expenses of Rs. 27,29,602/- on the total revenue receipts of Rs. 3,38,59,706/- which is 8.06% of the expenses. For the impugned assessment year, the total expenses so claimed comes to Rs. 9,28,094/- on a total revenue receipts of Rs. 1,98,05,868/- which comes to 4.66% of the total expenses. Therefore, find merit in the arguments of the Ld. Counsel for the assessee the expenses so debited in the profit and loss account as reasonable. Coordinate Bench of the Tribunal under identical circumstances in one of the sister concerns namely Nagesh Knitwears Pvt. Ltd. has deleted such disallowance of expenses. Since the books of accounts of the assessee has been accepted by the AO and no other disallowance except these expenses has been made and considering the fact that the expenses so claimed by the assessee appears to be reasonable, as compared to such expenses in the preceding assessment year which has under gone scrutiny by the AO and the order passed u/s 143(3) as no addition has been made - No reason on the part of the lower authorities to make such huge addition by disallowing the expenses. - Decided in favour of assessee.

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• 2021 (2) TMI 793
  Transfer pricing adjustment in respect of specified domestic transactions - HELD THAT:- As relying on case of Texport Overseas Pvt. Ltd. [ 2019 (12) TMI 1312 - KARNATAKA HIGH COURT ] Reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act. Restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act.

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• 2021 (2) TMI 792
  Penalty u/s 271(1)1(c) - addition of salary income - filling of revised return - HELD THAT:- As assessee failed to explain the reason behind the revised return having reduced the salary income from than in original return and that too, after due verification thereof. This has formed the precise reason for the Assessing Officer as well as the CIT(A) to hold the same as an instance of furnishing of inaccurate particulars of income - We are in complete agreement with the CIT(A) s above extracted findings confirming impugned penalty. Assessee s substantive ground fails.

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• 2021 (2) TMI 791
  Estimation of income - Rejection of books of accounts - CIT(A) has sustained the addition @ 1.5% gross profits on the basis of facts and circumstances of the case and on the basis of past history - HELD THAT:- CIT(A) has wrongly affirmed the action of the Assessing Officer in rejecting the books of account of the assessee without assigning any reasons. As pointed out by the Ld. counsel, in the past three years, the gross commission of the total receipts remained below 1% and the Ld. CIT(A) has determined the addition @ 1.5% and as per settled law when the books of account are rejected, the profit is determined on estimation basis and in determining the profit on estimation basis, the past history plays a vital role. As contended by the Ld. Counsel, the net profit rate of 1.5% sustained by the Ld. CIT(A) is on higher side in view of the past history. Hence, we find merit in the contention of the Ld. counsel that 1.5% profit rate estimated by the Ld. CIT(A) is on higher side. Therefore, in the interest of justice, we partly allow the appeal of the assessee and modify the order passed by the Ld. CIT(A) and restrict the net profit rate to 1% of the gross receipts, which is more than the percentage in the last 3 years. Accordingly, we direct the Assessing Officer to compute the addition @ 1% of the gross receipts. Appeal filed by the assessee is partly allowed.

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• 2021 (2) TMI 789
  TDS u/s 192 or 195 - Disallowance u/s 40(a)(ia) - expenditure towards salary and other allowances of expatriate employees - Whether the same are in nature of Fee for Technical Services and no tax was deducted at source by the assessee - HELD THAT:- As decided in assessee s own case[ 2020 (8) TMI 410 - ITAT DELHI] the secondees were, in fact, in employment of the appellant and as per the terms, the A was paying salaries at the home country of the secondees and, therefore, there was reimbursement by the appellant. These facts clearly show that the assessee has been paying to its own employees. As perused the TDS certificates, Forms 15CA and 15CB, tax deducted by the assessee and all these documents are part of the paper book. There is no dispute that the assessee has deducted tax at source u/s 192 of the Act. On the given facts of the case, we are of the considered opinion that the provisions of Section 195 of the Act do not apply. Considering the facts of the case in totality, we do not find any merit in the disallowance made by the Assessing Officer/DRP. We, accordingly, direct for deletion of addition .

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• 2021 (2) TMI 786
  Non admission of additional evidence of evidence by CIT-A - Unexplained credit u/s. 68 - unsecured loans - As argued there was no fresh loans raised by the appellant in the instant year and therefore the sum outstanding at the close of the year on account of purchases made by the appellant could neither in law and nor on fact be regarded as unexplained credit u/s. 68 - AR submitted that the CIT(A) erred in not admitting the additional evidence filed by the assessee under Rule 46 A read with Section 250(4) - HELD THAT:- It is pertinent to note that the CIT(A) without assigning any particular reasons has rejected the additional evidence which goes to the root of the matter. We therefore, direct the CIT(A) to admit the additional evidence and to decide the issue afresh after taking cognizance of the evidences filed by the assessee. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. The appeal of the assessee is partly allowed for statistical purpose.

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• 2021 (2) TMI 784
  Validity of proceeding u/s 158BC - block assessment order - exemption u/s 10 denied - AO determined the undisclosed income of the assessee for the block period treating the sales declared by the assessee from agricultural operations to be the unaccounted income - action of Ld. AO in treating the amount as non agricultural income and has further holding that joint venture agreement entered by the appellant are nothing but a device to channelise the income in the form of agriculture income - HELD THAT:- Undisclosed income so determined by the AO was already disclosed by the assessee in his regular returns - As the amounts were already disclosed in the regular assessment of the assessee from A.Y. 1996-97 to 2002-03, therefore, respectfully following the decisions, PINAKI MISRA SANGEETA MISRA [ 2017 (3) TMI 276 - DELHI HIGH COURT] , M/S. PROMAIN LIMITED[ 2017 (12) TMI 920 - ITAT DELHI] ,N. LEELA KUMAR [ 2013 (11) TMI 1776 - KARNATAKA HIGH COURT] ,ANAND PRAKASH AGRAWAL [ 2014 (5) TMI 1005 - ALLAHABAD HIGH COURT] ,SMT. MUKTABEN J. PATIRA [ 2014 (11) TMI 803 - GUJARAT HIGH COURT] ,CALTRADECO STEEL SALES (P.) LTD. [ 1999 (8) TMI 18 - CALCUTTA HIGH COURT] we are of the considered opinion that the amounts already disclosed in such regular assessments are outside the purview of the definition of undisclosed income. The AO, in our opinion, has no jurisdiction to make the aforesaid additions u/s 158BC - Decided in favour of assessee. Penalty u/s 158BFA(2) being 100% of the tax leviable on the undisclosed income determined - HELD THAT:- As already decided the appeal filed by the assessee for the block period and the undisclosed income made by the AO and sustained by the CIT(A) has been deleted. Therefore, the very basis on which penalty was levied does not survive. Accordingly, the grounds raised by the assessee are allowed.

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• 2021 (2) TMI 783
  Unexplained income/ unexplained expenditure - HELD THAT:- There is no corroborative / demonstrative evidence to justify the additions so made. When the AO came to know that the bank account at Vijaywada belongs to Lingaya Society then the AO should have made atleast some necessary enquiries from the said society but we find that neither the AO nor the first appellate authority has done any such exercise. We further find that the AO did not accept the contention of the assessee that the said document is a dumb document. According to the AO a document can be considered as dumb document only when it has no reference as to any person or identity or to any date or to any amount. We find that no dates have been mentioned in the impugned entries which are basis of the additions. We fail to understand when no dates have been mentioned then how the AO came to the conclusion that the document pertains to A.Y. 2008-09. Further the entries relating to LJT which according to the AO pertained to A.Y. 2008-09 have to be demolished on the fact that LJT came into existence on 10.07.2009 which falls in F.Y. 2009-10 relating to A.Y. 2010-11. The additions made by the AO are without any corroborative evidence brought on record, therefore, we have no hesitation in deleting the addition . Credit in bank entries - HELD THAT:- Appellant introduced his own accounted cash in the form of loan to show his accounted capital, what benefit a person would drive if the same loan is repaid immediately thereby reducing the accounted capital. Considering the fact in totality we do not find any merit in this addition of Rs. 4 lacs and the same is direct to be deleted. Exhibit 213 of the paper book is the confirmation of M/s. Gyan Kund Trust Educate and it can be seen that on 01.04.2007 there was an opening balance of Rs. 15 lacs out of which on 13.10.2007 Rs. 2.50 lacs was repaid by cheque No. 770251. Exhibit 215 show that on 08.12.2006 loan of Rs. 5 lacs was given by cheque No. 175852 and on 0802.2007 loan of Rs. 10 lacs was given by cheque No.917483. Since the entry of Rs. 2.50 lacs is nothing but the repayment of loan given by the assessee in earlier assessment years no addition need to be made on this account. We accordingly direct the AO to delete the addition. Validity of the reopening of the assessment - HELD THAT:- No action shall be taken under this section after the expiry of four years unless any income has escaped by reason of the failure on the part of the assessee to make a return u/s. 139 or to disclose fully and truly or on material facts necessary for his assessment. As mentioned elsewhere the assessee has filed the return of income u/s. 139 (1) of the Act which was duly assessed u/s. 143 (3) of the Act. All the queries raised by the AO were duly replied by the assessee with supporting documentary evidences. Merely because some unrelated party in her statement has stated that the assessee and his wife have paid consideration over and above the transaction value would not justify the reopening and the impugned addition, firstly because the said statement was recorded behind the back of the assessee for which no opportunity of cross examination was given and secondly, there is no evidence brought on record to show that the actual sale consideration was much higher than that mentioned in the sale deed. In fact the stamp valuation authorities have accepted the stamp duty on the transaction value of 1.05 crores and, therefore, no adverse inference should have been drawn by the AO. We accordingly quash the notice issued u/s 148 of the Act thereby quashing the assessment order framed u/s. 143 (3) r.w.s. 147 of the Act.

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• 2021 (2) TMI 782
  Penalty u/s 271(1)(c) - Non specification of charge - HELD THAT:- In order to initiate the penalty proceedings against the assessee goes to prove that the AO himself was not aware/sure as to whether he is issuing notice to initiate the penalty proceedings either for concealment of particulars of income or for furnishing of inaccurate particulars of such income by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). When the charge is to be framed against any person so as to move the penal provisions against him/her, he/she is required to be specifically made aware of the charges to be leveled against him/her. Following the decisions rendered in the cases of CIT vs. SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER ] and Pr. CIT vs. Sahara India Life Insurance Company Ltd.[ 2019 (8) TMI 409 - DELHI HIGH COURT ] we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous one having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings are initiated u/s. 271(1)(c) are not sustainable. - Decided in favour of assessee.

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• 2021 (2) TMI 781
  Reopening of assessment u/s 147 - primary argument of the assessee challenging the assumption of jurisdiction by the AO u/s 147 on the premise that the reasons recorded by the AO for assuming jurisdiction to reopen the case were bad in law, being based on incorrect facts which showed no application of mind by the AO on the information in his possession and also that the satisfaction for escapement of income was not his own but borrowed - HELD THAT:- Reassessment proceedings undertaken by the AO in the present case were invalid since the reasons recording his satisfaction of escapement of income were based on incorrect facts and there was no application of mind at all by the AO. The fallacies in the facts pointed out by the ld. counsel for the assessee, regarding the quantum of bogus purchases noted by the AO in his reasons as also name of one of the parties, has not been disputed or controverted by the Revenue. Even the fact recorded by the AO in the reasons that the bogus bills had been debited to the Profit Loss Account was incorrect which is evident from the fact that the ld. CIT(A) in his order passed on merits has found these bills to be relating to purchase of fixed assets and has accordingly, made the disallowance of only depreciation relating to the same, which has not been challenged by the Revenue before us. It is clearly evident that on receiving information from the Commercial Tax Department, the ld. AO did not even care to verify the same from his records from where all these factual inaccuracies would have been brought out. Non application of mind by the AO and the belief of escapement of income is definitely not his own but borrowed from that of the commercial tax officer who had forwarded the information. The basic requirement of law for reopening an assessment is application of mind by the AO to the material or information in his possession to conclude and arrive at a satisfaction therefrom that income has escaped assessment. Both application of mind and satisfaction/belief of the AO are lacking in the present case. The reassessment therefore we hold is invalid. The case laws relied upon by the Ld.Counsel for the assessee support the case of the assessee. The order passed by the AO is, therefore, set aside.

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• 2021 (2) TMI 780
  Addition u/s 68 - assessee had failed to discharge its initial onus to prove the creditworthiness of the investors - CIT-A deleted the addition - HELD THAT:- CIT (Appeals) without going into the details of the Assessing Officer s remand report has simply deleted the entire addition despite there is a difference which appears prima facie proper in respect of approximately Rs. 18 crores. Thus, the CIT (Appeals) has not at all properly verified the details given by the assessee during the appellant proceedings and the Ld. AR also could not point out how the difference has crept into. Merely, submitting the addresses, income tax particulars of debenture holders cannot be termed as sufficient evidence. In fact, the receipt of payment and repayment made through banking channels also reveals that the entire addition of Rs. 156.10 was not properly taken into account by the CIT(A) relating to the difference of Rs. 18 crores. Thus, it will be appropriate to remand back this issue to the file of the Assessing Officer for further investigation/verification of all the evidences produced by the assessee in respect of 110 parties and accordingly pass the appropriate order by following due process of law.

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• 2021 (2) TMI 779
  Estimation of income - bogus purchases - assessee failed to prove the genuineness of the transaction to the satisfaction of the AO - CIT (A) after hearing the assessee restricted the addition to 12.5% of the total amount of bogus purchases - HELD THAT:- AO has not rejected the sales of the assessee. Since there can be no sale without purchases, the Ld CIT(A) has rightly concluded that the assessee had purchases the material from the parties other than the parties mentioned in its books of account. Under these circumstances, the Ld. CIT (A) has rightly restricted the addition to 12.5%, keeping in view the profit element embedded in the transactions in question. In our considered view, the findings of the Ld. CIT (A) are well reasoned and based on the law laid down in SIMIT P SHETH [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] no reason to interfere with the findings of the Ld. CIT (A) - Decided against revenue.

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• 2021 (2) TMI 778
  Correct head of income - Interest income on FDRs - non commencement of business - income from other sources or capital receipt - HELD THAT:- As decided in own case [ 2018 (4) TMI 1853 - ITAT DELHI] since the business of the assessee had not commenced, the interest received in the period prior to the commencement of business was in the nature of capital receipt and was required to be set off against the preoperative expenses. Therefore, the impugned interest income is a capital receipt not chargeable to tax during the year under consideration. Accordingly, we allow the grounds of appeal raised by the assessee.

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• 2021 (2) TMI 777
  TP Adjustment - comparable selection - HELD THAT:- Assessee provides software development services [ SWD services for short], Information Technology Enabled Services [ ITES for short] and marketing support services [ MSS services for short] to VMware group companies, as a captive service provider. For all the above services, the Assessee is compensated by the Associate Enterprise (AE) on a cost plus mark up basis - Companies functionally dissimilar with that of services provided by the Assessee need to be deselected from final list. Addition u/s 40(a)(ia) - non deduction of tds - CIT(A) confirmed the action of the AO by holding that the necessary evidence of having deducted tax at source had not been produced by the assessee - HELD THAT:- Assessee brought to our notice Form No.27A which is a statement of deduction of tax at source for the period 01.10.2009 to 31.12.2009. It was brought to our notice that the necessary evidence was filed before the CIT(A) but the CIT(A) has overlooked the same. We are of the view that it would be just and appropriate to direct the AO to verify the claim of the assessee regarding tax deduction at source, in the light of the evidence produced before the CIT(A) after affording the assessee opportunity of being heard. TDS u/s 195 - Disallowance u/s 40(a)(ia) - disallowing the expenses grouped by the Appellant under Repairs and maintenance towards purchase of application software on the premise that it constitutes royalty - HELD THAT:- Prior to the decision in the case of Samsung Electronics [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT ] rendered by the Hon ble Karnataka High Court on 15.10.2011, the law as interpreted by various judicial forums was that payments for purchase of software were not in the nature of royalty but were in the nature of business profits and if the recipient non-resident did not have a Permanent Establishment in India, there was no obligation to deduct tax at source. Therefore payments to non-resident for purchase of software prior to 15.10.2011 cannot be disallowed u/s.40(a)(ia) of the Act for non deduction of tax at source as on the date of payment to non-resident, there was no such obligation. In view of the above said decisions, we hold that the disallowance under section 40(a)(ia) of the Act has to be deleted. We hold and direct accordingly. Suppressed income - audit adjustments made in the Appellant s financial statements and adding back the same to the taxable income - HELD THAT:-The issue has to be remanded to the AO for fresh consideration. The assessee works on a cost + mark-up as its margin. The revenue that the assessee shows in the financial statements is dependent on cost and if due to an incorrect estimation of cost or other reasons as submitted by the learned counsel for the Assessee before us, there is change in the revenue shown by the assessee then the corresponding cost which was wrongly estimated also needs to be identified. It is only when there is reconciliation of the incorrect estimate of the cost can it be said that the audit adjustment suggested would be correct. In other words, the restatement of revenue has to be matched by corresponding reduction in the estimated cost only then can it be said that the audit adjustment suggested will not have any effect on the income of the assessee. The submissions made before us as well as the revenue authorities are general and do not give one to one tally or reconciliation of the differences and the reasons for such differences. The assessee is, therefore, directed to give a complete breakup of the difference between the revenue recorded in financial statements and as per the invoices and correlate the same with the cost estimates and as to how both are reflected in the financial statements.

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• 2021 (2) TMI 776
  Disallowance u/s 14A r.w.r 8D - Whether investments which yielded dividend income should be considered for the purpose of Rule 8D? - HELD THAT:- We note that for the relevant assessment year i.e. AY 2015-16 the settled law in respect of computing disallowance under Rule 8D(2)(iii) was the decision of this Tribunal in REI Agro Ltd. [ 2013 (9) TMI 156 - ITAT KOLKATA ] There is an amendment in law which happened by the passage of the Finance Act, 2016 which is applicable for AY 2017-18 onwards, so the amended provision of section 14A read with Rule 8D of the Rules would be not be applicable for this relevant AY, so the direction by the Ld. CIT(A) for AY 2015-16, is legally untenable Law applicable on this issue will be as laid in REI Agro Ltd. (supra) wherein this Tribunal has directed that only investments which yielded dividend income should be considered for the purpose of computing of disallowance under Rule 8D(2)(iii) of the Rule. Therefore, the directions given by the ld. CIT(A) with regard to three specific investments made in mutual fund to AO to consider the monthly average of such dividend bearing investment have not the sanction of law, since it may, if applicable only from AY 2017-18 and not before that, therefore, we modify the order of the Tribunal and direct the AO to consider the disallowance made under Rule 8D(2)(iii) should be restricted to the average of the opening and closing value of those investments appearing as on 01.04.2014 and 31.03.2015 which actually yielded dividend income during the relevant FY.

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• 2021 (2) TMI 773
  TP Adjustment - reference under Sec. 92CA(1) to the TPO for determining the ALP of the international transactions of the assessee for the year under consideration - regional management services received by the assessee - HELD THAT:- We find that the DRP vide its order passed under Sec.144C(5), dated 22.09.2017 had upheld the findings of the TPO by relying on the earlier order of the panel passed in the case of the assessee for A.Y 2011-12. Except for drawing support from the aforesaid view that was earlier drawn by the panel in A.Y 2011-12 while rejecting the objection of the assessee in context of the aforesaid issue, we find that no independent reasoning had been given by the DRP. As observed by us hereinabove, the order passed by the A.O u/s 143(3) r.w.s 144C(13), dated 31.12.2015 for A.Y 2011-12 had been vacated by the Tribunal [ 2020 (12) TMI 719 - ITAT MUMBAI] . As the facts and the issue involved as regards receipt of regional management services by the assessee from its foreign AE, viz. Henkel AG Company KGaA remains the same as were there before the Tribunal in the aforesaid case of the assessee for A.Y 2011-12, therefore, we respectfully follow the view therein taken. Accordingly, adopting the reasoning given by the Tribunal while vacating the transfer pricing adjustment w.r.t regional management services received by the assessee from its aforesaid foreign AE, viz. Henkel AG Company KGaA, Germany, we herein finding no reason to take a different view direct the A.O/TPO to vacate the transfer pricing adjustment made in the hands of the assesseee for the year under consideration. Transfer pricing adjustment - transaction of receipt of regional management services by the assessee from its domestic AE, viz. Chembond Chemical Limited - HELD THAT:- We are unable to agree with the view taken by the lower authorities that the assessee had failed to place on record any evidence in support of its claim of having received services from its domestic AE. Insofar the sustaining of the transfer pricing adjustment carried out by the TPO as regards the aforesaid domestic transaction of receipt of regional management services by the assessee from its AE, viz. M/s Chembond Chemical Limited, we find that the DRP had only relied on the reasoning that was adopted by it for sustaining the transfer pricing adjustment as regards the services received by the assessee from its foreign AE, viz. Henkel AG Company KGaA. As the transfer pricing adjustment pertaining to the regional management services received by the assessee from its foreign AE, viz. Henkel AG Company KGaA had been vacated by us in terms of our aforesaid observations, therefore, the adjustment carried out by the TPO as regards the regional management services rendered by the domestic AE of the assessee, viz. M/s Chembond Chemical Limited, which too is found to be suffering from similar incorrect factual observations and invalid of assumption of jurisdiction by the TPO who without following any of the methods provided in Sec.92C had determined the arm s length price of the transaction of receipt of regional management services by the assessee from its domestic AE at Nil, also cannot be sustained and has to meet the same fate. Accordingly, in terms of our aforesaid observations we herein direct the A.O/TPO to vacate the transfer pricing adjustment made by him as regards the domestic transaction of receipt of regional management service by the assessee from its AE, viz. Chembond Chemical Limited. Disallowance of bad debts - HELD THAT:- As the assessee company had admitted that no documentary evidence in support of its claim of deduction of bad debts of Rs. 5,77,647/- was filed before the lower authorities. In fact, no such documentary evidence in support of its aforesaid claim of deduction was filed by the assessee even in the course of the remand proceedings. Accordingly, as the assessee had failed to substantiate on the basis of irrefutable material that the aforesaid amount so claimed as bad debt during the year under consideration was earlier offered as income and charged to tax, no infirmity could be related to the disallowance of the said claim of deduction by the lower authorities. We thus uphold the disallowance of bad debts . Short credit of TDS - HELD THAT:- A.R had requested that the A.O be directed to allow credit for the deficit amount of tax deducted at source. As the aforesaid claim of the assessee would require verification of facts, therefore, we restore the issue to the file of the A.O with a direction to verify the aforesaid claim of the assessee. In case the claim of the assessee is found to be in order, then, the A.O shall allow credit for the balance amount of TDS alongwith interest as per the extant law.

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• Customs

• 2021 (2) TMI 810
  Jurisdiction - power of proper officer to issue SCN - HELD THAT:- The matter is directed to appear on 3rd March, 2021 for further consideration. The petitioner, in the meantime, shall cooperate with the adjudication in terms of the two show-cause notices. However, the adjudication order in respect of the petitioner shall not be published and communicated without the leave of this Court.

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• 2021 (2) TMI 807
  Principles of Natural Justice - denial of opportunity of cross-examination - HELD THAT:- It is not in dispute that there is no formal order of denial of cross-examination of witness, pursuant to the applications made by the petitioner dated 20.10.2020 and 02.11.2020. Let the order be passed by the concerned officer, FIRSTLY, on the aspect of cross-examination of witness. This shall be done, BEFORE the order in original is delivered. Further, the grievance with regard to non-supply of certain documentary evidences, being the facet of the principles of natural justice, the same shall be regarded by the officer concerned and shall be decided ALONG WITH the application, seeking cross-examination of witness. Since, this matter is being disposed of in limini, this Court has expressed no opinion on the same on merit - Application disposed off.

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• Insolvency & Bankruptcy

• 2021 (2) TMI 788
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Business Transfer Agreement entered into between the parties - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Under the provisions of this Agreement, it was the obligation of the Respondent to make payment of all liabilities towards the retiral benefits of the employees and the Respondent has failed to perform this liability. Therefore, the Petitioner was compelled to discharge its liability on behalf of the Respondent and therefore, payment was made by the Petitioner to these parties on behalf of the Respondent. After making these payments, the Petitioner demanded these amounts from the Respondent and the Respondent even failed to make payment of these amounts. Also, when demanded by the petitioner, the Respondent has admitted its liability and still failed to make any payment to the Petitioner. Therefore, it is crystal clear that there is debt and default on the part of the Respondent. Operational Creditor or not - HELD THAT:- In this matter, the claims pertain to supply of goods and services by third parties and also pertains to the employees dues. Therefore, the same fall within the meaning of the term Operational Debt as defined under the Code. As per the terms of the Business Transfer Agreement, the Respondent was legally under a duty to pay various employees and suppliers of goods and services of which the payment was made by the Petitioner. Therefore, the debt is now transferred and is due and payable to the Petitioner by the Respondent - there remains no doubt that the debt is due and payable and also that the same is admitted by the Respondent itself. It is only now that the Respondent has come with certain defenses and an attempt to show that there is a dispute between the parties. It is observed that this is attempt is nothing but an afterthought and thus, we find no merit in the case of the Respondent. For these reasons, it is a case fit case for admission. Also, the documents submitted by the Petitioner are enough to establish the debt upon the Respondent and hence the defenses made by it cannot be relied. Also, they defaulted in repaying the debt which they themselves have admitted. Also, the amount of debt is much above the minimum required amount of Rs. 1,00,000/-. The debt is also within limitation. The Petitioner has also filed the consent of the proposed Interim Resolution Professional by way of Form-2. Hence, the petition is complete in all respects and fulfills the requisite conditions for admission of a petition under Section 9. Application admitted - moratorium declared.

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• 2021 (2) TMI 787
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Whether the amount claimed by the applicant falls under the definition of Financial Debt or not? - HELD THAT:- The Petitioner has failed to produce on record any document to show that the amount which is actually given to the Corporate Debtor for interest i.e. loan disbursed against the time value of money. From the careful perusal of the definition of Financial Debt, makes it clear that a debt will not become financial debt if it was not advanced for time value money. The letter dated 03.04.2016 at annexure D and the various balance sheets relied upon by the Petitioner makes it abundantly clear that there is no interest payable on the loan advanced by the Petitioner. Apart from the above, no time is fixed for repayment in the absence of which it cannot be said that the loan was lent for time value money. Thus, there should be no hesitation in holding that the above amount claimed in the above Petition does not fall under the definition of financial debt and the above Company Petition is liable to be dismissed. Petition dismissed.

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• 2021 (2) TMI 785
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - existence of debt and dispute or not - HELD THAT:- Ample opportunity was given to the Corporate Debtor to file its reply. Not only the Corporate Debtor failed to file a reply but also failed to make representation before this Bench. Therefore, the Corporate Debtor was set ex-parte vide an order of this Bench dated 05.12.2019. Later the constitution of the Bench was changed and the Corporate Debtor again was given an opportunity to be present before this Bench and make representation if any on their behalf and the corporate debtor did not chose to appear. Heard the counsel appearing for the Financial Creditor and perused the documents submitted by him. The counsel for the Financial Creditor successfully demonstrated and proved the existence of debt and default. Financial Creditor also mentioned the name Mr. Mukesh Kumar Gupta as IRP and enclosed the consent letter given by the proposed IRP in Form-2. The debt is within limitation. Thus, the Company Petition satisfies all the requirements for admission. Since the Corporate Debtor remained ex-parte even without filing any reply, the claim of the applicant remained unchallenged. The initiation of Corporate Insolvency Resolution Process (CIRP) is ordered against Shakti Motors Automobiles Private Limited. - petition allowed.

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• 2021 (2) TMI 775
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Operational Creditor has produced all invoices, delivery challans under the case were sold and supplied to the Corporate Debtor. He has also produced a copy of demand notice under Section 8 of the LB. Code and postal tracking record shows that the notice was delivered to the Corporate Debtor - The Operational Creditor also produced on record the affidavit of compliance of provision under Section 9(3)(b) and 9(3)(c) of the LB. Code. The application is defect free. In spite of notice, no one appeared on behalf of the Corporate Debtor. The notice was also published in local newspapers. The Corporate Debtor did not give any response. From the evidence, it is clear that the amount of debt Rs. 25,25,672/- is due and payable to the Operational Creditor - Application deserves to be admitted. Application admitted - moratorium declared.

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• Service Tax

• 2021 (2) TMI 814
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Procedural irregularity - Substantial right - Amnesty Scheme seeking waiver of interest and penalty - Rule 6A of the CESTAT (Procedure) Rules, 1982 - HELD THAT:- From the reading of the Rule, it is evident that with respect of one order, single appeal irrespective of number of show cause notices may be filed. The petitioners undisputedly had filed single appeal with respect to more than one show cause notices. Filing of appeal before Tribunal is a substantial right whereas filing of declaration under Amnesty Scheme is mere procedural formality as declaration is maintainable if eligibility conditions are complied with which are enumerated under Section 123 to 125 of the Finance Act, 2019. Indubitably, the petitioners are complying with all the eligibility conditions. Thus, the Petitioners cannot be denied the relief claimed. The intention of legislature cannot be gone into if language is plain and unambiguous especially in taxation matters. The scheme in question is not a piece of taxation legislation, instead, it is a piece of beneficial legislation for Union as well dealers/assessee. The Government is getting revenue without litigation and assessee is getting immunity from partial tax liability as well as interest and penalty, thus there is win-win situation for both sides. The Amnesty Scheme was launched to minimize litigation and respondent seems to unnecessarily dragging the matter. The hyper technical approach of the officials/authorities is contrary to the intent and purport of the beneficial scheme and the mandate of the Parliament. The Finance Act has excluded various categories of persons from the scheme and it is undisputed that petitioners fall within category of eligible persons. It is settled law even under taxation that if a person is eligible to one or another benefit, he should not be denied said benefit on procedural or technical grounds. The requirement of strict compliance of conditions is necessary to ascertain eligibility, however procedural formalities need not to be strictly complied with. Filing of one or more declarations has been prescribed by Rules whereas conditions of eligibility have been prescribed by Finance Act, 2019. The filing of separate declaration is not even condition whereas it is sort of procedure. Once an assessee complies with conditions prescribed by Finance Act, 2019 and no prejudice is caused to the revenue by filing of single declaration instead of multiple, there is no reason to deny benefit on the ground of non-compliance of any condition which is purely procedural in nature. In the present case, no prejudice has been or would be caused to the Revenue and if at all, severe prejudice would be caused to the petitioner in case his prayer is not accepted, in the light of the object of the Amnesty Scheme by permitting adoption of hyper technical approach. Petition allowed - decided in favor of appellant.

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• 2021 (2) TMI 808
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility of the petitioner or maintainability of his declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that the service tax dues of the petitioner for the related period was not quantified on or before 30th June, 2019 - HELD THAT:-All that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during inquiry, investigation or audit. For eligibility under the scheme, the quantification need not be on completion of investigation by issuing show-cause notice or the amount that may be determined upon adjudication. The issue is no more res-integra as decided in the case of THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] where it was held that there are no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. When there is a provision for granting personal hearing in a case where the declarant disputes the estimated amount, it would be in complete defiance of logic and contrary to the very object of the scheme to reject a declaration on the ground of being ineligible without giving a chance to the declarant to explain as to why its declaration should be accepted and relief under the scheme be extended to him. Matter remitted back to the respondents (designated authority) to consider the declaration of the petitioner dated 08.12.2019 afresh as a valid declaration in terms of the scheme under the category of investigation, inquiry and audit and thereafter grant the consequential relief(s) to the petitioner. While doing so, respondent No.1 shall provide an opportunity of hearing to the petitioner and thereafter pass a speaking order with due communication to the petitioner - petition allowed by way of remand.

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• 2021 (2) TMI 801
  Benefit of SVLDRS - Credit of amount deposited prior to SCN towards Interest - Levy of Service Tax - Supply of Tangible Goods Services - petitioner had not obtained a registration - period April 2008 to March 2013 - extended period of limitation - HELD THAT:- Sub-Section (2) to Section 124 states that the relief computed under Sub- Section (1) shall be subject to the condition that any amount paid as pre-deposit at any stage of appellate proceedings under an indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the final settlement. In the present case, the petitioner has, admittedly, remitted amounts of Rs. 66.05 and Rs. 16.58 lakhs as deposits even prior to the issuance of show cause notice. However, the petitioner has specifically demarcated the amount of Rs. 66.05 lakhs as towards tax and Rs. 16.58 lakhs as towards interest. Thus the respondent, while accepting the eligibility of the petitioner to the benefit of the Scheme, has proceeded to ignore the amount of Rs. 16.58 lakhs, since the amount has been credited under the accounting head relevant for interest payments. Interestingly, had the declaration filed by the petitioner been accepted, there would have been a total waiver of interest liability, as per the Scheme. Thus if only petitioner had remitted the entire amount of Rs. 82,63,340/- (Rs. 66.05 plus Rs. 16.58 lakhs) towards tax, the respondent would have simply given credit to the entire amount, waiving interest liability in full. It is the apportionment that has given rise to the present situation and the petitioner must not be made to suffer on account of this, irrelevant fact - Learned counsel for the petitioner points out that the amount pending payment under the declaration is liable to be paid within 30 days of receipt of the declaration. Since the petitioner has enjoyed an order of interim stay during the pendency of this writ petition, the period of 30 days for effecting payment will start today. Petition allowed.

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• 2021 (2) TMI 790
  Levy of penalty u/s 78 of the Finance Act, 1994 - demand of service tax on Construction of Complex Service (CCS) for the period from 2006-07 to 2009-10 - residential apartments constructed by the appellant - tripartite agreement - HELD THAT:- A perusal of the documents placed on record would indicate that the appellant was involved in providing taxable service under the category of Construction of Complex Service (CCS), which included construction of residential complex as well on account of the appellant having constructed semi-finished flats/villas by the time of the commencement of the National Games in 2002. This semi-finished job required further construction in order to complete the same into residential flats/villas, which was undertaken by the appellant under construction agreements with the respective owners/customers, which clearly brings the scope of the above work out of the purview of the exclusion clause under Section 65(91a) of the Finance Act, 1994 since the residential complex was never intended for the personal use of the appellant. But the law requires that such complex shall not be constructed by a person directly engaging any other person for designing or planning of the layout, which according to us stands satisfied here since the Revenue has nowhere flagged any objections on the satisfaction of this requirement of law - the demand do not sustain. Works Contract Service - HELD THAT:- The appellant as a builder was expected to put up partial construction as per plan which thereafter, i.e., after sale, was required to be completed. Hence, we find that the appellant was required to undertake a host of activities to ensure completion of the project before handing over possession - the demand cannot sustain. Demand of Service Tax on pipe laying and pipe laying civil works at MCGM-TANSA Pipeline - HELD THAT:- Revenue is not able to establish that this is a commercial or industrial project. Hence, we agree with the appellant s contentions that the demand on this count cannot sustain. Penalty under Section 78 - HELD THAT:- As per first proviso to Sub-section (1) of Section 78 of the Act, no penalty shall be imposable for any failure referred to in the said Provision viz., for failure to pay service tax, for contravention of Rules and Provisions of the Act, or for suppression of facts etc., if the assessee proves that there was reasonable cause for such failure. From the facts available on record, it is noticed that entire facts were available on record and on this there is no dispute; nor is there any contrary finding by the adjudicating authority. The entire dispute arose, as pleaded by the appellant, on account of wrong interpretation/understanding of the provisions of the Act and the lower authority has not disputed the bona fide pleadings of the appellant. But the penalty is levied as if it is automatic. However, it can hardly be said that there was evasion, much less wilful evasion, to pay tax or not to comply with the provisions of the Act - there was no justification for imposition of penalty, especially when there was no allegation of fraud, mis- representation, etc. Accordingly, the penalty imposed on the appellant shall stand deleted. Appeal allowed - decided in favor of appellant.

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• 2021 (2) TMI 774
  Taxability - Construction services or not - construction service to the Government of Madhya Pradesh through the nodal agency - Madhya Pradesh State Cooperative Marketing Federation Ltd. (MP MARKFED), being funded by the Government of India towards Drought Mitigation Scheme - service provided to the State Government - refund of service tax paid erroneously - time limitation under Section 11B of the Central Excise Act - HELD THAT:- In view of the difference of opinion, the following question arise for consideration by learned 3rd Member: (1) Whether the limitation prescribed under Section 11B of the Central Excise Act will not be applicable as the tax was paid erroneously though eligible to exemption and as such is in the nature of deposit and hence limitation is not attracted as held by Member (Judicial) following the ruling of Hon ble Karnataka High Court in COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT] affirmed by Hon ble Supreme Court in COMMISSIONER VERSUS KVR CONSTRUCTION [ 2011 (7) TMI 1334 - SC ORDER] . OR Limitation prescribed under Section 11B is applicable as held by Member (Technical) in view of the ruling of Hon ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] . Registry is directed to put up the appeal record before Hon ble President for nomination of 3rd member to consider the aforesaid questions and difference of opinion for his opinion.

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• Central Excise

• 2021 (2) TMI 809
  Recovery of MODVAT Credit - Capital goods or not - H.R. Plates/Coils - used in construction of platform for Conveyor Gallaries - whether can be regarded as machine, machinery, plant, equipments apparatus, tools, or appliances or their components spare parts and accessories specified at Explanation I (a), (b) or any other goods specified at Explanation 1(c) or 1(d) or 1(e) to Rule 57-Q or not? - immovable property being a non excisable goods attached to earth or not - penalty under Rule 173Q of erstwhile Central Excise Rule 1944. HELD THAT:- The Division Bench of this Court in M/S MANIKGARH CEMENT (A DIVISION OF CENTURY TEXTILES INDUSTRIES LIMITED) VERSUS THE COMMISSIONER OF CUSTOMS CENTRAL EXCISE [ 2017 (8) TMI 829 - BOMBAY HIGH COURT] found that the Authority had not rendered a factual finding as to the manner of use of manufacturing of final products in respect of the capital goods claimed by the Assessee therein. It is in that context the Division Bench remanded the proceedings to the Authority. In the present case, going by the test laid down in the case of M/S JAYASWAL NECO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2015 (4) TMI 569 - SUPREME COURT] whether such capital goods are utilized for the purpose of manufacturing of final products, a finding of fact has to be rendered in respect of the each of the manufacturing process. The question of law as framed treats all construction as the same position of law, which it is not. The Commissioner in the present case considered the use of H.R.Plates/Coils by the Respondent-Assessee and has recorded a finding that these H.R.Plates/Coils used as a component for platform of conveyor gallery in the aid of completion of manufacturing process. Therefore, the present manufacturing process is held to be used for producing the goods. The Commissioner has found that the Capital Goods in question are utilized for the purpose of manufacturing of final products. Appeal dismissed.

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• 2021 (2) TMI 806
  Imposition of penalty u/r 25 of CER - Second stage Dealer - Violation in respect of issuing Invoice - whether, the first respondent is correct in holding that the appellant has not contested the commission of fraud when all along the appellant is contesting and participating in the proceedings - scope of the adjudication order - HELD THAT:- Rule 25 of Central Excise Rules would clearly stand attracted to the case on hand. Rule 25 deals with confiscation and penalty . Sub-Rule (1) states that subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer (a) removes any excisable goods in contravention of any of the provisions of the rules or the notifications issued under the rules or (d) contravenes any of the provisions of the rules or the notifications issued under the rules with an intent to evade payment of duty, then all such case shall be liable for confiscation and the producer or manufacturer or the registered person of the warehouse or a registered dealer, as the case may be, shall be liable to penalty. Admittedly, the assessee is a registered dealer. The Tribunal rightly referred to Rule 11(7), which covers the removal from the premises of a second stage dealer and for such removal, the second stage dealer has to issue proper invoices disclosing full and true particulars. On facts, the Tribunal approved the finding of the Adjudicating Authority and the first appellate authority that proper invoices were not issued and consequently, there is contravention of Rule 25(a) in respect of duty paid goods supplied to units not availing CENVAT credit. Further, the Tribunal rightly observed that in respect of non-duty paid goods, cleared to the manufacturers, under invoice showing duty payment, there is a clear violation of the Rules with intent to evade payment of excise duty on final products manufactured by paying such duty through fraudulent credit - the entire dispute revolves on facts, which have been brought out in detail by the Adjudicating Authority in Order-in-Original dated 21.01.2010. Appeal dismissed.

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• CST, VAT & Sales Tax

• 2021 (2) TMI 812
  Period of limitation for completion of assessment in remand proceedings - Vires of Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 - notice of default assessment of tax and interest as well as notice of assessment of penalty - Section 34 of the DVAT Act - HELD THAT:- The assessment had to be completed within a period of four years. The impugned order relates to the year 2010-11 for which limitation expired on 31st March, 2015. The date of the impugned order is 15th January, 2021, which indicates that the same is ex-facie barred by limitation. We are not impressed with the submission advanced by Mr. Satyakam that the impugned order is within limitation in terms of Sub-section (2) of Section 34. The said provision is entirely inapplicable in the present facts and circumstances. The impugned order has not been passed in consequence of, or to give effect to, any decision of this court which requires the re-assessment of the Assessee/Petitioner. Further, it may be noted that this Court, while disposing of the miscellaneous application vide order dated 17th January, 2020, could not have extended the period of limitation contrary to the statute. On a plain reading of the same, it is evident that this Court only permitted the Respondents to take recourse to further proceedings consistent with the extant laws and the law laid down by this Court in the judgment noted therein. This liberty cannot be construed to mean that the limitation period was extended beyond statutory confines. The contention of the Respondents is untenable. In the present case, the notice is clearly barred by limitation in terms of Section 34 of the DVAT Act and accordingly, we have no hesitancy in setting aside the same on the ground of limitation. Petition allowed - decided in favor of petitioner.

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• 2021 (2) TMI 802
  Benefit of Section 5(3) of the Central Sales Tax Act, 1956 - Non-fulfilment of export obligation - case of the State is that the respective dealers would not be entitled to the benefit of Section 5(3) of the Act because what were exported, were not those goods, which were purchased - HELD THAT:- The Tribunal considered the entire factual matrix, took note of the documents, which were filed, which established that the coffee seeds were purchased and what was exported was instant coffee. The Tribunal had to consider as to whether the goods purchased by the exporter were actually exported as such or as a different commodity - After taking note of all the features as well as documents, the Tribunal held that the dealers were entitled to exemption under Section 5(3) of the Act, as the coffee seeds supplied by the dealers were roasted, ground, extracted and spray dried, which did not alter the character of the goods supplied by the dealers. In the instant case, the transaction between the dealers and the exporter and the transaction between the exporter and the foreign buyer are inextricably connected and this has been clearly brought out by the Tribunal after examining the documents, which were placed by the dealers before it. Therefore, in terms of the decision of the Hon ble Supreme Court in the case of STATE OF KARNATAKA VERSUS AZAD COACH BUILDERS PVT. LTD. AND ANOTHER [ 2010 (9) TMI 879 - SUPREME COURT] , the same goods theory would have no application to the case on hand. There are no error committed by the Tribunal warranting interference with the common impugned order - petition dismissed.

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• Indian Laws

• 2021 (2) TMI 813
  Seeking grant of Regular Bail - Smuggling - Charas - contraband item - offences under section 20/25 of the NDPS Act - HELD THAT:- In the instant case, GD entry No. 0011A was recorded on the basis of the secret information received. So, at the stage of bail factual matrix of the case cannot be looked into and the same would be seen during the course of trial. The petitioner was arrested alongwith his co-accused, who is involved in two other cases of NDPS Act and no doubt he was carrying only 555 Gms. of Charas, which according to the counsel for the petitioner is less than the commercial quantity but his co-accused was carrying 955 grams of conrtraband, so at this stage, it would not be proper to consider the alleged recovery to be an individual recovery as both of them were travelling in the same vehicle. Co-accused is a habitual offender and he knows the trick of the trade and the factum of conspiracy can only be looked into at the time when the evidence is led. Therefore, in the facts and circumstances of this case and the fact that the alleged recovered quantity from both the accused being more than 1 Kg., rigors of Section 37 applies. Bail application dismissed.

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• 2021 (2) TMI 811
  Dishonor of Cheque - Section 138 of the Negotiable Instruments Act, 1881 - compounding of offences - HELD THAT:- The petitioner is reported to be in custody, having surrendered on 12.02.2021, consequent upon the dismissal of his appeal. Now that the offence is compounded and the impugned judgments and orders are set aside, the petitioner Ratnakant Krishna Gaude will have to be released forthwith. Revision application disposed off.

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• 2021 (2) TMI 798
  Dishonor of Cheque - burden of proof on complainant to establish his case - rebuttal of presumption - fulfilment of requirements under section 138 of Negotiable Instruments Act - HELD THAT:- No doubt the said presumption is a rebuttable presumption. It is for accused to rebut the presumption cast in favour of complainant to prove to the contrary that there never existed any legally recoverable debt or liability. This rebuttal of presumption has to be made by accused not by merely putting vague suggestions and denials in cross-examination. Accused will have to do something more than just mere denials either by producing cogent material evidence or by eliciting in cross-examination of PW.1 with regard to loan amount having been repaid or non-existence of any legally recoverable debt. It is only when such rebuttal is made, with cogent material evidence to the satisfaction of Court, burden would shift to complainant to satisfy such rebuttal. Unless such cogent evidence is produced, or elicited in cross-examination of complainant/PW.1, burden would not shift to complainant and thereby the presumption would act in favour of complainant. In the present case on hand, apart from mere denial and suggestions in cross-examination, no worthwhile evidence has been adduced and no cogent material has been produced or confronted to PW.1 complainant. Therefore the rebuttal as made by accused is no rebuttal in law or on facts of the case and presumption of law in favour of complainant has not been proved to the contrary by accused. It is seen from the judgment of trial Court that trial Court is impressed by arguments of accused with regard to non service of notice which is erroneous in law and facts of the case as stated in detail in the above paragraph. Further, trial Court has laid entire burden of proof on complainant to prove advancement of loan and issuance of cheque. In the evidence of PW.1, it is clearly stated that on several dates on which complainant advanced loan, right from April 2003 till March 2004 and for repayment of which accused has got issued Ex.P.1 cheque, complainant has also produced Ex.P.7 which is prior in time than issuance of cheque. Ex.P.7 is dated 30.3.2004 and this document has stated in detail the amount of loan having been received by accused on several dates and this has been duly signed by accused. Signature in Ex.P.1 and in Ex.P.7 has been admitted by accused. No cogent evidence has been adduced by accused to disprove either the document Ex.P.1 or his signatures in Ex.P.1(a) and P.7(a). A mere denial of the same, would not disprove the case of, complainant. Therefore, mere denial of signatures will not help accused to prove contrary to the presumption laid in section 139 of Negotiable Instruments Act as section 139 says that holder of cheque has received the cheque of nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability. In the present case non filing or production of books of accounts and income tax returns would not be fatal to the case of complainant as no rebuttal is made by accused, shifting the burden necessitating the complainant to produce these documents to prove the case. Therefore there cannot be any adverse inference drawn on complainant for non production of these documents of books of accounts and income tax returns. Even otherwise non production of income tax returns or even non mentioning of same in the said income tax returns would not by itself prove that there was no loan advanced for which accused has issued the cheque in question for the transaction in existence. Therefore in the present case when complainant has proved necessary ingredients as contemplated under section 138 of Negotiable Instruments Act and accused having not rebutted the presumption, question of creating any suspicious circumstances and giving benefit of doubt to accused would not arise. In the case of Section 138 of Negotiable Instruments Act, burden of proof is not on complainant as there is a presumption under section 139 of existence of debt which is issued in the nature of cheque towards the discharge, in whole or in part of the said debt. In the present case, accused has not produced any material to show preponderance of probabilities and has not made out any case for showing any suspicious circumstances and has not raised any reasonable doubt by way of any probable defence. Under these circumstances, the order of acquittal passed by trial Court is contrary to materials both oral and documentary and the same is required to be reversed. It is seen that cheque is dated 21.7.2004 and in view of enormous delay in non payment of cheque amount, it is suitable in the present case to award compensation double the cheque amount to reasonably compensate the complainant. Appeal allowed.

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