Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 4, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
Articles
News
Highlights / Catch Notes
GST
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Classification of goods - unbranded mixture of flour of pulses and grams i.e. leguminous vegetables and cereal flours - different classification are for different mixtures - Rate of GST will be 5% or NIL as it depends on use of brand name.
Income Tax
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Relaxation from Tax audit in case of business – subject to limit of 5% cash receipts and payments. - who will certify the amount of cash received and paid and percentage?
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Additional depreciation of the Wind Mill - the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not germane to the specific provision contained in Section 32(1)(iia)
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The provisions of sub-section (5) that vest concurrent jurisdiction in more than one officer, will have to be seen and read with Section 124(4) only and do not constitute a standalone provision. In fact, it is only to decide the appropriate officer for exercise of concurrent jurisdiction vested in 124(5), that sub-section (4) provides for a reference of the matter to a superior officer by an Assessing Officer
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Penalty u/s 271B - Delay in getting the books of accounts audited cannot be considered as failure on the part of the assessee as envisaged under the provisions of section 271B of the Act. Thus the delay in getting the accounts audited cannot attract the penalty provisions as specified under section 271B of the Act.
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Additions towards Revenue sharing - Joint Venture Agreement - there is a commercial expediency in incurring the expenditure and the AO has no power to sit in the arm chair of the businessman and decide as to what would be the reasonable expenditure which is required to be incurred.
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Addition u/s 68 - Unexplained cash credit - Mere paperwork by the assessee does not take the authorities anyway, when the authorities suspected the existence of the entities that applied and paid for share application and share premium and insisted that a higher degree of proof is required in that respect.
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Income from cloud hosting services as fee for technical services within the meaning of Section 9(1)(vii) of the Act as well as fee for included services under Article 12(4)(a) of the IndoUS DTAA - cannot be taxed as FTS
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Write-off or waiver of advance given to its subsidiary - Since we have accepted the plea of the assessee for deduction of the said sum in terms of Sec. 36(1)(vii) of the Act, the alternate pleas made by the assessee for deductibility of the said sum in terms of Sec. 37(1) of the Act or as a 'business loss' in terms of Sec. 28 of the Act, are rendered academic.
Customs
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Revocation of CHA License - regardless of the fact that the appellant was licensed prior to the introduction of CBLR, 2013, the present proceedings, having been initiated post 2013, must be proceeded under the new regulations. CHALR, 2004 cannot be invoked as they did not exist during the relevant period.
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Imposition of penalties on CHA - mis-declaration of vessel - the inclusion of ‘supply vessel’ in the description is equally ambiguous in deciding upon the classification. It was, therefore, an overreach on the part of the licensing authority to conclude that description made in the documents despite the possession of these two certificates indicate a deliberate attempt to mislead.
Indian Laws
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Finance Bill 2020 - Amendment of meaning of short-term capital asset and cost of acquisition in case of segregation of portfolio and allotment of new units etc. - Budget
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Clarification regarding Proposal in the Finance Bill 2020 Clarification regarding Proposal in the Finance Bill 2020
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Budget 2020-21 + FINANCE BILL, 2020
IBC
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Initiation of CIRP - not increasing the rent of a period of 6 years - The alleged debt on account of purported enhanced rent of leasehold property does not fall within the definition of the operational debt in terms of Section 5(21) of the Code
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CIRP process - We are not convinced with the argument that amended Sub-Section (4) of Section 30 requires only Secured Financial Creditors to contribute towards interim finance and not the Unsecured Financial Creditors. No such interpretation can be drawn. We will not interfere in the collective decision of COC in this regard - The dissenting Financial Creditor in COC cannot be allowed to scuttle CIRP process otherwise the provision permitting COC to take decisions with regard to subjects stated in Section 28(1) by given majority of 66% under Section 28(3) would be rendered nugatory.
Service Tax
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Refund of service tax - time limitation - refund sought on the ground that, they have paid Service Tax and GST on the same four transactions - when the Service Tax was paid on the basis of self-assessment and declaration in their ST 3 Returns for the period April to June 2017, the Service Tax was paid correctly for the services which were provided during the period April to June 2017 as per Section 68 of the Act - No refund.
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Valuation - deductions from the gross receipt of the billing - Appellant has not produced any evidence which can show that the print media had during the disputed period revised the rates, as a result of which there was a change in the rate of commission nor is there any serious challenge to the other findings.
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Levy of service tax - construction of Railway siding for private parties - Even the inclusive definition of the term ‘railway’ is taken from the Railway Act, the exemption is provided to Railways and not to railway alone and hence private railway siding is also exempted.
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The interest is evidently and explicitly payable under Rule 6(3A) clause (e) read with Rule 14 of CCR 2004. The interest has indeed been demanded under Rule 14 of CCR 2004. Merely because they have also not mentioned Rule 6(3A) in the Show Cause Notice, it does not vitiate the entire demand of interest.
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Construction of Residential Complex Service - Abatement claim - charges collected from the buyers under ‘electric meter main load supply charges’ head - the said service is bundled services under Section 66F of the Finance Act, 1994.
Central Excise
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CENVAT credit - denial for want of duty paying documents - The allegation of the show cause notice are pointing merely a procedural lapse - Procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice.
Case Laws:
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GST
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2020 (2) TMI 98
Classification of goods - unbranded mixture of flour of pulses and grams i.e. leguminous vegetables and cereal flours - whether fall under the HSN Code 1106 and 1102 respectively? - circular no 80 dt. 31-12-2018 - rate of GST. HSN Code - Type I (Flour of Grams-80%, Flour of Maize-10% and Flour of rice-10%) - Type II (Flour of Grams-70%, Flour of Peas-10%, Flour of Maize-10% and Flour of Rice-10%) - Type III (Flour of Grams-50%, flour of Peas-20%, Flour of Maize-20% and Flour of Rice-10%) - Type IV (Flour of Peas-70%, Flour of Maize-15% and Flour of Rice-15%) - Type V (Flour of Grams-25%, Flour of Peas-25%, Flour of Maize-25% and Flour of Rice-25%) - HELD THAT:- Classifiable under CTH 11061090. HSN Code - Type VI (Flour of Rice-95% and Flour of Urad-5%) - HELD THAT:- CTH 11029090. Applicable rate of tax - products are packed with such a registered Trade Mark in unit containers - Type I, II, III, IV and V (CTH 11061090) - HELD THAT:- 2.5% CGST as per Sl.No. 59 of Schedule I of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 as amended and 2.5% SGST as per Sl.No. 59 of Schedule I of Notification Ms. No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. Applicable rate of tax - products are packed with such a registered Trade Mark in unit containers - Type VI (CTH 11029090) - HELD THAT:- 2.5% CGST as per Sl.No. 55 of Schedule I of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 as amended and 2.5% SGST as per Sl.No. 55 of Schedule 1 of Notification Ms. No. II(2)/CTR/532(d-4)/2017, vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. Applicable rate of tax - If the products are packed without a registered brand name - Type I, II, III, IV and V (CTH 11061090) - HELD THAT:- Nil CGST as per Sl.No. 78 of the Notification No. 2/2017-C.T.(Rate) dated 28.06.2017 as amended and nil SGST as per Sl.No. 78 of Notification No. II(2)/CTR/532(d-5)/2017 vide G.O. (Ms) No. 63 dated 29.06.2017 as amended. Applicable rate of tax - If the products are packed without a registered brand name - Type VI (CTH 11029090) - HELD THAT:- Nil CGST as per Sl.No. 74 of the Notification No. 2/2017 -C.T. (Rate) dated 28.06.2017 as amended and nil SGST as per Sl.No. 74 of Notification No. II(2)/CTR/532(d-5)/2017 vide G.O (Ms ) No. 63 dated 29.06.2017 as amended.
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Income Tax
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2020 (2) TMI 97
Reopening of assessment u/s 147 - allocation of R D expenses - as missed out in a question determined on scrutiny in a regular assessment, whether reopening on such left out angle is permissible or not, as far as this ground is concerned, in wake of the reasonings given in the records of reasoning; particularly emphasizing on SPS which never existed - HELD THAT:- SLP dismissed.
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2020 (2) TMI 96
Revision u/s 263 - AO allowed the claim of carried forward of losses u/s 72A, based on an incorrect assumption of facts - HELD THAT:- In the case of The Commissioner of Income Tax-II Vs. Lakshmi Machine Works Ltd., Coimbatore [ 2019 (2) TMI 1780 - MADRAS HIGH COURT] for purposes of according sanction to a scheme of amalgamation of a sick industrial undertaking with any other company under Section 18 of the said Act, the BIFR has to be satisfied that the amalgamating company is not financially viable, which is the effect of Section 3(o) of the said Act, and that the amalgamation is necessary or expedient in the public interest, which is the effect of Sections 17 and 18 of the said Act read together. Sanction of a scheme of amalgamation under Section 18 of the said Act necessarily implies that the requirements of Section 72A of the Income Tax Act have been met and the BIFR must exercise the power conferred upon it by Section 3 2 ( 2} of the said Act and make the declaration contemplated by Section 72A o f the Income Tax Act, The conditions for sanctioning a scheme under Section 18 of the said Act being the same as those required for a declaration under Section 72A of the Income Tax Act, the BIFR could not have sanctioned the scheme of amalgamation of Sharp Edge with the appellant but declined to make the declaration under Section 72A o f the Income Tax Act with regard to t hat amalgamation' (underlining for emphasis, ours) Nothing further remains to be said in the light of the categoric conclusion of the Supreme Court emphasised above. The view taken by the Assessing Authority to the effect that the claim of the assessee is liable to be allowed in the light of the provisions of section 32(2) of the SICA and its interpretation by the Supreme Court is thus, the correct one. Jurisdiction exercised by the CIT to correct the alleged error in assessment was in terms of section 263 of the Act. Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the interests of the revenue, both conditions to be satisfied concurrently. The action of the assessing officer, though prejudicial, can hardly be termed as erroneous in so far as the officer has followed the dictum laid down by the Supreme Court in the case of Indian Shaving products ( 1996 (1) TMI 375 - SUPREME COURT ) . Additional depreciation of the Wind Mill - HELD THAT:- As decided in case of Commissioner of Income Tax V. VTM Limited [ 2009 (9) TMI 35 - MADRAS HIGH COURT] what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31st March 2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed upto 31.03.2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not germane to the specific provision contained in Section 32(1)(iia) of the Act. - Decided against the Revenue and in favour of the Assessee.
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2020 (2) TMI 95
Reopening of assessment u/s 147 - issue of notice for reopening beyond the period of four years - HELD THAT:- There was no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. We are of the view that the case on hand is one of change of opinion. There is hardly anything on record to indicate that there was failure on the part of the assessee to disclose truly and fully all material facts. There was no tangible material available for the purpose of issuing the notice for reopening beyond the period of four years. The impugned notice under Section 148 of the Act, 1961 is not sustainable in law. - Decided in favour of assessee.
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2020 (2) TMI 94
Reopening of assessment of a non-resident Indian - Jurisdiction of Assessing Officers - period of stay in India Madurai - assessment of the petitioner would be transferred either to International Taxation, Bangalore or the Assessing Officer at Shimoga based on the status of the petitioner in the relevant financial year - HELD THAT:- In the present case the petitioner has, no doubt obtained a PAN from the Assessing Officer at Madurai, wherein the dress of the assessee is stated to be in Madurai. However, no assessments have been completed by the officials at Madurai, till date. For AY 2012-2013 to 2015-2016 the petitioner has filed returns of income electronically, stipulating his jurisdictional officer as the Income tax officer, Shimoga, Karnataka. These returns of income have been processed and intimations issued by the CPC wherein the address of the petitioner is stated to be Shimoga. The appropriate officer to assess the petitioner is thus the officer at Shimoga. No doubt, the provisions of Section 124(5) provide for the vesting of jurisdiction concurrently upon two officers if the situation and circumstances so warrant the same, such as if the assessee in question has business interests or assets as well as income arising there from spread over various parts of the country, Concurrent jurisdiction is, no doubt, a principle enshrined as part of the procedure for finalizing assessments, the thumb rule being that the same income not be assessed twice. However, if at all such jurisdiction were to vest concurrently by way of transfer to the respondent officer as well, it was incumbent upon the officials to have followed the methodology set out in terms of Section 127 for change of jurisdiction by way of a determination by a superior officer. The provisions of sub-section (5) that vest concurrent jurisdiction in more than one officer, will have to be seen and read with Section 124(4) only and do not constitute a standalone provision. In fact, it is only to decide the appropriate officer for exercise of concurrent jurisdiction vested in 124(5), that sub-section (4) provides for a reference of the matter to a superior officer by an Assessing Officer In the present case, though the petitioner/assessee has specifically sought such determination, the Assessing Authority has not bothered to refer the matter to the superior officer. In my view, this is a patent error that vitiates the assumption of jurisdiction of the respondent in full. In the light of the discussion as above, this writ petition is allowed and the impugned proceedings for re-assessment quashed.
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2020 (2) TMI 93
Revision u/s 263 - sec. 33AB deduction admissibility - HELD THAT:- PCIT has erred in law and on facts in holding the impugned assessment as erroneous causing prejudice to the interest of Revenue on the ground which nowhere formed subject-matter of the CASS scrutiny as it is evident from the case records. We reiterate the learned co-ordinate bench s detained reasoning hereinabove that the sec. 263 revision proceedings ought not to have been set into motion for expanding the jurisdiction of the AO to examine the issues beyond the scope of limited scrutiny. We therefore reverse the PCIT s action assuming sec. 263 revision jurisdiction in these facts and circumstances. We find that the relevant clause in Tea Development Accounts, Scheme, 2007 (pages 1 to 45 of the paper book) contain clause No.9 regarding withdrawal or utilization of the amounts deposited thereunder. The assessee s statement of necessary particulars in part-ii alongwithi Form No.3AC {Auditor report sec. 33AB(2)} indicates that it had withdrawn ₹44,58,300/-, ₹96,54,000/- as on 26.04.2013, 24.05.2013 and 05.05.2013 for green tea factory material alongwith plant and equipment of former two and irrigation; respectively. These crucial facts as well as the corresponding purpose in the Tea Development Accounts Scheme, 2007 have gone unrebutted from the Revenue side during the course of hearing. In this factual backdrop of that even if we agree with the PCIT s stand that the Assessing Officer had not carried out necessary enquiries about the purpose of the assessee withdrawals amounting of ₹165,36,500/- from the Tea Development Accounts Scheme, 2007, no prejudice has been caused to interest of the Revenue since the amounts pertain to the specified purpose under the scheme only. We make it clear that hon'ble apex court s landmark judgment in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax [ 1991 (10) TMI 26 - KERALA HIGH COURT] has settled the law long back that twin conditions of an assessment being erroneous as well as causing prejudice to the interest of the Revenue have to be simultaneously satisfied before the Commissioner of Income tax or Principal Commissioner of Income Tax; as the case may be, seeks to invoke sec. 263 Revenue proceedings. We therefore hold that the PCIT s revision directions under challenge are not sustainable in law. - Decided in favour of assessee.
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2020 (2) TMI 92
Transfer pricing adjustments in respect of purchase of raw material from associated enterprise - selection of MAM - assessee s claim to have bench marked its international transaction by applying CUP as MAM, however, the comparable uncontrolled price taken up by the assessee is the purchases made by the AE and then supplied to the assessee - HELD THAT:- What is claimed by the assessee is not in strict sense is CUP because even if the price at which the AE of the assessee has purchased the material is considered as CUP then it is the purchase price in the hand of the AE would be considered as CUP and not the price after making certain markup. If the AE is making any markup on the cost of purchase and charged from the assessee then the appropriate method would be cost plus method. The cost plus method is applied only when the cost of international transaction in the hand of the supplier AE is verifiable without any doubt. So far as the AE has supplied raw material to the assessee which represents the trading of AE being the purchases made from the third party, the MAM on such transaction for determination of ALP would be cost plus method as the AE has undisputedly charging price from the assessee after making some markup on the cost price. In such a case, the question arises is whether the change of margin/markup by the AE on the cost price is at arm s length or not and the exercise of determining the ALP is confined only to the markup charged by the AE from the assessee. Therefore, the transactions of purchases made from MCT to the tune of ₹ 46,62,68,683/- has to be tested by applying cost plus method as MAM because for the A.Y. 2011-12 and 2012-13, the TPO while passing the order dated 29/01/2016 has accepted the CPM as MAM for determination of ALP in respect of international transaction of purchasing of raw material from the AE. When there is no change in the facts and circumstances for the year under consideration then the TPO/AO is not permitted to take a different stand and view which is contrary to the view taken for the A.Y. 2011-12 And 2012-13. It is also undisputed legal proposition that res judicata does not apply to the income tax proceeding, however, the income tax authorities have to maintain rule of consistency. Once the CPM was accepted as MAM in the preceding year being A.Y. 2011-12 and 2012-13 then the same method has to be applied for the year under consideration for determination of ALP so far as the transaction of purchase of raw material from AE represents the trading of the AE in the said goods without any value addition. Purchases made from JPP - The first two transactions of purchases of polypropylene and Tafmer are also representing the purchases made by the AE from the third party and supplied the assessee without any value addition, therefore, these two transactions are to be tested by applying CPM as MAM as it was applied by the assessee in the preceding years and also accepted by the TPO/AO. Therefore, instead of applying any other method being CUP or TNMM these two transactions can be tested being at ALP by applying CPM as MAM. We find that the approach of the assessee is not permissible as per the transfer pricing regulation as there is no provision for taking the AE as tested party for determination of the ALP of price paid by the assessee. Third transaction of purchases, these are the AE s own manufactured product and therefore, the ALP for the third transaction which includes various items of purchases of raw material and consumables, therefore, a separate exercise of transfer pricing analysis is required in respect of third international transaction with the JPP - Though the assessee has claimed that there are some sale by the AE to the third party as well as there are some purchases of the same product by the assessee from third party and therefore, CUP is available for testing the said transaction, however, neither the assessee not the TPO has separately undertaken this exercise of testing these transactions by applying MAM. As we have discussed earlier that if the CUP is available then the same should be preferred as MAM in comparison to the other methods, however, while adopting CUP as MAM it is required to see that there is no scope of any variation and the comparable price should be perfectly matching with the transaction of the assessee. Hence the ALP of these transaction is required to be determined in above terms.
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2020 (2) TMI 91
Disallowance u/s 14A - HELD THAT:- During the year under consideration, there is no increase in the investment in mutual funds but there is a substantial decrease in the investment in mutual funds. The A.O. in the remand report has not given any factual finding and has stated that the documentary evidence produced by the assessee was considered by the A.O. during the assessment proceedings and consequently he does not find anything contrary to the order of the A.O Disallowance made on account of administrative expenses - A.O. in the remand report has not given any finding on the facts and the evidence produced by the assessee but simply stated that I do not find anything contrary to the order of the A.O. Such remand report would not serve any purpose and particularly when the matter was specifically remanded to the record of the ld. CIT(A) for giving the A.O. an opportunity to examine the evidence filed by the assessee. Hence, in view of the above facts and circumstances, we do not find any error in the impugned order of the ld. CIT(A) to the extent of sufficiency of the assessee s own funds for making investment in the mutual funds. Disallowance sustained by the ld. CIT(A) towards the administrative expenses as per Rule 8D(2)(iii) of the Rules - CIT(A) has restricted the said disallowance to the amount of dividend income - identical issue has been considered by this Tribunal in assessee s own case [ 2019 (4) TMI 192 - ITAT JAIPUR] - CIT(A) has also followed the order of the Tribunal while restricting the disallowance U/s 14A read with Rule 8D(2)(iii) of the Rules and hence we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. Disallowance made u/s 36(1)(iii) of the Act on account of interest expenditure in respect of OD account - HELD THAT:- CIT(A) has considered the fund flow position of the assessee and thereby come to the conclusion that the total interest expenses on OD account was ₹ 49,197/-. In view of the above facts and circumstances of the case when the A.O. has not given any finding in the remand report, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue
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2020 (2) TMI 90
Penalty u/s 271(l)(c) - Defective notice - AO has not struck off the irrelevant clause of the notice - HELD THAT:- Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] , CIT vs. SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] and Pr. CIT vs. Sahara India Life Insurance Company Lt d. . [ 2019 (8) TMI 409 - DELHI HIGH COURT] we are of the considered view that when the notices issued by the AO are bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, AO has moved the law into motion, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Not only this even at the time of initiating the penalty proceedings the Assessing Officer has not applied his mind and as such was not aware enough as to whether he is initiating the penalty proceedings for concealment of particulars of income or for furnishing inaccurate particulars of income rather sought to initiate the penalty against the assessee in a mechanical manner - Decided in favour of assessee.
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2020 (2) TMI 89
Disallowance u/s 54B - assessee has sold ancestral agriculture land admeasuring 10117 sq.meters situated at village Ambli together with other co-owners for a consideration by registered sale deed - assessee was having 50% share in that property - HELD THAT:- CIT(A) has come to the conclusion that assessee has utilised sales consideration of old land for purchase of new agriculture land, and prima facie complied with requirements of section 54B, and therefore, purchase price i.e. investment in new land of ₹ 2,70,00,000 being more than the sale consideration received of ₹ 2,67,50,000/-, there would not be any necessity to furnish evidence to prove cost of improvement. The Ld.CIT(A) observed that there was no bar on the appellate authorities to entertain claim of the assessee in the course of appellate proceedings, which the AO denied on account of non-filing of revised return. While holding so, the Ld.CIT(A) relied upon various authoritative judgments as mentioned in his above finding. We find that Ld.CIT(A) has considered the issue from factual as well as legal angle and arrived at a just conclusion, which cannot be said to be incorrect or unjustified. In view of the above, our interference is not called for on this issue. It is upheld. Ground no.1 of Revenue is thus dismissed. Addition invoking provisions of section 56(2)(vii)(b) - difference between the value adopted by the stamp valuation authority, and purchase consideration shown by the assessee - HELD THAT:- After considering comparable instance furnished by the assessee and also remand report submitted by the AO, the Ld.CIT(A) found that the rate for the transactions in the area registered subsequent to that of the assessee s transaction should have been at higher rates as per normal circumstances, and therefore, there is no possibility of payment in cash in excess of purchase price shown by the assessee. It was also recorded by the CIT(A) that comparable cases furnished by the assessee has not been disputed by the AO in his remand report, and therefore, no case has been made out by the AO on this count. Secondly, it has been observed by the Ld.CIT(A) that when the assessee disputed the value of the property as per the stamp valuation authority, which was considered by the assessee as purchase consideration, then the Ld.AO ought to have referred the matter to the DVO for determination of fair market value as contemplated under section 50C(2) of the Act. We find that the Ld.CIT(A) has made detailed analysis of the matter and based on the evidence furnished by the assessee and also remand report submitted by the assessee, arrived at a just conclusion that the impugned addition was not justifiable in the eyes of law. There is no other material before us to better the case of the Revenue and to take a different view than the view taken by the Ld.CIT(A). Therefore, we find no infirmity in the order of the Ld.CIT(A) on this issue - Appeal of the Revenue is dismissed.
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2020 (2) TMI 88
Addition u/s. 35D OR section 37 - HELD THAT:- Appellant has incurred the expenditure for improving its coal logistic and the genuineness whereof has not been doubted by the AO when the said expenditure is allowable as revenue expenditure in one year without differing the same for a further period of 5 years or so on. The nature of expenditure was for the improvement of regular day-to-day working of the assessee-company and wholly and exclusively for the business purpose. Entire expenditure ought to have been allowed by the AO as revenue expenditure taking into consideration the ratio laid down by the Hon ble Apex Court in the case of Taparia Tools Ltd. [ 2015 (3) TMI 853 - SUPREME COURT] as also decision of ITAT in the case of Pan India Food Solutions P.Ltd. [ 2014 (7) TMI 838 - ITAT MUMBAI] as relied upon by the ld.CIT(A) in the impugned order. Therefore, deletion of disallowance by the Ld. CIT(A) is, therefore, in our considered view is just and proper without any ambiguity so as to warrant our interference. Hence, the order is in the affirmative i.e. in favour of the assessee, and against the Revenue. Addition u/s 14A read with rule 8D - HELD THAT:- Computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the above decision of the Special Bench, we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules. No justification in reversing the order passed by the CIT(A) in deleting the enhancement of book profit made by the Learned AO to the extent of exempt, hence the Revenue s appeal is found to be devoid of any merit, and therefore ground no.3 is dismissed.
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2020 (2) TMI 87
Capital gains arising from the sale of land to be long term capital gain in the hands of assessee HUF - HELD THAT:- CIT(A), in our view, has appreciated the facts in perspective and held the capital gains arising on sale of land to be long term capital gain in the hands of the assessee HUF. No error in the process of reasoning adopted by the CIT(A) while granting the relief to the assessee. Deduction u/s 54EC 54F - HELD THAT:- The assessee has also furnished copy of bank account showing the deposit in capital gain scheme. The disallowance made by the AO is not justified as it is already held that sale of the land is long term capital gain instead of short term capital gain as held in the assessment order. Since the assessee has transferred long term capital asset, the deduction u/s.54F is available to the assessee. The assessee has also invested an amount of ₹ 1,25,00,000/-before the due date of filing of return as prescribed in the Section 54EC of the Act. As the assessee has fulfilled the conditions prescribed in Section 54EC of the Act, he is eligible for the deduction u/s.54F - Decided against revenue.
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2020 (2) TMI 86
Validity of assessment u/s 153A - lack of jurisdiction invoked by the AO under section 153A - HELD THAT:- AO for Assessment Years 1998- 99, 1999-2000 2001-02 had issued notice dated 7.3.2006 under section 153A read with section 153C of the Act. The initiation of the proceedings thus are under section 153C of the Act i.e. in respect of person other than the person searched, which is not the case. The assessee is the person searched and requirement of law is to issue the notice u/s 153A. The copy of the aforesaid notice have been filed on record and have been perused by us. Though in the assessment order, the AO mentions that the notice had been issued under section 153A of the Act on 7.3.2006, but infact the notice which is issued on 7.3.2006 was the notice under section 153A read with section 153C of the Act. The said notices were invalid and the consequent assessment framed under section 153A of the Act suffers from infirmity, because of lack of jurisdiction invoked by the AO under section 153A of the Act. Consequently, the assessment orders framed in the case are bad in law and we hold so. We thus cancel the assessment orders passed in the case against the assessee being bad and invalid in law. The ground of appeal no. 1 stands thus allowed in favour of the assessee. Addition u/s 68 - unexplained cash credit - HELD THAT:- Once the transaction had been completed in assessment year 2002-03, it is not discernible how the cash component if any, was to be taxed in the hands of the assessee in assessment year 2004- 05. Without going into the merits of the notings of the seized documents, we find no merit in the aforesaid addition made in the hands of the assessee with regard to the cash component of a sale transaction which was completed in assessment year 2002-03, where cash component was added to the income of the assessee in assessment year 2004-05. No merit in the protective addition made in the hands of the assessee on account of cash components relating to the resident and non-resident brothers/sisters of assessee under section 160 and 163 of the Act. In any case, the AO had failed to give separate notice under section 163(2) of the Act and in the absence on same, no addition could be made in the hands of the assessee.Where the assessee was not maintaining any books of accounts, no addition was maintainable under section 68 of the Act. Accordingly, we direct the AO to delete the addition made on account of cash component and on account of cash component relating to the brothers / sisters. In any case, second addition of made on protective basis in the hands of assessee and corresponding substantive addition has not been made for the instant assessment years in the hands of any person. On this ground also there is no merit in the aforesaid addition. The grounds of appeal raised by the assessee are thus allowed.
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2020 (2) TMI 85
Deduction u/s 80JJA - denial of deduction as no biological agents are manufactured and bio-degradable wastes are not used as raw materials - CIT(A) found merit in the case of the assessee for eligibility of deduction on profits arising from activity of collection and processing of biodegradable waste in order to generate/manufacture biofeeds/biological agents which are essentially nutrition booster derived by a combination of various biological processes for the use in Animal Healthcare Industry - HELD THAT:- As per process adopted, unwanted waste are further treated through a series of biological process with the help of biotechnology to produce biofeeds which are rich in energy values. Biofeeds are stated to help in improving the digestion in animals and poultry and the biological agents present in biofeeds are stated to be used to replace chemical based antibiotics in animal and poultry. On these facts, the CIT(A) has accepted the claim of the assessee under s. 80JJA of the Act on first principle but re-allocated a part of expenditure as considered attributable to the activity derived from the business of collecting and processing or treating biodegradable waste for production of biological agents. Owing to reallocation of expenses CIT(A) restricted the claim to the extent of ₹ 1.54 Crores as against the claim of the assessee amounting to ₹ 1.91 Crore. We find considerable substance in the process of reasoning adopted by the CIT(A) while concluding the issue in favour of the assessee. The CIT(A), in our view, has dealt with the issue objectively and hence does not warrant interference. The Revenue has failed to rebut the findings of the CIT(A) in any assertive manner. We thus decline to interfere. - Decided against revenue.
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2020 (2) TMI 84
Penalty u/s 271B - non complying the provisions of section 44AB - assessee did not get the books of account audited within the time as prescribed - non furnishing the audit report in form 3CD within the specified time - HELD THAT:- There was no infirmity in such tax audit report as observed by the AO. As such the income declared by the assessee in its income tax return has been accepted without pointing any variation. Moreover the purpose of tax audit was to ensure that the information furnished by the assessee in the income tax return are correct so as to save the time of the income tax officer is in carrying out routine verifications of the purchases and sales and other details shown in the financial statements. Thus it is transpired that there was the substantial compliance on the part of the assessee in getting the accounts audited and subsequently furnishing the tax audit report which was accepted by the revenue without pointing out any defect. Delay in getting the books of accounts audited cannot be considered as failure on the part of the assessee as envisaged under the provisions of section 271B of the Act. Thus the delay in getting the accounts audited cannot attract the penalty provisions as specified under section 271B of the Act. We are of the view that the assessee cannot be visited to the penalty on account of delay in getting the accounts audited and furnishing the tax audit report in form 3CD under the provisions of section 44 AB of the Act. With the above observations, the orders of lower authorities are set aside and the penalty levied u/s 271B is deleted. - Decided in favour of assessee.
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2020 (2) TMI 83
Disallowance u/s 14A r.w.r. 8D(2)(iii) - assessee has suo moto made the disallowance - HELD THAT:- In this case undisputedly the AO has recorded general satisfaction as is apparent from the perusal of the assessment order particularly para 3.3 and thus AO has failed to record any objective satisfaction after having considered the books of accounts and also point out as to how the suo motto disallowance made by the assessee is wrong by referring to the books of accounts of the assessee. Therefore, in our opinion, the AO has failed to meet the conditions precedent for invocation of provisions u/s 14A r.w. Rule 8D. The case is squarely covered by the decision of H.T. Media Ltd. [ 2017 (8) TMI 962 - DELHI HIGH COURT] as that AO is required to examine the books of accounts first and record his satisfaction as to how the disallowance made by the assessee, is wrong as per the mandate of section of 14A(2) of the Act r.w. Rule 8D(1)(a) of the Rules. Accordingly, we are not in agreement that the conclusion made by the ld. CIT(A) and the order of ld. CIT(A) on this issue cannot be sustained. We therefore set aside the order of CIT(A) and direct the AO to delete the disallowance made under Rule 8D(2)(iii). Disallowance under Rule 8D(2)(ii) of the Rules - CIT-A deleted the addition - HELD THAT:- In this case, we find that ld. CIT(A) has recorded the findings of the fact that the assessee s interest after setting off the interest expenditure with interest income therefore no interest expenditure is called for disallowance. Besides the ld. CIT(A) has recorded a finding of fact that borrowed funds were raised for advancing loans and earning taxable interest income. Moreover we have decided that AO has not recorded any objective satisfaction before invoking provisions of section 14A r.w.r. 8D and on this count of also the addition will not survive. Accordingly we dismiss the Ground No.1 of the Revenue. Disallowance of professional fees paid to Mr. Arata Nambu - CIT-A deleted the addition - HELD THAT:- As decided in own case [ 2019 (9) TMI 1312 - ITAT MUMBAI] documentary evidence which had been relied upon by the ld. AR to support the aforesaid claim of expenses debited by the assessee in its profit and loss account for the year under consideration, had neither been dislodged by the lower authorities, nor anything proving to the contrary had been placed on our record by the ld. LD.DR in the course of the hearing of the appeal. Accordingly, finding no force in the claim of the Revenue that the CIT(A) was in error in deleting the disallowance of the consultancy charges paid by the assessee company to Mr. Arata Nambu - decided against revenue Payment of commission - CIT(A) directed the assessee to produce relevant supporting evidences before the AO and the AO to allow the claim after verifying the evidences produced by the assessee - HELD THAT:- We note that this is not a case of set aside as has been contended by the Revenue as the ld. CIT(A) has recorded finding of facts that the issue in hand is identical to one as decided by CIT(A) in A.Y 2009-10 and is allowable during the year also but directed the AO to verify the evidences which the assessee may produce and allow the claim. Therefore we do not find any merit in the ground of the Revenue.
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2020 (2) TMI 82
Reopening of assessment - whether incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and that A.O. failed to verify the information received from Investigation Wing? - HELD THAT:- It is well settled Law that mere cash deposited in the bank account of the assessee per se would not disclose escapement of the income as is held by the ITAT in the case of Shri Tejendra Kumar Ghai, [ 2017 (6) TMI 491 - ITAT DELHI] and Shri Abrar Ahmad Qasimi, New Dekhi vs., ITO, [ 2018 (6) TMI 1655 - ITAT DELHI] . The assessee further explained that there is no unaccounted investment in the properties because the deal of ₹ 48 lakhs pertain to sale of the property by assessee which is supported by the Sale Deed and such property was purchased by the assessee way back in 1996. Thus, the sale could not be an unexplained investment in the case of the assessee. In respect of other property, assessee has made Collaboration Agreement with Shri Nilambar Rudrapal and paid ₹ 46 lakhs, the source of which itself is explained in the receipt. A.O. has recorded incorrect and wrong reasons for reopening of the assessment and did not apply his mind to the facts of the case before recording reasons for reopening of the assessment. The A.O. has also failed to verify the information received from the Investigation Wing before recording the reasons for reopening of the assessment. Even the sanctioning authority has not applied its mind to the conclusion drawn by the A.O. based on specific material on record which clearly revealed that reasons recorded by the A.O. are wrong, incorrect and based on no evidence. It is, therefore, clear case of non-application of mind by the A.O. before recording reasons for reopening of the assessment. We are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. - Decided in favour of assessee.
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2020 (2) TMI 81
Additions towards Revenue sharing - Joint Venture Agreement - Sham Transaction of Revenue Sharing or not - as submitted that in the joint venture project in the urban cities in India, the share of land owner is usually 35% to 50% whereas the assessee, in the instant case, has share of only 42% of the gross project revenue - HELD THAT:- In the order passed u/s 143(3) in the case of MGFD, the amount of ₹ 57 crores has been accepted by the AO as the share of revenue @ 60% of the hotel project at Jaipur. We, therefore, find merit in the submission of the ld. Counsel for the assessee that when the AO is not discarding the contribution of MGFD towards the completion of the project which is for the financing, implementation, providing brand name and other technical assistance for completion of the project, therefore, there is a commercial expediency in incurring the expenditure and the AO has no power to sit in the arm chair of the businessman and decide as to what would be the reasonable expenditure which is required to be incurred. AO has accepted the contribution of MGF Development Ltd., towards the completion of the project by providing financing and technical expertise, providing brand name and other technical assistance for the completion of the project and when the assessee has proved the commercial expediency in incurring the expenditure, therefore, detailed reasoning given by the CIT(A) against each allegation raised by the AO, which has been reproduced in the preceding paragraphs, we are of the considered opinion that the order of the CIT(A) does not suffer from any infirmity. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
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2020 (2) TMI 80
Disallowing service tax collected by the assessee u/s 43B - HELD THAT:- Service tax collected by the assessee and not paid to the Government exchequer before the due date of filing of return, is to be disallowed, though it was not charged to the profit and loss account and it attracts the provisions of section 43B of the Act and the present provisions of section 145A of the Act cannot be applied in view of non obstante clause in section 43B of the Act. Assessee raised an alternative plea before us that it should be allowed on actual payment in the assessment year in which it was actually paid. We accept this plea of the assessee and direct accordingly. Disallowance of brought forward loss arises due to additions made u/s 43B 36(1)(va) - HELD THAT:- According to the assessee, it is consequential and the income of the assessee for those years has computed after giving effect to the appellate orders for the respective assessment years. On this count, the CIT(A) also has given direction to the A.O. to verify the brought forward losses and consider the same in accordance with law. Since the CIT(A) has already given a direction to consider the above claim of the assessee, not find it necessary to give any further directions on this issue.
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2020 (2) TMI 79
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee engaged in the business of rendering software development services [hereinafter referred to as the SWD services ] and Information Technology enabled Services [ITES]. need to be deselected from final list. Working capital adjustment - Neither the TPO nor the DRP have gone into the quantum of adjustment that is to be given towards working of working capital adjustment, we are of the view that it would be just and appropriate to remand the issue of granting of working capital adjustment to the TPO/AO for fresh consideration in accordance with law after due opportunity of being afforded to the Assessee. We hold and direct accordingly.
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2020 (2) TMI 78
TP Adjustment - determination of arm s length price (ALP) in respect of an international transaction of rendering software development services - comparable selection - HELD THAT:- 5 comparables to be excluded by the assessee in this appeal are; (1) Infosys Ltd., (2) L T Infotech Ltd., (3) Mindtree Ltd., (4) Persistent Systems Ltd. and (5) Thirdware Solutions Ltd. as the turnover of these companies is 10 times greater than the turnover of the assessee Sagarsoft India Ltd. - if Sagarsoft (I) Ltd. has made a profit, then it shall not be excluded by applying the persistent loss filter. The TPO/AO will verify this aspect and consider inclusion of this company in the final comparables in accordance with law, after due opportunity to the assessee. Evoke Technologies P. Ltd. - assessee contains the annual report of this company for FY 2014-15 in which there is a reference to the revenue of this company for the year 2014-15 to be ₹ 55,60,87,264 and the export turnover, out of this to be ₹ 55,44,99,764. Attention was also drawn to pages 2397 and 2395 to show that the export income as per financial statement was 79.60%. In the light of the above statements, we are of the view that it would be just and appropriate to remand the issue for fresh consideration by the AO/TPO in accordance with law, after due opportunity to the assessee. Maverick Systems Ltd. - Since the R D filter of 3% of revenue was not satisfied, this company deserved to be excluded. The ld. counsel for the assessee submitted before us that this was never a filter applied by the TPO in his TP analysis. Apart from the above submissions, it was also submitted that incurring of R D expenses excluding capital expenditure was only ₹ 95.25 lakhs and that constituted 1.12% of turnover. We are of the view that this aspect also needs to be looked into afresh by the TPO/AO and accordingly we set aside the order of the DRP on this issue and remand the question of comparability of this company to the TPO/AO for fresh consideration in accordance with the law, after due opportunity to the assessee. Determination of ALP in respect of an international transaction whereby interest income was attributed by the TPO/AO on the delayed recovery of trade receivables - HELD THAT:- DR relied on the order of DRP wherein the DRP has placed reliance on the decision of Bectel India P. Ltd. [ 2015 (12) TMI 1560 - ITAT DELHI] wherein the earlier decision of the ITAT was distinguished and it was held that the mere fat that working capital adjustment is done while determining the ALP in respect of enhanced credit period will not subsume the determination of ALP in respect of enhanced credit period given for trade receivables. He also brought to our notice retrospective amendment to section 92B of the Act w.e.f. 1.4.2002 whereby deferred payment on receivables or any other debt arising during the course of business was also included as an international transaction. In view of the aforesaid decision cited by the ld. DR, we are of the view that the order of DRP has to be upheld. Accordingly, we uphold the order of DRP and find no merit in the grievances projected by the assessee. No other arguments were advanced on this issue except the contention that the extended credit period allowed to AE on account of trade receivables will not constitute an international transaction attracting the provisions of Sec.92 of the Act.
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2020 (2) TMI 77
Penalty u/s 271B - failure of getting the books of accounts audited u/s 44AB - HELD THAT: -There is a reasonable cause on the part of the assessee in not getting the books of accounts audited since it adopted the percentage completion method and that the advance received from customers is not part of turnover but in the shape of liability which can be crystallized to the sale turnover only when the project is completed and the possession is handed over along with registered sale deed to the customer. Therefore in our view the assessee succeeds on two counts firstly that it was not required to get books of accounts audited and if for sake of discussion if the alleged advance received from customers is presumed to be turnover then also the assessee will succeed on account of Section 273B of the Act which provides for penalty not to be imposed in certain cases where the assessee proves that there was a reasonable cause for the said failure and thus covers the situation of the assessee too. We, thus delete the penalty levied u/s 271B of the Act at ₹ 1,50,000/- each for Assessment Year 2010-11 to 2012-13 and allow all three appeals raised by the assessee.
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2020 (2) TMI 76
Penalty u/s 271AAB - assessee did not furnish Tax Audit Report for these years as required u/s 44AB - HELD THAT:- Hon ble Karnataka High Court rendered in the case of CIT vs. Babu Reddy [ 2010 (3) TMI 918 - KARNATAKA HIGH COURT ] are squarely applicable in the present case in which it was held that since no format of books of accounts were prescribed under the Rules for Civil Contracts, Penalty u/s 271A is not justified - because learned DR of the revenue could not point out any difference in facts. Therefore, respectfully following the same, we delete the penalty u/s 271B in all these six years. Penalty imposed by the AO u/s 271 (1) (c) - assessee mainly argued on this aspect that the penalty orders are bad in law because no specific allegation is made in the penalty notices issued u/s 274 r.w.s. 271 as to whether the charge is about concealment of income or furnishing of inaccurate particulars of income - HELD THAT:- We find that the Judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. Manjunath Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT ] is squarely applicable in the present case because learned DR of the revenue could not point out any difference in facts. We find that in each of the notices issued by the AO under section 274, the AO is alleging that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. Hence it is seen that the allegation is vague. Notice u/s 274 should specifically state the grounds mentioned in section 271 (1) (c ) i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income and clause q) specifically states that Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. Clause r) specifically states that the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee Penalty imposed by the AO u/s 271 AAB - existence of undisclosed income - Neither in the assessment order nor in the penalty order, this fact is pointed out by the AO that any statement was recorded u/s 132 (4) and some undisclosed income is admitted by the assessee in the same and the assessee has specified the manner in which such income has been derived. There was no undisclosed income found because to arrive at undisclosed income, Gross Profit as worked out by the AO in Para 9.1 of the Penalty Order after reducing only cost of land and Development cost but without reducing other expenses is not justified and there was a loss of ₹ 99,594/- after considering the expenses and this loss is accepted by the AO also except disallowance of ₹ 548,335/- and ₹ 265,000/- on account of disallowance of the assessee s claim of Improvement Cost and Business Expenses respectively and for such disallowance, separate penalty of ₹ 358,987/- was imposed by the AO u/s 271 (1) (c) of I T Act to the extent of 100% of tax sought to be evaded as per the AO and hence, such disallowance is not a subject matter of penalty u/s 271 AAB. Before such disallowance, there is loss as claimed by the assessee after considering all expenses and hence, there is no undisclosed income in the present case for which, penalty u/s 271AAB can be imposed. - Appeals of the assessee are allowed
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2020 (2) TMI 75
Exemption u/s 11 - Charitable activity u/s 2(15) - Total turnover from sweet shop business which is very higher the prescribed limit of ₹ 25 lacs - Transaction done with related party - certain purchases made by the assessee treating as transactions with specified persons u/s 13(3) of the Act which was allowed by the ld. CIT(A) by holding that assessee's activities are chartable in nature and there is no violation of section 13 (3) - HELD THAT:- AO in the remand report has not disputed the core basic activity of the assessee as preparation of Prasad as per request of the devotees, offering the same to God and thereafter distribution of this Prasad to other devotees as well as general public and finally remaining Prasad is distributed to the children of various schools. The assessee has furnished the details of day today distribution of Prasad which is not in dispute. Therefore, when the assessee is not charging anything for providing the services of distribution of Prasad to the devotees, general public as well as school children in the state of Rajasthan then the receipts from the devotees who are requesting for preparation of Prasad and offering the same to God itself is not in the nature of trade, commerce or business. Hence, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Violation of provisions of Section 13(1)(C)(ii) r.w.s.13(2)(g) - AO has invoked the provisions merely because the assessee has made purchases from M/s. Pawansut Trading Company Pvt. Ltd., New Delhi which is a related party. However, the AO has nowhere stated that the assessee has made excess payment to the said unrelated party. This payment ought to have been made in terms of fair market price. There is no allegation of the AO that the assessee has given more prices to the related party than to the unrelated third party. Merely because the transaction is done with the related party, if the same is done strictly as per normal terms and conditions and no undue benefit is given to the unrelated party then even if the transaction is done with specified persons, it will not amount to violation of provisions of section 13(1)(C)(ii) r.w.s. 13(2)(g) of the Act. Only when it is found that the assessee has given undue benefit to the related party then it would amount to violation of these provisions. Further, even if it is found that the assessee has give some benefit by making excess payment in comparison to the actual price in terms of fair market price then only excess payment found to be made to the related party would be considered as income not applied for charitable purposes. In this case, the AO has not made any such allegations and his finding is not based on any specific actual undue benefit but only on conjecture and surmises that since the transaction is with related party, it is a violation of provisions of section 13(1)(c)(ii) r.w.s. 13(2)(g). Once the income is not applied or used for direct or indirect benefit of specified person but it is only a transaction on a competitive rate then there would be no violation of section 13(1)(c)(ii) - when the income or the property of the trust is not diverted in favour of the any person specified in sub-section (3) then the provisions of section 13(2(g) are also not violated. In this case, it is only a transaction of purchase of materials by the assessee from the related party but when the purchases are made at the market rate and at competitive price then it would not amount to giving any benefit or utilizing the income for the benefit of related party. CIT(A) has decided this issue after giving opportunity to the AO to point out as to how any undue profit has been passed to the related party. In the absence of any facts or materials to indicate that the assessee has given any undue benefit or even applied its income or property for the benefit of the specified person, the mere transaction with the related party would not ipso facto attracts the provisions of section 13(1)(C)(ii) r.w.s. 13(2)(g) of the Act. Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A) qua this issue. Disallowance of 5% of the purchases made from M/s. Pawansut Trading Company Pvt.Ltd., New Delhi by the AO which was deleted by the ld. CIT(A) - This issue is only a consequential disallowance made by the AO after denying the benefit of exemption u/s 11 and 12 of the Act in respect of purchases made by the assessee from related party. Since we have already considered and decided this issue of violation of 13(1)(c)(ii) r.w.s. 13(2)(g) of the Act, therefore, in the absence of any excess or extra payment made by the assessee to the said related party on account of purchases and the transaction is found at arms length, therefore, the adhoc disallowance of 5% made by the AO is arbitrary and unjustified. - Decided against revenue
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2020 (2) TMI 74
Assessment u/s 153A - Rejection of books of accounts - GP estimation - HELD THAT:- The satisfaction recorded by AO initiating 153C is silent regarding the pending proceeding initiated u/s 153A by notice dtd. 29.12.2009 in the case of the assessee. The proceedings though purported to be initiated u/s 153C the assessments are completed u/s 153A rws 143(3) as evidenced by the respective orders of ld. AO and CIT(A). This leads to a legal situation where during the pendency of 153A proceedings notice u/s 153C is issued. To further confound the situation the proceedings are purported to be continued u/s 153C but the assessments are completed u/s 153A despite consciously dropping the notice u/s 153A. We find merit in the argument of ld. Counsel that assessments u/s 153A and 153C are independent and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. Regular trading results of the assessee s business were already subject matter of appeals, there was no search on his show room, and therefore, no incriminating material was found. By estimating the GP from regular business ld AO has reviewed settled position without any incriminating material in this behalf, which is not permissible in search assessments. In view thereof we delete the additions made in respect of estimation of GP from regular business. Apropos the income declared from unaccounted business it has not been disputed that assessee filed complete record of year wise and transaction wise accounts of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding comparatively lesser GP from unaccounted business than regular business assessee offered proper reasons which have not been even considered by AO. The GP has been enhanced not based on any objective considerations but by summarily relying on estimated GP of regular business. In our considered view the incriminating material should be considered in totality and when assessee has submitted copious accounts for incriminating material it cannot be discarded summarily as done by ld. AO. Since there is no rebuttal in respects of accounts of unaccounted income furnished by the assessee, the profits declared deserve to be accepted in given facts and circumstances. Similarly it is not disputed that value of stock of jewellery found from locker was taken by ld. AO on market price whereas as per settled accounting principles same should have been valued at cost. Consequently valuation adopted by assessee is to be adopted. Thus the additions in question deserve to be deleted on merits also. - Decided against revenue.
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2020 (2) TMI 73
Taxability of interest earned from time deposits - whether it is taxable under the head income from other sources or it can be reduced from capital work-in-progress, when the funds are inextricably linked with project funds ? - HELD THAT:- The co-ordinate bench of ITAT, Mumbai G bench in assessee s own case for AY 2011-12 had considered an identical issue and after considering relevant facts and also by following another co-ordinate bench decision, in the case of Infrastructure Development Company of Rajasthan Ltd. vs DCIT [ 2016 (9) TMI 957 - ITAT JAIPUR] held that interest earned from time deposits kept out of surplus funds available to the assessee out of project funds is deductable from the capital working progress We are of the considered view that interest earned from time deposits kept in banks out of surplus funds of project is rightly reduced from capital work-in-progress. Therefore, we direct the Ld. AO to delete additions made towards interest income under the head income from other sources. Disallowances of expenses u/s 37(1) - assessee had incurred total expenditure under the head other expenses - HELD THAT:- In this case, the Ld.CIT(A) after considering the nature of expenditure and its relevance for maintaining the corporate status of the assessee has allowed director s fees and audit fees on the ground that the above mentioned expenses are required to be incurred to maintain the corporate status of the assessee. The balance expenditure has been disallowed, on the ground that they are not related to maintaining the corporate status of the assessee. The assessee has furnished details of expenditure, as per financial statements prepared for the year. Ongoing through, the nature of expenditure debited into the profit and loss account under the head other expenses, we find that they are all general expenses, which are not directly related to maintain the corporate status of the assesee. Therefore, we are of the considered view that the Ld.CIT(A) was right in allowing only director s fees and audit fees out of total expenditure debited under the head other expenditure and disallowed balance amount, on the ground that they are not related maintaining the corporate status of the assessee. Insofar as, alternate ground of the assesee that if, the claim of the deduction is not accepted towards said expenditure, then the said sum may be added to capital work-in-progress. No doubt, the assessee is entitled for deduction towards certain expenditure incurred, either as revenue expenditure or if said expenditure is not in the nature of revenue expenditure, the same needs to be capitalized to work-in-progress. Since, we held that remaining expenditure is not in the nature of revenue expenditure, which could be allowed u/s 37(1), the Ld. AO is directed to add the balance expenditure to capital work-in-progress account.
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2020 (2) TMI 72
Disallowance u/s 36(1)(iii) - HELD THAT:- Assessee s own fund consisting of share capital and reserve and surplus was ₹ 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of ₹ 2,13,55,159/- only. The Hon ble Bombay High Court in Reliance Utility Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] held that if the assessee have funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. Therefore, in view of the decision of jurisdiction High Court as referred above, we are of the view that the assessee has sufficient interest free fund available with the assessee and therefore, no interest disallowance under section 36(1)(iii) was justified. Disallowance under section 14A - HELD THAT:- Assessee has made investment from its own interest free funds for the earning exempt income or the investment made are from the income generated from the business of assessee, therefore, no interest disallowance under Rule 8D(2)(ii) is warranted against the assessee. So far as disallowance under section Rule 8D(2)(iii) is concerned, the Assessing Officer have made disallowance @ .5% of average value of investment. In our view, the Assessing Officer has correctly made the disallowance of indirect expenses by applying the formula of Rule 8D. Therefore, we upheld the disallowance of .5% of average value of investment. The assessing officer is directed to allow the setoff of suo moto disallowance offered by the assessee. Thus, the assessee gets part relief on this ground of appeal Addition of Pooja Expenses - HELD THAT:- In assessee s own case for preceding year when no variance is brought to our notice. Thus, respectfully following the same, we direct the Assessing Officer to delete the disallowance of Pooja Expenses. Addition of Club Expenses - HELD THAT:- Considering the decision of Tribunal on similar ground of appeal in assessee s own case for preceding year when no variance is brought to our notice. Thus, respectfully following the same, we direct the Assessing Officer to delete the disallowance of Club Expenses. Transfer Pricing Adjustment for corporate guarantee - HELD THAT:- Provision of guarantee is not international transaction is not acceptable to us. In our view after introduction of Explanation 1(c) to section 92B with retrospective effect from 01.04.2002, the provision of guarantee has to be considered as international transaction. However, following the decision of Hon ble Bombay High Court in Everest Canto Cylinder Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] , we direct the Assessing Officer to charge/add guarantee commission @ 0.5% p.a. for the period of guarantee. In the result, this ground of appeal is partly allowed. Treatment of receipt received on transfer of TDR - capital receipt or revenue receipt - Admission of additional claim - HELD THAT:- Assessing Officer is not entitled to accept revised claim without filing of revised return of income, however, we are in agreement with the contention of ld. AR of the assessee that the appellate authority have jurisdiction to consider revised claim as held by jurisdictional High Court in Pruthvi Brokers Shareholder Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] - We are also in agreement with the submission of ld. AR of the assessee that acquiescence cannot take away the right of the parties for the relief that he is entitled, where tax is levied or collected without authority of law. Therefore, considering the facts of the case, we admit the additional ground/claim raised by assessee about the receipt of income received on transfer of capital asset/TDR. We have admits the additional ground/claim of assessee, therefore, we deem it appropriate to restore the issue to the file of Assessing Officer to decide this issue afresh in accordance with law. Interest u/s 244A and 234D - HELD THAT:- Appeal are restored the file of Assessing Officer to recompute the interest under section 244A and 234D in accordance with law. Disallowance under section 14A to book profit under section 115JB - HELD THAT:- Issue decided in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein Special Bench of Delhi Tribunal that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D.
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2020 (2) TMI 71
Addition u/s 68 - Unexplained cash credit - onus to prove - HELD THAT:- There is nothing contrary on record to show that the assessee has complied with the requirements of the learned Assessing Officer in the exercise of forming satisfaction as to the identity and the creditworthiness of the share applicants or the genuineness of the transaction. Mere paperwork by the assessee does not take the authorities anyway, when the authorities suspected the existence of the entities that applied and paid for share application and share premium and insisted that a higher degree of proof is required in that respect. In view of the decisions of the Hon ble jurisdictional High Court and Hon ble Supreme Court in the case of NDR Promotors Pvt. Ltd. [ 2019 (1) TMI 1089 - DELHI HIGH COURT] and NRA Iron and Steel (P) Ltd [ 2019 (3) TMI 323 - SUPREME COURT] we are of the considered opinion that the action of the learned Assessing Officer was illegal and non-compliance with the same had rightly led to the inference that the assessee had rooted their own money in the books of accounts through the fictitious and bogus companies. On this premise we sustain the addition made by the learned Assessing Officer under section 68 of the Act. We further find that the Ld. CIT(A) had followed the procedure established under law for enhancing the additions and such additions are justified by record. Consequently, we dismiss the grounds of appeals.
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2020 (2) TMI 70
Income recognition - determining estimated total profit/loss from the project - Extension of Time (EoT) claim excluded from estimated contract value for the purposes of recognizing revenue under Accounting Standard-7 (AS-7) - HELD THAT:- Undisputed fact is that the assessee itself has included a sum of ₹ 150 crores as EOT claim on the basis of expected probable realisation of the claim. Though the addition made by the AO has been deleted by ld CIT(A), which has also been confirmed by us, on the basis of AS-7 and surrounding facts, yet the fact remains that the assessee has included a sum of ₹ 150 crores with regard to the EOT claim on the basis of its past experience relating to the settlement of EOT claims. Hence, we are of the view that the principles adopted for deleting the enhancement made by the AO cannot be equally applied to the amount of ₹ 150 crores included by the assessee in the contract receipts on the basis of accounting principles consistently followed by it. Accordingly we confirm the order of Ld CIT(A) on this issue. Corporate Social Responsibility (CSR) Disallowance - addition on the ground that those expenses were not incurred for business purposes - HELD THAT:- We set aside the order of the Ld. CIT(A) on the above ground of appeal and restore the matter to the file of the AO to pass an order afresh after (i) following the order of the Tribunal in assessee s own case for AY 2008-09 to AY 2010-11 and (ii) examining whether the expenditure has been incurred for the purposes of business. We direct the assessee to file the relevant documents/evidence before the AO. Claim for set off of share of loss from AOP under the provisions of section 70 against business income the appellant is not allowable - see assessee's own case [ 2013 (1) TMI 367 - ITAT MUMBAI] Deduction u/s 80IA(4) rejected - HELD THAT:- This issue was decided against the assessee by the co-ordinate bench of Tribunal in the assessee s own case relating to AY 2003-04 and 2007-08, referred above by holding that the assessee has acted as a Contractor in various projects and not as a developer. Consistent with the view taken in the above said years, we uphold the order of Ld CIT(A) on this issue TP adjustment - assessee advanced an unsecured loan to its AE for the purpose of acquisition of shares - at LIBOR + 400 bps OR LIBOR + 300 bps on loan given by the appellant to its Associated Enterprise - HELD THAT:- The tenure of loan was 3 years and interests were payable @ LIBOR + 300 bps on completion of tenure of the loan. The assessee submitted before the TPO that the rate of interest charged by it is more than the prevailing market rate. The TPO has reproduced the submissions of the assessee on comparability of lending to the AE by Exim Bank and by the assessee at page 22 and 23 of his order. The TPO has tabulated at page 23 the comparable security of the two loans. However, we find that the TPO has not examined the submission by the assessee that the security that the assessee had was better than the security obtained by Exim Bank. As the TPO has arrived at the ALP at LIBOR + 400 bps, without contradicting the submission of the assessee and the adoption of LIBOR + 400 bps is not based on any reasoning, we delete the transfer pricing adjustment TP adjustment - Corporate Guarantee Commission - HELD THAT:- We are of the considered view that aptly in the case of Everest Kento [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] while commercial banks were stated to be charging 3% for guarantee, the Hon ble Bombay High Court upheld ALP at 0.5%. Following the same, we hold that the Corporate Guarantee Commission be charged at 0.5%. Thus the 1st to 8th grounds of appeal are partly allowed. Re-compute the disallowance u/s 14Ar.w.r. 8D - CIT-A stating that disallowance not to exceed exempt income - HELD THAT:- CIT(A) clearly indicates that he has directed the AO to re-compute the disallowance u/s 14A by following the judicial decisions. We agree with the order of the Ld. CIT(A) on the above issues. Only addition we make is to direct the AO to also follow Maxopp Investment Ltd. v. CIT [ 2018 (3) TMI 805 - SUPREME COURT] Excluding disallowance u/s 14A while computing Book Profit u/s 115JB - HELD THAT:- CIT(A) has rightly directed the AO to follow the order of the Special Bench of the Tribunal in the case of ACIT v. Vireet Investment Pvt. Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] for excluding the disallowance u/s 14A while computing Book Profit u/s 115JB.
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2020 (2) TMI 69
Reopening of assessment u/s 147 - expenditure not allowable under section 37 - HELD THAT:- There was no fresh tangible material before the Assessing Officer on the basis of which he formed his belief that income escaped in the case of the assessee. The only reason which has been recorded by the Assessing Officer is that it appeared to him that those expenses were not allowable under section 37 of the Act. In our opinion, this is mere change of opinion based on the suspicion without any tangible information that said expenditure was not allowable under section 37 of the Act. The Assessing Officer was not sure whether the said expenditure was not allowable under section 37 of the Act. We find that Hon ble Gujarat High Court in the case of Nitin P Shah Vs DCIT, [ 2004 (12) TMI 64 - GUJARAT HIGH COURT] quashed the reopening of the assessment, where the Assessing Officer only stated that note attached to return of income indicated possible escapement of income and was not sure about it. In the order passed u/s 143(3) in the case of MGFD, the amount of ₹ 57 crores has been accepted by the AO as the share of revenue @ 60% of the hotel project at Jaipur. We, therefore, find merit in the submission of the ld. Counsel for the assessee that when the AO is not discarding the contribution of MGFD towards the completion of the project which is for the financing, implementation, providing brand name and other technical assistance for completion of the project, therefore, there is a commercial expediency in incurring the expenditure and the AO has no power to sit in the arm chair of the businessman and decide as to what would be the reasonable expenditure which is required to be incurred. - Decided in favour of assessee.
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2020 (2) TMI 68
Reopening of assessment u/s 147 - addition on account of additional depreciation - objections raised by the assessee were not disposed-off by Ld. AO - HELD THAT:- No infirmity in the order of Ld. CIT(A) in setting aside the reassessment order passed by Ld. AO since the objections raised by the assessee were not disposed-off by Ld. AO either in assessment order or by way of separate speaking order. There was no fresh tangible material in the possession of Ld.AO to trigger reassessment proceedings against the assessee - reassessment proceedings were triggered merely by making certain observations during the course of assessment proceedings of the parent entity without establishing that certain income escaped in the hands of the assessee. It is also to be borne in mind that the original assessment was framed u/s 143(3) on 26/02/2014 and there was complete disclosure of claim of additional depreciation in the financial statements. Perusal of assessee s financial statements, as place on record, would establish that there was clear disclosure of addition in Plant Machinery and the claim of additional depreciation was separately shown in the depreciation schedule. After considering the same, Ld. AO chose not to make any additions in this respect. Therefore, revisiting the same issue in reassessment proceedings would tantamount to review of the order, which is impermissible under law. As per assessee s submissions, it acquired new plant machinery from the parent entity and in support of the same, it filed copies of invoices clearly mentioning the description of machinery bought by the assessee. The excise duty was charged in the invoices which would make it a case of manufacturing since no excise duty would be applicable in case of old machinery. No investigation, whatsoever, was done by Ld. AO during reassessment proceedings, to rebut the assessee s claim and no further verification was done. No contrary material was brought on record to fortify the stated additions except making an allegation that the assessee claimed additional depreciation on old machinery. - Decided in favour of assessee.
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2020 (2) TMI 67
Disallowance of interest u/s 24(b) - whether there is no interest free advances to the directors during the year? - HELD THAT:- Issue of re-payment of loan and settlement of account was over at the end of the financial year 2007-08. Similarly in case of Smt. Jai Mala Agarwal, the loan amount was ₹ 70,80,000/- whereas the AO has wrongly mentioned as ₹ 45,00,000/- and repayment was made by the assessee at ₹ 65,80,000/-, therefore, there is no excess payment in that case. We find from the ledger account that the account of Smt. Jai Mala Agarwal was settled before the end of the financial year 2007-08 and there was no excess payment or outstanding. Once the accounts of these three directors were settled before the end of the financial year 2007-08 by utilizing the loan taken from the ICICI Bank, no disallowance on account of interest expenditure for the assessment years 2010-11 and 12-13 is called for. Since the entire loan amount availed by the assessee from ICICI Bank was finally utilized for repayment of the loans taken from the Directors before the end of the financial year 2007-08, then the issue was no more survived thereafter and consequently for the assessment year under consideration no disallowance is called for on account of interest expenditure. Accordingly, in the facts and circumstances of the case, we delete the disallowance made by the AO on account of interest payment under section 24(b) of the Act - Decided in favour of assessee.
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2020 (2) TMI 66
Disallowance u/s 14Ar.w.s. 8D - Addition exceeding own exempted income - HELD THAT:- Admittedly, the exempted income declared by the assessee is of ₹ 11,83,96,894.00 only which is not in dispute. The Hon ble Gujarat High Court in the case of CIT vs. Corrtech Energy Private Ltd [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] has held that the amount of disallowance under section 14A read with rule 8D cannot exceed the amount of the exempted income Amount of disallowance as discussed above is not warranted in the present facts and circumstances. As such, the amount of the disallowance under section 14A r.w.r. 8D of Income Tax Rules cannot exceed the amount of disallowance made by the assessee i.e. ₹ 29,35,81,617.00 in the income tax return. Accordingly, we delete the addition made by the AO in the case of the assessee which was subsequently confirmed by the ld. CIT(A). Similarly, we also confirm the deletion as made by the learned CIT-A in the appeal of the Revenue. Hence, the ground of appeal of the assessee is allowed whereas the ground of appeal of the Revenue is dismissed.
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2020 (2) TMI 65
Addition u/s 68 - unexplained cash credit - HELD THAT:- It is the submission of the ld. Counsel for the assessee that the assessee has filed various documents to substantiate the identity and credit worthiness of the share applicants and genuineness of the transactions. It is to be noted here that the decision of the Hon ble Supreme Court in the case of PCIT vs. NRA Iron Stee l [ 2019 (3) TMI 323 - SUPREME COURT ] and NDR Promoters Pvt. Ltd.[ 2019 (1) TMI 1089 - DELHI HIGH COURT ] were pronounced subsequent to the orders passed by the lower authorities. Neither the assessee nor the Revenue had the benefit of these two decisions wherein the issue of share capital at high premium to bogus companies have been elaborately discussed. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessees to substantiate its case by producing the directors of the investor companies for recording of their statements and produce evidence to the satisfaction of the AO regarding the identity and credit worthiness of the investor companies and the genuineness of the transaction. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee Order of assessing officer without giving the adequate opportunity to the appellant - HELD THAT:- As per the provisions of section 250(4) and 250(6), the ld.CIT(A) is supposed to make further enquiry as he thinks fit or direct the AO to make further enquiry. While disposing of the appeal, he shall pass the order in writing and shall state the points for determination, the decision thereon and the reason for the decision. Even though the assessee has not appeared before him, the ld.CIT(A) cannot dismiss the appeal for want of prosecution and he is supposed to pass a speaking order on merit. Since, in the instant case, the ld.CIT(A) has failed to follow the law, therefore, we deem it proper to restore this issue to the file of the CIT(A) with a direction to pass a speaking order on this issue after giving an opportunity to the assessee to substantiate its case. The assessee is also hereby directed to appear before the CIT(A) and cooperate in completion of the hearing without seeking adjournment under any pretext, failing which the ld.CIT(A) is at liberty to pass appropriate order as per law. We hold and direct accordingly.
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2020 (2) TMI 64
TDS u/s 194C - addition u/s 40(a)(ia) - reimbursements of expenses or not - HELD THAT:- Assessee has not furnished any evidence before the AO or the CIT(A) that the recipients had no taxable income or that they had income which is less than taxable income or that the recipients have made the payment of tax on their receipts from the assessee. In view of the same, the proviso to Section 201(1) of the Act would not be applicable to the assessee and in the absence of such applicability, the second proviso to Section 40(a)(ia) of the Act also would not be attracted. TDS provisions are applicable in respect of the labour charges paid by the assessee. AO is therefore, directed to examine whether the labour charges paid by the assessee included reimbursement of the material and transportation cost and if it is found to be so, then after excluding such payment if the payment towards labour charges is less than ₹ 50,000/- to each of such persons, then TDS provisions would not be attracted. However, if the assessee is not able to produce the evidence in support of reimbursements, then the AO shall apply the provisions of section 40(a)(ia) to make the disallowance in respect of such payments. Appeal of assessee is partly allowed for statistical purposes.
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2020 (2) TMI 63
Income accrued in India - Indo-USA Data - income from cloud hosting services - PE in India - HELD THAT:- Agreement between the assessee and its customers is for providing hosting and other ancillary services to the customers and not for the use of leasing any equipment. The data centre and the infrastructure therein used to provide these serves belongs to the assessee. The customers are not having physical control or possession over the servers and right to operate and manage this infrastructure/servers vest solely with the assessee. The agreement is to provide hosting services simpliciter and is not for the purpose of giving the underlying equipment on hire or lease. The customer was not knowing any location of the server in data centre, web mail, websites etc. Accordingly, it cannot be said as royalty within the meaning of Explanation (2) to Section 9(1)(vi) of the Act as well as Article 12(3)(b) of the Indo-USA Data by the AO and DRP. Moreover, there is no PE of the assessee in India and hence, no income can be taxed in India in term of Indo-US DTAA. The facts are not distinguishable in this order also. Therefore, the finding above is quite applicable to the facts of the present case. Accordingly, we find that the issue is squarely covered by the decision of Hon ble ITAT in the assessee s own case hence, we decide these issues in favour of the assessee against the revenue. Income from cloud hosting services as fee for technical services within the meaning of Section 9(1)(vii) of the Act as well as fee for included services under Article 12(4)(a) of the IndoUS DTAA - HELD THAT:- On the basis of the finding given while deciding the issue no. 1 in which the income was not treated as royalty within the meaning of Explanation-2 to Section 9(1)(vi) of the Act as well as Article 12(3)(b) of the Indo-USA DTAA tax treaty. Accordingly, by following the decision of co-ordinate bench, the present issue is decided in favour of the assessee against the revenue. Direct the AO not to charge interest under section 234B - See NGC NETWORK ASIA LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT]
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2020 (2) TMI 62
Write-off or waiver of advance given to its subsidiary - Whether allowable as deduction under Section 36(1)(vii)/37(1)/28 and/or any other provision of the Act? - HELD THAT:- In the present case, it is not in dispute that the assessee earned interest income of ₹ 39,00,00,000/- and assignment charges of ₹ 10,45,00,000/- from the transaction of development of NGE land. Following the ratio laid down by the Hon'ble Supreme Court in the case of T. Veerabhadra Rao [ 1985 (7) TMI 2 - SUPREME COURT] which has been applied by the Hon'ble Bombay High Court in Shreyas S Morakhia [ 2012 (3) TMI 103 - BOMBAY HIGH COURT] we find that the income offered by the assessee in the form of interest and assignment charges formed part of the entire debt owned by the assessee from NGE and since the assessee had offered to tax a part of the debt, the requirement of Section 36(2) of the Act stood satisfied and the assessee is eligible to claim the deduction under Section 36(1)(vii). Since we have accepted the plea of the assessee for deduction of the said sum in terms of Sec. 36(1)(vii) of the Act, the alternate pleas made by the assessee for deductibility of the said sum in terms of Sec. 37(1) of the Act or as a 'business loss' in terms of Sec. 28 of the Act, are rendered academic and are not being adjudicated for the present. Accordingly, Ground of appeal no. 1 of the assessee is allowed. Disallowance of claim of Short Term Capital Loss and Long Term Capital Loss claimed by the assessee on sale of assets used for Research Development activities for which deduction under Section 35 of the Act was already claimed by the assessee holding it to be double deduction - HELD THAT:- Issue is decided against the assessee by the Tribunal in assessee's own case [ 2013 (9) TMI 522 - ITAT, MUMBAI] holding that the claim of short term and long term loss will amount to double deduction, which is not permissible. Since there is no change in facts, following the decision of our co-ordinate Bench in assessee's own case, this Ground of appeal is decided against the assessee. Disallowance of claim of special pension liability based on actuarial valuation - HELD THAT:- Since the Assessing Officer himself has allowed the claim of the assessee under Section 35DDA of the Act in subsequent years, we direct the Assessing Officer to allow the claim under Section 35DDA of the Act for the year under consideration as the nature of payment in all the years is the same, there being no change in facts. Thus, on this Ground, assessee partly succeeds. Addition of value of closing stock on account of unutilised MODVAT Credit applying the provisions of Section 145A - HELD THAT:- Irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME COURT] and Diamond Dye Chem Ltd. [ 2017 (7) TMI 616 - BOMBAY HIGH COURT] we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. This Ground of appeal is accordingly allowed. Manner of computation of deduction under Section 80HHC - HELD THAT:- Receipts by way of income from Services rendered and Property Development activity is concerned, undoubtedly the same are in respect of activities which fall within the ambit of 'income from business', a treatment which has been accepted by the Revenue in the past years also. AO has excluded 90% of the above items by applying Explanation (baa) to Sec. 80HHC of the Act on the premise that said receipts are not directly related to exports. Pertinently, the said position taken by the Assessing Officer is in variance with his stand in the earlier assessment years, as contended by the Ld. Representative for the assessee. Earnings by way of Services rendered and Property Development activity as well as income from scrap is an integral part of diverse activities being carried out by the assessee and the income has otherwise also been assessed from such activities as business income. In fact, the Ld. Representative pointed out, without controversion, that such receipts do figure as a part of 'total turnover' of business for the purpose of computing deduction under Section 80HHC of the Act. We are also in agreement with the Ld. Representative that so far as scrap income is concerned, since it has been generated from production process and assessee is not in the business of sale of scrap, any income from such scrap tantamounts to recoupment of cost of raw material/production and, therefore, is includible in the 'profits of business' for the purpose of Sec. 80HHC of the Act. The requirement of reducing 90% of such receipts from the 'profits of business' as contained in Explanation (baa) to Sec. 80HHC of the Act, in our view, is not relevant qua the aforesaid three receipts, since same are in the nature of operational incomes. Thus, on this aspect, assessee succeeds. Insofar as receipt from Royalty is concerned, the same has been rightly excluded as required by Explanation (baa) to Sec. 80HHC of the Act by the Assessing Officer, which is hereby affirmed. Insofar as the alternate plea of the assessee for exclusion of the same from the figure of total turnover is concerned, the Assessing Officer shall verify the same and thereafter decide on the plea of the assessee afresh. Thus, this Ground of appeal is partly allowed.
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Customs
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2020 (2) TMI 61
Amendment in shipping bill - rejection of request of the appellant for No Objection Certificate for claiming MEIS benefits by amendment of reward option from No to Yes in Shipping Bills - HELD THAT:- The Commissioner has failed to notice that the appellants have declared their intention to claim MEIS benefits in two cases out of three cases, the shipping bills which have been produced on record. The only lapse on the part of the appellant was that they have mentioned in the reward column as 'N' instead of 'Y', which is only a procedural defect. Further, I find that otherwise the appellant is entitled to claim MEIS benefit as per the export policy. Failure to mention 'Y' in the reward column of the shipping bill for availing the benefit under MEIS scheme can be corrected by amending the shipping bill. The rejection of request for amendment of shipping bills by the Commissioner is not sustainable in law - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 60
Revocation of CHA License - forfeiture of security deposit - smuggling of prohibited goods - sticks of cigarette were attempted to be smuggled by concealing them in HDPE granules imported - Regulation 20(1) of CHALR, 2004 - HELD THAT:- A plain reading of N/N. 65/2013-CUS (NT) dt.21.06.2013 shows that the erstwhile regulations have been completely superseded except in respect of things which were already done. Also, there is no separate savings clause in the CBLR, 2013. Therefore, regardless of the fact that the appellant was licensed prior to the introduction of CBLR, 2013, the present proceedings, having been initiated post 2013, must be proceeded under the new regulations. CHALR, 2004 cannot be invoked as they did not exist during the relevant period. The impugned order is bad in law - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 59
Imposition of penalties on CHA u/s 112 of Customs Act, 1962 - jurisdiction for imposition of penalties - mis-declaration of vessel - HELD THAT:- It is clear that the case against the custom broker is dependant entirely on the variance with the description found in the certificate issued by the Registry of Indian Ships as well as the certificate issued by the Fiji Shipping Registry. We are unable to arrive at the same conclusion as the licensing authority that the description in these two documents would indicate the classifiability of the vessel as tugs . On the contrary, the inclusion of supply vessel in the description is equally ambiguous in deciding upon the classification. It was, therefore, an overreach on the part of the licensing authority to conclude that description made in the documents despite the possession of these two certificates indicate a deliberate attempt to mislead. There is no adducing to any other motive for erroneous declaration in the bills of entry. Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2020 (2) TMI 58
Suit for recovery of price of goods sold and delivered - issue of forgery - HELD THAT:- In a suit for recovery of price of goods sold and delivered and in an application for judgment and decree on admission therein, a defendant can set up a defence of forgery. Such defence is required to be evaluated so as to arrive at a finding whether such defence is one of moonshine or of substance. In the facts of the present case, the defendant claims that one Mr. Pankaj Sharma issued certain letters to the defendant. Such Mr. Pankaj Sharma by way of an affidavit denies having issued such letters. These letters apparently relate to the alleged loss that the defendants suffered by way of the inferior supplies effected by the plaintiff. The pendency of the proceedings under the Insolvency and Bankruptcy Code, 2016 is no bar to the present suit being heard and decided. The jurisdiction of the two fora are different - The confirmation of account dated August 11, 2018 shows an outstanding amount of ₹ 5,79,58,608/-due and payable by the defendant to the plaintiff. Application disposed off.
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2020 (2) TMI 57
Maintainability of petition - initiation of CIRP - time limitation - fraudulent and malicious initiation of proceedings with an intent for any purpose other than for the resolution of insolvency or liquidation - HELD THAT:- The 1st and 2nd Respondents filed the application under Section 7, fraudulently with malicious intent for the purpose other than for the resolution or liquidation and they knocked at the doors of the Adjudicating Authority for refund of money and not for the Flat/ premises and thereby wanted to jump ship and really get back the amount, by way of coercive measure - Apart from the fact that the Corporate Debtor has offered the possession of flat on 15th November, 2016 and obtained completion certificate immediate thereafter. Therefore, delay in granting approval by the Competent Authority cannot be taken into consideration to hold that the Corporate Debtor defaulted in delivering the possession. The case of the 1st and 2nd Respondents is covered by Section 65 of the I B Code and are liable for imposition of penalty. However, in the facts and circumstances of the case, we are not imposing such penalty on 1st and 2nd Respondents, who even in presence of this Appellate Tribunal refused to accept the money in terms of the Agreement and also refused to take possession of the flat. The application preferred by 1st and 2nd Respondents under Section 7 of the I B Code is dismissed - The appellant Corporate Debtor (company) is released from all the rigours of Moratorium and is allowed to function through its Board of Directors from immediate effect.
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2020 (2) TMI 56
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of debt - existence of debt and default or not - HELD THAT:- The Insolvency and Bankruptcy Code recognises two types of debt to enable the creditors to make an application for initiating insolvency proceedings against the corporate debtor- financial debt and operational debt. If there is a debt, other than a financial debt or an operational debt, the creditor will not qualify to apply under Sections 7 or 9, as the case may be. Hence, the determination of nature of claim/debt is an important step while considering the admission of an application under the Code - While the law is still evolving, there are certain categories of dues, about which, the debate as to their classification into financial or operational debt continues. One such debt claims on account of unpaid rent payable by an entity to a landlord are in question in the present case. Any debt arising without nexus to the direct input to the output produced or supplied by the corporate debtor, cannot, in the context of Code, be considered as an operational debt, even though it is a claim amounting to debt - without going into the aspect whether an immovable property in itself constitutes stock- in- trade of the corporate debtor and has a direct nexus to its input- output, being an integral part of its operations, the Bench held that lease of immovable property cannot be considered as a supply of goods or rendering of services, and thus, cannot fall within the definition of operational debt. In case of lease of immovable property, Default can be determined, on the basis of evidence. While exercising summary jurisdiction, the Adjudicating Authority exercising its power under Insolvency and Bankruptcy Code 2016, cannot give finding regarding default in payment of lease rent, because it requires further investigation. It is clear that once an operational creditor has filed an application which is otherwise complete the Adjudicating Authority must reject the application U/S 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility, the Adjudicating Authority is to see whether there is a plausible contention which requires further investigation and the dispute is not a patently feeble legal argument or an assertion of fact, unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster - In the case in hand, the Respondent lessor has filed the petition for the realisation of enhanced lease rent from the lessee. The alleged debt on account of purported enhanced rent of leasehold property does not fall within the definition of the operational debt in terms of Section 5(21) of the Code - Appeal allowed.
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2020 (2) TMI 55
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment - existence of dispute or not - HELD THAT:- In the present case, applying the test of existence of a dispute , without going into the merit of the dispute, it is apparent that the Corporate Debtor had raised a plausible contention to require further investigation, which was not a patently, feeble, legal arguments or an assertion of facts, unsupported by evidence. The defence was not spurious, mere bluster, plainly, frivolous or vexatious. In this Operational Creditor has not filed any documents to show that the final bill was submitted regarding the alleged contract and the outstanding amount was also acknowledged by the Corporate Debtor. These email/communication submitted by the Corporate Debtor also shows that there was a pre-existing dispute, before issuance of the demand notice. Therefore, we are of the considered opinion that the Adjudicating Authority has rightly rejected the application filed under Section 9 of the I B Code for initiation of the Corporate Insolvency Process. Appeal rejected.
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2020 (2) TMI 54
CIRP process - constitution of Committee of Creditors (COC) - HELD THAT:- If a Resolution Plan comes to be considered and approved, Section 30(2)(a) shows that such Plan would require providing for the payment of the Insolvency Resolution Process costs in a manner specified by the Board in priority to the payment of other debts of the Corporate Debtor. Even if no Resolution Plan comes around to get approved and contingencies as provided in Section 33(1) arise and order of liquidation is to be passed, even then Section 53(1) makes it clear that in the waterfall mechanism, the first in order of priority is the insolvency resolution process costs and the liquidation costs paid in full. The Impugned Order shows the reasons why without waiting for Appellant the Order was required to be passed. It was in interest of resolution of Corporate Debtor. Even now, Appellant has not made out good case that if it was heard, Impugned Order could have been different. We are not convinced with the argument that amended Sub-Section (4) of Section 30 requires only Secured Financial Creditors to contribute towards interim finance and not the Unsecured Financial Creditors. No such interpretation can be drawn. We will not interfere in the collective decision of COC in this regard - The dissenting Financial Creditor in COC cannot be allowed to scuttle CIRP process otherwise the provision permitting COC to take decisions with regard to subjects stated in Section 28(1) by given majority of 66% under Section 28(3) would be rendered nugatory. Appeal dismissed.
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2020 (2) TMI 53
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Existence of debt and dispute or not - HELD THAT:- The application made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.
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2020 (2) TMI 52
Permission for withdrawal of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - debt and default due or not - HELD THAT:- Since the Company Petition is not yet admitted by the Adjudicating Authority, and the parities themselves have settled the issue, we are inclined to permit the Petitioner to withdraw the instant Company Petition with a liberty to file fresh Company Petition in case the Corporate Debtor failed to comply with the terms and conditions of the payment as mentioned in the said Joint Memo Settlement Terms dated 27.11.2019. Petition disposed of as withdrawn by directing the Corporate Debtor to strictly adhere to the terms and conditions as mentioned in the said Joint Settlement Terms dated 27.11.2019 without fail failing which the Petitioner is at liberty to file fresh Company Petition in accordance with law.
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2020 (2) TMI 51
Maintainability of petition - initiation of CIRP - Corporate Debtor defaulted in making repayment - existence of debt and default or not - HELD THAT:- In compliance of Section 9(3)(c) that no payment of an unpaid operational debt has been made, a statement of Bank account also seen produced on the side of the Corporate Debtor by way of filing supplementary affidavit dated 15-01-2019. So also, the Operational Creditor has proposed the name of Interim Resolution Professional, Mr. Ajay Kumar Agarwal, Insolvency Professional, a reference to Form 2 and written communication enabling us to hold that there is no disciplinary proceeding pending against the proposed Interim Resolution Professional - Accordingly, we are satisfied that the Operational Creditor has succeeded in proving the default of an unpaid operational debt by the Corporate Debtor and complied of all the requirements to be meted out under Section 9(5) of the Code. Application admitted - moratorium declared.
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2020 (2) TMI 50
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - section 9 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The present application is complete and the Applicant is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. The present application is admitted, in terms of section 9 (5) of IBC, 2016. Application admitted - moratorium declared.
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2020 (2) TMI 49
Maintainability of petition - initiation of CIRP - Corporate Debtor defaulted in making repayment of debt - existence of debt and dispute or not - HELD THAT:- There is an unpaid operational debt amounting to ₹ 24,74,085,/- plus interest @18% p.a.. Copy of the work order dated 19.08.2011 is attached as Annexure A1. Moreover, demand notice in Form No. 3 was also sent on 01.03.2018 stating that the amount due from the corporate debtor to the operational creditor is ₹ 37,72.979/- including interest. We have held above that the demand notice in form No.3 dated 01.03.2018 was properly delivered by the operational creditor and the reply has been examined above and found to be not acceptable. IRP is not proposed in Part III of Form No.5. Petition admitted - moratorium declared.
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2020 (2) TMI 48
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - existence of debt and dispute or not - HELD THAT:- The application made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudging Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.
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Service Tax
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2020 (2) TMI 47
Recovery of service tax - service sim cards sold by the Petitioner for BSNL - It is the plea of the Petitioners that the BSNL being the ultimate service provider has collected the service tax from the customers and paid service tax and therefore there cannot be any demand of tax for the Petitioner - HELD THAT:- The Petitioners should approach the First and Third Respondents for Adjudication of Show Cause Notice under the Finance Act - the First and Third Respondents are directed to pass appropriate order within a period of three months from the date of receipt of a copy of this order. While passing the order, the Respondents shall keep in mind the above cited orders. It is needless to state that before passing such order, the Petitioners shall be give an opportunity to file reply and also being heard. Petition disposed off.
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2020 (2) TMI 46
Business Auxiliary Service - allegation that income earned as commission agent had not been correctly declared in their ST-3 Returns during 2004-05 - time limitation - Section 11B of the Central Excise Act, 1944 - principles of unjust enrichment - HELD THAT:- From the very beginning, stand of the appellant was that he is not collecting Service Tax from any of his customers and as per the Notification, the appellant is also not liable to pay Service Tax but in spite of that he was made to pay the Service Tax which the appellant paid under protest. Further, the appellant vide letter dated 25.11.2005 written to Deputy Commissioner has stated that the appellants are remitting Service Tax under protest as the service recipients were not paying any Service Tax. This letter is sufficient to prove that Service Tax was paid under protest and once the Service Tax is paid under protest then as per proviso to Section 11B of the Central Excise Act, 1944, the bar of limitation will not be applicable and further the appellant had also produced sufficient proof on record to show that they have not collected the Service Tax from their recipients therefore the question of unjust enrichment will not be applicable. The impugned order rejecting the refund on time bar is not sustainable - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 45
Refund of service tax - time limitation - refund sought on the ground that, they have paid Service Tax and GST on the same four transactions. - HELD THAT:- This tax liability was correctly paid and declared by them in their ST 3 Returns for the period April to June 2017. The said amount of Service Tax was paid through debit in their CENVAT credit at that time. GST Regime came into being w.e.f. 01.07.2017 and subsequently between September and November, the appellant raised Credit Notes and another four invoices and paid GST on the same. After paying the GST, the appellants are seeking refund of the Service Tax of ₹ 17,84,952/- which was paid during the period April to June 2017 on the ground that they have paid Service Tax and GST on the same four transactions. Further, when the Service Tax was paid on the basis of self-assessment and declaration in their ST 3 Returns for the period April to June 2017, the Service Tax was paid correctly for the services which were provided during the period April to June 2017 as per Section 68 of the Act. There is no infirmity in the impugned order which is upheld by dismissing the appeal of the appellant - decided against appellant.
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2020 (2) TMI 44
Time Limitation - applicability of Section 11B of the Central Excise Act - works contract service - Circular No.108/2/2009 dated 29.1.2009 - HELD THAT:- This issue has been considered by the Larger Bench in the case of M/S VEER OVERSEAS LTD. VERSUS CCE, PANCHKULA [ 2018 (4) TMI 910 - CESTAT CHANDIGARH] and after examining the various decisions of the Tribunal and the Hon ble Supreme Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] the Larger Bench has held that the time limit prescribed under Section 11B of the Central Excise Act, 1944 will govern claim for refund of service tax. There is no infirmity in the impugned order, which is upheld by dismissing the appeal of the appellant - decided against appellant.
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2020 (2) TMI 43
Valuation - deductions from the gross receipt of the billing - Rate difference passed to print media - Agency billing - Commission/ discount passed to the customers. Rate difference passed to print media - HELD THAT:- The Commissioner (Appeals) found that though the Appellant had contended that the rate of communication varies and, therefore, this difference was liable to be deducted, but the Appellant had not produced any evidence which could show that during the disputed period print media had revised the rates. The Commissioner (Appeals) also found from a perusal of the reconciliation statement that the Appellant had claimed commission at the rate of 15 per cent only which meant that there was no change in the rate of commission. Agency billing - HELD THAT:- The Commissioner (Appeals) found that even if the Appellant was providing services through another advertising agency the amount received as it s share of commission will be included in the taxable value. Commission/discount passed to the customers - HELD THAT:- The Appellate Commissioner (Appeals) found that the Appellant was providing service to the print media as an agent and so the amount received from the print media would be taxable for the purpose of discharge of service tax. Finding no merit in the contentions raised by Appellant, the Commissioner (Appeals) dismissed the Appeal and upheld the order passed by the Adjudicating Authority - Appellant has not produced any evidence which can show that the print media had during the disputed period revised the rates, as a result of which there was a change in the rate of commission nor is there any serious challenge to the other findings. Thus, the finding recorded by the Commissioner (Appeals) cannot be said to be suffering from any illegality - Appeal dismissed.
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2020 (2) TMI 42
Levy of service tax - packaging activity - activity of filing up of the bags is sub-contracted to various sub-contractors by M/s. Aspinwall Co. - period from 16/06/2005 to 31/12/2006 - extended period of limitation - HELD THAT:- The appellant was admittedly a sole proprietorship and Shri. N. Chandra Mohan was the proprietor of M/s. Jaaacsons Enterprises, Mangalore. Also, during the pendency of this appeal, the sole proprietor died on 31/08/2019 in view of the death certificate placed on record. Also, the legal heirs of the sole proprietor are not continuing with the business. On the death of the sole proprietor Shri. N. Chandra Mohan, the present appeals and the demand and recovery proceedings against the appellant abate - the proceedings against the appellant abate - appeal disposed off.
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2020 (2) TMI 41
Valuation - turnover/transaction charges on the brokerage charges/commission - Section 65 of the Finance Act - CBEC Circular F No. 137/57/2006 CX4 dated 18.05.2007 - HELD THAT:- The Appellant does not dispute the liability of payment of service tax after 16.05.2008. However, the Appellant is aggrieved by the non-consideration of its prayer regarding the benefit of Cenvat Credit on the input services used by the Appellant. In this regard, we find that the issue has been clarified by the Central Board of Excise and Customs vide Circular dated 18.05.2017. This has also been clarified further by the Circular dated 17 September, 2010. The two Circulars clarify that turnover/transaction charges are liable to be included for the purpose of computation of service tax. The circulars are in conformity with the provisions of Section 67 of the Finance Act. The order passed by the Commissioner, therefore, does not suffer any infirmity on this ground. CENVAT Credit - HELD THAT:- The settled legal position is in favour of the Appellant as is clear from the decisions referred to above. The Appellant is entitled to avail Cenvat Credit on the input service used in providing output service. The Commissioner (Appeal) has, however, not granted the availment of Cenvat Credit to the Appellant, to which the Appellant was entitled to in terms of the Cenvat Credit Rules after the verification of the records. Levy of interest and imposition of penalty - HELD THAT:- The Appellant is liable to pay the same in terms of the provisions of Section 76, 77 and 78 of the Act, as in spite of having collected the amount representing service tax it failed to deposit the same with the Department. Accordingly, that portion of the order is sustained. Matter remanded back to the adjudicating authority to consider the benefit of Cenvat Credit to the Appellant in terms of Credit Rules - remaining portion of the impugned order is sustained - appeal allowed in part and part matter on remand.
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2020 (2) TMI 40
Levy of service tax - construction of Railway siding for private parties - extended period of limitation - HELD THAT:- Reliance placed in the case of KVR RAIL INFRA PROJECTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, SECUNDERABAD G.S.T. [ 2019 (5) TMI 376 - CESTAT HYDERABAD] where it was held that Section 65(25b) or Section 65(105)(zzzza) of the Finance Act, 1994 does not use the word railways for public carriage or that the railways should be government railways. The definition uses the words railways only. Therefore, the execution cannot be restricted to the government railways which are used for public transport of passengers or goods. It is further urged that no words can be added while interpreting a notification and when the language is clear and as per the Literal Rule of Interpretation of statutes; Even the inclusive definition of the term railway is taken from the Railway Act, the exemption is provided to Railways and not to railway alone and hence private railway siding is also exempted. Time Limitation - HELD THAT:- The audit objection was raised on 26.03.2012 on some different grounds to which reply was filed by the appellant on 10.05.2012. Show cause notice was issued after two years on 11.04.2014, thus, is barred by limitation - In the second appeal, for the period ending April, 2014, the show cause notice is not time barred. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 39
Refund claim - Section 11 B of the Central Excise Act, 1944 - procedural lapse - allegation of non-compliance with the condition 2 (h) of Notification No. 27/2012 CE (N.T) dated 18.06.2012 - CBEC Circular No. 1063/2/2018-CX dated 16.02.2018 - HELD THAT:- Since there is no finding by both the lower authorities on the debit entries effected by the appellant, matter requires re-adjudication because, it is for this reason that prompted the issuance of SCN which carried the allegation of non-compliance with the condition No. 2(h). If the debit/reversal of Cenvat Credit is effected, then it may amount to complying with the condition at 2 (h) of Notification ibid. But however, from the date of passing the Order-in-Original and Order-in-Appeal vis- -vis the debit/reversal of Cenvat Credit, it appears that the Adjudicating Authority did not have the benefit of this documentary evidence. Matters are remanded back to the original authority to look into and verify the debit of Cenvat Credit and call for such other details in this regard, if required, and then pass a speaking order - appeal allowed by way of remand.
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2020 (2) TMI 38
Principles of natural justice - recovery invoking Rule 14 and not Rule 6(3A) clause (e) - HELD THAT:- It is not in dispute that the appellant had wrongly availed CENVAT Credit and has been pointed out for reversing the same. The entire amount has been reversed by the appellant and the same has been confirmed and appropriated in the demand by the original authority. He also imposed penalty which has been set aside by the first appellate authority. The Department has not contested waiver of the penalty. The interest is evidently and explicitly payable under Rule 6(3A) clause (e) read with Rule 14 of CCR 2004. The interest has indeed been demanded under Rule 14 of CCR 2004. Merely because they have also not mentioned Rule 6(3A) in the Show Cause Notice, it does not vitiate the entire demand of interest. The first appellate authority has given the appellant adequate opportunity to explain as to why they are not liable to be paid interest - appeal dismissed - decided against appellant.
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2020 (2) TMI 37
Construction of Residential Complex Service - Abatement claim - charges collected from the buyers under electric meter main load supply charges head - HELD THAT:- Sub-Section 3 of Section 66F of Finance Act, 1994 provides that taxability of a bundled service shall be determined if various elements of such services are naturally bundled in the ordinary course of the business. From the submissions made recorded herein above it is clear that around ₹ 16 lakhs charges for electric meter main load supply were collected along with the consideration for sale of residential unit and they were collected from very person to whom the residential unit was sold and not to any other person and as explained the same was for providing electricity supply during the power failure to the residents of the complex. Therefore, the said service is bundled services under Section 66F of the Finance Act, 1994. The appellant has paid around ₹ 49 thousand along with interest which is appropriate amount after taking into consideration the abatement admissible - thus, without interfering with the service tax of around ₹ 49 thousand along with interest paid, the remaining part of the order is set aside - appeal allowed in part.
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Central Excise
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2020 (2) TMI 36
CENVAT credit - denial for want of duty paying documents - scope of SCN - HELD THAT:- There is no denial about the receipt of the inputs/raw-material by the respondent-assessee in their factory from their another unit at Haridwar for those inputs/raw-material to be used in the manufacture of dutiable final product by the assessee-respondent. There is also no denial to the facts that liability towards Excise Duty on such final product has already been discharged by the appellant. Apparently and admittedly, under Rule 9 (1) an invoice and Bill of Entry are valid documents based on which a manufacturer of final product can avail credit. The allegation of the show cause notice are pointing merely a procedural lapse - Procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice. A procedural prescription is the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. The endorsed invoice otherwise qualify the intent of the legislature in terms of proviso to Rule 9 (2) of CCR. Appeal dismissed - decided against appellant.
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2020 (2) TMI 35
CENVAT Credit - duty paid imported Reflex PVC film and aluminium rolls - subject inputs, PVC film/aluminium in rolls are subjected to process of cutting, slitting etc. to the required sizes as per the customer s requirements, cleared on payment of duty - benefit of N/N. 24/2012-CE(NT) dated 19.04.2012 - HELD THAT:- This Tribunal in the cases of COMMISSIONER OF CENTRAL EXCISE VERSUS ASSOCIATED CAPSULES LTD [ 2014 (2) TMI 721 - CESTAT MUMBAI] and COMMISSIONER OF C. EX., DAMAN VERSUS MEDLEY PHARMACEUTICALS LTD. [ 2012 (7) TMI 823 - CESTAT AHMEDABAD] held that cenvat credit cannot be demanded on the ground that the process of cutting, slitting etc. of jumbo rolls do not result into manufacture. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (2) TMI 34
Levy of interest for delayed remittance of tax - section 9(2A) read with 24(3) of the Tamil Nadu General Sales tax Act, 1959 - HELD THAT:- The facts involved in the case of JAGADEESWARAN TEXTILES (P) LTD. VERSUS COMMERCIAL TAX OFFICER, UDUMALPET [ 2009 (10) TMI 866 - MADRAS HIGH COURT] , may not be applicable to the instant case. While analysing the second proviso to section 24(3) of the TNGST Act, the court had held that the proviso enables postponement of payment of only the disputed tax and the petitioner ought to have paid at least the tax on the turnover, which is not in dispute. In the said case, the petitioner had not paid the tax even on the admitted turn over and therefore, the petitioner cannot take refuge under the theory of merger and contend that the original order of assessment stood erased. As such, the said decision may not be applicable to the petitioner's case. In view of the decision of the honourable apex court in EID. PARRY (INDIA) LTD. VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, CHENNAI (AND ANOTHER APPEAL) [ 2005 (5) TMI 302 - SUPREME COURT] , the levy of interest between the month of April to August 2000, cannot be justifiable or sustainable. Petition allowed.
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Indian Laws
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2020 (2) TMI 33
Recovery alongwith interest - restraint from making any payments towards their fixed deposits - HELD THAT:- It is deemed not necessary to examine the merit of the contentions made by the learned Senior Counsel. The depositors are being represented by the Authorized Representative before the Committee of Creditors. We leave it open to the Appellants to raise all points and contentions before the Committee of Creditors, the Administrator and if necessary, the NCLT - In view of the above, we are not inclined to interfere with the decision of the Committee of Creditors taken on 30.12.2019. We are informed that there are nearly one lakh depositors who have invested their life time earnings with Respondent No.1. Some of the deposits have matured and some of the depositors are critically ill. We have no doubt that the concerns of the depositors and their rights shall be considered in accordance with law. Appeal disposed off.
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