TMI Tax Updates - e-Newsletter
February 9, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. RESCINDED CUSTOMS NOTIFICATIONS

   By: DR.MARIAPPAN GOVINDARAJAN

2. Provisions under GST and Income Tax Act applicable on E- Commerce Business platform or online market place

   By: Rajeev Jain

News

1. Average monthly gross GST collection for third quarter of FY 2021-22 is ₹ 1.30 lakh crore

2. Exports of millets to increase exponentially as Indian exporters find new markets

3. J&K becomes the first Union Territory to be integrated with National Single Window System

4. ₹ 3.22 lakh crore sanctioned under PMMY against target of ₹ 3.50 lakh crore in FY 2020-21

5. More than 71 lakh subscribers enrolled under Atal Pension Yojana upto 24.01.2022

6. Progress related to PM Gati Shakti National Master Plan

7. CCI approves acquisition of athenahealth Group, Inc. by funds managed and advised by H&F, Bain, and GICSI

8. Export of Tractors at an all-time high; sees a growth of almost 72% since 2013

9. More than 43.34 crore Permanent Account Numbers (PANs) linked with Aadhaar till 24.01.2022

10. Disinvestment of Air India completed

11. Government of India cancels the auction of dated security scheduled on February 11, 2022

12. Gross non-performing assets of scheduled commercial banks have declined

13. Invitation for public comments on Draft International Financial Services Centres Authority (Fund Management) Regulations, 2022

Highlights / Catch Notes

GST

• Court Grants Bail in GST Evasion Case; Trial Court to Set Conditions Amid Dispute Over Officers' Conduct.

  Case-Laws - SC : Seeking grant of Bail - Evasion of GST - question mark on the conduct of the officers who performed the search operations - The stand of the respondent was also coloured by the proceedings taken out by the appellant/family members qua the conduct of the officers which has visited them with some adverse consequences though certain proceedings are still pending qua the same. - the appellant cannot be indefinitely detained in custody - Bail granted to the appellant on terms and conditions to the satisfaction of the Trial Court - SC
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Income Tax

• Court Affirms Advance Tax Credit Under Scheme, 2016; Sections 184 & 185 Affect Tax Rate, Surcharge, Penalty on Undisclosed Income.

  Case-Laws - HC : Claim for credit in respect of advance tax paid by a declarant under the Scheme, 2016 - character of the advance tax - the overriding effect of Sections 184 and 185 is confined to the rate at which the tax is to be imposed on the undisclosed income, surcharge to be paid thereon and the penalty. The substance of the matter, especially the fact that the advance payment made by the declarant retains the character of tax, however, cannot be lost sight of. - If the said payment is not apportionable towards any other liability, there is no justifiable reason to deprive the declarant from getting the credit for the same against the liability under the Scheme, 2016 - HC
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• Interest Exemption u/s 201(1A) Confirmed Due to Voluntary Disallowance u/s 40(a)(i)/(ia) for Non-TDS Claims.

  Case-Laws - AT : Interest levy u/s 201(1A) - suo-motto disallowances u/s. 40(a)(i)/(ia) - The provision of TDS provisions cannot applicable where there is no claim of expenditure made by the assessee. In the present facts assessee made suo motu disallowance of the entire provision under Section 40(a)(i)/(ia) of the Act. Once the amount is disallowed u/s. 40(a)(i)/(ia) for non-deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to interest u/s. 201(1A). - AT
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• Interest on Delayed Service Tax Payments is Deductible u/s 37(1) as Business Expense, Not Penal.

  Case-Laws - AT : Disallowance interest on delayed payment of service tax - It is well settled principle that interest on late payment of Service Tax is not penal in nature. Since, it is compensatory in nature, it is eligible for deduction u/s. 37(1) of the Act as it can be termed to be expended wholly and exclusively for the business purpose and the payment of interest on late remittance of Service Tax is neither an offence nor prohibited by law. I - AT
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• Interest on loans for unused assets must be disallowed u/s 36(1)(iii) despite interest-free shareholder funds.

  Case-Laws - AT : Addition to capital work-in-progress on account of property - amount of interest - The argument of the availability of shareholders' fund does not apply on loans specifically taken for the purposes of acquisition of an asset which has still not been put to use during the year. In other words, if a specific loan has been taken for purchasing an asset, notwithstanding the fact that the assessee has sufficient interest-free funds, interest on such loan has to be disallowed within the ambit of proviso to section 36(1)(iii). It is only after exhausting the specific loans taken for the purpose of acquisition of an asset that the proposition of availability of shareholders' fund can be invoked for the balance amount of investment. - AT
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• Interest on Indian tax refund not linked to PE is taxable under Article 11, Indo-US DTAA.

  Case-Laws - AT : Taxability of income in India - Interest income on income tax refund - As referring to relevant Article 11 of Indo-US DTAA with regard to interest it can be concluded that interest on income tax refund is not effectively connected with the PE either on the basis of asset- test or activity- test. Hence, it is taxable as per the provisions in the Para No. 2 of Article XI of Indo- US DTAA. - AT
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• Revocable Trust Not Assessed as AOP; Income Taxed on Specific Shareholders' Known Shares, Revenue Appeal Dismissed.

  Case-Laws - AT : Treatment of assessee trust as an Association of Persons (AOP) - Since it was revocable Trust, the provisions of Sec. 61 to 63 were applicable and the assessee could not be assessed as AOP. The income was to be taxed in the hands of the SR holders. Since the respective shares were known since inception, it could not be considered as indeterminate Trust. Finally the appeal of the revenue was dismissed. - AT
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• Section 69A Income Tax: Court Accepts Assessee's Explanation for Unexplained Cash Deposits Due to Age, Health Factors.

  Case-Laws - AT : Addition u/s 69A - Unexplained cash deposits in bank account - If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him - explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee - AT
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• Section 263 Revision Overruled: Assessing Officer's Net Profit Rate Application Seen as Plausible, Not Unsustainable.

  Case-Laws - AT : Revision u/s 263 by CIT - Rejection of trading results - lack of enquiry" or "lack of investigation" - Rejection of trading results and application of net profit rate by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise, invocation of section 263 is not in accordance with law - AT
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• Assessee Validates Unsecured Loan with Documentation Confirming Lender's Identity, Creditworthiness, and Transaction Authenticity.

  Case-Laws - AT : Unexplained unsecured loan - the necessary papers to establish genuineness of the transaction were filed and the assessee had proved beyond doubt the identity of the lender, credit worthiness and the genuineness. By filing these requisite documents, the assessee established the Identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Thus, the assessee had satisfied all the three conditions required for genuineness of the transaction - AT
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• Bandwidth Facility Payment Not Taxable as Equipment or Process Royalty; Appeals Allowed in All Seven Cases.

  Case-Laws - AT : Nature of payment in the light of the definition of “Royalty” - the consideration received for providing bandwidth facility will not be taxable as equipment royalty or process royalty. The plea of the Assessee in this regard is accepted and the relevant grounds of appeal in all the 7 appeals are allowed, as admitted by both the parties, the facts and circumstances of the case are identical. - AT
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• Loan Not in Books Escapes Section 68 of Income Tax Act; Unexplained Cash Loan and Interest Noted by AO.

  Case-Laws - AT : Unexplained peak cash loan - interest expenses on the money borrowed in cash - it is a fact on record that the impugned amount of interest as well as the amount of loan computed by the AO based on such interest, was not recorded in the regular books of accounts. Therefore, in our considered view the impugned amount of loan not recorded in the regular books of accounts cannot attract the provisions of section 68 of the Act. - AT
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Customs

• High Court Quashes Illegal Provisional Release Order from 2021; Misclassification and Payment Issues Highlighted.

  Case-Laws - HC : Provisional release of goods - alleged misclassification of the Product - the entire amount claimed by the respondents had already been paid by the petitioner voluntarily and not under protest - The conditional Provisional release order dated 03.12.2021 being ex-facie illegal and arbitrary being contrary and diametrically opposite to the earlier orders passed by this Court, the same deserves to be quashed - HC
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• Dispute Over Classification of Imported Low Aromatic White Spirit vs. Kerosene: Department Must Prove Correct Classification.

  Case-Laws - AT : Classification of imported goods - Low Aromatic White Spirit - The IS specification requires that all the eight parameters have to be satisfied in the case of Kerosene. When only seven parameters have been tested and reported, the department cannot conclude that the goods conform IS : 1459 : 2018 (kerosene) and not IS : 1745 : 2018 LAWS. When the department does not accept the classification declared by the importer and rejects the classification stated in the suppliers’ analysis certificate, the burden lies upon the department to establish the correct classification. - AT
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• Court Rules ViewSonic Interactive Display System as Automatic Data Processing Machine, Not Just a Monitor, Under CTI 8471 41 90.

  Case-Laws - AT : Classification of imported goods - (ViewBoard) ViewSonic Interactive Display System - the goods were Automatic Data Processing Machines [ADPM ] or Monitors - The goods in dispute, on the other hand, are much more than mere display devices and, therefore, cannot be classified under CTH 8528 as monitors. - There is no manner of doubt that the goods would merit classification under CTI 8471 41 90 as claimed by the appellant and not under CTI 8528 52 00 as claimed by the Department - AT
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• Rejection of Imported Goods' Transaction Value Unjustified Due to Different Quantities, Violating Rule 5 Valuation Criteria.

  Case-Laws - AT : Valuation of imported goods - The only ground on the basis of which the transaction value has been rejected is that the imports were made at a higher price by other importers than at the price at which the Appellant imported HR Coils in question - A perusal of the imports relied upon in the impugned order show that the quantity of imports were substantially different from the quantity of the import made by the Appellant. Rule 5 of the Valuation Rules requires, amongst others, that the transaction value of identical goods should be at the same commercial level and in substantially the same quantity as the goods being valued to determine the value of the imported goods. In the present case neither the goods were identical nor of substantially the same quantity. - AT
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IBC

• Corporate Insolvency Process Violated Code; Committee of Creditors Invalid, Leading to Flawed Decisions and Liquidation Order Overturned.

  Case-Laws - AT : Liquidation of Corporate Debtor - the corporate insolvency process in the instant case is totally in disregard of the provision of the Code and Regulations thereunder. The formation of the Committee of Creditors in the instant case is a nullity in the eyes of the law. Since the illegally constituted committee of creditors took the decisions at every stage of CIRP. Therefore, the entire corporate insolvency resolution process of the Corporate Debtor is found to be vitiated. Therefore the impugned order of liquidation passed by the Adjudicating Authority deserves to be set aside. - AT
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Central Excise

• Gold Coins Exempt from Excise Duty: Not Branded, Customers Non-Commercial, Order Against Appellants Overturned.

  Case-Laws - AT : Benefit of exemption from excise duty - As long as the customers of the appellants are not engaged in the trade/commerce/business, inscription on the gold coins cannot said to have in connection in the course of trade with the product manufacture. - As long as the goods are not sold by the customers of the appellant in the brand name which they are manufactured, the same cannot be held bearing brand name making them dutiable. Therefore, as the appellants have not manufactured branded jewellery, the exemption contained in the said notification is applicable to them and the impugned order is not legally sustainable.- AT
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• Court Sets Aside Order, Remands Case for Fresh Decision on Excise Duty Pre-Deposit Refund; Section 130(2) Misapplied.

  Case-Laws - AT : Refund of pre-deposit - predeposit was made under the head Excise Duty - the appellant never made any claim for refund under SVLDRS scheme - Both the authorities have misdirected in taking recourse Section 130 (2) ibid, which is, as seriously contended by the learned Consultant, is not applicable - the impugned order is set aside and the matter is restored to the file of the Adjudicating Authority to pass a fresh order in accordance with law, after affording reasonable opportunity to the appellant but, without going into the provisions of SVLDR Scheme - AT
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VAT

• Court Rules No Substantial Law Question in VAT Invoice Fraud Case; Registration Canceled u/s 16(4)(g.

  Case-Laws - HC : Input tax credit - false/forged VAT invoices issued by a dealer who has not deposited the tax and its registration was cancelled u/s 16(4) (g) of the Act - amount not deposited by the selling dealer - The issue raised in this petition has already been settled by this Court in more than one decision - no substantial question of law arises for consideration in this petition. - Decided against the revenue - HC
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Case Laws:

• GST

• 2022 (2) TMI 351
  Seeking grant of Bail - Evasion of GST - question mark on the conduct of the officers who performed the search operations - HELD THAT:- The appellant cannot be indefinitely detained in custody more so having already undergone a period of 25 months of custody when he can be sent behind bars for maximum five years. It is almost 50% of the sentence. The stand of the respondent was also coloured by the proceedings taken out by the appellant/family members qua the conduct of the officers which has visited them with some adverse consequences though certain proceedings are still pending qua the same. Bail granted to the appellant on terms and conditions to the satisfaction of the Trial Court - appeal allowed.

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• 2022 (2) TMI 350
  Violation of the principles of natural Justice - impugned assessment order creating demand of tax, interest and penalty, has been passed without affording opportunity of hearing - Section 75(4) of the Central Goods and Services Tax, 2017/ U.P. Goods and Services Tax, 2017 - HELD THAT:- From perusal of Section 75(4) of the Act, it is evident that opportunity of hearing has to be granted by authorities under the Act where either a request is received from the person chargeable with tax or penalty for opportunity of hearing or where any adverse decision is contemplated against such person. Thus, it prima facie , appears that where an adverse decision is contemplated against the person, such a person even need not to request for opportunity of hearing and it appears to be mandatory for the authority concerned to afford opportunity of hearing before passing an order adverse to such person. From perusal of the impugned order, it, prima facie , appears that the provisions of Section 75(4) of the Act, have not been complied with. Section 75(4) is reiteration of principles of natural justice. Put up as a fresh case before the appropriate bench on 11.02.2022, along with records of Writ Tax No.1037 of 2021.

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• 2022 (2) TMI 349
  Violation of principles of natural justice - Non-speaking order - discrepancies in the returns not mentioned as required under Section 61 of CGST Act, 2017 - no personal hearing was granted to the Petitioner - HELD THAT:- A perusal of the paper book reveals that the allegations against the Petitioner have been mentioned the specific particulars. The Petitioner neither filed any reply to the show cause notice nor any appeal against the impugned order. The present writ petition along with pending application is disposed of with liberty to the Petitioner to file an appeal under the statute with the appropriate Authority within four weeks.

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• Income Tax

• 2022 (2) TMI 348
  Motor accidents claims compensation - addition to the accident relief fund - TDS in Motor Accident Claims at two different rates from 10% to 20% - ASG points out that uniform system is being brought in place whereby TDS will be uniformly 10% for all categories - direction made on the last date of hearing to create a fund equivalent to an amount on the basis of determination for the last three financial years of compensation so disbursed - A suggestion made by learned Amicus Curiae is that where TDS is applied as per Section 194-A of the Income Tax Act, 1961, the insurance companies/transport corporations/others should file the statutory Form 16-A immediately upon filing the returns of the TDS to the Income Tax Department and the MACTs. should endeavour to handover to the claimants/counsel on proper acknowledgment, the forms to facilitate speedier disbursement - HELD THAT:- We would call upon the learned ASG to examine this aspect in the conspectus of the submissions of Mr. Gaurav Banerjee, more so that possibly a solution may be to increase the level of the funds which at present is specified at Rs. 20,00,000/- in 1982. This would logically require the amendment of the statutory rules. We expect the learned ASG to get back on this issue and since we had provided a dead line of three months which expires on 15.02.2022 we would like to examine this aspect alone at an earlier date. We are not inclined to implead the two applicants as a party but have taken note of their concern and dispose of the applications with liberty to the counsel to assist us in this behalf. Amicus curiae expressing some difficulties arising from directions given for maintenance of Savings Bank Accounts instead of current accounts - In view of the inevitable time lag between deposit of the award and actual disbursement, it is stated that accrued interest arising in savings Bank Accounts (something which we intended to benefit the claimants), there appears to be a stated problem in coordinating the exact accrued interest amounts with the claims and it is submitted that the total accrued interest in 328 MACTs in the State of Tamil Nadu and Puducherry is more than Rs. 40 crores. This fund is thus stated to be just lying in the account which is not disbursed and there is lack of proper identification as to whom the amount should be disbursed. Misuse of these amounts has come to light to the extent of 1.5 crores and 33 lakhs in two MACT courts and the matter as stated above is being investigated under the supervision of the Maras High Court. On the reading of the aforesaid suggestion it thus appears that the MACT Court seems to be seeking to wash their hands off because of the amounts being deposited in the Courts. That itself cannot require a change of direction as responsibilities have to be performed. However, the alternative suggestion made is that if the amounts can be kept in a current account but with general directions that they should be placed in FDR initially for 91 days to be kept renewed (practice followed in many Courts), it will be easier to identify the interest with the claimants amount. This is an aspect which will be examined by learned ASG who would revert to us on the same. In view of the directions aforesaid, except of creating of a fund, requiring about two months time, list for further directions on 31.03.2022.

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• 2022 (2) TMI 347
  Reopening of assessment u/s 147 - Admissibility of deduction u/s. 80 HHC - HELD THAT:- Reasons do not indicate that there was failure on the part of Petitioner to truly and fully disclose any material fact. AO is relying on the same material facts already filed and considered by the Assessing Officer who passed the original assessment order - the entire basis for reopening as could be seen from the reasons is change of opinion and as has been held time and again by various Courts, Respondent can not propose to reopen assessment on the basis of change of opinion - Assessing Officer has passed assessment order considering materials on record and taken a conclusive view. To reopen the assessment based on same material with a view to take another view, is not permissible. Moreover, in this case, there is simply a general statement in the reasons that assessee has failed to disclose fully and truly all material facts necessary for its assessment. In our view, this statement is clearly made only as an attempt to take the case out of the restrictions imposed by proviso to section 147 of the Act. According to the reasons recorded, there was an error on the part of AO because the qualifying amount for deduction under section 80HHC ought to have been determined after allowing set-off of brought forward losses against the adjusted profit of the business. An error discovered on a reconsideration of the same material does not give power to the AO to reopen the assessment - Decided in favour of assessee.

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• 2022 (2) TMI 346
  TDS u/s 195 - directing Google Cloud India Pvt. Ltd. (GCI) to deduct tax at source at the rate of 10% at the time of making payment to the Petitioner - HELD THAT:- As the petitioner submits that this Court in Sumo Logic vs. Commissioner of Income Tax International Taxation [ 2021 (8) TMI 1274 - DELHI HIGH COURT] has taken cognizance of identical facts and issue and has issued notice to Respondent Nos.1 2. Issue notice. Mr. Sunil Agarwal, Advocate accepts notice on behalf of Respondent Nos.1 2. He prays for and is granted six weeks time to file the counter affidavit. Rejoinder affidavit, if any, to be filed before the next date of hearing. List the matter before the Joint Registrar (Judicial) for completion of pleadings on 11th May, 2022. Withholding of tax - withholding at the rate of 10% in accordance with section 115A of the Act read with the DTAA - HELD THAT:- As perused the decision of this Court in Epcos Electronic [ 2019 (7) TMI 708 - DELHI HIGH COURT] as well as the FAQ issued by the CBDT, wherein it has been held that no additional surcharge and cess is to be applied over the 10% rate as prescribed under the DTA - we direct that purely as an interim measure, the Petitioner would be entitled to receive its payment from GCI subject to a deduction of 8% to be paid to the Respondent No.2 progressively. This interim arrangement is being made under the orders of this court. The deposit of 8% should not be treated as any non-compliance of the impugned order.

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• 2022 (2) TMI 345
  Validity of order u/s 201 - order against the GIA US company of the Assessing Officer has been reversed by ITAT which has held that amount paid to GIA US was not taxable - HELD THAT:- The Apex Court in Union of India Vs. Kamlakshi Finance Corporation Ltd. [ 1991 (9) TMI 72 - SUPREME COURT ] has held that quasi-judicial authorities like revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities and the mere fact that the order of the appellate authority is not acceptable to the department and is the subject matter of an appeal can be no ground for not following it unless its operation has been suspended by a competent court - As in Kamlakshi Finance [ 1991 (9) TMI 72 - SUPREME COURT ] High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws - No hesitation to allow the petition in terms of prayer clause (a) as quoted above.

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• 2022 (2) TMI 344
  Claim for credit in respect of advance tax paid by a declarant under the Scheme, 2016 - character of the advance tax - Income Declaration Scheme, 2016 - Is advance tax entitled to the same dispensation as is given to the TDS? - Can a legally sustainable distinction be made between TDS and Advance Tax in the matter of credit to be given against the liability under the Scheme, 2016? - certificate in Form 4 as required by Rule 4(5) of the Income Declaration Scheme Rules, 2016 in respect of the income declared by the petitioner under the said scheme in Form 1 under Section 183 of the Finance Act, 2016 - HELD THAT:- Section 219 provides in clear and explicit terms that an assessee who pays advance tax shall be entitled to credit therefor in the regular assessment. From a conjoint reading of Sections 199 and 219, it becomes clear that in the matter of credit, the TDS and advance tax stand on the same footing. As there is no sustainable ground to make a distinction between TDS and Advance Tax for the purpose of credit, we do not find any reason not to equate an advance tax with TDS for the purpose of the Scheme, 2016. If a TDS is entitled to credit, a fortiori advance tax must get the same dispensation. It is true that the provisions of Chapter XVII primarily deal with regular assessment in respect of the liability to pay income tax founded in Sections 4 and 5 of the Act, 1961, which are the charging sections. It is also true that the provisions of Sections 184 and 185 of the Act, 2016 incorporating the Scheme, 2016, begin with a non obstante clause. However, the overriding effect of Sections 184 and 185 is confined to the rate at which the tax is to be imposed on the undisclosed income, surcharge to be paid thereon and the penalty. The substance of the matter, especially the fact that the advance payment made by the declarant retains the character of tax, however, cannot be lost sight of. In the case at hand, it is not the case of respondent No.1 that the advance tax paid by the petitioner was not relatable to the income for the relevant assessment years, which petitioner disclosed. If the said payment is not apportionable towards any other liability, there is no justifiable reason to deprive the declarant from getting the credit for the same against the liability under the Scheme, 2016 Petition stands allowed - Respondent No.1 shall issue certificate in Form 4 as required by Rule 4(5) of Income Declaration Scheme Rules, 2016, upon the petitioner complying with all the requirements under the said Scheme, 2016. However, the petitioner shall be entitled to and given credit for the advance tax already paid by the petitioner and the respondent No.1 shall not refuse to issue Form No.4 on the said count.

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• 2022 (2) TMI 343
  Delayed employee s contribution u/s 36(1)(va) - HELD THAT:- Assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1) of the Act. Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. - Decided in favour of assessee.

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• 2022 (2) TMI 342
  Estimation of income - bogus purchases - Rejection of books of accounts - CIT-A made addition on bogus transaction of the assessee @2% instead of 0.01% as admitted by the assessee - HELD THAT:- As per assessee s own admission, it was the business of providing accommodation entries. Hence, the entire sales and purchases were accepted to be bogus and assessee admitted that he was getting 0.01% as commission. In these facts, there is no reason why the books of assessee should be accepted. Rejection of the books in the light of clear admission of the assessee that he is a bogus accommodation entry provider is quiet correct and there is no infirmity in this regard. Assessee has been found to be indulging in bogus accommodation entries, the income attributed to such transactions cannot be determined as per the whims and fancies of the assessee. On the facts and circumstances of the case, in our considered opinion, the 2% commission attributed by the revenue authorities is very fair. Hence, we do not find any infirmity in the same and we uphold the same - Decided against assessee.

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• 2022 (2) TMI 341
  Assessment of trust - Disallowance of 25% addition of expenses of the audited accounts - Assessment completed under scrutiny assessment and orders under section 143(3) passed - assessee was taken up for complete scrutiny on the ground of large profits or gain from business or profession in the case of trust - HELD THAT:- During the assessment proceedings one Shri Ram Kumar Gupta, CA/AR of the Trust appeared and filed written submission. It was recorded by the Assessing Officer that the assessee had been non-cooperative and there was no effective representation on behalf of the assessee and due to non-cooperation of assessee assessment for assessment year 2013-14 was also completed u/s 143(3)/144. From the finding of the authorities below it can be inferred that the assessee did not file requisite details as called for except certain details. In the absence of the requisite details, supporting the claim of the assessee, no reason to interfere into the decision of the authorities below. The grounds raised in the appeal are dismissed.

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• 2022 (2) TMI 340
  Income from house property - higher value of the rent be treated as deemed income under the head Income from house property with respect to the property which was actually let out, vacant and/or kept for self uses - HELD THAT:- We find that contention of the assessee was that the issue related to rateable value adopted by NDMC was under consideration for review before the Competent Authority at NDMC. This aspect is not addressed by Ld. CIT(A) therefore, we modify the order of Ld.CIT(A) and direct the Assessing Officer to consider the decision of NDMC in respect of the rateable value revised in the subsequent year and adopt the same for this year as well. This ground of assessee s appeal is allowed in terms stated herein above. Expenses incurred for earning rental income - CIT-A deleted the addition - HELD THAT:- We do not see any infirmity into the order of Ld.CIT(A) as the Revenue itself has not made any disallowance in other years. Moreover, no reason is assigned for not following Rule of Consistency. The Revenue is under legal obligation to be consistent in its approach regarding taxability of any item. It cannot be purely on the whims and fancies of the Assessing Officer. The Ground No.1 of Revenue s appeal is dismissed. Disallowance of compensation paid to allottees - HELD THAT:- We find that the similar issue was decided by the Hon ble High Court of Delhi in assessee s own case [ 2019 (3) TMI 1272 - DELHI HIGH COURT] answered question of law in favour of the Assessee and against the Revenue by holding that the conclusion recorded by the ITAT that the compensation was paid by the Assessee for extraneous consideration is perverse and contrary to the record - Decided against revenue. Addition of bank guarantee commission paid to Bank - HELD THAT:- Issue decided in own case that the expenditure incurred subsequent to the completion of the project cannot be attributed to work and had to be allowed only as revenue expenditure. Consequently, the question is answered in the affirmative in favour of the Assessee and against the Revenue.. Addition u/s 14A r.w. Rule 8D - HELD THAT:- We find that Ld.CIT(A) gave a finding on fact that the assessee had not earned any exempt income. Therefore, in the light of the judgement of Hon ble High Court of Delhi in the case of CIT vs Holcim India Pvt.Ltd [ 2014 (9) TMI 434 - DELHI HIGH COURT] (Del.), we hereby dismiss the ground raised by the Revenue. Addition u/s 41(1) on account of cessation of liability - CIT-A deleted the addition - HELD THAT:- CIT(A) has rightly followed the judgement of Hon ble High Court of Delhi in the case of CIT vs Shree Vardman Overseas Limited [ 2011 (12) TMI 77 - DELHI HIGH COURT] Moreover, the Assessing Officer has not brought any material to suggest that the liabilities have seized to exist. In the absence of such material, no interference is called for. Addition on account of difference in receipt in Form No.26AS in Profit Loss Account - HELD THAT:- A.O. could have made direct enquiries with the tenant or with the TDS Authorities and could have examined the bank statement and the Lease agreement with the tenant and also the extent of income offered by the appellant in respect of same tenants in subsequent assessment years before arriving at the decision. The Ld A.O. has evidently not made such efforts. Keeping in view the above in terms of the decision of Hon ble Delhi High Court in the case of Court On Own motion Vs Union [ 2013 (3) TMI 316 - DELHI HIGH COURT] the appellant cannot be asked the suffer on account of the errors committed by third party in filing the TDS statement. A.O. is therefore, directed to carry out enquiry from M/s Sahara and M/s EPCS to verify the actual amount of rental income for the twelve months falling in the period 01.04.2010 till 31.03.2011 and determine income of the appellant accordingly. With regard, one M/s Reliance Hyper Realty Ltd., since that party is not even a tenant, the mistake carried out by it in showing appellant as payee of rental income, cannot be the basis for making addition in the hands of appellant - Decided against revenue.

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• 2022 (2) TMI 339
  Late remittance of employees contribution to PF and ESI - As stated that the assessee had paid the employees contribution to PF and ESI prior to the due date of filing of the return u/s. 139(1) - scope of amendment by Finance Act, 2021, to section 36[1][va] and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra) [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.

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• 2022 (2) TMI 338
  Disallowance of interest expenses u/s.36(1)(iii) - whether the investment was made by the assessee to have controlling interest in the companies? - HELD THAT:- Admittedly, the borrowed fund has been invested by the assessee by acquiring the shares of 5 different companies which are capable of generating only dividend income which is exempt from the tax. We note that the investments was made by the assessee in the companies in order to have controlling stake which is considered as for the purpose of the business. Therefore, there cannot be any disallowance of interest expenses. The facts of the present case are identical to the facts of the case as discussed in M/S. PHIL CORPORATION LTD., [ 2011 (6) TMI 187 - BOMBAY HIGH COURT] . Accordingly, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of the appeal of the assessee is allowed.

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• 2022 (2) TMI 337
  Disallowance of loss incurred on hedging of copper scrap imports against the income of the appellant considering the said loss as speculative loss - HELD THAT:- The commodity hedged being Copper and Zinc are raw material of the assessee and is considered for the purpose of business of the assessee. As regards the recognition of the exchange we have relied upon the argument of assessee that the transaction of the assessee does not fall in to clause (d) of section 43(5). It is immaterial whether transaction is carried out at the recognized stock exchange or not. Even the circular of CBDT cited in the assessment order states that once it is established that the assessee has entered in the transaction of the commodity that they deal the other technical details have no material impact. Hence, this reasoning of the assessing officer also fails. Thus, we believe that the assessee by filling the bills, quantitative information, the same is in accordance with the audited books and there is not adverse remark on it. The fact that they are using brass as their raw material which is metallurgic combination of copper and zinc and they have hedge that copper and zinc No fault in the finding of the Ld. CIT(A) in allowing this loss against the income of the assessee, since the Ld. DR has not contracted any of the facts placed before us and before the Ld. CIT(A) . Therefore, we are inclined to agree with the views of Ld CIT(A) and based on the above finding the ground of Revenue that appellant is not eligible to set off the hedging loss having no merits and same is dismissed. Disallowance of the raw material consumption, treating the same as suppressed income from production @ 2 % - HELD THAT:- There is no abnormal increase in byproduct yield and drastic fall in finished goods but the same is due to change in the product mix, development of new product, import of material which contains higher impurities. The Ld. AO has provided the assessee with unjustifiable or invalid reasons without any basis by considering the excessive claim of 2% on generation of by-product during the manufacturing process as unaccounted income from suppression of production. The Ld A.O. has compared the yield figures of F.Y. 2010- 11 F.Y. 2009-10 and considered the decrease in yield as manipulative tactic of the assessee to avoid taxes. Mere arithmetical comparison of figures doesn t lead to any sort of manipulative tactic of the assessee to mislead or misguide the A.O. particularly when the assessee has maintained the stock records which are audited by Statutory auditor, VAT auditor, Excise authorities. Moreover, there cannot be comparison of current year data with the earlier years where there is constant change in technology, product mix, upgradation of machineries, demand and supply of products and economic conditions prevalent in particular year. A.O. has also made reference to data of M/s Shri Bhavani Extrusion, Jamnagar (Manufacturing Brass rods) compared the same with the assessee record, and held that assessee co. is manipulating the production results to reduce the tax-burden. Again in our considered opinion comparing the figures of one firm with the assessee co., does not serve as an important base for proving that the assessee has done any sort of manipulation or any accounting jugglery to minimize the tax burden without pointing any defect in record maintained by the assessee. We further note that no opportunity was provided to assessee to cross verify the details of those companies/ firms. AR before us submitted that that those firm/companies which figure were compared with assessee company were engaged in mere extrusion business at a very small scale, therefore same cannot be comparable with the assessee at all as they do not engaged in manufacture of components manufactured by the assessee. Further, there are no provisions referred in the Act, that increase in slag yield leads to accounting jugglery to evade taxes. There is a force in the arguments of the assessee and we hold that the view of the Ld. CIT(A) in deleting are finding of facts and there is no error on the facts brought before us by the DR - Ground of appeal of the Revenue is hereby dismissed. Addition being the amount paid and debited to the profit loss account under the head stamp duty expenses - HELD THAT:- AO even though the details were placed before him, without giving any reasons, simply added the sum by stating that the stamp duty is not of a revenue expenditure. Whereas, the ld. AR before us argued that the CIT(A) has rightly deleted the addition made the AO by observing that the expenses are not related to purchase of assets, it does not create any enduring benefit and expenditure were incurred wholly and exclusively for the purposes of the business and same is allowable. In our considered view the finding of ld. CIT (A) is correct and department has not objected to any of the arguments on facts. Therefore, this ground of appeal of the Revenue is dismissed. Disallowance u/s. 40(a)(ia) - non deduction of tax on the reimbursement of expenses paid the C F agent - HELD THAT:- The issue being covered by the jurisdictional High court in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co Ltd [ 2014 (4) TMI 235 - GUJARAT HIGH COURT ] CIT(A) has rightly deleted the addition and we found no error of facts and in law and therefore, this ground of appeal of the Revenue is dismissed. Addition of abnormal increase of store and spare expenses - HELD THAT:- The argument of the ld. DR which is repeated from the assessment order are general in nature. As such the ld. DR has not pointed any single defects in the books of account and the supporting evidence placed before the AO. Whereas the ld. AR brought our attention to paper books where all the details and evidences are placed and stated that the claim is supported by a third party bill and books of accounts are audited by independent auditor. As regards the use of coal as an alternate fuel and explaining the corresponding decrease in the electric expenses and in respect of packing charges the reasoning given is also supportive that the exports and its corresponding margin of the assessee is increased. The difference in claim of expenses has been explained before the AO as well as before CIT(A) and in the absence of any specific details the general and adhoc lumpsum disallowance is unwarranted and uncalled for. CIT(A) also observed that the profit margins have been improved, export have been increased compared to last year, the expenditure incurred is backed by proper evidence and justification given. The finding of the CIT(A) is purely on merits which has not been contravened by the learned DR. considering the facts in totality we find more force in arguments and supporting explanation placed on record by the ld. AR and we are inclined to agree with the finding of Ld. CIT(A) - Decided against revenue. Late deposit of employee s contribution toward P. F. - HELD THAT:- We find no mistake of facts and in law in the action of the Ld. CIT(A) in the ground taken by the revenue on this disallowance. The payment was made within the grace period. Accordingly, no interference in the order of the ld. CIT-A is required. Hence, the ground of appeal of the Revenue is dismissed.

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• 2022 (2) TMI 336
  Interest levy u/s 201(1A) - suo-motto disallowances u/s. 40(a)(i)/(ia) - Whether obligation to deduct tax at source did not arise in respect of the provisions created in the books of accounts on 31 March 2012 (i.e., year-end provisions), as the receipt of such amounts by the parties was not established as on 31 March 2012? - HELD THAT:- Present assessee filed details of bifurcation of amount estimated in respect of each payee, the month in which the actual invoice was received and the TDS deducted coupled with details of it being deposited with the Government account. ITO(TDS) did not consider the same by observing that it is voluminous and impossible to be verified. On verification of the list of payees placed we note that assessee has deducted TDS between May 2012 to December 2012 (F.Y: 2012-13). Thus it is an admitted fact that TDS has been deducted at the time of making payment in respect of the provision made as on 31/03/2012 and the same has been deposited to the Government account. On identical facts and similar circumstances this Tribunal in case of IBM ltd [ 2015 (6) TMI 323 - ITAT BANGALORE] appreciated the arguments advanced by assessee therein to discharge assessee from the from being called as, assessee in default , under section 201(1) of the Act to the extent the TDS was effectuated. The present assessee cannot be treated to be an assessee in default to the extent TDS has been effectuated though in subsequent financial year. The provision of TDS provisions cannot applicable where there is no claim of expenditure made by the assessee. In the present facts assessee made suo motu disallowance of the entire provision under Section 40(a)(i)/(ia) of the Act. Once the amount is disallowed u/s. 40(a)(i)/(ia) for non-deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to interest u/s. 201(1A). The assessee(deductor) gets exonerated from the applicability of TDS provisions on disallowance of the expenditure in question under section 40(a)(i)/(ia) of the Act. This rational is based on the scheme of Section 40(i)/(ia), which is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee(deductor) in a situation in which income embedded in such expenditure remained untaxed due to tax withholding lapses by such assessee(deductor). In the amount on which TDS could not be effectuated due to non receipt of invoices, the Ld. AO will first have to ascertain if the payee has paid taxes on the income embedded therein. This is the pre condition for levying interest u/s. 201(1A) of the Act. Applicability of section 201(1A) needs verification of payment of tax by the recipient (payee) at the end of the Ld. AO since the Ld. AO failed to carry out necessary verification in respect of the payees, the details of which were provided by assessee. In the interest of justice, we direct the Ld. AO to verify the details filed by assessee in respect of the payee in accordance with the principles laid down by Hon ble Supreme Court in case of Hindustan Coco Cola [ 2007 (8) TMI 12 - SUPREME COURT] and keeping in view the intention of the legislature envisaged under section 40(a)(i)/(ia) of the Act. Assessee is directed to file all the relevant details once again, details of TDS deducted and paid to the Government account on payment being made in the subsequent year on reversal of the provision. At this juncture we caution the Ld. AO provisions of section 201(1) cannot be invoked, in view of the fact that there is no loss to the revenue in the present facts of the case as observed by us in the preceding paras. In case the assessee has not added back the provision created towards the expenditure to the total income in the statement of income and took advantage of provision by reducing the income of assessee then assessee is liable for interest u/s. 201(1) (1A) - Grounds raised by assessee in both the appeals stands allowed for statistical purposes

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• 2022 (2) TMI 335
  Disallowance of CME Free goods expenses - AO noticed that the most of the expenses pertain to gifts, hospitality, cash or monetary grants by the assessee company to the medical Practitioners or other professionals - HELD THAT:- Regulations of MCI and also the Circular of the CBDT were not applicable for the relevant year. Hence, the assessee gets remission for the instant Assessment Year. Appeal of the assessee on this ground is allowed. Disallowance interest on delayed payment of service tax - CIT(A) held that similar to the interest paid on delayed payment of TDS, the interest paid on delayed payment of Service Tax also cannot be treated for the purpose of business - HELD THAT:- We find that the observation of the ld. CIT(A) is on a misplaced interpretation of the provisions of the Act. It is well settled principle that interest on late payment of Service Tax is not penal in nature. Since, it is compensatory in nature, it is eligible for deduction u/s. 37(1) of the Act as it can be termed to be expended wholly and exclusively for the business purpose and the payment of interest on late remittance of Service Tax is neither an offence nor prohibited by law. In the result, the appeal of the assessee on this ground is allowed.

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• 2022 (2) TMI 334
  Exemption u/s 11 - CIT-A rejected application observing that GDA is not Institution working for charitable purposes since it was not registered under Indian Trusts Act, 1982 or Societies registration Act, 1860 - CIT(A) held that the assessee is engaged in development of land and in accordance to the Uttar Pradesh Urban Development Act 1973 - whether Section 2(13) of the Income Tax Act, 1961 is applicable to the functions of the assessee or whether it is Section 2(15) of the Act which needs to be invoked? - HELD THAT:- As per Section 7 of the Act, the object of authority is to promote and secure the development of the area according to the plan and for that purpose authority shall have power to acquire, hold, manage and dispose of land and other property to carry out building, engineering, mining and other operations to execute the works in connection with the supply of water and electricity dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary end expedient for the purpose of such development and for purposes incidental thereto. Provided that save as provided in this act nothing contained in this act shall be construed as authorizing the disregard by the authority of any law for, the time being in force. Thus, the above said act authorizes the assessee to undertake any activity to fulfill the main object of development of land in the specified area. In the instant case, the AO has not brought anything on record that distinguishes the clauses of the trust that were available before the authorities while granting registration u/s. 12AA of the Act. There has been no change in the objects of the assessee. Hence, we hold that invoking of provisions of Section 2(13) against the relevant provisions of Section 2(15) is not legally sustainable Hence, we hold that the decision of the ld. CIT(A) cannot be sustained. Having held that the assessee is eligible for deduction u/s. 11 of the Act, the matter is being remand back to the file of the ld. CIT(A) for the limited purpose of recomputing the eligible deduction in accordance with the provisions of Section 2(15).Having held that the assessee is eligible for deduction u/s. 11 of the Act, the matter is being remand back to the file of the ld. CIT(A) for the limited purpose of recomputing the eligible deduction in accordance with the provisions of Section 2(15) - Decided in favour of assessee.

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• 2022 (2) TMI 333
  Exemption u/s 11 - denial of registration u/s. 12A - Proof of charitable activities - HELD THAT:- As to the activities of the appellant in the past, there are assessment orders for AY 2016-17, AY 2017-18, AY 2018-19 in which the appellant has been found to be providing education. In the AY 2019-20 the benefit of exemption u/s. 11 of the Act has been refused due to the impugned order affecting the status of the appellant as not charitable. The assessee provides education and training in the field of remote sensing for preservation of environment through optimization of land use and natural resources. It provides specialized post-graduate degree courses in that subject in association with a recognized university. There is thus no doubt as to its mission for providing education. The Hon ble Apex Court decision in Aditanar Educational Institution [ 1997 (2) TMI 3 - SUPREME COURT] supports this plea. It will, therefore, be clear that the objectives of the appellant certainly constitute education for charitable purpose as understood u/s. 2(15) of the Act. We find that for the Assessment Years 2016-17, 2017-18 and 2018-19, the assessee was found to be providing education. There is also no dispute that the assessee is providing specialized Post-Graduate degree courses. Hence, as per the provisions of the Income Tax Act, we hold that the assessee is eligible for registration u/s.12AA of the Act. - Decided in favour of assessee.

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• 2022 (2) TMI 332
  Disallowance u/s 40(a)(ia) - AO observed that a sum was paid by the assessee to non-banking financial companies without deduction of tax at source - Demand u/s 201(1) - HELD THAT:- Assessee paid Rs. 4.12 crore as interest without deduction of tax at source. Though certificates from some of the payees in non-prescribed form were furnished, but the assessee did not furnish the relevant certificate in the prescribed form from all the payees so as to qualify for the benefit conferred by the second proviso to section 40(ia). Despite that, the ld. CIT(A) deleted the disallowance by taking into account the certificates received from two or three parties confirming that the interest was offered to tax. Not only the certificates from all the payees were not furnished but such certificates were also not in the prescribed form or issued by a Chartered Accountant in terms of the first proviso to section 201(1). This being a case of violation of a procedural provision, we are of the considered opinion that it would be in the fitness of the things if the impugned order on this score is set-aside and the matter is restored to the file of AO for deciding it afresh as per law. Needless to say, the assessee will be allowed an adequate opportunity of hearing and to put forth necessary documents in this regard. Addition to capital work-in-progress on account of property at Bhosari and Hadapsar - Since the capital work-in-progress was not put to use during the year, the AO opined that the amount of interest to that extent was not allowable u/s. 36(1)(iii) - HELD THAT:- Since the assessee did not put to use the two projects under consideration, the interest thereon was required to be capitalized, which was not eligible for deduction u/s. 36(1)(iii). The assessee also admitted this fact before the AO and offered disallowance at Rs. 72.00 lakh. However, no detail was filed either before the AO or before the ld. CIT(A) to show which of the total borrowings were utilized in respect of these two projects. The ld. AR accentuated on the availability of sufficient shareholder funds for canvassing a view that no interference in the impugned order on this score was called for. The argument of the availability of shareholders fund does not apply on loans specifically taken for the purposes of acquisition of an asset which has still not been put to use during the year. In other words, if a specific loan has been taken for purchasing an asset, notwithstanding the fact that the assessee has sufficient interest-free funds, interest on such loan has to be disallowed within the ambit of proviso to section 36(1)(iii). It is only after exhausting the specific loans taken for the purpose of acquisition of an asset that the proposition of availability of shareholders fund can be invoked for the balance amount of investment. CIT(A) was swayed by the assessee s submission that only a sum of Rs. 6.25 crore was taken as loan from ICICI bank for these two projects without actually examining the details and purpose of other loans - We are unable to sustain the finding returned by the ld. CIT(A) in deleting the addition. The impugned order is, ergo, set-aside and the matter is remitted to the file of the AO for considering this issue afresh in terms of our discussion made above. Needless to say, the assessee will be allowed reasonable opportunity of hearing. Disallowance u/s 14A - HELD THAT:- We find that the Hon ble Delhi High Court in Cheminvest Ltd.[ 2015 (9) TMI 238 - DELHI HIGH COURT] has held that if there is no exempt income, there can be no question of making any disallowance u/s. 14A of the Act. Also see CIT vs. Holcim India P. Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] . More recently in Pr. CIT VS. Kohinoor Projects Pvt. Ltd. [ 2020 (1) TMI 1161 - BOMBAY HIGH COURT] has also held that in the absence of any exempt income, there cannot be any disallowance of expenses u/s. 14A of the Act. Since the assessee in the instant case earned exempt dividend income and the ld. CIT(A) restricted the disallowance u/s. 14A to that extent, we uphold the same. Addition on account of mismatch in TDS - HELD THAT:- The assessee furnished details of the amounts received and TDS thereon. Some amount of TDS in Form No. 26AS was not claimed by the assessee, which fact was also brought to the notice of the AO. Anent to the five parties listed, though the income was declared but no TDS claim was made. The ld. DR was fair enough to accept the reconciliation taken note of by the ld. CIT(A). We, therefore, countenance the action of the ld. first appellate authority on this count.

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• 2022 (2) TMI 331
  Disallowance of Advertisement and Business Promotion expenses - HELD THAT:- The returned income for the instant year 2010-11 was loss of Rs. 4,46,56,600/-. The returned income for the A.Y. 2011-12 was also loss of Rs. 12.76 crores. Hence, the issue raised before us is purely tax neutral in the instant case, hence there is no call to go into the technicalities of the issue. Hence, the appeal of the assessee on this ground is allowed. As gone through the expenditure and find that they pertain to barricading for installation of Vinyls, Unipol fabrications and hoardings which are indeed in the nature of advertising. Hence, we hereby direct that the disallowance made by the AO and confirmed by the ld. CIT(A) be obliterated.

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• 2022 (2) TMI 330
  Deduction u/s 54F - transaction of sale of paintings and investment in residential property - whether sale consideration of art effects has been utilized towards purchase of above property, the capital gain be treated exempt? - CIT(A) deleted the addition - HELD THAT:- As observed by the ld. CIT(A) that on the date of such transfer of capital asset, appellant was not in the possession of any other identical house property and the new residential property was purchased on 08.09.2011 within a year from the date of such transfer of capital asset. After examining the submissions made before him, the ld. CIT(A) has found them to be in order and held that the assessee is entitled to claim exemption u/s. 54F in respect of sale of art effects. Since, the investment in the property (Rs. 2.70 Cr.) is more than the amount of sale consideration received (Rs. 2.50 Cr), the entire capital gain is eligible for exempt from tax. Since, the facts could not be contradicted before us, considering the facts on record, we hereby decline to interfere with the order of the ld. CIT(A). - Decided against revenue.

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• 2022 (2) TMI 329
  Taxability of income in India - Interest income on income tax refund - AO has held that the interest income received by the appellant on account of income tax refund is taxable at Maximum Marginal Rate of 40 per cent - PE in India - Interest received on the income- tax refund was claimed to be chargeable in terms of Article 11 of the Indo- US DTAA - HELD THAT:- On making the assessment of tax under the treaty and the under the Act, it will be found that tax payable under the Act is more than the tax payable under the treaty. Accordingly, the aforesaid provision will come to the aid of the assessee to come to an automatic conclusion, without exercise of any option, that it should get the benefit under the DTAA. No other consideration is material for this purpose as ultimately what is to be seen is whether the provisions of the Act are more beneficial to the assessee or not. Accordingly, it can be held that the assessee is entitled to the benefit under the treaty. Interest income need not be necessarily business income in nature for establishing the effective connection with the PE because that would render provision contained in paragraph 4 of Article XI redundant Thus, there may be cases where interest may be taxable under the Act under the residuary head and yet be effectively connected with the PE. The bank interest in this case is an example of effective connection between the PE and the income as the indebtedness is closely connected with the funds of the PE. As referring to relevant Article 11 of Indo-US DTAA with regard to interest it can be concluded that interest on income tax refund is not effectively connected with the PE either on the basis of asset- test or activity- test. Hence, it is taxable as per the provisions in the Para No. 2 of Article XI of Indo- US DTAA.

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• 2022 (2) TMI 328
  Treatment of assessee trust as an Association of Persons (AOP) - as submitted that the assessee trust was set up pursuant to section 7 of SARFAESI Act and RBI guidelines issued thereon. It was specifically submitted that the trust was not created as a smokescreen to evade tax. Hence the assessee trust cannot be construed as an AOP as there is no inter se agreement between the names of the beneficiaries and their shares were known and have remained unchanged - HELD THAT:- We find that the issue in dispute is no longer res integra in view of the decision of this Tribunal in the case of ITO vs ARCIL AARF I -1 Trust for Asst Year 2013-14 [ 2021 (9) TMI 1334 - ITAT MUMBAI] wherein this tribunal by placing reliance on its earlier order passed in the case of CIT vs Scheme A1 of ARCIL in [ 2020 (9) TMI 465 - ITAT MUMBAI] had decided the issue in favour of the assessee wherein as dismissed the appeal with the findings that the assessee was a valid trust. Since it was revocable Trust, the provisions of Sec. 61 to 63 were applicable and the assessee could not be assessed as AOP. The income was to be taxed in the hands of the SR holders. Since the respective shares were known since inception, it could not be considered as indeterminate Trust. Finally the appeal of the revenue was dismissed. - Decided against revenue.

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• 2022 (2) TMI 327
  Assessment u/s 153C - nexus between the addition made in the assessment order and in the incriminating material found - HELD THAT:- A perusal of the assessment order shows that there is no reference to any incriminating material found during the course of search. In fact, the original assessment was framed vide order dated 13.12.2010 wherein short term capital gain was accepted as such. Therefore, in our considered opinion, in the assessment order framed u/s. 153C of the Act, there has to be direct nexus between incriminating material found during the course of search qua the addition, devoid of which, the ratio laid down in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia[ 2017 (5) TMI 1224 - DELHI HIGH COURT] squarely apply. Coming to the facts of Assessment Year 2009-10, we find that the assessee has returned short term capital loss on forfeiture of convertible share warrants which was accepted as such by order dated 10.09.2010 framed u/s. 143(1) of the Act. However, in the order framed u/s. 153C of the Act, the same was disallowed. A perusal of the assessment order clearly shows that there is no nexus between the addition made in the assessment order and in the incriminating material found at the time of search - we do not find any merit in the addition made in Assessment Year 2009-10. - Decided in favour of assessee.

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• 2022 (2) TMI 326
  Addition u/s 69A - Unexplained cash deposits in bank account maintained by the Bank of Baroda during demonetization period - CIT-A restricted part addition - HELD THAT:- From the perusal of the history of cash withdrawals starting from the financial year 2014-15, we find that assessee has been regularly withdrawing huge cash amount on various dates and there was hardly any credit balance left in his bank account. The funds flow statement as incorporated above clearly shows that each and every withdrawal has been mentioned and utilization thereof and the money being withdrawn from the bank account. Even after house-hold withdrawal, there was a huge amount available with the assessee in the form of cash. Under these facts and circumstances stated by the assessee, it cannot be held to be improbability that assessee did not have any availability of cash at the time of demonetisation. Also not brought on record whether assessee was carrying out any business or profession or was having income from undisclosed sources of income which can be said to be available with the assessee in the form of cash. If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him - explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee and without any adverse material it cannot be presumed that the cash deposited by the assessee is out of some his undisclosed source. Accordingly, the addition as sustained by the CIT (Appeals) is deleted - Decided in favour of assessee.

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• 2022 (2) TMI 325
  Revision u/s 263 by CIT - disallowance under Section 40(a)(ia) - HELD THAT:- Assessing Officer vide order passed in pursuance of order under Section 263 of the Act, has given a finding that assessee has produced the copies of details of TDS certificate and details of suppliers and also the material which were not supplied to the assessee. AO found that the assessee had deducted TDS on the expenses as mandated by Section 194C(3), hence no addition was made. Thus, the issue of 40(a)(ia) of the Act as raised by the ld. Pr. CIT in the impugned order is no longer in issue and hence on this score matter is decided in favour of the assessee. It is an admitted fact that this issue was covered in favour of the assessee by various orders of the Tribunal in the earlier years and the only reason assigned by the ld. Pr. CIT for setting aside the assessment order is that the AO has not seen the history of the case and the issue has not been settled. Thus, it cannot be held that the assessment order is either erroneous or prejudicial to the interest of Revenue. Accordingly, on this issue also the order of the Pr. CIT cannot be sustained. The order of the ld. Pr. CIT is set aside and the appeal of the assessee is allowed.

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• 2022 (2) TMI 324
  Delay payment of ESIC and PF - payment has been made on or before the due date of filing income tax return - Scope of amendment to section 36(1)(va) and section 43B - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case - See SHRI GOPALAKRISHNA ASWINI KUMAR VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU [ 2021 (10) TMI 952 - ITAT BANGALORE] Thus addition of deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.

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• 2022 (2) TMI 323
  Unexplained cash credit u/s 68 - in revised return gross receipts were shown as income from trading business of Grey Fabrics - HELD THAT:- The assessee is a practicing Chartered Accountant and is, therefore, barred from doing any business. Only under certain circumstances, the governing body ICAI permits a practicing Chartered Accountant to do business. However, no such evidence was brought on record. The assessee has been harping upon the revised return which is in-fact an in valid return. Further, even before us the assessee has not brought on record any demonstrative evidence to justify his business activities. There is no evidence of any VAT, GST or permission from Municipality. Nor there are any evidences in respect of purchases/ sales of Gray Fabrics. It appears that the revised return was filed only to cover up the queries raised during the assessment proceedings in respect of cash found to be deposited in various bank accounts. On finding, no demonstrative evidences, we do not find any reason to interfere with the findings of the CIT(A) filed by the assessee is dismissed.

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• 2022 (2) TMI 322
  Revision u/s 263 by CIT - Rejection of trading results - lack of enquiry or lack of investigation - HELD THAT:- Assessing Officer had made detailed inquiries regarding the assessee s claim of purchases, sales, sundry debtors, sundry creditors and trading results declared by the assessee in the return of income. However, since on detailed enquiry, the AO rejected the trading results, he estimated the business profit of the assessee by applying the net profit rate declared in subsequent years. The Ld. Pr. CIT has neither disputed the rejection of books of accounts by the AO by invoking section 145 of the Act and nor has disputed the application of net profit rate declared in subsequent years. He has, however, held that based on the enquiries made, addition ought to have been made on account of creditors and disallowance of purchases claimed by the assessee. He has also directed the AO to conduct detailed inquiries regarding the purchases and sales made by the assessee by conducting third party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis- -vis the trading results declared by the assessee. Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished - Thus, in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr. CIT that no inquiry was made by the Assessing Officer vis- -vis trading results or addition in fixed assets is factually incorrect. CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr. CIT although it was incumbent upon him to make such inquiry so as to reach the impugned conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. Rejection of trading results and application of net profit rate by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise, invocation of section 263 is not in accordance with law - no hesitation in holding that the Ld. Pr. CIT has wrongly invoked the revisionary powers u/s. 263 of the Act vis- -vis the trading results declared by assessee and we have no option but to hold the same as being bad in law. Unsecured loans were unexplained cash credits u/s. 68 - Loans raised from Shri Mohit Mehta and Smt. Satya Devi - We are in complete agreement with the conclusion of Ld. Pr. CIT that the Assessing officer had conducted no enquiry on this issue and the order was, thus, erroneous and prejudicial to interest of revenue. Thus, we concur with the stand of the Ld. Pr. CIT on the issue of unsecured loans and, therefore, uphold the 263 proceedings in respect of loans raised from Shri Mohit Mehta and Smt. Satya Devi and direct the AO to pass an order afresh on the said issue in accordance with law after affording reasonable opportunity of being heard to the assessee. Accordingly, the impugned order in in the case of M/s. Pardeep Ispat (P) Ltd. stands modified in terms of our observations above and the 263 proceedings are partly upheld and partly quashed. It is so ordered accordingly. Grounds 1 to 9, thus, stand partly allowed.

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• 2022 (2) TMI 321
  Addition in respect of income from contract receipts by assessing less than 8% of the total contract receipts - HELD THAT:- Admitted facts are that the assessee is a civil contractor having gross contract receipt of Rs. 39,47,319/- and admitted net profit at Rs. 2,08,500/- as against assessed by the AO at Rs. 4,70,258/-. It is an admitted fact that the assessee has filed Form No.3CB 3 CD for the assessment year 2000-01 as required u/s.44AB of the Act with the Department on 24.10.2000. The due date for filing of this audit report is 31.10.2000 and return of income is also 31.10.2000. The assessee has filed this evidence i.e., the audit report was filed with the Department and audit was carried out u/s.44AB of the Act on 15.10.2000. All these shows that these events are prior to due date of filing of audit report as well as return of income. Even now, before us the ld.senior DR could not controvert the above evidences filed or the authenticity of the same are not doubted. In view of the admitted facts, we are of the view that the CIT(A) has rightly accepted the contention of the assessee and estimated the profit at a lower rate than 8% of the gross contract receipts. Therefore, we uphold the order of CIT(A). - Decided in favour of assessee.

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• 2022 (2) TMI 320
  Deemed dividend u/s 2(22)(e) - loan transaction and transaction for purchasing the shares - HELD THAT:- From investment chart, ledger account of M/s Teleecare Network India Pvt. Ltd., confirmation of account and copy of allotment return submitted during the assessment, it is evident that the appellant has not received any amount / loan from Teleecare Network India Pvt. Ltd and as such there does not arise any question of any addition on account of deemed dividend u/s 2(22)(e) of the IT Act, 1961. Addition made by the A.O is therefore deleted - Decided against revenue.

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• 2022 (2) TMI 319
  Existence of PE in India - Income accrued in India - assessee has a PE in India subsidiary company set up - abassessee is a company incorporated in USA and also a tax resident of USA - Assessee pleaded that it does not have any PE in India in terms of Article 5 of the Double Taxation Avoidance Agreement (DTAA) entered into and subsisting between India and USA. The Indian Company i.e. GIA India Laboratory Pvt. Ltd., which was set up on 26/09/2007, is a subsidiary of the assessee company. This subsidiary company set up a laboratory in India and since then engaged in the activity of gem grading in India - HELD THAT:- As during the year under consideration vis- -vis earlier years [ 2019 (7) TMI 859 - ITAT MUMBAI ] which has been admitted both by the ld. AO as well as ld. DRP, respectfully following the aforesaid decisions of the Tribunal, we hold that the ld. AO erred in invoking section 9 of the Act and / or Article 5 of the India USA DTAA in order to say that assessee has a PE in India. Accordingly, the ground No.2 raised by the assessee is allowed. Taxability of royalty - HELD THAT:- Since there is no PE in India, there will be no occasion to royalty being effectively connected with the PE or taxability of royalty u/s.44DA Chargeability of interest u/s.234C - HELD THAT:- This ground would be consequential in nature as we have directed the ld. AO to re-determine the income in terms of the aforesaid directions. In any event, we hold that interest u/s.234C of the Act shall be charged only on the returned income and not on the assessed income. The law is very well settled in this regard.

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• 2022 (2) TMI 318
  Unexplained investment u/s 69 - Addition based on loose papers found in search - legal admissibility of the dumb document - During the course of search action at the premises of Signature Group, some unsigned draft MOU/Agreements between Simara Reality and the assessee were found - HELD THAT:- We are of the view that the additions have been made on the basis of a dumb paper as the agreements were not executed nor they were signed by any of the parties and simply on the basis of unsigned unexecuted documents, the additions cannot be made on merely assumptions and surmises. Nothing has been brought on record that these agreements were executed subsequently or the said transaction took place. In some of the agreements, the assessee s name does not appear. There is no iota of any evidence that the assessee has made the payment in cash in execution of these agreements. Under these circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) on this issue. Therefore, we confirm the same. Accordingly, ground no.1 raised in the departmental appeal is dismissed. Unexplained unsecured loan - assessee before AO failed to furnish the desired documents - HELD THAT:- The assessee could not submit the necessary details as the same were not available at the time of the assessment and the Assessing Officer made the addition on the ground that in absence of the bank statement and the income tax returns the genuineness and the credit worthiness of the parties are not established - we find that in the appellate proceedings, all details like the bank statements, income tax returns etc. were filed before the ld. CIT(A) with an application under rule 46A. CIT(A) sent all the papers to the Ld. A.O. for his comment and the remand report. CIT(A) after considering the submissions and facts of the case deleted the additions on the ground that the assessee has furnished all details such as, the documents relating to the identity, credit worthiness of the lender and genuineness of the transaction. Thus, prima facie the liability of the assessee to prove the genuineness, identity and credit worthiness stands discharged. We also find that the necessary papers to establish genuineness of the transaction were filed and the assessee had proved beyond doubt the identity of the lender, credit worthiness and the genuineness. By filing these requisite documents, the assessee established the Identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Thus, the assessee had satisfied all the three conditions required for genuineness of the transaction. - Decided against revenue. Admission of undisclosed income - additional income surrendered by the assessee u/s 132(4) - assessee surrendered the income on account of cash receipt outside the books of account jointly in the case of the assessee and in case of the other relevant firms - while filing the returns, the assessee retracted from the said surrender and filed the returns on the basis of the accounts which are duly audited - HELD THAT:- No addition can be made without finding any incriminating material merely on the basis of the declaration u/s 132(4). Our view is supported by the direct judgment of the this Indore Bench of Tribunal in the case of Shri Sudeep Maheshwari [ 2019 (2) TMI 1641 - ITAT INDORE] and in the case of M/s Ultimate Builder [ 2019 (9) TMI 1172 - ITAT INDORE] As common statement of Shri Rajkumar Khilwani was recorded during the course of the search in which he offered the various undisclosed incomes in various concerns of Signature Group. On the basis of this statement recorded u/s 132(4), the ld. A.O. made the additions in the cases of Ultimate Builders, Signature Builders and Signature Infrastructure and these additions have been deleted by the Tribunal in the respective cases holding that without finding any incriminating material, no additions can be made merely on the declaration u/s 132(4). We find that on the basis of the same statement and with the same reasoning, the addition has been made by the Ld. A.O. in the present case and the same has been deleted by the ld. CIT(A) following the judgment of the Tribunal (supra). In view of above discussion, we hold that the ld. CIT(A) rightly deleted the addition made by the Assessing Officer on account of additional income surrendered by the assessee u/s 132(4) - Decided against revenue.

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• 2022 (2) TMI 317
  Revision u/s 263 by CIT - second round before the ITAT - claim of exemption by the assessee under S. 10(23)(iiiac) denied - HELD THAT:- As per Income Tax Act, powers of ITAT are dealt with second appeal on all matters of direct tax including appeals against revisional order of the Administrative Commissioner as well as order denying the registration under S.12AA or 80G of the Act etc. Tribunal has been entrusted with the responsibility of deciding intricate question of law and facts and in case of facts, Tribunal is a final finding authority. Tribunal has categorically directed learned AO to examine the claim of the assessee under S. 10(23)(iiiac) of the Act and therefore decide as per law. In our considered opinion, learned PCIT has exceeded has power wherein ITAT has categorically given instruction to the AO. In such circumstances, the order under S.263 of the Act cannot be sustained. Thus, appeal of the assessee is allowed.

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• 2022 (2) TMI 316
  Validity of Reopening of assessment u/s 147 - Eligibility of reasons to believe - notice after expiry of four year - unexplained expenditure u/s 69 - HELD THAT:- Admittedly notice under section 148 was issued after expiry of four year from the end of relevant assessment year, therefore the Proviso to section 147 will come into effect. And as per said Proviso, no action can be taken after expiry of four year unless any income chargeable to tax has escape assessment by the reasons on the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. As the assessee has already disclosed all the facts fully and truly all necessary for assessment in the form of expenses of purchases shown purchases. Hence, we are of the view that notice under section 148 is issued on the basis of material available on record on the file of AO, thus, it is also a case of change of opinion, which is not permissible under law and has been held in CIT Vs Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ]. In view of the aforesaid factual and legal discussion, we are of the view that the reopening under section 147 and issuance of notice under section 148 is not in accordance with law and the same is set aside, resultantly the assessment order dated 25.02.2015 is quashed. Considering the facts that we have accepted two primary submissions of the Ld. AR for the assessee, therefore discussions on other submissions has become academic. In the result, ground No. 1of the appeal is allowed. Unexplained expenditure u/s 69 - We find that the AO has not rejected the books of the assessee, no comment was made by the AO on various documentary evidence, which were available before him. The ld AR for the assessee further submits that the assessee has declared better gross profit (GP) for the year under consideration @ 5.19%, which is more than the earlier years. Therefore, we find that the assessee has good case on merit as well - Appeal of the assessee is allowed

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• 2022 (2) TMI 315
  Capital gain computation - action of the DVO in assessing the fair market value of the property sold as against sale consideration recorded in the sale deed - AO by applying the provisions of Section 50C of the Act treated the sale consideration as per circle rates i.e., stamp duty valuation at Rs. 5.95 crores and computed the capital gains accordingly - HELD THAT:- The assessee has produced one letter dated 27.11.2019 filed with the DVO only on 29.11.2019 raising objections - Similar objections were raised by the assessee before CIT(A) and the CIT(A) has reproduced these objections in his order but these were never considered nor adjudicated upon. Keeping in view the entirety of facts in mind, we are of the considered view that the above objections cannot be decided at this stage because this being a technical issue. Moreover, the CIT(A) has passed a non-speaking order as noted above. Let the matter be referred back to the file of the AO, who will refer the matter back to the file of the DVO to consider the objections raised by the assessee and then determine the fair market value as per law. Hence, we set aside the orders of the lower authorities i.e., of the AO and that of the CIT(A) and remand the matter back to the file of the AO for reconsideration of the objections of the assessee. Disallowance of improvement cost, disallowance of deduction towards brokerage expenses and disallowance of construction expenses - HELD THAT:- Since the main issue is going back to the file of the AO, these three issues can also go back to the file of AO because these issues will affect the determination of long term capital gain of the assessee. To this, the ld. senior DR has not objected. Hence, we set aside these three issues also to the file of the AO. The orders of the lower authorities are set aside and these three issues are remanded back to the file of the AO.

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• 2022 (2) TMI 314
  Deduction of the amount retained by the monitoring committee out of sale proceeds - Disallowance relating to the 15% of sale proceeds retained by monitoring committee - assessee is a partnership firm and is engaged in the business of extraction of iron ore by taking lands on lease from Government - HELD THAT:- All the amounts collected from the lessees under different categories are directed to be given to the SPV, which will in turn take various types of ameliorative and mitigative steps in the interest not only of the environment and ecology but the mining industry as a whole so as to enable the industry to run in a more organized, planned and disciplined manner. Under these set of facts, it cannot be said that these amounts are penal in nature Tribunal in the case of NMDC Ltd [ 2018 (10) TMI 1120 - ITAT AHMEDABAD] came to the same conclusion by following the decision rendered by Hon ble Kolkata High Court in the case of Shyam Sel Ltd [ 2016 (8) TMI 511 - CALCUTTA HIGH COURT] and State Pollution Control Board vs. Swastik Ispat (P) Ltd [ 2014 (1) TMI 1893 - NATIONAL GREEN TRIBUNAL, NEW DELHI] wherein identical types of payments made to remedy the river pollution caused by the parties were held to be compensatory in nature. Hence the provisions of Explanation 1 to sec.37 will not apply to these payments. Hence, these expenses are allowable as deduction u/s 37(1) of the Act. Thus we hold that the amount deducted @ 15% from the sale proceeds constitute trading receipts in the hands of the assessee, but at the same time it is allowable as deduction u/s 37(1). - Decided in favour of assessee. Compensation amount retained from sale proceeds of iron ore - assessee claimed the same as deduction in its Profit and Loss account - AO considered the same as payment of penalty and accordingly opined that the same is not allowable u/s 37(1) - HELD THAT:- We hold that the compensation amount paid by the assessee is allowable as deduction. However, we notice that, in the instant case, the assessee has not furnished break-up details of payment while the details of break-up of payments was furnished in the case of Veerabhadrappa Sangappa Co. [ 2020 (12) TMI 1145 - ITAT BANGALORE] - AO also did not have occasion to examine the claim at all, since he had disallowed the entire claim. There should not be any dispute that, before applying the ratio of decision of Veerabhadrappa Sangappa Co. (supra), it is necessary to examine break-up details vis- -vis the decision rendered by Hon ble Supreme Court, to determine whether this claim pertain to the year under consideration etc., i.e., the AO should satisfy himself on parity of facts and year of claim. Hence for the limited purpose of examining factual aspects and applying the ratio of the decision rendered in the case of Veerabhadrappa Sangappa Co (supra), we restore this issue to the file of AO. Accordingly, the order passed by Ld CIT(A) on this issue is set aside. Appeal of the assessee is treated as allowed for statistical purposes.

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• 2022 (2) TMI 313
  Nature of payment in the light of the definition of Royalty - chargeability of amount received from MCPL by the Assessee towards BT charges for providing WAN connectivity/bandwidth services outside India as equipment/process royalty u/s 9(1)(vi) of the Act and/or Article 13(3) of the India UK DTAA - Assessee is a tax resident of UK - bandwidth services are provided as standard services wherein the customer enjoys an uninterrupted service to transmit voice and data at standard rate of reliability - diversified views - HELD THAT:- Applying the rule that if two interpretations are possible on tax liability benefit of interpretation is given to the subject, we follow the ruling of the Hon ble Delhi High Court in the case of Asia Satellite[ 2011 (1) TMI 47 - DELHI HIGH COURT] and Bombay High Court in the case of Siemens Aktiongesellschaft[ 2008 (11) TMI 74 - BOMBAY HIGH COURT] and hold that in the case of Assessee, the consideration received for providing bandwidth facility will not be taxable as equipment royalty or process royalty. The plea of the Assessee in this regard is accepted and the relevant grounds of appeal in all the 7 appeals are allowed, as admitted by both the parties, the facts and circumstances of the case are identical. Taxable income in India - purchase of software - Indo-UK DTAA - HELD THAT:- Case of present Assessee falls within the third category analyzed by Hon ble Supreme Court. Respectfully following the above view by Hon ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] We hold that purchase of software in the present facts does not amount to give rise to any taxable income in India as the provisions of sec.9(1)(vi) along with Explanation- 2 or the relevant provisions of the Indo-UK DTAA are not applicable to present Assessee s. Accordingly, we allow the relevant ground of appeal.

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• 2022 (2) TMI 312
  Nature of receipt - Voluntary severance payment received from the employer - Whether severance payment to the assessee is voluntary in nature and it does not amount to compensation within the provisions u/s 17(3)(i) ? - As per assessee he was in employment with the M/s.AREVA India Pvt Ltd from the year 2006 but due to shutting down of business operations in India the assessee has lost his employment - HELD THAT:- Assessee was paid severance pay due to loss of employment because of shutting down of business operations in India. Further, such payment takes the character of a capital receipt and cannot be considered taxable u/s 17(3)(i) as a compensation. The assessee has received the onetime payment and it is not recurring in nature. We are of the substantiate opinion that the assessee has lost his employment which was continued from the year 2006. The letter dated 31.05.2016 was in respect of severance payment received by the assessee though specifically does not mention the term ex- gratia but the fact remains that the assessee has lost his employment at the instance of the employer closing down its business operations in India. The receipt of severance pay though the nomenclature is not mentioned as ex- gratia but takes the character of a capital receipt and the payment was made voluntary by the employer for loss of employment. and such capital receipt is not taxable in the hands of the assessee. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee.

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• 2022 (2) TMI 311
  Taxation of money found during the search proceedings - Whether the on money found during the search proceedings are liable to be taxed in the hands of the assessee or in the hands of MOPL? - HELD THAT:- There are certain undisputed facts that both assessee and MOPL are related parties and chargeable to tax at the maximum marginal rate. Thus, effectively there is no loss to the revenue as far as the collection of taxes is concern after ascertaining the party in whose hand, the income needs to be taxed. In either of the case, the tax money will flow to the Government Exchequer. We do not find any infirmity in the order of the learned CIT (A) in so far, the issue in whose hands the income has to be taxed. Hence, we direct that there cannot be any addition to the total income of the assessee on account of the receipt of on money discussed above. As such, such amount of on money is liable to be taxed in the hands of MOPL Whether the gross amount of on money received should be subject to tax without allowing the deduction of the expenditure recorded in the seized documents? - As it is a fact on records that on money was reflecting in the seized documents. Such seized document was the basis of making the addition of such on money. It is also a fact on record that there were expenditures incurred against the on money as evident from the same set of seized documents. In our considered view these documents should be read as a whole. Such seized documents cannot be used as the basis for making the addition without giving the deduction of the expenses appearing in the seized documents - we hold that the assessee (MOPL) is very much entitled for the expenses appearing in the seized documents against the on money which was not recorded in the books of accounts like the expenses as discussed above. Income reflecting in the on money can be determined based on some percentage basis - Whether the entire amount of on money should be included in the taxable income or some percentage of profit embedded therein should be worked out? - HELD THAT:- Admittedly, the money which have been treated on money is the business receipts. Therefore, the entire amount of on money cannot be treated as income - we do not find any infirmity in the order of the learned CIT (A) so far, to determine the income of on money receipts on the percentage basis is concern. Determination of percentage to be applied on the on money - There is no standard jacket formula to work out the income embodied in the receipt of unaccounted money based on the documentary evidence in the given facts and circumstances. Thus, we are of the view that some element of guesswork is required to work out such income of the assessee. At the time of hearing the ld. DR has not brought anything on record against the finding of the ld. CIT-A. Thus we don t finding any infirmity in the order of ld. CIT-A in the light of the above stated facts and discussion. Payment throgh Unexplained sources - Whether the payment was made from the unexplained sources? - HELD THAT:- CIT (A) has duly explained the payment made to the parties against the expenses as recorded in the seized documents. In other words, there were certain expenses which were recorded in the seized documents. Likewise, the cash payment of such expenses were also recorded on the seized documents. As we have already held that the expenses were incurred out of the on money and therefore there cannot be any other addition with respect to the payment of such expenditure. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we do not find any infirmity in the order of the learned CIT (A). Receipt shown by the assessee in the books of accounts subjected to tax on percentage basis - HELD THAT:- In this regard we note that the assessee is a builder and developing a residential cum commercial project. The Accounting Standard 7 provides to recognize the income on progressive method. But the Accounting Standard 7 namely Accounting for the Construction Contract is not applicable to a builder. The income of the assessee being a builder has to be recognized in pursuance to the provisions of Accounting Standard 9 namely Revenue Recognition. We have already applied the rate of 10% somewhere in the preceding paragraph. Accordingly, we take the same rate and direct the AO apply percentage of profit on the gross receipt of Rs. 2,25,92.350/-. Hence the ground of appeal of the assessee is partly allowed whereas the ground of appeal of the revenue is hereby dismissed Whether the assessee is acting as a mutual concern and therefore there cannot be any tax liability on the assessee on mutuality concept? - It is also pertinent to note that there was a ground raised by the assessee in the memo of appeal by stating that the assessee is working in the capacity of mutual organization having no profit motive. Therefore, based on the principles of mutuality there cannot be any income in the hands of the assessee. However, at the time of hearing, we note that the learned AR has not made any argument on this issue. Unexplained peak cash loan - AO during the assessment proceedings based on the seized documents found that the assessee has incurred/paid the interest expenses on the money borrowed in cash - CIT-A has deleted the addition made by the AO by observing that the amount of loan taken in cash was not recorded in the regular books of accounts - HELD THAT:- Whether the loan amount represents the income of the assessee. The answer stands in negative. The loan cannot be treated as income. However, there is a presumption under section 68 of the Act which states that if any cash that is found in the books of accounts which has not been explained by the assessee with respect to the identity, creditworthiness and genuineness of transaction has to be treated as unexplained cash credit. The same shall be presumed as unexplained cash credit under section 68 and the same will be liable to be taxed. However, it is a fact on record that the impugned amount of interest as well as the amount of loan computed by the AO based on such interest, was not recorded in the regular books of accounts. Therefore, in our considered view the impugned amount of loan not recorded in the regular books of accounts cannot attract the provisions of section 68 of the Act. Hence, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly, we uphold the same. Likewise, on the same reasoning the income added by the AO on protective basis in the hands of MOPL is also liable to be deleted. Thus, the ground of appeal raised by the Revenue is dismissed. Addition on account of difference in cost of construction determined by the DVO and recorded by the assessee in the books of account - HELD THAT:- AO has already made addition of different types to the total income of the assessee particularly on account of on money involved in the project and expenditures incurred in cash on the project. Thus, there cannot be any further addition based on the valuation report as discussed above. If it is done so, it would lead to the double addition to the total income of the assessee which is not desirable under the provisions of the Act. Hence, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly, we uphold the same. Likewise, on the same reasoning the income added by the AO on protective basis in the hands of MOPL is also liable to be deleted. Hence the ground of appeal of the revenue is dismissed. Unexplained cash in hand - HELD THAT:- As there was the cash found from the premises of the assessee during the search proceedings. The onus lies upon the assessee to explain the source of the same. However, we find that the assessee failed to offer the source of the same, therefore the addition was made by the AO which was subsequently confirmed by the learned CIT (A). At the time of hearing the learned AR has not brought anything on record about the source of cash. Accordingly we do not find any reason to interfere in the finding of the authorities below. Hence the ground of appeal of the assessee is dismissed.

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• 2022 (2) TMI 298
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - reopening beyond the periods of years - HELD THAT:- Since the notice issued is after expiry of four years from the end of the relevant assessment year and assessment under Section 143(3) of the Act was completed, proviso to Section 147 of the Act shall apply. Respondent has to first show that there was failure on the part of petitioner to fulfill and there are non-disclosure of material facts required for assessment. As considered the reasons annexed at Exhibit F to the petition. In our view, respondent has miserably failed to disclose any facts, material or otherwise which has not been disclosed. In our view, first of all the reasons indicated change of opinion which is impermissible in law and secondly, the entire basis for re-opening is due to mistake of the Assessing Officer that resulted in under assessment. Hon ble Apex Court in Indian Eastern Newspaper Society [ 1979 (8) TMI 1 - SUPREME COURT ] has held that an error discovered on a reconsideration of the same material (and no more) does not give power to the Assessing Officer to re-open the assessment. - Decided in favour of assessee.

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• Customs

• 2022 (2) TMI 310
  Provisional release of goods - alleged misclassification of the Product - HELD THAT:- the entire amount claimed by the respondents had already been paid by the petitioner voluntarily and not under protest - A perusal of the order styled as Provisional release order dated 03.12.2021 would clearly indicates that the same travels well beyond and letter and spirit of the earlier orders passed by this Court as well as the submissions made on behalf of the respondents by its learned counsel, that too on instructions from the respondents. The Provisional release order dated 03.12.2021 being ex-facie illegal and arbitrary being contrary and diametrically opposite to the earlier orders passed by this Court, the same deserves to be quashed, though no prayers are sought for in this regard in the present petition, particularly when the said order has been passed during the pendency of this petition and in the teeth of the earlier orders passed by this Court - in view of the aforesaid orders passed by this Court on 19.11.2021 and 26.11.2021, the impugned orders deserve to be quashed and the respondents are liable to release the goods forthwith in favour of the petitioner without any further delay and close the proceedings as well as other consequential proceedings pursuant to the impugned orders in terms of the aforesaid earlier orders passed by this Court. The petition is hereby allowed.

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• 2022 (2) TMI 309
  Classification of imported goods - Low Aromatic White Spirit - to be classified under CTH 27101990 or under CTH 27101910? - restricted goods or not - burden to prove - Department holds that the goods are Kerosene and Super Kerosene oil classifiable CTH 27101910 which are restricted for import and allowed to be imported only through State Trading Enterprise - HELD THAT:- The parameters in regard to burning point was not tested and reported. The IS specification requires that all the eight parameters have to be satisfied in the case of Kerosene. When only seven parameters have been tested and reported, the department cannot conclude that the goods conform IS : 1459 : 2018 (kerosene) and not IS : 1745 : 2018 LAWS. When the department does not accept the classification declared by the importer and rejects the classification stated in the suppliers analysis certificate, the burden lies upon the department to establish the correct classification. In a similar issue, the Tribunal in the case of SWARNA OIL SERVICES, SM TRADING COMPANY VERSUS COMMISSIONER OF CUSTOMS, MUNDRA [ 2020 (6) TMI 70 - CESTAT AHMEDABAD ] held that if all the eight parameters are not tested, the evidence adduced in the nature of test reports cannot be relied to conclude the classification of the goods as Kerosene. The Commissioner (Appeals) has followed and applied the said decision. The impugned order calls for no interference - Appeal dismissed - decided against Revenue.

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• 2022 (2) TMI 308
  Classification of imported goods - (ViewBoard) ViewSonic IFP6550-2/65 Interactive Display System - (ViewBoard)-ViewSonic-IFP7550-2/75 Interactive Display System - case set up by the appellant at the time of assessment was that the goods were Automatic Data Processing Machines [ADPM ] and not Monitors and, therefore, classifiable under CTI 8471 90 00 and not under CTI 8528 52 00? - HELD THAT:- The impugned goods are IFP having an in-built CPU (ARM Cortex A.73 dual-core 1.2GHz Processor), a 2GB RAM and Android 7.0 Operating software. In addition, they also have an internal storage capacity of 16GB. Thus, goods are machines which are capable of storing data or programmes for the execution of programmes and satisfy condition no. (i) of Chapter Note 5(A) to Chapter 84. The goods are capable of working as an ADPM on a standalone basis and can also be used in conjunction with other ADPM, but this would not mean that the goods would cease to be ADMP in their own right, capable of working on a standalone basis. The large size display (65 inches and 75 inches) is only a feature/specification of the product and this cannot be construed to be its function, much less its principal function. The Deputy Commissioner and the Commissioner (Appeals), therefore, committed an error in holding that the large size of display would mean that the goods are meant for display purpose to a large gathering and, therefore, in terms of Note 5(E) of Chapter Note 84, the goods would merit classification as per the specific use - Commissioner (Appeals) committed an error in rejecting the contention of the appellant that the goods were ADPM by taking recourse to trade parlance, namely, that buyers intending to purchase a computer will not select the goods because of the large size display and, therefore, the goods should be specified according to the use. The Commissioner (Appeals) also committed an error in holding that even if the goods are capable of being used as ADPM considering their features, they would still merit classification under CTH 8528 in view of the provisions of GRI (3)(c). The goods in dispute, on the other hand, are much more than mere display devices and, therefore, cannot be classified under CTH 8528 as monitors. The HSN Explanatory Notes to CTH 8528 also mention that the viewable image sizes of the monitors do not generally exceed 30 inches and that they usually cannot be operated by a remote control. The goods, in the present case, are of 65 inches and 75 inches and do have a remote control. The goods, therefore, would not merit classification under CTH 8528. What also needs to be noted is that classification of a product is determined according to the terms of the Headings and any relative section or Chapter Note. GRI (1) also provides that titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification is determined according to the terms of the Headings and any relative Section or Chapter Notes. It is only when such Headings or Notes do not otherwise require that the provisions (2),(3),(4),(5) and (6) of GRI would apply. There is no manner of doubt that the goods would merit classification under CTI 8471 41 90 as claimed by the appellant and not under CTI 8528 52 00 as claimed by the Department - the differential duty of Rs. 13,37,043/- paid by the appellant by challan dated 28.01.2020 shall be refunded to the appellant with applicable rate of interest - appeal allowed - decided in favor of appellant.

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• 2022 (2) TMI 307
  Valuation of imported goods - Hot Rolled [HR] Steel Coil from foreign suppliers - rejection of declared value - rejection of value on the ground that the imports were made at a higher price by other importers than at the price at which the Appellant imported HR Coils in question - applicability of data as available form contemporaneous imports - HELD THAT:- What has to be seen under section 14(1) of the Customs Act, as amended in 2007, is the transaction value of the goods imported or exported for the purpose of customs duty and transaction value is stated to be the price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 of the Customs Act also makes it clear that the price actually paid or payable for the goods will not be treated as transaction value where the buyer and the seller are related to each other. As per the first proviso to the amended section 14 (1), certain charges are to be added to the transaction value of the imported goods. It is, therefore, clear that while there was scope for addition of notional charges in the assessable value under the un-amended section 14 of the Customs Act, but after the actual sale price concept was introduced in the year 2007 on the basis of GATT guidelines and section 14 of the Customs Act was amended in 2007, any inclusion of notional charges seems to have lost its relevance and only actual cost incurred by the buyer is required to be considered. It would be clear from a perusal of the Sales Order Number 1101041643 dated 10.04.2009 that the product was mentioned as HR Coil with country of origin as Ukraine and shipment was to be by 31 May, 2009. The payment terms were payable against confirmed L/C at 180 days after B/L date . The USD price PMT was mentioned as 392.70. The Assistant Commissioner had examined the contemporaneous imports of Alloy Steel during the relevant period. A perusal of the data contained in the order indicates that most of the imports were for substantially lesser quantity of HR Steel Plates and in one case where it was for prime HR Steel Coils Alloy and the quantity was 4964.9 MTs the unit price was USD 385.00. The value of Alloy Steel HR Coil as declared by the Appellant is in terms of the Sales Order entered into and mutually agreed upon by the Appellant and the supplier. It is not the case of the Department that any additional payment was made by the Appellant pursuant to which under invoicing was resorted to by the Appellant. In fact, the Bank Remittance Certificate evidences payment to the supplier for the imports in terms of the Sale Order dated 10.04.2009. The only ground on the basis of which the transaction value has been rejected is that the imports were made at a higher price by other importers than at the price at which the Appellant imported HR Coils in question - A perusal of the imports relied upon in the impugned order show that the quantity of imports were substantially different from the quantity of the import made by the Appellant. Rule 5 of the Valuation Rules requires, amongst others, that the transaction value of identical goods should be at the same commercial level and in substantially the same quantity as the goods being valued to determine the value of the imported goods. In the present case neither the goods were identical nor of substantially the same quantity. Thus, what was actually required to be ascertained was the value of similar goods which were commercially interchangeable with the goods being valued. The Appellant had declared USD at Rs. 392.70 PMT and as seen from contemporaneous data relied upon by the Department for a sale of 4964.9 MTs on 27.09.2009 of Prime HR Steel Alloy, the unit price was USD 385.00. Such being the position, the value declared by the Appellant in the three Bills of Entries could not have been rejected under rule 12 of the Valuation Rules - It is only when the value of the imported goods is not taken to be the transaction value that the value has to be determined sequentially in the manner provided for in rules 4 to 9. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2022 (2) TMI 306
  Sanction of Scheme of Amalgamation - Sections 230 and 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT:- The directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of various notices also issued. The scheme is approved - Application allowed.

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• Insolvency & Bankruptcy

• 2022 (2) TMI 305
  Liquidation of Corporate Debtor - no chances of revival of the Corporate Debtor - CoC are related parties in terms of proviso to Section 21(2) of the Insolvency and Bankruptcy Code 2016 or not - assignment of debt - violation of Section 5 of the SARFAESI Act 2002 and Factoring Regulation Act 2011 - constitution of CoC based on submission of claims only - no verification, or admission or rejection of claims. Whether Kamla Mills Private Limited and Fasqua Investment Private Limited who were made part of CoC are related parties in terms of proviso to Section 21(2) of the Insolvency and Bankruptcy Code 2016? - HELD THAT:- Section 5(24) (f) of the Insolvency and Bankruptcy Code 2016 clearly defines related Party in relation to Corporate Debtor that includes anybody corporate whose Board of directors, managing Director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor - In the instant case undisputedly, Mr Ramesh Ghamanndiram Gowani had a substantial shareholding of 99.74% in Financial Creditor Kamla Mills private limited. He is also Director and Shareholder of the Financial Creditor Fasqua Investment Private Limited. It is also on record that Mr Ramesh Ghamanndiram Gowani, who was in the proposed AGM Dt. 3rd March 2018 seeking the re-appointment, resigned from the Corporate Debtor s Board with effect from 20th November 2019, i.e. much after initiation of the Corporate Insolvency Process against the Corporate Debtor Incab Industries Limited. Mr Ramesh Ghamanndiram Gowani s resignation from the Board of Directors of the Corporate Debtor Incab Industries Limited after initiation of the Corporate Insolvency Process will not circumvent the exclusion under the first proviso to Section 21 (2) of the Code. Thus Financial Creditors Fasqua Investment Private Limited Kamla Mills Ltd are the related Party of the Corporate Debtor Incab Industries Ltd in terms of Section 5 (24)(f) of Insolvency and Bankruptcy Code 2016 and terms of Ist proviso to Sec 21(2) of I B Code; they are not entitled to represent, participate and vote in the CoC of the corporate debtor Incab Industries Ltd. Whether assignment of debt in violation of Section 5 of the SARFAESI Act 2002 and Factoring Regulation Act 2011 is valid? - HELD THAT:- Because the parties to the assignment deed were not made Party either before the Adjudicating Authority or before this Appellate Tribunal, the assignment in question can not be raised on this ground. Whether IRP/RP can constitute CoC based on submission of claims only, without verifying and admitting or rejecting the claims? - HELD THAT:- Based on the minutes of all the five COC meetings, it is crystal clear that entire CIRP proceedings were conducted completed even without any valuation of the Corporate Debtor. In all the COC meetings, it was informed that no records are available and suspended directors are not cooperating. The Interim Resolution Professional has constituted the Committee of Creditors even without admitting the claims. The Committee of Creditors has been formed based on claims submitted - There was no publication of Form G for inviting expression of interest. One of the Financial Creditors objected to the participation of Financial Creditors, Kamla Mills Ltd and Fasqua Investment Private Limited, as they are related parties. However, this objection was overruled by the Adjudicating Authority while he was issuing directions to the suspended Director to extend cooperation to the IRP for submission of records of the Corporate Debtor. In the instant case, it is found that the IRP/RP had formed the Committee of Creditors based on the Financial Creditors submission of claims even without verification, despite that one of the financial creditors had explicitly requested to defer the e-voting on the resolution of the 5th CoC dated 5th December 2019, till the verification of voting percentage and compliance of CIRP process. The IRP/RP has formed the Committee of Creditors without admitting the claims of the Financial Creditors, which violate Regulation 12 (3) of the CIRP Regulations - it is crystal clear that entire CIRP proceedings were conducted completed even without any valuation of the Corporate Debtor. In all the COC meetings, it was informed that no records are available and suspended directors are not cooperating. The Interim Resolution Professional has constituted the Committee of Creditors even without admitting the claims. The Committee of Creditors has been formed based on claims submitted. The Constitution of the Committee of Creditors violates the proviso to Section 21 (2) of the I B code 2016 read with 12(3) of CIRP Regulations. Therefore, the Constitution of the creditors committee is a nullity in the eye of law that vitiates the entire CIRP. Liquidation is like a death knell for the corporate entity/corporate person. Liquidation based on the resolution of the CoC, which consists of related party Financial Creditors having 77.20 % vote share, is a matter of grave concern - Resolution Professional failed to discharge duties and responsibilities cast on the Resolution Professional under the IBC and Regulations provisions. Kamla Mills Private Limited and Fasqua Investment Private Limited are related parties that were made part of this CoC and were in a commanding position to rush through the decision to liquidate the Corporate Debtor. Facts show that the Corporate Insolvency Resolution Process was initiated in view of Section 9 of the IBC. The petition was admitted on 7th August 2019, and the 5th CoC meeting held on 8th December 2019, which is within 122 days, decided to liquidate the Corporate Debtor. The impugned order dated 7th February 2020 was passed within 184 days of the petition being admitted on 7th August, 2019. The Application under Section 33 of the IBC appears to have been filed on 17th December, 2019. It appears in the interest of justice that the time spent before the Adjudicating Authority when the application under Section 33 of the IBC was filed, till now should be excluded from calculating the period under Section 12 (1), (2) (3) of the IBC. Parties and Corporate Debtor need not suffer for time spent during this period before Adjudicating Authority and in Appeal, as an effort at Resolution needs to be made - the corporate insolvency process in the instant case is totally in disregard of the provision of the Code and Regulations thereunder. The formation of the Committee of Creditors in the instant case is a nullity in the eyes of the law. Since the illegally constituted committee of creditors took the decisions at every stage of CIRP. Therefore, the entire corporate insolvency resolution process of the Corporate Debtor is found to be vitiated. Therefore the impugned order of liquidation passed by the Adjudicating Authority deserves to be set aside. The Adjudicating Authority directed initiation of liquidation proceedings against the Corporate Debtor- INCAB Industries Limited is quashed and set aside - Original Application under Section 9 of IBC is restored to the file of the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) - Appeal allowed.

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• Central Excise

• 2022 (2) TMI 304
  Benefit of exemption from excise duty - benefit of N/N. 12/2012-CE dated 17.03.2012 as per Sl. No. 200 - manufacture of gold coins bearing a brand name of others - Department opined that the appellant manufactured gold coins bearing a brand name of others and thus gold manufactured by them attract 1% duty in terms of Notification No.12/2012-CE dated 17.03.2012 as per Sl. No. 200 - Department confirmed the duty only on the premise that the appellants have manufactured branded jewellery - HELD THAT:- What the adjudicating authority has lost sight of is the fact that though the appellants have inscribed/embossed the name of the customers as well as Govt. of Tamil Nadu and Chettinad Cements Corporation Pvt. Ltd., it could not be said to be a brand used in connection of trade and commerce engaged by the person. It is not the case of the department that either of the customers of the appellant is engaged in the trade and gold coins bearing their brand. Therefore, the very concept of branding goods is not appreciated in a legal and proper manner. Admittedly, inscribed or embossed on the gold coins manufactured by the appellants have their customers is certain identification with the respective customers who have got the gold coins manufactured for distribution only and not for use as a merchandise. As long as the customers of the appellants are not engaged in the trade/commerce/business, inscription on the gold coins cannot said to have in connection in the course of trade with the product manufacture. As long as the goods are not sold by the customers of the appellant in the brand name which they are manufactured, the same cannot be held bearing brand name making them dutiable. Therefore, as the appellants have not manufactured branded jewellery, the exemption contained in the said notification is applicable to them and the impugned order is not legally sustainable. Appeal allowed - decided in favor of appellant.

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• 2022 (2) TMI 303
  Refund of pre-deposit - predeposit was made under the head Excise Duty - whether refund was not towards any amount paid under the legacy scheme but related to the pre-deposit? - HELD THAT:- When the appellant requested for refund of pre-deposit of Rs. 10.00 Lakhs, nothing prevented the Adjudicating Authority from verifying the same under any other provisions instead of proposing to deny the appellant s claim by quoting Section 130 (2) of the Finance Act, 2019. This assumes relevance since the appellant never made any claim for refund under SVLDRS scheme. Moreover, the purpose of the scheme in question was settlement of dispute per se and hence, such scheme cannot have the effect of depriving a bonafide litigant of its otherwise eligible refund. Both the authorities have misdirected in taking recourse Section 130 (2) ibid, which is, as seriously contended by the learned Consultant, is not applicable - the impugned order is set aside and the matter is restored to the file of the Adjudicating Authority to pass a fresh order in accordance with law, after affording reasonable opportunity to the appellant but, without going into the provisions of SVLDR Scheme since, the litigation is settled in so far as the scheme is concerned in respect of the appellant - appeal allowed by way of remand.

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• 2022 (2) TMI 302
  CENVAT Credit - CVD paid at the rate of 2% on the imported coal in terms of Notification No 12/2012-CUS dated 17.03.2012 or otherwise - HELD THAT:- The identical issue has been considered in SHREE ARIHANT TRADELINKS INDIA PRIVATE LIMITED AND MAHA SHAKTI COKE VERSUS C.C.E., KUTCH (GANDHIDHAM) [ 2021 (12) TMI 581 - CESTAT AHMEDABAD ] where it was held that Tribunal has considered various decisions given by the different benches and also distinguished the decisions relied upon by the Revenue and concluded that the appellant is entitled for Cenvat credit in respect of 2% CVD paid under Notification No. 12/2012-Cus. The assessees are entitled for cenvat credit in respect of 2% CVD paid under Notification No. 12/2012- Cus in respect of imported coal - the assesses in the present appeals are entitled for cenvat credit. Appeal allowed - decided in favor of appellant.

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• 2022 (2) TMI 297
  Refund of service tax - Time limitation - rejection of refund on the ground that the refund claim was not filed within a period of six months as provided in sub Section (3) of Section 102 of Finance Act, 1994 - HELD THAT:- The issue has been settled by the decision of Hon ble Madhya Pradesh High Court in the case of M/S MDP INFRA (INDIA) PVT. LTD. VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE CGST [ 2019 (2) TMI 208 - MADHYA PRADESH HIGH COURT] , which was approved by the Hon ble Apex Court in MDP INFRA (INDIA) PVT. LTD. VERSUS COMMISSIONER [ 2021 (7) TMI 1261 - SC ORDER] where it was held that Evidently, the notification No. 12/2012 25/2012 ceased to exist w.e.f. 01/04/2015. The exemption was revived by notification dated 01/03/2016. But since it was prospective in effect, the appellant was not entitled for any exemption, which the appellant was aware of and with open mind and eyes deposited the service tax due with interest. The appeal is dismissed.

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• CST, VAT & Sales Tax

• 2022 (2) TMI 301
  Input tax credit - false/forged VAT invoices issued by a dealer who has not deposited the tax and its registration was cancelled u/s 16(4) (g) of the Act - amount not deposited by the selling dealer - double jeopardy to the State - violation of provisions of section 18(2) of the RVAT Act or not - deletion of penalty u/s 61(2)(a) of the Act - HELD THAT:- A Division Bench of this Court in the case of R.S. INFRA-TRANSMISSION LTD. VERSUS STATE OF RAJASTHAN THROUGH ITS SECRETARY, DEPARTMENT OF COMMERCIAL TAXES, DEPARTMENT OF COMMERCIAL TAXES, DEPARTMENT OF COMMERCIAL TAXES, TANTIA ENTERPRISES [2018 (4) TMI 1800 - RAJASTHAN HIGH COURT] relying upon the decision rendered by the other High Courts and considering views taken by different High Courts held that it will be impossible for the petitioner to prove that the selling dealer has paid tax or not as while making the payment, the invoice including tax paid or not he has to prove the same and the petitioner has already put a summary on record which clearly establish the amount which has been paid to the selling dealer including the purchase amount as well as tax amount. In that view of the matter, we are of the opinion that Rule 18 if it is accepted, then the respondents will to take undue advantage and cause harassment. In taking this view, this Court relied upon the judgment of the High Court of Delhi in the case of ON QUEST MERCHANDISING INDIA PVT. LTD., SUVASINI CHARITABLE TRUST, ARISE INDIA LIMITED, VINAYAK TREXIM, K.R. ANAND, APARICI CERAMICA, ARUN JAIN (HUF) , DAMSON TECHNOLOGIES PVT. LTD., SOLVOCHEM, M/S. MEENU TRADING CO., MAHAN POLYMERS VERSUS GOVERNMENT OF NCT OF DELHI ORS. COMMISSIONER OF TRADE TAXES, DELHI AND ORS. [ 2017 (10) TMI 1020 - DELHI HIGH COURT ] where it was held that retrospective cancellation of registration of purchasing dealer does not affect the right of selling dealer for deduction. The issue raised in this petition has already been settled by this Court in more than one decision - no substantial question of law arises for consideration in this petition. Revision petition dismissed.

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• Wealth tax

• 2022 (2) TMI 300
  Wealth tax assessment - Piece of land in Panvel held as its stock in trade or taxable within the provisions of Wealth Tax Act - ITAT treating the land which was approved by the State Government only for industrial purpose as stock in trade - Whether Hon ble ITAT erred in not appreciation the provisions of section 2(ea) of Wealth Tax Act, 1957 which is totally applicable as per the facts of this case? - HELD THAT:- ITAT by its order pronounced on 21st June, 2019 and impugned in this appeal concurred with the finding of CIT(A). ITAT also held, and rightly so, that the explanation (1)(b) attached with Section 2(ea) of the Act clearly specified that any land held by assessee as stock in trade for a period of 10 years from the date of acquisition will not be included in the definition of Urban Land . ITAT also held that as per Section 2(m) of Wealth Tax Act, while determining the wealth tax liability of Respondent, the aggregate value of debt owed by Respondent in respect of assets owned by Respondent have to be reduced from the aggregate value of asset belonging to Respondent. Having considered impugned order of ITAT and also the order of AO as well as CIT(A), in our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analyzed and correct test is applied to decide the issue at hand, then, we do not think the questions as proposed raises any substantial question of law.

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• Indian Laws

• 2022 (2) TMI 299
  Dishonor of Cheque - amicable settlement of dispute - compounding of offences - offence punishable under Section 138 of the N.I. Act - HELD THAT:- It has emerged that the applicant has been convicted by the concerned Criminal Court for the offence punishable under Section 138 of the N.I. Act. However, now, the parties have amicably settled the dispute and, therefore, the complainant has filed an affidavit stating that if the order of conviction passed against the applicant is quashed and set aside, he has no objection. In the case of DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], the Honourable Supreme Court has held that if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs. Thus, when the parties have settled the dispute amicably, compounding of the offence is required to be permitted. Accordingly, the application is allowed.

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