TMI Tax Updates - e-Newsletter
March 15, 2019

Case Laws in this Newsletter:

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

Articles

• GST - Is an entry with GSTR-2A suffice for the GST Input Visa Vis with GSTR-3B and GSTR-2A:
• GST ON MAINTENANCE CHARGES FOR ROAD
• A round up of GST amendment in Credit & Debit Notes viz-a-viz post supply discounts

Notifications

Customs

• 12/2019-Customs (N.T./CAA/DRI) - dated 12-3-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 11/2019-Customs (N.T./CAA/DRI) - dated 12-3-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 10/2019-Customs (N.T./CAA/DRI) - dated 12-3-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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GST

• 01/2019 - S.O. 1359(E) - dated 13-3-2019 - CGST
  Central Government notifies the creation of the National Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at New Delhi

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GST - States

• 1/2019 – State Tax (Rate) - S.O. No-25 - dated 27-2-2019 - Jharkhand SGST
  Rescinds Notification No. 8/2017-State Tax (Rate), dated the 29th June, 2017

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• KA.NI.-2-231/XI-9(15)/17 - dated 18-2-2019 - Uttar Pradesh SGST
  Seeks to amend Notification No. KA.NI.-2-849/XI-9(15)/17-U.P.Act-1-2017-Order-(16)-2017 dated 30th June, 2017

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• KA.NI.-2-300/XI-9(47)/17 - dated 13-2-2019 - Uttar Pradesh SGST
  Insert the Explanation in Notification No. KA.NI.-2-842/XI-9(47)/17-UP Act-I-2017-Order-(09)-2017 dated 30th June, 2017

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Income Tax

• 18/2019 - dated 13-3-2019 - IT
  U/s 35(1) (ii) of IT Act 1961 Central Government approved M/s Indian Institute of Science Education and Research, Bhopal

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• 17/2019 - dated 11-3-2019 - IT
  U/s 35(1) (ii) of IT Act 1961 Central Government approved M/s Institute of Nano Science and Technology, Mohali

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SEZ

• S.O. 1338(E) - dated 7-3-2019 - SEZ
  Central Government rescinds the Notification Number S.O. 4121(E) dated 26th December, 2017

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• S.O. 1337(E) - dated 7-3-2019 - SEZ
  Central Government notifies an additional area of 0.853 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 57.898 hectares, at Village Sai, Taluka Panvel, District Raigad, in the State of Maharashtra

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Circulars / Instructions / Orders

GST - States

• 06/2019 - dated 13-3-2019
  Clarification regarding tax payment made for supply of warehoused goods while being deposited in a customs bonded warehouse for the period July 2017 to March 2018
• 05/2019 - dated 13-3-2019
  Compliance of rule 46(n) of the DGST Rules, 2017 while issuing invoices in case of inter-State supply
• 04/2019 - dated 13-3-2019
  Mentioning details of inter-State supplies made to unregistered person in Table 3.2 of FORM GSTR-B and Table 7B of FORM GSTR-1

FEMA

• 23 - dated 13-3-2019
  Trade Credit Policy – Revised framework

DGFT

• Trade Notice No. 48/2015-2020 - dated 13-3-2019
  Consideration of applications for grant of authorization for import of gold dore

Highlights / Catch Notes

GST

• Classification of goods - Rate of GST - Since, “tips and balls of pens” are definitively not considered as part of “Pen holders, pencil holders and similar holders” they are to be classified under 9608 99 90: Others, under HSN 9608 and are to be taxed accordingly.
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• Levy of IGST - process of appointing CDI Virtual Films Inc.(CDIVF) as a Line Producer in Brazil - Reverse charge mechanism - The transaction between CDIVF and the Applicant is, therefore, import of service and constitutes an inter-State supply within the meaning of section 7(4) of the IGST Act, 2017, and the Applicant is liable to pay IGST
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Income Tax

• Proceeding in case of non-operational/ dissolved / struck off company - HC dismissed the appeal filed by Department - non consideration of Section 506(5) proviso (a) of the Companies Act and Section 176 to 178 (discontinuance of business or dissolution) - matter restored before the HC
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• Validity of the reopening of the assessment - when that income which was the foundation on which he based his belief of escapement of income is absent /disappeared then the AO’s very usurpation of jurisdiction is on non-existing jurisdictional fact which renders his usurpation of jurisdiction to reopen the assessment legally untenable and so null in the eyes of law.
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• If an Indian national [legal person], enters into any international transactions with its Associated Enterprises, will it not be subjected to transfer pricing proceedings? The answer is “YES”
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• Addition u/s 41(1) - non verification of static sundry creditors for several years - if said liability exists in books of assessee, and has not been written off unilaterally or by other party or AO not been able to bring on record any documents to establish that said sum has been remission or cessation of liability then provisions of section 41 (1) is not applicable.
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• Interest income - Correct head of income - income from other sources OR income from business - if interest income earned by the assessee is not incidental to the business activity of the assessee but on loans in the market for earning the interest intentionally and deliberately then it is income from other sources and not the business income.
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• Bogus purchases - it is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases.
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• Attachment orders - to declare transfers to be void - If the declaration of nullity and voidity under Section 281(1) is automatic, then there is no necessity for the Law Makers to empower the Income Tax Officer to pass an order of attachment under Rule 48 prohibiting all transfers and the creation of charge on the properties.
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• Attachment orders - Mortgagee right of recovery vs Income tax dept. right of recovery - in the light of the fact that the mortgage was created by the assessee much before a demand was made under Rule 2 and even before an order of assessment was passed and in the light of the fact that before the stage of issue of a certificate of recovery, the voidity u/s 281 (1) is not automatic, the petitioner-bank deserves to succeed.
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• Capital gain computation - Determination of the FMV as on 1.4.1981 - reference to DVO - amendment made vide finance act 2012 u/s 55A, wherein the word “is less than its fair market value” is substituted by the word “is at variance with fair market value”, will applies prospectively.
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• Claim of deduction u/s 54/54F - claim for two units - two residential units constructed by the Developer for the Assessee is “a” (one) residential house only - Board having accepted all the decisions wherein courts have interpreted that the word “a” qualifies residential house and not the quantum/number of houses, for all years prior to the amendment by Finance Act, 2014 deduction/benefit is available on multiple houses.
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• Disallowance u/s.14A - recording of satisfaction - detailed discussion in order regarding investment in various schemes of mutual funds and question regarding no expenditure is attributable to such activities - it is clearly discernible that the AO recorded proper satisfaction before making disallowance u/s. 14A.
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• Unexplained expenditure - alleged excess payments to landlords - Department has not found anything to show that the landlords actually received the payments - The additions can be made only based on actual evidence and not based on presumptions - In the absence of any evidence, addition was deleted.
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• Admission of Settlement Commission applications u/s 245(D)(1) - Pr. CIT submitted a report u/s 245D(2B) nowhere directly or indirectly indicated that the income disclosed by the petitioner is not full and true - Admission of application should be based upon report of the Pr. CIT not on the basis of material and evidences on record contemplated u/s 245D(4)- decided in favour of assessee
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• Revision u/s 263 - Confirmation of loan not bearing address - no inquiries/verification, regarding creditworthiness of the lender and genuineness - neither bank statement of lender nor Return or balance sheet are filed - it is clear that the assessment order was passed without verification, application of mind, consequently, it is erroneous as well as prejudicial to the interest of the Revenue
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• Valuation of share by TPO - need to consider market risk premium with illiquidity discount, adjustment of goodwill, foreign exchange rate etc. in correct manner before rejecting Valuation of share made by assessee by independent valuer.
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• share premium - income from other sources - Section 56(2)(viib) of the Act which seeks to tax amount received in excess of fair market value of shares only applies from Assessment Year 2013-14. Hence, share premium is not taxable in AY 2012-13.
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• Disallowance of prior period expenses - merely debited expenditure in Profit and Loss account during year is not sufficient to claim expenditure pertaining to this year unless prove that this expenditure has crystallised during the year - If assessee proved that the liability was determined and crystallised during the year it will be allowable other wise it is disallowable.
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• Enhancement of income by CIT(A) - Treating agricultural income as taxable income - CIT(A) had no power to assess the source of income which had not been taken into consideration by the assessing officer.
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• Addition u/s 68 - assessee submitted all the necessary details in support of the share applicant and share premium receipt - The A.O. has not pointed out any defect in the documents - Even no notice u/s. 133(6) was issued to the share applicant to verify identity, genuineness and creditworthiness of the share applicant - In such cases Addition u/s 68 is not sustainable.
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Service Tax

• Utilization of cenvat credit on various input services for payment of output service tax liability for BAS - he scheme of one to one co-relation has been done away with, under the Cenvat Credit Rules, 2004. - SCN is misconceived and not maintainable
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• Real Estate Agent Service - Transfer charges for transfer the allotment of property - these transfer charges have not collected by the assessee as Real Estate Agent, therefore, no service tax is payable by the assessee on the transfer charges
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• Refund claim - time limitation - it is admitted fact that the appellant is not liable to pay service tax on the said activity. Therefore, time limit prescribed under Section 11B of the Central Excise Act,1944 is not applicable to the facts of this case.
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Central Excise

• CENVAT credit - input services is admissible so far as input services have been used directly or in directly, in or in relation to the manufacture of final product even if the term setting up has been deleted from the inclusive portion of the definition.
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• Manufacture of "pipes" and "pipe fittings" - benefit of exemption is admissible only to "pipes" and not to "pipe fittings"
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Case Laws:

• GST

• 2019 (3) TMI 705
  Classification of goods - ascertaining applicability of the Rate Notification - Parts of ink / ball point pen - Whether tips and ball, both being pen parts under HSN Chapter Head 9608, used in manufacturing process of ball point pens, are taxable at the rate of 12%; b) If the tips and balls used in the manufacturing of ball point pens are not taxable at the rate of 12% under HSN 9608, then at what rate shall they be taxable and under which HSN? Held that:- Since, tips and balls of pens are definitively not considered as part of Pen holders, pencil holders and similar holders they are to be classified under 9608 99 90: Others, under HSN 9608 and are to be taxed accordingly. In the Rate Notification ball point pens, classified under HSN 9608, are included under Sl No. 232 of Schedule II under the description: pens other than fountain pens, stylograph pens . The same Notification also mentions fountain pens, stylograph pens under Sl No. 447 of Schedule III. However, parts of pen, including tips and balls of pens , classifiable under HSN 9608 as discussed above, are not exempted or specifically included under entries of any other schedules. They are, therefore, to be included under Sl No. 453 of Schedule III and taxable @ 9% CGST and 9% SGST.

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• 2019 (3) TMI 704
  Levy of IGST - process of appointing CDI Virtual Films Inc.(CDIVF) as a Line Producer in Brazil - Reverse charge mechanism - rate of tax depending upon the classification of the service of a Line Producer - place of supply of services - Held that:- A Line Producer s job is not limited to arranging hotel accommodation, catering for the filming crew, local transportation and procuring location permits on behalf of the principal. Although he may facilitate the provisioning of a few services where the Applicant reimburses him on an actual cost basis, the Line Producer, being a key member of the production team, supplies the main service on his own account. It involves arranging all logistics for actual shooting, estimating and budgeting the cost of shooting and other residual activities relating to shooting on location. He assists and collaborates with the filming crew of the Applicant in deciding on various issues relating to the physical production of the motion picture in the offshore locations, including insurance coverage of the local actors and crew. He also takes the risk of an accident occurring during the shooting. His service is, therefore, an integral part of the activity for the production of the feature film. The service being supplied is not, therefore, classifiable as the one specified in subsections (3) to (13) of section 13 of the IGST Act, 2017. The transaction between CDIVF and the Applicant is, therefore, import of service and constitutes an inter-State supply within the meaning of section 7(4) of the IGST Act, 2017, and the Applicant is liable to pay IGST on the payments to be made to CDIVF in terms of Sl No. 1 of Notification No. 10/2017 IGST (Rate) dated 28/06/2017at 18% rate specified under Sl No. 34(vi) of Notification No. 08/2017 IT(Rate) dated 28/06/2017, as amended from time to time. Applicability of IGST - Held that:- If the Applicant modifies the contract so that CDIVF acts as pure agent for certain services in addition to the main supply of motion picture production service, the related transactions will be import of services from the actual suppliers, and the amount paid on actual cost basis for procuring those services will be subjected to IGST at the applicable IGST rate on such services.

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• Income Tax

• 2019 (3) TMI 703
  Proceeding in case of non-operational/ dissolved / struck off company - Appeal filed by Department before High Court was dismissed on the ground that it has rendered infructuous - non consideration of Section 506(5) proviso (a) of the Companies Act and Section 176 to 178 (discontinuance of business or dissolution)- HELD THAT:- Mere perusal of the impugned order quoted supra would go to show that the High Court dismissed the appeal on the ground that it has rendered infructuous because it was brought to its notice that the name of the company the assessee has been struck off from the Register of the Company u/s 560(5) of the Companies Act, 1956. High Court was of the view that since the respondent Company stands dissolved as a result of the order passed by the Registrar of the Companies under Section 560 (5) of the Companies Act, the appeal filed against such Company which stands dissolved does not survive for its consideration on merits. High Court was wrong in dismissing the appeal as having rendered infructuous. The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with liability in special cases and its clause (L) which deals with discontinuance of business or dissolution . The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. These provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with. Since the High Court did not decide the appeal keeping in view the aforementioned two relevant provisions, the impugned order is not legally sustainable and has to be set aside. In view of the foregoing discussion, the appeal succeeds and is accordingly allowed. The impugned order is set aside. The case is remanded to the High Court for deciding the appeal afresh on merits in accordance with law keeping in view the relevant provisions of Companies Act and the Income tax Act uninfluenced by any observations made by us on merits.

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• 2019 (3) TMI 702
  Settlement Commission applications u/s 245(D)(1) - whether or not the disclosure was full and true - Pr. CIT submitted a report u/s 245D(2B) nowhere directly or indirectly indicated that the income disclosed by the petitioner is not full and true - Settlement Commission permited the CIT (DR) to raise objections to the admission of the application and more so in permitting him to go beyond the report - decision making process of the Settlement Commission - permitting the Principal Commissioner to supplement the report submitted by the Commissioner by way of oral submissions - permission to raise objection to the admission of the application and be heard before the assessee and too, to supplement an incomplete report on the basis of the material and evidences on record - preliminary report based on prima-facie findings recorded by the Principal Commissioner or Commissioner HELD THAT:- What the Principal Commissioner was required to do was to record on the basis of the inquiry made by her as to whether or not the disclosure was full and true. In the absence of any such opinion having been expressed that there was no full and true disclosure, it was not permissible for the CIT(DR) to make supplementary submissions to contend that there was no full and true disclosure. Since the Principal Commissioner had found that it was not possible at this stage to comment on the adequacy of the additional taxes as well as other facts as recorded hereinabove, it is evident that all these facts could have been brought on record either by way of submission by the CIT(DR) at the stage to section 245D(4) or in the nature of the report as contemplated under sub-section (3) of section 245D of the Act, if so called for by the Settlement Commission. However, on the basis of such comments made by the Principal Commissioner in the report under sub-section (2C) of section 245D of the Act, the revenue could not have been permitted to object against the admission of the application by way of supplementary arguments made by the CIT(DR) with reference to the record as well as other evidence of the case. The Settlement Commission was, therefore, not justified in permitting the Principal Commissioner to supplement the report submitted by the Commissioner by way of oral submissions which were beyond the contents of the report. At best, if the applicant had made submissions in respect of the report, the Commissioner may have been permitted to deal with the same, but under no circumstances could the Commissioner be permitted to raise objection to the admission of the application and be heard before the assessee and that too, to supplement an incomplete report on the basis of the material and evidences on record. As already discussed hereinabove, any hearing based upon the material and evidences on record is contemplated at the stage of 245D(4) of the Act and insofar as sub-section (2C) of section 245D of the Act is concerned, the same contemplates a decision solely on the basis of the report of the Commissioner. As noticed earlier, insofar as the record of the case and other evidence is concerned, the same is required to be taken into consideration at the stage of section 245D(4) of the Act whereas insofar as the order under section 245D(2C) of the Act is concerned, the same is required to be made on the basis of the report. In the light of the above discussion, the impugned order passed by the Settlement Commission being in breach of the provisions of section 245D(2C) of the Act and also being in breach of the principles of natural justice inasmuch as at the stage of section 245D(2C) of the Act, the Settlement Commission has placed reliance upon material other than the report, cannot be sustained. The petitions, therefore, succeed and are accordingly, allowed.

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• 2019 (3) TMI 701
  Attachment orders - Mortgagee right of recovery vs Income tax dept right of recovery - legality of property mortgaged made before a demand was made under Rule 2 - whether all transfers made by the assessee during the pendency of the proceedings would automatically become null and void, without anything being done by any statutory authority or court? - whether the Tax Recovery Officer or the Civil Court, which is competent to issue a declaration of nullity and voidity of transfers under Section 281 (1) of the Income Tax Act? - mortgage was created by the assessee much before a demand was made under Rule 2 - whether all transfers made by the assessee during the pendency of the proceedings under the Act become automatically null and void, we must search for an answer from the Second Schedule to the Income Tax Act, 1961? - HELD THAT:- The proviso (i) to sub-section (1) of Section 281 provides an escape route for innocent third parties, to whom the property of the assessee is transferred during the pendency of the proceedings, but before an attachment is ordered. This compartmentalization is very important to be noted, in view of the fact that during the pendency of the proceedings for assessment, an assessee does not become an assessee in default. Section 281 (1) cannot be interpreted to mean that every assessee is likely to become an assessee in default and therefore, all transfers effected by him even before he becomes a defaulter are null and void. Keeping in mind the fundamental premise on which the scheme of Section 281 read with Section 222 and the Second Schedule to the Act operates, let us now come back to the facts of the case. The timeline of events Part-II, which we have furnished elsewhere, shows that the 3rd respondent herein filed a return of income on 31-07-2009. His case was selected for scrutiny through CASS. Notices under Section 143 (2) were issued in September 2010 and February 2011. A notice under Section 142 (1) was issued on 23- 02-2011. The order of assessment itself was passed only on 27-12- 2011 under Section 143 (3). Consequently, the demand notice under Section 156 was issued only on 27-12-2011, giving the Managing Partner of the 3rd respondent thirty days time. Even if the period of thirty days is counted from the date of the notice namely 27-12-2011, the notice period would expire on 26-01-2012. Therefore, the Managing Partner of the 3rd respondent became an assessee in default in terms of Section 220 (4), only on 26-01-2012. It is only thereafter that a notice ought to have been issued under Rule 2. We do not know the date on which the notice under Rule 2 was issued. However, it is an admitted fact that the Tax Recovery Certificate was issued on 09-01-2014. The order of attachment was issued on 14-03-2018. But the mortgage was created by the 3rd respondent in favour of the petitioner-bank on 11-07-2011, much before the order of assessment was passed under Section 143 (3) on 27-12-2011. In other words, the assessee was nowhere near the point of being declared as an assessee in default on the date of creation of the mortgage. Hence, the creation of the mortgage cannot be said to have automatically become void in terms of Section 281 (1) merely because of the pendency of the proceedings under Sections 143 and 142. It required something more to be done, but the same was not done in this case. Even an investigation under Rule 11 was not carried out in this case. Therefore, the order of attachment is clearly illegal. On the date on which the order of attachment was passed, the property had already been sold by the petitioner-bank, in exercise of the power conferred upon the bank under the Securitisation Act, 2002. There appears to be no provision in the Income Tax Act, by which a first charge is created automatically on the properties of the assessees. There is no provision in the Income Tax Act similar to Section 16C of the Andhra Pradesh General Sales Tax Act, 1957. It is by now well settled that wherever the statute does not create a first charge over the property, the crown’s debt does not take precedence over the claim of the secured creditor. In the light of the fact that the mortgage was created by the assessee much before a demand was made under Rule 2 and even before an order of assessment was passed and in the light of the fact that before the stage of issue of a certificate of recovery, the voidity under Section 281 (1) is not automatic, the petitioner-bank deserves to succeed. Accordingly, the writ petition is allowed and the impugned order of attachment is set aside. The Sub-Registrar may proceed to register the sale certificate issued by the Bank upon compliance with the necessary formalities.

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• 2019 (3) TMI 700
  Claim of deduction u/s 54/54F - second flat as the assessee has purchased two units, whereas as per the A.O. the Section states that “a” residential house should be purchased/constructed” - The Assessing Officer observed that both the units have separate main doors for each and the units were not adjoined together - HELD THAT:- On the facts of the case, the two residential units constructed by the Developer for the Assessee is “a” (one) residential house only, we observe that in any case, the Board having accepted all the decisions wherein courts have interpreted that the word “a” qualifies residential house and not the quantum/number of houses, for all years prior to the amendment deduction/benefit is available on multiple houses, this controversy does not survive. This is an acceptance by the Legislature that prior to the amendment deduction u/s. 54/54F is available on purchase of more than one residential unit also and that it has accepted the interpretation of the courts in this regard. The relevant assessment year under consideration is 2010-11 which is prior to the A.Y. 2015-16 wherein an amendment has been brought by the Finance Act, 2014. AO was not justified in declining the claim of exemption to the assessee in respect to two units of the house property allotted by the developer to the assessee. AO is directed to allow exemption in respect of both the units. Capital gain computation - Determination of the FMV as on 1.4.1981 - valuation to DVO - Action of the CIT(A) for referring the matter back to the DVO for determination of fair market value as on 01/4/1981 - HELD THAT:- Revenue makes a reference, to the DVO, in term of Section 55A of the Act, it should be of the opinion that the value determined by the Registered Valuer as the FMV of the property as on 1st April, 1981 is less than its FMV. Only on having formed the above opinion, it is entitled to call upon the DVO to submit a report with regard to its FMV as on 1st April, 1981. In the Assessee’s case neither the FMV as per the registered valuer’s valuation report was less that the FMV estimated by the DVO, nor is it a case where the FMV of the asset claimed by the Assessee is not supported by a registered valuer’s valuation report. Accordingly reference to the DVO was bad in law. We direct accordingly.

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• 2019 (3) TMI 699
  Disallowance u/s.14A read with Rule 8D - contention of assessee that AO has recorded no proper satisfaction - HELD THAT:- No force in this contention because the AO has categorically recorded that : the “assessee has incurred various kinds of expenses in its Profit and loss account. The investments have been made in various schemes of mutual funds. It is not possible that the assessee has not incurred any expenditure in connection with such investments and earnings of such dividend income. As this investment is substantial assessee has used its resources to monitor and oversee the progress of such schemes of mutual funds. Therefore it cannot be said that no expenditure is attributable to such activities”. In view of the above extracted portion of the assessment order, it is clearly discernible that the AO recorded proper satisfaction before making disallowance u/s.14A. Computing of disallowance - whether investments which did not yield any tax free income during the year should have been excluded while computing the disallowance? - HELD THAT:- The Hon'ble Delhi High Court in ACB India Ltd. vs. CIT (2015 (4) TMI 224 - DELHI HIGH COURT] has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken in the case of ACIT vs. Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] holding that only those investments should be considered for computing average value of investments which yield exempt income during the year - we set aside the impugned order to this extent and remit the matter to the file of Assessing Officer for re-computing the disallowance under Rule 8D(2)(iii) - Assessee appeal is partly allowed for statistical purposes.

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• 2019 (3) TMI 698
  Assessment u/s 153A - unabated assessment - necessity of any incriminating materials - HELD THAT:- There was a search u/s. 132 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) which was conducted on 18.02.2013 at the residence, offices, factories and other business concerns of the M/s. Rashmi Group and the assessment for this year was not pending before the AO on the date of search. Since it was not an unabated assessment, the AO could not have made any addition without the aid of any incriminating material and the CIT(A) has given relief to the assessee taking note of the decision of the Hon’ble Delhi High Court in CIT Vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]. We note that undisputedly this assessment year was not pending before the AO on the date of search and so it is an unabated assessment. So as per the settled law, in sec. 153A assessment, for assessment of unabated assessment as in the present case, no addition/disallowance can be made without the aid of incriminating materials unearthed during search qua this assessment year - Decided in favour of assessee

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• 2019 (3) TMI 697
  Bogus Short Term Capital Loss on sale of shares - Penny Socks - colorable devise to evade tax - HELD THAT:- AO mentions about the role of brokers in allowing entry operators to register their bogus companies as their client and also certain admission made by some brokers about their involvement in so called Jama kharchi companies. In the said para some names of few brokers and Jama Kharchi operators have been mentioned. However, we note that the name of assessee’s broker, M/s. Guiness Securities Ltd., through whom the assessee sold his shares, does not appear at all in that report. We note that M/s Guiness Securities Ltd was not named in the assessment order / D.I. report as a broker who was involved in price rigging of penny stocks. On the other hand, we note that M/s. Guiness Securities Ltd is a SEBI registered stock broking company having registration no. INB 011146033 and also is a member of Bombay Stock Exchange having membership no. 3027; Neither during the time of execution of the contract in FY 2013-14 nor even today, this stock-broking company was suspended by SEBI or BSE on any charge of irregularities like price rigging etc as alleged by the AO. We note that AO failed to bring on record any material to connect the assessee to any of the alleged entry operators/ brokers who are a part of this so called price rigging group or LTCG Generator Group. We note that in an identical/similar case, wherein the AO made addition of the LTCG claim made on sale of M/s. KAFL scrips on similar reasoning based on the SEBI interim report, investigation report of the Wing of the Department and certain statements recorded by the Department in the case of Sanjiv Shroff Vs. ACIT [2019 (1) TMI 213 - ITAT KOLKATA] and and particularly the Hon’ble jurisdictional High Court decision in the case of M/s. Blb Cables And Conductors [2018 (8) TMI 525 - CALCUTTA HIGH COURT] we, therefore, respectfully following the same, allow the claim of loss as claimed by the assessee - Appeal of the assessee is allowed

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• 2019 (3) TMI 696
  Penalty u/s 271(1)(c) - non specification of charge - non specifying in which limb of Section 271(1)(c) the penalty proceedings has been initiated as to whether it was for concealment of income or for furnishing inaccurate particulars of income - defective notice - assessee in return filed u/s 153A declared capital gain on the basis of consideration received as specified in registered sale deed - HELD THAT:- As decided in SHEVETA CONSTRUCTION CO. PVT. LTD., THROUGH ITS MANAGING DIRECTOR DINESH KR. CHOUDHARY VERSUS ITO, WARD 3 (4) , JAIPUR [2016 (12) TMI 1603 - RAJASTHAN HIGH COURT] A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r.w.S. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a catena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained. See MS. NEHA SHARMA VERSUS I.T.O., WARD 2 (3). JAIPUR. [2019 (3) TMI 599 - ITAT JAIPUR] - Decided in favour of assessee.

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• 2019 (3) TMI 695
  Addition u/s 68 - increase in share capital including share premium during the year under consideration - no evidences with regard to creditworthiness or genuineness of the transaction established by the assessee - 10 share applicant companies to whom the notices issued, neither appeared on the stipulated date nor a request for adjournment was filed by those companies - AO also recorded the statement of one Sh Surinder Kumar Arora at the address of M/s Karisma Industry Limited, who stated that said company didn’t exist - onus to prove - CIT-A deleted the addition - HELD THAT:- As respectfully following the decision of NRA Iron & Steel P. Ltd. [2019 (3) TMI 323 - SUPREME COURT] and NDR Promoters Pvt. Ltd. [2019 (1) TMI 1089 - DELHI HIGH COURT] we are of the opinion that share applicant entities are paper entities created by some individuals for providing entries to the persons including the assessee, not having tax paid capital for promoting their ventures. As the entries of credit are appearing in the books of the assessee, it was the onus of the assessee to explain satisfactorily the nature and source of those credits. As the assessee failed to discharge its onus of explaining source and nature of the credit received and failed to establish creditworthiness and genuineness of the transaction as required u/s 68 of the Act, the assessee is liable for addition under section 68 of the Act. Accordingly, we reverse the finding of the Ld. CIT(A) on the issue in dispute and confirm the addition in the hands of the assessee in terms of section 68 - Decided in favour of revenue.

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• 2019 (3) TMI 694
  Disallowance of the expenditure incurred on repair and maintenance - nature of expenditure - revenue or capital expenditure - HELD THAT:- D.R. rightly pointed out that purchases of laptop, LED screen and Ram and electric motor pump are clearly capital expenditure in nature and total of the same comes to ₹ 1,17,997/- (Rs.24,328/- + ₹ 51,435/- + ₹ 42,324/-). Therefore, these would provide enduring benefit to the assessee and as such could not be treated as revenue expenditure. However, the remaining expenses of the appellate order, are in the nature of software charges, office construction expenses, purchase of hard disk, UPS etc., are clearly revenue expenditure in nature, therefore, no addition could be made for the same. In this view of the matter, we set aside the orders of the authorities below and delete the addition on this head except to the extent. AO is directed to restrict the addition. This ground of appeal of assessee is allowed partly. Disallowance u/s 14A - sufficient own capital to make investment - HELD THAT:- It is clear that assessee claimed that no expenditure have been incurred for earning exempt income. A.O. has not recorded any satisfaction as to how the claim of assessee was incorrect. No material have been brought on record to justify the addition. Further, assessee has sufficient own capital to make investment in the firm. Therefore. no disallowance under section 14A is permissible. appeal of the assessee is allowed. Enhancement of income by CIT(A) - Treating agricultural income as taxable income - Power of CIT(A)- HELD THAT:- it is established that the assessing officer did not consider the agricultural income to be taxable income and assessing officer has considered the issue with reference to disallowance of expenses under section 14A of the Income Tax Act. Therefore, Ld. CIT(A) was not justified in enhancing the income by considering it as source of income on account of Agricultural income considered to be taxable income without any basis as to how the agricultural produce was spontaneous growth. It is also well settled Law that power of enhancement was restricted to the subject matter of the assessment or the source of income, which had been considered expressly or by clear implication by the assessing officer from the point of view of taxability and that the Appellate Commissioner had no power to assess the source of income which had not been taken into consideration by the assessing officer. The Ld. CIT(A), however, as against the Law has considered the new source of income for the purpose of making the addition by enhancing the income of the assessee from different new source, which have not been considered by the assessing officer. Thus, the Ld. CIT(A) clearly acted beyond his power and jurisdiction. Addition u/s 14A by disallowing expenses - HELD THAT:- In this case, assessee has not made any investment to earn agricultural income because land was acquired for real estate business purposes. No expenses have been incurred to earn any agricultural income. The assessee has sufficient own funds to make investment in agricultural land. Disallowance under section 14A is also not permissible in the facts and circumstances of the case and our findings on Ground No.3 above, would also support that the addition made by the assessing officer under section 14A of the Income Tax Act, 1961, was also not permissible. We set aside the orders of the authorities below and delete the entire addition made by the assessing officer as well as an enhanced by the Ld. CIT(A).

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• 2019 (3) TMI 693
  Disallowance of prior period expenses - whether these are routine business expenses which are allowable? - no supporting evidences have been filed to substantiate that liability arose and crystallised during year under consideration - HELD THAT:- Before us assessee has not produced any copy of supporting documents in respect of balance payments to establish that expenses had crystallised during year under consideration. We draw support from the order of Coordinate Bench in assessee’s own case for A.Y. 2005-06 (supra) in holding that merely because expenditure has been debited in Profit and Loss account during year neither it becomes expenditure pertaining to this year nor it becomes an expenditure pertaining to prior years. It is the duty of assessee to show that this expenditure has crystallised during the year and therefore are incurred during the year. As adequate details have not been produced before Ld.AO as well as before Ld.CIT(A), we do not find any infirmity in the disallowance made by CIT(A) Disallowance u/s 14A - assessee had given interest-bearing loan to Escotel a subsidiary of assessee during Financial Year 1997-98 and interest as per agreed terms were charged on such loans - HELD THAT:- We reject the argument that no expenditure could be attributed to earning of exempt income as section 14 A is automatic and comes into operation without any exception as soon as exempt income is claimed by assessee. As observed that total exempt income claimed by assessee amounts to ₹ 19,26,10,503/-, against which disallowance restricted by CIT(A) is ₹ 34,32,239/-. It is observed that Ld.CIT(A) records that proportionate expenses being considered for disallowance, has been incurred mainly for employees of manufacturing unit which cannot be related to earning of exempt income. Under such circumstances allocation of personal expenses towards earning of exempt income should not have been made. We therefore grant further relief to assessee by excluding personal expenses amounting to ₹ 16,85,000/-, from disallowance computed under section 14 A. We thus direct Ld.AO to restrict the disallowance Disallowance being amount of inventory written off during the year - HELD THAT:- Ld.Counsel was unable to establish market value of stock to be at ‘nil’, and therefore we do not find any infirmity in the order of CIT (A) and the same is upheld. Addition on account of investments written off - loss on investment - assessee owning shares in Escorts Overseas Pvt. Ltd. and as these were doubtful of recovery, and hence provision was made - HELD THAT:- Assessee before us has not been able to establish how the company was dissolved, and manner in which its assets/liabilities have been dealt with. Before us, assessee has not been able to establish value of shares on or before date of dissolution of company. Even if it has to be considered as capital loss, assessee has not provided any relevant details regarding same. Under such circumstances we do not find any infirmity in order of Ld.CIT(A) and same is upheld. Disallowance on account of redemption of SPNs - HELD THAT:- As decided in assessee's own case [2018 (3) TMI 1641 - ITAT DELHI] liability to pay the premium amount over and above the face value of SPNs on redemption is a liability incurred by the assessee for the purposes of its business by generating funds which were utilised for the business activities. Thus, such an expenditure is an allowable expenditure. Now, with regard to year of allowability, it is evident that the payment of premium results in securing or benefit over a number of years. The benefit is spread over the entry period of 7 years. The expenditure is therefore allowable over the entire period of the SPNs the redemption having regard to the party. The assessee, therefore, correctly claimed deduction only in respect of the proportionate premium relatable to the year in question. Disallowance being upfront fee paid to banks - HELD THAT:- As decided in assessee's own case any expenditure incurred for obtaining loan is also allowable as revenue expenditure even if the loan is intended for acquiring a capital asset. The Tribunal accordingly allowed the claim of assessee. Disallowance on account of development of existing products and prototype products - claim allowable u/s 35 - R & D expenses of capital nature - HELD THAT:- As assessee maintains separate accounts for capital expenditure for R&D purposes, and that expenses on development and prototype is not part of R&D expenses. Thus it is clear that Assessing Officer is not disregarding genuineness of expenditure incurred by assessee. Therefore we do not find any infirmity in the observations of Ld. CIT (A) and the same is upheld. Addition of prior period expenses - CIT (A) deleted addition in part as assessee had provided certain bills which were relating to year in consideration and was of the opinion that payments crystallised during the year to that extent - HELD THAT:- No infirmity in the factual observations of Ld.CIT(A) which has been verified by Ld.CIT(A) having regards to documents/evidences/bills etc., filed by assessee. There is nothing contrary to these observations that Ld.Sr.DR has been able to place before us and therefore we do not find any infirmity in the observations of Ld. CIT (A) and the same is upheld. Addition on account of commission, discount and brokerage on sales made to government parties - allowable expenditure u/s 37 - HELD THAT:- AO while disallowing the expenditure has presumed that this commission has been paid to middlemen for procuring the orders from the Government while there is no proof or evidence in support of the same. Before coming to this conclusion, the AO has not given any opportunity or show cause to the appellant company why it should not be disallowed invoking Explanation to Section 37(1) of the Act. This commission and discount is being claimed by the appellant company regularly and has also been allowed by the AO himself and also at the appellate stage. In view of the above facts, as all the evidence has been filed by the appellant company and there is no proof that the expenditure is covered under Explanation to Section 37(1) of the Act, the disallowance made by the AO is deleted Disallowance on account of professional charges - HELD THAT:- Expenditure on professional charges paid in respect of day to day activities vis-a-vis the existing business the appellant company cannot be treated as of capital nature and have to allowed as revenue expense. Disallowance of 25% of royalty - allowable revenue expenditure - HELD THAT:- Royalty is not being paid for acquiring any technical knowledge which may give any enduring benefit. Rather in this case royalty is being paid only for the use of name “Escorts” which is owned by Harparshad and Company Pvt. Ltd. Therefore, it cannot be said that by making this payment any enduring benefit is being obtained. Thus, the facts are distinguishable and, therefore, the decision is not applicable. In my opinion, this is a clear cut case of revenue expenditure. Not only that, it has been allowed in earlier years also be the A.O. in full as revenue expenditure. Therefore, royalty payment is directed to be allowed in full.

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• 2019 (3) TMI 692
  Bogus purchases - 100% disallowance for the purchases said to be bogus when sales are not doubted - HELD THAT:- Assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn as per the A.O. that the assessee has not produced the day-wise stock register and books produced for verification are not in working conditions. What is the meaning of the observation is not clear. A.O. has primarily relied upon the findings in Rajendra Jain group search. A.O. has not even issued notice to these parties said to be bogus. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from the Hon'ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT] as upheld 100% allowance for the purchases said to be bogus when sales are not doubted. However, in that case all the supplies were to the government agency. In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, in our considered opinion, on the facts and circumstances of the case, 3% disallowance out of the bogus purchases meets the end of justice, as reasoned done by the CIT(A) above. - Decided against revenue.

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• 2019 (3) TMI 691
  Disallowance of exemption income u/s 14A read with Rule 8D(2)(iii) - suo moto disallowance by the assessee - HELD THAT:- We find that none of the expenses above stated have nexus that the exempt income rather all these are related to business income. The assessee suo moto has disallowed a sum of ₹ 33,815/- relatable to the exempt income which according to us is quite reasonable. Even otherwise, the issue is covered by the Tribunal’s decision as assessee’s own case for AY 2011-12, respectfully following the same and in given facts and circumstances, we delete the disallowance. Hence, we allow the appeal of the assessee.

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• 2019 (3) TMI 690
  Penalty levied u/s 271G - assessee had not furnished the workings of AE and Non-AE segmental profitability as called for by him and accordingly, concluded that the relevant records in terms of Clause (g) and (h) of Rule 10D(1) was not maintained by the assessee - HELD THAT:- In the similar facts and circumstances, the Co-ordinate Bench of this Tribunal in assessee’s own case for the A.Yrs 2010-11 and 2012-13 had held that since there was no TP adjustment, there cannot be any levy of penalty u/s.271G of the Act. We also find that assessee had duly replied before the TPO in respect of queries raised by the TPO. TPO had accepted the stand of the assessee for A.Yrs. 2010-11 and 2012-13 also vide its order u/s.92CA(3) dated 31/12/2015, 25/01/2016 respectively wherein no penalty proceedings u/s.271G of the Act were initiated. This goes to prove that the Ld. TPO had understood the practical difficulty of the assessee before us and has decided not to initiate penalty u/s.271G of the Act. CIT(A) had placed reliance on the decision of the Jaipur Tribunal in the case of ACIT vs. Gillette India Ltd [2015 (1) TMI 918 - ITAT JAIPUR] which is also applicable to the facts of the instant case. In view of the aforesaid observations and respectfully following the aforesaid judicial precedents, we do not find any infirmity in the order of Ld. CIT(A) deleting the penalty u/s.271G of the Act in the peculiar facts and circumstances of the instant case before us. We would like to make it clear that the said decision shall not stand as a precedent for other cases. Accordingly, the grounds raised by Revenue are dismissed.

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• 2019 (3) TMI 689
  Unexplained cash credit u/s 68 - Genuineness of claim - Held that:- Assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 and no addition can be made on this account. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same - Considering the principles laid down by Hon’ble Supreme Court in the case of Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] and moreover, no new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). - Decided in favour of assessee Disallowance of interest u/s 36(1)(iii) - interest fee loans or advances given by the assessee - HELD THAT:- the assessee had filed the details of loans and advances given and from the said details, the contention of the assessee was found to be in order to the effect that interest fee loans or advances given by the assessee is at ₹ 22,10,18,973/- only as against the amount of ₹ 30,05,18,9737- considered by the A.O. Therefore, after considering the balance sheet. The own fund (i.e. share capital and surplus) of the assessee was ₹ 27,43,62,742/- against which the interest free advances given by the assessee was Rs, 22,10,18,973/-. Thus. this establishes that the interest free funds have been given by the assessee out of its own funds. As relying on RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT] CIT-A rightly allowed this ground. - Decided against revenue

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• 2019 (3) TMI 688
  Addition u/s 68 - Share capital and premium money received from investor company as not genuinely doing any business but is providing the accommodation entries of share premium in garb of genuine business activity - receipt of accommodation entries - HELD THAT:- Assessee has submitted all the necessary details in support of the share applicant and share premium receipt. The A.O. has not pointed out any defect in the documents. As a matter of fact, the A.O. has not even issued a notice u/s. 133(6) of the Act to the share applicant, if he had any doubt about the identity, genuineness and creditworthiness of the share applicant. In fact, the share applicant is the sister concerned of the assessee, from whom similar share application with premium were received in the earlier year. The identical addition in that year by the A.O. was deleted by the CIT(A) and confirmed by the ITAT. It is not the case that the Hon'ble Jurisdictional High Court has reversed the said ITAT decision. The facts in the present Assessment Year are identical as in the earlier year. Assessment of the share applicant has also been completed u/s. 143(3) of the Act and no adverse comment has been made by the A.O. in that case. The balance sheet of the share applicant shows ample source of funds. Hence, the A.O.’s negative observation about share applicant’s availability of funds is factually incorrect. The funds obtained by the share applicant appearing in its balance sheet cannot be disregarded. No adverse observation is noted in the assessment order of the said share applicant. Hence, the veracity of share applicant’s fund position remains undoubted by the A.O. of the said concern itself. It is not the case that the A.O. had wanted some information from the share applicant and which the assessee or the share applicant failed to provide. - decided in favour of assessee Disallowance u/s 14A r.w.r. 8D - sufficiency of non interest bearing own funds - Held that:- Submissions of the assessee with regard to the availability of the non interest bearing own funds being more than investments made are found to be correct. Hence, no disallowance is justified with regard to disallowance u/s. 8D(2)(ii). As regards the disallowance u/s. 8D(2)(iii) is concerned, the A.O. has computed the disallowance of ₹ 87,649/-. The ld. CIT(A) has sustained a disallowance of ₹ 50,380/- out of exempt income of ₹ 2,51,899/-. When this is considered under the context of the fact that majority of the shares are held as stock-in-trade and the fact that not all the investments have yielded exempt income during the year, the sustenance of the addition by the ld. CIT(A) meets the ends of justice - Decided against revenue

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• 2019 (3) TMI 687
  Disallowance u/s 14A under MAT - MAT adjustment u/s 115JB Explanation (f) - HELD THAT:- We notice in this backdrop that the instant issue of section 14A r.w.r. 8D disallowance for the purpose of section 115JB MAT computation is no more res integra. Hon’ble Bombay high court’s judgment in CIT vs. Bengal Finance & Investment P Ltd. [2015 (2) TMI 1263 - BOMBAY HIGH COURT] and this Tribunal’s Special Bench decision in ACIT vs. Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] settle this issue in assessee’s favour that such a disallowance is not to be subjected to MAT adjustment. Disallowance u/s 14A - AO invoked section 14A r.w.r. 8D(i) on direct expenses disallowance on brokerage, security transaction tax and other similar charges - HELD THAT:- Suffice to say, it fails to dispute the crucial fact recorded in the CIT(A)’s findings that the assessee had capitalized the above direct expenditure than claiming it as revenue expenditure by debiting the same through Profit & Loss account. We further find that the Revenue’s instant argument carries no substances since direct expenses sought to be disallowed have nowhere been claimed at assessee’s behest.The Revenue’s first argument fails therefore. Revenue seeks to revive section 14A r.w.r. 8D(2)(ii) proportionate interest disallowance - HELD THAT:- The assessee’s balance sheet reveals that its non-interest bearing funds read figures of ₹ 1,70,302.44 lakhs as against its exempt income investments of ₹ 15,894.02 lakhs and exempt income yielding investment of ₹ 13,650.89 lakhs; respectively. Various judicial precedents, i.e. CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT], CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] and CIT vs. Torrent Power Ltd. [2014 (6) TMI 185 - GUJARAT HIGH COURT] hold that impugned proportionate interest expenses disallowance does not apply in the case of non-interest bearing funds turning out to be more than exempt investments. We decline Revenue’s instant second argument as well. Whether only exempt income yielding investments have to be taken into consideration whilst computing administrative expenses disallowance u/s 14A r.w.r. 8D(2)(iii)? - HELD THAT:- Suffice to say, hon’ble jurisdictional high court’s decision in REI Agro Ltd. case [2013 (9) TMI 156 - ITAT KOLKATA] has already decided the very substantial question of law in assessee’s favour. We therefore reject the Revenue’s instant third argument as well. Nature of receipt - taxpayers sales tax, subsidy and industrial promotion assistance - revenue or capital receipt - Disallowance of depreciation - HELD THAT:- Respectfully following the decision of the Hon'ble ITAT, Kolkata in appellant's own case[2017 (2) TMI 685 - ITAT KOLKATA], the Ld. AO's action of adjusting the capital subsidy from the "actual cost" of assets under Explanation 10 to Section 43(1) is held to be unjustified in law. Accordingly the disallowance of excess claim of depreciation is directed to be deleted. Transfer pricing adjustment - loans given to its overseas Associate Enterprises (AEs) - currency benchmark LIBOR rate - Whether CIT-A not following the method of determining the cost of funds plus credit separately as the most appropriate method determined on the basis of comparables in controlled price (CUP) method - HELD THAT:- CIT(A) has precisely followed the tribunal’s earlier years’ order in the assessee’s cases [2017 (2) TMI 685 - ITAT KOLKATA]itself directing the authorities to benchmark assessee’s international transactions in the nature of loans given to its overseas Associate Enterprises (AEs) at the relevancy currency benchmark LIBOR rate prevailing in the relevant previous year(s). Learned coordinate bench’s detailed discussion held that the impugned international transactions of loans in the case of AEs have to be benchmarked in the respective foreign currency LIBOR rates than the domestic market credit ratings. We make it clear that the Revenue’s pleadings before us in its corresponding grounds have nowhere drawn any distinction on facts in all the assessment years. We accordingly adopt judicial consistency mutatis mutandis in the impugned assessment years to decline instant substantive grounds. TP adjustments - corporate guarantees to its overseas AEs - CIT-A directing the TPO to reduce the impugned corporate guarantee commission @3% to 0.5% - HELD THAT:- It is sufficiently clear by now that the assessee’s very arguments have been partly accepted through for benchmarking corporate guarantee transaction is issued @ 0.5% commission. We therefore adopt judicial consistency qua the instant issue as well to decline to Revenue’s corresponding substantive ground in both of its appeals. TPA on specified domestic transactions with respect to transfer of power from eligible units to manufacturing units - HELD THAT:- Following the judgment of the Supreme Court in the case of ThiruArooran Sugars Ltd. Vs. CIT [1997 (7) TMI 12 - SUPREME COURT]it is of the considered view that the tariff rates at which the non-eligible units procured power from Electricity Board was the most appropriate and internal comparable rate to benchmark the transfer of power by appellant's CPP to other non-eligible units. The benchmarking exercise conducted by the appellant is found to the appropriate and reasonable and hence no further transfer pricing adjustment is warranted on this count. We adopt learned coordinate bench’s discussion mutatis mutandis to uphold the CIT(A)’s findings deleting the impugned transfer pricing adjustments pertaining to specified domestic transactions in the absence of any distinction on facts or law pin-pointed at revenue’s behest

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• 2019 (3) TMI 686
  Addition on account of transfer of shares to group companies - Gift u/s 47(iii) - corporate transfer of shares by way of gift - revenue contended that the gain is taxable under the head income from other sources - assessee is contending that (i) the transaction is not colourable device, (ii) the selling price cannot be replaced by the market value and (iii) the sale of shares without price is a gift and not transfer u/s, 47(iii) - CIT(A) held that this was not a gift since the assessee had not ticked the option of “gift” provided in the slip instead had mentioned it was a case of transfer of off market inter se transfer between promoters - HELD THAT:- We observe that income from other sources is the last and residual head of income. A source of income which does not specifically fall under any one of the other four heads of income (viz, Salaries, Income from House Property, Profit and Gains of business or profession, or capital gain) is to be computed and brought to charge under section 56 under the head “Income from Other sources”.It can be said that the residuary head of income can be resorted to only if none of the specific head is applicable to the income in question and that it comes into the operation only if the preceding heads are excluded. Thus, it can be said that the residuary head of income can be invoked only if all the following conditions are satisfied. The benefit accrued to the Assessee in present case is in the capital field and can be brought to tax only under the head capital gain. Accordingly, the provisions of section 56(1) cannot be resorted to. After going through the entire order of the Assessing Officer wherein the Assessing Officer alleged that the assessee has adopted a colourable device, however, not a single instance has been brought on record by the department of any tax evasion. We direct the Assessing Officer to consider shares of WWIL transferred to ECRPL No. 1,03,31,658 and to ECRPL No. 1,28,26,555 as a gift, therefore, not liable to tax. In respect of shares transferred to EBPL, the sale consideration is not to be replaced by the market price but at the price on which these have been transferred. Similarly in respect of shares of DTIL transferred to PFT 2100 shares and DMNDVPL 3050 shares the same to be treated as a gift not liable to tax. In sum and substance only transaction of transfer of shares of Dist TV No. 10,32,125/- to ECRPL are liable to tax under the head capital gains amounting to ₹ 2,80,23,486/-. Disallowance of interest u/s 36(1)(iii) - HELD THAT:- All the facts and circumstances clearly indicate that the advances were under commercial expediency. The Hon’ble Bombay High Court in the case of PCIT v. Sesa Resources [2017 (9) TMI 126 - BOMBAY HIGH COURT] has held that where assessee company borrowed funds and advanced same to its sister concern, since amount was neither a donation nor loan was given to an individual or to a director for his personal use, same would be presumed to be advanced for commercial expediency, thus no disallowance could be made U/s 36(l)(iii) of the Act. Tribunal in assessee’s own case for the A.Y. 2008-09 and 2009-10 had set aside the issue for fresh adjudication, however, during the year under consideration, all the facts are on record. Considering all the facts and circumstances of the case during the A.Y. 2012-13 under consideration as discussed above, we hold that the investment was made as a commercial expediency. Accordingly, we direct the Assessing Officer to delete the disallowance of interest. Disallowance of interest u/s 14A read with Rule 8D - Non adjudication of additional claim for deletion of suo-moto disallowance under section 14A read with Rule 8D - HELD THAT:- The Hon’ble Bombay High Court in the case of PCIT v. Rivian International P. Ltd. [2017 (12) TMI 811 - BOMBAY HIGH COURT] has also held that if the assessee during the relevant year has not earned any tax-free income, the corresponding expenditure incurred cannot be taken into consideration for disallowance. In view of the above discussions we direct the Assessing Officer to delete the disallowance. Disallowance of share premium as unexplained cash credit u/s 68 - income from other sources - HELD THAT:- Since all the funds have been remitted through a proper banking channel duly recorded in the books of account and financials of the Company, there cannot be any doubt on the genuineness of the transaction. A copy of the bank statement of the Assessee was submitted to establish the same. The Assessee even submitted the relevant board resolution, register of members and Form 2 filed with the ROC intimating allotment of preference shares. In fact, the monies received towards share capital has been accepted by the AO and it is only the money received toward share premium which is in dispute. In view of the above, the nature and source of ₹ 35 crores received stands explained and no addition under section 68 of the Act is called for. Section 56(2)(viib) of the Act which seeks to tax amount received in excess of fair market value of shares only applies from Assessment Year 2013-14. Hence, Section 56(2)(viib) of the Act cannot be resorted to in the instant assessment year 2012-13 under consideration. Therefore, share premium is not chargeable to tax. Even if the share premium is excessive, the same cannot be taxed under the provisions of section 68 during the A.Y. 2012-13 under consideration, since the nature and source of the same stands fully explained. This contention is duly supported by the decision of the Mumbai Tribunal in the case of DCIT v. Varsity Education Management Pvt. Ltd [2018 (10) TMI 1438 - ITAT MUMBAI]. Addition made on account of share premium received by the assessee to be deleted - Decided in favour of assessee

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• 2019 (3) TMI 685
  GP estimation - rejection of books of accounts - estimation of income - invocation of Section 145(3) - true or correct income of the assessee’s business - assessee has not maintained proper records - non maintenance of stock separately for different types and varieties of skins and hides, i.e., of cows, goats and buffaloes, dealt in - HELD THAT:- defects in the assessee’s accounts observed by the Revenue are, thus, on examination, found valid. Section 145(3) stands, accordingly, rightly invoked by the Revenue in the facts and circumstances of the case. The gross profit as per books, even assuming a correct valuation of raw material, or the raw material cost of the processed goods, gets justified at ₹ 206.27 lacs. If the under-valuation in the opening stock is to be similarly taken into account for determining the profit for the year, the data on the conversion cost for the preceding year would be required. For the sake of discussion, assuming a 20% increase therein, i.e., for the current year vis-a-vis the preceding year, yields a per unit cost of ₹ 102.80, which results in a net increase in the gross profit by ₹ 30,01,615 (94,79,818 – 64,78,203), or at 8.48%, i.e., very close to do that estimated. We may hasten to add that we are not in any manner suggesting an increase in or disturbing the valuation of the closing stock; the same having penalty implications as well, but only that, other things being equal, an increase to this extent gets validated. That is to say, that the profit as estimated by the Revenue is reasonable and merits being upheld. In the present case, the accounts as not correct and complete in-so-far as they relate to the manner of accounting for the various direct costs and revenues that go into the working of the gross profit. Net profit cannot be computed or arrived at independent of or de hors the gross profit, being only derived there-from. The AO may also estimate some indirect costs and/or revenues as well, i.e., along with estimating the gross profit; the whole purport being to estimate those areas of income determination for which the assessee’s accounts are not regarded as reliable. At the same time, he, finding no defect therein, may not consider it necessary to disturb the indirect income/cost. How, therefore, we wonder, the invocation of sec. 145(3) be impugned on the basis that the assessee’s income is estimated by estimating the gross profit alone, allowing other costs and revenues as claimed? There are decisions galore where income estimated thus, have been upheld. - Decided against assessee.

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• 2019 (3) TMI 684
  Interest income - Correct head of income - income from other sources OR income from business - AO treated the lending of money as an independent and unrelated activity and consequently the interest on said lending was treated as income from other sources - HELD THAT:- We find that it is not a case of interest income earned by the assessee which is incidental to the business activity of the assessee but the assessee has given the loans in the market for earning the interest and therefore, the interest was earned by the assessee on intentional activity of lending. It is not a simple case of parking the money in the bank but the assessee has deliberately given the advances in the market for earning the interest. Hence, we concur with the view of the AO on the point that the interest earned by the assessee from giving loan by the assessee in the market is income from other sources and not the business income. Set off of business loss against the interest income as per the provisions of Section 71 - HELD THAT:- Since the assessee already commenced the business in the F.Y. 2005-06 and has now incurred expenditure on account of advertisement, exhibition, consultancy charges which are an allowable business expenditure, then the said business expenditure will be business loss for the year under consideration for want of any business income and consequently the interest income assessed as income from other sources would be set off against the business loss as per the provisions of Section 71. Therefore, we find merits in the alternative contention of the ld AR that the business loss can be set off against the interest income. We direct the Assessing Officer to allow the interest income to be set off against the business loss in the shape of the expenditure subject to the verification of the fact that the said expenditure has not been added to the cost of the project in the subsequent year. Appeal of the assessee is partly allowed.

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• 2019 (3) TMI 683
  Addition u/s 41(1) - non verification of static sundry creditors for several years - as per AO as assessee to prove that it is not a case of remission or cessation of liability and assessee has not been able to discharge its onus with any supporting document or proof - HELD THAT:- CIT (A) categorically record that said liability exists in books of assessee, and has not been written off unilaterally or by other party, which is evident from confirmation issued by M/s. Hero Motors Co. Ld.Sr.DR has not been able to bring on record any documents to establish that said sum has been treated by assessee either as trading liability, or that there has been remission or cessation of liability in order to attract provisions of section 41 (1) - we are satisfied with view taken by Ld.CIT (A) - Decided against revenue.

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• 2019 (3) TMI 682
  Unexplained expenditure - alleged excess payments to landlords - agreement of sale entered by the assessee-company and its group concern with its landlords for purchase of lands - part of the payment was also paid through cash and cheque for which the landlords have given their acknowledgment of receipt - HELD THAT:- Department found agreement to sell with the schedule of payments. There is proof for payment of ₹ 15 lakhs in cash and ₹ 15 lakhs by cheque. Apart from that, there is no comparative evidence to show that assessee has actually made the payment except schedule of payment mentioned in the agreement. There is no absolute proof that assessee has made the payment. AO made this addition only on presumption that the payment must have been made. Assessee denies that it actually made any further payments and submits that the deal did not go through. But, no details were submitted. It is always subjective when the transactions involved are to do with cash. Department has not found anything to show that the landlords actually received the payments. The additions can be made only based on actual evidence and not based on presumptions. Particularly, when the deal is not through and department can always verify whether this agreement was acted upon and sale was completed by proper registration. Since allegedly the deal is not completed and there is no proof for making further payments, the evidence available on the agreement to sell alone can be considered as actual payment made relating to this deal. In the absence of any evidence, we have no choice, but, to accept the contention of the assessee and delete the addition Addition u/s 40(a)(ia) - Violation reported by the Special Auditor on no deduction of TDS and short deduction of TDS - scope of amendment in act - HELD THAT:- There is no dispute but the legislature has softened the stand on the default by the assessee subsequent to various judicial precedents and amended the sections like 40(a)(ia), 201(1), etc. The Courts have held that these amendments are retrospective in nature. Considering the subsequent amendments to the section 40(a)(ia), assessee has to prove that the recipient has declared the income in its gross income. Since, the AO has not initiated proceedings u/s 201(1), the assessee has not submitted any documents. At this juncture, i.e., after a lapse of a decade, there is no point in remitting the issue back to AO. Since, it is the responsibility of the assessee to collect the tax on behalf of Revenue, which assessee has failed, but, there is 99% chance that the recipient must have declared the same as income and paid the tax. There is no doubt that assessee has failed and assessee also accepts the same. At this stage, we can only direct the AO to delete the addition u/s 40(a)(ia) and calculate interest u/s 201(1A) for the period of default. This is in line with the direction of the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages Ltd. Vs. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA]. Ground raised by the assessee is partly allowed. Deduction u/s.80lB (10) - non-fulfilment of the precondition as detailed in the provisions of section 80IB(10), the assessee is not entitled to claim deduction of any part of its income u/s 80IB(10) - non furnishing of all the particulars of the housing project(s) which is claimed for deduction u/s 80IB, separate Profit & loss account for other projects, method of accounting, amount of WIP, accounting of the sale of flats, etc., vide notices given - HELD THAT:- We notice that assessee has only submitted the letters before CIT(A) to claim the deduction in pro-rata basis. As per the findings of ld. CIT(A), these letters do not give any details about the stage of completion, size of the flat to ascertain whether these projects satisfy the conditions specified in section 80IB(10). Therefore, we direct the AO to collect information about the stage of completion of the projects and size of the flats. If it is within the norms, AO should give pro-rata deduction u/s 80IB(10). This is accepted law as far as allowing pro-rata deduction u/s 80IB(10). With regard to completion certificates, it is enough that assessee files the completion certificate on block-wise or handing over proof to the flat owners. We direct the AO to decide the issue as per the above said directions and accordingly, ground raised by the assessee is allowed. Addition on account of unexplained investments - as during the search operations in the case of the assessee group, seized material in the nature of Agreements for Sale, Development Agreements, Sale Deeds, Receipts issued by land owners etc., were recovered - peak credit addition - HELD THAT:- We notice that AO has arrived the peak credit based on the information found during the search - assessee has submitted audited balance sheet and cash book. AO has to analyse the information based on the reliable sources offered by the assessee and the audited cash book. It is common that books are not complete at the time of search. Assessee should be given opportunity to submit proper information. In this case, assessee has submitted audited cash book. This should be considered and arrive at the peak credit as per cash flow or AO should take the reliable sources on record and make addition of unexplained cash outflow as unexplained investment in cash payments made to land owners. We direct the AO to verify the audited cash book entries with the payments to landlords and also the reliable source of cash available for such payments to landowners. Therefore, ground raised by the assessee is allowed for statistical purposes. Unexplained investment u/s 69B - HELD THAT:- As at the time of search, the department found two documents, one for the registered sale deed and another for agreement to sell. The consideration mentioned in both the documents are different. It is natural to presume that when the transaction is complete by registering the document, two parties must have exchanged the value as per the agreement to sell. This is the original arrangement between the parties. All the transactions i.e. three transactions are complete. CIT(A) has come to conclusion that assessee must have adhered to the clauses in the agreement to sell. AR brought to our notice in the case of Shri Lingala Senapati that the department has agreed the value of sale consideration as per the registered sale deed and completed the assessment. For the same transaction, the department cannot treat two different sale consideration. Therefore, we direct the AO to determine the sale consideration adopted for Shri Lingala Senapati and consider the same value as sale consideration in the case of assessee also. Also direct the AO to verify the other two cases also and determine the sale consideration adopted for the other two parties and determine the same sale consideration as the proper value of consideration in the case of assessee. Therefore, ground raised by the assessee is allowed for statistical purposes. Unexplained expenditure u/s 69C - HELD THAT:- We are of the view that the AO has already made addition in the hands of M/s Janapriya Engineers Syndicate and the same payments to land owners cannot be made as addition in the case of assessee on protective basis. Therefore, we are inclined to accept the findings of ld. CIT(A) and therefore grounds raised by the revenue in both the appeals are dismissed.

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• 2019 (3) TMI 681
  Revisional jurisdiction u/s 263 of CIT or Pr. CIT - whether the assessment order is erroneous in so far as prejudicial to the interest of Revenue? - Re-look at the orders or proceedings of the lower authority to effect correction - addition u/s 68 - assessee claimed to have obtained loan from one “Anubhav Vinimay" but creditworthiness/genuineness of the transactions of the lender was never verified/examine by the AO and even in the loan confirmation documents, the address of the lender is not mentioned and further the assessee company neither filed the return of income of M/s Anubhav Vinimay Pvt. Ltd. nor the bank statement - HELD THAT:- Assessing Officer while framing the assessment made no discussion with the claim of the assessee and simply framed the assessment in a slip shot manner. Such an approach of the Ld. Assessing Officer cannot be appreciated. Thus, it is clear that the assessment order was passed without verification, application of mind, consequently, it is erroneous as well as prejudicial to the interest of the Revenue, consequently, the revisional jurisdiction was rightly invoked. Ld. Pr. CIT observed that the Ld. Assessing Officer should have made enquiries/verification, to satisfy himself with respect to the creditworthiness of the lender and genuineness of the transactions before framing the assessment, thus, the ld. Assessing Officer was directed to pass fresh assessment order after providing due opportunity of being heard to the assessee. Even in the direction by the Ld. Pr. Commissioner to the Assessing Officer is not going to cause any prejudice to the assessee because the direction has been issued to the Ld. Assessing Officer to examine the genuineness of the loan and after providing due opportunity of being heard to the assessee, the assessment be reframed. The assessee is at liberty to substantiate its claim, thus, we don’t find any infirmity in the impugned order, resultantly, the appeal of the assessee is without any merit, consequently, dismissed. - decided against assessee.

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• 2019 (3) TMI 680
  Disallowing the prior period expense - Reopening of assessment - assessee submitted that the prior period expenditure relates to the customers billing of earlier years rectified during the year, arrears of rent, depreciation and other items - HELD THAT:- Claim of the assessee stated to have been though related to the earlier years but crystallized and determined during the year and therefore same is allowable as expenditure for this year. With respect to the lease rent assessee submitted a copy of the letter dated 5/5/2003, issued by the under Sec to the government of India, Ministry of civil aviation regarding the award of arbitrator dated 2/5/2003, in which the appellant was directed to pay the lease rents at the increased rates. According to that the assessee has provided the enhanced claim of lease rent. As the award of arbitrator was received on 2/5/2003 same has not accrued during the year but in FY 2003-04 related to AY 2004-05. Such increased rent for earlier years. Therefore, same does not pertain to assessment year 2002 – 03. Even otherwise, it is not coming out of the record that when the arbitration award was received on 2/5/2003, how assessee could have made provision for the year ended on 31/03/2002 of above sum. No infirmity in the order of the learned CIT – A, in confirming the above disallowance as it did not crystallized during the year. Further sum on account of debit to customers billing of earlier years rectified during the year. Undisputedly the income from the original bill has already been offered to the income tax in earlier years. Therefore the above sum becomes a writing of the debts which was offered as income in earlier years. Therefore, this Claim cannot be disallowed as prior period expenditure. To this extent, we reverse the order of the learned CIT-A in Confirming the disallowance of the above sum. The further sum was claimed as an depreciation of the earlier years, which is as such not allowable, Therefore, the order of the learned CIT – A does not have any infirmity in confirming the above disallowance. Disallowance pertaining to the earlier years, the assessee could submit before us that the above sum includes a sum with respect to the items like travelling allowance or daily allowance claim of the employees of the Indian oil Corp such as fuel bills of earlier years at the attachment/bases like Northeast Lakshadweep island, Andaman and Nicobar Islands and Port Blair etc. which crystallized during the year. The assessee has shown the copy of the email and submitted that that these are the claims of the employees which was received during the year, though pertaining to the earlier year but admitted and provided in the books of account in this year. We are of the view that the above expenditure cannot be classified as prior period expenditure and should be allowed as and when admitted and approved by the authority. With respect to the other expenditure out of the total expenditure appellant could not produce any details and evidence regarding the nature and the precise period to which the same pertains, before the lower authorities and therefore the disallowance was confirmed. Even before us no details have been furnished with respect to the above sum. We direct the learned AO to allow the sum as expenditure incurred during the year out of total sum. The balance sum has been correctly disallowed by the lower authorities. Accordingly, we allow the claim of assessee and confirm the disallowance. No infirmity in the order of the learned CIT – A to the extent mentioned above, in confirming the above disallowance - Appeal of the assessee is partly allowed.

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• 2019 (3) TMI 679
  Validity of the reopening of the assessment - no addition based on alleged reasons to belief that assessee in receipt of accommodation entry of loss from Mahanagar Group - Power of AO to make other addition u/s 147 proceedings - HELD THAT:- AO has not made any addition/disallowance on the issue. So, without making any addition/disallowance on this accommodation entry for loss the AO ought not to have proceeded to re-assess the assessee on other incomes like the addition of STCG and disallowance u/s 14A. The jurisdictional fact which empowered the AO to invoke the jurisdiction to reopen by issue of notice u/s. 148 r.w.s. 147 as deciphered from the reasons recorded is the accommodation entry of loss. So, when AO desired to reopen this assessment year, he had information of assessee in receipt of accommodation entry of loss from Mahanagar Group, which fact was recorded to re-open the assessment. This precise fact was the foundation based on the information from Director of income Tax and the AO recorded the reason which warranted him to hold the belief that income chargeable to tax has escaped assessment and thereafter, the AO usurped the jurisdiction to reopen the assessment. Words is the ‘income’ which according to the AO escaped assessment while recording reasons for reopening assessment u/s 147 r.w.s. 148. This ‘income’ which AO records in his reasons recorded has escaped assessment and which constituted the bedrock/basis for reopening is the jurisdictional fact which empowered him to usurp the jurisdiction to reopen and reassess the escaped income as contemplate u/s 147/148. So, when that income which was the foundation on which he based his belief of escapement of income is absent /disappeared then the AO’s very usurpation of jurisdiction is on non-existing jurisdictional fact which renders his usurpation of jurisdiction to reopen the assessment legally untenable and so null in the eyes of law and therefore, the assessee succeeds and therefore, we quash the reassessment made by the AO without jurisdiction. - decided in favour of assessee.

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• 2019 (3) TMI 678
  Validity of assessment order - Period of limitation - Appeal allowed by CIT(A) on ground that assessment order was passed beyond the limitation period prescribed - assessment order dated 31/03/ 2014 - served on the appellant on 28/04/2014 - HELD THAT:- We find no merit in Revenue’s instant arguments. The facts remains the CIT(A) made tremendous efforts by way of various correspondence(s) to get all the relevant material on record as to whether the impugned assessment had been framed within the statutory time limit up to 31.03.2014 or not. It has come on record that the assessing authority had also failed to indicate any material on record that the relevant computation had been uploaded even on the department’s portal. We therefore hold that the CIT(A) has rightly quashed impugned assessment not framed within the time limitation prescribed. Hon’ble jurisdictional high court’s decision CIT vs. Subrata Roy [2014 (7) TMI 42 - CALCUTTA HIGH COURT] involves a case where the Revenue had filed sufficient proof before their lordships that the Assessing Officer had framed the assessment in issue within the time period prescribed as against the facts of the instant case. Distinguishable on facts.

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• 2019 (3) TMI 677
  Article 25 of India-Italy DTAA - Transfer pricing adjustment - capital gains arising on sale of shares by the appellant foreign company to another non resident associated enterprise - violation of the non discrimination clause under Article 25(1) of the India-Italy Tax Treaty - whether the transfer pricing provisions under the Act do not apply to a transaction of transfer of shares entered into between two Indian companies? - HELD THAT:- Nationals of a contracting state [i.e. the appellant company] shall not be subjected in other contracting state [i.e. India] to any taxation or any requirement connected therewith, which is there or more burdensome than the taxation and connected requirements to which nationals [i.e. Indian national] of that other state [i.e. India] in the same circumstances and under same conditions are or may be subjected. In our understanding, under Article 25 of this India Italy DTAA and an Italian national shall not be subjected to in India to any taxation or any requirement connected therewith to which Indian nationals in the same circumstances and under the same conditions are or may be subjected which is more burdensome to Italian national. This means that if an Indian national [legal person], enters into any international transactions with its Associated Enterprises, will it not be subjected to transfer pricing proceedings? The answer is “YES”. The Indian national will be subjected to transfer pricing proceedings. Therefore, in our considered opinion, the transfer pricing proceedings taken in the case of the appellant company is not at all discriminating and, therefore, do not fall within the purview of Article 25 of the India Italy DTAA as claimed by the appellant. On the given facts and circumstances of the case, we do not find it necessary to discuss the judicial decisions relied upon by the ld. counsel for the assessee as they are totally different from the facts of the case in hand. Thus, the additional ground raised by the assessee is, accordingly, dismissed. AO's no power to substitute actual consideration with notional consideration u/s 45 r.w.s 48 - HELD THAT:- On finding that there was an international transaction between the AEs, the Assessing Officer referred the matter to the TPO for determination of Arm’s length Price. In our considered opinion, the Assessing Officer has not substituted actual consideration with notional consideration but has made adjustment as per the report of the TPO after receiving directions from the DRP. Section 92 of the Act provides that any income arising from an international transaction shall be computed having regard to the arm’s length price. Section 92C(4) provides “where an Arm’s length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income having regard to the ALP so determined. This means that after determining the ALP, the total income of the assessee is computed having regard to the ALP. Therefore, it is not a case of substitution of actual consideration with notional consideration but adjustment of ALP as determined by the TPO. This objection also fails. TPO rejected the share valuation report furnished by the assessee - HELD THAT:- The market risk premium is generally computed as return on market index i.e. SENSEX over a long period of time. We find that market risk premium for various countries is also computed by reputed valuers like Professor Aswath Damodaran. He computes market risk premium from time to time for various countries and posts the same on his website/ in public domain. We find that in the share valuation report, SS Kothari Mehta & Co, Chartered Accountants has considered Market Risk Premium as 8.09%, based on performance of Indian market index over past 32 years, which is largely same as what has been computed and published by Professor Aswath Damodaran on his website is as updated upto January 2012 at 9% and 8.6% as updated up to January 2011. In our considered opinion, considering the market return over a longer time frame would neutralize the impact of any abnormalities on the market risk premium. Considering the facts of the case in totality, we are of the opinion that the market risk premium at 8.09 % as adopted by the valuer is correct, which makes the discounted rate at 18.12% and if the same is taken, then again also, the fair value per share taken by the assessee will be higher than the fair value per share taken by the TPO. Adjustment of goodwill - difference in adoption of valuation approach by suggesting addition of goodwill in a DCF computation [discounted cash flow] - HELD THAT:- We are of the considered opinion that when the fair value is determined in accordance with the discounted cash flow [DCF] methodology, subsumes values of all kinds of assets of business/ company, whether tangible or intangible, or otherwise, which means that future operating profits of the company are taken into consideration for arriving at a value under the DCF Approach. Goodwill is an intangible asset arising as result of name, reputation, customer loyalty, location, products and other similar factors not separately identified. Goodwill is an apparatus that assists in improving the profitability of a Company, being the base for determination of value under the DCF approach. Therefore, Business Value arrived at under DCF approach subsumes the value attributable to Goodwill. Since DCF valuation methodology inherently captures the entire value of business, therefore, based on valuation principles, there cannot be a separate addition of the value of goodwill. AO / TPO have inappropriately added value of one of the assets i.e. goodwill in the DCF calculation without appreciating the fact that cash flows of business already factor the benefits accruing from a combination of all business assets and, therefore, adding the value of goodwill to the enterprise value arrived using DCF methodology amounts to double counting. AO/ TPO have failed to appreciate the fundamental difference in adoption of valuation approach by suggesting addition of goodwill in a DCF computation. In a DCF computation, the value of incremental profits (reflection of goodwill) is already factored and therefore, the question of adding a separate amount towards goodwill does not arise. Fair valuation of ₹ 396.42 per share of Technip India undertaken by an independent Valuation Expert/ Chartered Accountant subsumes fair value of entire business of Technip India including all intangibles, including goodwill. Hence, there is no need to separately add the value of goodwill to the amount of sales consideration. Adjustment on account of difference in exchange rate - TPO taken the value of share transaction in Euros whereas the transaction has been done in Indian currency - HELD THAT:- The aggregate purchase price for all the shares is taken at 1,14,96,18,000/- equivalent to 16798439.41 Euros. The TPO has erroneously taken the value of share transaction in Euros whereas the transaction has been done in Indian currency. Therefore, the adjustment on account of exchange rate is uncalled for and deserves to be deleted. Levy of interest u/s 234B - HELD THAT:- Since in the present case the income has been received by the appellant after deduction of tax at source, therefore, the aforesaid provision is not applicable. Respectfully following the findings of M/S TECHNIP UK LTD. C/O 712- 713, TULSIANI CHAMBERS [2018 (12) TMI 1069 - ITAT DELHI] we hold that no interest is leviable u/s 234B of the Act.

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• 2019 (3) TMI 676
  Territorial jurisdiction of the High Court - Subsequent to passing order of Tribunal, an order was passed u/s 127 to transfer assessee's case from an AO at Banglore to an AO at Pune - appropriate High Court for purpose of appeal under Section 260A - HELD THAT:- On interpretation of Section 127 of the Act, it held that it has nothing to do with the territorial jurisdiction of the High Court as it only deals with the transfer of assessee's case from one Assessing Officer to another Assessing Officer. Similarly, the Calcutta High Court J.L. Morrioson (I) Ltd [2004 (6) TMI 17 - CALCUTTA HIGH COURT] has on application of section 260-A and 269 of the Act held that the High Court where the Tribunal is seated will be the appropriate High Court for purpose of appeal under Section 260A. Both these orders deal with the issue which arise in this appeal i.e which Court would have jurisdiction to entertain the appeal from the order of the Tribunal passed in Banglore whether the Bombay High Court or Karnataka High Court. In similar situation, both the Courts have held that it would be the Court which exercises jurisdiction over the seat of the Tribunal which passed the order which would have jurisdiction. Our view is in consonance with the views of the Hon'ble Punjab Haryana High Court in Motorola [2007 (10) TMI 384 - PUNJAB HARYANA HIGH COURT] and JL. MORRISON (INDIA) LTD. [2004 (6) TMI 17 - CALCUTTA HIGH COURT] Therefore, in the present facts, we uphold the preliminary objections of the respondent. We hold that this Court does not have jurisdiction to entertain appeals under Section 260A of the Act in respect of order dated 30th July, 2015 passed by the Bangalore bench of the Tribunal. Thus, this appeal is not maintainable before this Court.

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• Customs

• 2019 (3) TMI 674
  Quantum of redemption fine and penalty - import of second hand photocopiers without license - Held that:- The redemption fine and penalty imposed should be in consonance with the law as has been laid down by this Bench. i.e. 10% of the enhanced value as redemption fine 5% as penalty. The redemption fine of 10% of the enhanced value should meet the ends of justice - in the present case, the redemption fine imposed on the appellant in this case is reduced to 10% of the enhanced value i.e. ₹ 16,13,570/- - penalty imposed is reasonable and within the range as has been applied by the Tribunal - appeal allowed in part.

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• Corporate Laws

• 2019 (3) TMI 673
  Failure to repay the amounts borrowed from the depositor - section 73 of the Companies Act, 2013 - Held that:- The petitioner has not given all the material facts with regard to the invoking of section 73 of the Companies Act, 2013, no company shall invite, accept or renew deposits under this Act, from the public except in a manner provided under this Chapter - Admittedly, the petitioner has not filed any document to show any invitation was issued by the company from the public including the petitioner. The petitioner has not produced any material to show that in response to notification they have deposited the money primary company petition (sic). It is very clear that the applicant has not deposited the amount pursuant to any invitation made by the company. However, for inviting any public deposit. Therefore, the claim of the petitioner is not maintainable under section 73(4) of the Companies Act, 2013 and is misconceived - petition dismissed.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 657
  Initiation of the Corporate Insolvency Resolution Process - alleged existence of default in repayment of loan advanced to the Corporate Debtor - I B Code - maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that:- The facts as narrated and the order passed by the Hon ble High Court clearly shows that till date the Hon ble High Court of Calcutta has not passed any order of winding up/liquidation of the Corporate Debtor . The Adjudicating Authority has failed to notice the aforesaid relevant orders passed by the Hon ble High Court of Calcutta. In the present case, as there is no specific order of winding up/liquidation has been passed by the Hon ble High Court of Calcutta and whatever the order of admission or winding up earlier issued has been recalled by the Division Bench, it can be held that the application under Section 7 preferred by the State Bank of India is maintainable. Matter remanded to the Adjudicating Authority, Kolkata Bench, Kolkata with direction to admit the application under Section 7.

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• Service Tax

• 2019 (3) TMI 672
  Cenvat Credit - co-relation between input and output services - utilization of cenvat credit on various input services for payment of output service tax liability for BAS - Held that:- Under the provisions of Rule 3 (1) of CCR 2004 producer of final products or a provider of output service is entitled to take credit of all duty of excise and service tax etc, paid by him which relate to the business of either manufacture or providing of output service - Further Rule 3 sub-rule 4 provides the manner of utilization of the cenvat credit once taken. It is provided that such cenvat credit once taken can be utilized for payment for duty for any final product or payment of service tax on any output service. The scheme of one to one co-relation has been done away with, under the Cenvat Credit Rules, 2004. SCN is misconceived and not maintainable - appeal allowed.

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• 2019 (3) TMI 671
  Real Estate Agent Service - Transfer charges for transfer the allotment of property in the name of the assignee - principal agent relationship or not - levy of service tax - Held that:- The said issue has been examined by this Tribunal in detail in the case of Ansal Housing & Construction Ltd. Vs. CST, New Delhi [2017 (11) TMI 546 - CESTAT NEW DELHI], where it was held that To levy service tax first of all the provider of service should be a real estate agent and second while acting as such agent the person concerned should have provided service in relation to sale, purchase, leasing or renting of real estate. As these transfer charges have not collected by the assessee as Real Estate Agent, therefore, no service tax is payable by the assessee on the transfer charges - demand of service tax is not sustainable against the assessee - Appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 670
  Utilization of CENVAT Credit - can credit can be utilized for payment of Inwards Transportation Service or not? - Held that:- The said issue has been settled by the Hon’ble Punjab & Haryana High Court in the case of CCE vs. Nahar Industrial Enterprises Ltd. [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT], wherein it has been held that for payment of Inwards Transportation Service, the Cenvat credit account can be utilized - demand do not sustain. Levy of service tax - Outwards Transportation Service - Held that:- On the service of transportation, the transporter has already paid the service tax. In that circumstance, the appellant is not required to pay the service tax. If service tax is paid by the appellant, the same amount shall be double payment of service tax paid by the appellant on the same service - demand do not sustain. Appeal allowed in toto.

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• 2019 (3) TMI 669
  Refund claim - time limitation - services provided by the appellant are non taxable - Held that:- The issue has been examined by the Hon’ble High Court in the case of National Institute of Public Finance and Policy [2018 (8) TMI 1524 - DELHI HIGH COURT], where it was held that for the refund claim of service tax which were not required to pay by the appellant, the provision of Section 11B of the Central Excise Act are not applicable. Thus, it is admitted fact that the appellant is not liable to pay service tax on the said activity. Therefore, time limit prescribed under Section 11B of the Central Excise Act,1944 is not applicable to the facts of this case. The refund claim filed by the appellant is within time - Refund allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 668
  Works Contract Services - construction of Residential Complex Services (RCS) - reverse charge mechanism - levy of service tax - Held that:- The issue in dispute is squarely covered by the decision of the Hon’ble Apex Court in M/s.Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] for the period upto 01.06.2007, where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - demand for the period set aside. Period after 01.06.2007 - Held that:- The Chennai Bench of the CESTAT in the case of M/s.Real Value Promoters Pvt. Ltd. & Ors. Vs Commissioner of G.S.T & Central Excise, Chennai & Ors. [2018 (9) TMI 1149 - CESTAT CHENNAI] has held that even after 01.06.2007, service tax liability for composite contracts can only be demanded under Works Contract Service and not under CICS etc. - the impugned order demanding the amount of tax liability under CICS for a composite contract will not survive and will require to be set aside. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 667
  CENVAT credit - input services - erection/commissioning of machinery, which is used for manufacture of sugar - Held that:- These impugned services fall in the definition of input service even after 1.4.2011 - in the case of Uni Abex Alloy Products [2019 (2) TMI 569 - CESTAT BANGALORE], this Tribunal has held that it is a settled law that CENVAT credit is available if the impugned services are used in or in relation to the manufacture of final products and if the nexus of such services with the manufacture is established. Further, it has consistently been held by the Hon’ble Supreme Court that the words ‘in relation to manufacture’ have been used to widen and explain the scope, meaning and content of the definition and applying the same ratio, CENVAT credit of service tax paid on input services is admissible so far as input services have been used directly or in directly, in or in relation to the manufacture of final product even if the term setting up has been deleted from the inclusive portion of the definition. Also, in the case of Birla Corporation Ltd. vs. Commissioner [2013 (11) TMI 987 - CESTAT NEW DELHI], CENVAT credit on erection, commissioning and installation services have been allowed. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 666
  Compounded Levy Scheme - processed textile fabrics - Section 3A of the Central Excise Act, 1944 - Appellant claimed that it was an independent textile processor and applied for compounded levy scheme (CLS) as per Rules 96ZNA to 96ZND of erstwhile CER, 1944 and Notification No.32/2001 – CE (NT) dated 30.04.2001 - Held that:- Rule 96ZNA prescribes certain criteria for filing the application whereas, 96ZNB prescribes conditions for availing of special procedure. Hence, in the background of our findings that here in the case on hand and the facts of this case, the appellant has not got through in its first hurdle as far as threshold investment limit is concerned, thus the mere application filed under 96ZNA per se will not confer any benefit, much less of the kind sought for by the appellant herein. Valuation of fabrics cleared on job work basis to M/s. Jansons Industries Ltd. - Held that:- What cannot be dispute is that the appellant was only doing a job work on materials provided by their principals. In this regard, there are merits in the contention of the appellants that in such cases, the method of valuation laid down in M/s. Ujagar Prints Ltd. [1989 (1) TMI 124 - SUPREME COURT OF INDIA] and reiterated in M/s. Pawan Biscuits Co. (Pvt.) Ltd. Vs. Collector of Central Excise, Patna [2000 (7) TMI 78 - SUPREME COURT OF INDIA] will necessarily have to be followed, in which case, the value to be adopted will be restricted to the material cost of job work charges. There cannot then be any question of adding the profit of the principals. Valuation - processed goods sent via appellant to M/s. Jansons Exports - the appellants have contended that no findings have been given by the adjudicating authority with regard to the detailed submissions made on this aspect by the appellant in their reply to the Notice. It is also brought out that in the reply to the Show Cause Notice, they had submitted a revised quantification of demand, as per which the duty payable is only ₹ 68,65,550/- - Held that:- There is a definite case for re-consideration of the quantum of demand in this case - The matter is therefore remanded to the adjudicating authority. Penalty - Held that:- No suppression can be assailed against the appellant - the penalty of ₹ 2,17,05,582/- under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the erstwhile Central Excise Rules, 1944 read with Section 38A of the Act ibid cannot be sustained and is therefore set aside. Appeal allowed in part and part matter on remand.

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• 2019 (3) TMI 665
  Clearances towards international bidding - benefit of N/N. 6/2006-CE dt. 1.3.2006 - Held that:- The conditinoalities that are required to be fulfilled to avail exemption of the impugned goods when they are imported under a customs exemption notification cannot be insisted upon in respect of the clearances made by the domestic manufactures, for example under Notification No.6/2006-CE. Coming to the Ld. A.R’s contention that respondents are neither a contractor nor a sub-contractor but only a supplier, the Commissioner (Appeals) in para-6 of the impugned order has observed that it is not in dispute that respondent has supplied certain process equipments to Cairn Energy India Pvt. Ltd. for use in Petroleum Exploration Operation against international competitive bidding. So also, we find that in para-2 of both the SCNs, it has been clearly indicated that respondent had cleared processed equipment to M/s.GEA Cooling Tower Technologies India Pvt. Ltd. and that the goods were further consigned to M/s.Cairn Energy India Pvt. Ltd. - Thus there is no dispute on the fact that goods have indeed been supplied for the purpose of petroleum exploration operations to the sub-contractor and from thereon to the main contractor. In the circumstances, this particular argument of the Ld. A.R will not succeed. Appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 664
  Imposition of penalty - applicants submitted that considering the fact that acceptances of such an order of penalty would adversely affect their export credibility - Held that:- Commissioner of CGST and Central Excise had confirmed duty demand of more than 14 crores alongwith interest and penalty against the original company M/s. HP International and imposed penalty on the individuals, including these three applicants vide his order dated 07.06.2018. It is stated that the said company had already preferred appeal in the CESTAT. This being so that could affect the credit reading as exporters, there is a justifiable ground to accept the appeal in which penalty of less than 2 lakhs of rupees is imposed. Appeals be admitted for hearing if cost is paid within 30 days hence.

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• 2019 (3) TMI 663
  Liability of duty - manufacture of Gutkha - Pan Masala Packing machines (Capacity Determination and Collection of Duty) Rules, 2008 effective from 01/07/2008 - demand on pro-rata basis for the factory closed on 03/07/2008 - Held that:- In respect of clearance of goods during such stoppage of production and sealing of machinery, though no express provision or clarification is available as to if clearance of previously manufactured goods is to be included or excluded, in borrowing Rule 92 ZND dealing with procedure for claiming abatement on textiles vis-à-vis Board’s circular no. B.04.06.2001 dated 30.04.2001 whereby clarification was given that the stock of stentered fabrics lying in the factory could be allowed to be removed during the period of closure, which is conterminous to Rule 10 of Pan Masala Rules, he gave his findings that on removal of previously manufactured Pan Masala which is not included in the proviso dealing with such removal, the benefit of abatement granted under Rule 10 of the Pan Masala Rules can be extended to the Appellant. The said findings are upheld - appeal dismissed.

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• 2019 (3) TMI 662
  Rectification of mistake - error apparent on the face of record - Held that:- It is a mistake apparent on record, therefore, the body of the order be read as under:- Arising out of OIA No. LUD-EXCUS-001-APP-920-18 dated 13.04.2018 instead of OIA NO. 254/CE/CGST/Appeal/Gurugram/SG/2017 dated 29.12.2017 - ROM Application allowed.

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• 2019 (3) TMI 661
  Area Based exemption denied - N/N. 49-50/2003 dated 10.06.2003 - mandatory declaration has been filed by the appellant or not? - communication from General Manager, District Industries Centre, Shimla, whether taken as intimation in terms of notification or not? - Held that:- Admittedly, the appellant has failed to bring any documents on record to show that they have filed mandatory declaration in terms of the Notification No. 49-50/2003 dated 10.0602003. In that circumstances, issue No. 1 is answered against the appellant as there is no documentary evidence on record - Further, the communication received from General Manager, District Industries Centre, Shimla has been placed on record dated 16.10.2008 wherein the General Manager, District Industries Centre, Shimla has sent a communication to Deputy Commissioner, Central Excise Division, Mukund Nivas, Panthagarh, Shimla which certified that the appellant has started a unit of Harbal Cosmatic in the state of Himachal Pradesh, this fact has not been denied by the Revenue with any cogent evidence. Therefore, the said communication is to be taken as the date of intimation to the department in term of Notification No. 49-50/2003 dated 10.06.2003. As it was in the knowledge of the department that the appellant has installed a unit of Harbal Cosmatic in the state of Himachal Pradesh, through intimation by General Manager, District Industries Centre, Shimla dated 16.10.2008 - the appellant is entitled for the exemption of the said notification w.e.f. 16.10.2008. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 660
  Manufacture of "pipes" and "pipe fittings" falling under chapter heading 73070000 CETA, 1985 - benefit of N/N. 47/2002 CE dated 06.09.2002 as amended and Notification No. 6/2006-CE dated 01.03.2006 (Sr.No.7) - benefit denied on the ground that benefit of exemption is admissible only to ‘pipes’ and not to 'pipe fittings' - interpretation of the notification - Held that:- On a simple reading of the aforesaid notification there is no room for doubt that the exemption has been allowed to ‘Pipes’ needed for delivery of water from its source to the plant and from there to the storage facility. It is clear that no where, the expression 'Pipe fittings' has been mentioned in the said notification. Needless to mention an exemption notification has to be strictly construed. The Constitutional bench of Hon'ble Supreme Court in Dilip Kumar & Company's case [2018 (7) TMI 1826 - SUPREME COURT OF INDIA] laying down the principle of interpretations of an exemption notification has held that When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. - thus, there cannot be any doubt that to extend the benefit of the exemption, one has to read 'pipe fittings' alongwith the word 'pipe' in the relevant entry of the said notification. Limitation - Held that:- The Ld. AR for the Revenue, at this stage, submits that some period of the demand notice falls within the normal period of limitation, whereas the Learned Advocate for the appellant in his synopsis mentioned that the period of demand is from March, 2006 to July, 2008, and the show cause notice was issued on 09/02/2010. Therefore, the entire demand was barred by limitation - To ascertain the correct position, matter remanded to the adjudicating authority to compute the demand, if any, for normal period. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 659
  Attachment of Bank Accounts - defaulters as named in the notice issued under Section 45 of the Karnataka Value Added Tax Act, 2003 - Held that:- It is not in dispute that the garnishee notice under Section 45 of the Act has been issued to the Directors and Partners of M/s Vishal Concrete Works. If the bankers of these petitioners have issued any communication to freeze the accounts of the petitioners herein, the petitioners are required to clarify the same with the bankers. This Court directs the bankers not to proceed with the petitioners accounts in terms of Annexure-A issued by the Department - petition disposed off.

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• Wealth tax

• 2019 (3) TMI 658
  Inheritance of property - Held that:- The facts and circumstances of the present appeal are identical to the facts in H.H. BHAWANI SINGH (INDIVIDUAL) , VERSUS ASST. COMMISSIONER OF WT, NEW DELHI [2011 (2) TMI 1560 - ITAT DELHI], where The Tribunal has restored the matter to the file of the first appellate authority. We set aside the issue to the file of the learned first appellate authority for fresh adjudication in accordance with the order of the Tribunal - the appeal of the assessee is allowed for statistical purposes.

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• Indian Laws

• 2019 (3) TMI 675
  Appointment of an arbitrator - lease agreement - enhancement of rent - Held that:- It is well settled that in the cases of matters "in rem", the arbitration cannot be invoked - In the instant case, the petitioner is entitled to file a petition for enhancement of rent under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. In case the respondents fail to vacate and commit willful default, the petitioner is entitled to evict the respondents under Section 10 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. It is also the apprehension of the petitioner that the respondents, being a Government Agency, they may rely on the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 and also on the basis of arbitration clause will raise objections with regard to maintainability of the eviction petition filed under the above mentioned provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. In fact, the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, is applicable only against those under unauthorised occupation of the public premises and not against lawful persons - Therefore, the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, will not apply to the case on hand. Therefore, the petitioner shall work out his remedy under Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. The Original Petition is dismissed as not maintainable.

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