TMI Tax Updates - e-Newsletter
March 17, 2020

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Securities / SEBI Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

Articles

1. PROFITEERING UPHELD ON SUPPLY OF FLATS

   By: Dr. Sanjiv Agarwal

2. REVOCATION OF EARLIER DETENTION ORDER DOES NOT IPSO FACTO BARS PASSING THE FRESH DETENTION ORDER AGAINST THE DETENU.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Index Numbers of Wholesale Price in India (Base: 2011-12=100)

2. Sanction for prosecution in 366 cases given in violation of CSR provisions

3. Privatisation of Companies

4. Fake Currency

5. Bank Mergers

Notifications

Customs

1. 25/2020 - dated 16-3-2020 - Cus (NT)

Exchange Rates Notification No.25/2020-Custom (NT) dated 16.03.2020

GST - States

2. CCTs Ref.in CCW/GST/74/2015 - dated 13-2-2020 - Andhra Pradesh SGST

Extension of the last date for furnishing of annual return/reconciliation statement in FORM GSTR-9/FORM GSTR-9C for the period from 01.07.2017 to 31.03.2018

3. CCTs Ref.in CCW/GST/74/2015 - dated 13-2-2020 - Andhra Pradesh SGST

APGST Act, 2017 – prescribing of due dates for filing of return in FORM GSTR-3B in a staggered manner for the months of January, February and March, 2020

4. 11/GST-2 - dated 12-3-2020 - Haryana SGST

Amendment in Notification No. 35/ST-2, dated the 30th June, 2017

5. 01/2020 - FD 12 CSL 2020 (e) - dated 28-2-2020 - Karnataka SGST

Seeks to amend Notification No. (01/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

6. 08/2020 - dated 5-3-2020 - West Bengal SGST

West Bengal Goods and Services Tax (Second Amendment) Rules, 2020

Income Tax

7. 17/2020 - dated 13-3-2020 - IT

Central Government specifies a nonresident being an Eligible Foreign Investor u/s 115AD

SEZ

8. S.O. 1089 (E) - dated 13-3-2020 - SEZ

Central Government notifies 19.9001 hectares area at Sector- 157, Noida in the State of Uttar Pradesh and constitutes an Approval Committee

9. S.O. 1046 (E) - dated 11-3-2020 - SEZ

Central Government notifies an additional area of 2.01 hectares thereby making the total area of the Special Economic Zone as 11.86 hectares, at KIADB, Industrial Area, Taluka Hebbel-Hootagally, District Mysore in the State of Karnataka

Highlights / Catch Notes

GST

• Restaurants Must Pass GST Rate Cuts to Each Customer Equally, No Offsetting Allowed (Section 171.

  Case-Laws - NAPA : Profiteering - restaurant service - reduction in rate of GST - every recipient/ customer is entitled to the benefit of the tax rate reduction by way of reduced prices and Section 171 does not offer the Respondent to suo moto decide on any other modality to pass on the benefit of reduction in the rate of tax to his recipients. Therefore, any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction that ought to accrue to another recipient or customer. - NAPA
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• Cinema Overcharging: Company Violates Section 171 by Failing to Pass GST Reduction Benefits to Customers, Faces Action u/r 133.

  Case-Laws - NAPA : Profiteering - Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees” - Rate of GST reduced from 28% to 18% - the Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rates of tax - he is liable for action under Rule 133 of the CGST Rules, 2017. - NAPA
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• Court Orders Authorities to Review Petitioner Representations and Unlock GST Registrations for Post-GST Payments; Respond to Notices in 2 Weeks.

  Case-Laws - HC : Blocking GST registration number - Upon such representations being made, the authorities are directed to consider the same and unlock the GST registration so that the payments for the post-GST period can be made by the petitioners - Petitioners are also directed to respond to the show cause notices manually to the concerned authorities within a period of two weeks from date. - HC
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• Exports as "zero rated supplies" under IGST Act Section 16 eligible for IGST refund, even with higher duty drawback claimed.

  Case-Laws - HC : Refund of IGST - exports were declared as the “zero rated supplies” - Section 16 of the IGST Act - the refund of the IGST paid on the exports cannot be denied on the ground that the higher rate of duty drawback is claimed. - HC
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• GST Dealer Registration Cancellation Ignored by GSTN Despite Restoration Order; GSTN Council Urged to Act Swiftly.

  Case-Laws - HC : Cancellation of registration of dealer - grievance of the writ-applicant is that although there is an order passed by the respondent no.2 restoring the registration, which was inadvertently cancelled, yet the same has not be given effect to by the GSTN - GSTN Council directed to immediately look into the matter - HC
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• Provisional GST property attachment expires after one year per Section 83(1); accounts not under attachment post-expiry.

  Case-Laws - HC : Provisional attachment of property - time limitation for such attachment - The provisional attachment would cease to have effect after the expiry of a period of one year from the date of the order made u/s 83(1) - In such circumstances as on date, it cannot be said that the account of the writ-applicant is under any attachment. - HC
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• ITC Denied u/s 17(5) CGST Act for Construction, Maintenance of Warehouses; Includes Goods and Work Contract Services.

  Case-Laws - AAR : Input Tax Credit - GST paid on goods purchased for the purpose of construction & maintenance of Warehouse - no ITC of GST paid on goods purchased for the purpose of construction & maintenance of Warehouse such as Vitrified Tiles, Marble, Granite, ACP sheet, Steel Plates, TMT Tor (saria), Bricks, Cement, Paint and other construction material is admissible u/s 17(5) of CGST Act, 2017; no ITC of GST paid on work contract service received from registered & unregistered Contractor for construction & maintenance contract of building is admissible u/s 17(5) of CGST Act, 2017; and; no ITC of GST paid on goods purchased & works contract service received during the FY 2017-18 for the purpose of construction & maintenance of Warehouse is admissible u/s 17(5) of CGST Act, 2017. - AAR
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Income Tax

• Nonresident Designated as Eligible Foreign Investor u/s 115AD, Impacting Tax Obligations and Benefits in India.

  Notifications : Central Government specifies a nonresident being an Eligible Foreign Investor u/s 115AD - Notification
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• Court Rules: Successor Company Can't Claim Depreciation on Revalued Assets in Firm Succession u/s 47(xiii.

  Case-Laws - AT : Allowability of depreciation on the actual cost of the assets arrived at by virtue of revaluation of the trade mark - firm is succeeded by a company falling u/s 47(xiii) - No where the proviso mentions that the predecessor has always to be a company. It specifically covers transfer under section 47(xiii). This section deals with succession of a firm by a company. When learned counsel of the assessee is himself admitting that the predecessor could not have claimed on the revalued amount, there is no question of the assessee company getting depreciation on the revalued amount. - AT
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• Interest on Refund u/s 244A(1) is Taxable When Granted, Even if Adjusted Against Prior Tax Liabilities.

  Case-Laws - AT : Taxability of Interest on refund u/s 244A(1) - interest on refund whenever it is granted, it is assessable in that year itself and if it is adjusted with any prior tax liability of earlier years and such interest is in turn paid to the Government Account that also is payment of interest to the assessee, in such case, there is no need for any intimation separately. - AT
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• Section 254(2) Limits: Rectification Only for Clear Errors, Not Tribunal Dissatisfaction or Decision Review.

  Case-Laws - AT : Rectification of mistake u/s 254 - If such prayer is allowed then in every case, where the assessee is not satisfied with the finding of the Tribunal, the MA will be filed. In our considered view, powers u/s 254(2) are very limited which could only be exercised to rectify any mistake or fact apparent from the record. But, where the Tribunal has applied its mind and comes to a particular conclusion then disturbing such finding would tantamount to review the order - AT
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• High Court Rules NSE Not Liable for Short Deduction of Security Transaction Tax in Broker Trades.

  Case-Laws - HC : Short deduction / collection of Security Transaction Tax (STT) - Liability of National Stock Exchange (NSE) - On occasions where client codes for institutional trades were not modified by the broker, the trades were treated as squared off trades and a lower STT was levied. This resulted in the exchange charging a lower STT from the member broker while the member broker collected a higher delivery based STT from the client - under the statute NSE was not liable for any alleged short deduction of STT - HC
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• No Penalty for Assessee: Section 271G Non-Compliance Didn't Affect Arm's Length Price Determination by Transfer Pricing Officer.

  Case-Laws - AT : Penalty u/s 271G - non–maintenance of documents which the assessee is required to maintain under the statutory provisions, the Transfer Pricing Officer found it difficult to determine, the arm’s length price of the transactions with the AE - The blame for failure on the part of the TPO to determine the arm’s length price cannot be fastened with the assessee - No penalty - AT
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• Court Upholds Constitutionality of Section 234E Fee for Delayed TDS Statements; Not Considered a Penalty u/s 271H.

  Case-Laws - HC : Levy of fee u/s 234E - delay in furnishing TDS statements / returns - Challenging the vires of Section 234E - Revenue is right in contending that Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. - Since the levy is constitutional, the challenge to the demand notices also fail - HC
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• Court Allows Reopening of Tax Assessments u/s 147; Advises Against Coercive Actions for Black Money Act Cases.

  Case-Laws - HC : Reopening of assessment u/s 147 - unable to make declaration under the Black Money Act -There is always a presumption as to constitutionality of a statute and the burden lies heavily on him who challenges the constitutionality - we feel that while respondents may proceed pursuant to the impugned notices dated December 20, 2017, no coercive measures may be taken against the petitioners if the occasion so arises. - HC
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• Penalty u/s 271(1)(c) Removed: AO Accepts Revised Return, No Inadmissible Deduction or Income Misreporting Found.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - If AO accepted the revised return, there was no question of making inadmissible claim of deduction u/s 10B in such revised return. In fact, there is no concealment or inaccurate furnishing of income in such revised return. - penalty levied by the AO u/s 271(1)(c) deleted - AT
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• Taxpayer's Loss on Derivative Trading Allowed Under Mark-to-Market Rules; Valuation Based on Year-End Exchange Rates.

  Case-Laws - AT : Disallowance of loss on mark to market basis in respect of trading in derivatives - - it is undisputed that assessee is dealing in derivatives which has to be valued on prevailing foreign exchange rate at the year end in view of the mercantile system being followed by the assessee. - the said loss is allowable - AT
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• CESTAT overturns Central Excise orders; Assessing Officer's additions on unrecorded sales and unaccounted purchases to be deleted.

  Case-Laws - AT : Undisclosed production and sale - whole case of the Revenue regarding undisclosed sales rest on the orders of the Central Excise authorities which has since been set-aside by the CESTAT - In view of the same, the additions so made by the Assessing officer towards gross profit on unrecorded sales and unaccounted purchases is directed to be deleted. - AT
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• CIT(A) Restores Appeals for Absentee Assessee to Ensure Fair Hearing and Substantial Justice.

  Case-Laws - AT : Ex parte order of CIT(A) - providing proper opportunity to the assessee - Although, we do note that the assessee have been most casual in their approach and were not present before the Ld. Commissioner of Income Tax (Appeals) and have also chosen not to be represented before this Tribunal today, in the interest of substantial justice, we deem it fit to restore these appeals to the file of the CIT(A) - AT
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• Income Tax Act Section 80IB(10)(b): Deductions Require Plot Including D.P. Road to Meet One-Acre Minimum Requirement.

  Case-Laws - AT : Deduction u/s 80IB - requirement of Section 80IB(10)(b) of the Act which states “the project is on the size of the plot of land which has a minimum area of one acre” - such D.P. Road cannot be alienated or separated from main portion of the land and the area of the plot should be inclusive of the land acquired by the Municipal Corporation as D.P Road. - AT
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• Court Rules Revenue-Sharing Agreement Not a Sham; Income Properly Declared by Individual and Co-Licensors.

  Case-Laws - AT : Income from house property - sharing of revenue between the assessee and 6 other co-licensors - sham transaction or not - the agreement dated 20/04/2009 could not be termed as sham agreement or an artificial structure with a view to evade tax liability. The said argument would be further weakened by the fact that proportionate income has already been offered to tax by the assessee as well as other 6 licensors. - AT
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• Court Criticizes Government for Withholding Tax Refunds u/s 241A; Urges Fair and Honest Practices.

  Case-Laws - HC : Withholding the refund u/s 241A - Approval granted by the Pr.CIT - refund due to higher rate of TDS - The sovereign cannot, but, be seen as fair, honest and credible in its dealings with its subjects. Any lapse in this regard tarnishes the image and credibility of the sovereign. It certainly cannot act like any unscrupulous businessman, who is seen to dodge his liabilities by resort to frivolous excuses and devious ways. - HC
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• High Court Rejects Revenue's Argument on Client Code Modifications Addition u/s 153A, Needs Separate Assessment.

  Case-Laws - HC : Assessment u/s 153A - Addition made on account of disclosure of undisclosed income made u/s 132(4) - client code modifications for an unusually high number of times - Contention of the revenue that the addition with regard to client code modifications was subsumed in the addition made on account of non-disclosure made u/s 132(4), does not merit acceptance - HC
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Customs

• Gold Smuggling Attempt Foiled: Concealed Bars in Baggage Violates Customs Act, Sections 77 & 111, Evades Duty.

  Case-Laws - CGOVT : Smuggling - Gold bars - concealment in the baggage - the applicant crossed the green channel without declaring the impugned articles in his possession in the Customs declaration form or in any other form to the Customs officers and thereby violated Section 77 of the Customs Act, 1962. Therefore the applicant has attempted to smuggle the impugned gold bars with an intention to evade customs duty in gross violation of provisions of Customs Act, 1962 and rules made thereunder read with Foreign Trade Policy (2015-2020). Hence the impugned goods are liable for confiscation under Section 111 of Customs Act, 1962. - CGOVT
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• Suspending a Customs Broker's license without inquiry or notice is unlawful and should be reversed.

  Case-Laws - AT : Suspension of CHA License - The continuous suspension of the licence of the Customs Broker without either conducting an inquiry or issuing a notice for revocation of licence or imposition of penalty is bad in law and needs to the set aside. - AT
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SEBI

• Failure to Disclose Pledge and Off-Market Transactions Violates SEBI Regulations, Affecting Shareholding Structure in Company Case.

  Case-Laws - AT : Failure to make the necessary disclosures regarding creation/invocation/release of certain pledge transactions and off-market transactions/purchase of shares in the company - whenever the pledging of the shares of the appellants were invoked, the appellants were required to make the necessary disclosures as it involved a change in the shareholding. - AT
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Service Tax

• Residential Unit Construction Not Taxed as Complex; No Service Tax for Single Unit Buildings Since 2012 Definition.

  Case-Laws - AT : Construction of complex services - the appellant had constructed independent buildings having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be “construction of complex” and, therefore, the service tax could be levied. - The definition of “construction of complex” and a “residential complex” continue to remain the same after 1 July, 2012 and, therefore, service tax liability could not have been fastened even after 1 July, 2012 under “construction of complex” - AT
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Central Excise

• Court Rules Interest Denial on Refunds is Final Once Reasoned, Even if Flawed, Under Central Excise Laws.

  Case-Laws - HC : Interest on refunds - Relevant date for Grant of interest - Once the court has after duly recording reasons, turned down the prayer for grant of interest, even if the reasoning for declining such relief may be fallacious, the same would not fall within the scope of a review application. - HC
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VAT

• "Total Turnover" Definition: Clarifying Exempted Turnover Deductions for Club Food and Drinks; Non-Retrospective Interpretation.

  Case-Laws - HC : Scope of the term 'Total Turnover' - Entitlement for deduction of exempted turnover of the food and drinks which is served in the Club - A substantive provision of the Act unless specifically made retrospective by the Legislature cannot, by a deeming fiction, be construed to be a retrospective provision. - HC
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Case Laws:

• GST

• 2020 (3) TMI 618
  Input Tax Credit - GST paid on goods purchased for the purpose of construction maintenance of Warehouse such as Vitrified Tiles, Marble, Granite, ACP sheet, Steel Plates, TMT Tor(saria), Bricks, Cement, Paint and other construction material - GST paid on work contract service received from registered unregistered Contractor for construction maintenance contract of building - GST paid on goods purchased works contract service received during the FY 2017-18 for the purpose of construction maintenance of Warehouse - whether ITC can be claimed in full or not? HELD THAT:- As per the Section 16 of CGST Act, 2017, every registered person shall entitle for ITC subject to such conditions and restriction as may be prescribed. As per the Section 17(5) of CG5T Act mentioned above, the Input tax credit shall not be available on the goods and services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. In the present case, the applicant constructed the building/warehouse which is a immovable property and as per the exclusion clause 17(5) (d)of CGST Act, 2017, the input tax credit is not available on the goods and services used in construction of immovable property. The Section 17(5) of CGST Act is an exclusion clause in spite of the goods or services used in the course or for furtherance of his business as the Section 16 of CGST ACT, it is clearly mentioned that the entitlement of ITC is subject to the condition and restriction. The view of applicant that they are entitled for ITC in view of Section 16 is incorrect as per law - Further the applicant stated that if the ITC is not allowed as per the Section 17(5) (d) then it is unwarranted, unreasonable, arbitrary, unconstitutional, illegal, violation of fundamental right, double taxation is baseless as the Section 17(5)(d) of CGST Act is very clear and there is no scope of interpretation but in spite of clearcut law, the Applicant has wrongly interpreted the Section to avail the benefit of inadmissible ITC. The submission of Applicant that if ITC is not admissible, it would render building now constructed for renting out uncompetitive is also not correct as the said provision of Section 17(5)(d) of CGST Act, is applicable to all not only to the applicant only. Thus, it can be concluded that the ITC is not admissible on the goods and services received and used in the construction of warehouse used for letting out on rent as per the Section 17(5)(d) of CGST Act, 2017. Thus, it is finally held that no ITC of GST paid on goods purchased for the purpose of construction maintenance of Warehouse such as Vitrified Tiles, Marble, Granite, ACP sheet, Steel Plates, TMT Tor (saria), Bricks, Cement, Paint and other construction material is admissible under Section 17(5) of CGST Act, 2017; no ITC of GST paid on work contract service received from registered unregistered Contractor for construction maintenance contract of building is admissible under Section 17(5) of CGST Act, 2017; and; no ITC of GST paid on goods purchased works contract service received during the FY 2017-18 for the purpose of construction maintenance of Warehouse is admissible under Section 17(5) of CGST Act, 2017.

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• 2020 (3) TMI 617
  Provisional attachment of Petitioner s Bank Accounts - time limitation of continuation of such order - whether after the expiry of period of one year from the date of passing of the provisional attachment order, under Section 83 of the Central Goods and Service Tax Act, 2017, the attachment over the bank account of the petitioner can continue? HELD THAT:- The provision of Sub-section (2) of Section 83 of the Act, 2017 is very clear in this regard. No attachment over the bank account can continue after the period of one year from the date of passing of the order under Section 83 of the Act, 2017, unless such order is renewed or fresh order is passed by the authority. The respondent Nos.3 and 4-Banks are directed to lift the attachment over the accounts of the petitioner, placed by the respondent No.1, by virtue of order dated 10.01.2019 passed under Section 83 of the Act, 2017 - Petition disposed off.

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• 2020 (3) TMI 616
  Provisional attachment of property - time limitation for such attachment - Section 83 of the Gujarat Goods and Services Tax Act, 2017 - HELD THAT:- The provisional attachment would cease to have effect after the expiry of a period of one year from the date of the order made under Subsection (1). Mr.Joshi, the learned AGP after taking instructions from the concerned Department makes a statement that the order of provisional attachment has not been renewed or no fresh order has been passed - In such circumstances as on date, it cannot be said that the account of the writ-applicant is under any attachment. Application disposed off.

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• 2020 (3) TMI 615
  Cancellation of registration of dealer - grievance of the writ-applicant is that although there is an order passed by the respondent no.2 restoring the registration, which was inadvertently cancelled, yet the same has not be given effect to by the GSTN - HELD THAT:- This writ-application is disposed off with a direction to the newly impleaded respondent no.4 i.e. the GSTN Council to immediately look into the matter, more particularly, the order passed by the respondent no.2 dated 04th June, 2019, Annexure-A to this writ-application and see to it that the order is given effect to.

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• 2020 (3) TMI 614
  Refund of IGST - exports were declared as the zero rated supplies - Section 16 of the IGST Act - Simultaneous duty drawback claim - It is the case of the writ-applicants that since the clearing and forwarding agent had erroneously selected the option of export without payment of tax while filing the shipping bill, the amount of the IGST paid was shown as Nil in the shipping bill. In such circumstances, the customs authorities denied to grant refund of the IGST paid on exports by the writ-applicants - HELD THAT:- Identical issue decided in the case of M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [2019 (7) TMI 472 - GUJARAT HIGH COURT] where it was held that the refund of the IGST paid on the exports cannot be denied on the ground that the higher rate of duty drawback is claimed. In view of the aforesaid, no further adjudication is necessary in the present case. The respondents are directed to immediately sanction the refund of the IGST paid with regard to the exported goods, i.e. zero rated supplies , with 7% simple interest from the date of shipping bill till the date of actual refund. The refund shall be granted after deducting the differential amount of the duty drawback for the period between July and September, 2017 - application allowed.

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• 2020 (3) TMI 613
  Blocking GST registration number - Levy of GST - Works contract - pre-GST period - case of the petitioners is that they are contractors under the State Government and have been performing their contracts during the pre-GST period - HELD THAT:- The petitioners are required to respond to the notices and approach the concerned authorities by making specific request with regard to the payments they want to make for the post-GST contracts. Petitioners are directed to appear before the concerned authorities within a week and file their representations. Upon such representations being made, the authorities are directed to consider the same and unlock the GST registration so that the payments for the post-GST period can be made by the petitioners - Petitioners are also directed to respond to the show cause notices manually to the concerned authorities within a period of two weeks from date. In the event, the portal is open, the petitioners are at liberty to do so through the portal. The matter is adjourned for a period of four weeks from date.

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• 2020 (3) TMI 612
  Profiteering - Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees - Rate of GST reduced from 28% to 18% - Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less - allegation that the benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is clear from the narration of the facts mentioned that the Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rates of tax as per the Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 in respect of the above services to his customers and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017. Accordingly, the profiteered amount is determined as Rs. 3,90,272/- which includes an amount of Rs. 14/- including the GST which the Respondent has profiteered in respect of the Applicant No.1 and Rs. 3,90,258/- in respect of the other recipients which also includes the GST on the said profiteered amount, as per the provisions of Rule 133 (1) of the CGST Rules, 2017. Accordingly, the Respondent is directed to reduce the sale prices of his admission tickets immediately commensurate to the reduction in the rates of tax as were notified on 31.12.2018 and pass on the benefit of reduction in the rates of tax to his customers. Penalty - HELD THAT:- It is evident from the above that the Respondent has denied the benefit of rate reductions in the GST to his customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is apparently liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him.

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• 2020 (3) TMI 611
  Profiteering - restaurant service supplied by the Respondent (Franchisee of M/s Subway Systems India Pvt. Ltd.) - allegation that the benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT:- Section 171 (1) of the CGST Act, 2017 states that the reduction in the rate of tax or benefit of ITC which means that the benefit of tax reduction or ITC has to be passed on by a supplier since it is a sacrifice granted from the public exchequer, which cannot be misappropriated by him. It also means that the above benefit is to be passed on each product to each buyer and in case it is not passed on, the profiteered amount has to be calculated for which investigation has to be conducted on all such impacted supplies made to each recipient, thereby clearly implying that a supplier cannot claim that he has passed on more benefit to one customer, therefore he would pass less benefit to another customer than the benefit which is actually due to that customer. In other words, each customer is entitled to receive the benefit of tax rate reduction or ITC on each product purchased by him. The word commensurate mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product supplied based on the extent of tax reduction as also the existing base price of the product before such tax rate reduction. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product and hence no fixed methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a recipient or for computation of the profiteered amount. The Respondent has contended that the computation of profiteering by the DGAP was flawed on various counts. One contention made before us was in respect of Sub of the Day (SOTD) which was sold by him @ Rs. 110/- till 14.11.2017 but the base price of SOTD had been incorrectly mapped by the DGAP to Rs. 105/- while working out the base price for the pre rate reduction period. However, the record of the case reveals that the Respondent, at no point in time, has furnished any invoice/ supply document that shows SOTD as an item supplied/ sold by him. Since no invoices mention SOTD as an item supplied, there is no ground for accepting Respondent s contention regarding SOTD - The Respondent has himself stated that he had charged different base prices to his customers for the same product on different days of any particular week/ month during the pre rate reduction period and therefore. the only alternative available was to compute the average base prices for the above period so that comparison could be made with the post rate reduction actual base prices. Therefore are no merit in the claim of the Respondent regarding the same. The Respondent has further contended that one of the products, i.e. Vegetarian Seekh kebab was launched only in January 2018 and sold thereafter and hence there could be no profiteering in respect of the said product. In this regard, it is observed form the DGAP s supplementary report dated 06.12.2019, that the price of the said product has been culled out from Respondent s sales data for October 2017 (Transaction ID 1/A-18653 dated 4.10.2017) and mentioned in the Annexure-10 of DGAP Report - it is clear to us that the said product has been sold by the Respondent in the pre-rate reduction period and this contention of the Respondent is untrue and unacceptable. We do not find any reason to interfere in the computation of profiteering by the DGAP on this ground. The Respondent has also claimed that the DGAP, while calculating the profiteered amount, erroneously added a 5% notional amount without providing any rationale for such addition. This amount had been added due to GST. which had been collected from the customers and deposited with the Government of India with his monthly GST returns. Therefore, this addition of a further 5% amount should be removed and hence the profiteered amount be reduced appropriately. This contention of the Respondent is not correct because the provisions of Section 171 (1) and (2) of the CGST Act, 2017 mandate that the benefit of reduction in the tax rate is to be passed on to the recipients/ customers by way of commensurate reduction in price, which includes both, the base price and the tax paid. In this connection, it would be appropriate to mention that the Respondent has not only collected excess base prices from the customers which they were not required to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on these excess base prices which they should not have paid. The Respondent has also contended that as per his franchisee-franchisor agreement with his franchisor M/s Subway Systems India Private Ltd., he was under an obligation to pay 8% of his net sales towards royalty and 4.5% of his net sales towards advertisement charges to the franchisor and that post 14.11.2017, when the tax rate was reduced, his cost towards royalty and advertising charges had increased significantly but the same was not considered by the DGAP while calculating profiteering - It is clear that an increase or decrease in costs of a supplier, which included costs such as royalty and advertisement charges or the costs towards the renovation of the store. has no ramification on the amount of profiteering which is computed in line with the provisions of Section 171 of the CGST Act. In case a supplier has not passed on the benefit of tax rate reduction by way of a commensurate reduction in prices in each of his supplies, anti-profiteering provisions will apply to him, irrespective of his costs or whether he makes profits or losses. In any case, the payments made by the Respondent on account of Royalty and Advertisement Charges are purely an internal agreement between the franchiser and the franchisee without any connection with the anti-profiteering provisions applicable to the franchisee, i.e. the Respondent. Hence, this contention of the Respondent is not accepted. The Respondent has further contended that w.e.f 15.11.2017, ITC on inputs and capital goods stood denied to him vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017. Hence, for calculating the base prices after the reduction in the rate of tax with simultaneous denial of ITC, the loss on account of denial of ITC on capital goods ought to have been factored in the computation of profiteering by the DGAP since before 14.11.2017. he was allowed to take ITC on his purchases of capital goods - It is pertinent that for the pre rate-reduction period. ITC on capital goods, if any, availed by the Respondent, has already been accounted for in the computation. Hence, the contention of the Respondent is without any merit. The Respondent has further claimed that in the case of certain products supplied by him after the tax rate reduction. he had reduced the prices more than commensurately, but this aspect has been ignored by the DGAP, in as much as the DGAP has not considered the negative values and instead taken them as zero, whereas the profiteering should have been netted off - It has to be kept in mind that every recipient/ customer is entitled to the benefit of the tax rate reduction by way of reduced prices and Section 171 does not offer the Respondent to suo moto decide on any other modality to pass on the benefit of reduction in the rate of tax to his recipients. Therefore, any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction that ought to accrue to another recipient or customer. Therefore. the contention of the Respondent is not accepted. The fact that the Respondent has not complied with the law till 31.03.2019 implies that profiteering has to be computed for the entire period and hence we do not see any reason to accept this contention of the Respondent. We further observe that had the Respondent passed on the benefit before 31.03.2019, he would have been investigated only till that date. Therefore, the period of investigation i.e. from 15.112017 to 31.03.2019 has been rightly taken by the DGAP. In the present case, we determine the profiteered amount as Rs. 8,24,260/-, details of the computation of which are given in in Annexure-16 of the DGAP Report dated 09,09.2019. Accordingly, the Respondent is directed to reduce his prices commensurately. As indicated in the above mentioned Annexure. in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of Rs. 8 24 260/- in two equal parts of Rs. 4,12.1301- each in the Central Consumer Welfare Fund and the and the Maharashtra State Government as per provisions of Rule 133 (3) (c) of the above Rules, since the recipients are not identifiable at this stage and since the supplies were affected in the state of Maharashtra. Penalty - HELD THAT:- Since it has been found that the Respondent has denied the benefit of tax reduction to his customers/ recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and since he has resorted to profiteering, he has been found to have committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is liable for the imposition of penalty under the provisions of the above Section - Accordingly; a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules. 2017 should not be imposed on him.

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• Income Tax

• 2020 (3) TMI 610
  Reopening of assessment u/s 147 - Unable to make declaration u/s 59 of the Black Money Act - undisclosed foreign accounts - window of opportunity given to an assessee under Sections 59 to 63 of the Black Money Act to make a declaration of undisclosed foreign income and assets which is not available to an assessee who is already facing a proceeding under the Act - HELD THAT:- Prior to issuance of the impugned notices dated December 20, 2017, petitioners were subjected to proceedings under the Act though the income tax proceedings were concluded on December 30, 2017 to the effect that issue relating to escaped income was left to be decided by the authorities under the Black Money Act. It is also evident that income tax proceedings pertaining to the petitioners were reopened following receipt of information in respect of undisclosed asset by the competent authority in terms of agreements entered into by the Central Government under Section 90 or Section 90A of the Act. On the basis of such information, search and seizure operations were carried out in the premises of the petitioners under Section 132 of the Act leading to issuance of notice under Section 148 of the Act. Therefore, in terms of Clause (d) of Section 71, provisions of Chapter-VI would not be applicable in the case of the petitioners. This position has also been clarified by the departmental circulars . Therefore, unlike other persons in respect of whom the Black Money Act is sought to be made applicable, petitioners and similar category of assessees under the Act would be statutorily barred from making a declaration in terms of Section 59 of the Black Money Act. This has been contended by the petitioners to be highly arbitrary and discriminatory. This Court on 08.10.2018 had admitted the writ petition for hearing by issuing rule observing that arguable questions have been raised. Admittedly, when rule is issued, it presupposes existence of a prima facie case; in the absence of which rule is not ordinarily issued by the Court. Evidently, provisions of the Black Money Act are extremely severe having stringent penalty provisions and also leading to offences and prosecutions. Therefore, to enable a person to come clean and to shield himself from the rigours of the said Black Money Act, a small window is provided in Section 59 to make a declaration of such undisclosed foreign income and asset. The window was for the period upto 30th day of September, 2015. According to the petitioners, they were statutorily debarred from making a declaration under Section 59 in view of Section 71 (d). Respondents have taken the stand that such contention of the petitioners is hypothetical inasmuch as petitioners never admitted having any undisclosed foreign asset and continue to deny the same till date. According to the respondents, this contention is of academic interest only as even in the income tax proceedings, petitioners never admitted that they had undisclosed foreign asset. That apart, a reading of Section 72 (c) may indicate that provisions of the Black Money Act have been given retrospective operation. This is also a highly debatable issue since the Black Money Act contains provisions for imposition of penalty and for initiation of prosecution. There is always a presumption as to constitutionality of a statute and the burden lies heavily on him who challenges the constitutionality - we feel that while respondents may proceed pursuant to the impugned notices dated December 20, 2017, no coercive measures may be taken against the petitioners if the occasion so arises.

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• 2020 (3) TMI 609
  Assessment u/s 153A - Addition made on account of disclosure of undisclosed income made u/s 132(4) - client code modifications for an unusually high number of times - profit/loss has been worked out with reference to the old clients instead of new clients - diversion of profit - HELD THAT:- It is apparent that the AO had made addition in the hands of the assessee on the basis of disclosure made by Shri Nayan Thakkar by bifurcating the amount of Rs. 12 crore into three parts, Rs. 8 crore in the hands of Kunvarji Finance Private Limited, Rs. 2 crore in the hands of Shri Nayan Thakkar and Rs. 2 crore in the hands of the assessee as amount received for providing client code modification. Assessing Officer has held that Rs. 2 crore was received by the assessee for providing the client code modification and he has attributed this amount year-wise in the ratio of client code modifications, such addition is not based on any material other than the disclosure made by Shri Nayan Thakkar. The Assessing Officer has merely held that an amount of Rs. 2 crore out of the amount disclosed by Shri Nayan Thakkar has been received by the assessee from the clients by aiding them by suppressing their profits by way of diversion of profits through the methodology of client code modifications. Contention of the revenue that the addition with regard to client code modifications was subsumed in the addition made on account of non-disclosure made under section 132(4) of the Act, does not merit acceptance - Decided in favour of assessee.

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• 2020 (3) TMI 608
  Fee for default in furnishing statements u/s 234E - delay in furnishing TDS statements / returns - Challenging the vires of Section 234E - HELD THAT:- It is well settled that if it is a charge for service rendered by the commercial agency and the amount of fee levied is based on the expenses incurred by the Government rendering the fee. Unlike the tax which is compulsory extraction of money, enforceable by law and not in return of any services rendered. The distinction between the tax and the fee is that tax is levied as a part of common burden while fee is payment for a special benefit of privilege. Fee confers some advantage and is a return of consideration for services rendered. Revenue is right in contending that Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. Penalty is levied only when tax is deducted at source along with interest fee is not deposited and statement is not filed within one year. If the above two conditions are satisfied, then penalty is not leviable. On the other hand, Section 234 (E) of the Act is only a late fee at the rate of Rs. 200/- per day. As held in the judgments relied above, Section 234 (E) of the Act is purely compensatory and is a special benefit to the advantage of the assessee as well for belatedly filing the TDS statement. The revenue is right in contending that Section 234 (E) of the Act is meant to ensure that assessee files the statement in time, so that the Department can clear the returns of the persons connected with the assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading the burden of the department. A provision can be held unconstitutional only when the legislature was incompetent to bring out the legislation or that it offends some provision of the Constitution or when it is manifestly arbitrary. . The Parliament is competent to pass legislation on Taxes in Income under Entry 82 of the List I to the Seventh Schedule. Section 234E is not violative of any of the other provisions of Income Tax Act or the Constitution of India. Nothing has been shown as to how the Section is manifestly arbitrary for it to be struck down. Since the levy is constitutional, the challenge to the demand notices also fail.

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• 2020 (3) TMI 607
  Rectification of mistake u/s 254 - Profit from sale of shares - assessee had shown long term and short term capital gains on sale of shares, which were earlier, held as stock-in-trade - Business income u/s.41(l) - difference between the book value of shares held as stock-in-trade as on 31.03.2002 and the cost thereof at which the same were converted into investments on 1.4.2002 - HELD THAT:- HELD THAT:- We find that while passing the order dated 30.05.2018 [ 2018 (5) TMI 1977 - ITAT MUMBAI] Tribunal had dismissed the appeal of the petitioner for the assessment year 2006- 07. There was omission to deal with the appeal of the petitioner for the assessment year 2003-04 [ 2018 (5) TMI 1977 - ITAT MUMBAI] That being the position and on due consideration, we interfere with the impugned order [ 2019 (4) TMI 1842 - ITAT MUMBAI] passed by the Tribunal to the effect that order. [ 2018 (5) TMI 1977 - ITAT MUMBAI] would stand recalled qua both the grounds

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• 2020 (3) TMI 606
  Withholding the refund u/s 241A - Approval granted by the Pr.CIT - claim for refund could not be issued, on account of the fact that there was an order passed against Petitioner u/s 241A - refund is primarily on account of issuance of tax deduction (TDS) certificates at considerably higher rate of 5%, in comparison to Petitioner s request of 3.12%. - HELD THAT:- The refund of amounts claimed where they appear justified, by itself cannot be said to be adverse to the interest of the revenue. The interest of revenue lies in collecting revenue in a legal and justified manner. It does not lie in retaining the collected taxes in excess of what is justified, since the excess collection cannot even be properly termed as revenue . The excess collection of tax is a liability of the State and it lies in the interest of the revenue of the State to discharge its interest bearing liability without any delay. The sovereign cannot, but, be seen as fair, honest and credible in its dealings with its subjects. Any lapse in this regard tarnishes the image and credibility of the sovereign. It certainly cannot act like any unscrupulous businessman, who is seen to dodge his liabilities by resort to frivolous excuses and devious ways. In absence of any cogent reasons justifying withholding of the refund due to the petitioner under Section 143(1) for AY 2017-18, 2018-19, we find that the proposal as well as the approval granted by Principal Commissioner of Income Tax lacks consideration of the relevant and germane conditions. We, accordingly, set aside the order and direct the respondents to undertake the exercise afresh and pass an order under Section 241A. We, therefore, grant six weeks time to the respondents to consider the aspect whether the amount found due to be refunded, or any part thereof, is liable to be withheld under Section 241A. The order must reflect due application of mind of the Assessing Officer while making a proposal whether, or not, to withhold any part of the refund amount. Such a proposal should be examined by the Principal Commissioner of Income Tax with due application of mind on all the aforesaid aspects. The entire consideration, with the approval of the Principal Commissioner of Income Tax to the withholding of the refund amount, or any part thereof, should be completed within six weeks from today, failing which, we direct that without awaiting any further orders, the respondents shall transmit the amount of Rs. 48,361,57,240/- (for AY 2017-18), Rs. 421,18,02,760/- (for AY 2016-17) and Rs. 349,41,45,020/- (for AY 2018-19) with interest to the petitioner.

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• 2020 (3) TMI 605
  Disallowance u/s 14A r.w.r. 8D - Assessee is covered by Tonnage Tax Scheme where Shipping Business Income is computed on the basis of deemed income under Chapter XIIG and no expense has been claimed nor allowed while computing TONNAGE TAX INCOME as BUSINESS INCOME of shipping business - HELD THAT:- Disallowance u/s 14A is concerned, we find that this issue has already been adjudicated by the Tribunal in assessee s own case for various years [ 2019 (2) TMI 1815 - ITAT MUMBAI] . The co-ordinate bench, relying upon the decisions of this Tribunal in Varun Shipping Co. Ltd. [ 2011 (11) TMI 370 - ITAT MUMBAI] , Tag Offshore Ltd. [ 2014 (12) TMI 224 - ITAT MUMBAI] , Raj Shipping Agencies Ltd. [ 2013 (12) TMI 995 - ITAT MUMBAI] held that once the department has allowed the option to the assessee under Clause (i) of sub-section (3) of Section 115VP, the disallowance u/s 14A would not be attracted. Respectfully following the same, taking the same view, we delete the disallowance u/s 14A as sustained by Ld. CIT(A). Consequentially, the adjustment of the same while computing Book Profits u/s 115JB would not be arise. Revised statement of income - claiming that INCOME FROM HOUSE PROPERTY on account of rent received from Managing Director should be considered as shipping business income and cannot be taxed separately as Income from House Property u/s.22 - interest income includes tax free income - interest on certain Bank fixed deposits should be considered as business income - interest on staff loan and interest on delayed payment should be considered as business income - bad debts recovered should be considered as business income - sale of old magazines should be considered as business income - assessee is seeking exclusion of all the above stated items while computing book profits u/s 115JB - HELD THAT:- Lower authorities refused to admit the assessee s revised computation of income in terms of ratio of Hon ble Apex Court rendered in Goetz India Ltd. V/s CIT [ 2006 (3) TMI 75 - SUPREME COURT] which mandate the assessee to claim deduction by filing a revised return only. No findings on merits have been rendered by lower authorities on any of these issues. It is settled law that there is no bar on the appellate authorities to entertain the same. Further, equity demands that correct income of the assessee be ascertained. Therefore, without delving much deeper, keeping all the issues open, we direct Ld.AO to consider all these claims and remit the matter back to the file of Ld. AO. The Ld. AO is directed to adjudicate the same in the light of the submissions made by the assessee that the aforesaid items would constitute business income for the assessee and secondly, these arises out of shipping business being carried out by the assessee. These grounds stand allowed for statistical purposes.

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• 2020 (3) TMI 604
  TP Adjustment - selection/rejection of certain comparable - HELD THAT:- ICRA MANAGEMENT CONSULTING SERVICES LTD. company being a good comparable has to be retained as the service provided by this company is akin to the service provided by an investment advisory service provider. INFORMED TECHNOLOGIES LTD. company appears to be functionally similar to the assessee. In fact, in various decisions cited before us, some of which relate to the impugned assessment year, the Tribunal as well as the Hon ble Jurisdictional High Court has held that this company is functionally similar to an investment advisory service provider. Therefore, following the consistent view expressed in relation to this company in the judicial precedents referred to above, we direct the Assessing Officer to include this company as a comparable. INTEGRATED CAPITAL SERVICES LTD. company cannot be treated as a comparable to investment advisory service provider. In view of the aforesaid, we direct the Assessing Officer to exclude this company. As submitted by the assessee that with the inclusion of the ICRA Management Consultancy Services Pvt. Ltd., and Information Technologies Pvt. Ltd. and exclusion of Integrated Technologies Ltd., assessee s margin would be within the 5% range of the raised of the comparable requiring no further adjustment. In view of the aforesaid, we do not intend to deal with any other issue raised in the present appeal, save and except, the issue relating to the comparables dealt by us herein before.

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• 2020 (3) TMI 603
  Penalty u/s 271G - non maintenance of documents which the assessee is required to maintain under the statutory provisions, the Transfer Pricing Officer found it difficult to determine, the arm s length price of the transactions with the AE - HELD THAT:- Assessee has maintained primary books of account / documents in respect of its business activity. The fact that the documents relating to transaction with the AE have also been maintained by the assessee is evident from the transfer pricing study report, wherein, the transaction with the AE has been benchmarked under TNMM. This shows that the assessee has maintained documents / books of account as required under the statute. It is also evident, in the course of proceedings before the Transfer Pricing Officer, the assessee has made substantial compliance by furnishing transfer pricing study report as well as many other documents. What the assessee has failed to furnish is, the segmental profitability of the AE and non AE transactions. The inability to furnish the aforesaid details was also well explained by the assessee before the Transfer Pricing Officer and learned Commissioner (Appeals) by demonstrating the practical difficulty in maintaining those details considering the nature of business carried on. Though, the Transfer Pricing Officer has alleged that non furnishing of segmental profitability makes it difficult for him to correctly ascertain the arm s length price, however, ultimately the Transfer Pricing Officer has accepted the transaction with the AE to be at arm s length. If the Transfer Pricing Officer was not satisfied with the benchmarking of the assessee under TNMM, nothing prevented him from rejecting assessee benchmarking and determining the arm s length price of the transaction with the AE independently by applying any one of the prescribed methods. The blame for failure on the part of the Transfer Pricing Officer to determine the arm s length price cannot be fastened with the assessee. Hon ble Gujarat High Court in case of D. Navinchandra Exports Pvt. Ltd. [ 2018 (7) TMI 2099 - GUJARAT HIGH COURT] has also uphold the deletion of penalty imposed under section 271G - Decided in favour of assessee.

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• 2020 (3) TMI 602
  Income from house property - sharing of revenue between the assessee and 6 other co-licensors - sham transaction or not - Treating the Rent and Amenities charges on account of Rent and Amenities received as Rent Income of the appellant - HELD THAT:- As before leave and license agreement dated 28/08/2009 entered into by the 7 licensors with M/s DFIRPL, there was a pre-existing agreement dated 20/04/2009 between the assessee and other 6 persons. As per terms of this agreement, certain license was granted to these persons against license fees for valuable consideration of Rs. 2.10 Lacs with respect to 60% of the licensed premises. As per Clause-15 of the agreement, the licensees had a right to assign, sub-license or to grant on leave and license basis, the licensed premised to third parties without prior consent of licensors. Pursuant to said agreement, the assessee as well as other 6 persons, entered into subsequent leave and license agreement with M/s DFIRPL. The terms of the said agreement have duly been recognized in leave and license agreement dated 28/08/2009 and the share of the assessee and other 6 persons find specific mention in this agreement. The aforesaid agreement has been executed by the 7 licensors and licensee and the same is a registered document. Pursuant to the terms of both the agreements, the transactions have been carried out and assessee as well as other 6 persons have offered their respective share of income in their own tax returns. There is nothing illegal in both the agreements. This being the case, the agreement dated 20/04/2009 could not be termed as sham agreement or an artificial structure with a view to evade tax liability. The said argument would be further weakened by the fact that proportionate income has already been offered to tax by the assessee as well as other 6 licensors. The observations of Ld. CIT(A) that the said income should have been offered as Income from House Property by the 6 persons could not be a ground to make impugned additions in the hands of the assessee. It is also fortified by the fact that learned first appellate authority, himself, observed that Ld. AO should have taken corrective measures about income shown as income from house property by the family members. However, the said error, in our considered opinion, could not empower Ld. CIT(A) to confirm the additions in the hands of the assessee.If the tax payer was in a position to carry a transaction in two alternative ways, one of which would result in lower tax liability, the assessee would be at liberty to choose that particular method. In the present case, we find nothing illegality in both the leave and license agreement entered into by the assessee. The terms of the agreement were duly honoured by the respective parties and it could not be said that the earlier agreement was a sham agreement. The rule of consistency would also favor assessee s case since similar apportionment done in AY 2010-11 has been accepted by the revenue. We hold that the clubbing of rental amenities income of 6 persons, in the hands of the assessee, would not be sustainable in the eyes of law. AO is directed to recompute the income by taking assessee s share of rental income and amenities charges under the head Income from House Property. The rental income of Rs. 25.20 Lacs earned by the assessee from 6 persons would also be taxable under the head Income from House Property. The statutory deductions, as available as per law, shall be provided to the assessee. Accordingly, the appeal stands allowed.

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• 2020 (3) TMI 601
  Reopening of assessment u/s 147 - Deduction u/s. 80P (2)(a)(i) - assessee cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members if it has carved out a category called nominal members and hence the principle of mutuality was compromised - HELD THAT:- AO already formed an opinion and allowed deduction u/s 80P - AR further contended that there is no tangible fresh material on the basis of which assessment is sought to be reopened. In the present case, the original assessment was completed u/s 143(3) of the Act on18.11.2016 accepting the declared income and the A.O. examined the deduction u/s 80P and granted the deduction. The reassessment in this case was made to withdraw deduction u/s 80P by treating the interest income under the head income from other sources instead of business income . This is nothing but change of opinion. On mere change of opinion, the concluded assessment cannot be reopened as held in the case of CIT v. Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] . For reopening the concluded assessment, the Assessing Officer should form an opinion on the basis of same material which is already on record and not from any external sources. Reopening an assessment, AO cannot consider the information which is already on record and it should be from outside sources as held by case of CIT v. Ramakrishna Hegde [ 2009 (7) TMI 815 - KARNATAKA HIGH COURT] - Since there is no new material and on the available material the A.O. has reopened the present assessment. Being so, we cannot uphold the action of the reopening of assessment. For this proposition, reliance is placed on the following judgments, viz., (i) CIT v. Standard Chartered Finance Ltd. [ 2012 (1) TMI 381 - KARNATAKA HIGH COURT] (ii) Parixit Industires (P.) Ltd. v. ACIT [ 2012 (4) TMI 464 - GUJARAT HIGH COURT] (iii) H.K.Buildcon Ltd. v.ITO [ 2010 (4) TMI 831 - GUJARAT HIGH COURT] (iv) Lahneyer Holdings GmbH v. DCIT [ 2015 (5) TMI 654 - DELHI HIGH COURT] . Accordingly, we quash the reassessment order. Since we have decided the issue on merits, we are refrain from going into other grounds raised by the assessee. - Decided in favour of assessee.

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• 2020 (3) TMI 600
  Deduction u/s.80IB(10) - Not having completed the project during the eligible period - out of the total 60 flats since for these 12 flats, completion certificate was not received - Assessing Officer held that the initial permission being given to the 60 flats the assessee has, therefore, failed to complete the project within 4 years from the ends of the financial year in which the project was approved i.e.31.03.2009 - HELD THAT:- Assessee has accepted disallowance made by the Assessing Officer for assessment year 2009-10 and paid the entire demand and has not filed an appeal against that order. The Explanation of the provision clearly states that the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. This signifies that in order to get deduction under the relevant provision, after completion of the project, completion certificate has to be obtained from the concerned authority i.e. Municipal Corporation etc. which cannot be done away with. This becomes the fundamental requirement of this provision since prior to receiving the completion certificate whatever work is done, it cannot be said that the project has been completed and there has to be some authoritative check and finding about the completion of the project which is thereafter fit for residing etc. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is hereby upheld. Thus, grounds raised in appeal by the assessee are dismissed. Deduction u/s 80IB - requirement of Section 80IB(10)(b) of the Act which states the project is on the size of the plot of land which has a minimum area of one acre - contention of the Revenue that after deducting the D.P Road, the total area of the plot which remains is only 3994.25 sq.mts which is less than one acre - First Appellate Authority has opined that what CBDT circular directed is that the area limit of the plot has to be understood with reference to the area of the site and not with reference to the demarcation done by the Municipal Authorities - HELD THAT:- It is settled legal position that area of land has to be determined including the D.P Road also procured by the Municipal Corporation since the area or size of the land for the project is rightly to be understood considering all amenities which are to be provided to the assessee. Such D.P. Road acquired by the Municipal Corporation cannot be reduced from the total land area of the project. This is moreso in terms with principles of equity and fairplay since the local authority or the Municipal Corporation has to work under certain set of rules and regulations but those set of rules and regulations should not restrict the right of the assessee. The project size has to be looked into in totality with all amenities which is already there even before such D.P. Road is acquired by the Municipal Authority. Therefore, such D.P. Road cannot be alienated or separated from main portion of the land and the area of the plot should be inclusive of the land acquired by the Municipal Corporation as D.P Road. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and relief provided to the assessee on this issue is hereby sustained.

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• 2020 (3) TMI 599
  Penalty u/s 271(1)(c) - Defective notice - non specification of charge - HELD THE:- Assessing Officer did not specify under which limb of the provision he has initiated the proceedings. Moreover, the penal proceedings are separate from assessment proceedings and while initiating penalty proceedings u/s 271(1)(c) of the Act, it is incumbent upon the Assessing Officer to demonstrate under which limb he is proposing levy of penalty. See M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. and M/S SSA S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SC ORDER] [ 2019 (8) TMI 409 - DELHI HIGH COURT] Notice issued by the Assessing Officer u/s 274 r.w.s 271(1)(c) of the Act to be bad in law as it did not specify which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The issue was decided in favour of the assessee.

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• 2020 (3) TMI 598
  Ex parte order of CIT(A) - providing proper opportunity to the assessee - assessee in default - HELD THAT:- Orders were passed ex parte as the assessees were not represented before the Ld. First Appellate Authority. In all the six appeals the assesses have challenged the action of the Ld. Commissioner of Income Tax (Appeals) in not affording a proper opportunity to the assessee and in passing an ex parte order. Although, we do note that the assessee have been most casual in their approach and were not present before the Ld. Commissioner of Income Tax (Appeals) and have also chosen not to be represented before this Tribunal today, in the interest of substantial justice, we deem it fit to restore these appeals to the file of the Ld. Commissioner of Income Tax (Appeals) with the direction to adjudicate the appeals of the assessees on merits after giving proper opportunity to the assessees to present their cases. It is so directed accordingly. We also direct the assessees to comply with the notices issued by the office of the Ld. First appellate authority and fully cooperate in the first appellate proceedings when called upon to do so failing which the Ld. First appellate authority shall be at liberty to proceed ex parte qua the assessees and adjudicate these appeals on merits in accordance with law.

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• 2020 (3) TMI 597
  Deduction u/s 80P(2)(a)(i) denied - A.O. allowed deduction u/s 80P only proportionately to the extent of agricultural loan disbursed by the assessee - assessee will not be entitled to deduction u/s 80P in respect of disbursement of non-agricultural loan - HELD THAT:- In the instant case, AO had denied a portion of claim of deduction u/s 80P for the reason that assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule. AO concluded to the extent of the disbursement of agricultural loan alone, assessee is entitled to deduction u/s 80P(2) - AO after perusing the narration of the loan extracts for the financial period 2009-2010 and 2013-2014, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O. A.O. has not examined to what extent loans, if any, has been disbursed to non-members. There is a passing statement of the assessment order that there has been disbursement of non-agricultural loans to non-members as well. There has been no detailed examination of these aspects by the A.O. At the time of assessment, the judgment of Chirakkal Service Cooperative Bank Ltd. [ 2016 (4) TMI 826 - KERALA HIGH COURT] was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessee as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P. Therefore, in view of the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra), we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. The A.O. shall list out the instances where loans have disbursed to non-members of assessee-society, for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2).

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• 2020 (3) TMI 596
  Deduction u/s 80P(2)(a)(i) - as per AO assessee was essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT:- We are of the view that the narration in loan extracts in the audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O. At the time of assessment, the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd. [ 2016 (4) TMI 826 - KERALA HIGH COURT] was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessee as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P of the I.T.Act. In the light of the dictum laid down by the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - For the above said purpose, the issue raised in these appeals is restored to the files of the Assessing Officer. The Assessing Officer shall examine the activities of the assessee-society by following the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) and shall take a decision in accordance with law.

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• 2020 (3) TMI 595
  Addition u/s 68 - Unexplained cash credit - proof of identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions - HELD THAT:- CIT(A) has gone by irrelevant considerations to confirm the impugned additions. The object clause of the investor entities would have no relevance vis- -vis proposed additions in the hands of the assessee u/s 68. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises. The impugned additions, in our considered opinion, could not be sustained under law in the light of binding judicial pronouncements as enumerated by us in the opening paragraphs. Therefore, we delete the same. Consequently, the set-off of losses, as allowable under law, would be available to the assessee. Reopening of assessment u/s 147 - We find that the original return was processed u/s 143(1) and the only requirement in law to trigger assessment was that Ld. AO certain reasons to believe that certain income escaped assessment in the hands of the assessee. We find that Ld. AO was clinched with tangible information from investigation wing which suggested possible escapement of income in the hands of the assessee. In our opinion, nothing more was required at this stage since Ld. AO had sufficient reasons to form such a belief. Therefore, we do not find much substance in assessee s legal grounds. Ground Nos. 1 to 3 stand dismissed.

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• 2020 (3) TMI 594
  Undisclosed production and sale - Addition based on search action carried out by DGCEI conducted at the assessee s factory premises wherein it was found that the assessee was involved in clandestine manufacture and clearance of finish goods - HELD THAT:- Findings of CESTAT where the whole demand relating to clandestine manufacture and clearance of finished goods has been set-side, the findings of the AO which are solely based on the proceedings under Central Excise therefore doesn t survive and the consequential addition made by him are liable to be deleted. At the same time, the Revenue would be at liberty to take action as per law where the matter so decided by the CESTAT is appealed against by the Revenue and is decided in its favour by the Courts. As decided in case of M/s Natani Rolling Mills Pvt. Ltd. [ 2019 (9) TMI 1336 - ITAT JAIPUR] whole case of the Revenue regarding undisclosed sales rest on the orders of the Central Excise authorities which has since been set-aside by the CESTAT vide its order dated 7.02.19. In view of the same, the additions so made by the Assessing officer towards gross profit on unrecorded sales and unaccounted purchases is directed to be deleted. At the same time, the Revenue would be at liberty to take action as per law where the matter so decided by the CESTAT is appealed against by the Revenue and is decided in its favour. - Decided in favour of assessee.

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• 2020 (3) TMI 593
  Addition on account of deposit of cash in the bank account - reopening of assessment - HELD THAT:- Assessee has furnished his PAN, driving license for opening the bank account. The bank opening form was also signed by him in the capacity of the proprietor as confirmed by the bank. We also find that the cases for the assessee were reopened by the AO u/s 148 for the assessment years 2006-07 and 2007-08 on the reasoning that the assessee has deposited cash in the impugned bank account which has escaped assessment. AO accordingly made the addition to the total income of the assessee in the respective assessment years. AR before us has not brought anything on record suggesting that the impugned addition made by the AO for the assessment years 2006-07 and 2007-08 has been challenged before the higher forum. But the learned AR before us has placed the copies of the assessment order. Thus in the absence of such information, it is transpired that the orders of the AO for the assessment years 2006-07 and 2007-08 have reached to its finality. Thus we can safely conclude that the impugned bank account belongs to the assessee. Availability of opening balance of cash in hand - HELD THAT:- Assessee has utilized the amount of cash deposits for some commercial activities. Moreover the revenue has not brought anything on record suggesting that the amount of cash deposits was utilized by the assessee either for investment purposes or it was used to meet the personal expenses. As such, in the given facts and circumstances, we are of the view that the amount of cash deposit cannot be treated as income in the entirety. Thus, we are of the considered opinion that justice shall be served to the assessee and the revenue if some percentage of profit of the cash deposit is treated as income to bring the end to the ongoing dispute. Accordingly, we direct the AO to treat 20% on average basis of cash deposit as income of the assessee. We are taking the basis of 20% of the cash deposit as income of the assessee from the profit and loss account filed by the assessee for different years. Interest expenses incurred in the CC bank account - HELD THAT:- onus lies on the assessee to justify based on documentary evidence that such interest expenses was incurred in connection with the business. But there was no documentary evidence filed by the assessee suggesting that the interest expenses incurred on borrowing were in connection with the business. Therefore we hold that the assessee cannot be allowed the claim for the deduction of such interest expenses under the provisions of section 36(1)(iii) of the Act. Hence the ground of appeal of the assessee is partly allowed.

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• 2020 (3) TMI 592
  Addition on account of diversion of interest bearing funds - HELD THAT:- Undoubtedly, the own interest free funds of the assessee exceeds the amount of interest free advances, therefore, we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. See RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - thus we hold that no disallowance of interest expense claimed by the assessee can be made on account of loans and advances - Decided in favour of assessee Nature of expenses - Information Technology Expenses - revenue or capital expenditures - HELD THAT:- AO in his assessment order has recorded the findings that the assessee has not furnished the supporting evidences to justify the disputed expenditure as revenue in nature. However, we find that the disallowance have been made by the AO treting the same as capital in nature. Thus, it is implied that the AO has not doubted on the genuineness of the expenses claimed by the assessee. Had the AO been doubted on the genuineness of the expenses claimed by the assessee, then he would have disallowed the entire expenditure. But he has not done so. Now the controversy arises whether the expenditure claimed by the assessee representing the capital expenditure which are eligible for depreciation. It is the admitted fact that there was no allegation of the revenue to the effect that some asset came into existence out of such expenditure. Further more, we find that major expenses were incurred by the assessee in the name of three parties which were providing services to the assessee as discussed above. On perusal of the same expenses, we find that these expenditure are incurred in routine and therefore no benefit of enduring nature is arising. Similarly, we also note that the expenses incurred on IT consumables are also routine expenses which doesn not bring any fixed asset into existence. See NJ. INDIA INVEST (P.) LTD. [ 2013 (7) TMI 738 - GUJARAT HIGH COURT]. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As own fund of the assessee exceeds the amount of investment. This fact was also not disputed by the Ld. DR appearing for the Revenue. Accordingly we presume that the investment was made by the assessee out of its own fund. In holding so, we find support and guidance from the judgment of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - no disallowance of interest expense claimed by the assessee can be made on account of investment as discussed above. Hence, we do not find any infirmity in the order of the ld. CIT-A. Addition representing the income as shown in the TDS certificate - certain entries in the form 26AS showing the TDS deducted by several parties only which was not claim by the assessee in its income tax return - HELD THAT:- Admittedly, there is no change in the rate of tax for the year under consideration vis-a-vis in the subsequent assessment year. Therefore even the income pertaining to the year under consideration has been offered to tax in the subsequent assessment year there is no loss to the revenue and therefore no addition can be made. In holding so we find support and guidance from judgment of Hon ble S.C. in the case of CIT vs Excel Industries [ 2013 (10) TMI 324 - SUPREME COURT]. Disallowance u/s.36(1)(va) on account of late payment of Employee s contribution of PF - HELD THAT:- Assessee is not eligible for deduction on account of late payment of employees Contributiuon by the order of the Hon ble Gujarat High Court in the case of CIT versus GSRTC [ 2014 (1) TMI 502 - GUJARAT HIGH COURT].

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• 2020 (3) TMI 591
  LTCG on sale of BSE equity shares - taking the depreciated value of BSE card as on 31.03.2005 as cost of acquisition of BSE shares - HELD THAT:- Perusing the material on record and the decision in the case of Techno Shares Stocks Ltd. [ 2019 (11) TMI 359 - ITAT MUMBAI] we observe that the identical issue has been decided by the co-ordinate bench 3rd Member wherein it has been held that the cost of acquisition of the shares of BSE shares shall be the original cost of acquisition to the members of card in terms of section 55(2)(ab) of the Act even though the assessee has claimed depreciation on the cost of membership card in the earlier year. Disallowance of loss on mark to market basis in respect of trading in derivatives - HELD THAT:- In this case the assessee has treated the derivatives as stocks during the year as the assessee is a share broker in BSE. The assessee has computed mark to market loss as on 31.03.2008 with reference to the prevailing rate of foreign exchange in respect of those contracts which were not settled at the end of the year and thus recognized the said loss according to the accounting standard- 30 issued by ICAI. The AO has disallowed the said loss as contingent and being unascertained as the settlement of the derivative contracts have not taken place. However, it is undisputed that assessee is dealing in derivatives which has to be valued on prevailing foreign exchange rate at the year end in view of the mercantile system being followed by the assessee. In our opinion the said loss is allowable as the issue is squarely covered by the decision of CIT vs. Woodward Governor India (P.) Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] and also in the case of Edelweiss Capital [ 2012 (10) TMI 223 - ITAT, MUMBAI] and Motilal Oswal Securities Ltd. vs. DCIT [ 2016 (3) TMI 962 - ITAT MUMBAI] . Addition under rule 14A read with rule 8D - suo moto disallowance - non recording of satisfaction - HELD THAT:- In this case the AO has simply applied the provisions of section 14A read with rule 8D and computed the disallowance without recording any satisfaction as to how the suo-moto disallowance made by the assessee is incorrect. Under these circumstances, we are of the view that a mechanical application of section 14A read with rule 8D is not correct and against the provisions of the Act. The case of the assessee is squarely covered by the decision of the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT [ 2017 (5) TMI 403 - SUPREME COURT] wherein held that AO must record his satisfaction as to how the assessee s calculation is incorrect having regard to the books maintained by the assessee. The Hon ble Apex Court has held that in absence of any satisfaction by the AO, the provisions of section 14A read with rule 8D can not be invoked. - Decided in favour of assessee.

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• 2020 (3) TMI 590
  Penalty u/s. 271(1)(c) - Defective notice - specific reason/charge against the Appellant for levy of penalty - inadmissible claim of deduction u/s 10B - HELD THAT:- In the instant case, the AO had issued a show-cause notice u/s 274 r.w.s 271 dated 28.01.2014 and served it on the assessee. There was no response by the assessee to that show-cause notice. Thereafter the AO issued another show-cause notice dated 02.07.2014 to the assessee. In response to it the assessee filed a reply date 10.07.2014 before the AO. As mentioned earlier, the AO has initiated the penalty proceedings not only for furnishing inaccurate particulars of income but also for having concealed the income and subsequently levied penalty having considered the above two ingredients. Therefore following the order in Samson Perincherry [2017 (1) TMI 1292 - BOMBAY HIGH COURT] and in Mak Data P. Ltd. [2013 (11) TMI 14 - SUPREME COURT] we hold that there is no technical defect in initiating the penalty proceedings u/s 271(1)(c) of the Act. Thus the first ground of appeal is decided against the assessee. Inadmissible claim of deduction u/s 10B - In the instant case, as mentioned earlier the appellant filed a letter dated 14.12.2012 intimating the revision of its return filed on 05.12.2012 u/s 139(5) and the reasons for revision of the said original return. The AO accepting the said revised return passed an assessment order u/s 143(3) without making any further adjustments, except by observing at para 4 that by putting inadmissible claim of deduction u/s 10B, the assessee has not only furnished inaccurate particulars of income but also concealed income within the meaning of section 271(1)(c) of the Act. It is relevant to mention here that the AO accepted the revised return and made assessment. If he accepted the revised return, there was no question of making inadmissible claim of deduction u/s 10B in such revised return. In fact, there is no concealment or inaccurate furnishing of income in such revised return. We delete the penalty levied by the AO u/s 271(1)(c) - Decided in favour of assessee

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• 2020 (3) TMI 576
  Allowability of depreciation on the actual cost of the assets arrived at by virtue of revaluation of the trade mark - firm is succeeded by a company falling u/s 47(xiii) - Revenue has not been able to produce the copy of approval from Joint CIT for invocation of Explanation 3 to section 43(1) - HELD THAT:- Once there is a categorical finding in this regard, the invocation of Explanation 3 to section 43(1) fails. Accordingly we hold that that the disallowance of depreciation by invocation of Explanation 3 to section 43(1) in this regard fails on account of lack of jurisdiction. Applicability of 5th proviso to section 32(1) - Even in case as the present one where the firm is succeeded by a company falling u/s 47(xiii), the Act mandates that the aggregate deduction in respect of the concern asset shall not exceed in any previous year, the deduction calculated at the prescribed rates as if the succession has not taken place and such deduction shall be apportioned between the predecessor and successor in the ratio of the number of days for which the assets were used by them. In the present case the predecessor is the firm M/s Veeky Industries. The trade mark PIK standing in its books had a cost of Rs. 100/- It had a revaluation figure of Rs. 5.52 crores and the amount of revaluation was transferred to reserve account. As per the provisions of Law, the firm cannot claim depreciation on any revaluation figure. The depreciation has to be claimed on the cost incurred by it. By no stretch of imagination Rs. 5.52 crores less Rs. 100/- was the cost incurred by the assessee firm. Hence the assessee firm was not entitled to depreciation on the revaluation figure of Rs. 5.52 crores. Now the firm i.e. the predecessor has been succeeded by assessee company on 01-02- 1999 and the company has claimed depreciation on the value of trade mark in its books at Rs. 5.52 crores. If the succession had not taken place, there would not have been any depreciation allowance on the revaluation figure. In other words, the revaluation of Rs. 5.52 crores (less Rs. 100/-) cannot be taken into account for granting depreciation to the successor i.e. the assessee company. As per the plain reading of the Law, the 5th Proviso to section 32(1) debars the assessee company to claim depreciation on the amount which was represented by revaluation in the books of the predecessor. The various arguments given by the learned counsel of the assessee are not at all sustainable on the plain meaning of the provision of the statute. In situation such as in the present case where a firm has been successed by the company the depreciation is to be provided as if the succession has not taken place. As the depreciation is to be allowed in the same manner as it would have been allowed in the hands of the predecessor firm. Since the predecessor firm was not entitled to depreciation on the amount of trade mark presented by revaluation reserve, depreciation to that extent is also not available in the hands of the assessee company also. The scheme of the Act in this regard does not require any valuation report to be obtained by the Revenue. As a matter of fact, learned counsel of the assessee in his submissions in item No. B above is mentioning that Thus for 5th proviso to be applicable both the predecessor and the successor company should be capable/eligible for claiming depreciation. In the facts of the present case, the predecessor company could not have claimed depreciation on the revalued amount. Hence 5th proviso to section 32(1) cannot apply. We find that the above is a distortion of the proviso. No where the proviso mentions that the predecessor has always to be a company. It specifically covers transfer under section 47(xiii). This section deals with succession of a firm by a company. When learned counsel of the assessee is himself admitting that the predecessor could not have claimed on the revalued amount, there is no question of the assessee company getting depreciation on the revalued amount. In the present case as the facts indicated that the said trade mark was acquired at a cost of Rs. 100/-, no further addition on account of revaluation for the purpose of depreciation is allowable in the hands of the assessee. - Decided against assessee

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• 2020 (3) TMI 575
  TP Adjustment - comparable selection - HELD THAT:- Companies functionally different with that of assessee as engaged in software services need to be deselected as comparable. Interest on refund under Section 244A(1) - HELD THAT:- We observe that the interest on refund either it can be directly given by the Department to the assessee or as in the present case, suppose if some tax liability is arising with regard to the assessee in respect of the earlier years then the interest on the refund amount if adjusted vis- -vis those outstanding tax liability i.e. also deemed payment of interest. It has been held in the case of Avada Trading Co. (P.) Ltd. [ 2006 (1) TMI 465 - ITAT MUMBAI] that interest on refund under Section 244A(1) would be assessable in the year in which it is granted and not in the year in which proceedings under Section 143(1)(a) attain finality. Therefore, interest on refund whenever it is granted, it is assessable in that year itself and if it is adjusted with any prior tax liability of earlier years and such interest is in turn paid to the Government Account that also is payment of interest to the assessee, in such case, there is no need for any intimation separately. Hence, this ground of appeal raised by the assessee is dismissed.

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• 2020 (3) TMI 574
  Assessment u/s 153A - Addition u/s 68 - HELD THAT:- As the facts and circumstances in the case of present assessee with same A.Y.2010-11 are same, respectfully following the order of the Co-ordinate Bench, we do not find any merit for the addition so made on account of share capital and the alleged commission paid for obtaining the same. Addition u/s 14A -While framing assessment U/s 153A r.w.s 143(3) of the Act. The A.O. has made disallowance U/s 14A - However, no incriminating material was referred by the A.O. while making addition U/s 14A of the Act. This issue has also been dealt with by the Tribunal kin the group cases as stated above and after observing that in absence of any incriminating material, no addition can be made in respect of the assessment which become final and no proceeding is pending as on the date of search. In the Tribunal order also as stated above, search was also taken on 24/09/2013 and with reference to the very same search, the A.O. as made disallowance U/s 14A of the Act. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in the group case, we do not find any merit for the addition made u/s.14A of the IT Act. Appeal of the assessee is allowed.

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• 2020 (3) TMI 572
  Assessment u/s 153C - No discovery of any assets/documents in course of search conducted in the case of any person that belongs to the appellant - non abated assessment - HELD THAT:- We find that the return of income was filed on 30.09.2013 and notice under section 143(2) could be issued up to 30.09.2014 for making scrutiny assessment in this case. However, the search was conducted on 09.10.2014 hence, on the date of search no proceeding were pending for assessment year 2013-14, hence, the assessment is not abated on the date of search. Therefore, no addition under section 153C could be made for the assessment year under consideration, where no incriminating material was found in search relating to that assessment year. Accordingly, addition in business income sustained on account of estimation @ 8.5% of gross receipts is therefore, deleted - Decided in favour of assessee. Charging of interest under section 234A 234B and 234C - HELD THAT:- Hon ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] , therefore, we upheld the same. However, we held that the assessee is entitled to consequential relief if any as arise out on giving effect to this order if any. Rejection of books of accounts - estimation of income - Income supported by the audited financial statement while reducing the estimation of business income to 8.5% of the gross receipts as against 12% of the gross receipts adopted by the Ld. AO, which is very highly excessive and liable to be reduced - HELD THAT:- We find that the assessee could not produce books of accounts and supporting vouchers of expenses and there was huge expenses debited in Profit Et Loss Account. Hence, we are of the considered opinion that the AO has rightly rejected book result under the provisions of section 145 Estimation of percentage at 8.5% - rate of gross profit is disclosed at 8.94% in A.Y. 2011-12, 8.98% in A.Y. 2012-13 , 7.43% in A.Y. 2013-14, 7.12% in A.Y. 201415 and 7.12% in A.Y. 2015-16 of which average comes to 7.918%. CIT(A) was not justified adopting rate at 8.5% of gross receipts by upholding the addition on this account. Since, the average gives a rate of 7.918%, which is almost equal presumptive rate of 8% under section 44AD in the case of non-maintenance of books of accounts. Therefore, on careful consideration of facts and taking a reasonable approach, it would be met end of justice, if the profit rate were applied to 8% being equal to presumptive rate under section 44AD of gross receipts as against estimation @ 8.5% by Ld. CIT (A). The AO is, therefore, directed to recalculate the addition of business income by adopting 8% of gross receipts. Addition in respect of 1/3rd cash seized at the time of search - HELD THAT:- We find that the assessee has withdrawn cash of Rs. 7 Lakh on 01.10.2W014, hence, this cash might be available with the assessee on the date of search. As against this, the addition made by the AO is Rs. 3.93 lakhs only. We further note that the assessee has been showing substantial income over the years and nature of business requires holding cash in hand for making weekly payments to pourakarmikas, diesel etc. Considering these facts, it can be assumed that cash of Rs. 3.93 Lakh was available out of known sources, which can be considered as explainable out of cash withdrawals made prior a week of search date. Therefore, we are of the view the AO was not justified in making this addition. Addition in respect of 1/3rd of gold seized at the time of search - HELD THAT:- Jewellery of all family members was kept together at one place and assessee was jointly residing therein. The inventory so made during search is also reflecting this fact. The assessee has filed a list of 19 person to whom this jewellery was found during search. The list of 19 person to whom jewellery belonged was submitted during the course of assessment proceedings, which is placed at Paper Book Page No. 262, according to which the assessee has owned jewellery of 261 grams, which reflected in balance sheet - no justification in making addition in the case of the assessee - no addition can be made in the hands of the assessee by treating 1 /3rd of seized jewellery in his hand as jewellery was belonging to entire family members. Therefore, if at all if any addition to be made it is to be equally divided among family member - the assessee has only claimed jewellery of 261 grams as belonging to him, which has been reflected in balance sheet as on 31.03.2011 hence, no addition could be made in the hands of the assessee - considering the CBDT Circular which provides jewellery holding by female member and male members and children in particular quantity as not be served meaning thereby as explained, we are of the considered opinion that no addition can be sustained on this account. Accordingly, 1/3rd addition made in the case of the assessee on account of jewellery is deleted.

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• 2020 (3) TMI 571
  TP Adjustment on notional interest on overdue receivables - HELD THAT:- As decided in own case [ 2019 (9) TMI 1200 - ITAT DELHI] Assessee is a debt free company and the question of receiving any interest on receivables did not arise - thus issue decided in favour of assessee. Corporate Tax Adjustment in relation to Tax Deducted at Source Reconciliation - AO noticed that there was mismatch between Form 26AS and tax credit claimed - HELD THAT:- Invoking of provisions of section 68 of the Act on the alleged difference in the revenue recognised by the assessee and Form 26AS statement is bad in law in as much as section 68 is not at all applicable on such difference. Secondly, we find that the DRP has given categorical finding that only the difference, if any, should have been added but we find that without going into the reconciliation statement, the Assessing Officer has made addition thereby disobeying the directions of the DRP - in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer/TPO. AO/TPO is directed to examine the reconciliation statement mentioned elsewhere and when found correct, no addition is called for. TP Adjustment - comparable selection - HELD THAT:- Assessee is into ITES services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowance of the expenses on car lease rentals u/s 40(a)(ia) - HELD THAT:- There is no dispute that the assessee has paid car lease rentals amounting to Rs. 7,55,58,782/- and on such payments, provisions of section 40a(ia) of the squarely apply. However, the second proviso inserted to section 40a(ia) of the Act has been held to be declaratory and curative and have been given a retrospective effect from 1.4.2005 as held in the case of Ansal Land Mark Township [P] Ltd [ 2015 (9) TMI 79 - DELHI HIGH COURT] However, it is incumbent upon the assessee to furnish necessary evidences to demonstrate that the payees have shown receipts as their income - Restore this issue to the file of the Assessing Officer/TPO. The assessee is directed to furnish necessary evidences and the Assessing Officer/TPO is directed to examine the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee.

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• 2020 (3) TMI 570
  Rectification of mistake u/s 254 - percentage of g.p. of the assessee co. was 3.40% in the assessment year 2007-08 and the same was restricted to 3.30% in case of unaccounted turnover in that year but book result as declared by the assessee co. was neither disturbed by the AO nor by any of the appellate authority - HELD THAT:- We are unable to accept this contention of the assessee in view of the finding of fact recorded by the ld. CIT(A) that the facts and circumstances for the assessment year 2007-08 were entirely different from the facts and circumstances of the year under appeal. Hence, the profit adopted for that year cannot mechanically be adopted for the year under appeal as this Tribunal has already considered the facts on record and expressed its view. The case-laws relied upon by the assessee are not applicable to the facts of the present case as the powers of Tribunal u/s 254(2) of the Act for rectification of mistake are not wide enough to revisit consciously taken decision. The assessee by way of present application is seeking review of order, which is not permissible under the law. See Karan Co [ 2001 (7) TMI 48 - DELHI HIGH COUR ] , NIRANJAN AND CO. LIMITED [ 1979 (3) TMI 24 - CALCUTTA HIGH COURT] If such prayer is allowed then in every case, where the assessee is not satisfied with the finding of the Tribunal, the MA will be filed. In our considered view, powers u/s 254(2) are very limited which could only be exercised to rectify any mistake or fact apparent from the record. But, where the Tribunal has applied its mind and comes to a particular conclusion then disturbing such finding would tantamount to review the order. Such exercise would even be contrary the scheme of Act as the order of Tribunal is appealable u/s 260A of the Act before the Hon ble High Court. In view of these facts, the miscellaneous petition filed by the assessee has no merit.

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• 2020 (3) TMI 567
  Short deduction of Security Transaction Tax (STT) - Whether Tribunal was correct in holding that NSE had not committed any fault in collection of correct STT, when infact section 100(1) of Securities Transaction Tax mandates the recognized stock exchange for collection and recovery of STT at the rates specified in section 98 of STT Act? - responsibility of member brokers of NSE to collect the correct STT on the transactions - penalty for failure to collect the said Security Transaction Tax - HELD THAT:- STT is collected through a member broker under a particular client code. The client code is provided by the brokers and not by the stock exchange. Responsibility of the stock exchange is to ensure firstly that STT is collected as per Section 98; secondly, it has been determined in accordance with Section 99 read with Rule 3 and Explanation thereto; and lastly, such STT collected from the purchaser or seller is credited to the Central Government as provided under Section 100. Holding that respondent had not committed any default and that under the statute respondent was not liable for any alleged short deduction of STT, Tribunal deleted the addition made on this count as modified by the first appellate authority. Consequently, levy of interest and penalty were deleted. As advert to the explanation provided by one of nine brokers before the Assessing Officer. Morgan Stanley India Company Private Limited which was one of the broking companies dealing with FIIs stated before the Assessing Officer that for institutional clients the stock exchange provided facility of different client codes for purchase and sale trade for the same client to ensure that such trades were not netted. On occasions where client codes for institutional trades were not modified by the broker, the trades were treated as squared off trades and a lower STT was levied. This resulted in the exchange charging a lower STT from the member broker while the member broker collected a higher delivery based STT from the client. We find no error or infirmity in the view taken by the Tribunal that under the statute respondent was not liable for any alleged short deduction of STT and therefore, no fault can be prescribed to the respondent and to hold the respondent to be in default for short collection of STT.

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• Benami Property

• 2020 (3) TMI 589
  Benami transactions - application was filed for summoning of the documents before leading rebuttal evidence - application filed by the petitioner under Order XVI Rule 6 CPC read with Section 151 CPC for summoning documents/record from the Deputy Commissioner, Income Tax Department - HELD THAT:- The conclusion of the trial court pertaining to the irrelevance of the documents is apparently against the record inasmuch as, as already noticed, the plaint is inter alia based on the allegation pertaining to transaction being Benami and irrespective of the fact as to whether the same would have any implication ultimately qua the relief claimed in the suit, the petitioner essentially is entitled to lead evidence qua the said fact and once the documents sought to be summoned pertain to the said aspect, the rejection by indicating the same as irrelevant cannot be sustained. The other finding based on the provisions of Section 4 of the Act, 1988 also has no substance in view of the fact that the provision restricts the right of those seeking enforcement or defend an action based on same being Benami, however, the third parties are not prevented from alleging and/or proving the said aspect and, therefore, the rejection on this count also cannot be sustained. Various submissions made by learned counsel for the respondent pertaining to delay in the suit, the fact that the plaintiff is not entitled to lead rebuttal evidence and that provisions of Order VII Rule 14 and Order XI CPC were not followed, apparently have no substance inasmuch as once the court has permitted leading of rebuttal evidence, the defendant cannot preempt the fact as to what evidence can be or would be led by the plaintiff. The provisions of Order VII Rule 14 and Order XI CPC also have no application inasmuch as neither the documents are available with the plaintiff nor the same are claimed to be available with the defendants and, therefore, the fact that no application under the provisions of Order VII Rule 14 and Order XI CPC was filed, would have no implication whatsoever. So far as the observations made by the trial court, though the same has not been made basis for rejection of the application, that the particulars of the documents have not been indicated, suffice it to observe that once the requisition as prayed by the petitioner is issued, the department has to respond on the said aspect and same also in view of submission that record is maintained property wise, cannot be preempted at this stage. In view of the above discussion, the writ petition is allowed. The order dated 3/2/2020 passed by the trial court is quashed and set aside. The application filed by the petitioner under Order XVI Rule 6 CPC is allowed. The trial court is directed to summon the documents/record as prayed by the petitioner in its application under Order XVI Rule 6 CPC from the office of Deputy Commissioner, Income Tax Department, Jaipur.

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• 2020 (3) TMI 588
  Benami Property Transactions - Prohibition of the right to recover property held benami - trial Court while rejecting the alleged application filed under Order 7 Rule 11 of CPC has held that the suit as framed is not barred by the provision prescribed under Section 4 of the Act, 1988 - Whether the property in question has been purchased by the Plaintiff from her Stridhan, i.e., known source of income, or not ? - HELD THAT:- What has been observed by the trial Court by rejecting the application filed under Order 7 Rule 11 of CPC that the suit property appears to have been purchased by the Plaintiff for the benefit of the family members, and therefore, the suit as framed is not barred by virtue of Section 4 of the Act, 1988. The trial Court has, thus, virtually given his finding that the alleged transaction does not come within the purview of benami transaction. It, however, appears that such an observation has been made without considering the fact as to whether it was purchased by the Plaintiff from her known source of income, i.e., Stridhan in order to arrive at such a conclusion. It is, therefore, rather premature to hold that the suit is not barred by the provision prescribed under Section 4 of the Act, 1988. Question whether a particular sale is a benami or not is largely one of fact and that cannot be decided in absence of evidence and in order to get the exclusive ownership, the Plaintiff has to establish the said fact by way of cogent and reliable evidence that it was acquired from her Stridhan and the alleged transaction does not fall within the ambit of benami transaction defined under Section 2(9) of the Act, 1988 and only after its establishment, it could be held that the suit is not barred under Section 4 (1) of the Act, 1988. However, without considering all these facts, the trial Court in a cursory manner has opined that the suit is not barred by the said provision. The finding of the trial Court, therefore, in so far as the suit cannot be held to be hit or barred by Section 4 of the Act, 1988 in such a pre-matured stage, is liable to be and is hereby set aside. From perusal of the aforesaid provision, it is clear that the Court is vested with the discretion under this Order to deal with an issue of law, which it may try as a preliminary issue if it relates to the jurisdiction of the Court, or is a bar to the suit created for the time being in force. Obviously, this provision would apply after issues are struck, i.e., after written statement is filed and this is the principle which has been laid down by the Supreme Court in the matter of Kuldeep Singh Pathania vs. Bikram Singh Jaryal [ 2017 (1) TMI 1708 - SUPREME COURT] whereby while dealing with the aforesaid provision - Revision petition is disposed of with the aforesaid observations

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• Customs

• 2020 (3) TMI 587
  Suspension of CHA License - allegation that the Customs Broker is actively connected with the fraudulent import of certain consignments - Regulation 19(2) of CBLR, 2013 - HELD THAT:- The continuous suspension of the licence of the Customs Broker without either conducting an inquiry or issuing a notice for revocation of licence or imposition of penalty is bad in law and needs to the set aside. The appellants have made out a case for seeking the revocation of the suspension of the Customs licence - appeal allowed - decided in favor of appellant.

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• 2020 (3) TMI 579
  Smuggling - Gold bars - concealment in the baggage - absolute confiscation - prayer for redemption and reduction in quantum of penalty - HELD THAT:- It is observed that gold in any other form other than ornaments does not come within the ambit of bona fide baggage as per the Baggage Rules, 2016. The applicant has brought gold of foreign origin in raw form/small pieces weighing 1000 grams. This is an admitted fact by the applicant in his voluntary statement tendered under Section 108 of Customs Act, 1962 wherein he has stated that he is the owner of the recovered gold and the same has been purchased by him on cash payment in Dubai. Prohibited goods or not - HELD THAT:- From the evidence on record it is observed that the applicant crossed the green channel without declaring the impugned articles in his possession in the Customs declaration form or in any other form to the Customs officers and thereby violated Section 77 of the Customs Act, 1962. Therefore the applicant has attempted to smuggle the impugned gold bars with an intention to evade customs duty in gross violation of provisions of Customs Act, 1962 and rules made thereunder read with Foreign Trade Policy (2015-2020). Hence the impugned goods are liable for confiscation under Section 111 of Customs Act, 1962. It is observed that C.B.I. C. had issued instruction vide Letter F. No. 495/5/92-Cus. VI, dated 10-5-1993 wherein it has been instructed that in respect of gold seized for non-declaration, no option to redeem the same on redemption fine under Section 125 of the Customs Act, 1962 should be given except in very trivial cases where the adjudicating authority is satisfied that there was no concealment of the gold in question. Thus, absolute confiscation upheld. Penalty - HELD THAT:- Although the penalty of Rs. 4,80,000/- has been imposed under Section 112(a) read with Section 114AA of the Customs Act, 1962, it is observed that penalty is not imposable under Section 114AA of the Customs Act, 1962. Since penalty can only be imposed under Section 112(a) of Customs Act, 1962, penalty of Rs. 4,80,000/- under Section 112(a) of Customs Act, 1962 is upheld. Revision application dismissed.

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• Securities / SEBI

• 2020 (3) TMI 586
  Failure to make the necessary disclosures regarding creation/invocation/release of certain pledge transactions and off-market transactions/purchase of shares in the company - contention of the appellants is that Regulation 29 of the SAST Regulations is not applicable and is only applicable to the pledgee - penalty has been imposed for violation of Regulation 29(2) and 29(3) which provides that an acquirer who holds shares or voting rights entitling them to 5% or more of the shares or voting rights in the target company shall disclose every acquisition or disposal of shares representing 2% or more within two working days - HELD THAT:- Whenever a share which is pledge is invoked meaning thereby the shares are sold, the necessary consequence which follows is the reduction in the shareholding of that particular entity. In the instant case, whenever the pledged shares of a particular appellant was invoked, there was a change in the shareholding of that appellants and, consequently, the appellants under Regulation 29(2) read with 29(3) was required to disclose the change in the shareholding within two working days of the revocation of the shares to the stock exchange as well as to the target company. Admittedly, as per the chart indicated after paragraph 21 of the impugned order, no disclosures were made by the appellants. A perusal of the chart shows two such transactions of the Appellant No. 1 Anjaneya Holdings Pvt. Ltd. that when their share pledges were invoked on August 28, 2012 and November 2, 2012, the percentage of the shareholding was less than 2% being 1.21% and 1.82% respectively. Thus, for the said two transactions penalty under section 29(2) and 29(3) could not be invoked to that extent. The said appellant Anjaneya Holdings Pvt. Ltd. is entitled for relief. Other transactions of all the appellants describing violation for non-disclosure under Regulation 29(2) and 29(3) does not suffer from any error and the order of the AO to that extent is maintained. The contention of the appellants is patently erroneous in as much as the provisions of Regulation 13 provides for a continual disclosures of the shareholding or voting rights and if the shareholding falls below a certain percentage as provided in the said regulations then it is incumbent for the person to make the necessary disclosures. Thus, whenever the pledging of the shares of the appellants were invoked, the appellants were required to make the necessary disclosures as it involved a change in the shareholding. Thus, the contention of the appellants cannot be accepted. We also find that the Appellant No. 1 had also indulged in off-market transaction which resulted in the change in the shareholding and such change is required to be disclosed under Regulation 13(4A) and 13(5) of the PIT Regulations. Since, the same was not done, the penalty imposed was justified. We also find that when the pledge was revoked, the said revocation also triggered the requirement to make the disclosures under Regulation 31(2) and 31(3) of the SAST Regulations which again was not made by the Appellant No. 1. Order of the AO is affirmed with the modification that the penalty of Rs. 15 lacs imposed upon the Appellant No. 1 for violation of Regulation 29(2) read with 29(3) is reduced to Rs. 10 lacs. All other imposition of penalties against the appellants are affirmed. The appeal is partly allowed to the extent stated aforesaid.

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• 2020 (3) TMI 573
  Violation of Section 6A(4)(b)(iii) of the Insurance Act, 1938 - transfer of shares made without previous approval of the authority and, therefore, such transfer of shares are null and void ab initio - HELD THAT:- Referring to communication of IRDAI vide their letter dated February 4, 2020 and their reply filed before this Tribunal, it is apparently clear that damage control measures have been adopted by Respondent No. 1 subsequent to the impugned orders dated December 4, 2019 and December 27, 2019. The communication/order of IRDAI dated February 4, 2020 has largely diluted its own order dated December 4, 2019 and December 27, 2019. The stand of the Respondent No. 1 as depicted in paragraph No. 21 of their reply makes is apparently clear that prior to any transfer of the shares in question, the authority is required to be in a position to carry out due diligence in order to ascertain fulfillment of Fit and Proper criteria and financial soundness of the transferee. Stand of the respondent No. 1 that the use of the word transfer as depicted as per the provisions of Section 6A(4)(b)(iii) of the Insurance Act would also include any form of transfer of shares including a pledge is not being considered at this stage and is left open. Dispose of the appeal with the direction that the observation in the impugned orders that the transfer/pledge of the shares in question are null and void ab initio is incorrect and to that extent, the order is set aside. We also record that IDBI Trusteeship Services Ltd. Respondent No. 2 is holding the pledged shares as a custodian and will make every endevour to find a suitable buyer. As and when a suitable buyer is found suitable application would be made before IRDAI for appropriate approval to enable the IRDAI to carry out due diligence and to ascertain fulfillment of Fit and Proper criteria, financial soundness, etc. We also make it clear that so long as the IDBI Trusteeship Services Ltd. Respondent No. 2 is holding the shares in the capacity as a trustee/custodian, IDBI Trusteeship Services Ltd. Respondent No. 2 will not exercise any control over RGIC or make changes or have a say in the management or decision making process of RGIC or exercise any voting rights in respect of the said RGIC shares.

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• 2020 (3) TMI 568
  Unregistered Collective Investment Scheme (hereinafter referred to as CIS ) - violation of Section 12 (1B) of the SEBI Act, 1992 and Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 - fund mobilizing activity of VBDP through the scheme of allotment of land post September 2013 - fraudulent practice in terms of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations, 2003 ) - Interim order also called upon the Noticees to show cause as to why suitable directions/prohibitions under Sections 11, 11(4), 11B and 11AA of the SEBI Act read with Regulation 65 of the CIS Regulations, 1999 and Regulation 11 of the PFUTP Regulations, 2003, should not be issued/imposed? - HELD THAT:- As perused the material available on record as inclined to agree with the observations in the Interim order and find that the Scheme of allotment of lands/developing colony/plots, as offered by VBDP satisfies the four requirements of a CIS as defined in Section 11AA of the SEBI Act. Consequently, Section 12 (1B) of the SEBI Act, 1992 as well as Regulation 3 of the CIS Regulations prohibits carrying on CIS activities without obtaining Certificate of Registration from SEBI. VBDP had not obtained a certificate of registration from SEBI for offering the Scheme which has been found to be CIS in the previous paras. Therefore, VBDP has violated Sections 12(1B) of the SEBI Act, 1992 and Regulation 3 of the CIS Regulations. Noticee 2 and 3 are directors of VBDP with effect from August 03, 2010 and continues to be directors till date and thus Noticee nos. 2 and 3 are responsible for the violations of provisions of law by VBDP. Regulation 4 (2) (t) was inserted in the PFUTP Regulations 2003 with effect from September 13, 2013 and as per the said provision the raising of funds by VBDP under its Scheme without seeking registration from SEBI or filing any offer document as required under the CIS Regulations amounts to illegal mobilisation of funds and therefore the Noticees have also violated Regulation 4 (2) (t) of the PFUTP Regulations, 2003. Directions a. VBDP and its Directors, viz. Yogendra Bisay and Jitendra Bisay shall wind up its existing CIS and refund the contributions or payments collected from investors under the schemes with returns due to the investors within a period of three months from the date of this order. b. Upon completion of the refund as directed above, within a further period of fifteen days, the Noticees shall submit a winding up and repayment report to SEBI in the format provided under regulation 73 of the CIS Regulations. The report shall be supported by the proof of the trail of funds claimed to be refunded, bank account statements of the company indicating refund to the investors and receipt from the investors acknowledging such refunds along with a certification of such repayment from two independent Chartered Accountants. c. The Noticees shall not divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of VBDP or its Directors and they shall not alienate or dispose of or sell or create any encumbrance on any of the assets of VBDP except for the purpose of making refunds to its investors as directed above. d. The Noticees shall provide inventory of all the assets purchased in the name of the Noticees including all assets movable and/or immovable wherein Noticees have interest directly or indirectly in whatsoever manner, to SEBI within a period of fifteen days from the date of this order. e. The Noticees are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities market, directly or indirectly, till the directions for refund/repayment to the investors are complied with, as mentioned above, to the satisfaction of SEBI and repayment completion certificate is submitted to SEBI and thereafter for a further period of four years from the date of completion of the refund, as directed above. Restrain to access securities market and prohibition from buying, selling or otherwise dealing in securities shall extend to their existing holding of securities including the units of mutual funds. f. Noticee nos. 2 and 3 shall be restrained from holding position as directors or key managerial personnel of any listed company for a period of four years from the date of this Order.

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• Service Tax

• 2020 (3) TMI 578
  Construction of complexes services - work undertaken by the appellant for the MP Development Board for construction of duplex Riviera Towne (Phase I), Bhopal - GTA services - Demand of service tax - HELD THAT:- The definition of a residential complex leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of residential complex - In the present case, the appellant had constructed independent buildings having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be construction of complex and, therefore, the service tax could be levied. The appellant has not constructed a residential complex having more than 12 residential units. It has constructed independent buildings having one residential unit - The decisions of the Tribunal in MACRO MARVEL PROJECTS LTD. VERSUS COMMR. OF SERVICE TAX, CHENNAI [ 2008 (9) TMI 80 - CESTAT, CHENNAI] and AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2012 (11) TMI 1000 - CESTAT, NEW DELHI] clearly apply to the facts of the present case, where it was held that service tax can be demanded under section 65(105)(zzzh) only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where in one compound has many buildings, each having not more than 12 residential units. The definition of construction of complex and a residential complex continue to remain the same after 1 July, 2012 and, therefore, service tax liability could not have been fastened even after 1 July, 2012 under construction of complex - The levy of service tax on the appellant under construction of complex service is, therefore, not justified and, cannot be sustained. GTA services - HELD THAT:- It is seen that an amount of Rs. 1,12,847/- was confirmed for the period 1 October, 2007 upto 31 March, 2012 and an amount of Rs. 1,142/- was confirmed for the period from 1 April, 2013 upto 31 March, 2014. The Principal Commissioner has recorded a finding that the appellant had not submitted any documentary evidence in support of the contention that transportation of goods was through local cartage and no consignment notes were issued. The learned Chartered Accountant for the appellant has referred to receipts to substantiate that it was a case of local cartage and not a case of transportation by GTA. Though it is a fact that the appellant had not produced these receipts before the Principal Commissioner in response to the show cause notice but the meager amount paid by the appellant for this activity during this period persuades us to remand the matter to the Principal Commissioner for examining this aspect after providing an opportunity to the appellant to submit the relevant documents within six weeks from the date of order. The order to the extent it confirms the demand of service tax under construction of complex services is set aside - However, the matter relating to confirmation of demand of service tax under GTA services is remanded to the Principal Commissioner for a fresh determination - Appeal allowed in part and part matter on remand.

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• 2020 (3) TMI 577
  Construction of complex services - work undertaken by the appellant for the Bhopal Development Authority for construction of 489 EWS quarters at Vinayak Nagar - period April, 2012 to 31 March, 2013 - Demand of service tax with interest and penalty - HELD THAT:- A complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of residential complex - In the present case, the appellant had constructed independent buildings having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be construction of complex and, therefore, the service tax could be levied. The appellant has not constructed a residential complex having more than 12 residential units. It has constructed independent buildings having one residential unit - The decisions of the Tribunal in MACRO MARVEL PROJECTS LTD. VERSUS COMMR. OF SERVICE TAX, CHENNAI [ 2008 (9) TMI 80 - CESTAT, CHENNAI] and AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2012 (11) TMI 1000 - CESTAT, NEW DELHI] clearly apply to the facts of the present case, where it was held that service tax can be demanded under section 65(105)(zzzh) only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where in one compound has many buildings, each having not more than 12 residential units. The definition of construction of complex and a residential complex continue to remain the same after 1 July, 2012 and, therefore, service tax liability could not have been fastened even after 1 July, 2012 under construction of complex - The levy of service tax on the appellant under construction of complex service is, therefore, not justified and, cannot be sustained. The order confirming the demand of service tax under construction of complex services is set aside - Appeal allowed - decided in favor of appellant.

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• 2020 (3) TMI 569
  Rectification of mistake - error apparent on the face of record or not - scope of review application - HELD THAT:- All the contentions applicant has sought to raise in this application for recall of the order cannot be considered as error apparent from the records as the no record in form of any written submission or document filed by the appellant at time of hearing has been shown which shows that they have pressed for the other grounds. Once the appeal has been considered and finding recorded then because the finding recorded is adverse to the applicant, then the same cannot be ground for rectification application. The scope of application for rectification of mistake is very limited to correct errors apparent from record and in garb of rectification tribunal cannot recall and review its own order. There are no merits in the application for recalling the order - application for recall of order dismissed.

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• Central Excise

• 2020 (3) TMI 585
  Interest on refunds - Relevant date for Grant of interest - applicant seeks interest from the date the respective amounts were deposited with the respondents till the date of actual refund of the deposit - HELD THAT:- This court has held that since refund is not in the nature of duty under the Central Excise Act, the petitioner is not entitled to statutory interest under section 11BB of that Act. It has further been held that in the absence of any statutory provision entitling the petitioner to interest, a mandamus cannot be issued to the revenue to pay interest. It may be noted that while the petitioner in the relief paragraph has prayed for interest at the rate of 18% per annum, at the time of hearing of the petition, no submissions had been made in this regard. Nonetheless, since in the reliefs prayed for a prayer for grant of interest had been made, this court had considered the same and rightly or wrongly, for the reasons set out in the order as recorded hereinabove, declined to grant such relief. Once the court has after duly recording reasons, turned down the prayer for grant of interest, even if the reasoning for declining such relief may be fallacious, the same would not fall within the scope of a review application. It may be pertinent to note that in the present application, the petitioner has sought review of the judgement dated 16.6.2016 and grant of interest at the rate of 18% per annum or such other rate as the court may deem fit from the date the respective amounts were deposited with the respondents till the date of actual refund of the deposit. However, in the memorandum of petition of the captioned special civil application, the petitioner has prayed for interest at the rate of 18% per annum claimed vide application dated 21.7.2014. Thus, the refund application claimed in the application is not identical to the relief claimed in the petition. At this stage of review, the court would be required to rehear the learned counsel for the respective parties on the question of interest, namely, the entitlement, quantum and the date from which such interest is required to be granted which would amount to giving a fresh opportunity to the petitioner to argue on a point which though, could have been argued, was not argued at the relevant time when the case was heard, which would be beyond the scope of a review petition. Therefore, even while accepting the submission of the learned counsel for the petitioner that the findings recorded by this court in paragraph 19 of the judgment are inconsistent with each other, it would not be possible for this court to grant the relief prayed for in the application as it would entail long drawn arguments on the question of entitlement, rate of interest as well as the point of time from which such interest should be granted which would be beyond the scope of a review application. Application rejected.

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• 2020 (3) TMI 584
  Clandestine Removal - Brass Ingots - considerable difference in the quantity of various excisable goods manufactured as shown under the heads of manufactured, cleared and under closing balance in the records maintained for central excise purpose viz-a-viz quantity shown in the balance sheet for the financial year 2008-2009 - HELD THAT:- Admittedly the entire case of the Revenue is based upon the mis-match of quantities as reflected in the excise records and the account records of the assessee. There is no evidence to show the receipt of the excess raw materials, manufacture of the excess final product and transportation of the same as also the identification of the customers. Tribunal in the case of M/S. SAC POLYMERS VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS CGST, NEW DELHI [ 2018 (7) TMI 523 - CESTAT NEW DELHI] have observed that charge of clandestine removal cannot be established merely on the ground of difference in the balance sheet and the statutory record unless the same is corroborated by any other evidence showing receipt of raw material, consumption of the same, production and removal of the final product. It is well established that the onus to prove the charges of clandestine removal lies very heavily upon the Revenue and is required to be discharged with production of sufficient positive evidences. The same cannot be based upon assumptions and presumptions - Admittedly, in the present case, there is no evidence produced by the Revenue indicating the clandestine clearance of the goods except the difference in the figures. The same cannot be adopted as sufficient evidence for upholding the charge of clandestine removal. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (3) TMI 583
  Scope of the term Total Turnover - Entitlement for deduction of exempted turnover of the food and drinks which is served in the Club - exemption on the second sales made by such Club within their premises to the customers - HELD THAT:- The concept and definition of total turnover, exempted turnover and taxable turnover are distinct in the Sales Tax Law and these terms are separately defined in the definition caluses of the Act and the Rules made thereunder. The total turnover obviously would include the total turnover of all the goods made by the Assessee, irrespective of the liability to pay tax thereon. If the turnover in question is exempted from payment of tax, it would nonetheless remain part of the total turnover even though it may not form part of the taxable turnover . Section 3-D of the Act as it stood prior to 01.04.1999 clearly mentioned the total turnover for applying the said flat rate of 2% tax. Even after amendment from 01.04.1999, the words total turnover have been employed in said Section 3-D of the Act - there are no merit in the argument raised by the learned counsel for the Assessee that the provisions after its substitution from 01.04.1999 should be held to be clarificatory in nature and to apply to the period even prior to 01.04.1999 i.e. Assessment year 1997-1998 which is the assessment year involved in the present case. A substantive provision of the Act unless specifically made retrospective by the Legislature cannot, by a deeming fiction, be construed to be a retrospective provision. As far as the words total turnover is concerned, there are no doubt that the total turnover would include even the exempted turnover. Since obviously the total turnover of the Assessee in question for the Assessment Year 1997-98, 1998-99 was beyond the prescribed limit of Rs. 50 Lakhs viz., being Rs. 72,34,527/- and Rs. 82,56,668/- as quoted above, we have no doubt that the learned Tribunal and the authorities below were justified in not applying the Section 3-D of the Act to the present case. There are no merits in the present petition - petition dismissed.

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• Wealth tax

• 2020 (3) TMI 582
  Wealth tax assessment - Valuation of the shares - HELD THAT:- The case of applicant s wife has held that Rule 1D of the Wealth Tax Rules, 1957, is prospective in nature and therefore, the same could not have been applied for undertaking valuation of the shares for the assessment years 1964-65, 1965-66 and 1966-67. However, the Tribunal, Pune Bench has held that Rule 1D of the Wealth Tax Rules could have been applied for the assessment years 1967-68 and 1968-69. On this basis, the Tribunal, Pune Bench, in fact, partly allowed the Appeals instituted by the applicant s wife, insofar as assessment years 1964-65, 1965-66 and 1966-67 are concerned, but, dismissed the Appeals for the assessment years 1967-68 and 1968-69. Once, the Tribunal, Pune Bench ruled that Rule 1D of the said Act could have been invoked prospectively and such view of the Tribunal, Pune Tribunal was never challenged by the Revenue, the same view was required to be adopted in the case of the present applicants as well. In fact, the Tribunal has also taken a view that the Pune Bench view was required to be followed. However, while actually following such view, the Appellate Tribunal proceeded to dismiss all the Appeals instituted by the present applicants, instead of following the same course of action as was adopted by the Tribunal, Pune Bench. Appeals instituted by the present applicants, insofar as assessment years 1964-65, 1965-66 and 1966-67 were required to be partly allowed by the Appellate Tribunal and only the Appeals concerning the assessment years 1967-68 and 1968-69 could have been dismissed. Inclusion in the net wealth of the assessee the amount due to the assessee by certain parties in Portugal - HELD THAT:- As relying on M/S SHIV SHAKTI FLOUR MILLS (P) LTD. VERSUS COMMISSIONER OF INCOME TAX [ 2020 (3) TMI 182 - SUPREME COURT] Tribunal was not justified in law in confirming the inclusion in the net wealth of the assessee as amount due to the parties (the Lisbon fund).

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• 2020 (3) TMI 581
  Maintainability of appeal - monetary limit - low tax effect - HELD THAT:- Revenue contention that said Circular is prospective and cannot be made applicable to the pending matters, which we are not inclined to accept in the light of law laid down by Coordinate Bench of this Court in the case of COMMISSIONER OF INCOME TAX ANOTHER V/S RANKA RANKA [ 2011 (11) TMI 449 - KARNATAKA HIGH COURT] wherein it has been held that scope of Circular issued by Central Board of Direct Taxes would be applicable to the pending proceedings, which also came to be affirmed by Apex Court in the case DIRECTOR OF INCOME TAX V/S S.R.M.B DAIRY FARMING (P) LTD. [ 2017 (11) TMI 1494 - SUPREME COURT] . In fact, Central Board of Direct Taxes has also issued an instruction bearing No.F.No.279/MISC/M-93/2018-ITJ dated 20.08.2019 intimating all the Principal Chief Commissioners of Income Tax that Circular No.17/2019 would be applicable on all pending SLPs/appeals/cross objections/references. Hence, contention of learned counsel Sri.E.I.Sanmathi stands rejected. Present appeal as already noticed herein above, being an off shoot of common order passed by ITAT, this appeal also deserves to be dismissed. Accordingly, appeal stands dismissed as not maintainable

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• 2020 (3) TMI 580
  Net taxable wealth - Assessment of net taxable wealth on the immovable property - share of flat at Khairatabad - HELD THAT:- It is not in disputed that the house was not under repair. In these circumstances, it cannot be presumed that the house is habitable. In such situation, it cannot be treated as a residential property in the true sense. Further, the Ld. WTO has adopted the market value on estimate basis without any supporting evidence which is not justifiable. Considering the above facts of the issue, we are of the considered view that the aforesaid residential house cannot be treated as an asset exigible for wealth tax. However, only the undivided share in the land attributable to the residential flat shall be exigible for wealth tax which the Ld. WTO shall estimate after obtaining the value from the Stamp Valuation Authority of the State Government and by considering all the relevant factors and thereafter arrive at the taxable wealth. It is ordered accordingly. share of land at Jubilee Hills - We are of the considered view that the ad-hoc estimate of the market value of the immovable asset is not justifiable. Further, the unfinished building cannot be treated as a building exigible to wealth tax. However, the urban land is exigible to wealth tax as per section 2(ea)(v) of the Act. Accordingly, the Ld. WTO is hereby directed to obtain the market value of the land from the Stamp Valuation Authority of the state Government for the relevant assessment year and after considering all the relevant factors estimate and adopt the same for computing the taxable wealth of the assessee. Land at Kapra - Assessee had intimated to the Ld. WTO that the land purchased along with others were for the purpose of the business viz., construction of flats which are to be subsequently sold and therefore it should be treated as stock in trade. Further the assessee had also conducted in such a manner so as to establish that the land was purchased for the purpose of business by obtaining permission for construction from GHMC. In such situation, merely because the permission for granting construction from GHMC was applied on 25/7/2009 it is not appropriate to treat the urban land as asset U/s. 2(ea)(i)(v) of the Act because the moment the land is purchased for trading it has to be treated as stock-in-trade and section 2(ea)(i)(2) vividly exempts stock in trade within the purview of assets for the purpose of computing taxable wealth. Hence, we do not subscribe to the view of the Ld.WTO. Accordingly, we hereby direct the Ld. WTO to exclude the land at Kapra for the purpose of determining the taxable wealth of the assessee. Land at Katedan - Assessee should be provided with one more opportunity to justify his claim with cogent evident before the Ld. WTO. Accordingly, we hereby remit back the matter to the file of Ld. WTO for de novo consideration on the issue. Land at L.B. Naga - We are of the considered view that the assessee should be provided with one more opportunity to justify his claim with cogent evident before the Ld. WTO on this issue also. Accordingly, we hereby remit back this issue to the file of Ld. WTO for de novo consideration. Motor Car - On perusing the issue, we are of the view that the Ld. WTO has rightly assed the motor car to wealth tax because neither the assessee is in the business of running motor car nor hiring them. Further the motor car is not held by the assessee as stock in trade. Therefore, we do not find any infirmity in the order of the Ld. WTO on this issue.

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