TMI Tax Updates - e-Newsletter
March 28, 2020

Case Laws in this Newsletter:

GST Income Tax Insolvency & Bankruptcy CST, VAT & Sales Tax

Articles

1. Refund of wrongly paid amount as Tax

   By: CA Akash Phophalia

2. GST reliefs announced in Press Conference dated March 24, 2020 on COVID- 2019

   By: Kashish Gupta

3. PRESS RELEAS OF FM –RELIEF AND RELAXATION IN FINANCIAL SERVICES IN VIEW OF COVID 19 – more relief is desirable for deferment of EMI of housing and other loans.

   By: DEVKUMAR KOTHARI

4. Synopsis of recent notification issued under GST on 21st March'2020 and 23rd March'2020

   By: Ashwarya Agarwal

News

1. THE FINANCE ACT, 2020

2. Shri Piyush Goyal holds video conference with Export Promotion Councils representatives;

3. Seventh Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

4. Governor’s Statement - Seventh Bi-monthly Monetary Policy Statement, 2019-20, March 27, 2020

5. Petroleum & Explosives Safety Organization takes various measures to address the problems faced by Petroleum, Explosives, Oxygen and Industrial Gas Industries

6. Shri Piyush Goyal holds video conference with stakeholders from e-Commerce and Logistics industry;

Notifications

Customs

1. 33/2020 - dated 26-3-2020 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver

2. 32/2020 - dated 26-3-2020 - Cus (NT)

Amendment in Notification No. 27/2020-CUSTOMS (N.T.), dated 19th March, 2020

GST - States

3. G.O.MS.No. 50 - dated 17-2-2020 - Andhra Pradesh SGST

Seeks to amend Notification G.O.Ms.No.83, Revenue (Commercial Taxes– II) Department, Dated 16.02.2018

4. G.O.MS.No. 49 - dated 17-2-2020 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Amendment) Rules, 2020

5. G.O.Ms.No. 47 - dated 17-2-2020 - Andhra Pradesh SGST

WAIVER OF LATE FEES PAYABLE UNDER SECTION 47 OF THE APGST ACT, 2017 FOR FAILURE TO FILE THE RETURN IN FORM GSTR-1 FROM JULY, 2017 TO NOVEMBER, 2019, WITHIN THE DUE DATE.

6. G.O.MS. No. 52 - dated 17-2-2020 - Andhra Pradesh SGST

Seeks to amend Notification G.O.Ms. No.588, Revenue (Commercial Taxes - II) Department, dated the 12th December, 2017

7. G.O.Ms. No. 48 - dated 17-2-2020 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2019

8. 07/2020-State Tax - dated 5-2-2020 - Maharashtra SGST

Prescribe due dates for filing of return in FORM GSTR-3B in a staggered manner.

9. 06/2020-State Tax - dated 5-2-2020 - Maharashtra SGST

Seeks to extend 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.

10. Maharashtra Ordinance No. V Of 2020. - dated 2-2-2020 - Maharashtra SGST

Maharashtra Goods & Services Tax, (Amendment) Ordinance, 2020 (Mah. Ordinance No-V of 2020).

11. 02/2020-State Tax - dated 20-1-2020 - Maharashtra SGST

Maharashtra Goods and Services Tax (Amendment) Rules, 2020.

SEZ

12. S.O. 1220 (E) - dated 26-3-2020 - SEZ

Central Government notifies the 7.67 hectares area at SIPCOT IT Park, Siruseri, Egattur Village, Thiruporur Taluk, Chengalpattu District in the State of Tamil Nadu and constitutes an Approval Committee

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DCR1/CIR/P/2020/49 - dated 27-3-2020

Relaxation from compliance with certain provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 due to the COVID-19 pandemic.

GST - States

2. Circular No. 07/2020 (State) - dated 5-3-2020

Reverse charge Mechanism (RCM) on renting of Motor Vehicles

3. 01T of 2020 - dated 6-2-2020

Reimbursement of SGST applicable on tickets of Movies.

Highlights / Catch Notes

GST

• Petitioner's Bank Accounts Frozen Over GST Liabilities; Agrees to Pay Rs. 5.5 Crores to Avoid Coercive Action.

  Case-Laws - HC : Freezing of petitioner's Bank Accounts - GST liability of the petitioner qua Delhi is about ₹ 11.5 crores and for PAN India’s is ₹ 59.24 crores approximately. - on payment of ₹ 5.5 crores within two days from the date of defreezing of its all accounts, no coercive action be taken against the petitioner till it continue abiding by the undertaking given today. An undertaking be filed in the course of the day.
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• Petitioner Granted 45 Days to Correct TRAN-1 Form; Respondents to Verify CENVAT Credit Claims Before GST Transition.

  Case-Laws - HC : CENVAT credit/transitional credit - inputs/input services/capital goods - situation prior to GST regime - petitioner is permitted to file or revise their already filed incorrect statutory form TRAN-1 either electronically or manually within a period of 45 days from today. - respondents shall be at liberty to verify the genuineness of the claim of the petitioner.
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Income Tax

• Black Money Act Proceedings Delayed by COVID-19; Bar Council of West Bengal Urges Lawyers to Avoid Court Participation.

  Case-Laws - HC : Proceeding undertaken under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Due to the prevailing situation of the pandemic COVID-19 and Resolution of the Bar Counsel of West Bengal directing the lawyers not to appear in any judicial proceedings, none of the Counsel are present to assist the Court - Accordingly, the assessment order is stayed till April 24, 2020
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• Cinema Hall Subsidies Excluded from Tax Assessment Under Government Scheme to Boost Film Industry.

  Case-Laws - HC : Subsidy pursuant to a scheme formulated and implemented by the Government for promotion of construction of Cinema Halls and support the film industry - revenue or capital subsidy - Subsidy in the given circumstance will definitely constitute ‘capital subsidy’ and it is to be excluded from assessment of tax
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• Taxpayer Purchase Figures Align with Certified Data; No Grounds for Additions Based on Tentative Figures.

  Case-Laws - AT : Additions towards Bogus purchases - When the figures of purchase shown by the assessee in the profit and loss account are matching with the figures certified by the Sales Tax Department and VAT return filed by the assessee, then no addition can be made on the basis of earlier tentative figure shown by the assessee as per Sales Tax Department.
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• Reopening Tax Assessment Needs Solid Grounds, Not Doubt; Section 148 Reasons Deemed Insufficient.

  Case-Laws - AT : Reopening of assessment u/s 147 - Merely creating a doubt of the transaction does not suffice the Assessing Officer to reopen the case u/s 148 - AO has to give proper reasons in case those documents are not at all produced in the original assessment itself. The reasons recorded by the Assessing Officer u/s 148 are not complete reasons and lack in the context of invocation of Section 148 itself.
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• Section 68 Case: No Cash Exchanged, No Unexplained Credit Entry Needed in Cash Book.

  Case-Laws - AT : Unexplained cash credit u/s 68 - When the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise.
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• Tax Dispute: Payments Classification u/ss 194C or 194H Sent Back for Assessing Officer's Verification.

  Case-Laws - AT : Short deduction of TDS - TDS u/s 194C or 194H - nature of contract payments - there is contradictory in the submissions of the assessee as the assessee has taken plea before the authorities below that it is a commission payment towards selling of goods, whereas as per TDS return as well as copy of ITR-IV of the Payee, which is in the nature of contract payments. - Matter restored before AO for verification.
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• Deduction for Replanting Costs Denied u/r 7A: Expenses for New Rubber Planting Must Be Capitalized, Not Deducted.

  Case-Laws - AT : Disallowance of claim of deduction on cost of replanting under Rule 7A - The assessee does not have a case that the expenses incurred under the head replanting and maintenance are for infilling through replacement of dead trees or other trees that have become useless. On the contrary, it is an admitted position that the replanting expenses and maintenance expenses are incurred for planting new area of rubber and not an area already planted with yielding rubber. - Expenditures need to be capitalized.
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• Court Rejects TNMM for Brokerage Income Transfer Pricing; Prefers Internal CUP Method for Fairness in AE Transactions.

  Case-Laws - AT : TP Adjustment - adjustment of brokerage income - assessee also filed submission before the TPO providing detailed explanation with regard to the differences in services provided to the AE and Non-AEs and explanation in support that TNMM was the most appropriate method to determine the ALP of brokerage earned from AEs. - No merit in the submission that TNMM is the correct method and internal CUP would entail adhoc adjustment to price in so far as broking commission from AE and Non AEs are concerned.
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IBC

• Guarantor's Independent Liability Allows Section 7 Application; Creditor Cannot Sue Debtor and Claim in Guarantor Insolvency.

  Case-Laws - AT : Initiation of CIRP - if the ‘Contract of Guarantee’ itself mentions that the liability of a Guarantor will be independent and separate than that of ‘Principal Debtor’s liability, then an application against the Guarantor as per Section 7 is maintainable. The only rider will be that a Creditor is not permitted to do the same, sue the principal Debtor and claim in the Guarantor’s Insolvency at the same time. - AT
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• CIRP Application Dismissed Due to Improper Authorization Predating Insolvency and Bankruptcy Code.

  Case-Laws - Tri : Maintainability of Application for CIRP - The application is not maintainable on the ground of proper authorisation itself which is of the year 2015 when the IB Code was not in existence - Application dismissed. - Tri
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VAT

• Petitioner opts for offense compounding over contesting penalty; barred from challenging penalty merits under composition order.

  Case-Laws - HC : Levy of penalty - Had the petitioner contested the notice on merits and opposed the proposal for imposing penalty or handing down punishment, all aspects could have been gone into. The petitioner instead opted for compounding of offence. Thereupon the Superintendent of Taxes passed the composition order. Petitioner now cannot challenge it on merits. - HC
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Case Laws:

• GST

• 2020 (3) TMI 1150
  Restriction on Input Tax Credit (ITC) - Scope of Section 17(5)(d) - construction of immovable property (shopping malls) intending for letting out for rent - input tax credit from construction against output GST on rental income - it was held by High Court that if the assessee is required to pay GST on the rental income arising out of the investment on which he has paid GST, it is required to have the input credit on the GST, which is required to pay under Section 17(5)(d) of the CGST Act. HELD THAT:- Issue notice - List on 2-12-2019.

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• 2020 (3) TMI 1149
  Freezing of petitioner s Bank Accounts - It is alleged the bona fide of the petitioner can be ascertained from the very fact that even while its M.D. was in custody, the petitioner have been paying some or the other amount in the account of the respondent towards clearing its tax liability - HELD THAT:- On payment of Rs. 5.5 crores within two days from the date of defreezing of its all accounts, no coercive action be taken against the petitioner till it continue abiding by the undertaking given today. An undertaking be filed in the course of the day. This order shall be without prejudice to rights and contentions of both the parties on merits. Petition disposed off.

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• 2020 (3) TMI 1148
  CENVAT credit/transitional credit - inputs/input services/capital goods - situation prior to GST regime - denial on the ground that the case of the petitioner does not fall under the category of technical error - HELD THAT:- Similar issue decided in the case of UNION OF INDIA ORS. VERSUS ADFERT TECHNOLOGIES PVT. LTD. [ 2020 (3) TMI 188 - SC ORDER] where it was held that the petitioner is permitted to file or revise their already filed incorrect statutory form TRAN-1 either electronically or manually within a period of 45 days from today. Thus, respondents shall be at liberty to verify the genuineness of the claim of the petitioner. However, the petitioner shall not be denied of their legitimate claim of CENVAT/ITC on the ground of non filing of TRAN-1 by 27/12/2017. As this Court has allowed this writ petition, the respondent shall not cancel the GST registration of the petitioner. The respondent shall be free to take appropriate action in accordance with law after permitting the petitioner to remove the technical glitch (omission while uploading the information on GST Board). Petition allowed.

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• Income Tax

• 2020 (3) TMI 1147
  Exemption u/s 11 - application for registration u/s.12AA denied - assessee failed to file documentary evidences to enable him to bring satisfaction about the genuineness of the assessee-trust activities - HELD THAT:- Since according to assessee, the assessee had already submitted the required documents before Ld.CIT(E), but the same do not find mention in the order. Therefore, it can be inferred that those documents filed by the assessee were not considered. The principle of audi alteram partem is the basic concept of natural justice. The expression audi alteram partem implies that a person must be given an opportunity to defend himself. This principle is sine qua non of every civilized society. The right to notice, right to present case and evidence, right to rebut adverse evidence, right to cross examination, right to legal representation, disclosure of evidence to party, report of enquiry to be shown to the other party and reasoned decisions or speaking orders. We took this guidance for right of hearing, from the ratio as is laid down in the case of Maneka Gandhi v. Union of India, [ 1978 (1) TMI 161 - SUPREME COURT] has laid down that rule of fair hearing is necessary before passing any order. We find that it is pre-decision hearing standard of norm of rule of audi alteram partem. We are, therefore, of the view that matter requires reconsideration at the level of Ld.CIT(E) - While setting aside the order of Ld.CIT(E), we restore it back to Ld.CIT(E) and direct that all the documents filed by the assessee be considered and assessee be given one more opportunity of being heard and to file any other documents before the Ld.CIT(E) - Decided in favour of assessee for statistical purposes.

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• 2020 (3) TMI 1146
  Proceeding undertaken under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Due to the prevailing situation of the pandemic COVID-19 and Resolution of the Bar Counsel of West Bengal directing the lawyers not to appear in any judicial proceedings, none of the Counsel are present to assist the Court - HELD THAT:- This matter needs to be heard properly with the assistance of the Counsel appearing on behalf of both the parties. Assessment order that has been passed subsequent to the filing of the writ petition is required to be stayed for a limited period of time only. In the light of the same, I direct the authorities not to take any coercive step in pursuance of the assessment order that had been passed. The assessment order is also stayed for the time being to prevent the limitation period for filing appeal to expire. Accordingly, the assessment order is stayed till April 24, 2020. This matter shall appear on April 1, 2020 at the top of the list under the heading Court Application . In the event, the Court starts functioning normally prior to April 1, 2020, parties shall be at liberty to mention. Point of maintainability of this writ petition is kept open.

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• 2020 (3) TMI 1145
  Subsidy pursuant to a scheme formulated and implemented by the Government for promotion of construction of Cinema Halls and support the film industry - revenue or capital subsidy - character of the receipt - HELD THAT:- As decided in SAHNEY STEEL AND PRESS WORKS LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX [ 1997 (9) TMI 3 - SUPREME COURT] if the monies are given to an assessee for assisting him for carrying out the business operation and the money is given only after and conditional upon commencement of the production, such subsidies must be treated as assistance for the purpose of trade. Applying the said legal position to the given case, the purpose of the scheme as evident from Annexure A/2, and in particular Rule 1, is obviously for promoting the construction of new Cinema Theaters. The effective date is given under Rule 3, as 14.01.1980 . The eligibility conditions are mentioned in Rule 4 and Rule 5 stipulates the measure of subsidy , which could be aspired by the assessee. Going by the said Rules, it is quite clear that the extent of benefit payable to an Assessee by way of subsidy is quantified with reference to the entertainment tax as specified under Rule 5([k). But for fixing the extent of benefit payable, Annexure A/2 does no where mention that the purpose of subsidy is to promote the trade or business. On the other hand, it is explicitly clear that the said scheme was introduced by the Government to promote the construction of new cinema theaters in the State and as such, the contention raised by the learned Standing Counsel for the Department to the contrary can only be repelled. Subsidy in the given circumstance will definitely constitute capital subsidy and it is to be excluded from assessment of tax under the provisions of the Income Tax Act.

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• 2020 (3) TMI 1144
  Addition being the provident fund amount paid as per arrangement between the assessee, a contractor under the principal Tata Refractory Ltd. - HELD THAT:- Assessee has submitted plausible evidence in his command to show that the as agreed by the assessee-contractor and TRL-contractee, the amount of provident fund to be deducted was calculated and statement was submitted by the assessee to the financial department of TRL, obviously with an object to comply with the provident fund proceedings - there is no evidence either before authorities below or before the Tribunal to show that as per the instruction of the assessee, the TRL deducted the provident fund from the billing amount of the assessee for further depositing the same to the provident fund department/competent authority - restore the issue to the file of AO for limited verification as to whether the TRL has deducted the provident fund from the bill raised by the assessee for further depositing the same to the provident fund authority/competent authority. Accordingly, ground No.1 of the assessee is allowed for statistical purposes Bogus purchases - tentative and provision figures shown by the assessee as per the Sales Tax Department in absence of any verification or audit by the Sales Tax Department - HELD THAT:- When the figures of purchase shown by the assessee in the profit and loss account are matching with the figures certified by the Sales Tax Department and VAT return filed by the assessee, then no addition can be made on the basis of earlier tentative figure shown by the assessee as per Sales Tax Department. Accordingly, ground No.2 of assessee is allowed

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• 2020 (3) TMI 1143
  Reopening of assessment u/s 147 - whether no incriminating material against the assessee and was reopened after the expiry of the time limit prescribed under the Income Tax Act, 1961? - HELD THAT:- Section 143 assessment was completed in respect of discount and rebate which was categorically inquired by the Assessing Officer during the original assessment. All the details were before the Assessing Officer and after verification only the Assessing Officer passed original assessment without giving any adverse finding to that effect. It is pertinent to mention that the bank statement called for and the information given by the bank to the Assessing Officer itself reveals that the transaction and the payments were the genuine payments in respect of discount and rebate. There is no doubt or suspicious arise from the perusal of these documents. Merely creating a doubt of the transaction does not suffice the Assessing Officer to reopen the case u/s 148 - AO has to give proper reasons in case those documents are not at all produced in the original assessment itself. The reasons recorded by the Assessing Officer u/s 148 are not complete reasons and lack in the context of invocation of Section 148 itself. Therefore, the reopening itself is bad and hence the assessment is bad in law. The appeal of the assessee is allowed. Assessment u/s 153A - addition for bogus claim of rebate/incentive/discount amount - HELD THAT:- There is no incriminating material shown by the Assessing Officer upon which the addition was made. In fact, the seized ledger accounts pertains to A.Y. 2011-12 only and therefore the said material cannot be held against the assessee for A.Y. 2012-13 and also cannot be termed as incriminating material. While making the additions on these documents, the Assessing Officer has not specifically pointed out that these expense but has disallowed all these expenses only on ad-hoc basis which is not permissible under the Income Tax Act. Therefore, the additions made itself does not have any foundation as such. Thus, the appeal of the Revenue does not sustain

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• 2020 (3) TMI 1142
  Penalty u/s 271(1)(c) - disallowance u/s 14A on estimated basis made proportionately out of the finance charges - HELD THAT:- Assessee has shown all the expenses in the Profit Loss account and there is no dispute about the particulars provided in the books of accounts nor the A.O has rejected the book results since no such finding is appearing in the penalty order as well as appellate order. There is no mandatory rule that for earning exempt income assessee has to incur any expenditure. It is only when the A.O is satisfied about the type and amount of expenses which have been incurred specifically for earning the exempt income and has been debited to Profit Loss account for claiming expense against the revenue liable to be taxed. In the instant case the disallowance u/s 14A is on estimated basis made proportionately out of the finance charges. There is no case of concealment of particulars of income or furnishing of inaccurate particulars of income since the amount has been duly debited as expenses in Profit Loss account. Since no bonafide intention or mensrea on the part of the assessee is appearing on the face of the record placed before us, we are of the considered view that A.O was not justified in levying the penalty u/s 271(1)(c) - Decided in favour of assessee.

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• 2020 (3) TMI 1141
  Unexplained cash credit u/s 68 - share capital and share premium received by the assessee during the year under consideration - HELD THAT:- When the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. In our opinion, the ratio of this decision of the Hon ble Jurisdictional High Court in the case of Jatia Investment Co. [ 1992 (8) TMI 16 - CALCUTTA HIGH COURT] is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in deleting the addition made by the AO u/s 68 by holding that the said provision was not applicable. - Decided in favour of assessee.

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• 2020 (3) TMI 1140
  Determination of Fringe Benefit Tax on travelling u/s. 115WE(3) - No opportunity to the assessee to produce the relevant supporting evidence to substantiate its claim - violation of principle of natural justice - HELD THAT:- Relevant details of the expenses claimed under the head travelling and conveyance were duly furnished by the assessee during the course of appellate proceedings before the CIT(Appeals) to show that the said expenses did not accrue any fringe benefit directly or deemingly to any person. CIT(Appeals) did not accept this claim of the assessee on the ground that any supporting voucher or documentary evidence to support and substantiate the said claim was not produced by the assessee-company. It appears that the CIT(Appeals), however, did not give any opportunity to the assessee to produce the relevant supporting evidence to substantiate its claim and rejected the claim of the assessee without giving such opportunity. There is thus a violation of principle of natural justice by the ld. CIT(Appeals) and keeping in view the same, we consider it fair and just to set aside the impugned order passed by the CIT(Appeals) confirming the additions made by the Assessing Officer to the fringe benefit value and restore the matter to the file of the Assessing Officer for deciding the same afresh after giving an opportunity to the assessee to produce the relevant supporting evidence to support and substantiate its claim that the expenses incurred on travelling and conveyance did not accrue any fringe benefit directly or deemingly to any person. - Appeal of the assessee is treated as allowed for statistical purposes.

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• 2020 (3) TMI 1139
  Short deduction of TDS - TDS u/s 194C or 194H - nature of contract payments - HELD THAT:- in the case of many instances the tax has been deducted @1% or 2% as per Section 194C of the Act which is clear from the exact break up of TDS return. He has also deducted TDS @2% u/s.194C of the Act. Further on perusal of the copies of Income Tax Return produced by the assessee of Shri Khagesh Patel in the form of ITR-IV, It is clear that Shri Khagesh Patel has offered the amount received from the assessee company as per Section 44AD of the Act. Section 44AD of the Act relates to the civil contract works but not for the commission received. We noted from the documents and submissions of the assessee, there is contradictory in the submissions of the assessee as the assessee has taken plea before the authorities below that it is a commission payment towards selling of goods, whereas as per TDS return as well as copy of ITR-IV of Shri Khagesh Patel, which is in the nature of contract payments. Therefore, in our considered opinion, to avoid confusion we think it fit to send back this issue to the file of AO for finding out the correct nature of payments made to Shri Khagesh Patel by the assessee company after providing reasonable opportunity of being heard to the assessee and the assessee is also directed to provide the documents and avoid in taking unnecessary adjournments. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Additional evidence filed by the assessee denied - violation of Rule 46A of the Income Tax Rules, 1962 - HELD THAT:- After hearing both the sides and perusing the entire material available on record, we noted that the documents provided by the assessee go to the root of the matter which are part of the records, therefore, the contention of the assessee is accepted and the matter is sent back to the file of AO for consideration of the documents and decide the issue as per law. The assessee is directed to cooperate with the department for early disposal of the case. This ground of appeal of the assessee is allowed for statistical purposes. Bogus purchases - assessee failed to produce copy of VAT return in the case of Asansol and Dhanbad purchase - VAT return was calculated at 12.5% on the purchased as shown by the assessee whereas as per the information of the AO which should have been calculated on the backward method - HELD THAT:- As perusing the entire material available on record and the documents submitted by the assessee,, which were filed before the AO and CIT(A) with proper documentary supports. Therefore, the documents filed by the assessee are hereby accepted and this issue is also sent back to the file of AO for proper adjudication of the issue. The assessee is directed to cooperate with the AO with necessary documents. This ground of appeal is allowed for statistical purposes.

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• 2020 (3) TMI 1138
  Corporate tax adjustment pursuant to denial of deduction u/s 10B - assessee had been claiming deduction u/s 80HHE of the Act upto to Assessment Year 1998-99 i.e. upto the 7th year from the establishment of the company - HELD THAT:- As decided in own case [ 2014 (4) TMI 929 - ITAT DELHI] and [ 2014 (1) TMI 1637 - ITAT DELHI] Assessing Officer ignored this fact that the assessee s 100% EOU was established in AY 1997- 98 related to AY 1998-99. AO denied exemption on surmises and conjectures by taking hyper technical approach. Since the assessee was entitled to exemption u/s 10B of the Act, then the period cannot be said to be exhausted in the year under consideration, hence we uphold the findings of the Commissioner of Income Tax(A) in the impugned order. Accordingly, ground no.2 of the revenue is dismissed. Transfer Pricing adjustments - Comparable selection - HELD THAT:- Appellant company was established as a back-end software services company and works mainly for its parent Infogain, USA. The appellant company is also registered under the STP Scheme and has been claiming tax u/s 10B of the Act, thus companies functionally dissimilar with that of assessee need to be deselected from final list.

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• 2020 (3) TMI 1137
  Addition u/s 68 as unexplained cash credit - genuineness or otherwise of the MOU - Additions based on statement of third party - HELD THAT:- On perusal of the MOU, we find that both the parties have agreed therein that the amount to the tune of Rs. 5.69 Crores has already been paid by M/s. U-Turn Housing Pvt. Ltd. prior to entering into such fresh MOU and the same shall be adjusted against the total consideration of Rs. 9.14 crores. The Court of ld. ADJ Jaipur has also taken cognizance of receipt of Rs. 5.69 crores by the assessee company. The said assertion in the MOU has also been confirmed separately by way of annual confirmation statement submitted before the AO duly signed by Shri Nikhil Tripathi and it is not the case of the Revenue that his signature on such confirmation was forged. Further, credit notes are issued by M/s. U-Turn Housing Pvt. Ltd. again signed by Shri Nikhil Tripathi drawing reference to MOU dated 14.07.2007 and stating that sum has been credited in account of the assessee company against sale proceeds of specified plots of land. As we have noted above, the payment of Rs. 3.89 Crores also corroborates with the books of accounts of M/s. U-Turn Housing Pvt. Ltd. The statement of Shri Nikhil Tripathi cannot be held as reliable piece of evidence against the assessee company in view of various discrepancies and lack of corroboration as we have discussed above. Further, there is no material on record which can form the basis to hold that the assessee company has received Rs. 3.26 crores in cash from M/s U-Turn Housing Pvt. Ltd. which has not been accounted for in its books of accounts during the financial year 2006-07. Addition made by the Assessing officer to this effect is hereby directed to be deleted. - Decided in favour of assessee.

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• 2020 (3) TMI 1136
  Deduction u/s 80P - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly.

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• 2020 (3) TMI 1135
  Deduction u/s 80P(2) - assessee was 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 the deduction u/s 80P(2) - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly

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• 2020 (3) TMI 1134
  Disallowance of claim of deduction on cost of replanting under Rule 7A of the Income-tax Rules, 1962 - assessee is a plantation company, which is fully owned by the Government of Kerala - assessee undertakes processing of latex into value added forms like centrifuging latex - HELD THAT:- The Hon ble Kerala High Court in the case of M/s.Rehabilitation Plantations Ltd. [ 2012 (6) TMI 570 - KERALA HIGH COURT ] had categorically held that the expenditure incurred for planting and development of plantation up to maturity has to be necessarily capitalized and it cannot be allowed as revenue expenditure. The assessee does not have a case that the expenses incurred under the head replanting and maintenance are for infilling through replacement of dead trees or other trees that have become useless. On the contrary, it is an admitted position that the replanting expenses and maintenance expenses are incurred for planting new area of rubber and not an area already planted with yielding rubber. The finding of the Hon ble Kerala High Court being very clear and categorical, the judgment is binding on the lower authorities. - Decided against assessee.

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• 2020 (3) TMI 1133
  TP Adjustment - adjustment of brokerage income - selection of MAM - AR prayed that the TNMM may be adopted as the most appropriate method and, without prejudice, if CUP method is to be adopted as the most appropriate method the adjustments to the cost structure be allowed to iron out the differences between the AE and Non-AE transactions - HELD THAT:- Assessee being an institutional brokerage house has earned significant brokerage commission from FII clients, which included AE and Non AE enterprises. The transactions from Non-AE FII clients, the assessee is required to provide broader range of services viz-a-viz services to AE FII clients did not include marketing and international sales support. We find that the assessee is dependent on the overall CLSA group resources without which the brokerage from FII clients could not have materialized. The assessee also filed submission dated 27.10.2014 before the TPO providing detailed explanation with regard to the differences in services provided to the AE and Non-AEs and explanation in support that TNMM was the most appropriate method to determine the ALP of brokerage earned from AEs. We find merit in the submission that TNMM is the correct method and internal CUP would entail adhoc adjustment to price in so far as broking commission from AE and Non AEs are concerned. Operating model of J P Morgan India Pvt. Ltd. [ 2014 (2) TMI 1215 - ITAT MUMBAI] is not comparable to that of the assessee as majority of the income in the case of J P Morgan India Pvt. Ltd was from related parties, whereas in the case of the assessee significant revenue is from third party FII clients Assessee could not have generated business from FII clients without the support of CLSA group resources, for which it is paying intra group service charges. Hence, in such a case, TNMM could be used as the most appropriate method. In view of these facts and circumstances, we are of the view that assessee has rightly followed the TNMM as the most appropriate method and the decision of the co-ordinate Bench in the case of J P Morgan India Pvt Ltd. [ 2014 (2) TMI 1215 - ITAT MUMBAI] is not applicable to the present set of facts of the assessee. Accordingly, we are inclined to set aside the order of the DRP and direct the TPO/AO to delete the adjustment of brokerage income Provision of sub-advisory services and information technology ( IT ) support services - Companies functionally dissimilar with assessee s services need to be deselected from final list. Addition with regard to sub-advisory services - comparability - Ladderup Corporate Advisors has to be excluded as the said company is into investment banking business and not rendering non-binding investment services. Similarly, Bombay High Court in the case of New Silk Route Advisors P. Ltd General Atlantic Private Ltd. and Goldman Sachhs (India) Securities Pvt Ltd. [ 2018 (8) TMI 384 - BOMBAY HIGH COURT] has held that merchant banking business cannot be company to nonbinding investment advisory services Mecklai Financial Services company is a persistent loss making company. It has incurred loss only during the year. We also find merit in the argument of the learned AR that product similarity is not important when the method selected for benchmarking is TNMM. Accordingly, we direct the TPO to hold Mecklai Financial Services as a valid comparable. ICRA Management Consulting Services Ltd. is accepted to be a comparable to non-binding investment advisory activity: See AGM INDIA ADVISORS PRIVATE LIMITED VERSUS DCIT, 10- (1) , AAYAKAR BHAVAN, MUMBAI AND VICE-VERSA [ 2016 (5) TMI 1335 - ITAT MUMBAI] - ICRA Management Consulting Services Ltd. and IDC India Ltd. as valid comparables. Allowability of repairs and maintenance charges of computers - allowable revenue expense - HELD THAT:- We find that additional evidences have been filed which have bearing on the issue involved and accordingly, we remit the issue back to the file of the AO to decide the same in the light of these fresh evidences as per facts and law. Needless to mention that in case, the AO finds these expenses to be in capital in nature, then the assessee may be allowed depreciation on that part of the capital expenditure @60% in terms of provisions of the Income tax Rules.

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• Insolvency & Bankruptcy

• 2020 (3) TMI 1132
  Maintainability of application - Appellant submits that the Deed of Guarantee for overall limit was executed by M/s. Genegrow Commercial Pvt. Ltd. on 05.10.2009 as Guarantor and that the account of the Corporate Debtor Gee Pee Infotech Pvt. Ltd. (Principal Borrower) was declared Non Performing Asset - scope of Claim and Default primarily committed by the Principal Borrower - section 7 of the I B Code - HELD THAT:- It is not in dispute that the Corporate Debtor (Being Corporate Guarantor of the Principal Borrower Gee Pee Infotech Pvt. Ltd.) had executed the Guarantee Deed on 05.10.2011 in respect of overall Limit and sanctioned in favour of the Financial Creditor . Also that a supplementary Guarantee Deed was executed between Corporate Guarantor and the Financial Creditor - As per Section 145 of the Indian Contract Act, 1872 in every contract of Guarantee , there is an implied promise by the Principal Debtor to indemnify the Surety . This court pertinently points out that a Financial Debtor includes Debt owed to the Creditor by both the Principal and the Guarantor. Section 3(11) of I B Code refers to a sum that it is due from any person including Corporate Debtor . A mere failure of the Guarantor to pay the Financial Creditor when the principal sum is demanded will come within the purview of default u/s 3(12) of the Code. A Financial Creditor who has a Guarantee on the Debt due can commence proceedings u/s 7 of I B Code against the Guarantor for failure to repay the sum borrowed by the Principal Borrower. It is to be remembered that if the Contract of Guarantee itself mentions that the liability of a Guarantor will be independent and separate than that of Principal Debtor s liability, then an application against the Guarantor as per Section 7 is maintainable. The only rider will be that a Creditor is not permitted to do the same, sue the principal Debtor and claim in the Guarantor s Insolvency at the same time. The Learned Adjudicating Authority had admitted the application u/s 7 of the I B filed by the Principal Borrower on 02.08.2019 in CP(IB)No.353/KB/2018. Also, on 02.08.2019 itself, the Learned Adjudicating Authority had admitted an application filed u/s 7 of the I B Code filed by the Financial Creditor against the Corporate Debtor Gengrow Commercial Pvt. Ltd. being the Corporate Guarantor of the Principal Borrower viz. Gee Pee Infotech Pvt. Ltd. for the very same debt/claim it is impermissible. Viewed in that perspective, this Tribunal comes to a consequent conclusion that the Application u/s 7 of the I B Code filed by the 1st Respondent/Bank/ Financial Creditor against the Corporate Debtor Gengrow Commercial Pvt. Ltd. is not maintainable in law and the same is accordingly dismissed but without costs.

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• 2020 (3) TMI 1131
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Section 7(5) of the Code provides for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred ; (b) the application under sub-section (2) of section 7 is complete ; (c) there is no disciplinary proceedings pending against the proposed resolution professional. The satisfaction of the three conditions is being examined: The first condition is that a default has occurred. The default in repayment of debt is supported by account statements filed by the bank at annexure P7 and certificate under section 2A(a) and 2A(b) of the Bankers Books Evidence Act, 1891 in support of the account statements appended with the petition. It is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as non- performing asset while one time settlement proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly. Thus, we do not see any merit in the contention of the respondent-corporate debtor and pendency of any one time settlement cannot be an embargo in triggering the provisions under the Code - It is the settled principle of law that CIRP is not a proceeding for recovery of money nor a suit or litigation. Hence, the interim order dated June 26, 2018 cannot come in the way of this Adjudicating Authority in initiation of CIRP against the respondent-corporate debtor, if all other requirements of the Code are satisfied. The second condition is that the application under section 7(2) is complete - it is already established that the application is complete. The third condition is that there are no disciplinary proceedings pending against the proposed resolution professional. In the present case, Shri Neeraj Bhatia, IBBI/IPA-001/IP-P00824/2017-18/11400, has been proposed as interim resolution professional. Form 2 filed by the proposed interim resolution professional is at page 374A of the petition. Shri Neeraj Bhatia has certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a resolution professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 2016. In view of the satisfaction of the conditions provided for in section 7(5) of the Code, the petition for initiation of CIRP in the case of M/s. S. A. Gold Ispat P. Ltd., is admitted - petition admitted - moratorium declared.

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• 2020 (3) TMI 1130
  Revival under Resolution Plan - application for clarification in regard to treatment of aforesaid claims of work men and employees and such other claims which have accrued during the non-implementation period and that whether the same should have priority over other dues - HELD THAT:- The claims received during the period between July 18, 2018 till July 7, 2019 can neither be treated as a part of insolvency resolution process costs nor do they fall within the ambit of liquidation cost and hence, cannot be accorded priority over other dues in terms of the provisions of the law. In respect of the aforesaid claims received during the period between July 18, 2018 till July 7, 2019 the applicant may rely on the statutory treatment of claims as laid down in section 53 of the IBC. Application disposed off.

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• 2020 (3) TMI 1129
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - financial debt is barred by time limitation or not - HELD THAT:- This Bench is of the view that the objections raised by the corporate debtor as regards to the authority for filing the petition under section 7 of the IBC and the financial debt being barred by limitation are not tenable. The financial creditor has placed on record the letter of authority issued in favour of Sh. P. Y. Jakkareddy, DGM, Corporation Bank and also the letters dated March 31, 2015 and February 13, 2018 clearly showing acknowledgment of debt by the corporate debtor within the limitation period, even if the date of default is considered as November 29, 2014 as pointed out by the corporate debtor. The financial creditor has established a default on the part of the corporate debtor in payment of their financial debt and succeeded in establishing a case for triggering the corporate insolvency resolution (CIR) process - The present petition being complete and having established the default in payment of the financial debt for the default amount being above Rs. 1,00,000, the petition is admitted in terms of section 7(5) of the IBC and accordingly, moratorium is declared in terms of section 14 of the Code.

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• 2020 (3) TMI 1128
  Maintainability of Application - Initiation of CIRP - valid authorization - Despite reminders the corporate debtor failed to pay the outstanding dues and, therefore, the operational creditor was compelled to issue demand notice under section 8 of the I and B Code seeking payment of the outstanding amount - HELD THAT:- It is found that the petition is filed by one Ms. Sneha Ranade on the basis of resolution passed by the board of directors of the operational creditor company on June 24, 2015, i. e., much before the Insolvency and Bankruptcy Code, 2016 came into force - only an authorised person as distinct from a power of attorney holder can make an application under sections 7, 9 and 10 and required to state his position in relation to the financial creditor. Palogix Infrastructure P. Ltd. v. ICICI Bank Ltd. [ 2017 (10) TMI 913 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] , speaks about the specific authorisation but in this case, the authorisation is of the year 2015, when the Code was not in existence. Hence, the question of any specific authorisation does not arise at all, otherwise also the resolution does not disclose any power to file application before the National Company Law Tribunal and/or any Tribunal - It is pertinent to mention here that during the course of hearing the learned lawyer appearing on behalf of the respondent submitted that the respondent has made part payment and trying to enter with an agreement to which the petitioner has denied. The application is not maintainable on the ground of proper authorisation itself which is of the year 2015 when the IB Code was not in existence - Application dismissed.

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• CST, VAT & Sales Tax

• 2020 (3) TMI 1127
  Filing of the appeals before statutory authorities and recovery of dues under various laws in the situation of outburst of Corona Virus pandemic - HELD THAT:- Issue notice. - In the meantime, there shall be ex-parte ad-interim stay of the impugned judgment and order(s).

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• 2020 (3) TMI 1126
  Levy of penalty - storage of goods even in an undisclosed unregistered godown - Section 66 of the Tripura Value Added Tax Act, 2004 - petitioner opted for Compounding of Offences - HELD THAT:- In the present case, it was not merely a case of the goods being found at an unregistered godown, as can be seen from the detention order the allegations also were that on the date of the raid the petitioner failed to produce relevant documents regarding compliance of the provisions of the VAT Act in respect of transport of taxable goods. Section 75 of the VAT Act makes several acts and omissions by a dealer punishable. Had the petitioner contested the notice on merits and opposed the proposal for imposing penalty or handing down punishment, all aspects could have been gone into. The petitioner instead opted for compounding of offence. Thereupon the Superintendent of Taxes passed the composition order. Petitioner now cannot challenge it on merits. Petition dismissed.

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