TMI Tax Updates - e-Newsletter
March 31, 2020

Case Laws in this Newsletter:

GST Income Tax Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. COMPANY’S INCOME TAX PROVISIONS APPLICABLE FOR AUDIT OF F.Y. 2019-20 A.Y 2020-21

   By: ROHIT KAPOOR

2. Audit by Tax Authorities - Snapshot

   By: CA Akash Phophalia

3. THE CENTRAL GOODS AND SERVICES TAX (THIRD AMENDMENT) RULES, 2020

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Relaxations provided on compliances to be met by units / developers / co‐developers of SEZs

2. The IBBI amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

3. Over 1.75 Lakh people visit Business Immunity Platform website in a week;

Notifications

IBC

1. IBBI/2020-21/GN/REG059 - dated 20-4-2020 - IBC

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020.

2. IBBI/2020-21/GN/REG058 - dated 20-4-2020 - IBC

Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2020

3. IBBI/2020-21/GN/REG057 - dated 20-4-2020 - IBC

Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2020.

Indian Laws

4. S.O. 1226(E) - dated 30-3-2020 - Indian Law

Seeks to amend Notification No. S.O. 115 (E), dated the 8th January, 2020

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DIL2/CIR/P/2020/50 - dated 30-3-2020

Continuation of Phase II of Unified Payments Interface with Application Supported by Block Amount due to Covid-19 virus pandemic

2. SEBI/HO/FPI&C/CIR/P/2020/056 - dated 30-3-2020

Temporary relaxation in processing of documents pertaining to FPIs due to COVID-19

3. SEBI/HO/IMD/DF1/CIR/P/2020/57 - dated 30-3-2020

Relaxation in compliance with requirements pertaining to Portfolio Managers

4. SEBI/HO/IMD/DF1/CIR/P/2020/58 - dated 30-3-2020

Relaxation in compliance with requirements pertaining to AIFs and VCFs

5. SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2020/ 53 - dated 30-3-2020

Relaxation from compliance with certain provisions of the circulars issued under SEBI (Credit Rating Agencies) Regulations, 1999 due to the COVID-19 pandemic and moratorium permitted by RBI.

6. SEBI/HO/CFD/CMD1/CIR/P/2020/55 - dated 30-3-2020

Extension of deadline for implementation of the circular on Stewardship Code for all Mutual Funds and all categories of AIFs due to the CoVID– 19 pandemic

GST - States

7. Order No. 01 /2020 – State Tax - dated 10-2-2020

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the Central Goods and Service Tax Rules, 2017 in certain cases

8. 01/WBGST/PRO/2020 - dated 10-2-2020

Authorization under rule 86A of the WBGST Rules, 2017

FEMA

9. 24 - dated 30-3-2020

Investment by Foreign Portfolio Investors (FPI): Investment limits

10. 25 - dated 30-3-2020

‘Fully Accessible Route’ for Investment by Non-residents in Government Securities

DGFT

11. Trade Notice No. 59/2019-2020 - dated 28-3-2020

Retrospective issuance of Certificates of Origin under India’s Trade Agreements.

Customs

12. PUBLIC NOTICE No. 14/2020 - dated 26-2-2020

Empanelment of Chartered Engineers for valuation of Second Hand Machinery/ Goods in the Office of the Commissioner of Customs, Imports, Chennai — Calling for application

13. PUBLIC NOTICE No. 12/2020 - dated 25-2-2020

24x7 Clearance - Extension of examination, assessment, clearance and Lab under Chennai Customs Zone till 31.05.2020

14. PUBLIC NOTICE NO. 22/2020 - dated 21-2-2020

Facilitation of trade for speedy clearance of import and export consignments from and to China in the wake of recent outbreak of Novel Coronavirus

15. Public Notice No. 21/2020 - dated 19-2-2020

Streamlining export data to include District level details in Shipping Bills

16. Public Notice No. 23/2020 - dated 14-2-2020

Renewal of appointment of M/s. Central Warehousing Corporation, Logistic Park as “Custodian” of the Imported goods.

17. Public Notice No.12/2019-20 - dated 12-2-2020

Registration of Shipping Lines, Freight Forwarders and Non vessel operating common carrier (NVOCC) and other members of Trade and Industry which are covered under “Handling of Cargo in Customs Areas Regulations, 2009”

18. PUBLIC NOTICE NO. 02/2020 - dated 3-2-2020

Amendment in Import Policy of items under Exim code 151190 of Chapter 15 of ITC (HS), 2017 Schedule — I (Import Policy)

19. PUBLIC NOTICE No. 02/2020 - dated 31-1-2020

Amendment in Public Notice No. 101/2019 dated 17.12.2019 regarding Import Policy of toys

20. PUBLIC NOTICE No. 03/2020 - dated 16-1-2020

Levy and Collection of Social Welfare Surcharge(SWS) on imports under various schemes such as Merchandise Exports from India Scheme(MElS), Services Exports from India Scheme (SEIS), etc

21. PUBLIC NOTICE No. 01/2020 - dated 13-1-2020

ICES Advisory 01/2020 (SCMTR) dated 13.01.2020 Registration and Application Process for all the Stakeholders

22. PUBLIC NOTICE No. 05/2020 - dated 7-1-2020

ICES Advisory 01/2020 (SCMTR) dated 13.01.2020 Registration and Application Process for all the Stakeholders

Highlights / Catch Notes

GST

• Court Rules: No Condonation for Late Appeals Under OGST Act's Section 107; Article 226 Can't Extend Deadlines.

  Case-Laws - HC : Condonation of delay in filing appeal - time limitation - Section 107 of the OGST Act - When the Statute is clear about the limitation, this Court, in exercise of the jurisdiction under Article- 226 of the Constitution of India, cannot direct the appellate authority to entertain the appeal.
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Income Tax

• Reopening of Assessment u/s 147 Invalid Due to Over Four-Year Gap; Deemed Dividend Not Applicable to Petitioner.

  Case-Laws - HC : Reopening of assessment u/s 147 - deemed dividend addition u/s 2(22)(e) - gap of more than four years - when the amount received by the two concerns from the loan giver company was neither received by the petitioner nor was it for the benefit of the petitioner, such amount cannot be considered as deemed dividend in the hands of the petitioner, and consequently no income accrued to the petitioner from such transactions - in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment, the reopening of assessment beyond a period of four years from the relevant assessment is without authority of law.
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• Tax Dispute: CIT(A) Must Refer Property Valuation to DVO u/s 56(2)(ii)(b) for Accurate Income Assessment.

  Case-Laws - AT : Addition being difference between the actual sale consideration and the stamp valuation of immovable property - deemed income u/s 56(2)(ii)(b) - CIT(A) has coterminous powers with the assessee officer, ought to have referred the matter for valuation to the Departmental Valuation Officer( in short DVO). - Directed accordingly.
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• Section 263 Revision: Non-Compliance with Section 144C(1) is Not Curable u/s 292B of Income Tax Act.

  Case-Laws - AT : Revision u/s 263 - failure to adhere to requirement of section 144C(1) - This requirement the courts has been held to be mandatory that gives substantive rights to assessee to object to any additions, before they are made, and such objections have to be considered not by the assessing officer but by the DRP. We therefore reject the argument of Ld. CIT DR that failure to adhere to requirement under 144C (1) is curable defect u/s. 292B of the Act.
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• Revenue Must Prove Actual Sales in Seized Diary u/ss 153C and 69A; Presumptions Insufficient.

  Case-Laws - AT : Assessment u/s 153C - Unexplained cash receipt u/s 69A - The onus was on revenue to prove with corroborative evidence that the entries in the seized dairy actually represented the sales made by the assessee. Mere entries in the seized material was not sufficient to prove that the assessee has indulged in such a transaction - additions based on mere presumptions and assumptions and without any corroborative evidence could not be sustained.
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• Clarification Needed on Asset Classification as "Plant" or "Office Equipment" Due to Insufficient Details; CIT(A) to Investigate Further.

  Case-Laws - AT : Additional depreciation should be regarded as “Plant” or “Office Equipment” - As we have already observed there is complete lack of details to decide whether the assets in question are “Plant” or “Office equipment” in the absence of the role these assets perform and purpose for which these assets are used by the Assessee. - CIT(A) directed to determine the issue.
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• Assessee's appeal dismissed for revenue expense treatment; interest income classified as capital receipt adjusted against pre-op expenses.

  Case-Laws - AT : Nature of Interest income - first ground of appeal of the assessee for treating expenses to the amount as revenue expenditure is dismissed. However, the alternative ground of appeal of the assessee for treating the interest income earned on fixed deposit pertaining to prior period commencement of business is allowed by treating the impugned interest income as capital receipt which is adjusted against pre-operative expenses of the assessee.
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• Section 11 Exemption Denied Due to Typographical Errors; Minor Mistakes Shouldn't Block Statutory Benefits Without Explicit Requirement.

  Case-Laws - AT : Exemption u/s 11 denied - certain mistakes were made in ticking of certain circle - i A typographical mistake or minor procedural lapse cannot act as an estoppel to deny statutory benefit to the assessee unless statute lays down the condition for claiming benefit or deduction or there is statutory violation.
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• Transfer Pricing Case: Arm's Length Adjustments Not Allowed for Debt-Free Company's Outstanding Receivables as Loans.

  Case-Laws - AT : TP Adjustments - Arm’s Length adjustment in respect of outstanding receivables - the assessee is a debt free company as is reflected in the profit and loss account - re-characterisation of the outstanding receivables as loan is impermissible unless the transactions are found to be substantially at variance with the stated form.
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• Transfer Pricing Dispute: TPO's Benefit Test on Technical Know-How Fees Violates Rule 10B and 10AB.

  Case-Laws - AT : TP Adjustment - Technical know-how fees paid by Appellant to its Associated Enterprise - For the year under consideration (AY 204-15), we notice that TPO has applied Benefit Test which is not as per the rules prescribed under Rule 10B & 10AB of Income Tax Rules. In our view, the payment of Technical knowhow was never bench marked in the earlier AYs.
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• Court Denies Bad Debt Claim Due to Lack of Evidence Showing Amount was Previously Taxed as Income.

  Case-Laws - AT : Disallowances of bad-debt - to avail the benefit of the bad debt written off the impugned amount should have been recognised as income/offered to tax previoulsy. However in the present case the assessee admittedly failed to produce any evidences to the effect that the impugned amount have already been recoginsed as income of the assessee - Additions confirmed.
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• Assessee's unexplained cash credits u/s 68 and undisclosed bank account lead to confirmed addition by authorities.

  Case-Laws - AT : Unexplained cash credit u/s 68 - Undisclosed bank account - the assessee has not filed any satisfactory explanation or documentary evidence either before authorities below neither before us - Addition confirmed.
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• Section 254(2) limits rectifications to clear record mistakes, excluding judgment errors. Tribunal order had rectifiable mistake.

  Case-Laws - AT : Rectification u/s mistake u/s 254 - apparent mistake in the order of Tribunal warranting rectification - scope of section 254(2) is limited to rectification of mistake apparent from record itself and not rectification in error of judgment
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DGFT

• India Allows Retrospective Issuance of Certificates of Origin Amid COVID-19 Disruptions to Support International Trade Compliance.

  Circulars : Retrospective issuance of Certificates of Origin under India’s Trade Agreements. - On account of the lockdown/curfew in India due to the COVID-19 pandemic - Trade Notice
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Indian Laws

• New Indian Stamp Act Amendments from Finance Act 2019 Effective July 1, 2020, Streamline Securities Stamp Duties Nationwide.

  Notifications : AMENDMENTS TO THE INDIAN STAMP ACT, 1899 vide Finance Act, 2019 will come into from 1.7.2020 (date extended from 31.3.2020) - Notification
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• Interim court orders from March 16, 2020, automatically extended until May 15, 2020, due to COVID-19 lockdown.

  Case-Laws - HC : Extension of expiry dates of interim order in the event of Lockdown in the event of Corona Virus outbreak - in all matters pending before this court and courts subordinate to this court, wherein such interim orders issued were subsisting as on 16.03.2020 and expired or will expire thereafter, the same shall stand automatically extended till 15.05.2020 or until further orders, except where any orders to the contrary have been passed by the Hon’ble Supreme Court of India in any particular matter, during the intervening period.
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IBC

• Regulation 13 details procedures for inspecting insolvency professionals, ensuring compliance and accountability in India's bankruptcy framework.

  Act-Rules : Inspection or Inquiry - Regulation 13 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 as amended
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• Regulation 7 outlines registration requirements for insolvency professionals, including application, eligibility, renewal, and suspension conditions.

  Act-Rules : Certificate of registration. - Regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 as amended
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• Amended Model Bye-Laws for Insolvency Professional Agencies Enhance Governance and Efficiency per IBBI Regulations 2016.

  Act-Rules : MODEL BYE-LAWS OF AN INSOLVENCY PROFESSIONAL AGENCY - SCHEDULE of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 amended
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• Regulation 40C: Lockdown Period Excluded from Insolvency Timeline Calculations to Accommodate COVID-19 Delays in India.

  Act-Rules : Special provision relating to time-line - Exclusion of period of lockdown imposed by Central Government - New Regulation 40C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016
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• CIRP initiation timely as debt acknowledgments by borrower and debtor extend limitation; NCLT Kolkata application valid.

  Case-Laws - AT : Initiation of CIRP - Period of limitation - here is an acknowledgment of Debt by the Principal Borrower but also the Corporate Debtor on 27.5.15 & 8.12.18 respectively.The object of specifying time limit for limitation is undoubtedly based on ‘Public Policy’.The application projected before the Adjudicating Authority(NCLT) Kolkata Bench, on 13.2.19 is well within limitation and not barred by Limitation.
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SEBI

• Deadline Extension for Stewardship Code Compliance for Mutual Funds and AIFs Due to COVID-19 Challenges.

  Circulars : Extension of deadline for implementation of the circular on Stewardship Code for all Mutual Funds and all categories of AIFs due to the CoVID– 19 pandemic - Circular
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• SEBI Offers Temporary Relief to Credit Rating Agencies Amid COVID-19 Challenges, Easing Compliance Burdens Under 1999 Regulations.

  Circulars : Relaxation from compliance with certain provisions of the circulars issued under SEBI (Credit Rating Agencies) Regulations, 1999 due to the COVID-19 pandemic and moratorium permitted by RBI. - Circular
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Service Tax

• Bank's Cheque Dishonor Charges Excluded from Service Tax Value u/r 5(1); Demand Set Aside.

  Case-Laws - AT : Valuation - bank collects charges for dishonouring of the cheques, which are recovered by the appellant from their clients - inclusion of such reimbursable charges in assessable value or not - Rule 5(1) - the said expenses are reimbursable expenses - Demand set aside.
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• Company Wins Right to CENVAT Credit on Service Tax for External Office Rent and Maintenance Costs.

  Case-Laws - AT : CENVAT Credit - input services - service tax paid on rent of premises which is used as office of the company outside the company - Department was of the view that the appellant is not eligible for credit of service tax paid towards rent as well as maintenance charges for the premises outside the factory - credit allowed.
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Central Excise

• Penalty Imposed for Duplicate CENVAT Credit Claim on Single Invoice Despite Reversal by Party.

  Case-Laws - AT : Imposition of penalty - irregularly availed CENVAT Credit - credit availed on the same invoice twice in the month of June 2014 - It is contended that, they had no intention to evade payment of Cenvat credit and they had already reversed the amounts on being pointed out by the department - Evidently, nobody can legitimately claim Cenvat credit twice on one invoice. - Levy of penalty confirmed.
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• Valuation Dispute in Related Party Transactions Under Central Excise Laws Dismissed Due to Lack of Evidence.

  Case-Laws - AT : Valuation - related party transaction - apart from the units being inter-connected undertakings there is nothing to show that the buyers and seller are related persons. There is no mutuality of interest or fund flow brought out by evidence on the part of the department - Demand set aside.
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Case Laws:

• GST

• 2020 (3) TMI 1205
  Application for revocation of the cancellation order - rejected on the ground that, the petitioner is liable to pay interest for the delayed payment - HELD THAT:- Petitioner submits that the petitioner has also paid interest in the meantime. The writ application disposed off directing the petitioner to file a detailed representation before the CT GST Officer, Barbil Circle, Jajpur- Opp. Party No.3 within a week from today.

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• 2020 (3) TMI 1204
  Condonation of delay in filing appeal - time limitation - Section 107 of the OGST Act - HELD THAT:- The petitioner filed appeal beyond the limitation of four months and the appellate authority admittedly had no authority to condone the delay in preferring the appeal. When the appeal was dismissed on the ground of delay vide order dated 06.12.2019, the petitioner has filed this writ application along with medical reports in respect of the petitioner to show that he had reason not to approach the appellate authority during the time allowed by the Act. When the Statute is clear about the limitation, this Court, in exercise of the jurisdiction under Article- 226 of the Constitution of India, cannot direct the appellate authority to entertain the appeal. Application disposed off.

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• Income Tax

• 2020 (3) TMI 1203
  Reopening of assessment u/s 147 - deemed dividend addition u/s 2(22)(e) - gap of more than four years - failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment - second mode of payment envisaged under clause (e) of section 2(22) viz. to any concern in which such shareholder is a member or a partner and in which he has substantial interest. - HELD THAT:- In the facts of this case, the petitioner being an individual does not fall in the first category; and since his gross total income is only Rs. 1.48 crores, he also does not fall under the second category of enterprises. Therefore, also there does not appear to be any specific requirement for the petitioner to disclose such transaction. In the aforesaid premises, this court is of the view that on the reasons recorded by the Assessing Officer, he could not have formed the belief that income chargeable to tax has escaped assessment. If the contention of the learned counsel for the respondent that the fact as to whether the petitioner has benefitted from the transaction or not is a matter to be decided at the stage of evaluation of the material during the course of re-assessment were to be accepted, it would amount to allowing the Assessing Officer to make a fishing inquiry to ascertain as to whether or not any income has escaped assessment. For the purpose of invoking section 147 AO has to form a belief that income chargeable to tax has escaped assessment and not that income chargeable to tax may have escaped assessment. In the facts of this case, the petitioner being an individual does not fall in the first category; and since his gross total income is only Rs. 1.48 crores, he also does not fall under the second category of enterprises. Therefore, also there does not appear to be any specific requirement for the petitioner to disclose such transaction. In the aforesaid premises, this court is of the view that on the reasons recorded by the Assessing Officer, he could not have formed the belief that income chargeable to tax has escaped assessment. If the contention of the learned counsel for the respondent that the fact as to whether the petitioner has benefitted from the transaction or not is a matter to be decided at the stage of evaluation of the material during the course of re-assessment were to be accepted, it would amount to allowing the Assessing Officer to make a fishing inquiry to ascertain as to whether or not any income has escaped assessment. In the facts of the present case, it is not the case of the Assessing Officer that the petitioner has received any loan from the loan giver company or that the loans advanced by the loan giver company in which the petitioner had shareholding of not less than 10% of the voting power to the two concerns in which the petitioner had substantial interest was for the benefit of the petitioner. The petitioner had also disclosed the extent of his shareholding in the loan giver as well as loan receiver companies. The reopening of assessment is founded on the premise that the petitioner did not disclose the transactions between the loan giver company in which he had shareholding not less than 10 per cent of the voting power and the loan receiver concerns in which he had substantial interest. However, as discussed earlier, when the amount received by the two concerns from the loan giver company was neither received by the petitioner nor was it for the benefit of the petitioner, such amount cannot be considered as deemed dividend in the hands of the petitioner, and consequently no income accrued to the petitioner from such transactions. In the absence of any finding having been recorded by the Assessing Officer that any income had accrued in favour of the petitioner, it is not possible to say that there was any obligation cast upon him to disclose such transactions. Under the circumstances, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment, the reopening of assessment beyond a period of four years from the relevant assessment is without authority of law. - Decided in favour of assessee.

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• 2020 (3) TMI 1202
  Exemption u/s 11 - condonation of delay in filing Form 10 - claim of accumulation requires filing of Form 10 within the specified time limit - whether the prescription of Form 10 for the purpose of accumulation under section 11(2) was mandatory or directory - HELD THAT:- The Supreme Court in the case of Commissioner of Income Tax V. Nagpur Hotel Owners Association [ 2000 (12) TMI 99 - SUPREME COURT] considered the question of whether the prescription of Form 10 for the purpose of accumulation under section 11(2) was mandatory or directory. The conclusion was that the requirement of filing Form 10 at the time of assessment was only directory and it would suffice if the same were filed even thereafter so long as relevant information in support of the claim of accumulation was furnished by the assessee even at the time of assessment. The impugned order of assessment in this case refers to the claim of accumulation and the details of such accumulation. For this reason and in line with the judgment of Supreme Court in Nagpur Hotel [ 2000 (12) TMI 99 - SUPREME COURT] that has also been followed by this Court in the case of Commissioner of Income Tax V. Spic Educational Foundation [ 2019 (2) TMI 1438 - MADRAS HIGH COURT] the petitioner was permitted on 06.01.2020 to file a petition for condonation of delay in filing Form 10 and the Commissioner of Income Tax (Exemptions), who is the proper authority to consider the condonation of delay was impleaded suo motu in the Writ Petition as second respondent. The second respondent was directed to consider the submissions of the petitioner, and to dispose the delay condonation petition within a specified time limit. The matter was listed today for production of a copy of the order of the Commission either accepting or rejecting the request for condonation and it is seen that vide order dated 28.01.2020 passed under Section 119(2)(b) of the Act, R2 has, after consideration of the submissions of the petitioner, condoned the delay. The impugned assessment which rejects the claim of exemption solely on the ground of non-filing of Form 10 is thus set aside and the matter remitted to the file of the Assessing Authority to be re-done de novo, taking into account order of R2 dated 28.01.2020.

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• 2020 (3) TMI 1201
  Disallowance u/s 40(a)(ia) - payment of shipment expenses - Amount paid or payable during the year under consideration - HELD THAT:- Provision of section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Therefore, respectfully following the discussions made, analysis done and the judgment passed by Hon ble ITAT, Lucknow Bench-B in the case of Ama Medical Diagnostic Centre [ 2014 (5) TMI 931 - ITAT LUCKNOW] it is held that the assessee was required to deduct TDS on the full amount paid or payable during the year under consideration. Since, the same has not been done, which is an admitted fact by the appellant during the appellate proceedings, therefore, in my considered opinion, the A.O. has rightly made the disallowance u/s 40(a)(ia) of the IT Act. Accordingly, the action of the A.O. is upheld. - Decided against assessee

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• 2020 (3) TMI 1200
  TP Adjustment - addition made under royalty segment and advertisement segment - MAM selection - Adopting the CUP method for comparing ALP of advertisement expenses - HELD THAT:- Admittedly TPO has not made any adjustment upon segregating trading and manufacturing segment. However, Ld. AR vehemently submitted that, the two segments cannot be segregated, as they are interlinked and intertwined with each other and that assessee has determined the ALP by using TNMM at entity level. It is observed that, this issue has been considered by this Tribunal in assessee s own case for AY 2003-04, 2007-08, 2008-09 and 2010-11.TPO for AY 2012-13 accepted manufacturing and trading segment as integrated and combined transaction for purpose of determining ALP under TNMM. Revenue has not been able to establish any factual differences between the year under consideration as well as preceding Assessment and successive assessment year. More over Revenue has accepted combined transaction approach of Trading and Manufacturing segment in immediate subsequent assessment year. We therefore do not find any reason to deviate from the same. Further Ld. TPO has held Trading and Manufacturing segments independently to be at arm s length. On the basis of above discussions, respectfully following earlier orders of this Tribunal, we direct Ld.AO/TPO to compute ALP by considering trading and manufacturing segments as interlinked with each other and as a combined transaction. Addition made to royalty - Assessee in transfer pricing study considered royalty as a part of operating expenses in TNMM as most appropriate method. AR submitted that comparison of percentage of average royalty in respect of comparables was submitted which comes to 3% and 2.27%. Whereas assessee has paid royalty to its AE at 5%. He submitted that, since average percentage of royalty expenditure on net sales of assessee is much lower than percentage of royalty and R D expenditure on net sales of proposed comparables, the transaction of royalty payments to AE has to be treated at arm s length. It is also been submitted that, most of the auto parts companies are paying royalty of 3% to 5% and assessee is being royalty at 3% on part sales. He thus submitted that, even if royalty is to be considered independently, the transaction is at arm s length as compared to the comparables considered by Ld.TPO. We agree with the submissions made by Ld. AR insofar as considering the margin of transaction computed by assessee vis-a-vis average margin of comparables. However, in our view this needs to be verified by Ld. AO/TPO. Direct Ld.AO/TPO to consider the above submissions of assessee and to recompute ALP of the transaction, in accordance with law. It is also directed that, comparables considered by Ld.TPO in the order passed under section 92CA of the Act, should be considered for computing ALP of the tr ansaction.Accordingly, we set aside this issue back to Ld. AO/TPO with the aforestated directions. A djustment made towards the claim of expenditure - HELD THAT:- We are of the opinion that Ld. AO/TPO shall verify the details filed by assessee and to compute ALP of transaction by using most appropriate method, that would be applicable in accordance with law. Needless to say, that assessee shall be granted proper opportunity of being represented.

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• 2020 (3) TMI 1199
  Addition being difference between the actual sale consideration and the stamp valuation of immovable property - deemed income u/s 56(2)(ii)(b ) - Non reference of matter for valuation to DVO HELD THAT:- There is no dispute with regard to the fact that assessee had purchased immovable property and there was a difference of value as disclosed by the assessee and adopted by the Stamp Valuation Authority. It is also not a case where the assessee objected before the AO regarding valuation adopted by the Stamp Valuation Authority. The assessee first time made objection before the Ld. CIT(A) regarding valuation of the property. Since the Ld. CIT(A) has coterminous powers with the assessee officer, ought to have referred the matter for valuation to the Departmental Valuation Officer( in short DVO). Therefore, set aside this issue to the file of Ld. CIT(A) for deciding afresh after referring the matter to the DVO. The assessee would also be at liberty to file a valuation report if so advised. Assessee s Grounds allowed for statistical purposes.

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• 2020 (3) TMI 1198
  Rate of tax deductible on the payments made to the non-resident USA company in respect of Fee for Technical Services (FTS) - @25% under section 260AA (1) (i) OR @15% - order passed under section 201(1) and 201(1-A) - India - USA DTAA - CIT-A held that the action of the Assessing Officer in treating the assessee as assessee in default on the ground that instead of 20% it should have deducted tax at the rate of 25% was not justified and granted relief on that count, since the assessee had withheld tax at source at the rate of 20% as per clause (iii) of section 206AA (1) - HELD THAT:- Hon ble jurisdictional High Court in the case of Danisco India Private Limited [ 2018 (2) TMI 1289 - DELHI HIGH COURT] dealt with this aspect and while approving the decision of the Tribunal in the case of Serum Institute of India Ltd. [ 2015 (6) TMI 26 - ITAT PUNE] held that having regard to the position of law explained in Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT] and later followed in numerous decisions that a Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. Issue being covered squarely by the order of the Tribunal in the case of Serum Institute of India Ltd. (supra) and the decision of the Hon ble High Court in the case of Danisco India Private Limited (supra), in the absence of any decision to the contrary, while respectfully following the same, we do not see anything illegality or irregularity in the findings of the Ld. CIT(A).

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• 2020 (3) TMI 1197
  Revision u/s 263 - failure to adhere to requirement under 144C (1) - HELD THAT:- For assessment year 2008-09, Ld.AO passed final assessment order immediately within 2 days of receipt of report from Ld. TPO whereas for assessment year 2009-10 final assessment order was passed after a period of 6 months from the date of receipt of transfer pricing report. Admittedly, present assessee is an eligible assessee, as defined in section 144C (15) (b) of the Act. On perusal of section 144C of the Act, non-compliance with section in case of an eligible assessee cannot be considered to be a mere irregularity as has been argued by Ld. CIT-DR. Plethora of decisions referred to herein above and relied upon by Ld.AR supports this view. Admittedly, in present facts of the case, for years under consideration, the Ld.AO has not followed the mandate required under section 144C (1), wherein he is required to forward draft of proposed order of assessment to the eligible assessee, if he proposes to make any variation in the income or loss returned, which is prejudicial to the interest of assessee. This is a non-obstinate clause that gives an overriding effect to the procedure. Various Hon ble Court s in decisions relied upon like TURNER INTERNATIONAL INDIA PVT. LTD.[ 2017 (5) TMI 991 - DELHI HIGH COURT] , LIONBRIDGE TECHNOLOGIES PVT. LTD., [ 2018 (12) TMI 764 - BOMBAY HIGH COURT] , JCB INDIA LTD. [ 2017 (9) TMI 673 - DELHI HIGH COURT] , CONTROL RISKS INDIA PVT. LTD. [ 2017 (7) TMI 1077 - DELHI HIGH COURT] and M/S ESPN STAR SPORTS MAURITIUS [ 2016 (4) TMI 45 - DELHI HIGH COURT] has held that procedure laid down u/s 144C of the Act is of great importance. When an assessing officer proposes to make variation to the returned income declared by an eligible assessee, he has to first pass draft order, provide a copy thereof to assessee and only thereupon the assessee could exercise the right under 144C (2) of the Act to raise objections before DRP on proposed variations. This requirement the courts has been held to be mandatory that gives substantive rights to assessee to object to any additions, before they are made, and such objections have to be considered not by the assessing officer but by the DRP. We therefore reject the argument of Ld. CIT DR that failure to adhere to requirement under 144C (1) is curable defect u/s. 292B of the Act. - Decided in favour of assessee.

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• 2020 (3) TMI 1196
  Assessment u/s 153C - Unexplained cash receipt u/s 69A - HELD THAT:- The only basis of making impugned addition was loose paper found at the premises of the third party. However, no corresponding incriminating material was found from assessee s premises which would corroborate the same. In fact, each and every document impounded from assessee s premises was explained during the course of assessment proceedings and no infirmity could be found in the same. It was incumbent upon Ld. AO to make further inquiries in the matter to substantiate the veracity of the loose paper and bring on record cogent material / evidences to establish that cash was received by the assessee. In the absence of any such incriminating material/ evidences, no such addition could be made in the hands of the assessee. It is also evident that booking of flats against which the cash was alleged to be received by the assessee was already cancelled much before the date of search and cheque amount was already refunded by assessee to other party which would further weaken the stand of Ld.AO. Therefore, no fault could be found with the approach of Ld. first appellate authority. Our view find support from the decision rendered in CIT V/s Maulikkumar K.Shah [ 2007 (7) TMI 267 - GUJARAT HIGH COURT] wherein Hon ble Court refused to admit revenue s appeal, inter-alia by noting that Ld. AO had not brought any corroborative material on record to prove that on-money was received. The onus was on revenue to prove with corroborative evidence that the entries in the seized dairy actually represented the sales made by the assessee. Mere entries in the seized material was not sufficient to prove that the assessee has indulged in such a transaction - additions based on mere presumptions and assumptions and without any corroborative evidence could not be sustained. - Decided against revenue.

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• 2020 (3) TMI 1195
  TP Adjustment - determination of Arm s Length Price (ALP) in respect of an international transaction of rendering of Software Development Services by the Assessee to its Associated Enterprise - HELD THAT:- At the time of hearing it was brought to our notice by the learned counsel for the Assessee that the issue with regard to determination of ALP has been settled under Mutual Agreement Procedure (MAP) between the Assessee and the revenue and the AO has under rule 44H(4) of the Income Tax rules, 1962 has given effect to the MAP resolution vide proceedings dated 22.2.2016. Hence, the relevant grounds of appeal raised by the Assessee as well as the revenue are dismissed as not requiring adjudication. Deduction u/s.80JJAA in respect of employment of new workmen - first reason assigned by the AO for denying the claim for deduction u/s.80JJAA of the Act was that persons working in software industry cannot be said to be Workmen for the purpose of Sec.80JJAA - HELD THAT:- AO also noticed that in Assessee s own case for AY 2001-02 and 2002-03, the Tribunal had not accepted the stand of the revenue in this regard but still chose not to follow the decision of the Tribunal as the revenue has not accepted the decision of Tribunal and had preferred appeal to the Hon ble High Court on this aspect of deduction u/s.80JJAA - On the question whether the employees employed in software industry can be said to be Workmen , the Bangalore Bench of ITAT has already settled this issue in Assessee s own case. The Tribunal held that Software Industry has also been notified as Industry for the purpose of Industrial Disputes Act, 1947 by the State of Karnataka and that the employees employed in software development industry render technical services and not services in the nature of supervisory or management character. In view of the aforesaid decision of the Tribunal, we are of the view that the above reason given by the AO for denying the benefit of deduction u/s.80JJAA of the Act cannot be sustained. In fact the CIT(A) in the impugned order has also not sustained the disallowance of deduction u/s.80JJAA of the Act on this ground and has followed the earlier order of the Tribunal in Assessee s own case. Additional wages paid to these 287 employees were not eligible to deduction u/s.80-JJAA of the Act because these employees did not work for more than 300 days in FY 2006-07 relevant to AY 2007-08, the wages paid to these employees in AY 2008-09 will also not qualify for deduction u/s.80JJAA - if some workmen were employed for a period of less than 300 days in the previous year then no deduction is allowable in respect of payment of wages to such work men in the present year even if such workmen was employed in the preceding year for more than 300 days but in the present year, such workmen was not employed for 300 days or more. By the very same reasoning the fact that in the first year of employment the additional wages paid is not allowed deduction for the reason that the workmen did not work for 300 days or more but if the next two Assessment years, if he works for more than 300 days each, then the deduction u/s.80JJAA of the Act has to be allowed. It is not proper to say that if the deduction is refused in the first year of employment of the new employee then for the next two succeeding Assessment Years also, the benefit of deduction will not be available. Such an approach defeats the very purpose for which deduction u/s.80JJAA of the Act is allowed for three consecutive Assessment years. This aspect has now been clarified in the Finance Act, 2018 by adding a second proviso to the definition of additional employee in Explanation (ii) to Sec.80JJAA of the Act. Even prior to such curative or clarificatory amendment, we are of the view that the claim for deduction u/s.80JJAA of the Act cannot be and ought not to have been disallowed on this ground. We therefore direct that the deduction claimed by the Assessee should be allowed. Capital work in progress written off - Whether expenditure in question cannot be regarded as capital expenditure and was incidental to carrying on business of the Assessee and was revenue expenditure? - HELD THAT:- Identical claim has been considered capital expenditure by the tribunal in AY 2007-08, we find no reason to take a contrary view. The nature of the capital work in progress written off being identical, respectfully following the decision of the Tribunal, we uphold the orders of the revenue authorities. We also find all the case laws cited by the learned counsel for the Assessee before us were dealt with and distinguished by the AO. We are also of the view that the damages though was in connection with a claim for not engaging the services of the contractor in future for other contracts cannot be regarded as having no nexus with the capital work in progress written off in the books of accounts of the Assessee and therefore to that extent the claim for deduction and cannot be allowed as deduction and were rightly held to be capital expenditure by the revenue authorities. Assessee has submitted that a sum was disallowed u/s.40(a)(i)/(ia) of the Act and that sum is also part of the sum of Rs. 4,42,14,942 which was disallowed by the AO as capital expenditure and therefore to the extent of Rs. 61,04,942/- there has been a double addition made by the revenue authorities. We are of the view that it would be just and appropriate to direct the AO to look into this aspect while giving effect to the decision of the Tribunal after affording opportunity of being heard to the Assessee and if the contention is found to be correct, allow relief to the Assessee. Disallowance of additional depreciation claimed - description of the items of plant and machinery on which additional depreciation was claimed by the Assessee were such that those items cannot be regarded as Plant and Machinery but were to be regarded as Office Equipment on which additional depreciation cannot be claimed u/s.32(1)(iia) - HELD THAT:- Application of section 32(1)(iia ) what is required to be satisfied in order to claim the additional depreciation is that a new machinery or plant, which has been set up, should have been acquired and installed after 31-3-2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed after 31-3-2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a windmill had nothing to do with the manufacture of textile goods was totally not germane to the specific provision contained in section 32(1)(iia ). In the light of the aforesaid decision in VTM LIMITED [ 2009 (9) TMI 35 - MADRAS HIGH COURT] we are of the view that one of the basis on which the revenue authorities disallowed the claim of the Assessee for disallowance of additional depreciation cannot be sustained. Whether the assets on which the Assessee claimed additional depreciation should be regarded as Plant or Office Equipment ? - In the case of CIT Vs. IBM World Trade Corpn. [ 1977 (11) TMI 4 - BOMBAY HIGH COURT] wherein the Hon ble Bombay High Court held the expression office equipment used in Sec.33 should be construed in context of appliances which are generally used in office as an aid for proper function of office and that EA machines, data processing machines installation and operation of which is on scientific basis, and which has their roles to play cannot be equated with office appliances and therefore such machines are Plant and not Office appliances . As we have already observed there is complete lack of details to decide whether the assets in question are Plant or Office equipment in the absence of the role these assets perform and purpose for which these assets are used by the Assessee. We therefore set aside the order of CIT(A) on this limited issue of determining whether the assets on which additional depreciation is claimed by the Assessee can be regarded as Plant. The Assessee is directed to furnish the details and description to the AO in this regard, who shall decide the issue afresh in accordance with law. TDS u/s 194C OR 194I - payment of lease rental on finance lease of cars - addition u/s.40(a)(i) 40(a)(ia) - HELD THAT:- We are of the view that the AO made the addition only on the basis of provisions of Sec.194C of the Act and he did not invoke the provisions of Sec.194I of the Act. As far as provisions of Sec.194C of the Act is concerned, we are of the view that the CIT(A) has rightly come to the conclusion that payment of lease rentals under a finance lease will not attract the provisions of Sec.194C of the Act. Nature of expenditure - Treating amount paid towards automation software as revenue expenditure - AO however did not allow the claim of the Assessee by concluding that the expenditure was capital expenditure and therefore only depreciation at 60% would be allowed and not the entire expenditure - HELD THAT:- A copy of the group cost allocation Agreement dated 24.3.2006 is at page -406 of Assessee s paper book. The agreement is between Texas Instruments Inc., USA and the Assessee. The Agreement refers to the US parent company of the Assessee having acquired license to use EDA tools from the vendors and the right of the Assessee to use the same and the fact that billing will be done on the Assessee on the basis of actual use of the software by the Assessee. It is thus clear that the Assessee had acquired no right or interest whatsoever in the EDA tools and had only a right to use the software. It is not the case of the revenue that the EDA tools was not connected to the business of the Assessee. In such circumstances, we are of the view that the deduction was rightly allowed by the CIT(A) as revenue expenditure.

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• 2020 (3) TMI 1194
  Non commencement of business - disallowance of expenses - HELD THAT:- It is not substantiated with relevant evidences that business has been set up. We have also gone through the judicial pronouncements referred by the ld. counsel and noticed that facts of these cases are distinguishable from the case of the asssessee. In the case of CIT Vs. Samsung India Electronics Ltd. [ 2013 (7) TMI 335 - DELHI HIGH COURT] the assessee company was ready to commence trading operation as on the date of incorporation viz. 3.8.1995. In the case of Prem Conductors (P) Ltd. Vs. CIT [ 1976 (3) TMI 28 - GUJARAT HIGH COURT] it was seen that assessee company has started accepting orders for production of goods since very date of its incorporation. In the light of the facts of the case, material on records and judicial findings, we consider it is not substantiated that assessee has commenced its business operations during the year under consideration and the expenses claimed by the assessee company appeared to be at the stage of setting up of its business, therefore, this ground of appeal is dismissed. Whether interest income earned from temporary deposit of the fund brought by way of share capital are inextricably linked to setting up of manufacturing facilities and same should be considered as capital in nature and should be reduced from the cost of the project? - HELD THAT:- Once it has been considered that assessee has not commenced its business, therefore, the interest income earned by the assessee prior to the commencement of the business is required to be treated as capital receipt - See INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED, NEW DELHI VERSUS INCOME TAX OFFICER [ 2009 (2) TMI 32 - DELHI HIGH COURT] We consider that the impugned interest receipt by the assessee company is related to the prior period to commencement of business which is in nature of capital receipt and was required to be set off against pre-operative expenses. Therefore, first ground of appeal of the assessee for treating expenses to the amount as revenue expenditure is dismissed. However, the alternative ground of appeal of the assessee for treating the interest income earned on fixed deposit pertaining to prior period commencement of business is allowed by treating the impugned interest income as capital receipt which is adjusted against pre-operative expenses of the assessee. Therefore, the alternative ground of appeal of the assessee is allowed.

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• 2020 (3) TMI 1193
  Exemption u/s 11 denied - filing the return of income online electronically, certain mistakes were made in ticking of certain circle - instead of clicking yes whether assessee is registered u/s.12A/12AA, by mistake assessee has clicked No - Rectification of mistake u/s 154 - deduction claimed has been disallowed while processing the return of income by the CPC - HELD THAT:- Once, the assessee has brought on record that not only it is registered u/s.12A but has also filed form 10B, then it is incumbent upon the Assessing Officer to allow the benefit of Section 11 and compute the income in accordance with law, when it brought to his notice. Certain clerical/typographical mistake in filing of return of income cannot deny the benefit which is otherwise available under the provisions of the Act, especially when such defect or mistake is brought to the notice of the Assessing Officer. The reasoning given by the Ld. CIT(A) to deny the deduction simply on the ground that assessee itself has mentioned that it was not registered u/s.12A has filled up the columns wrongly cannot be upheld. A typographical mistake or minor procedural lapse cannot act as an estoppel to deny statutory benefit to the assessee unless statute lays down the condition for claiming benefit or deduction or there is statutory violation. Looking to the facts and circumstances of the case, we direct the Assessing Officer to verify the claim of the assessee and compute the income in accordance with law as contained in Sections 11 to 13 and grant exemption/benefit allowable to the assessee. - Decided in favour of assessee for statistical purposes.

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• 2020 (3) TMI 1192
  Arm s Length adjustment in respect of outstanding receivables - argument of the AR that the receivables are not independent transactions separate from the transaction of sale; that receivables are merely an offshoot of commercial transactions and cannot be viewed on standalone basis - HELD THAT:- There is no denial of the fact that operating profit margin earned by the assessee from the services rendered to AEs is 45.88% and the same is significantly higher than the working capital adjusted results for comparables at 22.07%. Working capital adjustment is an adjustment for the opportunity cost of capital for investments made in working capital, which require capital and operating assets and an uncontrolled entity is expected to earn a market rate of return on that required capital independent of the services that it provides. The amount of capital required to support the services is dependent upon the level of inventory, debtors and creditors measured at a particular percentage of the total cost and had impact on the profits from investing at different levels of working capital due to the differences in the cash collection cycle which imply differences in credits granted to the customers which activity is similar to an additional service for which the markets would pay. In Kusum Healthcare Private Ltd. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] held that working capital adjustment takes into account the impact of outstanding receivables on the profitability. Not in dispute that the assessee is a debt free company as is reflected in the profit and loss account wherein the interest charges are only Rs. 30,278/-. It is, therefore, clear that the assessee does not have any interest where borrowed funds were utilized for extending any kind of loan to its AEs, so that transfer pricing adjustment could be made. In the case of BC Management Services Pvt. Ltd. [ 2017 (12) TMI 255 - DELHI HIGH COURT] held that notional income on account of delayed payment cannot be treated as part of income and be made subject matter of adjustment. It is, therefore, clear that re-characterisation of the outstanding receivables as loan is impermissible unless the transactions are found to be substantially at variance with the stated form. There is no denial of the fact that in the assessment year 2012-13, this question of adjustment on account of receivables was dealt by the CIT(A) and by referring to the decision of Hon ble jurisdictional High Court in the case of Kusum Healthcare Private Ltd.(supra), deleted the entire adjustment suggested by ld. TPO on account of interest on outstanding receivables. We, agree with the submission of the ld. AR that because the ld. CIT(A) did not have the benefit of decision of Hon ble jurisdictional High Court in the case of Kusum Healthcare Pvt. Ltd. (supra), the issue was held otherwise for the assessment year 2009-10. Addition made on account of arm s length price adjustment in respect of outstanding receivables cannot be sustained and we, therefore, while allowing grounds Nos. 1 to 3, direct the ld. Assessing Officer to delete the addition. Disallowance u/s. 14A read with Rule 8D - HELD THAT:- On a reading of the order in [ 2019 (7) TMI 1590 - ITAT DELHI] for assessment year 2011-12 in assessee s own case, we find that this issue stands covered and in the absence of any reason to show why the view taken by the Tribunal in assessee s own case on identical facts and circumstances should not be followed, we find that mechanical application of Rule 8D is not tenable and the addition made on this account has to be deleted.

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• 2020 (3) TMI 1191
  TP Adjustment - Technical know-how fees paid by Appellant to its Associated Enterprise - HELD THAT:- From the aforesaid decision of Tribunal in AY 2013-14 [ 2019 (9) TMI 1342 - ITAT, MUMBAI] we find that TPO determined the ALP of international transaction, without resorting to the method prescribed in the Act, which has been set aside by the Tribunal. We have further noted that in AY 2013-14 the ld. DR for the revenue also made prayed to restore the issue to the file of TPO for fresh determination of ALP; the same was not accepted by the coordinate bench, in the earlier. For the year under consideration (AY 204-15), we notice that TPO has applied Benefit Test which is not as per the rules prescribed under Rule 10B 10AB of Income Tax Rules. In our view, the payment of Technical knowhow was never bench marked in the earlier AYs. Considering the totality of the facts and circumstances and the fundamental question that revenue should not be deprived of legitimate tax due to the exchequer. Therefore, in order to bench mark this transaction and to determine proper ALP, of the international transaction, we are inclined to remit this issue back to TPO/AO to determine the ALP afresh as per Rule 10B 10AB of the I.T. Rules. Needless to order that before making fresh bench marking in accordance with Rule 10AB 10B read with section 92C, the TPO/ AO shall provide opportunity of hearing to the assessee. Accordingly, the Ground No 1 of the appeal is allowed for statistical purpose.

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• 2020 (3) TMI 1190
  Unexplained cash credit u/s 68 - Unexplained loan - HELD THAT:- Assessee claimed to have accepted loan of Rs. 85 lakhs from the parties through the involvement of the undisclosed bank account namely Bank of India. However, the assessee has shown receipt of cheques amounting to Rs. 66.5 lakhs from the parties as detailed in table shown somewhere in the preceding paragraph of this order. The difference amount of Rs. 18.5 lakhs transferred out of cash deposit were held as unexplained cash credit under section 68 of the Act by us while deciding the loan amount of Rs. 50 lakh from Shri Nilesh N Panchal in vide paragraph no 8.5 of this order. Therefore in our considered view treating entire cash deposit and making the addition of same to the income of the assessee will lead to double addition to tune of Rs. 18.5 lakh in the hand of the assessee. As the same was already confirmed by us while deciding the genuineness of the loan received. Remaining amount of cash deposit - AR before us agreed to addition with regard to cash deposit. Accordingly we sustain the addition on account cash deposit in Bank of India. Undisclosed bank account maintained with ICICI bank we note that the assessee has not filed any satisfactory explanation or documentary evidence either before authorities below neither before us. Accordingly in absence of any submission from the assessee we sustained the addition of Rs. 49,500/- made by the AO on account of deposit made there under. In the result the ground of the assessee partly allowed. Addition of cessation of liability - HELD THAT:- Assessee at the time of hearing before us admitted to the impugned addition. Thus the ground of appeal of the assessee is dismissed. Disallowances of bad-debt - assessee during the year under consideration has written off its debtor balance but failed to produce the information about the year in which such bad debts were shown as income - AO in absence of any evidence with repect to the fact that impugned bad debt were offered to tax previously, disallowed the claim of the assessee and added the same to the total income of the assessee - HELD THAT:- Provisions of section 36 (2) of the Act allow the assesse to claim the dedution of bad debt written off during the year under consideration subject to the condition specified therein. On perusal of the provision of the section 36(2)(i) we note that the legislature has used the word shall i.e. it is mandatory. Hence to avail the benefit of the bad debt written off the impugned amount should have been recognised as income/offered to tax previoulsy. However in the present case the assessee admittedly failed to produce any evidences to the effect that the impugned amount have already been recoginsed as income of the assessee. As the assessee expressed its inability to produce such document on the ground that its books of account are in the custody of previous management. Therefore in the absence of requisite information we find that the conditions prescribed under section 36 2 is not been complied with. Accordingly we hold that the assessee is not eligible for deduction for such bad debts. Hence, the ground of appeal of the assessee is dismissed. Addition of receipt from Madhya Gujarat Vij Co. Ltd. - HELD THAT:- Admittedly, the assessee is following mercantile system of accounting. Therefore, the assessee, in our considered view, was under the obligation to offer the impugned income tax in the year under consideration. Accordingly, we confirm the order of the authorities below subject to the direction that the AO shall verify the fact whether the assessee has offered interest income in any of the succeeding year then the AO shall extend the relief the assessee in that assessment year. It is the settled law that income cannot be taxed twice. Accordingly, we dispose of the ground of appeal of the assessee in terms of the above. Appeal of the assessee is partly allowed.

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• 2020 (3) TMI 1189
  TP Adjustment - comparable selection - functional similarity - HELD THAT:- Assessee is engaged in providing business support/liaising and coordination services companies functionally dissimilar with that of assessee need to be deselected from final list. Risk adjustment - assessee for rendering of support and coordination is remunerated at cost plus basis - HELD THAT:- The risk factors like marketing and business risk etc. which are normally associated with any independent entity are more as compared to the assessee which is a risk mitigated entity and is insulated from various kind of risk operating as a capital service provider. Accordingly, we agree with the assessee that risk adjustments are warranted in case of comparables on account of the difference in the risk profile of the assessee vis- -vis the comparable companies. As brought on record that the Tribunal in assessee s own case for the Assessment Year 2011-12 and 2012-13 has allowed the risk adjustment to the net margin of the comparable in order to align the risk profile of the assessee. The ld. counsel has also given the quantification of the risk adjustment which has been placed in the paper book at pages 447 to 449, wherein it has given the difference between the bank rates and SBI base rates and quantification factor as been laid down by the Sony India (P) Ltd. vs. DCIT [ 2008 (9) TMI 420 - ITAT DELHI-H] Accordingly, we direct the TPO to examine the assessee s quantification of risk adjustment specifically where assessee has taken the difference between bank rates and SBI bank rate and the quantification done by the assessee of the risk adjustment on 10.50%, is correct or not. With this direction this issue is remanded back to the TPO/Assessing Officer.

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• 2020 (3) TMI 1188
  Rectification u/s mistake u/s 254 - apparent mistake in the order of Tribunal warranting rectification - as held by the Tribunal that the Assessing Officer is not entitled to reopen the assessment on the basis of opinion of the DVO and the AO had no authority to reopen the assessment u/s.147/148 of the Act and consequently, the assessment order passed u/s.143(3) r.w.s147 do not stand - HELD THAT:- There are series of decisions by the Hon ble Supreme Court as well as Hon ble High Court expounding scope of exercising powers under section 254(2) - core of all these authoritative pronouncements is that power for rectification under section 254(2) of the Act can be exercised only when mistake, which is sought to be rectified, is an obvious and patent mistake, which is apparent from the record and not a mistake, which is required to be established by arguments and long drawn process of reasoning on points, on which there may conceivably be two opinions. We make reference to the decision of the Hon ble jurisdictional High Court in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ld. [ 2003 (3) TMI 70 - GUJARAT HIGH COURT] which has been upheld by the Hon ble Supreme Court [ 2008 (9) TMI 11 - SUPREME COURT] - scope of section 254(2) is limited to rectification of mistake apparent from record itself and not rectification in error of judgment In view of the above and as per the Miscellaneous Application filed before us, we do not find any mistake, much less any apparent mistake that warrants rectification in the order of Tribunal [ 2019 (3) TMI 1752 - ITAT PUNE] The Tribunal in its own wisdom has relied on the decision of the Hon ble Supreme Court in the case of ACIT Vs. Dhariya Construction Company [ 2010 (2) TMI 612 - SC ORDER] and adjudicated the appeal of the assessee - Miscellaneous Application filed by Revenue is dismissed

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• 2020 (3) TMI 1187
  TDS u/s 194J - disallowance u/s 40(a)(ia) - non-deduction of tax at source on payment of roaming/interconnectivity charges - Whether not in nature of fee for technical services ? - HELD THAT:- Since this issue is covered in favour of the assessee by the decision of the coordinate Bench of the Tribunal in assessee s own case for the assessment year 2009-10 to assessment year 2012-13 and [ 2016 (6) TMI 174 - ITAT MUMBAI] as held roaming /inter- connectivity charges paid by the appellant to other telecom networks are not in the nature of fees for technical services and provisions of section 194J of the IT Act are not applicable to these payments. Since there is no change of material facts in the present case, the Ld. CIT(A) has rightly followed the decision of the coordinate Bench and decided this issue in favour of the assessee. Hence, respectfully following the decision of the coordinate Bench aforesaid, we dismiss this ground of appeal of the revenue and direct the AO to delete the addition made on account of disallowance u/s 40(a)(ia) TDS u/s 194H - payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers - HELD THAT:- As decided in own case [ 2016 (6) TMI 174 - ITAT MUMBAI] appellant was not required to deduct tax at source under section 194H of the IT Act in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Depreciation claim of the assessee u/s 32 in respect of the amount paid to the DOT for purchase of 3G spectrum and not restricting to proportionate amount as per the provisions of section 35ABB - HELD THAT:- As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in Idea Cellular Limited [ 2017 (12) TMI 660 - ITAT MUMBAI] . Since the Ld. CIT(A) has decided this issue by following the decision of the coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT(A). Hence, respectfully following the decision of the coordinate Bench discussed above, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.

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• Insolvency & Bankruptcy

• 2020 (3) TMI 1185
  Maintainability of application - initiation of CIRP - Period of limitation - Financial Debt - Corporate Debtor failed to make repayment of its debt - HELD THAT:- An Acknowledgment does not create any new right and it extends the limitation period as per decision P. SREEDEVI VERSUS P. APPU [ 1990 (8) TMI 412 - KERALA HIGH COURT] - When a Debtor makes an acknowledgment of his liability to pay a Debt, it would mean that he was admitting a subsisting liability to pay. The burden lies on the Creditor to prove that an acknowledgment was made within time. An acknowledgment in writing must indicate Jural Relationship as that of Debtor and Creditor between the parties. As far as the present case present case is concerned the pendency of OA No. 310 of 2010 (filed on 14.7.2010) before the Debt Recovery Tribunal -III Kolkata will not preclude the first Respondent/bank to file the application under Section 7 of the Code before the Adjudicating Authority. If a party claiming the benefit of the Section 14 of the Limitation Act, 1963 had failed to secure relief in favour of earlier proceeding not because of any defect or Jurisdiction or some other cause of like nature, he cannot derive the benefit of the ingredients of Section 14 of the Act. By virtue of Deed of Guarantee Corporate Debtor being a Corporate Person owes debt to the Bank.In the present case the Corporate Debtor is the Guarantor and in the year 2008, undertook to repay the debt in case of default by the Principal Borrower. As per Section 3(8) of the Code Corporate Debtor means a Corporate Person who owes debt of any person. This Tribunal keeping in mind the present facts and circumstances of the instant case in an integral fashion, which float on the surface case comes to an inescapable conclusion that there is an acknowledgment of Debt on various dates like 2.2.07, 17.2.07, 3.8.07 for the loan facilities availed by Mahaveer Construction the Letters of Guarantee Acknowledged by the Corporate Debtor (M/s Surana Metals Ltd.) on 16.9.10, 3.3.12, 27.5.15, 24.10.16 executed by the Appellant and on 8.12.18 by the Surana Metals Ltd. etc. This apart, here is an acknowledgment of Debt by the Principal Borrower but also the Corporate Debtor on 27.5.15 8.12.18 respectively.The object of specifying time limit for limitation is undoubtedly based on Public Policy .The application projected before the Adjudicating Authority(NCLT) Kolkata Bench, on 13.2.19 is well within limitation and not barred by Limitation. Appeal dismissed.

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• Service Tax

• 2020 (3) TMI 1183
  Valuation - bank collects charges for dishonouring of the cheques, which are recovered by the appellant from their clients - inclusion of such reimbursable charges in assessable value or not - Rule 5(1) of Service Tax [Determination of Value] Rules, 2006 - period involved is From Sept. 04 to Jun. 09 - HELD THAT:- There is dispute with the amount collected by the appellant from their clients is equal to the amount that the appellant pays to the bank due to dishonouring of cheques. Therefore, we are satisfied that the said expenses are reimbursable expenses. By applying the rule of Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] it is held that the demand against the appellant is not sustainable. Appeal allowed - decided in favor of appellant.

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• 2020 (3) TMI 1182
  CENVAT Credit - input services - service tax paid on rent of premises which is used as office of the company outside the company - Department was of the view that the appellant is not eligible for credit of service tax paid towards rent as well as maintenance charges for the premises outside the factory - HELD THAT:- The restriction that credit can be availed for materials that has been brought into the factory is applicable only in the case of inputs and not that of input services. In regard to input services, it is immaterial whether the services are availed within the factory or outside the factory. It is only necessary that the manufacturer has to avail it in relation to the manufacture of the final product. In the present case, the department does not dispute that the said premises is used by the appellant as office for their manufacturing factory. In NITCON INDUSTRIES (P.) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II [ 2014 (9) TMI 681 - CESTAT MUMBAI] , the Tribunal has analyzed the very same issue and held that it is immaterial whether the rented premises is within the factory or outside but the same should be availed in the course of manufacture of final product. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (3) TMI 1184
  Valuation - 3MM Stranded Ply wire - related party transaction - applicability of Section 4 (1) (b) of CEA, 1944 - to be valued at 110% of the cost of production of such goods as per CAS-4 as envisaged in Rule 10 (a) read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or not? - HELD THAT:- The authorities below have concluded that valuation under Section 4 (1) (b) has to be adopted and not the transaction value mainly on account of the fact that the six units are inter-connected undertakings. However, from the Order-in-Original or the impugned order there is no discussion how the buyers are related persons. As per Rule 10 (a) of the Valuation Rules only if the buyers and seller are related in the manner specified under the sub-clause (ii), (iii), (iv) of Clause-(b) of Sub-section (3) of Section 4 of the Central Excise Act, 1944, the valuation as alleged in the SCNs will come into application. In the present case, apart from the units being inter-connected undertakings there is nothing to show that the buyers and seller are related persons. There is no mutuality of interest or fund flow brought out by evidence on the part of the department. Demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2020 (3) TMI 1181
  Imposition of penalty - irregularly availed CENVAT Credit - credit availed on the same invoice twice in the month of June 2014 - It is contended that, they had no intention to evade payment of Cenvat credit and they had already reversed the amounts on being pointed out by the department - HELD THAT:- There are no doubt that the appellant had wrongly availed Cenvat credit twice in the same invoice. It is not the case where one could have a doubt about the admissibility of such Cenvat credit. Evidently, nobody can legitimately claim Cenvat credit twice on one invoice. Similarly, with respect to the capital goods removed after use, they have reversed inadequate amount of Cenvat credit which remains undisputed. The intention is self evident and the violation of Act and Rules are undisputed - Appeal dismissed - decided against appellant.

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• Indian Laws

• 2020 (3) TMI 1186
  Extension of expiry dates of interim order in the event of Lockdown in the event of Corona Virus outbreak - HELD THAT:- Taking suo moto cognizance of the aforesaid extraordinary circumstances, under Article 226 227 of the Constitution of India, it is hereby ordered that in all matters pending before this court and courts subordinate to this court, wherein such interim orders issued were subsisting as on 16.03.2020 and expired or will expire thereafter, the same shall stand automatically extended till 15.05.2020 or until further orders, except where any orders to the contrary have been passed by the Hon ble Supreme Court of India in any particular matter, during the intervening period. This order be uploaded on the website of this Court and be conveyed to all the Standing Counsel, UOI, GNCTD, DDA, CIVIC AUTHORITIES, Delhi High Court Bar Association, all the other Bar Associations of Delhi, as well as to all District Courts subordinate to this court.

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