TMI Tax Updates - e-Newsletter
March 8, 2019

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax Indian Laws

TMI SMS

• Implementation of various decisions taken by the GST Council for the MSME Sector; Issue of Notifications there of

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• No penalty is leviable on account of failure to deposit TDS u/s 271C(1)(b). U/s 271C(1)(a) penalty is leviable only for non deduction of TDS

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• Addition u/s 68 - The practice of conversion of un-accounted money through the cloak of Share Capital must be subjected to careful scrutiny.

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News

1. Implementation of various decisions taken by the GST Council for the MSME Sector; Issue of Notifications there of

2. Cabinet approves Ex-post facto approval of the MoU signed in 2008 and renewed in 2014 between the ICAI and ICAEW

3. Cabinet approves creation of Post of Technical Member in SAT, Mumbai

4. Cabinet approves procedure and mechanism for Strategic Disinvestment of the CPSEs – delegation thereof

5. Insolvency and Bankruptcy Board of India signs a Cooperation Agreement with the International Finance Corporation to further build the capacity of the Insolvency Professionals, and Insolvency Professional Agencies for the purposes of the effective implementation of the Insolvency and Bankruptcy Code, 2016 among others

Notifications

Companies Law

1. G.S.R.180(E) - dated 6-3-2019 - Co. Law

Companies (Incorporation) Second Amendment Rules, 2019

Customs

2. 21/2019 - dated 7-3-2019 - Cus (NT)

Exchange Rates Notification No.21/2019-Custom(NT) dated 07.03.2019

3. 20/2019 - dated 6-3-2019 - Cus (NT)

Customs Tariff Determination of Origin of Goods under the Comprehensive Economic Cooperation Agreement between the Republic of India and Republic of Singapore (Amendment) Rules, 2019

GST

4. 14/2019 Central GST (CGST) - dated 7-3-2019 - CGST

The limit of threshold of aggregate turnover for availing Composition Scheme u/s 10 of the CGST Act, 2017 extended to ₹ 1.5 crores. [For certain Hill States, it is ₹ 75 lakhs]

5. 13/2019 Central GST (CGST) - dated 7-3-2019 - CGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019.

6. 12/2019 Central GST (CGST) - dated 7-3-2019 - CGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019.

7. 11/2019 Central GST (CGST) - dated 7-3-2019 - CGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019.

8. 10/2019 Central GST (CGST) - dated 7-3-2019 - CGST

To give exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs.

9. 02/2019-Central GST (CGST) Rate - dated 7-3-2019 - CGST Rate

To give composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs.

10. 02/2019 Union Territory Tax - dated 7-3-2019 - UTGST

To give exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs.

11. 02/2019 - dated 7-3-2019 - UTGST Rate

To give composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs

GST - States

12. EXN-F(10)-33/2018 - dated 13-2-2019 - Himachal Pradesh SGST

Corrigendum – Notification Nos. 24/2018-State Tax (Rate), dated the 31st December, 2018 and 26/2018-State Tax (Rate), dated the 31st December, 2018

13. F.17(131)ACCT/GST/2017/4187 - dated 31-1-2019 - Rajasthan SGST

Extension in period of submitting the declaration in GST Form TRAN-1

14. F.17(131)ACCT/GST/2017/4056 - dated 31-12-2018 - Rajasthan SGST

Amendment in Notification No. F. 17(131)ACCT/GST/2018/3765 dated the 10th August, 2018

15. F.17(131)ACCT/GST/2017/4055 - dated 31-12-2018 - Rajasthan SGST

Amendment in Notification Nos. F.17(131)ACCT/GST/2017/2472 dated the 15th September, 2017 and F.17(131)ACCT/GST/2017/3179 dated the 23rd March, 2018

16. F.17(131)ACCT/GST/2017/4054 - dated 31-12-2018 - Rajasthan SGST

Amendment in Notification Nos. F. 17(131) ACCT/GST/2017/2309 dated the 08th August, 2017 and F. 17(131) ACCT/GST/2017/2857 dated the 15th November, 2017

17. F.12(46)FD/Tax/2017-Pt-V-142 - dated 31-12-2018 - Rajasthan SGST

Amendment in Notification No. F.12(56)FD/Tax/2017-pt-III-84 dated the 6th August, 2018

Service Tax

18. 01/2019 - dated 6-3-2019 - ST

Exempting services provided by project implementation agencies under the DDUGKY for the period commencing from the 1st of July,2012 and ending with the 29th of February, 2016

SEZ

19. S.O. 1107(E) - dated 28-2-2019 - SEZ

Central Government notifies an additional area of 1.684 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 2.844 hectares at Sy. No. 141 & 142 Nanakramguda Village, Serilingampally Mandal, Ranga Reddy District, in the State of Telangana

20. S.O. 1105 (E) - dated 28-2-2019 - SEZ

Central Government hereby rescinds Notification No. S. O. 1973(E) dated 21st November, 2007

21. S.O. 1104 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification Nos. S.O. 2018(E) & S.O. 1278(E) dated 11th August, 2008 & dated 19th May, 2009

22. S.O. 1103 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. S.O. 2255(E) dated 3rd September, 2009

23. S.O. 1123 (E) - dated 27-2-2019 - SEZ

Central Government notifies the 27.425 hectares area at 371/2, Kadayam Perumpathu Village, Near Petrol Bunk, Mathapuram, Ambasamudram Taluk, Tirunelveli District, in the State of Tamil Nadu and constitutes an Approval Committee

24. S.O. 1122 (E) - dated 27-2-2019 - SEZ

Central Government notifies the 50.946 hectares area at Lingojiguda Village, Choutuppal Mandal, Yadadri Bhuvanagiri District, in the State of Telangana and constitutes an Approval Committee

Circulars / Instructions / Orders

GST

1. 92/11/2019 - dated 7-3-2019

Various doubts related to treatment of sales promotion scheme under GST clarified

DGFT

2. 77/2015-2020 - dated 6-3-2019

Amendments in Appendix 4J of Hand Book of Procedures 2015-20

Highlights / Catch Notes

GST

• New Circular Clarifies GST Treatment for Sales Promotions, Discounts, Offers, and Incentives to Ensure Compliance.

  Circulars : Various doubts related to treatment of sales promotion scheme under GST clarified
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• GST Council Implements Measures to Support MSMEs, Streamlining Tax Processes and Enhancing Compliance with New Notifications.

  News : Implementation of various decisions taken by the GST Council for the MSME Sector; Issue of Notifications there of
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• Court Considers Granting Anticipatory Bail in Fake Invoice Case Under GST Act Section 137, With Conditions.

  Case-Laws - HC : Anticipatory Bail - input tax credit - continuous issuance of fake invoices without actual supply of goods - offence punishable u/s 137 of Goods and Services Tax Act, 2017 - Anticipatory Bail subject to conditions.
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• Profiteering Penalty for Issuing Incorrect Invoices and Overcharging Customers, Resulting in Unjust GST Collection.

  Case-Laws - NAPA : Profiteering - Respondent has issued incorrect invoices while selling the above product to his customers as he had not correctly shown the basic price which he should have legally charged from them. The Respondent has also compelled them to pay additional GST on the increased price through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he has failed to pass on - liable to penalty.
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• Construction Firm Violates CGST Act by Denying Input Tax Credit Benefits, Faces Penalties for Overcharging Buyers.

  Case-Laws - NAPA : Profiteering - Auric City Homes - Construction of flats - Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled them to pay more GST - they are liable to penalty.
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Income Tax

• Exemption Allowed for Liquidated Damages as Interest u/s 10(23G) of Income Tax Act for Infrastructure Financing.

  Case-Laws - HC : Exemption u/s 10(23G) in respect of the liquidated damages - interest income earned from long term finance provided to enterprises undertaking developing, maintaining and operating infrastructure facilities - the liquidated damages constitutes interest - benefit of exemption allowed.
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• Income Tax Act Section 60: Tax Transferor on Income from Assets Even Without Actual Transfer to Transferee.

  Case-Laws - AT : Section 60 contemplates income arising to transferee which should be taxed in the hands of transferor in the event there is no actual transfer of assets from which such income accrued. This fiction u/s 60 operates irrespective of whether the concerned transfer is irrevocable or not.
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• Tax Case Reopened on Specific Ground; Unrelated Additions for Unaccounted Investments Deemed Impermissible.

  Case-Laws - AT : Reopening of assessment - case was reopened on a ground but additions were made on different ground - it was not open to him to make the addition for unaccounted investment
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• Section 68: Enhanced Scrutiny on Unaccounted Money as Share Capital or Premium, Burden of Proof on Assessee.

  Case-Laws - SC : Addition u/s 68 - The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny - a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee - Additions confirmed.
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• Assessment Reopening u/s 147 Quashed; AO Opposed Deemed Dividends Addition u/s 2(22)(e) Despite Audit Suggestion.

  Case-Laws - HC : Reopening of assessment u/s 147 - Deemed dividend addition u/s 2(22)(e) - audit party pointed out possibility of invoking Section 2(22)(e) - AO opposed any such invocation of Section 2(22)(e) in reply to audit party - Despite notice u/s 148 issued - Notice for reopening quashed.
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• Payment to Deceased Partner's Heirs as Diversion of Income by Overriding Title is Allowable.

  Case-Laws - AT : Diversion of income by way of overriding title - legal heirs of the deceased partner was paid a sum as per the partnership deed - Diversion of income at source can take place either under a legal compulsion or under a contractual obligation or else under a statutory provision. Hence payment legal heirs of the deceased partner is allowable as Diversion of income.
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• UAE Market Study Payment Classified as Royalty u/s 195, Subject to TDS Due to Indo-UAE DTAA.

  Case-Laws - AT : TDS u/s 195 - payment for a market study in UAE - Indo-UAE DTAA - the market study being in the nature of Technical Services (FTS), is in the nature of information concerning commercial experience and hence Royalty. Hence it is liable to TDS.
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• Rental Income Taxable for Property Owners Despite Third-Party Management Agreements Allowing Rent Collection and Interest-Free Advances.

  Case-Laws - AT : Income from House property - lease rental income - rental income is taxable in the hands owner of of property irrespective of the fact there is a agreement with other party giving right to collect and keep rent and manage the property in lieu of certain interest free advance.
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• No Penalty for Not Depositing TDS u/s 271C(1)(b); Applies Only to Non-Deduction Cases.

  Case-Laws - HC : Levy of penalty TDS deducted u/s 194C but not deposited - No penalty is leviable on account of failure to deposit TDS u/s 271C(1)(b). Under Section 271C(1)(a)penalty is leviable only for non deduction of TDS.
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• Notice u/s 148 Quashed Due to Invalid Directions from CIT(A) Lacking Legal Authority for Reopening Assessments.

  Case-Laws - AT : AO merely issued the notices u/s 148 on fallacious assumptions by acting only on the directions of Ld. CIT(A) who is legally not having such powers to give direction to reopen the assessment - Notice quashed as invalid.
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• Penalty u/s 271(1)(c) Invalid Due to Defective Notice Issued u/s 274 Lacking Specificity.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - defective notice u/s 274 - show cause notice issued u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. - penalty not sustainable
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Customs

• Courts Avoid Parallel Proceedings on Coastal Zone Regulation Violations to Ensure Judicial Efficiency and Propriety.

  Case-Laws - HC : Violations of Coastal Zone Regulations - Courts will not, as a matter of judicial propriety, entertain parallel proceedings, even when the relief sought, as the petitioner puts it, is limited. Piecemeal and fractured adjudication is the least of the judicial virtues.
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Corporate Law

• Chartered Accountant Faces Legal Action for Issuing False Audit Certificate, Must Refund Fee u/s 447.

  Case-Laws - Tri : Professional misconduct on the part of CA/ auditor who is the member of ICAI - It is clear that the CA(R-1) colluded with the Director of R-2 company and has given a false Audit certificate relating to the Profit & Loss Account and Balance Sheet of the R-2 company, without even examining and verifying the books of account - R-1 directed to refund the fee and liable for action u/s 447.
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Service Tax

• Interest Imposed Under Finance Act Section 75 Deemed Improper for Partial Month Delay Not Exceeding 30 Days.

  Case-Laws - HC : Levy of interest u/s 75 of FA - the levy was made for the entire month, despite the delay being only for certain days spreading over two months, but not exceeding 30 days. We find the said levy to be improper and not sanctioned by the Statute.
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VAT

• Dealers Must Calculate Additional Sales Tax on Total Yearly Turnover, Not Split Yearly Periods, Court Rules.

  Case-Laws - HC : The liability to pay additional sales tax is to be collected on the total taxable turnover of the dealer for the entire year. Therefore, the contentions advanced by the petitioner that the year should be split into two, is impermissible.
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Case Laws:

• GST

• 2019 (3) TMI 374
  Maintainability of petition - alternative remedy of appeal - order passed under Section 73 (9) of the U.P. GST Act, 2017 - Held that:- The aforesaid order is appellable under Section 107 of the U.P. GST Act - In view of the statutory provision for appeal we are not inclined to entertain the petition at all - petition dismissed.

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• 2019 (3) TMI 373
  Anticipatory Bail - offence punishable under Section 137 of Goods and Services Tax Act, 2017 - input tax credit - continuous issuance of fake invoices without actual supply of goods - whether the alleged offences are non cognizable or cognizable? - Held that:- The issue has been dealt in by the Hon ble Apex Court in the case of Om Prakash Anr. v. Union of India Anr. [2011 (9) TMI 65 - SUPREME COURT OF INDIA], where it was held that on a construction of the definitions of the different expressions used in the Code and also in connected enactments in respect of a non-cognizable offence, a police officer, and, in the instant case an Excise Officer, will have no authority to make an arrest without obtaining a warrant for the said purpose. A close glancing of the above proposition of law with present Act, the punishment imposed is five years. In that light, the alleged offences are non- cognizable offences. By keeping the above proposition of law and on plain reading of all these sections together, one thing in the case is clear that the said offences are compoundable by the commissioner on payment and maximum punishment of five years with fine and they are not punishable with death or imprisonment for life - When the maximum punishment which can be imposed is only up to five years with fine, will throw light on the seriousness of the offence. By imposing some stringent conditions, if accused petitioners are ordered to be released on bail, it will meet the ends of justice - the petitioners/accused are ordered to be enlarged on anticipatory bail in the event of their arrest in O.R. No.40/2018-19 for the offence punishable under Section 137 of GST Act, 2017 subject to conditions imposed - petition allowed.

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• 2019 (3) TMI 372
  Prayer for withdrawal of petition - Filing of Form TRAN-1 - input tax credit - transition to GST Regime - Petitioner submitted that after filing of the writ petition certain new developments have taken place and a communication has been received from the respondent office. Accordingly, prayer was made that he may be allowed to withdraw the present petition with liberty to the petitioner to file fresh one on the same cause of action with better particulars. Held that:- Petition dismissed as withdrawn with liberty as prayed for.

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• 2019 (3) TMI 371
  Profiteering - Melaglow Rich (Niacinamide) Depigmentation Glow Restoration Cream - situation post implementation of GST - benefit of reduction in the rate of tax/input tax credit not passed on - increase in MRP by tampering the label - contravention of the provisions of Section 171 of the CGST Act, 2017 - Penalty. First objection raised by Respondent No. 1 states that Section 171 of the CGST Act, 2017 was not applicable in the instant case since its scope was restricted to the cases where there was reduction in the rate of GST on the supply of the goods or services and a reduction in the rate of GST, did not extend to a reduction in the rate of tax when compared with the pre-GST indirect tax regime rates - Held that:- IT would be appropriate to mention that the main objective of introducing the GST was to subsume multiple central and state taxes to reduce the costs of doing business and while doing so there should not be exorbitant rise in the prices. To curb the tendency of undue enrichment by the suppliers of goods and services on account of and on the eve of implementation of the GST Section 171(1) of the CGST Act, 2017 was enacted which states that a reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. - thus, any reduction in the rate of tax should result in commensurate reduction in the price w.e.f. 01.07.2017, the date from which the above Act has come in to force so that there is no profiteering by the suppliers at the expense of the consumers in case the rate of tax is reduced post GST and in case it is not done the supplier shall be liable for breach of the above provision. There is no force in the contention of the above Respondent that the provisions of Section 171 (1) can not be invoked by comparing the pre GST rate with the post GST rate of tax as he can not be allowed to pocket the amount of reduced tax which should have normally gone to the coffers of the Central/State Governments. Any benefit of reduction in the rate of tax given by the above Governments by sacrificing their own revenue must be passed on to the customers by commensurate reduction in the prices by the suppliers as per the intention of Section 171 and any other interpretation of the same would be illogical and unreasonable. It appears that the Respondent No. 1 is trying to misinterpret the provisions of Section 9 of the CGST/SGST Acts, 2017 and Section 5 of the IGST Act, 2017 by stating that the term tax as used in the above Sections does not apply on the CED, CST or the VAT as it applies only on the supply of goods and services - A bare perusal of Section 7 of the CGST/SGST Acts, 2017 shows that supply includes sale also and as per Section 2(21) of the IGST Act, 2017 the supply shall have the same meaning as has been assigned to it under Section 7 of the CGST Act, 201 T As CED forms part of the price of the product on which VAT is leviable therefore, all of them viz. CED CST and VAT are equally applicable on the taxable event of supply as supply includes sale also. There is no restriction imposed by the Parliament/ State Legislatures on comparing the pre and post GST rates and nor the terms tax , rate of tax or rates of tax or change in the rate of tax prohibit such comparison, to examine whether the above two benefits have been passed on or not. There is no doubt that the expression reduction in the rate of tax has to be read in conjunction with the words on any supply of goods and services but it can not be interpreted to mean that only reduction in the rate of GST can be considered for invocation of Section 171(1) and no comparison can be made with the pre-GST rates. The rate of tax was 30.06% in the pre-GST era which was reduced to 28% in the post-GST era vide Notification No, 1/2017 Central Tax (Rate) dated 28.06.2017, and the rate of GST was further reduced from 28% to 18% vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017. However, during these periods, the base price of the product was increased from Rs. 202.06 to Rs. 230.90 per unit which resulted in increasing of the selling price amounting to denial of not passing the benefit of tax reduction to the customers - the total amount the benefit of which was denied to the recipients by the Respondent No. 1 or the profiteered amount during the period w.e.f. 01.07.2017 to 31.07.2018, comes to Rs. 96,59,716.26/-. The Respondent No. 1 has also himself agreed to deposit this amount along with the applicable interest, vide his submission dated 24 12 2018 before this Authority. Since, the present investigation in to the issue of not passing on the benefit of reduction in the rate of tax by the Respondent No. 1 has been conducted w.e.f. 01.07.2017 to 31 07 2018, and the Respondent No. 1 has also not provided the details of every stage MRP change in the value chain along with the date of change of MRP for all the products that was demanded by the Authority during the hearing on 15.11.2018, the DGAP is directed to further investigate the quantum of profiteering on all the products including the present product which the Respondent No. 1 is supplying and thereafter submit his report accordingly. Penalty - Held that:- Respondent has issued incorrect invoices while selling the above product to his customers as he had not correctly shown the basic price which he should have legally charged from them. The Respondent has also compelled them to pay additional GST on the increased price through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he has failed to pass on - It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act. Hence, he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - opportunity must be provided to respondent No. 1 to be heard, a notice be issued to him to explain why such a penalty should not be imposed on him. Application disposed off.

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• 2019 (3) TMI 370
  Profiteering - Ceramic Vitrified Tiles - benefit in the reduction of rate of tax not passed on - contravention of Section 171 (1) of the CGST Act, 2017 - N/N. 41/2017-Central Tax (Rate) dated 14.11.2017 - Held that:- It is clear that the base price of the product per box was Rs. 232.50 prior to 15.11.2017 and had remained the same even after GST rate reduction w.e.f. 15.11.2017. Therefore, the benefit of rate reduction appears to have been passed on. This Authority agrees with the DGAP s Report dated 28.09.2018 and accordingly, holds that the allegation of profiteering is not sustainable. The provisions of Section 171 of the CGST Act, 2017, have not been contravened and there is no merit in the application forwarded by the Applicant No. 1 - application dismissed.

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• 2019 (3) TMI 369
  Profiteering - Auric City Homes - benefit of input tax credit not passed on - net additional benefit of ITC - contravention of Section 171 of the CGST Act, 2017 - whether there has been any benefit of reduction in the rate of tax or ITC that needs to be passed on to the recipients by way of commensurate reduction in prices - Held that:- In the present case, the Respondent has availed benefit of additional ITC of 6.49% (post GST) as compared to 3.65% (pre-GST). Based on the data and the documents filed by the Respondent, this percentage has been rightly arrived at by the DGAP by taking into account the benefit of credit available during pre GST (April 2016 to June 2017) to the taxable turnover received during the said period. Similarly for the post GST period (01 07.2017 to 31.08.2018) the percentage of ITC has been arrived at by taking into account the credit available as against the taxable turnover received during the same period. The Respondent had benefit of ITC of Rs. 1,59,38,195 (3.6%) in pre GST when compared to Rs. 3,09,70,006 (6.49%) in the post GST period thus providing him the net benefit of ITC of 2.84%. This Authority under Rule 133(3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent as and when the remaining residential/commercial units are sold. The Respondent s Annexures dated 19.02.2019 and 25.02.2019 which comprise of the details of payments made through various modes are taken on record. As per this Annexure the Respondent has paid to the Applicant No. 1 and 473 other home buyers the entire profiteered amount through cheques as has been shown in the Annexures. The Respondent has also stated that to 177 home buyers the profiteered amount has been passed on through the credit notes and letters to this effect have been sent to all these home buyers. Thus, the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122(1) (i) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty - thus, a SCN be issued to him directing him to explain why the penalty prescribed under Section 122 of the above Act read with rule 133(3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.

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• Income Tax

• 2019 (3) TMI 2078
  Reopening of assessment - addition u/s 68 - unexplained credit entries /share capital - non discharge of initial onus of proof by assessee to establish by cogent and reliable evidence of the identity of the investor companies, the credit-worthiness of the investors, and genuineness of the transaction - HELD THAT:- Civil Appeal is allowed, in terms of the signed reportable judgment.

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• 2019 (3) TMI 376
  Unexplained cash credit u/s 68 - Return filed on presumptive basis u/s 44AD - Assessee not required to maintain any books of accounts u/s 44AA(2)(iv) - AO accepted taxability u/s 44AD - HELD THAT:- It is observed from the record that the assessee offered profit at eight per cent. and the Assessing Officer accepted claim of exemption of non-maintenance of books as provided under section 44AA(2)(iv) of the Act. Therefore, in view of the discussion made hereinabove in respect of two decisions of KAMAL KUMAR MISHRA [2014 (1) TMI 71 - ITAT LUCKNOW] and YADWINDER SINGH VERSUS INCOME-TAX OFFICER [2016 (2) TMI 911 - ITAT AMRITSAR] in our opinion the addition made by the Assessing Officer under section 68 of the Act and confirmed by the Commissioner of Income-tax (Appeals) is liable to be deleted. We find that the assessee has furnished the details as required by the Assessing Officer and possible explanation along with confirmation with regard to the different deposits made in the banks as well as withdrawals from Sahara India. Therefore, it is clear that the assessee provided the identity and creditworthiness of said two donors. Referring to summary of statements of the two donors suggests that the assessee has furnished explanation and the Assessing Officer examined the veracity of details of the said explanation along with the confirmations of the said donors and accepted the gift given by the mother-in-law to an extent of Rs. 1,32,000. Therefore, in our opinion, as discussed above, in terms of the decisions as relied on by the assessee, the addition made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) is deleted. - Decided in favour of assessee

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• 2019 (3) TMI 375
  Self occupied house property - treatment of USA properties occupied by the daughter of assessee- deemed let out - deemed value of consideration for the purpose of computing income from house property - change of method of computation of income from self occupied house property - Held that:- Considering the factual and the legal discussions appeal is restored to the file of assessing officer to treat the USA property as deemed let out and determine the ALV of the said property. Relied on SMT. ASHA BHOSLE [2011 (9) TMI 1179 - ITAT MUMBAI] and Balmukund Acharya vs. DCIT reported in [2008 (12) TMI 88 - BOMBAY HIGH COURT] Long term capital loss on sale of property - asset was hold for more than 36 months - period of holing - absolute legal right ownership - HELD THAT:- In the light of expanded definition is contained in section 2(47) even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is put in possession of an immovable property or retained the same in part performance of contract under section 53A of Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. In CIT Vs K Ramakrishanan [2014 (3) TMI 812 - DELHI HIGH COURT] held that in order to determine taxability of capital gain arising from the sale of property, it is the date of allotment of property which is relevant for the purpose of computing holding period and not the date of registration of conveyance deed. No illegality and infirmity in the order passed the ld Commissioner (Appeals), which we affirms.

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• 2019 (3) TMI 368
  Grant exemption u/s 10(23C)(vi) - CIT(E) declined to grant registration under Section 10(23C)(vi)by holding that no evidence of accumulation of income after following the due process had been adduced - Tribunal directed CIT(E) to grant exemption under Section 10(23C)(vi) from the date of application - HELD THAT:- SLP dismissed.

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• 2019 (3) TMI 367
  Transfer pricing - knowledge management systems - international transactions/activities - services rendered to its associated enterprises, i.e. AE - assessee seeks to be identified as a BPO and not as a KPO - Adjustments with regard to notional interest attributed to the assessee - Exclusion of relative comparables which were held to be irrelevant for the purpose of ALP determination - controlled transactions - HELD THAT:- SLP dismissed.

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• 2019 (3) TMI 366
  Exemption u/s 10(23G) in respect of the liquidated damages - interest income earned from long term finance provided to enterprises undertaking developing, maintaining and operating infrastructure facilities - liquidated damages were admittedly on account of defaults committed by the borrowers - HELD THAT:- There are instances when lenders of money on long term basis impose an obligation on the borrowers to pay commitment charges. This is necessitated since after the sanction of the loan, the borrower could not make use of the funds upto a particular point of time. In the case of default in redemption of default payment of interest and all other monies (except Liquidated Damages) on their respective due dates, Liquidated Damages at the rate of 2.10% per annum is levied and is payable by the borrowers for the period of default. It is also seen that arrears of Liquidated Damages shall carry interest at the rate mentioned in Clause 2.4(iv) stating all interest on the Debentures and on all other monies accruing and due under this Agreement shall, in case the same be not paid on the respective due dates, carry further interest at the rate of 2.5% (plus applicable interest tax), over and above the interest rate mentioned in (i) and (iii) above prevailing on the date of such default. It is thus seen that though the term Liquidated Damages is used in the agreement, it actually signifies interest claimed by the appellant. This term “interest” would come within the word 'charge' as provided under the definition of interest in the Act. Consequently, we hold that the three authorities had erred in understanding the scope of the expression 'Liquidated Damages' while coming to a conclusion that it would not come within the purview of the word “interest” under Section 2(28A) of the Act. - Decided in favour of assessee. Claim for deduction under Section 36(1)(viia)(c) after reducing from the appellant's income deduction under Section 36(i)(viii) - carrying of eligible business - HELD THAT:- It is an admitted fact that the appellant comes within the definition of a 'specified entity' and is carrying on 'eligible business' as provided under Section 36(1)(viii). A provision had been made for deduction of provisions for Bad and Doubtful debts under Section 36(1)(vii)(c) independent of Section 36(1)(viii) which provide for deduction upto 40% for special Reserve created by Assessee providing long term finance for development of infrastructure facility. The Tribunal in the present case had actually not applied its mind on this issue. They had simply reaffirmed the earlier order dated 05.09.2003 for the Assessment Year 2000-2001, and the order dated 19.01.2004 for the Assessment Year 2001-2002 and followed the same principles. However, as pointed out above, the appeals against the said orders had been allowed by a Co-ordinate Bench of this Court and the answer has been given in favour of the Assessee. If Section 36(1) is examined, it is clear that sub-section (1) gives the list of matters in respect of which deduction can be allowed while computing the income referred under Section 28. Clause (i) to (xi) of sub-section 1 of Section 36 do not imply that those deductions depend on one another. If an Assessee is entitled to the benefit under Clause (i) sub-section (1) of Section 36, the Assessee cannot be deprived of the benefit the other Clauses. This is how the provisions have been arrayed. The computation of amount of deduction under both these clauses has to be independently made without reducing the total income by deduction under clause (viii) of Section 36 of the Act. - Decided in favour of assessee.

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• 2019 (3) TMI 365
  Stay of demand - condition for grant of stay - recovery proceedings - paying 20% of the disputed demand of tax - HELD THAT:- In the instant case, the petitioner has already filed an Appeal against the demand dated 27.12.2018 before the second respondent on 27.01.2019, raising identical grounds as raised in the instant writ petition. As seen from the averments in the affidavit filed in support of the writ petition, it is the apprehension of the petitioner that the condition for grant of stay before the second respondent is onerous. Since the condition has now been relaxed as seen from the Official Memorandum dated 31.07.2017 read with paragraph (B) of the official memorandum dated 29.02.2016, issued by the Government of India, Ministry of Finance, CBDT whereby the petitioner can obtain an order of stay of the demand dated 27.12.2018, by Therefore, the apprehension of the petitioner that for obtaining the stay, conditions imposed will be onerous are no more applicable. The petitioner is granted liberty to approach the Assessing Officer as per the Office Memorandum dated 31.07.2017 read with paragraph (B) of the official memorandum dated 29.02.2016, issued by the Government of India, Ministry of Finance, Central Board of Direct Taxes (CBDT), by paying 20% of the disputed demand and seek stay of the impugned demand dated 27.12.2018 by filing an application under Section 220 (3) or 220 (6) of the Income Tax Act, as the case may be.

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• 2019 (3) TMI 364
  ADMIT following substantial questions of law arise for consideration: “[A] Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in confirming the order of Commissioner (Appeals) in allowing interest expenses of Rs. 22,75,11,447/- on Deep Discount Bonds (DDBs)? [B] Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in confirming the order of Commissioner (Appeals) in allowing deduction of Rs. 95,98,355/- under section 80IA of the Income Tax Act, 1961 on wind farm division’s captive power plant? [C] Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in allowing carry forward of unabsorbed depreciation of Rs. 217,04,95,567/- of demerged entities, viz., M/s Nirma Limited? [D] Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the Assessing Officer had not fulfilled pre-requirement of invoking provisions of Explanation (3) to sub-section (1) of section 43 of the Income Tax Act, 1961, and thereby, allowing claim of depreciation on full written down value of Rs. 2,49,07,23,831/- on intangible assets worth rupees five hundred crores of M/s Nirma Industries?”

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• 2019 (3) TMI 363
  Computation of deduction u/s 80HHC - whether the word 'Profit' occurring in Section 80HHC means the net of the profit from the export of the self-manufactured goods and also the export of the traded goods? - HELD THAT:- As assessee claimed that only net interest income could be included, namely, gross interest minus expenditure incurred on the borrowal of the amount for investment for earning that interest and such net interest alone could be considered for the purpose of Section 80HHC and, if that net figure is so taken, there is no question of disallowance to the extent of 90% of the negative figure of net interest we are of the opinion that this matter deserves to be sent back to the Tribunal for considering the aforesaid ground of the Assessee about the netting of the interest income, as the same apparently does not seem to have been considered by the Tribunal at all.

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• 2019 (3) TMI 362
  Disallowance of interest on borrowed funds - commercial expediency - funds diverted for advancing interest-free loans to sister concerns - Tribunal held the pattern of loan extended to sister concerns would qualify business expediency as relying on S.A.Builders Ltv. v. CIT [2006 (12) TMI 82 - SUPREME COURT] - HELD THAT:- In the impugned order passed by the Tribunal, we find that the Tribunal took note of the factual position and held that loans advanced by the assessee was a business expediency. Tribunal has recorded the facts to support its stand that the decision in S.A.Builders would aid the case of the assessee. The CIT(A) was also satisfied with the nature of the transaction and it would qualify as "business expediency". Merely because a reference is pending that does not mean that the decision rendered by the Hon'ble Supreme Court is no longer good law. As pointed out by us earlier, the CIT(A) and the Tribunal has discussed the factual position and held that the transaction would qualify "business expediency". - Decided against revenue

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• 2019 (3) TMI 361
  Penalty u/s. 271(1)(c) - extended time limit for passing the impugned penalty order when the assessment order is the subject matter of appeal before the CIT(A) - HELD THAT:- The impugned penalty order as well as the appellate order has been passed by the tax authorities before the disposal of the appeal in quantum assessment proceedings by the CIT(A). The assessee furnished a copy of the appellate order dt. 03-08-2018, passed in the quantum assessment proceedings as per which the appeal of the assessee is partly allowed. Accordingly, in the interest of natural justice, we are of the view that the issues contested in the present appeal requires re-examination at the end of the AO by duly considering the appellate order passed in the quantum assessment proceedings - restore all the issues to the file of AO for examining afresh - decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 360
  Non proper representation by assessee - CIT(A) failure to grant reasonable opportunity of being heard to the assessee in violation of the principles of natural justice - assessee made a statement at Bar that this time the assessee would make proper representation before the lower authorities and pleaded for grant of one more opportunity of being heard to the assessee - HELD THAT:- The assessee failure to attend before the CIT(A) is not proper. The appeal cannot be argued through written submissions. The assessee should have appeared before the CIT(A) in response to the notice issued by him. The CIT(A) should have in force the attendance of the assessee by issue of more notices for meaningful adjudication of the CIT(A). This kind of adjudication of appeals will only prefer the appeals before the Tribunal. With these directions, the ground no.1 raised by the assessee in both the appeals is remanded to the file of CIT(A). CIT(A) shall decide the issue afresh after granting a reasonable opportunity of being heard to the assessee in accordance with the settled principles of natural justice. Accordingly, the preliminary issue raised by the assessee in both the appeals is allowed for statistical purposes.

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• 2019 (3) TMI 359
  Disallowance of deduction of interest by virtue of section 80P(4) - provision for interest payment allowability - as per AO interest income of the society from the loan given to the members be not considered as ineligible for deduction by virtue of section 80P(4) - HELD THAT:- It transpires during the course of hearing that no exempt income has been derived at the assessee’s behest in the impugned assessment year. I put a specific query as to whether the assessee had claimed any 80P deduction or not in the impugned assessment year. Learned counsel has filed assessee’s computation of income, return as well as acknowledgement of the impugned assessment year nowhere indicating such a deduction claim. Thus hold in these facts and circumstances that both the lower authorities have erred in disallowing assessee’s interest claim vide its above extracted detailed reasoning referring sec. 80P(2) of the Act. Thus direct the Assessing Officer to delete the impugned addition therefore. - Decided in favour of assessee.

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• 2019 (3) TMI 335
  Reopening of assessment - Original assessment u/s 143(3) - no tangible materials on record - No allegation that the assessee has filed to disclose fully and truly all materials for completion of the assessment - disallowance of benefit u/s 80-IB (10) - Held that:- AO considered the entire facts, and verified the documents produced by the assessee, viz., plan approval, permit, completion certification and also the books of accounts, bills for major expenditure, which were checked and retained to the assessee. Thus, based upon the detailed material, evidences and clarifications, AO completed the assessment. Thus, in the absence of any allegation that the assessee has filed to disclose fully and truly all materials for completion of the assessment and also in the absence of no fresh tangible material, reopening of the assessment is held to be bad in law. Disallowance of benefit u/s 80-IB (10) - Applicability of amended provision in respect of allotments made before 19.08.2009. Amended provision Provision applicable from A.Y 2010-11 - HELD THAT:- This has been clarified by the Board in the Explanatory Notes to the Provisions of the Finance (No.2) Act, 2009, dated 02.06.2010 that the amended provision shall not apply in respect of allotments made before 19.08.2009. So far as the assessee's case is concerned, all the allotments/sale deeds have been executed on 04.06.2009, and this aspect has not been disputed by the Revenue. In fact, the documents were considered by the Assessing Officer while completing the assessment under Section 143(3) of the Act, vide order dated 13.02.2013. Therefore, the assessment could not have been reopened based upon the amendment, which could not have been applied for the subject assessment year. Hon'ble Supreme Court in the case of CIT vs. Sarkar Builders [2015 (5) TMI 555 - SUPREME COURT] clause (d) is to be treated as inextricably linked with the approval and construction of the housing project and the assessee cannot be called upon to comply with the said condition either of the assessee or even the Legislature, when the housing project was accorded approval by the local authorities. Therefore, it held that the said amendment cannot be applied to those projects, which were sanctioned and commenced prior to 01.04.2005, and completed by the stipulated date, though such stipulated date is after 01.04.2005. The above decision also strengthens the case of the assessee. Thus we hold that the Tribunal was not right in rejecting the assessee's appeal. - Decided in favour of assessee.

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• 2019 (3) TMI 334
  Reopening of assessment u/s 147 - Deemed dividend addition u/s 2(22)(e) - loan received by the assessee during the relevant accounting period from one M/s Rupani Spinning Mills Private Limited - scrutiny assessment conducted - shareholding pattern reference - audit party report relied upon - HELD THAT:- Since the very AO in the immediately preceding assessment year, had examined the loan transaction between the petitioner and the said M/s Rupani Spinning Mills Private Limited with special focus of Section 2(22)(e) by separate order passed today in Writ Petition [2019 (3) TMI 320 - BOMBAY HIGH COURT] we had occasion to examine these documents in the context of the petitioner's challenge to the notice of reopening of assessment of the said assessment year. In the scrutiny assessment, the Assessing Officer in the said assessment year had at length collected materials in the context of the possible applicability of Section 2(22)(e). We have no hesitation to come to the conclusion that this issue was duly scrutinized by the Assessing Officer in the original scrutiny assessment. The perusal of the original file would clearly show that the audit party had brought to the notice of the Assessing Officer the possibility of invoking Section 2(22)(e) of the Act in relation to the loan transaction in question. The AO under a detailed reply dated 9th June, 2015 had opposed any such invocation of Section 2(22)(e) of the Act. He had given reasons why in his opinion Section 2(22) (e) of the Act was inapplicable. Despite this, upon further insistence by the audit party, impugned notice came to be issued. It is well settled through series of judgments that the decision to reopen the assessment must be on the basis of the belief found by the Assessing Officer. It may be open for the audit party to bring the relevant aspect to the notice of the Assessing Officer. However, thereafter it must be the independent decision of the Assessing Officer to reopen the assessment upon formation of his belief that income chargeable to tax had escaped assessment. See CIT Vs. Ranjan N. Aswani (2018 (3) TMI 315 - BOMBAY HIGH COURT) - decided in favour of assessee.

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• 2019 (3) TMI 333
  Penalty u/s 271C - delay in paying the tax deducted at source from the bills of the contractors - violation to Section 273B - mandate of sub-section (2) of Section 115-O as well as the 'second proviso' to Section 194B - Tax on distributed profits of domestic companies and Winnings from lottery or crossword puzzle - HELD THAT:- On deduction of tax, if there is delay in remitting the amount to Revenue, it has to be satisfied with interest as payable under Section 201(1A) of the Act as mentioned above, besides the liability to face the prosecution proceedings, if launched in appropriate cases, in terms of Section 276B of the Act. This alone has been sought to be explained in the said Circular issued by the CBDT. Even according to the CBDT, no penalty is envisaged under Section 271C of the Income Tax Act for non payment of the tax deducted at source. Once the burden is discharged by the person/assessee as to the existence of good and sufficient reason for not complying with the stipulation under Section 271C, it is for the authorities to consider with proper application of mind, whether the penalty is to be waived or reduced, based on the facts and circumstances. Section 271C of the Income Tax Act is quite categoric. Its scope and extent of application is discernible from the provision itself, in unambiguous terms. When the non-deduction of the whole or any part of the tax, as required by or under the various instances/provisions of Chapter XVII-B would invite penalty under Clause 271C(1)(a); only to a limited extent, involving sub-section (2) of Sec.115-O(coming under Chapter XIID) or covered by the 'second proviso' to Section 194B (coming under Chapter XVIIB) alone would constitute an instance where penalty can be imposed in terms of Section 271C(1)(b) of the Act. Since there is no obscurity in the above provision, it is not for the Court to read something more into it, contrary to the intent and legislative wisdom, which stands to be a forbidden field for the Court. It is settled law that the rule of 'strict interpretation' is the relevant one in so far as the fiscal statute is concerned. We find support from the ruling rendered by the Apex Court in Sneh Enterprises vs. Commissioner of Customs, New Delhi [2006 (9) TMI 179 - SUPREME COURT OF INDIA]. The finding of the Division Bench in U.S.Technologies International Pvt. Ltd. vs. Commissioner of Income Tax [2009 (6) TMI 1016 - KERALA HIGH COURT] and Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax [2015 (6) TMI 399 - KERALA HIGH COURT] to the effect that Section 271C(1)(b) will take in Section 271C(1)(a) as well, to attract penalty for non-payment of the tax deducted at source, does not reflect the correct provision of law. They stand overruled. The finding and reasoning in U.S.Technologies International Pvt. Ltd vs. Commissioner of Income Tax and Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax that the benefit of waiver/reduction of penalty [once good and sufficient reason is established in terms of Section 273B of the Income Tax Act] is not attracted in a case covered Section 271C(1)(b) (involving failure as to non-deposit of the tax deducted at source) is not correct. It also stands overruled. Whether anything survives to be considered? - It is quite open for this Court to decide the merit as well, by virtue of the specific power conferred under 'Section 7' of the Kerala High Court Act, instead of having the case sent back to the same/appropriate Bench for further consideration, after answering the reference. In view of our declaration that nonremittance of tax deducted at source as in the instant case (which comes under Section 194C of Chapter XVIIB of the Act) is not covered by Section 271C(1)(b) of the Act to attract penalty, nothing remains to be considered further, either by the Tribunal or by this Court since the verdict passed by the departmental authorities and the Tribunal (copies of which have been produced as Annexures A, B and C) stand contrary to the declaration as above. The said orders stand set aside.

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• 2019 (3) TMI 332
  Diversion of income by way of overriding title - right to receive the money - sum paid by the assessee-firm to the legal heirs of the deceased partners - legal heirs of the deceased partner was paid a sum as per the terms mentioned in clauses 23 and 24 of the partnership deed dated 31.12.2007 - not for purpose of business of the assessee-firm and added back - HELD THAT:- Diversion of income at source can take place either under a legal compulsion or under a contractual obligation or else under a statutory provision. In the case of CIT v. Smt.Kamlabai Juthalal [1975 (7) TMI 25 - BOMBAY HIGH COURT] it was held that where obligation is undertaken by the assessee to apply the income in a particular way before being received by the assessee or its accrual, the same results in the diversion of income. On the other hand, where the obligation to apply income is undertaken after being received or accrued to the assessee, it will be the case of application of money and will be liable to be taxed in hands of assessee. The underlying test, therefore, is whether the income in question ever reaches to the assessee. In the instant case, the effect of creation of the overriding of income is achieved by clause 23 of the partnership deed dated 31.12.2007. In identical factual situation, the Mumbai Tribunal in the case of ACIT v. Deloitte Haskins & Sells [2018 (5) TMI 418 - ITAT MUMBAI] had held that the payment made by a firm to the ex-partners and spouses / legal heirs of the deceased partners would be paid part of the income of the assessee-firm for the services rendered by them. The Mumbai High Court in case of CIT v. Kanga & Co. [2016 (2) TMI 573 - BOMBAY HIGH COURT] had confirmed the Tribunal order, wherein the Tribunal held that payment by firm relatable to retired / deceased partner’s would tantamount to diversion of income by overriding title. Therefore,amount of should be allowed as deduction in the case of the assessee-firm - Decided in favour of assessee.

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• 2019 (3) TMI 331
  Income from House property - lease rental income - assessee company was not legal owner of the property which lease rental income were shown in its accounts - Addition on protective basis - standard deduction on lease rent - HELD THAT:- Said rental income is taxable in the hands of M/s. Ambience Hotels and Resorts Pvt.Ltd., as there is no transfer of capital asset to assessee. Thus protective assessment made in hands of assessee to the extent of income received from lease of shops/spaces as per agreement dated 31.03.2008 deserves to be deleted. Assessee cannot be allowed to claim standard deduction under such circumstances in returned income in respect of rental income earned from such premises. - Decided against revenue Income from house property - Appeal of Ambience Hotels and Resorts Pvt.Ltd - applicability of section 60 - Taxability of lease rentals arising out of retail shops and retail spaces owned by assessee - actual transfer of assets - rental income from retail spaces and retail shops owned by assessee, which was collected by M/s.Ambience Developers and Infrastructure Pvt.Ltd. by virtue of agreement dated 31/03/2008 - HELD THAT:- Section 60 contemplates income arising to transferee which should be taxed in the hands of transferor in the event there is no actual transfer of assets from which such income accrued. This fiction under section 60 operates irrespective of whether the concerned transfer is irrevocable or not. Thus essential condition is that there should be no transfer of asset from which such income arises. There are various decisions of Hon’ble Supreme Court and Hon’ble High Court’s, wherein, relation of property from which income arises has been considered to be an essential condition for applicability of section 60. Unable to concur with argument advanced by Ld.AR for taxing rental income received from leased premises in the hands of M/s.Ambience Developers and Infrastructure Pvt.Ltd., when such assets are owned and held by assessee. The exception argued by Ld.AR is no longer available to assessee, by virtue of strict interpretation of section 60-63 of the Act. Uphold view of CIT (A) that income from leasing of shops/retail spaces has to be assessed in the hands of assessee under the head, ‘Income from House Property’, after allowing statutory deductions under section 24 of the Act. Addition u/s 14A - HELD THAT:- Admittedly, assessee during the year has earned dividend. Further, there is substantial investment made by assessee in its subsidiaries during the year. We agree with the submissions advanced by Ld. CIT DR that the ratio laid down by Hon’ble Supreme Court in case of Maxop Investment vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] would be applicable under such circumstances. In our opinion disallowance cannot exceed dividend earned during the year. Therefore we restrict disallowance to the extent of dividend earned.

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• 2019 (3) TMI 330
  TDS u/s 195 - default u/s 201/201(1A) - execution of works in Srilanka - services of technical personnel are used in the Installation of Wind turbines - payments made for repair service to Non Resident of Germany - income accrued in India - India-Germany DTAA - neither the Srilankan nor the German entity has any PE in India - The situs/ source of income generating activity - HELD THAT:- Services of technical personnel are used in the Installation of Wind turbines and hence the services rendered by Wind Force Pvt. Ltd. to Regen Power tech for its projects in Srilanka are in the nature of Fee for Technical Services and the payments made to M/s Windforce Private Limited, Srilanka for erection and commission services rendered to customers outside India are also in the nature of Royalty as it involves the payment for the right to use industrial, commercial, or scientific equipment, as the present payment is towards hiring of cranes and hence in the nature of right to use Industrial and as per clause (2) of Article 12 of DTAA, the payments made towards the services rendered by WFPL, Srilanka are liable to withholding tax at 10%. Similarly, on the payments made for repair service to Non Resident of Germany, the Ld CIT(A), inter alia, held, that it is in the nature of FTS, rightly treated as income chargeable to tax in India and hence liable to TDS. Therefore, the AO has rightly levied tax and interest u/s 201(1) & u/s 201(1A) of the Act. Since the assessee provided full turnkey installations for wind power projects for the customers outside India and thus the assessee has fulfilled /rendered its turnkey projects outside India by availing the impugned services. Therefore, its business is not carried out entirely outside India. In the facts and circumstances, we do not find any reason to interfere with the order of the ld CIT(A). The corresponding grounds of the assessee are dismissed. Payment made for purchase of software - royalty as per explanation 4 to section 9(1)(vi) of the Act and as per Article 13(3) of the Indo Denmak DTAA r.w.s 90 - HELD THAT:- The impugned consideration is paid for the purchase of software, it is paid for right to use software and hence such consideration is not royalty. Therefore, we direct the A.O not to treat the assessee in default u/s 201/201(1A) and delete the taxes and interest levied u/s 201 (1A) on this issue. The corresponding grounds of the assessee are allowed. TDS u/s 195 - remittance to M/s Ernst and Young, UAE in connection with a market study for Wind Energy rendered by Ernst and Young in UAE - Indo-UAE DTAA - assessee in default - HELD THAT:- After examination of the definition of market study and provisions of section 9 (1) (vii), the Indo UAE DTAA, the Ld CIT(A) has, inter alia, held, supra, that the market study being in the nature of Technical Services, is in the nature of information concerning commercial experience and hence Royalty. Therefore, the impugned remittances are treated as FTS income in the hands of E & Y and is liable to TDS. Since, the assessee has not placed any material to dislodge the findings recorded by the Ld CIT(A), we do not find any reason to interfere with his order. The corresponding grounds of the assessee fails.

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• 2019 (3) TMI 329
  Assessment u/s 153A - penalty u/s 271(1)(c) - Disclosure made u/s 132(4) in the search proceedings - difference between the income declared in the return originally filed prior to search qua the return filed subsequently in compliance of notice u/s 153A in pursuance of search action - Explanation 5/ Explanation 5A to Section 271(1)(c) reference - HELD THAT:- The identical issue has been squarely considered by the co-ordinate bench in the case of same combination in Vijay K. Shah vs. ITO [2017 (4) TMI 1426 - ITAT AHMEDABAD] Explanation 5A to Section 271(1)(c) of the Act deems act of concealment even before the return is filed. Thus, having regard to the statutory presumption of concealment in search cases under Explanation 5A, we do not subscribe to the fundamental plea on behalf of the assessee that penalty under s. 271(1)(c)can be invoked only with reference to return of income filed after search and where there was no addition over and above the income declared by the assessee in the return filed under s.153A of the Act (notwithstanding the fact that such return filed after search includes additional nature based on incriminating material and oral evidence under s.132(4). Pertinently, the plea raised on behalf of the assessee, if admitted, would render provisions of Section 271AAA/271AAB of the Act otiose and infructuous as noted in the case of Vijay K. Shah (supra). Plea raised on behalf of the assessee that Section 153A of the Act opens with a non obstante clause as noted earlier, Section 271AAA and Explanation 5A to Section 271(1)(c) of the Act deems culpability in appropriate cases even before the return is filed in search cases. Therefore, substitution of return originally filed under s.139 of the Act by subsequent return under s.153A of the Act has no impact on the legal fiction towards concealment enjoined by Explanation 5A of the Act. Therefore, the non obstante provision in Section 153A of the Act does not come in the way of penalty proceedings in search cases at all. Thus, the plea of the assessee for applicability of penalty provisions qua the return of income which may hold good under the normal provisions will not apply to special provisions enacted in search cases. In view of the special provisions enacted for imposition of penalty in search cases, the default under s.271(1)(c) of the Act gets triggered towards undisclosed income immediately on search action pending filing of return under s.139/s.153A of the Act albeit subject to escape roots as provided in Section 271AAA/271AAB/Explanation 5A to Section 271(1)(c) of the Act etc. See PRASANNA DUGAR VERSUS COMMISIONER OF INCOME TAX, CENTRAL-III, KOLKATA [2015 (8) TMI 477 - SUPREME COURT] - Decided against assessee.

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• 2019 (3) TMI 328
  Penalty u/s. 271(1)(c) - defective notice - validity of show cause notice as not struck off the irrelevant portion as to whether the charge against the Assessee is “concealing particulars of income” or “furnishing of inaccurate particulars of income” - Sale of the plots not declared in return of income filed prior to search - Some year even return was not filed - After search, in response to notice u/s.153C sale of plots was disclosed in returns - whether additions made to the income declared in the returns filed for the aforesaid AYs. u/s.153C would by itself be sufficient to impose penalty u/s.271(1)(c) - HELD THAT:- show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. As decided in COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] as relying on M/S MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, [2013 (7) TMI 620 - KARNATAKA HIGH COURT]imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income.

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• 2019 (3) TMI 327
  Reopening of assessment u/s 147 - reasons recorded were due to issue of shares at a very high share premium of Rs. 90/- per share raised by a private company - eligibility of reason to believe - reopening within four years from the end of the assessment year - meagre income earned by the assessee - identity and creditworthiness of the subscribers and genuineness of the transaction - HELD THAT:- In the instant case, CCIT based on intelligence inputs from DGIT(Intelligence and Criminal Investigation) has informed the AO that the assessee has issued equity shares at a high premium. The return of income was originally processed u/s 143(1) and no scrutiny assessment was framed u/s 143(3). The reopening u/s 147 was sought to be done within four years from the end of the assessment year and amended provisions of Section 147 shall be applicable. The processing of return of income u/s 143(1) cannot be called as an assessment as was held in the case of Rajesh Jhaveri Stock Brokers Private Limited [2007 (5) TMI 197 - SUPREME COURT] - AO must have tangible material to come to formation of a belief that income has escaped assessment. The assessee was incorporated only on 14.01.2009 and this is the first year of its operation. There is a meagre income earned by the assessee for the year ended 31.03.2009. There are no assets base nor any business of the assessee as is discernible from the financial statements filed before us. The assessee being a newly incorporated company has issued equity shares of Rs. 10 each at a premium of Rs. 90 per share. The outsiders having no connection with Promoters/Directors of the assessee company had subscribed 90.12% of the total fund infusion in the assessee company while the promoters/directors have infused 9.88% of the total fund infused in the assessee company. The AO acted on the information as to very high rate of share premium charged by the assessee company considering the same to be tangible incriminating material forming a belief that income has escaped assessment. Each case is to be decided on its own factual matrix and present case before us is a fit case for invocation of reopening of assessment u/s 147 of the 1961 Act. We have no hesitation in upholding invocation of provisions of Section 147 of the 1961 Act for reopening of the concluded assessment based on factual matrix of the case. CIT(A) passed a very cryptic order which in our opinion is not sustainable in the eyes of law as the learned CIT(A) whose powers are co-terminus with the powers of the AO is required to adjudicate on the factual matrix of the case keeping in view provisions of Section 68 to see whether evidence on record satisfy the ingredients of provisions of Section 68 as to identity and creditworthiness of the subscribers and genuineness of the transaction of raising of share capital and share premium. Thus, on merits also the appellate order passed by learned CIT(A) is not sustainable in the eyes of law and we set aside the same on merits too. Setting aside the issues in this appeal on merits to the file of learned CIT(A) for denovo adjudication of the issue of raising share capital and share premium to be adjudicated keeping in view provisions of Section 68 and all other relevant provisions of the 1961 Act. - Decided in favour of revenue for statistical purposes.

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• 2019 (3) TMI 326
  Transfer Pricing Adjustment - excessive AMP expenditure - international transaction - HELD THAT:- Issue in dispute has been decided in favour of the assessee by the coordinate Bench of this Court in earlier assessment years and the order passed by the coordinate Bench for A.Y.2009-10 {2017 (10) TMI 998 - ITAT DELHI] [2017 (2) TMI 650 - ITAT DELHI] has also been upheld by the Hon ble Jurisdictional High Court [2017 (5) TMI 1223 - DELHI HIGH COURT] Transfer Pricing Adjustment - transaction for Notional Interest attributable to delayed payments receivable from the AE - HELD THAT:- The revenue has not filed any appeal before the Hon ble High Court against the above decision of the Tribunal on the issue in dispute in A.Y. 2009-10[2017 (2) TMI 650 - ITAT DELHI]. Moreover, following the decision of A.Y. 2009-10, the coordinate Bench, in A.Y. 2010-11, has again decided the issue in favour of the assessee. It will also be relevant to note that there is no adjustment proposed on this issue by the TPO in A.Ys. 2011-12 2013-14. - Decided in favour of assessee Disallowance of deduction u/s 10A - Data Processing Receipts derived by the assessee from Units 1 and 2 would not be eligible for deduction u/s 10A - HELD THAT:- As decided in assessee s own case [2017 (10) TMI 998 - ITAT DELHI] the impugned order of the ITAT in the case of AIPL for AY 2009-10 on the issue of allowing the deduction under Section 10A suffers from no legal infirmity either in its analysis of the legal provisions or in its conclusions. The Court is not inclined to frame any question of law on the issue concerning a Section 10A deduction in the appeal of the Revenue against AIPL for AY 2009-10. Disallowance u/ 14A - HELD THAT:- Since undisputedly, there is no exempt income derived by assessee/appellant in the instant case, in our considered opinion, the issue merits to be decided in favour of the assessee/appellant following the Hon ble jurisdictional High Court s decision in the case of Mc Donald India Pvt. Ltd [2018 (11) TMI 1057 - DELHI HIGH COURT] and M/s Cheminvest Ltd.[2015 (9) TMI 238 - DELHI HIGH COURT].

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• 2019 (3) TMI 325
  TP adjustment - Comparable method - variation in the quality and design of the carpets - average method - weighted average method - we set aside this issue to the record of the A.O./TPO to carry out a fresh exercise of determining the arm’s length price as well as the price of the international transaction by using weighted average instead of simple average of all the transactions entered into by the assessee with AE as well as all the transactions of sale of carpets to non-AE. Further once the comparable uncontrolled price taken are more than one then the benefit of second proviso to Section 92C(2) of the Act has to be allowed and thereby if the price of the international transaction is within the tolerance range of + 5% of the arm’s length price then no adjustment is called for. TP adjustment - granting of loan to the AE - notional interest on the outstanding receivables from the AE - credit allowed to the AE beyond 60 days - arm’s length interest at LIBOR rate as against the PLR applied by the TPO - HELD THAT:- CIT(A) has rightly applied the LIBOR for the purpose of bench-marking the credit allowed to the AE for realization of sale proceeds. CIT(A) has also considered the exchange rate gain against the said arm’s length interest which in our view, is not proper as the exchange gain or loss would be part of the sale proceeds and therefore would consequently increase or decrease the sale price at the time of computing the arm’s length price and bench-marking of international transaction. Hence the for ex-gain or loss has to be taken as part of the sale price in both the cases of international transaction as well as comparable uncontrolled price. In other words, the exchange gain or loss would be part of the sale price of the transaction between the assessee and AE as well as non-AE. The effect of the exchange gain or loss has to be given in computing of arm’s length price being the part of sale proceeds as well as comparable price. The adjustment on account of credit allowed to the AE beyond 60 days shall be made at the time of determining the arm’s length price of sale transaction and not to be considered as a separate international transaction. Accordingly, this issue is also set aside to the record of the TPO/A.O. for computation of arm’s length price alongwith main international transaction of sale. Appeal of the revenue allowed for statistical purposes only.

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• 2019 (3) TMI 324
  Reopening of assessment - AYs Involved are 1996-97 & 1997-98 - Proceedings u/s 148 initiated on the basis of the findings given by Ld.CIT(A) in its appellate order for A.Y. 1998-99 - no prior approval of Joint Commissioner of Income Tax u/s 151 - non independent application of Mind by AO - HELD THAT:- we find that the Ld. A.O has not applied his mind, nor gathered any material evidence and merely issued the notices u/s 148 of the Act on fallacious assumptions by acting only on the directions of Ld. CIT(A) who is legally not having such powers to give direction to reopen the assessment. It is also not disputed that the Ld. A.O has not taken the prior approval of Joint Commissioner of Income Tax u/s 151 of the Act before issuing notice u/s 148 of the Act which is a mandatory requirement. In our considered view the Assessing Officer has simply acted upon i.e. initiated the reopening proceedings on the directions of Ld. CIT(A) and has totally ignored his part of the job i.e. his satisfaction. - Decided in favour of assessee. Reopening of assessment - case was reopened on a ground but additions were made on different ground - HELD THAT:- Assessee was opened for assessment after issuance of notice u/s 148 after 4 years from the end of the assessment year for the alleged escapement of income being the deposits in the bank and assessment framed thereafter on 27.12.2016. A.O did not made any addition or part thereof but has made addition for other income i.e. unaccounted investment. We therefore respectfully following the judgment JET AIRWAYS (I) LTD. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and the given facts and circumstances of the case are of the considered view that as the Ld.A.O has not assessed the income for which the reasons were recorded in the notice issued u/s 148 of the Act, and therefore it was not open to him to make the addition for unaccounted investment - Decided in favour of assessee.

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• 2019 (3) TMI 323
  Addition u/s 68 - expansion of scope of primary onus - unexplained credit entries /share capital - non discharge of initial onus of proof by assessee to establish by cogent and reliable evidence of the identity of the investor companies, the credit-worthiness of the investors, and genuineness of the transaction - HELD THAT:- The principles which emerge where sums of money are credited as Share Capital/Premium are :- i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. - ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. - iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. - In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company – Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.

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• 2019 (3) TMI 322
  Admit following substantial questions of law arise for consideration. (A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the Assessing Officer had not fulfilled the pre-requirements of invoking the provisions to Explanation-3 to section 43 (1) of the Income Tax Act, 1961, and thereby allowing full claim of depreciation of Rs. 61,48,20,284/- on intangible assets worth Rs. 500 crore? (B) Whether the Income Tax Appellate Tribunal was justified in allowing carry forward of unabsorbed business losses and depreciation in the facts of this case? (C) Whether the Income Tax Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) allowing interest expenses of Rs. 40,99,56,735/- on Deep Discount Bonds (DDBs) ? (D) Whether the Income Tax Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) allowing interest expenses of Rs. 2,65,24,193/- on Optionally Fully Convertible Premium Notes (OFCPNs) ? (E) In the light of the Circular No. 2 of 2002 dated 20.3.2002 of the CBDT, whether the Income Tax Appellate Tribunal was justified in law and on facts in confirming the order of the Commissioner (Appeals) that income of Optionally Fully Convertible Premium Notes (OFCPNs) of other companies of Rs. 1,79,56,195/- was not taxable in the hands of the assessee on accrual basis ?

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• Benami Property

• 2019 (3) TMI 336
  Determination of ownership of property - suit barred by virtue of Section 4 of the Benami Transactions (Prohibition) Act, 1988 - operation, control, administration and management as well as the business affairs of proprietary concern opened in the name of the 1st defendant - fiduciary relationship between the plaintiff and defendant - Held that:- The plaint when read as a whole, certainly averrs that there was a fiduciary relationship between the plaintiff and the 1st defendant. This is quite clear when one reads the plaint as a whole and more particularly Paragraphs 5, 7, 9,10, 11 and 12 of the plaint. We are not examining whether there is any merit in the factual averments made in the plaint with reference to the fiduciary relationship that the plaintiff had with the 1st defendant. That will, of course, be subject to the plaintiff proving such a relationship by adducing the necessary evidence. If he is unable to prove those facts, his suit would then fail as it would clearly be hit by Section 4 of The Benami Transactions (Prohibition) Act, 1988. Fiduciary relationship - Held that:- It is not as if under no circumstances there can be no fiduciary relationship between an employer and an employee. Whether on the facts pleaded, such a relationship is proved is a question that will be decided at the trial after both the parties are allowed to lead their evidence in support of their respective cases - the word fiduciary has not been specifically used in the plaint. However, that makes a little difference. When one reads the plaint as a whole, it is clear that such a relationship is pleaded though the specific word fiduciary has not been used - the learned Judge could not have rejected the plaint under Order VII Rule 11 (d) of the CPC. The impugned order dated 8th February, 2017 is hereby set aside - the suit is restored back to the file of the Trial Court to be decided on merits and in accordance with law - appeal allowed.

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• Customs

• 2019 (3) TMI 358
  Theft of Red Sanders - licensed Container Freight Station (CFS) - Red sanders kept in the warehouse - it is alleged that the seal in the container was broken open and replaced with another broken customs seal and the Red Sanders were stolen from the container - Release/Return of Bank Guarantee - Held that:- The fact that the stolen goods have been seized and is now lying with the forest department has not been disputed by the respondents. The only thing they are disputing is that it has not been returned back to them by the forest department and therefore, at this stage, the Bank Guarantee given by the petitioner cannot be returned by them. The Bank Guarantee was given by the petitioner only for the purpose of securing the interest of the respondents and the Directorate of Revenue Intelligence, in respect of the stolen goods - Admittedly, the stolen goods are now very much available with the forest department which in all likelihood will be returned back to the respondents in accordance with law. This Court is of the considered view that no useful purpose would be served by the retention of Bank Guarantee . Being a commercial establishment, the said amount of Rs. 6,79,50,000/- for which the Bank Guarantee was issued will be useful for the petitioner for his day-to-day business, instead of remaining idle without benefiting both the parties - petition allowed.

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• 2019 (3) TMI 357
  Violations of Coastal Zone Regulations - matter pending before Supreme Court - resumption of construction - petitioner submits that the proceedings pending before the Supreme Court have nothing to do with the issue raised in this writ petition - Held that:- I reckon whatever relief this Court can grant in this writ petition is the relief the Supreme Court can eminently consider. Once a competent judicial forum, its hierarchy notwithstanding, has an issue before it, all other collateral or incidental issues must also be placed only before that forum. Courts will not, as a matter of judicial propriety, entertain parallel proceedings, even when the relief sought, as the petitioner puts it, is limited. Piecemeal and fractured adjudication is the least of the judicial virtues. Petition closed.

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• 2019 (3) TMI 356
  Principles of natural justice - non-consideration of arguments by the CESTAT - Held that:- There is no merits in the appellant’s grievance; the order-in-original - the common one against several assessees, was appealed through separate proceedings. The CESTAT noticed the arguments addressed in each of those appeals, however, it summarily disposed of all the appeals in merely two paragraphs, on an assumption of culpability and consequential reliability of the assessees. The matter is remitted for fresh hearing and consideration by the CESTAT which shall address the arguments of all the appellants on their merits and pass a speaking and reasoned order dealing with all contentions - appeal allowed by way of remand.

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• 2019 (3) TMI 355
  Principles of natural justice - detention of goods - non-fulfillment of export obligation - petitioner’s case is that no notice was served on the petitioner and the copy of the Order-in-Original was not received by them - Held that:- It may not be necessary for this Court to examine the correctness of the stand taken by the petitioner as to whether they have received the Order-in-Original and whether they were put on notice prior to initiation of adjudication proceeding on account of subsequent events - On account of the fact that if the petitioner is discharging the export obligation, then the very fact will stand effaced. However, the Representations sent by the petitioner to be verified by the respondent - appeal allowed by way of remand.

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• Corporate Laws

• 2019 (3) TMI 354
  Validity of Arbitral Award - Default in repayment of mortgaged loan - Held that:- Having not disclosed the factum of the pendency of the Company Petition to the Arbitrator and not disclosed the order of winding up to the learned Single Judge hearing the Arbitration Petition, the Appellant cannot turn around and seek to invalidate the Award on the ground of non-compliance of Section 446 - If according to the Appellants the learned Single Judge should not have proceeded with the matter because of the order of winding up, the Appellants should have brought this to the notice of the learned Single Judge. Having remained silent, not even filing a reply to the Arbitrator, the Appellants are attempting to nullify the Award of the admitted liability by putting forth an argument which has no basis. The legislative policy and the series of decisions of this Court and the Apex Court envisages a lean towards upholding the Arbitral Awards. In the present case what we have before us is a clear case of debtors refusing to pay back the loan. The Arbitrators gave ample opportunity to file reply yet the Appellants did not do so. The challenge raised on the same ground against the Respondent in identical circumstances stands concluded against the Appellants up to the Apex Court. The sole contentions advanced by the Appellants cannot be accepted - appeal dismissed.

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• 2019 (3) TMI 353
  Professional misconduct on the part of Chartered Accountant - case of Revenue is that the Respondent No 1, being the Statutory Auditor of the Respondent No 2 Company has miserably failed to fulfill the statutory duty entrusted to him as per the provisions of the Companies Act, 2013 - Held that:- In the present times when the national economy is highly dependent upon the profitability and credibility of commercial institutions, the role of Statutory Auditors is becoming a very important tool of keeping a check and preventing re-occurrence of scams like Satyam. This Tribunal while exercising its power under the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013 has on several occasions made crucial decisions in important matters relating to Amalgamations and Merger, Oppression and Mismanagement, Voluntary Liquidation, Insolvency petitions, etc.and for such matters, it has to rely upon the reports of the Independent Auditors. It is not only the Company or the Board of Directors or promoters of a company, but the investors, both current and prospective, Securities Market, and the Courts/Tribunals too, that often rely upon the reports of independent Auditors - The role of Statutory Auditor is thus vital, and the auditor owes a fiduciary duty towards Nation. It is, therefore, necessary to take stern action against the person who has tried to diminish the credibility of the Auditor’s profession. The conduct of the Respondent no. 1, who happens to be a senior member of the ICAI, amounts to a gross violation in the form of professional misconduct and has challenged the credibility of the whole Profession. The respondent no. 1 has brought disrepute to the Institute of Chartered Accountant and the profession itself. We hope the ICAI will take necessary action against Respondent No. 1 for his professional misconduct. It is clear that the R-1 Mr Mukesh Maneklal Choksi colluded with the Director of R-2 company and has given a false Audit certificate relating to the Profit & Loss Account and Balance Sheet of the R-2 company, without even examining and verifying the books of accounts, The Statutory Auditor has not given any plausible explanation for such irresponsible fraudulent activities. Thus the charges levelled against the R-1 Mr Mukesh Maneklal Choksi have been found correct - petition allowed.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 352
  Dues towards Employees provident fund - Applicant has submitted that Section 11 (2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 declares that the amount due as contribution to the employees provident fund shall be made a first charge on the assets of the establishment - Corporate debtor in liquidation - Corporate Debtor defaulted in payment of dues/damages/interest including the Employees' share of contributions, which were deducted from the wages of the poor employees Held that:- The verification and admission of the claim of the applicant viz., EPFO has correctly been recorded by the liquidator vide his statement of verification, admission, rejection and determination of quantum of claim dated 23.04.2018. Therefore, the application filed by the applicant viz., EPFO is devoid of merits and stands rejected.

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• 2019 (3) TMI 351
  Maintainability of proceedings - Inability of repayment on the part of Corporate Debtor - default in paying the loan instalment - Held that:- The proceeding before the DRT, Kolkata has been filed by the bank for recovery of their dues whereas this proceeding is filed to declare the corporate debtor to be insolvent because they are not able to pay their dues and in order to have resolution of their insolvency. Both the laws work in different field. Their object is altogether different. Section 238 of I&B Code states that, “Provisions of this Code to override other law - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.” - So provisions of l&B Code supersedes any other law when it comes to the resolution of the Corporate Debtor. Hence, this proceeding is maintainable. The Financial Creditor proves that there is a debt against the Corporate Debtor of which they committed default. This application is not defective in any manner. Application allowed.

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• 2019 (3) TMI 350
  Maintainability of appeal filed by Corporate Debtor - Held that:- We are not adjourning the case as even on appearance of the counsel we cannot entertain the appeal preferred by Corporate Debtor being not maintainable - Appeal dismissed being not maintainable.

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• Service Tax

• 2019 (3) TMI 349
  Interest on delayed refund - relevant time for calculation of interest - Section 11BB of the Central Excise Act, 1944 - Held that:- The petitioner is entitled to the interest as claimed. The writ petition is allowed in terms of prayer clause (a). The amount of interest in terms of the legal provisions and as per the prayer be released as expeditiously as possible and in any event by 30th April, 2019 - petition allowed.

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• 2019 (3) TMI 348
  Franchise service or not - Demand of service tax - Held that:- The definition of the term franchise as found in this clause means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved - Insofar as the understanding of the Revenue about the franchise service is concerned, it is apparent that this is to be found in sub-clause (zze) of clause (105) of section 65 of the Finance Act, 1994. There, the definition of taxable service means any service provided or to be provided and, in the instant case, to a franchise by the franchisor in relation to franchise. The tribunal found that clause (10) of the agreement between the assessee and the dealer was picked up and read in isolation to arrive at the above conclusion. That is not justified at all. The agreement will have to be read as a whole and precisely - Once the matter is approached in a holistic manner and looked as such, then, we do not find any perversity or error of law apparent on the face of the record in the impugned order. Appeal dismissed.

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• 2019 (3) TMI 347
  Levy of interest u/s 75 of FA - delay occasioned in making such deposit - Relevant period for levy of interest - Circular issued by the Chandigarh Commissionerate, based on which the interest levy was made in the impugned order - Whether the Tribunal was correct in having confirmed the order of the Commissioner levying interest for the entire month in which the delay was caused, without reference to the actual period of delay? - Held that:- What has to be noticed is that from 1998 onwards, the rate of interest was to be applied either for every month or part of the month or for the period by which such crediting of the tax or any part thereof is delayed. This indicates that merely on a delay having been occasioned, there can be no levy of interest for the entire month. It has to be confined for the period in which the delay was occasioned ie: for every month or part of the month in which the delay was occasioned. Hence, the levy could have been made only for the actual period in which the delay was occasioned, ie: the number of days or when exceeding 30 days, a month and the additional delay occasioned again calculated on the basis of days and so on and so forth. In the present case, the levy was made for the entire month, despite the delay being only for certain days spreading over two months, but not exceeding 30 days. We find the said levy to be improper and not sanctioned by the Statute. The aforesaid Circular was in the context of the officers levying interest for two months, when the number of days delayed spread over more than one month. That is, when the payment had to be made on the 25th of the next month, if it is made on the 3rd or 4th of the next subsequent month, the officers used to levy two months interest, which the Commissionerate found to be not proper; rightly so. The Commissionerate then directed that in such cases, interest should be charged for only one month; which however is not sanctioned by the Statute, which speaks of the period of delay ie: the month or part of month in which the delay occurred - The arbitrary levy by the officers was sought to be mitigated by the Circular; which again permitted the levy for a period in excess of that prescribed by the Statute. The Commissionerate cannot issue a Circular against the specific provisions of the Statute. Whether the interest levy could be made on the full amount of tax due when actually a portion of the amount was paid within the due date? - Held that:- The interest levy on delay being occasioned can only be on the delayed payments and not on the entire payments due in a particular month. If a portion of the dues have been paid prior to the due date, then necessarily the said portion would be deemed as having been deposited within time and there could be no levy under Section 75 to that portion. If the amounts due have been remitted by the appellant to the DOT before the due date, then there could be no levy of interest. Further, if the delay was occasioned in making such remittance, the delay has to be calculated from the due date upto to the date of remittance to the DOT or the Excise Department, whichever is earlier. The order of the Commissioner and the Tribunal set aside, however, retaining that portion of the Tribunal s order, which interferes with the order of penalty - Commissioner shall rework the entire levy - questions of law are all answered in favour of the assessee and against the Revenue.

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• 2019 (3) TMI 346
  Grant of anticipatory Bail - offence punishable under Section 89(1)(a) of Finance Act, 1994 - evasion of service tax - non-appearance before the court and non-payment of service tax - case of petitioner is that because of the non-communication and inadvertence he did not appear before the Court and has not paid the service tax due and as such the NBW has been issued - Held that:- It is not in dispute that a case was registered under Section 89(1)(a) of Finance Act, 1994 and the petitioner-accused No.2 has also not appeared before the Court below and as such the NBW has been issued since 24.04.2015. No doubt by going through the records it indicates inspite of issuance of NBW by the learned Magistrate it was not possible to secure and has evaded the service of the NBW - But, now the petitioner-accused No.2 has come forward before this Court that he is going to appear before the Court regularly and in the first instance, he is going to deposit Rs. 20,00,000/- (Rupees Twenty Lakhs only) out of the remaining dues and subsequently he will be regular in appearing before the Court and for payment. By keeping the said undertaking given by the learned counsel for the petitioner, if by imposing some stringent conditions, if the petitioner-accused No.2 is enlarged on anticipatory bail it is going to meet the ends of justice - the petitioner-accused No.2 herein is released on anticipatory bail subject to conditions imposed - petition allowed.

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• 2019 (3) TMI 345
  CENVAT Credit - input services - insurance services - period from April 2016 to June 2017 - denial on account of nexus - Held that:- The first policy is in the nature of errors and omission insurance policy. It is a form of insurance policy which covers the risk on failure to perform on the part of financial loss caused or shortage in the service provided or the products sold - the disallowance of credit on errors and omission insurance policies is unjustified and requires to be set aside. The second type of insurance policy is the transit insurance policy. The appellant has explained that such insurance policy is taken to cover the risk of accident or damage of the goods such as computers, routers etc. which are transported to the premises of the customer - the appellant herein is not a manufacturer but an output service provider and the definition of input service would not be applicable to output service provider. Any input service used for providing output service is eligible for credit in the case of an output service provider. Hence disallowance of credit on this policy is unjustified. The third type of insurance policy is umbrella fixed asset policy. The appellant has taken this insurance policy to cover the risk such as fire, theft, weather damages of the fixed assets of the appellant as well as those goods that have been installed within the premises of the customer - These are assets of the company and are owned by the company and only for providing service, it is installed in the customers premises. This insurance policy is taken to cover the risk of fixed assets and is eligible for credit. Hence the disallowance is unjustified. Credit allowed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 344
  Classification of goods - Chlormint with Herbasol - Happydent White - whether classified as ayurvedic medicines and liable to be taxed @ 4% in view of Item 41 of Part 'A' in Schedule-II to U.P. VAT Act or classified under the residuary entry in Schedule-V @ 12.5%? - Held that:- There is no reason to entertain this petition - SLP dismissed.

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• 2019 (3) TMI 343
  Constitutional Validity of Section 25(1) of the Kerala Value Added Tax Act, 2003 - Held that:- Indeed, this Court imposed two conditions: One on the petitioner, and the other on the respondent officials. Admittedly, the petitioner did not comply with the burden cast on him; that is, appearing before the authorities in response to the notice and producing the relevant records. On the other hand, the respondent authorities were directed to hold the proceedings on hold until the writ petition was disposed of. The petitioner has not discharged its burden. By that event, the authorities ought not to have disregarded the directive against it: not to proceed further. The matter is remanded to the Assessing Authority perhaps, under the cover of the interim order, the petitioner may have bona fide believed that the authorities would not act - orders are set aside - appeal allowed in part.

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• 2019 (3) TMI 342
  Principles of natural justice - revision of earlier deemed assessment without considering the objections raised by the petitioner in accordance with law - purchases effected by the petitioner were duly reported to the respondent - case of petitioner is that the respondent is to initiate action against the other end seller for not reporting the sales effected by them to the respondent. Held that:- It is not in dispute that the petitioner who is the purchaser of the goods has reported to the respondent the details of the purchases from the seller, who has not reported the sale to the respondent. Copies of invoices relating to the purchase made by the petitioner were also submitted to the respondent The decision relied upon by the learned counsel for the petitioner, in the case of Assistant Commissioner (CT), Presently Thiruverkadu Assessment Circle, Kolathur, Chennai Vs. Infiniti Wholesale Limited [2016 (9) TMI 1431 - MADRAS HIGH COURT] is squarely applicable to the facts of the instant case. In the said judgment it has been held that if the sales effected through the writ petitioner from dealer are not disclosed by the other end seller either in the form of return filed monthly or the tax collected from the writ petitioner/dealer is not made over to the department by such seller, action lies only against such a defaulting seller but not against the purchaser. In the instant case also the error, is not attributable to the petitioner who is the purchaser who has claimed Input Tax Credit (I.T.C.) based upon the invoice generated by seller. The genuineness of the purchase is also not disputed by the respondent. The matter is remanded back to the respondent for fresh consideration and the respondent is directed to afford sufficient opportunity to the petitioner including the right of personal hearing - petition allowed by way of remand.

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• 2019 (3) TMI 341
  Power to waive pre-deposit - Section 68 of the Punjab VAT Act, 2005 - Held that:- The Tribunal had directed the appellant(s) to make pre-deposit of Rs. 6 lakhs and Rs. 2 lakhs in VAT Appeal Nos.89 and 98 of 2018 respectively in lumpsum on the basis of offer made by it. It was also directed that after making deposit of the said amount, the First Appellate Authority would hear and decide the appeals on merits. On failure to do so, the order passed by the First Appellate Authority shall remain intact. There is no illegality or perversity in the aforesaid findings recorded by the Tribunal which may warrant interference by this Court. No substantial question of law as claimed by the appellant(s) arises in this appeal - appeal dismissed.

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• 2019 (3) TMI 340
  Imposition of penalty - Deletion of an addition made - detention of goods - probable omissions and suppression - Held that:- If, on detection of offence, the transaction was reflected in the books of accounts, that is not a ground to either absolve the liability to penalty or restrain a best judgment assessment - Here there is no explanation offered for the offence which led to the imposition of penalty. The assessee before the A.O merely claimed that they were not even served with the penalty order. If that be so, atleast then, the assessee ought to have taken steps to obtain the order and challenge the same - Nothing seems to have been done even when the statutory appeals from the assessment was pending. The allegation of non-service of penalty order cannot be believed especially when the assessee asserts that the specific goods which were the subject of penalty was entered in the accounts. The question of law answered against the assessee and in favour of the revenue.

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• 2019 (3) TMI 339
  Levy of additional sales tax for the period from 01.04.1999 to 18.06.1999 - head office was situated outside the State of Tamil Nadu - TNGST Act - amendment vide the Tamil Nadu Additional Sales Tax Act [amendment Act] - whether the appellant/dealer is liable to pay additional sales tax pursuant to the amendment vide the Tamil Nadu Additional Sales Tax Act [amendment Act], from the date on which it was published in the Tamil Nadu Government Gazette? - Held that:- As identical question was decided by the Hon'ble Division Bench of this Court in the case of Philips India Limited Vs. The Assistant Commissioner [2004 (5) TMI 538 - MADRAS HIGH COURT], where it was held that The Assessing Officer was justified in coming to a conclusion that the taxable turnover for the period between 01.04.1996 and 31.03.1997 being more than Rs. 100 crores, the petitioner was liable to pay additional sales tax even as per the amended provision as contained in Section 2(1)(aa). Thus, it is clear that the liability to pay additional sales tax is to be collected on the total taxable turnover of the dealer for the entire year. Therefore, the contentions advanced by the petitioner that the year should be split into two, is impermissible as we cannot add words to a statute which are clear and unambiguous. The Assessing Officer needs to apply the said decision and take a fresh decision on merits and in accordance with law - Tax Case Revision stands disposed of by remitting the matter to the Assessing Officer and calculate the liability of additional sales tax.

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• 2019 (3) TMI 338
  Levy of sales tax - job-work - TNGST Act - no concrete evidences from the revenue to prove that the petitioners have transferred the materials in the job work - demand on the ground that there was no written agreement for stitching of job work, but in contrary supported by delivery challans, only job work - Held that:- The Tribunal proceeded on independent footing which was not the manner in which the Assessing Officer had completed the assessment. One important fact is that the Tribunal noted that the petitioner carries on job work also apart from manufacturing for export. However, the petitioner was denied relief on the ground that the purchase value of fabric and embellishments used for job work could not be dissected and arrived at. The petitioner's specific case is that the delivery challan of fabric and material for the purpose of job work will only contain the quantity and not the price, since the petitioner has to complete this job of stitching and returning the finishing goods to the principal. Once the revenue accepts that the petitioner has also done job work, it has to analyse as to whether the documents produced by the petitioner support the stand taken by the petitioner that they have done job work. We are of the view that the Tribunal should not have rejected the documents solely on the ground that the value of the material has not been mentioned. The matter requires to be re-examined by the Assessing Officer in proper perspective - appeal allowed by way of remand.

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• Indian Laws

• 2019 (3) TMI 337
  Guilty of “other misconduct” - inappropriate behaviors of CA - Clause 2 of Part IV of the First Schedule to the Chartered Accountants Act, 1949 - It is the petitioner’s case that the allegations made against him have no bearing with him carrying on the profession as a Chartered Accountant and, therefore, the Board and/or ICAI would have no jurisdiction to entertain a complaint in this regard - inter-personal relationships between HA and the petitioner. Held that:- Section 21A of the Act contains provisions for constitution of a Board of Discipline. Sub-section (3) of Section 21A provides that where the Board of Discipline is of the opinion that a member is guilty of professional or other misconduct as specified in the First Schedule, it shall afford to the member an opportunity of being heard and may, thereafter, take any one of the actions as specified therein. Section 21B of the Act contains provisions relating to the Disciplinary Committee - As is apparent from the plain language of Part IV of the First Schedule to the Act, the expression ‘other misconduct’ includes any conduct, which brings disrepute to the profession or the ICAI as a result of an action whether or not related to professional work. Thus, it is not necessary that the misconduct complained of should be a conduct in exercise of the profession of Chartered Accountancy. Any conduct, which tends to bring disrepute, would be a subject matter of proceedings under Chapter V of the Act. In Council of the Institute of Chartered Accountants and Another v. B. Mukherjea [1957 (9) TMI 60 - SUPREME COURT], the Supreme Court had examined the provisions of the Act, as in force at the material time (prior to the amendments in the year 2006 and in the year 2011). The Court had explained that the acts of commission and omissions specified in the Schedule were not exhaustive and did not purport to limit the power of the Council under Section 21(1) of the Act. In a recent decision in Council of the Institute of Chartered Accountants of India v. Shri Gurvinder Singh & Anr. [2018 (11) TMI 1163 - SUPREME COURT OF INDIA], the Supreme Court had allowed an appeal preferred against the decision of this Court. In that case, a complaint was made against a Chartered Accountant who had sold certain shares of a public limited company to the complainant therein, in the year 1999 - The Division Bench answered the reference in favour of the Chartered Accountant and held that since he was acting in an individual capacity while dealing with the complainant and not acting as a Chartered Accountant, he could not be held guilty of misconduct. The Supreme Court allowed the ICAI’s appeal against the said decision and held that the High Court had incorrectly appreciated the provisions of the Act. Thus, this Court is unable to accept the contention that the Board of Discipline does not have the jurisdiction to examine the alleged misconduct on the part of the petitioner. Clause (2) of Part-IV of the First Schedule to the Act is wide, and would include within its scope, any conduct that would tend to bring disrepute to the profession or the Institute. If a Chartered Accountant is found to have been guilty in outraging the modesty of a woman and/or other offences involving moral turpitude, it would not be inapposite for the Board of Discipline to also conclude that the conduct did, in fact, lower the dignity of the profession. In this view, this Court is not able to accept that the proceedings before the Board of Discipline are without jurisdiction. Whilst, it is correct that the Board of Discipline has no jurisdiction to sentence the petitioner, it would be erroneous to contend that the Board of Discipline does not have the jurisdiction, to examine the allegations made against the petitioner, in the context of determining whether the petitioner is guilty of other misconduct as defined under Part-IV of the Schedule-I to the Act - This Court is refraining from expressing any opinion on the merits of the complaint made by respondent no.2, as the question whether the petitioner is guilty of other misconduct is yet to be decided by the Board of Discipline. Petition dismissed.

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