TMI Tax Updates - e-Newsletter
March 8, 2021

Case Laws in this Newsletter:

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

Articles

1. ADDITIONS UNDER SECTION 68 OF INCOME TAX ACT, 1961

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Repayment of ‘8.01% PLI GoI Special Security 2021’

2. Repayment of ‘11.50% GoI (IIBI) Special Security 2021’

Notifications

Companies Law

1. S.O. 1066 (E) - dated 5-3-2021 - Co. Law

Seeks to bring force section 23 of Companies (Amendment) Act, 2017

2. G.S.R. 159 (E) - dated 5-3-2021 - Co. Law

Companies (Management and Administration) Amendment Rules, 2021

3. G.S.R. 158 (E) - dated 5-3-2021 - Co. Law

Companies (Incorporation) Third Amendment Rules, 2021

Customs

4. 12/2021 - dated 5-3-2021 - ADD

Seeks to impose anti-dumping duty on imports of 'Black Toner in powder form' originating in or exported from China PR, Malaysia, and Chinese Teipei for a period of 5 years from the date of imposition of provisional ADD, i.e. from 10th August 2020

GST - States

5. EXN-F(10)-17/2020 - dated 24-2-2021 - Himachal Pradesh SGST

Seeks to bring in force Section 2 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2020

6. EXN-F(10)-17/2020 - dated 24-2-2021 - Himachal Pradesh SGST

Seeks to bring force Section 13 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2019

7. (4-k/2020)-FD 05 CSL 2020 - dated 1-3-2021 - Karnataka SGST

Karnataka Goods and Services Tax (Amendment) Rules, 2021

8. (4-A/2021)-FD 02 CSL 2021 - dated 1-3-2021 - Karnataka SGST

Karnataka Goods and Services Tax (Second Amendment) Rules, 2021

9. (01/2021)-KGST.CR.01/17-18 - dated 1-3-2021 - Karnataka SGST

Seeks to extend the time limit for furnishing of the annual return specified under section 44 of KGST Act, 2017 for the financial year 2019-20 till 31.03.2021.

10. F A 3-42-2020-1-V(07) - dated 23-2-2021 - Madhya Pradesh SGST

Amendment in Notification No. F A 3-31-2020-1-V-(67),dated 5th December, 2020

11. F A 3-42-2019-1-V(08) - dated 23-2-2021 - Madhya Pradesh SGST

Amendment in Notification No. F A 3-42-2019-1-V(88), dated 22nd November 2019

12. F A 3-41-2020-1-V(06) - dated 23-2-2021 - Madhya Pradesh SGST

Amendment in Notification No. F A 3-31-2020-1-V-(67), dated 5th December, 2020

13. 6736 - FIN-CT1-TAX- 0002 /2020 - dated 26-2-2021 - Orissa SGST

Seeks to notify persons to whom provisions of sub-section (6B) or sub-section (6C) of section 25 of OGST Act will not apply

14. F.No-509/60/Commercial Tax - dated 5-3-2021 - Uttar Pradesh SGST

Amendment in Notification No. GST-2020-21/F.No.-509/59/Commercial Tax Dated 31.12.2020

15. 206/XI-2-21-9(42)/17-U.P. GST Rules-2017-Order-(173)-2021 - dated 23-2-2021 - Uttar Pradesh SGST

Uttar Pradesh Goods and Services Tax (Forty Ninth Amendment) Rules, 2021

IBC

16. F. No. IBBI/2020-21/GN/REG069 - dated 4-3-2021 - IBC

Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2021

Income Tax

17. 11/2021 - dated 5-3-2021 - IT

Income-tax (1st Amendment) Rules, 2021 - New Rule 3B inserted - Annual accretion referred to in the sub-clause (viia) of clause (2) of section 17 of the Act

Law of Competition

18. F. No. R-40007/6/ Reg-Meeting/Noti/2021-CCI - dated 2-3-2021 - Competition Law

Competition Commission of India (Meeting for Transaction of Business) Amendment Regulations, 2021

Circulars / Instructions / Orders

IBC

1. IBBI/LIQ/40/2021 - dated 4-3-2021

Filing of list of stakeholders under clause (d) of sub-regulation (5) of regulation 31 of the IBBI (Liquidation Process) Regulations, 2016

Highlights / Catch Notes

GST

• Rohtak Court Lacks Jurisdiction for DGGI Case; Matter to Be Filed in New Delhi Court Under CGST Act.

  Case-Laws - DSC : Territorial jurisdiction of Hon'ble Court at Rohtak - Investigation conducted by the DGGI, Rohtak - All alleged Firms/ Companies are 'Registered' under the CGST Act, 2017 at 'Delhi' and not in Haryana / Rohtak - even if Charge Sheet/ Complaint is filed before this Hon'ble Court at Rohtak, Haryana, this Hon'ble Court would not be Jurisdictionally Competent to take COGNIZANCE of the Charge Sheet/Complaint and the same would have to be returned to the Department for filing before a Court of Competent Territorial Jurisdiction i.e., the Court of Ld. C.M.M, New Delhi. - DSC
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Income Tax

• High Court Upholds ITAT's Decision on Share Premium Valuation u/s 56(2)(vii)(b); No Flaws Found in Method Used.

  Case-Laws - HC : Addition u/s 56(2)(vii)(b) - share premium - The valuation is a question of fact which would depend upon appreciation of material or evidence. The methodology adopted by the Respondent-Assessee, accepted by the learned ITAT, is a conclusion of fact drawn on the basis of material and facts available. The test laid down by the Courts for interfering with the findings of a valuer is not satisfied in the present case, as the Respondent-Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process. - HC
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• Taxpayer's Challenge Fails as Reassessment Validity Hinges on Recorded Reasons, Not Provided by Taxpayer. No Error Found.

  Case-Laws - AT : Validity of reopening of assessment - It is well settled Law that validity of the reassessment proceedings is to be judged with reference to the reasons recorded for reopening of the assessment. The assessee even now failed to produce copy of the reasons recorded for reopening of assessment so as to challenge the reopening of the assessment in the matter. In the absence of any material on record in support of the contention of the assessee, we do not find any infirmity in the orders of the authorities below for reopening of assessment. - AT
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• Section 153A: Assessee's statement alone can't justify estimated additions without corroborative evidence found during a search.

  Case-Laws - AT : Assessment us 153A - Statement of assessee alone cannot be the basis for making any estimated additions against the assessee. May be the assessee has retracted from the statement given under section 131 later on and there is a delay in retracting by filing a letter and affidavit to the Income Tax Authorities as well as President of Noida Authority, but, the delay in retracting the statement is of no significance because there were no corroborative material found during the course of search - AT
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• Trust Assessment: A.O. Wrongly Rejects Explanation Due to Common Director, Lacks Evidence u/s 68.

  Case-Laws - AT : Assessment of trust - addition being loans from three parties - It is well settled Law that assessee need not to prove source of the source. A.O. entirely on different reasons that there is a common Director in 03 companies and common address disbelieved the explanation of assessee. It may not be relevant criteria to decide the issue under section 68 - A.O. has not brought any evidence against the assessee on record to disbelieve the documentary evidences. - AT
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• Expenditures like stamp charges and loan fees deemed revenue, not capital; allowed for tax purposes.

  Case-Laws - AT : Nature of expenditure - Whether expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are revenue expenditure or capital expenditure, which gives enduring benefit to the assessee? - Allowed as revenue expenditure - AT
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• No Further Revision Allowed u/s 263 if Assessing Officer Follows Pr. CIT Directions Under Income Tax Act.

  Case-Laws - AT : Revision u/s 263 - addition u/s 68 - The Assessing Officer has taken a possible view. When the Assessing Officer follows the direction of the Ld. Pr. CIT, in his order passed u/s. 263 of the Act, no revision can be done u/s. 263 of the Act on the ground that the Assessing Officer has not travelled beyond these directions. - AT
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• Court Upholds 15% Revenue Attribution to Indian Permanent Establishment; Rule 27 Invoked to Challenge CIT(A) Decision.

  Case-Laws - AT : Attribution of 15% Revenue to the PE in India - invocation of Rule 27 for challenging the decision of the CIT (A) - Since no guidelines are available as to how much should income be reasonably attributable to India, the same has to be determined on the basis of the facts of the case and judicial precedents. - the ld. CIT(A) rightly attributed 15% of the Revenue - AT
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• Doctrine of Merger Inapplicable: Jurisdiction Issue Not Raised or Considered by Superior Court, No Binding Order Exists.

  Case-Laws - AT : Doctrine of Merger - Once the superior court has disposed of the list before it either way - it is the decree or order of the superior court which is final and binding. In the present case, the point of jurisdiction was never raised before the lower authorities and accordingly, the same never formed the subject matter of appeal before the Hon'ble High Court and hence the doctrine of Merger will not be applicable in the case in hand. - AT
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Customs

• Court Rules Shipping Bill Amendment Valid; Declares Circular Ultra Vires Under Articles 14, 19(1)(g), and Customs Act Section 149.

  Case-Laws - HC : MEIS scheme - conversion of the EPCG shipping bill into the EPCG­ cum­ Drawback shipping bill - Since in the present case, the amendment of shipping bills by converting them into Drawback shipping bills is possible on the basis of the documentary evidence which was in existence at the time the goods were cleared for export and the benefit of Drawback at All industry rate of 1.5% of value of the exported goods is also possible to be allowed - the impugned circular to the extent of para 3(a) is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as also ultra vires Section 149 of the Customs Act, 1962. - HC
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• Refund of Special Additional Duty Granted After Proving No Unjust Enrichment via Chartered Accountant Certification.

  Case-Laws - AT : Refund of SAD - denial of refund on the ground that the test of unjust enrichment not passed on - non-collection of excess duty paid by the appellant - The certificate of the Chartered Accountant would show that he has examined records and verified as to the details of the refund claim made by the appellant. Further, it is also shown that the amount was reflected in the accounts /balance sheet under the head ‘Customs Refund Receivables’. This would clearly go to establish that the excess duty has not been passed on to the buyers by the appellant Refund allowed - AT
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Corporate Law

• Majority Shareholders Approve Share Capital Reduction; Company Ordered to Revalue Shares, Compensate Shareholders at Fair Price.

  Case-Laws - AT : Reduction of share capital - Even though the public shareholders/non promotor shareholders had objected to the reduction of share capital in the EGH but the majority shareholders i.e. promotor group having majority, passed the resolution in favour of reduction of share capital. - The Company is hereby directed to revalue the shares by a registered/independent valuers to value the shares of the Company and the Company shall pay the fair price arrived at by the valuer based on the latest audited accounts of the Company - AT
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Indian Laws

• Supreme Court Affirms International Nature of Transaction; Delhi High Court Lacks Jurisdiction to Appoint Arbitrator.

  Case-Laws - SC : Seeking appointment of a sole arbitrator - international commercial arbitration or not - distributors of Amway products in India - sole proprietary concern is equated with the proprietor of the business - The argument that there is no international flavour to the transaction between the parties has no legs to stand on. - This being the case, it is clear that the Delhi High Court had no jurisdiction to appoint an arbitrator in the facts of this case. - - SC
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Service Tax

• High Court Upholds Tribunal's Interpretation of Rules 5 and 6 on CENVAT Credit Refunds for 100% EOUs.

  Case-Laws - HC : 100% EOU - Refund of the accumulated CENVAT Credit - The Tribunal has rightly interpreted the words used in Rules 5 and 6 by pointing out that the words used in Rule 6 are “exempted goods/services”, whereas Rule 5 does not use these words and uses the words “final product/output service” - HC
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• SEZ Unit's Service Tax Refund on Insurance Services Upheld; Absence from Approval List Not Grounds for Rejection.

  Case-Laws - AT : Refund of Service tax paid - SEZ unit - input service or not - Group Health Insurance Service - Group Medical Insurance Service - Group Personal Accident Insurance Service - mere non-inclusion of services in the list of Unit Approval Committee shall not be a ground for rejection of refund claim. - AT
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• Penalty for Wrongful CENVAT Credit Availment Removed Due to Lack of Justification u/r 15(1.

  Case-Laws - AT : Penalty - wrong availment of cenvat credit - The intention as to fraud, suppression of facts, etc., are relevant for the penalty under Rule 15 (3) and hence, the Revenue has not made out any case to rope-in Rule 15 (1) which deals with a different situation altogether - there is no scope to sustain even the reduced penalty and accordingly, the same is directed to be deleted in toto. - AT
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• Auctioneering via sealed bids isn't "auctioneer's service"; direct lending by appellants isn't business support for banks.

  Case-Laws - AT : Auctioneering services - What they are rendering is facilitation of tenders for sale of the products of their members through sealed tenders. Therefore, the term “auctioneer’s service” does not apply to their activity at all - Regarding BSS, Appellants are getting loans from their bank and lending to their members on interest. Therefore, this is a case of they lending money to their members and not supporting service of business of some other bank. - AT
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Central Excise

• High Court Overturns Tribunal's Penalty Reduction u/r 26(2); Finds Insufficient Justification for Credit Reversal.

  Case-Laws - HC : Reduction in quantum of penalty imposed under Rule 26(2) (i) & (ii) - the Tribunal would say that there is no revenue loss because M/s.Sujana Metal Products Limited have reversed the credit, that can hardly be a mitigating factor for reduction of penalty on the five entities because those entities were well aware that the transaction was a 'circular transaction' and credit was availed on invoices without movement of goods - the exercise of discretion by the Tribunal for reduction of penalty is perverse and unsustainable and accordingly, the same is set aside - the issues are answered in favour of the revenue. - HC
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Case Laws:

• GST

• 2021 (3) TMI 244
  Maintainability of petition - grievance of the petitioners is with regard to decision of the Goods and Services Tax Council on Agenda Item No. 6 undertaken in its 39th meeting held on 14.03.2020 - HELD THAT:- Several contentions have been raised by learned counsel for the petitioners while questioning correctness of the decision aforesaid. Having considered the same, we deem it appropriate to admit this petition for writ and to hear the same finally at earliest. The writ petition is admitted for hearing. No post admission notice be issued as the parties are already represented by their counsels - Let this petition for writ be listed for final disposal on 15.03.2021.

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• 2021 (3) TMI 242
  Liability of GST - Calculation of the tax amount - value of property is to be taken in which value? - purchase price or circle rate? - whether the properties offered as security are unencumbered and whether the petitioner company, is possessed of the original title deeds pertaining to these properties? HELD THAT:- The petitioner-company is directed to file an affidavit, in the very least, in respect of the following aspects, in the course of the day:- (i) Whether or not the subject properties are unencumbered and/or free of charge. (ii) Whether the petitioner-company is willing to deposit the original title deeds with the respondents. (iii) The manner in which the petitioner-company proposes to bridge the monetary gap between the value of the properties and the liability towards GST as quantified by the respondents. (iv) The bank particulars and other identification details of the employees of the petitioner-company. List the matter on 5th March, 2021.

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• 2021 (3) TMI 241
  Best judgement passed u/s 62 (1) of the GST Act - ex parte order of assessment - time limitation prescribed under section 107 of the Goods And Services Tax Act, 2017 - return filed by the petitioner for the tax period Of June 2019 on 04.10.2019 with delay of three days with respect to the limitation off 30 days prescribed under section 62 (2) of the act - section 16 (2), 16 (4,39 read with section 46 and 47 of the act permits filing of a monthly return after due date and imparts all characteristics of a return valid and acceptable - seeking declaration that section 62 (2) of the act is directory and not mandatory and therefore any return validly filed in terms of section 39 read with section 47 of the act shall replace the best judgement assessment made under section 62 (1) irrespective of the bar of limitation prescribed under section 62 (2) of the act. HELD THAT:- It stands clarified that deposit of such amount would be without prejudice to the respective rights and contentions of the parties and the order which the authority may pass upon the matter being remanded for consideration afresh. As such, purely on a limited ground, the impugned order passed by the State Tax Additional Commissioner (Appeal), Patna, as contained in Annexure 6 and order dated 31.8.2019 passed under section 62(1) of Goods and Services Tax Act, 2017, as contained in Annexure 4, is set aside with further mutually agreeable directions imposed - the petitioner shall deposit a sum of Rs. 3 lacs with the authority on or before 9th March, 2021 - the petitioner shall appear before the assessing authority on 9th March, 2021 in his office at 10:30 A.M., on which date he shall place on record additional material, if so required and desired.

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• 2021 (3) TMI 205
  Territorial jurisdiction of Hon ble Court at Rohtak - Investigation conducted by the DGGI, Rohtak - All alleged Firms/ Companies are Registered under the CGST Act, 2017 at Delhi and not in Haryana / Rohtak - the alleged Firms/ Companies have NOT Issued NOR Received any alleged invoices within the Territorial Jurisdiction of the District Courts, Rohtak - HELD THAT:- Remand of the Applicant was not obtained by the Department from this Hon ble Court on the basis of any allegation based on any Firm/ Company Registered within the Territorial Jurisdiction of this Hon ble Court - admittedly, the alleged Firms/ Companies have NOT Issued NOR Received any alleged invoices within the Territorial Jurisdiction of this Hon ble Court. It is therefore clear that this Hon ble Court lacks the Territorial Jurisdiction in the present case and therefore the Remand of the Applicant is required to be Transited to the Court of Appropriate Jurisdiction i.e., the Court of Ld. C.M.M, New Delhi, which exercises the Territorial Jurisdiction over the Firms/ Companies , which are Registered in Delhi - Rather, given the abovesaid facts, even if Charge Sheet/ Complaint is filed before this Hon ble Court at Rohtak, Haryana, this Hon ble Court would not be Jurisdictionally Competent to take COGNIZANCE of the Charge Sheet/Complaint and the same would have to be returned to the Department for filing before a Court of Competent Territorial Jurisdiction i.e., the Court of Ld. C.M.M, New Delhi.

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• Income Tax

• 2021 (3) TMI 239
  Addition u/s 56(2)(vii)(b) - projection/estimated figures as presented in the valuation report - Assessee has received share premium from various subscribers/equity partners - Determination of fair market values as per prescribed methodology - Cash Flow projections taken into account in the Discounted Cash Flow Method by the assessee are nothing but paper plans that have no relation with the reality - AO analysed the business profitability of the Respondent-Assessee only to the extent that such profitability was not commensurate with the actual financials provided by the Respondent-Assessee during the course of assessment proceedings - whether the AO after invoking the deeming provision under Section 56(2)(viib), could have determined the FMV of the premium on the shares issued at nil after rejecting the valuation report given by the Chartered Accountant based on one of the prescribed methods under the Rules adopted by the valuer? - HELD THAT:- Determination of fair market values as per prescribed methodology. Appellant-Revenue had the option to conduct its own valuation and determine FMV on the basis of either the DCF or NAV Method. Assessee being a start-up company adopted DCF method to value its shares. This was carried out on the basis of information and material available on the date of valuation and projection of future revenue. There is no dispute that methodology adopted by Assessee has been done applying a recognized and accepted method. Since the performance did not match the projections, Revenue sought to challenge the valuation, on that footing. This approach lacks material foundation and is irrational since the valuation is intrinsically based on projections which can be affected by various factors. We cannot lose sight of the fact that the valuer makes forecast or approximation, based on potential value of business. However, the underline facts and assumptions can undergo change over a period of time. The Courts have repeatedly held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. It is a technical and complex problem which can be appropriately left to the consideration and wisdom of experts in the field of accountancy, having regard to the imponderables which enter the process of valuation of shares. The Appellant-Revenue is unable to demonstrate that the methodology adopted by the Assessee is not correct. AO has simply rejected the valuation of the Respondent-Assessee and failed to provide any alternate fair value of shares. As noted in the impugned order and as also pointed out by Mr. Vohra, the shares in the present scenario have not been subscribed to by any sister concern or closely related person, but by outside investors. Indeed, if they have seen certain potential and accepted this valuation, then Appellant-Revenue cannot question their wisdom. The valuation is a question of fact which would depend upon appreciation of material or evidence. The methodology adopted by the Respondent-Assessee, accepted by the learned ITAT, is a conclusion of fact drawn on the basis of material and facts available. The test laid down by the Courts for interfering with the findings of a valuer is not satisfied in the present case, as the Respondent-Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process. No question of law.

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• 2021 (3) TMI 229
  TP adjustment only to the international transactions - dispute is for restricting the transfer pricing adjustment to the international transactions alone and not extending it to the entity level transactions - HELD THAT:- Section 92 is first section of the Chapter-X containing special provisions relating to avoidance of tax. Sub-section (1) of section 92 provides that: `Any income arising from an international transaction shall be computed having regard to the arm s length price . Thus it is graphically clear that the ALP and the consequential transfer pricing adjustment are contemplated only in respect of the international transactions (with AEs) and not the entity level transactions (which also include transactions with non-AEs). The TPO, in the instant case has computed transfer pricing adjustment in respect of entity level transactions, which cannot be countenanced. We, therefore, direct to restrict the transfer pricing adjustment only to the international transactions rather than the entity level transactions, of course, after giving due opportunity of hearing to the assessee. Calculation of PLI - What is essential to consider is the PLI computation of the comparable at the time of the passing of the original order by the TPO for ensuring that VRS expenses did not form part of the cost base as contended. The ld. AR did not readily have such a copy of the working of the PLI of the company by the TPO. We set-aside the impugned order and restore the matter to the file of AO/TPO with a direction to include VRS costs incurred by Veejay Laskshmi Engineering Works Ltd. in its operating cost base, if not already included, in the same manner as has been done in the case of the assessee and thereafter to compute the operating costs and the consequential operating profit. Needless to say, the assessee will be allowed a reasonable opportunity of hearing.

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• 2021 (3) TMI 226
  Validity of enhancement order of CIT-A u/s 251 - Violation of principles of natural justice - CIT(A) has enhanced the addition under section 251(2) - Unexplained cash deposits in the Bank accounts - HELD THAT:- CIT(A) has given a specific notice to assessee under section 251(2) of the Income Tax Act, 1961 for enhancing the assessment and such fact is mentioned in the Order Sheets Dated 05.11.2018 and 15.11.2018 as is mentioned in paras-8 and 9 of the appellate order. Therefore, when the fact of showing cause why enhancement to the assessed income be not made under section 251(2) is recorded in the Order Sheet at the appellate stage, there is no violation of section 251(2) - CIT(A) has given sufficient notice to the assessee before enhancing the assessment and that Ld. CIT(A) has also given several adjournments to the Counsel for Assessee for hearing of the appeals, but, the Assessee or his Counsel did not avail the opportunity of being heard of the appeals before him. Therefore, contention of Learned Counsel for the Assessee has no merit that no reasonable opportunity of being heard have been given by the Ld. CIT(A). This issue is, therefore, decided against the assessee and contention of Learned Counsel for the Assessee is rejected. Addition of new source of income while enhancing the income of the assessee - A.O. has made addition on account of commission income estimated on Bank deposits in several Bank accounts maintained by assessee - Assessee submitted that Ld. CIT(A) cannot enhance the income by considering the new source i.e., entire Bank deposits as unexplained - HELD THAT:- Since the A.O. in the absence of any evidence on record did not make addition of unexplained cash deposits in the Bank accounts of the assessee and even no details were filed before the Ld. CIT(A), the Ld. CIT(A) was justified in considering the same source of income at appellate stage and was justified in making enhancement. Notice to the assessee as to show cause why income should not be enhanced by making the addition on account of entire cash deposited in the Bank accounts of the assessee clearly support his findings that it was same source considered. CIT(A), thus, did not consider a new source of income while making enhancement to the income of the assessee at the appellate stage. The decisions relied upon by the Learned Counsel for the Assessee would not support the case of the assessee and are clearly distinguishable on facts. We, therefore, reject the contention of the Learned Counsel for the Assessee and decide this issue against the assessee. Unexplained cash deposit in the Bank accounts of the assessee - Assessee submitted that A.O. has accepted that assessee earned commission income on the cash deposits in the Bank accounts of the assessee, therefore, there was no justification for the Ld. CIT(A) to enhance the addition on account of unexplained cash deposit in the Bank accounts - HELD THAT:- Assessee failed to give even name and address of any factory owner or businessman who have given cash to the assessee. In the absence of any details the assessee failed to explain source of the cash deposits in his Bank accounts. It appears that the A.O. in collusion with the assessee did not make addition on account of unexplained cash deposits in his Bank account in both the assessment years under appeal and without any reason and justification accepted the explanation of assessee that assessee received commission income only. The assessee also did not produce any evidence or explanation before the Ld. CIT(A) with regard to source of the cash deposits in his Bank accounts despite show cause was given to him for enhancement to the returned income. Even before the Tribunal no evidence is produced to support the explanation of assessee that it was the amount of other factory owners or businessman which were deposited in the Bank accounts of assessee for making further payment on their behalf. In the absence of any evidence, material or explanation in this regard, we are of the view that assessee failed to substantiate the explanation given before the authorities below, therefore, assessee failed to establish the source of the cash deposits in the Bank accounts of the assessee - Decided against assessee. Maintainability of addition u/s 68 on account of cash deposits in the Bank accounts - Assessee submitted that Ld. CIT(A) has made addition under section 68 despite assessee did not maintain any books of accounts, therefore, addition under section 68 of the Income Tax Act is not sustainable - HELD THAT:- We do not agree with the contention of Learned Counsel for the Assessee. The Ld. CIT(A) while considering the issue on merit has held that assessee failed to furnish the evidence to explain the source of the cash deposits in the Bank accounts of the assessee, therefore, entire cash deposits in the Bank accounts becomes unexplained money in the hands of the assessee under section 69A of the Income Tax Act, 1961. The Ld. CIT(A) also alternatively held that since the amount is credited into the books of the assessee, the amount is liable to be added under section 68 also. Thus, the finding of fact given by Ld. CIT(A) as reproduced above clearly show that Ld. CIT(A) correctly made addition under section 69A. Validity of reopening of assessment - as argued no reasons recorded under section 148 have been supplied to the assessee - HELD THAT:- CIT(A) also reproduced the Order Sheet Dated 05.11.2018 for the A.Y. 2008-09 in the appellate order in which Ld. CIT(A) has specifically mentioned the submission of the assessee that assessee never asked for the reasons for reopening of assessment as well as did not challenge the reopening of assessment in the matter. These background of the facts clearly show that assessee and A.O. were in collusion with each other and A.O. made a very small addition against cash deposits in Crores of Rupees in the Bank accounts of the assessee. Therefore, assessee himself defaulted in not asking for copy of the reasons from the A.O. It is well settled Law that validity of the reassessment proceedings is to be judged with reference to the reasons recorded for reopening of the assessment. The assessee even now failed to produce copy of the reasons recorded for reopening of assessment so as to challenge the reopening of the assessment in the matter. In the absence of any material on record in support of the contention of the assessee, we do not find any infirmity in the orders of the authorities below for reopening of assessment. This contention of Learned Counsel for the Assessee is, therefore, rejected. In the result, this issue is decided against the assessee.

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• 2021 (3) TMI 225
  Assessment of trust - depreciation claimed on fixed assets and carry forward of excess application of income for charitable purposes to subsequent years - HELD THAT:- Hon ble Supreme Court in the case of CIT Vs. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER] where held that any excess expenditure incurred by trust / charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking section 11 - We further noted that in the case of CIT Vs. Institute of Banking Personnel Selection [ 2003 (7) TMI 52 - BOMBAY HIGH COURT] had considered an identical issue and held that excess application of income for charitable purposes can be carried forward to subsequent year and trust is entitled to set off amount of excess application of the last year against income derived from property held under the trust. The above finding recorded by learned CIT(A) is uncontroverted by Revenue. DR has supported the order of Assessing Officer and in light of decision of ITAT., Chennai Bench in the case of Anjuman-E-Himayth-E-Islam vs. ADIT(Exemption) [ 2015 (7) TMI 594 - ITAT CHENNAI] we find that Hon ble Jurisdictional High Court has considered the above issue and by following number of decisions of other High Courts has held that depreciation on fixed assets is allowable, even though trust claimed amount incurred for purchase / acquisition of capital asset as application of income. Similarly, Hon ble High Court has further held that excess application of income of charitable trust can be carried forward and trust is entitled for set off of excess application of income in the earlier year against income of the trust in subsequent years. Therefore, we are of the considered view that there is no error in the findings recorded by learned CIT(A) and hence, we are inclined to uphold findings of CIT(A) and reject ground taken by Revenue. - Decided against revenue.

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• 2021 (3) TMI 224
  Deduction u/s 54 - mandation of investment made in one residential house - scope of amendment of Section 54( 1) - as per revenue since here the assessee has purchased two different flats on two different dates and, therefore, assessee is not entitled to the deduction u/s 54 in respect of the second flat - HELD THAT:- Deduction u/s 54 is restricted to only one residential house by the Finance Act 2014 is prospective in nature and is effective from assessment year 2015-16 and not retrospective in nature and that deduction u/s 54 of the Act in respect of investment made in one residential house can be claimed by the assessee. In this view of the matter we set aside the order of the Ld. CIT(A) and the grounds raised by the assessee are allowed.

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• 2021 (3) TMI 223
  Exemption u/s 11 - registration u/s. 12AA denied - DR submits that the assessee having no registration u/s. 12AA of the Act and made false claim of exemption u/s. 11(1) - Regarding the utilization of surplus raised from pre-primary and primary school no details filed to show that such surplus has been utilized in secondary division of assessee s school - HELD THAT:- As assessee was enjoying claim of exemption u/s. 11 of the Act from A.Y. 2000-01 onwards and granting of certificate u/s. 80G from 01-04-2012 onwards till date. CIT(Exemption) did not dispute the same. We note that the returns of income filed by the assessee have also been accepted by the respondent-revenue. The contention of Revenue is that no assessment from A.Ys. 2014-15 to 2018-19 selected for scrutiny and since the CIT(Exemption) found during the process of application for registration u/s. 12AA of the Act reopened the assessments from A.Ys. 2014-15 to 2018-19. We note that the AO filed its factual report in response to direction of CIT(Exemption) which is reproduced of the impugned order which clearly shows that the respondent-revenue allowing the claim u/s. 11 of the Act prior to A.Y. 2016-17. Therefore, no dispute in respect of granting exemption u/s. 11 of the Act treating the assessee having got registration u/s. 12AA of the Act and u/s. 80G of the Act. Merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose - See SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (AND OTHER REFERENCES) [ 1979 (11) TMI 1 - SUPREME COURT] In view of the law laid down in the case of St. Peter s Educational Society [ 2016 (6) TMI 536 - SUPREME COURT] by following the decision in the case of Queen s Educational Society [ 2015 (3) TMI 619 - SUPREME COURT] we hold that the assessee is entitled for grant of registration u/s. 12AA of the Act from the date of application and CIT(Exemption) is directed to grant the same. Accordingly, the grounds raised by the assessee are allowed.

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• 2021 (3) TMI 221
  Assessment us 153A - statement of assessee to be the basis for making any estimated additions against the assessee - Reliance on third party statement - HELD THAT:- If the Revenue recorded statement of any witness at the back of the assessee, such statement shall have to be confronted to the assessee and right of cross-examination to such statement shall have to be given to the assessee. In this case no material is produced before us to show if any right of cross-examination have been allowed by the A.O. or the other Income Tax Authority to the statement of Shri Ramendra Kumar Singh to the assessee. Therefore, such statement otherwise also cannot be read in evidence against the assessee. No statement of assessee was recorded under section 132(4). Later on A.O. recorded the statement of assessee under section 131which is the sole basis of making the above estimated additions against the assessee, but, the statement of the assessee is also not corroborated by any evidence or material on record. We may also note even if assessee has made some admission in his statement recorded under section 131, however, the question is what is the basis of assessee in making any admission in statement recorded under section 131 of the I.T. Act, 1961. Statement of assessee alone cannot be the basis for making any estimated additions against the assessee. May be the assessee has retracted from the statement given under section 131 later on and there is a delay in retracting by filing a letter and affidavit to the Income Tax Authorities as well as President of Noida Authority, but, the delay in retracting the statement is of no significance because there were no corroborative material found during the course of search at the residence of Smt. Kusum Lata or Shri Ramendra Kumar Singh or at the residence of the assessee. Thus, in the absence of any corroborative evidence, statement of Shri Ramendra Kumar Singh or assessee cannot be the basis for estimating the additions of commission against the assessee in all the assessment years under appeal. It is well settled Law that if no incriminating material was found during the course of search, such type of additions cannot be made against the assessee. See KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] Statement of Shri Ramendra Kumar Singh and Annexures A1 and A2 found in their case being a third party cannot be referred to or relied upon in the case of the assessee unless the procedure provided under section 153C of the I.T. Act, 1961 have been adopted by the authorities below. - Decided in favour of assessee.

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• 2021 (3) TMI 220
  Assessment of trust - addition being loans from three parties - whether deemed income u/s 68 is applied for charitable purposes? - assessee society has been granted Registration under section 12AA and also granted exemption under section 80G - HELD THAT:- The assessee has taken the loans from the above 05 parties out of which 03 are the Companies. The assessee admittedly filed confirmation of all the creditors, their ITRs, bank statements, ledger accounts and wherever balance-sheets of the companies were prepared have been filed, copies of the same are also filed in the paper book. The creditors have confirmed giving loan to the assessee through banking channel and their bank accounts shows sufficient balance with them to give loan to the assessee. In the balance-sheet of 03 creditors sufficient balances are available to show their net worth to give loan to the assessee. The loans are subject to payment of interest earned and TDS has also been deducted. Details of the TDS are filed and the assessee has filed the details to show that all the loan amounts have been utilised towards objects of the assessee society. Also loans have been later on returned to the parties. Initial onus upon the assessee to prove identity of the creditors, their creditworthiness and genuineness of the transaction have been discharged by the assessee. The decisions relied upon by the Learned Counsel for the Assessee before the authorities below clearly supports the explanation of assessee that assessee received genuine loans into the matter which were later on returned to the concerned parties. It may also be noted here that assessee has registration under section 12AA which is in force in assessment year under appeal and A.O. has also computed the income of the assessee as per Section 11 of the Income Tax Act, 1961 and accepted the NIL returned income filed by the assessee because the amount more than 85% have been incurred by the assessee towards its objects. Since assessee came into existence in part of the assessment year under appeal and it was the first year of charitable activities conducted by the assessee, therefore, it is highly unbelievable that assessee would earn huge undisclosed income in assessment year under appeal. Thus, no addition could be made against the assessee of such nature in assessment year under appeal particularly when the nature of the activities of the assessee is admittedly mentioned in the assessment order to run an Educational Institution. It is well settled Law that assessee need not to prove source of the source. A.O. entirely on different reasons that there is a common Director in 03 companies and common address disbelieved the explanation of assessee. It may not be relevant criteria to decide the issue under section 68 - A.O. has not brought any evidence against the assessee on record to disbelieve the documentary evidences. Whatever enquiry was conducted through Income Tax Inspector does not appear to have been confronted to the assessee or explanation of assessee have been called for. Therefore, such material cannot be used in evidence against the assessee - Decided in favour of assessee.

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• 2021 (3) TMI 219
  Nature of expenditure - deduction claimed by the assessee towards prepaid expenses disallowed - expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are in the nature of revenue expenditure, which does not give any enduring benefit to the assessee - AO made addition of expenditure only on the sole basis of method of accounting followed by assessee in the books of account - assessee has changed its method of accounting - HELD THAT:- The assessee is entitled to change its method of accounting as long as said change in method of accounting is bonafide. Section 145 of the Act, nowhere provides if assessee follows one method of accounting for many years, it cannot change the same in subsequent year. The assessee can very well change method of accounting to give better treatment to various income and expenses in books of account to give true and correct income, but such change should be disclosed in notes to account and effects on taxable income for the year on account of change of method of accounting. In this case, the assessee has changed its method of accounting to give better treatment to prepaid expenses shown in the financial statement upto assessment year 2015-16 and such change is supported by the decision of the Hon ble Supreme Court in TAPARIA TOOLS LIMITED [ 2015 (3) TMI 853 - SUPREME COURT] where it was categorically held that once an expenditure is incurred and made payment and claim of the assessee is in accordance with the provisions of the Act, the same needs to be allowed to the assessee, irrespective of treatment given in books of account . The Hon ble Supreme Court in the case of M/s.Kedarnath Jute Manufacturing Co.Ltd. [ 1971 (8) TMI 10 - SUPREME COURT] held that entries in books of account are not determinative and or conclusive and the matter is to be examined on the touchstone of provisions contained in the Income Tax Act. In the present case, entire expenditure has been incurred at the beginning of the sanctioning of term loan and also qualifies to be revenue expenditure. Therefore, in our considered view the decision of TAPARIA TOOLS LIMITED [ 2015 (3) TMI 853 - SUPREME COURT] is squarely applicable to the facts of present case and hence, we are of the considered view that learned CIT(A) was right on allowing deduction towards various expenses as revenue expenditure. Whether expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are revenue expenditure or capital expenditure, which gives enduring benefit to the assessee? - n this case, if you see nature of expenditure incurred by the assessee there is no doubt of whatsoever that said expenditure are purely revenue expenditure, which does not give any enduring benefit or resulting in creation of asset either tangible or intangible . Therefore, these expenses are essentially revenue expenses and needs to be allowed when such expenditure has been incurred, but only requirement is whether said expenditure is incurred for the purpose of business or not. In this case, it is not a case of Assessing Officer that those expenditure are not revenue in nature and further, those expenditure are not incurred for the purpose of business of the assessee. Therefore, we are of the considered view that once Assessing Officer come to the conclusion that expenditure incurred by assessee are revenue in nature and further the same are incurred wholly and exclusively for the purpose of business, then the same needs to be allowed in the year of incurrence, irrespective of length of period for which finance is sanctioned. The learned CIT(A) after considering relevant facts has rightly held that expenditure incurred by the assessee are revenue in nature which does not give any enduring benefit to the assessee or resulting in creation of asset as tangible or intangible which needs to be allowed as deduction, when such expenditure has been incurred. - Decided against revenue.

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• 2021 (3) TMI 217
  Revision u/s 263 - addition u/s 68 - HELD THAT:- In the case on hand, the Assessing Officer considered the specific directions given by the ld. CIT(A] in his order u/s. 263 of the Act dt. 23/08/2016 and based on the same had issued questionnaires to the assessee company which is in Annexure-A of the assessment order. Summons were issued u/s. 131 of the Act to the directors of the share holding company M/s. Lakshmi Dealmark Private Limited. The actions taken in compliance with the directions given by the ld. Pr. CIT are given at page 5 to 7 of the assessment order. A perusal of the same demonstrates that the directions were carried out. This is not a case of non-applicability of mind or non-verification. The Assessing Officer has taken a possible view. When the Assessing Officer follows the direction of the Ld. Pr. CIT, in his order passed u/s. 263 of the Act, no revision can be done u/s. 263 of the Act on the ground that the Assessing Officer has not travelled beyond these directions. We have to necessarily hold that the exercise of the revisionary powers by the Ld. Pr. CIT u/s. 263 is bad in law. Hence, we quash the same.

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• 2021 (3) TMI 216
  Reopening of assessment u/s 147 - Bogus purchases - estimation of income - HELD THAT:- After processing of return of income under section 143(1) Assessing Officer had received specific information from the Sales Tax Department that certain purchases claimed to have been made by the assessee during the year are non genuine. Therefore, the Assessing Officer has tangible material in his possession to form a belief regarding escapement of income. Mentioning of a wrong figure in the reasons recorded, therefore, would not invalidate the proceeding. Therefore uphold the validity of re opening of assessment under section 147. Bogus purchases - added back the profit element embedded in such purchases by estimating it @ 25% - Considering the fact that the disputed goods purchased by the assessee is steel, wherein, as per industry norms, the profit rate varies between 5% and 8% and further, the fact that the assessee has paid applicable VAT on such purchases to the Sales Tax Authorities because of the default made by the selling dealers, disallowance @ 8% of the alleged non genuine purchases would be fair and reasonable. Accordingly, direct the Assessing Officer to restrict the disallowance to 8% of the non genuine purchases. The grounds raised by the assessee are partly allowed.

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• 2021 (3) TMI 215
  Disallowance u/s 14A r.w.r. 8D - As per AO assessee has earned exempt income during the year and has not made any corresponding disallowance of expenses for earning of the exempt income - HELD THAT:- PMS fee has been paid to three funds as stated above and the investments made has yielded taxable income. The payment of to Motilal Oswal PMS Account was Rs. Rs. 11,125/- and the assessee has earned short term capital gain of Rs. 24,614/- from the securities dealt through this fund. Similarly, assessee has paid PMS fee to Trust Investment Equity of Rs. 2,06,018/- and claimed the same against short term capital gain of Rs. 1,53,995/- which is chargeable to tax. Likewise, assessee paid PMS fee to Trust Investment Debt of Rs. 1,27,812/- which has yielded taxable income of Rs. 6,08,676/- and thus all these expenses were incurred in relation to earning of taxable income and we find merit in the contentions of the learned counsel for the assessee that these cannot be disallowed as direct expenses relating to earning of exempt income. We are inclined to set aside the finding of learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance Disallowance being 0.5%of the average investments - Assessing Officer has simply rejected the submissions of the assessee without pointing out as to how the said submissions are wrong and thus has not recorded any satisfaction before invoking the provisions of section 14A r.w.r. 8D(2)(iii). The assessee has filed Income Expenditure account before the Assessing Officer and each expense debited therein has been explained as having been incurred in relation to earning of taxable income. Assessing Officer has not controverted the submissions of the assessee but has simply invoked the provisions of Section 14A of the Act r.w.r 8D of the Rules without recording any satisfaction as to how the books of account of the assessee are not correct. So far as the disallowance under Section 14A of the Act r.w.r 8D(2)(iii) is concerned, we are not in agreement with the conclusion drawn by learned CIT(A) on this issue. The case of the assessee finds support from the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. vs CIT [ 2018 (3) TMI 805 - SUPREME COURT] . We, therefore, are inclined to set aside the order of learned CIT(A) following the ratio laid down in the above decision and direct the Assessing Officer to delete the addition made u/s 14A of the Act. Appeal of the assessee is allowed.

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• 2021 (3) TMI 213
  Rectification u/s 154 - gain on sale of agricultural land and income from agriculture - while computing the MAT in the return of income, the same was not reduced from the book profit and hence this anomaly has taken place - HELD THAT:- We are quite convinced that this is an apparent mistake which the revenue should have rectified on its own. In our view, the income which is not taxable under the Act, can not be brought to tax on the technicalities of the matter that no exemption was claimed by the assessee. In the present case the gain on sale of agricultural land as well as income from agriculture are exempt from tax under the provisions of section 10(1) of the Act and therefore it has erroneously been included while computing the book profit. On the issue of observation of the Ld. CIT(A) that the AO could not have considered the rectification in view of the decision of Hon ble Supreme Court in the case of Goetz India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT ], but certainly the Ld. CIT(A) could have directed the AO to rectify this mistake as there is no bar on the ld CIT(A) to correct the apparent mistake nevertheless the mistake attributed to the assessee . We are therefore not in agreement with the finding of the Ld. CIT(A) and direct the AO to exclude the gain on sale of agriculture and also income from agriculture while computing the book profit under section 115JB of the Act. Consequently, the Ld. CIT(A) s order is set aside and AO is directed to exclude the gain on sale of agricultural land and income from agriculture from book profit - Appeal of the assessee is allowed.

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• 2021 (3) TMI 212
  Allowable revenue expenditure - penalty/fine paid to BMC - whether expenses not allowable in the scheme of section 37(1) - whether the assessee in return of income for the year in which income from project has been declared has reduced the amount of Rs. 19.51 lacs paid as penalty/fine to BMC? - HELD THAT:- Assessing Officer in his remand report has mentioned that the assessee in its revised computation for assessment year 2017-18 has reduced penalty/fine. CIT(A) has not granted relief to the assessee merely for the reason that in the Tax Audit Report for assessment year 2017-18, the Auditor has not reported any amount of Rs. 19,51,365/- paid by way of penalties/fines. Thus, in view of the admitted fact that the assessee has reduced the amount of penalty/regularisation charges in the computation of income while filing of return of income in the year it has offered the profits from the project, no disallowance in respect of aforesaid penalty/regularisation charges is warranted in the impugned assessment year - Decided in favour of assessee.

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• 2021 (3) TMI 211
  Ex-parte order of CIT-A - CIT(A) order shows that he has dismissed the appeal preferred by the assessee due to non prosecution - HELD THAT:- CIT(A) has not given any reason for his decision on merits but has simply dismissed the appeal on account of non appearance which is not as per the statute. Therefore, deem it proper to restore the issue to the file of the Ld. CIT(A) with a direction to decide the appeal on merit by passing a speaking order after giving one last opportunity to the assessee to substantiate its case. The assessee is also hereby directed to appear before the Ld. CIT(A) and substantiate its case failing which the Ld. CIT(A) is at liberty to pass appropriate order as per law.

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• 2021 (3) TMI 210
  Addition u/s 68 - unexplained share premium - share premium component received from bogus shareholders - CIT-A deleted the addition - HELD THAT:- CIT(A) has decided the issue in detail relying some authorities of law. We are also in agreement with the view taken by the CIT(A) that once the assessee has produced the documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case and that reliance on statements of 3rd parties, who have not been subjected to cross examination is not permissible. Thus, the case laws relied on by the ld. CIT-DR are not applicable to the present case, whereas the reliance placed by the ld. AR of the assessee on the decision of coordinate bench of the Tribunal in the case of M/s. Savera Towers Pvt. Ltd. [ 2019 (1) TMI 1328 - ITAT KOLKATA ] is accepted because once the receipt of share capital has been accepted as genuine within the purview of Section 68 of the Act, there is no reason for the AO to doubt the share premium component received from the very same shareholders as bogus. - Decided against revenue.

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• 2021 (3) TMI 208
  Attribution of 15% Revenue to the PE in India - invocation of Rule 27 for challenging the decision of the CIT (A) - Doctrine of Merger - assessee moved applications u/r 11 and u/r 27 of the ITAT Rules, raising an additional plea, which was never taken in the first round of litigation, challenging the jurisdiction of the Assessing Officer claiming that the assessments for Assessment Years 2007-08, 2008-09 and 2009-10 are barred by limitation and further, assessment for Assessment Year 2010-11 is also barred by limitation on the ground that provisions of section 144C of the Act do not apply - DR vehemently stated that the order of the Tribunal is merged with the order of the Hon ble Delhi High Court and therefore, on Doctrine of Merger, these applications should not be allowed - HELD THAT:- Submissions of the ld. DR are not acceptable for the simple reason that the issues which have been considered and decided get merged with the findings of the superior court but the issues which have neither been considered or have been decided by inferior court cannot merge with the orders of the superior court. In our considered view, the logic underlying the Doctrine of Merger is that there cannot be more than one decree or operative orders governing the same subject matter at a given point of time. Once the superior court has disposed of the list before it either way - it is the decree or order of the superior court which is final and binding. In the present case, the point of jurisdiction was never raised before the lower authorities and accordingly, the same never formed the subject matter of appeal before the Hon ble High Court and hence the doctrine of Merger will not be applicable in the case in hand. Therefore, in our view, the distinction sought by the ld. DR in the decision of the Hon ble High Court of Gujarat in the case of P.V. Doshi [ 1977 (8) TMI 29 - GUJARAT HIGH COURT] does not hold any water. DR has heavily relied upon the decision of the Hon ble High Court of Delhi in the case of Sanjay Sawhney [ 2020 (5) TMI 441 - DELHI HIGH COURT] which is more in favour of the assessee than to the Revenue. Assessment for A.Ys 2007-08, 2008-09 and 2009-10 as barred by limitation - AO has framed draft assessment order when the provisions were not there in the statute. Therefore, the period of limitation, as prescribed u/s 153 of the Act were applicable and, therefore, the date of final assessment order makes the assessment barred by limitation. Attribution of 15% Revenue to the PE in India - Since major part of the business activities were carried out outside of India and only limited activities were attributable to India and finding parity in the facts with those of Galileo International Inc [ 2014 (8) TMI 902 - DELHI HIGH COURT] we are of the considered view that 15% of the revenue is enough to attribute towards the activities done in India. On identical facts, the Tribunal in the case of SABRE Inc.[ 2009 (6) TMI 1021 - ITAT DELHI] has held that the said company had a PE in India but only 15 per cent of revenue accruing to assessee in respect of bookings made in India should be treated as income accrued or assessed in India. Facts considered in the case of Amadeus Global Travel Distribution SA [ 2007 (11) TMI 330 - ITAT DELHI-B] are identical to the facts of the present appeal in as much as in the present appeal also, Travelport LP owned and maintained a CRS and had the same distribution and revenue earning model. Hence, a similar attribution of 15% of the revenue accruing to the assessee in respect of bookings made in India as income accruing or arising in India is also warranted in the case at hand. Since no guidelines are available as to how much should income be reasonably attributable to India, the same has to be determined on the basis of the facts of the case and judicial precedents. On finding parity in the facts of the case in hand with the facts of the judicial precedents discussed hereinabove, we are of the considered view that the ld. CIT(A) rightly attributed 15% of the Revenue and therefore, we do not find any error or infirmity in the findings of the ld. CIT(A).

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• Customs

• 2021 (3) TMI 240
  MEIS scheme - conversion of the EPCG shipping bill into the EPCG cum Drawback shipping bill - Striking down circular No.36/2010 Cus dated 23.9.2010 (i.e. para 3(a) of this Circular) as ultra vires Section 149 of the Customs Act, 1962 and also ultra vires Articles 14 and 19(1)(g) of the Constitution of India - whether the Principal Commissioner committed any error in passing the impugned order? - HELD THAT:- There is no merit in the principal argument of Mr. Dave that in Section 149 of the Act, no time period has been prescribed and if in a substantive statutory provision of law, if no time period has been prescribed, then the CBEC could not have issued the circular providing for three months time period to make a request for conversion from the date of the LEO. Under Rule 3 of the Drawback Rules, a Drawback is allowed on the export of goods at such amount, or at such rates, as may be determined by the Central Government. Such rates determined by the Central Government are called All industry rate , because Drawback at such rates is allowed to all the exporters in the country without any conditions. This is because all the industry rates are determined by the Central Government on the basis of the general data collected from the industry about utilization of duty paid inputs, input services etc. While allowing such All industry rate of Drawback, no verification of the exported goods is required, and hence no verification is undertaken also by the Custom authorities. But there may be cases where the rate of Drawback has not been determined, and such cases are covered under Rule 6 - Where no All India rate of Drawback is determined in respect of any goods, the manufacturer/exporter has to apply within 3 months from the relevant date for fixation of Drawback rate in his individual case, and all the relevant facts including the proportion in which the materials or components or input services are used in the production or manufacture of goods and the duties paid on such materials or components or the tax paid on input services have to be submitted with such application as mandated under Sub Rule (1) of Rule 6. Thereafter, as laid down under Clause (b) of Rule 6(1), the proper Revenue Officer would make an enquiry and determine the amount or rate of Drawback in respect of such goods; which is the brand rate for that particular case. In the present case, no verification whatsoever of the goods or any examination of the exported goods is required, because the claim for Drawback is at the All industry rate, which is the common and general rate fixed by the Central Government for all exporters of the goods in the country. If the writ applicant herein had been claiming Drawback at the special brand rate, then the amendment of shipping bills by allowing conversion into Drawback shipping bill may not be possible only on the basis of the documentary evidence which was in existence at the time the goods were cleared for export. For fixing brand rate, examination of the goods and also verification of the goods as well as inputs, raw materials, input services etc. used for such goods would be necessary; and such verification would be impossible once the goods have been exported - On the value so assessed by the Custom officers, the calculation of Drawback at All industry rate is only an arithmetical exercise, which could be easily done on the basis of the documentary evidence (i.e. the export documents like shipping bill and export invoice) which was in existence when the goods were cleared for export. Since in the present case, the amendment of shipping bills by converting them into Drawback shipping bills is possible on the basis of the documentary evidence which was in existence at the time the goods were cleared for export and the benefit of Drawback at All industry rate of 1.5% of value of the exported goods is also possible to be allowed - the impugned circular to the extent of para 3(a) is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as also ultra vires Section 149 of the Customs Act, 1962. The impugned order passed by the Principal Commissioner of Customs, Ahmedabad is hereby quashed and set aside - It is declared that the writ applicant is entitled to the drawback of Rs. 11,18,458/ being the principal amount with statutory interest as provided in Rule 14 of the Drawback Rules - application allowed.

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• 2021 (3) TMI 214
  Refund of SAD - non-collection of excess duty paid by the appellant - credit notes - denial of refund on the ground that the test of unjust enrichment not passed on - rebuttal presumption as per Section 28D of Customs Act - HELD THAT:- The certificate of the Chartered Accountant would show that he has examined records and verified as to the details of the refund claim made by the appellant. Further, it is also shown that the amount was reflected in the accounts /balance sheet under the head Customs Refund Receivables . This would clearly go to establish that the excess duty has not been passed on to the buyers by the appellant From the discussions made by the original authority, and also after perusing the documents enclosed in the appeal, there are no hesitation to agree with the decision of the refund sanctioning authority that incidence of customs duty has not been passed on to another. In the case of COMMISSIONER OF CUSTOMS, NEW DELHI VERSUS ORGANAN (INDIA) LTD. [ 2008 (9) TMI 62 - SUPREME COURT] , similar issue came up for consideration wherein the Hon ble Apex Court held that the assessee had not passed on the burden of the customs duty to its customers. This finding is a finding of fact based on evidence which does not call for any interference. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2021 (3) TMI 231
  Reduction of share capital - question of public participation in the equity market - minority shareholders adequately compensated to their legitimate expectation with regard to valuation of shares - method of valuation and assumptions carried out by the Valuers - HELD THAT:- From the NAV method it is amply clear that the Company is going concern with positive networth. Learned NCLT has taken into consideration the valuation report which was made in the year 2017 which was submitted on 25.10.2017 by PWC and on 26.10.2017 by Haribhakti. Learned NCLT, Mumbai passed its order on 27.10.2020, almost three years after the submission of valuation report. In our view the valuation reports as made in 2017 are not as on date when learned NCLT passed its order on 27.10.2020. The statement made in the explanatory statement with regard to payment of DDT by the Company now taken a stand that the said DDT was abolished and the shareholders are under the obligation to pay the same. When in such a situation, the Company takes its stand in a changed scenario, the Company also should follow the same principles by adopting a method of re- valuation of shares. The Company cannot take duel stand to its advantage. The public shareholders/non-promotors shareholders have not been adequately compensated for the reason that the valuation done in the year 2017 had been taken into consideration even after three years it was passed. We are of the view that there is a drastic change in the growth of the Company. It is clear that if the Company makes profits, the same need to be shared with the public shareholders/non- promotor shareholders which are exiting from the Company by surrendering their shares. As stated supra, we are not going into the veracity of the fairness of the valuation reports and not finding fault with the valuation done by the Valuers. We also hold that the reduction of the share capital is in accordance with law and we do not interfere with the same. We are concerned that the public shareholders/non-Promotor shareholders, economic interest need to be protected by paying latest fair value - The shareholders in a Company has every right to sell their shares as and when they get good price meaning thereby the shareholders have every right to trade shares as and when they get good price. However, in the present case the Company passed its resolution for reduction of the share capital to an extent of 11,81,036 equity shares constituting 3.59 %. Since in the EGM, the majority shareholders approved the reduction of share capital, public shareholders/non-promotor shareholders have no option except to surrender their shares to the Company by extinguishing their shares and exit from the Company whatever price is fixed by the Company. Therefore, the shareholders in the present case expects justification from the Courts/Tribunals. Even though the public shareholders/non promotor shareholders had objected to the reduction of share capital in the EGH but the majority shareholders i.e. promotor group having majority, passed the resolution in favour of reduction of share capital. The Company is hereby directed to revalue the shares by a registered/independent valuers to value the shares of the Company and the Company shall pay the fair price arrived at by the valuer based on the latest audited accounts of the Company - The Company is directed to place all the audited accounts of the Company as required by the valuer to value the shares.

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• Insolvency & Bankruptcy

• 2021 (3) TMI 247
  Privilege of interim resolution appointed by the Court - Taking extreme step to arrest the Interim Resolution Professional, Mr. Anuj Jain, who was working in that capacity pursuant to the order passed by the Court and entrusted with the functioning of the Company in question - Section 233 of the Insolvency and Bankruptcy Code - HELD THAT:- We will examine this aspect of the matter elaborately at appropriate time by treating this application as substantive writ petition filed by the applicant under Section 32 of the Constitution of India and to be numbered accordingly. In the meantime, we direct immediate release of the applicant, Anuj Jain, who is presently in custody of Police Station, Beta-II, District Greater Noida, Uttar Pradesh and had been produced today i.e. 02.03.2021 before the Court of Chief Judicial Magistrate, Gautam Buddh Nagar, Uttar Pradesh - It is directed that the Investigating Officer not to take any coercive action against the applicant in connection with the subject F.I.R. until further orders. List the writ petition after two weeks.

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• 2021 (3) TMI 232
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - SICA proceedings - existence of debt and dispute or not - time limitation - Whether as per section 22(1) of the SICA the legal proceedings for recovery of operational debt were suspended? - HELD THAT:- During sanction of the rehabilitation scheme Appellant filed an application under Section 22(1) of the SICA before the BIFR. BIFR vide order dated 20.11.2012 allowed the application and the Appellant was permitted to approach appropriate Civil Court for adjudication of its dues, with the condition that if any, decree awarded by the Court, it would be executed with prior approval of BIFR - it is clear that the Appellant was not ready to accept proposal of the settlement of outstanding dues at 20% and Appellant sought consent of the board to approach appropriate Civil Court for adjudication of its dues. It means the Appellant was not part of the Scheme and he intends to approach Civil Court for recovery of operational debt. It is also seen that during the pendency of reference before BIFR on 23.03.2009 the Appellant had filed a Civil Suit No. 315 of 2009 before Civil Judge Vadodara for declaration that the transfer or alienation of the assets by the Respondent is illegal and malafide and issue injunction against the Respondent not to transfer or alienate the assets of the Company - The Appellant was not part of the scheme and they have already approached Civil Court. In such circumstances, it cannot be said that the legal right of remedy of the Appellant against the Respondent was suspended as per section 22(1) of the SICA. Whether as per section 22(5) of the SICA the Appellant is entitled to get exclusion in computing the period of limitation spent in SICA Proceedings? - HELD THAT:- As per the provision of Section 22(5) of the SICA the Appellant is entitled to get exclusion for aforesaid period in computing the period of limitation - the Appellant was not part of the scheme and he has obtained the consent of BIFR for initiating its legal right of remedy against the Respondent Company before the Civil Court. Thus the remedy against the Respondent was not suspended, therefore, the Appellant is not entitled to claim extension of period of limitation by virtue of exclusion of period of suspension. The Ld. Adjudicating Authority has rightly held that the Appellant is not entitled for exclusion of the period which spent during the pendency of proceedings under SICA. Thus, the Application under Section 9 of the I B Code is barred by Limitation. Appeal dismissed.

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• 2021 (3) TMI 227
  Maintainability of application - initiation of CIRP - Corporate Debtor committed default in payment of the dues - Existence of debt and dispute or not - HELD THAT:- Wherein the instant case it is born from the record that the Appellant have issue cheque on 12.01.2016 for sum of Rs. 44,298/- in favour of the Respondent No. 1 which amounts from acknowledgment of the debt although the said cheque dishonoured for the reason payment stopped by drawer (Exhibits D D-1) at page 25 to 26 of the petition filed before the NCLT - From the perusal of the records at page 49 of the Appeal Paper Book which the Application under Section 9 of the IBC filed before the NCLT by Respondent No. 1 Part IV Colum 2 the Debt from which such Debt fell due The Respondent made part payment on 16.02.2016, after which no payment was made and cheque issued on 12/01/2016 was returned dishonoured . The Learned Counsel for the Appellant have failed to make out any ground and the finding recorded by Ld. Adjudicating Authority, so we are affirmed the finding recorded in the impugned order passed by Ld. Adjudicating Authority, National Company Law Tribunal, Mumbai Bench. There are no merit in this Appeal - appeal dismissed.

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• 2021 (3) TMI 222
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt - genuintiy of cheque relied upon to establish acknowledgement of debt - time limitation - HELD THAT:- Admittedly, from the perusal of the Part IV particulars of financial debt on which default occurred on 01.04.2014 has agreed between the parties - Hon ble Supreme Court of India in Babulal Vardharji Gurjar V/s Veer Gurjar Aluminium Industries Pvt. Ltd. and Anr. [ 2020 (8) TMI 345 - SUPREME COURT ] has held that even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgement - the issue decided in favor of Appellant and against the Respondent No. 1. Genuintiy of cheque relied upon to establish acknowledgement of debt - HELD THAT:- The Appellant has filed I.A. before the NCLT, Kolkata Bench on 27th August, 2018 with a prayer to direct the Financial Creditor to produce the original cheque so that it may be sent to the Questioned Document Investigation Department, CID, West Bengal for verification, but no order was passed by the Adjudicating Authority and no reliance could be placed on the aforesaid document. As the Appellant disputed the cheque in question as it is disputed document, did not decide this issue and no order - decided in favour of the Appellant and against the Respondent No. 1. Thus, the Ld. Adjudicating Authority have failed to consider the facts that Application under Section 7 of the IBC is barred by limitation and secondly, that so called cheque on which the Respondent No. 1 disputed, no reliance could be placed on the aforesaid document. The impugned order cannot be sustained in the eye of Law - application dismissed.

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• 2021 (3) TMI 207
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - amount due and payable to the operational creditor under a settlement agreement - existence of debt and dispute or not - HELD THAT:- The claim of the applicant is based on settlement agreement and on the basis of that the petitioner claimed that since the respondent violated the terms and conditions of settlement and there is default in payment of the settlement amount, therefore, the petitioner filed the present application for initiation of CIRP for default in payment of operational debt. Whether the terms and condition of settlement agreement comes under the definition of operational debt? - HELD THAT:- On reading of three definition together, operational debt, default and debt, it can be said that definition of debt as defined under the IBC does not mean the operational debt only rather it includes financial debt as well as liability or obligation in respect of a claim which is due from any person and default means non- payment of debt, but in order to trigger section 9 of the IBC an operational creditor is required to establish a default for non-payment of operational debt as defined in section 5(21) of the IBC, which means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and if a person fails to establish that then they cannot initiate CIRP under section 9 of the IBC. Now it is the settled principle of law that the National Company Law Tribunal is not recovery court rather when a default of either financial debt or operational debt occurred in that case financial creditor or operational creditor may file an application for initiating corporate insolvency resolution process under section 7 or section 9 respectively. The settlement agreement on the basis of which the present application is filed by the applicant does not come under the definition of operational debt - As default of instalment of settlement agreement does not come within the definition of operational debt, hence, we are not inclined to admit the application rather we are of the view the present application is liable to be dismissed. Application dismissed.

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• 2021 (3) TMI 206
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt - existence of debt and dispute or not - HELD THAT:- The claim of the applicant is based on settlement agreement and on the basis of that the petitioner claimed that since the respondent violated the terms and conditions of settlement and there is default in payment of the settlement amount, therefore, the petitioner filed the present application for initiation of CIRP for default in payment of operational debt. Whether the terms and condition of settlement agreement comes under the definition of operational debt? - HELD THAT:- As per the settlement agreement cheques were given to the petitioner which is mentioned at page Nos. 96 and 97 of the paper book and when the petitioner presented the cheque, the two cheques were dishonoured. Thereafter, the petitioner sent a demand notice under section 8(1) of the IBC and then filed this application. A claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force is an operational debt and only default in respect of that operational debt a person can initiate CIRP under section 9 of the IBC - It is also found that the settlement agreement on the basis of which the present application is filed by the applicant does not come under the definition of operational debt. The default of instalment of settlement agreement does not come within the definition of operational debt - application dismissed.

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• PMLA

• 2021 (3) TMI 246
  Grant of Regular Bail - allegation of deliberately manipulating/falsifying stocks, inventories - tampering of evidence - influencing the witness - HELD THAT:- The petitioner in the instant case is in custody since 27.10.2020. Nothing has been placed on record to show that the petitioner is a flight risk and according to the counsel for the petitioner the petitioner was granted permission to go to Sri Lanka for two weeks and thereafter he returned, the fact which has not been denied by the respondent. Tampering - HELD THAT:- The evidence is documentary in nature and the documents and digital evidence is in the custody of the prosecuting agency. Influencing the witnesses - HELD THAT:- No material has been placed on record by the respondent to show that anyone on behalf of the petitioner had tried to influence the witness of this case in any manner whatsoever. A vague allegation that the accused may tamper with the evidence or witnesses may not be a ground to refuse the bail and it is not the case of the prosecution that the accused is of such character and stature that his mere presence at large would intimidate the witnesses and there is no material on record to show that if released on bail, he would tamper with the evidence or subvert the course of justice. As per the record, moveable and immovable properties have already been attached, the statement of the witness have also been recorded. The FIR was registered way back in 2014 and there is nothing to show that the petitioner tried to influence the witnesses or tamper with the evidence. The petitioner is admitted to bail on his furnishing personal bond in the sum of Rs. 1,00,000/- with one surety of the like amount to the satisfaction of the Ld. Trial Court, subject to the condition that he shall not leave the country without permission of the Special Court, the passport if already not deposited, shall be deposited with the Special Court, he shall join the investigation as and when required by the prosecuting agency and he shall not tamper with the evidence and influence the witnesses in any manner - Bail application allowed.

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• Service Tax

• 2021 (3) TMI 238
  100% EOU - Refund of the accumulated CENVAT Credit - Output Service of Call Centre provided by the Assessee was exempted under the Notification, having been exported to foreign country, ignoring the effect of Rule 6 of the CENVAT Rules 2004 - interpretation and interplay of Rules 5 and 6 of CENVAT Rules - can a refund under Rule 5 be granted by the Excise Department Authorities even though the Services exported out of India are exempted from payment of any Duty? HELD THAT:- The legal issue which is brought before this Court to be decided which have framed as substantial questions has been considered in the earlier decisions rendered by the Hon ble High Courts. It appears that the earliest of the decision was in the case of REPRO INDIA LTD. VERSUS UNION OF INDIA [ 2007 (12) TMI 209 - BOMBAY HIGH COURT ]. This decision was relied on by the High Court of Himachal Pradesh in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DRISH SHOES LTD. [ 2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT ]. The substantial questions of law which were framed for consideration in the said decision were identical to that of the substantial questions of law which have been framed in this appeal though the language adopted may be slightly different. The Court after elaborately considering the scheme of the CCR, taking note of Rules 3, 5 and 6 held that it is clear from a bare reading of Rule 5 of the CCE that a manufacturer who exports final product which are exempt can claim refund of CENVAT. High Court of Judicature at Bombay in the case of Commissioner of Central Excise Cus., Aurangabad vs. Jolly Board Ltd. [ 2016 (9) TMI 1355 - BOMBAY HIGH COURT ], identical issue was considered and the Court held that the assessee was eligible for refund of unutilized CENVAT credit of duty paid in terms of Rule 5 of the CCE. In the said decision, the Court has referred to the decision in the case of Drish Shoes Limited and Repro India Limited. Identical view was taken by the High Court of Rajasthan in the case of Commissioner of CGST, Rajasthan vs. Medicamen Biotech Limited [ 2018 (7) TMI 2069 - RAJASTHAN HIGH COURT ]. The Tribunal has rightly interpreted the words used in Rules 5 and 6 by pointing out that the words used in Rule 6 are exempted goods/services , whereas Rule 5 does not use these words and uses the words final product/output service - Further, the Tribunal also rightly took into consideration the effect of the notification No.8/2003-ST by pointing out that it is an exemption applicable within the territory of India and goods which are dutiable as well as exempted can be exported, so also, output services which are taxable and exempted can also be exported. Therefore, the Tribunal rightly held that the export need not necessarily confine to dutiable products or taxable services. The idea of Rule 5 was also clearly set out by stating that it is to avoid export of duty/taxes. There is no error in the order passed by the Tribunal - the appeal filed by the revenue is dismissed and the substantial questions of law are answered in favour of the assessee.

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• 2021 (3) TMI 230
  Refund of Service tax paid - SEZ unit - input service or not - Group Health Insurance Service - Group Medical Insurance Service - Group Personal Accident Insurance Service - services are used for providing various authorized operations in the appellant company - Department entertained the view that the appellants are not entitled to the refund of service tax paid on the specified services on the ground that those services are not falling under the default list of services approved by the Development Commissioner - HELD THAT:- The Hon ble Apex Court in the case of Toyo Engineering India Ltd. [ 2006 (8) TMI 184 - SUPREME COURT ] and also in the case of Commissioner of Central Excise V. Gas Authority of India Ltd. [ 2007 (11) TMI 276 - SUPREME COURT] has held that the authorities under Act cannot travel beyond the show-cause notice. Further I find that in the show-cause notice as well as in Order-in-Original, the refund has been rejected only on the ground that the said insurance services have not been approved by the Approval Committee of the SEZ and hence the appellants are not entitled to the refund. Even on merit the said services fall in the definition of insurance service and has also been approved by the Unit Approval Committee read with Ministry of Commerce Industry letter dated 16/09/2013 and subsequent letters dated 19/11/2013, 19/06/2014, 09/07/2014 which includes General Insurance Business Services at Sl. No. 26. Further, it is found that the General Insurance Business Services also form part of the default list of services specified by the Karnataka Special Economic Zone vide Circular No. 2/2014 dated 25/07/2014 - Further this Tribunal in the case of Barclays Global Service Centre Pvt. Ltd. [ 2018 (6) TMI 1080 - CESTAT MUMBAI ] held that Medical Insurance and Personal Accident Insurance are covered under the General Insurance Business. Also it has been consistently held by the Tribunal in the appellant s own case as well as in other cases that mere non-inclusion of services in the list of Unit Approval Committee shall not be a ground for rejection of refund claim. The provisions of Special Economic Zones Act, 2005 has an overriding effect over other laws in force. Appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 228
  CENVAT Credit - input services - construction service - renovation services - insurance service - ground rent - consequential penalty was reduced to Rs. 50,000/- by the Learned Commissioner (Appeals) in the impugned order. CENVAT Credit - input services - construction services - construction activity was undertaken only for setting up an additional warehouse to the factory and that the said construction was directly used for providing output service namely, renting of immovable property service - HELD THAT:- The Co-ordinate Allahabad Bench of the CESTAT in the case of M/s. Upal Developers Pvt. Ltd. [ 2019 (5) TMI 1532 - CESTAT ALLAHABAD ] has also observed that services used for constructing mall which were meant for renting which were discharging service tax liability, the duty paid on the inputs or capital goods or services used for construction of the mall is available as credit - credit is liable to be allowed. CENVAT Credit - input services - renovation services - HELD THAT:- The issue decided in the case of M/S GUJARAT ECO TEXTILE PARK LTD. VERSUS C.C.E. S.T. SURAT-I [ 2019 (9) TMI 581 - CESTAT AHMEDABAD ] where it was held that During the period 2006-2011, the unit was being set up and laying of pipeline and building wall is certainly part of renovation of premises and thus covered under the definition of input services - the disallowance of CENVAT Credit on this issue also is held to be improper - credit allowed. CENVAT Credit - input services - insurance service - Revenue has denied the credit holding that insurance service does not qualify as input service since it was not used and it did not alter the provision of the output service - HELD THAT:- The Bangalore Bench of the CESTAT in the case of M/s. Meyer Organics Pvt. Ltd. v. The Commissioner of Central Excise, Bengaluru-II [ 2017 (10) TMI 962 - CESTAT BANGALORE ] held that appellants are entitled to the CENVAT Credit on service tax paid on rent of dealer s premises which is nothing but an extension of the factory of the appellant. The appellants are entitled to the CENVAT credit on security services availed for dealer s premises as well as insurance paid for the finished goods stored in the factory premises - it is clear that even the CENVAT Credit on insurance service becomes allowable. CENVAT Credit - input services - Ground rent - HELD THAT:- The development agreement and rental agreement with M/s. Vira Properties (Madras) Pvt. Ltd. is placed on record. The facts borne out of record indicate that the land in question was leased to developer who in turn leased the same back to the owner for which leased rental was collected from the owner-appellant. Prima facie, the assessee who is the owner of the land, has claimed itself to be the lessee of the portion of the same land and paid rent along with applicable Service Tax. Be that as it may, no document evidencing as to how the developer assumed the role of the lessor is there on record nor has it been placed before me. This fact coupled with the crucial fact as to against which output activity did the assessee seek to take the input Service Tax credit has also never been explained - Credit cannot be allowed. Penalty - consequential penalty was reduced to Rs. 50,000/- by the Learned Commissioner (Appeals) in the impugned order - HELD THAT:- The Learned Commissioner (Appeals) has categorically observed that there was no element of fraud, suppression of facts, etc., with an intent to evade tax. The intention as to fraud, suppression of facts, etc., are relevant for the penalty under Rule 15 (3) and hence, the Revenue has not made out any case to rope-in Rule 15 (1) which deals with a different situation altogether - there is no scope to sustain even the reduced penalty and accordingly, the same is directed to be deleted in toto. Appeal allowed in part.

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• 2021 (3) TMI 218
  Business Support Service - Auctioneering services - extended period of limitation - penalty - HELD THAT:- The issue of auctioneering service and business support service, these issue stand covered by the decision of the Tribunal in the case of M/S. ATTUR AGRICULTURAL PRODUCERS VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2019 (8) TMI 262 - CESTAT CHENNAI] where it was held that As far as the demand with respect to the Auctioneer s Service is concerned, he would assert that the charge is only on auctioning service and not on tendering service. What they are rendering is facilitation of tenders for sale of the products of their members through sealed tenders. Therefore, the term auctioneer s service does not apply to their activity at all and As far as the demand of service tax under Business Support Service is concerned, he submits that they give gold loans against jewels pledged by their members and collect an appraising charge of 3% on the amount of loan sanctioned subject to maximum of Rs. 100/- per loan as per the direction given by their finance bank. Appellants are getting loans from their bank namely M/s.Salem District Central Cooperative Bank, Salem and lending to their members on interest. Therefore, this is a case of they lending money to their members and not supporting service of business of some other bank. The facts analyzed in the above case is similar to the facts of the present appeals - there are no hesitation to apply the decision of this Bench which is rendered in one of the assessee s own case - the demand under Auctioneering Service and Business Support Service cannot sustain. GTA Services - appellant has argued that during the relevant period when GTA services was introduced (w.e.f 1.1.2005), the understanding was that when individual truck owners are engaged the activity would not fall under definition of GTA - HELD THAT:- There were several litigations on this issue and the Tribunal in the case of NIRAV INDUSTRIES VERSUS COMMR. OF C. EX. CUS., RAJKOT [ 2009 (3) TMI 592 - CESTAT, AHMEDABAD] held the issue in favour of assessee and it was upheld by Hon ble Karnataka High Court in COMMR. OF SERVICE TAX, BANGALORE VERSUS LAKSHMINARAYANA MINING CO. [ 2012 (8) TMI 651 - KARNATAKA HIGH COURT] . Extended period of limitation - Penalty - HELD THAT:- As the issue was interpretational in nature and also for the reason that there were notifications exempting service tax for carrying food items which underwent amendment later, it cannot be said that the appellant has suppressed facts to evade payment of service tax. In fact, they were carrying food items as part of PDS. Such transportation would be clearly accounted with government and it cannot be said that appellant has willfully suppressed any facts. In the Show Cause Notice apart from a bald allegation that appellant has suppressed facts, there is no evidence of any positive act of suppression established by the department. The demand invoking extended period cannot sustain - On the same grounds, the penalties imposed under section 76 and 78 of the Finance Act, 1994 is unwarranted. Appeal allowed in part.

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• 2021 (3) TMI 209
  Evasion of Service tax - repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Business auxiliary services - period April 2005 to March 2010 - Goods Transport Agency Services - period January 2005 to July 2009 - penalties. Repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Appellant submit that repair and maintenance of roads was not chargeable to service tax as per their understanding - HELD THAT:- The demand in respect of repair and maintenance of roads is undisputedly covered by the retrospective exemption provided by way of Section 97 of Chapter V of the Finance Act 1994. Therefore, the demand on this account needs to be set aside. Goods Transport Agency Services - period January 2005 to July 2009 - HELD THAT:- The appellant has already paid the amount along with interest and is not contesting the same. Therefore, the demand to this extent needs to be upheld. Business auxiliary services - period April 2005 to March 2010 - amount in question was wrongly shown in their books of accounts as commission but in fact it is their TDS amount only - service rendered to the subcontractors or not - HELD THAT:- There is no force whatsoever in the argument of the learned counsel that the amount shown as commission in their books of account is actually tax deducted at source (TDS). Learned counsel tried to convince us that this is TDS amount by saying that the amount shown as commission matches with the amount deducted as TDS from their payment by the Govt Department. These figures match because both are only 2% of the contract value. For instance if Rs. 100/- is the value of the contract, the Govt department pays the appellant Rs. 98/- and deducts Rs. 2/- as TDS. A credit for this Rs. 2/- also comes to the appellant which they can use to set off against their tax liability. In other words, the appellant has got the entire Rs. 100/-. In the second leg of transaction, the appellant is required to pay Rs. 100/- to the sub-contractor to whom he outsourced the work on back to back basis. He did so after deducting 2% as commission and paid only Rs. 98 to the sub-contractor. This Rs. 2 has been reflected in their books of account correctly as commission. In fact, a perusal of the profit and loss statements of the appellant during the relevant period shows that the amounts have been recorded on the income side as commission and there is no corresponding TO TDS on the expenditure side. The net profit has been calculated after subtracting the expenses and depreciation from the income including the commission. This net income has been duly reflected in their income tax returns - as a matter of fact that the appellant has received commission of 2% of the contract value in contracts which they have outsourced to their subcontractors. Whether the commission so received is chargeable to service tax under the Head Business Auxiliary Services ? - Revenue argues that the appellant is promoting and marketing the services of the sub-contractor - HELD THAT:- This is not a promotion or marketing of the services of the sub-contractors but actually outsourcing some of their work to the subcontractors. Although their assertion is that the contract is on back to back basis with no commission whatsoever, they were, in fact, deducting 2% as their own commission. Regardless of how much commission they deduct or whether they sub-contract for the same amount as they receive or for a much lower amount, this outsourcing arrangement does not amount to promoting or marketing the service of the sub-contractors to whom the work is outsourced. In view of the above, we find that no service tax can be charged from the appellant under the head business auxiliary services. Penalties - HELD THAT:- As bulk of the demands in the impugned order are already set aside, exercising the powers under Section 80 of the Finance Act 1994, all the penalties imposed upon the appellant is set aside. The impugned order is set aside except to the extent of confirmation of demand and interest on GTA services which they have already paid - Appeal allowed in part.

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• Central Excise

• 2021 (3) TMI 243
  Refund of Excise duty paid - Area Based Exemption - benefits under the Northeast Industrial Policy - allegation is that without giving a due consideration to the claim for special rate made by the petitioners, the respondents now intend to attach the bank accounts of the petitioner on the premises that the refund of excise duty would be as per the rates provided in the Notification dated 27.03.2008 - HELD THAT:- As the Notification dated 27.03.2008 provides for a legal right to the assessee to claim for a special rate to be fixed in the event of there being any add-ons to the goods manufactured, we are of the view that without an appropriate decision being taken on such claim for special rate, it would be inappropriate for the department to proceed against the petitioners as per the rates provided in the Notification dated 27.03.2008. This petition stands disposed of by directing the Principal Commissioner of GST Guwahati to consider the aforesaid application of the petitioner dated 28.09.2020 claiming for a special rate to be fixed on the basis of the add-ons made to the goods manufactured. After arriving at the special rate, if any as per the order to be passed by the Principal Commissioner, GST further process against the petitioner as per law may be initiated - Petition allowed.

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• 2021 (3) TMI 236
  Levy of penalty u/r 15(1) of the CENVAT Credit Rules, 2004 - reduction in quantum of penalty imposed under Rule 26(2) (i) (ii) of the Central Excise Rules, 2002, when no discretion is provided in the said Rule - reversal of ineligible CENVAT Credit taken by the assessee - Rule 14 of the CENVAT Credit Rules, 2004 -whether the Tribunal was justified in interfering with the order-in-original and reducing the penalty levied by the adjudicating authority? - HELD THAT:- It is no doubt true that the Tribunal has got discretionary power to interfere with the order of the adjudicating authority in the matter of reduction of the quantum of penalty which has been imposed by the adjudicating authority. But, however the exercise of discretion should be with sound reasons and cannot be arbitrary or whimsical. On perusal of paragraph 9 of the impugned order passed by the Tribunal, we find that the Tribunal has not assigned any acceptable reasons as to why the penalty imposed on M/s.Endeavour Industries Limited should be reduced from Rs. 50 lakhs to Rs. 12.50 lakhs, on M/s.Future Tech Industries Limited should be reduced from Rs. 50,00,000/- to Rs. 12,50,000/-, on M/s.Victoria Steel Enterprises Limited should be reduced from Rs. 80,00,000/- to Rs. 20,00,000/- and on M/s. Sujana Steel Products Ltd., should be reduced from Rs. 1 Crore to Rs. 25,00,000/-. The only finding that the Tribunal has recorded in paragraph 9 of the impugned order is that apparently there is no revenue loss to the Department. The availment of credit by the five entities, namely, M/s.Endeavour Industries Limited, M/s.Future Tech Industries Limited, M/s.Victoria Steel Enterprises Limited, M/s.Omnicron Bio-Genesis Industries Ltd. and M/s.Sujana Metal Products Limited was not authorized and illegal because this credit was based on invoices without actual movement of goods. It may be a fact that those five entities have not utilized the credit to discharge their duty burden in respect of other transaction. But that cannot be the reason for reduction of the penalty, especially when the amount which was availed as credit remained with the five entities over a period of time until it was reversed. Apart from that, the Tribunal would say that there is no revenue loss because M/s.Sujana Metal Products Limited have reversed the credit, that can hardly be a mitigating factor for reduction of penalty on the five entities because those entities were well aware that the transaction was a circular transaction and credit was availed on invoices without movement of goods - the exercise of discretion by the Tribunal for reduction of penalty is perverse and unsustainable and accordingly, the same is set aside - the issues are answered in favour of the revenue. Recovery of CENVAT Credit - HELD THAT:- The factual position being that M/s.Sujana Metal Products Limited having already reversed the credit of Rs. 8,21,75,955/-, once more to call upon them to reverse an equivalent amount would not be permissible in law - the finding rendered by the Tribunal in the impugned order is confirmed - this issue decided against Revenue. Appeal allowed in part.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 237
  Levy of sales tax - on the ground that there is abnormally low reporting of purchases when compared to the sale - Mismatch - check post movement where the Assessing Officer wanted to verify the transactions and called for documents relating to check post movements - short payment of tax - stock difference for the assessment year 2016-17. Mismatch - cross verification of the buyers and the sellers returns as per the web report - HELD THAT:- The issue is with regard to cross verification of the buyers and the sellers returns as per the web report and verification of the purchase details from other dealers Annexure II and the purchase details from the petitioner-dealer s Annexure I has been kept in abeyance by the Department on account of verification, which is being done. Check post movement where the Assessing Officer wanted to verify the transactions and called for documents relating to check post movements - HELD THAT:- The assessment orders that the dealer produced necessary documents namely Form F declarations, which, according to the Assessing Officer, were insufficient and therefore, the proposal made in the revision notices was confirmed. Thus, that adequate opportunity should be given to the dealer to place all the records on account of the submission made before us that all records are available with the dealer. Hence, the levy of tax as a result of verification of the check post movement details has to be redone by the Assessing Officer. Short payment of tax - for all the assessment years involved except for the assessment year 2016-16 - Stock difference for the assessment year 2016-17 - HELD THAT:- The dealer has agreed to go before the Assessing Officer by producing details - Therefore, the finding rendered in that regard by the Assessing Officer on (i) levy of tax upon verification of the check post movement details, (ii) short payment of tax and (iii) stock difference are set aside and the matters are remanded to the Assessing Officer for a fresh consideration after affording an opportunity of personal hearing to the authorized representative of the dealer. A reading of the relevant assessment orders, which contained the basis, on which, re-assessment proceedings were initiated, shows that the Assessing Officer, on verification of the books of accounts, noticed that the dealer reported their purchases during the relevant years and in the opinion of the Assessing Officer, there is abnormally low reporting of purchases when compared to the sale. Hence, he proposed to treat it as a purchase suppression and issued revision notices. The dealer would state that for the relevant assessment year, their opening stock as per the balance sheet was Rs. 4,57,36,085/-, out of which, 75% of the value constituted stock of Chennai unit and the amounts spent for stitching and job work charges were not considered, which came under direct expenses reported in the balance sheet, which were to be added to the purchase. Further, the dealer would contend that valuation of the closing balance as per the consolidated balance sheet was Rs. 5,21,41,736/-, out of which, Rs. 3,33,98,729/- constituted stock of Chennai unit and the total purchases amounted to Rs. 9,70,07,869/- and there was no suppression of purchases - Assessing Officer rejected the said stand taken by the dealer stating that reconciliation was not properly done nor was supported by documentary evidence. It is the settled legal position that revision of assessment cannot be done on surmises and conjectures, but should have foundational facts. Though the Assessing Officer used the term purchase suppression , what has been levied by the Assessing Officer is essentially sales tax on Rs. 9,70,74,613/-, on which, the dealer already paid sales tax at 14.5%. Though elaborate submissions were made by the learned Special Government Pleader as to under what circumstances purchase tax can be levied under Section 12 of the Act, the said issue does not arise in the instant case on account of the fact that the show cause notice issued by the Assessing Officer for revision of assessment was not with a proposal to levy purchase tax. The writ appeals are partly allowed and the levy of sales tax for all the assessment years except for the assessment years 2012-13 and 2016-17 on the ground that the purchases were abnormally low is set aside - With regard to levy of tax under the heads (i) check post movement for all the assessment years except for 2010-11, 2011-12 and 2016-17 and (ii) short payment of tax for all the assessment years involved except for the assessment year 2016-17 and (iii) stock difference for the assessment year 2016-17 alone, the matters are remanded to the Assessing Officer for a fresh consideration after affording an opportunity to the dealer. Appeal allowed in part and part matter on remand.

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• 2021 (3) TMI 235
  Refund of Input Tax paid - Sales to 100% EOU - zero rated sale under Section 18 of the TNVAT Act, 2006 - HELD THAT:- Section 18 of the TNVAT, Act 2006 is very clear. There are two options available under the scheme of Section 18. In respect of sale effected to 100% EOU, a dealer is entitled to adjust the Input Tax Credit or claim refund under sub clause (2) to Section 18. The petitioner has opted to adjust the Input Tax Credit. The petitioner has not opted to claim the refund of Input Tax Credit subject on the sale effected to 100% EOU under sub clause (2) to Section 18. The impugned orders passed by the respondent holding that the petitioner was not entitled to refund and consequently not entitled to adjust the Input Tax Credit, is not sustainable - the impugned orders to that extent is set aside leaving the other issue open for the petitioner to take it on appeal before the Appellate Court, if desired - petition allowed in part.

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• 2021 (3) TMI 234
  Maintainability of petition - availability of alternative remedy - Section 22(2) of Tamil Nadu Value Added Tax Act - mismatch of purchase - HELD THAT:- It appears that the Government filed a petition seeking review of the order made in M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT] where it was held that this Court is fully convinced that the procedure adopted by the respondent, Assessing Officers in all these cases are half baked attempts, which have not yielded results and these cases are before this Court or before the Appellate Authorities and all that the Assessing Officers can record is that they have issued show cause notices or passed orders reversing the Input Tax Credit with no appreciable impact on the revenue collection. - It is now stated at the Bar that even while dismissing the review petition, some observations were made. The fact remains that the procedure laid down in M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED has not been followed in this case. Even though the petitioner has furnished certain material evidence in support his contentions, they have been casually brushed aside - the matter is remitted to the file of the second respondent to hear the issue and pass orders afresh - Petition allowed by way of remand.

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• 2021 (3) TMI 233
  Maintainability of petition - alternative remedy of appeal - interstate sales against C Form declarations - violation of principles of natural justice - HELD THAT:- In the impugned order, quite a few transactions were held liable to higher rate of tax at 12.5% on the sole ground that annexures were not filed. The petitioner s counsel drew my attention to the materials enclosed along with the reply. It is seen therefrom that the petitioner had given invoice particulars including the date and the amount covered thereby. In the pre-assessment notice, the ground taken by the respondent was that the petitioner has not made available the invoice details. All those details have been made available, when the petitioner submitted his reply. The respondent had casually rejected the same by observing that the annexures have not been filed. The matter is remitted to the file of the respondent to pass order in accordance with law - Petition allowed by way of remand.

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• Indian Laws

• 2021 (3) TMI 245
  Seeking appointment of a sole arbitrator - international commercial arbitration or not - Jurisdiction to appoint arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - association or body of individuals under Section 2(1)(f)(iii) and not under Section 2(1)(f)(i) - whether the requirements of sub-clause (i) to Section 2(1)(f) have been met, in which case it is unnecessary to go to sub-clause (iii), as under Section 2(1)(f), at least one of the parties must fall under sub-clauses (i) to (iv) of Section 2(1)(f)? - HELD THAT:- The respondents have themselves applied to become distributors of Amway products in India as a sole proprietorship concern under the relevant forms issued by the appellant, read with the Code of Ethics. In ASHOK TRANSPORT AGENCY VERSUS AWADHESH KUMAR AND ANOTHER [ 1998 (3) TMI 701 - SUPREME COURT] , this Court has clearly held that a sole proprietary concern is equated with the proprietor of the business. The argument that there is no international flavour to the transaction between the parties has no legs to stand on. Indeed, an analysis of Section 2(1)(f) would show that whatever be the transaction between the parties, if it happens to be entered into between persons, at least one of whom is either a foreign national, or habitually resident in, any country other than India; or by a body corporate which is incorporated in any country other than India; or by the Government of a foreign country, the arbitration becomes an international commercial arbitration notwithstanding the fact that the individual, body corporate, or government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India. This being the case, it is clear that the Delhi High Court had no jurisdiction to appoint an arbitrator in the facts of this case. Appeal allowed - decided in favor of appellant.

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