TMI Tax Updates - e-Newsletter
April 13, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Mergers and Acquisitions- Understanding of Basic Concepts

   By: Shubham Agarwal

2. Penalty and immunity from penalty under new provisions – penalty will not apply when tax and interest is not payable as per assessment order – a study and point of view for brain storming.

   By: DEVKUMAR KOTHARI

News

1. Auction for Sale (Re-issue) of ‘3.96% GS 2022’, and ‘5.85% GS 2030’ and ‘6.76% GS 2061’

2. Shri Piyush Goyal launches “DGFT Trade Facilitation App” for Providing instant access to Exporters/Importers any-time any-where;

3. THE TRIBUNALS REFORMS (RATIONALISATION AND CONDITIONS OF SERVICE) ORDINANCE, 2021

Notifications

Customs

1. 27/2021-Customs (N.T./CAA/DRI) - dated 8-4-2021 - Cus (NT)

Amendment in Notification No. 10/2018- Customs (N.T./CAA/DRI) dated 24.07.2018

DGFT

2. 01/2015-2020 - dated 11-4-2021 - FTP

Amendment in Export Policy of Injection Remdesivir and Remdesivir API.

IBC

3. IBBI/2021-22/GN/REG071 - dated 9-4-2021 - IBC

Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 - dated 12-4-2021

Circular on Reporting Formats for Mutual Funds

GST

2. CBEC-20/16/05/2021-GST/359 - dated 23-2-2021

Guidelines for provisional attachment of property under section 83 of the CGST Act, 2017

Highlights / Catch Notes

Income Tax

• Tribunal's Order u/s 263 Deemed Erroneous for Failing to Address Assessee's Issues; Revision Needed.

  Case-Laws - HC : Revision u/s 263 - The Tribunal while testing the correctness of the order passed by the PCIT has also not dealt with the issues, which were specifically pleaded by the assessee. Therefore, we are to necessarily hold that the order passed by the Tribunal is also erroneous. - Tribunal committed an error in not interfering with the order passed by the PCIT. - HC
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• Surrogacy payments under scrutiny: Authorities uphold disallowance for TDS non-deduction per Section 194C, funds misappropriated by NGO.

  Case-Laws - AT : TDS u/s 194C - surrogacy payments without deducting TDS - these parties have done nothing else but exploited the poor and destitute surrogate mothers without even paying the adequate compensation. Rather the payee ‘NGO’ and its office bearer(s) have prima facie swindled the entire money. This conclusion flows from the entire surrogacy procedure adopted by the assessee with the so called NGO and its authorised person - We thus uphold the learned lower authorities’ action invoking Section 194C r.w.s. 40(a)(ia) disallowance - AT
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• Assessment Reopening u/s 147 Invalid Due to A.O's Mechanical Reliance on Incomplete Information from Directorate of Income-tax.

  Case-Laws - AT : Reopening of assessment u/s 147 - we are of a strong conviction that as the A.O had failed to independently apply his mind to the ‘material’ available on his record and mechanically acting on the information supplied by the Directorate of Income-tax (Inv.) had on the basis of incomplete and incorrect facts reopened the case of the assessee u/s 147 of the Act. - AT
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• Business Expenses in Cash Supported by Self-Made Vouchers Are Valid if No Other Evidence Available.

  Case-Laws - AT : Ad-hoc disallowances of the expenses - the expenses claimed for the purpose of the business cannot be disallowed merely on the reasoning that these expenses were incurred in cash and were supported on the self-made vouchers. There are many occasions/situations where the supporting details are not available for the expenses incurred by the assessee. Thus, in such a situation only self-made vouchers can be prepared in support of the expenses incurred by the assessee. - AT
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• Court Rules Sub-Leased Land Income as 'Property Income' u/s 22 of Income Tax Act; Assessee Wins Appeal.

  Case-Laws - AT : Correct head of income - rental income - assessee had got lease right from the Rajasthan govt. on the land for a period of 20 years - for the purpose of section 22 of the Act, the assessee is the deemed owner of the land and the assessee 's contention that sub-letting this land to L&T is to be considered as 'income from house property' - CIT(A) rightly granted relief to the assessee - AT
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• Clarification on Section 194C: Non-deduction of TDS is valid if PAN information is provided, despite missing prescribed info.

  Case-Laws - AT : TDS u/s 194C - Payment on account of freight expense - the statutory obligation to furnish the information regarding receipt of PAN and non-deduction of TDS is a fall out of and consequent of the first statutory obligation to not deduct TDS on receipt of PAN - merely because there is non-compliance on part of the assessee to furnish the prescribed information to the Revenue authorities, the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation. - AT
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• Ex-parte order u/s 144 for non-compliance since 2014; CIT(A) remands for further review by AO.

  Case-Laws - AT : Ex-parte order u/s 144 - notices issued during the year 2014 onwards have remained uncomplied with and the assessment was thereafter completed u/s 144 - CIT(A) admitted the additional grounds and restored the matter before the AO - these additional evidences have been sent to the Assessing Officer for necessary examination and therefore, as far as Revenue’s interest is concerned, the same has been duly safe-guarded by way of providing the reasonable opportunity to the AO. - AT
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• Revision Proceedings Quashed: PCIT Failed to Specify Missing Enquiries in Section 263 Case Against Assessing Officer.

  Case-Laws - AT : Revision u/s 263 by CIT - if the learned PCIT was of the view that the AO failed to make the necessary enquiries which should have been made during the assessment proceedings then it was a duty upon the learned PCIT to specify the relevant enquiries which should have been made but the order of the learned PCIT is silent about such enquiries which should have been made by the AO during the assessment proceedings. - Revision proceedings quashed - AT
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• Stay Extended as Delay Not Attributable to Assessee; Tribunal's Directions Followed, Balance of Convenience Favorable.

  Case-Laws - AT : Stay petition for extension of the stay - the delay in non disposal of the appeal is not attributable to the assessee. Hence, the balance of convenience lies in the favour of the assessee for extension of stay as the assessee complied with the directions of the Hon’ble Tribunal - Stay extended - AT
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Customs

• High Court Orders Assessment of Gold Ore Bills of Entry Within Two Weeks After Tribunal's Final Decision.

  Case-Laws - HC : Seeking assessment of Bills of Entry - seeking clearance of such goods for home consumption on payment of custom duties to be assessed together with redemption fine - import of Natural Gold Ore Concentrates - The earlier the order of the Tribunal has achieved finality as no appeal is filed by the department against such order before the Supreme Court - The respondents are hereby directed to make assessment of Bill of Entry within a period of two weeks - HC
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• Appeal Against Duty Assessment Considered Protest; Limitation Period Not Applicable for Refund of Excess Duty Paid.

  Case-Laws - AT : Refund the excess duty paid - The refund has been rejected on the ground that it is barred by limitation - When the appellant has approached the higher forum aggrieved by the rejection of the notification benefit, it is sufficiently implied that the duty has been paid under protest. - when appeal is filed against the assessment of the bill of entry, the same has to be considered as a protest in paying the duty. - Period of limitation is not applicable - HC
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• Court Rules EXIM Policy Benefits Revocation Cannot Be Retrospective; Effective Only From Issue Dates of Notifications.

  Case-Laws - HC : Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would be effective only from the dates they were issued. - HC
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Service Tax

• High Court Quashes Criminal Proceedings for Service Tax Evasion Due to Amount Being Less Than Rs. 2 Crores.

  Case-Laws - HC : Evasion of Service Tax - Punishable offence - initiation of criminal proceedings - the power of arrest in Service Tax is available only if a person collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond the period of six months from the date on which such payment becomes due and the amount exceeds ₹ 2 crores. - The amount involved in this case is less than Rupees two crores - Criminal proceedings quashed - HC
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• Appeal Dismissed: Insufficient Cause for 50-Day Delay in Filing Before Commissioner (Appeals) u/s 35, Central Excise Act.

  Case-Laws - AT : Condonation of delay in filing appeal - appellant even today has not cited any reason which may be considered as sufficient cause for the impugned delay of one month and 20 days for filing an appeal before Commissioner (Appeals) in terms of Section 35 of Central Excise Act, 1944 - Appeal dismissed - AT
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Case Laws:

• GST

• 2021 (4) TMI 468
  Violation of principles of natural justice - no personal hearing was accorded to the petitioner before passing the impugned order - HELD THAT:- The petitioner was not afforded a reasonable opportunity, this Court is of the considered view that the matter needs to be remitted back to the 1st respondent. The matter is remanded to 1st respondent with a direction to afford personal hearing to the petitioner wherein the petitioner is entitled to take the relevant pleas which are permissible to him under law - Petition allowed by way of remand.

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• Income Tax

• 2021 (4) TMI 467
  Assessment u/s 153C - whether a notice under Section 143(2) of the Act is to be mandatorily issued prior to completion of an assessment in consequence of a notice under Section 153C? - Denial of natural justice - HELD THAT:- The difference in the language of Section 158 BC and Section 153A must be attributed sufficient weightage. While there is specific reference to the provisions of Section 143(2) in Section 158 BC, such reference is conspicuous by its absence in Section 153A. Section 153A only states that an assessment in terms thereof shall be completed in terms of the provisions of the Income Tax Act, 1961 as if such return were a return required to be furnished under Section 139. It would thus suffice that in framing an assessment under Section 153A, due regard must be given to the principles of natural justice, which requirement will stand satisfied either by issuance of notice under Section 143(2) or a questionnaire under Section 142(1). In this case, a questionnaire has been issued.Thus in agreement with the ratio of the decisions cited answer this legal issue in favour of the revenue. Adherence to the principles of natural justice - The relevant sequence of dates and events is that a notice under Section 153C was issued on 25.10.2019 in regard to a search conducted in 2017. Unfortunately neither the affidavit filed in support of the writ petitions nor the impugned orders of assessment anywhere mention the date of search and it was only in the course of the submissions made orally that the date of search was noted by me as 07.11.2017. The limitation for completion of assessments would be the 31st of December, 2019. The impugned orders state that centralization of the assessments took place only on 24.09.2019 and pursuant to the centralization, notices under Section 153C were issued on 25.10.2019, leaving barely a period of a little over two months for completion of six search assessments. The notice under Section 153C called upon the petitioner to file returns within a period of 8 days from service of the notice and the returns have been filed on 07.12.2019, in all cases, beyond the period granted by the respondent. On the same date a questionnaire under Section 142(1) has been issued calling for various particulars in response to which the petitioner has filed replies dated 13.12.2019 furnishing some of the particulars sought. The impugned orders have come to be passed on 30.12.2019 without further reference to the petitioner. In respect of batch-1, dealing with Assessment Years (AY) 2012-13, 2013-14, 2014-15 and 2017-18, the impugned assessments proceed on the basis that the petitioner has purchased certain immovable properties, which were not admitted in the petitioner s returns of income. The purchase cost has come to be added as undisclosed investment. The questionnaire issued notice under Section 142(1) called for various particulars such as a brief note on the activities carried out during the relevant year, a copy of computation of income, statement of gross profit, audited financials, details of movable and immovable assets, details of sundry debtors and creditors, bank statements and documentary evidences for remittance of statutory liabilities. The petitioner has stated that all details of movable and immovable properties have been disclosed in the return of income filed. It was thus incumbent upon the respondent, to have, in the aforesaid circumstances issued a show cause notice putting the petitioner to notice of the properties of which he appears to have collated information found reflected in the order of assessment, and the purchase cost of which, have been added as undisclosed income. Such details however, findj mention only in the impugned order and no opportunity has been furnished to the petitioner, prior to passing thereof, which in my view, constitutes a violation of the principles of natural justice. AY 2015-16 and AY 2016-17 - Assessments have certainly been completed in haste. When the search has been completed on 07.04.2017, there was no necessity to have waited till 20.09.2019 for centralization, and issue notices under Section 153C only on 25.10.2019. Any delay on the part of the petitioner in responding to the notices appears insignificant in the face of the enormous delay by the Income Tax Department in taking stock of the search material, centralizing the cases and issuing the notices in time, particularly, since it is their case that the assessment get time barred on 31.12.2020. The petitioner has, for AY 2015-16 and AY 2016-17, specifically sought more time to make his submissions on the merits of the matter, relating to alleged undisclosed income from quarrying operations and seigniorage fee. The respondent officer has, in making additions as aforesaid, simply ignored this request. The Investigating officer is thus, empowered to refer an issue to valuation even during the process of search. However, such report has to be put to the assessee and his full and complete response sought prior to using the same against him. This has not been done in the present case. Thus, while the reference to valuation is in order, the decision making process is flawed and in violation of the principles of natural justice. There is no explanation set forth in counter or at the time of hearing to explain why the assessment had been taken up for completion, at the very fag end of limitation and for this reason, I believe I would have been justified, had I annulled the assessments, as a second innings is not to be granted to the department, merely as a matter of rote. However, and solely as a matter of prudence, I set aside the assessments with a direction to the respondent to issue notices afresh, hear the petitioner and pass orders of assessments within a period of eight (8) weeks from today, with sufficient time being given to the petitioner to putforth his submissions on merits.

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• 2021 (4) TMI 466
  Revision u/s 263 - Income deemed to accrue or arise in India - HELD THAT:- Non-resident assessee did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessee in India as contemplated by clause (a) of the Explanation to section 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessee for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the Department. As relying on M/S. FLUIDTHERM TECHNOLOGY PVT. LTD., [ 2015 (4) TMI 191 - MADRAS HIGH COURT] and MALABAR INDUSTRIAL CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2000 (2) TMI 10 - SUPREME COURT] issue decided in favour of assessee.

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• 2021 (4) TMI 465
  Disallowance on account of expenditure incurred and claimed on foreign travel u/s 37 by the employee few the firm - HELD THAT:- It is pertinent to note that in the Assessment Order, M/s.Shoetek Agencies is the assessee s proprietary concern and is engaged in the business of leather and leather products. In the Assessment Order, though the assessee contended that Mrs. Swetha Reddy went aboard in the capacity of Marketing Executive, he has not produced any document to prove that her visit was exclusively for business purpose. AO observed that since Mrs. Swetha Reddy had accompanied the assessee on several occasions , the element of personal tour cannot be denied. When the assessee is contending that Mrs. Swetha Reddy was an employee of the firm, he should have produced sufficient documents to establish the said contention. Further it is not the case of the assessee that there is perversity in the order passed by the Income Tax Appellate Tribunal, Commissioner of Income Tax(Appeals) and in the order of the Assessing Officer. No substantial question of law.

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• 2021 (4) TMI 464
  Revision u/s 263 - AO has granted deduction claimed under Section 10A of the Act - Tribunal upholding the jurisdictional validity of the revisionary proceedings initiated - Whether tribunal was right in law in concluding that in the absence of separate books of accounts being maintained for the 10A units, the deduction shall be computed based on the overall average profit margin of the appellant despite the provisions of Section 10A of the Act specifically provides for unit-wise computation of deduction? - HELD THAT:- We find there is no discussion and finding with regard to the exercise of jurisdiction under Section 263, which according to the assessee was without jurisdiction. Secondly, the issue whether it is mandatory for the assessee to maintain separate books of accounts was also not decided by the PCIT. If according to the PCIT, it is mandatory to maintain separate books of accounts, the alternate submission made by the assessee that they have maintained separate profit and loss account and the same was submitted to the Assessing Officer, who has considered the same and then completed the assessment, was not dealt with or discussed. To be noted that the Assessing Officer did not reject the profit and loss account submitted by the assessee, but undertook an exercise to rework the deduction, which was not challenged by the assessee. PCIT would state that the Assessing Officer has not made any enquiry. This finding is absolutely vague, as we find from the assessment order under Section 143(3) of the Act, the Assessing Officer did conduct an enquiry, called for details, the details were produced and thereafter, the assessment was completed. Therefore, the finding of the PCIT in that regard is erroneous, consequently, assumption of jurisdiction under Section 263 of the Act was not sustainable. The Tribunal while testing the correctness of the order passed by the PCIT has also not dealt with the issues, which were specifically pleaded by the assessee. Therefore, we are to necessarily hold that the order passed by the Tribunal is also erroneous. The CBDT by Circular No.1/2013, dated 17.01.2013, issued clarification on various issues, which were highlighted by the software industry and one such issue was, whether it is necessary to maintain separate books of account for eligible units claiming tax benefit under Sections 10A and 10B In terms of the above clarification, there is no requirement to maintain separate books of account. By Instruction No.17/2013 dated 19.11.2013, the Field Officers of the Department were advised to follow Circular No.1/2013 dated 17.01.2013, in letter and spirit. By Instruction No.3/2014, dated 14.03.2014, the Department Representatives and the Standing Counsel of the Department were directed to be informed about Circular No.1/2013, who appear for the Department before the Tribunal and the Court. The above circulars and instruction are binding on the Department and therefore, the conclusion of the PCIT that it is necessary to maintain separate books of account is not sustainable. See M/S. CAIRN INDIA LTD. VERSUS DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) [ 2017 (11) TMI 643 - MADRAS HIGH COURT] as held that Section 80IB does not mandate that for claiming deduction, separate books of accounts should be maintained. - we are of the clear view that the Tribunal committed an error in not interfering with the order passed by the PCIT. - Decided in favour of assessee.

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• 2021 (4) TMI 463
  Computation of deduction under section 10A - Whether travelling expenditure incurred in foreign currency is to be reduced from the total turnover also for the purpose of computation of deduction? - HELD THAT:- The above question of law is covered by the decision of this Court in M/s. SRA Systems Ltd., Chennai [ 2021 (3) TMI 977 - MADRAS HIGH COURT ] wherein held covered by the decision of the Hon ble Supreme Court reported in Commissioner of Income-tax, Central III Vs. HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] .- Questions of Law are decided against the Revenue and in favour of the assessee

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• 2021 (4) TMI 462
  Disallowance u/s 14A r.w. Rule 8D - direct and administrative expenses - HELD THAT:- We notice that as followed the tribunal s order in assessee s case itself for A.Y 2013- 14 [ 2018 (8) TMI 2024 - ITAT HYDERABAD] that only exempt income yielding investments deserve to be considered for the purpose of Rule 8D disallowance computation. The Revenue is equally fair in its substantive ground in not pinpointing any distinction on facts or law in these twin assessment years. We thus adopt judicial consistency to affirm CIT (A) s impugned directions. Revenue s formal appeal rising this solitary substantive grievance fails therefore. Addition u/sec 115JB MAT issue qua sec 14A disallowance - HELD THAT:- This tribunal s special bench in VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] has decided the issue to assessee s favour. Thus Rule 27 petition is partly allowed to this limited extent.

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• 2021 (4) TMI 461
  Addition of outstanding expenses and liabilities belonging to earlier assessment years - as contended that no particular section has been invoked by the Ld. AO or the Ld. CIT(A) for making this addition and that the only section under which the addition can be made is only u/s. 41(1) - HELD THAT:- AO made the addition of all outstanding liabilities except in the case of commission expenses, where both outstanding as well as current year expenses were added as income. Such additions of outstanding liabilities can be made only u/s. 41(1) of the Act. This section can be invoked only when there is either cessation or remission of the liabilities. It is not the case of the ld. AO or the Ld. CIT(A) that there is cessation of liability in question. It is true that on a perusal of the nature of the expenses, our conclusion is that there cannot be outstanding for these many number of years. This indicates that these expenditure is not genuine. Such expenses should not have been allowed in the year in which they were claimed. The AO is correct in doubting the genuine of these expenses. But the problem is that they do not pertain to this asst. year. The disallowance, if any, has to be made in the year in which they were claimed. It cannot be taxed as income of this year unless it falls under the provisions of section 41(1) of the Act. No addition can be made to the income of the assessee in this asst. years, as in the view of the AO the outstanding liability in question is bogus and non-existent. The question of cessation of such non-existent as bogus liability does not arise. Hence, Sec. 41(1) cannot be applied. Only when there is a genuine liability and there is cessation of such liability or it is written off in the books of account, then Sec. 41(1) of the Act can be applied. Law permits the Ld. AO to re-open the assessment for the earlier year and consider whether the expenditure incurred are to be allowable or not and in such cases additions can be made of bogus expenditure. Thus, in view of the above discussion, we delete all these additions of outstanding liabilities/expenses as appearing in the balance sheet as made by the Ld.AO and confirmed by the Ld. CIT(A) and allow the grounds of the assessee. Disallowance of expenditure in commission - A/R during the stage of hearing was asked to produce the details of parties to whom the commission was given and for what purposes - HELD THAT:- As assessee specifically submits that he does not have any employee throughout the state of W.B., where supplies of goods have taken place and instead the assessee appointed sales agent to liaison the supply of goods and follow up of the bills and collection in various districts of State of W.B. and commission expenses were paid through a/c payee cheques after deducting tax at source against the bills raised by the Commission Agents. The sales agents have filed their I.T returns declaring such commission as there income. We also find that similar commission had been paid by the assessee in the earlier years also. The Ld. DR could not controvert these facts as stated by the assessee. The only basis for such disallowance is that supply of goods was to State Govt. by way of open tender and that no commission need to be paid for sales. Commission expenditure in this case was paid for liaison work at various locations in the state where goods were supplied. Thus, expenditure incurred was in lieu of salary which was required to be paid to employees; agents were not employed. In view of the above discussion, we find no justification in the disallowance of commission expenditure - Decided in favour of assessee.

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• 2021 (4) TMI 460
  Revision u/s 263 - Deduction u/s 80IC allowability - stand of the ld.CIT is that the Asstt.Year 2015-16 is the sixth year, whereas according to the assessee, the company has made substantial expansion in the Asstt.Year 2011-12 and is eligible for the exemption under section 80IC of the Act at the rate of 100% for five years for the Asstt.year 2011-12 - HELD THAT:- The Asstt.Year 2015-16 fall in those five years. The next grievance of the ld.Commission is that the AO has not carried out the investigation or verification about the claim of substantial expansion. The ld.CIT failed to take note of the facts that in the Asstt.Year 2011-12, the assessee has made substantial expansion. The assessment order in this assessment year was passed under a scrutiny assessment and the copy of this assessment order has also been placed on record by the assessee. AO has passed an assessment order on 12.3.2014 under section 143(3). The detailed explanations were available in the income-tax record, because the addition of Rs. 1.70 crores in the plant machinery would increase WDV of the assets, and accordingly, depreciation would have also been accounted for. Earlier value of the assets was reported by the assessee at Rs. 1.68 crores. It has made further addition of Rs. 1.70 crores in the gross block of assets. Hon ble Delhi High Court in the case of DG Housing Projects Ltd. [ 2012 (3) TMI 227 - DELHI HIGH COURT] has held that the ld.Commissioner should have not relegated to the point that assessment order is erroneous to the AO himself. The ld.Commissioner, after analyzing the record, ought to have recorded a categorical finding as to how the assessment order is erroneous. In the present case also, when the assessee took a specific plea in its reply that it has made substantial expansion in the Asstt.Year 2011-12, and it has produced those details, then the ld.Commisisoner ought to have considered the same, and should have recorded a categorical finding. Had that been done, then it would have avoided the second round of litigation at the level of the AO - The assessment order was passed under section 143(3) in the Asstt.Year 2011-12. Its claim of depreciation on enhanced value of the asset was not disturbed and therefore it is to be construed that these substantial expansion was in the knowledge of the Department right from the year the expansion was made and when the assessee has claimed the deduction under section 80IC from that year. The assessment year 2011-12 is to be construed as the fresh initial year, in view of the latest decision of the Hon ble Supreme Court SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS [ 1997 (12) TMI 4 - SUPREME COURT] . Therefore, the assessee has rightly claimed exemption under section 80IC and the AO has rightly granted. The ld.Commissioner failed to point out any error for establishing that the assessment order is erroneous, and that the order of the AO cannot be sustained. We quash the impugned order of the ld.CIT under section 263 of the Act and allow the appeal of the assessee.

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• 2021 (4) TMI 459
  Denial of deduction under section 80P(2)(a)(i) - assessee being a bank is not entitled for deduction under section 80P(2)(a)(i) of the Act by placing reliance on the judgment of Citizen Co-operative Society Ltd [ 2017 (8) TMI 536 - SUPREME COURT] -.HELD THAT:- The issue is squarely covered in case of M/S. SAPTAGIRI PATTINA SOUHARDA SAHKARI NIYAMITHA [ 2020 (2) TMI 155 - ITAT BANGALORE] wherein held that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of co-operative society as enacted in sec.2(19) of the Income Tax Act, 1961, and therefore, subject to all just exceptions, petitioners are entitled to stake their claim for the benefit of sec.80P - Decided in favour of assessee.

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• 2021 (4) TMI 458
  Penalty u/s 271(1)(c) - validity of notice issued - defective notice - AO completed the assessment under section 143(3) - addition treating unsecured loan as bogus and ingenuine - HELD THAT:- A perusal of the assessment order shows that penalty has been initiated in general terms and the assessment order is not clear as to under which limb of the penalty i.e. for concealment of income or for furnishing inaccurate particulars of income has been mentioned. Similarly, in the case of penalty order, where it is mentioned that assessee has concealed its income to the tune of Rs. 2,47,06,820/- willingly and knowingly by furnishing inaccurate particulars of income. We, therefore, find merit in the arguments of the learned counsel for the assessee that in order to initiate penalty proceedings, the Assessing Officer has to specify in the show-cause notice u/s 271(1(c) r.w.s 274 of the Act, if the assessee has concealed the particulars of income or has furnished inaccurate particulars of income which is in instant case, the Assessing Officer has failed to do. See M/S SSA S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SC ORDER] As relying on M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the penalty notice has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. - Decided in favour of assessee.

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• 2021 (4) TMI 457
  Revision u/s 263 - Allowability of claim of bad debts - HELD THAT:- It is an admitted fact that the same has been claimed in respect of investment made in M/s Oro Trade Network India Ltd which has been written off in the books of accounts and not in respect of any regular debtors in respect of which the revenues have been booked on cash basis. Where the said claim has been made and allowed by the Assessing officer during the course of assessment proceedings, we donot find that the order so passed by the AO can be held as erroneous in so far as prejudicial to the interest of Revenue. Software updation charges are recurring charges paid on regular basis for updation of software from time to time and are thus for usage of the software and cannot be held as providing any enduring benefit to the assessee or for that matter, has resulted in creation of any ownership rights over such software and are more in the nature of usage/licence fees for usage of the software and has thus rightly been claimed and allowed as revenue expenditure - it is an admitted position that the assessee has purchased the vehicle only on 15.03.2015 and he has not claimed any interest on auto loan and vehicle maintenance expenses for the impugned assessment year and therefore, the question of disallowance of the same doesn t arise. In light of the aforesaid discussions, we are of the considered view that there is no basis to hold that the order so passed by the AO is based on mistaken view of law/erroneous application of the provisions of the Act and is erroneous in so far as prejudicial to the interest of the Revenue. The order so passed by the ld Pr CIT is thus set-aside and the order of the AO is restored.

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• 2021 (4) TMI 456
  Addition for delayed deposit of employees share of ESI PF contribution - HELD THAT:- All dues were deposited well before due date of filing of Return of Income - The issue is no more res integra in light of various judicial pronouncements of the Hon ble Rajasthan High Court relied upon by the assessee. Regarding the decision of the Hon ble Rajasthan High Court in case of Rajasthan Renewal Energy Corporation limited [ 2018 (3) TMI 1756 - RAJASTHAN HIGH COURT] relied upon by the ld CIT(A), we are of the considered belief that having read the said decision in its entirety, the decision infact supports the case of the assessee rather than the Revenue. As relying on M/S K.S. AUTOMOBILES PVT. LTD. VERSUS THE ITO, DCIT, JAIPUR. [ 2019 (3) TMI 1648 - ITAT JAIPUR] we set-aside the order of the ld CIT(A) and the disallowance made by the AO towards employees contribution to ESI and PF is hereby deleted Disallowance being expenses relating to earlier years - HELD THAT:- In the instant case, the ld CIT(A) has accepted the fact that the salary pertaining to earlier years and payable to certain staff members have been settled during the year and hence, the same has been allowed. In respect of other expenses as well, we find that there are advertisement, printing and stationery expense which pertain to earlier years and which have again been finally settled during the year. Similarly, there are legal and professional expense which have been settled during the year and liability towards service tax which has been paid during the year. We therefore find that these expenses are duly allowable in the hands of the assessee as settled during the year and in any case, there are no changes in the tax rates and thus, no prejudice is caused to the Revenue and as held by the Courts, such an exercise of disallowing otherwise allowable expenses treating as mere prior period expenses will only result in an academic discussion without any tangible results.See Rajasthan Renewable Energy Corporation Ltd. [ 2018 (3) TMI 1756 - RAJASTHAN HIGH COURT] . Disallowance is hereby directed to be deleted Disallowance of travel, conveyance and business promotion expenses - AO has disallowed a sum holding that some of the expenses are not fully supported by proper bills/vouchers and thus not subject to verification - CIT(A) upheld the finding of the AO and at the same time, holding that the disallowance seems to be bit excessive has restricted the disallowance - HELD THAT:- We find that the AO is well within his right and jurisdiction to examine the claim of the expenses and adopt an appropriate methodology of determining the nature and sample size of expenses and on examination thereof, where he find that the expense are not genuine or have not been incurred for the purposes of business, the same can be disallowed. However, before arriving at such a finding, he has to record specific finding highlighting particular expenditure which accordingly to him is not allowable and the reasons for the same which in the instant case is conspicuously absent and thus, the disallowance so made and sustained by the ld CIT(A) is clearly in the nature of an adhoc disallowance which cannot be sustained in the eyes of law., the disallowance of Rs. 250,000/- is hereby directed to be deleted and ground no. 3 of assessee s appeal is allowed.

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• 2021 (4) TMI 455
  Gain on Sale of house property - whether it resulted in long term capital gain or short term capital gain? - period of holding - A.O. was of the opinion that assessee acquired the said property w.e.f. 11.8.2006 and not from June, 1997 since the assessee has not got transferred, the property in favour of him in terms of section 2(47)(v) r.w.s. 53A of the T.P. Act - contention of the assessee is that for the purpose of computation of capital gain indexation cost of acquisition to be made from the date of making substantial payment and not from the actual date of sale deed - whether date of substantial payment towards acquisition of flat to be considered as a date of acquisition or the date of sale agreement to be considered as a date of acquisition of the said property? - HELD THAT:- This controversy was settled in the case of A. Suresh Rao [ 2014 (1) TMI 1585 - KARNATAKA HIGH COURT] in which Hon ble High Court analysed various provisions of the Act pertaining to computation of capital gain under various situations and also circulars issued by the CBDT on this issue. Being so, assessee paid a substantial amount of Rs. 16,75,900/- before the year 1996 and as such, the year of acquisition to be 1996. Accordingly, Idirect the A.O. to consider the year of acquisition of flat as 1996 and thereafter compute the cost of acquisition from this year 1996 as long term capital gain only. This ground of appeal is allowed. Payment of commission - 2% commission on sale consideration is very high - we are inclined to grant payment of commission of 1% and the same to be deducted from the sale consideration. The assessee would get a benefit partially as claimed by the assessee. Appeal filed by the assessee is partly allowed.

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• 2021 (4) TMI 454
  TDS u/s 194C - surrogacy payments without deducting TDS - assessee company runs infertility clinic(s) - Addition u/s 40(a)(ia) - whether payments made to surrogate mothers attract chapter-XVII of the Act requiring TDS deduction? - HELD THAT:- As per the assessee s sample surrogacy agreement in this regard the introductory portion thereof duly contains the clause that the same is by and among the genetic parents, surrogate mothers and the assessee in other words. Not only this, material breach clause 17.2 therein also suggests that it is the infertility centre/physician only who shall reimburse intended parents for all sums expended plus interest at the maximum allowable rate . All this sufficiently negates the assessee s stand that it is neither a party to the surrogacy agreement nor any right or liability flows thereof on its role as an infertility clinic. Revenue s able assistance and from a perusal of the case file at pg.35 that the NGO herein has proposed the assessee to arrange for surrogate mothers in lieu of the decided remuneration of Rs. 4 lakhs for single and Rs. 4.5 lakhs in case of twins pregnancies; respectively. This NGO further claimed itself as working for rehabilitation for poor destitute woman after they were neglected by their families facing poverty and other adverse circumstances. The assessee is fair enough in not disputing the fact that it had duly agreed to the said proposal only alongwith its undertaking to pay for the material breach of contract to the genetic parents on account of the surrogate mothers default. We make it clear that this payee had also failed to throw any light on payments made to surrogate mothers whose services had been utilized by the assessee/infertility centre for the purpose of surrogate pregnancy on behalf of the genetic parents. We therefore exercise our inherent jurisdiction vested u/s.254 of the Act as well to observe these parties have done nothing else but exploited the poor and destitute surrogate mothers without even paying the adequate compensation. Rather the payee NGO and its office bearer(s) have prima facie swindled the entire money. This conclusion flows from the entire surrogacy procedure adopted by the assessee with the so called NGO and its authorised person as it is evident from the perusal of the case file in the light of human probabilities after removing all blinkers as held in Sumati Dayal Vs. CIT [ 1995 (3) TMI 3 - SUPREME COURT] and CIT Vs. Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] - We thus conclude that so far as the application of 194C r.w.s. 40(a)(ia) is concerned, the assessee s all other arguments regarding taxability of the surrogate mothers also deserve to be rejected since its payee himself had admitted that it had not maintained any accounts of the payments made to the surrogate mothers. We thus uphold the learned lower authorities action invoking Section 194C r.w.s. 40(a)(ia) disallowance Whether all these payments attract Section 194J so as to hold that the payee concerned had rendered any technical service in arranging poor and destitute women as surrogate mothers? - We do not find any technical service element involved in all this surrogacy process involving the recipient or the surrogate mothers attracting the clinching statutory expression(s) of managerial, professional and technical services u/s.194J r.w.s.9(i)(vii) Explanation (supra). We thus reverse both the lower authorities action invoking Section 194J in facts of the instant case(s). It is therefore concluded that our instant latter adjudication has no bearing on final outcome of the impugned 40(a)(ia) disallowance as the same already stands confirmed u/s.194C of the Act. TDS u/s 195 - section 40(a)(i) disallowance in case of the overseas payees - HELD THAT:- It is not in dispute that the South Africa based payee Ms.Celeste Coetzee has not performed any services in India herself even if egg donation activity taken as a technical services. What all she has done is to arrange overseas egg donor s not on salary or contractual assignment but on free lancer basis only. There is further no indication before us that assessee s egg donor payments per head exceed the threshold limit u/s.194J(1) 1st proviso as well. All this makes it sufficiently clear these payments are not taxable in India so as to be held liable for TDS deduction going by M/s.GE India Technology Centre P. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] ; CIT Vs. Faizan Shoes Pvt. Ltd. [ 2014 (8) TMI 170 - MADRAS HIGH COURT] DCIT Vs. Welspun Corporation Ltd.[ 2017 (1) TMI 1084 - ITAT AHMEDABAD] . We thus hold that the impugned 40(a)(i) disallowance in case of the overseas payees deserves to be deleted for this reason alone

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• 2021 (4) TMI 453
  Reopening of assessment u/s 147 - information received from the DDIT(Inv.), Unit-1(4), Mumbai - no independent application of mind by AO - Addition of Future Option Loss (hereinafter referred to as F O loss ) from certain transactions carried out through its broker - HELD THAT:- We hold a strong conviction that the A.O had mechanically acted upon the information received from the DDIT(Inv.), Unit 1(4), Mumbai, and without even doing the bare minimum i.e consulting the assessment records of the assessee for the year in question as was indispensably required on his part for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment therein reopened its concluded assessment. On the basis of our aforesaid observations, we are of a strong conviction that as the A.O had failed to independently apply his mind to the material available on his record and mechanically acting on the information supplied by the Directorate of Income-tax (Inv.) had on the basis of incomplete and incorrect facts reopened the case of the assessee u/s 147 of the Act. We, thus, not being able to persuade ourselves to subscribe to the view taken by the CIT(A) that the A.O had validly assumed jurisdiction u/s 147 of the Act therein set aside his order to the said extent. Accordingly, in the absence of valid assumption of jurisdiction by the A.O u/s 147 of the Act, the consequential assessment framed by him u/s 143(3) r.w.s 147, dated 29.03.2015 cannot be sustained and is quashed. Genuineness and veracity of F O transactions - We are unable to persuade ourselves to subscribe to the view taken by the A.O, wherein adopting a predetermined approach he had discarded the documentary evidences that were furnished by the assessee in support of the authenticity of the F O transactions, and had without giving any cogent reason held the same as bogus and accommodation transactions. As is discernible from the order of the CIT(A), we find that he had taken cognizance of the fact that the assessee in the course of the assessment proceedings had on the basis of supporting documentary evidences substantiated the authenticity of the F O transactions, which however were not accepted by the A.O without any whisper of rebuttal or dislodging of the same. Also, the view taken by the A.O that the broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. had issued bills to the assessee during the year in question despite having been debarred from trading was found by the CIT(A) to be factually incorrect and misconceived. Accordingly, the CIT(A) after deliberating at length had found favour with the claim of the assessee that it had carried out genuine F O transactions and suffered the resultant loss during the year in question. We would not hesitate to observe that the A.O in the course of the reassessment proceedings had not even raised any doubt as regards the authenticity of the documents that were filed by the assessee in support of the F O transactions in question. Ac CIT(A) had rightly concluded that as the assessee had submitted complete evidences in support of its F O transactions which had not been disputed/rebutted by the A.O thus, the addition made on the basis of the general statement of Shri Mukesh Choksi (supra) as against the specific proved transactions cannot be sustained and had rightly been vacated by the CIT(A). Our aforesaid view that an admission of the aforementioned Shri. Mukesh Choksi, key person of Mahasagar Securities Pvt. Ltd. in his statement recorded under Sec. 132(4) of the Act that his group was engaged in providing accommodation entries would not on a standalone basis suffice for concluding that every transaction carried out through the group entities of the aforesaid person were to be held as ingenuine transaction is supported by the order of the Hon ble High Court of Gujarat in the case of PCIT-3 Vs. Vineet Sureshchandra Agarwal [ 2017 (9) TMI 1924 - GUJARAT HIGH COURT] We find substantial force in the claim of the ld. A.R that as the broker in question, viz. M/s Alliance Intermediaries Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009 therefore, no adverse inferences as regards its transactions carried out during the year under consideration i.e the period relevant to A.Y 2008-09 were liable to be drawn. On a perusal of the order of the CIT(A), we find that it was observed by him that Shri. Mukesh Choksi (supra) in his statement recorded u/s 132(4) (as reproduced in the body of the assessment order) had himself admitted that the bills were issued by him as membership was at the relevant point of time in force. In the backdrop of the aforesaid facts, we concur with the view taken by the CIT(A) that now when the broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009 therefore, no adverse inferences as regards the bills issued by it during the year in question viz. A.Y 2008-09 were liable to be drawn. Thus as the assessee had in the course of the reassessment proceedings by drawing support from clinching documentary evidences substantiated the authenticity of the F O transactions carried out through the aforesaid broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd., which had not been dislodged or disproved by the revenue therefore, the CIT(A) had rightly observed that no adverse inference as regards the authenticity of such F O transactions and the resultant loss could have been drawn in the hands of the assessee. We, thus, concur with the view taken by the CIT(A) insofar the merits of the case are concerned and uphold his order to the said extent. - Decided in favour of assessee.

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• 2021 (4) TMI 452
  TP Adjustment - Comparable selection - most appropriate method as well as computation of margins etc. using TNMM method - HELD THAT:- The dispute as to adoption of most appropriate method as well as computation of margins etc. using TNMM method was the subject matter of revenue s appeals as well as assessee s cross-objections before this Tribunal in AYs 2005-06 to 2007-08 [ 2016 (6) TMI 100 - ITAT MUMBAI] and [ 2019 (6) TMI 1529 - BOMBAY HIGH COURT] - We find that the issue of adoption of TNMM and the issue of manner of TP adjustment which is to be done, as of now, has attained finality and the aforesaid decision is binding upon us. Proceeding further, straightway going to the alternative plea of Ld. AR that even if TNMM method is accepted, the assessee s margin, after providing benefit of tolerance range of +5%, would be within Arm s Length Price. The working of the same has been placed in the paper-book. Keeping in view the earlier decision of Tribunal the bench is inclined to accept this plea. Therefore, without delving much deeper into the issue, we direct Ld. TPO to apply TNMM but restrict the adjustments only to the extent of international transactions carried out by the assessee and not to entire segment of manufacturing activity. TPO is directed to verify the computations made by the assessee and decide accordingly. The benefit of tolerance range of +5%, as provided in law, would be available to the assessee. Consequently, the revenue s ground, to that extent, stands allowed which would render assessee s cross-objection infructuous. So far as the issue of market research expenses is concerned, we find that this issue is squarely covered in assessee s favor by the decision of this Tribunal for AYs 2005-06 to 2007-08 [ 2016 (6) TMI 100 - ITAT MUMBAI] . In view of this uncontroverted fact, this ground stand dismissed.

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• 2021 (4) TMI 451
  Undisclosed business turnover - Addition as income u/s.44AD - estimating 15% of the excess cash deposits - As per assessee cash deposits were made out of earlier cash withdrawals from the bank account and hence, the same cannot be regarded as undisclosed business turnover - HELD THAT:- Assessee deposited Rs. 111.06 lakhs into bank account. Assessee gave a list of persons from whom cash has been received to the tune of Rs. 74,29,800/-. The assessee has claimed before the lower authority that earlier cash deposit was available to assessee to redeposit into account. Therefore, it is the duty of the assessee to establish that earlier cash was not spent by the assessee and is kept with him to redeposit it into bank account. In the absence of such evidence to show that the assessee kept the earlier cash withdrawals with him as idle, it is not possible to give any benefit of earlier withdrawals as available to assessee to redeposit into bank account. Accordingly, this ground of appeal is dismissed. Addition beyond the matter for which he has selected for limited scrutiny - Estimating the income at 15% of cheque deposit to bank account - contention of the AR is that the assessee received cheque from the prospective customers and the same was deposited into bank account and it cannot be treated as income of the assessee - HELD THAT:- Whenever assessee deposits money into bank, it is the duty of the assessee to furnish the name, address and PAN to show that it is towards the advance received from the customers. In this case, the assessee failed to establish the identity of the parties from whom it has been received. Being so, the AO having no alternative, has estimated the income at 15% as offered by the assessee in its return of income. We do not find any infirmity in this action of the lower authority. The assessee made one more plea by way of additional ground that the AO cannot extend the limited scrutiny towards the estimation of income on cheque deposited in bank account In the present case, the tax liability on the impugned issue is less than Rs. 10 lakhs. Being so, the AO is within jurisdiction to take up the issue relating to cheque deposit into bank account. Accordingly, in the result this ground as well as additional ground is dismissed. Appeal of the assessee is dismissed.

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• 2021 (4) TMI 450
  CIT(A) enhancing the income u/s 251(1)(a) - disallowing interest expenditure u/s 36(1)(iii) - as per CIT-A no business activities were carried out by the assessee company - HELD THAT:- CIT(A) had enhanced the income of the assessee by disallowing interest expenditure, which was not the subject matter of assessment. Whenever, the question of taxability of income from a new source is concerned, which had not been considered by AO, the right manner to tax such new source is by invoking Section 147/ 148 or Section 263 of the Act. In view of such specific provisions, it is inconceivable that a similar power is available to CIT(A) u/s 251 of the Act. See SH. JAGDISH NARAYAN SHARMA VERSUS ITO WARD-7 (2) [ 2018 (7) TMI 1398 - ITAT JAIPUR] . In the Show Cause Notice issued by ld. CIT(A), u/s 251(2) of the Act, the sole basis through which ld. CIT(A) proposed to enhance the income of the assessee company, by disallowing interest expenses u/s 36(1)(iii) was that no business activities were carried out by the assessee company, during the relevant previous year. However, ultimately, when such expenses were disallowed by the ld. CIT(A), the reason given was that such interest expenses claimed by the assessee company in its Profit and Loss account had no relation with the interest income earned by the assessee company, during the relevant previous year. The reason of no business being carried out by the assessee company changed to the nexus not being proved between the interest income and the interest expenses for the relevant previous year. Although, ld. CIT(A) u/s 251 has been given powers of enhancing the income of any assessee, however, such powers are not unfettered and come with riders. One such rider is that ld. CIT(A) before enhancing the income of the assessee is duty bound to give reasonable opportunity to the assessee of showing cause against such enhancement. The reason in the Show Cause Notice is vital so that the assessee can make a pointed rebuttal and convince the CIT(A), if possible, with the legal or factual position involved in the case. Thus, if a particular basis has been given by ld. CIT(A) in the Show Cause notice, the ld. CIT(A) has to stick to the same basis while ultimately making the enhancement. Ld. CIT(A) cannot shift his goal posts at his own will. Ld. CIT(A), although alleged that no business activities were carried out by the assessee company, however, he himself noted the fact of sale transaction undertaken by the assessee company, during the year of Rs. 24,64,224/-. CIT(A) was himself not sure of the reason making disallowance of the interest expenditure claimed by the assessee company u/s 36(1)(iii), thereby enhancing its income . On one hand ld. CIT(A) stated that no business activities were carried out by the assessee company, however on the other hand ld. CIT(A) himself at page 40 of his order referred to the sale of inventory by the assessee company. Ld. CIT(A) at page 39 of his order, for no reason has made irrelevant reference to the Audit Report. The observation of ld. CIT(A) that the assessee company stopped its business operations is un-warranted and devoid of the business realties. Business is a complex affair. Lot of factors such as the market condition, availability of funds, risk taking capacity etc. drives the business decision. Simply because less revenue/ no revenue is generated by the assessee, that does not mean that the business of the assessee has been stopped - Thus , we found merit in the contentions of the ld. AR of the assessee and we set aside the order of the ld. CIT(A) and direct to delete the disallowance made and confirmed by the ld. CIT(A) - Decided in favour of assessee.

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• 2021 (4) TMI 449
  Disallowance u/s 14A read with Rule 8D - HELD THAT:- The issue is settled in view of judgment of Apex Court in case of Essar Teleholdings Ltd. [ 2018 (2) TMI 115 - SUPREME COURT] that Rule 8D cannot be enforced prior to AY 2008-09 for making disallowance u/s 14A of the Act. Further, in assessee s own case [ 2020 (2) TMI 1485 - ITAT DELHI] and [ 2018 (2) TMI 2030 - ITAT DELHI] this Tribunal has upheld deletion of disallowance u/s 14A r.w.r. 8D in view of sufficiency of assessee s own surplus funds in form of reserves and surplus over the value of investments. As has been brought to our attention that in the year under consideration, the reserve and surplus are much higher than the investments and further, investment made during the year is only Rs. 399.17 Lakhs (net Rs. 299.00 Lakhs), while there is actual repayment of borrowings during the year to the extent of Rs. 12,020 lakhs. Therefore, assessee s own funds are much more than investment and on the facts of the case it can be reasonably inferred that amount of investment made cannot be said to be made from borrowings but out of assessee s own funds. Thus, the contentions of CIT(A) that assessee has failed to establish the acquisition of shares and sources thereof by producing books of accounts and other documentary evidence by relying on the judgment of Calcutta High Court in case of Dhanuka Sons[ 2011 (4) TMI 861 - CALCUTTA HIGH COURT] is erroneous. It is apparent from the facts submitted by the assessee before assessing officer as well as before CIT (A) from which one may reasonably infer that investments are not out of borrowings but from the assessee s own surplus funds. - we direct the AO to delete the disallowance made u/s 14A - Decided in favour of assessee. Adjustment on account of transfer pricing international transaction under dispute is the Export of Nylon Tyre Yarn and Export of Chafer by the assessee to its associated enterprise namely SRF Overseas Ltd, Dubai - assessee benchmarked the aforesaid international transaction by applying CUP as most appropriate method (MAM) to determine ALP - HELD THAT:- As carefully examined the working given by the assessee in Annexure-I of the synopsis, according to which the net effect under aggregate approach which we have affirmed before giving effect of debit note is a positive of Rs. 14,58,033/- against the negative of Rs. 44,77,914/- computed by the TPO. While the aforesaid net positive after giving the effect of debit note the same gets enhanced to Rs. 51,53,489/-. Hence there is no scope left for any ALP adjustment in these facts. We therefore, allow the claim of the assessee of benchmarking the entire transaction of export of nylon yarn and chafer using the aggregation approach which has been duly confirmed in various decisions cited supra and accordingly, the assessee s international transactions of export of Nylon Yarn and Chafer are held at arm s length. Thus, transfer pricing adjustment made by the TPO/AO and upheld by CIT (A) is hereby deleted. Transfer of Carbon emission reduction (CER) certificates - assessee has received carbon emission reduction ( CER or carbon credits ) certificates on account of its efforts to reduce the emission of greenhouse gases in terms of Kyoto Protocol - HELD THAT:- We have observed that facts of the assessee are similar to the case of Gujarat Flourochemicals Ltd [ 2018 (8) TMI 857 - ITAT AHMEDABAD] . Further, in other cases too, the Hon ble High Courts have held CER as the capital receipts not liable to tax. This tribunal in earlier years also has dealt with this issue in the case of assessee and remitted the matter to the file of AO. [ 2018 (2) TMI 2030 - ITAT DELHI] . Thus following the judgments of coordinate benches in assessee s own case on merits, remit this issue back to the file of AO to decide it in accordance with the law having regard to above observations and the case laws relied upon by the assessee, after granting a reasonable opportunity of hearing to the assessee. Admission of additional grounds - Interest subsidy under TUF scheme and other pertaining to allowance of deduction of education cess u/s 37 - HELD THAT:- NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1996 (12) TMI 7 - SUPREME COURT] and M/S. JAI PARABOLIC SPRINGS LTD. [ 2008 (4) TMI 3 - DELHI HIGH COURT] has categorically held that there is no fetters on the powers of the tribunal to entertain an additional ground. Hon ble Court has described that power of tribunal in dealing with appeals have been expressed in widest possible term.We, therefore allow the application of the assessee for admission of additional grounds. Interest Subsidy under Technological upgradation fund (TUF) - It is a settled position that purpose of subsidy or incentive and not the nomenclature of such incentive have to be seen for the purpose of deciding its nature as capital or revenue. Following the order of coordinate bench in assessee s own case for AY 2012-13, we remit the issue to the file of assessing officer to verify the claim of the assessee and allow the relief if the same is in the nature of interest subsidy under TUF scheme after granting a reasonable opportunity of being heard to the assessee. Deduction of education cess u/s 37/40(a)(ii) - HELD THAT:- As decided in M/S. SICPA INDIA PRIVATE LTD [ 2020 (4) TMI 425 - ITAT DELHI] education cess is not a disallowable expenditure u/s 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) of the Act. Moreover, cess is not in the nature of tax as has been held by Hon ble Supreme Court in case of Smith Kline Amp; French (India) Ltd. and Ors.[ 1996 (4) TMI 2 - SUPREME COURT] - So, we are of the considered view that AO/CIT(A) have erred in disallowing the deduction for education cess on income-tax, dividend distribution tax and fringe benefit tax for AYs 2009-10, 2010-11 2011-12 in computing the total income under normal provisions of the Act, consequently ordered to be deleted. . Accordingly, we remit the issue back to the file of the AO to verify the claim of the assessee and allow the same in accordance with the law after granting a sufficient opportunity to the assessee.

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• 2021 (4) TMI 448
  Estimation of income on the basis of assessee s past income - case was selected for scrutiny and notices u/s. 143(2) and 142(1) - estimating the profit @ 4% on the unrecorded sales without any basis when the assessee had relied on Section 44AD - HELD THAT:- Admittedly, in these cases, the assessee himself offered the income at 10% in his return of income. See MR. M.A. SIDDIQUE, MR. MOHAMMED SAFWAN VERSUS DCIT, CENTRAL CIRCLE 1, MANGALURU AND VICE-VERSA. [ 2020 (8) TMI 835 - ITAT BANGALORE] In our opinion, there was no admission by that assessee like in the present case. Being so, it is appropriate to estimate the income of the assessee on the basis of assessee s past income. The assessee furnished before us the past history of income - Accordingly, we direct the AO to consider the average net profit declared by the assessee in the last 3 immediate Assessment Years i.e., 2013-14, 2014-15, 2015-16 and apply the same rate and recompute the income of the assessee. Separate addition with regard to undisclosed investment in unaccounted purchases against receivables - Since there was no corroborative evidence to substantiate the co-relation of transactions, in our opinion, once the income of the assessee is estimated, there cannot be any further additions. This view of ours is fortified by the judgment in the case of Indwell Construction Vs. CIT [ 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT] . Accordingly, we are inclined to dismiss the other grounds of appeal raised by the Revenue.

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• 2021 (4) TMI 447
  Exemption u/s 11 - as per AO assessee is on the activity of publishing of books which account for 59.44% of its total income and 94.30% of its total expenditure under the head educational and accordingly concluded that the activities of the trust falls in the category of advancement of any other object of general public utility u/s. 2(15) - whether the activities of the assessee trust are charitable in nature within the meaning of section 2(15)? - whether the assessee s activities are hit by the amended proviso to section 2(15) ? - HELD THAT:- We find that over the years, the assessee trust had published over 240 magazines and 120 books thereby making them a veritable encyclopedia of art and culture. The profile of Marg Publications reveal that their publications enjoy a loyal readership and a very high reputation nationally and internationally, being read not only in the major cities, but also in remote towns in India and across 30 countries abroad. Their readers include Indophiles, connoisseurs and art dealers, executives, scholars, architects, designers, and students all over the world. We find that for some of the publications of assessee trust, grants are received from Ministry of Culture, Government of India. We find that the entire grants received for publications are also reflected as Sales in the Income and Expenditure Account of the assessee. Now whether the publication and sale of books and magazines/journals could be construed as charitable in nature need to be ascertained. We find that this issue has been squarely addressed in the case of Delhi Bureau of Text Books vs. Director of Income Tax (Exemptions) [ 2017 (5) TMI 430 - DELHI HIGH COURT] wherein it was held that the assessee society engaged in printing, publication and distribution of school text books at subsidized rates or even free and generated profits out of these activities, it could not be concluded that assessee ceased carrying on charitable activity of education. Respectfully following the aforesaid decision we hold that the activities of the assessee trust to be charitable in nature falling under the ambit of Education and not advancement of any other object of general public utility and hence proviso to section 2(15) of the Act does not apply to the assessee. Consequentially the assessee would be eligible for exemption u/s. 11 of the Act. Accordingly, the grounds raised by the assessee are allowed.

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• 2021 (4) TMI 446
  Income deemed to accrue or arise in India - Taxability of certain amount received from the Indian subsidiary - PE in India - royalty or/and fees for technical services (FTS) - assessee is a company incorporated in Singapore and is also a tax resident of that country - HELD THAT:- On a careful reading of Article 12(4) of the tax treaty, it becomes very much clear that Article 12(4)(a) and 12(4)(c) are not applicable to the present case. Insofar as Article 12(4)(b) is concerned, it clearly denotes that a payment can be treated as FTS, if it makes available technical knowledge, experience, skill, know-how or process which enables the person acquiring the services to apply the technology contained therein - most crucial factor which requires examination is, while rendering services, whether the assessee has made available any technical knowledge, experience, skill, know-how or process in terms of section 12(4)(b) - material on record would not persuade one to conclude so. The true meaning of the aforesaid provision is, not only the payment is received for providing technical or managerial services, but, while doing so the service provider also makes available any technical knowledge, experience, skill, know-how or process, etc. to the recipient of services, which enables the person acquiring such services to apply the technology contained therein independent of the service provider. In other words, the service recipient must be in a position to apply the technical knowledge, experience, skill, know-how, etc. without requiring the permission or presence of the service provider. In the facts of the present case, there is nothing on record to suggest that Atos India can use any technical knowledge, experience, skill, know-how or process, etc. independently on its own without requiring the involvement of the assessee. Therefore, in our considered opinion, the tests and conditions of Article 12(4)(b) are not satisfied. That being the case, the payment received by the assessee from various projects related services would not qualify as FTS either. That being the case, the payment received by the assessee has to be treated as business profits; hence, would not be taxable in absence of a permanent establishment in India. Definitions of royalty and FTS have been given under Article 12(3) and 12(4) of the tax treaty. Of course, Article 12(2) provides for taxation of royalty and FTS in the source country. However, in our considered view, Article 12(2) has to be read in conjunction with Article 12(1), 12(3) and (4) of the tax treaty and not on standalone basis. In our view, Article 12(2) will get triggered only if the amount received qualifies as royalty and FTS under the treaty provisions. Since, in the facts of the present case we have held that the payment received towards various project related services does not qualify as royalty and FTS under the treaty provisions, the applicability of Article 12(2) of the tax treaty would not arise. Payment being the cost recharge pertaining to the salary of Mr. Thomas Boutard - We find from record, the learned DRP has very categorically observed that inspite of the fact that the assessee was specifically asked to provide the details of services rendered by Mr. Thomas Boutard, the assessee has neither furnished nature of services provided nor furnished other details - it is the case of the assessee that Mr. Thomas Boutard is an employee of the assessee, who assisted the employees of Atos India for finalizing annual accounts. However, the nature of services provided by Mr. Thomas Boutard needs to be examined. It also requires examination whether while rendering such services, the concerned person has made available any technical knowledge, skill, know-how, etc to the employees of Atos India to treat the payment received towards cost recharge as FTS. The learned Counsel has submitted before us that similar payment made to the concerned person in subsequent assessment years has been allowed by the assessing officer. All these factors need to be properly verified by the assessing officer to come to a definite conclusion, whether the payment received by the assessee towards cost recharge of salary paid to Mr. Thomas Boutard shall qualify as FTS under Article 12(4)(b) of India-Singapore Tax Treaty. Accordingly, this issue is restored to the assessing officer for fresh adjudication, after due opportunity of being heard to the assessee. Addition made of the payment received towards various project related services by treating them as royalty and FTS is hereby deleted - Whereas, the issue relating to payment of cost recharge pertaining to salary of Mr. Thomas Boutard is restored back to the assessing officer. Grounds 1, 2 3 are disposed of accordingly. Levy of surcharge and education cess on the tax liability computed - It is the case of the assessee that the total tax payable cannot exceed the tax rate as prescribed under Article 2 of India-Singapore Tax Treaty - HELD THAT:- Admittedly, this issue has been raised for the first time before us. Further, in case, the assessing officer decides the issue of cost recharge pertaining to the salary paid to Mr. Thomas Boutard in favour of the assessee, the issue will become academic. Keeping in view the aforesaid facts, we restore this issue to the assessing officer for adjudication after due opportunity of being heard to the assessee. Ground 4 is allowed for statistical purpose.

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• 2021 (4) TMI 445
  Validity of reopening of assessment u/s 147 - undisclosed share capital - whether assumption of jurisdiction u/s. 148 was by Ld. AO was in violation of mandatory jurisdictional conditions stipulated under the Act? - HELD THAT:- The Section mandates that the case can only be reopened after expiry of four years only if there was a failure on the part of the assessee to fully and truly disclose all material facts necessary. The assessee has disclosed the fact of receipt of Rs. 60,00,000/- towards the share capital in the regular return filed which has been scrutinized u/s. 143(3). In the reasons recorded for reopening, the Assessing Officer has not mentioned anything with regard to failure on the part of the assessee to disclose all the material facts. This matter has been examined by the Hon ble Apex Court in the case of NDTV Ltd. Vs DCIT [ 2020 (4) TMI 133 - SUPREME COURT] , in the case of BPTP Ltd. [ 2020 (1) TMI 56 - DELHI HIGH COURT] , Haryana Acrylic Manufacturing Company [ 2008 (11) TMI 2 - DELHI HIGH COURT] . The Coordinate bench of Tribunal in the case of RMP Holdings Pvt. Ltd. [ 2020 (11) TMI 402 - ITAT NEW DELHI] relied on judgments of the Hon ble Courts and held that the Assessing Officer has to specifically record reasons with regard to failure of the assessee to disclose fully and truly all material facts. Thus we hereby quash the reassessment proceedings initiated u/s.147. - Decided in favour of assessee.

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• 2021 (4) TMI 444
  Minimum Alternate Tax (MAT) credit under section 115JAA for company stands merged with the Appellant - HELD THAT:- the issue before us is mutatis mutandis identical to the issue decided by a Co-ordinate bench of this Tribunal in Ambuja Cements Ltd [ 2019 (9) TMI 726 - ITAT MUMBAI ] we hold that the Assessing Officer ought to have allowed the claim of assessee in carrying forward MAT credit of amalgamating company. Consequently, we set aside the impugned order of the Assessing Officer and direct him to allow assessee s claim. Thus, ground no.1, is allowed. Interest u/s 234D after excluding the interest paid on refund issued u/s 143(1) - assessee preferred an alternative plea that the computation of interest under section 234D of the Act is incurred and, therefore, the interest under section 244A of the Act should be excluded - HELD THAT:- After considering the decision in case of sister concern of the assessee in Tata Communication Ltd. [ 2015 (7) TMI 529 - ITAT MUMBAI ] and Tata Power Ltd. [ 2013 (3) TMI 662 - ITAT MUMBAI ], the issue was restored to the file of the Assessing Officer with the direction that interest under section 244A needs to be excluded while computing interest under section 234D. Facts of this issue being similar in the current year as well, consequently, we deem it fit to set aside the impugned order of the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer to follow the above direction. It is also pertinent to mention here that the assessee, by way of Exhibit 9, has also filed calculation of interest under section 244A.Assessing Officer is further directed to verify the above calculation and while deciding the issue proper opportunity of hearing may be provided to the assessee. Accordingly, grounds no.2 and 3, raised are allowed for statistical purposes in terms indicated above.

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• 2021 (4) TMI 443
  Exemptions u/s.11 and 12 - Charitable activity u/s 2(15) - assessee is AOP (Trust), which was constituted by the Government of Gujarat by enacting the Gujarat Housing Board Act, 1961 for the purpose of undertaking the housing scheme. The assessee is engaged in the sale of flats/house of various kinds which are available for all income group namely higher income group, middle income group, lower income group and economically weaker section - Accordingly, the AO was of the view that the activities of the assessee are commercial in nature and the AO disallowed the claim of the assessee under section 11 - HELD THAT:- As decided in own case [ 2018 (11) TMI 1121 - ITAT AHMEDABAD] object and purpose for which the assessee is established/constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. We deem it fit and proper to hold that the authorities below were in error in invoking proviso to Section 2(15) and declining the benefit of Section 11 to the assessee. We see no point in remitting the matter to the file of the Assessing Officer for examination de novo, in the light of the above legal position as was the decision of the coordinate bench in immediately preceding assessment year, since all the related facts are on record and, unlike in the immediately preceding assessment year, it is not a case of ex parte best judgment assessment order. Such an exercise will unnecessarily delay the matter reaching finality. In any case, no specific points, on which further examination is required, were pointed out to us. The grievances of the assessee are thus upheld and the Assessing Officer is directed to allow the benefits of exemption under section 11 to the assessee. The assessee gets the relief accordingly. - Decided in favour of assessee.

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• 2021 (4) TMI 442
  TP adjustment on account of international marketing expenses - benchmarking the transaction in line with the provisions of section 92C - HELD THAT:- In view of the law expounded by Hon ble High Courts in M/S. LEVER INDIA EXPORTS LTD. [ 2017 (2) TMI 120 - BOMBAY HIGH COURT and EKL APPLIANCES LTD [ 2012 (4) TMI 346 - DELHI HIGH COURT] , OECD guidelines and the provisions of the Act, we are of considered view that in the instant case objections raised by the TPO for making adjustment in international marketing expense and upheld by the CIT(A) are without any legal rational and thus, liable to be set aside. On merits, we observe that per se payment for the marketing services are not disputed by the Assessing Officer, however, the TPO has not carried out necessary exercise of benchmarking ALP of the international transaction in question, ergo, we deem it appropriate to restore this issue to the file of Assessing Officer/TPO for determination of arm s length price of the transactions, as per the provisions of section 92C of the Act. Needless to say that reasonable opportunity of hearing be afforded to the assessee, in accordance with law. The findings of the CIT(A) on the issue of transfer pricing adjustment of international marketing expenses are set aside and ground no. 1 of the appeal is allowed for statistical purpose. Addition u/s 145A on account of alleged unutilized CENVAT credit - assessee is following exclusive method for accounting excise duty of purchases - AO insisted that inclusive method of accounting should have been followed - whether inclusive method or exclusive method of accounting is adopted, both would give same result? - HELD THAT:- We find that the dispute with regard to CENVAT credit in the case of assessee is perennial since AY 2002-03. The assessee has been following exclusive method of accounting as against inclusive method as required under section 145A of the Act. Under excusive method the amount of CENVAT credit is not added to the sales and purchases, but is shown separately. The assessee has filed the copies of order passed by the CIT(A) from AY 2002-03 onwards (except for AY 2003-04 when no addition was made on account of unutilised CENVAT Credit) alongwith order giving effect. The CIT(A) has been consistently allowing the benefit of CENVAT credit to the assessee. The Assessing Officer has been giving effect to the order of CIT(A), accordingly. In the impugned assessment year position is no different. We find merit in the contentions raised by the assessee. The Assessing Officer is directed to delete the addition u/s. 145A of the Act. The findings of CIT(A) in the impugned order are set aside and ground no. 2 of the appeal is allowed.

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• 2021 (4) TMI 441
  Addition in respect of administrative expenses made u/s 14A - expenses incurred by the assessee in relation to such exempted income needs to be disallowed under the provisions of section 14A - HELD THAT:- The primary onus lies upon the assessee to justify, based on the documentary evidence, that it has not incurred any expense against the exempted income. But the assessee before us failed to discharge the onus imposed upon him except contending that it has not incurred any expenses. Thus, the AO, in the absence of any material brought on record by the assessee in support of his contention, had no alternate except to make the disallowance as per the method prescribed under rule 8D of income tax rule. Even at the time of hearing before us, the learned AR appearing on behalf of the assessee has not brought any material evidence except making bald statement that it has not incurred any expense. Accordingly, we do not find any infirmity in the order of the authorities below. Addition on account of late payment of PF and ESI - Addition u/s 36(1)(va) r.w.s. 2(24)(x) - assessee for the month of April to June has deposited employee contribution toward PF and ESI after due date as prescribed under the respective Act - HELD THAT:- As decided in GUJARAT STATE ROAD TRANSPORT CORPORATION [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees account in the relevant fund or funds on or before the due date mentioned in Explanation to section 36(1)(va). Consequently, it is held that the Tribunal has erred in deleting respective disallowances being employees contribution to PF Account/ESI Account made by the Assessing Officer as, as such, such sums were not credited by the respective assessee to the employees accounts in the relevant fund or funds on or before the due date as per the Explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act - Decided against assessee. Ad-hoc disallowances of the expenses being not incurred wholly and exclusively for business purpose - AO found that most of the expenses were incurred through cash which was supported on self-made vouchers. Therefore, the element of personal expenses out of the enhanced expenses incurred by the assessee cannot be ruled out - HELD THAT:- We note that there is no provision under the Act to make the disallowance on ad-hoc basis. The AO has to see whether the expenses claimed by the assessee were to be disallowed under the provisions of law. But the AO has not made reference to any specific provision which was violated by the assessee. Admittedly, the expenses incurred in cash and further more supported on the basis of self-made vouchers, might create doubt about the genuineness of the expenses to ensure whether such expenses were incurred wholly and exclusively for the purpose of the business - there is no denial under the Act to incur the expenses in cash except as provided under section 40A(3) read with rule 6DD of income tax rule. But there was no invocation of such section. Thus, the expenses claimed for the purpose of the business cannot be disallowed merely on the reasoning that these expenses were incurred in cash and were supported on the self-made vouchers. There are many occasions/situations where the supporting details are not available for the expenses incurred by the assessee. Thus, in such a situation only self-made vouchers can be prepared in support of the expenses incurred by the assessee. There is no provision under the Act to make the disallowance on ad-hoc basis. The AO has to see whether the expenses claimed by the assessee were to be disallowed under the provisions of law. But the AO has not made reference to any specific provision which was violated by the assessee. Fact on record show that the assessee has added some new items in its business line. In a scenario where there is cut throat competition, the assessee has certainly to incur more expenses by extending more discount, free distribution samples to the prospective customers. This contention of the assessee has not been doubted by the authorities below. Accordingly, the onus was shifted from the assessee to the revenue and the revenue was to prove wrong to the assessee based on the materials available on record. But to our mind, the revenue has not brought any tangible material to draw an inference that the expenses were not incurred for the purpose of the business AO has doubted on the reasonableness of expenses but as such he has not pointed out that these expenses were not incurred for the purpose of the business which was the precondition for invoking the provisions of section 37 of the Act. Accordingly, we are of the view that no disallowance of the expenses is warranted. Thus the ground of appeal of the assessee is allowed.

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• 2021 (4) TMI 440
  Benefit of Vivad Se Vishwas Scheme ( VVS Scheme ) - Substantial Questions of Law framed for consideration on account of certain subsequent developments - Option to appeal in case application for settlement is rejected - application filed application under Vivad-Se-Vishwas Scheme and Form 3 is awaited from the Revenue - HELD THAT:- Following the above decision of M/S. NANNUSAMY MOHAN (HUF) [ 2020 (11) TMI 484 - MADRAS HIGH COURT] this appeal is disposed off accordingly, with liberty to the assessee to file a miscellaneous application, in the event of either the assessee not opting for Vivad se Vishwas scheme as contemplated by it before the due date of the scheme in operation or in the event of the department not accepting the application made by the assessee under the said scheme, the appeal of the assessee shall be recalled by the Tribunal and restored for adjudication on merits. It is further made clear that if the assessee seeks to restore the appeal in the event of assessee s declaration made under Vivaad se Vishwas scheme is not accepted by the Revenue, the Registry shall not insist for filing of application for condonation of delay, if the Miscellaneous Application for recalling the order is filed beyond time on account of delayed communication of outcome under Vivaad se Vishwas scheme in view of the decision - With these observations this appeal is dismissed as withdrawn.

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• 2021 (4) TMI 439
  Assessment u/s 153A - whether the Assessing Officer is justified to complete the assessment u/s.153A of the Act by making impugned additions for the assessment years under consideration even in the absence of any incriminating material deemed to be found during the search conducted u/s.132 ? - HELD THAT:- From the entire assessment order, the AO has not referred any seized materials, if any found during the course of search and seizure operation and we also observe that the assessee has not cooperated during the entire proceedings of assessment. If the assessee does not appear before the AO after giving several notices/opportunities then the AO can utilize the remedy provided in the Act. The AO has huge power to require the presence of the assessee before him as defined in the Income Tax Act. He can also impose the penalty but not done so. The books of accounts and other seized documents were available before him while completing the assessment. From the assessment order, it is clear that that in the opinion of the AO that there was no any incriminating material. Had it been found some incriminating material during the course of search, then the AO must have taken into cognizance while framing the assessment order but he did not refer to any incriminating materials/documents. Even the ld. CIT(A) in his order has not referred any incriminating material. He has simply made addition on adhoc basis as stated supra in para no.8. Further we notice that the AO has added the 20% of the aforesaid expenditure without referring to any seized/incriminating material. The impugned assessment year is abated assessment year and in case of abated assessment year for making addition there must be incriminating material as decided by various courts. Since these four years are unabated assessment years and no any incriminating material referred by the AO, therefore, the argument advanced by the ld. CITDR is not accepted. Thus the assessment is unabated and the Tribunal is bound by the judicial precedence we allow legal ground raised by the assessee for the assessment years 2009-2010 to 2012-2013 challenging the assessment framed u/s.153A of the Act in the absence of any incriminating materials nor observed by the AO while framing the assessment order. Accordingly, we set aside the orders of both the authorities below and held that assessment framed u/s.153A of the Act for all the four years under consideration are not sustainable being unabated assessment and, therefore, also no addition can be made while framing the assessment under section 153A of the Act having no incriminating material found during the course of search, which is clear from the assessment order. - Decided in favour of assessee. Addition of the total expenditure for films, drugs chemicals and salary to staffs in the abated assessments - HELD THAT:- We found that the assessee could not furnish the details for the expenditure claimed on account of films, drugs chemicals and salary to staffs, therefore, the AO restricted the disallowance to 20% of the total expenditure claimed, which has been upheld by the CIT(A) in the appellate order. Before us, the ld. AR of the assessee requested to restrict the disallowance to 10% as against 20% made by the AO, which has also not been objected by the ld.CIT-DR. Accordingly with the consent of both the parties and considering the observations made by both the authorities below, we restrict the disallowance to 10% as against 20% made by the AO and confirmed by the CIT(A). Thus, this ground of appeal of the assessee is partly allowed

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• 2021 (4) TMI 438
  TDS u/s 194C - Addition u/s 40(a)(ia) - Payment on account of freight expense - assessee has claimed that the PAN details were furnished by the transporters at the time of payment of freights - HELD THAT:- Similar identical issue has also been decided by the Coordinate Bench of this Tribunal in the case of ACIT Vs M/s Arihant Trading Co.[ 2019 (3) TMI 1251 - ITAT JAIPUR] in favour of the assessee and against the Revenue by observing that non-deduction of TDS on payment to the transporter is that the latter furnishes his PAN number to the person responsible for paying or crediting the amount to him. The primary onus is thus on the recipient to furnish his PAN to the payer and the payer, on receipt of such PAN number, is under statutory obligation not to deduct TDS on such payments. The payer is also under a statutory obligation to furnish the said information in prescribed forms to the Income tax authority. To our mind, the statutory obligation to furnish the information regarding receipt of PAN and non-deduction of TDS is a fall out of and consequent of the first statutory obligation to not deduct TDS on receipt of PAN - merely because there is non-compliance on part of the assessee to furnish the prescribed information to the Revenue authorities, the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation. There are separate penal provisions for non-compliance thereof and the AO has in fact invoked those penal provisions whereby show-cause has been issued to the assessee. We observe that the case laws relied on by the ld DR are not applicable in the facts of the present case. The ld. CIT(A) has passed a speaking and reasoned order discussing all the facts and circumstances as well as legal propositions of law therefore, considering the totality of facts and circumstances and case laws exactly similar to the facts and circumstances of the present case, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same. Correct head of income - rental income received from M/s L T Ltd .- income from house property as against of income from business or profession taxed by the A.O. - HELD THAT:- We observe that the ld. CIT(A) has given relief to the assessee by holding that the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head Income from house property In this case the assessee had got lease right from the Rajasthan govt. on the land for a period of 20 years and therefore covered by the provision of section 27(iiib) and section 269UA(f) of the Act. Therefore, for the purpose of section 22 of the Act, the assessee is the deemed owner of the land and the assessee s contention that sub-letting this land to L T is to be considered as income from house property . The ld. CIT(A) has further held that preceding year case i.e A.Y. 2014-15 was also assessed u/s 143(3) of the Act where the rent income received from the same tenant has been accepted by the department. CIT(A) has passed a speaking and reasoned order discussing all the facts and circumstances as well as legal propositions of law therefore, considering the totality of facts and circumstances and case laws, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same. Addition of printing and stationary expenses and workmen and staff welfare expenses - HELD THAT:- From perusal of the impugned order, we observe that any expenditure is allowed under section 37(1) of the Act only if such expenditures are incurred or expended wholly and exclusively for business purposes. Telephone and travelling expenses come under the purview of personal expenses but being a firm office expenses and expenditure related to printing and stationary, staff welfare etc is a reasonable business expenses. Therefore, considering the totality of facts and circumstances of the case, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same. Appeal of the Revenue is dismissed.

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• 2021 (4) TMI 437
  Ex-parte order u/s 144 - notices issued during the year 2014 onwards have remained uncomplied with and the assessment was thereafter completed u/s 144 - CIT(A) admitted the additional grounds and restored the matter before the AO - HELD THAT:- Where the business of the assessee is discontinued and the premises have been taken over by the Bank as part of its recovery proceedings, it is quite likely that the focus of the assessee company and its directors is directed towards the crises being faced by them due to non recovery of the Bank dues and consequent action taken by the Bank and it is therefore likely that the notices issued by Assessing Officer have remained un-complied with and there was reasonable cause which prevented the assessee from submitting the requisite information/documents. Therefore, in such peculiar facts and circumstances of the case and especially where the assessment has been completed u/s 144 of the Act, the ld. CIT(A) where he deemed it appropriate to admit the additional evidences under rule 46A(1) to adjudicate the grounds of appeal and also on principle of natural justice, we do not find any infirmity in such action of the ld. CIT(A) in admitting such additional evidences. It is also noted that these additional evidences have been sent to the Assessing Officer for necessary examination and therefore, as far as Revenue s interest is concerned, the same has been duly safe-guarded by way of providing the reasonable opportunity to the AO.

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• 2021 (4) TMI 436
  Revision u/s 263 - CIT directing the AO to tax the amount which is in excess of its FMV as income from other sources on receipt basis - A.O. computed the FMV of shares in accordance with Rule 11(U)(b) of the Income Tax Rules, 1962 on the date of issue of shares holding that as per Explanation 2 of Section 56(2) (viib) the FMV of share shall be the value on the date of issue of share and added the same to the income of the assessee under the head income from other sources - assessee challenged the assessment order before the Ld. CIT(A) inter alia on the ground that the AO has invoked section 52(2) (viib) on the receipt of consideration against issue of shares since the assessee had not received amount in the impugned year but in the earlier year no addition could be - HELD THAT:- The coordinate Bench in M/S FRED ENTERPRISES PVT. LTD., [ 2020 (6) TMI 745 - ITAT CHANDIGARH] holding that the provisions of section 56(2)(viib) of the Act are triggered in the year in which the shares are issued. Therefore, the impugned order passed by the Ld. PCIT, directing the AO to tax the amount which is in excess of its FMV as income from other sources on receipt basis, is contrary to the findings of the coordinate Bench. As per the settled law, the jurisdiction u/s 263 of the Act can be exercised on satisfaction of twin conditions that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. In the present case since the AO has passed the assessment order in accordance with the decision of the coordinate Bench rendered in the case discussed above, the same cannot be termed as erroneous within the meaning of section 263 of the Act. In our considered view since the order passed in the present case is in consonance with the findings of the coordinate Bench, the Ld. PCIT has wrongly exercised the revision powers u/s 263 and directed the AO to tax the amount excess of its fair market value under the head income from other sources on receipt basis. Hence, we hold that since the order passed by the A.O. is not erroneous, the Ld. PCIT has wrongly set aside the same by exercising jurisdiction u/s 263. Appeal of the assessee is allowed.

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• 2021 (4) TMI 435
  Revision u/s 263 by CIT - Error in computing capital gain - PCIT holding assessment framed under section 143(3) read with 147 of the Act as erroneous and prejudicial to the interest of the revenue - AO erred in not making addition of difference in the value of the property viz a viz stamp value as provided under section 50C of Act which is causing prejudice to the interest of revenue - HELD THAT:- The value of the property determined for the purpose of the stamp value at the time of registration of the property shall not be taken as sale consideration for working out the capital gain if there is difference between the date of registration of sale deed and fixing the sale consideration of the property and seller has received the consideration from the buyer wholly or partly through banking channel on or before the time of agreement of transfer. There is no ambiguity to the fact that the assessee being a seller has received the consideration from the buyer in the financial year 2010-11 as discussed above and that too through banking channel as provided under 2nd proviso to section 50C of the Act which has been discussed above. This fact has not been challenged by the authorities below. Thus it can be inferred that the value of the property as determined by the assessee with the buyer of the property for transferring the property at the time of agreement shall be taken as the full value of consideration for the purpose of computing the capital gain under the provisions of section 48. Whether the amendment brought in the proviso to section 50C of the Act as applicable with effect from 1 April 2017 can be applied for the year under consideration i.e. assessment year 2012-13 ? - As decided in DHARAMSHIBHAI SONANI VERSUS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9, SURAT [ 2016 (9) TMI 1259 - ITAT AHMEDABAD] such amendment being clarificatory in nature is applicable retrospectively - We also note that the fact that the assessee has transferred the property in the financial year 2010-11 was very much appearing in the sale deed - Thus there remains no ambiguity that there was no violation of the provisions of section 50C of the Act for adopting the sale consideration for the transfer of the property by the assessee. AO has made the assessment under section 147 of the Act after necessary verification and due application of mind. Thus, on this count as well, the order of the AO cannot be held as erroneous insofar prejudicial to the interest of revenue. Admittedly there is an explanation-2 brought under section 263 of the Act which states that the order of the AO shall be deemed to be erroneous insofar prejudicial to the interest of revenue if it was passed without making enquiries verification which should have been made. In this regard, we find that the AO has made the enquiries while framing the assessment under section 147 of the Act which have been discussed here in above. However, if the learned PCIT was of the view that the AO failed to make the necessary enquiries which should have been made during the assessment proceedings then it was a duty upon the learned PCIT to specify the relevant enquiries which should have been made but the order of the learned PCIT is silent about such enquiries which should have been made by the AO during the assessment proceedings. See SHRI ANIL L. TODARWAL VERSUS PR. CIT-19, MUMBAI [ 2018 (1) TMI 660 - ITAT MUMBAI] Thus we are of the view that the revision proceedings initiated by the learned PCIT under section 263 of the Act are not sustainable in the given facts and circumstances. - Decided in favour of assessee.

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• 2021 (4) TMI 434
  Estimation of income - Bogus purchases - CIT-A restricting the addition to 12.5% - HELD THAT:- No infirmity in the order passed by the Ld.CIT(A) in restricting the addition to 12.5% as against the entire bogus purchases disallowed by the Assessing Officer. Grounds raised by the revenue are dismissed.

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• 2021 (4) TMI 433
  Stay petition for extension of the stay - Tribunal has granted further extension of stay of outstanding demand for a period of six months or till disposal of the appeals whichever is earlier - subsequent to orders of Hon ble Tribunal in extension of stay, the cases were listed and also the interim orders were passed. In the present stay petitions, the assessee seeking extension of stay which was granted earlier and the interim orders passed. The Ld.AR emphasized that the delay in non disposal of appeal is not attributed to the assessee and referred to the explanations filed along with the Stay petitions - HELD THAT:- We find the Hon ble Delhi High Court in Pepsi Foods (P) ltd Vs ACIT [ 2015 (5) TMI 655 - DELHI HIGH COURT ] has observed that when the delay is not attributed to the assessee, the Tribunal has power to extend the stay even beyond the time limit laid down in 3r d proviso to Sec 254(2)A of the Act We considering the facts, circumstances and stay petitions hold that the delay in non disposal of the appeal is not attributable to the assessee. Hence, the balance of convenience lies in the favour of the assessee for extension of stay as the assessee complied with the directions of the Hon ble Tribunal. Accordingly, we extend the stay of outstanding demand for further period of six months from the date of this order or till disposal of the appeal whichever is earlier.

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• Customs

• 2021 (4) TMI 432
  Seeking assessment of Bills of Entry - seeking clearance of such goods for home consumption on payment of custom duties to be assessed together with redemption fine - import of Natural Gold Ore Concentrates - HELD THAT:- The respondent-authorities are required to assess the Bill of Entry filed by the petitioners for quantity of 16,050 grams of Natural Gold Ore Concentrates imported at Air Cargo Complex at Ahmedabad on 29.01.2014 in view of the order passed by the CESTAT reducing redemption fine to Rs. 15 lacs and penalty of Rs. 10 lacs imposed under section 112(a) of the Customs Act, 1962 in respect of the confiscated consignment. The order of the CESTAT is confirmed by this Court by dismissing Tax Appeal and therefore, the order of the Tribunal has achieved finality as no appeal is filed by the department against such order before the Supreme Court. It is also pertinent to note that the appeal against the order of the Tribunal as well as this Court would not lie before the Supreme Court in view of the monetary limits of Rs. 2 crores prescribed for filing of such appeal before the Supreme Court by the department and admittedly, the amount involved with regard to fine and penalty is less than the monetary limits prescribed for preferring the appeal before the Supreme Court. The respondents are hereby directed to make assessment of Bill of Entry within a period of two weeks from the date of receipt of this order and release the goods for home consumption by the petitioners on payment of duty assessed and redemption of fine of Rs. 15 lacs and penalty of Rs. 10 lacs as per order of the CESTAT and confirmed by this Court - Petition allowed.

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• 2021 (4) TMI 431
  Seeking permission to forthwith record their statements under Section 108 of the Customs Act, 1962 by video conferencing in investigations under Customs Act, 1962 by temporarily waiving their physical presence - HELD THAT:- In Poolpandi and Others Vs. Superintendent, Central Excise and Others [ 1992 (5) TMI 147 - SUPREME COURT] Supreme Court was pleased to reject the argument recorded in paragraph No.5 thereof claiming the presence of lawyer for active participation who could advise potential accused. The answer to the aforementioned objection has been given in the judgment SENIOR INTELLIGENCE OFFICER VERSUS JUGAL KISHORE SAMRA [ 2011 (7) TMI 910 - SUPREME COURT ] wherein presence of an advocate at a visible but not audible distance was permitted which would not amount to any active participation of the advocate. The situation of Corona/COVID-19 for the last two weeks has increased exponentially, there has been lock down in Maharashtra, Panjab, Chandigarh and various other states. Even curfews have been imposed in Delhi and Chandigarh. Considering the fact that the petitioners are in Kerala and also for the safety of the DRI officials, it is directed that petitioners would appear before the investigating officers on 15.04.2021 from 10 a.m. till 6.p.m. And would be entitled to have an advocate present at a visible distance beyond audibility during interrogation and recording of the statement. After recording the statements and completing the investigation, respondent DRI may consider it appropriate in issuing addendum to show cause notice dated 24.09.2019 as expeditiously as possible preferable within a period of six weeks from 15.04.2021, so that the adjudication proceedings in respect of all the persons involved can be taken up expeditiously and till such time, for the safety of the officers and persons involved, the personal liberty of petitioners shall not be prejudiced. Application stands disposed of with the clarification in the order dated 22.06.2020.

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• 2021 (4) TMI 429
  Refund the excess duty paid - duty paid under protest - rejection of refund on the ground that it is beyond one year when computed from the date of reassessment of the bills of entry - Time limitation - HELD THAT:- There is no dispute that the appellant has paid excess duty of Rs. 29,57,931/- after reassessment of the bills of entry by extending the benefit of Notification No. 12/2012-CE. The refund has been rejected on the ground that it is barred by limitation - When the appellant has approached the higher forum aggrieved by the rejection of the notification benefit, it is sufficiently implied that the duty has been paid under protest. The Tribunal in the case of BAYSHORE GLASS TRADING PVT. LTD. VERSUS COMMISSIONER OF CUS., KOLKATA [ 2002 (7) TMI 161 - CEGAT, KOLKATA] has held that when appeal is filed against the assessment of the bill of entry, the same has to be considered as a protest in paying the duty. The rejection of refund on the ground of time-bar is unsustainable - Appeal allowed - decided in favor of appellant.

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• 2021 (4) TMI 428
  Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Validity and Scope of Notifications - Power to DGFT to amend the policy - Notifications are Retrospective or prospective - HELD THAT:- In view of the decision of the Supreme Court in DIRECTOR GENERAL OF FOREIGN TRADE AND ANOTHER VERSUS M/S. KANAK EXPORTS AND ANOTHER [ 2015 (11) TMI 80 - SUPREME COURT] , the appeal is disposed of on same terms holding that Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would be effective only from the dates they were issued. The Order dated 29th September 2005 passed by the learned single Judge is set aside and the Writ Appeal is disposed of in the light of the decision of the Supreme Court in DIRECTOR GENERAL OF FOREIGN TRADE AND ANOTHER. Needless to state that the appellant shall be entitled to take steps to avail of the benefit of Trade Notice dated 7/2018 dated 8th May 2017. Appeal disposed off.

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• Service Tax

• 2021 (4) TMI 430
  Evasion of Service Tax - Punishable offence - initiation of criminal proceedings - The amount involved is less than Rupees two crores - Site Formation and Clearance Service - Erection, Commissioning or Installation Service - Interior Decorators Service - Supply of Tangible Goods Service - HELD THAT:- By virtue of Circular No.201/11/2016-Service Tax vide Annexure-R4, produced by the respondent, as a consequence of the amendment, the power of arrest in Service Tax is available only if a person collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond the period of six months from the date on which such payment becomes due and the amount exceeds Rs. 2 crores. The amount involved in this case is less than Rupees two crores. The learned counsel for petitioners would also contend that out of the total tax dues amounting to Rs. 1,38,88,566/- for the period from April 2009 to December, 2012, the assessee had remitted 50% of the tax dues i.e., Rs. 69,44,254/- during December, 2013 and the remaining tax dues to the tune of Rs. 69,44,254/- has been paid along with interest. However, the same has to be verified by the respondent and it is always open for the Department to recover the dues from the petitioners, if any, in accordance with law. Petition allowed.

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• 2021 (4) TMI 426
  Condonation of delay in filing appeal - no sufficient cause for delay shown - Recovery of Refund of Service Tax - principles of unjust enrichment - Section 35 of Central Excise Act - HELD THAT:- There is no denial that the impugned appeals were filed before Commissioner (Appeals) after a delay of one month and 20 days. There is also no denial to the fact that no sufficient reason was explained to Commissioner (Appeals) for the said delay. Learned Counsel for appellant even today has not cited any reason which may be considered as sufficient cause for the impugned delay of one month and 20 days for filing an appeal before Commissioner (Appeals) in terms of Section 35 of Central Excise Act, 1944. The prescribed period for filing appeal before Commissioner (Appeals) is two months, however, delay of one month is condonable by the Commissioner subject to a sufficient cause being shown to him by the appellant. As is apparent from the impugned order, there is no such sufficient cause shown. Appeal dismissed - decided against appellant.

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• Central Excise

• 2021 (4) TMI 425
  CENVAT Credit - input services - Air Travel Agent service - Club or Association service - Event Management service - Fashion Designing service - Franchise Service - Interior Decorator service - Outdoor Catering service - Rail Travel Agent service - Renting on immovable property service - Rent-a-cab Operator service - Tour Operator service - Travel Agent Services - credit denied on the ground that no evidence was produced by the appellant to prove that the services was availed by the appellant and also on the ground that there is no nexus between the services with the manufacture and clearance of the goods or for their business activity. HELD THAT:- All the services per se are prima facie input services held in various judgments, however, the admissibility of Cenvat credit on these services can be decided on the basis that whether the services were used for the purpose specified in the definition of input service - The appellant along with this appeal submitted various documents such invoices, CA certificates etc, but since the said documents were not considered by the lower authority, the denial of credit is not correct as the same is on presumption basis. The entire matter needs to be re-considered in the light of the various documents submitted by the appellant - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2021 (4) TMI 427
  Refund of Input tax credit - zero rated sales - rejection on the ground that the Form-W was not filed within 180 days from the date of making zero rated sale - HELD THAT:- Section 18(3) of the Tamil Nadu Value Added Tax Act, 2006 states that where the dealer has not adjusted the input tax credit or has not made a claim for refund within a period of 180 days from the date of making zero rated sales accrual of such input tax credit shall lapse to Government. The matter is remitted to the file of the second respondent. The second respondent shall verify the petitioner s Form-I returns filed on monthly basis and also confirm as regards the admissibility and genuinity and if they are found to be in order, the second respondent shall pass appropriate orders for refund - petition allowed by way of remand.

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