Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 14, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Classification of supply - rate of GST - composite supply of services or not - vehicle owner, the driver and the associate partner together - pick-up charges paid to the Owner/ Driver - service charges collected from the passengers - it's not a composite supply - the pick-up service is incidental to the main service of transportation of passengers by radio taxi, liable to GST @5% - Other activities liable to GST @18%- AAR
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Classification of goods - rate of GST - parboiling and drier plant - part of rice milling machinery or not - Parboiling and Drying plant is classified under HSN 8419 - Taxable at the rate of 18% of GST - AAR
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Requirement of filing appeal on online mode or in any other way - Assessment Order copies were received manually - apparently there is a discrepancy between Rule 108(1) and (2) with regard to the manner of filing the appeal and other documents. In view of the discrepancy, the benefit must go to the subject as it is a tax law. - HC
Income Tax
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Disallowance of the amount of expenditure incurred for the purpose of establishing MRF Pace Foundation - The contentions placed by the assessee have not been found to be false or baseless. In such circumstances, it is best for the Department to leave it to the assessee to take a decision as to what is best for them and for the health of the company. These aspects were rightly taken note of by the CIT(A) by observing that the assessee-company is able to get popularity because of its close association with the game of cricket and it is comparable to any other mode of advertisement establishing hoardings, publicity material and other conventional modes of advertisement. - HC
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Stay on collection/ recovery of tax and interest demands - We grant a stay on collection/ recovery of the disputed impugned demands on account of dividend distribution tax, and interest thereon, aggregating to ₹ 3786.34 crores subject to conditions - assessee directed to furnish securities worth ₹ 760 crores, to the satisfaction of the Assessing Officer, which works out to almost 20% of disputed demands anyway - AT
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Unexplained cash deposits - In the light of the clear cut explanation which is duly supported by; firstly, the sale receipt of the assessee; and secondly, the amount which has been transferred from current account to his savings bank account which was duly appearing in cash book, explains the entire source. Therefore, it cannot be held that the cash deposits remain unexplained. - AT
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Validity of the penalty u/s 271(1)(c) or 158BFA - AO has levied the penalty under section 271(1)(C) of the Act by observing that the assessee has concealed/furnished inaccurate particular of income whereas there is no concept of concealment/furnishing inaccurate particular of income under the provisions of section 158BFA(2) - the penalty levied under section 271(1)(c) of the Act is not sustainable - AT
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Disallowance of SWAP loss under section 37(1) - As for the CBDT instructions, it is only elementary that any instructions issued by the CBDT cannot bind the assessee even though the assessee is entitled to, and can legitimately ask for, any benefits granted to the assessee by such instructions or circulars. Nothing, therefore, turns on the CBDT instruction even if it is actually contrary to the claim of the assessee. - AT
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Addition u/s.40A(3) - Purchases made in Cash - assessee has purchased gold and silver through staff at villages, on Sunday/bank holidays, exchange value of old gold and silver and petty purchases, no doubt the assessee has violated the provisions of Section 40A(3) of the Act but there are some instances under which the assessee may get relief as per sub-rule (k) of Rule 6DD of I.T.Rules, 1962. - AT
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Disallowance of expenditure u/s 37(1) - expenditure under various heads of expenses such as doctors' spends, gifts & external and internal conference, etc - when an expenditure is an allowable business expenditure as per the provisions of the Act, then by invoking the provisions of MCI Guidelines, ad-hoc disallowance cannot be made to the total income without any basis. - AT
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Revision u/s 263 by CIT - Even after giving effect to the order of the ld. PCIT u/s.263 of the Act, there would be no taxable income under normal provisions of the Act and even then, the income would ultimately get determined only u/s.115JB of the Act. Hence, there would be no prejudice that could be caused to the interest of the Revenue in this regard. - AT
Customs
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Import of prohibited goods - Decalcified Fish scale for Collagen (Fish Protein) - when the goods allowed to be reexported by the Commissioner(Appeals), then the imposition of redemption fine and penalty is not sustainable in view of the various decisions relied upon by the appellant. - AT
Service Tax
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Levy of service tax on municipalities - Renting of immovable property service - the Petitioner Municipalities can be held liable to pay service tax only for service specified in Sub-Clauses in (i), (ii) and (iii) of Clause (a) of Section 66D of the Finance Act, 1994 for the Period post 01.07.2012 - HC
Central Excise
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Clandestine manufacture and removal - Section 31 of Evidence Act has been wrongly applied. - Law is settled that burden of proof for alleged clandestine removal of goods by appellant is upon the department. Section 31 and 58 of Indian Evidence Act are held not applicable to the given facts and circumstances. - AT
VAT
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Levy of tax - transfer of right to use goods or not - The fact that the petitioner is stated to have acted as an agent of the lessee at the time of import under the respective Operating Lease Agreements is of no relevance as the petitioner neither transferred the possession nor effective control to the lessee till the actual delivery and also continued to receive lease rentals during the currency of the respective Operating Lease Agreements. Therefore, the petitioner cannot claim exemption under Section 5(2) of the Central Sales Tax Act, 1956 for the entire period- HC
Case Laws:
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GST
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2021 (4) TMI 509
Classification of supply - rate of GST - composite supply of services or not - vehicle owner, the driver and the associate partner together - pick-up charges paid to the Owner/ Driver - service charges collected from the passengers - Associate Partner renders services to the Passengers and to the Drivers/ Vehicle Owners directly - amount received from the Owners / Drivers towards bidding - Goodwill Bonus being paid by Passenger to the Driver for good service - charges for cancelling the trip - charges for insurance - Principal supplier/ Applicant collects GST, along with fare from Passengers and remits that amount. Whether the various supplies (of the applicant, the vehicle owner, the driver and the associate partner together) qualify as Composite supply? - HELD THAT:- The conditions for a supply to be considered as a Composite Supply are (i) the supplier (taxable person) should supply two or more taxable supplies to a recipient, (ii) the said supplies should be naturally bundled and (iii) the supplies should be supplied in conjunction with each other, in the ordinary course of business, one of which is a principal supply. In the instant case, we observe that the applicant is providing two taxable services, i.e. providing an online platform and insurance coverage to the passenger. It is an admitted fact that the insurance coverage to the passenger is optional and also online platform service is neither related to nor ancillary to insurance service. Thus these two supplies are not naturally bundled. Further the said supplies are not in conjunction with each other, in the ordinary course of business. Therefore, we conclude that the activities performed by the applicant do not amount to a composite supply. Whether the pick-up charges paid to the owner / driver fall under GST rate of 5%? - HELD THAT:- The driver need to pick up the passenger before starting of the radio taxi service and hence the pick-up service is incidental to the main service of transportation of passengers by the drivers. The applicant has been made liable for paying the tax in respect of the said service through the e-commerce platform, as if the applicant is the supplier of such service, in terms of Section 9 (5) of the CGST Act, 2017. Further, Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 stipulates that an electronic commerce operator is supposed to pay GST for services by way of transportation of passengers by a radio taxi - the pick-up charges and basic fare are part of the service of transportation of passengers by a radio taxi and hence the applicant is liable to pay GST @ 5%, on the pick-up charges also. Whether any supply of service exists between the applicant /aggregator and the Associate partner, if yes, what is the rate at which GST has to be collected and remitted? - HELD THAT:- In the instant case the associate partner is providing services to the applicant. The impugned services of associate partner are covered by clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and hence GST @ 18 % has to be paid by associate partners in case the associate partner is registered under GST. In the case where the associate partners are not registered under GST due to threshold limit, no GST is leviable on the amount remitted to the associate partner. Whether the amount received from drivers/owners towards bidding gets covered in the 5 % GST or should it be separately charged at 18%? - HELD THAT:- The amount received as a bidding charge is outside the fold of basic fare i.e. the relevant service is not related to the service provided by the owner/driver to the passenger/customer through the e-commerce operator. We therefore find that 5% GST rate is not applicable - the same is covered by clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, at the rate of 18 %. Goodwill bonus being paid by passenger to the driver and on which the applicant collects the service charges - Whether the service charges so collected attract GST and if so at what rate? - HELD THAT:- Goodwill bonus is a voluntary payment made by passengers when they are happy with the service provided by the drivers. It is outside the fold of basic fare charged from the passengers for the trip. The applicant collects service charge on the goodwill amount. We find that the service charge collected for facilitating the payment of goodwill amount to drivers is consideration in terms of Section 2 (31) of CGST Act, 2017 and hence is liable for GST at 18% under heading 9985 vide clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. Whether the charges for cancelling the trip for any reason attract GST liability? - HELD THAT:- The applicant has submitted that cancellation charges collected from the passengers may be shared with the owners or drivers. The activity of tolerating the cancellation by the applicant for a consideration is supply of service by virtue of clause (e) of para 5 of Schedule II of CGST Act, 2017 and attracts GST at 18 %. Whether the charges for insurance come under composite supply? - HELD THAT:- It is observed from the terms and conditions that passengers are covered under appropriate insurance against accidents, that the passenger has to opt and give his/her specific consent for the insurance coverage, at the time of booking the ride/trip - thus, its optional on the part of passenger to avail insurance on the trip and the same will not fall under composite supply. If the principal supplier / applicant collects GST, say at 5% along with fare from passengers (as mentioned in the Table submitted by the applicant), does it amount compliance of the GST Rules? - HELD THAT:- 5% GST is only applicable on basic fare. The applicant has to pay GST at 18% on other incomes.
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2021 (4) TMI 508
Classification of goods - rate of GST - parboiling and drier plant - part of rice milling machinery as specified in the Notification dated 28-06-2017 or not - to be classified under HSN 8437 or under HSN 8419? - HELD THAT:- As there was conflicting judgments on the issue in the case of J JYOTI SALES CORPORATION VERSUS COMMISSIONER OF C. EX., PANCHKULA [ 2011 (3) TMI 1317 - CESTAT, NEW DELHI] classifying par-boiling machine and dryer under 8419 of Central Excise Tariff and in the case of SKF BOILERS DRIERS (P) LTD. VERSUS COMMISSIONER OF C. EX., MANGALORE [ 2010 (10) TMI 230 - CESTAT, BANGALORE] classifying the same machines under 8437, the Hon'ble President of CESTAT constituted a Larger Bench as per the directions of the Hon'ble Supreme Court in JYOTI SALES CORPORATION VERSUS COMMISSIONER OF CENTRAL EXCISE, PANCHKULA [ 2016 (2) TMI 973 - SUPREME COURT] to resolve this conflict and to decide the appropriate classification of the par boiling machine and drier. The Hon'ble Tribunal Larger Bench judgment in the case of M/S JYOTI SALES CORPORATION, M/S PUNJAB FABRICATOR VERSUS CCE, PANCHKULA [ 2016 (11) TMI 767 - CESTAT CHANDIGARH] held that par boiling machine and dryer is classifiable under Heading 8419 of the Central Excise Tariff and there being on stay on the order by the Apex Court which is also in conformity with the Board's Circular No.982/06/2014-CX, dated 15-05-2014 issued in F.No.167/42/2009-CX.1, we observe that the goods under reference merits classification under 8419 attracting 9% CGST and 9% SGST.
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2021 (4) TMI 505
Cancellation of registration of petitioner - inter-state sale - allegation that appellant failed to prove his e-way transaction details - opportunity of hearing provided or not - principles of natural justice - HELD THAT:- The detailed enquiry was conducted before passing the impugned order, in which certain discrepancies were found with regard to the business of the appellant. It was found that the appellant had failed to prove eway bill transaction details, therefore, the registration was cancelled. A proper opportunity of hearing was afforded to the appellant. No cogent documentary evidence is available on record to justify the stand taken by the appellant. The learned Single Judge has rightly come to the conclusion and dismissed the writ petition.
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2021 (4) TMI 504
Attachment of petitioner's bank accounts - petitioner's case is that he has to make repayment of salaries of employees and hence attached bank accounts ought to be released - HELD THAT:- The counsel for the banks notes the aforesaid position and having regard to the statements made by the counsel appearing for the Petitioner and the Revenue states that if that be so, the petitioner may be able to operate the bank account, for the amounts over and above the amount of revenue of ₹ 78.91 crores - At this stage, learned senior counsel for the petitioner submits that fixed deposit of the amount of ₹ 78.91 crores may be considered. It may be in the interest of all to have the same in a nationalized bank. The petitioner is at liberty to approach the respondent No. 2 for the same. Petition disposed off.
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2021 (4) TMI 498
Interpretation of statute - requirement of filing appeal on online mode or in any other way - case of petitioner is that since the Assessment Order copies were received manually, there was no occasion for the petitioner to submit grounds of appeal electronically - Rule 108(2) and Rule 26 of the APGST Rules - HELD THAT:- It is true that Rule 26(1) specifies that all applications including the appeals which are required to be submitted under the provisions of these Rules shall be so submitted electronically with a digital signature certificate or through e-signature or verified by any other mode of signature or verification as notified by the Chief Commissioner - So far as verification is concerned, Notification No.6/2017-Central Tax dated 19.06.2017 was issued by the G.O.I.Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, stating that the mode of verification for the purpose of Rule 26(1) is (i) Aadhar based electronic verification code (EVC) and (ii) Bank account based one time password (OTP). Thus apparently there is a discrepancy between Rule 108(1) and (2) with regard to the manner of filing the appeal and other documents. In view of the discrepancy, the benefit must go to the subject as it is a tax law. Petition allowed with a direction that the 3rd respondent shall receive the appeal, process the same and if there are any defects, issue suitable check memos for compliance by the petitioner.
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2021 (4) TMI 472
Permission for withdrawal of appeal - Refund of excess GST amount paid - time limitation - rejection on the ground that the refund claim has been filed after the time limit of 2 years - HELD THAT:- Personal hearing in virtual mode through video conference was fixed in both the cases for 24.03.2021. Further, the Authorized Signatory and Chief Manager of the appellant Sh. Girish P Lele instead of attending personal hearing has sent a E mail dated 18.03.2021 as well as letter through Speed Post therein he intimated that the appeals are to be treated as withdrawn. The appeals allowed to be withdrawn.
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2021 (4) TMI 471
Rejection of refund claim - rejection on the ground that appellant did not submit any explanation regarding mismatch in ITC - opportunity of hearing provided to the Appellant - HELD THAT:- Before passing the said order adjudicating authority had issued show cause notice in Form RFD-08, dated 8-4-2020 reason stated therein that it appears refund application is liable to be rejected on account of mismatch of ITC amount ₹ 6,04,638/- and it was directed to appellant to furnish a reply to this notice within 15 days from the date of service of this notice and also directed to appear before adjudicating authority on 23-4-2000. The appellant has taken the main plea in their ground of appeal that adjudicating authority has rejected the refund claim without providing the opportunity of personal hearing in the instant matter and thus has violated the principle of natural justice. Moreover, the appellant has emphasized the various reasons for mismatch of ITC between GSTR-3B and GSTR-2A and stated that he is entitled for the refund of ₹ 6,04,638/- in terms of Circular No. 139/09/2020-GST, dated 10-6-2020, which has not been considered by the adjudicating authority - the appellant did not get the proper opportunity to submit their reply/submission in their contention before the adjudicating authority. The reason of non-submission of reply and not appearing for personal hearing before the adjudicating authority is acceptable in terms of Notification No. 35/2020-Central Tax, dated 3-4-2020. As per the notification the time limit for filing of reply by taxpayers was extended upto 30-8-2020 due to COVID-19 spread - An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. The adjudicating authority while rejecting the refund claim of the appellant neither considered their request nor their first request for seeking adjournment of personal hearing due to COVID-19 lockdown in terms of Notification No. 35/2020-Central Tax, dated 3-4-2020 - the passing of non-speaking order indeed amount to denial of natural justice - case remanded back to the adjudicating authority for decide the case afresh by following the principle of natural justice and for passing the speaking order - appeal allowed by way of remand.
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Income Tax
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2021 (4) TMI 502
Gross profit determination - Tribunal, applied the decision in A.Vajjiram Bros [ 2008 (8) TMI 528 - MADRAS HIGH COURT ] and fixed the gross profit at 8% - assessee did not cooperate in the assessment by producing certain labour registers, which was called for by the Assessing Officer and therefore, the AO, taking note of Section 44AD of the Act, which is a special provision for computing profits and gains of business on presumptive basis - assessment for A.Y. 2012-13 net profit was comutation at 3.21% of the Gross receipts - HELD THAT:- Before us, the appellant has filed a chart showing a comparison of the figures for the assessment years 2012-13 to 2019-20 and we find that the net profit ratio to turnover in percentage ranges between 2.86% and 3.42%. Further, from the assessment order for the year 2017-18, it is seen that the Assessing Officer adopted 3.16% and held the same to be reasonable and completed the assessment by order dated 21.12.2019. Thus, we find that the Tribunal committed an error in reversing the order passed by the CIT(A) and restoring the order of the Assessing Officer. The tax case appeals are allowed and the order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the appellant/assessee.
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2021 (4) TMI 501
Disallowance of the amount of expenditure incurred for the purpose of establishing MRF Pace Foundation - Allowable business expenditure u/s 37(1) - Assessing Officer was of the prima facie view that the expenditure incurred would fall within the purview as charitable nature and asked to show cause as to why the same cannot be added to the total income of the current year - CIT-A allowed the assessee claim - contention of the assessee that they get huge publicity and increased sales was rejected by observing that the Pace Foundation of the assessee-company has been mainly engaged in imparting bowling and training and the expenses cannot be considered as expenses related to sponsorship of cricket wherein, the company will get publicity by way of display of hoardings and media advertisement - Tribunal was of the view that the assessee having not sponsored any sport activity for its sales promotion, but formed Pace Foundation for training bowlers and such activity cannot, by any stretch of imagination, be treated as business activity - HELD THAT:- It is not for the Assessing Officer to decide what would be good for the assessee in promoting its business and therefore, decision cannot be arrived at by the Assessing Officer based on his own personal perceptions and it should be left to the decision of the assessee, who is the best person, who knows that what would be best for his business activity. Bearing the above legal principle in mind, if we test the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal, we have no hesitation to hold that the order passed by the CIT(A) is a well reasoned order. We support such conclusion with the following reasons. Admittedly, MRF Pace Foundation is part of the assessee-organisation and the expenditure incurred for the Foundation has been claimed as a business expenditure under Section 37 of the Act. Therefore, it is clear that the Assessing Officer assumed certain matters, which were not on record and attempted to compare the expenditure incurred to that of giving donations. Firstly, the concept of charity or donation can never be implanted to the present facts, which were clearly explained by the assessee in their reply to the show cause notice issued by the Assessing Officer. Once we steer clear of this issue, by holding that it is never the case of the assessee that what was spent was in the nature of donation, the Assessing Officer cannot draw a parallel or assume certain facts, which are not on record. As already observed, the expenditure incurred by the assessee in the Pace Foundation cannot be regarded as a donation and it was never the case of the assessee, nor there was anything on record for the Assessing Officer to draw such a conclusion. Secondly, the assessee has been able to point out certain facts before the Assessing Officer as well as before the First Appellate Authority as to how the training of pace bowlers has helped them in a business activity. The contentions placed by the assessee have not been found to be false or baseless. In such circumstances, it is best for the Department to leave it to the assessee to take a decision as to what is best for them and for the health of the company. These aspects were rightly taken note of by the CIT(A) by observing that the assessee-company is able to get popularity because of its close association with the game of cricket and it is comparable to any other mode of advertisement establishing hoardings, publicity material and other conventional modes of advertisement. CIT(A) rightly took note of the decision in Delhi Cloth and General Mills Co. Ltd.[ 1978 (4) TMI 75 - DELHI HIGH COURT] by observing that the power of the Revenue is confined only to examine the purpose of genuineness of the expenditure and not the expediency or the quantum. Nowhere there is any observation either made by the Assessing Officer or the Tribunal that the expenditure was not genuine. In fact, Mr.T.Ravikumar would fairly submit that all other expenditure, which have been claimed by the assessee towards sponsorship, advertisement, have been allowed in its entirety. The Tribunal fell in error in coming to a conclusion that donations were extended towards the Pace Foundation, when the fact remains that the assessee has established the foundation and it is part and parcel of the assessee themselves and not a separate entity to draw any such inference of donation. Thus we hold the Tribunal committed an error in reversing the order of the CIT(A). - Decided in favour of assessee.
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2021 (4) TMI 497
Penalty u/s 271AAA - undisclosed income recovered in search operation u/s 132 - estimation of Gross Profit @ 3.68% - assessment was completed at an income on account of estimation of gross profit rate due to difference in stock as per the books of accounts and the stock as per the physical inventory taken - contention of the assessee that the discrepancy in stock was due to malfunction in the ERP software - HELD THAT:- Though, assessee's explanation was not accepted by the Assessing Officer, the assessee has demonstrated with evidence that due to malfunction of the software, the accounts could not be completed in time and that the assessee had to approach the Company Law Board with a petition to extend the date for adoption of audited accounts. This petition was accepted by the Company Law Board and the offence was compounded. Therefore, in our considered opinion, the assessee had a reasonable explanation for the discrepancy found in stock and due credence should have been given to this explanation. Therefore, it cannot be said that the assessee had no explanation to offer regarding the difference in stock. Further, the amount on which the penalty has been imposed is only an ad-hoc addition based on average gross profit rate and does not relate directly to any undisclosed income unearthed during the course of search. In such a situation, it is our considered opinion that the imposition of penalty u/s 271AAA is not sustainable - Decided in favour of assessee.
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2021 (4) TMI 495
Stay on collection/ recovery of tax and interest demands - deemed dividend distribution of accumulated profits in the course of a demerger transaction which took place in the period relating to assessment year 2018-19 - Demand in question is on account of genuine differences about tax implications of a wholly internal business restructuring transaction - garnishee proceedings already initiated by the Assessing Officer - HELD THAT:- It is not a fit case of unconditional stay on collection or recovery of the entire impugned demands of tax and interest aggregating to ₹ 3,786.34 crores. It is a fit case in which the assessee must pay or provide reasonable security for at least 20% of the disputed demand, and this amount, which comes to ₹ 757.26 crores, is rounded off to ₹ 760 crores. We must also take into account the fact that the amount of ₹ 760 crores is so substantial an amount, more so in these pandemic days, that such a huge cash outgo would cripple functioning of that business and bring it to a halt at least temporarily, and the fact that the conduct of the assessee, in not seeking any adjournment at all and thus making every effort for expeditious disposal of appeal, has not been wanting at all. While, on one hand, revenue authorities must safeguard and protect their legitimate interests, revenue authorities must take a pragmatic stand with compassion and with larger interest of the nation in mind. The assessee applicant is a well-established business houses, with firm roots, in India, the delay in disposal of appeal is on account of the delay in appointment of, and availability of, counsel by the income tax department, and the assessee has not been evasive or wanting in compliance or in conduct- at least so far as the appellate proceedings before this Tribunal are concerned. The demand in question is on account of genuine differences about tax implications of a wholly internal business restructuring transaction. Considering all these factors, while we have declined an unconditional stay on collection/ recovery of disputed demands, we also consider it fit and proper to permit the assessee to furnish a reasonable security of the value of ₹ 760 crores or more, in lieu of making payment of the aforesaid amount, to the satisfaction of the Assessing Officer, and we also deem it fit and proper to direct the Assessing Officer to accept such a security for the time being and keep all the coercive recovery proceedings in abeyance till the disposal of this appeal. As to what will constitute reasonable security is something which is in the exclusive domain of the Assessing Officer, and unless his decision is perverse or grossly unreasonable, obviously there is no occasion for any other authority to interfere in the matter. In case the assessee is aggrieved of the stand taken by the Assessing Officer in this regard, the Assessing Officer will give the assessee a period of two weeks, on the same lines as directed by Hon ble jurisdictional High Court in assessee s own case, before taking any recovery measures, so that the assessee can seek legal remedies, if so advised, against the same. The garnishee proceedings already initiated by the Assessing Officer shall also remain suspended, even if not withdrawn by the Assessing Officer, in the meantime. Even on merits, we have directed the assessee to furnish securities worth ₹ 760 crores, to the satisfaction of the Assessing Officer, which works out to almost 20% of disputed demands anyway, we see no need to deal with the broader question about the impact of amendment in the scheme of Section 254(2A) which is said to restrict powers of the Tribunal in granting the stay, unless the assessee makes a pre-deposit of 20% of the impugned demands or provides security in respect thereof. We grant a stay on collection/ recovery of the disputed impugned demands on account of dividend distribution tax, and interest thereon, aggregating to ₹ 3786.34 crores on the following conditions: a) The assessee shall provide a reasonable security for an amount of ₹ 760 crores or more, to the satisfaction of the Assessing Officer, at the earliest possible, and, in no case, not later than two weeks from today; Provided, however, in case the Assessing Officer is, for any reasons whatsoever, not satisfied with the security offered by the assessee, the Assessing Officer shall pass a detailed speaking order in respect of the same, and will give a two week notice to the assessee, on the same lines as was directed by Hon ble jurisdictional High Court in assesee s own case (supra), before initiating any coercive recovery proceedings, so that the assessee can pursue appropriate legal remedies against the stand of the Assessing Officer, if so advised. b) The assessee will fully cooperate in expeditious disposal of appeal before this Tribunal, and will not seek any adjournment of hearing; and c) This stay will be in operation till 180 days from the date of this order, till the order on the related appeal is pronounced or till further orders- whichever is earlier.
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2021 (4) TMI 494
Characterisation of income - interest awarded u/s 28 of the Land Acquisition Act - computation of capital gain u/s 45 - assessee had received enhanced compensation of land acquisition, which included compensation and interest thereon - Assessing Office had made addition being 50% of interest u/s 56(2)(viii) r.w. Section 57(iv) - Whether interest awarded u/s 28 of Land Acquisition Act, 1894 is nothing but an accretion to the value compensation and hence it is part and parcel of compensation? - HELD THAT:- The capital receipt unless specifically taxable u/s 45 under the head capital gain, in principle, is outside the scope of income chargeable to tax and cannot be taxed as income unless it is in the nature of Revenue receipt or specifically brought within the ambit of income by way of specific provision of the Income Tax Act. Thus, the interest received on compensation to the assessee is nothing but a capital receipt and the addition is against the law. From the perusal of the order of the CIT(A), it can be seen that the CIT(A) has not given a separate finding as to why the Assessing Officer is justified in making the addition. This issue has been decided in case of Union of India Vs. Hari Singh [ 2017 (11) TMI 923 - SUPREME COURT ] wherein it is held that on agricultural Land no tax is payable when the compensation/enhanced compensation is received by the assessee as their land were agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. The CIT(A) has not taken cognizance of the decision of the Apex Court in case of Hari Singh (supra). The ratio of the said decision is applicable in the present case. Thus, the appeal of the assessee is allowed.
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2021 (4) TMI 490
Addition u/s 69B - no explanation to sources for the investment made - CIT- deleted addition admitting additional evidences - whether CIT(A) has not given proper opportunity of hearing to the A.O. while deleting the addition? - HELD THAT:- AO submitted remand report on 21.10.2013. The assessee once again filed submissions before Ld. CIT(A) on 16.1.2014. The Ld. CIT(A), on the basis of these submissions and additional evidences without confronting these submissions to the A.O. deleted the additions. By reading the Ld. CIT(A)'s order, we are not in a position to appreciate on what is the basis for deletion of the additions made by the A.O. The order does not show any evidence that Ld. CIT(A) has considered to delete the additions and it is not based on any concrete evidence. Being so, in our opinion, in the interest of justice, it is appropriate to remit the entire issue to the file of the A.O. for reconsideration of the case afresh. Appeals of the revenue are allowed for statistical purposes.
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2021 (4) TMI 489
Undisclosed deposits in bank account - addition made by the Assessing Officer treating the cash deposit to assessee's own income earned from undisclosed sources - Cancellation of agreement/deal to buy house on which advance payment made due to no clear title of seller - seller agreed compromise and to pay the money in bank account in six equal instalments - HELD THAT:- We notice that during the course of assessment proceedings AO examined Mr. Ravi Gulati and recorded his statement. Mr. Gulati in his statement has categorically stated that he had paid ₹ 15,00,000/- to the assessee in instalments. He has further stated that he had taken the said amount from his employer Sh. Rahul Mehra. Sh. Ravi Gulati one of the accused in the F.I.R.registered with P.S. Manimajara, which prima facie shows his involvement in the said fraudulent deal. Hence, the documents on record corroborate the contention of the assessee. The AO has not examined the in-charge of the concerned police station to verify the version of the assessee. Similarly, the AO has not examined Sh. Rahul Mehra to ascertain as to whether he had paid money to Sh. Ravi Gulati. As per the settled law AO cannot make addition on the basis of surmises and conjunctures. The AO could have placed on record some important facts by examining the concerned persons to falsify the contention of the assessee. Under these circumstances, we have no reason to disbelieve the contention of the assessee and to reject the documentary evidence on record - Decided in favour of assessee.
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2021 (4) TMI 488
Exemption u/s 11 - application of the assessee for registration u/s. 12A rejected - unverified Receipt of donations - non furnishing of bills in support of the expenditure as well as the evidence to prove that the assessee has actually carried the medical services to the poor by organizing medical camps and running medical clinics - HELD THAT:- There is no quarrel on the point that while granting the registration u/s. 12A the competent authority (Commissioner) is required to satisfy himself about the charitable nature of the objects of the trust/institutions and genuineness of the activities. Charitable nature of the objects of the assessee society is concerned, the CIT (Exemption) has not doubted the charitable nature of the objects which are duly stated in the memorandum and rules of the society and available with the Commissioner (Exemption). The only precondition which the assessee was required to satisfy the Commissioner (Exemption) is the genuineness of the activity to achieve the objects of the assessee society. So far as the confirmation of the donations are concerned since the assessee has explained the cause of incomplete confirmation as time constrains therefore, we find that the assessee ought to have been granted sufficient time for submitting the confirmation of donations. The second objection is regarding the genuineness of the activities and proof of providing the medical services to the poor by organizing medical camp running medical clinics. Though, the Commissioner (Exemption) has observed that the said claim is not supported by the evidence however, we find force in the contention of the assessee that the assessee was not specifically asked by the Commissioner to produce such evidence - we set aside the impugned order of the Commissioner (Exemption) and remit the matter to the record of the Commissioner (Exemption) for deciding the same afresh after giving one more opportunity to the assessee to submit the complete confirmation of donations as well as other documentary evidence in support of carrying out the activities of providing medical services to the poor in the rural areas - Appeal of the assessee is allowed for statistical purposes.
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2021 (4) TMI 487
Disallowance of assessee's claim of write off of bad debts - assessee has claimed write off of bad debts in respect of amount not recoverable from transactions at NSELX - transactions carried out by the assessee at NSEL were in the financial year 2013-14 - contention of the assessee is that the loss was not claimed in the preceding assessment year, as the assessee could recover some amount during the financial year 2013-14 and even during 2014-15. Ostensibly, no payments were received after November, 2014 from NSEL. The assessee in his accounts for the impugned Financial Year has written off irrecoverable amount of NSEL transactions as bad debts. HELD THAT:- We find that the Tribunal in the case of various similarly situated assesses has allowed write off of bad debts where the assessee has failed to recover the amount from transactions at NSEL. In the case of Megh Sakariya International P. Ltd. [ 2018 (9) TMI 1961 - ITAT CHENNAI] the Tribunal allowed the claim of bad debts arising from trading of commodity at NSEL in accordance with principle laid down in the case of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] It is no more res-integra that for write off of bad debts as irrecoverable, the assessee is not under obligation to show that the debt has in fact become irrecoverable. Now, the only requirement as per the provisions of section 36(1)(vii) is that the assessee has to write off the debts as irrecoverable in the accounts. In the present case, the assessee in its books has written off the amount from NSEL as bad debt. Once the assessee has written off bad debts in its book, there is no justification in rejecting the claim of assessee. The Board has issued Circular No. 17/2016 dated 30/05/2016 regarding admissibility of claim of deduction of Bad Debts under section 36(1)(vii) r.w.s. 36(2) of the Act. The CBDT has accepted the law explained by the Hon'ble Supreme Court of India in the case of TRF Ltd. (supra) post amendment to the provisions of Sec. 36(1)(vii) and 36(2) of the Act. Assessing Officer has also observed that the loss is capital in nature and hence, can only be claimed for set off against capital gains. It is nowhere emanating from records that the transactions carried out at NSEL are on capital account. There is no denying the fact that the assessee can simultaneously maintain both portfolios. However, we fail to understand as to from where the Assessing Officer has come to conclusion that the loss suffered by assessee from sale and purchase of transaction at NSEL is on capital account. The observations made by the Assessing Officer are superfluous and unsubstantiated - Decided in favour of assessee.
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2021 (4) TMI 486
Addition on account of share capital and share premium as unexplained cash credit u/s 68 - no replies were received from the said competent authority before the completion of assessment - AO observed that the assessee did not furnish the details of source of funds for OMIL and accordingly concluded that the assessee had not proved the creditworthiness of OMIL to make investment in assessee company - HELD THAT:- We find that the ld CIT-A had deleted the addition made in the year under consideration by placing reliance on the order of his predecessor for Asst Year 2011-12 wherein, on similar facts and circumstances in respect of share capital and premium received from the same party i.e OMIL, the addition made u/s 68 of the Act was deleted. We find that the ld CIT-A had also observed that reference made to CBDT Foreign Tax Division had not brought out any adverse remarks on the bonafides of OMIL and transactions carried out by them with the assessee. We also find that this tribunal in assessee s own case for the Asst Year 2011-12 [ 2019 (4) TMI 1422 - ITAT MUMBAI] had deleted the same addition u/s 68 of the Act in respect of share capital and share premium received from OMIL wherein held documentary evidences, arguments of both the sides clearly established that this transaction carried out by assessee receiving share application money party seems to be genuine and explained. AO has not carried out any further inquiry except the fact recorded that there is no authorized share capital to that extent and moreover, AO also noted that there is unjustifiable amount of share premium and hence, entire transactions is not genuine - We have noted that for the purpose of section 68 of the Act, three requirements are required to be fulfilled which is the genuineness of transaction, source of money i.e. creditworthiness of the party and identity of the party. According to us, the assessee has fulfilled all the three ingredients of section 68. Share premium can only be added under section 56(2)(vii)(b) which was inserted by the Finance Act, 2013 with effect from 01.04.2013 i.e. for and from the AY 2013-14 - w.e.f A. Y. 2013-14 for closely held companies share premium or share capital is deemed to be normal income if shares are issued exceeding fair market value of shares. But, in any case the amendment will apply for and from AY 2013-14 and not to earlier Assessment Year because the amendment is prospective and not retrospective. Hence, on the issue of share premium, the provisions of section 56(2) (viib) cannot be applied for making addition even under section 68. Assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 and no addition can be made on this account. CIT(A) has rightly deleted the addition and we confirm the same. These two common issues of Revenue s appeal are dismissed. Disallowance on account of depreciation on intangible assets - AO observed that the assessee had shown addition of intangible assets as rights in infrastructure and claimed depreciation thereon during the year under consideration - AO had denied depreciation on the only ground that the assessee had self-contradicted its claim by saying that such rights were intangible assets on one hand and by claiming depreciation at the rate applicable to factory building on the other hand - HELD THAT:- We find that the ld CIT-A had granted relief to the assessee by categorically holding that the rights in infrastructure acquired by the assessee in VITP is having direct nexus with effective utilization of its factory premises in its Textile Park. This factual finding has not been controverted by the revenue before us . Either way, the incurrence of expenditure towards acquiring rights in infrastructure in VITP has not been doubted by the revenue. The only issue is the rate of depreciation thereon. The ld CITA had also observed that the assessee is eligible for 25% depreciation but had claimed only 10% and accordingly deleted the disallowance made by the ld AO. Hence we do not deem it fit to interfere in the order of the ld CITA. Accordingly, the Ground No. II raised by the revenue is dismissed. Addition u/s 56(2)(viia) - assessee had acquired shares of VITPL at a price less than fair market value of such shares - assessee became member in Vraj Integrated Textile Park Ltd (VITPL) formed on the basis of Scheme of Integrated Textile Park (SITP) of Ministry of Textiles, Government of India - HELD THAT:- We find that the ld CIT- A by placing reliance on the decision of his predecessor in assessee s own case for the Asst Year 2011-12 [ 2019 (4) TMI 1422 - ITAT MUMBAI] on the similar set of facts , deleted the addition made u/s 56(2)(viia) of the Act as held entire reserves and surplus appearing in the balance sheet as on 1.4.2010 are only on account of the grant received from the Government of India and not on the basis of any business profit earned by the company - there can be no inference that the shares of VITPL have been acquired by the assessee at a price which is less than its fair market value. Hence, we find no reason to reverse the findings of CIT(A) and accordingly, the same is upheld. - Decided against revenue.
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2021 (4) TMI 485
Disallowance of gift sales promotion - allowable business expenses or not? - Gifts given to the doctors as freebies and in violation of circular of medical council - HELD THAT:- We find that in the immediate preceding assessment year similar disallowance on expenditure incurred towards gifts and sales promotion was made by Assessing Officer. The issue travelled to the Tribunal. The Co-ordinate Bench after considering CBDT Circular No. 5 of 2012 (supra) and various decisions rendered on this issue held that the prohibition imposed by Indian Medical Council with regard to acceptance of gift by medical practitioner/doctor was imposed w.e.f. 10th Dec., 2009. Thus, as could be seen, the prohibition imposed by Indian Medical Council against acceptance of gift is on the medical practitioner and doctor and not on the pharmaceutical companies. - Decided in favour of assessee. Transfer pricing adjustment in respect of guarantee fee - HELD THAT:- Tribunal in assessee's own case for assessment year 2009-10 placing reliance on the decision rendered in the case of Everest Kento Cylinders Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] held that Corporate Guarantee fee paid @ 0.5% would be at arm's length. Respectfully following the decision of Tribunal in assessee's own case [ 2019 (4) TMI 1429 - ITAT MUMBAI] for assessment year 2009-10, the ground of the appeal is partly allowed in the same terms. Charging of interest on loan to A.E. by applying rate of interest prevalent in Romania + 300 B.P.S - contention of the assessee is that since the loan was granted in EURO, therefore, EURIBOR rate should be applied - HELD THAT:- We find merit in the contentions of the assessee. In the instant case, it is evident from the loan agreement that the assessee had advanced loan to its AE in Romania in EURO, therefore, the interest should be charged in EURIBOR. In principle, we accept the assessee's submissions, however, to determine interest rate we deem it appropriate to restore this issue to the Assessing Officer with a direction to applying EURIBOR + base points, if required. Consequently, the ground No. 2.2 of the appeal is allowed for statistical purpose. Additional ground claiming deduction in respect of Education Cess paid on income tax and dividend distribution tax - HELD THAT:- Since, the issue has been raised for the first time before the Tribunal, we deem it appropriate to admit the additional ground and restore the issue back to the Assessing Officer for consideration in the light of ratio laid down in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] . The additional ground of appeal is thus, allowed for statistical purpose.
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2021 (4) TMI 484
Penalty levied u/s. 271(1)((c) - estimation of income on bogus purchases - CIT(A) restricted the addition GP @ 14.33% and 12.63% for the A.Y. 2009-10 and A.Y. 2010-11 respectively - HELD THAT:- As held in the case of CIT v. Aero Traders Pvt. Ltd. [ 2010 (1) TMI 32 - DELHI HIGH COURT ] wherein the Hon'ble High Court affirmed the order of the Tribunal in holding that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars. In both these appeals on hand the Assessing Officer has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. Thus, we do not observe any infirmity in the order passed by the Ld. CIT(A) in deleting the penalty u/s. 271(1)((c) of the Act levied by the Assessing Officer for both the Assessment Years. Grounds raised by the revenue are rejected.
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2021 (4) TMI 483
Unexplained cash deposits - no explanation on source of cash deposits - assessee has purchased immovable property through cash deposits in bank - Whether bank deposits have been made out of the cash book which has been not found to be incorrect and nor rejected? - HELD THAT:- Entire payment for purchase of property has been made by the assessee from his bank account and the details of cash deposits has been incorporated - The source of cash deposits was from the business carried out by the assessee for which the assessee has given details of sales with the name of the parties which was to the tune of ₹ 2.13 crores. The summary of cash transactions along with date-wise detail of cash book which was produced before the authorities below has already been incorporated above. All the source of the cash deposits are from the regular books of account and cash books entry is also matching with the bank statement filed by the assessee in the paper book. In the light of the clear cut explanation which is duly supported by; firstly, the sale receipt of the assessee; and secondly, the amount which has been transferred from current account to his savings bank account which was duly appearing in cash book, explains the entire source. Therefore, it cannot be held that the cash deposits remain unexplained. In the light of the aforesaid explanation as submitted by the ld. counsel duly corroborated by the evidence on record, we hold that the entire cash deposits of ₹ 52 lac stands explained. Addition on household expenses - CIT(A) has confirmed the addition on the ground that assessee has not shown household expenses - HELD THAT:- We find that the assessee had shown household expenses and cash drawings from savings bank account at ₹ 60,000/- and approximately ₹ 35,000/- for LIC payments. Apart from that, assessee has also explained that he was staying with his father and majority of the household expenses was borne out by him. Without there any specific finding or material, the addition based on pure surmises and presumption cannot be sustained. Accordingly, the same is directed to be deleted. Undisclosed payment of rent - Difference as per the amount mentioned in rent agreement and shown in the P L account - HELD THAT:- It is clear from the rent agreement itself that on the expiry of the period mentions rent will be further increased by 10% per annum. The rent agreement was dated 20.11.2009 and year under consideration is Assessment Year 2012-13, therefore, increment of 10% as per the clause of the rent agreement itself justifies the payment of ₹ 10,000/- per month which has been duly shown by the assessee. Accordingly, there is no reason for making the addition of ₹ 12,000/-, same is deleted.Appeal of the assessee is allowed.
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2021 (4) TMI 482
Validity of the penalty u/s 271(1)(c) or 158BFA - in search certain documents of incriminating nature were found and accordingly the assessment was framed under section 158BC after making certain addition - AO also initiated the penalty proceedings under section 158BFA(2) of the Act by issuing notice dated 30- 07-2004 - AO finally passed the order under section 271(1)(c) of the Act levying the penalty - HELD THAT:- Reading of provision u/s 158BFA (2) shows that it is applicable for the specified years in the case of search carried our u/s 132 of the Act, on or after first day of June 2007, but before the first day of July 2012. In case of search proceedings it is compulsory to make the assessment in particular manner under the different provision of the sections of the Act. Similarly, the penalty is levied with respect to search proceedings under a different provisions. AO has levied the penalty under section 271(1)(C) of the Act by observing that the assessee has concealed/furnished inaccurate particular of income whereas there is no concept of concealment/furnishing inaccurate particular of income under the provisions of section 158BFA(2) of the Act as discussed above. In view of the above we hold that the penalty levied under section 271(1)(c) of the Act is not sustainable and accordingly we quash the same. Hence the ground of appeal of the assessee is allowed.
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2021 (4) TMI 481
Disallowance of SWAP loss under section 37(1) - CIT-A deleted the addition - HELD THAT:- This ITAT involving identical facts and circumstances in the case of DCIT vs. Elitecore Technology Pvt Ltd [ 2017 (4) TMI 394 - ITAT AHMEDABAD ] has decided the issue in favour of the assessee stating that the gains on foreign exchange contracts in the same year have been taxed as other income , the losses on foreign exchange contracts have not been allowed as deduction. Such an approach cannot meet any judicial scrutiny. As for the CBDT instructions, it is only elementary that any instructions issued by the CBDT cannot bind the assessee even though the assessee is entitled to, and can legitimately ask for, any benefits granted to the assessee by such instructions or circulars. Nothing, therefore, turns on the CBDT instruction even if it is actually contrary to the claim of the assessee. No nfirmity in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Disallowance of provision of gratuity - CIT-A deleted the addition - HELD THAT:- As the provision for the gratuity in the year under consideration stands at ₹ 2,98,71,626/- which can be verified from note 26 of the audited balance sheet placed on page 22 of the paper book. As such the sum of ₹ 15,74,957/- represents the amount paid during the year towards the opening balance of gratuity provision which not claimed as expenditure in the year under consideration. However, the auditor inadvertently in his tax audit report has recorded the amount of disallowance at ₹ 3,14,46,585/- only. Accordingly we hold that there cannot be any question of disallowing the payment towards the opening balance represented under the provision for gratuity. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we do not find any infirmity in the order of learned CIT (A) - Decided against revenue.
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2021 (4) TMI 480
Validity of reassessment u/s 147 - non-compliance of statutory notices - Addition of bogus purchases - notice issued u/s. 142(1) And questionnaire were also returned back unserved - due to non-appearance before the AO to substantiate that the assessee was not involved in making bogus purchases and in absence of substantiating his case, the AO was constrained to pass the order u/s. 147/144 - HELD THAT:- On a pointed query by the Bench as to whether the assessee has received the notice issued by the AO or not, the ld. Counsel for the assessee fairly conceded that the assessee, in fact, has received the notice, but, under the misconception that the notice does not belong to him did not appear before the AO. It is his alternate contention that given an opportunity, the assessee is in a position to substantiate his case that the assessee was not indulged in any bogus purchases, and, therefore, no addition is called for. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate his case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the AO and produce the relevant details to substantiate his case, failing which the AO is at liberty to pass appropriate order as per law. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2021 (4) TMI 479
Company insolvency proceedings - Overriding effect of section 238 of the Insolvency and Bankruptcy Code, 2016 - directions for liquidation of the assessee company by appointing Shri Anil Kohli, Resolution Professional as Liquidator under section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Provisions contained under section 238 of the Code are having an overriding effect over all other Central and State statutes including Income-tax Act as held by Hon'ble Supreme Court in case of PCIT vs. Monnet Ispat and Energy Ltd.[ 2018 (8) TMI 1775 - SC ORDER ] In view of the matter, section 238 of the Code will have overriding effect over all other Central and State statutes including the Income-tax Act and all the claims including claim of the Income-tax Department under the Income-tax Act, 1961 shall be entertained by the Official Liquidator u/s. 53(1) of the Code. Keeping in view all these facts, ld. AR for the assessee stated at Bar that he does not press this appeal and same may be dismissed as withdrawn. Consequently, present appeal is dismissed as withdrawn having been become infructuous.
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2021 (4) TMI 478
Disallowance on account of bogus loan - addition u/s 68 on unexplained cash credit - findings of the DGIT(Inv.) during the search that the assessee had deliberately made accommodation entry in the Profit Loss account and balance sheet - CIT- A deleted the addition - HELD THAT:- CIT(Appeals) has decided the matter of controversy on the basis of the decision of Hon ble Supreme Court in the case of Lovely Exports Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER] , Anant Shelters Pvt. Ltd. [ 2012 (4) TMI 272 - ITAT MUMBAI] and various decision of the Hon ble Courts mentioned above. Moreover, no law contrary to the law relied by the CIT(A) has been produced before us. The facts are not distinguishable at this stage. CIT(A) has considered the each and every aspects of the facts of the case.Taking into account, all the facts and circumstances, we are of the view that the finding of the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. - Decided in favour of assessee.
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2021 (4) TMI 477
Disallowance of broken period interest on purchase of securities - expenditure deductible as business expenditure - HELD THAT:- As decided in own case AO has not disputed the aforesaid factual position, however, he has held that the Income Tax Act, 1961 will get precedence over the Banking Regulation Act, 1949. Thus, from the aforesaid facts it is clear, though, the assessee has held the securities as stock-in-trade, however, complying to the provisions of Banking Regulation Act, 1949, it has shown them as investment. But, for that reason itself, the nature and character of securities held as stock-in-trade will not change. Moreover, the Department has not disputed the fact that the income derived by the assessee from sale of securities has been offered as business income and the department has also accepted it. Applying the same logic, the expenditure incurred by way of payment of broken period interest while purchasing such securities must be treated as business expenditure. The decisions relied upon by the learned Authorised Representative clearly support this view. In aforesaid view of the matter, we uphold the decision of the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the Revenue.
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2021 (4) TMI 476
Validity of assessment - Statutory approval of Draft Assessment order u/s 153D - Jurisdiction - Approval by the JCIT as required under section 153D obtained or not? - as argued no approval said to be granted by Joint Commissioner u/s. 153D - HELD THAT:- As relying on MITTAL ROADWAYS PVT. LTD. [ 2021 (3) TMI 555 - ITAT JABALPUR] this Tribunal is of the considered opinion that there is no approval u/s 153D of the Act for passing of the assessment order. Therefore, this Tribunal is unable to uphold the orders of the authorities below. Accordingly, the orders of the authorities below are quashed. - Decided in favour of assessee.
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2021 (4) TMI 475
Adhoc Disallowance of expenses - AO disallowed the lumpsum of the total expenditure claimed - HELD THAT:- The contention of the ld. AR is not acceptable that the adhoc disallowance cannot be made. During the course of assessment proceedings the AO specifically asked to the assessee for production of the evidence/bills and vouchers but the assessee did not produce any vouchers. He has rightly confirmed 10% of the total expenditure. The AO was unable to verify the actual expenses incurred by the assessee with proper supporting vouchers. Therefore, the ground raised by the assessee is rejected. Ld. AR referred to the decision of the CIT(A) in case of Kumar Sunrise Jewellers, we are also not binding on the decision of the CIT(A), therefore, this ground is dismissed. 10. In respect of ground No.1(ii), the AO has added to the total expenditure on carriage inwards of ₹ 2,64,014/- for want of supporting documents. As the assessee purchases valuable articles from outside also, therefore, safety is necessary and there must be incurred some expenses towards carriage inwards. The total purchase of gold is ₹ 98,31,994/- and silver purchased is ₹ 24,30,000/-. Considering the facts of the case and looking to the nature of business of the assessee, we restrict the disallowance made by the AO and confirmed by the CIT(A) to the extent of 50% of ₹ 2,64,014/-. Thus, the assessee gets relief of ₹ 1,32,007/-. This ground is partly allowed. Addition of capital introduce by the partners - HELD THAT:- Issue decided in favour of assessee as relying on METACHEM INDUSTRIES [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] as held whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income-tax. It is open to the Assessing Officer to take appropriate action under Section 69 of the Act, against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner of Income-tax (Appeals) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries. Discrepancies found in the stocks of gold silver on the date of survey i.e. on 04.04.2012 just after closure of the dates of the financial year - survey team has pointed out some discrepancy in physical stocks taken by them to which the assessee had stated before them that he will reconcile the issue - HELD THAT:- During the course of hearing ld. AR of the assessee has also accepted that there is excess/shortage of stocks. In the case of gold and silver he conceded that there is an excess stock found of 34.16gms and in case of silver 33,932.71 gms, respectively. He also conceded that the net profit rate should be added instead of entire value of the excess/shortage of the stocks. In this regard, he has also relied on the judgment as cited in his written submissions. However, we are not in agreement with the submission of the ld. AR regarding the profit element as offered by the ld. AR of the assessee. The shortage found of silver of 33,932.71 gms are conceded by the ld. AR on behalf of the assessee, therefore,, the entire value of the silver is to be added into the total income of the assessee, which has not been recorded properly in the books of accounts of the assessee. Further in respect of excess of 34.16 gms which are found excess is investments and the value of this is also to be added into the total income of the assessee. In this regard, the case law relied on by the ld. AR of the assessee is not applicable in the present case. Therefore, this ground of appeal of the assessee is partly allowed. Addition u/s.40A(3) - AO has disallowed that the assessee has violated the provisions of Section 40A(3) of the Act regarding purchase of gold and silver - HELD THAT:- On careful consideration of the details submitted by the ld. AR of the assessee that the assessee has purchased gold and silver through staff at villages, on Sunday/bank holidays, exchange value of old gold and silver and petty purchases, no doubt the assessee has violated the provisions of Section 40A(3) of the Act but there are some instances under which the assessee may get relief as per sub-rule (k) of Rule 6DD of I.T.Rules, 1962. No doubt that the AO has accepted that the purchases have been made by the assessee and the payments have also been made by the assessee to the sellers. We found substance on the submissions made by the ld. AR of the assessee in his written submissions which has been quoted in the above paras. In the written synopsis the ld. AR has relied on the judgment of Hon ble Rajasthan High Court in the case of Harshila Chordia [ 2006 (11) TMI 117 - RAJASTHAN HIGH COURT] and Fakri Automobiles[ 1985 (7) TMI 36 - RAJASTHAN HIGH COURT] . The decision of Hon ble Gujarat High Court in the case of Anupam Tele Services [ 2014 (2) TMI 30 - GUJARAT HIGH COURT] are squarely applicable in the present case in hand, therefore, relying the above judgments of the Hon ble High Courts, we allow this ground of appeal of the assessee. Addition of sundry creditors - assessee has submitted in his written submissions that the sundry creditors appearing in the balance sheet are relating to previous assessment years and not any fresh creditors have been created and the AO has also noticed that the assessee is making payment in cash - HELD THAT:- Considering this view if the creditors are relate to the previous assessment years and no fresh creditors have been created, the addition cannot be made in impugned assessment year - As relying on LYCOS INDIA LIMITED VERSUS ITO, WARD-1 (1) , BHUBANESWAR [ 2020 (9) TMI 192 - ITAT CUTTACK] we delete the addition made by the AO and allow this ground of appeal of the assessee.
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2021 (4) TMI 474
Disallowance of expenditure u/s 37(1) - expenditure under various heads of expenses such as doctors' spends, gifts external and internal conference, etc - addition on the ground that the same was in violation of the MCI Regulations and consequently, was in violation of the Circular No. 5/2012 dated 01 August 2012 issued by the CBDT - HELD THAT:- It is well-settled that the CBDT Circular No. 5 of 2012 shall be applicable prospectively w.e.f. the date of Circular i.e. 01.08.2012. There is no dispute that in the decisions relied on by the Ld. counsel mentioned at para 6 hereinabove, it is held that CBDT Circular is applicable prospectively. Therefore, no disallowance u/s 37(1) of the Act r.w. Circular No. 5 of 2012 dated 01.08.2012 issued by CBDT can be made. In the instant case, neither the Ld. CIT(A) nor the Department have held/argued that the expenses incurred towards payments to the doctors is not a business expenditure. The only question is whether the expenditure is disallowable under the Explanation to section 37(1) of the Act, being violative of MCI Guidelines or not. We are of the considered view that when an expenditure is an allowable business expenditure as per the provisions of the Act, then by invoking the provisions of MCI Guidelines, ad-hoc disallowance cannot be made to the total income without any basis. In this regard, we rely on the order of the Tribunal in the case of Johnson Johnson Ltd [ 2013 (4) TMI 228 - ITAT MUMBAI] accepted by the Department before the Hon ble Bombay High Court [ 2016 (7) TMI 1272 - BOMBAY HIGH COURT] wherein it has been held that after the expenditure is held to be for the purpose of business, then ad-hoc disallowances cannot be made treating the same as non-business expenditure. In view of the above factual scenario and position of law, we direct the AO to delete the disallowances of expenses upheld by the CIT(A). - Decided in favour of assessee. Weighted deduction u/s 35(2AB) - HELD THAT:- In the case of Microlabs Ltd. [ 2015 (3) TMI 982 - ITAT BANGALORE], the Tribunal has held that where the assessee-company engaged in the business of pharmaceuticals received product development charges which were credited the profit and loss account as a part of normal sales, same was not to be reduced from expenditure incurred by the assessee on carrying out scientific research on which section 35(2AB) deduction had to be allowed. As mentioned earlier, the same issue was adjudicated upon by the Tribunal in assessee s own case for AY 2008-09 and AY 2009-10. The Tribunal in para 9 of the order has restored back the matter to the AO for statistical purposes. Pursuant to the direction of the Tribunal, the AO passed order giving effect for the above assessment years. After the directions provided by the Tribunal, the Department has not preferred an appeal before the High Court. Thus the issue having attained finality in assessee s own case, we direct the AO to allow expenditure on gross basis. Computing capital gains on transfer of leasehold rights - Applicability of section 50C of the Act on transfer of lease hold lands - HELD THAT:- In the instant case, the ownership of the land and superstructure on the same was with MIDC and with the approval of MIDC, the said leasehold rights were transferred from Bombay Dyeing to the assessee - After acquisition of land, the factory and the residential building, the assessee agreed in the agreement dated 31.03.2004 that it would obtain permission from MIDC for demolishing the superstructure of the said land. - Thus it is crystal clear that the assessee had no rights to construct or sub-plot or assign the rights to anyone without obtaining approval from MIDC. In fact the assessee only had limited rights to undertake construction on the said land. The assessee has assigned the leasehold rights only after obtaining approval from MIDC. - As the assessee did not have the right to construct/transfer/sub-plot or assign the property without obtaining the approval from MIDC and accordingly the assessee had limited rights in the leasehold property unlike the complete right for development of property, thus we direct the AO to delete the addition made by applying the provisions of section 50C of the Act. Accordingly, assessee grounds of appeal are allowed. TP Adjustment - order of the Ld. CIT(A) re-computing the ALP of the international transaction pertaining to sale of pharmaceutical products by the assessee to its AE and confirming an adjustment - assessee has adopted TNMM as the most appropriate method, selecting itself as the tested party and adopting OP/OC as the profit level indicator (PLI) - HELD THAT:- We find merit in the contentions of the Ld. counsel that the Ld. CIT(A) has confirmed the adjustment made by the AO/TPO in respect of only part of the total products and accepted the remaining exports made by the assessee at arm s length and thus he cannot accept TNMM for only part of the same transaction. Thus it is incongruous on the part of the Ld. CIT(A) accepting the international transaction of sale of pharma products (portion pertaining to sale of other products) to be at arm s length, however rejecting the remaining portion (sale of Metformin product) and confirming TP adjustment on such portion after allowing certain adjustment with adoption of CUP as the most appropriate method. In the instant case, we find that the TPO has straight proceeded to apply CUP method. The TPO has not examined the applicability and relevance of TNMM. Thus well-settled principles delineating the ingredients of TNMM and keeping in mind the facts in the present case, we set aside the order of the Ld. CIT(A) on the above grounds of appeal and restore the matter to the file of the TPO/AO to pass an order afresh as per Rule 10B. We hold that TNMM is the most appropriate method in the present case and while using TNMM, the search for comparables may be broadened by the assessee as well as revenue by including comparables. However, this can be done only if (a) the functions performed by the tested party and the selected comparable entity are similar including the assets used and the risks assumed; and (b) the difference in services/products offered has no material bearing on the profitability. We direct the assessee to file the relevant documents/evidence before the TPO/AO. As the above grounds of appeal are restored to the file of the TPO/AO, we are not adverting to the case laws referred by the Ld. counsel. Grounds of appeal are allowed for statistical purposes. Deduction in respect of education cess on income tax paid during the year ought to be allowed as a deduction while computing the total income - HELD THAT:- The Hon ble Bombay High Court in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] has held that education cess is an allowable business expenditure and not subject to disallowance u/s 40(a)(ii) of the Act. Also the Hon ble Rajasthan High Court in the case of Chambal Fertilizers Chemicals Ltd. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] has held that education cess liability is eligible for deduction while computing the total income.
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2021 (4) TMI 473
Revision u/s 263 by CIT - Long term loss arising of transfer of preference shares on redemption at par due to indexation and further purchase on preference shares of the same company which tantamount to conversion - HELD THAT:- We find that assessee had filed all the supporting documents relating to redemption of preference shares of TML Holdings Pte Ltd., and further subscription of 2020000 cumulative preference shares of TML Holdings Singapore - We find that the ld. AO on going through all these relevant documents had (a) allowed carry forward of long term capital loss to be carried forward under normal provisions of the Act by duly appreciating the fact that the loss of redemption of preference shares had occurred during the year only because of indexation benefit which is a statutory deduction available to the assessee; (b) setting off business loss with the foreign dividend income u/s.71 of the Act while computing income under normal provisions of the Act. This order was sought to be revised by the ld. PCIT u/s.263 on the ground that the ld. AO had not made any enquiries regarding the aforesaid two issues in the original assessment proceedings. Assessee before the ld. PCIT in reply to show-cause notice u/s.263 of the Act had duly brought all these facts before him by pointing out that the ld.AO had made adequate enquiries with regard to the subject mentioned dispute issues during the course of assessment proceedings and on due appreciation of those submissions, the ld. AO had framed the assessment without disturbing claim thereon. It was specifically pointed out before the ld. PCIT that the order passed by the ld. AO was not in violation of any order, direction or instruction issued by CBDT u/s.119 of the Act. Rather it was specifically pointed out that in respect of taxability of foreign dividend u/s.115BBD of the Act, the order was passed by the AO in conformity with the decision of the Hon ble Jurisdictional High Court in the case of British Insulated Calendar Ltd. [ 1993 (1) TMI 43 - BOMBAY HIGH COURT] There is absolutely no basis for arriving at this conclusion by the ld. PCIT. What could be expected from the side of the assessee is only furnishing of necessary and requisite details before the ld. AO in response to queries raised by him. Once that onus is discharged by the assessee, the assessee cannot be expected to step into the shoes and minds of the Assessing Officer by providing him assistance in the manner in which the impugned issues are to be addressed by the ld. AO in the assessment order and reach relevant conclusions thereon. This is apparently the job of the ld. AO. Hence, the assessee can in no way be faulted for the same. Even otherwise, we find that the ld. AO had duly appreciated all these facts and materials with evidence available on record and had accepted to the contentions of the assessee by making proper examination and enquiries thereon. Hence, it is not a case of lack of enquiry on the part of the ld. AO which would enable the ld. PCIT to invoke revisionary jurisdiction u/s.263 of the Act. We hold accordingly that Explanation 2 to Section 263 which has been heavily relied upon by the ld. PCIT for invoking revisionary jurisdiction u/s.263 of the Act, is bad in law in the facts and circumstances of the instant case. Once adequate enquiries were made by the ld. AO and the assessment has been framed accordingly, merely because no mention about those impugned issues has been recorded in the assessment order by the ld. AO, the said assessment order cannot be termed as erroneous even if it is found to be prejudicial to the interest of the revenue. The order of the ld. AO could not be termed as erroneous at all. Reliance in this regard is placed on the decision of the Hon ble Supreme Court in the case of Malabar Industrial Company Ltd., vs. CIT [ 2000 (2) TMI 10 - SUPREME COURT] As assessee had duly responded before the ld. PCIT also by way of making detailed submissions on merits on the first issue regarding the loss of redemption of preference shares due to indexation benefit by specifically stating that the said loss of redemption of preference shares is distinguished from fresh purchase of preference shares during the year and the same does not amount to conversion . Order passed by the ld. AO and the opinion framed thereon by him was one of the possible views taken by him while framing the assessment based on the laws prevailing at that relevant point in time. The law is very well settled that, once a possible view has been taken by the ld. AO while framing the assessment, the same cannot be subjected to revision u/s.263 of the Act merely because the ld., PCIT is of a different view on the impugned subject. From the elaborate factual submissions made by the assessee on merits which are reproduced hereinabove, we are in complete agreement with the contentions of the assessee that the ld. PCIT ought not to have even resorted to take a divergent view than that taken by the ld. AO in the facts and circumstances of the instant case. In any case, we hold that revision jurisdictional u/s.263 of the Act is not permissible when a possible view has been taken by the ld. AO (though this is a case where no two views are possible) while framing the assessment and further revision u/s.263 could not be made merely because the ld. PCIT is trying to substitute his view in the view already taken by the ld. AO. Taxability of dividend received from specified foreign companies u/s.115BBD - We find that assessee had even submitted that by setting off the foreign dividend income with the business loss of the year u/s.71 of the Act, the assessee had actually set off the income taxable @15% with the loss which would have a tax effect of 30%. This has only caused prejudice to the interest of the assessee and it is not prejudicial to the interest of the revenue. Even this aspect has not been considered and appreciated by the ld. PCIT. We hold that in view of the aforesaid detailed observations that assessee had also made out a case before the ld. PCIT even on merits and accordingly, the ld. PCIT ought not to have given directions to the ld. AO to disallow the claim of carry forward of long term capital loss and for taxing the foreign dividend income. Hence, the assessee succeeds on this aspect on merits also. Also find from the final pages of the assessment order that ultimately the income has been determined only u/s.115JB of the Act. Even after giving effect to the order of the ld. PCIT u/s.263 of the Act, there would be no taxable income under normal provisions of the Act and even then, the income would ultimately get determined only u/s.115JB of the Act. Hence, there would be no prejudice that could be caused to the interest of the Revenue in this regard. While this is so, we are unable to persuade ourselves to accept to the contentions of the ld. PCIT that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue. Reliance in this regard has been rightly placed by the ld. AR on case of Luxmi Co. Ltd. [ 2017 (2) TMI 1439 - ITAT KOLKATA] which is directly on the point in dispute before us. For the sake of brevity, the relevant operative portion of the said order is not reproduced hereunder. Even on this ground, we hold that the revision order passed by the ld. PCIT is unsustainable in the eyes of law. - Decided in favour of assessee.
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2021 (4) TMI 469
Assessment of trust - depreciation allowable as application of income on charitable objects - Double deduction - HELD THAT:- Substantial questions of law, which have been framed in these appeals, have been answered against the Revenue as relying on RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA [ 2017 (12) TMI 1067 - SUPREME COURT] . - Decided against revenue.
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Customs
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2021 (4) TMI 492
Import of prohibited goods - Decalcified Fish scale for Collagen (Fish Protein) - Revenue found the item to contain pathogenic Salmonella on testing and directed the importer to move the cargo back to Customs jurisdiction - re-export of goods allowed subject to payment of redemption fine and penalty - HELD THAT:- The Commissioner(Appeals) in the impugned order has specifically allowed the benefit to the appellant under Section 74 of the Customs Act, 1962 for reexport of goods as the governing factors under Section 74 for reexport of goods imported have not been violated by the appellant - when the goods allowed to be reexported by the Commissioner(Appeals), then the imposition of redemption fine and penalty is not sustainable in view of the various decisions relied upon by the appellant. Tribunal in the case of Kenda Farben India Pvt. Ltd. [ 2018 (10) TMI 1571 - CESTAT ALLAHABAD ], has held that imposition of redemption fine is not justified when permission was granted to reexport the goods. Thus, imposition of fine and penalty not sustainable - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2021 (4) TMI 506
Inspection of the books of accounts and other statutory records of the Petitioner company - whether the Registrar would have to first call upon the Petitioner to give an explanation and also provide them a reasonable opportunity of being heard before the Registrar, before issuing show cause notices? - section 206(5) of the Companies Act, 2013 - HELD THAT:- There is no doubt that under Section 207 of the Companies Act, 2013, statements of the Directors of the company have been recorded. However, under these circumstances the Petitioner ought to be given a reasonable opportunity of being heard - In the present case, preliminary findings were issued in September, 2020, and owing to the belated reply, the authorities have proceeded further, to issue the said show cause notices and it is not clear if the reply submitted was considered or not. A copy of the report of the IO, which contains allegations against the Petitioner, if already not supplied, shall be supplied to the Petitioner within a week from today - In continuation of the reply submitted in June, 2020, a comprehensive detailed reply be filed by Petitioner, in response to all the show cause notices within a period of four weeks, i.e. on or before 5th May, 2021. No further opportunity shall be granted in this regard. Petition disposed off.
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Insolvency & Bankruptcy
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2021 (4) TMI 493
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Financial Creditors - HELD THAT:- The Instant Appeal was filed before this Hon ble Tribunal on 19.03.2021, after expiry of the date fixed by the Learned Adjudicating Authority - This shows that the Appellant was not serious in pursuing his remedy before the Learned Adjudicating Authority. There are no reason to interfere with the Impugned Order - appeal dismissed - decided against appellant.
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2021 (4) TMI 491
Dispensation of the meeting of the Equity Shareholders and Creditors of the Appellant Company - whether filing of separate Petition by the transferee company is necessary? - HELD THAT:- From the perusal of the pleadings it is amply clear that the Appellant Company is a 100% holding of its Subsidiary i.e. the transferor Company. Therefore, there is no issuance of any new shares, there is no reorganisation of share capital of the Appellant Company and no arrangement wherein shareholders have to compromise with creditors of the Transferor Company. Further, it is also seen that the net worth of the Appellant Company is highly positive in compare to the net worth of the Transferor Company. Hon ble High Court of Bombay in the matter of Mahaamba Investments Ltd. vs IDI Ltd. , [ 2001 (1) TMI 904 - HIGH COURT OF BOMBAY] whereby it is clear that an Application filed by the Transferor Company or Transferee Company, a separate Application is not necessary by the Transferee/Transferor Company. Further, this Tribunal in the matter of DLF Phase IV Commercial Developers Ltd. Ors. [ 2019 (8) TMI 829 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ] dispensed with the meetings of the Creditors and shareholders. However, the facts of the DLF matter are little different i.e. in the DLF matter the written consent was obtained by way of an Affidavit . This Tribunal allowed the Appeal by setting aside the order of the Tribunal where the Learned Tribunal rejected the approval seeking the dispensation of the meetings of creditors and shareholders. In the present case the Learned Tribunal ought to have dispensed with the meetings of the Equity shareholders and Creditors of the Appellant Company. The only objection taken by the Learned NCLT that no written consent by way of an Affidavit of the Shareholders and Creditors, were filed. The meetings of the Equity shareholder, Secured and Unsecured Creditors of the Appellant Company is dispensed with - matter is remanded back to the NCLT for further Consideration - appeal allowed.
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PMLA
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2021 (4) TMI 507
Seeking enlargement on Bail - Money Laundering - fraudulent transfer of funds abroad - HELD THAT:- As it appears from record, the applicant has floated various bogus entities, several money transactions/transfers, have been traced between the companies/firms owned by applicant and accused companies. Prima-facie, evidence suggests, applicant was managing and controlling financial affairs of accused and beneficiary companies. Whereas, one co-accused was an employee of a beneficiary company and another, was director. Besides, evidence suggests, both co-accused had joined the investigation; soon after they were summoned and co-operated investigation. Reply fled by the Enforcement Directorate suggests, that the investigation is not complete and non-co-operation of the applicant has resulted into lack of financial information available with the respondent in respect of over-seas companies, their bank accounts and financial transaction. Prosecution in their reply has submitted that the applicant has not co-operated in respect of financial information of over-seas companies; that investigation is still going on and there is likelihood of applicant meddling with the investigation, if released on bail. The applicant cannot be released on Bail - application dismissed.
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Service Tax
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2021 (4) TMI 500
Levy of service tax on municipalities - Renting of immovable property service - a person within meaning of Finance Act, 1994 as it stood prior to 01.07.2012 or not - period prior to July 2012 as well as post 01.07.2012. Period prior to 01.07.2012 - HELD THAT:- To attract levy under Section 65(105) (zzzz) of the Finance Act 1994 there should be renting of immovable property or provision any other service in relation to such renting, for use in the course of or furtherance of, business or commerce to any person . Only if service was provided by any other person , i.e, by a person other than the owner, such service was liable to service tax - The expression any other person can only mean any other person other than the owner of the property. Therefore, owner of the immoveable property is not liable to pay tax under Section 66 of the Finance Act, 1994 for the period up to 30.06.2012 - An owner can be held liable to pay tax for renting of immoveable property service only if there was an appropriate notification issued under Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d) of the Service Tax Rules, 1994. Service tax was payable only if such services were provided by any other person other than the owner, to any person by such renting, for use in the course of or in furtherance of, business or commerce - As the owner of the immovable property who rents out the property simplicitor was not in contemplation in the definition of taxable service of renting of immovable property in Section 65(105(zzzz) of the Finance Act, 1994, demand against the petitioner was without jurisdiction. Since the petitioner municipality is the owner of property, question of it being made liable to pay service tax for any service in relation to such renting of immoveable property does not arise even if it had rented out its immoveable property for use in the course of or for furtherance of, business or commerce of the person who was renting it. Period post 01.07.2012 - HELD THAT:- From 01.07.2012, there was a paradigm shift in the entire structure of the provision of the Finance Act, 1994 in view of the amendments to it by Finance Act, 2010. It introduced a new definition of service in Section 65B(44) of the Finance Act, 1944 for the first time - The definition of Service as in Section 65B(44) of the Finance Act, 1944 is very wide. Thus, any activity carried out by any person for another for valuable consideration is service. It includes declared service as defined in Section 65B(22) of the Finance Act, 1944 read with 66E of the Act. Certain activities were listed in the negative list. Those services are not liable to tax as Service tax is payable on the value of all services provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed under Section 66B of the Finance Act, 1994. Under Section 66B of the Finance Act, 1994 no tax was payable for the services specified in the negative list - Most services provided by the Central or State Government or local authorities are in the negative. Section 66D of the Finance Act, 1994 gives list of 17 service which were grouped under the negative list . If the activity carried out by the Petitioner Municipalities are categorised as Support Service , it cannot be held that there was a provision of taxable service and such service was liable to tax under Section 66B of the Finance Act, 1994 as in force with effect from 01.07.2012. However, for such support services, service tax was payable by the recipient of such service in terms of Rule 2(1)(d)(E) of the Service Tax Rules, 1994 as amended by notification No.36/2012-ST dated 20.6.2012 with effect from 1.17.2012 - For support service provided, the recipient was liable to pay tax on reverse charge basis under Rule 2(1)(d)(E) of the Service Tax Rules, 1994 as amended by notification No.36/2012-ST dated 20.06.2012 as in force from 01.07.2012. Therefore, the Petitioner Municipalities can be held liable to pay service tax only for service specified in Sub-Clauses in (i), (ii) and (iii) of Clause (a) of Section 66D of the Finance Act, 1994. Renting of immovable property Service - HELD THAT:- Though under Rule 2(1)(d)(E) of the Service Tax Rules, 1994, service tax is payable by the service provider, it has to be held that if such services are provided by a Government or Local Authority, they are exempted under Section 65D(1)(a) of the Finance Act,1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immoveable property of a non-governmental or local body will be liable to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself. That apart, it is seen that some of the services provided are also exempted under the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide Sl.Nos.38 and 39 - it includes: Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets and Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. Petition disposed off.
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Central Excise
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2021 (4) TMI 496
Clandestine manufacture and removal - copper wire ingots - entire documents on which the demand has been confirmed, recovered from the factory premises of M/s Kaycee Electricals and from the residential premises of its Partners - corroborative evidences or not - third party evidences - HELD THAT:- Apparently and admittedly, no search was conducted in premises of any of the present appellants. No physical verification of the stock of present appellants was conducted. Both the show cause notices, the initial order-in-original and the impugned order under challenge are based merely upon the loose parchies and other handwritten documents as was recovered from the premises of M/s Kaycee Electricals and also on the basis of statements of the Supervisor as well as Partner that too of M/s Kaycee Electricals itself. The entire evidence is therefore nothing but a third party evidence - neither the documents as were recovered from the premises of M/s Kaycee Electricals can be read against the appellants nor the statements of employees of M/s Kaycee Electricals can be considered to be the admission on part of appellants Section 31 of Evidence Act has also been wrongly applied. Section opens up saying that admissions are not conclusive proof, but may estop. The intent of section 31 of Evidence Act is also that admissions can always be explained and can be shown to be wrong. It is in the absence of such explanation that the admission may estop the maker thereof - Law is settled that burden of proof for alleged clandestine removal of goods by appellant is upon the department. Section 31 and 58 of Indian Evidence Act are held not applicable to the given facts and circumstances. The Adjudicating Authorities below are warned to make complete proper compliances of the orders of remand. They need to be careful while making the interpretation of the orders of the Tribunal - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (4) TMI 503
Levy of tax on turnover - transactions purportedly involving inter-state sales and branch transfers which were not supported by the Form-C and Form-F respectively - inclusion of freight element in taxable turnover - HELD THAT:- Assessments under the Tax enactments are by and large based on the returns filed by an assessee. In the case of Tamil Nadu Value Added Tax, 2006 and the Central Sales Tax Act, 1956, it is certainly driven by the returns filed by a dealer unless no returns were filed. In this case the petitioner had filed returns under the provisions of the Central Sales Tax Act, 1956. In the present case, the sale was concluded at the factory gates itself and therefore the freight element cannot from part of the taxable turnover as was rightly contented by the petitioner - Since the sale took place at the factory gate, the sale never assumed the character of an inter-state sale. It was actually a local sale. It was therefore to be assessed as a local sale under Tamil Nadu Value Added Tax Act, 2006. As an Appellate Authority, the 1st respondent is required to merely examine the correctness of the order passed based on the returns filed by an assessee. Therefore, if the first respondent as an Appellate Authority, finds that the petitioner had wrongly filed return by treating a transaction as that of an inter-state when it indeed it was that of a local sale, as an Appellate Authority, the 1st respondent was well within his rights to direct the Assessing officer to complete assessment in accordance with law - In the impugned order, the first respondent has not added any tax liability in the impugned order. The first respondent has merely directed the jurisdictional Assessing Officer to exercise the jurisdiction by revising the assessment. The original assessment which was impugned before the 1st respondent proceeded on a wrong assumption that the transactions were liable to tax under the provisions of the Central Sales Tax Act, 1956 when indeed the transaction in question was liable to tax under the provisions of the Tamil Nadu Value Added Tax Act, 2006. The direction in the impugned order to the Assessing Officer was not outside the scope of Section 52 of the Tamil Nadu Value Added Tax Act, 2006. The impugned order was based on the facts put forth by the petitioner - there are no merits in the present petition - the second respondent is directed to complete the assessment under the provisions of the Tamil Nadu Value Added Tax Act, 2006 - Assessing Officer directed to complete the assessment under the provisions of the Central Sales Tax Act, 1956 regarding the transaction involving branch transfer if the petitioner has produced requisite Form F - petition disposed off.
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2021 (4) TMI 499
Levy of tax - transfer of right to use goods or not - sale was in the course in the import or not - Operating lease agreements - eligibility for exemption under Section 3-A(2)(a) of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT:- Since the dispute pertains to the Assessment Years 2004-2005 and 2005-2006 and since these Writ Petitions are pending considerably for a long period of 13 years before this Court, the Court is inclined to exercise its jurisdiction under Article 226 of the Constitution of India and therefore takes up the case for a final disposal on merits even though the petitioner may have an alternate remedy before an Appellate Authority under the provisions of the Tamil Nadu General Sales Tax Act, 1959. Since the petitioner continued to be the real owner of the goods imported under the arrangement as per the respective Operative Lease Agreements, it was quite natural for the petitioner to have filed the respective Bills of Entry and paid the customs duty on the imported goods. The petitioner also transported the goods to the respective factories of the respective user with whom it had entered to operative lease agreement - Though under the Sale of Goods Act 1930, the definition of sale is restricted, it nevertheless recognizes any other document used in the ordinary course of business as a proof of possession or control of the goods or authorising or purporting to authorise, either by endorsement or by delivery, the processor of the document to transfer to receive the goods thereby represented. The expression crossing of the customs frontiers of India has been defined in Section 2(ab) of the Customs Act, 1962. As per the decision of the Hon ble Supreme Court in BSNL Vs. Union of India , [ 2006 (3) TMI 1 - SUPREME COURT] , actual delivery of the goods may not be necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer and must be deliverable and delivered at some stage - If the above principles in BSNL Vs. Union of India , are applied to the facts of the present case, the petitioner may contending that the extended definition of sale, viz. transfer of the right to use goods took place before actual clearance and there cannot be any levy of tax under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 as the transaction was exempted under Section 5(2) of the Central Sales Tax Act, 1959. The fact that the petitioner is stated to have acted as an agent of the lessee at the time of import under the respective Operating Lease Agreements is of no relevance as the petitioner neither transferred the possession nor effective control to the lessee till the actual delivery and also continued to receive lease rentals during the currency of the respective Operating Lease Agreements. Therefore, the petitioner cannot claim exemption under Section 5(2) of the Central Sales Tax Act, 1956 for the entire period - Further, it should be noted that in the case of ordinary sale , the transaction between the seller and the buyer ends with a single transaction. However, in the case of lease, where there is no transfer of ownership but only a transfer of possession and effective control. Tax is to be paid on the transaction for the period upto the period of lease under the Agreements. Each payment of lease rent would amount to extended definition of sale. While the petitioner is entitled for deduction of lease rental received period upto the date of actual clearance of the imported goods from the customs barriers under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959, for the period thereafter, i.e. after the effective possession and control were transferred to the respective lessees / actual users, the petitioner will be liable to pay tax under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 - Case remitted back to the respondent to give the benefit of deduction to the petitioner upto the date of import to the petitioner for any lease rental which the petitioner may have received prior to the said date - petition allowed by way of remand.
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Indian Laws
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2021 (4) TMI 470
Dishonor of Cheque - rebuttal of presumption - signatures on cheque accepted - decision on receipt of notice - Section 143A of Negotiable Instruments Act - HELD THAT:- Considering that the petitioner has admitted his signatures on the cheque in question and that even according to the petitioner some amount was due and payable, there is a presumption under Section 139 of the N.I. Act that there exists a legally enforceable debt or liability. Of course such presumption is rebuttable in nature and the same could only be done by adducing evidence at trial but at this stage as the minute appreciation of evidence is not to be done complaint could not be quashed on this score. Therefore at this stage of trial complainants are entitled for the presumption as provided under Section 139 of N. I. Act. The reciept of notice could not be decided in the proceedings under Section 482 Cr.P.C and the same has to be decided in the trial after the evidence has been led by the parties - the trial court is directed that if in compliance of its order dated 11.11.2020 the required amount is deposited or recovered from the petitioner the same will only be released in favour of opposite parties 2 and 3 on their furnishing adequate sureties, so that the amount remains secured. There are no merits in the petition - petition dismissed.
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