TMI Tax Updates - e-Newsletter
April 19, 2021

Case Laws in this Newsletter:

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

Articles

• S.68- not applicable in case of banking transactions done digitally with names appearing in bank statement – illustrative submission before the AO.
• RECENT DEVELOPMENTS IN GST

News

• Shri Piyush Goyal says Maharashtra has so far received the highest quantity of Oxygen in India;

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• Open Banking in India (Remarks by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India - Wednesday, April 14, 2021 - in a webinar on Open Banking organised by Tata Consultancy Services (TCS) in association with the Embassy of India in Brazil)

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Notifications

GST - States

• 66/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Amendment in Notification No. 35/2020-State Tax, dated the 19th November, 2020

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• 65/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Amendment in Notification No. 35/2020-State Tax, dated the 19th November, 2020

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• 56/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Amendment in Notification No. 46/2020-State Tax dated the 19th November, 2020

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• 55/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Amendment in Notification No. 35/2020-State Tax, dated the 19th November, 2020

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• 47/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Amendment in Notification No. 35/2020-State Tax, dated the 19th November, 2020

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• 40/2020 – State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Seeks to amend Notification No. 35/2020-State Tax dated the 19th November, 2020

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• 01/2021 - State Tax - dated 9-2-2021 - Chhattisgarh SGST
  Chhattisgarh Goods and Services Tax (Amendment) Rules, 2021

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• 05/2021 – State Tax - dated 12-4-2021 - Jharkhand SGST
  Seeks to amend Notification No. 13/2020 – State Tax, dated the 25th June, 2020

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• 04/2021 – State Tax - dated 12-4-2021 - Jharkhand SGST
  Amendment in Notification No. 95/2020 - State Tax, dated the 24th March, 2021

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• 03/2021 – State Tax - dated 12-4-2021 - Jharkhand SGST
  Class of persons who shall be exempted from aadhar authentication

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• F A 3-49/2017/ V (10) - dated 23-2-2021 - Madhya Pradesh SGST
  Amendment in Notification No. FA-3-49/2017/1/V(68) Dated the 03rd July, 2017

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• 06/2021- State Tax - dated 15-4-2021 - Maharashtra SGST
  Seeks to amend Notification No. 89/2020—State Tax dated 7th December, 2020

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Highlights / Catch Notes

Income Tax

• Disallowance u/s 40A(3) - cash paid against purchase of land - Genuineness of the transaction is not in doubt. Assessee being in the business of real estate has entered into such transaction for business and commercial expediency. - Ld. CIT(A) has rightly deleted the disallowance - AT
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• TP Adjustment - Addition considering the interest free loan and advances to its Associated Enterprises - As assessee got such huge business from its associated enterprises based in the USA. In the absence AE in UK the assessee would have taken services from third party which would have led to more cost than the notional interest income. In other words, the transaction for advancing the interest-free loans to the associated enterprises has to be seen in the context of the benefit received by it from such associated enterprises. - no adjustment under the transfer pricing provisions is required to be made with respect to the interest free loans and advances by the assessee to its associated enterprises in the given facts and circumstances. - AT
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• Correct head of income - Gain on sale of shares - short term capital gain or business income - If we analyze given chart, then it can be clearly seen that out of above scripts, the gain/profit is mainly from one scrip, that is, DLF Ltd. Hence, it cannot be held the transaction is in the nature of business or profession. - AT
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• Estimation of Net profit - difference between the amount shown as turnover by the assessee and as reflected in Form 26AS - only because there is a mismatch between TDS certificate (26AS) and turnover shown by the assessee in its P& L account cannot be the sole basis on which the entire addition of the difference could have been brought to tax. - AT
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• TDS u/s 195 - Payment of Royalty or not - The assessee agreed for reimbursement of cost incurred by the GTRC for doing research activity as a part of joint research on which both the parties have equal right on result of such joint research project - AO has not carried out any verification/investigation to disprove the claim of pure reimbursement of expenses made by the assessee on the basis of relevant supporting material as reflected in this order. - payment made to GTRC was towards cost reimbursement for joint research project and not royalty - AT
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• Revision u/s 263 - claim of depreciation - no business activity - the assessee is not carrying on any business activity. Indeed the manufacturing activity of the assessee was closed down but the assessee changed its object clause which can be verified from the memorandum of association. As such the assessee got inserted new objects in the main object clause of memorandum of association by passing special resolution - It seems that the assessee was carrying on the business activities and therefore the depreciation claimed by the assessee on the cars cannot be disallowed on the ground that there was no business activity carried out by the assessee in the year under consideration. - AT
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• Bad debts - Disallowance of deduction claimed in respect of notional interest taxed as income in earlier year, which was not realized by the appellant - the assessee is not in money lending, therefore, the assessee cannot claim that the assessee made inter corporate deposit in the course of his business. During the earlier years the assessee never claimed as a business loss on account of non-receipt of interest on such inter corporate deposit, therefore, the assessee is also not entitled for business loss as well. - AT
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• Addition on account of estimation of net taxable profit earned on the total 'on money' - difference in the sale price - The statement of purchaser cannot alone prove that they were having any agreement with the assessee regarding any payment made outside books of accounts. The contention of assessee that both the buyers paid extra money for extra work agreement is also proved by proof of disbursal of bank loans as well as by extra work agreements. - The adoption of huge 'on money' without iota of evidence is not justified - AT
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• Penalty u/s. 271(1)(c) - unexplained share application money and unsecured loans - No incriminating material was found during the curse of search relating to the alleged surrender of income made by the assessee in the Income Tax Return. The assessee suo moto offered the additional income in the return and paid taxes there on. It is also an established fact in the instant case that Ld. A.O. was not sure that which assessee has concealed the particulars of income or furnished inaccurate particulars of income. - AT
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• Disallowance of interest - As rightly noted by Ld. CIT(A), it was not the case the case where the funds were borrowed for the purpose of business and the excess funds were parked by the company for earning interest income. This was a case where the funds for the Lohegaon project were transferred separately and the loan to GBL in the books of the holding company was transferred to the assessee along with equal liability. - Claim of interest expenditure cannot be denied - AT
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Customs

• Rewards under the Merchandise Exports from India Scheme ('MEIS') - Seeking completion of process of sanctioning and grant of the reward - the petitioner had not intimated the intent for claiming MEIS benefits initially on their shipping bills dated 30.03.2015. There is so much of impact prevailing on the export being made from SEZ unit as it was from Kandla SEZ that the export has been made by the petitioner - there could be no exclusion of SEZ or non-EDI Port unit for availing the benefit. - HC
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Indian Laws

• Dishonor of two cheques - dispute remained pending for past 16 years - humongous pendency of complaints u/s 138 of the Act - The High Courts may issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 from summary trial to summons trial in exercise of power under the second proviso to Section 143 of the Act. - The evidence of witnesses on behalf of the complainant shall be permitted on affidavit. If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses. In suitable cases, the Magistrate can examine documents for satisfaction as to the sufficiency of grounds for proceeding under Section 202. - SC
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IBC

• Initiation of CIRP - Time limitation - The Annual Returns/Audited Balance Sheets, one-time settlement proposals, proposals to restructure loans, by whatever names called, cannot be simply ignored as debarred from consideration and in every given matter, it would be a question of applying the facts to the law and vice versa, to see whether or not the specific contents, spell out an acknowledgement under the Limitation Act. - AT
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Service Tax

• CENVAT Credit - exempted activity or not - trading in mutual funds - The appellant cannot be termed as “service provider” because he only makes an investment in the mutual fund and earn profit from it which is shown in the Books of Accounts under the head “other income”. Hence the question of invoking Rule 6 does not arise and hence the Department has wrongly invoked the provisions of Rule 6(3) demanding the reversal of credit on the exempted services. - AT
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Central Excise

• CENVAT Credit - exempt goods - On merits, it is a case that the appellant is manufacturing dutiable goods not exempted goods. Some clearances were exempted from payment of duty by way of Notification No.10/1997 dt.1.3.1997, (amended) to specified buyer of the goods if those buyers fulfil condition of the said notification. Buying goods from the appellant under Notification No.10/1997 dt.1.3.1997 without payment of duty does not change the character of the goods as exempted goods - Rule 6(3) of Cenvat Credit Rules are not applicable to the facts of the present case. - AT
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Case Laws:

• GST

• 2021 (4) TMI 694
  Pendency of Departmental Appeal - transfer of the matter to the call book by Principal Commissioner of Customs - HELD THAT:- As this Court has kept open all the legal issues, the learned Central Government Standing Counsel, Mr. Vyas, on taking instructions, submitted that the matter shall be decided within a period of 8 weeks. Let the same be decided by the competent authority without raising any technical issue of jurisdiction - Application disposed off.

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• 2021 (4) TMI 660
  Permission for withdrawal of appeal - Refund of accumulated ITC - rate of tax on outward supplies is lower than the rate of tax on inward supplies - Inverted Duty Structure under clause (ii) of the proviso to Section 54(3) of the CGST Act, 2017 - HELD THAT:- The Authorized Representative of the appellant Sh. Chirag Jain instead of attending personal hearing has sent a E mail dated 10.03.2021 therein he intimated that the appellant has already submitted an application for withdrawal of appeal vide letter dated 19.02.2021 and copy of the same has also been enclosed for reference. That in this context, the appellant does not wish to appear for personal hearing for the same . Further, he wished to withdraw the appeal filed with immediate effect owing to the cash flow crunches in the settlement of tax liabilities of current months. Appeal dismissed as withdrawn.

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• Income Tax

• 2021 (4) TMI 701
  CIT non disposing of the objections filed by the assessee with regard to reopening of assessment under Sections 147 to 150 - main reason for reopening of the assessment is that the assessee has erroneously applied CBDT Circular No.09/2014 dated 23/04/2014 and claimed amortization expenses for the financial year 2014-15 - as submitted that since the assessee was entitled to deduction under Section 80IA there was no question of any escapement of tax as increase in income by not claiming amortization would not result in the assessee paying any further tax as the same was 100% deductible under Section 80IA.- HELD THAT:- CIT's impugned order does not address the issue in relation to the tax neutrality because of the fact that the assessee was eligible for deduction under Section 80IA. All other issues raised by the petitioner have been dealt with. Whether the same have been dealt with correctly or not, has not been gone into by me in this writ petition. Commissioner of Income Tax should have looked into the fact as to whether there could not be an escapement of tax because of the fact of the deduction available to the petitioner under Section 80IA. It is to be noted that this was the last year of deduction that was available to the petitioner out of the ten consecutive years that is available. As the reassessment proceeding is based on the fact that there was an escapement of tax, this issue was required to be answered and taken care of by the Commissioner of Income Tax. This not having been done, the impugned order is quashed and set aside with a direction upon the Officer to pass a further reasoned order after granting an opportunity of hearing to the petitioner. The Commissioner of Income Tax is specifically directed to deal with all points including the point in relation to escapement of tax because of deduction available to the petitioner under Section 80 IA of the Act.

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• 2021 (4) TMI 698
  Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) - HELD THAT:- We are informed by the learned counsel for the respondent/ assessee that the assessee has already filed the requisite Forms 1 2 on 29.01.2021, in all the three Tax Case Appeals, under Section 4 of the Act. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping this appeal pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, the Tax Case Appeal stands disposed of on the ground that the assessee has already filed the requisite Forms 1 2 and the Department shall process the application at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders.

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• 2021 (4) TMI 690
  Penalty u/s 271F - failure of assessee to furnish the return of income by the end of the relevant assessment year in consideration - whether assessee has utilised the money for any other purpose other than meeting the urgencies is or other than for survival of business itself? - CIT-A deleted penalty levy - HELD THAT:- There is a categorical finding returned by Ld.CIT(A) that assessee was unable to get loan from Citibank for meeting the expenses and Citibank also refused to extend the loan. Subsequently assessee was waiting for funds from the principle which was received only after 31/03/2013 by issue of series of 3 preferred stock. It has been observed by Ld.CIT(A) that the funds have been raised by assessee from issue of stock by the principle to the subsidiary, out of which the taxes were paid immediately and IT returns were furnished. We observe that Ld.CIT(A) has considered the financial difficulties faced by assessee in a very practical manner thereby deleting the penalty of ₹ 5000/- levied under section 271F of the act. This view is also supported by the ratio of Hon ble Supreme Court in case of CIT vs KTC Tires India Pvt Ltd [ 2005 (9) TMI 665 - SUPREME COURT] . Under such circumstances the view taken by Ld.CIT(A) do not call for any interference and the same is upheld. - Decided against revenue.

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• 2021 (4) TMI 686
  Enhancing the income of the assessee u/s 40A(2)(b) by CIT - enhancement in respect of purchases made from sister concern and on account of suppressed sale to the sister concern - Submission of assessee that the learned CIT(A) is not empowered to make enhancement in respect of a new source of income which is not the subject matter of the assessment order and which has not been considered by the Assessing Officer - HELD THAT:- Since, the facts of the instant case are identical to the case decided by the Co-ordinate Bench of the Tribunal in the case of Hari Mohan Sharma [ 2019 (2) TMI 113 - ITAT DELHI ], therefore, respectfully following the same, we hold that the learned CIT(A) in the instant case was not justified in enhancing the income of the assessee in the form of new source of income which has not been considered by the Assessing Officer and thus he had exceeded his jurisdiction u/s 251(1)(a) of the Act. Accordingly, grounds no. 3, 4 and additional grounds are allowed. Addition u/s 36(1)(iii) - Addition being interest @12% per annum for two days on account of advance of ₹ 2,20,00,000/- given to one of its supplier - CIT(A) sustained the addition made by the Assessing Officer on the ground that the assessee is not into business of lending of money - HELD THAT:- A perusal of the audited balance sheet, copy of which is placed at page 18 of the paper book shows that the share capital and reserves and surplus of the assessee company at the beginning of the year was ₹ 11,93,456.12/- and at the close of the year was ₹ 11,67,33,870/-. Thus, own capital and free reserves of the assessee company throughout during the year was much more than the interest free advance of ₹ 2,20,00,000/- given to M/s Lakshya Overseas. We, therefore, respectfully following the decision of Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] hold that the learned CIT(A) was not justified in sustaining the addition of ₹ 14,194/- made by the Assessing Officer u/s 36(1)(iii) of the Act. Under valuation of closing stock - as submitted that the learned CIT(A) has not considered the submission of the assessee on this issue properly, if given an opportunity, the assessee is in a position to substantiate either before the Assessing Officer or learned CIT(A) that there is no undervaluation of closing stock - HELD THAT:- Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to give one final opportunity to the assessee to substantiate its case that there is no undervaluation of closing stock and decide the issue as per fact and law. We hold and direct accordingly. Ground raised by the assessee is allowed for statistical purpose.

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• 2021 (4) TMI 685
  Rectification of mistake u/s 254 - Assessment on protective basis enhancing the returned income - Whether income of the family members has to be assessed in the hands of the assessee namely Mr. Siya Ram Gupta? - CIT(A) dismissed the appeal of the assessee on the grounds that the income held to be assessed in the hands of the assessee by the AO on protective basis does not stand any more as the same is brought to tax in the hands of Sri Siya Ram Gupta on substantive basis , and hence the additions on protective basis made by AO in the hands of the assessee does not survive - whether the ld. CIT(A) was right in dismissing the appeal of the assessee or not? - HELD THAT:- The assessee never raised the ground of appeal before ld. CIT(A) that the addition be sustained in the hands of Mr. Siya Ram Gupta , as Shri Siya Ram Gupta owned up the amounts of income of other family members as his income and no challenge was made by assesse before ld. CIT(A) for deleting the addition on protective basis on the grounds that the AO has already taxed the same in the hands of Mr. Siya Ram Gupta on substantive basis, and thus there was no occasion before ld. CIT(A) to have allowed the appeal of the assessee. Thus, in fact ld. CIT(A) dismissed the appeals of the assessee because the same had become infructuous, because the substantive additions made of the income of the assessee in the hands of Mr. Siya Ram Gupta stood confirmed in the hands of Shri Siya Ram Gupta and in view of that protective addition of the same amount of income in the hands of the assessee would not stand. Once the substantive assessment in the case of Mr. Siya Ram Gupta is confirmed , the protective assessment has no independent standing but dependent on the final outcome of the substantive assessment. Thus, to that extent , order of the tribunal stand modified and MA filed by Revenue is allowed

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• 2021 (4) TMI 684
  Undisclosed investment u/s 69B as per DVO s report - CIT-A deleted the addition - HELD THAT:- As respectfully following the decision of this Tribunal in the case of another group concern M/s Signature Builders [ 2021 (1) TMI 945 - ITAT INDORE ] wherein held as the assessee has maintained regular books of accounts which are not found to be incomplete or unreliable and also have not been rejected by the Ld. A.O and secondly Valuation was done of the incomplete project which has been valued not on the basis of local price but on the basis of Delhi rates which are universally accepted on higher side. Therefore since no defects were pointed out in the books of accounts regularly maintained by the assessee and are duly audited and no incriminating material was found in the search to show that unaccounted investment in the building project has been made, addition made purely on the basis of Departmental Valuation Report, we find no reason to interfere in the finding of Ld. CIT(A) who was rightly deleted the addition for the alleged undisclosed investment u/s 69B of the Act made by the Ld. A.O - Decided against revenue. Unexplained investment u/s 69 in Purchase of land at Sernari Kalan - Assessee offered ₹ 225 lakhs as voluntary disclosure towards investment in land in a general manner without any reference to any specific land - HELD THAT:- CIT(A) has given telescoping benefit to the assessee against the income surrendered during the course of search. Revenue failed to prove that the alleged surrender for ₹ 225 lakh was given with regard to a specific transaction. It was a general surrender not having any nexus with any specific transaction to land and therefore Ld. CIT(A) has rightly given the credit for income declared in such declaration. We therefore confirm the finding of Ld. CIT(A) deleting the addition for₹ 21,50,000/- treating it to be a part of surrender of ₹ 225 lakh made by the assessee during the course of search. Thus Ground No.3 of the revenue stands dismissed. Disallowance u/s 40A(3) - cash paid against purchase of land at Semri Kalan, Bhopal - HELD THAT:- The cash payment of ₹ 4,90,000/- was made at the time of registering purchase deed. The payment made is duly recorded in the books of accounts as well as in the purchase deed which was registered before the registering authority. It is not the case of the revenue that the assessee had attempted to evade any tax liability by making payment in cash. Genuineness of the transaction is not in doubt. Assessee being in the business of real estate has entered into such transaction for business and commercial expediency. We therefore are of the considered opinion that Ld. CIT(A) has rightly deleted the disallowance in light of settled judicial precedence and the decisions referred by him in his appellate order, which do not call for any interference. Accordingly Ground No.4 raised by the revenue is dismissed.

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• 2021 (4) TMI 682
  TP Adjustment - Addition considering the interest free loan and advances to its Associated Enterprises - assessee before the AO/TPO contended that there cannot be any adjustment of the notional interest under the provisions of section 92C read with rule 10B of the Income Tax Rules - whether the amount of interest free loans and advances provided to the associated enterprises should be subject to the adjustment on account of notional interest under the transfer pricing provisions as provided under section 92C? - The assessee in the case on hand has provided interest-free advances to its four associated enterprises ? - HELD THAT:- We find that the assessee along with its associated enterprises has been carrying out clinical research activities as a whole. On perusal of the activities of the assessee along with its group associated enterprises, it is revealed that there are different activities which are carried out by the different associated enterprises. For example, the preclinical phase activity is carried out in India and Canada. Similarly, the phase-0 activities carried out in India, Canada and Poland so on and so forth - the project of the research activity can be ended upon the completion of process of the different phases. Once the activities of the assessee and its associated enterprises are so interrelated and interconnected then the transactions should be seen in aggregation for working out the ALP. OECD Transfer Pricing Guidelines which reiterates that though ideally the arm's length principles should be applied on a transaction by transaction basis, there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. As assessee got such huge business from its associated enterprises based in the USA. In the absence AE in UK the assessee would have taken services from third party which would have led to more cost than the notional interest income. In other words, the transaction for advancing the interest-free loans to the associated enterprises has to be seen in the context of the benefit received by it from such associated enterprises. As such the transaction of interest free loans/ advances viz a viz the benefit received by the assessee are intrinsically linked which has to be evaluated after aggregating both the transactions. The transaction of interest free advances cannot be viewed without considering the benefit derived by the assessee from the associated enterprises. On analyzing the notional interest added by the TPO under the transfer pricing adjustment with the benefit derived by the assessee, the interest cost appears to be negligible. The amount of interest cost stands at ₹ 26,19,740/- whereas the amount of gross receipt generated by the assessee stands at USD 1,556,230 which is far more than the interest expenses after converting in India rupees. Admittedly there was no benefit accrued to the assessee in the year under consideration but considering the interrelated activities carried out by the assessee along with associate enterprises, in our considered view it is not necessary that the benefit will arise in the year in which such loans and advances were provided without interest. A drug normally takes 8 to 10 years time for its development. This associated enterprise was set up for the activities which are directly connected with the assessee as discussed/elaborated in the preceding paragraph. In our view, the generation of the benefit in terms of money in the year under consideration only cannot be a criteria for making any adjustment under the transfer pricing provisions in the given facts and circumstances. Such income may arise in subsequent years. It is also significant to note that the Ld. CIT-A in his order has given a finding that there was no benefit derived by the assessee with respect to the amount of interest free loans and advances given to UK AE. However, on perusal of the details submitted by the assessee, we note that there was the benefit derived by the assessee from such associated enterprises which has been elaborated somewhere in the preceding paragraph. Thus, such finding of the Ld. CIT-A is factually incorrect. At the time of hearing the Ld. DR has also not controverted the fact of benefit derived by the assessee. We hold that no adjustment under the transfer pricing provisions is required to be made with respect to the interest free loans and advances by the assessee to its associated enterprises in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed and the ground of appeal of the revenue is dismissed. Disallowance under section 115JB of the Act on account of exempted income - AO in the year under consideration found that the assessee has made investments in its subsidiary companies - assessee has incurred interest expenses on the borrowed fund thus AO invoked the provisions of section 14A read with rule 8D - HELD THAT:- As per explanation (1) to section 115 JB book profit shall increase by the amount of expenditure incurred by the assessee in relation to the income to which the provisions of section 10 applies. Indeed the income by way of dividend is exempt under subsection (34) of section 10 of the Act. Accordingly, subsection (34) of section 10 of the Act applies to the dividend income and consequently the amount of expenses relatable to the exempted income needs to be added while determining the book profit. However, in the case on hand we note that there was no dividend income earned by the assessee in the year under consideration. Accordingly in our considered view the provisions as specified in clause (f) of explanation 1 to section 115JB of the Act cannot be applied in the case on hand.Accordingly the ground of appeal of the assessee is allowed. Addition made on account of deduction u/s.80IB - AO found that the income from the notice pay and miscellaneous income are not arising from the eligible business activities and therefore such income is not subject for deduction under section 80IB (8) - HELD THAT:- As income arising to the assessee on account of notice pay represents the income of the earlier cessation of the job of the employees. It is a normal business practice in the industry where the employee wants to leave organization, the employee is required to give the notice in advance and if he doesn t do so the employer recovers certain amount from the employee to compensate the loss which otherwise arises in hiring the new staff in place of previous employee - the assessee would have adjusted the amount of notice pay recovered from the employee against the salary expenses but the assessee has not done so and shown notice pay as a separate item of income. It doesn t mean that the assessee is not entitled for the deduction with respect to the notice pay. In holding so we draw support and guidance from the order of ITAT Delhibench in the case of Birlasoft (India) Ltd. [ 2011 (12) TMI 385 - ITAT DELHI] wherein it was held that notice pay received/receivable from the employee is an income derived from eligible undertaking for the purpose of the section 10A of the Act. Miscellaneous income represents the settlement of the advances given by the assessee to its employees - such income also represents from the day to day activities of the assessee. Accordingly we hold that such income is eligible for deduction under section 80IB. Disallowance of deduction claimed u/s 80 IB (8) - DR contended that the assessee claimed deduction under section 80 IB(8) of the Act first time in the assessment year 2003-04 and its period of 10 years has expired in the assessment year 2012-13. Therefore the assessee is not eligible for deduction under section 80 IB(8) of the Act for the year under consideration - HELD THAT:- Admittedly, the assessee has claimed deduction for the assessment year 2003-04 under section 80 IB(8) of the Act which was also allowed by the Revenue. Thus it appears that the assessee has wrongfully claimed the deduction under section 80 IB(8) of the Act for the assessment year 2003-04 under the bona fides believe that it will get the approval in that particular year. But the Revenue failed to take a note of such wrong deduction claimed by the assessee. Thus the question arises, whether the AO can disturb the deduction claimed by the assessee for the year under consideration by holding that it is the 11th year in the given facts and circumstances. In this regard, we are of the view that the inaction on the part of the revenue cannot disentitle the assessee for its rightful claim. Once the Revenue has missed the bus for disallowing the deduction for the assessment year 2003- 04, it cannot challenge the deduction on this reasoning in the year under consideration until and unless there was some violation of the provisions of law under section 80 IB(8) of the Act r.w. relevant rules i.e. rule 18D and 18DA of income tax rule. As we have already held that there was no violation of the provisions of section 80 IB(8) of the Act for the year under consideration, the assessee cannot be denied for its rightful claim. In view of the above and after considering the facts in totality, we do not find any infirmity . Adjustments with respect to corporate guarantee provided by the assessee - International transaction of not? - HELD THAT:- As the assessee has extended the guarantee by involving the Axis Bank of India after incurring the cost. Indeed, such cost was reimbursed by the AE of the assessee on actual basis and the same was added by the assessee in the computation of income. Thus, what is inferred is this that the assessee has given corporate guarantee to its AE after availing the services from the bank viz a viz incurring the cost there on which was given in the course of the business. Accordingly, we hold that the corporate guarantee given in the case on hand is the international transaction which requires to be benchmarked at the arm length price. See INFOTECH ENTERPRISES LIMITED, HYDERABAD VERSUS ADDL. CIT, RANGE-2, HYDERABAD [ 2014 (1) TMI 1363 - ITAT HYDERABAD] - thus it cannot, therefore, be said that the issuance of guarantees, on the facts and in the circumstances of this case, did not constitute an 'international transaction'. Determination of the benchmark in order to working out the ALP of the impugned international transaction? - TPO/AO has treated the assessee as if it was engaged in the business of financial services and accordingly the ALP was determined by comparing with the average margin earned by the banks on cost. Admittedly, the assessee is not carrying out any financial activity and therefore we are not convinced with the basis adopted by the authorities below - There is no difference between the banks or a corporate entity as far as corporate guarantee is concerned. Both have to consider the functions performed, assets employed and risks assumed. In case of default by the borrower, the corporate guarantor is exposed to the same risk of a bank.In case of an AE the risk would not be as high as in case of an outsider. Therefore, the rate charged by the bank for providing the corporate guarantee should be a benchmarked for working out the ALP for the corporate guarantee extended by the assessee to its AE. In the case on hand, the bank has charged .79% of the amount of the corporate guarantee as fees from the assessee which has been reimbursed to the assessee by the AE. This fees in absolute amount works out at ₹ 23,52,607/- only. However, the assessee has not added any markup on this international transaction with its AE. In the interest of justice and fair play, we are of the view that a sum of ₹ 1,17,630/- being 5% of the fees paid to the bank for the corporate guarantee of ₹ 23,52,607/- will be sufficient to add as margin of the assessee. We note that the assessee has already made the disallowance in its computation of income and further addition of the same amount to the total income of the assessee will lead to the double addition which is unwanted under the provisions of law. Accordingly, we are of the view that the decision of the learned CIT (A) for deleting the addition does not require any interference. Hence, the ground of appeal of the assessee is partly allowed whereas the ground of appeal of the revenue is dismissed. Addition of advances with respect to the premises taken on rent - assessee has written off the advances given as rent deposits which were not recovered - AO disallowed the same on the reasoning that such rent deposits represents the capital advance and therefore the same cannot be allowed as deduction - CIT (A) deleted the addition HELD THAT:- There is no dispute to the fact that the premises were taken by the assessee for its business purposes. It is a prevailing practice that the tenants is to make the rent deposits with the landlord. Generally these rent deposits are returned back to the tenants on the expiry of rent agreement or it is adjusted against the rent due. The assessee against such advance rent deposit has neither generated any capital assets nor getting any benefit of enduring nature. Therefore the same cannot be treated as capital advance as held by the AO. Any expense incurred by the assessee for the purpose of the business is allowable expenses under section 37(1) of the Act, if it is not capital in nature viz a viz personal in nature. In the case on hand, such advance was neither capital in nature nor personal in nature - the premises were taken for the purpose of the business and therefore any rent deposits with respect to such rented premises are allowable as deduction as business loss - Decided against revenue. Addition of amount reflecting in form 26AS which was not shown as income of the assessee - mismatch in the amount of income shown by the assessee in the books of accounts viz a viz the amount recorded in form 26AS - HELD THAT:- In the case on hand, there is no dispute to the fact that the AO has selected only those instances where the assessee has shown less income than the amount shown in form 26AS ignoring the cases where the assessee has shown more income in the books of accounts then the amount reflected in the form 26AS. In fact the AO has used the method favouring the revenue which is not correct as a matter of principle. As such the AO, should have taken only in the difference for working out the suppressed income. Even the difference is not to be taken as income for the reason that this has already been offered to tax by the assessee in different years. For this purpose, the reconciliation statement was filed by the assessee before the learned CIT (A). Accordingly the learned CIT (A) allowed the ground of appeal of the assessee subject to verification of reconciliation statement. In fact, there is no ambiguity in the direction of the ld. CIT-A for the reason that, if the difference as highlighted by the AO, has been accounted for as income by the assessee any other year which will prove that the income of the assessee has suffered the tax otherwise the AO will make the addition to the total income of the assessee. The direction of the learned CIT (A) is very clear on the issue and therefore no interference is required. Hence the ground of appeal of the revenue is dismissed. Addition under the provisions of section 14A read with rule 8D of Income Tax Rule - HELD THAT:- Undisputedly, there was no income earned by the assessee being exempted from tax and therefore no disallowance under section 14A read with rule 8D is required to be made in terms of the judgment of Hon ble Gujarat High Court in the case of CIT vs. Corrtech Energy Private Ltd [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] TDS u/s 195 - non deduction of TDS under section 40(a)(i) on payment with respect to consultancy expenses in foreign currency to Holter Clinical Outsourcing Corporation (USA) and Grigoria Mavrogeorgis (Canada) - CIT (A) deleted the addition made by the AO by observing that the payment made by the assessee to the non-residents based in USA and Canada are not chargeable to tax in India in terms of the Article 12 of the DTAA with both the countries - HELD THAT:- As per the learned CIT (A), the payment made by the assessee was the consultancy charges falls under clause 7 of the DTAA which requires that the payee should have permanent establishment and business connection in India for holding that the income is accruing or arising in India. In other words, if the payee being a non-resident does not have any permanent establishment or business connection in India, then it is construed that income is not arising or accruing in India and therefore the same is not chargeable to tax in India. Thus, once an income is not chargeable to tax in India then the question for deducting the TDS does not arise. DR has not brought any infirmity in the finding of the learned CIT (A). On the contrary, the learned AR before us has contended that the payment made by the assessee to the non-residents as discussed above is not chargeable to tax in India in terms of the provisions of DTAA. In view of the above, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Deemed dividend addition u/s 2(22)(e) - CIT-A delete the addition - whether the assessee company, which is not a registered shareholder obtains any loan from other company in which its shareholder also holding substantial share in such other company may be brought under the scanner of deemed dividend? - HELD THAT:- As provision of section 2(22)(e) of the Act can only be invoked in case of shareholder who is holding substantial interest. The provision of section 2(22)(e) of the act nowhere talks about taxing an entity/company who is not a shareholder holder in lender company but shareholder of such company holding substantial share in lender company. See MAHAVIR INDUCTOMELT PVT. LTD. [ 2017 (1) TMI 1159 - GUJARAT HIGH COURT ] - Coming to the case on hand admittedly the assessee company in not holding any shares or rights of M/s. Epsillion Marketing and Cons Pvt. Ltd. O was not justified in invoking the provision of section 2(22)(e) of the Act in the present case. The learned CIT(A) rightly deleted the addition made by the AO.

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• 2021 (4) TMI 681
  Validity of assessment order passed u/s.158BC r.w.s. 143(3), r.w.s 254 - Time limit for completion of assessments and reassessments - assessee submitted that block assessment order passed by the Assessing Officer is without jurisdiction and out of time - HELD THAT:- We are of the considered view that provisions of section 153(3) of the Act has no application and provisions of section 153(2A) should be applied as discussed in preceding paragraphs. As per amended provisions of section 153(2A) of the Act, time limit for completion of assessment in pursuant to order of the appeal Commissioner u/s 250 or Appellate Tribunal u/s. 254 is one year from the end of the financial year in which such an order was received by Office of Commissioner / PCIT. In this case, order of the Appellate Tribunal was passed on 04.10.2000 and such an order was received by the Office of the Commissioner on 10.11.2000. As per the amended provisions of section 153(2A), the impugned assessment order ought to have been passed on or before 31.03.2002. Because of the intervening order of the High Court in writ and stay of proceedings on 08.03.2002 and subsequent disposal of said Writ Petition on 14.12.2018 (communicated to O/o.PCIT on 13.02.2019), the period covered under operation of stay shall be excluded while computing period of limitation, as per Explanation 1(ii) to section 153 of the Act and if such period is excluded, then the Assessing Officer will get 60 days clear time for completion of assessment, in view of explanation referred to in section 153 of the Act, because balance time available as on date of interim order passed by High Court was 23 days, which is less than 60 days. Since the order of Hon ble High Court in Writ Petition was received in the Office of PCIT on 13.02.2019 and the Assessing Officer has sixty days clear time to pass order giving effect order and if such 60 days is considered for limitation period, then the Assessing Officer ought to have passed assessment order on 14.04.2019. In this case, the impugned order was passed on 31.12.2019. Therefore, we are of the considered view that the assessment order passed u/s. 158BC r.w.s 143(3) / 254 dated 31.12.2019 is barred by limitation and liable to be quashed. Accordingly, the assessment order is quashed. - Decided in favour of assessee.

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• 2021 (4) TMI 680
  TP Adjustment - Arm s Length Price (ALP) adjustment towards interest on receivables qua its international transactions with overseas Associated Enterprise(s) (AEs) - HELD THAT:- This tribunal s co-ordinate bench s decision involving AY.2013-14 [ 2017 (12) TMI 862 - ITAT HYDERABAD] holds that since no interest was charged in AEs and non-AEs, the impugned interest on receivables leading to ALP adjusted under Chapter-X of the Act is not sustainable. Coupled with this, learned CIT-DR fails to dispute that the authorities herein have adopted SBI s short term deposit rates for computing the impugned adjustment which are not based on any comparable in the very segment. We thus find no reason to sustain the impugned adjustment both on principles of judicial consistency as well as on merits. The same is directed to be deleted. The assessee succeeds in the first and foremost substantive ground. Disallowance of Depreciation of Plant and Machinery of Solar Power Plant at Chilveru Unit - date from which asset put to use - HELD THAT:- The assessee s stand all along has claimed to have commenced its solar power plant on test check production well before the last day of the relevant accounting period i.e., 31-03-2014 and therefore entitled for the impugned depreciation. It has further stated that the energisations of the circuit was a condition precedent which never took place after 31st of March, 2014. Doubts on assessee s trial production claim - M/s.Schneider Electric India Private Limited had merely clarified the letter number as 1350 which was ultimately issued on 11-04-2014. It therefore appears an instance wherein the said number was allotted to the latter followed by Schneider s Certificate and the ultimate sanction coming on 11-04-2015. We make it clear that the Revenue s stand otherwise also would not result in any deviation of facts as to when the assessee had installed the power plant and commenced its trial production. We notice the same in light of the Regulation 43(3) of the Central Electricity Authority (measures relating to safety and electrical supply) Regulations, 2010 makes it mandatory that the owner of any power installation shall itself test check every circuit of voltage followed by recording of the corresponding results to be forwarded to the inspecting authority. It is this regulation s prior test results condition that the assessee had ensured compliance in March, 2014 itself which ultimately culminated in its approval. We thus quote the case law discussed at assessee s behest before the DRP (supra) and accept the assessee s depreciation claim on the ground that it had very well installed and put to use the solar plant in issue which further underwent all the mandatory inspections in the month of March, 2014 only. The impugned depreciation disallowance is deleted. Forward contracts loss disallowance - HELD THAT:- Continuing with the assessee s regular system of accounting, its corresponding figures of the amount is reversed and offered to income or adjusted against forward contract loss as it has done in AY.2013-14. Case file suggests that the impugned loss of ₹ 27,70,201/- pertains to four vouchers for the years 2012-13 and 2013-14 which had been duly accepted by the Assessing Officer in revenue. Coming to gain on such forwards contracts; if any, the learned lower authorities have failed to indicate any deficiency on assessee s part in recognising the same. So far as its stand is that these transactions relating to capital account, the assessee s treatment of these forward contracts in revenue account in the said earlier assessment years has admittedly gone un-rebutted. The fact also remains that the assessee s treatment given to these forward contracts in earlier and latter assessment years have been duly accepted by the Assessing Officer which has also not been rebutted in the lower proceedings. We therefore allow the assessee s claim in principle and leave it open for the Assessing Officer to finalize factual verification as per law. The third substantive grievance is taken as allowed for statistical purposes. Disallowing cultivation, lease and depreciation towards biomass plant - HELD THAT:- As overwhelming evidence duly proves the assessee s case that it had very much established its biomass plant by investing its capital. All these approvals and permissions also prove the stand adopted through out in support of the impugned expenses. Case law SPR Publications Pvt. Ltd. [ 2015 (7) TMI 117 - ITAT HYDERABAD] holds that such a plant and machinery which is ready to use is very much entitled for depreciation. We thus allow assessee s depreciation claim on plant and machinery of ₹ 1,08,49,065/- and ₹ 6,28,182/- on vehicles; respectively totalling to ₹ 1,14,77,247/- in issue. Remaining twin components of lease amount and cultivation charges and the reasoning that no income had been generated from all this activity thereby raising serious doubts on assessee s claim, we are unable to lose sight of the fact that learned lower authorities even took pains to summon the revenue records of the concerned estate to ascertain the actual fact it is very much evident not only from the list of payees but also forming part of the entire project details. Coupled with this, we find that assessee s travelling/conveyance, repairs/maintenance claims qua the same stand accepted by the Assessing Officer himself.

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• 2021 (4) TMI 679
  Correct head of income - Gain on sale of shares - short term capital gain or business income - as submitted that there were only 10 scrips in which the investment had been made during the year and the deliveries of all the shares purchased were taken in the depository account of the company and shares had been shown as investment in the Balance Sheet as per Schedule VI of the Companies Act, 1956 and not as stock-in- trade - as per AO assessee is not maintaining separate books of accounts for the alleged investments and regular business and No separate bank account is maintained for diffracting the alleged investment made and for business activity HELD THAT:- When assessee itself has classified its shares into investment portfolio, and had sold the shares in the relevant year itself after making substantial gain, then it cannot be held that assessee was not an investor but a share trader. Here, the assessee s business as clarified by the ld. counsel was not dealing in purchase and sale of shares but for providing financial consultancy and all allied and auxiliary services. As pointed out before us, there were many months where assessee had undertaken no transaction and in other several months assessee had transacted only in one scrip. Thus, such a pattern cannot be reckoned that there was a huge frequency of purchase and sale of shares. As stated above, the assessee has made investment and disinvestment in shares of 10 scrips which are all delivery based transactions and the main gain is only from one particular scrip i.e., DLF Ltd. If detail of date-wise transaction is taken into consideration of various scrips which are as under, then it can be seen that transaction are not huge which has been the allegation of the Assessing Officer. If we analyze given chart, then it can be clearly seen that out of above scripts, the gain/profit is mainly from one scrip, that is, DLF Ltd. Hence, it cannot be held the transaction is in the nature of business or profession. - Decided against revenue.

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• 2021 (4) TMI 677
  Estimation of Net profit - difference between the amount shown as turnover by the assessee and as reflected in Form 26AS - CIT-A deleted the addition - CIT(A) in estimating the net profit at 11.17% to match the TDS vis- -vis additional turnover estimated by the AO, when according to assessee the net profit it had disclosed on its turn over from the same source which was accepted by both the Ld. CIT(A) AO is at the tune of 1.22% - HELD THAT:- We note that only because there is a mismatch between TDS certificate (26AS) and turnover shown by the assessee in its P L account cannot be the sole basis on which the entire addition of the difference could have been brought to tax. Therefore, on the facts and circumstances discussed above we find the view of the Ld. CIT(A) to be a plausible view and accordingly his action of deleting addition is confirmed and therefore, the appeal of the revenue stands dismissed. Partial confirmation made by the Ld. CIT(A) by resorting to estimation of NP at 11.17% of the difference in amount/turnover - We note that while doing so i.e. while exercising his co-terminus power in the appellate proceedings he could have done so as per law meaning when he proposed to estimate the income of the assessee, the Ld. CIT(A) should have first of all rejected the audited books of account produced by the assessee in accordance to Section 145 of the Income Tax Act, 1961 (hereinafter referred to as the Act) which the Ld. CIT(A) has not admittedly done. So the estimation of Ld. CIT(A) fails being bad in law. Therefore we direct the deletion of estimated amount. It is not that assessee s case is that it has not claimed the credit for ₹ 2.14 crores, if that is so, then the presumption is that the corresponding receipt of ₹ 2.14 crores is not belonging to assessee. If that fact is correct, then no addition is warranted. However, on examination if it is found that assessee has claimed credit for TDS of ₹ 2.14 crores then the AO is directed to assess the income element embedded in these receipt which in the facts of the present case is N.P. of 1.22%.

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• 2021 (4) TMI 676
  Addition u/s 69 on account of business income from M/s Ashu Marketing proprietorship concern engaged in the business of trading of clothes - AO made an addition on account of income estimated by applying net profit @ 8% on gross sales - assessee has explained the reasons for not disclosing this income as there was a loss in the said business activity and hence it was not claimed by the assessee in the return of income due to smallness of the amount - HELD THAT:- AO has not disputed the transactions as recorded in the bank account of the assessee with HDFC Bank in the name of proprietorship concern as well as the gross sales shown by the assessee in the profit and loss account produced before the AO - AO has rejected the said computation of the loss as per the profit and loss account and estimated the income of the assessee in respect of retail business of cloth. Once the retail business of purchase and sale of cloth is accepted by the Assessing Officer and gross sales as shown by the assessee is not in dispute then the loss not reflected in the return of income would not lead to the re-classification of the income. Since the assessee has not declared this business income/loss in the return of income therefore, the Assessing Officer has rightly invoked the provisions of section 44AF and estimated the income of the assessee - However, the re-classification of the income by applying the provisions of section 69 of the Act is contrary to the facts as well as law and action of the Assessing Officer is highly unjustified and unreasonable. Accordingly, the said addition is directed to be treated as business income of the assessee. This ground of the assessee is partly allowed. Unexplained investment in the immovable property - immovable property which was purchased by the assessee vide sale deed dated 27.04.2012 - The assessee has explained the source as cash withdrawal of ₹ 6,00,000/- from the Axis Bank account of the assessee on 23.04.2012 and availability of fund in the bank account is also explained by the assessee as withdrawal from the partnership firm M/s Soft Solutions of ₹ 9,00,000/- which is also reflected in the Axis Bank account of the assessee - HELD THAT:- As the entries in the bank account of the assesse are not in dispute and therefore when the withdrawal from the bank account of ₹ 6,00,000/- and payment of purchase consideration of ₹ 5,30,120/- are contemporaneous transactions then the assessee has explained the source. It is not the case of the Revenue that the said amount of ₹ 6,00,000/- withdrawn by the assessee on 23.04.2012 was utilized for some other purpose then the purchase of property on 27.04.2012. The withdrawal of the cash from the bank account and payment of consideration are matching transactions without any delay or time gap. Hence, in view of the facts as evident from the record and particularly from the bank account of the assessee. The assessee has discharged its onus of explaining source of investment. Accordingly, the addition made by the Assessing Officer is deleted. Unexplained deposits in the saving bank account of the assessee and his daughter with HDFC Bank and Axis Bank u/s 68 - HELD THAT:- The assessee has now explained the source of these deposits as transfer the fund from other bank account of the assessee as well as the opening balance available with the assessee as per the cash flow statement. It is pertinent to note that all these explanations and details as well as evidences were not produce before the Assessing Officer. Therefore, the cash flow statement relied upon by the assessee as well as the explanation that the deposits in the bank account of the assessee are from other banks are to be verified. Hence, in the facts and circumstance of the case and interest of justice this issue is set aside to the record of the Assessing Officer for proper verification and examination of all the relevant facts as well as the evidence relied upon by the assessee in the shape of the transfer from the other bank accounts and availability of opening cash balance as per the cash flow statement. Needless to say the assessee be given an opportunity before passing the fresh order. Disallowance of deduction u/s 80TTA - AO made an addition on account of interest income under the head income from other sources - HELD THAT:- Before the CIT(A) the assessee has claimed the deduction u/s 80TTA as the interest income was in respect of saving bank account is less than the threshold limit. The CIT(A) has directed the Assessing Officer to allow the necessary deduction as per law from income of ₹ 3,097/- being in the income from other sources. Once the CIT(A) has directed the Assessing Officer to allow the deduction as per law no grievance is left against the impugned order of the CIT(A). Accordingly, the Assessing Officer is directed to consider the claim of deduction u/s 80TTA and allow the same if the assessee satisfy the requirements of eligibility of deduction. Appeal of the assessee is partly allowed.

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• 2021 (4) TMI 675
  Characterization of income - subsidy receipt as capital in nature or revenue - HELD THAT:- From the Preamble of Package Scheme Incentive, 2007, it is clear that the object of subsidy is only to encourage the dispersal of industries to the less developed areas of the State, Government has been giving a Package of Incentives to New / Expansion Units set up in the developing region of the State since 1964 under a Scheme popularly known as the Package of Incentives and scheme was amended from time to time, known as 2001 Scheme which is operative from the 1st April, 2001 to 31st March, 2007. It is clear that the object of the subsidy was to encourage setting up of industries in less developed areas. It is settled proposition of law that the test to be applied to determine whether the subsidy is capital or revenue in nature is the purposive test as held by the Apex Court in the case of Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] and the identical issue was decided by the Hyderabad Bench of Tribunal (wherein A.M. is Author of order) in the case of Thermo Cables Limited Vs. ACIT [ 2018 (8) TMI 2026 - ITAT HYDERABAD] Thus it is undisputed fact that the object of the Subsidy Scheme is only to encourage the setting up of industries and not to subsidize the operating expenses of industry. Therefore, we are of the considered opinion that the subsidy received by the assessee is only capital in nature. Accordingly, we reverse the orders of authorities below and allow the appeal filed by the assessee.

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• 2021 (4) TMI 674
  TDS u/s 195 - payment made to Georgia Tech Research Corporation towards cost reimbursement for joint Research Projects as Royalty - DTAA between India and USA - levy of interest u/s. 201(1A) - HELD THAT:- As perused the copy of agreement executed on 23rd July, 2010 between the assessee and Georgia Tech Research Corporation placed in the paper book for disclosing information by the assessee and GSRTC collectively for the purpose of joint research pertaining to tight gas sandstone and reservoirs. It is a joint research project and both the parties have right on result of research project. Each party shall use the proprietary information only for and to the extent required to accomplish the purpose of the agreement. Explanation to section 9(1)(vi) which defines royalty. AO has not ascertained the true characters of the transactions. The assessee has explained with the support of agreement and copies of invoices that payment made was towards cost reimbursement of joint research project and does not amount to royalty as per section 9(1)(vi) and not covered with clause 3 of Article 12 as royalties and fees for included services of India USA DTAA. The assessee has demonstrated from the copies of agreement and copies of invoices that the payments to GTRC was not in the nature of royalties but was in the nature of cost reimbursement for a joint research project on which both the parties have equal right to use. AO has not specifically considered the relevant clauses of the agreement of joint research to be carried out for the subject matter from sharing of information from both the parties. We have also gone through the decision of Hon ble High Court of Calcutta in the case of Dunlop Rubber Company Ltd. [ 1982 (2) TMI 24 - CALCUTTA HIGH COURT] holding that the result of the research was for the benefit of all concerned including the head office and subsidiary concern. But the very fact that technical data was jointly obtained and the expenses were shared together indicates that it could not be treated as income. The assessee agreed for reimbursement of cost incurred by the GTRC for doing research activity as a part of joint research on which both the parties have equal right on result of such joint research project - AO has not carried out any verification/investigation to disprove the claim of pure reimbursement of expenses made by the assessee on the basis of relevant supporting material as reflected in this order. CIT(A) has also not specifically controverted the related material referred by the assessee as clauses of agreement pointing out that payment was made to GTRC towards cost reimbursement for joint research project and not for any royalty - not established by the authorities below that the agreement grant the assessee the right to use the GTRC s intellectual property in exchange for royalty payments. Thus AO failed to prove that payment made by the assessee to GTRC was of the nature of royalty payment. Therefore, this ground of appeal of the assessee is allowed. Since we have allowed the ground of appeal of the assessee that payment made to GTRC was towards cost reimbursement for joint research project and not royalty, therefore, levy of interest u/s. 201(1A) is also not justified. Decided in favour of assessee.

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• 2021 (4) TMI 672
  Revision u/s 263 - different block of assets for the plant and machinery is viz-a-viz. motor cars as per appendix-I under the heading III of the depreciation schedule - Pr. CIT was of the view that the motor cars purchased by the assessee cannot form part of the block of assets under the category of plant and machinery. But the assessee in the revised computation of income has shown both the assets under the same category which was also accepted by the AO - HELD THAT:- Admittedly there are 2 different block of assets as specified in the depreciation schedule but both the assets carry the same rate of depreciation i.e. 15%. There is no ambiguity to the fact that motor cars and the plant machinery being eligible for depreciation at the same rate has to be classified under same block of assets despite there were different entries in the depreciation schedule. It was also pointed out that the assessee is not carrying on any business activity. Indeed the manufacturing activity of the assessee was closed down but the assessee changed its object clause which can be verified from the memorandum of association. As such the assessee got inserted new objects in the main object clause of memorandum of association by passing special resolution dated 13th November 2013. We also note that the assessee has declared interest income as business income which was also accepted by the revenue. This interest income of ₹ 85,30,962/- was declared in the year under consideration. It seems that the assessee was carrying on the business activities and therefore the depreciation claimed by the assessee on the cars cannot be disallowed on the ground that there was no business activity carried out by the assessee in the year under consideration. AO during the assessment proceedings have carried out necessary verification after applying his mind. Thereafter he has taken a conscious decision by accepting the income declared by the assessee in the revised return of income. Once the AO has taken a view after necessary verification then the learned Pr. CIT cannot substitute the view taken by the AO by his own view on the ground of non-verification. We hold that there is no infirmity in the order of the AO which requires to be revised by the learned Pr. CIT under section 263 of the Act. Accordingly the order of the learned Pr. CIT is based on wrong assumption of facts. Consequently we quash the same. Hence the ground of appeal of the assessee is allowed.

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• 2021 (4) TMI 671
  Disallowance of claim of bad debts written off - HELD THAT:- We are of the view that the disallowance of bad debts claimed by the assessee in assessment year 2013-14 was justified as the assessee could not establish that there existed business compulsion to write off the loan amount given to MSL as on 31.3.2013. At the same time, it is an admitted fact that the loan given to MSL has become bad. It is also corroborated by the fact that MSL has also written off the amount payable to the assessee in A.Y. 2015-16. In view of the above, we are also of the view that the bad debts claim of the assessee should be examined only in assessment year 2015-16. Since we have given a specific finding that the above said claim is required to be examined in assessment year 2015-16, the assessee may move appropriate petition before the A.O. for making its claim for bad debts in assessment year 2015-16 before the A.O - We are of the view that it would not be appropriate to adjudicate the question as to whether the amount of ₹ 8.39 crores given to MSL by the assessee is loan or investment, which may be examined by the AO afresh while disposing the petition of the assessee.

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• 2021 (4) TMI 670
  Bad debts - Disallowance of deduction claimed in respect of notional interest taxed as income in earlier year, which was not realized by the appellant - assessee claimed this amount of interest as deductible amount either as a bad debts or business loss under section 36(1)(vii) and/or section 28 by filing revised return - AO rejected the claim of assessee on the ground that principal amount is recovered - HELD THAT:- We have noted that for claiming the said amount the assessee has not fulfilled the condition prescribed under section 36(2) for claiming bad debts meaning thereby the assessee has not offered the said notional income as its income in earlier years. Hence, the assessee is not eligible for deduction of bad debts. Similarly, it was never the claim of the assessee that the inter corporate deposit was given for business purpose. Even otherwise, the assessee is not in money lending, therefore, the assessee cannot claim that the assessee made inter corporate deposit in the course of his business. During the earlier years the assessee never claimed as a business loss on account of non-receipt of interest on such inter corporate deposit, therefore, the assessee is also not entitled for business loss as well. - Decided against assessee.

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• 2021 (4) TMI 667
  Addition on account of estimation of net taxable profit earned on the total 'on money' - difference in the sale price - AO made addition by assuming that during the survey, the partner of the firm stated that the project consists of 288 flats and 30 shops and booked 18 shops at 2000 per sq ft upper ground floor in Vaishnodevi Heights on the basis of statement of two flats buyers comparing to booking of the project calculated 'on money - CIT(A) held that no document proof 'on money' receipt was recovered from the possession of the firm of partner during the search/survey proceedings. The basic evidence on which the AO relied and made estimated figure of 'on money' are the statement of two buyers namely Shri Anand Gaur and Sudhirbhai Parikh recorded during the survey - HELD THAT:- CIT(A) after considering the submission of assessee, working of AO and the statement of parties held that there is no documentary evidence to substantiate, the receipt of 'on money'. No documents were recovered from the position of firm during the search or survey proceedings. The AO estimated the figures of 'on money' on the basis of statements of two buyers namely Shri Anand Gaur and Sudhirbhai Parikh, recorded during the survey. We have further noted that ld. CIT(A) independently examined the statement of both these two flat buyers, the ld. CIT(A) on examination of their statement held that both the parties stated about the rate of flat booking, payment terms, money paid from time to time both the buyers nowhere asked in the statement that they have made 'on money' payment. The statement of purchaser cannot alone prove that they were having any agreement with the assessee regarding any payment made outside books of accounts. The contention of assessee that both the buyers paid extra money for extra work agreement is also proved by proof of disbursal of bank loans as well as by extra work agreements. The ld. CIT(A) further noted that if the extra work doubted by search or survey party, no further investigation was made against those flats owners. The adoption of huge 'on money' without iota of evidence is not justified and deleted the entire addition. - Decided against revenue.

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• 2021 (4) TMI 666
  Penalty u/s. 271(1)(c) - unexplained share application money and unsecured loans - defective notice u/s 274 - assessment u/s. 153A r.w.s. 143(3) of the Act was completed on 24.03.2015 accepting the returned income -additional income offered in the Income Tax Return - Assessee contending that proper show cause notice was not issued and on merits relied on various decisions contending that penalty was not leviable since no incriminating material was found during the course of search and the assessee has suo moto offered the additional income for tax - HELD THAT:- As from show cause notice it is very much clear that the Ld. A.O. failed to strike off one of the specific charge levied against the assessee which thus violates the principle of natural justice available to the assessee as provided u/s. 274 of the Act.CIT(A) was justified in deleting the penalty on legal ground by holding the penalty proceedings as void ab initio as the Ld. A.O. failed to level the specific charge against the assessee. Thus on the legal ground itself the appeal of revenue deserves to be dismissed. Also no incriminating material was found during the curse of search relating to the alleged surrender of income made by the assessee in the Income Tax Return. The assessee suo moto offered the additional income in the return and paid taxes there on. It is also an established fact in the instant case that Ld. A.O. was not sure that which assessee has concealed the particulars of income or furnished inaccurate particulars of income. Even though the share application money was received by M/s. Exotic Exports P Ltd. and duly reflected in its books of accounts but Ld. A.O. accepted the additional income offered by the assessee in his individual capacity and levied the penalty also. Simultaneously the Ld. A.O. also made addition in the hands of M/s. Exotic Exports P Ltd. for the similar amount of share application money and initiated the penalty proceedings. In the given facts and circumstances itself the revenue fails to succeed and the action of initiating penalty by Ld. A.O. is unjustified. No incriminating material was found during the course of search relating to the additional income offered by the assessee during the course of search which was subsequently honoured by disclosing in the return of income and paying taxes thereon. Transaction of alleged share application money was duly reflected in the regular books of accounts. Under these given facts and circumstances revenue fails to succeed as the Ld. A.O. was not justified in levying the penalty u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

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• 2021 (4) TMI 665
  Disallowance of interest - As interest earned by the assessee would be assessable as income from other sources and the netting off of the interest cost could not be allowed - HELD THAT:- As certain assets as well as liabilities delved upon assessee pursuant to agreement dated 30/03/2013 with its holding company wherein it was agreed that Lohegaon project would be carried out by the assessee. The differential of assets and liabilities was treated as loan from M/s BEBL to the assessee for which the assessee paid interest expenditure of ₹ 398.52 Lacs during the year. The assessee also earned interest income from loan granted by its holding company to M/s GBL which was also transferred to the assessee under the said agreement. The net interest, thus earned, has been offered to tax. We find that there is clear nexus between the interest income as well as interest expenditure. As rightly noted by Ld. CIT(A), it was not the case the case where the funds were borrowed for the purpose of business and the excess funds were parked by the company for earning interest income. This was a case where the funds for the Lohegaon project were transferred separately and the loan to GBL in the books of the holding company was transferred to the assessee along with equal liability. There was a direct nexus of loan (asset) with loan (liability) in the books of the assessee company. These findings remain undisturbed before us also. Therefore, we find no reason to interfere in the impugned order. The appeal stand dismissed. Facts are pari-materia the same in AY 2015-16 wherein interest income has been assessed under the head Income from Other sources whereas interest expenditure has been disallowed while framing an assessment on 28/12/2017. The Ld. AO follows the logic of AY 2014-15. The Ld. CIT(A) deleted the disallowance on similar findings, against which the revenue is in further appeal before us. Facts and issues being identical, following our adjudication as for AY 2014-15, we dismiss the appeal.

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• 2021 (4) TMI 664
  Estimation of income - Bogus purchases - case of the assessee was reopened by the A.O on the basis of an information received from the office of DGIT(Inv.), Mumbai that as per the incriminating documents unearthed in the course of the search proceedings conducted under Sec. 132(1) on certain entities engaged in the business of providing accommodation entries/bills, the name of the assessee had surfaced as a beneficiary that had obtained accommodation purchase bill - HELD THAT:- We are of the considered view that it can safely be concluded that the assessee had purchased the goods under consideration, though not from the aforementioned party viz. M/s Moulimani Impex Pvt. Ltd, but from the open/grey market - addition in the hands of the assessee is liable to be restricted only to the extent of the profit which it would have made by procuring the goods at a discounted value from the open/grey market. Insofar the quantification of the profit from making of the impugned purchases is concerned, we find that in the case of Pr. Commissioner of Income Tax-17 Vs. M/s Mohhomad Haji Adam Company [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate as that of the other genuine purchases. Addition in respect of purchases which were found to be bogus in the case of the assessee before them, a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of the other genuine purchases. We, respectfully following the aforesaid judgment of the Hon ble High Court direct the A.O to restrict the addition insofar the bogus/unproved purchases in the case before us is concerned, by bringing the G.P rate on the amount of such bogus purchases at the same rate as that of the other genuine purchases. Needless to say, the assessee in the course of the set aside proceedings shall furnish the requisite details before the A.O, who shall after making necessary verifications restrict the additions in terms of our aforesaid observations. The order passed by the CIT(A) is set aside and the matter is restored to the file of the A.O for the limited purpose of giving effect to our aforesaid directions. Appeal of the assessee is partly allowed for statistical purposes.

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• 2021 (4) TMI 663
  Estimation of income - bogus purchases - CIT(A) restricting the addition to 12.5% as against the 30% bogus purchases disallowed by the Assessing Officer - HELD THAT:- No infirmity in the order passed by the Ld.CIT(A) in restricting the addition to 12.5% as against the 30% bogus purchases disallowed by the Assessing Officer. Grounds raised by the revenue are dismissed.

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• 2021 (4) TMI 662
  Estimation of income - bogus purchases - CIT(A) has restricted the addition of disallowance of bogus purchases to the extent of 10% - HELD THAT:- We find the facts and the issues in the present case are similar to the earlier years [ 2017 (2) TMI 1481 - ITAT MUMBAI] and follow the judicial precedence and observe that the Ld.CIT(A) has granted the relief by restricting the addition to 10% of the bogus purchases relying on the assessee s own case for earlier years and passed a speaking order. Further the Ld.DR of the revenue could not controvert the findings of the CIT(A) with any new cogent evidence or information Accordingly we are not inclined to interfere with the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.

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• 2021 (4) TMI 661
  Disallowance u/s 14A r.w.r. 8D - CIT (A) confirmed the disallowance made by the assessing officer u/s 14A being 0.5% of the total investments on the assumption that certain administrative expenses must have been incurred to earn exempt income - HELD THAT:- In the present year, the AO has made disallowance under section 14A by invoking provisions of Rule 8D of the Income Tax Rules, 1962. Since Rule 8D is not retrospective, the same is not applicable in the present assessment year and accordingly, we hold that the assessing order erred in invoking the provisions of Rule 8D of the Rules. Assessee had been consistently following a method of disallowance in the succeeding years commencing from AY 2006-07 onwards. The said method has been accepted by the Tribunal in AY 2010-11, 2011-12 and 2006-07 (set aside proceedings) in the absence of any dissatisfaction by the AO qua inaccuracy of the same. We have also upheld the said method in the appeal for AY 2015-16, in the absence of any dissatisfaction by the AO. We accordingly restore the matter back to the file of the AO to compute disallowance on the same basis in the year under consideration after taking requisite details from the assessee and giving opportunity of hearing by following the principle of natural justice. The ground is allowed for statistical purposes. Disallowance of deduction claimed under section 80IA in respect of captive power generating unit situated at Gurgaon - HELD THAT:- As relying on own case [ 2018 (12) TMI 1613 - ITAT DELHI] we hold that the disallowance made by the Assessing Officer (AO) under 80IA of the Act in relation to the generation of power cannot be sustained. We, accordingly, allow this ground of appeal raised by the assessee. Additional depreciation on new plant and machinery acquired and installed during the year - AO disallowed the aforesaid claim of additional depreciation holding that there was no correlation between installed capacity and installation of machine - HELD THAT:- No condition requiring nexus of the relevant plant and machinery acquired and installed during the year with the increase in installed capacity of the relevant industrial undertakings during the year. As per our reading, the requirement of the section is that in case of an existing industrial undertaking, additional depreciation shall be available on new plant and machinery acquired and installed during the previous year, if such industrial undertaking achieves substantial expansion by way of increase in installed capacity by not less than 10%. Accordingly, if there is an increase in installed capacity of the relevant industrial undertaking, the new plant and machinery acquired and installed during such year shall be eligible for additional depreciation at the rate prescribed in that section. There is no further condition of drawing operational nexus of such plant and machinery with increase in installed capacity. - said condition, has even been removed in section 32(1)(iia) by the Finance Act, 2005, w.e.f. 01.04.2006, although said amendment is not applicable during the year under consideration, but re-enforces the intent of the legislature, that the same was not relevant even in the earlier year, warranting nexus of plant machinery with increase in installed capacity - there is no condition of the relevant plant and machinery resulting in the increase in production of the relevant industrial undertaking. What the AO and the Ld. CIT (A) have held in the impugned order(s), is drawing nexus of the installed plant and machinery with increase in production from such machinery, which is clearly not the requirement in law. - we find that, the AO and the Ld. CIT (A) have travelled to an extraneous territory, while examining and disallowing the aforesaid claim of additional depreciation under section 32(1)(iia) - Thus we delete the disallowance made by the AO and hence the ground of appeal is allowed. Disallowance of portfolio management expenditure claimed by the assessee as deduction against business income - HELD THAT:- We find that the aforesaid issue has been decided against the assessee by the Tribunal in the assessee s own case for the assessment year 2008-09, [ 2021 (1) TMI 1109 - ITAT DELHI] wherein it has been held that the portfolio management expenditure is not allowable as business expenditure. We also find that if the expenditure is not allowed as business deduction, then the same ought to be allowed as deduction under either clause (i) or clause (ii) of section 48 of the Act while computing income arising from investments under the head capital gains. The Tribunal in the aforesaid order has also accepted the aforesaid alternate plea of the assessee. We, however, further find that the nexus of the aforesaid expenditure with earning of exempt dividend cannot be completely ruled out. Accordingly, we accept the alternate contention of the assessee and direct the assessing officer to disallow part of the aforesaid expenditure in the ratio of dividend income to capital gains under section 14A and the balance expenditure to be allowed as deduction under section 48 from income declared by the assessee under the head capital gains. Such expenditure can be further apportioned by the assessing officer in the ratio of short term or long term capital gain declared by the assessee. Disallowance under Section 40(a)(i) - Disallowance of professional fee paid to resident of USA for want of TDS or alternatively as capital expenditure - HELD THAT:- The foreign national had only made available its findings of the scenario planning exercises conducted by him as a professional, but did not make available his knowledge, which was used for conducting the aforesaid exercise.The legal position in this regard is no longer res integra and is settled by catena of decisions referred to by the Ld. Counsel of the assessee supra with regard to the meaning of expression make available used in the Treaty. Useful reference can be made to the decision of the Hon ble Delhi High Court in the case of DIT vs Guy Carpenter Co Ltd: [ 2012 (5) TMI 31 - DELHI HIGH COURT] Accordingly, the impugned payment made was not taxable in India. Accordingly, the assessee did not commit any error in not deducting tax at source while making the remittance and, therefore, the same did not warrant any disallowance under Section 40(a)(i) of the Act. No force in the alternate contention of the assessing officer to treat the said payment as capital expenditure. The assessee is a large sized company already existing in the business of manufacturing two wheelers since past several years. The impugned expenditure constitutes a miniscule part of the total expenses incurred by the assessee in the course of carrying on the said business. The aforesaid expenditure did not result in providing any benefit of enduring nature leave alone the benefit by way of accretion to the profit earning apertures or in the capital field. The said expenditure is part and parcel of the existing business, incurred to gain some insight of the future outlook of the two-wheeler industry and, therefore, the same formed integral part of the existing business, which cannot, in our view, be sought to be capital in nature. Transfer Pricing adjustment on account of international transaction of import of components - CIT (A) upheld the transfer pricing adjustment holding that the associated enterprise charged excessively high price for the two components which cannot be attributed to geographical variation - HELD THAT:- Referring to Co-ordinate Bench of the Tribunal in assessment year 2004-05 [ 2019 (7) TMI 1770 - ITAT DLEHI] we hold this issue in favour of the assessee and hold that the transfer pricing adjustment made by the TPO cannot be sustained and accordingly while allowing the grounds delete the same. Annual payment of Royalty/technical guidance fee as allowable as revenue expenditure Disallowance of net expenditure incurred on account of model fee by holding the same to be capital in nature after allowing depreciation @ 25% - HELD THAT:- We have perused the record. It is, clear that for quite a long time there is consistency in the view taken by the Tribunal as upheld by the Hon ble jurisdictional High Court and Hon ble Apex court. Therefore, the issue is no longer res integra and is in favour of the assessee. We uphold the findings of the Ld. CIT (A). Accordingly, we dismiss the ground of appeal raised by the Revenue. TDS u/s 195 - Disallowance of export commission paid to Honda Motor Company Ltd. (Honda), Japan under Section 40(a)(i) - addition on ground that the same constituted royalty/fee for technical services on which the assessee was obliged to deduct tax at source - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by the order passed by the Tribunal in AY 2006-07[ 2018 (12) TMI 1613 - ITAT DELHI] . Disallowance being provision for warranty made in respect of sales made during the year - HELD THAT:- We find that the issue has been decided in favor of the assessee company by order passed by the Tribunal in the earlier years and since appeal filed by the Revenue has not been admitted by the High Court, the issue has attained finality. We find that the order passed by the CIT (A) is correct in law. We accordingly uphold the order of the Ld. CIT (A) and dismiss the ground of appeal raised by the Revenue.

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• Customs

• 2021 (4) TMI 704
  Initiation of Contempt Action - HELD THAT:- The question of precipitating the matter by way of contempt action does not arise. For, the entire subject matter is pending before this Court. There are conflicting decisions on the same question involved in the writ petition and the appeals pending before this Court. It is not a fit case for initiating contempt action in view of the debatable aspects involved in the proceedings and are still pending before this Court - Appeal allowed - decided in favor of appellant.

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• 2021 (4) TMI 700
  Grant of Bail - Smuggling - Gold Bars - Bailable offence or not - Section 135(1)(i)(A) of the customs Act, 1962 - HELD THAT:- Considering the length of detention, this court is of the opinion that further continuation of detention of the accused may not be required. Accordingly, it is provided that the accused petitioner shall be released on bail with two suitable sureties each (atleast one should be permanent resident of Assam), of the like amount to the satisfaction of the learned CJM, Kamrup(M), Guwahati, subject to the conditions imposed - bail application allowed.

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• 2021 (4) TMI 696
  Rewards under the Merchandise Exports from India Scheme ('MEIS') - Seeking completion of process of sanctioning and grant of the reward - export of Cryogenic Tanks and Vessels and such other specially manufactured items - denial of rewards under MEIS on the ground that petitioner had not intimated the intent for claiming MEIS benefits initially on their shipping bills - eligibility as per para 3.14(a) of the HBP 2015-20 announced on 01.04.2015 for MEIS rewards denied - HELD THAT:- Mandatory declaration of intent is made a necessity for claiming reward under the MEIS under any of the schemes for export shipment. Such declaration is a must and in case of shipping bills other than free shipping bills, such declaration was made mandatory w.e.f. 01.06.2015. It is also vital to notice that the SEZ Devision, Department of Commerce in its communication dated 29.09.2016 has declared that though window for manual shipping bills for claiming MEIS benefit was allowed for the period between 01.04.2015 to 31.05.2015 due to short term problem in on-line filing, the condition for intimating the intent for claiming MEIS benefits had not been waived and the intent must have been clear for claiming the benefits. Undoubtedly, the petitioner had not intimated the intent for claiming MEIS benefits initially on their shipping bills dated 30.03.2015. There is so much of impact prevailing on the export being made from SEZ unit as it was from Kandla SEZ that the export has been made by the petitioner even after the petitioner was granted license in the month of December for having exported the goods worth 17,23,000 US$, there was still a confusion as to whether this mandate would be applicable in case of free shipping bills and whether any export made by Kandla SEZ would be covered. Noticing that the declaration of intent on the shipping bill for claiming the benefit under the reward scheme is made mandatory w.e.f 01.06.2015 under the Foreign Trade Policy, 2015-20 or the Handbook of Procedure, 2015-20, in wake of the aforementioned decision, there could be no exclusion of SEZ or non-EDI Port unit for availing the benefit. The decision of this Court in case of M/S. RAJ AND COMPANY VERSUS UNION OF INDIA [ 2021 (2) TMI 1101 - GUJARAT HIGH COURT] , where the Court has emphasized on procedurality not to hamper the substantive right of the party. Petition allowed.

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• 2021 (4) TMI 695
  Prohibition on import of raw material - Calcined Petroleum Coke (CPC) - Raw Petroleum Coke (RPC) into a Special Economic Zone - enhancement of import limit of RPC and CPC - manufacture, blending and re-export without the said goods being cleared for domestic usage in India under the SEZ Act - HELD THAT:- Though in the order dated 28.01.2019, the Hon ble Supreme Court referred to the order dated 09.10.2018 [ 2018 (11) TMI 1352 - SUPREME COURT ] and observed that outer limit for import of raw pet coke cannot exceed 1.4 M.T. per annum, outer limit of 0.5 M.T. per annum for import of CPC, as fixed by the order dated 09.10.2018, was not mentioned. But the same will make no difference - As the Hon ble Supreme Court had rejected I.A.No.1847 of 2019, wherein prayer for enhancement of import limit of RPC and CPC was made, the prayer made by the petitioner cannot be granted and therefore, submission made that the representations were rejected without any application of mind pales into insignificance. Petition dismissed.

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• 2021 (4) TMI 692
  Violation of principles of Natural justice - opportunity of hearing not granted - Revocation of Custom Duty Exemption Certificate (CDEC) - import of certain medical equipments exempt from customs duty by N/N. 64/88-Cus. Dated 1.3.1988 - consideration of the decision in the case of Sir Gangaram Trust Society and another Vs. Union of India and Others [ 2007 (10) TMI 645 - SUPREME COURT ] - HELD THAT:- A plain reading of the Order passed by the first respondent clearly shows that proper opportunity has not been granted by the first respondent to the appellants in considering their case - The documents which were furnished by the appellants to the first respondent before this court, which are annexed to the Appeal Memorandum running approximately 200 documents have not been mentioned in the Order passed by the first respondent, let alone being considered or discussed. The Order passed by the Hon'ble Apex Court in Gangaram's case clearly mentioned that the first respondent was duty bound to consider the case of the appellant in accordance with law. Further, the first respondent was a party before this court in Writ Appeal. When this court has clearly passed an order referred, it was for the first respondent to consider the case of the appellant judiciously by affording opportunity for the appellant to establish that they have complied with all the eight conditions and therefore, they were entitled for the exemption of the customs duty. The first respondent has not considered the case of the appellants or not even discussed the materials placed by the appellants before it. The first respondent being the quasi judicial authority was duty bound to consider the materials placed before it in its proper perspective and should have passed a speaking order assigning the reasons - the first respondent has failed to do so in the case on hand. Appeal allowed - decided in favor of appellant.

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• 2021 (4) TMI 691
  EPCG Scheme - fulfilment of all obligations or not - reliance placed on statements of various persons - request for cross-examination rejected - violation of principles of natural justice or not - HELD THAT:- The Hon'ble Supreme Court in a recent decision I.C.D.S. Ltd. vs. Commissioner of Income Tax [ 2020 (2) TMI 1424 - SUPREME COURT ] held that if the department wants to rely on the evidence of certain witnesses, it may be necessary to provide opportunity of cross examination of these witnesses to the noticee. This is a self-evident proposition for which no authority is needed. The said decision of the Hon'ble Supreme Court squarely applies to the case on hand. Since this basic right of the petitioners has been denied, the order impugned in these writ petitions will have to be necessarily set aside - the matter is remitted to the file of the first respondent - petition allowed by way of remand.

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• 2021 (4) TMI 659
  Re-export of goods - goods lying in the customs warehouse to outside India - HELD THAT:- It will be open to the private respondents to opt for re-export of perishable imported goods lying in the customs warehouse to outside India, to avoid absolute confiscation. Matters heard in-part - For further hearing, list these matters on 23rd March, 2021 at the end of the miscellaneous list.

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• Insolvency & Bankruptcy

• 2021 (4) TMI 689
  Approval of Resolution Plan - Jurisdiction - validity of conclusion that the requirement of the prior written consent of the mortgagee of the Ace Complex Limited as provided in the Resolution Plan has been rendered infructuous - provisions for effective implementation in resolution present or not - curtain has been drawn on the endeavours of Appellant to seek withdrawal of its offer by declining the same - HELD THAT:- CIRP against Corporate Debtor/AAL was initiated by Corporation Bank now known as Union Bank of India by filing Application under Section 7 of I B Code. AA admitted the Application on 24th July, 2017. Thus, CIRP qua CD/AAL was commenced. IRP was appointed and public announcement was made. COC was constituted on 17th August, 2017. IRP was confirmed as RP in the first meeting of COC. CIRP period was extended by 90 days - It emerges from the impugned order that this IA, filed by COC, sought approval of Resolution Plan on account of special process having been undertaken under the inherent powers of Hon ble Apex Court and since the issuance of LOI and the underlying purpose thereto in terms of RFRP became nugatory, such process was not required to be followed prior to filing of Application for approval of Resolution Plan. Thereafter, Application being IA No.225/2020 came to be filed by the Resolution Professional for approval of Resolution Plan of Appellant, which was allowed in terms of the impugned order. Appellant assails the impugned order primarily on the ground that declaration of critical parts of the Resolution Plan affecting its feasibility and viability as being infructuous or redundant was beyond the scope of jurisdiction of the AA. The ground of challenge is that the Resolution Plan is contingent on the execution of a long term lease for the Ace Complex Land on acceptable terms defined in the Resolution Plan, i.e. with the prior written consent of Vistra, the mortgagee of Ace Complex Land - the approval of the Resolution Plan is said to be without complying with the requirement of obtaining prior written consent of Vistra in respect of execution of the lease of Ace Complex Land and without obtaining approval of CCI. It is contended on behalf of Appellant that the AA failed to satisfy itself whether the Resolution Plan was compliant as regards vital conditions and whether it had provisions for its effective implementation. Vistra is a mortgagee with Ace Complex Land mortgaged in its favour by Gateway. The Adjudicating Authority has taken note of the 2020 lease and approved the Resolution Plan submitted by Appellant which protects the legitimate interests of Vistra. Since the present appeal lacks merit, Vistra cannot be permitted to introduce a case beyond the scope of examination of legality of the Resolution Plan of Appellant under the garb of seeking impleadment. Same is true in respect of intervention sought by Kotak Mahindra Bank. The execution of long term lease for the Ace Complex Land with Acceptable Terms was not a condition precedent in regard to approval of Resolution Plan but only in regard to effective date. The impugned order does not travel beyond the scope of enquiry under Section 31 of I B Code - appeal not only lacks merit but also is frivolous - Appeal dismissed with costs to the tune of ₹ 1/- Lakh imposed on the Appellant which shall be deposited in this Appellate Tribunal within 15 days.

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• 2021 (4) TMI 688
  Principles of natural Justice - ex-parte order - service of notice or not - HELD THAT:- Having regard to the fact that 18.03.2020 falls during the Covid-19 period and the restrictions imposed by the Government read together with the Notice issued by the Learned Adjudicating Authority on 15.03.2020 that matters posted during the period 16.03.2020 to 27.03.2020 would be adjourned, except for urgent matters, keeping in view Principles of Natural Justice, it can be said that an opportunity may be given to the Appellant herein to file his Reply and take part in the proceedings. Further, it is an admitted fact that the Appellant before the Adjudicating Authority is a guarantor of Agnipa Energo Private Limited whose Petition is already pending before the Adjudicating Authority. Therefore, the Order setting the Appellant herein ex-parte is set aside. Though the Adjudicating Authority had the power to set aside an ex-parte Order provided, it is satisfied that there was sufficient cause with respect to service of Notice, as provided in Rule 49(2) of the NCLT Rules, 2016, it is noted that the Appellant herein is silent about the service of Notice which was affected upon them by e-mail. Hence, it a fit case to impose costs of ₹ 25,000/- on the Appellant to be paid to the Respondent before the next date of Hearing. Appeal allowed.

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• 2021 (4) TMI 678
  Initiation of CIRP - Time limitation - acknowledgments of debts under Section 18 of the Limitation Act, 1963 or not - NPA - HELD THAT:- While the Writ Petition was pending Financial Creditor issued notice dated 24th December, 2014, that authorized officer had taken possession of the secured assets. On 11th May, 2017, District Magistrate Hooghli issued order under SARFAESI Act, 2002 for possession by the Financial Creditor of the assets hypothecated. On 24th July, 2017, High Court passed interim orders restraining Financial Creditor from taking further steps under SARFAESI Act, 2002, until further orders. Financial Creditor on 10th July, 2018 filed Application under Section 7 of IBC. Corporate Debtor opposed the Application but ground of limitation was not there. Adjudicating Authority admitted the said application on 25th April, 2019. In Appeal to NCLAT issue of limitation was raised but the Appeal was dismissed - it is clear that Section 18 of the Limitation Act applies. Balance-Sheets-Acknowledgment? - HELD THAT:- There are various Judgements passed by various Hon ble High Courts including High Court of Delhi and even Hon ble Supreme Court of India which have dealt with the Balance Sheet/Annual Returns of Companies and entries in books of Account where entries in the same have been treated as acknowledgement of debt and even accepted the same for the purpose of Section 18 of the Limitation Act, 1963. It is well settled position of law that Annual Returns/Audited Balance Sheets can be referred to and relied on to see if contents therein amount to acknowledgement or not - it is settled law appearing from the Judgements of the High Court of Delhi and other High Courts that Balance Sheets can be looked into to see if there is acknowledgement of debt. Perusing Judgements of Hon ble Supreme Court we find that even Hon ble Supreme Court has looked into Balance Sheets and Books of Account to see if there is Acknowledgement of Liability. If the amount borrowed is shown in the Balance Sheet, it may amount to Acknowledgement. The Judgements of Hon ble Supreme Court of India are binding and Balance Sheets cannot be outright ignored. The Annual Returns/Audited Balance Sheets, one-time settlement proposals, proposals to restructure loans, by whatever names called, cannot be simply ignored as debarred from consideration and in every given matter, it would be a question of applying the facts to the law and vice versa, to see whether or not the specific contents, spell out an acknowledgement under the Limitation Act. Thus, if the NPA is counted even from 30.09.2012, the balance- sheets which were before the Adjudicating Authority for year ending 2015 to 2016 show acknowledgment of debt and the Application under Section 7 filed on 3rd October, 2018 cannot be said to be time-barred. The balance-sheet for financial year ending 2015 was signed at 30.05.2015 and balance- sheet for financial year ending 31st March, 2016 was signed on 30.05.2016. Thus the Application under Section 7 was within limitation - OTS was declined. Even keeping this document in mind, if one was to keep in view the balance- sheet for year ending 31st March, 2015 and consider this OTS proposal and perused the date of filing of Application under Section 7 of IBC, still the claim must be held within limitation. The main thrust of the argument of Learned Counsel for the Appellant has been that in the matter of Swiss Ribbons [ 2019 (1) TMI 1508 - SUPREME COURT ] Hon ble Supreme Court has referred to the shift in the legislative policy and thus see date of default, simply calculate three years and hold the Application as time-barred unless there is Application under Section 5 of Limitation Act. The legislative policy moved from the concept of inability to pay debts to determination of default and one of the policy reasons for this was that cause of default is not relevant. We are unable to appreciate the submission made by the Learned Counsel for the Appellant that because of shift in legislative policy from inability to pay debts to determination of default , it makes any difference to the applicability or inapplicability of provisions of Limitation Act, as far as may be. Appeal dismissed.

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• 2021 (4) TMI 673
  Approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In K.Sashidhar v. Indian Overseas Bank Others [ 2019 (2) TMI 1043 - SUPREME COURT ] the Hon ble Apex Court held that if the CoC had approved the Resolution Plan with requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon ble Court observed that the role of the NCLT is no more and no less . The Hon ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan as approved by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) when the Resolution Plan does not conform to the stated requirements. In CoC of Essar Steel [ 2019 (11) TMI 731 - SUPREME COURT ] the Hon ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. The Resolution Plan as approved by the CoC under Section 30(4) of the Code meets the requirements of Section 30(2) of the Code and Regulations 37 to 39 of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law - Application allowed.

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• Service Tax

• 2021 (4) TMI 699
  Recovery of service tax not paid - time limitation for issuance of notice for recovery - validity of SCN - HELD THAT:- The notice is a show cause notice served upon the Appellant under Section 73(1) of the Act of 1994 to explain as to why service tax specified therein should not be charged from the Appellant - Court should not interfere at the stage of show cause notice except where there is jurisdictional error or there is apparent absence of process of law. No such exceptional ground is made out. It is for the authority to consider the reply submitted by the Appellant and decide the same at the earliest by speaking order in accordance with law - appeal dismissed.

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• 2021 (4) TMI 687
  CENVAT Credit - exempted activity or not - trading in mutual funds - Commercial Training and Coaching Services - maintenance of separate records or not - extended period of limitation - HELD THAT:- The trading‟ has not been defined under the Service Tax but in the context of securities, trading‟ means an activity where a person is engaged in selling the goods and occupy for the purpose of making profit but certainly trading is different from redemption of mutual fund units, in the present case appellant cannot transfer the mutual fund units to third party and give only by redemption to the mutual fund because the appellant is not permitted to trade mutual fund unit in the absence of a license from the SEBI. There is a restriction on the right to transfer unit and the appellant cannot transfer units to any other person. The appellant cannot be termed as service provider because he only makes an investment in the mutual fund and earn profit from it which is shown in the Books of Accounts under the head other income . Hence the question of invoking Rule 6 does not arise and hence the Department has wrongly invoked the provisions of Rule 6(3) demanding the reversal of credit on the exempted services. Extended period of Limitation - HELD THAT:- The substantial demand is time-barred as during the audit, the Department entertained the view that the appellant is engaged in providing the exempted services and consequently issued the show-cause notice. The appellant has been filing the returns under the taxable service of Commercial Training and Coaching and has provided all the records to the Department during the course of investigation and has not suppressed any material fact from the Department - the extended period cannot be invoked where the Revenue‟s case is based on Balance Sheet and income return and other records of the assessee. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (4) TMI 693
  Maintainability of petition - Violation of principles of natural Justice - officer who had heard the petitioners personally at Annand, has not decided the matter and instead it is the Commissioner of Central Excise, Vadodara, who adjudicated the matter - substantial delay in delivering the judgment after having heard the parties - HELD THAT:- It is not in dispute that the order is appealable under Section 35 B of the Central Excise Act, 1944 which provides for appeal to the Appellate Tribunal within three months from the date on which the order sought to be appeal is communicated. The alternative efficacious remedy is available. Therefore, we are inclined to relegate the parties to the CESTAT. We could not oblivious of the averments of breach of principles of natural justice and also the emphasis on the delay in delivering the judgment and order by the adjudicating authority; however, in the interregnum, since in the case of the very petitioner, the second Show Cause Notice for the subsequent period from April 2016 to June 2017, which came against the petitioner when challenged to the CESTAT, the judgment has been delivered in favour of the petitioner on 28.02.2020. It is not in dispute that all questions regarding factual matrix as well as legal issues raised in the first Show Cause Notice and in the second Show Cause Notice are identical. The Communication dated 21.07.2017 called for from the petitioner by Superintendent, Range 1, Division- 3, CGST and Central Excise, Vadodara. The reply on the part of the petitioner dated 21.08.2017 indicates the total value of the sulphur at ₹ 74,93,182.13 and duty involved including the cess being of ₹ 9,32,088.25. Therefore, we pertinently inquired from the learned standing counsel to get the details from the respective authorities of the exact amount of the duties, which the petitioner would be required to pay as per the decision of the CESTAT - Petition disposed off.

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• 2021 (4) TMI 683
  Levy of penalty - wrongful availment of CENVAT Credit - appellant immediately, on being pointed out, reversed the ineligible credit along with interest and the same has been appropriated - HELD THAT:- The appellant who is a State Government Undertaking has inadvertently availed the cenvat credit which on being pointed out by the audit reversed the same along with interest which fact is not in dispute and the Order-in-Original appropriated the amount and the interest paid by the appellant. Further, it is a settled position of law that no suppression of material to evade payment of duty can be alleged against the State Government Undertaking. This issue has been consistently considered by the Tribunal in the case of YCH LOGISTICS (INDIA) PVT. LTD. VERSUS C.C.E C.S.T. -BANGALORE SERVICE TAX- I [ 2020 (3) TMI 809 - CESTAT BANGALORE ] and it has been held that once the duty is paid before the issuance of show-cause notice along with interest, the show-cause notice need not be issued and question of imposition of penalty does not arise. Penalty set aside - appeal allowed - decided in favor of appellant.

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• 2021 (4) TMI 669
  CENVAT Credit - exempt goods - non-maintenance of separate account of inputs and input services used in manufacturing of exempted as well as dutiable goods - invocation of extended period of limitation or not - Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- It is fact on record that the appellant is filing ER-1 return regularly showing clearance of impugned goods without payment of duty and without reversal of credit and the show cause notice was issued by invoking the extended period of limitation. Therefore, the extended period of limitation is not invokable in the facts and circumstances of the case. On merits, it is a case that the appellant is manufacturing dutiable goods not exempted goods. Some clearances were exempted from payment of duty by way of Notification No.10/1997 dt.1.3.1997, (amended) to specified buyer of the goods if those buyers fulfil condition of the said notification. Buying goods from the appellant under Notification No.10/1997 dt.1.3.1997 without payment of duty does not change the character of the goods as exempted goods - Rule 6(3) of Cenvat Credit Rules are not applicable to the facts of the present case. Appeal allowed - decided in favor of appellant.

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• 2021 (4) TMI 668
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection on the ground of Time Limitation - rejection on the ground that the application was filed beyond the limitation of time - HELD THAT:- The Hon ble Apex Court have taken sue motto cognizance for extension of limitation in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] wherein the Hon ble Apex Court has held that in case where the limitation period expired during the period 15.03.2020 till 14.03.2021, the limitation shall start from 15.03.2021. Admittedly, the appellants have filed appeal within this period, in that circumstances, the order of the Ld. Commissioner (Appeals) is bad in law, therefore, the impugned order is set aside. The Ld. Commissioner (Appeals) has not decided the merits of the appeal, therefore, the Ld. Commissioner (Appeals) is directed to decide the issue on merits within 60 days of the receipt of this order and pass the detailed speaking order for disposal of the appeals - appeal disposed off by way of remand.

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• CST, VAT & Sales Tax

• 2021 (4) TMI 697
  Finalisation of deemed assessment - suppression of sales or not - argument of the petitioner's counsel is that the respondent did not conduct any independent enquiry in the matter - violation of principles of natural justice - HELD THAT:- In the impugned orders, the petitioner's liability as regards the sales suppression was quantified approximately ₹ 7,00,000/-. Without prejudice to his contention, the petitioner is directed pay the said amount to the respondent on or before 31.03.2021. The petitioner gives an undertaking that he would do so without seeking any extension of time - The said remittance shall abide by the final order to be passed by the respondent following this remand. Of-course, it is seen that the respondent had chosen to infer that there must have been corresponding purchase suppression also. For purchase suppression, on the face of it, there are no materials. The matters are remitted to the file of the respondent to pass orders afresh in accordance with law - Petition allowed by way of remand.

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• Indian Laws

• 2021 (4) TMI 703
  Smuggling - poppy straw - requirement of search warrants for conducting raids - public conveyance or not - non-compliance of Section 42 of N.D.P.S. Act - HELD THAT:- The evidence in the present case clearly shows that the vehicle was not a public conveyance but was a vehicle belonging to accused Gurdeep Singh. The Registration Certificate of the vehicle, which has been placed on record also does not indicate it to be a Public Transport Vehicle. The explanation to Section 43 shows that a private vehicle would not come within the expression public place as explained in Section 43 of the NDPS Act. On the strength of the decision of this Court in Jagraj Singh alias Hansa [ 2016 (7) TMI 44 - SUPREME COURT] , the relevant provision would not be Section 43 of the NDPS Act but the case would come under Section 42 of the NDPS Act. It is an admitted position that there was total non-compliance of the requirements of Section 42 of the NDPS Act - Total non-compliance of Section 42 is impermissible. The rigor of Section 42 may get lessened in situations dealt with in the conclusion drawn by this Court in Karnail Singh 1 but in no case, total non-compliance of Section 42 can be accepted. Appeal allowed.

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• 2021 (4) TMI 702
  Dishonor of two cheques - dispute remained pending for past 16 years - humongous pendency of complaints under Section 138 of the Act - service of summons - Statutory amendment to Section 219 of the Code - Summary trials - Attachment of bank accounts - Applicability of Section 202 of the Code - Mediation - Inherent jurisdiction of the Magistrate. Service of summons - HELD THAT:- Service of summons on the accused in a complaint filed under Section 138 of the Act has been one of the main reasons for the delay in disposal of the complaints - several suggestions have been given by the learned Amici Curiae for speeding up the service of summons. Some of the suggestions given by him pertain to dishonour slips issued by the bank under Section 146 of the Act, disclosing the current mobile number, email address and postal address of the drawer of the cheque, the details of the drawer being given on the cheque leaf, creation of a Nodal Agency for electronic service of summons and generation of a unique number from the dishonour memo. The Union of India and the Reserve Bank of India were directed to submit their responses to the suggestions made by the learned Amici Curiae on these aspects. Mechanical conversion of Summary Trial to Summons Trial - HELD THAT:- The object of Section 143 of the Act is quick disposal of the complaints under Section 138 by following the procedure prescribed for summary trial under the Code, to the extent possible. The discretion conferred on the Magistrate by the second proviso to Section 143 is to be exercised with due care and caution, after recording reasons for converting the trial of the complaint from summary trial to summons trial. Otherwise, the purpose for which Section 143 of the Act has been introduced would be defeated. We accept the suggestions made by the learned Amici Curiae in consultation with the High Courts. The High Courts may issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 from summary trial to summons trial in exercise of power under the second proviso to Section 143 of the Act. Inquiry u/s 202 of the Cods in relation to section 145 of the act - HELD THAT:- Section 145 had been inserted in the Act, with effect from the year 2003, with the laudable object of speeding up trials in complaints filed under Section 138. If the evidence of the complainant may be given by him on affidavit, there is no reason for insisting on the evidence of the witnesses to be taken on oath. On a holistic reading of Section 145 along with Section 202, we hold that Section 202 (2) of the Code is inapplicable to complaints under Section 138 in respect of examination of witnesses on oath. The evidence of witnesses on behalf of the complainant shall be permitted on affidavit. If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses. In suitable cases, the Magistrate can examine documents for satisfaction as to the sufficiency of grounds for proceeding under Section 202. Sections 219 and 220 of the Code - HELD THAT:- The High Courts are requested to issue practice directions to the Trial Courts to treat service of summons in one complaint forming part of a transaction, as deemed service in respect of all the complaints filed before the same court relating to dishonour of cheques issued as part of the said transaction. Inherent powers of the Magistrate - HELD THAT:- Section 143 of the Act mandates that the provisions of summary trial of the Code shall apply as far as may be to trials of complaints under Section 138. Section 258 of the Code empowers the Magistrate to stop the proceedings at any stage for reasons to be recorded in writing and pronounce a judgment of acquittal in any summons case instituted otherwise than upon complaint. Section 258 of the Code is not applicable to a summons case instituted on a complaint. Therefore, Section 258 cannot come into play in respect of the complaints filed under Section 138 of the Act. The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial. Inquiry shall be conducted on receipt of complaints under Section 138 of the Act to arrive at sufficient grounds to proceed against the accused, when such accused resides beyond the territorial jurisdiction of the court - amendment to the Act empowering the Trial Courts to reconsider/recall summons in respect of complaints under Section 138 shall be considered by the Committee constituted by an order of this Court dated 10.03.2021. List the matter after eight weeks. Further hearing in this matter will be before 3-Judges Bench.

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