Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 3, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of supply - composite supply or not - r works relating to Planning, designing and supervision of construction of various building infrastructure development and interior work etc. - The turnkey project works executed by M/s. NBCC (India) Ltd. is an “works contract” in terms of clause 119 of Section 2 of CGST/OGST Act, 2017 and ought to be treated as a composite supply as per clause 30 of the Section 2 of CGST/OGST Act. - AAAR
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Classification of services - pure agent services or not - supervisory charges - The applicant indubitably is pure agent of the recipient FCI. The applicant is involved in provision of services to supervise handling and transportation of agriculture produce, belonging to the FCI, from railhead to warehousing station and hence procures the services from H&T contractors for the said purpose. - supervision services are squarely covered under other services n.e.c. and the said supervisory services are exigible to GST at the rate of 9% CGST and 9% KGST or at 18% IGST respectively. - AAR
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Classification of supply - supply of goods or supply of services - software license - the Explanatory Notes to the Scheme of Classification of Services stipulates that the services of limited end-user licence as part of packaged software are excluded from the SAC 997331, that covers Licensing services for the right to use computer software and databases. Hence the supply made by the applicant is covered under “Supply of goods” and the said supply is covered under tariff heading 8523. - AAR
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Classification of supply - Composite supply or not - leasing of property for use as residence along with basic amenities - Leasing of property for use as residence along with basic amenities, in the instant case, is covered under accommodation services falls under SAC 996311 and hence would qualify as composite supply under Section 2(30) of the CGST/KGST Act, 2017- AAR
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Provisional Attachment of Bank Accounts - Section 83 does not provide for such delegation or authorization - Attachment of property including bank account of a person even if provisional is a serious intrusion into the private space of a person. Therefore, section 83 of the MGST Act has to be strictly interpreted - Since the impugned attachment of bank account has been found to be without jurisdiction, availability of alternative remedy in the form of fling objection under rule 159(5) of the MGST Rules would be no bar to the petitioner from seeking relief under writ jurisdiction. - HC
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Simultaneous investigation by the Central and State GST authorities - the period of enquiry as far as Central tax authority is concerned is from July, 2017 to June, 2018 whereas Opposite Party No.3 has issued a show cause notice specific for March, 2018 and, therefore, there is also an overlapping of the periods. - The Court quashes the show cause notice dated 23rd July, 2019, the impugned order dated 5th November, 2019 including the order dated 4th November, 2019 all passed by Opposite Party No.3 and directs that till the conclusion of the proceeding initiated against the Petitioner by the DGGSTI, no coercive action be taken against the Petitioner by the Opposite Party No.3 - HC
Income Tax
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TDS u/s 195 - commission paid outside India - disallowance made under Section 40(a)(i) - the Associated Enterprises has rendered services out of India in the form of placing orders with the manufacturers who are already outside India. The commission was paid to Associate Enterprises out of India. No taxing event has taken place within the territories of India - ITAT rightly deleted the additions - HC
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Reopening of assessment u/s 147 - there is prima facie tangible material to form an opinion that the income has escaped assessment and the assessee failed to disclose truly and fully all primary facts at the time of the previous assessment, as a result, the assessing officer could not draw proper legal inferences with regard to the alleged transaction. Therefore, as at the relevant time, there was no formation of opinion with regard to the alleged transaction, the assessing officer is not prohibited to form an opinion on the basis of the tangible material that came in his hands by way of information. - HC
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Penalty u/s 271(1)(b) - assessment has been completed u/s 143(3) - Assessee has not complied to the statutory notice issued by the AO - Since the assessment in the instant case has ultimately been completed u/s 143(3) of the Act on the basis of various details filed by the assessee before the AO, therefore, considering the totality of the facts of the case it is not a fit case for levy of penalty u/s 271(1)(b) - AT
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Reopening of assessment u/s 147 - while disposing of the objections against the reopening, Assessing Officer has observed that it has credible information as received by the office pertaining to the transaction claimed as a part of turnover and same can be clearly made out from the copy of the reasons recorded provided by the office. After close scrutiny of the reasons recorded, the Assessing Officer did not have refer the facts that the transactions was part of the turnover. Therefore, we hold that the formation of belief entertained by the Assessing Officer seems to be vague and based on irrelevant material. - HC
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Reopening of assessment u/s 147 - In the case on hand, upon disclosure made by the assessee with regard to the date for put to use of the assets, the Assessing Officer thought fit not to disallow the depreciation claimed by the assessee. Therefore, when primary materials having been disclosed bonafide, a mere technical mistake committed by the auditor, could not be said to be an “omission” or “failure” to disclose fully and truly all material facts for the assessment by the assessee. - HC
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Doctrine of mutuality - Income generated by Clubs with the Appellate Association - the income in dispute relates to pay and park charges, rent from Vodafone Tower, rent from BSNL Tower, rent from Idea Tower and Interest from Fixed Deposit. In the first place the income i.e, pay and park charges, rent from Vodafone Tower, Rent from BSNL Tower, Rent from Idea Tower cannot be considered to be covered by the doctrine of mutuality. With regard to interest on Fixed Deposit also, the doctrine is certainly not at all applicable. - HC
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Assessment u/s 153C - AR submitted that the impugned assessment order framed under S. 143(3) - the search took place - assessment ought to have been framed u/s 153C r.w.s 153A of the Act which is the mandate of relevant provisions relating to assessment in the case of search and seizure operation. The present assessment order is framed u/s 143(3) of the Act and is, therefore, bad in law. - AT
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Exemption u/s 11 - Grant of registration u/s 12AA - The provisions of section 11 (1)(c) comes into operation only once registration is granted u/s 12A of the Act and therefore cannot be relevant for the purposes of granting registration u/s 12A of the Act. The scheme of the Act is that all entities carrying out charitable activities, as defined in section 2 (15) of the Act, qualify to be registered as charitable entities subject to satisfaction of the concerned officer vis a vis their objects and activities, but the exemption is provided/restricted only to the extent of income which is applied for charitable purpose in India. - AT
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Penalty u/s 271AAA - Addition being 10% of the undisclosed income - There remains no ambiguity to the fact that the AO has not brought anything on record including the statement recorded under section 132(4) of the Act suggesting that the conditions as specified under section 271AAA of the Act has not been satisfied - No penalty - AT
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Nature of land sold - Agricultural land - the land in question of the assessee was situated beyond 8 KM from the municipal limits of Jaipur and was being used for agricultural purposes and was thus outside the scope of Section 2(14) of the Act and therefore, any gain on sale of the said land is exempted from tax. - AT
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Estimation of income - Non genuine purchases of diamond - the first appellate authority himself has sustained addition @3% of the non genuine purchases under more or less identical facts and circumstances - thus disallowance at 3% of the alleged non genuine purchases would be fair and reasonable. - AT
Customs
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Classification of imported consignment - two-sided coated paper in rolls - one-sided coated paper in rolls - the petitioner has classified the goods in question under eight digit ITC (HS) 4810 13 90. If the respondents are asked to classify the goods in question, they cannot come up with a different classification. Yet by introducing an impermissible yardstick namely, GSM variation, the respondents have arrived at a finding that the imported goods constitute a stock lot. This is patently illegal. - HC
FEMA
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Rejection of permission to remit foreign exchange - FEMA ODI Regulations - The appellant has rejected the application of the respondent at the behest of ED - We have already, while adverting to the arguments of the learned Sr. Counsel for the appellant in ground (A) held that the reasons for rejection have been merely the apprehension expressed by the ED. The said apprehension of the ED is neither in spirit of the scheme of FEMA nor Regulation 9(3). The reliance of RBI on the apprehensions expressed by ED in its e-mail of 30.12.2019 and the letter of 03.09.2020 itself has been held by us to be incorrect and hence, the rejection by the appellant dated 30.12.2019 is incorrect. - HC
Central Excise
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CENVAT Credit - duty paying documents - The party against whom the allegation of fraud is made has to be put on notice and heard. Evidence must be led wherefrom a conclusion can be drawn that there was intent to deceive by the party who is alleged to have committed fraud - CESTAT was not justified in rejecting the application filed by the petitioner for recalling the finding of fraud and additionally in imposing cost. - HC
VAT
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Entitlement of deduction of freight - freight in the sale bill charged separately - part of sale price or not - since the Tribunal made a factual error as regards the place of delivery in terms of the Clauses of the Contract in the present case, it made a further error in distinguishing the the decision of Apex Court as not applicable to the facts. On the other hand, this Court finds that the said decision is squarely applicable to the fact in the present case. - HC
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Entitlement to Input Tax Credit - suppression of turnover or not - Bogus dealer - genuine purchase or not - There cannot be any dispute as to the burden cast on the assessee to establish the transaction to lay a claim for deduction of input tax by production of documents referred to supra. This Court is of the considered opinion that the assessee has discharged this burden in proving that transaction is a genuine transaction. - HC
Case Laws:
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GST
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2021 (4) TMI 89
Classification of supply - composite supply or not - Applicability of rate of taxes -r works relating to Planning, designing and supervision of construction of various building infrastructure development and interior work etc. - Authority for Advance Ruling have concluded that the works entrusted to the Applicant by IIT, Bhubaneswar under contract/agreement dt.02.05.2016 cannot be termed as composite supply - HELD THAT:- On perusal of the copy of the agreement made between IIT, Bhubaneswar M/s. NBCC (India) Ltd. executed on dt.02.05.2016, we observed that IIT, Bhubaneswar entrusted the entire project works on turnkey basis to M/s. NBCC (India) Ltd. for works relating to Planning, designing and supervision of construction of various building infrastructure development and interior work etc. in IIT, Bhubaneswar campus and its extended campus. Under para 1 of the agreement, it is clearly mentioned that after completion of the project M/s. NBCC(India) Ltd. will hand over the building to IIT, Bhubaneswar in ready to use condition. Nowhere in the agreement the works order were offered to M/s. NBCC(India) Ltd. differently for different works and also there is no such conditions made in the agreement to make separate invoices for separate works. The agreement clearly speaks that the project was awarded on turnkey basis. The turnkey project works executed by M/s. NBCC (India) Ltd. is an works contract in terms of clause 119 of Section 2 of CGST/OGST Act, 2017 and ought to be treated as a composite supply as per clause 30 of the Section 2 of CGST/OGST Act. Composite supply works contract are treated as a supply of service under Schedule II para 6 of the CGST/OGST Act - the decision of the Authority for Advance Ruling that the works contract entrusted to Applicant M/s. NBCC (India) Ltd. cannot be termed as composite supply, cannot be accepted.
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2021 (4) TMI 88
Classification of services - pure agent services or not - supervisory charges under clause 28(b) of the Office order on charges of KSWC charged to Food Corporation of India (FCI) by the Corporation towards supervision of loading, transportation and unloading of agricultural produce like Rice, wheat etc - whether taxable at the rate of 8% on the amount billed by 'Handling and Transportation' Contractors? - HSN code - HELD THAT:- A contract is an agreement between two or more parties and can be either written or oral. An oral contract is an agreement made with spoken words and either no writing or only partially written and is just as valid as a written agreement. The existence of a contract requires the factual elements of (i) an offer, (ii) an acceptance of that offer which results in a meeting of the minds, (iii) a promise to perform, (iv) a valuable consideration, (v) a time or event when performance must be made (meet commitments), (vi) terms and conditions for performance including fulfilling promises and (vii) performance. In the instant case the letter of FCI quoted supra contains all the ingredients required for a contract and hence the said letter is nothing but contractual agreement between the applicant and FCI for the applicant to be acting as pure agent of FCI, for the purpose of supervision of handling and transportation of agriculture produce. Further the applicant procures the services of H T contractors for and on behalf of the FCI and charges actuals separately in the invoice along with their supervisory charges, separately. Thus the applicant squarely qualifies to be a pure agent of FCI in the instant case. The applicant indubitably is pure agent of the recipient FCI. The applicant is involved in provision of services to supervise handling and transportation of agriculture produce, belonging to the FCI, from railhead to warehousing station and hence procures the services from H T contractors for the said purpose. Now we proceed to examine the classification of the supply of the said services of the applicant - the Explanatory Notes to the Scheme of Classification of Services stipulates that SAC 999799 includes Other services n.e.c . In the instant case, the services provided by the applicant i.e. supervision services are squarely covered under other services n.e.c. and the said supervisory services are exigible to GST at the rate of 9% CGST and 9% KGST or at 18% IGST respectively.
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2021 (4) TMI 87
Classification of supply - supply of goods or supply of services - software license - N/N. 45/2017-Central Tax (Rate), dated 14.11.2017 or N/N. 47/2017- Integrated Tax (Rate) - HELD THAT:- The software supplied by the applicant is a pre-developed or pre-designed software and made available through the use of encryption keys and hence it satisfies all the conditions that are required to be satisfied to cover them under the definition of 'goods'. Further the goods which are supplied by the applicant can't be used without the aid of the computer and has to be loaded on a computer and then after activation would become usable and hence the goods supplies is Computer Software and more specifically covered under Application Software . Further the Explanatory Notes to the Scheme of Classification of Services stipulates that the services of limited end-user licence as part of packaged software are excluded from the SAC 997331, that covers Licensing services for the right to use computer software and databases. Hence the supply made by the applicant is covered under Supply of goods and the said supply is covered under tariff heading 8523. The Notification No.45/2017- Central Tax (Rate) dated 14.11.2017 and Notification No. 47/2017-Integrated Tax (Rate) dated 14.11.2017 stipulates the rate of CGST / IGST @ 5%, if the goods of computer software is supplied to public funded research institutions subject to fulfillment of the conditions prescribed under column 4 of the said notification. In the instant case the applicant is supplying computer software to National Institute of Science Education and Research, Bhubaneswar, a public funded research institution, under the administrative control of Department of Atomic Energy (DAE), Government of India. Further the said institute has also furnished a certificate as required to fulfill the required condition.
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2021 (4) TMI 86
Classification of supply - Composite supply or not - leasing of property for use as residence along with basic amenities - renting of property - leasing of property for residential subletting - Exemption Notification 12/2017 (Rate) dated June 28, 2017 - HELD THAT:- A Rooming house is a residential house, of which most or some of the rooms are rented out to paying customers. It is a place where individuals who are living in rent in that house shares the bathroom and the kitchen. The Explanatory Notes to the Scheme of Classification of Services stipulates, at the exclusion clause to the SAC 997211, that accommodation services provided by rooming houses are covered under SAC 99631. Further SAC 996311 covers Room or unit accommodation services and includes accommodation services consisting of rooms or units, with or without kitchens with or without daily housekeeping services, provided by Hotels, INN, Guest houses, Clubs other similar establishments on a single or multi occupancy basis, for purposes of leisure or business or others - the services of the applicant squarely get covered under SAC 996311 as accommodation services and hence the said services are not covered under renting of residential dwelling. It is pertinent to mention here that the Goods and Services Tax (GST) is a transaction based tax, with seamless input tax credit at each transaction level. In the instant case two transactions are involved. The first being a transaction between the applicant the business entity and the second between the business entity the actual tenant. Thus the two transactions are different and the taxability / exemption of these transactions need to be examined individually. In the transaction between the applicant business entity, the renting of residential welling is not for use as residence by the business entity but in the course or furtherance of the business of the said entity and hence the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the impugned transaction. On the other hand in the transaction between the business entity and the tenant, the service amount to renting/leasing of rooming house which falls under accommodation services that get covered under SAC 996311 and hence the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 would not be applicable to the said transaction. Leasing of property for use as residence along with basic amenities, in the instant case, is covered under accommodation services, as ruled in the preceding paras, falls under SAC 996311 and hence would qualify as composite supply under Section 2(30) of the CGST/KGST Act, 2017 - Renting of property by Applicant is not covered under entry 12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as their services are covered under accommodation services falling under SAC 996311 - the exemption under entry 14 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is available to the transaction of the applicant - Leasing of property for residential subletting would not be covered under the exemption for residential dwelling under entry 12 Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as the two are different and individual transactions.
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2021 (4) TMI 85
Provisional Attachment of Bank Accounts - Jurisdiction of Commissioner in the MGST Act - Section 83 of the MGST Act - HELD THAT:- Since the power under section 83 is vested in the Commissioner, it is necessary to refer to the definition of Commissioner in the MGST Act. Section 2 (24) of the MGST Act defnes 'Commissioner' to mean the Commissioner of State Tax appointed under section 3 and includes the Principal Commissioner or Chief Commissioner of State Tax appointed under section 3. Though appointment of the Commissioner is made by the State Government under section 3, under sub-section (3) of section 5, the Commissioner may delegate his powers to any other ofcer who is subordinate to him, subject to such conditions and limitations as may be specifed by him. The search and resultant investigation was carried out in respect of M/s. Prarush Impex. Authorization under section 67 was given in respect of M/s. Prarush Impex, that too by an officer of the rank of Deputy Commissioner though as per section 67 such authorization should be by a proper ofcer not below the rank of Joint Commissioner There is no such authorization under section 67 of the MGST Act in respect of M/s. Praful Nanji Satra. Shri Praful Nanji Satra was summoned under section 70 of the MGST Act to tender evidence as a witness in connection with proceedings under section 67 of the MGST Act and section 64 of the Maharashtra Value Added Tax Act, 2002 in the case of M/s. Satra Retail Private Limited which prima-facie is a diferent business entity distinct from M/s. Praful Nanji Satra. Thus, it is evident that there was no proceeding against M/s. Praful Nanji Satra or against Shri Praful Nanji Satra under section 67 of the MGST Act. If that be so, then invocation of power under section 83 of the MGST Act against the petitioner would not be justified. Section 83 does not provide for such delegation or authorization. The opinion contemplated under section 83 of the MGST Act that to protect the interest of government revenue, it is necessary to provisionally attach any property including bank account has to be necessarily that of the Commissioner. No such opinion of the Commissioner is discernible from the record. Attachment of property including bank account of a person even if provisional is a serious intrusion into the private space of a person. Therefore, section 83 of the MGST Act has to be strictly interpreted - Since the impugned attachment of bank account has been found to be without jurisdiction, availability of alternative remedy in the form of fling objection under rule 159(5) of the MGST Rules would be no bar to the petitioner from seeking relief under writ jurisdiction. Even here also it is doubtful whether the Joint Commissioner to whom the representation dated 01.07.2020 was addressed could have at all exercised power under rule 159(5) of the MGST Rules when the authority to do so is the Commissioner. The impugned provisional attachment order cannot be sustained - Petition allowed.
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2021 (4) TMI 81
Principles of Natural Justice - levy of tax and penalty imposed without opportunity of hearing provided - Cancellation of petitioner's registration due to non-filing of returns, which was rectified later and tax with late fee already paid - HELD THAT:- On perusal of the contents of the notice issued by the third respondent, it is nowhere found in the said notice that personal hearing has been afforded to the petitioner herein. In the impugned order also, it is nowhere mentioned that such opportunity was afforded to the petitioner. The matter is remitted to the file of the third respondent to pass orders afresh in accordance with law - petition allowed by way of remand.
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2021 (4) TMI 80
Enhancement of CENVAT Credit - applicability of first proviso to Section 140(8) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The difference quantified by the petitioner is an amount equivalent to ₹ 7,44,483/-. The matter requires examination - Issue notice. Mr. Harpreet Singh, who appears on advance notice, accepts service on behalf of the respondent.
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2021 (4) TMI 76
Levy of GST - printed books - submission is that while the goods themselves may or may not be taxable, the requirement of the registration is mandatory under the OGST Act - HELD THAT:- The bid of the Petitioner was rejected for non-submission of the GST certificate. The other bidder M/s.Padmalaya submitted a valid GST Certificate. However, the bid of M/s.Padmalaya was rejected for nonsubmission of other documents. It is also pointed out that similar tenders incorporating submission of GST registration certificate as a conditions have been issued by the SCB Medical College and Hospital, Cuttack and the Indira Gandhi Institute of Technology, Dhenkanal. There is merit in the contention of Mr. Muduli that the issue of a particular product not being amenable to GST is very different from the requirement of a supplier of goods having to get a valid GST registration. As pointed out, it is quite possible that in future the goods that are presently exempt from GST, may be amenable to it - the Court is not persuaded that any direction should be issued to Opposite Party No.1 to delete the above requirement as one of the essential conditions to be fulfilled by the bidders. Petition dismissed.
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2021 (4) TMI 73
Simultaneous investigation by the Central and State GST authorities - Non-payment/short-payment of tax dues - erroneous release of refund - wrongful availment/utilization of input tax credit - Section 74 of the Odisha Goods and Services Tax Act - HELD THAT:- It may be noted that the period of enquiry as far as Central tax authority is concerned is from July, 2017 to June, 2018 whereas Opposite Party No.3 has issued a show cause notice specific for March, 2018 and, therefore, there is also an overlapping of the periods. The Court quashes the show cause notice dated 23rd July, 2019, the impugned order dated 5th November, 2019 including the order dated 4th November, 2019 all passed by Opposite Party No.3 and directs that till the conclusion of the proceeding initiated against the Petitioner by the DGGSTI, no coercive action be taken against the Petitioner by the Opposite Party No.3 - Petition allowed.
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Income Tax
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2021 (4) TMI 93
TDS u/s 195 - commission paid outside India - disallowance made u/s 40(a)(i) - Tribunal setting aside the disallowance made u/s 40(a)(i) by holding that the income of the non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agents were rendered or utilized outside India and the commission was also paid outside India - HELD THAT:- In case of GE India Technology Pvt. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] as dealing with remittance of royalty of purchase prices of subsidiary delivered by the foreign party. It was held that if the payment is made by the resident to the non-resident was an amount which was not chargeable to tax in India, then no tax is deductible at Source even though the assessee had not made an application under Section 195(2) of the Act. A reliance has also been placed upon the judgment delivered in the case of Exotic Fruits Pvt. Ltd. [ 2013 (10) TMI 826 - ITAT BANGALORE] and the judgment delivered by the Income Tax Appellate Tribunal is in favour of the assessee. Keeping in view the totality of the circumstances of the case, this Court is of the considered opinion that in the present case the Associated Enterprises has rendered services out of India in the form of placing orders with the manufacturers who are already outside India. The commission was paid to Associate Enterprises out of India. No taxing event has taken place within the territories of India and therefore, the Tribunal was justified in allowing the appeal of the assessee.
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2021 (4) TMI 92
Reopening of assessment u/s 147 - return was processed under Section 143 (1) - case was selected for scrutiny assessment and under Section 143 (2) of the Act, the notice was issued - assessee failed to disclose true facts with regard to the transactions made with M/s. Brown Pharmaceuticals, which provides a link between his conclusion and materials gathered during the enquiries - as contended it is a case of mere change of opinion and the proceedings could be said to have been initiated mechanically on the basis of the third party information - HELD THAT:- In view of the aforesaid observations made by this Court in the case of Aaradhna Estate Pvt. Ltd. [ 2018 (2) TMI 1534 - GUJARAT HIGH COURT] and considering the facts and circumstance of the present case, we are of the view that, the true facts with regard to the transactions made with M/s. Brown Pharmaceuticals by the assessee, having been discovered by the assessing officer on the basis of the information received from the investigation wing, the assessing officer could be said to be justified in forming an opinion that the income has escaped assessment. Therefore, the contention with regard to change of opinion and that there was full disclosure at the previous assessment lacks merit. We are of the firm opinion that, there is prima facie tangible material to form an opinion that the income has escaped assessment and the assessee failed to disclose truly and fully all primary facts at the time of the previous assessment, as a result, the assessing officer could not draw proper legal inferences with regard to the alleged transaction. Therefore, as at the relevant time, there was no formation of opinion with regard to the alleged transaction, the assessing officer is not prohibited to form an opinion on the basis of the tangible material that came in his hands by way of information. It cannot be said that, there was no tangible material before the assessing officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 - Writ petition dismissed.
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2021 (4) TMI 91
Penalty u/s 271(1)(b) - assessment has been completed u/s 143(3) - Assessee has not complied to the statutory notice issued by the AO - ultimately the order has been passed u/s 143(3) - HELD THAT:- Coordinate Benches of the Tribunal in a number of decisions have held that where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and taking a lenient view the penalty u/s 271(1)(b) should not be levied. Further, the Coordinate Bench of the Tribunal in the case of one of the group member SMT. NEETU NAYYAR AND SMT. MEENA NAYYAR VERSUS ACIT, CENTRAL CIRCLE-20 NEW DELHI [ 2020 (12) TMI 1221 - ITAT DELHI ] has also deleted the penalty levied by the AO u/s 271(1)(b) and sustained by the Ld. CIT(A) under identical circumstances. Since the assessment in the instant case has ultimately been completed u/s 143(3) of the Act on the basis of various details filed by the assessee before the AO, therefore, considering the totality of the facts of the case it is not a fit case for levy of penalty u/s 271(1)(b) - Decided in favour of assessee.
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2021 (4) TMI 90
Levy of penalty u/s 271(1)(b) - no compliance of notices u/s 142(1) issued on 30.08.2018 05.10.2018 and the AO was forced to issue penalty notices on -07.09.2018 09.11.2018 apart from the prosecution notice on 19.11.2018 to elicit response from the appellant, which was first made on 07.12.2018 - HELD THAT:- Although the assessee in the instant case has not complied to the statutory notice issued by the AO on 5th October, 2016 fixing the case for hearing on 25th October, 2018 which is the basis for levy of penalty u/s 271(1)(b) of the Act, however, ultimately the order has been passed u/s 143(3). Coordinate Benches of the Tribunal in a number of decisions have held that where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and taking a lenient view the penalty u/s 271(1)(b) of the I.T. Act 1961 should not be levied. Since the assessment in the instant case has ultimately been completed u/s 143(3) of the Act on the basis of various details filed by the assessee before the AO, therefore, considering the totality of the facts of the case and relying on the decision of the Tribunal in the case in SMT. NEETU NAYYAR AND SMT. MEENA NAYYAR VERSUS ACIT, CENTRAL CIRCLE-20 NEW DELHI [ 2020 (12) TMI 1221 - ITAT DELHI ] it is not a fit case for levy of penalty u/s 271(1)(b) of the Act - Decided in favour of assessee.
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2021 (4) TMI 75
Reopening of assessment u/s 147 - reopening after 4 years from the end of relevant financial year - HELD THAT:- After careful examination of the assessment order and materials furnished by the assessee at the stage of previous assessment, would go to show that there was conscious application of mind to the issue of deduction by the then AO and after considering the evidences and materials, he thought not fit to disallow the deduction. A mere change of opinion while persuading the same material by the AO, while initiation of the proceedings, cannot be a reasons to believe that the income has escaped assessment. Thus, once an opinion is formed on the issue of deduction and assessment on the issue was framed under Section 143 the reopening on the same set of facts and material, without there being any tangible material would be nothing but a change of opinion. We take the notice of the fact that the assessee had disclosed true facts with regard to claim of deduction under Section 80IB(10) of the Act while filing return of income and same had been mentioned in the audit report as well as Form 10CCB and considering these materials, the then Assessing Officer did not disallow the deduction. Therefore, the condition precedent for reopening of the assessment beyond 4 years having not satisfied and on this ground also, the impugned notice is required to be quashed and set aside. No hesitation to hold that there was no basis or jurisdiction for Assessing Officer to form a belief that any income of the assessee chargeable to tax for the year under consideration, had escaped assessment under Section 147 of the Act and reasons recorded could not have led to formation of any belief that income had escaped assessment.
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2021 (4) TMI 74
Reopening of assessment u/s 147 - Addition u/s 68 - reliance on information received from the Investigation Wing- Surat - HELD THAT:- AO has not applied his independent mind while recording the reasons that the income has escaped assessment. The original assessment record was with the AO. The scrutiny assessment framed by the respondent has been challenged by the assessee company and the appeal is pending before the Appellate Tribunal. As the issue of alleged transaction was earlier added by the then Assessing Officer under Section 68 of the Act at the original assessment stage, the same amount cannot be brought to tax once again in the reassessment proceedings. It is not the case of the revenue that the transaction as reported by the Investigating Wing, Surat was distinct and has no relation with the earlier scrutiny assessment made under Section 143(3) of the Act. Thus, as such there was no tangible material in the hands of the Assessing Officer for reopening of the proceedings. AO has acted mechanically based on the information received from the Investigating Wing, Surat for the purpose of reopening of the assessment and any independent satisfaction to the effect that the income chargeable to tax has escaped assessment is not reflected. It is a settled principle of law that the respondent cannot justify by taking recourse to some material and information beyond the scope of the reasons recorded by the Assessing Officer prior to reopening. In the instant case, the respondent has traveled beyond the scope of reasons recorded in order to justify the action of reopening. It is pertinent to note that while disposing of the objections against the reopening, Assessing Officer has observed that it has credible information as received by the office pertaining to the transaction claimed as a part of turnover and same can be clearly made out from the copy of the reasons recorded provided by the office. After close scrutiny of the reasons recorded, the Assessing Officer did not have refer the facts that the transactions was part of the turnover. Therefore, we hold that the formation of belief entertained by the Assessing Officer seems to be vague and based on irrelevant material. Assumption of jurisdiction on the part of the Assessing Officer under Section 147 of the Act to reopen the assessment by issuing the impugned notice u/s 147 of the Act is without authority of law which renders the notice unsustainable - Decided in favour of assessee.
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2021 (4) TMI 70
Reopening of assessment u/s 147 - deduction under explanation 7 of section 80IB(10)(a) (iii) - HELD THAT:- As examined all the material facts as well as the reasons recorded for reopening of the assessment for the years under consideration. The impugned action on the part of the respondent to issue the impugned notices under Section 148 of the Act is without authority of law and therefore, the same are required to be quashed and set aside on the following reasons reasons recorded by the assessing officer led to belief about the escapement of assessment is nothing, but mere a change of opinion, which cannot sustainable in law. The issue of claim of deduction under Section 80IB(10) of the Act was thoroughly examined at the stage of original assessment by the assessing officer and had considered various details and consciously arrived at the conclusion not to disallow the deduction claimed by the assessee for the respective years under consideration. Even on the issue of commission paid to Mr. Baldevbhai Patel and cash deposit of ₹ 6,50,000/-, sufficient explanation was made by the assessee and accordingly, for the A.Y. 2011-12, the assessing officer did not add this amount for the purpose of tax. Therefore, it is presumed to have accepted the contention of the assessee even there was no express reference in the assessment order. Considering the facts of the present case, no any tangible material came in the hands of the assessing officer after concluded assessment and therefore, in absence of any tangible materials, the reassessment on the basis of change of opinion cannot be permissible. We have examined the materials on record, which show that, at the time of filing the return of income as well as during the course of original assessment proceedings, the assessee had disclosed all the material facts fully and truly and there was no false and untrue declaration on the part of the assessee with regard to approval of the project by the concerned authorities to avail the benefit of claim of deduction under Section 80IB (10) of the Act. We have no hesitation to hold that, there was no basis or jurisdiction for the assessing officer to form a belief that, any income of the assessee for the respective assessment years, had escaped assessment within the meaning of Section 147 of the Act and the reasons recorded could not have led to formation of any belief that, the income has escaped assessment within the meaning of the aforesaid provisions. Notice issued under section 148 of the Act are required to be quashed and set aside and accordingly the same are hereby quashed. - Decided in favour of assessee.
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2021 (4) TMI 68
Reopening of assessment u/s 147 - Reassessment initiated after four years - assessee is not eligible to claim the depreciation and additional depreciation under Section 32 of the Act as auditor of the assessee had not mentioned the date of put to use assets, which had been acquired during the year under consideration - HELD THAT:- From the letter dated 28.11.2014 and the explanation dated 22.12.2014 in support of the claim of depreciation under Section 32 of the Act, it cannot be stated that the assessee failed to disclose the necessary dates of put to use for assets acquired during the year under consideration. The assessee had furnished the details of the additions before 30.9.2011 and after 30.9.2011 which clearly established that there was no suppression of true facts with regard to date of use of the assets. Even this very facts having been admitted by the revenue while passing the order of disposing the objection raised by the assessee. The technical mistake of the auditor detected by the revenue is that he failed to mention the date in the Form 3CD at the time of submitting the report. We are of the view that at the relevant time, the then Assessing Officer had examined the issue at length and did not disallow the depreciation claim. Therefore, in our view, now on the same set of facts and material, which were earlier examined by the Assessing Officer, the initiation of the reassessment proceedings under Section 147 by issuing notice is nothing but a change of opinion in the hands of the Assessing Officer. Applicability of principle of change of opinion not applicable in the present case as in the previous assessment proceedings the issue of depreciation was not dealt with by the Assessing Officer while passing the order - We do not agree with the contention raised by the learned counsel for the revenue. In our opinion the issue of depreciation examined by the erstwhile Assessing Officer is enough to invoke the principle of change of opinion. In this context, we may refer and rely of the judgment of this Court in case of Gujarat Power Corporation Ltd Vs. ACIT [ 2012 (9) TMI 69 - GUJARAT HIGH COURT] wherein, it was held that merely because of the Assessing Officer does not set out the details reasons for not making the disallowance, it cannot be inferred that the Assessing Officer has not formed an opinion on the issue. So far as the formation of opinion is concerned, all that is necessary, the matter should have been examined by the Assessing Officer. In the case on hand, upon disclosure made by the assessee with regard to the date for put to use of the assets, the Assessing Officer thought fit not to disallow the depreciation claimed by the assessee. Therefore, when primary materials having been disclosed bonafide, a mere technical mistake committed by the auditor, could not be said to be an omission or failure to disclose fully and truly all material facts for the assessment by the assessee. Therefore, the contention raised by the revenue that there was a nondisclosure of the material facts by the assessee has no merits. In view of the aforesaid discussions made hereinabove and reasons thereof, we hold that the Assessing Officer is not justified in reopening the assessment of the assessee and he could not have issued the impugned notice under Section 148 of the Act and initiation of proceedings is without jurisdiction and contrary to law - Decided in favour of assessee.
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2021 (4) TMI 65
Doctrine of mutuality - Income generated by Clubs with the Appellate Association - not applying the doctrine of mutuality and not tainted with commerciality - HELD THAT:- The assessee was claiming the disallowance on the basis of principles of mutuality. The principle of mutuality relates to the notion that a person cannot make a profit from himself. An amount received from oneself is not regarded as income and is therefore not subject to tax, only the income which comes within the definition of Section 2(24) of the Act is subject to tax. In the present case, the income in dispute relates to pay and park charges, rent from Vodafone Tower, rent from BSNL Tower, rent from Idea Tower and Interest from Fixed Deposit. In the first place the income i.e, pay and park charges, rent from Vodafone Tower, Rent from BSNL Tower, Rent from Idea Tower cannot be considered to be covered by the doctrine of mutuality. With regard to interest on Fixed Deposit also, the doctrine is certainly not at all applicable. In the light of the aforesaid, as the matter is squarely covered by the judgment delivered by the Hon ble Supreme Court in Bangalore Club vs. Commissioner of Income tax [ 2013 (1) TMI 343 - SUPREME COURT ] the substantial questions of law are answered in favour of the department and against the assessee.
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2021 (4) TMI 64
TP Adjustment - whether other method applied by the taxpayer to benchmark its international transactions is the MAM as against TNMM applied by the TPO/ld.DRP? - HELD THAT:- When undisputedly there is no change in the business model of the taxpayer during the year under consideration and in the succeeding assessments years i.e. 2014-15 to 2017-18, in which TPO/DRP have accepted the other method applied by the taxpayer to benchmark the international transactions qua its manufacturing operation, the rule of consistency has to be followed by the Revenue Authorities, otherwise it will lead to multiplicity of the litigation at different forums and will also lead to the uncertainty in the termination of litigation. So, when there are no distinguishing features and no change in the business model of the taxpayer, this issue is required to be remitted back to the TPO to decide afresh as to whether other method applied by the taxpayer to benchmark its international transactions qua manufacturing segment is the MAM afresh by providing an opportunity of being heard to the taxpayer.Grounds determined in favour of the taxpayer for statistical purposes.
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2021 (4) TMI 63
Disallowance u/s 14A - contention of the assessee before the Assessing Officer that it has not received any exempt income for the year under consideration and hence, question of disallowance of expenditure incurred towards said exempt income does not arise - HELD THAT:- by following the decision of Hon'ble Jurisdictional High Court of Madras in the case of M/s. Redington India Ltd. [ 2017 (1) TMI 318 - MADRAS HIGH COURT] we are of the considered view that when there is no exempt income earned for the year, no disallowance can be made towards expenses relatable to said exempt income u/s.14A read with Rule 8D. Hence, we are inclined to uphold the findings of the learned CIT(A) and reject ground taken by the Revenue. Disallowance of contribution to PF and ESI u/s.36(1)(va) r.w.s 2(24)(x) - employees contribution to PF ESI not remitted within due date specified under respective Acts - CIT(A) has deleted additions made by the Assessing Officer towards employees contribution to PF ESI, which was paid belatedly to the credit of employees account, but remitted on or before due date for furnishing return of income u/s.139(1) - HELD THAT:- Hon ble Supreme Court in the case of CIT V. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] where it was held that if employees contribution to PF ESI is remitted on or before due date for furnishing return of income filed u/s.139(1) of the Act, then such payments need to be allowed as deduction, irrespective of the fact that such payment has been remitted beyond due date specified under the respective Acts. The Hon'ble Supreme Court has also considered Board s Circular No.22/2015 dated 17.12.2015 to arrive at such conclusion. Therefore, we are of the considered view that we uphold the findings of the learned CIT(A) and reject the ground taken by the Revenue. Disallowance of loss on forward contracts - AO has disallowed loss claimed on forward contracts on the ground that assessee s case does not fall under any of the exceptions provided under the proviso to section 43(5) of the Act, because the assessee has entered into forward contracts not for goods or merchandise, but for currency - HELD THAT:- CIT(A) has recorded a categorical finding in light of decision of CIT Vs. Friends Friends Shipping Pvt Ltd [ 2013 (5) TMI 458 - GUJARAT HIGH COURT] that when forward contracts entered into with banks for the purpose of hedging loss due to fluctuation in foreign currency while implementing export of goods, then the same cannot be considered as speculative loss u/s.43(5) of the Act. The learned CIT(A) has further recorded that the assessee has furnished necessary evidences to prove that it has exported goods and hedge possible loss in fluctuation in foreign currency had entered into forward contract with its bankers and incurred loss. Therefore, we are of the considered view that once forward contracts are entered into with bankers for the purpose of hedging possible loss in fluctuation of foreign currency, then the same is in the nature of revenue expenditure, but not speculative loss u/s.43(5) of the Act. The learned CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer towards disallowance of loss on forward contracts. Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the Revenue. Disallowance of stitching charges - addition only for the reason that party has not appeared before the Assessing Officer in response to notice u/s.133(6) - HELD THAT:- Except this, no other adverse comment has been made in respect of payment made to M/s.R Design Apparels for stitching charges. In fact, the Assessing Officer has not doubted genuineness of payment. The learned CIT(A), after considering relevant facts has rightly pointed out that payments have been made through banking channels after deducting applicable TDS as per law. Further, the assessee has filed necessary evidences, including bills issued by party for rendering services. Therefore, he opined that mere non-production of the party cannot be a basis to make disallowance, when all other supporting evidences have been filed to substantiate claim of expenditure. The said findings of the learned CIT(A) goes uncontroverted from the Revenue. The revenue has failed to file any evidence to counter the finding of facts recorded by the CIT(A) . Hence, we are inclined to uphold the findings of learned CIT(A) and reject ground taken by the revenue.
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2021 (4) TMI 62
Assessment u/s 153C - additions made towards loan taken from Indus Ind Bank along with estimated interest on the ground that said loan was repaid on or before 31.03.2011 - additions made towards interest income on the ground that additions made by the Assessing Officer is not supported by any incriminating material found during the course of search - HELD THAT:- When the assessment is unabated or concluded on the date of search, no addition could be made in absence of incriminating material found as a result of search. In this legal background, if you examine the claim of the assessee that additions made towards interest received is not supported by any incriminating material found during the course of search, we find that arguments taken by the assessee are devoid of merit, because the Assessing Officer has made additions towards interest income on the basis of document found during the course of search marked as annexure NRKRC/loose sheets which contains documents related to unaccounted repayment of loan to Indus Ind bank. The said loan taken from Indus Ind Bank was not disclosed to the income-tax department including repayment made towards said loan. Although, additions made by the AO towards unaccounted repayment of loan was deleted by learned CIT(A), but fact remains that documents found during the course of search clearly indicate that said loan was not disclosed to income tax department . Out of the said loan, the assessee has advanced loan to M/s. Standard Press India Pvt. Ltd. and that company has paid interest for four years to the account of the assessee in the financial year 2011-12 relevant to assessment year 2012-13. The assessee has credited interest received from company to the capital account, but was not offered to tax. The Assessing Officer has assessed interest received from said company in the assessment framed u/s.153C r.w.s 153A on the ground that interest received should be assessed to tax on receipt basis irrespective of the period for which said interest pertains to. Additions made towards interest income is having nexus with incriminating material found during the course of search and marked as annexure NRKRC/loose sheets/S/SNo.1(p.79 to 83). But, whether total interest received from the company is related to incriminating material found as a result of search or only interest received towards Indus Ind Bank loan account is related to said document has to be examined. The assessee has filed details of interest received of ₹ 48,48,820/- out of which a sum of ₹ 36,20,263/- pertains to loan taken from SBI and said loan was disclosed in the regular return of income filed by the assessee. Therefore, interest to the extent of ₹ 36,20,263/- is not having any reference to incriminating material found during the course of search. Hence, no addition could be made to interest received towards loan given out of SBI loan. Insofar as interest received towards Indus Ind Bank loan amounting to ₹ 13,28,557/-, there is a direct nexus between incriminating material found during the course of search vide document in annexure NRKRC/loose sheets/S/SNo.1(p.79 to 83) and interest income assessed to tax for the impugned assessment year. Therefore, to this extent, it cannot be said that there is no reference to incriminating material found during the course of search. Hence, we are of the considered view that the arguments taken by the assessee that there is no incriminating material to support additions towards interest in respect of Indus Ind Bank loan amounting to ₹ 13,28,557/- cannot be accepted. We are of the considered view that additions made by the Assessing Officer towards interest income on account of interest received for SBI loan to the extent of ₹ 36,20,263/- cannot be sustained, because said addition was not based on any incriminating material found as a result of search . Insofar as, additions made towards Indus Ind Bank loan amounting to ₹ 13,28,557/-, the said addition was supported by incriminating material found as a result of search and consequently, addition made by the Assessing Officer is in accordance with law. Hence, addition made towards Indus Ind bank loan interest is sustained. Appeal filed by the assessee is partly allowed.
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2021 (4) TMI 61
TDS u/s 195 - Disallowance u/s 40(A)(ia) - payment made by the appellant to M/s. Ansys Inc. U.S.A. towards the purchase of goods as Royalty for having not done TDS on such payments made - HELD THAT:- Admittedly the issue involved in these appeals has been set at rest by the decision of Hon ble Supreme Court in a recent case of Engineering Analysis Centre of Excellence Pvt.Ltd.[ 2021 (3) TMI 138 - SUPREME COURT] while considering the issue of royalty on sale of software, have also considered the decision of Hon ble Karnataka High Court in case of CIT vs Samsung Electronics Co.Ltd [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] as held that the amounts paid by resident Indian end-users/distributors to nonresident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 - Decided in favour of assessee.
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2021 (4) TMI 60
Assessment u/s 153C - additions have been made in the assessment order solely on the basis of the statement of Shri R.K. Miglani, without conducting any independent enquiry - HELD THAT:- This Tribunal, in the case of Lord Distillery Ltd. [ 2018 (12) TMI 1606 - ITAT DELHI] passed in the cases of other members of the UPDA, has held that the non-granting of opportunity to cross-examine Shri Miglani is illegal and fatal to the assessment order. Respectfully following the order passed by the Coordinate Bench we hold that in such circumstance, the statement of Shri R.K. Miglani cannot bind the Assessee. In absence of any other new material, and in the absence of any material change in the facts and circumstances of the case, respectfully following the decision/s of the co-ordinate benches on the identical issue and following the rules of consistency, the addition made by the Assessing Officer and sustained by the Ld. CIT (A) is hereby deleted. Assessment u/s 153C - AR submitted that the impugned assessment order framed under S. 143(3) - as submitted that the search took place on UPDA and Radico Khaitan on 14.02.2006, and the alleged incriminating material / documents pertaining to Financial Year 2005-06 were also recovered - HELD THAT:- As decided in LORDS DISTILLERY LIMITED, VERSUS DCIT, DELHI [ 2018 (12) TMI 1606 - ITAT DELHI] assessment ought to have been framed u/s 153C r.w.s 153A of the Act which is the mandate of relevant provisions relating to assessment in the case of search and seizure operation. The present assessment order is framed u/s 143(3) of the Act and is, therefore, bad in law. Accordingly, we do not have any hesitation in annulling the assessment order. Since the assessment order has been annulled, all the subsequent happenings get vitiated
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2021 (4) TMI 59
Reopening of assessment u/s 147 - proceedings are pending u/s 143 - Revised return is pending before ld AO - HELD THAT:- Provision of section 143 (2) does not make any distinction between return of income filed u/s 139(1) or U/s 139 (5) of the act. If the return filed u/s 139[5] is a valid return then the notice u/s 143(2) of the act can be issued to the assessee within expiry of six months from the end of the Financial Year in which revised return of income is filed. In this case, Revised return is filed on 12/2/2013, so 143 (2) notice could have been issued to the assessee on or before 30/9/2013. Therefore, the assessment proceedings were pending before ld AO. AO issued notice u/s 148 of the act on 15/04/2013, i.e. when the original assessment proceedings were pending as time limit for issue of notice u/s 143 (2) did not expire. Section 142(1) and Section 148 of the Act cannot operate simultaneously. There is no discretion vested with the Assessing Officer to utilize any one of them. The two provisions govern different fields and can be exercised in different circumstances. If income escapes assessment, then the only way to initiate assessment proceedings is to issue notice under Section 148 of the Act. In fact, the proceedings are pending u/s 143 of the act, it looks in appropriate to call for a return under Section 148 of the Act because income cannot be said to have escaped assessment when the assessment proceedings are pending. Same is also the mandate in KLM ROYAL DUTCH AIRLINES [ 2007 (1) TMI 138 - DELHI HIGH COURT ] where in it has been held that Where an assessment has not been framed at all, it is not possible to posit that income has escaped assessment. When the revised return is pending before ld AO, Time limit for picking that return for scrutiny is pending u/s 143 (2) of the act, the ld AO could not have multiplied the proceedings and initiated proceedings u/s 148 of the act. Addition u/s 68 - unexplained cash deposits - HELD THAT:- Various questions referred to Indo statement the director has clearly referred to the name of Assessee Company stating that it is carrying on business in computer accessories and peripherals. The address of the Godown of the company was also mentioned. The company maintains eight bank accounts as per question number seven out of which one was found to be out of books. The director of the company has also given reference to the turnover of this company and mentioned the names of the suppliers. It was also stated that assessee has not dealt with the above concerns for the last one and half years. On reading of question number 11 it is apparent that the amount of cheques issued to Messer s Atul traders and Vicetex International and Shri Dev Narain Shukla s transactions were asked for by the investigation wing. Assessee submitted their mobile number as well as the addresses. The source of cash deposit was also stated by the assessee. The assessee in fact gave details with respect to four different other suppliers in response to question number 13 and mentioned the major brands dealt with by it. All the four parties mentioned in question number 13 remains unquestioned; the turnover of the assessee other than the undisclosed bank account also remained undisturbed. Furthermore, the learned CIT A has upheld the addition u/s 68 of the act itself on the peak balance in the bank account of the assessee - no infirmity in the order of the learned and CIT A.
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2021 (4) TMI 57
Exemption u/s 11 - Grant of registration u/s 12AA - charitable society for the purposes of claiming exemption of its income u/s 11 12 - n denied registration for the reason that its incidental and ancillary objects included carrying out the activities outside the India - HELD THAT:- The provisions of section 11 (1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities carried out in India will qualify as charitable for grant of registration, is only for the purpose of determining the income which qualifies for exemption u/s 11 of the Act. The said section comes into operation only once registration is granted u/s 12A of the Act and therefore cannot be relevant for the purposes of granting registration u/s 12A of the Act. The scheme of the Act is that all entities carrying out charitable activities, as defined in section 2 (15) of the Act, qualify to be registered as charitable entities subject to satisfaction of the concerned officer vis a vis their objects and activities, but the exemption is provided/restricted only to the extent of income which is applied for charitable purpose in India. The issue we find, is squarely covered in favour of the assessee by the decisions relied upon by the Ld. Counsel for the assessee before us. In the case of MK Nambyar SAARC Law Charitable Trust [ 2004 (5) TMI 51 - DELHI HIGH COURT] , we find, the application for grant of registration was rejected on the ground that the applicant itself had admitted that the scholarship could be paid to members even outside India. The Hon' ble High Court held that the application of income outside India is not a relevant criteria for rejecting the application for grant of registration u/s 12 AA of the Act and the officer has to only restrict himself to the satisfaction about the objects and genuineness of the activities of the trust while granting registration with no restriction on the activities being carried out inside or outside India. The aforesaid decision of the Hon'ble Delhi High Court has been followed by the Coordinate Benches of the Tribunal in the case of National Informatics Centre Services Inc. [ 2017 (6) TMI 872 - ITAT DELHI] . The order passed by the Ld.CIT(E) denying registration u/s 12 A of the Act is set aside and the Ld. CIT(E) is directed to grant registration as applied for by the assessee. Appeal of assessee allowed.
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2021 (4) TMI 56
Reopening of assessment u/s 147 - Notice after a period of 4 years from the end of the assessment year - eligible reasons to believe - HELD THAT:- From the replies furnished by assessee during the original assessment proceedings placed in the paper book relied by the Ld.AR, against queries raised by the Ld.AO, we are satisfied that assessee had filed submissions in respect of the issues considered for reopening the assessment. The reasons recorded reproduced hereinabove suggests that there was no failure on behalf of assessee to fully and truly disclose all material facts necessary for assessment, which is a necessary condition for reopening an assessment beyond a period of 4 years as stipulated under the act. The reasons recorded also reveal that, there has been no new material available with the Ld.AO which could justify the reopening of a concluded assessment beyond a period of 4 years. Respectfully following the ratio laid downin case of Hon ble Supreme Court in case of CIT vs Kelvinator India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ] we set aside and quash the notice dated 17/05/2016 seeking to reopen concluded assessment to be bad in law. - Decided in favour of assessee.
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2021 (4) TMI 55
Reopening of assessment u/s 147 - Search and seizure proceedings - addition only on the basis of diary noting, statement of VP (Finance), RNSIL, and data retrieved by using forensic tools from seized computer server (data was deleted and the same was retrieved by using forensic tools) - HELD THAT:- There is no nexus between any payment made by RNSIL to that of the assessee. There is no mentioned anywhere that the assessee was the recipient of the payment, the alleged quantum of payment, the date, the month or the year of the alleged payment. There were two sets of reasons for reopening the assessment, one with ₹ 15 lakh and another with ₹ 5 lakh. In the impugned assessment order, the AO had stated that there is reason to believe that the amount of ₹ 1 crore chargeable to tax for assessment year 2009-2010 have escaped assessment, while the impugned order relates to the assessment year 2011-2012. All these facts point to a situation that the addition has been made merely on surmises, conjectures and without any valid evidences. On identical facts arising out of the same search case, the Tribunal in the case of D.S. Suresh v. ACIT [ 2021 (4) TMI 1 - ITAT BANGALORE] had held that the addition of ₹ 10 lakh for assessment year 2009-2010 and ₹ 49 for the assessment year 2011-2012 is to be deleted. Tribunal held that there is no material / evidence for making such addition - thus we deleted the addition. - Decided in favour of assessee.
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2021 (4) TMI 54
Deemed dividend u/s 2(22)(e) - loan advanced to the shareholder - HELD THAT:- CIT(A) held that the provisions of section 2(22)(e) were not applicable in the case of the assessee as the said loan was advanced to the shareholder in the ordinary course of business of lending of money by the said company. DR could not point out any defect in the said observations made by the CIT(A).There is no merit in this ground of Revenue. The findings of the ld. CIT(A) on this issue are accordingly upheld. Addition u/s 56(2)(viia) - HELD THAT:- CIT(A) considering the above submissions observed that since the assessee company was 100% subsidiary of M/s Alpine Commercial Co. Ltd. in which the public was substantially interested, therefore according to the provisions of section 2(18)(b)(B)(c), the assessee company being 100% of subsidiary of the said public limited company was also treated as a company in which public was substantially interested and that the provisions of section 56(2)(viia) were not attracted in the case of the assessee company. DR could not bring out any defect in the order of the CIT(A) warranting our interference. The findings of the CIT(A) on this issue are upheld. Addition u/s 14A on account of expenditure incurred for earning of tax exempt income - HELD THAT:- CIT(A) while deleting the aforesaid addition has observed that the assessee during the year did not earn any tax exempt income. He while relying upon the decisions of the various High Courts including the decision in the case of CIT vs. Shivam Motors Pvt. Ltd.. [ 2014 (5) TMI 592 - ALLAHABAD HIGH COURT] and in the case of Corrtech Energy P. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] held that when there is no exempt income earned by the assessee, no disallowance of corresponding/notional expenditure is to be made under the provisions of section 14A of the Income Tax Act. DR could not point out any infirmity in the order of CIT(A) in this respect. The findings of the ld. CIT(A) on this ground are, therefore, upheld.
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2021 (4) TMI 52
Deduction u/s 80IC - substantial expansion of the Unit - HELD THAT:- As decided in own case [ 2018 (3) TMI 1817 - ITAT CHANDIGARH] AO have not disputed that the assessee unit has carried out substantial expansion as provided under clause (b) of sub section (2) read with clause (ix) of sub section (7) of section 80IC of the Act. Almost similar view has also been taken by the Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India vs. Commissioner of Income Tax [ 2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT] No justification at this stage to give the Assessing officers a second innings to re-examine undisputed facts. The impugned orders of the CIT(A) are set aside and the Assessing officers are directed to grant to the assessee deduction at the rate of hundred percent of its eligible profits - As the issue is already settled in light of the Hon'ble Supreme Court decision in case of Aarham Softronics [ 2019 (2) TMI 1285 - SUPREME COURT] and thus, the issue is squarely covered in favour of the assessee
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2021 (4) TMI 51
Exemption u/s 11 - registration under section 12A cancelled - effective date of cancellation of registration - Authority to cancel the registration under section 12AA(3)/(4) - PCIT jurisdiction in cancelling the registration of the Appellant - whether PCIT failed to appreciate that the power of cancellation of registration vests in the authority who has the jurisdiction to grant registration and the CIT(E) is the authority who can grant registration, therefore, he is the only authority who can cancel the registration under section 12AA(3)/(4) of the ITAT - HELD THAT:- No reasons to take any other view of the matter than the view so taken by the coordinate bench in the case of Navajbai Ratan Tata Trust vs PCIT [ 2021 (3) TMI 1146 - ITAT MUMBAI] These observations will apply mutatis mutandis in the present case as well. Respectfully following the same, we hold that the impugned order cancelling registration granted to the assessee trust will have effect from the date on which hearing, on the first show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015.
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2021 (4) TMI 47
Revision u/s 263 - case of the assessee was selected under scrutiny under CASS on account of large specified domestic transactions i.e. payment made to the related parties as specified under section 40A(2)(b) - Effect of amendment vide Finance Act, 2017, where Transfer Pricing Adjustments have been made at Arms length price - HELD THAT:- Admittedly the provisions relating to the expenditure in respect of which payment was made to the persons referred to section 40A(2)(b) of the Act was omitted by the Finance Act 2017 which was effective from 1st April 2017 and the impugned order was framed by the learned Pr. CIT dated on 25th February 2019. As relying on General Finance Company Vs. ACIT [ 2002 (9) TMI 3 - SUPREME COURT ] we hold that since the provision itself stood omitted at the time when the order was passed by the Ld. Pr. CIT, which is undisputed fact, the impugned order cannot be sustained. Accordingly, the question of holding the assessment order as erroneous insofar prejudicial to the interest of Revenue does not arise on account of non-reference to the TPO with respect to the provisions for the specified domestic transactions prescribed under section 92BA of the Act which stood omitted. Hence it is hereby quashed. The impugned order is thus quashed and the grounds raised in the appeal are allowed.
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2021 (4) TMI 46
Nature of land sold - Agricultural land - applicability of provisions of Capital Asset u/s. 2(14) - land as situated beyond 8 KM from the outer limits of municipality of Jaipur - HELD THAT:- Since now before us, the assessee has successfully proved by placing on record the documentary evidences that the land in question at village Machhwa is 17 KM away from Jaipur and this village is having population of 2453 and land of the assessee is used for agriculture purposes as discussed therefore, keeping in view the totality of facts and circumstances and also keeping in view all the documentary evidences placed on record, we are of the view that the land in question of the assessee was situated beyond 8 KM from the municipal limits of Jaipur and was being used for agricultural purposes and was thus outside the scope of Section 2(14) of the Act and therefore, any gain on sale of the said land is exempted from tax. Thus, we allow these grounds of appeal and directed to delete the addition.- Decided in favour of assessee.
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2021 (4) TMI 44
Undisclosed investments u/s 69B - cash payment against the purchase of the flat which was not recorded in the regular books of accounts - Addition based on documents found in the course of search by DGCEI viz a viz the directors of CPIPL have admitted in their respective statements to have received payment in cash from the assessee - whether the addition can be sustained on the basis of search materials and the statements without providing the opportunity to the assessee for his confrontation/rebuttal? - HELD THAT:- The answer is in negative. The principles of natural justice requires that the assessee should be given the opportunity of placing his points of contentions with respect to search materials and the statements based on which additions were made. In holding so we draw support and guidance from the judgment in the case Heirs and Legal Representative of Late Laxmibhai S. Patel [ 2008 (7) TMI 544 - GUJARAT HIGH COURT] - Also see H.R. MEHTA VERSUS THE ASSISTANT COMMISSIONEROF INCOME TAX, MUMBAI [ 2016 (7) TMI 273 - BOMBAY HIGH COURT] We hold that no addition can be sustained in the hands of the assessee. As we have decided the issue in favor of the assessee on the preliminary ground as discussed, we are not inclined to decide the issue on merit. Accordingly we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. - Decided in favour of assessee.
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2021 (4) TMI 43
Penalty u/s 271AAA - Addition being 10% of the undisclosed income - HELD THAT:- We find that the assessee has disclosed the unaccounted income from the sale of land which has not been doubted by the authorities below. Thus, it is transpired that that the assessee complied with the conditions provided under sub-section 2 of section 271AAA of the Act. The onus is on the Revenue Authorities to show as to how and in what manner conditions of section 271AAA(2) had not been complied with. AO in the penalty order without elaborating the facts with the reasons has just mentioned that the assessee has not complied with the conditions as specified under section 271AAA of the Act for claiming the immunity. There remains no ambiguity to the fact that the AO has not brought anything on record including the statement recorded under section 132(4) of the Act suggesting that the conditions as specified under section 271AAA of the Act has not been satisfied. Accordingly we are not impressed with the finding of the authorities below. Thus the order of the learned CIT (A) is set aside by us with the direction to the AO to delete the penalty levied by him. Thus the ground of appeal of the assessee is allowed.
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2021 (4) TMI 42
Reopening of assessment u/s 147 - not making any assessment u/s. 143 of the Act for the AY 2006-07 - making protective addition - HELD THAT:- We find in this clinching factual backdrop that the tribunal's co-ordinate bench's order in assessee's case itself for AY. 2007-08 [ 2020 (5) TMI 675 - ITAT HYDERABAD] holds that such a re-opening making protective addition is not sustainable as per case law DHLF Venture Capital Fund [ 2013 (6) TMI 575 - BOMBAY HIGH COURT] . We adopt the very reasoning herein mutatis mutandis to quash the impugned reopening. All other pleadings on merits are rendered infructuous. - Decided in favour of assessee.
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2021 (4) TMI 41
Disallowance u/s.14A on interest - HELD THAT:- The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders' funds, presumption gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds. Similar view has been taken in CIT vs. Tin Box Company [ 2002 (11) TMI 75 - DELHI HIGH COURT] holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. More recently, the Hon'ble Supreme Court in CIT (LTU) VS. Reliance Industries Ltd.[ 2019 (1) TMI 757 - SUPREME COURT] has reiterated the same view. When we examine the amount of Investments at ₹ 39.94 crore as against the availability of Share Capital and Reserves at ₹ 397.86 crore, it becomes evident that the amount of such Investments is much less than the amount of shareholders fund. We, therefore, order to delete the disallowance of interest amounting to ₹ 45,16,437/-. Second component of disallowance of interest at half percent of average value of investments - AR did not raise any dispute as to the applicability of 0.5% towards disallowance on the average value of investments. It was, however, requested that only the investments which yielded exempt income should be considered for the purpose of calculation. The Hon'ble Delhi High Court in ACB India Ltd. [ 2015 (4) TMI 224 - DELHI HIGH COURT] has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] - we set aside the impugned order to this extent and remit the matter to the file of Assessing Officer for recomputing the disallowance under Rule 8D(2)(iii) by considering only such investments in calculating the average value of investments, which yielded exempt income during the year. The assessee will be allowed hearing opportunity in such fresh proceedings. It is further made clear that while computing disallowance u/s.14A, the suo motu disallowance offered by the assessee, to the extent concerning with rule 8D(2)(iii), should be accordingly reduced. Deduction towards Education Cess and Secondary and Higher Education Cess paid u/s. 40(a)(ii) - HELD THAT:- We find that this issue is no more res integra in view of the judgment of Hon'ble jurisdictional High Court in Sesa Goa Lt. Vs. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education Cess is not disallowable expenditure u/s. 40(a)(ii) of the Act. Similar view has earlier been taken in Chambal Fertilisers and Chemicals Ltd. and Another Vs. JCIT[ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . We, ergo, direct to allow deduction for such an amount after verification.
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2021 (4) TMI 40
Estimation of income - Non genuine purchases of diamond - Commissioner (Appeals) submitted, disallowance at 5% is most reasonable as in some other cases the Tribunal has upheld disallowance at 8% of the non genuine purchases - reasonableness of the disallowance made at 5% of the non genuine purchases - HELD THAT:- On a perusal of the report of the Task Group for Diamond Sector under the aegis of Ministry of Commerce and Industry, Department of Commerce, Government of India, New Delhi in the year 2013, it is noticed that as per the benign assessment procedure (BAP) introduced in the budget presented in 2007-08, the threshold net profit rate was fixed at 8% which was subsequently revised to 6% as per CBDT Instruction No.2/2008 dated 22-02-2008. The task group has stated that the rate of 6% so fixed is nowhere reflective of the reality in the diamond manufacturing and trading industry, which operates on profit margin in the range of 1% to 3% only. Also in case of ITO vs Dhawal Exim P Ltd [ 2018 (11) TMI 1840 - ITAT MUMBAI] assessee, the first appellate authority himself has sustained addition @3% of the non genuine purchases under more or less identical facts and circumstances - thus disallowance at 3% of the alleged non genuine purchases would be fair and reasonable. Accordingly, direct the assessing officer to do so. Ground is partly allowed.
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2021 (4) TMI 39
Unsecured loans considered as unexplained cash credit u/s. 68 - CIT-A restricted part addition - HELD THAT:- CIT(A) has granted substantial relief to the assessee. However, the assessee is contesting the same. Despite conceding before the ld. CIT(A) with respect to some of the loans remaining unconfirmed, the assessee has raised an appeal. Moreover, despite noting that the A.O. has observed that the additional evidence should not be admitted, the ld. CIT(A) has held that the A.O. in his remand report seems to have accepted the other loan creditors. Hence, we find that this is obvious contradiction in CIT(A)'s observation. Hence, in the interest of justice, we set aside the issue to the file of A.O. for consideration anew. Assessee's appeal is allowed for statistical purposes.
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2021 (4) TMI 38
Revision u/s 263 - unexplained time deposits and cash deposits - whether PCIT has erred in issuing show case notice u/s. 263 without mentioning the DIN? - notice U/s.148 of the Act was issued on account of the reasons that the assessee has deposited certain cash in his bank account maintained with Bharatpur Urban Cooperative Bank - Pr. CIT has however stated that the order so passed by the Assessing Officer is erroneous so far as it is prejudicial to the interest of the Revenue as the order is based on mistaken view of law and erroneous application of provisions of the Act - HELD THAT:- We however find that how the order so passed by the AO is based on mistaken view of law or how the AO has erroneous applied the provisions of the law has not been spelt out by the ld. Pr. CIT. Further, there is a clear finding given by the Assessing Officer in the assessment order, as we have noted above, where the assessee was asked to explain the nature and source of the cash deposit in his bank account and after considering the submissions so filed by the assessee along with corroborative evidences that the source of such cash deposits are out of his agricultural produce, the cash deposits were found duly explained and the returned income was accepted. Therefore, the findings of the ld. Pr. CIT that the assessee failed to submit the source of cash deposit made in his bank account and the AO has not made proper investigation and verification of the issue is borne out of the records and therefore cannot be accepted. In view of the same, we are of the considered view that there is no basis to hold that the order so passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. In view of the same, other contention raised by the Ld. AR regarding non-quoting of DIN is considered not necessary to adjudicate and left open. - Decided in favour of assessee.
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2021 (4) TMI 37
Revision u/s 263 - no proper and adequate enquiry as regard to the TDS obligation on payments made by it to the foreign company - HELD THAT:- When the matter was taken up today, the learned counsel for the assessee submitted that theissue involved in this appeal has been set at rest in view of the decision rendered by the Supreme Court in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VS.THE COMMISSIONER OF INCOME TAX ANOTHER [ 2021 (3) TMI 138 - SUPREME COURT] and the issue involved in this appeal has been answered against the Revenue and in favour of the assessee.
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Customs
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2021 (4) TMI 83
Classification of imported consignment - two-sided coated paper in rolls - one-sided coated paper in rolls - goods freely importable or not - second respondent entertained a doubt that the imported goods are stock lots and seized them - petitioner seeking their clearance on the ground that the consignments cannot be considered as 'stock lots' - seeking release of seized goods. Whether the goods imported by the petitioner can be termed as a stock lot? - HELD THAT:- This expression in normal parlance refers to those goods whose transaction value is less than the market value as they were purchased during clearance sale or distress sale. But in the case on hand, the expression bears a different connotation altogether. The Director General of Foreign Trade has ascribed a particular meaning to this term in their trade notice No. 8/2020-2021. Like Humpty Dumpty in Lewis Carroll's 'Through the Looking Glass', when DGFT uses a word, it means just what it chooses it to mean-neither more nor less - The imported paper consignment will qualify to be a stock lot, if it is without description for each category of the paper or if papers of different descriptions have been bundled together. In the case on hand, one consignment contains one sided coated paper rolls and the other consignment contains two sided coated paper rolls. The respondents have categorised the imported paper as falling under different heads only based on GSM dimensions. This is evident from the particulars set out in the mahazar. Classification of goods - HELD THAT:- Classification is based on description of goods - If the imported goods can be demonstrated as falling under different codes and the importer has failed to describe each category of paper or if paper of different descriptions have been bundled together, then they would constitute a stock lot. In this case, the petitioner has classified the goods in question under eight digit ITC (HS) 4810 13 90. If the respondents are asked to classify the goods in question, they cannot come up with a different classification. Yet by introducing an impermissible yardstick namely, GSM variation, the respondents have arrived at a finding that the imported goods constitute a stock lot. This is patently illegal. The seizure and detention of the petition-mentioned goods is not warranted - Petition allowed.
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2021 (4) TMI 71
Confiscation - penalty - Gold Bars - noticee not permitted to cross examine the co-noticees, even though their statements recorded under Section 108 of the Customs Act were relied upon - violation of principles of natural justice - HELD THAT:- It was held in the case of S. RAJENDRAN VERSUS THE JOINT COMMISSIONER OF CUSTOMS, ADDL. DIRECTOR AND DEPUTY DIRECTOR [ 2019 (1) TMI 1868 - MADRAS HIGH COURT ] that such a right is not available. Since the impugned order is appealable, the petitioner are permitted to file an appeal before the appellate authority - petition dismissed.
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Corporate Laws
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2021 (4) TMI 67
Transfer of shares - Winding up of company or not - appellant contended that in the absence of requirements contemplated under Section 397 of the Companies Act, 1956, the Company Law Board has committed an error in passing such an order (for transfer of shares) in view of the fact that there was no circumstances established for winding up of the company - HELD THAT:- This Court is of the opinion that when the provisions of the Statute contemplate certain requirements and ingredients then such requirements are to be established by the parties who approached the Court and in the absence of any proof to that effect, relief cannot be granted merely on the ground that there was a dispute existing between the parties. Mere dispute is insufficient to pass an order to transfer the shares. The dispute must result in winding up of the Company and such a situation must be beyond any pale of doubt - In the present case, none of the requirements were adjudicated nor any finding was given by the Company Law Board. Thus, this Court has no hesitation in arriving a conclusion that the order passed by the Company Law Board is not in consonance with the provisions of Section 397 of the Companies Act, 1956, and further opposed to the principles laid down by the Apex Court in the case of Hanuman Prasad Bagri and Others v. Bagrees cereals Pvt. Ltd and others [ 2001 (3) TMI 931 - SUPREME COURT ]. The Apex Court in an unequivocal terms in the case of Hanuman Prasad Bagri and Others v. Bagrees cereals Pvt. Ltd and others [ 2001 (3) TMI 931 - SUPREME COURT ] held that attention is to be made only with reference to the aspect that the winding up of the Company would unfairly prejudice the members of the company who have a grievance and are the applicants before the court and that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the Company should be wound up. However, no such circumstances are raised by the parties nor the Company was considered by the Company Law Board in the present case. Appeal allowed - decided in favor of appellant.
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2021 (4) TMI 49
Scheme of Amalgamation - seeking to dispense with the convening and holding of the meeting of Equity Shareholders of the Applicant Companies and Secured Creditors of the Applicant No. 2 and Unsecured Creditors of the Applicant No. 1 - seeking direction to convene the Meeting of Unsecured Creditors of the Applicant No. 2 - Sections 230 232 of the Companies Act, 2013 - HELD THAT:- The Companies have followed extant provisions of Companies Act in framing the Scheme in question, which are duly approved by the Board of Directors of the Companies involved. The Statutory Auditors/Chartered Accountants of the Company have also issued respective Certificates by inter-alia certifying the details of shareholders, creditors, and compliance of accounting treatment as prescribed U/s. 133 of the Companies Act, 2013 with reference to the Scheme in question. The Applicant Companies have disclosed all the material facts relating to the Scheme in question and filed necessary documents along with the Application. The case, made out by the Applicants so as to grant relief as sought for, by dispensing with the meeting of the Equity Shareholders, Unsecured Creditors of the Applicant Company No. 1 and Secured Creditors of the Applicant company No. 2 and convene the meeting of the Equity Shareholders and Unsecured Creditors of the Applicant Company No. 2/Transferee Company by appointing the Chairperson and Scrutinizer for convening the meeting, fixing venue, time, quorum etc. is convincing. Various directions regarding holding and convening of various meetings issued - various directions regarding issuance of various notices issued - application alllowed.
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2021 (4) TMI 45
Sanction the Scheme of Amalgamation - Section 230 to 232 of the Companies Act, 2013, r/w Companies (CAA) Rules, 2016 - HELD THAT:- In terms of sub-section (3) of Section 232 of Companies, the Tribunal is empowered to sanction the scheme of amalgamation, if it is satisfied that sub-section (1) and (2) of the above section, however, subject to filing a Certificate by the Company's Auditor with Tribunal to the effect that the accounting treatment, if any, proposed in the Scheme of Amalgamation is in conformity with the Accounting Standards prescribed under Section 133, etc. It is a settled position of law that any Scheme of Amalgamation or Arrangement, under the extant provisions of Companies Act, would not contemplate to waive any liability or legal action for any violation of provisions of Companies Act, so as to prevent Statutory Authorities from initiating any action against violation of provisions of Companies Act, in respect of the Companies involved, in accordance with law. In the instant case also, the Transferee Company would inherit all the liabilities/Responsibilities of Transferor Company and it is not being exempted from complying with all statutory requirement by virtue of this order. The Tribunal, in the instant proceedings, cannot examine every alleged violation committed by the Petitioner Companies, since the issue here is only to sanction of the Scheme, subject to compliance of extant provisions of Companies Act and to make them to comply all terms and conditions as mentioned in the proposed Scheme in question, and other consequential actions, after sanction of the Scheme - It is settled principles of law that Court/Tribunal cannot interfere in commercial wisdom of Companies involved to frame scheme of merger/amalgamation, unless scheme is ex facie illegal and it is made with an intention to dupe stake holders of Companies involved. The Scheme in question is comprehensive one complying with the provisions of Sections 230 to 232 of the Companies Act, 2013 and the Rules made thereunder and the Petition/Application is filed in accordance with law. It covers all the issues relating to legal proceedings, continuation of contracts, deeds, therefore, the Scheme in question and thus prima facie eligible to be sanctioned, however, subject to compliance of various undertakings as mentioned in the Scheme and to follow/comply various observations made by the Statutory Authorities. It is also appears to be fair, reasonable and it is not detrimental against the Members or Creditors or contrary to public policy. The Scheme of Amalgamation is provisionally sanctioned with effective date i.e. from 1st April, 2020 prayed for, however subject to complying all undertakings, extant statutory provisions - Petition disposed off.
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Insolvency & Bankruptcy
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2021 (4) TMI 58
Maintainability of application - initiation of CIRP - Corporate Debtor sought time to make payment for several times. But without making payments they proceeded to sell the assets of the Corporate Debtor, which is a clear case of fraud and cheating - present Application has been settled after admission before making the Public Announcement - existence of debt and dispute or not - HELD THAT:- In this case the existence of debt is reasonably evidenced in the consent terms that were also made part of the order of this Tribunal dated 24.09.2020 as well as the averments made by the Corporate Debtor themselves regarding the amount of debt outstanding to the Financial Creditor, admitting the existence of a debt. The Applicant having proved the existence of a debt as well as existence of default, as elaborately discussed in the order dated 25.08.2020 admitting the Application, the only course to be adopted here is to admit this application and order Corporate Insolvency Resolution Process against the Corporate Debtor. The I B Code allows the Applicants to withdraw their Application under Sections 7, 9 and 10 of the Code at any time; a) one before the constitution of the CoC b) after constitution of the CoC but before the invitation of the EoI or c) after the invitation of the EoI in exceptional cases, on application made by the applicant. The present Application has been settled after admission before making the Public Announcement as per Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The I B Code does not bar the Tribunal to Admit a matter which was settled after Admission. Application filed on behalf of Financial Creditor/ Applicant under Section 7 of the I B Code, 2016 for initiation of Corporate Insolvency Resolution Process is admitted - Application admitted - moratorium declared.
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2021 (4) TMI 53
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 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. The same needs to be approved as provided under Section 31 of the Code. Application allowed.
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2021 (4) TMI 50
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - Financial creditors - NPA - existing debt and dispute or not - time limitation - HELD THAT:- The Learned Counsel for the Respondent points out Paragraph 19 of that Reply filed by the Corporate Debtor where clearly the Corporate Debtor accepted that principal amount due and in default reflecting in their accounts was ₹ 41.67 Crores. It is stated that this is admittedly more than ₹ 1 lakh. It is stated that the debt due has been accepted. Time Limitation - HELD THAT:- Considering the Judgment of the Hon ble Supreme Court of India in SESH NATH SINGH ANR. VERSUS BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. [ 2021 (3) TMI 1183 - SUPREME COURT] , we have no difficulty to state that Section 18 of the Limitation Act is applicable to proceedings under IBC and that if there is acknowledgment of debt in the balance-sheets or the OTS Proposal, the period of limitation would get extended if the acknowledgment is made before the period of limitation expires. Considering the findings recorded by the Adjudicating Authority based on balance-sheets and even keeping in view the admitted dates when OTS Proposals were made by the Corporate Debtor, it is not found that Appellant is able to demonstrate that the Adjudicating Authority committed any error when the Adjudicating Authority concluded that the debt was not time-barred and admitted the Application. Appeal dismissed.
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2021 (4) TMI 48
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Debt and Default in question are not disputed by the Respondent. The instant Petition is filed strictly in accordance with the extant provisions of the Code, and also suggested a qualified Resolution Professional namely Shri Kondishetty Kumar Dushyantha - the Instant Company Petition is fit case to admit by initiating CIRP by appointing IRP, and declaring moratorium etc., in respect of the Corporate Debtor. Application admitted - moratorium declared.
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FEMA
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2021 (4) TMI 82
Rejection of permission to remit foreign exchange - FEMA ODI Regulations - approval on the basis of the reservations expressed by ED - as the wholly owned subsidiary of the respondent has already taken the credit of foreign exchange from various lenders and the foreign exchange has already come to the country. It is only this foreign currency which is now being repaid by the respondent - Writ of Mandamus, directing Respondent to permit Petitioner to make additional commitments and payments of USD 300 Million to its wholly owned subsidiary namely Jindal Steel and Power (Mauritius) Limited by way of equity subscription or loan or corporate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations - HELD THAT:- We are of the view that the order of denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations gives no reason for rejecting the application of the respondent. Assuming for the sake of arguments that the reasons are contained in the e-mail of 30.12.2019 as well as in the letter of 03.12.2019, we are also required to see that the reasons so mentioned are not arbitrary, whimsical and in accordance with the scheme of the FEMA. The reasons for rejection must be considered and also must relate to the dominant purpose of the FEMA Regulations which is conservation of Foreign Exchange. The reason contained in the e-mail of 30.12.2019 namely reservation expressed by DOE/on-going investigations and in the letter of 03.12.2019 namely conducting investigations against M/s Jindal Steel Power under FEMA in four cases and conducting investigations under PMLA in three cases, cannot be a ground for denial of permission. The appellant cannot deny approval merely on the premise of pending investigation. It is not the case of the RBI, in the appeal, counter affidavit in the writ petition or argued before us that the remittances made in the past by the respondent have been misused. Till date pursuant to the permission of the RBI the respondent has remitted a total amount of 241.14 million USD (USD 90 million+ USD 54.99 million+ USD 96.15 million). Hence, we hold that even if we look at the reasons for rejection contained in the order dated 30.12.2019, the reasons are arbitrary, whimsical and do not further the scheme of Foreign Exchange Management Act. The reliance on word inter alia under Regulation 9(3) - Regulation 9(3) the word inter alia of FEMA ODI Regulations must take its colour from the scheme, drift and tenor of the Act as well as Regulations. The FEMA ODI Regulations do not contemplate any role of the third party or the agency for approval or for prior approval, least of all investigating agency. The only mention of pending investigation is under Regulation 6(2) (iii) ie. If the Indian Party is under RBI caution list/lists of defaulters or under investigation by an investigation/enforcement agency or by a regulatory body. The very fact that Regulation 9(3) makes a conscious omission of pending investigations, by an investigation/ enforcement agency, further strengthens our opinion that merely an on-going enquiry /pending investigations cannot be a ground for rejection of permission to remit Foreign Exchange. It will be relevant to point out that all permissions given by the appellant have categorically stated each permission is without prejudice to any action that may be taken by any investigative agency on account of contravention . We also note with approval that even after so-called reservation indicated by the DOE, the appellant has granted permission to the respondent on 09.09.2020 indicating no objection from the FEMA 1999 angle. The counter affidavit of the appellant has reiterated that the conditions imposed in the letter of 09.09.2020 are in line with FEMA ODI Regulations. Hence, we hold that the denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations is wrong. Learned Single Judge has not adverted to the preliminary objections raised in the counter affidavit. No finding against ED could have been given without ED being a party - We are unable to agree with this contention of the appellant as there is no finding given against the ED by the learned Single Judge. The learned Single Judge in Para 38 of the impugned order and judgment dated 04.12.2020 has observed merely that there is nothing on record of the writ court which shows that any demand appears to have been raised by the ED on the respondent. The learned Single Judge has further held that DOE has enough power under various statutory regimes to attach properties and assets of the defaulter individual. The appellant has rejected the application of the respondent at the behest of ED - We have already, while adverting to the arguments of the learned Sr. Counsel for the appellant in ground (A) held that the reasons for rejection have been merely the apprehension expressed by the ED. The said apprehension of the ED is neither in spirit of the scheme of FEMA nor Regulation 9(3). The reliance of RBI on the apprehensions expressed by ED in its e-mail of 30.12.2019 and the letter of 03.09.2020 itself has been held by us to be incorrect and hence, the rejection by the appellant dated 30.12.2019 is incorrect. In view of the above, the reliance placed on the judgment State of Bihar v. Asis Kumar Mukherjee (Dr) [ 1974 (12) TMI 74 - SUPREME COURT] is misplaced. The appellant taking u-turn by taking permission - During the course of arguments the learned Sr. Counsel for the respondent has categorically made the statement that they would give a Board Resolution to deposit equivalent amount of the said financial commitment amounting to USD 241.5 million and an undertaking that it had unencumbered assets worth USD 241.5 million but the same was not acceptable to the respondent. Be that as it may, it is clear that the letter of 09.09.2020 was issued by the respondent after the so-called Panama/Mauritius Leaks and there is no justification or satisfactory explanation as to why the permission was granted even as late as 09.09.2020. Moreover, the learned Sr. Counsel for the appellant had relied on the Judgment M/s. Mahabir Jute Mills LTD., Gorakhpore Vs. Shri Shibban Lal Saxena and Ors [ 1975 (7) TMI 148 - SUPREME COURT] to urge that the very fact that the appellant chose not to challenge the order and in fact comply with the same cannot be held against them. The said judgment need not detain us as we are of the opinion that the order dated 30.12.2019 is itself flawed. Application filed under Order I Rule 10 read with Section 151 of CPC by the Directorate of Enforcement seeking impleadment as a respondent in the present appeal - HELD THAT:- A proper party is a person whose presence would enable the court who completely, effectively and properly adjudicate upon all matters and issues, though he may not be the person in favour of or against whom a decree is to be made for the reasons we have elaborated in our judgment dated 26.03.2021. We feel that DOE is neither a proper nor a necessary party to the present proceedings as no relief is claimed against DOE ii. The disputes in question can be effectively, completely and properly be adjudicated in the absence of applicant. We are also persuaded by the fact that there is no averment in the application as to why DOE chose not to file a similar application for impleadment in the original writ proceedings and has only come up for the first time in the present appeal. The application is totally silent on the said ground. In this view of the matter we find no merit in the application and the same is dismissed.
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PMLA
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2021 (4) TMI 69
Permission for withdrawal of application - second application seeking grant of interim bail on medical grounds - reports given by the Doctors, posted in jail was forged and misused by appellant - HELD THAT:- This Court finds that the Senior Medical Officer, in his report dated 15.08.2020, has specifically opined that the accused-applicant was required to be worked at for surgery since surgical issue had got deteriorated which means that accused needed urgent surgery at a High Referral Hospital. This report became the basis for enlarging the accused-applicant on interim-bail by the Delhi High Court vide order dated 17.09.2020 as well as the order dated 14.08.2020 passed by this Court. The Doctors, posted at the Jail Hospital, are required to remain careful, while issuing medical certificates, which may be misused by an accused. In the present case, the accused-applicant pressurized the AIIMS, New Delhi for his admission, but no urgency was found by the AIIMS, New Delhi for his admission for any surgery. However, the report dated 15.08.2020 of the Senior Medical Officer of Central Jail, 11 Mandoli, Delhi points out extreme urgency of surgical intervention for ailment of the accused-applicant - Mr. Lalit Kumar, the Senior Medical Officer, Central Jail, 11 Mandoli, Delhi is cautioned to remain careful in future, while issuing medical report in respect of an accused as the same may be used for an accused to obtain favourable order from the Court. The Director, AIIMS, in his affidavit dated 14.02.2021 has stated that the accused-applicant was mounting pressure upon the authorities and Doctors of the AIIMS for admission, but none of the Departments recommended for his admission or surgery - the accused-applicant then submits that he would not like to press this second application for interim bail on medical ground and, he prays that the same may be dismissed as withdrawn. This second application for interim bail is dismissed as withdrawn.
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Central Excise
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2021 (4) TMI 77
CENVAT Credit - duty paying documents - petitioner had availed ineligible credit of service tax paid on certain input services on the strength of documents not covered under Rule 9(2) of the CENVAT Credit Rules, 2004 - presence of Fraud or not - scope of SCN - H ELD THAT:- The fraud has serious civil as well as criminal consequences. To constitute the offence of fraud there must be intent to deceive. That apart, a finding of fraud is a stigma which is a reflection on the integrity of a person or of a corporate entity. The basic allegation against the petitioner pertaining to availing of CENVAT credit on account of labour services as could be discerned from the notice to show cause-cum-demand dated 23.12.2015 was that the services for which the CENVAT credit was availed of was not connected with the manufacturing activities of the petitioner. Therefore, such claim was held to be inadmissible - petitioner s availment of CENVAT credit was being denied by the adjudicating authority on merit and not on the ground that the invoices were manufactured or manipulated. While there cannot be any two opinion that fraud vitiates everything and should be strongly dealt with particularly in a judicial or a quasi-judicial proceeding, Supreme Court in HARJAS RAI MAKHIJA (D) THR. L. RS. VERSUS PUSHPARANI JAIN AND ORS. [ 2017 (1) TMI 1736 - SUPREME COURT] had sounded a note of caution. Firstly, there must be a specific allegation of fraud being played by a party to the proceeding. When such an allegation is made, it must be enquired into. The party against whom the allegation of fraud is made has to be put on notice and heard. Evidence must be led wherefrom a conclusion can be drawn that there was intent to deceive by the party who is alleged to have committed fraud - CESTAT was not justified in rejecting the application filed by the petitioner for recalling the finding of fraud and additionally in imposing cost. Petition allowed.
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2021 (4) TMI 72
100% EOU - Clandestine Removal - coconut shells procured and subjects the same through a heating process - contention is that the levy of excise duty can only be on the product actually manufactured which is removed from the factory premises - HELD THAT:- While the respondents cannot be accused of any arbitrariness, the question is whether they are justified in applying the norms laid down by the Coconut Development Board. The issue on hand is no longer res integra - The Division Bench of the Madras High Court in M/S. IOCEE EXPORTS LTD., VERSUS THE COMMISSIONER OF CENTRAL EXCISE, CHENNAI-II COMMISSIONERATE, CHENNAI, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH, [ 2021 (3) TMI 276 - MADRAS HIGH COURT] had also held that standard input and output norms cannot be the sole basis for giving a cause of action for issuing the show cause notice for determination of the wastage, when there is no allegation of diversion made against the assessee. In the case on hand, there is no allegation against the petitioner that they had indulged in clandestine removal. The matter is remitted to the file of the first respondent - petition allowed by way of remand.
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CST, VAT & Sales Tax
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2021 (4) TMI 84
Entitlement of deduction of freight - freight in the sale bill charged separately - part of sale price or not - HELD THAT:- In the considered view of the Court, the discussion by the Tribunal, and the conclusion reached by it, overlooks the actual applicable clauses of the contract. In fact the Tribunal does not actually discuss Clause 6.1 read with Clause 4 (a) of the PO which would indicate what the intention of the parties was when they entered into the contract of sale and purchase as to the exact place of delivery of the goods in question. The definition of sale in Section 2(h) of the CST Act had to be understood in the context of the clauses of the contract. Here, once the sale was complete at the site of the inspection of the goods, which is the factory of the Petitioner, then the freight charge for further transportation of the goods to the purchaser s site would obviously not form part of the sale price. Therefore, it was being separately shown in the invoice. It is seen that the Petitioner had indicated separately the freight charge of ₹ 45/-. The Tribunal committed a serious error in understanding the freight charge to be same freight charge irrespective of the distance between the factory of the Petitioner and the destination of the Purchaser. The crucial factor, which was missed, was that the rate was an uniform rate of ₹ 45 per piece as this was for a supply of 50000 units - In almost identical facts, the Supreme Court in STATE OF KARNATAKA AND ANOTHER VERSUS BANGALORE SOFT DRINKS PVT. LTD. [ 1998 (9) TMI 539 - SUPREME COURT] held that despite there being a uniform rate per unit as freight charge that still would not be included in the sale price - the case supports the case of the Petitioner is that in the instant case the freight charges are not includable in the sale price, which is amenable and therefore, has to be excluded while calculating the taxable turn over for the purposes of the OST Act. In the considered view of the Court, since the Tribunal made a factual error as regards the place of delivery in terms of the Clauses of the Contract in the present case, it made a further error in distinguishing the above decision as not applicable to the facts. On the other hand, this Court finds that the said decision is squarely applicable to the fact in the present case. The question framed is answered in negative that is in favour of the Petitioner-assessee and against the Department by holding that the Tribunal was incorrect in holding that the freight shown in the sale bill separately is part of the sale price - Revision petition disposed off.
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2021 (4) TMI 79
Issuance of 'C' Forms - concessional rate of tax - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- The issue decided in the case of M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that the respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.
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2021 (4) TMI 78
Concessional benefit of tax - Issuance of C forms - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- Issue decided in the case of M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that the respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.
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2021 (4) TMI 66
Entitlement to Input Tax Credit - suppression of turnover or not - Bogus dealer - genuine purchase or not - burden to prove for entitlement to claim input tax credit - HELD THAT:- The transaction is not a bogus transaction or make believe transaction. Further, goods have been transported from Kustagi to Bengaluru as is evident from the documents produced by the assessee. Hence for the dis allowing of input tax by the AA and the FAA is without factual basis. There cannot be any dispute as to the burden cast on the assessee to establish the transaction to lay a claim for deduction of input tax by production of documents referred to supra. This Court is of the considered opinion that the assessee has discharged this burden in proving that transaction is a genuine transaction. In the case on hand, if M/s. Priya Traders has remitted the tax to the Department, assessee cannot be penalized. Therefore, there are no justification in interfering with the order of the Karnataka Appellate Tribunal. There are no infirmity of whatsoever by the Tribunal in arriving at a finding that the AA and the FAA were wrong in disallowing the input tax credit in favour of the assessee for the purchases made from M/s. Priya Traders - Sales Tax Revision Petition is dismissed.
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