Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 30, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Seeks to give effect to the provisions of rule 87 (13) and FORM GST PMT-09 of the CGST Rules, 2017 - Notification
Income Tax
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Doctrine of mutuality - Exemption from taxability - The doctrine of mutuality bestows a special status to qualify for exemption from tax liability. It is a settled proposition of law that exemptions are to be put to strict interpretation. The appellant having failed to fulfil the stipulations and to prove the existence of mutuality, the question of extending exemption from tax liability to the appellant, that too at the cost of public exchequer, does not arise - SC
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Deferred Revenue expenditure disallowance - The advertisement and sales promotion is the necessity of the business and thus, an integral part of the business activity. Therefore, the expenses incurred on advertisement etc. are not for acquisition of an asset or right of a permanent character, therefore, cannot be said to be a capital expenditure. It is but a revenue expenditure. - HC
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Addition on loose papers impounded during the survey proceedings - AO had not been able to substantiate that there was really any other project running at the same time, otherwise the Assessing Officer ought to have subjected them to tax in the assessment year 2009-10 as well, which had not been done.
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Deduction u/s 80-IA - Assessee not filed form No.10CCB alongwith return of income in original assessment proceedings - the audit report furnished at the time of reassessment proceedings could not be ignored by the Assessing Officer while adjudicating the issue of admissibility of deduction under Section 80-IA
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Assessment u/s 153A - Addition u/s 68 - incriminating material found in search or not? - all the facts were disclosed in the ITR or books accounts maintained, prior to search - Thus, there is no recovery of any incriminating material during the course of search against the assessee so as to make any of the additions against the assessee.
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Unexplained money u/s 69A - assessee had not maintained books of account that is why he opted for 8 per cent income as per section 44AD - Argument of the revenue that the turnover of the assessee has been doubted by the Assessing Officer is totally ill-found - AT
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Write off of receivables on discontinuation of joint venture (JV) - assessee had duly complied with the provisions of section 36(2) of the Act. It is not in dispute that the said trade debts had been duly written off as irrecoverable in the books of accounts of the assessee company - Claim allowed - AT
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Nature of interest expenditure - since the loan had been raised for purchase of the shares of subsidiary company so as to enable the assessee company to acquire the business of M/s RPIL, hence the expenditure incurred in respect of loan raised in the instant year is a revenue expenditure u/s 36(l)(iii) - AT
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Penalty u/s 271D - receipt of deposit of loan or repayment of the same otherwise than banking channel - adjustments through journal entries - the assessee’s case is squarely falls under a reasonable cause under section 273B - No penalty - AT
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Reopening the Assessment u/s 147 - period of limitation - Limitation under sub-Section 2 to Section 150 will apply only when the limitation had already expired by the time before the assessment order for the Assessment Year 2006-07 was made. If not, there is a saving of limitation u/s 150(1) - HC
Customs
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Confiscation - Imposition of redemption fine and penalty - claim of drawback for export of ‘ready-made garments - Valuation of export goods - Even though the factum of goods being other than declared is not in dispute nothing has been brought to evidence that this was deliberate act. - AT
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Valuation of import goods - automobile parts - requirement of affixing of ‘retail selling price’ - Such goods when routed through channels for industrial/institutional consumers are explicitly excluded from the statutory requirement under Legal Metrology Act, 2011. It would, therefore, appear that demonstrated intention of the importer/manufacturer by affixing of ‘retail selling price’ is the sole decider for adopting the alternative mechanism for assessment of additional duties of customs or duties of central excise, as the case may be. - AT
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Refund of SAD - Once there is no proposal in the notice to deny refund claim on a particular ground which also does not stand considered by the original adjudicating authority, the consideration of the same by Commissioner (Appeals) amounts to travelling beyond the show cause notice. - AT
DGFT
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Clarification with respect to application for Free Sale and Commerce certificate - Trade Notice
Corporate Law
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Striking off the name of the petitioner company from the Registrar of Companies - If it makes an application under Section 248 (c), then the Registrar will have to follow the procedure under Section 455 of the Companies Act, 2013 - In the present case, the petitioner had not taken recourse to the provisions of Section 248 (c) of the Companies Act, 2013. - HC
Service Tax
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Refund of Service tax - amount was paid under protest - time limitation - Tribunal held that appellants are not liable to pay service tax vide order issued on 16.11.2016 - the relevant date for filing the refund claim is 16.11.2016 and from the date within one year - thus, refund claim cannot be rejected as barred by limitation - AT
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Nature of activity - sale or service - photography service - use of the paper upon which an image is printed using certain consumables and chemical in the photography service - The term ‘sale’ appearing in exemption Notification No.12/03-ST dated 20.06.2003 would also include “deemed sale” as defined by Article 366(29A)(b) of the Constitution. - HC
Central Excise
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100% EOU - Demand of Differential Cost Recovery Charges paid - Claim of refund of excess MOT charges paid - the finding of the Commissioner is factually wrong - Demand set aside - refund allowed - AT
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Validity of changes brought in Rule 6(3) (i) of Cenvat Credit Rules, 2004 - the Tribunal erred in not appreciating the significant change brought in Rule 6(3) of Cenvat Credit Rules, 2004, w.e.f. 1.3.2008 which as noticed in the OIO with reference to sale of goods, was deleted and in its place the emphasis was shifted to the payment of an amount equal to 10% of the 'value' of exempted goods - HC
Case Laws:
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GST
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2020 (4) TMI 829
Permission for withdrawal of application - Stay of operation of impugned order - validity of provisional attachment orders - utilization of amount lying in the attached accounts for payment of current GST liabilities - HELD THAT:- Application is dismissed as withdrawn with liberty as sought for by learned counsel for the petitioner.
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2020 (4) TMI 828
Validity of enactment of Central Goods and Service Tax Act, 2017 and the law framed by the Madhya Pradesh Outdoor Advertising Media Rules, 2017 - vires of Rule 4 - HELD THAT:- The prayer seems to be reasonable and accordingly it is hereby allowed. The petitioner is directed to deposit the amount before the Registry of this Court in the form of fixed deposit within a period of 30 days from today and the respondents shall not take any coercive action against the petitioner - List the matter on 26.03.2020 as prayed for.
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Income Tax
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2020 (4) TMI 827
Doctrine of mutuality - Exemption from taxability - excess of income over expenditure - Common Identity - Oneness with the members / contributors - Completeness of Identity - Non-profiteering and Obedience to Mandate - assessee incorporated by YRIPL as its fully owned subsidiary after having obtained approval from the Secretariat for Industrial Assistance (for short SIA ) for the purpose of economisation of the cost of advertising and promotion of the franchisees as per their needs - HELD THAT:- What is prohibited is the infusion of a participant in the transaction who does not become a member of the common fund, at par with other members, and yet participates either in the contribution or surplus without subjecting itself to mutual rights and obligations. The principle of common identity prohibits any one dimensional alteration in the nature of participation in the mutual fund as the transaction fructifies. Any such alteration would lead to the non-uniform participation of an external element or entity in the transaction, thereby opening the scope for a manifest or latent profitbased dealing in the transaction with parties outside the closed circuit of members. It would be amenable to income tax as per Section 2(24) of the 1961 Act. In the present case, it is indisputable that Pepsi Foods Ltd. is a contributor to the common pool of funds. However, it does not participate in the surplus as a beneficiary for at least two reasons first, Pepsi is not a member of the purported mutual concern as the Tripartite Agreement as well as the terms of SIA approval permit only franchisees to become members of the mutual concern. Notably, Pepsi Foods Ltd. is not a franchisee and thus, it cannot participate in the surplus. Second, Pepsi does not enjoy any right of participation in the surplus or any right to receive back the surplus which are mandatory ingredients to sustain the principle of mutuality. The contention of the assessee company that Pepsi Foods Ltd., in fact, does benefit from the mutual operations by virtue of its exclusive contracts with the franchisees is tenuous, as the very basis of mutuality is missing as far as Pepsi Foods Ltd. is concerned, as discussed hitherto. Even if any remote or indirect benefit is being reaped by Pepsi Foods Ltd., the same cannot be said to be in lieu of it being a member of the purported mutual concern and therefore, cannot be used to fill the missing links in the chain of mutuality Surplus of a mutual operation is meant to be utilised by the members of the mutual concern as members enjoy a proximate connection with the mutual operation. Non-members, including Pepsi Foods Ltd., stand on a different footing and have no proximate connection with the affairs of the mutual concern. The exclusive contract between the franchisees and Pepsi Foods Ltd. stands on an independent footing and YRIPL as well as the assessee company are not responsible for implementation of this contract. Resultantly, the first limb of the three pronged test stands severed. In the present case, even if any surplus is remaining in a given assessment year, it is unlikely to reduce the liability of the franchisees in the following year as their liability to the extent of 5 per cent is fixed and non-negotiable, irrespective of whether any funds are surplus in the previous year. The only entity that could derive any benefit from the surplus funds is YRIPL, i.e. the parent company. This is antithetical to the third test of mutuality. Exemption granted to a mutual concern is premised on the assumption that the concern is being run for the mutual benefit of the contributors and the contributions made by the members ought to be directed in that direction. Contrary to this fundamental tenet, clause 8.1 of the Tripartite Agreement relieves the assessee company from any specific obligation of spending the amounts received by way of contributions for the benefit of the contributors. It explicates that the assessee company does not hold such amount under any implied trust for the franchisees The doctrine of mutuality bestows a special status to qualify for exemption from tax liability. It is a settled proposition of law that exemptions are to be put to strict interpretation. The appellant having failed to fulfil the stipulations and to prove the existence of mutuality, the question of extending exemption from tax liability to the appellant, that too at the cost of public exchequer, does not arise. Difference between purported mutual concern (assessee company) and clubs - Held that:- In the case of clubs, the operations are exempted from taxability because of the underlying notion that they operate for the common benefit of the members wishing to enter into a social exchange with no commercial intent. Further, all the members of the club not only have a common identity in the concern but also stand on an equal footing in terms of their rights and liabilities towards the club or the mutual undertaking. Such clubs are a means of social intercourse, as rightly observed by CIT (A) in the present case, and are not formed for the facilitation of any commercial activity. On the contrary, the purported mutual concern in the present case undertakes a commercial venture wherein contributions are accepted both from the members as well as non-members, as discussed earlier. Moreover, one member is vested with a myriad set of powers to control the functioning and interests of other members (franchisees), even to their detriment. Such an assimilation cannot be termed as a case of ordinary social intercourse devoid of commerciality. Once it is conclusively determined that the assessee company had not operated as a mutual concern, there would be no question of extending exemption from tax liability. Application of income by overriding title - It is urged that once the incoming amount is earmarked for an obligation, it does not become income in the hands of the assessee as no occasion for the application of such income arises. - Held that:- the question of diversion by overriding title was neither framed nor agitated in the appeal memo before the High Court or before this Court (except a brief mention in the written submissions), coupled with the fact that neither the Tribunal nor the High Court has dealt with that plea and that the rectification application raising that ground is still undecided and stated to be pending before the Tribunal - Argument rejected. Decided against the assessee.
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2020 (4) TMI 826
Deferred Revenue expenditure disallowance - deferred revenue expenditure on account of advertisement, publicity, holding conferences, market research, subsidy, various launch schemes, selling and distribution etc.- AO held that the expenses were incurred for the accounting year below the line in the books of account but the assessee had claimed in full for computing the total income as revenue expenditure incurred during the year - HELD THAT:-In the present case, the expenditure on advertisement and sales promotion has been claimed for deduction as revenue expenditure. The advertisement and sales promotion is the necessity of the business and thus, an integral part of the business activity. Therefore, the expenses incurred on advertisement etc. are not for acquisition of an asset or right of a permanent character, therefore, cannot be said to be a capital expenditure. It is but a revenue expenditure. Whether the expenses on account of advertisement, publicity and sales promotion in relation to the business are in the nature of deferred revenue expenditure and although the benefit of such expenses would be availed by the assessee over a number of years but should it be allowed for the relevant assessment year for which assessee claims exemption, also came up for consideration before a Division Bench of Punjab and Haryana High Court in Commissioner of Income Tax vs. M/s Glen Appliances Pvt. Ltd.D. [ 2011 (5) TMI 1108 - PUNJAB AND HARYANA HIGH COURT] accepting the plea of the assessee had held that the expenses incurred by the assessee on the aforesaid activities were revenue in nature and the entire amount was admissible in the year in which it was incurred. - Decided in favour of the assessee.
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2020 (4) TMI 825
Addition on loose papers impounded during the survey proceedings - case was selected for scrutiny - HELD THAT:- In the case in hand, once it was found that there was double addition on same papers for two assessment years for a single project, it cannot be said that the assessee had failed to explain the loose papers despite the onus was placed upon him to prove the loose papers. No benefit can be derived by the Revenue from the judgment in Chuharmals case [ 1988 (5) TMI 1 - SUPREME COURT ] which is distinguishable on facts and is not applicable in the present case. No force in the submission advanced by the appellant that at the time of survey more than one project was in progress. CIT(A) specifically observed that the AO had failed to prove that the seizure was in respect of site different from Shanti Residency project and no effort was made by him to make spot inspection to prove that at the time of survey other projects of the assessee were also running. AO had also not been able to substantiate that there was really any other project running at the same time, otherwise the Assessing Officer ought to have subjected them to tax in the assessment year 2009-10 as well, which had not been done. Addition on the basis of the expenditure made out of books of accounts - CIT(A) deleted the said addition accepting the plea of the assessee that the papers pertaining to the expenses shown in those papers were not part of his accounts but were related to the sub-contractors and the sub-contractors had also filed ITRs showing 8% NP - CIT(A) also deleted the addition on the ground that the Revenue failed to substantiate that the papers pertained to project other than Shanti Residency and there was reason to believe that when the profit was calculated on the basis of the NP/GP rate then there was nothing to separate the expenses therefrom - HELD THAT:- In view the findings recorded by the CIT(A) which have been affirmed by the learned Tribunal and considering the same on the touchstone and anvil of the arguments advanced by the learned counsel for the appellant/Revenue, we find no reason to differ as no illegality or perversity has been pointed out by learned counsel for the Revenue in the aforesaid findings of fact, which may warrant interference by this Court.
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2020 (4) TMI 824
Deduction u/s 80-IA - Assessee not filed form No.10CCB alongwith return of income in original assessment proceedings - AO fails to file the audit report under Section 80-IA(7) along with the original return of income filed under Section 139 but presents the same during the course of assessment proceedings u/s 143 - Whether Unit-II was eligible for claiming deduction u/s 80-IA of the Act, when the profits shown by the Unit-II in respect of sales to consumption of raw material clearly showed that the profit claimed by Unit-II for deduction u/s 80-IA of the Act was erroneous? - HELD THAT:- In a decision reported in Commissioner of Income Tax vs. Punjab Financial Corporation) [ 2001 (12) TMI 50 - PUNJAB AND HARYANA HIGH COURT] section 32AB(5) of the Act is not mandatory and the Assessing Officer has the discretion to entertain the audit report even though the same has not been filed with the return but presented during the course of assessment proceedings and give benefit of the deduction to the assessee in terms of Section 32AB(1) - provision under Section 139 of the Act which provides for filing of revised return and rectification of defect in the return and, therefore, the requirement of filing the duly audited report along with the return was held to be not mandatory. Be it noted, the provision under Section 32AB(5) of the Act is similar to Section 80-IA(7) of the Act. Therefore, we are unable to take any different view in the matter than the one arrived at by the Punjab and Haryana High Court in Punjab Financial Corporation (supra). First point under issue No.(a) is held in affirmative. Where the assessee files the audit report in Form No.10CCB before completion of the assessment, we do not find any reason to hold that the condition envisaged under Section 80-IA of the Act had not been fulfilled. Benefit as admissible in case of reassessment proceedings - Basic purpose of Section 148 of the Act is merely to empower the Assessing Authority with the machinery for assessment. Fundamentally, both the assessment and reassessment need the same machinery. In other words, the provisions relating to regular assessments shall apply to the assessment made pursuant to the notice of reassessment. Once that is so, all the essential traits and requirements of procedure embodied for framing of regular assessment under the Act would also apply to reassessment proceedings as well. Therefore, the audit report furnished at the time of reassessment proceedings could not be ignored by the Assessing Officer while adjudicating the issue of admissibility of deduction under Section 80-IA of the Act. The point No.(ii) noticed above is decided accordingly. At the time of passing of the order, there was material before the Assessing Officer to rely upon the audit report duly filed by the assessee in Form No.10CCB as contemplated under Section 80-IA(7) of the Act. Once the accounts of the assessee for the relevant year were examined and the audit report was submitted at the time of reassessment proceedings, it could not have been discarded by the Assessing Officer on the ground that no separate audited financial statements were attached in the original assessment proceedings. There is nothing to show that the Assessing Officer had doubted the correctness of the said audit report so as to make it necessary for the assessee to have submitted separate audited financial statements of Unit No.II and in absence of which the audit report had been incomplete. Admittedly, since the audit report in Form No.10CCB was ultimately filed before completion of the reassessment, we do not find any reason to hold that condition under Section 80-IA(7) of the Act had not been satisfied. Consequently, question No.(A) is answered in favour of the assessee and against the Revenue. Deduction u/s 80IA - Once the assessee was maintaining separate accounts for both the units and product manufactured was different and raw material used was also different then it was not open to the Assessing Officer to compare the value of sales of Unit-II by combining the accounts of Unit-I and Unit-II. Thus, we do not find any force in the submission of the learned counsel for the appellant that profit shown by Unit-II in respect of sales to consumption of raw material was erroneous and therefore, deduction under Section 80-IA of the Act was not allowable to the Unit-II. Accordingly, the question No.(B) is also answered against the Revenue.
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2020 (4) TMI 823
Nature of expenditure - treatment of non-compete fee - capital or revenue expenditure - assessee has raised that in case expenditure is held to be capital in nature then depreciation is to be allowed on the same - HELD THAT:- Payment of non-compete fee was capital expenditure in the hands of the assessee, on which the assessee is not entitled to claim depreciation u/s 32 of the Act. The Tribunal had relied on the decision of Jurisdictional High Court in the case of Sharp Business System vs CIT [ 2012 (11) TMI 324 - DELHI HIGH COURT] and applied the same. We decide both the main issues and alternate grounds against the assessee. Disallowance of expenses incurred on ice boxes provided to dealers - whether expenditure incurred towards ice boxes and dealer sign board provided to hawkers/dealers carrying on brand names of the assessee was capital in nature? - HELD THAT:- The assessee explained that since the product sold by it were to be sold on particular temperature, the ice boxes were used by the hawkers for selling the items at aforesaid temperature. As in CIT vs Honda Siel Power Products Ltd. [ 2007 (8) TMI 251 - DELHI HIGH COURT] while deciding the issue of advances made for ownership of tools and dies which remained with the manufacturer, had allowed the same as revenue expenditure as it facilitated the trading operations of the assessee. Despite the non-allowance of expenditure in Assessment Year 2002-03, the Assessing Officer himself has allowed the expenditure in Assessment Year 200-3-04,2004-05 and 2005-06. In the totality of the above said facts and circumstances and following the consistency approach, we are of the view that the expenditure incurred on ice boxes, merits to be allowed as deduction in the hands of the assessee. Hence, the claim of the assessee is allowed in entirety. - Decided in favour of assessee.
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2020 (4) TMI 822
Assessment u/s 153A - Addition u/s 68 - incriminating material found in search or not ?- HELD THAT:- Assessee has already filed original return of income accompanied by P L A/c, balance-sheet. In the original return of income, the assessee has disclosed the receipt of ₹ 7 lakhs from Shri Praveen Kumar as per balance-sheet. Copy of the ledger account shows that it is already disclosed in the books of account of the assessee. Therefore, receipt of ₹ 7 lakhs from Shri Praveen Kumar as advance was already disclosed in the original return of income. Further, on the date of search, the return was not pending as same was completed because no proceedings were initiated against the assessee for passing the original assessment. Further the original assessment order were passed in the Group cases in which the Ld. CIT, Central-(2), New Delhi, has invoked jurisdiction under section 264 of the I.T. Act, 1961 and all the matters were restored to the file of A.O. for passing the Order afresh, as per Law. Thus, all the facts with regard to receipt of ₹ 7 lakhs from Shri Praveen Kumar was disclosed to the Revenue Department in the original return of income. therefore, mere recovery of the Agreement to Sell, through which, advance of ₹ 7 lakhs was received by assessee from Shri Praveen Kumar could not be treated as incriminating material found in search. Thus, there is no recovery of any incriminating material during the course of search against the assessee so as to make any of the additions against the assessee. The issue is, therefore, covered by Judgments of Hon ble jurisdictional High Court in the cases of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] . Identical issue have considered and decided in the Group cases of M/s. Alankar Saphire Developers and following the reasons for decision in the same case of the Group, we set aside the Orders of the authorities below and delete all the additions. The additional ground is, therefore, allowed - Decided in favour of assessee.
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2020 (4) TMI 821
Computation of capital gains - A.O. adopted the sale consideration as full value of consideration while computing the capital gains on transfer of land - HELD THAT:- Assessee disclosed the capital gains by adopting the sale consideration at ₹ 19,85,000/-. This sale consideration figure was sought to be substituted by the Ld. A.O with ₹ 37,92,600/- being the consideration figure mentioned in the agreement for sale. A.O also recorded a statement from the purchaser of the land Smt.R.Pushpavalli on 23.11.2011 wherein on oath, she had categorically confirmed that she had paid actual consideration of ₹ 37,92,600/- to the assessee in cash in three installments. This fact when confronted with the assessee, the assessee was not able to counter the same.A.O. adopted the sale consideration figure of ₹ 37,92,600/- as full value of consideration while computing the capital gains on transfer of land. This action was upheld by the learned CIT(A). We do not find any infirmity in the said action of learned CIT(A) upholding the Ld. A.O s order with regard to adoption of sale consideration. Cost of improvement - Claim made said sum was incurred by her towards cost of development and assessee had incurred this expenditure through a mason Shri C.Vasudevan. - A.R. argued that without incurring of development cost on the said land, the sale of land could not have happened - HELD THAT:- Except merely making a bald statement, the Ld. A.R. was not able to furnish any other evidence before us to substantiate the claim. However, as the last opportunity in the process of identifying truth behind the transfer of land by the assessee, we deem it fit and appropriate, in the interest of justice and fair play, to remit this aspect of the issue to the file of Assessing Officer for denovo adjudication i.e only with respect to amount of deduction towards cost of improvement of ₹ 5 lakhs while computing the capital gains. We hold that the assessee should furnish all necessary evidences in support of her claim before the Assessing Officer and the Assessing Officer should also make cross verification with Shri C.Vasudevan or any other person through whom the development work has been carried out to identify the truth involved thereon. Hence this aspect of the issue is remitted back to the file of A.O. for afresh adjudication. Exemption under Section 54F denied - reinvestment in new property has been made by the assessee in the name of her husband instead of in her name - HELD THAT:- As relying on C.I.T Vs. V.Natarajan [ 2006 (2) TMI 136 - MADRAS HIGH COURT ] we hold that even though the new property has been invested in the name of assessee s husband, exemption under Section.54F cannot be denied to the assessee. - Decided in favour of assessee.
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2020 (4) TMI 820
Deemed dividend addition u/s 2(22)(e) - assessee is having substantial interest in M/s. Kasani Hotels and Resorts Pvt Ltd., by holding more than 20% shares or not? - HELD THAT:- Apparently, the business transaction is only between the assessee and his family members with M/s.Amsri group of concerns. In this situation, the explanation presented by the assessee cannot be simply brushed aside. If the assessee has withdrawn the amount from M/s. Kasani group of Companies which was received from Amsri Group of business entities due to the business transaction between the assessee and his family members with Amsri Group of business entities then it cannot be said that M/s. Kasani group of Companies has extended loan to the assessee. There is nothing on record to suggest that there is any business relationship between M/s. Amsri Group of entities and M/s. Kasani Group of Companies other than the business transaction between M/s. Amsri group of companies with the assessee and his family members. Hence it is obvious that M/s. Kasani Group of Companies had been only used as a conduit by M/s. Amsri Group of companies to deliver the money to the assessee and his family. In such situation, the financial transaction between the M/s. Kasani Hotels and Resorts Pvt Ltd., and the assessee cannot be treated as loan transaction. Therefore, the provisions of section 2(22)(e) of the Act shall have no application in the case of the assessee. - Decided in favour of assessee.
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2020 (4) TMI 819
Deduction u/s 80IB (8A) - royalty income on cotton hybrid seeds AND miscellaneous income - whether assessee company has not carried out any research activities during the year under assessments rather merely surviving on insect tolerance technology for BT Cotton created by Mahyco Monsanto Biotech (I) Ltd. (MMB) on payment of trait value and has been receiving royalty from the parties by merely passing on the technology of MMB as has been held by AO/CIT(A) in AY 2010-11? - HELD THAT:- When we refer to clauses 4 5 of the Tripartite Agreement, it is clear that the payment of trait value by SBGIL to MMB is only on behalf of assessee company which is required to be accounted for in the books of account of the assessee company. From this arrangement, it is safely concluded that when SBGIL claimed to have used parent seeds developed by the assessee company then why the payment of trait value has been made by SBGIL to MMB. When we examine aforesaid facts which have come on record from sub-licencee agreement and tripartite agreement in the light of the arguments addressed by the ld. AR for the assessee that assessee is an approved research company by the Department of Scientific and Industrial Research, Ministry of Science Technology since AY 2004-05. Matter is required to be remitted back to the AO who shall examine afresh if the assessee company has carried out any scientific research and development activities during the year under assessment independent of the technology purchased from MMB in the light of Agreement (supra) between assessee company and MMB an tripartite agreement between assessee company, MMB and SBGIL, keeping in view the observations made herein before by providing an opportunity of being heard to the assessee, hence the appeals filed by the assessee as well as Revenue are allowed for statistical purposes.
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2020 (4) TMI 818
Unexplained money u/s 69A - assessee had not maintained books of account that is why he opted for 8 per cent income as per section 44AD - CIT-A rejected the transactions declared u/s 44AD as turnover - HELD THAT:- If 8 per cent of gross receipts are 'deemed' income of the assessee, the remaining 92 per cent are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92 per cent of gross receipts, only for the purposes of taxation, it is considered to be so. Expenditure may be less than 92 per cent or it may also be more than 92 per cent of gross receipts. On the reading of the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income at the rate of 8 per cent or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get then audited is only on the assessee who opts to claim the income being less than 8 per cent of the gross receipts. Argument of the revenue that the turnover of the assessee has been doubted by the Assessing Officer is totally ill-found, in view of the overwhelming evidences proving contra. Further, it is a fact on record that the assessee had not maintained books of account that is why he opted for 8 per cent income as per section 44AD of the Act. The section also does not put obligation on the assessee to maintain books of account, more so, in view of the fact that his income has been assessed as per section 44AD of the Act, he cannot be punished for not maintaining the same. The argument of the revenue that the assessee was in fact, not in the eligible business untenable. Confirmations of the parties, having proved their sources and creditworthiness, the entries in the bank statement, the payments made for purchase of material and keeping in view, the place of execution of the work, we hold that the addition made by the Assessing Officer is liable to be deleted. - Decided in favour of assessee.
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2020 (4) TMI 817
Long-term capital gain on sale of the property - Addition invoking of the provisions of section 50C - mandation of referring the property for valuation to the DVO - value adopted by the stamp valuation authority as deemed sale consideration received/accrued as a result of the transfer - HELD THAT:- We find that in the instant case, the Assessing Officer in the assessment order has specifically mentioned that such a request for making reference to the DVO was not maintainable. As relying on M/S. ADITYA NARAIN VERMA [HUF] [ 2017 (6) TMI 542 - ITAT DELHI] AO is barred from invoking provision of section 50C of the Act for computation of the long-term capital gain on the sale transactions carried out by the assessee. AO is required to compute the long-term capital gain on the sale consideration declared by the assessee in the sale deed in respect of the portion of the property sold by the assessee. Accordingly, we restore the issue of computation of the long-term capital gain on sale of the properties to the Learned Assessing Officer with the direction to compute the long-term capital gain keeping in view of our finding above. Deduction u/s 54 - admitting any claim of the assessee, otherwise then made in the return of income - HELD THAT:- As decided in in the case of CIT vs. R. L. Sood [ 1999 (9) TMI 27 - DELHI HIGH COURT] wherein it is held that when the assessee has made substantial payments of the property purchase, then the assessee become owner of the property and merely because registered sale deed is exhibited at a later stage, the assessee cannot be denied the benefit of section 54 We are of the opinion that claim of the assessee for deduction under section 54 is admissible if the assessee is found to satisfy all the conditions laid down under section 54 of the Act. Accordingly, we restore the issue in dispute to the file of the AO for considering the claim of the assessee for deduction under section 54 in accordance with the law. Appeal of the assessee is allowed for statistical purposes.
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2020 (4) TMI 816
Higher rate of depreciation on the UPS, printers and scanners @ 60% as relying on own case [ 2017 (8) TMI 167 - ITAT CHENNAI] TDS u/s 195 - addition u/s 40(a)(ia) - Payment to non residents for agency commission, professional consultancy charges, warehousing charges, emballage cost, tool development charges etc - HELD THAT:- As decided in own case [ 2017 (8) TMI 167 - ITAT CHENNAI] The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilized by the assessee in the business or profession carried on by the said non-residents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee is liable to deduct tax only where the payment made to non-residents is chargeable to tax under the provisions of the Act. In the circumstances mentioned above, assessee was justified in having a bonafide belief that the payments did not warrant application of Section 195 of the Act. In such circumstances, we are of the opinion that it could not have been saddled with the consequences mentioned under Section 40(a)(i) of the Act. Disallowances were rightly deleted by the ld. CIT(Appeals). Disallowance u/s 43B - delay in payment - Employees contribution to the ESI after 5 days from the due date specified - HELD THAT:- M/S. INDUSTRIAL SECURITY INTELLIGENCE INDIA PVT. LTD [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003. Disallowance u/s 14A - As per assessee assessee had huge interest free funds in the form of capital, reserves, surplus etc and hence no interest disallowance could be made and for the purposes of quantifying the average value of investments , only those investments which yielded exempt income alone should be considered etc - HELD THAT:- We find that the assessee s plea that it had huge interest free funds in the form of capital, reserves, surplus etc and hence no interest disallowances could be made in its case remain unexamined and hence we deem it fit to remit this issue back to the AO for a fresh examination. The assessee shall lay relevant material in support of its contentions and comply with the requirements of the A O in accordance with law. AO shall after affording effective opportunity to the assessee shall decide this issue in accordance with law. The assessee s plea that for the purposes of quantifying the average value of investments, only those investments which yielded exempt income alone should be considered is in accordance with the decision of the special bench of the ITAT decision in the case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] and hence we direct the AO to recompute the disallowance in accordance with that decision.
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2020 (4) TMI 815
Rectification u/s 254 - non adjudication of grounds of appeal and additional grounds of appeal filed before the Tribunal - HELD THAT:- On perusal of the impugned order, it is clear that above grounds of appeal and additional grounds of appeal filed before the Tribunal were not adjudicated by this Tribunal. It is settled proposition of law that non adjudication of grounds of appeal and additional grounds of appeal filed before the Tribunal constitute mistake apparent from the records capable of being rectified in exercise of the powers vested with Tribunal u/s.254 (2) of the Income Tax Act, 1961. Thus, we recall the appeals for limited purpose for adjudicating the mentioned grounds of appeal and additional grounds.
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2020 (4) TMI 814
Rectification u/s 254 - apparent mistake in the impugned Tribunal order - Deduction u/s 54F - if the assessee is owning more than one residential house other than the new asset on the date of the transfer of the original asset, it has to be seen as to whether income from such residential houses is chargeable under the head Income from house property and since this aspect was not examined and decided, there is an apparent mistake in the impugned Tribunal order which should be rectified or this Tribunal order should be recalled - HELD THAT:- Assessee purchased two house properties on 25.04.2014 and 28.04.2014. One of these two properties is new asset for which deduction is claimed u/s 54F. Proviso will be applicable if the condition prescribed in Proviso (b) that income is taxable under the head Income from House Property for the second house is satisfied. In para No.11 of the impugned Tribunal order as reproduced above, there is no discussion or finding on this aspect as to whether income from property purchased on these two dates is chargeable to tax under the head income from house property or not. There may be various reasons due to which income from house property may not be chargeable to tax under the head income from house property and since this aspect was not examined and decided by the Tribunal in the impugned Tribunal order, we find force in the submission of the learned AR of the assessee that there is apparent mistake in the impugned Tribunal order to this extent. We feel it proper to recall this ex-parte Tribunal order for a fresh decision on this limited aspect as to whether the income from these two house properties purchased by the assessee on 25.04.2014 and 28.04.2014 are chargeable to tax under the head income from house property or not and thereafter decide about the applicability of the proviso to section 54F(1) - Miscellaneous petition filed by the assessee stands allowed.
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2020 (4) TMI 813
Deduction u/s 80HHC - amount received from sale of scrap in the total turnover - HELD THAT:- While deciding identical issue in assessee s own case for Assessment Years 1998-99 to 2000-01, the Tribunal has held that the income received from sale of scrap has to be included in the total turnover for computing the deduction under section 80HHC of the Act, however, subsequently the Hon'ble Supreme Court in case of CIT vs. Punjab Stainless Steel Industry [ 2014 (5) TMI 238 - SUPREME COURT] has held that the income from sale of scrap cannot be included in total turnover. Keeping in view the ratio laid down by the Hon ble Supreme Court in the aforesaid decision, the Tribunal while deciding identical issue in assessee s own case for Assessment Year 2001-02 has restored the issue to the Assessing Officer for considering afresh keeping in view the ratio laid down by the Hon ble Supreme Court in the decision referred to above. Facts being identical, respectfully following the decision of the Tribunal in assessment year 2001-02, as referred to above, we restore the issue to the Assessing Officer for fresh adjudication with similar direction. Disallowance under section 14A - HELD THAT:- Investments on which the assessee has received dividend income were made long time back and not in the current year. Further, in the year under consideration, the assessee had sufficient interest free funds available with it. Therefore, no disallowance of interest expenditure can be made. It is further noticed, while deciding identical issue in assessee s own case in Assessment Year 2001-02 (supra), the Tribunal after examining the availability of fund and all other aspects has deleted disallowance of interest expenditure and further, has restricted the disallowance of administrative expenditure to 1% of the exempt income earned. Keeping in view the facts of the present case as well as the decision of the Tribunal in Assessment Year 2001-02, we hold that learned Commissioner (Appeals) was justified in restricting the disallowance to ₹ 2 lacs. Disallowance of depreciation on share issue expenses incurred and capitalized in earlier assessment years - HELD THAT:- Tribunal has allowed assessee s claim of depreciation. It is also relevantly observe, while deciding the appeals filed by the Revenue against the decision of the Tribunal in Assessment Years 1984-85 to 2000-01, the Hon ble jurisdictional High Court has also upheld the decision of the Tribunal allowing assessee s claim of depreciation. In view of the aforesaid factual and legal position, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. The ground raised is dismissed. Disallowance of bad debt - HELD THAT:- Only because the bad debts were not actually written off during the current year but were written off after March 2002, the Assessing Officer disallowed the same. Notably, while deciding identical issue in assessee s own case in Assessment Years 2000-01 and 2001-02 the Tribunal following the decision of the Hon ble Calcutta High Court in the case of Turner Morrison And Co. Ltd. vs. CIT [ 2000 (3) TMI 34 - CALCUTTA HIGH COURT] has allowed assessee s claim of bad debt. Depreciation after reducing estimated Written Down Value (WDV) of block of assets transferred - HELD THAT:- On a perusal of the latest order of the Tribunal for Assessment Year 2001-02 it is noticed that the Tribunal after following its earlier decision has directed the Assessing Officer to allow deprecation after reducing the WDV of FPU assets from the block of assets. Facts being identical, respectfully following the decisions of the Tribunal in the preceding assessment years, we uphold the order of learned Commissioner (Appeals) on this issue. Ground raised dismissed. Disallowance made on account of closing stock of diesel, oil and coal - following the decision of Tribunal in Assessment Year 1995-96 has allowed assessee s claim with regard to consumable items. It is further relevant to observe, the Hon'ble Jurisdictional High Court has also upheld the decision of the Tribunal in the preceding assessment years while deciding Revenue s appeal. Deduction u/s 80IB - HELD THAT:- In assessee s own case for Assessment Year 2001-02, the Tribunal has held that till the date of approval of amalgamation in October, 2001, the NIP at Bangalore was functioning independently without intervention of the assessee. Therefore, head office expenses of the assessee cannot be allocated to the Bangalore unit. The Tribunal has also observed that appropriate head office expenses of SBPI had already been allocated to the Bangalore Unit. Accordingly, the Tribunal upheld the order of learned Commissioner (Appeals) on this issue. Facts being identical, the aforesaid decision of co-ordinate bench squarely applies to the case. Therefore, we do not find any infirmity in the order of learned Commissioner (Appeals). Ground raised is dismissed. Interest liability on account of Drug Price Equalization Account (DPEA) has to be allowed on year to year basis - HELD THAT:- Issue relating to DPEA has already attained finality as the Hon'ble Supreme Court vide order dated 30.03.2011 has confirmed the DPEA demand raised by the Central Government while dismissing the petitions filed by the assessee. Thus, in effect, the DPEA demand has also crystallised. That being the case, the decision of learned Commissioner (Appeals) on the issue deserves to be upheld. Ground raised is dismissed. Claim of deduction under section 80HHC of the Act has to be allowed only on actual amount of advance licence benefit utilized and offered to tax. Accordingly, we restore the issue to the Assessing Officer for deciding afresh after due opportunity of being heard to the assessee. TP Adjustment - mark-up of 15% has been challenged - HELD THAT:- from the material available on record it is noticed that the employees of the Procurement Department were exclusively engaged in managing procurement activities of the assessee till 31st December, 2001. Provision of global procurement services to AEs started only with effect from 1st January, 2002. The aforesaid factual position has not been controverted by the Revenue through any supporting evidence brought on record. Further, the observation of learned Commissioner (Appeals) that the average time spent for global Sourcing support services by the eight employees was about 60% appears to be on the basis of evidences furnished by the assessee and has not been controverted through any cogent evidence brought on record by the department. It is also a fact on record that the mark-up of 15% applied by the Transfer Pricing Officer is purely on estimate and has no basis at all. On the contrary, the finding of learned Commissioner (Appeals) that the assessee has already earned mark-up of about 66% is on sound basis. In view of the aforesaid, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on this issue. Ground raised is dismissed.
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2020 (4) TMI 812
Nature of expenses - Disallowance of Software Expenses - revenue or capital ependiture - AO proceeded to capitalise the said expenditure and granted depreciation @60% - HELD THAT:- As decided in own case [ 2019 (5) TMI 689 - ITAT MUMBAI] expenditure incurred by the assessee on purchase of software application and payment made for acquiring license to use those applications was to be allowed as a revenue expenditure. In the backdrop of the aforesaid settled position of law, we are of the considered view that as the aforesaid software purchased by the assessee did not form part of its profit making apparatus and only facilitated carrying its business more efficiently, therefore, the same was rightly claimed by it as a revenue expenditure. - Decided in favour of assessee. Addition made u/s.145A in respect of unutilised MODVAT credit - HELD THAT:- As decided in own case [ 2019 (5) TMI 689 - ITAT MUMBAI] We have perused Clause 12(b) of the Tax Audit report of the assessee and find that it is the claim of the assessee that the impact of grossing up of tax, duty, cess etc. by restating the values of purchases and inventories by inter alia including the effect of CENVAT credit will be Nil, subject to Sec. 43B that the duty, taxes, cess etc. is paid before the due date of filing of the return of income. As the ld. D.R had submitted that the aforesaid working of the assessee would require to be verified, we therefore, in all fairness restore the matter to the file of the A.O for readjudication. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate its claim before him. Disallowance of expenditure on Interest and Prepayment Charges by treating it as capital expenditure - HELD THAT:- In the instant case, the expenditure on interest and prepayment charge had been incurred by the assessee to expand the existing business of the assessee company. It was submitted by the ld AR that it was with the intent of acquiring the business of M/s RPIL that, subsidiary of the assessee company had purchased shares of M/s RPIL and, since the loan had been raised for purchase of the shares of subsidiary company so as to enable the assessee company to acquire the business of M/s RPIL, hence the expenditure incurred in respect of loan raised in the instant year is a revenue expenditure u/s 36(l)(iii)of the Act. We find lot of force in the said argument of the ld AR and we accept the same. Proviso to section 36(1)(iii) in any case would not be applicable for the year under consideration as the same was introduced in the statute only with effect from Asst Year 2004-05 and not applicable for earlier years. Payment of prepayment charges also partakes the character of interest . We find that there cannot be any iota of doubt that the entire transaction of acquisition of business assets by the assessee has been done on the grounds of commercial expediency and hence the entire interest payment of ₹ 27.11 crores and prepayment charges of ₹ 8.62 crores would be squarely allowable as deduction u/s 36(1)(iii) of the Act itself. Accordingly, the Ground raised by the assessee is allowed. Addition u/s 35DD OR 37(1) - 1/5th of expenditure incurred in respect of payment made to M/s. Accenture - HELD THAT:- Services to be rendered by Accenture, it could be seem that Accenture had purely rendered professional services by way of pre-proposal study to understand the viability of the merger by integrated operations of RPIL with NPIL and the resultant profitability that the resultant merged entity would derive in short to medium term. Hence, it is a clear case of simple professional services rendered by Accenture to the assessee which at any cost cannot be considered as a capital in nature. We find that the said expenditure has to be considered as wholly and exclusively as deduction u/s.37(1) of the Act. We hold that the provisions of Section 35DD as alleged by the ld. CIT(A) cannot be made applicable in the instant case as admittedly the same only refers to expenses incurred pursuant to amalgamation. Hence, we direct the ld. AO to grant deduction of the said expenditure u/s.37(1) of the Act Write off of Stocks / receivables - HELD THAT:- Assessee being in pharmaceutical industry, has no other option but to write off the same in its books and claim the same as deduction which is a normal business loss occurring to the assessee. We find that the assessee had submitted before the lower authorities that out of total stock of ₹ 133.48 lacs, entire stock had expired other than stock to the tune of ₹ 1,41,698/-. We find that with regard to the observation made by the ld AO for non-furnishing of stock register by the assessee , we find that the assessee had duly adduced the reason that entire records stood destroyed in fire on 22.12.2004, evidences in support of the same are enclosed in pages 328 to 336 of paper book I. In view of these facts and circumstances, we hold that the assessee would be entitled for deduction in respect of write off of dead stocks of ₹ 133.48 lacs during the year under consideration. Write off of receivables on discontinuation of joint venture - Joint venture company had discontinued the business and thereby the stocks lying with it became dead. The joint venture did not pay any sum due to the assessee company and hence the debtors balance had to be written off by the assessee during the year under consideration and claim deduction towards bad debts u/s 36(1)(vii) - assessee had duly complied with the provisions of section 36(2) of the Act. It is not in dispute that the said trade debts had been duly written off as irrecoverable in the books of accounts of the assessee company. Hence it is eligible for deduction u/s 36(1)(vii) of the Act. Write off of receivables on discontinuation of distributorship arrangement - Settlement was reached between the two parties as is evident from the settlement letter dated 23.5.2002, as a result of which, a sum of ₹ 195.22 lacs was written off by the assessee. The assessee had also furnished the invoice wise statement of the amounts written off. These details are available in pages 251 to 257 of paper book I. Since Voltas Ltd did not pay the sum due to the assessee company , it became irrecoverable pursuant to settlement letter dated 23.5.2002 as stated supra, the assessee had no other option but to write off the same which was duly done in its books. Accordingly, the assessee would be entitled for deduction u/s 36(1)(vii) of the Act in respect of the same. Compensation paid to Cost and Freight Agents (CFAs) - Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit- earning process and not for acquisition of an asset or a Tight of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure - we hold that the assessee would be entitled for deduction in respect of compensation paid to CFAs. Loss on closure of Hospital Products division - When the stocks come back to the assessee, the same are included in the closing inventory and hence there cannot be any grievance for the revenue. Hence there is no artificial loss as claimed by the revenue in the instant case. Hence we direct the ld AO to grant deduction towards loss on closure of USS Subdivision. Loss on closure of STYR Subdivision - Assessee had submitted that the same was on account of demonstration stocks which are used to demonstrate the features, efficiency, usefulness etc of the products to the customers including potential customers. These stocks obviously would lose their value over a period of time. It was submitted that on account of improper use and wear and tear of stocks, the stocks had to be disposed off at a reduced price. We further find that this explanation has been found to be acceptable by the ld AO in the remand proceedings. Then there is absolutely no basis for the ld CITA to deny the claim of deduction. Loss on closure of G2 Subdivision - We find that the assessee had submitted that the stock of ₹ 5,23,626/- was sold for ₹ 94,361/- resulting in a loss of ₹ 4.28 lacs. Since these stocks had already undergone huge wear and tear and on account of improper use , the same would not fetch the real market price and had to be sold at a much discounted price. This commercial decision of the assessee cannot be questioned by the revenue. Accordingly we direct the ld AO to grant deduction of ₹ 4.28 lacs towards loss on closure of G2 Subdivision which is a genuinely incurred business loss by the assessee company. Treating Sale of Scrap, Cash discount and insurance claim in the nature of receipt covered by the clause (baa) of Explanation to Section 80HHC - HELD THAT:- We find that cash discounts are only in respect of purchases made by the assessee company and therefore not in the nature of receipts specified in clause (baa) of Explanation to Section 80HHC of the Act. Infact pursuant to this cash discount, the value of purchases had been reduced having direct nexus with the profits of the business. We find that it has been held in the following decisions that the aforesaid receipts would be profits of the business for the purpose of computation of deduction u/s 80HHC i PFIZER LTD. [ 2010 (6) TMI 433 - BOMBAY HIGH COURT], M/S. RN. GUPTA [ 2013 (1) TMI 626 - PUNJAB AND HARYANA HIGH COURT] and GKN SINTER METAL PVT LTD [ 2014 (1) TMI 588 - ITAT PUNE]. Computation of capital gains on arising out of transfer of property styled as Rhoni Poulenc House - whether assessee s case falls under 55(2)(b)? - HELD THAT:- Assessee company herein as well as M/s. RPIL were in possession of the said lease hold rights in perpetuity. We hold that the perpetual lease cannot be compared at par with normal lease. Hence, we cannot say that assessee has only acquired the tenancy rights from RPIL pursuant to merger so as to fall within the ambit of Section 55(2)(a)(i) of the Act. There is no dispute that assessee would be entitled to enjoy the entire sale consideration of ₹ 33.13 Crores received during the year under consideration at its own whims and fancy and there is no diversion of such income by over riding title warranting the need to pass on some portion of such sale consideration to any other party including the main lessor who had given perpetual lease to the assessee i.e. Municipal Corporation of City of Bombay - assessee need not to transfer any part of its sale consideration to Municipal Corporation of City of Bombay. This itself goes to prove that assessee had not acquired any tenancy rights pursuant to perpetual lease granted by Municipal Corporation of City of Bombay on 04/04/1938. Lease creates right or interest in the demised property. The lease is a transfer of interest in land. The interest transferred is called lease hold interest . The lessor parts with his right to enjoy the property and lessee gets that rights to the execution of the lessee. Hence, the said acquisition of interest cannot be construed to be in the nature of tenancy rights. In the instant case pursuant to the perpetual lease deed conferring lease hold rights for 999 years, the said lease deed did provide to the assessee not a mere right to use in a particular way but also ownership of control of the property. In the instant case, we hold that assessee s case falls under 55(2)(b) of the Act, wherein assessee is entitled to substitute the actual cost of acquisition with fair market value as on 01/04/1981. Hence we direct the ld AO to recompute the long-term capital gains on sale of land and short term capital gains and sale of building in the light of above mentioned directions and findings. Accordingly, the ground raised by the assessee and ground of the revenue are disposed off in the aforesaid manner. Claim of depreciation on assets - HELD THAT:- When the matter as to whether the sale of the two divisions by the assessee is to be treated as an itemized sale or a slump sale is pending in the case of the assessee for the preceding years, therefore, we find no infirmity in the order of the DRP who had rightly directed the A.O to allow depreciation to the assessee on the basis of the outcome of the main appeal. TDS u/s 195 - addition u/s.40(a)(i) in respect of payment in foreign exchange for professional services rendered - HELD THAT:- Retrospective amendment in the Act cannot fasten any TDS liability on the payer as the TDS application would lie on the payer only based on the law prevailing at the time of payment or incurrence of the expenditure. Obviously the payer i.e. assessee herein could not have pre-empted the retrospective amendment in the statute while making the payment. It is well settled that the retrospective amendment could fasten income tax liability but not TDS liability on the payer herein. Hence, no disallowance could be made in the hands of the payer u/s.40(a)(i) of the Act based on retrospective amendment in the statute. Accordingly, the ground No.2 raised by the revenue is dismissed. Allowable deduction u/s.37 - legal and professional fees - HELD THAT:- Legal and professional fees were paid to parties for rendering professional services for improving the overall functioning of the company and consequentially to improve the revenue of the assessee company. Hence, we hold that the said expenditure is squarely allowable as revenue expenditure in terms of Section 37 of the Act. We do not find any infirmity in the action of the ld. CIT(A) granting relief to the assessee in this regard. Computing deduction u/s.80HHC - action of ld. CIT(A) in holding that 90% of the processing charges - HELD THAT:- We find that other income of the assessee included processing charges and the assessee had not reduced 90% of the said processing charges to work out the profits of the business while computing deduction u/s 80HHC of the Act. The ld. AO accordingly re-worked deduction u/s.80HHC of the Act on the premise that the said receipt is in the nature of receipt covered by the Explanation (baa) to Section 80HHC of the Act. We find that this issue is covered by the decision of Hon ble Supreme Court in the case of Southern Sea Foods Ltd., vs. JCIT [ 2009 (3) TMI 988 - SUPREME COURT] - we hold that processing charges has got direct nexus with the export activity of the assessee and the said receipt would not be in the nature of receipt covered by Explanation (baa) of Section 80HHC.
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2020 (4) TMI 811
Penalty u/s 271D - receipt of deposit of loan or repayment of the same otherwise than banking channel - genuineness of the transaction made through journal entries is in doubt - reasonable cause under section 273B - CIT-A deleted the addition - HELD THAT:- As decided in M/S BRIGHTGOLD CONSTRUCTION PVT. LTD.[ 2019 (7) TMI 1609 - ITAT MUMBAI] where loan / deposit has been repaid by day to day accounts of the parties through journal entries, it must be held that the assessee has committed default for the contravention of provisions of section 269SS or 269T as the case may be. But the Hon ble Bombay High Court in Lodha developers Pvt. Ltd [ 2018 (2) TMI 603 - BOMBAY HIGH COURT] and Triumph International Finance (I) Ltd [ 2012 (6) TMI 358 - BOMBAY HIGH COURT] has clarified the position with effect from 12.06.2012 date when the judgement was pronounced and prior the date of decision of Hon ble Bombay High Court in the case of Triumph International Finance (I) Ltd (supra) there was a reasonable cause for the assessee to receive deposit of loan or repayment of the same through journal entries. Accordingly, the assessee s case is squarely falls under a reasonable cause under section 273B of the Act and therefore, in our view, penalty levied by the addl. CIT under section 271D of the Act has rightly been deleted - Decided in favour of assessee.
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2020 (4) TMI 810
Reopening the Assessment u/s 147 - period of limitation - limitation under sub-Section 2 to Section 150 - whether the reopening of the assessment for the three Assessment Years would get time-barred in view of the order of the Income Tax Appellate Tribunal - Computation of deduction u/s 10B - HELD THAT:- Limitation under sub-Section 2 to Section 150 will apply only when the limitation had already expired by the time before the assessment order for the Assessment Year 2006-07 was made. If not, there is a saving of limitation u/s 150(1) - It is for this reason, the Income Tax Appellate Tribunal [ 2015 (8) TMI 1500 - ITAT CHENNAI] held that such recomputation will be subject to limitation. No merits in the present Writ Petitions. The petitioner is directed to participate in the proceedings before the respondent. Since the dispute pertains to the AY 2003-04 to 2005-06, the petitioner is directed to file objections/ representations, if any, within a period of thirty days from the date of receipt of a copy of this order.
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Customs
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2020 (4) TMI 805
Refund of SAD - N/N. 102/2007-Cus. - Refund denied on the ground of non-stamping of the invoices - denial on the ground that the invoices showing sale of the goods do not bear no credit of additional duty of Customs leviable under sub-section 5 of Section 3 of Customs Act shall be admissible - HELD THAT:- Non-declaration in the invoices as per para 2(b) of the notification indicating that no credit of additional duty is admissible to the customer is only a procedure required to be adopted. The purpose of the said declaration is that the buyer does not have undue Cenvat credit in case SAD has not been shown separately in the invoices. Refund also denied on the ground that CA certificate is not supported by any documentary evidence to show that the duty incidence has not been passed on to the customers - HELD THAT:- The impugned order stands passed beyond the scope of the show cause notice. Once there is no proposal in the notice to deny refund claim on a particular ground which also does not stand considered by the original adjudicating authority, the consideration of the same by Commissioner (Appeals) amounts to travelling beyond the show cause notice. Inasmuch as the appellant has produced the Chartered Accountant s certificate, the same has to be allowed on this ground alone. Refund allowed - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 804
Valuation of import goods - automobile parts - requirement of affixing of retail selling price - goods, subject to assessment under section 4A of Central Excise Act, 1944 when manufactured in India, are mandatorily to be subject to additional duties of customs under the corresponding proviso in Customs Tariff Act, 1975 even when not sold as such after import - notification no. 44(RE-2000)/97-2002 dated 24th November 2000 - Third Member, has held, by majority, that there was no provision for assessment by recourse to retail selling price except upon voluntary adoption at the time of import - HELD THAT:- Admittedly, appellant is barred from disposal of the impugned goods without affixing the various particulars prescribed under Legal Metrology Act, 2011 and, therefore, in conjunction with inclusion in Third Schedule of Central Excise Act, 1944, the goods cannot be denied assessment to additional duty of customs by reference to declared, or assessed, transaction value. The expression that is variably deployed in connection with such assessment is intended for retail sale and, thereby, implies the existence of such labelled price from the time of import or clearance from factory, as the case may be, till arrival at the point of retail sale as demonstrative of intention. Such goods when routed through channels for industrial/institutional consumers are explicitly excluded from the statutory requirement under Legal Metrology Act, 2011. It would, therefore, appear that demonstrated intention of the importer/manufacturer by affixing of retail selling price is the sole decider for adopting the alternative mechanism for assessment of additional duties of customs or duties of central excise, as the case may be. From the decision of the Tribunal in STARLITE COMPONENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASHIK [ 2013 (4) TMI 624 - CESTAT, MUMBAI] , it is deduced that, even if such goods are covered by notification for assessment to duties of central excise on retail selling price to the extent that these are further subject to duties of central excise in circumstances of inclusion in the Third Schedule to Central Excise Tariff Act, 1985, the prescription of affixing of retail selling price and assessment thereof does not arise. Therefore, the consequence is assessment on the basis of transaction value. The assessment insisted upon in the impugned order is not in accordance with law - Appeal allowed - decided in favor of appellant.
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2020 (4) TMI 803
Confiscation - Imposition of redemption fine and penalty - claim of drawback for export of ready-made garments - Valuation of export goods - declaration of value for the purposes of exports - case of appellant is that the amount realized is the correct transaction value and that settled law holds that the market inquiry in India is not a valid substitute for a market inquiry in the country of destination - HELD THAT:- Even though the factum of goods being other than declared is not in dispute nothing has been brought to evidence that this was deliberate act. It is limited to a small portion of the consignment. Also, the consequence of misdeclaration is only ₹ 1,01,000/- and the difference drawback claimed and eligible drawback is mere 2%. The confiscation of goods and imposition of penalty does not appear to be appropriate - redemption fine and penalty set aside - appeal allowed.
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2020 (4) TMI 800
Principles of natural justice - opportunity for cross-examination of Panch witnesses and DRI officers - HELD THAT:- The appellant s request for cross-examination of Panch witnesses as also the officers is prima facie genuine request so as to complete the adjudication proceedings judiciously. In as much as the Panch witnesses have already been allowed cross-examination, though according to the learned advocate they have not appeared during any of the hearings so fixed for the said purpose, we deem it fit to direct the Adjudicating Authority to ensure the appearance of Panch witnesses during the next date of hearing to be fixed by him. Appeal allowed by way of remand.
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Corporate Laws
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2020 (4) TMI 808
Striking off the name of the petitioner company from the Registrar of Companies - main grievance of the petitioner is that there should have been an obligation on the respondents to pass an order under Sections 248 (5) and 248 (6) of the Companies Act, 2013 - HELD THAT:- As per Section 248 (6) of the Companies Act, 2013, before passing an order under Section 248(5) of the Companies Act, 2013 (to strike off) the Registrar shall satisfy himself that sufficient provision has been made for the release of all amounts due to the company for payment or discharge of its liability and obligations by the company and also shall obtain necessary undertakings from the Managing Directors/Directors or the person in-charge of the companies with respect to such discharge of liabilities. In the instant case, the records do not show that the petitioner had actually filed any application seeking to classify it as a dormant company or inactive company. Hence, the provision under Section 455 of the Companies Act, 2013 will not be applicable. Even otherwise, Section 245 (1) (c) of the Companies Act, an exemption from a company not to be struck off can be granted only, when the company voluntarily applied to the Registrar, seeking to declare it as a Dormant company. If it makes an application under Section 248 (c), then the Registrar will have to follow the procedure under Section 455 of the Companies Act, 2013 - In the present case, the petitioner had not taken recourse to the provisions of Section 248 (c) of the Companies Act, 2013. Petition dismissed.
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Service Tax
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2020 (4) TMI 809
Maintainability of appeal - appropriate forum - issue relates to taxability or excisability of goods - primary objection taken by the Revenue is that this case would not be covered under Section 35G of the Central Excise Act, 1944 but under Section 35L of the Act - HELD THAT:- From Section 35L(1) (b) of the Act it is evident that the appeal shall lie to the Supreme Court on the question in relation to rate of duty of excise or value of goods. Sub-Section(2) of Section 35L of the Act clarifies that the rate of duty shall include the determination of taxability or excisability of goods - In the present case, the issue involved is as to whether the activity of the appellant falls within the definition of Section 65 (19) of the Finance Act, 1994 and thereby whether the cost of activity would form part and parcel of the charge levied by the Revenue. The case would be covered by Section 35L of the Act because taxability depends on whether the activity carried out by the Assessee is a business auxiliary service or not - appeal dismissed as not maintainable.
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2020 (4) TMI 806
Refund of Service tax - amount was paid under protest - time limitation - unjust enrichment - HELD THAT:- The facts are not in dispute that this Tribunal held that appellants are not liable to pay service tax vide order issued on 16.11.2016 and the refund claims were filed by the appellants on 02.11.2012, therefore, the impugned refund claims were filed within one year of the date of issuance of the order by this Tribunal - the relevant date for filing the refund claim is 16.11.2016 and from the date within one year, they were required to file refund claim in terms of Section 11B of the Central Excise Act, 1944 which the appellants have done - thus, refund claim cannot be rejected as barred by limitation. Principles of unjust enrichment - HELD THAT:- The service tax has been paid by the appellant under protest. Moreover, at the time of issuance of invoice, they have not charged any service tax from the service recipient for reimbursement of any amount towards service tax to the appellant - the appellant have passed the bar of unjust enrichment which is not applicable to the facts of the present case. The appellant are entitled to the refund of the amount for which they have filed refund claims - Appeal allowed - decided in favor of appellant.
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2020 (4) TMI 799
Nature of activity - sale or service - use of the paper upon which an image is printed using certain consumables and chemical in the photography service - valuation of photography service to be determined in isolation of cost of such goods or not - meaning of sale appearing in exemption Notification No.12/03-ST dated 20.06.200 - deemed sale - whether the appellant-assessee was entitled to the benefit of Notification No.12/2003-ST dated 20.06.2003? Whether for the purposes of service tax the value of photography service can be determined separately from the value of certain consumables and chemicals which are used on the paper for printing the image and whether such printed photograph can be said to be a sale of goods in terms of Article 366(29A)(b) of the Constitution? - HELD THAT:- The view expressed by the Apex Court in Bharat Sanchar Nigam Limited s case [ 2006 (3) TMI 1 - SUPREME COURT ] that after the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying, was reiterated by the Apex Court in M/s Pro. Lab s case - the finding of the Tribunal that in Bharat Sanchar Nigam Limited s case, the Apex Court has only given the passing remarks and did not overrule either C.K. Jidheesh [ 2005 (10) TMI 3 - SUPREME COURT ] or Rainbow Colour Lab and Another vs. State of Madhya Pradesh and others, [ 2000 (2) TMI 2 - SUPREME COURT ], is unsustainable. Whether appellants having once paid the VAT under the State Act as works contractor on the material and chemicals consumed in photography service, can be charged service tax on the same value? - HELD THAT:- In view of the law laid down by the Apex Court in M/s Pro. Lab s case, it can be safely held that photography service, which has both the elements of goods and services is covered under works contract. Thus, in a works contract which involves transfer of property, the provisions as contained in Article 366(29A) of the Constitution are attracted. Therefore, in the light of sub-clause (b) of Clause (29A) of Article 366 of the Constitution, in execution of a works contract when there is transfer of property even in some other form than in goods, the tax on such sale or purchase of goods is leviable. In this view of the matter, after the 46th Amendment, there is no question of dominant nature test applying in photography service and the works contract, which is covered by Clause (29A) of Article 366 of the Constitution where the element of goods can be separated, such contracts can be subjected to sales tax by the States under Entry 54 of List II of Schedule II - Once that is so, value of photographic paper and consumables cannot be included in the value of photography service for the purposes of imposition of service tax. The term sale appearing in exemption Notification No.12/03-ST dated 20.06.2003 would also include deemed sale as defined by Article 366(29A)(b) of the Constitution. Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (4) TMI 807
Validity of changes brought in Rule 6(3) (i) of Cenvat Credit Rules, 2004 - main contention of the counsel for the appellant is that the adjudicating authority as well as the Tribunal failed to appreciate the significant change brought in Rule 6(3) (i) of Cenvat Credit Rules, 2004 w.e.f. 1.3.2008 vide Notification No.10/2008 C.E.(N.T.) dated 1.3.2008 - HELD THAT:- The adjudicating authority and the Tribunal erred in not appreciating the significant change brought in Rule 6(3) of Cenvat Credit Rules, 2004, w.e.f. 1.3.2008 vide Notification No.10/2008 C.E.(N.T.) dated 1.3.2008 which as noticed in the OIO with reference to sale of goods, was deleted and in its place the emphasis was shifted to the payment of an amount equal to 10% of the 'value' of exempted goods - In the absence of any findings to this effect that the provisions prescribed in the relevant Rule with reference to changes brought in Rule 6(3) of Cenvat Credit Rules, 2004 w.e.f. 1.3.2008 have been complied with or not, the dropping of the demand is against the spirit of law. Thus, dropping of the demand is correct only upto February,2008 in terms of Rule 6(3)(b) and demand raised for period March, 2008 onward is required to be examined in terms of changes brought in Rule 6(3)(b) of Cenvat Credit Rules, 2004 w.e.f. 01.03.2008 vide Notification No.10/2008 C.E.(N.T.) dated 1.3.2008 - the matter requires to be remanded to the Tribunal for reconsideration of the matter - appeal allowed by way of remand.
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2020 (4) TMI 802
100% EOU - Demand of Differential Cost Recovery Charges paid - Claim of refund of excess MOT charges paid - The case of the appellant is that they have paid both the Merchant Overtime Charges and also cost recovery charges on sharing basis till the time of debonding, when application was made on 08.12.2014. Prior to this, vide their application dated 01.04.2014, they filed option with the appropriate officer on 01.04.2014 that they shall be paying only MOT charges. HELD THAT:- The Commissioner (Appeals) have erred in holding that the appellant have not raised the issue initially. Admittedly, from the facts it is evident that such issue was never raised by the appellant earlier and it was raised for the first time on 28.03.2014. As regards the allegation of short recovery of cost recovery charges , admittedly such charges (short paid) amounting to ₹ 71,25,382/- have been paid under protest and after sometime the appellant have applied for refund of the same. Thus, the finding of the Commissioner is factually wrong. The impugned order is set aside and appeal is allowed, so far as it has confirmed the levy of cost of recovery charges. Such cost recovery charges of ₹ 38,51,558/-, the Assistant Commissioner is directed to refund the above amount alongwith interest as per Rules, within a period of thirty days from the date of receipt of the order. - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 801
CENVAT Credit - intermediate goods - press mud and bagasse - exempt goods - demand of an amount of 6% on the value of clearance of the said goods in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 - HELD THAT:- Inasmuch as according to Supreme Court s decision in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] , bagasse has been held to be an agricultural waste or residue, there could be no manufacturing activity. The press mud has also been held to be a waste and not a manufactured product. As such the amendment made in the provisions of Rule 6 would not have any effect to the facts and circumstances of the present case. Appeal dismissed - decided against Revenue.
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