Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 26, 2021
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Power u/s 83 as well as under Section 5(3) off KGST Act - designation of proper officer in terms of Sections 83(1) and 5(3) of the Act be adjudicated upon - Power to attach bank accounts - Interim Relief granted - the challenge as regards delegation under Section 83 of the Act by the Commissioner to other person would remain an academic question which need not be adjudicated in the present case and may be dealt with in an appropriate case. - HC
Income Tax
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Revision u/s 263 - assessment order as contrary to the draft assessment order - The remedy against unjust disallowances, on merits, lies in the appellate process and not in review by the Assessing Officer on his own. In our considered view, an Assessing Officer cannot revisit his conclusions at the stage of passing the final order under section 144C(3). - The order of the Assessing Officer was thus clearly erroneous as also prejudicial to the interest of the assessee, and the learned PCIT was indeed justified in assuming the powers under section 263 on the facts of this case - AT
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Disallowances u/s 40A(2)(b) - payment of commission to related party - There is no reasoning given by the ld AO that why the earlier two payment to the same party for the same services for the same accounting period on same terms and conditions are allowable, whereas the last bill itself was found to be not justified. Even at the time of disallowances, the ld AO could not show any comparable cases that the payment made to the recipient of income is unreasonable or excessive. - AT
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Validity of assumption of jurisdiction by the ld. PCIT u/s.263 - disallowance of interest on borrowed funds - this matter certainly requires factual verification and the ld AO had to give a factual finding as to whether the assessee is indeed having sufficient interest free funds which would explain the investment in plant and machinery. To this extent, the order of the ld PCIT u/s 263 of the Act stands modified as per the aforesaid directions to the ld AO to examine the availability of interest free funds with the assessee. - AT
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Exemption u/s 11 - Once it is to be held that the assessee is a charitable institution and it is entitled for benefit u/s 11 and 12, then all other aspects of section 11(5) and 13(1)(d) etc are to be considered afresh. Somehow, it appears that the ld.AO failed to comprehend or concur with the higher appellate authorities about the status of the assessee being held as charitable institution, which is entitled for the benefit of section 11 and 12. - AT
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Validity of reopening of assessment u/s 147 - the assessment becomes a nullity and does not survive as the Assessing Officer has not passed a speaking order of disposal of the objections filed by the assessee. The assessment also becomes void-ab-intio as the reasons recorded are also not in consonance with the actual escapement of the income of the assessee. - AT
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Admissibility of expenditures incurred by the assessee (a pharmaceutical company) u/s 37 - disallowance of referral fees paid to doctors in violation of public policy and regulations formulated by the Medical Council of India ("MC!') - We uphold the lower authorities action treating the assessee's referral fees as commission payment not allowable in principle. - AT
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Validity of reopening of assessment - No statutory notice u/s 143(2) has been served - assessee failed to comply with the notice u/s 148 of the Act within the time period specified - Once, the assessee fails to comply with the conditions given in the notice, the assessee losses its right to object to service of notice under section 143(2) of the Act. Before seeking relief on legal grounds, it is incumbent upon the assessee to first comply with the conditions within the time frame prescribed under the notice. - AT
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Levy of penalty u/s 271(1)(c) - Once, all the documentary evidences were produced before the AO and sales are no doubted, it is doubtful, whether the purchases are bogus or not. Once, there is doubt, the penalty cannot be levied under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income because, the assessee has not furnished any inaccurate particulars of income in this case. - AT
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TP Adjustment - upward adjustment under the provisions of section 92 - ALP determination - The amount of depreciation claimed by the assessee in the ratio of turnover stands at 9.366% whereas average ratio of depreciation of the comparable companies claimed to their turnover stands at 2.086%. Thus it is inferred that the adjustments in the depreciation is required to be made. Now, the issue arises how to make the adjustments. In this regard we find that there is no guidelines or the provisions of law providing the mechanism for making the adjustments with respect to the depreciation. - AO should have taken the PBDIT as the profit level indicator while working out the arm length price with respect to the international transactions carried out by the assessee with its AE - AT
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Penalty u/s 271G - international transactions with its AE of import of rough diamonds which were sold to the third parties - once the TPO has accepted the bench marking of the assessee to be at Arm Length, the penalty under section 271G of the Act can not be levied. - AT
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Reopening of assessment u/s 147 - unexplained cash credit u/s 68 - AO has not formed a prima facie and independent belief in the reasons recorded that income has escaped assessment but initiated proceedings u/s 147 of the Act for carrying out the verification of facts/information qua the share premium raised by the assessee. - the proceedings u/s 147 are invalid - AT
Corporate Law
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Seeking restoration of name of company in the register of ROC - The appellant has submitted sufficient evidence that it has been in operation during the period preceding strike off, therefore, it could not be termed as a defunct company as per Section 252 of the Act. - The name is to be restored - Tri
Indian Laws
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Dishonor of Cheque - non-supply of list of prosecution witnesses - It is true that under Section 204 of the Code of Criminal Procedure, the Court shall not issue summon or warrant against the accused unless list of prosecution witnesses is filed. However, the defect of not supplying the list of prosecution witnesses is only an irregularity and the same would not vitiate the proceedings unless failure of justice has in fact been occasioned thereby - No prejudice has been pleaded by the petitioner in this petition. - HC
IBC
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Initiation of CIRP - It is a settled legal position that the pendency of SARFAESI proceeding or other dispute does not prevent a Financial Creditor to trigger the CIRP because the nature of remedy being sought for under the provisions of the IB Code is “Remedy in Rem” in respect of the CD - Tri
Case Laws:
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GST
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2021 (5) TMI 772
Cancellation of registration of petitioner - validity of SCN - HELD THAT:- The record presently available shows that prior to the issuance of the aforesaid order, a show cause notice dated 05.01.2021 was served on the petitioner and the petitioner was called upon to file a reply to the same within seven working days from the date of service of the said notice - However, a perusal of the show cause notice shows that it is internally inconsistent. Mr. Mahana says, the authorized representative of the petitioner had appeared before the concerned officer pursuant to service of the show cause notice dated 05.01.2021 - issue notice to the respondents via all permissible modes including email. List the matter on 12.07.2021.
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2021 (5) TMI 767
Power u/s 83 as well as under Section 5(3) off KGST Act - designation of proper officer in terms of Sections 83(1) and 5(3) of the Act be adjudicated upon - Power to attach bank accounts - Invoice was not available for claiming Input Tax Credit - HELD THAT:- Statement is made by the learned Additional Government Advocate that on the basis of the material available necessary report would be sent to the concerned to initiate assessment proceedings as per law and that they do not intend to further proceed with the proceedings under Section 67 of the Act and such submission is stated to be made under instructions of the respondent No.3. The petitioner may be called upon to secure the interest of the revenue. In light of the said stand by putting the petitioner on terms while noticing the absence of the invoice, at the present point in time as regards to the claim of credit for input tax, the Court is of the view that the petitioner on furnishing bank guarantee of ₹ 7,00,000/- the order of attachment may be lifted. It must be noted that in light of disposal of the main petition while recording the statement of the Government Advocate stated to be made upon instructions that proceedings under Section 67 of the Act will not be proceeded with on the basis of the material made available by the assessee to the department, entering in to the question of validity of the order at Annexure-A and the challenge as regards delegation under Section 83 of the Act by the Commissioner to other person would remain an academic question which need not be adjudicated in the present case and may be dealt with in an appropriate case. Further when the petition is itself being disposed off without the necessity of adjudication there is no warrant to embark upon further adjudication of the legal contention raised. The request of the petitioner for continuing with the present proceedings is rejected - Petition disposed off.
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Income Tax
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2021 (5) TMI 770
Assessment order u/s 143(3) r.w.s.144B - a notice under Section 143(2) was issued followed by several notices under Section 142 (1) - a request for accommodation was made by the petitioner on 27.04.2021, wherein a reference was made to the CBDT circular dated 24.04.2021, whereby, the limitation for passing the assessment order had been extended till 30.06.2021 - HELD THAT:- Once respondent no. 1 issued a show cause notice-cum-draft assessment order calling upon the petitioner to file its objections qua the same, this argument cannot be taken on behalf of respondent no. 1 in view of the fact that the impugned show cause notice-cum-draft assessment order dated 22.04.2021 has brought about a variation in the returned income of the petitioner. Therefore, for the foregoing reasons, we are inclined to allow the writ petition. It is ordered accordingly. The impugned assessment order, the notice of demand and the notice for initiation of penalty proceedings, are quashed. Liberty is, however, granted to respondent no. 1 to pass a fresh assessment order after giving an opportunity of a personal hearing to the authorised representative of the petitioner, qua the show cause notice-cum-draft assessment dated 22.04.2021. While granting the personal hearing, the respondent no. 1 will inter alia bear in mind the provisions of Clauses (vii) to (xii) of Section 144B (7) of the Act. Respondent no. 1 will, thus, serve upon the petitioner, a written notice indicating therein, the date and time as to when the hearing will be convened, albeit via virtual mode, given the fact that the pandemic is raging in Delhi.
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2021 (5) TMI 765
Revision u/s 263 - assessment order as contrary to the draft assessment order - disallowances proposed in the draft assessment order have been dropped by the Assessing Officer suo motu and without any interference on those points by the Dispute Resolution Panel - whether an assessment order, contrary to the draft assessment order, could be subjected to revision or not? - HELD THAT:- The expression used in Section 144C(3) undoubtedly is that the Assessing Officer shall complete the assessment on the basis of the draft assessment order but in a situation in which the final assessment drops certain proposed disallowances, can it really be said that the Assessing Officer has completed the assessment on the basis of the draft assessment order- more so when there is no further hearing, no further directions and no occasion for further application of mind. The answer has to be, in our humble understanding, emphatically in negative. When a draft order is finalized by the Assessing Officer, no further hearings take place on the issues raised therein, no directions are received by the Assessing Officer to make any variations from the stand so taken, there is no occasion for making any variations from such a draft assessment order. When the Assessing Officer does not have an obligation to hear the assessee to review the draft orders or any specific powers enabling such a review, it is a natural corollary thereto that the Assessing Officer does not have the discretion, that too in such an unfettered and most opaque manner, to review the draft order nevertheless. The change of heart on the part of the Assessing Officer, howsoever well meaning and justified as it may be, is not permissible at the stage of passing the final assessment order. We disapprove and deprecate the same. Right now the limited question before us is whether an assessment order, contrary to the draft assessment order, could be subjected to revision or not, and, on that point, we uphold the action of the PCIT. Whether these disallowances were covered in favour of the assessee or not is immaterial because it is a conscious decision to keep the matters alive or not, and, in any case, all this was relevant before finalizing the draft assessment order. The remedy against unjust disallowances, on merits, lies in the appellate process and not in review by the Assessing Officer on his own. In our considered view, an Assessing Officer cannot revisit his conclusions at the stage of passing the final order under section 144C(3). In addition to these points, the assessee has also raised several other facets of this controversy in grounds of appeal before us, but arguments of the learned counsel were restricted to these points. We see no legally sustainable merits in the arguments of the learned counsel on these points. The order of the Assessing Officer was thus clearly erroneous as also prejudicial to the interest of the assessee, and the learned PCIT was indeed justified in assuming the powers under section 263 on the facts of this case, and direct the Assessing Officer to pass the assessment order on the basis of draft assessment order issued by the Assessing Officer. No interference is called for. - Decided against assessee.
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2021 (5) TMI 764
Penalty u/s 271(1)(c) - addition of commission - HELD THAT:- From the perusal of the assessment order, it is clear that the addition was made merely because the assessee was unable to substantiate the rendition services by the commission agent in connection with the purchase of Tobacco from Shri Narayan Tobacco, Gopalpura, Dist. Anand, Gujarat. There is no positive evidence on record to say that the commission agent had not rendered any service, there is no the requirement under law that the name of the commission agent should be mentioned in the purchase bills. Mere inability to substantiate the claim does not entail the levy of penalty. It is settled proposition of law that the penalty cannot be levied for mere inability to substantiate the claim in the absence of any positive evidence to the contrary. Reliance in this regard can be placed on the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., [ 2010 (3) TMI 80 - SUPREME COURT] We are of the considered opinion that the impugned order of penalty cannot be sustained in the eyes of law. Accordingly, the orders of the lower authorities are set-aside and we direct the Assessing Officer to delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
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2021 (5) TMI 763
Disallowances u/s 40A(2)(b) - payment towards commission made to related party M/s. DLF Home Developers Ltd for service charges on account of collection received from customers on account of project Capital Green Phase 1 - DLF Home Developers is a subsidiary company of the assessee company and therefore, claim of the assessee is that provision of section 40A(2)(b) do not apply to such payment - AO held that the assessee has not incurred these expenses to meet legitimate needs of the business - HELD THAT:- Assessee has made payment to the parties for three bills - AO has disallowed amount involved in last bill but has allowed the earlier two bills despite the payments made for same services. There is no reasoning given by the ld AO that why the earlier two payment to the same party for the same services for the same accounting period on same terms and conditions are allowable, whereas the last bill itself was found to be not justified. Even at the time of disallowances, the ld AO could not show any comparable cases that the payment made to the recipient of income is unreasonable or excessive. In fact, the ld CIT(A) has noted that the assessee has paid commission to this party @ 1% whereas commission to other brokers is paid @2%. Therefore it is apparent that conditions satisfied u/s 40A(2) of classifying expenditure as excessive or unreasonable is not satisfied as the comparable market rate for same services provided by unrelated parties are higher. In view of this, we do not find any infirmity in the order of the ld CIT(A) in deleting the above disallowance - Decided in favour of assessee. Capital gain computation - Disallowance on account of cost of improvement while calculating the capital gain earned by the assessee - HELD THAT:- Cost of development was paid to Associated Infrastructure Company for cost of development of the land at the rate of ₹ 200 per sq ft as per tripartite arrangement dated 29.04.2008. The ld CIT(A) considered the agreement and referred to the clauses of agreement at para 5.3. It was noted that the above amount of cost of development was integral part of the development and therefore, it cannot be ignored and disallowed. The purchase agreement itself contains the provisions for development of land at the behest of the Vendor. It was also carried in the books of accounts of earlier years. Therefore, there is no justification for the ld AO to disallow the same - we confirm the order of the ld CIT(A) in deleting the addition as cost on improvement for the land sold. Accordingly, the ground No. 2 of the appeal of the ld AO is dismissed. Addition on account of brokerage paid to M/s. Totem Infrastructure Ltd on sale of land - AO disallowed the same as the assessee could only submit the copy of the bill for brokerage but according to ld AO assessee failed to submit justification for payment of brokerage to the above party - CIT(A) deleted the addition - HELD THAT:- The assessee has also paid similar brokerage for sale of land at Jamnagar. Therefore, the claim of the ld AO that the assessee paid brokerage only for sale of Vadodara property is not correct. However, during the course of assessment wherein details of payment of brokerage at 1.80% on sale of ₹ 87 crores at Vadodara land along with address and PAN of the broker was given. The ld AO did not make any enquiry on the bill but merely on other reasons made the disallowance. CIT(A) has categorically dealt with all these reasons and deleted the addition. Even before us, the findings of the ld cit (A) were not controverted. We find that the brokerage paid by the assessee is demonstrated in the bill , which is for the purpose of the sale of Vadodara Land. Therefore, in absence of any specific enquiry proving otherwise, the above disallowance cannot be made. Even otherwise, other findings of the ld AO about payment of brokerage on other properties sold were not found correct. Thus, we do not find any infirmity in the order of the ld CIT(A) in deleting the above disallowances. Accordingly, ground No. 3 of the appeal of the ld AO is dismissed. Disallowances of interest u/s 14A - AO noted that the assessee has made interest payment and has also incurred certain expenditure. Therfore according to him, the assessee has incurred proportionate expenditure for earning exempt income. Therefore, disallowances u/s 14A of the Act is required to be made - HELD THAT:- Assessee has incurred certain expenditure for the purpose of earning exempt income. However, the assessee did not given any basis for allocating 50% of the salary of one person. No other corresponding expenditure or incidental expenditure was disallowed. The ld AO noted this fact and recorded his satisfaction that the claim of the assessee is that it has not incurred any expenditure in earning the exempt income is incorrect. Thus no fault can be found with the action of the ld AO in applying provision of Rule 8 D as it satisfied the condition laid down u/s 14A (2) of the act. As far as the issue of interest expenditure is concerned, it is apparent that assessee has huge interest free funds in form of share capital and free reserve of approximately ₹ 983 crores against the investment in equity shares of ₹ 53 crores. Therefore, in absence of any contrary evidence, the presumption lies in favour of the assessee that investment in such equity shares have been made out of interest free funds. The ld CIT(A) has deleted the same on this basis only. In view of this we do not find any infirmity in the order of the ld CIT(A) in so far as the deleting the disallowance on account of interest. It is also not the claim of the ld AO that the assessee has utilized interest-bearing funds for making investment in the equity shares. So far as the issue of other expenditure there is no justification for reducing the sum of ₹ 22.67 crores being investment in subsidiaries out of total investment in equity shares of ₹ 53.51 Therefore, we find that disallowances of ₹ 26,75,393/- should have been confirmed by the ld CIT(A). Anyway as the disallowance u/s 14A cannot exceed the exempt income of ₹ 22,34,355/- ,we direct the ld AO to restrict the disallowance only to the extent of ₹ 22,34,355/-. Accordingly, appeal of the assessee is dismissed and appeal of the ld AO with respect to ground No. 4 and 5 is partly allowed.
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2021 (5) TMI 762
Estimation of income - bogus purchases - CIT(A) was justified in restricting the profit element embedded in respect of alleged bogus purchases at 3% as against 9% made by the ld. AO - HELD THAT:- We find that this Tribunal going by the gross profit ratio of the assessee in earlier years had decided in assessee s own case [ 2021 (4) TMI 799 - ITAT MUMBAI ] in similar facts and circumstances by adopting the profit element at 1% of value of ingenuine purchases. Respectfully following the said decision, we hold that 1% profit element on the value of ingenuine purchases would meet the ends of justice. Disallowance on an estimated basis at 10% on conveyance, telephone and travelling expenses - HELD THAT:- AO in the assessment proceedings had observed that most of the expenses claimed are not verifiable and that the personal element of expenses cannot be ruled out. Accordingly, he proceeded to estimate 10% of the expenses towards personal element and unverifiable nature and made disallowance thereon in the assessment, which was confirmed by the ld. CIT(A) in the first appeal. We find that the ld. CIT(A) had observed that assessee could not prove with any concrete evidence that there was no personal element involved. Even before us, the assessee was not able to justify the same and infact, no arguments were even advanced by the ld. AR before us with regard to said disallowance. In view of this, the ground No.3 raised by the assessee is hereby dismissed.
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2021 (5) TMI 761
Validity of assumption of jurisdiction by the ld. PCIT u/s.263 - disallowance of interest on borrowed funds - HELD THAT:- Assessee had furnished the details of loans taken during the year and corresponding interest payments made thereon before the ld. AO during the course of original assessment proceedings. But we find that the basic premise on which the ld PCIT had invoked revisionary jurisdiction is that the AO having alleged that the assessee had invested in plant and machinery only to the extent of ₹ 8.26 crores (based on valuation report of DVO), ought to have correspondingly examined the allowability of interest expenditure on borrowed funds utilised for investment in plant and machinery. Since this was not examined by the ld AO while framing the original assessment, the order passed by the ld AO becomes erroneous in as much as it is prejudicial to the interest of the revenue. The issue pending before the ld CITA is only on the depreciation on value of plant and machinery and the issue of disallowance of interest on borrowed funds thereon was not before the ld CITA. Hence the argument advanced by the ld DR that provisions of Explanation 1 clause (c ) of section 263(1) of the Act does not come into operation in the instant case, holds good and deserves to be accepted. We find that the ld. PCIT had presumed that the investment in plant and machinery and other assets have been made out of borrowed funds of the assessee. In this regard, we find that the ld AR vehemently argued that the assessee was having sufficient interest free funds in its kitty to make investment in plant and machinery. However, we find that there is no finding of fact to this effect in the orders of the lower authorities. We find that this matter certainly requires factual verification and the ld AO had to give a factual finding as to whether the assessee is indeed having sufficient interest free funds which would explain the investment in plant and machinery. To this extent, the order of the ld PCIT u/s 263 of the Act stands modified as per the aforesaid directions to the ld AO to examine the availability of interest free funds with the assessee. Accordingly, the grounds raised by the assessee are partly allowed. Production expenses disallowed u/s.40(a)(ia) of the Act for valuation of TDS provisions - We find that ultimately this is a matter requiring factual verification. There is no mention as to whether these details were filed by the assessee before the ld. AO in the course of original assessment proceedings. Hence, it could be safely held that the ld. PCIT had indeed validly assumed revision jurisdiction u/s.263 of the Act in respect of this issue of production expenses vis- -vis its TDS compliance. This is a matter requiring factual verification, hence, we hold that the ld. PCIT had rightly invoked revision jurisdiction in respect of this issue of production expenses. We find that the ld. AR had also placed on record the copy of the assessment order passed by the ld. AO dated 11/12/2019 u/s.143(3) r.w.s. 263 of the Act wherein the ld. AO had ultimately on verification of the entire details of all the parties vis- -vis the TDS compliance made thereon, held that the sum of ₹ 3,60,000/- is required to be disallowed u/s.40(a)(ia) of the Act for payments made without deduction of tax at source. In view of these observations, we hold that the ld. PCIT had rightly assumed revision jurisdiction u/s.263 of the Act in respect of this issue of production expenses. Accordingly, the ground No.3 raised by the assessee is dismissed and ground No.1 raised by the assessee is partly allowed.
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2021 (5) TMI 760
Excessive sugarcane price paid to members as well as non-members of the respective assessees - Review petition - HELD THAT:- Review petition has been filed before the Hon'ble Supreme Court against the judgment in the case of CIT Vs Tasgaon SSK Ltd.[ 2019 (3) TMI 321 - SUPREME COURT] which is still pending and hence the decision thereon should be awaited, is of no consequence. Hundreds of orders have been passed by the Tribunal on this issue following the final judgment of the Hon'ble Supreme Court in the case of CIT Vs Tasgaon SSK Ltd. (supra). Mere filing of Review petition does not obliterate the ratio laid down in the judgment under review. It is only when an order on review is passed that the ratio can undergo change subject to the outcome of the review order. Till then, the ratio of the decision operates with force and remains binding on all the subordinate courts in the country. Since the issue under consideration is admittedly fully and directly covered by the judgment of the Hon'ble Supreme Court in the case of CIT Vs Tasgaon SSK Ltd. (supra), we are disinclined to accept the argument of the ld. AR. All the appeals are allowed for statistical purposes.
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2021 (5) TMI 759
Exemption u/s 11 - Revenue filed Miscellaneous appication (MA) stating that its Cross objection was not adjudicated with the appeal of the assessee - HELD THAT:- Tribunal was of the view that since character of the assessee has been changed, it has been held that it is entitled for the benefit of sections 11 and 12 of the Act, and considering its nature as a charitable institution, the exercise of determining the income has to be carried out afresh. In such circumstances, quantification and impact of section 11(5) and 13(1)(d) has to be examined afresh. The Tribunal has observed that this aspect could be looked into while determining the taxable income of the assessee. In the first round, the income of the assessee was determined by denying exemption under section 11 and 12. This stand of the AO was reversed by the Tribunal, and the matter was relegated to him to examine afresh. We fail to understand how it can be pleaded that CO filed by the Revenue has not been considered on merit. These very issues were available in appeals of the assessee as well of the Revenue. The ultimate dispute was true determination of the income of the assessee. In the first round, the AO was of the view that benefit of sections 11 and 12 cannot be granted. This stand did not meet approval of the Tribunal. Once it is to be held that the assessee is a charitable institution and it is entitled for benefit u/s 11 and 12, then all other aspects of section 11(5) and 13(1)(d) etc are to be considered afresh. Somehow, it appears that the ld.AO failed to comprehend or concur with the higher appellate authorities about the status of the assessee being held as charitable institution, which is entitled for the benefit of section 11 and 12. Misc. Application of the Revenue is dismissed.
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2021 (5) TMI 758
Penalty u/s 271(1)(c) - undisclosed capital gain on sale of flat - bona-fide mistake or not - assessee admitted the mistake during assessment proceedings and offered short-term capital gains in the revised computation of income - During penalty proceedings, the assessee submitted that it relied on the professional advice tendered by one Shri Jitendra Chimanlal Darji that the gain so earned by the assessee were eligible for deduction u/s 54 since the assessee had purchased a new flat within two years - HELD THAT:- As assessee had made investment in a new residential flat situated at C-103, Baba Sadan, 4, Bungalows, J.P. Road, Andheri (W), Mumbai which is evident from the copy of agreement as placed on record. The payment of the same was made through bank account on 28/06/2013 and 04/07/2013. Hence, the assessee would have been eligible to claim deduction u/s 54 if the property sold was a long-term capital asset. The assessee has also placed on record letter dated 11/10/2018 from Shri Jitendra Chimanlal Darji admitting the said mistake. The assessee has also filed an affidavit as to the above stated facts. All these facts and documentary evidences lend strength to assessee s submissions that the claim was under bona-fide mistake and the same was duly accepted during assessment proceedings. Under these circumstances, it could not be said that the assessee failed to offer any explanation as to wrong claim or the explanation furnished by the assessee was untrue. Therefore, keeping in view the ratio laid down by Hon ble Apex Court in Price Waterhouse Coopers Pvt. Ltd. [ 2012 (9) TMI 775 - SUPREME COURT] held that no penalty would be leviable in case of bona-fide explanation, we are inclined to delete the impugned penalty. - Decided in favour of assessee.
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2021 (5) TMI 757
Validity of reopening of assessment u/s 147 - Reasons for initiation of proceedings under section 147 - HELD THAT:- AO was not specific as to on what basis the Assessing Officer has the reason to believe that the income of the assessee to the tune of 1 crore has escaped assessment. In fact, in one para the Assessing Officer is observing the assessee as accommodation entry provider and in next, the assessee is treated as the receiver of the share application money. But the basis for which is not elaborated and there is contradiction in the reasons given by the Assessing Officer. Besides this the Assessing Officer has not disposed off the objections filed by the assessee prior to concluding of the assessment proceedings, but has given a general finding in the Assessment order itself which is not in consonance with the provisions of the Income Tax statute relating to disposal of the objections by the Revenue authorities. In the present case, the Assessing Officer has not taken proper cognizance of the direction of the Hon'ble Supreme Court in case of GKN driveshaft India Ltd versus ITO [ 2002 (11) TMI 7 - SUPREME COURT] . Thus, the assessment becomes a nullity and does not survive as the Assessing Officer has not passed a speaking order of disposal of the objections filed by the assessee. The assessment also becomes void-ab-intio as the reasons recorded are also not in consonance with the actual escapement of the income of the assessee. Thus, the assessment order itself is null and void-ab-intio as the reassessment proceedings becomes invalid. Decided in favour of assessee.
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2021 (5) TMI 756
Penalty u/s. 271(1)(c) - quantum addition made as long term capital gain - HELD THAT:- In the present case, it is noticed that the quantum addition on the basis on which, the impugned penalty was levied by the A.O. has been deleted by the ITAT [ 2020 (2) TMI 776 - ITAT CHANDIGARH] therefore, the addition on the basis of which the penalty u/s. 271(1)(c) of the Act was levied by the A.O. is not in existence, therefore, penalty u/s. 271(1)(c) of the Act levied by the A.O. was rightly deleted by the Ld. CIT(A). Also see KC BUILDERS AND ANOTHER VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2004 (1) TMI 7 - SUPREME COURT] - Decided against revenue.
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2021 (5) TMI 753
Admissibility of expenditures incurred by the assessee (a pharmaceutical company) u/s 37 - disallowance of referral fees paid to doctors in violation of public policy and regulations formulated by the Medical Council of India ( MC!') - allowability of assessee's referral fees paid to various eye clinics/eye specialists in their business premises in lieu of rent and other advantages - HELD THAT:- Assessee; a company engaged in eye care business has shared its revenue with the eye clinics and ophthalmologists inter alia in lieu of availing rent free premises without maintenance charges. We make it clear that the learned senior counsel has himself argued that it is an instance of the emerging business model only. We observe in these facts that no business model could be taken allowable of it since violate public policy as per the above stated CBDT Circular. As observed during the hearing that the learned senior counsel has filed paper book running into 193 pages containing various case law(s), he himself was fair enough that none of the said decisions would apply herein since they do not involve any such business model of revenue sharing. All the said decisions are distinguishable on the facts therefore as per the assessee's stand. These facts and circumstances make it apparent that the interest of general public patients is very much compromised by the assessee s revenue s sharing agreement. We accordingly uphold the lower authorities action treating the assessee's referral fees as commission payment not allowable in principle. Whether referral fees involves rental payment without being any maintenance charges etc? - As come on record that neither the assessee itself has placed on record the corresponding rent s market rate nor the lower authorities have made any such attempt. Faced this situation, we deem it appropriate that a lump sum disallowance of 1/3 rd of the assessee's impugned claim (including the rent and other miscellaneous charges on estimation basis) would be just and proper in the given facts and circumstances. The assessee gets relief to the extent of 2/3rd of the impugned services in other words. Necessary computation shall follow as per law. Very nature of payment stands accepted in earlier year we quote the honourable apex court s landmark decision in Radhasoami Satsang Vs. CIT [ 1991 (11) TMI 2 - SUPREME COURT] holds that the principle of res judicata is not applicable in income tax proceedings. The assessee's corresponding argument stands declined therefore.
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2021 (5) TMI 752
Rejection of books of accounts - NP determination - books of account rejected by the Assessing Officer for the reason that the assessee had failed to produce the relevant vouchers of expenses - HELD THAT:- We are in complete agreement with the observation of the Assessing Officer that since the assessee had failed to produce bills and vouchers relating to the various expenses debited in the Profit and Loss Account, complete and correct profit cannot be deduced from such books of account. Since, the assessee had failed to produce the relevant bills and vouchers, we uphold the action of the Assessing Officer in rejecting the books of account. Although the assessee did not produce the relevant vouchers and bills before the Assessing Officer, at this juncture, it does not appear very feasible to us to remit the matter back to the Assessing Officer for re-examination. In our considered opinion, interest of substantial justice would be served by directing the Assessing Officer to re-compute the net profit @ 4% on sales of ₹ 12,81,85,658/- before deduction of depreciation and interest and remuneration to partners. This will take care of any possible leakages on account of expenses not duly evidenced by bills and vouchers and the interest of the Revenue would be safeguarded. Accordingly, we direct the Assessing Officer to re-compute the income of the assessee by taking 4% of the sales as net profit for the year under consideration and, thereafter, allow deduction of depreciation and remuneration and interest to the partners from such net profit for the purpose of computing the taxable income of the partnership firm. The appeal is disposed off with the directions to the Assessing Officer as above.
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2021 (5) TMI 751
Validity of reopening of assessment - non proper satisfaction of the authority specified under section 151 - HELD THAT:- In the instant case since reopening proceedings were initiated prior to amendment by the Finance Act, 2015, satisfaction of Joint Commissioner was required for issuing notice under section 148 of the Act. The Assessing Officer has issued notice after the satisfaction was recorded by the Additional CIT. The Additional CIT has been included in the definition of Joint Commissioner, therefore, see no infirmity in the notice issued under section 148 of the Act. The case laws on which the ld. AR of the assessee has placed reliance does not apply to the facts of the case. Consequently, the ground No.11 raised as additional grounds of appeal is dismissed. Reopening have been recorded by an Assessing Officer having no jurisdiction - Undisputedly, the reasons recorded for reopening, notice u/s 148 and the assessment order can only be passed by the assessing officer having valid jurisdiction over the assessee. Reasons recorded for reopening or notice u/s 148 of the Act or the assessment order passed by any assessing officer without jurisdiction is bad in law. I find that this legal objection has been raised by the assessee is without any cogent evidence. The assessee has failed to discharge its onus to substantiate that the Assessing Officer who has issued notice under section 148 of the Act or the one who has passed assessment order were not having jurisdiction over the assessee at relevant point of time. The assessee has made mere bald assertions without there being any substantive material on record. The case laws relied on by the ld. AR of the assessee are on different set of facts and hence, distinguishable. Ergo, additional ground of the appeal is rejected. No statutory notice under section 143(2) has been served on the assessee before making assessment - As in assessment order has categorically mentioned that in response to the notice under section 148 of the Act issued and served on 19/03/2014, the assessee filed letter dated 24/07/2014 stating that the return filed on 31/10/2013 may be treated as return in response to the notice under section 148 of the Act. The said dates have not been disputed by the ld. AR of the assessee. Thus, it is evident from record that the assessee failed to comply with the notice u/s 148 of the Act within the time period specified. Once, the assessee fails to comply with the conditions given in the notice, the assessee losses its right to object to service of notice under section 143(2) of the Act. Before seeking relief on legal grounds, it is incumbent upon the assessee to first comply with the conditions within the time frame prescribed under the notice. Validity of reasons to believe - In the instant case, as is evident from the assessment order no assessment was made under section 143(3) as the return filed by the assessee was time barred, hence, invalid. Proceedings u/s 148 r.w.s. 147 of the Act were initiated on the bases of tangible material received by the Assessing Officer. The Assessing Officer has recorded his satisfaction for reopening the assessment explicitly mentioning the name of the firm to whom the assessee has given its premises for use. I find no merit in the submissions of ld. Authorised Representative of the Assessee on this legal ground. The case law on which reliance has been placed to support this argument does not apply to the facts of this case and hence, distinguishable. Income from house property - Rental value of the property - HELD THAT:- As in the case of Park Paper Industries Pvt. Ltd. [ 2008 (8) TMI 599 - ITAT MUMBAI] the Tribunal held that where the property has not been let out, Municipal value would be proper yardstick for determining annual value. We restore this issue back to the file of Assessing Officer with a direction to determine the exact area of the shops and thereafter, compute annual rental value in line with the decision of Tribunal rendered in the case of Park Paper P. Ltd. (supra). It is further made clear that any municipal taxes actually paid by the assessee qua the shops under question for the impugned assessment years are to be allowed as deduction.
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2021 (5) TMI 750
Reopening of assessment u/s 147 - validity of initiation of proceedings u/s 147/148 for want of valid service, incorrect facts recorded by the Assessing Officer (A.O.) in the reasons for reopening and non- adjudication of these issues by the Ld. CIT (A) - HELD THAT:- From the order of the Ld. CIT (A) itself, it is clear that the new ITR was introduced for individual / Hindu Undivided Family (HUF) for the A.Y. 2007-08 and not for the A.Y. 2006-07 under consideration. Therefore, the rejection of the claim of return of income on this ground is not justified. CIT (A) has not conducted any enquiry or getting the claim of the assessee to file the return of income verified by calling upon the remand report from the A.O. Hence, to the extent of the correctness of the claim of filing return of income neither the Assessing Officer nor the Ld.CIT (A) has verified this fact. Service of notice u/s 148 of the Act, it is noted that the notice u/s 148 of the Act was issued on 28.03.2013 through registered post but the assessee has not participated in the proceedings, therefore, the objection of non service of notice u/s 148 was not before the A.O. The assessee raised this ground before the Ld.CIT (A) as the substituted grounds which are duly reproduced by the Ld. CIT (A). However, these issues of the validity of proceedings u/s 147 for want of valid service of notice u/s 148 has not been decided by the Ld. CIT (A). The Ld. CIT (A) has rather stated that these grounds are general in nature. Thus, it is a matter of fact that all these issues regarding validity of reopening of the assessment and proceedings u/s 147 of the Income Tax Act without considering the fact of return of income filed by the assessee on 09.03.2007 as well as for want of valid service notice u/s 148 of the act remained un-adjudicated at the level of the A.O. as well the Ld. CIT (A). Though these issues an legal in nature however adjudication of same certain facts and record are required to be verified which are not before this Tribunal. Thus, in the facts and circumstances of the case these issues are remanded to the record of the A.O. for deciding the same after giving an appropriate opportunity of hearing to the assessee. Additions on account of cash deposit in the bank on account of the assessee - HELD THAT:- The assessee has explained the source of deposit as the contract receipt. In support of claim the assessee has referred to the return of income filed by the assessee as well as the order/certificate of Commercial Tax Department which has been reproduced by Ld.CIT (A) in the impugned order - non consideration the claim of the assessee of filing the return of income by the Ld. CIT (A) or by the A.O. and therefore these facts are required to be verified at the level of the A.O. Accordingly without expressing any view on the merits of the issues the matter is set aside to the record of the A.O. to adjudicate the same afresh after considering the claim of the assessee of filing of the return of income as well as the source of the deposit as contract receipt. Needless to say that the assessee be given an appropriate opportunity of hearing before passing the afresh order. Appeal of the assessee is allowed for statistical purposes.
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2021 (5) TMI 749
Levy of penalty u/s 271(1)(c) - Estimation of income on bogus purchases - hawala parties u/s 69C - CIT(A) reduced the addition and restricted the same to the profit element of 15% of the alleged bogus purchases - HELD THAT:- As the sales has not doubted, he has only estimated the profit and on estimation of profit, the penalty cannot be levied. Even otherwise, the assessee has produced the complete invoices of purchases, payment was made by account payee cheque and further, the stock tally was also produced before the AO during the assessment proceedings. Once, all the documentary evidences were produced before the AO and sales are no doubted, it is doubtful, whether the purchases are bogus or not. Once, there is doubt, the penalty cannot be levied under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income because, the assessee has not furnished any inaccurate particulars of income in this case. Hence, we are of the view that CIT(A) has rightly deleted the penalty and we confirm the same. - Decided against revenue.
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2021 (5) TMI 748
TP Adjustment - upward adjustment under the provisions of section 92 - ALP determination - profit level indicators for working out the ALP - PBIT or PBDIT - - whether PBIT or PBDIT should be taken as profit level indicators for working out the ALP with respect to the transactions carried out by the assessee with its associated enterprise? - HELD THAT:- The purpose of transfer pricing provisions is to ensure that the companies which are connected with each other and operating internationally, such companies should not divert their income to another country. In other words, the price charged by one company from its associated enterprises should not be influenced by their connections between them. Such price should have been at the arm length price, meaning thereby the price/service or the cost should be at a value which is agreeable to the independent/unrelated parties under uncontrolled situations/circumstances. How to determine the ALP with respect to the transactions carried out between two associated enterprises ? - adjustments in the depreciation - The price or the margin of one company (tested party), depending upon facts and circumstances, should be compared with the companies which are comparable in terms of functions, capital employed, debt equity ratio, turnover, risk, contractual terms, assets employed etc. If any of the item such as capital employed, turnover is not comparable to the tested party for any reason, then the necessary adjustments are required to be made. The amount of depreciation claimed by the assessee in the ratio of turnover stands at 9.366% whereas average ratio of depreciation of the comparable companies claimed to their turnover stands at 2.086%. Thus it is inferred that the adjustments in the depreciation is required to be made. Now, the issue arises how to make the adjustments. In this regard we find that there is no guidelines or the provisions of law providing the mechanism for making the adjustments with respect to the depreciation. Furthermore, it also appears that there cannot be any guidelines or formula for making such adjustments, rather it depends upon various factors and circumstances. However, we find that none of the authorities below has made such adjustments while determining the PLI for working out the ALP despite such contention was raised by the assessee before the learned CIT (A). See ERHARDT+LEIMER (INDIA) PRIVATE LIMITED VERSUS ASST. COMMISSIONER OF INCOME TAX [ 2016 (12) TMI 1792 - ITAT AHMEDABAD] CIT (A) has equated the amount of depreciation with the repair and maintenance expenses. As per the learned CIT (A) if the assessee is claiming higher depreciation than the comparable companies, it implies that the assessee must be claiming less repair and maintenance expenses than the comparable companies. Accordingly, the learned CIT (A) rejected the contention of the assessee for making the adjustments with respect to the depreciation. In this connection, we find that the repairs and maintenance expenses cannot be equated/compared with the depreciation. These are two independent items of expenses. There is no guarantee that if the depreciation is higher then, the repair and maintenance expenses will be lower or vice versa. Accordingly we are not convinced with the reasoning of the learned CIT (A). In view of the above and in the interest of justice we hold that the AO should have taken the PBDIT as the profit level indicator while working out the arm length price with respect to the international transactions carried out by the assessee with its AE. - Decided in favour of assessee.
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2021 (5) TMI 747
Penalty u/s 271G - international transactions with its AE of import of rough diamonds which were sold to the third parties - HELD THAT:- The assessee has not maintained segmental accounts of transactions with AE and non AE, however, the TPO has accepted the Arm Length Price of international transactions as submitted by the assessee and also the method of bench marking i.e. TNMM with certain observations that assessee has not maintained the documentation in terms of provisions of section 92D(3) of the Act and therefore he was not in a position to propose any adjustment to Arm Length Price to the international transactions and has to accept the version of the assessee and thus levied a penalty equal to 2% of the value of international transactions with the AE u/s 271G of the Act. The primary argument of the Ld. A.R. is that since the TPO has accepted the bench marking of the assessee under TNMM to be at Arm Length Price, the imposition of penalty under section 271G of the Act for non furnishing of segmental audited statement of AE and non AE was wrong and against the provisions of law. We find merit in the argument of the assessee as the TPO could have gone for its own determination of ALP of the international transactions by following one of the methods prescribed under the Act, however, the TPO has not done so. We find merit in the contentions of the assessee that once the TPO has accepted the bench marking of the assessee to be at Arm Length, the penalty under section 271G of the Act can not be levied. The case of the assessee finds support from the decision of the co-ordinate Bench of the Tribunal in the case of CIT v. Decent Dia Jewels (P.) Ltd. [ 2020 (3) TMI 603 - ITAT MUMBAI] wherein the Tribunal has held that where the TPO having accepted the bench marking of the assessee under TNMM, the imposition of penalty under section 271G of the Act was to be deleted under similar facts. Appeal of the assessee is allowed.
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2021 (5) TMI 746
Reopening of assessment u/s 147 - unexplained cash credit under section 68 - assessee has not filed return of income for the year under consideration - information gathered from ROC, as noticed that the assessee has received share premium - HELD THAT:- In this case the assessee has raised share capital and share premium - AO has recorded the reasons as required u/s 148(2) of the Act to reopen the assessment after receiving information from ROC and recorded in the concluding para of the reasons that facts and information as to receipt of share premium by the assessee are not verifiable as the assessee has not filed the return of income. AO has mentioned in the reasons recorded that the facts and information as regards share premium are not verifiable as no return of income has been filed by the assessee and considering these facts, he has reason to believe that income chargeable to tax has escaped assessment and accordingly initiated proceedings u/s 147 - We find merit in the contentions and arguments of the Ld. A.R. that the AO has not formed any independent belief or recorded a finding that income of the assessee has escaped assessment but merely stated in the reason to believe that these facts and information need proper verification and hence reopened the case in order to carry out the verification of these facts which are not permissible under the Act. We are of the considered view that the AO has not formed a prima facie and independent belief in the reasons recorded that income has escaped assessment but initiated proceedings u/s 147 of the Act for carrying out the verification of facts/information qua the share premium raised by the assessee. Under these facts and circumstances, we are in full agreement with the finding of the Ld. CIT(A) holding the proceedings under section 147 of the Act as invalid Under these facts and circumstances, the order of Ld. CIT(A) is required to be upheld on the jurisdictional issue. - Decided against revenue.
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2021 (5) TMI 745
Exemption u/s 11 - charitable activity u/s 2(15) - HELD THAT:- Assessee is not carrying out of any activity which is related to advancement of any other object of general public utility. Source of the income of the assessee is from the member s fee and from the organization of exhibitions etc which is done only to promote the interest of the members. The assessee filed the memorandum of association and also referred to various objects of the assessee which has been reproduced above and we find that none of the objects of the assessee can be construed as advancement of any other object of public utility. The case of the assessee finds from the decision of Society of Indian Automobile Manufacturers [ 2016 (6) TMI 802 - ITAT DELHI] wherein it is held that if the purpose of all the activities is to promote objects for which it was set up, then it will not be caught within sweep of proviso notwithstanding fact that they result in some income from carrying out such activity. We direct the AO to allow the exemption under section 11 of the Income Tax Act of the assessee and further hold that the case of the assessee does not fall within ambit of the proviso to section 2(15) of the Act. The appeal of the assessee is allowed.
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2021 (5) TMI 744
Allowability of expenditure - commencement of business or not ? - HELD THAT:- As decided in own case [ 2014 (5) TMI 471 - ITAT AHMEDABAD ] hon‟ble ITAT has held that the assessee has started the business in the A.Y. 2003-04, hence, no doubt when it has already been held that the assessee has started the business of A.Y.2003-04 then in the present assessment year business is liable to be considered as commenced accordingly. This issue is decided in favour of the assessee against the revenue. Correct head of income - Interest income treated as income from the other sources or business income - HELD THAT:- We noticed that the assessee was under obligation to place on record the purpose of the deposit, utilization of funds and most important fact is also to be brought on record about the nexus of interest earned and interest paid. Accordingly, the AO was directed to examine the material afresh so that the nexus can be established in respect of interest earned and interest paid. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the controversy afresh in accordance above mentioned guidelines. Disallowance of deduction of expenses debited to the profit loss account which were incurred wholly and exclusively for the business carried on by the appellant during the previous year - HELD THAT:- Since the business has been commenced in the year 2003-04 then no doubt the deduction of expenses debited to the profit loss account which were incurred wholly and exclusively for the business carried on by the appellant is liable to be allowed in accordance with law. In this regard no doubt the AO is under obligation to verify the facts and to allow the claim of the assessee, hence, this issue is restore to the AO to allow the claim in accordance with law. Disallowance u/s 14A r/w rule 8D - HELD THAT:- The factual position which emerges is, in the year under consideration the assessee has not earned any exempt income. That being the case, as per settled principle of law, no disallowance under section 14A r/w rule 8D can be made. See decision of t PCIT v/s Rivian International Pvt. Ltd [ 2017 (12) TMI 811 - BOMBAY HIGH COURT ] - In view of the aforesaid, we delete the disallowance made by the Assessing Officer. Allowance of Interest expenditure claim u/s 57(iii) - income earned from ICDs was held by the Departmental Authorities as income from other source as against business income claimed by the assessee - alternative claim made by the assessee for deduction of interest expenditure under section 57(iii) of the Act in respect of such income was rejected on the ground that such interest expenditure has no nexus with the interest earned on ICDs - HELD THAT:- As held that interest earned on ICDs are to be treated as income from business. Consequently, the interest expenditure claimed by the assessee has to be allowed. Therefore, the alternative claim of deduction under section 57(iii) of the Act becomes redundant. Suffice it to say, assessee‟s claim of deduction under section 57(iii) of the Act in respect of interest expenditure has been allowed by learned Commissioner (Appeals) and the issue has attained finality as neither the assessee nor the Revenue has contested the order of learned Commissioner (Appeals). Therefore, even otherwise also, assessee‟s claim of deduction under section 57(iii) of the Act is allowable. Disallowance of interest capitalized to work in progress (WIP) - HELD THAT:- Advanced given to the sister concern for purchase of land. The AO disallowed the interest expenses and did not allow to get capitalized to WIP. Additional evidence was filed before the CIT(A) appeal who did not admit the additional evidence. The advance was given to the sister concern who is also engaged in the business of land development and used it for business purpose. The Ld. Representative of the assessee has placed reliance upon the decision in the case of S.A.Builders Ltd. vs CIT ( 2006 (12) TMI 82 - SUPREME COURT ) Taking into account all the facts and circumstances, we set aside the finding of the CIT(A) and restore the issue before the AO to examine the matter of controversy denova.
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Corporate Laws
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2021 (5) TMI 755
Seeking restoration of name of company in the register of ROC - Section 252 of the Companies Act, 2013 - HELD THAT:- The grounds contemplated under Section 252 of Companies Act, 2013, are that the company was carrying on business or was in operation at the time of striking off its name or where it appears just to the Adjudicating Authority that the name of the company is to be restored to the Register of Companies and the Section 252(1) further contemplates that one of the above three conditions are required to be satisfied before exercising jurisdiction to restore the company to its original name on the register of the Registrar of Companies. The appellant has submitted sufficient evidence that it has been in operation during the period preceding strike off, therefore, it could not be termed as a defunct company as per Section 252 of the Act. Thus, taking into consideration the provisions of Section 252(1) of the Companies Act, 2013, which vests this Tribunal with a discretion where the Company, whose name has been struck off, and such Company is able to demonstrate that it is just to do so, can restore the name of the Company, in the Register and in the interest of all stakeholders, including the Appellant itself, who seeks restoration of the name of the Company in the register maintained by Registrar of Companies, the company deserve to be restored. The name is to be restored - appeal allowed.
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Insolvency & Bankruptcy
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2021 (5) TMI 754
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The CD has defaulted in making repayment of the credit facilities to the Petitioner Bank due on 31.03.2018 and 06.04.2019. The Total Debt as per the Statement of Accounts and the Affidavit filed on behalf of the Petitioner Bank confirms the defaulted amount of ₹ 32,59,99,856.25 - Further, the CIBIL/CRILIC Reports submitted by the Petitioner Bank confirm the existence of liability to the Financial Creditor and default committed by the Corporate Debtor. Time Limitation - HELD THAT:- The Petitioner Bank has filed the petition within the period of limitation, as the last payment into the account has come on 04.03.2019 and the amended petition has been filed on 30.12.2020. It is a settled legal position that the pendency of SARFAESI proceeding or other dispute does not prevent a Financial Creditor to trigger the CIRP because the nature of remedy being sought for under the provisions of the IB Code is Remedy in Rem in respect of the CD - present IB Petition is filed by the duly authorised official of the Petitioner Bank in a prescribed format under Section 7 of the IB Code annexing copies of loan documents confirming the existence of debt due, payble and defaulted and proposed a name of a Resolution Professional to act as an Interim Resolution Professional (IRP). Petition admitted - moratorium declared.
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Central Excise
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2021 (5) TMI 771
Delay in conclusion of adjudication - Recovery of dues - recovery of deficit in payment of excise duty etc. on the ground of 11 years' delay in adjudication till now - HELD THAT:- Similar issue was considered by Gujarat High Court in SIDDHI VINAYAK SYNTEX PVT LTD. VERSUS VERSUS UNION OF INDIA 2 [ 2017 (3) TMI 1534 - GUJARAT HIGH COURT] . Judgments of different High Courts were referred to and it was summed up that delay in conclusion of proceedings pursuant to show cause notices after a long gap without proper explanation, is unlawful and arbitrary. The Court further examined the fact as to whether transfer of proceedings to call book in view of circular dated 14.12.1995 can be said to be a reasonable explanation. The opinion expressed was that the mandate of law cannot be diluted by issuing circular especially when there is no power to issue such directions regarding transfer of cases to call book. The impugned show cause notices having been issued long back more than a decade are not sustainable in the eyes of law, and thus, deserve to be quashed - petition allowed.
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Indian Laws
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2021 (5) TMI 773
Dishonor of Cheque - presence of legally enforceable debt or liability or not - non-supply of list of prosecution witnesses before issuance of process - section 138 of Negotiable Instruments Act - HELD THAT:- It true that in the complaint the respondent has not disclosed the legally enforceable debt or liability in discharge whereof he has received the cheque from the petitioner. That, however, cannot vitiate the complaint for the simple reason that under Section 139 of the Act, there is presumption that holder of the cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability unless of course the contrary is proved - In view of the provision of Section 139 of the Act, it is not available to the petitioner to argue that in the absence of specific mention in the complaint that the cheque was received by the respondent in the discharge of any debt or other liability, the complaint is not maintainable. Equally untenable is the argument of the learned counsel for the petitioner that the complaint in the absence of list of witnesses submitted alongwith the complaint, is not maintainable. It is true that under Section 204 of the Code of Criminal Procedure, the Court shall not issue summon or warrant against the accused unless list of prosecution witnesses is filed. However, the defect of not supplying the list of prosecution witnesses is only an irregularity and the same would not vitiate the proceedings unless failure of justice has in fact been occasioned thereby - No prejudice has been pleaded by the petitioner in this petition. In the instant case, the petitioner is yet to cause appearance in the case and before the respondent embarks upon recording of his evidence he can very well file the list of witnesses and cure the defect - the defect of not supplying the list of prosecution witnesses before issuance of process is curable, as Section 465 Cr.P.C. would come to the rescue of the respondent. Petition dismissed.
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2021 (5) TMI 769
Dishonor of Cheque - acquittal of accused - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- The parties have settled their dispute(s) by way of the compromise dated 23.01.2019, coupled with the law laid down by the Hon'ble Apex Court in MADHYA PRADESH STATE LEGAL SERVICES AUTHORITY VERSUS PRATEEK JAIN ANOTHER [ 2014 (10) TMI 528 - SUPREME COURT ] and keeping in view the specific/special reasons, this Court deviates from the conditions laid down by the Hon'ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ] and grants permission to the parties to compound the offence punishable under Section 138 N.I. Act. The impugned judgment dated 30.07.2018 passed by the learned Additional Sessions Judge, Panchkula, and the judgment of conviction dated 28.04.2016 and the order of sentence dated 29.04.2016, passed by the learned Judicial Magistrate Ist Class, Panchkula, are set aside. The complaint under Section 138 N.I. Act. is dismissed and the petitioner is acquitted of the notice(s) of accusation served upon him. The complaint under Section 138 N.I. Act. is dismissed and the petitioner is acquitted of the notice(s) of accusation served upon him - Petition disposed off.
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2021 (5) TMI 768
Recovery of outstanding dues of Municipal dues - who is liable to pay - Exemption from the liability to pay tax arises for consideration - whether the defendants can be called upon to discharge the liability? - HELD THAT:- The submission on behalf of the defendants that the plaintiff cannot insist upon the payment of taxes and charges by the defendants unless the plaintiff unequivocally acknowledges the defendants as the lessee of the suit premises, does not merit acceptance. The basic premise of the plaintiff s case is that the term of lease, as modified by the indenture of modification, has expired. In the plaint, the plaintiff has made categorical assertion that the defendant No.2, the appropriate authority, is an illegal occupant and in unauthorised possession of the suit premises. It is not the requirement of law that unless the plaintiff acknowledges the continuation of status of lessee, the later cannot be called upon to discharge the liability under the instruments/contract, in terms of which it has entered into the demised premises. The question of bar under Order II Rule 2 to the tenability of the instant suit would warrant adjudication after providing an opportunity of hearing to the parties. Undoubtedly, the expiry of term of lease, as alleged by the plaintiff, constitutes the substratum of the plaintiff s case. The question as to whether the claim for damages, as prayed for in the instant suit, is based on cause of action distinct from the cause of action on the basis of which the suit for recovery of possession of the suit premises has been instituted would, thus, arise for consideration. However, for the purpose of determination of the prayer in the instant Notice of motion, especially, the prayer for direction to pay accumulated Municipal dues and the Municipal Taxes and charges, as they fall due, the challenge on the count of the bar under Order II Rule 2, may not apply with equal force. The basis of the alleged liability is the instruments under which the predecessor-in-interest of the defendants had entered upon the suit premises The term of property has wide amplitude. It is not restricted to lands and buildings but may subsume within its fold all forms of property. There is no warrant for restricting it to the property in which the Union of India has absolute ownership right and to assume that it does not cover the interest short of absolute ownership. The plaintiff being the owner of the suit premises is served with the notices under the Mumbai Municipal Corporation Act to pay the outstanding municipal dues, at the pain of coercive action. The defendants, who are indisputably in possession of the suit premises, contest the liability to pay the municipal dues. In terms of the instruments under which the predecessor-in-interest of the defendants entered upon the suit premises, the lessee is bound to pay the municipal taxes, cess and charges. Alternatively, the defendants claim immunity from payment of municipal taxes. It is necessary to modulate the relief in such a way that the defendants get an opportunity to pursue its stand that the suit premises is exempt from payment of taxes, with the Municipal Authorities and in the event of failure to obtain a favourble order of exemption, direct the defendants to pay the Municipal taxes and charges, as have accumulated up to date, and continue to pay the same as they fall due till the disposal of the suit. The Court is confronted with the issue of Municipal Corporation proceeding with coercive action to recover its dues. As observed above, in the absence of Municipal Corporation as a party to the instant proceeding, no restraint can be ordered against the Municipal Corporation. Even otherwise, it is well recognized that a Municipal Corporation cannot be restrained from levying and collecting taxes by lightly passing interim orders. O R D E R I) Defendants No.1 to 3 may pursue the claim with the Mumbai Municipal Corporation that the suit premises is exempt from payment of taxes, cess and charges, within a period of two months. II) If the defendants do not get a declaration/order/ clarification that the suit premises is exempt from the payment of taxes, cess and charges from the Municipal Corporation, within the said period of two months, the defendants shall pay the Municipal dues accumulated till 31st March 2021 and continue to pay the Municipal taxes and charges, as they fall due henceforth. III) In the event, any coercive action is taken by the Municipal Corporation, in the intervening period of two months, costs and consequences thereof shall also be borne by the defendants No.1 to 3.
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2021 (5) TMI 766
Bribe - validity of order whereby the tribunal directed the respondents to take final decision qua departmental proceedings initiated against the respondent no.1 original applicant without delay and to complete the entire exercise before 31.03.2019 - HELD THAT:- It is the say of the petitioner that Chief Vigilance in a Circular dated 17.12.2012 states that all disciplinary proceedings in which the disciplinary authorities propose to exonerate or drop of charges, the consultation at second stage would continue to be made to the CVC by the concerned administrative authorities. This circulation also provides that all such cases where the disciplinary authority proposes to take any action which is at variance with the Commissioner's first stage advice would continue to be referred to the Commissioner for obtaining second stage advice - It emerges that the Directorate General of Vigilance, Central Board of Indirect Taxes and Customs, New Delhi vide communication dated 28.08.2018 directed that second stage advice be kept pending till the final decision of appeal before the High Court. Noticing the development in the interregnum and also considering the fair direction on the part of the CAT to the respondent authority, even otherwise, the Court finds nothing meritorious in the application, however, with the subsequent development, the matter has become infructuous and deserves to be dismissed and disposed of. Petition disposed off.
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