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TMI Tax Updates - e-Newsletter
May 5, 2020
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reopening of assessment u/s 147 - validity of reasons to believe - Information has to be such as is contemplated in the Explanation 1 to section 147 of the Act. In the present case, there is no observation of the AO that the material on record was embedded in such a manner that it was not possible for the AO to notice the same at the time of scrutiny assessment.
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Exemption u/s 11 - registration u/s 12AA - the assessee is required to provide all details regarding Constitution of its members, funds received and utilized towards charitable activities et cetera detail since inception of the society.
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Income accrued in India - the salary earned by the assessee in respect of services rendered in Australia for the period 31.08.2014 to 31.03.2015 is taxable only in Australia
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Taxability of dividend income and other income in the hands of the assessee - The assessee was all along getting returns only in the form of dividend and had never participated in any profit sharing with those public sector undertakings right from the inception of the assessee company.
Customs
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Provisional Clearance of Goods under India’s Trade Agreements - Order-Instruction
Direct Taxes
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Benami transaction - Prohibition - where it has been asserted that the suit premises was purchased in the name of the respondent No.1, but from the exclusive contributions made by late Shri R.P. Dhir and therefore in reality, was meant for the benefit of all the family members, the real test would be the source from which the purchase money came from, the nature and status of possession of the property after its purchase, the motive if any for giving the transaction a Benami colour, the position of the parties and their inter se relationship, between the appellants/plaintiffs and the respondent No.1, the overall conduct of the parties in dealing with the suit premises after it was acquired, etc.
IBC
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Initiation of CIRP - Time limitation - notwithstanding the fact that the Corporate Debtor has not raised the issue of limitation and in effect abandoned the plea before the Adjudicating Authority, it is obligatory upon this Appellate Tribunal to examine the issue of limitation, determination whereof has a bearing on the claim itself. If the claim is barred by limitation, the debt will cease to be recoverable and it will not be payable in law or in fact.
Central Excise
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Classification of goods - car matting - As the subject-goods come under the chapter-heading 570390.90, and the other entry under the same Chapter forming the subject of dispute in the second order of the Commissioner, there is no necessity to import the “common parlance” test or any other similar device of construction for identifying the position of these goods against the relevant tariff entries.
Case Laws:
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GST
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2020 (5) TMI 93
Release of confiscated goods alongwith vehicle - section 129 of CGST Act - HELD THAT:- The writ applicant availed the benefit of the interm-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1159 - GUJARAT HIGH COURT] - It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged. Application disposed off.
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2020 (5) TMI 92
Release of confiscated goods alongwith vehicle - section 129 of CGST Act - HELD THAT:- The writ applicant availed the benefit of the interm-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1159 - GUJARAT HIGH COURT] - It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged. Application disposed off.
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Income Tax
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2020 (5) TMI 91
Reopening of assessment u/s 147 - validity of reasons to believe - HELD THAT:- In the entire reasons recorded there is not even a whisper that there is any failure on the part of the assessee to disclose fully and truly all material facts. It being an admitted position that the assessment is sought to be reopened beyond a period of four years from the end of the relevant assessment year in a case where a scrutiny assessment has been made u/s 143(3) it was incumbent upon the AO to record, in the reasons itself, as to whether there was any failure on the part of the assessee to disclose fully and truly all material facts. In the absence of any such finding in the reasons recorded for reopening the assessment, the assumption of jurisdiction on the part of the Assessing Officer, beyond a period of four years from the end of the relevant assessment year, lacked validity. No substantial question of law. Insofar as the finding recorded by the Tribunal that the Assessing Officer could not lay his hands on any new information and has re-appreciated the information already possessed by him and considered it in the scrutiny assessment, as rightly pointed out by the learned senior standing counsel for the appellant, in the light of the provisions of Explanation 1 to section 147 there is no bar against the Assessing Officer on reopening the assessment on the basis of information contained in the material which was already placed before the Assessing Officer. Information has to be such as is contemplated in the Explanation 1 to section 147 of the Act. In the present case, there is no observation of the AO that the material on record was embedded in such a manner that it was not possible for the AO to notice the same at the time of scrutiny assessment. Moreover, as recorded earlier, the very same issue had already been scrutinized during the course of scrutiny assessment. No infirmity can be found in the impugned order warranting interference. - Decided against revenue.
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2020 (5) TMI 90
Long-term capital gain computation - assessee had received 50% share out of the sale consideration recorded in the sale deed - applicability of provisions of section 50C - amount at which the property was registered for the purpose of the stamp valuation - AO has raised doubt on the genuineness of this agreement to sale - HELD THAT:- If we read, the entire registered sale deed as a whole, then we cannot import part related to sale consideration only as in view of the other part, sale of the property would be taxable in the hands of the assessee in subsequent assessment year. Thus, we can t take the sale value shown in registered sale deed as sale consideration while treating the agreement to sale as genuine document. Applicability of section 50C on the agreement to sell - The word assessable has been inserted in section 50C w.e.f. 01/10/2009. Thus, prior to 01/10/2009, the section 50C was applicable over the sale of properties, which were sold by of the registered deed where the stamp value was assessed by the registration authorities and the section 50C was not applicable, where the properties were sold otherwise than by registered sale deed. The Hon ble Rajasthan High Court in the case of Satya dev sharma [ 2017 (9) TMI 1161 - RAJASTHAN HIGH COURT] has held insertion of the word assessable by way of Finance Act 2009 with effect from 01/10/2009 as having prospective in nature. In the instant case, if we consider the agreement to sale as genuine, then provisions of section 50C are not applicable and in such circumstances, the deemed sale consideration as per the stamp valuation authorities cannot be invoked in the case of the assessee. In both the situation whether the agreement to sale is genuine or not, deemed sale consideration of ₹ 1.56 crore cannot be invoked and thus finding of the lower authorities on the issue in dispute are accordingly set aside. The ground of the appeal of the assessee is accordingly allowed. Loss on sale of the shares held by the lower authorities as not genuine and not allowing set-off of the same against the long-term capital gains - For the purpose of the computation of the capital gain on transfer of asset, in terms of section 48 of the Act, the cost of acquisition and cost of an improvement of the asset along with any expenditure incurred in connection with such transfer of the asset, are to be reduced from the full value of the consideration received or accrued as a result of the transfer of the capital asset. Thus in the instant case, first issue of dispute is regarding full value of the consideration received or accrued. The assessee has explained the consideration received of ₹ 50,000/-. The Revenue has not brought on record whether the assessee received consideration more than ₹ 50,000 or consideration more than ₹ 50,000 will be accrued to the assessee. In the relevant year the provision of section 50CB were also not in existence, which provide for deemed sale consideration in case of the sale of the shares less than fair market value. In the circumstances, there is no other option other than the considering ₹ 50,000 as the sale of consideration for the purpose of section 48 of the Act. Similarly regarding cost of the acquisition also the Assessing Officer has not brought on record any adverse evidence. The contention of the Assessing Officer that the transaction is not genuine is not based on any evidence brought on record. The reliance placed by the lower authorities on the decision of Sumati Dayal [ 1995 (3) TMI 3 - SUPREME COURT] and Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] are also out of the context as no surrounding circumstances like accommodation entry providers etc. which could justify human probability, have been brought on record. The addition has been sustained without any documentary evidences on record, accordingly set aside. - Decided in favour of assessee.
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2020 (5) TMI 89
Disallowance u/s 14A - assessee received dividend income from investment including shares which were held as stock-in-trade - HELD THAT:- First ground being the exempt income earned on stock-in-trade will not attract disallowance under section 14A of the act in view of the decision in the case of CCI Ltd Vs JCIT [ 2012 (4) TMI 282 - KARNATAKA HIGH COURT] . However, in the case of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] after considering the decision of the Hon ble Karnataka High Court in the case of CCI Ltd held on the shares held as stock-in-trade , an assessee earn profit or loss on trading of the those share and additionally earn dividend also. The Hon ble Supreme Court has directed to apportion expenses towards exempt dividend income from stockin- trade as well as profit earned on trading of stock-in-trade and the expenses apportioned toward exempt income are only held as liable for disallowance. Accordingly , the Assessing Officer is required to apportion the part of expenses related to exempt dividend income and consider that part for disallowance only . CIT(A) has deleted the disallowance in view case of CIT Vs Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] if there are sufficient interest-free funds available, it can be presumed that investment had been made out of from such funds and thus no disallowance for interest is required - As seen that exempt income is not only from the equity shares kept as stock-in-trade but also from interest received on bonds. The same has been invested in compliance of the Reserve Bank of India (RBI) Rules. But once exempt income is earned, then interest for corresponding borrowing would be liable for disallowance. Thus, the assessee is required to demonstrate not only investment in shares had been out of interest free funds but investment in Bonds was also made out interest free own funds. We feel it appropriate to restore this issue to the file of the learned Assessing Officer for deciding a fresh in view of our finding above and in accordance with law. The assessee shall provide all details of the investment in assets yielding exempt income as well as own funds and funds borrowed. The assessee shall also provide details of apportionment of interest expenses in relation to a stock-in-trade towards earning dividend income as well as towards earning trading profit - ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purposes. Disallowance u/s 36(1)(iii) - as per AO interest paid on short-term borrowings for the equity shares held as a stock in trade, dividend income from which has been claimed as exempt, is not allowable in terms of section 36(1)(iii) of the Act being incurred not for business purposes - HELD THAT:- This issue has been decided in favour of the assessee by the Tribunal in assessment year 2011-12, but in view of the decision of the Hon ble Supreme Court in the case of Maxopp investment Ltd (supra), the issue requires reconsideration. It is undisputed that any expenditure related to exempted income cannot be allowed under the head profit in gains of the business. Under the head profit in gains of the business expenses related to the business income are only to be allowed as per the provisions of the Act. In the instant case, the assessee has claimed dividend income from the stock-in-trade as exempt but profit from trading of such stock-in-trade is taxable under the head profit in gains of the business. In the case of Maxopp investment Ltd (supra) as directed to apportion such interest expenses towards exempted dividend income and towards trading income. The entire interest expenditure corresponding to stock-in- trade cannot be allowed to the assessee as business expenditure. 4.3 The portion of the interest expenses related to earning of the exempted dividend income has to be disallowed. Since the issue in dispute of apportionment of interest expenses corresponding to stock-in-trade has already been restored to the file of the Assessing Officer, while deciding the disallowance under section 14A read with rule 8D of the income tax rules, this issue being connected is also restored to the file of the learned Assessing Officer for deciding a fresh in accordance with law. This ground of the appeal is also allowed for statistical purposes. Disallowance on account of provision for diminution in market value of stock-in- trade - AO observed that the assessee made a provision for diminution in market value of the stock which had already been added back while computing the book profit under section 115JB - whether diminution or reduction in price of the stock-in-trade can be allowed while computing business income? - HELD THAT:- There is no dispute that the assessee is at liberty to value its stock at cost or market value, whichever is lower as per consistent method of accounting, and such reduction if any , in value of the shares held as stock-in-trade will be allowed . But, if such a provision is made outside the trading account ( only while computation of income) then same may not be allowable. In the facts of the case , it is not clear whether the provision for diminution in value of stock-in-trade has been made out of the trading account or within the trading account , therefore, we feel it appropriate to restore the issue to the file of the AO for verifying the facts from the books of accounts and other records of the assessee and decide the issue in dispute afresh in accordance with law. We order accordingly. The ground of the appeal is accordingly allowed for statistical purpose.
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2020 (5) TMI 88
Exemption u/s 11 - rejecting the registration of the assessee under section 12AA - as per CIT-E Society is not carrying out any Charitable activities - HELD THAT:- Hon ble allowable High Court in the case of Hardyal Charitable and Educational trust [ 2013 (3) TMI 377 - ALLAHABAD HIGH COURT] after analyzing various judicial precedents on the issue in dispute held that registration under section 12AA cannot be refused on the ground that trust has not commenced the charitable or religious activity. Question of exemption of the application of the income received by way of the donation being a separate issue might be examined in assessment proceeding of relevant years. In the instant case the assessee is claiming that it was in the process of establishing educational institution for commencing its charitable activity and thus activity not being commenced, and therefore, the Learned CIT was not required to examine the said activities and reject the registration. But the registration of the assessee society before the register of society shows that the society was resisted prior to financial year 2009. The assessee has not provided any detail of the activities for the period from its establishment till the date for applying registration. In our opinion, the assessee is required to provide all details regarding Constitution of its members, funds received and utilized towards charitable activities et cetera detail since inception of the society. Since all the details have not been examined by the Learned CIT, we set aside the order of the Learned CIT with the direction to decide a fresh on verification of the objects and genuineness of the activities - Appeal of the assessee is allowed for statistical purposes.
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2020 (5) TMI 87
Reopening of assessment u/s 147 - claim of deduction u/s 54F disallowed on the ground that it was not raised in his return of income - HELD THAT:- In the original return of income, the assessee has not offered the capital gain to tax nor has he claimed deduction u/s 54F - assessment order, disallowing the claim of deduction u/s 54F is justified. Assessee had filed written submissions before the CIT(A) and had submitted before the Tribunal that he had all the relevant evidence to substantiate the claim u/s 54F. Since S.54F of the Act is a beneficial provision and the Hon ble Courts have held that the beneficial provision should be construed liberally, deem it fit and proper to admit assessee s claim of deduction u/s 54F of the Act and remand the issue to the file of the AO with a direction to consider the eligibility of the assessee for deduction u/s 54F and allow the same if the assessee satisfies the conditions. The assessee is directed to produce all the necessary evidence before the AO and cooperate with the AO for early completion of the assessment - Assessee s appeal is partly allowed for statistical purposes.
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2020 (5) TMI 86
TP Adjustment - Comparable selection - HELD THAT:- Assessee-company is engaged in the activities in India, which includes design and sales agent support services NXP s design competence centre in Bangalore offers user solutions for vibrant medis technologies and focuses on automotive, identification and software businesses, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowing the stock compensation expense - HELD THAT:- There was an amendment to section 17(2)(iiia) with effect from 01.04.2000, however, the same was deleted by the Finance Act, 2000 with effect from 01.04.2001. Being so, the judgment of the Hon ble Supreme Court in the case of Infosys Technologies Limited [ 2006 (12) TMI 62 - HIGH COURT, KARNATAKA] is squarely applicable to the facts of the case. Accordingly, we hold that the element of shares to employees under ESOP could not be treated as perquisite as there was no benefit and value of benefit, if any, was unascertainable at the time when the options were exercised. Accordingly, we allow this ground raised by the assessee.
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2020 (5) TMI 85
Reopening of assessment u/s 147 - assessee made false claim of discount passed on the customers through selfmade vouchers and bearer cheques which was against the facts on record - HELD THAT:- Section 143 assessment was completed in respect of discount and rebate which was categorically inquired by the Assessing Officer during the original assessment. All the details were before the AO and after verification only the AO passed original assessment without giving any adverse finding to that effect. Bank statement called for and the information given by the bank to the AO itself reveals that the transaction and the payments were the genuine payments in respect of discount and rebate. There is no doubt or suspicious arise from the perusal of these documents. Merely creating a doubt of the transaction does not suffice the AO to reopen the case u/s 148 - AO has to give proper reasons in case those documents are not at all produced in the original assessment itself. The reasons recorded by the AO u/s 148 are not complete reasons and lack in the context of invocation of Section 148 itself. Therefore, the reopening itself is bad and hence the assessment is bad in law. The appeal of the assessee is allowed. Assessment u/s 153A - HELD THAT:- It is pertinent to note that there is no incriminating material shown by the Assessing Officer upon which the addition was made. In fact, the seized ledger accounts pertains to A.Y. 2011-12 only and therefore the said material cannot be held against the assessee for A.Y. 2012-13 and also cannot be termed as incriminating material. While making the additions on these documents, the AO has not specifically pointed out that these expense but has disallowed all these expenses only on ad-hoc basis which is not permissible under the Income Tax Act. Therefore, the additions made itself does not have any foundation as such. Thus, the appeal of the Revenue does not sustain. - Decided against revenue.
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2020 (5) TMI 84
Disallowance u/s 14A - HELD THAT:- From the reading of the judgment of the Hon ble Apex Court in the case of Maxopp Investment Ltd. Vs CIT [ 2018 (3) TMI 805 - SUPREME COURT] we find that having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the accounts of the assessee suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment, in that eventuality, the Assessing Officer will have to record its satisfaction to this effect. In the instant case, we find that no such satisfaction has been recorded by the A.O to come to the conclusion to invoke the provisions of Section 14A(2). Hence, we decline to interfere with the order of the ld. CIT (A) and the disallowance is directed to be deleted. Claim of depreciation on software - @25% OR 60% depreciation claimed by the assessee - CIT (A) deleted the addition on the grounds that the AO has mislead himself treating the software as intangible asset - HELD THAT:- we find that the nature of the software acquired were licenses, which do not confer any enduring right and could be used for the duration as acquired for by the licensor. The taxpayer s objective was to use computer software to maximize its performance and streamline efficiency. The Hon ble Bombay High Court in the case of M/s IFlex Solutions Ltd. . [ 2014 (3) TMI 1162 - BOMBAY HIGH COURT] held that there is no reason to differentiate the computer and the software as the latter is an integral part of the former. The software cannot be seen in isolation delinked from the computers. The issue of depreciation @60% on the software is now a settled issue beyond any perplexity. Employee Compensation Expenses - allowable expenditure u/s 37(1) - HELD THAT:- Discount offered on the shares under the ESOP of scheme is allowable deduction u/s 37(1) of the Act, we hereby remand the matter to the file of the AO for the limited purpose of arithmetic calculation of apportioning the year wise discount over the period of vesting taking into consideration, the options granted to the employees, determination of the perk value, FBT levied and allow the same as per the provisions of the Income Tax Act, 1961.
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2020 (5) TMI 83
Penalty levied u/s 271(l)(c) - Bogus purchases - AO restricting the profit element in the alleged bogus purchases at 20.71% - penalty levied on estimate basis and voluntary surrender by the assessee - HELD THAT:- It is a settled position of law that penalty cannot be levied when an adhoc estimation is made. On a perusal of the record, in this case we find that an estimation of Gross Profit was made by the Assessing Officer restricting the profit element in the alleged bogus purchases at 20.71% for the year under consideration. Similar view has been taken in the case of CIT v. Aero Traders Pvt. Ltd. [ 2010 (1) TMI 32 - DELHI HIGH COURT] wherein the Hon'ble High Court affirmed the order of the Tribunal in holding that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars. In the case on hand the AO has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. No infirmity in the order passed by the CIT(A) in deleting the penalty u/s. 271(1)(c) levied by the Assessing Officer. - Decided in favour of assessee.
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2020 (5) TMI 82
Addition of Leave encashment claim(s) - Deduction on payment basis or accrual basis - HELD THAT:- CIT-DR fails to dispute the CIT(A) s identical lower appellate discussion in these three assessment year(s) has gone by actual payments only u/s 43B(f) of the Act. The CIT(A) has also taken note of the hon'ble jurisdictional high court s decision in Exide Industries Ltd. vs. Union of India [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] quashing foregoing statutory provision itself as ultra vires and its operation stayed in hon'ble apex court s to conclude that assessee s mere provision of leave encashment does not deserve to be accepted. We find neither any legality nor irregularity in the CIT(A) s action under challenge. The Revenue s identical first substantive grievance in these three assessment year(s) fails therefore. Addition u/s 14A r.w.r. 8D - HELD THAT:- There is hardly any dispute that the Rule 8D of the Income Tax Rules comes into play for the purpose of quantification of disallowance of expenditure pertaining to an assessee s exempt income. The same applies from assessment year(s) 2008-09 onwards as held in Godrej Boyee Manufacturing Co. Ltd. vs. DCIT [2017 (5) TMI 403 - SUPREME COURT] upholding hon'ble Bombay high court s decision to this effect. Coming to assessee s dividend income, case file(s) suggests that it had declared suo motu expenses. AO's corresponding regular assessment disallowed proportionate interest as well as administrative expenses under Rule 8D(2)(ii)(iii). We proceed in this backdrop and observe that since the assessee could neither explain correctness of its suo motu expense; whether falling under any or all three head(s) nor there was any indication that the corresponding administrative expenditure indirect in nature stated included qua the exempt income yielding investments or not. We make it clear that this tribunal s co-ordinate bench s decision in REI Agro Ltd. vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] holds that the impugned administrative disallowance has to be computed going by the exempt income yielding investments only. We therefore decline the assessee s arguments that the Assessing Officer s action invoking sec. 14A / 8D disallowance was without recording any satisfaction. Computation of the impugned disallowance going by the three head(s) of direct , proportionate interests and administrative expenditures under Rule 8D(2)(ii)(iii) of the Income Tax Rules w.e.f. assessment year 2008-09 onwards, we are of the opinion that the Income Tax Settlement Commission s adjudication in the said preceding three assessment year(s) restricting the impugned disallowance pertaining to three AYs of exempt income does not form a binding precedent being per incarium as per CIT vs. B.R. Constructions [ 1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT] . We thus reverse the CIT(A) s above lower appellate findings to this effect. Indirect head of administrative expenditure @ 0.5% of average value of investment under Rule 8D(2)(iii) - HELD THAT:- Only exempt income yielding investments deserve to be included for the purpose of determining the corresponding figures. We therefore restore the Revenue s instant second substantive grievance to the extent of Rule 8D administrative disallowance computation back to the Assessing Officer. See REI AGRO LTD, KOLKATA VERSUS DCIT CENTRAL CIRCLE-XXVII, KOL [ 2013 (9) TMI 156 - ITAT KOLKATA] No sec. 115JB MAT computation qua the impugned sec. 14A read with Rule 8D disallowance Additional depreciation claim @ 10% u/s 32(1)(iia) since it had put its corresponding fixed assets to use in earlier assessment year(s) than installation thereof in the relevant previous year. TP Adjustment - corporate guarantee amount to an international transaction - HELD THAT:- As relying on M/S EMAMI LIMITED [2019 (5) TMI 1371 - ITAT KOLKATA] a corporate guarantee as not amounting to an international transactions u/s. 92B of the Act. All these corresponding grounds fail therefore. Provision for foreseeable loss in contract revenue for the purpose of normal as well as MAT computation - AO disallowed the same as a contingent liability since not crystallized in the relevant previous year - HELD THAT: - Hon'ble apex court s landmark judgment in Commissioner of Income Tax vs. Chainrup Sampatram [1953 (10) TMI 2 - SUPREME COURT] held long back that although the principles of conservatism and prudence in accounting require that no anticipated profits are to be recorded as income until realised, the converse is not true regarding anticipated losses which could be booked at the first sign of reasonable probability. We conclude in view of all these foregoing facts that the assessee was very well justified in claiming the impugned foreseeable liability provision in these two assessment year(s) regarding its project works by in compliance of AS-7 of the Act. The Revenue s instant substantive grievance fails therefore. Disallowing assessee s employees contribution to PF ESI respectively by invoking sec. 36(1)(via) of the Act since the same had not been paid within the due date as prescribed in the specific Acts - HELD THAT:- Hon'ble jurisdictional high court in Commissioner of Income Tax vs. M/s Vijay Shree Ltd. [2011 (9) TMI 30 - CALCUTTA HIGH COURT] holds that such a disallowance deserves to be deleted in case the assessee has deposited the ESI / PF contribution in question before the due date of filing of its return of income which is not in dispute before us. We thus affirm the CIT(A) s action deleting the impugned disallowance on this count alone. Market-to-market loss derived from the derivative transactions - HELD THAT:- CIT(A) has admittedly taken note of various judicial precedents i.e. Woodward Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] that the impugned mark-to-market loss is allowable to be recognized in respect of the outstanding derivative contracts pertaining to regular course of business. Hon'ble apex court s decision in CIT vs. Indra Industries [2000 (1) TMI 44 - SUPREME COURT] also holds that Board s circular are binding only on the departmental authorities. Coming to sec. 115JB computation relevant to the impugned MAT loss - As decided in Himadri Chemicals [2018 (9) TMI 528 - ITAT KOLKATA] such a provision is not a contingent liability and not liable to be included therefore. The CIT(A) s findings are affirmed therefore. Bogus management consultancy services - AO invoked the impugned disallowance mainly on the ground that the payee herein alleged to have provided consultancy services to the assessee s turned out to a shell entry in mere accommodation entry business - HELD THAT:- CIT-DR fails to dispute that the assessee had placed on record all the relevant evidence of the said recipient. Hon'ble jurisdictional high court s decision in Inbuilt Merchant Pvt. Ltd. [2014 (3) TMI 1107 - CALCUTTA HIGH COURT] has already set identical issue to treat that such a compliance by way of all detailed evidence forms sufficient reason to prove rendering of the services as well as genuineness of payments. We thus affirm the CIT(A) s findings deleting the impugned management consultancy services disallowance as well. Notional interest income addition received / receivable from M/s SPL for loans provided - HELD THAT:- No fault in the CIT(A) s action going only by real income principle in view of the various judicial precedents that such a notional income in case of defaulting entity a NPA does not lead to assessment of taxable income. Department could not add any notional income in an assessee s hands just because a payer had deposited TDS qua the same. We wish to re-emphasis here that there is material whatsoever which could suggest payment credit of any interest income in assessee s books. See TOYO ENGG. INDIA LIMITED [ 2005 (9) TMI 237 - ITAT BOMBAY-J] .We thus uphold the CIT(A) s findings under challenge. Adding educational cess u/s 40(a)(ii) - HELD THAT:- This issue of educational cess disallowance u/s 40(a)(ia) is no more res integra as in Chembal Fertilizers Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] holds that the relevant statutory provision to this effect as well as the CBDT s circular issued way back on 18.05.1967 do not include Cess .
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2020 (5) TMI 81
Validity of reopening u/s.147 - addition u/s.68 - HELD THAT:- Here in this case based on specific information and material found during the course of investigation in the case of Shri S.K. Jain, the assessee was found to be beneficiary of accommodation entry and there was specific mention of cheque and details and the entity providing the entry along with date, which also commensurate with the entries in the assessee s books of account. Such an information and material prima facie goes to show that the transaction entered by the assessee was not genuine and thus, constitute tangible material for forming reason to believe that income chargeable to tax escape assessment. The reasoning as incorporated by CIT(A) is not only based on correct facts but also had correct appreciation of law and we do not find any reason to deviate from such a conclusion and absence of any rebuttal from the side of the assessee. Accordingly, the validity of reopening is upheld. Addition u/s 68 - AO has conducted his inquiry and issued summons and notices to the three entities. However, none of the parties responded on the notices sent came back unserved. When assessee was confronted with this fact and was asked to produce the Director/Principal Officer of the company who have given loan, the assessee could not comply with such a requisition by the Assessing Officer. Thus, genuineness of the transaction and the creditworthiness could not be established. As noted by the Ld. CIT(A) is that, before issuing the cheques in the form of loan to the assessee, exact amount of cash was found to be deposited in the bank account of these companies and these companies were managed and controlled by Shri S.K. Jain through dummy Directors which fact has emerged from the inquiry made by the Investigation Wing. In such a situation, the onus lies heavily upon the assessee to rebut and allay the doubts, which assessee has failed to do so. Therefore, the burden cast upon the assessee to prove the creditworthiness and genuineness of the transaction could not be proved. In absence of any contrary material, we do not find any reason to deviate from the finding recorded by the Ld. CIT(A) and same is confirmed. - Decided against assessee
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2020 (5) TMI 80
Capital gain computation - Non-grant of deduction of interest expenditure as part of cost of construction while computing capital gains u/s 48 - HELD THAT:- There is a consistent view among various Hon ble High Courts and which has been consistently followed by the various Benches of the Tribunal that the assessee is entitled to include interest as part of the cost of the assets while computing the capital gains u/s 48 of the Act. In the absence of any contrary authority brought to our notice, the Assessing Officer is directed to allow the interest expenses paid to LIC Housing Finance Ltd. subject to appropriate indexation while computing capital gains u/s 48. - Appeal of the assessee is allowed.
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2020 (5) TMI 79
Disallowance of prior period expenses - HELD THAT:- Having said that, the fact that the interest was paid by the assessee has not been disputed by the Revenue and following the proposition laid down by the Hon ble Supreme Court in case of case of Excel Industries [2013 (10) TMI 324 - SUPREME COURT ] where there is no change in effective rate of tax at which the assessee company has paid the taxes in the preceding financial year and in the year consideration, there is no loss to the Revenue. Whether such borrowing has been made for business purposes has not been examined by the Assessing officer as the claim was rejected on ground of prior period expense, the same has to be examined by the Assessing officer. Therefore, for these two limited purposes of examining the effective rate of tax at which the assessee company has paid taxes and whether borrowing has been made for business purposes, the matter is set-aside to the file of the Assessing officer after providing reasonable opportunity to the assessee. In the result, ground No. 2 of assessee s appeal is allowed for statistical purposes. Disallowance of travel expenses - whether such travel have been undertaken for the purposes of assessee s business or not? - HELD THAT:- In the instant case, we find that nothing has been brought on record in terms of any dealer s meeting invitation and related correspondence which can reasonably be relied upon in support of assessee s contention. In absence of appropriate documentary evidence in support of the foreign travel, the onus cast on the assessee is not satisfied and we see no infirmity in the action of the Assessing officer and the disallowance so made by the Assessing Officer is hereby confirmed and the Ground No. 3 of assessee s appeal is dismissed. Disallowance of rent expenses - Addition u/s 40A(2)(b) - assessee company was using the said premises just for address purposes and no business activities were being carried out and the said premises were actually residence of the directors - HELD THAT:- On perusal of the minute books of the assessee-company, it is noted the meetings of Board of Directors and also of the shareholders in terms of annual general meetings are regularly held at this place. Therefore, we find that the said office premises have been used for the purposes of assessee-company s business and it has established the necessary nexus of the rent expenses being incurred for the purpose of its business - rent payments have been made by the assessee company to one of its Directors, however, merely because payment has been made to a related person would not be sufficient to make the disallowance U/s 40A(2)(b) - onus is on the Revenue to bring on record comparable instances wherein the rent payment for similar premises are the lower than the rent paid by the assessee-company - there is nothing on record which has been brought by the Revenue to hold the payment as excessive -disallowance so made by the Assessing Officer is hereby deleted - ground no. 4 of assessee s appeal is allowed. Disallowance of interest u/s 36(1) - HELD THAT:- There are liquid funds which are not locked up in assets and inventory and which can be actually used for placing the advance towards the purchase of land. That is, availability of surplus deployable funds at the relevant point in time when the advances were placed towards the purchase of land. Secondly, whether such funds are arising out of operating revenues for the year and otherwise available as part of free reserves and doesn t carry any interest burden or not. In the instant case, we find that there are mere contentions not supported by any hard data and figures. At the same time, where the Assessing officer alleges that interest bearing funds have been used for placing such advances, the onus is equally on the Revenue to support the said contention with verifiable hard data and figures. Merely stating that the assessee is paying huge interest cost on borrowed funds and has given interest-free funds is not sufficient as necessary nexus has to be established between the borrowed funds and placing of such advances. There are short-comings on both side, the matter require further examination, and in the interest of justice, it would be appropriate that the matter is set-aside to the file of the Assessing officer to examine the same afresh after providing reasonable opportunity to the assessee. In the result, the matter is set-aside to the file of the AO and the ground of appeal is allowed for statistical purposes. Disallowance of salary expenses - HELD THAT:- CIT(A) has recorded a finding that during the assessment and appellate stage, the assessee did not furnish complete name and address or designation of the employees whom the salary was claimed to have been paid and the maximum salary is claimed to have been paid in cash. Per contra, the contention of the asseseee is that it maintains full record of salaries subject to regular scrutiny of labour department. Further, salary has been paid after deduction of ESI, PF etc and details are available on record showing month wise salary, PF, ESI and net payment to employees along with evidences. The question is whether such records were produced and available before the Assessing officer for his examination or not, however, we donot find any clear answer from the perusal of records. Given that such records are claimed to be maintained at the relevant point in time and already subject to scrutiny of labour department, we believe that the assessee deserve one more opportunity to produce such records for verification before the Assessing officer and the matter is accordingly set-aside to the file of the Assessing officer. In the result, the ground of appeal is allowed for statistical purposes. Disallowance @15% out of various expenditures - HELD THAT:- There are contradictory claims and contentions advanced by both the parties and in absence of relevant facts emerging from records, we deem it appropriate to restore the matter to the file of the Assessing officer to examine the same afresh and to pass a speaking order in this regard. Factum of particular expense payment in assessee s line of business may be consistent with earlier years, however, the examination thereof is a factual exercise to be undertaken every year and outcome thereof need not be guided solely with the outcome and treatment done in the earlier years. It is therefore, incumbent on part of the Assessing officer, where he intends to disallow any expenses, to bring out specific defect in the documentation so maintained for the year under examination and submitted for verification, and record a finding that a particular expense has not been incurred for the purposes of business or the expense is bogus in nature for the relevant year. In the result, the ground of appeal is allowed for statistical purposes. Non deduction of TDS - payments u/s 194H and 194C - HELD THAT:- Payments are below the threshold limits provided in the respective TDS provisions and thus, the disallowance so made is directed to be deleted. In the result, the ground of appeal is allowed.
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2020 (5) TMI 78
Allowing capital loss claimed by the assessee on the debts - HELD THAT:- We are in agreement with the argument advanced by the Ld. A. R. that merely because the assignee company had not disclosed business income in their income tax returns for subsequent years in the year of recovery of debts, that would not prejudice the right of the assessee company to claim capital loss in the year of extinguishment of their right in favour of the assignee company. We find that CIT(A) had given a categorical finding in page- 22 of his order that MCC Finance Ltd., came out of liquidation by an order of Madras High Court dated 09. 11. 2012, Mr. Rajamani became a director in MCC Finance Ltd., only on 15. 11. 2012. We find that Mr. Rajamani upon becoming a Director in MCC Finance Ltd., had signed the share certificates which were allotted to the assignee company M/s. Golden Star Asset Consultants (P) Ltd. It is normal practice that the lender company would propose a Director to the board of borrowing company. The borrowing company in the instant case would be MCC Finance Ltd., pursuant to the assignment of debt. Hence, the event that had happened after the date of assignment of debt, cannot be used to judge the transaction, which had happened on the date of assignment in assessment year 2011-12. Accordingly, the argument of the Ld. D. R. is dismissed. To sum up, the transactions in respect of assignment of debt recoverable from API, is remitted back to the file of A. O. and transactions in respect of debt recovery from MCC Finance Ltd., is decided in favour of the assessee. Accordingly, the grounds raised by the Revenue are disposed off in the aforesaid manner. - Appeal of Revenue is allowed for statistical purposes.
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2020 (5) TMI 77
Income accrued in India - salary received by the assessee from Australia entity - India-Australia DTAA - taxability of salary received for the period 31.08.2014 to 31.03.2015 in India in respect of services rendered by him in Australia - HELD THAT:- From the reading of aforesaid provisions of Section 15(a) of the Act, it could be concluded that the salary is always taxable on accrual basis. Even as per Provisions of Section 9(1)(ii) which states that income deemed to accrue or arise in India, salary income could be deemed to accrue or arise in India, only if it is earned in India in respect of services rendered in India. Provisions of Section 9(1)(ii) of the Act read with Explanation to clause(a) is very clear in this regard. We find the assessee had claimed exemption under Article 15(1) of India-Australia DTAA for claiming the salary income received for the period 31.08.2014 to 31.03.2015 as not taxable in India. In the instant case as narrated above, there is absolutely no dispute that assessee herein is a resident of Australia and non-resident of India during the year under consideration. Hence, assessee would be entitled to India-Australia Treaty wherein as per Article-15, salary income of resident of Australia is taxable only in Australia. Accordingly we hold that the salary earned by the assessee in respect of services rendered in Australia for the period 31.08.2014 to 31.03.2015 is taxable only in Australia (this is also duly offered to tax by the assessee in Australia as evident from Australian Tax return filed by the assessee) and not in India. - Decided in favour of assessee.
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2020 (5) TMI 76
Deduction u/s 10 (38) denied - AO in treating the purchase and sale of shares by the assessee, as penny stock transactions - denial of natural justice - HELD THAT:- Assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made based on the evidences collected by the Revenue in the course of the investigation conducted by them on brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. See RAMAKRISHNA DEO. [ 1958 (10) TMI 9 - SUPREME COURT] A O must keep in mind that the onus of proving the exemption rests on the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. We deem it fit to remit the issues of exemption claim in this appeal back to the file of the A.O. for re-adjudication on the lines indicated above. A O shall require the assessee; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply with the A.O s requirements as per law - issues of exemption claim u/s 10(38) are restored to the file of the AO for re-adjudication - Assessee appeal allowed for statistical purposes.
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2020 (5) TMI 75
Revision u/s 263 - adjustment of business loss or unabsorbed depreciation as per books of account, while computing book profit u/s.115JB - HELD THAT:- We find that this is only a factual verification to be made by the Ld.AO from the records of the earlier years and decide the availability of business loss or unabsorbed depreciation for the purpose of reduction while computing book profit U/s.115JB - AO is directed to do so in accordance with law. Hence, the direction of the Ld.CIT in this regard is hereby upheld with all issues left open for the assessee to present with necessary evidences before the Ld.AO. AO is directed to decide this entire issue in accordance with law. Accordingly grounds raised by the assessee in respect of this issue are dismissed. Taxability of dividend income and other income in the hands of the assessee under the head profits and gains of business and profession or income from other sources and consequently set-off of brought forward business losses from earlier years against such income - It is incumbent on the part of the assessee that having promoted industries in the State and having undertaken to participate in the day to day affairs in the management of those undertakings by participating in crucial decision making process. The assessee had to maintain its 24% equity stake in those undertakings at every point in time, so as not to lose controlling interest over the respective undertakings. With regard to yet another observation made by the Ld.CIT in his order that in Schedule VII of the Balance sheet, the assessee company had shown investments other than subsidiaries and had shown market value of investments thereon. We find that this disclosure requirement is made in accordance with Schedule VI of the Companies Act, 1956, which has got absolutely no relevance for the purpose of Income Tax Act. The assessee was all along getting returns only in the form of dividend and had never participated in any profit sharing with those public sector undertakings right from the inception of the assessee company. Hence, the case laws relied upon by the Ld.AR which were passed by this Tribunal and by the Hon ble Jurisdictional High Court in the assessee s own case for the earlier years would rule the field even for the year under consideration before us. Accordingly, the observations of the Ld.CIT in Pages 6 to 8 of his order are dismissed and the grounds raised by the assessee in this regard are allowed. Appeal of the assessee is partly allowed.
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2020 (5) TMI 74
Denial of natural justice - no opportunity granted by show cause notice - admission of additional evidence under Rule 46A of the IT Rules refused - As per assessee no realistic opportunity was given to the assessee to comply with the notice seeking relevant details - HELD THAT:- Final show cause notice dated 27-12-2017 issued by the AO sought details and explanations on certain expenses in question expecting the assessee to comply therewith on the very next day i.e. 28-12-2017 and the assessment order was eventually passed on 29-12-2017. It is thus, apparent that the opportunity granted by show cause notice was illusory and an empty formality to complete the assessment. An assessment order passed in contravention of natural justice is a nullity in the eyes of law. Clause-(b) of Rule 46A itself clearly spells out that an assessee would be entitled to produce additional evidence before the CIT(A) where he was prevented by sufficient cause from producing the evidence which he was called upon to produce by the AO. The case of the assessee squarely falls within the circumstances explicitly laid down under Rule 46A. Be it as it may, the powers of CIT(A) is not fettered or circumscribed by Rule 46A for admission of additional evidences. In view of the mandate of the provisions of s.250(4) of the Act also, the situation existing in the case as narrated above, clearly warranted admission of additional evidence by the CIT(A). We thus find apparent fallacy in the action of the CIT(A). The order of CIT(A) on the subject matter of appeal is thus set aside and restored to the file of AO for denovo adjudication - Assessee appeal allowed for statistical purposes.
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2020 (5) TMI 73
TP Adjustment - comparable selection - exclusion of companies by application of RPT filter of 0% - HELD THAT:- In ordinary circumstances when there is no difficulty of selecting the comparable companies the tolerance range of 15% of related party is considered to be proper. Only in extreme and exceptional circumstances when the comparable companies are not easily available or found then this tolerance range is relaxed up to 25%. Therefore in the case of the assessee where neither the TPO nor the assessee has made out a case of exceptional difficulty in searching the comparable companies then the normal tolerance range of 15% shall be taken as proper. Hence we set aside the order of the CIT(A) qua this issue of related party transaction filter and also modify the order of the TPO on this issue and hold that 15% tolerance range of related party is reasonable and proper in the case of the assessee. By applying this filter the companies which are having the related party transaction upto 15% will be restored to the set of comparable however, subject to our finding on the functional comparability of those companies. High profit margin was taken by the CIT(A) for exclusion of certain companies namely Exensys Solutions Ltd., and Thirdware Solutions Ltd. - This issue is now settled that high profit or loss cannot be a criteria for inclusion or exclusion of companies in the set of comparables - if the high profit or loss is by the reason of some extraordinary circumstances then those extraordinary circumstances which has led to the high profit or loss can be considered as a criteria for inclusion or exclusion of the companies in the list of comparables. Therefore, the mere high profit margin or loss cannot be considered as a parameter or criteria for selection of comparable companies as held by the special bench of this Tribunal in case of Maersk Global Centres (India) (P.) Ltd. Vs ACIT [ 2014 (3) TMI 891 - ITAT MUMBAI] Functional dissimilarity - Referring to software development services provider companies like assessee companies functionally dissimilar with that of assessee need to be deselected from final list. Eligibility of deduction u/s. 10A in respect of the amount of provision for management charges payable to its AE - HELD THAT:- The assessee has stated that this amount was allowed as business expenditure in the earlier year and therefore the business profit of the assessee for the purpose of deduction u/s. 10A was reduced by this amount in the earlier year. During the year under consideration the assessee has reversed the provision which has resulted increase in the business income of the assessee and therefore it is eligible for deduction u/s.10A. Since this fact of provision being allowed as business expenditure in the earlier year has not been verified by the authorities below and therefore in the absence of any finding on this issue by the authorities below it is not possible to give a concluding finding at this stage. Thus in the facts and circumstances of the case we set aside this issue to the record of the AO for verification of the relevant facts and then decide the claim of the assessee as per law.
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2020 (5) TMI 72
Shortage of stock - Addition u/s 69 - Difference in Stock as per stock statement filed before Bank and as per books - CIT-A deleted the addition - HELD THAT:- CIT (A) has noted that the assessee has duly explained the difference in the valuation of the stock as given to the bank and as compared with the books of account of the assessee. CIT (A) has rightly observed that the method of accounting followed for valuation of the closing stock should have been applied in respect of the valuation of the opening stock also. CIT (A) has rightly noted from the statement of the Bank Manager that the stock was not physically verified by the bank at the spot. The assessee has duly explained through the charts that if the adjustment of shortage usually booked on the last date of the financial year as per the regular accounting policy followed by the assessee taken into consideration, there remains no / negligible difference between the stock statement given to the bank. The Ld. Counsel for the assessee in this respect has also explained that the stock statement given to the bank was on estimation basis and that the minor difference in this respect was required to be ignored. - Decided against revenue.
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2020 (5) TMI 71
Revision u/s 263 - Unexplained income - Addition based on document found in the course of survey in the case of Vijay Construction as undisclosed income of the assessee - HELD THAT:- AO of M/s. Vijay Construction who examined all these details has considered the explanation given therein that the amount of ₹ 1,05,00,000/- included the amount of ₹ 75,00,000/- being the advance from M/s. Ashish Barter Pvt. Ltd., and an amount of ₹ 30,00,000/- representing gift from the mother of Shri Pawan Vijay Jadhav, a partner of M/s. Vijay Construction. It is after considering the explanation that no addition has been made in the hands of either Pawan Vijay Jadhav or Vijay Construction Pvt. Ltd. Said document is in fact the document found in the course of survey of M/s. Vijay Construction Pvt. Ltd. M/s. Vijay Construction Pvt. Ltd. has given an explanation in respect of the said document. AO in respect of M/s. Vijay Construction has accepted explanation given by the assessee therein. Now, it would be farfetched for the A.O in the case of assessee herein to take a stand that the amount belongs to the assessee just because the assessee s name is mentioned in the seized document. Confirmation letters have been produced in respect of amount being the advance received from Ashish Barter Pvt. Ltd. and the gift from the mother of Shri Pawan Vijay Jadhav. This being so, we are of the opinion that the enhancement done by the learned CIT(A) in respect of the amount of ₹ 1,05,00,000/- in the hands of the assessee is unsustainable and is deleted. As we have already held that the amount is the undisclosed income in the hands of the assessee. The said amount does not in any way relate to the assessee and consequently the interest in respect of the said amount cannot be added in the hands of the assessee. - Decided in favour of assessee.
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Benami Property
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2020 (5) TMI 70
Benami transaction - Prohibition of the right to recover property held benami - Holding suit premises in a fiduciary capacity - Suit for partition and permanent injunction instituted against the respondents/defendants claiming that they are collectively entitled to 1/10th undivided share in the residential premises - three appellants/plaintiffs are the successors-in-interest (widow and children) of late Shri Anil Kumar Dhir, brother of the respondents No.1 to 7 and the deceased respondents No.8 and 9 - HELD THAT:- In the present case, the stage of evidence had not even been arrived at. In fact, only pleadings in the suit were completed. Issues have also not been framed. Therefore, there was no occasion for the court to determine as to whether the respondent No.1 stood in a fiduciary capacity vis-a-vis his deceased brother, Shri Anil Kumar Dhir, predecessor-in-interest of the appellants/plaintiffs. On perusing the averments made in the plaint, it cannot be said at this stage that the suit is barred by Benami Act. On a bare reading of the averments made in the plaint read in conjunction with the documents placed on record, we are of the opinion that sufficient material facts have been disclosed requiring determination only after a proper trial. At the stage of deciding an application moved by the respondents under Order VII Rule 11 CPC, there was no occasion for the court to have taken pains to interpret and analyse the documents filed by the appellants/plaintiffs to hold in favour of the respondents. In the instant case where it has been asserted that the suit premises was purchased in the name of the respondent No.1, but from the exclusive contributions made by late Shri R.P. Dhir and therefore in reality, was meant for the benefit of all the family members, the real test would be the source from which the purchase money came from, the nature and status of possession of the property after its purchase, the motive if any for giving the transaction a Benami colour, the position of the parties and their inter se relationship, between the appellants/plaintiffs and the respondent No.1, the overall conduct of the parties in dealing with the suit premises after it was acquired, etc. [Refer: Jaydayal Poddar (Deceased) through LRs and Anr. vs. Mst. Bibi Hazra and Ors. [ 1973 (10) TMI 55 - SUPREME COURT] - It would therefore be imperative to weigh the evidence in the instant case for the court to conclusively decide as to whether the appellants/plaintiffs can succeed in their claim that the respondent No.1 is holding the suit premises in a fiduciary capacity, for the benefit of all the family members. Present appeal succeeds. The impugned judgment is quashed and set aside. The suit is restored to its original position for being taken further from the stage at which the impugned judgment was passed.
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Customs
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2020 (5) TMI 69
Provisional release of seized goods - perishable goods - requirement of furnishing of bond/securities to the satisfaction of the customs officer - HELD THAT:- The contention of the learned advocate for the customs authorities, cannot be accepted, inasmuch as, the law on the subject is that after seizure under Section 110 of the said Act, the goods may be released provisionally to the owner, pending adjudication, upon taking a bond from him or upon furnishing such security and fulfillment of such other conditions. The release as contemplated under Section 110(2) is unconditional release on account of the failure of the authority to initiate the confiscation proceedings within the period of six months whereas provisional release is a section giving a right to an importer to pray for a provisional release of perishable goods likely to be damaged due to pendency of the proceedings upon fulfillment of all conditions and furnishing of bond and security to the satisfaction of the authorities. Quantum of security that should be furnished - HELD THAT:- The issue is not taken into consideration at this stage because this Court is not deciding on the provisional release which is entirely within the domain of the authorities. Petition disposed off.
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2020 (5) TMI 68
Redemption of goods for the purpose of re-export only - Section 125 of the Customs Act, 1962 - HELD THAT:- Tribunal in the case of NATHI MAL RUGAN MAL VERSUS COMMISSIONER OF CUSTOMS, NHAVA SHEVA, RAIGAD [ 2018 (11) TMI 99 - CESTAT MUMBAI] after referring to Section 125 of the Customs Act, 1962 as well as various decisions have observed that no such condition that the goods can be redeemed only for re-export can be imposed. Further, in the case of HBL POWER SYSTEMS LTD. VERSUS CC, VISAKHAPATNAM [ 2018 (7) TMI 793 - CESTAT HYDERABAD] , similar view was taken. The order passed by the Commissioner (Appeals) that the goods can be redeemed only for re-export is unjustified - The impugned order is modified to the extent of setting aside the direction by the commissioner (Appeals) that the goods can be redeemed only for re-export. As already directed by the Commissioner (Appeals), the adjudicating authority shall quantify the redemption fine payable by the appellant within 30 days from the date of receipt of certified copy of this order. Appeal allowed in part.
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Corporate Laws
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2020 (5) TMI 67
Sanction of scheme of amalgamation - sections 230 to 232 of the Companies Act, 2013 - in the entire undertakings of the transferor companies as a going concern together with all the assets and liabilities relating thereto is proposed to be transferred to and be vested in the transferee company on the terms and conditions and in the manner fully stated therein - HELD THAT:- The scheme of amalgamation mentioned in paragraph 1 of this petition being annexure A1 hereto be sanctioned by this hon'ble Tribunal to be binding with effect from the April 1, 2017 or from such other date as this hon'ble court may fix on transferor companies and transferee company. All the properties, rights and interest of transferor companies be transferred to and be vested without further act or deed in transferee company and accordingly the same shall pursuant to sections 230 to 232 of the Companies Act, 2013 be transferred to and be vested in transferee company for all the estate and interest of transferor companies subject never the less to all charges now affecting the same. Petition disposed off.
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Insolvency & Bankruptcy
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2020 (5) TMI 66
Condonation of delay in the submission of the Resolution Plan - condonation sought on the ground that Applicant is not in a position to reasonably evaluate the liabilities and claims that may devolve upon the said Applicant- Sify Technologies Limited - HELD THAT:- As per third proviso to Section 12, now 90 days more time has been given to complete the Resolution Process from the date the aforesaid amendment has come into force i.e. from 16th August, 2019 - In view of the aforesaid development, as further time has been allowed under the I B Code , we are not inclined to interfere with the impugned order dated 7th August, 2019 merely on the ground that the Appellant will have to face the consequence. If one or other Resolution Plan is found to be more viable and feasible and will maximise the assets of the Corporate Debtor , balancing all the stakeholders by maximising the assets of the Financial Creditor / Operational Creditor and others, no right accrues to any individual Applicant(s) to stall such process. Appeal dismissed.
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2020 (5) TMI 65
Initiation of CIRP - Time limitation - advancement of loan and allied financial facilities to the Corporate Debtor - HELD THAT:- In view of there being no controversy as regards facts qua advancement of loan and allied financial facilities to the Corporate Debtor falling within the purview of financial debt , the status of parties before the Adjudicating Authority as Financial Creditor and Corporate Debtor besides the admitted position as regards default in clearing the outstanding amount of debt which according to Financial Creditor stood at ₹ 273,09,68,793/- as on 31st March, 2018, the only issue requiring consideration in the instant appeal relates to limitation, notwithstanding the fact that the issue appears not to have been pressed before the Adjudicating Authority - Section 3 of the Limitation Act, 1963 renders it obligatory upon the Tribunal to address the issue of limitation notwithstanding the fact that the same has not been raised as a ground of defence by the Respondent. The dictum of law enshrined in Section 3 of the Limitation Act is loud and clear and speaks of no exception other than the situations covered under Sections 4 to 24 thereof. This is a mandatory provision of law barring a remedy qua an enforceable right and the effect is that the Creditor s remedy to recover an outstanding debt gets eclipsed though the right itself does not get extinguished. Therefore, notwithstanding the fact that the Corporate Debtor has not raised the issue of limitation and in effect abandoned the plea before the Adjudicating Authority, it is obligatory upon this Appellate Tribunal to examine the issue of limitation, determination whereof has a bearing on the claim itself. If the claim is barred by limitation, the debt will cease to be recoverable and it will not be payable in law or in fact. In such an eventuality, the Corporate Debtor cannot be held to have committed default in respect of the outstanding debt. It is manifestly clear that unless the case of a Creditor falls within the exceptions, exemptions or exclusions as noticed hereinabove or there is no acknowledgment of liability in writing on the part of the Debtor at a time when the claim was enforceable i.e. within limitation period, the claim of the Creditor shall be barred by limitation unless preferred (whether in the form of a suit or such other form as may be prescribed) within the period of limitation prescribed under law - It is therefore necessary to wade through the record to find out as to when the right to sue accrued and whether the application filed by the Financial Creditor was within limitation. Contention raised by Appellant that the power of attorney was executed prior to enactment of I B Code and could not extend the authority to file application under Section 7 of I B Code is bereft of merit both in technique as also in substance. Once the authority was given, inter alia, to file litigation pertaining to recovery of the outstanding debt of the Financial Creditor, it becomes irrelevant whether the law governing such recovery or providing for a mechanism like the resolution process contemplated under I B Code was or was not in force on the date when the authority was given - Any interpretation to the contrary would be absurd. In so far as the contention regarding the application being incomplete is concerned, suffice it to say that the Adjudicating Authority has shown its awareness in regard to the particulars required to be furnished in Form 1. It noticed that the Financial Creditor had provided details of loan sanctioned, Statement of accounts, interest debited and charges debited, etc. in Part 4 of Form 1. It also found that the certificates under Banker s Books Evidence Act and the Information Technology Act had been filed by the Financial Creditor and after recording its satisfaction in regard to the application being complete and there being debt and default and the debt being payable, the Adjudicating Authority passed the impugned order admitting the application with all consequential directions - In so far as joining of issue by the Corporate Debtor qua the quantum of payable debt is concerned, same does not fall for consideration of the Adjudicating Authority at the stage of admission of the application under Section 7 of the I B Code. Appeal dismissed.
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Service Tax
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2020 (5) TMI 64
Classification of services - Commercial or Industrial Construction Services or not - contracts awarded by the Greater Noida Development Authority are basically for the general public and for non-commercial purposes - HELD THAT:- It is seen that various activities of the appellant were required to be considered separately based upon the contracts. Further, many of the issues stand decided by the precedent decision of the Tribunal. As each and every contract is required to be examined separately, it is deemed fit to set aside the impugned order and remand the matter to Original Adjudicating Authority for fresh examination in the light of the precedent decisions of the Tribunal. Appeal allowed by way of remand.
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Central Excise
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2020 (5) TMI 63
Classification of goods - car matting - classified within Chapter 57 of the First Schedule to the Central Excise Tariff Act, 1985 under the heading Carpets and Other Textile Floor Coverings or they would be classified under Chapter 87 thereof, which relates to Vehicles other than Railway or Tramway Rolling-Stock and Parts and Accessories Thereof ? HELD THAT:- Three cases have been decided by the Tribunal in COLLECTOR OF C. EX., BOMBAY-II VERSUS STERLING INDIA [ 1999 (7) TMI 704 - CEGAT, NEW DELHI] , COLLECTOR OF CENTRAL EXCISE VERSUS SWARAJ MAZDA [ 1993 (7) TMI 186 - CEGAT, NEW DELHI] , and JYOTI CARPET INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I [ 2001 (4) TMI 316 - CEGAT, NEW DELHI] which obviously has no precedent value for us - We however, discussed these cases only for the purpose of ascertaining as to whether the revenue authorities had been treating car mats as a subject head under sub-heading 8708, on proper analysis of competing claim of the assessees to include them in sub-heading 5703. We do not find so from these decisions of the Tribunal. There are authorities in which it has been held that the popular meaning among consumers would be a major factor for interpretation of dispute relating to classification - This principle has been laid down in the cases of PLASMAC MACHINE MFG. CO. PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1990 (11) TMI 142 - SUPREME COURT] and DABUR (INDIA) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAMSHEDPUR [ 2005 (4) TMI 57 - SUPREME COURT] - In the case of Dabur India Ltd, it was held that In classifying a product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. Emphasis on technical meaning has been highlighted in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S WOCKHARDT LIFE SCIENCES LTD [ 2012 (3) TMI 40 - SUPREME COURT] for resolving classification related disputes of goods. In this case, it has been held that a commodity cannot be classified in a residuary entry if there is a specific entry, even if the specific entry requires the product to be understood in a technical sense. The common parlance test , marketability test , popular meaning test are all tools for interpretation to arrive at a decision on proper classification of a tariff entry. These tests, however, would be required to be applied if a particular tariff entry is capable of being classified in more than one heads. So far as subject-dispute is concerned, we have already referred to Chapter note 1 of Chapter 57. This note stipulates that carpets and other floor coverings would mean floor coverings in which textile materials serve as the exposed surface of the Article when in use. This feature of the car mats has not really been rejected by the revenue authorities as untrue in the order of the Commissioner, before whom assertion to that effect was made by the respondent - Chapter 87 of the Central Excise Tariff of India does not contain car mats as an independent tariff entry. We have reproduced earlier the various parts and accessories listed against tariff entry 8708. All of them are mechanical components, and revenue want car mats to be included under the residuary sub-head other in the same list. The HSN Explanatory Notes dealing with interpretation of the rules specifically exclude tufted textile carpets, identifiable for use in motor cars from 87.08 and place them under heading 57.03. The main argument of the appellant is that because the car mats are made specifically for cars and are used also in cars, they should be identified as parts and accessories. But if we go by that logic, textile carpets could not have been excluded from Parts and Accessories. We have referred to such exclusion in the preceding paragraph. It has also been urged on behalf of the revenue that these items are not commonly identified as carpets but are different products. The Tribunal on detailed analysis on various entries, Rules and Notes have found they fit the description of goods under chapter heading 570390.90. We accept this finding of the Tribunal. Once the subject goods are found to come within the ambit of that sub-heading, for the sole reason that they are exclusively made for cars and not for home use (in broad terms), those goods cannot be transplanted to the residual entry against the heading 8708 - As the subject-goods come under the chapter-heading 570390.90, and the other entry under the same Chapter forming the subject of dispute in the second order of the Commissioner, there is no necessity to import the common parlance test or any other similar device of construction for identifying the position of these goods against the relevant tariff entries. Appeal dismissed.
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2020 (5) TMI 62
Maintainability of appeal - non-prosecution of the case - HELD THAT:- Office objections to be removed within a period of two weeks, failing which, the concerned matter shall stand dismissed for non-prosecution.
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2020 (5) TMI 61
Stay of impugned order during pendency of the appeal - impleadment as a respondent - SSI Exemption - clubbing of clearances - HELD THAT:- The court is of the view that a prima facie case has been made out for grant of exparte interim relief. Issue Notice, returnable on 29th January, 2020 - By way of ad-interim relief, the operation of the impugned order M/S JOLLY ELECTRICAL INDUSTRIES AND NILESH V SHAH VERSUS C.C.E. S.T. VADODARA-II [ 2019 (10) TMI 95 - CESTAT AHMEDABAD] is hereby stayed.
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