Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 7, 2020
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Insolvency & Bankruptcy
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Central Excise
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06/2020 - dated
5-5-2020
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CE
Seeks to amend Notification No. 04/2019-Central Excise, dated the 6th July, 2019
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05/2020 - dated
5-5-2020
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CE
Seeks to amend Notification No. 05/2019-Central Excise, dated the 6th July, 2019
Customs
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21/2020 - dated
5-5-2020
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Cus
Seeks to amend Notification No. 18/2019-Customs, dated the 6th July, 2019
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41/2020 - dated
6-5-2020
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Cus (NT)
Exchange Rates Notification No.41/2020-Custom (NT) dated 06.05.2020
DGFT
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04/2015-2020 - dated
6-5-2020
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FTP
Amendment in Export Policy of Sanitizers.
GST
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42/2020 - dated
5-5-2020
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CGST
Seeks to extend the due date for furnishing FORM GSTR-3B, Jan-March, 2020 returns for the taxpayers registered in Ladakh.
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41/2020 - dated
5-5-2020
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CGST
Seeks to extend the due date for furnishing of FORM GSTR 9/9C for FY 2018-19
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40/2020 - dated
5-5-2020
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CGST
Seeks to extend the validity of e-way bills till 31.05.2020 for those e-way bills which expire during the period from 20.03.2020 to 15.04.2020 and generated till 24.03.2020.
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39/2020 - dated
5-5-2020
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CGST
Seeks to make amendments to special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
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38/2020 - dated
5-5-2020
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CGST
Central Goods and Services Tax (Fifth Amendment) Rules, 2020.
GST - States
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37/2020-State Tax - dated
1-5-2020
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Himachal Pradesh SGST
Seeks to give effect to the provisions of rule 87 (13) and FORM GST PMT-09 of the HPGST Rules, 2017
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Order No. 10 - State Tax - dated
30-4-2020
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Jharkhand SGST
Jharkhand Goods and Services Tax (Tenth Removal of Difficulties) Order, 2019.
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Order No. 09/2019-State Tax - dated
30-4-2020
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Jharkhand SGST
Jharkhand Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019
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F. A-3-01-2020-l-V-(21) - dated
4-5-2020
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Madhya Pradesh SGST
Appoints Revisional Authority
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CT/LEG/GST-NT/12/17-04/2020 - dated
23-3-2020
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Nagaland SGST
Seeks to prescribe the due date of GSTR-1 for registered persons with turnover of more than 1.5 crore
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CT/LEG/GST-NT/12/17-03/2020 - dated
23-3-2020
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Nagaland SGST
Seeks to extend the time of Annual return for 2018-2019 till 30th June,2020.
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Central Goods and Services Tax (Fifth Amendment) Rules, 2020. - Filing of NIL GSTR-3B return through SMS
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Seeks to make amendments to special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. - Notification
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Seeks to extend the validity of e-way bills till 31.05.2020 for those e-way bills which expire during the period from 20.03.2020 to 15.04.2020 and generated till 24.03.2020. - Notification
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Seeks to extend the due date for furnishing of FORM GSTR 9/9C for FY 2018-19 till 30th September, 2020. - Notification
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Seeks to extend the due date for furnishing FORM GSTR-3B, Jan-March, 2020 returns for the taxpayers registered in Ladakh. - Notification
Income Tax
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Penalty u/s 271(1) (c) - Defective notice - non specification of charge - ITAT rightly set-aside the order of the penalty levied on the Assessee.
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Summons u/s 131 - In the considered opinion of this Court, the impugned summons to the extent of asking the assessee to be present for unlimited period till the time he obtains permission from the Assistant Commissioner, is highly unreasonable. Though there is no infirmity in asking the petitioner to be present for enquiry, this Court does not find any justification on the part of the Assistant Commissioner in asking the assessee to be present for unlimited period.
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Validity of assessment order - demand notice for lack of jurisdiction in the Assessing Officer - writ petition dismissed on account of availability of alternative remedy.
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Disallowance of advances written off - the parent company has not reimbursed the amount only on account of change of policy of the parent company. - the assessee has failed to substantiate as to why the advances amount was written off, particularly under the fact that the same is recoverable from its parent company.
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Share income received from the Society - Society has claimed deduction u/s 80IAB, hence not suffered any tax - Since the income of the society was taxed separately as rightly observed by the Ld.CIT(A), individual members of the society are not liable to be tax the same income. Taxing the income again in the hands of the assessee would amount double taxation of the same income which is not permissible.
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Capital gain computation - justification in adopting the value u/s. 50C - property not sold for the market rate - when the assessee mortgaged property to Catholic Syrian Bank and could not effectively negotiate for sale of property due to Kidney failure of one of the assessee, the provisions of s. 50C of the Act not be applicable.
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Claim of deduction u/s. 35 - scientific research activities - very fact that expenditure was incurred in the form of salary and overheads only goes to suggest that there is no research activities carried out. In the absence of any capital assets employed for the purpose of research activities, this issue requires to be adjudicated with reference to the evidence of research activities if any carried on by the assessee.
DGFT
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Amendment in Export Policy of Sanitizers. - Notification
Indian Laws
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Dishonor of Cheque - case of petitioner is that the petitioner being a non-executive Director was never in-charge of the business of the accused company or responsible to the company for the conduct of its business - vicariously liability u/s 138 - the petition is not only highly belated, but also filed only with a view to delay the trial - Dismissed with cost of ₹ 25,000/- to be paid to “PM Cares” Relief Fund
IBC
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Initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Any subsequent dispute raised while replying to the demand notice under section 8(1) cannot be taken into consideration to hold that there is a pre-existing dispute.
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Maintainability of application - initiation of CIRP - Financial debt or not - The applicants failed to produce any document to show that what was the agreed interest in between the parties on the basis of which money was borrowed. Therefore, the case of the applicant, does not comes u/s 5(8) of the I and B Code
VAT
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Constitutional validity of the Kerala Tax on Paper Lotteries Act, 2005 - levy of licence fee on the draw of lotteries - vires of Section 5BA of the KGST Act - what is sought to be taxed indirectly is the sale of the lottery tickets within the State of Kerala, which is prohibited by virtue of the law. - The Kerala Tax on Paper Lotteries Act, 2005 is hereby declared as unconstitutional and invalid.
Case Laws:
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Income Tax
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2020 (5) TMI 147
Condoning the delay of 93 days in filing the present application - In 2019 when the appeal was on board, the same was dismissed on withdrawal in terms of Circular No.17 of 2019 dated 8th August, 2019 on the ground that the tax effect was below the prescribed monetary limit of ₹ 1 crore for the Department to file appeal in the High Court - HELD THAT:- As stated that the related addition was made to the income of the assessee on the basis of information received from banking sources, Geneva, Switzerland - related appeal would be covered by the exceptions as provided in the CBDT Circular No.3 of 2018 dated 11th July, 2018. Instructions to that effect could not be communicated to learned counsel who appeared for the Revenue at that point of time which resulted in dismissal of the appeal on 3rd October, 2019 on withdrawal in terms of the CBDT Circular No.17 of 2019. After hearing learned counsel for the parties and on due consideration, we are of the view that the delay of 93 days in filing the interim application should be condoned and the order of dismissal on withdrawal dated 3rd October, 2019 should be recalled.
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2020 (5) TMI 146
Penalty u/s 271(1) (c) - Defective notice - non specification of charge - HELD THAT:- It is apparent that the show-cause notice issued under Section 274 of the Act does not specifically disclose the charge against the Assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income, which is sine-quo-non for issuance of show-cause notice and for want of such particulars, the Tribunal set-aside the order of the penalty levied on the Assessee. Questions of law being answered in the case of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] we do not find any reason to entertain the present appeal to answer the questions of law raised by the appellant-Revenue.
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2020 (5) TMI 145
MAT - Computing book profit u/s 115JB - assessee Company has not added the provision for bad and doubtful advance as determining book profits - HELD THAT:- Issue involved is squarely covered by the decision of this Court in the case of Commissioner of Income Tax Vs. Kirloskar Systems Limited [ 2013 (12) TMI 9 - KARNATAKA HIGH COURT] wherein this Court has held that no addition be made to the profit as per the profit and loss account by invoking clause (i) or (c) of Explanation 1 to Section 115JB of the Act in a case where there is a corresponding reduction of the sum debited to the profit and loss account on account of provision for bad and doubtful debts from the Advances shown in the Balance Sheet of the Assessee. - Decided against revenue.
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2020 (5) TMI 144
Summons u/s 131 - patent violation of the Fundamental Rights guaranteed under Part-III of the Constitution of India - Assistant Commissioner issued the impugned summons to the assessee u/s 131 asking the assessee to be present on 07.02.2020 at 2.30 p.m., to give evidence and to produce personally the books of accounts or other documents specified therein and not to depart until he grants permission to do so - HELD THAT:- A perusal of the impugned summons shows that apart from asking the assessee to be present on a particular day, the Assistant Commissioner also directed the assessee not to depart from the premises till he grants permission to do so. In the considered opinion of this Court, the impugned summons to the extent of asking the assessee to be present for unlimited period till the time he obtains permission from the Assistant Commissioner, is highly unreasonable. Though there is no infirmity in asking the petitioner to be present for enquiry, this Court does not find any justification on the part of the Assistant Commissioner in asking the assessee to be present for unlimited period. Keeping in view the submissions of the learned counsel for the petitioner and the learned Standing Counsel for respondents, this Court deems it appropriate to direct the petitioner herein to co-operate with the enquiry initiated by the Assistant Commissioner and be present before the officer concerned on the day on which the officer asks the assessee to be present, till 7.00 p.m., or any other time earlier thereto specified by the officer concerned.
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2020 (5) TMI 143
Validity of assessment order - demand notice for lack of jurisdiction in the Assessing Officer - availability of alternative remedy - HELD THAT:- A bare perusal of the response filed on behalf of the petitioner pursuant to the notice u/s 142(1) calling upon the petitioner as to why his income should not be treated as income from business would reveal that no objection worth the name in relation to the jurisdiction was raised. The response was confined only to the question raised and based on that the AO by exhaustively dealing with the material available before him and dealing with the limited issues raised in reply, passed the assessment order. The assessment order is open to appeal under Part A of Chapter XX of the Act, 1961. Various submissions sought to be made questioning the jurisdiction of the authority, in the circumstances of the case, can very well be raised before the appellate authority and apparently no case for bypassing the alternative remedy of appeal has been made out. Hon ble Supreme Court in Genpact India Private Ltd vs. Deputy Commissioner of Income Tax Ors [ 2019 (11) TMI 1118 - SUPREME COURT] reiterating the principles laid down in Commissioner of Income Tax Ors. vs. Chhabil Dass Agarwal [ 2013 (8) TMI 458 - SUPREME COURT] and Authorised Officer, State Bank of Travancore Anr. vs. Mathew K.C. [ 2018 (2) TMI 25 - SUPREME COURT] upheld the dismissal of writ petition on account of availability of alternative remedy against an assessment order. Writ petition challenging the assessment order and demand notice on account of availability of alternative remedy of appeal is not entertained and the same is, therefore, dismissed.
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2020 (5) TMI 142
Deduction u/s 80IB(10) in respect of interest received and other income - recognition of immediate source of the income - as per AO the said income was not derived by the assessee from the business of development of housing project and the same, therefore, was not eligible for deduction u/s 80IB(10) - HELD THAT:- Income by way of transfer fees received by the assessee for Apartment Booking and interest received for delay in payment against Flat had a direct or first degree connection with the business of the assessee of developing a housing project and the same, therefore, was eligible for deduction under section 80IB(10). The immediate source of the said income was the business of the assessee of developing a housing project and therefore, the said income was eligible for deduction under section 80IB(10). Regarding the balance amount of other income the assessee has not been able to furnish any details of the same to show that the said amount was eligible for deduction under section 80IB(10). I accordingly allow partly Ground No. 1 of the assessee s appeal. Alternative claim that the disallowance of deduction under section 80IB(10) in respect of interest income should be restricted to net interest and not gross interest as done by the authorities below - This alternative claim of the assessee is duly supported by the decision of ACG Associated Capsules Pvt. Limted vs.- CIT [ 2012 (2) TMI 101 - SUPREME COURT] wherein it was held in the context of assesee s claim for deduction under section 80HHC that 90% of not the gross interest but only the net interest which had been included in the profits of business of the assessee, as computed under the head profits and gains of business or profession should be deducted for determining the profits of the business eligible for deduction - direct AO to verify the amount of net interest keeping in view the direct nexus theory and allow appropriate relief to the assessee on this issue. Disallowance u/s 43B on account of ESI payable - assessee failed to produce any evidence to show that the same was deposited before furnishing its return of income for the year under consideration - HELD THAT:- Even at the time of hearing before the Tribunal, no such evidence has been brought on record on behalf of the assesee to show that the ESI payable was paid before the due date of filing of the return of income for the year under consideration - no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the disallowance made by AO - Decided against assessee.
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2020 (5) TMI 141
Revision u/s 263 - allowability of bad debts claimed by the assessee - HELD THAT:- AO is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the AO becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which resulted in loss of revenue. In the present case AO without examining the issue allowed the provision for bad debts as deduction though it was not written off by crediting to the individual accounts of the parties concerned in the books of accounts of the assessee so as to claim deduction u/s. 36(1)(vii) which is erroneous and prejudicial to the interests of the Revenue. Being so, we do not find any infirmity in exercising power u/s. 263 by the Pr. CIT. Main contention of the Ld. AR is that the Assessing Officer had duly verified the accounts of the assessee and allowed deduction and also there is no mandate to write off of bad debts by debiting to the P L account so as to claim deduction u/s. 36(1)(vii) - AR relied on the judgment of the Supreme Court in the case of Vijaya Bank Ltd. [ 2010 (4) TMI 46 - SUPREME COURT] . Unable to accept the proposition because profit and loss account is the final computation of profit made by the assessee based on which assessment is to be framed. Unless the bad debt is written off by debiting to the P L account which necessarily means that the debtors account should be credited or so much of the amount debited in the profit and loss account should be written off from the amount due from the debtors, the condition as contemplated u/s. 36(1)(vii) is not satisfied. Even though the assessee s Counsel contended that when bad debt is recovered, there is provision for assessment of the same u/s. 41 of the I.T. Act, we do not think that such a safety provision will entitle the assessee to claim bad debt as a deduction without satisfying the conditions contained in section 36(1)(vii). Judgment of the Supreme Court in the case of Vijaya Bank Ltd. [ 2010 (4) TMI 46 - SUPREME COURT] relied on by the assessee s Counsel applies mainly to Banking companies and not to other assessees. Accordingly, we hold that the Pr. CIT is justified in exercising his power u/s. 263 of the I.T. Act so as to reconsider the allowability of bad debts claimed by the assessee - Grounds of appeal of the assessee are dismissed.
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2020 (5) TMI 140
Disallowance of advances written off - dues from parent company - According to the assessee, the amount so paid was recoverable from its parent company and hence it has treated the same as Advances recoverable in AY 2008-09 - HELD THAT:-Though the Ld. A.R. contends that the parent company has refused to reimburse the payments made to the employees, yet no document was produced before tax authorities or before us in support of the said claim. Hence, in our view, the assessee has failed to substantiate as to why the advances amount was written off, particularly under the fact that the same is recoverable from its parent company. We also notice from the assessment order that the parent company has not reimbursed the amount only on account of change of policy of the parent company. The internal decision taken by two related concerns cannot be a ground in allowing the claim of write off. Accordingly, we are of the view that the Ld. CIT(A) has rightly confirmed the disallowance. Addition made of on the basis of Annual Information Report (AIR) - difference between the amount paid by the assessee towards credit card bills and that reported by American Express Bank in the AIR information - A.R. submitted that the assessee has now collated details of payments made to American Express Bank on account of the credit card transactions AND the aggregate amount of payment made by the assessee company along with another sister concern named M/s. Tektronix Engineering Development India Private Limited was ₹ 2.90 crores. - HELD THAT:- All these details require verification at the end of the assessing officer. Accordingly we restore this issue to the file of the AO for examining it afresh by duly considering the submissions and explanations of the assessee. Appeal of the assessee is treated as partly allowed for statistical purposes.
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2020 (5) TMI 139
Addition based on survey statement - rejection of books - addition based on statement recorded and diaries impounded during survey, without verifying the veracity of the same - HELD THAT:- Admittedly, a diary was found during the course of survey recording the transactions of receipts. Undisputedly, part of the transactions were disclosed in the regular books of accounts as business receipts. There is no dispute about the fact that the diary found during the course of survey belongs to the assessee in pursuance to the provisions of section 292C. Similarly the contents of such diary are also true as per the provisions of section 292C. This fact has not been disputed by assessee at the time of hearing before us. Thus it is proved beyond doubt that the diary belongs to the assessee and its contents are true. Determine the income of the assessee based on the contents recorded in such diary - Only element of profit embedded in such business receipts which can be added to the total income of the assessee. Rate of profit should be adopted for determining the income - Assessee has given a chart showing the amount of profit for the last 3 years along with detail of its sister concern namely Sanvira Infrastructure engaged in similar line of business and there average profit comes at 6.29% and 7.27% respectively. In our considered view average profit of sister concern will be justifiable as the same is showing profit in all 3 year where as the assessee is showing profit in current year only. We set aside the finding of the CIT (A) and direct the AO to tax the element of profit embedded in such business receipts at the rate of 7.21% by treating the same as net profit chargeable to tax. The ground of appeal of the assessee is partly allowed.
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2020 (5) TMI 138
Share income received from the Society - Society has claimed deduction u/s 80IAB, hence not suffered any tax - whether the share income received by the assessee as member of the society is required to be taxed separately or not? - HELD THAT:- In the instant case, what was received by the assessee was only share of income from the society. The income of the society was taxed separately in the hands of the society. CIT(A) also has given a finding that the income should be taxed in the hands of the society only but not in the hands of individual members. CIT(A) confirmed the addition, because of the reason that the assessee as well as the society have not filed the returns of income, thereby held that the assessee has relinquished the claim for deduction u/s 80IAB which was disallowed by the AO. Since the income of the society was taxed separately as rightly observed by the Ld.CIT(A), individual members of the society are not liable to be tax the same income. Taxing the income again in the hands of the assessee would amount double taxation of the same income which is not permissible. Since, the claim of deduction u/s 80IAB has reached finality in the hands of the society, we hold that both the lower authorities have erred in taxing the share income received by the assessee, accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO and allow the appeal of the assessee.
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2020 (5) TMI 137
Penalty u/sec. 271(1)(c) - defective notice - non specification of charge - concealment of income or furnishing of inaccurate particulars of income - whether the notice issued by the AO dated 28/12/2011 is valid or not? - HELD THAT:- We find that the Hon'ble High Court of Telangana A.P. in the case of Smt. Baisetty Revathi [ 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] has considered the very same issue and held that non-striking of the irrelevant portion of notice issued u/sec. 274 is invalid. The very same judgment has been followed by the coordinate bench of this tribunal in the case of Konchada Sreeram [ 2017 (11) TMI 1164 - ITAT VISAKHAPATNAM] . Therefore, we hold that the notice issued under section 274 read with section 271, dated 28/12/2011 is invalid and, therefore penalty order passed by the AO, dated 27/10/2016 is hereby cancelled. - Decided in favour of assessee.
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2020 (5) TMI 136
Addition u/s 68 - undisclosed income of the sums received as share premium - HELD THAT:- AO has categorically mentioned that there is no doubt about the genuineness of the source of fund. He has accepted the identity, creditworthiness and genuineness of the sources of funds of the share applicants. AO has drawn adverse inference on the ground that the assessee company s performance does not command the justification for share premium. In this regard by referring to the observations about shell companies the AO has contradicted himself by observing that the source of fund is duly explained. It is quite settled that in shell companies there is doubt about the source of funds. As regards the reliance of the AO on the decision of Major Metals [ 2012 (4) TMI 227 - BOMBAY HIGH COURT] is concerned the same was with respect to the order of the settlement commission wherein the veracity of the funds were in doubt and in those circumstances honourable jurisdictional High Court has upheld the order of the settlement commission with regard to the absence of genuineness of the source of share premium. In the present case we note that assessee has duly submitted all the necessary documents for the verification of the identity creditworthiness and genuineness of the share applicants as evident. Examination of justification of share premium is concerned it is noted that the concerned provision in income tax law was brought into statute books in the form of section 56 (2)(vii)(b) . This was with effect from 2013-14. Honourable jurisdictional High Court in the case of M/s. Gangadeep Infrastructure (P) Ltd. [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] has duly held that the said provision is prospective. In the present case there is no such doubt as the assessing officer has accepted that the sources of funds are duly explained. Further those decisions refer to the absence of the share applicants and/or their director at the given address. There is no such case made out by the AO here. Furthermore some of the cases refer to notices returning unserved, which is not at all the case here. Hence these decisions do not fructify the revenues case in the fact of the present case. The other decisions referred by learned counsel of the assessee duly support the case of the assessee. No infirmity in the order of learned CIT(A). Decided against revenue.
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2020 (5) TMI 135
Deduction u/s. 80(P) - interest earned from its investments with the Dharmapuri district central co-op bank Ltd - AO held that the interest earned from investments made in any bank, not being a co-op society, is not eligible for deduction u/s. 80P(2)(d) and rejected the assessee s claim - HELD THAT:- Assessee is a co-operative society. It has earned the impugned interest from Dharmapuri District Co-operative Bank Ltd., which is also a co-operative society engaged in banking business. As in the case of CIT vs Salem Agricultural Producers Cooperative Marketing Society [ 2016 (9) TMI 699 - MADRAS HIGH COURT ] a District Central Co-operative Bank, is also a Society, in which event, the income by way of interest and dividend earned by the assessee/respondent Society from the investments made in Salem District Central Co-operative Bank, which is also a Co-operative Society is entitled for deduction under Section 80 P (2) (a) (i) of the Income Tax Act. Decision relied on by the assessee and considered by the Tribunal squarely applies to the facts on hand - Decided in favour of assessee.
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2020 (5) TMI 134
Capital gain computation - justification in adopting the value u/s. 50C - property not sold for the market rate - HELD THAT:- Property is admittedly mortgaged with Catholic Syrian Bank. It is also not in dispute that one of the assessee Smt. Muragasamy Lalitha was suffering from Kidney failure. Therefore, the contention of the assessee that the property could not be sold for the market rate may have some justification. In the case of G. Anitha [2015 (4) TMI 723 - ITAT HYDERABAD] found that wherever there was an encumbrance, the value u/s. 50C of the Act need not be applied. The decision of the Division Bench of ITAT, Hyderabad (supra) is binding on a single Member. Therefor this Tribunal is of the considered opinion that when the assessee mortgaged property to Catholic Syrian Bank and could not effectively negotiate for sale of property due to Kidney failure of one of the assessee, the provisions of s. 50C of the Act not be applicable. Orders of the both the lower authorities are set aside and the addition made by the AO as confirmed by the Ld. CIT(A) is deleted. - Decided in favour of assessee.
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2020 (5) TMI 133
Estimation of profit - rejection of books of accounts - AO estimated net profit @ 10% as against 5% declared by assessee also confirmed by CIT-A - HELD THAT:- Drawing inference from provision of section 44AD and looking to the fact that assessee is not engaged in business of plying, hiring or leasing goods carriages and also not maintaining regular books of accounts, are of the considered view that applying of 8% of net profit rate on the undisputed total business turnover disclosed by the assessee shall be justified and fair to both the parties. - Decided partly in favour of assessee.
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2020 (5) TMI 132
Claim of deduction u/s.10A - Used machinery employed in the new business is 28% and transfer of employees of the existing unit to the new unit holding it to be reconstruction of already existing business. - findings of the AO that the new Software Technology Parks of India (STPI) unit is only an extension of existing business with the old machinery and also with old employees and hence deduction is not allowable in view of provisions of sub-section (2)(ii) of section 10A - HELD THAT:- CIT(A) considering the value of plant and machinery purchased prior to the setting up of new unit had came to conclusion that value of old machinery is less than 20% and transfer of the employees from the existing unit to new unit cannot be construed as reconstruction of existing business. This finding of the CIT(A) is contrary to the finding of the AO that the total value of old machinery employed by the assessee and new machinery. This variation in the value of the old machinery and new machinery has bearing on the issue on hand. CIT(A) had not addressed the reason, given by the AO nor was it the case of the assessee company that the total value of asset adopted by the AO is incorrect. In view of the discrepancies in the total value of fixed assets adopted by ld. CIT(A) and AO, we are of the considered opinion that the matter should be remitted back to the file of ld. CIT(A) for fresh adjudication on the merits of the appeal after affording due opportunity of hearing to the appellant in accordance with law. Grounds of appeal Nos. 2 to 2.2 filed by the Revenue are partly allowed for statistical purposes. Cost of software as revenue expenditure - HELD THAT:- CIT(A) considering fresh evidence filed before him came to conclusion that expenditure was incurred wholly towards renewal of subscription for software. Accordingly, allowed the same as revenue expenditure placing reliance on the decisions of Jurisdictional High Court in the cases of Southern Roadways Ltd [ 2007 (6) TMI 193 - MADRAS HIGH COURT] and Karur Vysa Bank [ 2014 (10) TMI 2 - MADRAS HIGH COURT] . From the perusal of para 4.3 of the order of ld. CIT(A), it is clear that ld. CIT(A) had considered additional evidence in violation of provisions of Rule 46A of Income Tax Act, 1962. We are of the considered opinion that this issue should be remitted back to the file of the ld. CIT(A) for de novo assessment in accordance with law. Depreciation @60% as against 25% allowed by the Assessing Officer, as the allocated common expenditure - HELD THAT:- Admittedly, assessee derives income in the form of licence fees for software so developed. But from the material on record, it is not clear whether it is application software embedded recorded on CD or disc, tape, perforated media or other information storage devices or in the nature of an intangible asset. Other issues are also remanded back to the file of the ld. CIT(A), we remit this issue also back to the file of the ld. CIT(A) with a direction that issue shall be adjudicated afresh keeping in view of the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Computer Age Management Services P. Ltd [ 2019 (7) TMI 1153 - MADRAS HIGH COURT] Claim of deduction u/s. 35 - HELD THAT:- CIT(A) allowed the claim considering the approval granted by DSIR. However, ld. CIT(A) had not addressed reasons of the Assessing Officer that no research activities was carried on. Further very fact that expenditure was incurred in the form of salary and overheads only goes to suggest that there is no research activities carried out. In the absence of any capital assets employed for the purpose of research activities, this issue requires to be adjudicated with reference to the evidence of research activities if any carried on by the assessee. Thus, in our considered opinion, the ld. CIT(A) has clearly fell in error in allowing the claim of the assessee.
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Corporate Laws
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2020 (5) TMI 131
Oppression and Mismanagement - restoration of status of management committee - whether the petitioner are members of the company or not? - HELD THAT:- The respondents have filed Form 21A, dated November 21, 2012, September 30, 2013, September 30, 2014, June 16, 2015, September 2, 2016 with the Registrar of Companies by duly enclosing list of members of the company. By perusal of the lists of members enclosed, we found that the names of petitioners are not found in these lists. It is also relevant to point out here that the minutes of the annual general meeting held on November 21, 2012 shows that there are 8 (eight) constituent/invitees attended, which included the second and third petitioners apart from Mr. Srinivasan. Therefore, the first petitioner ceased to be member and second the third petitioners are not all members of the company. The second and third petitioners are on par with Mr. Subhas Bhosle, Rev. Sunil Dandge, who are petitioners along with the present petitioners in the earlier litigation - the contention of the first petitioner that he cannot be removed by the company, as per extant articles of association of the company, is not tenable and baseless. And the company is entitled to remove any member for misconduct, mismanagement on the part of a member. Therefore, the annual general meeting held on November 21, 2012 has rightly removed the first petitioner from the membership as per law. So far as the contention of the respondents that, that the issue became final on rejection of earlier company petition by the then Company Law Board and thus it became final and the instant company petition is not maintainable, since the Company Law Board has rejected the case by granting liberty to the petitioner to file fresh company petition in accordance with law. The petitioners are not the members of the company and thus they have no locus standi to maintain the main company petition for the alleged acts of oppression and mismanagement made in the company petition. Therefore, the main company petition is liable to be rejected as not maintainable and thus no necessity to consider various contentions raised by the petitioners - application rejected as not maintainable.
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Insolvency & Bankruptcy
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2020 (5) TMI 130
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The Applicant has placed on record all the invoices, stating that the Respondent itself had acknowledged the said invoices. Once the debt is shown as due, it is for Respondent to prove that there are no outstanding dues to be paid to the Applicant. There has been much cloud in the submission of the Respondent. Therefore, without any specific details of material particulars or evidence the fact of existence of a dispute cannot be sustained. In Innoventive Industries Ltd. v. ICICI Bank Ltd. [ 2017 (9) TMI 58 - SUPREME COURT ] , the Hon'ble Supreme Court held that pre-existing dispute is the dispute raised before demand notice or invoices was received by the 'Corporate Debtor'. Any subsequent dispute raised while replying to the demand notice under section 8(1) cannot be taken into consideration to hold that there is a pre-existing dispute. In the present case, there is no such dispute as pre-existing, the dispute which was being claimed to be pre-existing by the corporate debtor did not survive - The applicant has attached the copy of Bank statements in compliance of the requirement of Section 9(3)(c) of the IBC, 2016. The present application is complete and the Operational Creditor is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt, and fulfillment of requirements under section 9(5) of the Code. Hence, the present application is admitted - Application admitted - moratorium declared.
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2020 (5) TMI 129
Maintainability of application - initiation of CIRP - Financial debt or not - Corporate Debtor has failed to make repayment of its debt - existence of debt and dispute or not - Time Limitation - HELD THAT:- The applicant has failed to file the agreement entered in between the parties regarding the debt, which the applicant claim to be deposited in the account of Desiya Hotel and Resorts P. Ltd. Further, the applicant has also failed to produced any documents to show that what was the agreed term of interest, which applicant are entitled to get in case of default of payment - the applicant has also failed to produce any document to show that as per the agreed terms the Desiya Hotel and Resorts P. Ltd., which was required to repay the loan amount within certain period and if he fails to repay the amount during such period then on that day, the default occurred and that is the reason the applicant claim that the date of default is the date when he sent the notice of demand to Desiya Hotel and Resorts P. Ltd. Time Limitation - HELD THAT:- As per the provision of article 137 of the Limitation Act, so far the recovery of money is concerned, the person is required to file the application within three years when the cause of action arises - Here the case in hand, the applicants has failed to show what is the date of cause of action or what is the date of actual default. Therefore in my opinion, since the last amount claimed by the applicant was defaulted on December 26, 2014, December 29, 2014 and August 25, 2014 therefore limitation runs from that day. Since this application has been filed on June 27, 2019, therefore, in my opinion it is much after the 3 years as provided under the law. So the present application is also barred by law of limitation. The applicants failed to produce any document to show that what was the agreed interest in between the parties on the basis of which money was borrowed. Therefore, the case of the applicant, does not comes under section 5(8)(a) of the I and B Code and further it is found that it also does not come either under (b) or (c) or (d) or (e) or (f) or (g) or (h) or (i) of section 5(8) of the I and B Code. Therefore, I am unable to accept the contention of the applicant that these deposit annexed as annexure 1 comes under financial debt and they comes under the definition of financial creditor in view of section 5(7) of the I and B Code - this Adjudicating Authority is of the considered view that in absence of any document, the contention of the applicant is not liable to accepted and the applicants fails to prove that there deposit as per annexure 1 comes under the definition of financial debt under section 5(8) of the IBC and deposited amount as claimed is not barred by law of limitation The application filed under section 7 is not according to the provision of law and is not complete thus this application is not liable to be admitted - Application admitted - moratorium declared.
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CST, VAT & Sales Tax
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2020 (5) TMI 128
Constitutional validity of the Kerala Tax on Paper Lotteries Act, 2005 - levy of licence fee on the draw of lotteries - vires of Section 5BA of the KGST Act - main ground of attack against validity of the impugned Act is the lack of legislative competence of the state - principles of res-judicata - refund of tax already paid - HELD THAT:- The sale of lottery tickets does not involve any sale of goods. Inspite the lottery tickets representing a chance or a right to a conditional benefit of winning the prize, it was held that, it is nothing else but an actionable claim and no sale of goods is involved, within the meaning of the sales tax laws - apart from wording of the charging section tax on paper lotteries , the taxable event upon which the charge is to be imposed is totally absent. There is no much dispute that the draw is only a measure provided for the purpose of fixing the quantum of tax and it cannot be said that tax is levied on the draw. Hence the draw also cannot be considered as a taxable event. While evaluating the issue regarding validity of the charging section and with respect to its alleged vagueness, uncertainties or ambiguities, even on accepting the contentions of the respondents that the taxable event is the entire activity of the scheme of lottery, it is necessary for this court to consider whether the impugned Act is extra territorial in operation. Under Article 246 (3) of the Constitution, legislature of any state has power to make laws for such state or any part thereof. There is no power at all to make any law with respect to any event happening in other states. As defined under the Act, the lottery is a scheme intended for distribution of prize by lot or by chance, by which a person purchases the ticket for participating in the chance for winning a prize - In the case at hand, it cannot be disputed that, organising and conduct of the lottery by the 1st respondent / State of Sikkim is what is sought to be taxed. In this context, question arose as to whether the activity in organisation and conduct of the lottery is in any manner done within the territorial limits of the State of Kerala. The only part of the activity which takes place within the State of Kerala is the distribution and marketing of tickets, probably through advertisements, enumerating the prize money as well as the price of the ticket and the date of draw etc. In the above context, even assuming that the expression tax on paper lotteries contained in the charging section indicates the whole lot of activity of the conduct of lotteries, whether the taxable event falls within the territorial limits of the State of Kerala, is the question posed. Can a part of the activity of distribution and sale of tickets within the State of Kerala alone can be taxed under the guise of the term tax on paper lotteries , contained in the charging Section? The levy of tax is on the organising state or on the person appointed by that state for selling the lottery tickets within the State of Kerala. A person so appointed cannot be construed as a person responsible for organizing and conducting of the lottery. Further it has to be noted that the measure of tax is the draw, which takes place outside the territory of the state. The rate of tax is to be fixed based on the number and type of draws. The draws are conducted by the organizing state within their territory. But the person appointed for sale of the lottery is insisted upon, by virtue of provisions contained in Section 10, to make payment of the tax in advance, based on the draws proposed to be taking place in the organising state. Section 10 insists upon that the Promoter should pay the full amount of tax in advance based on the particulars of the draws, which are intended to be conducted by the organizing state, during the month commencing from the next succeeding month. Since the definition of the word Promoter includes the state which is organising the lottery, it has became obligatory on the part of the state which organises the lottery to pay the tax, if the person appointed for sale of the ticket fails to pay the tax in advance - it is assured that the levy and collection of tax will be made only with respect to the draws of the schemes for which tickets are marketed within the State of Kerala. The above aspect would again persuade this court to draw an inference that, what is sought to be taxed indirectly is the sale of the lottery tickets within the State of Kerala, which is prohibited by virtue of the law. Doctrine of constructive res judicata - HELD THAT:- In the present writ petition the challenge is against the constitutional vires of a statute on various grounds including the legislative competence of the state. Hence it cannot be said that the doctrine of constructive res judicata would apply in the case at hand. Refund of the tax amount already paid by the appellants / writ petitioners - HELD THAT:- It is evident that the liability has not been passed on to the customer of the lotteries. It is pointed out that, the State of Sikkim cannot be said to be gaining any unwanted or unmerited monetary benefit, if the refund if effected. When the money in question belongs to a State and the dispute is in between two States, the doctrine of unjust enrichment cannot be applied. It is clear that the Distributor has not passed on the liability to the consumers. But, as pointed out by the respondents, the writ petitioners have not furnished any materials to prove that the liability has been ultimately borne by the 1st appellant State. Nor it is proved through any convincing materials that such liability has been paid by the 2nd appellant Distributor, out of the commission he had received from the State of Sikkim. At any rate, as contended, if the State of Sikkim is the ultimate person who borne the liability, there cannot be contended that the doctrine of unjust enrichment will apply. On the other hand, if it is of Distributor who had borne the liability, proof is required to the effect that the same has not been recouped from the State of Sikkim - Proof regarding quantity of the tax collected is also not available. Therefore we hold that the appellants will be entitled for refund of the tax paid from the State Government, on their producing proper accounts and proof as to who had ultimately borne the burden. Such proof being produced, the State of Kerala is held liable for making refund. The Kerala Tax on Paper Lotteries Act, 2005 is hereby declared as unconstitutional and invalid. The appellants will be at liberty to make claim for refund of the tax already collected by the State of Kerala from the appellants under the said Act, on producing proper accounts and proof. If any such claim is received it is for the 1st respondent, State of Kerala, to consider the same and to pass appropriate orders making refund of the amount due, based on evaluation of such proof. The refund if any due shall be effected without any delay, on submission of such claim. Appeal allowed.
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Indian Laws
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2020 (5) TMI 127
Dishonor of Cheque - Maintainability of application - recall of summon order - non-executive director - case of petitioner is that the petitioner being a non-executive Director was never in-charge of the business of the accused company or responsible to the company for the conduct of its business - vicariously liability for the offence under Section 138 of N.I. Act - HELD THAT:- In the present case, the petitioner has not placed any material on record to show that he had resigned from the accused company and that his resignation had been accepted by the Board of Directors of the Company. Even going by the pleadings on record, the date of petitioner s resignation is post issuance of the cheques in question and their dishonor - The petitioner is an Executive Director in the category of Promoter. The complaint carries an averment that the petitioner along with others was looking after the day to day affairs of the company, being in-charge thereof was jointly and severally liable for the acts and deeds of the accused company and also responsible for not maintaining sufficient balance in the account for encashment of the cheques in question. Also, the petition is not only highly belated, but also filed only with a view to delay the trial. In view of the aforesaid discussions and especially the observation of the Supreme Court in GUNMALA SALES (P.) LTD. VERSUS ANU MEHTA, NAVKAR INFRA PROJECTS PVT. LTD. AND OTHERS [ 2014 (12) TMI 1116 - SUPREME COURT] , where in similar circumstances, the petition was dismissed for not placing on record any material of impeccable nature to prove that the accused had resigned, the present petition is dismissed along with the pending application with a cost of ₹ 25,000/- to be paid to PM Cares Relief Fund in Account no. 2121PM20202 maintained with the SBI, New Delhi Main Branch within a period of two weeks from the passing of this judgment. Petition disposed off.
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