TMI Tax Updates - e-Newsletter
June 23, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax

Articles

1. Breaking Myths - Warrant of Authorization

   By: Dinesh Inbavadivu

2. ANALYSIS OF E- COMMERCE OPERATOR IN GST

   By: Yogesh Narang

3. Sale of Plots with Amenities- Whether Liable to GST

   By: Rachit Agarwal

Notifications

GST - States

1. (4-CA/2020) - FD 05 CSL 2020 - dated 17-6-2020 - Karnataka SGST

Seeks to give effect to the provisions of Rule 67A for furnishing a nil return in FORM GSTR-3B by SMS.

2. (21/2020) - FD 03 CSL 2020 - dated 16-6-2020 - Karnataka SGST

Seeks to amend Notification (17/2020) No. FD 03 CSL 2020 dated 20.04.2020

3. (20/2020) - FD 03 CSL 2020 - dated 16-6-2020 - Karnataka SGST

Seeks to extend period to pass order under Section 54(7) of KGST Act

4. ERTS(T) 2/2020/229 - dated 9-6-2020 - Meghalaya SGST

Extension of validity of e-way bill generated on or before 24.03.2020 (whose validity has expired on or after 20th day of March 2020) till the 30th day of June.

5. ERTS(T) 2/2020/228 - dated 9-6-2020 - Meghalaya SGST

Seeks to extend period to pass order under Section 54(7) of MGST Act

6. ERTS(T) 2/2020/222 - dated 8-6-2020 - Meghalaya SGST

Seeks to give effect to the provisions of Rule 67A for furnishing a nil return in FORM GSTR-3B by SMS

7. ERTS (T) 2/2020/218 - dated 16-5-2020 - Meghalaya SGST

Seeks to bring into force Section 128 of Finance Act, 2020 in order to bring amendment in Section 140 of MGST Act w.e.f. 01.07.2017.

8. ERTS(T) 2/2020/213 - dated 5-5-2020 - Meghalaya SGST

Seeks to extend the due date for furnishing of FORM GSTR 9/9C for FY 2018-19 till 30th September, 2020.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS/CIR/P/2020/102 - dated 22-6-2020

Conducting meeting of unitholders of InvITs and REITs through Video Conferencing (VC) or through other audio-visual means (OAVM)

GST - States

2. 91/2020-GST - dated 19-6-2020

Clarification on refund related issues

3. 92/2020-GST - dated 19-6-2020

Clarification in respect of levy of GST on Director's remuneration

4. 90/2020-GST - dated 21-4-2020

Clarification in respect of certain challenges faced by the registered persons in implementation of provisions of GST Laws

DGFT

5. Trade Notice No. 15/2020-2021 - dated 21-6-2020

Issuance of Preferential Certificate of Origin for India’s exports to Vietnam under ASEAN-India FTA

Highlights / Catch Notes

GST

• High Court's Order to Reopen Portal or Accept TRAN-1 Manually Stayed Pending Further Review.

  Case-Laws - SC : Transitional Input tax credit - The order and direction of the High Court that Respondents to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually, stayed.
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• State Government's Mine Lease to Business Entity: Tax Payable by Recipient Under Reverse Charge Mechanism.

  Case-Laws - AAR : Classification of services - The transaction/service i.e. “leasing of mines” is between the State Government and applicant and the services are supplied by the State Government to the applicant which is a business entity. The subject transaction/service being a supply is not covered under the exceptions, the applicant being the recipient of such service shall have to pay tax on the said supply under reverse charge mechanism (RCM).
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• Taxpayer Can't Claim ITC for Employee Transport Unless Required by Law, 12% GST Rate Possible Per Section 17(5)(b).

  Case-Laws - AAR : Input Tax Credit (ITC) - If the facility provided by a taxpayer for transportation of employees is not obligator under any law, for the time being in force then no ITC will be available to such a taxpayer. The applicant will however be eligible to claim ITC for the service supplied at 12% GST Rate if the conditions laid down in the second proviso to section 17 (5)(b) are satisfied.
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• Unregistered GST provider using own truck for transport can issue Form 2.1 as a consignment note u/r 4B.

  Case-Laws - AAR : Classification of services - GTA services - person unregistered with GST, providing road transport services by his own truck - issuance of E-way bill - consignment note' has not been defined in the Act or in the Notification either. In this context we take the help of Explanation to Rule 4B of Service Tax Rules, 1994 wherein the ''consignment note' has been defined as a document provided by a goods transport agency against the receipt of goods for the transport of goods by roadways in a goods carriage. - Form 2.1 may be treated as consignment note, thus the condition of OTA is fulfilled.
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• GST on Uttarakhand Royalty Payments for Extraction: 5% (July 2017-Dec 2018), 18% (Jan 2019 Onwards) under RCM.

  Case-Laws - AAR : Rate of GST - royalty payable to Govt of Uttarakhand under RCM in respect of Reta, Bazri & Boulders extracted as per the permission of Govt authorities - The services rendered by the applicant during the period 01.07.2017 to 31.12.2018 attract GST at the same rate of central tax as on supply of like goods involving transfer of title in goods i.e 5% and w.e.f 01.01.2019 the said service attract GST@ 18%.
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Income Tax

• Court Rules on Section 54F: Can Multiple Apartments Be a Single "Residential House" for Tax Exemption?

  Case-Laws - HC : Denial of exemption u/s 54F - interpreting the meaning of the word residential house used in Section 54F(1) - assessee even otherwise is entitled to the benefit of exemption u/s 54F(1) of the Act as the assessee owns two apartments in same building and therefore, it has to be treated as one residential unit.
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• Section 54 Amendment Clarifies "A Residential House" as Singular, Limiting Income Tax Exemption to One Property.

  Case-Laws - HC : Exemption under Section 54 - Assessee had purchased more than two houses - Subsequent amendment of Section 54(1) also fortifies the fact that the legislature felt the need of amending the provisions of the Act with a view to give a definite meaning to the expression 'a residential house', which was interpreted as plural by various courts by taking into account the context in which the aforesaid expression was used.
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• Proving transaction genuineness or intention isn't enough to avoid penalty u/s 271D for Section 269SS violations.

  Case-Laws - HC : Penalty u/s 271D - reasonable cause - mere proof regarding genuineness of the transaction or the intention in accepting the amounts in cash or that there was no attempt to induct black money into the business etc. cannot be considered as a reasonable cause or as compelling circumstances provided u/s 273B to avoid the penal action contemplated u/s 271D, with respect to violation of the provisions contained under Section 269SS.
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• Assessee Misses Section 11 Exemption; AO Must Verify Compliance Despite Section 12A Registration.

  Case-Laws - AT : Exemption u/s 11 - The Assessee did not claim benefit of exemption u/s.11 of the Act before the AO and the AO did not have the benefit of examining such a claim. Mere existence of registration u/s.12A will not confer benefit of exemption u/s.11 and the other conditions for availing benefit of exemption u/s.11 of the Act has to be examined by the AO.
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• Interest Deduction on CCDs Allowed; Thin Capitalisation Rules Not Applied by Tax Authorities in Relevant Year.

  Case-Laws - AT : Interest expenditure on Compulsorily Convertible Debentures [CCDs] - the deduction claimed by the assessee has to be allowed. We may also clarify that the Thin Capitalisation principle was neither invoked by the AO or the CIT(Appeals) in the present case nor were those rules part of the statute for the relevant AY in this appeal.
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• Revenue Fails to Prove Unrecorded Sales; Profit Decline Alone Insufficient to Reject Books of Accounts.

  Case-Laws - AT : Understatement of sales price / turnover - there was no allegation by the Revenue that the assessee by making the sale at a price lower than the cost of purchase has received some consideration without recording the same in the books of accounts. - Decline in the GP rate and NP rate in comparison to the immediately preceding assessment year cannot be criteria to reject the books.
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Customs

• Textile Machine Duty Exemption Not Retroactive; No Refunds for Past Customs Duties in Textile & Chemical Sectors.

  Case-Laws - HC : Exemption for Customs duty - import of textile machines - The inclusion of the import items namely, ‘textile’ and ‘chemical sectors’, if construed to be operative retrospectively, then the same would entail refund of all customs duties already levied under the ten per cent customs duty regime. Such a consequence was never the intendment of the amendment.
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Case Laws:

• GST

• 2020 (6) TMI 521
  Rate of GST - royalty payable to Govt of Uttarakhand under RCM in respect of Reta, Bazri Boulders extracted as per the permission of Govt authorities - HELD THAT:- The issue in hand has already been decided in [ 2020 (3) TMI 239 - AUTHORITY FOR ADVANCE RULING - UTTARAKHAND ] wherein it was held that service in question falls in residual entry 17(viii) of Heading 9973 of said Notification and on perusal of aforesaid tables, we find that the said entry was amended vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 (applicable w.e.f 01.01.2019) which implies that the service in question provided during the period 01.07.2017 to 31.12.2018 attract GST at the same rate of central tax as on supply of like goods involving transfer of title in goods and w.e.f 01.01.2019 the said service attract GST @ 18%. Since the transfer of title in goods attract GST @ 5%, therefore the supply of service in question also attract GST @ 5% during the period 01.07.2017 to 31.12.2018.

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• 2020 (6) TMI 520
  Classification of services - GTA services for RCM - person unregistered with GST, providing road transport services by his own truck - issuance of E-way bill by or to road transporter who is unregistered with GST, providing road transport services by his own truck - to be treated as consignment note for GST-RCM purposes - person unregistered with GST providing road transport services by hiring trucks from third party, to applicant - issuance of E-way bill by or to road transporter who is unregistered with GST providing road transport services by hiring trucks from third party - to be treated as consignment note for GST-RCM purposes. HELD THAT:- The concept of Mechanism (in short RCM) is incorporated under UM wherein the Government has notified not only supply of certain services but also supply of certain goods under RCM. Under RCM the liability to pay tax is fixed on the recipient of supply of goods or set vices instead of the supplier or provider - As per the provisions of section 9(3) of Act, the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both A list of goods on which GST is payable under section 9(3) of the Act is given in the Notification No. 4/2017-Central Tax (Rate) dated 28.06.2017 and the category of services on which tax is payable is enumerated in the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017. On perusal of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, the services rendered by the Goods Transport Agency in short (GTA) falls under Reverse Charge Mechanism . The services provided by GTA in respect of transport of goods by road is a taxable event. As per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called - consignment note has not been defined in the Act or in the Notification either. In this context we take the help of Explanation to Rule 4B of Service Tax Rules, 1994 wherein the consignment note has been defined as a document provided by a goods transport agency against the receipt of goods for the transport of goods by roadways in a goods carriage. Form 2.1 may be treated as consignment note, thus the condition of OTA is fulfilled and thus the services procured from unregistered person for transportation of goods full under the definition of OTA and the applicant is liable to pay GST on the same under ROM.

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• 2020 (6) TMI 519
  Input Tax Credit - GST paid by the contractor on the services rendered to the applicant - rate of GST - HELD THAT:- The availability of ITC as per the provision of second proviso to section 17(5)(b) is available only on the condition that such goods or service or both is obligatory for an employer to provide to its employees under any law for the time being in force. Since, the applicant has not been able to cite any law under which the service of providing the facility of transportation to his employees is obligatory under any law, therefore ITC will not be available to him. The applicable rate of tax on renting of Cabs as per Notification No. 20/2017 dated 22.08.2017 is 5% with limited ITC (of input services in the same line of business) and 12% with full ITC - If the facility provided by a taxpayer for transportation of employees is not obligator under any law, for the time being in force then no ITC will be available to such a taxpayer. The applicant will however be eligible to claim ITC for the service supplied at 12% GST Rate if the conditions laid down in the second proviso to section 17 (5)(b) are satisfied.

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• 2020 (6) TMI 518
  Classification of services - services issued by the State Government to M/s Raj Quarry Works, for which royalty is being paid - service to be classified under Tariff Heading 9973, specifically under 997337 as Licensing services for the right to use minerals including its exploration and evaluation or as any other service? - rate of GST - applicability of Notification No 13/2017-CT(Rate), dated 28.06.2017 under entry number 5 - Reverse charge mechanism - scope of exclusion clause number (1) of entry no 5 and State Government is liable to discharge GST on same?. HELD THAT:- The activities mentioned in the Entry No. 2 of the Schedule II relate to the activities to be treated as supply of goods or supply of services with regard to the Land and Building - from the leasing of the Government land to the applicant to carry out the activity of the quarrying is a supply of service to the applicant. The nature of service received by the application is covered under the Service Accounting Code 9973 37 - Licensing services for the right to use minerals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same - payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. Applicability of GST rate - HELD THAT:- In the present case, the mining rights so granted is covered under the sub-heading 9973 37 that specifies - Licensing services for the right to use minerals including its exploration and evaluation . Whether the license to extract mineral and also the right to use such minerals extracted is a leasing or rental service? - HELD THAT:- Since, the service received by the applicant is not at all leasing of goods but rather Licensing services for the right to use minerals including its exploration and evaluation , the transaction is appropriately covered under the residual entry of Sl. No. 17 of the aforesaid notification. The aforesaid description of service received by the applicant has subsequently been classified against item no. vii [From 13-10-2017 to 24-1-2018] and item no. viii from 25-1-2018 onwards. The rate prescribed in the relevant notification against aforesaid item is same rate of Central tax as applicable on supply of like goods involving transfer of title in goods till 31-12-2018 and 9% thereafter. Also, the GST rate so prescribed at Sl. No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. The rate of GST applicable on lease of goods may have been prescribed as the rate of GST applicable to supply of like goods involving transfer of title over the goods but the rate of GST prescribed for lease of goods can t be made applicable for leasing of mining area conferring the right to extract and appropriate the minerals. The lease by Government not being a lease of any goods, the conditional rate of tax applicable to sale of like goods cannot be imported for prescribing the rate of GST applicable to leasing of mining area. Therefore, in view of the above discussion of GST Council it is clear that amendments have been carried out vide the aforesaid notification No. 27/2018- CT (Rate) Dated 31.12.2018 to clarify the legislative intent as well as to resolve the unintended interpretations. It is well settled that the legislative intent cannot be defeated by adopting interpretations which is clearly against such interpretations. The transaction/service i.e. leasing of mines is between the State Government and applicant and the services are supplied by the State Government to the applicant which is a business entity. The subject transaction/service being a supply is not covered under the exceptions, the applicant being the recipient of such service shall have to pay tax on the said supply under reverse charge mechanism as per Notification No. 13/2017-Central Tax (Rate), dated 28-6-2017. Hence the applicant is liable to pay GST under reverse charge mechanism.

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• 2020 (6) TMI 517
  Transitional Input tax credit - availment of accumulated CENVAT credit as of 30th June, 2017 by filing declaration Form TRAN-1 beyond the period provided under CGST Rules - validity of Rule 117 of the CGST Rules - it was held by High Court that Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. HELD THAT:- Notices issued - Operation of the impugned order shall remain stayed

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• 2020 (6) TMI 516
  Impleadment of Directorate General of Goods and Services Tax Intelligence, Ghaziabad to present petition - HELD THAT:- This Court is of the view that Directorate General of Goods and Services Tax Intelligence, Ghaziabad Region Unit (DGGI) is a necessary and proper party. Accordingly, DGGI is impleaded as respondent no. 3 to the present writ petition. Issue notice to respondent no. 3. Mr. Harpreet Singh, learned senior standing counsel for respondent nos. 1 and 2 undertakes to inform today s order to the newly impleaded respondent no. 3.

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• 2020 (6) TMI 515
  Refund alongwith interest - respondents have failed to to release refund despite two orders which have attained finality - HELD THAT:- List on 03rd July, 2020.

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• Income Tax

• 2020 (6) TMI 514
  Denial of exemption u/s 54F - interpreting the meaning of the word residential house used in Section 54F(1) - HELD THAT:- A bench of this court in SAMBANDAM UDAY KUMAR SUPRA [ 2012 (3) TMI 80 - KARNATAKA HIGH COURT] while interpreting Section 54F has held that provisions of Section 54F is a beneficial provision for promoting construction of residential houses and has to be construed liberally. Kerala, Delhi, Allahabad, Calcutta and Hyderabad High Courts have taken a view that usage of the property has to be considered in determining whether it is a residential property or a commercial property and Madras High Court in C.H.KESVA RAO [ 1983 (1) TMI 5 - MADRAS HIGH COURT] has held that expression residence implies some sought of permanency and cannot be equated to the expression temporary stay as a lodger. Revenue have fairly submitted that out of nine apartments, seven flats have been sanctioned for commercial purposes. Therefore, the dispute only survives in respect of two apartments, which have been sanctioned for residential purposes and are being used for commercial purposes as serviced apartments. The usage of the property has to be considered for determining whether the property in question is a residential property or a commercial property. It is not in dispute that the aforesaid two apartments are being put to commercial use and therefore, the aforesaid apartments cannot be treated as residential apartments. The contention of the revenue that the apartments cannot be taxed on the basis of the usage does not deserve acceptance. We hold that assessee even otherwise is entitled to the benefit of exemption under Section 54F(1) of the Act as the assessee owns two apartments of 500 square feet in same building and therefore, it has to be treated as one residential unit. The aforesaid fact cannot be permitted to act as impediment to allowance of exemption under Section 54F(1). Similar view was taken by Delhi High Court in case of Geeta Duggal wherein the issue whether a residential house which consists of several independent residential units would be entitled to exemption under Section 54F(1) was dealt with and the same was answered in the affirmative. - Decided in favour of the assessee.

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• 2020 (6) TMI 513
  Exemption under Section 54 - Assessee had purchased more than two houses - scope of expression a residential house - HELD THAT:- It is axiomatic that property sold is referred to as original asset and the original asset is prescribed as buildings and lands appurtenant thereto and being a residential house. The expression a residential house therefore, includes building or lands appurtenant thereto. It cannot be construed as one residential house. It is well settled in law that an Amending Act may be purely clarificatory in nature intended to clear a meaning of a provision of the principal Act, which was already implicit. [SEE: DECISION OF THE SUPREME COURT IN CIT VS. NEW DELHI VS. RAMKRISHNA DAS [ 2019 (3) TMI 1469 - SUPREME COURT] ]. In view of aforesaid enunciation of law by different High Courts including this court and with a view to give definite meaning to the expression a residential house , the provisions of Section 54(1) were amended with an object to restrict the plurality to mean singularity by substituting the word a residential house with the word one residential house . The aforesaid amendment came into force with effect from 01.04.2015. Subsequent amendment of Section 54(1) also fortifies the fact that the legislature felt the need of amending the provisions of the Act with a view to give a definite meaning to the expression a residential house , which was interpreted as plural by various courts by taking into account the context in which the aforesaid expression was used. See M/S. TILOKCHAND AND SONS [ 2019 (4) TMI 713 - MADRAS HIGH COURT] and GITA DUGGAL [ 2013 (3) TMI 101 - DELHI HIGH COURT] As interpreted the expression a residential house and have held that the aforesaid expression includes plural. The ratio of the decisions rendered by coordinate bench of this court are binding on us and we respectively agree with the view taken by this court while interpreting the expression a residential house . Therefore, the contention of the revenue that the assessee is not entitled to benefit of exemption under Section 54(1) of the Act in the facts of the case does not deserve acceptance.- Decided in favour of assessee.

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• 2020 (6) TMI 512
  Interest income earned from the deposits - Whether share application money is not liable for tax under the head income from other sources when the interest earned was revenue nature - Whether the tribunal was correct in holding that the interest income earned from deposits is liable to be setoff against the expenses incurred towards public issue ? HELD THAT:- Revenue fairly submitted that he does not intend to press the first substantial question of law as the same does not arise in the fact situation of the case. Further, it is fairly submitted that the second substantial question of law is answered against the revenue by the Supreme Court in COMMISSIONER OF INCOME TAX-IV, AHMEDABAD Vs. SHREE RAMA MULTI TECH LTD. [ 2018 (4) TMI 1374 - SUPREME COURT] In view of the aforesaid enunciation of law, the second substantial question of law is answered against the revenue and in favour of the assessee.

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• 2020 (6) TMI 511
  Revision u/s 263 - AO has not set off the unabsorbed brought forward depreciation from total income for computing deduction u/s.10A - Whether the Tribunal was correct in not taking into consideration that the non-set off of unabsorbed brought forward depreciation against the total income for computing deduction u/s.10A of the Act, was contrary to the provisions of section 10A and hence the order of assessment was erroneous and prejudicial to the interest of the revenue and hence invoking of section 263? - HELD THAT:- Both parties jointly submitted that the substantial questions of law involved in these appeals have been answered against the revenue by the Supreme Court in COMMISSIONER OF INCOME-TAX Vs. YOKOGAWA INDIA LTD. [ 2016 (12) TMI 881 - SUPREME COURT] Substantial questions of law are answered against the revenue and in favour of the assessee.

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• 2020 (6) TMI 510
  Deduction u/s 80P - Whether an entity registered under the Karnataka Souharda Sahakari Act, 1997 fits into the definition of co-operative society as enacted by Section 2(19) for the purpose of Section 80P thereof? - HELD THAT:- Interpretation adopted by the 3rd respondent that the petitioner- Shri Vittalray Souharda Pattin Sahakari Niyamit registered under the Karnataka Souharda Sahakari Act, 1997 is not a cooperative society within a definition of Cooperative Society under Section 2(19) of Income Tax Act is arbitrary, illegal and ultra vires the constitution and violative of Article 14 and 19(1)(c) of the constitution of India. Consequently, the order of assessment is quashed. The respondent No.3 is directed to pass fresh order treating the petitioner as a cooperative society extending the benefit under Section 80P of Income Tax Act, 1961 with all other exceptions as observed in the order and connection writ petition.

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• 2020 (6) TMI 509
  Maintainability of appeal - low tax effect - Revision u/s 263 - assessee, while inviting the attention of this Court to the proposal under Section 263 of the Income Tax Act, 1961, submitted that the tax impact is less than Rs. 1 Crore - HELD THAT:- As revenue submitted that the appeal may be disposed of with liberty to revive the same subject to the condition that if the tax effect is more than Rs. 1 Crore or exceptions as mentioned in the notification dated 08.08.2019 are attracted. In view of the aforesaid submission, the appeal is disposed of with liberty as prayed for by the revenue.

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• 2020 (6) TMI 508
  Deduction u/s 10A - HELD THAT:- This court need not detain us as it is no longer res integra and is squarely covered by decision of the supreme court in COMMISSIONER OF INCOME-TAX V. HCL TECHNOLOGIES LTD. [2018 (5) TMI 357 - SUPREME COURT] . In view of aforesaid enunciation of law, the tribunal was justified in directing the assessing officer to exclude telecommunication expense, per diem expenses. It is pertinent to note that in case expenses are incurred on insurance in respect of the employees of the assessee on visit to their clients premises, the same also deserves to be excluded. However, in the instant case, there is a dispute with regard to claim of the assessee with regard to expenditure incurred on insurance to the tune which requires adjudication. Accordingly, the first substantial question of law framed by a bench of this court is answered against the revenue insofar as it pertains to exclusion of expenses under the head of telecommunication and per diem expenses. Allowable business expenditure - Whether the assessee has incurred an amount on account of medical insurance of the employees of the assessee on visit to their clients premises or the same is not relatable to medical insurance? - HELD THAT:- We find from the order passed by the tribunal that tribunal has remitted the claim of the assessee that insurance expenditure is not relatable to export of computer software but it relates to medical insurance of the employees of the assessee on the visit to their clients premises. While issuing the aforesaid direction, the tribunal has followed the decision rendered by it in INFOSYS TECHNOLOGIES LTD. [2013 (7) TMI 451 - KARNATAKA HIGH COURT] . Therefore, it is not necessary to answer the second substantial question of law.

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• 2020 (6) TMI 507
  Penalty u/s 271D - violation of the provisions contained u/s 269SS - reasonable cause or as compelling circumstances provided under Section 273B - HELD THAT:- It should be proved that there existed reasonable and acceptable cause for not accepting the loans or deposits through crossed cheques or demand drafts. It was found that the mere proof regarding genuineness of the transaction or the intention in accepting the amounts in cash or that there was no attempt to induct black money into the business etc. cannot be considered as a reasonable cause or as compelling circumstances provided under Section 273B to avoid the penal action contemplated u/s 271D, with respect to violation of the provisions contained under Section 269SS. Analysed on the basis of the principle remaining settled as above, contention raised all along by the assessee is that it was due to ignorance of the provisions or due to lack of banking facilities in the area etc; cannot be accepted. Contention that both the parties to the transaction were having agricultural income and therefore the transaction will fall within the purview of the 2nd proviso to Section 269SS, cannot also be accepted, because the admitted case itself is that the appellant is a company doing finance business of money lending and receiving deposits. Appellant has raised a contention that the assessee will fall within the exempted category of banking company contained under the 1st proviso to Section 269SS. There is nothing to indicate that the assessee has got any registration as a banking company, as defined under the Banking Regulation Act or not even to the effect that the appellant is a non-banking financing company having authorisation from the Reserve Bank of India. Therefore the said contention also cannot be accepted. No substantial question of law.

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• 2020 (6) TMI 506
  Exemption u/s 11 - whether existence of registration u/s.12A will not confer benefit of exemption u/s.11? - HELD THAT:- Where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year for which assessment proceedings are pending before the assessing officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year. It has to be held that an assessment proceeding which is pending in appeal before appellate authority should be deemed to be assessment proceedings pending before Assessing Officer within meaning of that term as envisaged under proviso to section 12A(2). Consequently, an Assessee which obtained registration under section 12AA during pendency of appeal was entitled to exemption claimed under section 11. In the present case Assessee did not claim benefit of exemption u/s.11 of the Act before the AO and the AO did not have the benefit of examining such a claim. Mere existence of registration u/s.12A will not confer benefit of exemption u/s.11 and the other conditions for availing benefit of exemption u/s.11 of the Act has to be examined by the AO. It would be just and proper to set aside the order of the CIT(A) and remand to the AO the question of allowing exemption u/s.11 of the Act as by reason of the proviso to Section 12A(2), the Assessee should be deemed to have had registration u/s.12A of the Act. The registration u/s. 12AA(1)(b)(i) of the Income Tax Act, 1961 does not automatically exempt the income of the Trust/Institution. The question of taxability of the income of the Trust/Institution shall be examined and decided upon by the Assessing Officer based on the activities, compliance with various statutory and other requirements, etc., as referred to in Sections 2(15), 11, 12 13 - Appeal of the Assessee is treated as allowed for statistical purposes.

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• 2020 (6) TMI 505
  Interest expenditure on Compulsorily Convertible Debentures [CCDs] - claimed as revenue expenditure - principle of capitalization - HELD THAT:- We are of the view that the decision of the ITAT Bangalore Bench in the case of CAE Flight Training (I) Pvt. Ltd . [ 2019 (8) TMI 554 - ITAT BANGALORE] supports the plea of the assessee for allowing deduction on interest paid on CCDs held that the fact that the RBI under its Foreign Direct Investment Policy mandates conversion of debentures into equity and such mandate will not make any difference to the allowability of interest on debentures u/s. 36(1)(iii) Till date of conversion, CCDs are in the nature of debt and interest paid on CCDs cannot be disallowed on the ground that CCDs will later on be converted into equity. The Tribunal examined the decision rendered in Ashima Syntex Ltd. [ 2006 (3) TMI 188 - ITAT AHMEDABAD-B] and concluded that the issue therein was regarding expenses incurred on issue of convertible debentures and not interest paid on CCDs for the period before conversion and therefore the decision of Special Bench will not be of any application to the facts of the cases where deduction u/s. 36(1)(iii) of the Act is claimed. The Tribunal also discussed the RBI Master Circular on Foreign Investments in India dated 2.7.2007 and 1.7.2008 and held that those circulars will have no effect and the debentures till its conversion will retain its character as loan or borrowings. We are of the view that the deduction claimed by the assessee has to be allowed. We may also clarify that the Thin Capitalisation principle was neither invoked by the AO or the CIT(Appeals) in the present case nor were those rules part of the statute for the relevant AY in this appeal. We allow the appeal of the assessee and hold that deduction claimed by the assessee should be allowed.

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• 2020 (6) TMI 504
  TDS u/s 194H - Disallowance u/s. 40(a)(ia) - Commission payment - HELD THAT:- The perusal of the details of the commission paid by the assessee, reveals that out of the total commission which has been disallowed u/s 40(a)(ia), includes the amounts paid to Anuj Kumar, Surya Kumar, Mukesh Tyagi and Krishna Dayal which individually are below Rs. 10,000/- each and therefore we find force in the argument of the Ld AR that on those payments assessee was not required to deduct TDS u/s. 194H - same cannot be disallowed u/s 40(a)(ia) of the Act. We accordingly direct its deletion. As far as the amounts paid to other persons in the list are concerned, we find the payments to be in excess of Rs. 10000/- each. We find that Finance (No.2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 01.04.2015. Various benches of the Tribunals including the Delhi Benches of the Tribunal, have held the amendment made by Finance (No 2) Act to be curative in nature. We further finds the coordinate bench of the Tribunal in the case of R.H. International Vs. ITO [ 2019 (5) TMI 616 - ITAT DELHI] has held that disallowance u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively. - Appeal filed by the assessee is partly allowed.

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• 2020 (6) TMI 503
  Understatement of sales price - decline in the gross profit ratio declared by the assessee for the year under consideration - AO has rejected the book results of the assessee - assessee in the year under consideration has shown gross profit ratio at the rate of 1.47% of the turnover whereas the same was shown for the assessment year 2010-11 and 2009-10 at 2.42% and 5.94% of the turnover respectively - HELD THAT:- AO has rejected the book results of the assessee based on the facts and figured that the assessee after purchasing the products has sold the same within short span at a price lower than the purchase cost. However, there are certain undisputed facts that the books of accounts were subject to audit under companies Act and under section 44AB under Income Tax Act. As per the assessee the goods were of poor/inferior quality, therefore the same were sold at a lower price. The ld. AR in support of his contention drew our attention on page 38 of the paper book. Similarly, we also find that there was no allegation by the Revenue that the assessee by making the sale at a price lower than the cost of purchase has received some consideration without recording the same in the books of accounts. The necessary details about the parties were available before the AO, but he has not conducted any enquiry from such parties to ascertain the fact that the assessee has sold the goods at a price lower than the purchase price. AO has also not brought any comparable cases showing that the market price was more than the price at which assessee sold the goods. Decline in the GP rate and NP rate in comparison to the immediately preceding assessment year cannot be criteria to reject the books. It is because the assessee explained that it had reduced the sale price due inferior quality. This reason for fall in GP of the assessee was nowhere controverted by the authorities below. Lower gross profit as compared to earlier year cannot be the ground to reject the books of accounts. AO did not point out any defect in the stock statement, purchase and sales, bank statement furnished by the assessee. Therefore in our considered view, the books of accounts of the assessee cannot be rejected until and unless the AO point out the specific mistakes. See AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS VERSUS COMMISSIONER OF INCOME-TAX [ 1993 (12) TMI 28 - ALLAHABAD HIGH COURT] CIT (A) has confirmed the addition on ad hoc basis without pointing out any specific material. In our considered view such ad hoc disallowance is not permissible. CIT (A) has given a contrary finding by accepting the books of accounts on the one hand and making ad hoc addition on the other hand. Accordingly, in the backdrop of the aforesaid discussion and precedent, we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

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• 2020 (6) TMI 502
  Disallowance u/s 80C - addition u/s. 68 towards unexplained cash deposited in the SB Account - case was selected for scrutiny and notice u/s 143(2) - AR submitted that the assessee was not able to produce sufficient evidence to justify his claim which resulted in the addition and was further confirmed by the Ld. CIT (A) - HELD THAT:- It is apparent from the orders of the Ld. Revenue Authorities that proper opportunities were provided to the assessee. In this situation, the prayer of the Ld. AR does not have much merits. However, considering the financial strain of the assessee and the nature of additions made, I hereby remit the matter back to the file of Ld. AO for de-novo consideration. I also hereby direct the assessee and his AR to promptly co-operate before the Ld. Revenue Authorities failing which the ld. Revenue Authorities shall be at liberty to pass appropriate orders in accordance with law and merits based on the materials on record.

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• 2020 (6) TMI 501
  Non speaking order of CIT(A) - non going into merit of the issues - Assessee relied on the order of the CIT(A) and submitted that in remand report proceedings AO has accepted the claim of the assessee and did not propose any additions/disallowance and, therefore, the Revenue is not justified in filing the appeal - HELD THAT:- We find that nothing contrary has been produced before us, which could show that the Ld. CIT(A) has allowed the relief to the assessee in any unreasonable manner. Though, admittedly the learned CIT(A) has not mentioned the brief facts of the addition as well as brief finding of the Assessing Officer in the remand report mentioned, but that does not take away the substantial issue that the Assessing Officer has accepted the claim of the assessee in the remand proceeding. Before us, Revenue has not been able to explain as why the appeal has been filed when the Assessing Officer himself has accepted the claim of the assessee in the remand report, which was endorsed by the Supervisory Officer also. No reason for filing the appeal by the Revenue, once the Revenue has accepted the claim of the assessee during remand proceeding. CIT(A) has decided the issue on the basis of the remand report of the AO duly forwarded by the Supervisory Officer. In our opinion, the stand taken by the Assessing Officer and the Supervisory Officer in the remand proceeding is considered to be the stand of the Revenue unless anything malafide is not found in the action of the Assessing Officer in remand report. Since the Ld. CIT(A) has decided the issue in view of the remand report of the Assessing Officer, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute for assessment year 2009-10 and accordingly, we uphold the same. - Decided against revenue.

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• Customs

• 2020 (6) TMI 500
  Exemption for Customs duty - import of three textile machines - inclusion of new items in the exemption - Amendment is retrospective or prospective - Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT:- The question whether the relevant customs notification was retrospective in nature becomes academic. However, since the Director General of Foreign Trade had declined to grant relief to the company holding that the said notification had no retrospective effect and the learned Single Judge, on the other hand, allowed the writ petition taking a contrary view, the said issue is also addressed - aforesaid notification dated November 04, 1999, was introduced for further amending the notification No. 29/97-cus dated the 1st April, 1997 and giving a retrospective effect would mean that the same would relate back to 1st April, 1997. The amended EXIM Policy was made effective from 1st April, 1999. Such interpretation, therefore, leads to an absurdity where the customs notification would be made operative even before the EXIM Policy came into being. If the law maker, by way of amendment, introduces anything which was left out or omitted by mistake in the original provision, then such amendment may operate retrospectively with effect from the date of the original provision - The relevant amendment in the customs notification has not been made for rectification of any such mistake. Two additional import items were introduced to give effect to the amendment of the EXIM Policy. The inclusion of the import items namely, textile and chemical sectors , if construed to be operative retrospectively, then the same would entail refund of all customs duties already levied under the ten per cent customs duty regime. Such a consequence was never the intendment of the amendment. Appeal allowed.

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• Insolvency & Bankruptcy

• 2020 (6) TMI 499
  Disciplinary Action against the liquidator / IP professional - Voluntary Liquidation of a company - delay of 18 months while making public announcement in newspapers - contravention of Section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The DC is conscious of the fact that the profession of IP is in a stage in which IPs are striving to learn. However, it is incumbent upon the IPs to perform their duties diligently and act strictly in accordance with the provisions of the Code and the regulations made thereunder. They must endeavor to build and safeguard the reputation of the profession which should enjoy the trust of the society and inspire confidence of all the stakeholders - DC is also aware of the fact that the IP himself came forward and sought permission to make public announcement belatedly though there is no such provision. Further, non-compliance of law is not tolerable, however, coming forward at his own deserves some leniency. The DC hereby imposes on Mr. Tarun Jaggi a monetary penalty of Rs. 1,00,000/- and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the Insolvency and Bankruptcy Board of India . The Board in turn shall deposit the penalty amount in the Consolidated Fund of India - Mr. Tarun Jaggi shall not accept any new assignment as an IP till he deposits the monetary penalty of Rs. 1,00,000/- (Rs. One Lakh only) with the Board and produces evidence to the Board of such deposit.

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• 2020 (6) TMI 495
  Extension of period of limitation - prescribed timelines for taking the Resolution Process to its ogical conclusion in order to obviate and mitigate such hardships - HELD THAT:- A copy of this order be communicated to Registrar of National Company Law Tribunal, New Delhi with a request to circulate the same to all Benches of NCLT across the country including the Principal Bench based at Delhi.

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• 2020 (6) TMI 494
  Approval of Resolution Plan - Appellant has challenged the decision for fresh valuation as made by the Adjudicating Authority on the ground that it is not permissible - HELD THAT:- We are not inclined to interfere with the impugned order as no party has a right to say whether the Adjudicating Authority should go for further valuation before approval of the plan or not and it is open to the Adjudicating Authority to satisfy itself of the plan approved by the Committee of Creditors, to ascertain whether to approve the plan under Section 31 of the I B Code or not. Appeal disposed off.

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• 2020 (6) TMI 492
  Dissolution of Applicant/Liquidator/Petitioner s Company - section 59(7) of the Insolvency and Bankruptcy Code - HELD THAT:- The affairs of the company have been completely wound up, and its assets have been completely liquidated. The petitioner Liquidator has duly complied with the above stated provision and prescribed procedure, seeking for voluntary liquidation and dissolution of the petitioner company - By perusal of the material available on record in the present petition, it is evident that, the affairs of the company are completely closed down and the assets of the company have been completely liquidated. Thus, the petitioner company stands wound-up. Hence, the Petitioner Company deserves to be dissolved. Accordingly, this Adjudicating Authority hereby order that the company shall stand dissolved with effect from the date of this order. Petition allowed.

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• 2020 (6) TMI 491
  Approval of Resolution Plan - liquidation of the Corporate Debtor - HELD THAT:- The Appellant cannot derive advantage of clause 15.3(b) of the Agreement as the provisions of the I B Code can prevail over such agreement. Finally, if no arrangement or Scheme framed under sections 230-232 of the Companies Act, 2013 becomes possible or the Corporate Debtor is not sold in its totality along/with the employees as ordered by this Appellate Tribunal in Y. Shivram Prasad [ 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] and there is no option but to sell the assets of the Corporate Debtor and to distribute the same amongst the Creditors in terms of Section 53 read with Section 52 of the I B Code , at that stage, the Appellant may ask the Liquidator to return the assets i.e. Plant Machinery, if it belongs to it as the third party. Appeal dismissed.

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• Service Tax

• 2020 (6) TMI 493
  CENVAT Credit - input/capital goods - tower and shelter - input service used for providing telecommunication services/passive infrastructure - HELD THAT:- The issue has been settled by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX-GURGAON VERSUS BHARTI INFRATEL LIMITED [ 2019 (2) TMI 1736 - CESTAT CHANDIGARH ] where it was held that assessee-appellant are entitled to avail cenvat credit on items, towers, shelter parts thereof being input used for providing output service. Credit allowed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (6) TMI 498
  Whether the Tribunal was right in upholding the alleged stock variation merely for reason that departmental delivery notes were not issued? HELD THAT:- The Tribunal erroneously deleted such additions made on the ground that addition would be taken care of in that made with respect to suppression. The addition made on the basis of the stock variation, to cover probable omissions and suppression is only that up to September of the assessment year; till which date the assessee had not been using departmental delivery notes. The under-valuation is insofar as the months from October to March of the assessment year. Computing the figures from the table available in the assessment order, the total products sent on departmental delivery note had a value of Rs. 3,50,01,765/- between October and March. The sale conceded as disclosed in the list available in the assessment year is Rs. 3,21,54,750/-. The difference comes to Rs. 28,47,015/-. The addition hence could be only of Rs. 28,47,015/-. In the facts and circumstances, we do not think there need be any further addition on lower sales reported, other than the difference arrived at from the value disclosed and the sale conceded - we affirm the addition to the turnover of Rs. 4,08,81,975/- with an equal addition as also the purchase return of Rs. 65,10,575/- and the under-valuation of sale coming to Rs. 28,47,015/-. The Assessing Officer is directed to modify the assessment order - revision allowed.

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• 2020 (6) TMI 497
  Works Contract - validity of pre-assessment notice - disallowance of exemption claimed by the petitioner under Rule 10 - disallowance of minor portion of input tax credit - petitioner has made a specific case that the pre-assessment notice does not disclose grounds which has actually been now relied on in the impugned Ext.P-5 assessment order - HELD THAT:- Going by the data and facts and figures now projected in Ext.P-6 application for rectification would indicate that the petitioner has made out a very strong case that even parametres like land cost, corpus fund, electrical and water charges, etc. has already been reckoned by the 1st respondent, while determining the issue of value added tax, as per the impugned Ext.P-5 assessment order. Such an aspect would certainly termed as wednesbury unreasonableness in the decision making process, which led to the impugned Ext.P-5 assessment order. Since that is the specific case of the petitioner, it is only to be held that the plea for rectification made by the petitioner as per Ext.P-6 would require serious re-consideration at the hands of the 1st respondent. In that view of the matter, it is ordered that the impugned Ext.P-7 order rejecting the plea for rectification made out as per Ext.P-6 application will stand set aside. This Court has not entered into the merits of the controversy in any manner and has only examined the decision making process on the part of the 1st respondent and has only noted the abovesaid contentions of the petitioner and the adjudication of all those issues on merits would be falling within the exclusive zone and domain of the 1st respondent Assessing Officer - Petition disposed off.

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• 2020 (6) TMI 496
  Refund of Excess payment made towards excess IPT - grant of interest on refund - Section 89(4) of the KVAT Act - HELD THAT:- It is ordered that the respondents will immediately take up the plea for refund made by the petitioner in Ext.P4 and after affording reasonable opportunity of being heard to the petitioner, will take considerable decision thereon, passing orders in the matter of grant of refund due to the petitioner, within a period of 4 weeks from the date of production of the certified copy of this judgment and depending on the orders so passed, the consequential steps for disbursing the new refund amounts should also be duly completed by the respondents or the competent official concerned within 4 weeks thereafter. Grant of interest on the refund - HELD THAT:- The said claim for interest should also be duly considered and orders passed thereon by the respondent officer in the light of the mandatory provisions contained in Sec.89(4) of the KVAT Act. So that the due admissible interest amounts should also be duly disbursed to the petitioner along with the principal amount of the refund amounts. Petition disposed off.

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