TMI Tax Updates - e-Newsletter
June 3, 2020

Case Laws in this Newsletter:

Income Tax Customs Service Tax Indian Laws

Articles

• NEW FORM 26AS UNDER INCOME TAX ACT, 1961
• GST on Director’s Services - An Instigating Litigation with multiple Absurdity

News

• Issue of GST late fee for the past period (August 2017 to January 2020) to be discussed in the next GST Council meeting

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• Shri Piyush Goyal asks NPC to leverage its strengths for expansion of its Advisory & Capacity Building services;

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Notifications

Customs

• F. No. 01(0.5)/Circular/CESTAT-2017 - dated 23-5-2020 - Cus
  Clarifies the submission of pen drives alongwith appeal memorandum or application or the paper book, as the case may be, is optional

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GST - States

• GST.1020/C.R.47/Taxation-1 - dated 26-5-2020 - Maharashtra SGST
  Supersession of Notification No. MGST.1017/C.R.146/Taxation-1. Dtd. 7.9.2017 (regarding reconstitution of the State Level Screening Committee.

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• G.O. Ms. No. 23 - dated 15-5-2020 - Puducherry SGST
  Appoints the 21st day of April 2020, as the date from which the said provisions of the Puducherry Goods and Services Tax (Fourth Amendment) Rules, 2019, shall come into force.

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• F. No. 3240/CTD/GST/2020/6 - dated 6-5-2020 - Puducherry SGST
  Supersession Notification F. No. 3240/CTD/GST/2020/2, dated the 15th April, 2020

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• F. No. 3240/CTD/GST/2020/5 - dated 6-5-2020 - Puducherry SGST
  Amendment in Notification F.No. 3240/CTD/GST/2020/4, dated the 15th April, 2020

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• 362/XI-2-9(42)/17-U.P. GST Rules-2017-Order-(101)-2020 - dated 24-4-2020 - Uttar Pradesh SGST
  Uttar Pradesh Goods and Services Tax (Thirty Seventh Amendment) Rules, 2020

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• 412/XI-2-9(47)/17-U.P.Act-1-2017-Order- (100)-2020 - dated 31-3-2020 - Uttar Pradesh SGST
  Amendment in Notification No. KA.NI.-2-842/XI-9(47)/17-U.P. Act-1-Order-(9)-2017 dated the 30 June, 2017

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• 411/XI-2-9(47)/17-U.P.Act-1-2017-Order- (99)-2020 - dated 31-3-2020 - Uttar Pradesh SGST
  Amendment in Notification No. KA.NI.-2-836/XI-9(47)/17-U.P. Act-1-2017-Order-(6)-2017 dated the 30th June , 2017

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• 493-F.T. - dated 13-5-2020 - West Bengal SGST
  Seeks to make amendments to special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. (Amendment to notification No. 439-F.T. dated 03.04.2020.).

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• 492-F.T. - dated 13-5-2020 - West Bengal SGST
  West Bengal Goods and Services Tax (Fifth Amendment) Rules, 2020.

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• 07/2020–C.T./GST - dated 13-5-2020 - West Bengal SGST
  Seeks to extend the due date for furnishing of FORM GSTR 9/9C for FY 2018-19 till 30th September, 2020

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Circulars / Instructions / Orders

Customs

• Instruction No. 08/2020 - dated 1-6-2020
  24x7 clearance

Highlights / Catch Notes

Income Tax

• Addition as income from other sources - Stamp value in excess of consideration price - gift of flat to a grandson - Addition made against the clubbing of income u/s 56(2)(vii)(b) read with Section 64(1A) of the Act - gift of flat to a grandson does not come within the clutches of sec. 56(2)(viib) since grandfather and grandson are relative.
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• Claim of loss in the stock business denied - loss from commodity stock trading - transaction could not be held to be a bogus transaction - delivery taken by arhtias in the capacity of agent of the assessee is to be construed as actual delivery taken by the assessee, the transaction therefore cannot be treated as speculative also.
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• Set off/ adjustment and carry forward of accumulated losses and unabsorbed depreciation of the demerged company - In the instant case, all the conditions stated in section 72A(4) read with section 2(19AA) of the Act has been fulfilled. In view of the same, assessee company is eligible to claim the set off of brought forward losses transferred from the demerged company
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• Penalty u/s 271(1)(c) - The Revenue may or may not agree with this understanding of law of the assessee but the fact that there can be a bona fide view to that effect cannot be ruled out. The human probabilities favour acceptance of this explanation for bona fides. It cannot always be feasible to prove the claim of bona fides to the hilt, nor, in our considered opinion, the assessee cannot be expected to do so.
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• Income tax proceedings against assessee - whether appellant is not a "state" under Article 289 of the Constitution of India and therefore, liable to tax under the Income Tax Act? - Maharashtra State Board of Technical Education is “State” under Article 289 of the constitution of India, and is entitled to immunity from taxation under the Income Tax Act 1961.
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• Income from offshore supply of products - income taxable in India - as the repair works are undertaken at the overseas work stations of the assessee, therefore, the question of taxability of such receipts from rendering of the repair work as attributable to PE of the assessee in India does not arise.
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• Validity of assessment u/s 144C - Non passing draft Assessment Order - TP Adjustment - AO merely captioned the final Assessment Order as Draft Assessment Order along with issuance of notices u/s 156 and 274 r.w.s 271(1)(c) - Final Assessment order passed in remand proceedings without passing a draft Assessment order is in violation of Section 144C and is therefore null and void.
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• Exemption u/s 80G(5)(iii) - renewal of exemption - denial as primary object of the Trust among others, primarily was for the benefit of Catholics and others may be admitted without any distinction of caste or creed - Assessee is held entitled for renewal of exemption under Section 80G(5)(iii) of the Act from the year 2009
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Customs

• Duty Free Credit Entitlement’ Scheme - Review petition - merely because the respondents have granted some relief to M/s Adani Export Ltd. or have not made any recoveries from it, cannot entitle the petitioner, by itself, to claim benefit under the DFCE Scheme in spite of the clear and categorical judgment of the Supreme Court holding it to be not entitled for the same
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Indian Laws

• Liability of last owner - Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on “AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS”, there can be no doubt that the liability to pay electricity dues exists on the respondent (purchaser)
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Service Tax

• Benefit under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 rejected - The mistake made by the petitioner by not stating about the penalty imposed upon them in Form SVLDRS-1 cannot be said to be a mistake by which the petitioner claimed an undue benefit which they otherwise are not entitled under the law.
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Case Laws:

• Income Tax

• 2020 (6) TMI 55
  Exemption u/s 80G(5)(iii) - renewal of exemption denied as primary object of the Trust among others, primarily was for the benefit of Catholics and others may be admitted without any distinction of caste or creed - whether the respondent is doing charitable work without any discrimination on the basis of caste, creed or religion? - HELD THAT:- Clause 3 of the Memorandum of Association which uses the expression primarily for the benefit of Catholics . Others may be admitted without distinction of caste and creed has been thoroughly examined by the Department several time and only on the satisfaction, the Tribunal granted exemption under Section 80G(5)(iii) of the Act to the Assessee. No explanation is forthcoming on behalf of the appellants Revenue as to why the exemption was granted to the respondent - Society for the previous years from 1963 till the year 2009. From the perusal of paragraph No.7.3 of the order passed by the Tribunal, it is recorded that, even though the object of formation of Trust was primarily for the benefit of Catholics, the Tribunal has taken into account the statistics in the financial year 2008-09 and has found that the assessee Trust s Hospital has treated 8,51,127 patients of non-Christian community out of 9,00,406 total patients received treatment which works out to 94.5%. Similarly, in the financial year 2009-10, the total number of patients received various treatments in the hospital is 9,07,641 and out of which, 8,50,146 patients did not belong to the Christian community. Thus, this fact belies the finding recorded by the Director of Income Tax (Exemptions) that the Assessee - Trust had served only Catholic community and only run for the benefit of the Catholics. Out of total number of 685 students admitted in the medical college, 195 students were from Hindu community, 24 from Muslim and the remaining were from various sects of Christian community. Similarly, the number of staffs employed in its various institutions such as Research Institute, Medical College, Hospital etc., were from other communities also. In paragraph No.7.4 of the order of the Tribunal, it has been held that the assessee Trust has been serving the people on humanity basis in its noble profession by rendering timely treatment to the needy without discriminating the caste, creed, community etc. The findings recorded by the Tribunal are based on meticulous appreciation of the evidence on record which does not call for our interference. Assessee is held entitled for renewal of exemption under Section 80G(5)(iii) of the Act from the year 2009. - Decided in favour of assessee.

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• 2020 (6) TMI 54
  Exemption u/s 54F - AO restricted the exemptions to the expenses incurred till 31.07.2012, as the assessee failed to invest unutilized portion in Capital Gains Deposit Scheme - HELD THAT:- Mere non compliance of a procedural requirement under Section 54(2) itself cannot stand in way of assessee in getting benefit under Section 54, if he is, otherwise, in a position to satisfy that mandatory requirement under Section 54(1) is fully complied with within time limit prescribed therein. We direct the A.O. to allow the total investments made by the assessee under Section 54F of the Act after satisfying whether the impugned investment was utilized for the construction of the house within the time limit specified under Section 54F - Appeal of assessee is treated as allowed for statistical purposes.

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• 2020 (6) TMI 53
  Validity of assessment u/s 144C - Non passing draft Assessment Order - TP Adjustment - excessive Advertisement, Marketing and Promotion Expenditure (AMP) for development of the brand owned by its foreign AE, therefore such excessive AMP expenditure would amount to international transaction - Penalty u/s 271(1)(c) - whether AO has passed the final assessment order instead of a draft assessment order? - HELD THAT:- As per Section 144C of the Act, it is mandatory for the Assessing Officer to pass draft Assessment Order. But instead of that, the Assessing Officer vide order dated 18.10.2019 merely captioned the final Assessment Order as Draft Assessment Order along with issuance of notices under Section 156 and 274 read with Section 271(1)(c) of the Act which means a final Assessment order u/s 144C was passed without following the mandatory provisions of Section 144C. Final Assessment order passed in remand proceedings without passing a draft Assessment order is in violation of Section 144C of the Act and is therefore null and void. The Ld. DR could not bring any case law on contrary to these decisions. In fact, the statute itself gives a mandatory direction to the Assessing Officer under Section 144C that in the first instance the Assessing Officer should forward the draft of the proposed order of assessment. When the Tribunal remanded back the matter for fresh determination, it has set aside the earlier Assessment and hence the Assessing Officer has to conduct a fresh Assessment as per the mandate of Section 144C. Thus, the Assessment order itself is bad in law and void ab initio, hence quashed. Appeals of the assessee are allowed.

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• 2020 (6) TMI 52
  Income from offshore supply of products - income taxable in India - income of assessee as computed in accordance with provisions of section 44BB - activity of the PE in India - revenue from repair activities rendered by the assessee to ONGC - HELD THAT:- As decided in own case [ 2018 (8) TMI 52 - ITAT MUMBAI] revenue received by the assessee from offshore supply of goods to ONGC could not be taxed in India. We thus finding no infirmity in the order of the CIT(A) in context of the issue under consideration uphold the same to the said extent. If the service provider does not make available the technical knowledge, experience, skill know how or process etc., then the consideration received for rendering of such services cannot be characterised as royalty for the purpose of Article XII(3)(g) of India-Australia DTAA. Finding no infirmity in the order of the CIT(A) holding that the revenue received by the assessee from rendering of the repair services to ONGC cannot be brought within the sweep of FTS or Royalty, uphold the same. Before parting, we may further observe that as the repair works are undertaken at the overseas work stations of the assessee, therefore, the question of taxability of such receipts from rendering of the repair work as attributable to PE of the assessee in India does not arise. We thus, in terms of our aforesaid observations conclude that the A.O had erred in holding that the revenue from repair activities rendered by the assessee to ONGC was taxable in India under Sec. 44DA - Decided against revenue.

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• 2020 (6) TMI 51
  Income tax proceedings against assessee - whether appellant is not a state under Article 289 of the Constitution of India and therefore, liable to tax under the Income Tax Act? - HELD THAT:- As relying on MAHARASHTRA STATE BOARD OF TECHNICAL EDUCATION VERSUS ITO-15 (2) (2) , MUMBAI [ 2019 (4) TMI 755 - ITAT MUMBAI] we hold that the assessee is State under Article 289 of the constitution of India, and is entitled to immunity from taxation under the Income Tax Act 1961. The plea of the assessee is thus sustained.

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• 2020 (6) TMI 50
  Penalty u/s 271(1)(c) - bona fide view of the assessee - Income in relation to the New Mangalore Port Trust (NMPT) project - permanent establishment (PE) in relation to the NMPT project - India Netherlands Treaty - HELD THAT:- None of the conditions is fulfilled in favour of the Revenue for imposing penalty. As it appears on record that at the very onset of filing of return the assessee explained the reasons for not including the amount in question being 3.79 crores received as arbitration award in its taxable income by annexing Note 7 relying upon the content of the India-Netherlands Treaty. Such Explanation has not been found to be false by the authorities below neither there is any finding to that effect as on record. Even assuming the assessee fails to substantiate the explanation, he has been able to demonstrate that the explanation is bona fide. All the details and justification of claim have been set out in said Note 7 annexed to the return of income filed by the assessee giving rational and computation which is evident from the statement showing gross total income as annexed to the Paper Book before us. Question of bona fides cannot be decided against the assessee either. The conduct of the assessee is bona fide or not is essentially a question of fact and the related facts are always in the exclusive knowledge of the assessee. The Revenue may or may not agree with this understanding of law of the assessee but the fact that there can be a bona fide view to that effect cannot be ruled out. The human probabilities favour acceptance of this explanation for bona fides. It cannot always be feasible to prove the claim of bona fides to the hilt, nor, in our considered opinion, the assessee cannot be expected to do so. As long as the explanation given by the assessee in the light of the human probabilities, there are no factual errors or inconsistencies, and it is supported by rational supporting evidences regarding factual evidences embedded therein, if any, the bonafides should be taken as proved. We observe that the assessee s explanation regarding bonafides of the claim does not suffer from any apparent inconsistencies or factual errors and it is quite in tune with the human probabilities. We, therefore, find no reason to reject the reason as unacceptable. In that view the matter the case of the assessee is not even hit by the mischief of any of the three eventualities envisaged by the deeming fiction under Explanation 1 to Sec. 271(1)(c) - Decided in favour of assessee.

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• 2020 (6) TMI 49
  Transfer Pricing Adjustments - Selection of MAM - HELD THAT:- We find that TNMM method as adopted by the assessee in earlier years has constantly been accepted to be the Most Appropriate Method as against the observation of Ld. TPO that it was to be applied as a last resort. We find that similar facts exist in this year. Applying TNMM method, the assessee s margins in AE segment are much higher than margin in non-AE segment and therefore, it could be stated that the transactions were at Arm s Length. No infirmity has been pointed out by any of lower authorities in assessee s methodology. Therefore, respectfully following the earlier order of Tribunal in assessee s own case, we hold that TNMM method as adopted by the assessee was appropriate methodology and therefore, no TP adjustment would be warranted on these transactions. Corporate Guarantee - HELD THAT:- The rate of 1.25% would apply to gross amount of guarantee given by the assessee and not on the actual loan availed by AE as held in Mumbai Tribunal in Laqshya Media Pvt. Ltd. [ 2017 (1) TMI 1519 - ITAT MUMBAI]. Corporate Adjustment - deduction u/s 35(2AB) being 200% of amount incurred towards scientific research - HELD THAT:- As rightly contended by the assessee before Ld. DRP that the issue is squarely covered in assessee s favor by the decision of Pune Tribunal in Cummins India Ltd. V/s DCIT [ 2018 (5) TMI 1314 - ITAT PUNE] - we hold that Ld.AO was not justified in curtailing the deduction u/s 35(2AB) in the pre-amended period. Therefore, by deleting the impugned additions.

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• 2020 (6) TMI 48
  Disallowance of interest expenses u/s.36(1)(iii) on the ground that it was not incurred for business purposes - A plea of Rule of consistency has been raised to submit that since the assessee fulfilled the conditions laid down in Sec.36(1)(iii), entire interest-disallowance including suo-moto disallowance made by the assessee, was to be deleted - HELD THAT:- Correct facts need to be ascertained and brought on record in view of our observations - we are left with no option but to set-aside the impugned order and remit the issue back to the file of Ld.AO for adjudication de-novo. The Ld. AO is directed to reappreciate assessee s claim in the light of our observations. The assessee, in turn, is directed to substantiate its claim. All the issues are kept open. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 47
  Set off/ adjustment and carry forward of accumulated losses and unabsorbed depreciation of the demerged company - validity of the return filed under section 139(5) - AO to reject the revised ROI was that both the demerging company and the resultant company have claimed the same loss resulting in double claim of set off and carry forward of losses pertaining to the demerged undertaking - HELD THAT:- Intimation issued u/s 143(1) of the Act does not preclude the assessee from filing a revised return of income. More so, when assessment order u/s 143(3) of the Act was also passed in the present case of the assessee, thus the intimation u/s 143(1) of the Act loses its importance. And we find in this case the assessee has rightly filed the revised return of income u/s 139(5) of the Act within the stipulated time frame as per statute. In this advanced technological era, the AO (Kolkata) could have cross checked the veracity of the contention of M/s. SYK that they have filed revised return of income forgoing the claims of Vortal Division for AY 2010-11 without doing that AO has stuck to his allegation which action of AO cannot be countenanced. And in any way the department has the power vested in them to ensure that M/s. SYK does not get the benefit of M/s. Vortal Division for AY 2010-11 after it has filed the revised returns disclaiming the benefits. In the light of the above discussion, we do not find any merit in the objection raised by AO. Hence, there was no double claim as alleged by the AO since the demerged company (SYK Ltd) has forsaken its claim with respect of brought forward losses of the demerged unit. Once demerger is sanctioned by the Hon ble High court the enabling provision is section 72A of the Act, which allows carry forward and set off of accumulated loss and unabsorbed depreciation allowance in cases of amalgamation or demerger etc. Sub-section (4) of section 72A provides that in the case of a demerger is compatible to the scheme as envisaged and defined u/s. 2(19AA) of the Act, the eligible accumulated loss and the allowance for unabsorbed depreciation of the demerged company shall be allowed to be carried forward and set off in the hands of the resulting company. In the instant case, all the conditions stated in section 72A(4) read with section 2(19AA) of the Act has been fulfilled. In view of the same, assessee company is eligible to claim the set off of brought forward losses transferred from the demerged company M/s. SYK. Since the assessee company meets all the requirements contained in the Income-tax Act, 1961, all the carried forward losses and unabsorbed Depreciation in respect of M/s. Vortal Undertaking were transferred, pursuant to section 72A(4) of the Act, from the demerged company (M/s. Star Ya Kalakaar.Com Limited) to the resulting company (M/s. Padma Logistic Khanij Private Limited) w.e.f. the appointed date i.e. 01.03.2010. The claim of assessee is as per law and the AO erred in refusing to consider the Revised Return of Income so, the Ld. CIT(A) rightly allowed the claim of assessee and, therefore, the ground nos. 1 and 2 raised by the Revenue lacks merit. Disallowance u/s. 14A - HELD THAT:- Assessee was having sufficient own funds to invest in shares. And since the assessee was having a common fund consisting of both own funds and borrowed funds and in case the own funds are sufficient to invest in non-business activities, a presumption drawn is that the said investment is made out of own funds. For this proposition of law, we rely on the judgment of Hon ble Bombay High court in the case of CIT Vs. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and hold that no disallowance under rule 8D(2)(ii) is warranted. Disallowance of rent - HELD THAT:- Since the department while preferring the grounds of appeal has not assailed the factual finding rendered by the Ld. CIT(A), the result is that the assessee on the strength of the rental agreements referred to by the Ld. CIT(A) establishes the relation of assessee as that of tenant with the land/building owner. With this factual finding in the backdrop, when we peruse the impugned order of the Ld. CIT(A) we note that the Ld. CIT(A) has taken note that the AO has not refuted the claim of the assessee that the expenditure/rent paid was for the purpose of the business. This factual assertion of Ld. CIT(A) has also not been assailed before us which is evident from the ground raised by the department. So, the factual finding of the Ld. CIT(A) crystallizes and therefore, the order of the Ld. CIT(A) is based on material and cannot be termed as perverse. - Decided against revenue.

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• 2020 (6) TMI 46
  Addition on account of liquidated damages - Allowable business expenditure - HELD THAT:- Both the sides, this issue is squarely covered in favour of the assessee by the decision of this Tribunal rendered in assessee s own case for A.Y. 2008-09 to 2011-12 [ 2019 (4) TMI 1469 - ITAT KOLKATA] wherein held inbuilt condition of the contract that in case of late delivery of goods, percentage of consideration as liquidated damages would be deducted by the customer while making payment. It is noted that the payment was made to the assessee by the parties while it was carrying on its business, and the deduction of payment made by the parties were as per the contractual terms and so, it is an allowable deduction and we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. Addition on account of prior period expenses - HELD THAT:- Decided in assessee s own case [ 2019 (4) TMI 1469 - ITAT KOLKATA] expenses of such nature which though relates to earlier period had crystalised in the year under consideration either due to change of law with retrospective effect like bonus or till finalization of sales tax case or settlement with trade union with retrospective effect in respect to fee, allowance etc. or receipt of final bill after the cut-off date of the assessment years. The Ld. CIT(A) has duly considered the magnitude and the scale of operations of the assessee company and observed that many of the expenses could not be correctly estimated and there could arise exigencies which require calibration/correction and, therefore, taking note of the fact that these expenses are crystallized in this assessment year under consideration, the Ld. CIT(A) has given relief which according to us, does not require any interference Disallowance on account of Cold Weather Expenses - HELD THAT:- At the time of hearing before the Tribunal, the ld. Representatives of both the sides have submitted that the appellate orders of the ld. CIT(Appeals) giving relief to the assessee on a similar issue were challenged by the Revenue in the appeals filed before the ld. CIT(Appeals) and while disposing the said appeals, the Tribunal has restored this issue to the file of the AO for deciding the same afresh with certain directions. They have urged that a similar issue involved in the year under consideration, therefore, may also be sent back to the Assessing Officer for deciding the same afresh. The impugned order of the ld. CIT(Appeals) on this issue is accordingly set aside and the matter is restored to the file of the Assessing Officer for deciding the same afresh Expenses incurred on maintenance of young tea bushes - HELD THAT:- Decided in assessee s own case for A.Y. 2008-09 to 2011-12 [ 2019 (4) TMI 1469 - ITAT KOLKATA] since the expenses were incurred by the assessee company for maintenance of and replacement of tea bushes in its existing garden only, the same cannot be said to be that of an enduring benefit of capital nature and accordingly we hold that the expenses claimed by the assessee company are allowable as revenue expenditure. Disallowance on account of provision of Gratuity - CIT(Appeals) giving relief to the assessee on the similar issue for A.Y. 2004-05 has been accepted by the Department as there was no appeal filed by the Department - HELD THAT:- CIT-A relied on the provision of clause (b) of sub-section (7) of section 40A of the Income Tax Act, 1961, whereby any provision for the purpose of payment by way of contribution towards an approved gratuity fund is allowable as deduction. As further submitted by him, section 43B thus is not applicable here and as specifically provided in Explanation below section 40A(7)- once deduction is allowed on account of any provision made for the purpose of payment by way of contribution towards an approved gratuity fund, no deduction can be claimed by the assessee again on payment basis. Keeping in view this submission made by the ld. Counsel for the assessee which has remained un-rebutted or uncontroverted by the ld. D.R., we find no infirmity in the impugned order of the ld. CIT(Appeals) Disallowance on account of fees to ROC for recapitalisation of depleted net worth - HELD THAT:- In the present case, capitalisation however was made by the assessee company for meeting urgent payments like employees dues on account of PF etc. and the intention was not to enlarge capital for higher productive capacity by acquisition of any fixed assets. A perusal of the relevant balance sheet of the assessee company also shows that there was no change in the issued and subscribed capital during the year under consideration and the increase of authorised capital did not lead to increase of issued capital or acquisition of fixed assets. Keeping in view all these facts of the present case as well as the decision in the case of Hindustan Machine Tools Ltd. vs CIT [ 1988 (3) TMI 14 - KARNATAKA HIGH COURT] we find no infirmity in the impugned order of the Ld. CIT(A) allowing the deduction claimed by the assessee on account of fees paid to ROC for capitalisation of depleted net worth by treating the same as revenue expenditure.

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• 2020 (6) TMI 45
  Addition u/s 68 - source of the cash deposited were amount received out of the unsecured loan taken in the preceding year - HELD THAT:- Issue being of double additions and in some case proper opportunity of being heard have not been provided during the course of assessment and appellate proceedings, we in the interest of justice and fair to both the parties are of the considered view that all the issues raised in these appeals for AY 2007-08 and 2008-09 by the assessee needs to be restored to the file of A.O for denovo adjudication. A.O is directed to accept all the details and material evidence brought on record by the assessee in support of his contention that double additions should not have been made, telescoping benefit of cash deposits out of the funds received from cash creditors should be provided and proper opportunity of being heard should also to be given to the assessee to produce the cash creditors if needed by the A.O so as to prove the genuineness and creditworthiness of the cash creditors. Ld. A.O is also directed to examine the genuineness of loan given to M/s Roshanlal Deshraj Party and if satisfied with the transactions then necessary relief, if any, available to assessee may be given as per the provisions of Income Tax Act.

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• 2020 (6) TMI 44
  Disallowance of the Prepaid Expenses - HELD THAT:- Upon perusal of financial statements and ledger extract, we find substance in the arguments of Ld. AR. The nature of the aforesaid expenditure is prepaid expenditure which is to be claimed in subsequent years. This being the case, the impugned addition could not be sustained and therefore, we delete the same. This ground stands allowed. Training Expenditure disallowance - HELD THAT:- We find that the action of Ld. AO in treating the said expenditure as capital expenditure was bereft of any merits. The expenditure was merely training expenditure to train the assessee s employees qua new products. The assessee did not gained any benefit of enduring in nature. The said expenditure was rightly claimed as revenue expenditure. Ground No.2 stands allowed. Depreciation on office equipment - Purchases consisted of items such as coffee maker, T.V., microwave, washing machine which were installed at the residence of employees of the company and AO treating the same to be personal expenditure - HELD THAT:- The undisputed fact that emerges is that the fixed assets were purchased by the assessee and they entered into block of assets - simply because they were put at the disposal of employees, depreciation could not be denied to the assessee. Therefore, the disallowance made in this regard stand deleted. The ground stands allowed. Disallowance of gifts - cost of mangoes sent to Austria, Germany, Switzerland as gift on the occasion of marriage of one of the employees - AR has pleaded that there could be no question of any personal expenditure in case of a company and therefore, the said expenditure would be allowable - HELD THAT:- Going by the said argument, whatever expenditure was claimed by a corporate assessee, could never be disallowed despite non-fulfilment of conditions laid down by Sec. 37(1). Not convinced with the arguments, this addition stand confirmed. The ground stands dismissed. Capital Expenditure OR revenue expenditure - items under the head repair and maintenance expenditure claimed as revenue expenditure, were treated as capital expenditure and depreciation was allowed against the same - HELD THAT:- Going by the nature of expenditure, we find that these were routine repair and maintenance expenditure and therefore the same, by no stretch of imagination, could be treated as capital expenditure. Hence, the adjustment made in this regard, stand reversed. This ground stands allowed. Travelling Expenses - No supporting documents / vouchers were furnished - HELD THAT:- Without delving much deeper into the issue, we estimate the disallowance @10%. This ground stands partly allowed.

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• 2020 (6) TMI 43
  Claim of loss in the stock business denied - loss from commodity stock trading - not accepting the well accepted system of stock, wherein there is a pakka arthtia and other is stockiest - claim denied by the revenue authorities treating the same as bogus - HELD THAT:- Assessee who filed sufficient documentary evidences to substantiate its claim of purchase and sale of commodity stock in the form of documents above giving details of all commodity stock transactions entered into, copy of account of the parties with whom transaction had been entered alongwith consignment purchase and consignment sale documents. Revenue has based its findings of the transaction being bogus merely on the basis of suspicion and there is no concrete evidence, nor any investigation carried out by it on the findings submitted by the assessee, to arrive at this conclusion. As held in the case of Anju Sharma [ 2019 (11) TMI 1297 - ITAT CHANDIGARH] on identical facts and circumstances, we are unable to agree with the findings of the Revenue that the transaction could be held to be a bogus transaction - delivery taken by arhtias in the capacity of agent of the assessee is to be construed as actual delivery taken by the assessee, the transaction therefore cannot be treated as speculative also - Accordingly, we hold that the assessee be allowed its claim of loss of commodity transaction . Decided in favour of assessee.

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• 2020 (6) TMI 42
  Setting off of unabsorbed depreciation against Business Income and Income from Other Sources for the current year before setting off of brought forward business losses of previous year - HELD THAT:- A bare perusal of sub-section (2) of section 72 would show that before giving effect to the provisions of section 32(2) dealing with carry forward of unabsorbed depreciation, precedence is given to set off of brought forward business losses against income under the head Profits and Gains from Business or Profession. Thus, we find merit in the contentions of the assessee. AO is directed to first set off brought forward business losses of previous years before set off of unabsorbed depreciation of the earlier year. TP adjustment - Addition on account of advertising, marketing and sales promotion expenditure - HELD THAT:- As decided in own case [ 2019 (8) TMI 698 - ITAT MUMBAI] wherein the entire adjustment has been deleted on the ground that there is no agreement or arrangement for incurring AMP expenditure. The ld.Authorized Representative for the assessee asserted that the facts in the assessment year under appeal are identical. Disallowance of royalty expenditure - HELD THAT:- As assessee fulfilled all the prescribed conditions, he is entitled for the benefit of the same and hence, we are inclined to delete the impugned additions and allow the appeal of the assessee. See assessee's own case [ 2019 (8) TMI 698 - ITAT MUMBAI] Brought forward unabsorbed depreciation - AO disallowed unabsorbed depreciation on the ground that assessee could carry forward unabsorbed depreciation upto a maximum period of eight years - HELD THAT:- The authorities below have erred in not considering the judgment of Hon'ble Bombay High Court in the case of CIT vs. Hindustan Unilever Ltd. [ 2016 (7) TMI 1245 - BOMBAY HIGH COURT] wherein it has been held that the assessee can set off brought forward unabsorbed deprecation without any cap of years. Computation of interest u/s 234B of the Act without considering set off of credit of MAT Tax paid - HELD THAT:- Contention of the assessee is that interest under section 234B has been computed without set off of credit of MAT tax paid for assessment year 2009-10, 2010-11 and 2011-12. It is no more res-integra that interest under section 234B is to be charged after MAT credit available under section 115JAA is set off against tax payable on total income[CIT vs. Sage Metals Ltd.. [ 2012 (10) TMI 802 - SC ORDER] . The ground No.5 of the appeal is allowed, accordingly. Interest under section 234C on returned income - contention of the assessee is that the Assessing Officer has erred in charging interest under section 234C on assessed income - HELD THAT:- A bare perusal of the provisions of section 234C would make it clear that the interest under section 234C is to be charged on returned income and not assessed income. The Assessing Officer is directed to recompute interest under section 234C of the Act in the aforesaid manner.

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• 2020 (6) TMI 41
  Unexplained cash credit u/s 68 - summon u/s 131 was issued to ten creditors but all returned un-served - only three Suppliers could produce by the assessee and one appeared in response to summon u/s.131 - HELD THAT:- The appellant had actually received these goods in its premises. The assessee is duly maintaining proper quantitative details to record purchase as well as sales made out of such purchases. If is further submitted that since these farmers do not maintain any proper books of accounts probably that is why some anomalies were pointed out by the Ld. AO while recording their deposition. It is further submitted that the Ld. AO has verified the books of accounts of the appellant and did not find any discrepancy in relation to sale of purchased goods to all the parties. The assessee had made total sales which has been credited in the profit and loss account. The entire sales has been accepted by the AO. We note that only the profit embedded in such transaction can be brought to tax. Therefore,ld CIT(A) has rightly rejected books of accounts of the assessee and made estimate 1% of net profit taking into account past net profit history of the assessee. Addition as income from other sources - Stamp value in excess of consideration price - gift of flat to a grandson - Addition made against the clubbing of income u/s 56(2)(vii)(b) read with Section 64(1A) of the Act - HELD THAT:- We note that the gift of flat to a grandson (Umang Dugar) does not come within the clutches of sec. 56(2)(viib) since grandfather and grandson are relative, (being lineal descendant ascendant) as clearly defined in the particular section itself. Therefore, there is no infirmity in the order of the ld. CIT(A). That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the grounds of appeal raised by the Revenue is dismissed.

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• Customs

• 2020 (6) TMI 40
  Duty Free Credit Entitlement Scheme - validity of Notification no.28 dated 28.01.2004 - third party exports - status holder - petitioner filed application before the respondent, contending therein that out of the total exports of ₹ 1070.35 crores made by the petitioner between 01.04.2003 to 31.03.2004, exports of ₹ 355.69 crores had become ineligible in view of the exclusion set out in Notification dated 28.01.2004, leaving the eligible exports at ₹ 714.66 crores entitled for the benefit of the DFCE Scheme - respondent has rejected the application of the petitioner relying upon the judgment of the Supreme Court and observing that in terms thereof, the petitioner is not eligible to any benefit under DFCE Scheme as claimed. HELD THAT:- The Supreme Court in its judgment dated 27.10.2015 [ 2015 (11) TMI 80 - SUPREME COURT ] had inter alia considered the letter dated 13.10.2003 addressed by the Joint Secretary, Govt. of India, Central Board of Excise and Customs, addressed to the DGFT as also various other contemporaneous letters/Circulars/Minutes of Meeting leading up to the issuance of the Notifications dated 21.04.2004 and 23.04.2004. It also took note of the counter affidavit filed by the Union of India, giving details of the modus operandi used by the exporters in inflating their exports to claim benefit of the DFCE Scheme - In the counter affidavit, specific reference was made by the respondents to the petitioner herein to contend that the petitioner has shown an exponential growth in its exports of 3816% against the National Growth of Export of merely 18%. The petitioner in fact, filed a Review Petition seeking review of the said judgment, which was also dismissed by the Supreme Court. In the Review Petition, the petitioner had categorically contended that the finding of the Supreme Court that held the petitioner as having resorted to paper transactions was not justified as the respondents had not placed any material on record against the petitioner to prove the same. Relevant paragraphs of the Review Petition have been quoted hereinabove. The Review Petition was, however, dismissed by the Supreme Court - The petitioner certainly could not have been allowed to re-agitate As far as seeking parity with M/s Adani Export Ltd. is concerned, there can be no equality achieved in the violation of law. There is no right stipulated under Article 14 of the Constitution of India in the negative. Therefore, merely because the respondents have granted some relief to M/s Adani Export Ltd. or have not made any recoveries from it, cannot entitle the petitioner, by itself, to claim benefit under the DFCE Scheme in spite of the clear and categorical judgment of the Supreme Court holding it to be not entitled for the same. Petition dismissed.

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• 2020 (6) TMI 39
  Jurisdiction - proper officer to adjudicate the case - Adjudication of confiscation and penalties - Smuggling - contraband item - Gold - Section 122 of the Customs Act, 1962 - HELD THAT:- A plain reading of Section 122 would indicate that in every case under the said Chapter i.e., Chapter XIV under which anything is liable to be confiscated or any person is liable to be imposed with the penalty has to be adjudicated under Clause (a) of Section 122 of the Act by the Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs without limit. Under Clause (b) the penalty has to be adjudicated by the Assistant Commissioner of Customs or Deputy Commissioner of Customs where the value of goods came to be confiscated does not exceed ₹ 5 Lakhs and under Clause (c) same shall be adjudicated by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs where the value of the goods confiscated would not exceed ₹ 50,000/-. Undisputedly, in the instant case, value of goods was more than ₹ 5 lakhs and as per the appraisal value, who had appraised the gold bar so confiscated and had certified the weight at 2566.05 grams of 24 carot gold of foreign origin he had valued at ₹ 77,87,962/-. Before levy of penalty show cause notice came to be issued by Additional Commissioner of Customs proposing to levy penalty on appellant - In the instant case, order under Section 122 having been passed by the Additional Commissioner of Customs under Chapter XIV, said authority would fall within the definition of Section 2(8) and as such order passed by the Additional Commissioner of Customs cannot be faulted or in other words, contentions raised by Sri.Dakshina Murthy, learned counsel appearing for appellant cannot be accepted and it stands rejected. The appellant has not retracted his retrospective statement and it has never been contended by the appellant that statement has been obtained from him under threat or duress or coercion. It is only after show cause notice was issued proposing to levy penalty, appellant has tried to retrace his steps and not before the said date - there is no substantial question of law involved in this appeal for being admitted, adjudicated and answered. Appeal dismissed - decided against appellant.

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• Service Tax

• 2020 (6) TMI 38
  Benefit under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 rejected - mistake in the entry of penalty in Form SVLDRS-1 by petitioner - whether the claim of the petitioner for the benefit under Scheme 2019 would stand rejected as because of the aforesaid mistake of not mentioning the penalty or a different view can also be taken in the matter? HELD THAT:- Apparently, a mistake made can be of two different types, one being a mistake based upon which a legal right is claimed so that the mistake made can be construed to be an act of misleading the authorities to claim a benefit which otherwise a party is not entitled or the mistake made was more of inadvertent nature, which can also be terms as a callous mistake, which does not put the party making such mistake on an undue advantageous position so as to make them entitled to a benefit which they are otherwise not. In the instant case, the mistake made by the petitioner was that the penalty imposed was stated to be zero whereas it is already on record that the respondent authorities had imposed a penalty of ₹ 11,48,82,644.00. The mistake made by the petitioner by not stating about the penalty imposed upon them in Form SVLDRS-1 cannot be said to be a mistake by which the petitioner claimed an undue benefit which they otherwise are not entitled under the law. When we look into the Scheme 2019, there are no provision which provides that a person upon whom a penalty is imposed would not be entitled to the benefit given under the scheme. This petition stands disposed of by requiring the petitioner to submit an application before the respondent authorities for correction to be made in the information provided in the Form SVLDRS-1 as regards the penalty imposed and upon such application being made, the respondent authorities would pass a reasoned speaking order thereon - Petition disposed off.

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• Indian Laws

• 2020 (6) TMI 37
  Liability of last owner - statutory dues under the Electricity Act, 2003 read with the General Terms Conditions of Supply - whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent? - HELD THAT:- The electricity dues, where they are statutory in character under the Electricity Act and as per the terms conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically Section 56 of the Electricity Act, 2003 (in pari materia with Section 24 of the Electricity Act, 1910), and cannot partake the character of dues of purely contractual nature. Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS , there can be no doubt that the liability to pay electricity dues exists on the respondent (purchaser) - The debate over connection or reconnection would not exist in cases like the present one where both aspects are covered as per clause 8.4 of the General Terms Conditions of Supply. The impugned orders cannot be sustained and are accordingly set aside while opining that appellant No.1 would be well within its right to demand the arrears due of the last owner, from the respondent-purchaser - Appeal allowed.

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