TMI Tax Updates - e-Newsletter
June 9, 2020

Case Laws in this Newsletter:

GST Income Tax Customs CST, VAT & Sales Tax Indian Laws

Articles

1. GST Refunds: Why to file one application for one tax period under a particular category?

   By: Kashish Gupta

2. Eligibility of ITC on COVID 19 related Expenses – Potential Bone of Contention Between Assessee & Department

   By: Chitresh Gupta

3. A REVERSE GOOGLY- ALLOWABILITY OF TRAN 1 CREDIT ADMIST RETROSPECTIVE AMENDMENT IN SECTION 140 OF CGST ACT, 2017 VIS A VIS VARIOUS JUDGEMENTS PRONOUNCED.

   By: AANCHAL KAPOOR

4. GST ANNUAL RETURN FOR F.Y.2018-19

   By: Ganeshan Kalyani

News

1. Government rolls out facility of filing of NIL GST Return through SMS

2. COVID Emergency Credit Facility covers all companies and not just MSMEs: Finance Minister

3. Auction for Sale (Issue) of ‘New GS 2025’, Auction for Sale (Re-issue) of ‘6.19% GS 2034’, and Auction for Sale (Re-issue) of ‘7.16% GS 2050’

4. Growth Trajectory of Direct Tax Collection & Recent Direct Tax Reforms

Notifications

GST - States

1. 41/2020 - State Tax - dated 8-5-2020 - Chhattisgarh SGST

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

2. 39/2020 - State Tax - dated 8-5-2020 - Chhattisgarh SGST

Seeks to make amendments to special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016

3. 38/2020 - State Tax - dated 8-5-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Fifth Amendment) Rules, 2020

4. 37/2020 - State Tax - dated 8-5-2020 - Chhattisgarh SGST

Seeks to give effect to the provisions of rule 87 (13) and FORM GST PMT-09 of the CGGST Rules, 2017

5. 36/2020 - State Tax - dated 8-4-2020 - Chhattisgarh SGST

Seeks to extend due date for furnishing FORM GSTR-3B for supply made in the month of May, 2020.

6. 34/2020 - State Tax - dated 8-4-2020 - Chhattisgarh SGST

Seeks to extend due date of furnishing FORM GST CMP-08 for the quarter ending March, 2020 till 07.07.2020 and filing FORM GSTR-4 for FY 2020-21 till 15.07.2020

7. 33/2020 - State Tax - dated 8-4-2020 - Chhattisgarh SGST

Seeks to provide relief by conditional waiver of late fee for delay in furnishing outward statement in FORM GSTR-1 for tax periods of February, 2020 to April, 2020

8. 32/2020-State Tax - dated 8-4-2020 - Chhattisgarh SGST

Seeks to provide relief by conditional waiver of late fee for delay in furnishing returns in FORM GSTR-3B for tax periods of February, 2020 to April, 2020

9. 31/2020 - State Tax - dated 8-4-2020 - Chhattisgarh SGST

Provide relief by conditional lowering of interest rate for tax periods of February, 2020 to April, 2020 under the Chhattisgarh Goods and Services Tax Act, 2017

10. G.O. Ms. No. 26 - dated 28-5-2020 - Puducherry SGST

Seeks to amend Notification G.O. Ms. No. 7, dated the 1st April, 2020

11. G.O. Ms. No. 25 - dated 28-5-2020 - Puducherry SGST

Puducherry Goods and Services Tax (Fifth Amendment) Rules, 2020

Circulars / Instructions / Orders

DGFT

1. 10/2015-20 - dated 8-6-2020

Amendment in Para 2.20(b) of Handbook of Procedures (HBP) of Foreign Trade Policy 2015-20 regarding revalidation of Export Authorisation /License for Non-SCOMET and SCOMET item.

Highlights / Catch Notes

GST

• Court Orders Return of Seized Documents in Fake Purchase Bills Case; No Grounds to Quash Search Under Customs Act.

  Case-Laws - HC : Direction to the respondents to return all the documents and record seized - Allegation of availing ineligible drawback and IGST by way of accumulating ITC by procuring fake purchase bills - Section 105 of the Customs Act, 1962 - The factual aspect cannot be gone into at this stage and would not be a reason to quash the panchnama or to declare the search illegal.
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• OIDAR Services: Type 2 Test Qualifies for Taxability, Type 3 Test Does Not Meet Criteria.

  Case-Laws - AAR : Classification of services - Online Information and Database Retrieval Services or not - self-administered test taken by the candidates - taxability - The service provided for type 2 test classifies as OIDAR Services. - Service provided for type 3 test does not classify as OIDAR Services.
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• GST Classifies Whole Wheat and Malabar Parota Under Heading 2106, Following Rule 3(c) for Classification Order.

  Case-Laws - AAR : Classification of goods - preparation of Whole Wheat parota and Malabar parota - even if the applicant’s argument of classification of impugned products under heading 1905 as well as the classification under heading 2106 are considered as two relevant headings, the heading 2106 occurs last in numerical order and hence the heading 2106 would be more appropriate and right classification by virtue of Rule 3(c).
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Income Tax

• Taxpayer Wins Deduction u/s 10B: Calculate Before Depreciation Carry Forward, Boosting Business Profit Claims.

  Case-Laws - AT : Deduction u/s 10B - computation - CIT(A) has rightly held that the assessee is eligible for deduction under section 10B of the Act prior to giving effect to the brought forward depreciation of earlier years and thus, the assessee is eligible to claim deduction under section 10B on profits of business.
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• New Double Taxation Agreement's Article 13(4) Doesn't Apply Retroactively to Capital Gains in India.

  Case-Laws - AT : Income accrued in India - Capital gain - the new double taxation avoidance agreement has come into force much letter then the transaction took the place. In the new double taxation, avoidance agreement there is a provision as per article 13 (4) wherein now such transaction, probably is chargeable to tax in India. However, as the amended double taxation avoidance agreement is subsequent to the date of transaction it does not apply.
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• Taxpayer's Expense Disallowance Reduced from 20% to 10% Due to Lack of Supporting Documents.

  Case-Laws - AT : Disallowance under various heads of expenses - adhoc disallowance by disallowing 20% of the expenses - When the assessee is unable to produce the bills and vouchers, the Assessing Officer can make reasonable addition, as he deems proper - disallowance restricted at 10%
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• Deduction Allowed u/s 80P(2) If Fixed Deposit Made from Reserved Marketing Funds, Not Surplus Funds.

  Case-Laws - AT : Deduction u/s 80P(2) - If it is found that the fixed deposit has not been made from surplus funds or it has been made from the own funds which were kept for marketing assistance not immediately disposable in the form of marketing assistance to craftsmen and are also not available for otherwise use by the assessee, the AO is directed to give the benefit of deduction u/s.80P(2)(d) to the assessee.
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• Entity Not "Assessee-in-Default" for Not Deducting Tax on Roaming Charges u/s 194J; No Interest Charge Required.

  Case-Laws - AT : Assessee-in-default' for non-deduction of tax at source u/s 194J of the Act on roaming charges paid to other telecom operators - Once, the assessee is treated as assessee not in default u/s.201(1), the interest u/s. 201(1A) is not required to be charged
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• Interest on Tax Refunds Taxable Despite Non-Deductibility of Interest Paid u/ss 234B, 234C, 234D.

  Case-Laws - AT : Tax liability towards Interest on Income Tax Refund - The argument of the assessee is that since interest paid u/ss.234B, 234C &. 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. - This argument is not acceptable.
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Customs

• Court Halts Proceedings Against EOU for Alleged Export of Substandard Goods to Singapore Due to Severed Conspiracy Link.

  Case-Laws - HC : 100% EOU - Export of substandard capital goods/machinery to Singapore by falsely declaring the item exported as Capital Goods - in view of the live connect of conspiracy being snapped at both end, this Court finds that the continuation of the proceedings against the petitioners would be an excise in futility.
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VAT

• Court Rules Sales Tax Reimbursement Valid Despite Contract Stating Rates Include Taxes; Importance of Contract Clarity Highlighted.

  Case-Laws - SC : Reimbursement of the sales tax paid - Scope of terms of works contract - contract inclusive of taxes - even when the contract provided that the rates quoted by the contractor shall be deemed to be inclusive of sales and other taxes and royalties on the materials, it was agreed to between the parties that sales tax and other taxes under completed items of work, as paid by the contractor were to be reimbursed.
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Case Laws:

• GST

• 2020 (6) TMI 183
  Classification of goods - preparation of Whole Wheat parota and Malabar parota - whether classified under Chapter heading 1905, attracting GST at the rate of 5%? - Applicability of the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 - HELD THAT:- Rule 1 is not applicable since no Heading, Chapter Note or Section Note mention porota . Rule 2 is also not applicable since there is no mention of the finished article, i.e. porota anywhere in the tariff. Rule 3 is about classification of mixed or composite goods, prima facie, classifiable under two or more headings. In the instant case the product porota is though, made up of whole wheat flour or refined flour (maida) along with common ingredients like RO purified water, edible vegetable oil or refined oil, edible common salt and edible vegetable fat, there is no specific entry competing against a general entry (Rule 3 (a)); or has any specific essential characteristic by which we can describe the product (Rule 3 (b)) - Rule 3 (c) provides that when goods can t be classifiable under Rule 3(a) or 3(b), then they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Thus even if the applicant s argument of classification of impugned products under heading 1905 as well as the classification under heading 2106 are considered as two relevant headings, the heading 2106 occurs last in numerical order and hence the heading 2106 would be more appropriate and right classification by virtue of Rule 3(c). Applicability of the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 - HELD THAT:- The GST rate of 5% is applicable to the products subject to fulfillment of the conditions that (i) they should be classified under heading 1905 or 2106 and (ii) they must be either khakhra, plain chaptatti or roti. In the instant case the first condition of classification is fulfilled as the classification of the impugned products has been resolved as 2106. As for as the second condition is concerned the impugned products are described as parota and hence are neither khakhra, plain chaptatti nor roti. Further the products khakhra, plain chaptatti or roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat foods preparations, whereas the impugned products are not only different from the said khakhra, plain chaptatti or roti but also are not like products in common parlance as well as in respect of the essential nature of the product. The benefit of entry No.99A of Schedule I to the Notification No. 1/2017 -Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017 is not applicable to the instant case and the applicant is not entitled for the same.

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• 2020 (6) TMI 182
  Classification of services - Online Information and Database Retrieval Services or not - self-administered test taken by the candidates - taxability - levy of IGST - CBEC Circular No. 202/ 12/2016-Service Tax dated 09.11.2016 - HELD THAT:- Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017 exempts Services ( not including OIDAR services) received from a provider of service located in a non- taxable territory by the Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession. Sl. No. 1 of Notification No. 10/2017-IGST (R) dated 28.06.2017 provides for payment of tax on any recipient when service is being supplied by any person who is located in a non taxable territory and is engaged in providing any service to any person other than non taxable online recipient. Serial No.1 of Notification No. 10/2017 - IGST (Rate) dated 28-06-2017 is only shifting the liability to pay tax from the hands of the supplier to the recipient. It does not create any liability. We have to first see whether there is any liability and if there is a liability to pay tax on a particular transaction then the liability to pay tax on that transaction would shift from the usual supplier to the exceptional recipient as per Notification No. 10/2017-IGST (Rate) dated 28-06-2017. If the transaction itself is exempt, there is no liability on the recipient of service. Since Type 3 is not an OIDAR service, there wont be any special liability on the supplier located outside India and hence the entire transaction is exempted both in the hands of the supplier and also the recipient by virtue of Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017. Self-administered test taken by the candidates - the candidate is required to go to the test center, where an administrator will verify the identity of the candidate, validate test registration and appointment of the candidate - Whether the service provided for type 2 test (the specified service) classifies as Online Information and Database Retrieval Services ? - HELD THAT:- The service provided for type 2 test classifies as OIDAR Services. Levy of IGST - type 2 test provided by the applicant does not qualify as Online Information and Database Retrieval Services - supply of said services to non-taxable online recipients in India - HELD THAT:- Nil in view of (a) above. Type 3 test - these tests contain a mixture of multiple choice questions and analytical writing assessment section i.e. essay-based questions - whether the service provided for type 3 test (the specified service) classifies as Online Information and Database Retrieval Services ? - HELD THAT:- Service provided for type 3 test does not classify as OIDAR Services. If the type 3 test provided by the applicant does not qualify as Online Information and Database Retrieval Services , whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India? - HELD THAT:- IGST is exempted by virtue of Sl. No. 10 of Notification No. 09/2017-IGST (Rate) dated 28.06.2017.

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• 2020 (6) TMI 177
  Direction to the respondents to return all the documents and record seized - Allegation of availing ineligible drawback and IGST by way of accumulating ITC by procuring fake purchase bills - Section 105 of the Customs Act, 1962 - HELD THAT:- Section 105 is widely worded and search can be conducted if the Assistant or Deputy Commissioner of Customs has reasons to believe that there are any document or thing which in his opinion will be useful or relevant to any proceedings under this Act or secreted at any place. The section does not restrict the search only with regard to importer or exporter, the other premises can also be searched. The petitioner was a supplier/seller to the exporters at Ludhiana, there was an investigation that ineligible drawback etc. had been claimed by procuring only the bills without there being transfer of goods, this establishes the relevance of search with proceedings under the Act. The petitioner had written letter stating that there is a mistake in panchnama in recording the contents and same may be rectified. The said aspect cannot be gone into at this stage and would not be a reason to quash the panchnama or to declare the search illegal. The issue of evidentiary value of the contents can be raised by the petitioner at the appropriate stage. Petition dismissed.

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• Income Tax

• 2020 (6) TMI 179
  Seeking extension of time to deposit the balance amount with the Income Tax Department - HELD THAT:- Considering the grounds given by the petitioner for delay in depositing the amount and in the peculiar facts and circumstances, the delay in depositing the balance amount by the petitioner with the Income Tax Department is condoned subject to cost of Rs. 5,00,000/- to be deposited by the petitioner with the Missionaries of Charity, Jeevan Jyoti Home, Mathura Road, Jangpura B, New Delhi-110014 (Tel.011-24375483). The cost be deposited by the petitioner within one week and the receipt of the cost be deposited by the petitioner with the Registry within one week thereafter. The Registry shall list the case for directions in the event of non-deposit of cost within one week. Income Tax Department shall take all appropriate actions required to be taken within a period of four weeks with intimation to the petitioner. In view of the condonation of delay in depositing amount, the immunity granted to the petitioner in terms of paras 4 and 5 of the order dated 06th September, 2019 shall continue to operate.

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• 2020 (6) TMI 176
  Depreciation on lease hold land - HELD THAT:- As decided in own case [ 2018 (3) TMI 1197 - ITAT CUTTACK ] depreciation is not allowable u/s.32(1)(iii) of the Act in respect of intangible assets. Valuation of closing stock of coal (due to impact of overburden removal expenditure) - HELD THAT:- Valuation of closing stock has been changed due to Uniform Accounting Policy of Coal India Limited. We found that a reference made by the AO on the audited accounts that Reduction in value of stock is due to overall adjustment is as per the Uniform Accounting Policy adopted by the Coal India Limited. Ld A.R. demonstrated before us with a copy of letter of Uniform Accounting Committee recommendation and supported with paper book. Accordingly, we consider it appropriate to restrict our view on the method of valuation of closing stock mine-wise and the valuation of closing stock of coal are interconnected and since we have discussed on the applicability of the provisions, facts and reasons for valuation of stock centre on the first disputed issue. Therefore, we remit this disputed issue to the file of the Assessing Officer for appropriate adjudication afresh and the ground of appeal of the assessee is allowed for statistical purposes. CMPDIL Expenses - HELD THAT:- We find that the CIT(A) has granted relief with regard to addition made by the AO on account of CMPDIL expenses, which has been approved by the Tribunal by holding as above. In the instant case, the CIT(A) has confirmed addition made by the AO. In our opinion, when the Tribunal has upheld the findings of the CIT(A) thereby deleting the addition made on account of CMPDIL expenses in the assessee s own case for the immediately previous assessment year as cited above, therefore, respectfully following the decision of the Tribunal, we direct the AO to delete the addition made under the head CMPDIL expenses. This ground of appeal of the assessee is allowed. Addition made u/s.14A - HELD THAT:- AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of Special Bench in the case of ACIT vs. Vireet Investment (P) Ltd., [ 2017 (6) TMI 1124 - ITAT DELHI ]. None of the parties before us, however, have laid any details to examine as to which of the investments have yielded such income which did not form part of the total income. We, therefore, restore the matter back to the file of the Assessing Officer for calculating the disallowance u/s. 14A read with Rule 8D afresh, in the light of observations made in the body of this order above. Accordingly, ground No.4 is allowed for statistical purposes. Tax liability towards Interest on Income Tax Refund - HELD THAT:- The argument of the assessee is that since interest paid u/ss.234B, 234C . 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. - This argument is not acceptable. Short Credit of TDS - HELD THAT:- We restore this issue to the file of AO and after due verification if the AO finds that the assessee is eligible for credit of TDS, it should be given, otherwise, the AO is free to pass order accordingly. This ground is allowed for statistical purposes. 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 175
  Penalty u/s. 271(1 )(c) - Defective notice - non specification of charge - no mention of specific fault/charge as to whether assessee had concealed the particulars of his income or furnished inaccurate particulars of such income - HELD THAT:- We note that the AO has not stricken out the irrelevant portion of the fault/charge which would have spelt out the specific fault/charge against the assessee. According to the Ld. Counsel, since the proposed notice itself is a defective, all subsequent proceedings are bad in law and the penalty imposed by the AO u/s. 271(1)(c) of the Act and confirmed by the Ld. CIT(A) should be cancelled. As decided in JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [ 2017 (12) TMI 883 - ITAT, KOLKATA] show cause notice u/s 274 of the Act does not strike out the inappropriate words.show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.

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• 2020 (6) TMI 174
  TDS u/s 194H - assessee-in-default on non-deduction of tax at source on discount allowed to the prepaid distributors on distribution of right to prepaid service - HELD THAT:- As relying on BHARTI AIRTEL LTD. AND OTHERS [ 2014 (12) TMI 642 - KARNATAKA HIGH COURT ] assessee is not required to deduct tax under section 194H of the Act on the prepaid SIM Cards and hence, the assessee is not in default as per provisions of section 201(1) of the Act. Assessee-in-default for non-deduction of tax at source u/s 194J of the Act on roaming charges paid to other telecom operators - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the judgment of Hon ble Delhi High Court in the case of Bharti Cellular Ltd [ 2008 (10) TMI 321 - DELHI HIGH COURT ] and respectfully following the same, we hold that the assessee is not required to deduct tax u/s.194J of the Act and consequently, the assessee shall not be treated as an assessee in default u/s 201(1) of the Act. Once, the assessee is treated as assessee not in default u/s.201(1), the interest u/s.201(1A) is not required to be charged. We, accordingly, allow the grounds of appeal raised by the assessee. 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 173
  Disallowance u/s 14A r.w.r. 8D - CIT(A) has given relief to the assessee by holding that the amount of disallowance u/s. 14A should be restricted to the amount of exempt income only and not a higher figure. - HELD THAT:- This issue we note is no longer res integra and as rightly noted by the Ld. CIT(A), the Hon ble Supreme court [ 2018 (11) TMI 1565 - SC ORDER ] has upheld similar view of the Hon ble High court of Punjab Haryana in PCIT Vs. State Bank of Patiala [ 2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT ] and the Ld. CIT(A) has relied on the decision of the coordinate bench of this Tribunal in the case of West Bengal Infrastructure Development [ 2015 (11) TMI 926 - ITAT KOLKATA ] to come to the decision that disallowance u/s. 14A of the Act to be restricted to the amount of exempt income only and not at a higher figure. Therefore, we find no infirmity in the order of the Ld. CIT(A) and therefore, we confirm it. 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 172
  Penalty u/s. 271(1 )(c) - Defective notice - non specification of charge - no mention of specific fault/charge as to whether assessee had concealed the particulars of his income or furnished inaccurate particulars of such income - HELD THAT:- We note that the AO has not stricken out the irrelevant portion of the fault/charge which would have spelt out the specific fault/charge against the assessee. According to the Ld. Counsel, since the proposed notice itself is a defective, all subsequent proceedings are bad in law and the penalty imposed by the AO u/s. 271(1)(c) of the Act and confirmed by the Ld. CIT(A) should be cancelled. As decided in JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [ 2017 (12) TMI 883 - ITAT, KOLKATA] show cause notice u/s 274 of the Act does not strike out the inappropriate words.show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.

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• 2020 (6) TMI 171
  Deduction u/s 80P(2) - carry forward loss - Addition towards interest earned, assessed as income from other sources - HELD THAT:- We find from the statement of facts submitted by the assessee before the CIT(A) that the assessee is obtaining loan from Government for attaining the objects. The assessee keeps the fund in the manner of fixed deposit till the distribution of the said funds to the eligible recipients. However, it is not clear from the orders of the authorities below that how much amount was kept as surplus fund and how much amount has been kept for the distribution to the eligible recipients and which has not been distributed till the date and kept as fixed deposit out of loan funds. Therefore, this matter is sent back to the file of AO to determine as to whether the assessee had actual surplus funds which has been made as fixed deposit. The AO is also directed to examine the source of fixed deposit. If it is found that the fixed deposit has not been made from surplus funds or it has been made from the own funds which were kept for marketing assistance not immediately disposable in the form of marketing assistance to craftsmen and are also not available for otherwise use by the assessee, the AO is directed to give the benefit of deduction u/s.80P(2)(d) to the assessee. Needless to say, the assessee shall be given reasonable opportunity of hearing - Decided in favour of assessee for statistical purposes. Disallowance of ESI EPF contributions - assessee has not deposited the contribution of EPF and ESI within the due date - HELD THAT:- We found substance in the submissions of the ld. DR that Section 36(1)(va) of the Act deals with the deduction in respect of the sum received by the assessee from any of his employees to which the provisions of sub-section 2(24)(x) of the Act applies, provided such sum is credited by the assessee to the employee s account in relevant fund on or before the due date. The due date is defined under the Explanation to section 36(1)(va) of the Act by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. This very similar issue has also been decided in the case of Milind Gupta [ 2019 (10) TMI 128 - ITAT CUTTACK ] wherein the Tribunal has restored the issue to the file of AO to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act.- Decided in favour of assessee for statistical purposes. Addition made on adhoc basis - Assessee incurred expenses under different heads - HELD THAT:- As during the course of assessment proceedings, the AO noticed that the assessee has incurred expenses under different heads i.e. packing materials, miscellaneous expenses and printing and statutory expenses but the assessee was failed to furnish the documentary evidence in support of his claim but these are the incidental expenses to be incurred by the assessee considering to the nature of business of the assessee but for want of production of desired evidence of expenses, the AO has rightly disallowed 10% of the total expenditure incurred which has been upheld by the CIT(A) also. If the assessee was unable to produce the required document before the AO, he had an opportunity to produce the same in support of his claim of expenses debited into the profit and loss account under the aforesaid heads before the CIT(A) but the assessee could not do so. Therefore, the CIT(A) has rightly upheld the action of AO. No reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed. Addition on account of presumptive basis - HELD THAT:- AO during the course of assessment proceedings that the assessee has claimed the expenses as allowable expenditure claimed u/s.37(1) of the Act, however, the AO disallowed the same stating that the expenditure claimed by the assessee does not relate to the business of the assessee towards earning of the income as per Section 37(1) of the Act. It is also not an incidental expenses to earn the income of the assessee which rightly been confirmed by the CIT(A). Accordingly, we do not see any reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed. 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 170
  Addition u/s.68 - Unexplained share capital - onus to prove - HELD THAT:- Basic requirements of section 68 have been discharged by the assessee by furnishing the relevant evidences. The evidences which were furnished by the assessee were confirmation letters of the partners, copies of I.T.Returns, PAN Nos, and income declared. By furnishing the above, the preliminary onus was discharged by the assessee. There is no dispute to the fact that all the partners have owned the introduction of capital in assessee s firm. The AO has not challenged the correctness of the evidences filed by the assessee. We find that this is a case where the partners have introduced the capital, therefore, the issue is covered in the case of Metachem Industries [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT ] wherein held moment the firm gives satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be income of the firm for the purposes of income tax. It is open for the AO to take appropriate action under section 69 of the act against the person who has not been able to explain the investment. In the case at hand, the assessee has discharged its onus satisfactorily by furnishing all the relevant evidences. Therefore, when the firm is disclosing capital introduction by the partner providing names and PAN nos of contributing partners, then no addition can be made in the hands of the firm - Decided in favour of assessee. Disallowance under various heads of expenses - adhoc disallowance by disallowing 20% of the expenses - HELD THAT:- The onus is on the assessee to prove the genuineness of expenses claimed by furnishing relevant bills and vouchers. When the assessee is unable to produce the bills and vouchers, the Assessing Officer can make reasonable addition, as he deems proper. In this case, the assessee has produced ledger copies in support of various expenses incurred by him. The assessee is in the business of hotel and textile business and is bound to incur the above expenditure for smooth running of the hotel and textile business but has to keep the bills and vouchers for claiming the deduction, which is lacking in this case. However, keeping in mind the nature of business and expenditure incurred, we are of the view that the disallowance @ 20% is on higher side. Therefore, we restrict the disallowance at 10% - Decided partly in favour of assessee. Disallowance of interest on loans - HELD THAT:- onus was on the assessee to establish that no amount of interest-bearing loan was being used to extend interest free loan. Since the assessee was not properly show caused by the authorities below enabling him to explain his stand and to establish that no amount of interest bearing loan was used for advancing interest free loan, therefore, we deem it proper, as also candidly agreed by the ld D.R. to restore the issue to the file of the AO for afresh examination and verification after allowing due opportunity of hearing to the assessee. Hence, this ground is allowed for statistical purposes. 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (6) TMI 169
  Addition u/s.14A - assessee has not claimed any exempted income during the year under consideration- HELD THAT:- There is no quarrel that section 14A postulates the disallowance of expenditure incurred for earning the exempt income which is not forming part of the total income of the assessee. It is also clear from the copy of the return filed by the assessee for assessment year 2010-2011 that no claim has been made in respect of dividend income. The formula given in the Rule 8D does not recognize the actual expenditure incurred by the assessee but it calculates the disallowance being 0.5% of the average investment therefore, this computation of disallowance cannot disregard and override the actual expenditure attributable for earning the exempt income. The reliance placed by assessee in the case of Cheminvest Ltd [ 2015 (9) TMI 238 - DELHI HIGH COURT ] also support the case of the assessee. Accordingly, we set aside the orders of the authorities below on this issue and delete the disallowance made by the Assessing Officer made by the AO u/s. 14A by applying Rule 8D(2). 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. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ].

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• 2020 (6) TMI 168
  Deduction u/s 80P - disallow the claim as that the assessee was doing the business of banking, and in view of insertion of section 80P(4) with effect from 01.04.2007 - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied - HELD THAT:- The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P Thus restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. In this case, the A.O. had concluded that out of the total loan disbursed by the assessee only 12.54% are for agricultural purpose / allied activities. I am of the view that the above finding of the A.O. is not conclusive unless each loan applications / loan ledger are verified and the A.O. AO shall examine the activities of the assessee afresh and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) - Appeal filed by the assessee allowed for statistical purposes.

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• 2020 (6) TMI 167
  Computing allowable deduction u/s 10A - CIT(A) directing the AO to exclude the expenses incurred in foreign currency outside India, from total turnover of the assessee - HELD THAT:- As decided in TATA ELXSI LTD. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] total turnover is sum total of domestic turnover and export turnover. Therefore, if an amount is reduced from export turnover, then total turnover also goes down by the same amount automatically. In view of this, we find that the direction of the learned CIT(A), we decline to interfere in the order of CIT(A) on this issue. Reducing export sales on the ground of non-realization for the purposes of computing deduction u/s 10A - HELD THAT:- We find that this issue was discussed by learned CIT(A) in para Nos. 3.3 to 3.5 and in para 3.5, a specific finding was given by learned CIT(A) that the assessee has himself admitted that it could not realize an amount of Rs. 20.23 Crores out of total export sales of Rs. 1880.48 Crores. Before us, learned AR of the assessee could not point out any mistake in this categorical finding of CIT (A) on the basis of assessee s own submissions and therefore, the facts of the present case are different because the export proceeds were not brought into India even after lapse of the prescribed time and hence, this tribunal order and in turn the judgment of Hon ble Karnataka High Court is not applicable in the present case. We, therefore, decline to interfere in the order of CIT (A) on this issue. Ground No.1 is rejected. Expenditure incurred in foreign currency should not be reduced from export turnover Eligible business profits for the purposes of computing deduction u/s 10A - Exclusion amount as profit from trading of third-party software - Appellant had done value addition to the third-party software before supplying it to its customers, thereby making it eligible for deduction u/s 10A - HELD THAT:- We find that in this judgment in the case of CIT Vs. Hewlett Packard Global Soft Ltd. [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] , the assessee was 100% EOU. We do not know whether in the present case also, the assessee is 100% EOU or not. In para No.2 of the Assessment Order, it is noted by the AO that the assessee is engaged in the business of developing Software Products for Billing, Wireless and Internet Space and it renders services to its clients both for maintenance as well as core development. Hence, the relevant facts are not on record as to whether the assessee is 100% EOU or not. We restore this matter back to the file of CIT (A) for fresh decision. TDS u/s 195 - HELD THAT:- Commission payments made by the assessee to non residents cannot be treated as income deemed to accrue or arise in India and therefore, the provisions of section 195 are not applicable in the case in hand.

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• 2020 (6) TMI 166
  Income accrued in India - Capital gain chargeable to tax in India - income of the Cyprus entity chargeable to tax in India - whether the sale of shares by a Cyprus company to the assessee of an Indian company, who was holding a technology Park [immovable property] as only asset, is taxable in India in view of the Double Taxation Avoidance Agreement between India and Cyprus? - HELD THAT:- There is no dispute that the seller of the share is a resident of Cyprus, holding necessary tax residency certificate, therefore, the recipient of the income is entitled to take the benefit of the Double Taxation Avoidance Agreement between India and Cyprus. AO and the assessee both agree that under the Indian income tax act, the transaction is taxable in India by virtue of the provisions of section 5 (2) and 9, but taxability is to be determined as per DTAA. The Cyprus Company has sold the shares of an Indian company. The impugned asset sold by the assessee does not fall under the article 6 (2) of the Double Taxation Avoidance Agreement as immovable property , therefore article 14 (1) does not apply to the transaction. Further, as the Cyprus entity does not have any permanent establishment or fixed base, the provisions of article 14 (2) does not apply. Further it is not the alienation of any ship or aircraft or movable property pertaining to that, therefore article 14 (3) also do not apply. For this reason that the transaction falls under article 14 (4) of the double taxation avoidance agreement as the impugned property from which the capital gain has arose is shares of an Indian company. Therefore any gain arising from the alienation of property i.e. shares of an Indian company, shall be chargeable to tax only in the contracting state in which the alienator is resident. Here the alienator is a Cyprus resident. Therefore such gain is chargeable to tax only in Cyprus. Thus, the new double taxation avoidance agreement has come into force much letter then the transaction took the place. In the new double taxation, avoidance agreement there is a provision as per article 13 (4) wherein now such transaction, probably is chargeable to tax in India. However, as the amended double taxation avoidance agreement is subsequent to the date of transaction it does not apply. No infirmity in the order of the learned that CIT A in holding that the income of the Cyprus resident seller is not chargeable to tax in India, as per the double taxation avoidance agreement prevailing at that time, no tax was required to be withheld by the assessee. - Decided against revenue As already held that the income of the Cyprus entity is not chargeable to tax in India, applicability of the provisions of section 163 of the income tax act becomes merely academic in nature

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• 2020 (6) TMI 165
  Deduction u/s 10B computation - Adjusting the brought forward depreciation loss prior to working out the eligible profit of section 10B - HELD THAT:- Referring toYokogawa India Ltd. case [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT ] as confirmed by Supreme court [ 2016 (12) TMI 881 - SUPREME COURT ] CIT(A) has observed that the profit of the undertaking should be computed independently before adjusting any carried forward business. The profit thus arrived should be given benefit under eligible sections 10A/10B of the Act even though the assessee has had unabsorbed business loss of previous years besides not commenting on the unabsorbed depreciation. The ld. CIT(A) further observed that nonetheless, considering the fact that brought forward business loses have precedence over brought forward depreciation, the question of giving effect to brought forward depreciation does not arise at all. CIT(A) has held that the assessee is eligible for deduction under section 10B of the Act prior to giving effect to the brought forward depreciation of earlier years and thus, the assessee is eligible to claim deduction under section 10B on profits of business - We find no infirmity in the order passed by the ld. CIT(A) - Decided against revenue.

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• 2020 (6) TMI 164
  Seeking extension of time to deposit the amount with the Income Tax Department - HELD THAT:- This Court is of the prima facie view that this application shall be taken up for hearing after the deposit of the amount by the petitioner. In that view of the matter, without prejudice to the rights and contention of the parties, the petitioner is permitted to deposit the amount with the Income Tax Department by 31st May, 2020.

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• Customs

• 2020 (6) TMI 180
  100% EOU - Maintainability of revision petition - Conspiracy - Export of substandard capital goods/machinery to Singapore by falsely declaring the item exported as Capital Goods - allegations in the charge sheet are specific and there were sufficient evidence with regard to the criminal conspiracy between the petitioners/accused and the other accused for misappropriation of foreign funds and there are sufficient oral and documentary evidence to prove the offences - HELD THAT:- The Income Tax Department after analyzing all official transaction and on perusal of the document, books of account found that the petitioner did not import the machinery and did not make any claim for depreciation. Likewise the CESTAT has held M/s.Sundaram Finance Limited (SFL) and M/s.ICICI Bank (erstwhile Bank of Madura) are its importers, owners of the goods and liable to pay duty. Further, in view of the live connect of conspiracy being snapped at both end, this Court finds that the continuation of the proceedings against the petitioners would be an excise in futility. In view of the subsequent development that it has become inherently improbable to reach a just conclusion that there is sufficient ground to proceed against the petitioners/A6 to A8 and further considering that the case is pending from the year 2004 without any progress - revision allowed.

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• CST, VAT & Sales Tax

• 2020 (6) TMI 181
  Reimbursement of the sales tax paid - Scope of terms of works contract - contract inclusive of taxes - as per the contract the stipulation that any Central or State sales tax and other taxes on completed items of works (excluding penalty), as may be levied and paid by the contractor shall be reimbursed by the employer on proof of payment (and) on production of assessment certificate. - Circulars dated 07.11.2001 and 19.06.2002 - main plank of the case of the appellant about the nature, extent and implication of the levy of sales tax in relation to a works contract, it could be usefully recapitulated that in view of the forty sixth amendment to the Constitution of India, Clause (29-A) came to be inserted to Article 366; and, by virtue of sub-clause (b) thereof, it became permissible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials HELD THAT:- Heavy reliance on behalf of the appellant on the expression completed item of work , as occurring in the first part of Clause 45.2, is entirely misplaced. The only implication of this expression is that a claim for reimbursement of sales tax cannot be made in relation to a particular work or item whose execution is pending or is in progress and has not been completed. So far the levy of sales tax in relation to a works contract is concerned, the same is on taxable turnover and not on the entire turnover. It follows necessarily that the claim for reimbursement could only be made of the amount of sales tax that had been levied; and had been paid by the contractor. Hence, the suggestion as if the expression completed item of work refers to the end-product of a works contract is without any substance. The contentions urged in that regard are required to be, and are, rejected. It remains trite that the terms of contract bind the parties thereto and unless there be any case of ambiguity or violation of law, ordinarily, the terms of contract, revealing the intent of parties, are required to be given effect to - It is, therefore, crystal clear that even when the contract provided that the rates quoted by the contractor shall be deemed to be inclusive of sales and other taxes and royalties on the materials, it was agreed to between the parties that sales tax and other taxes under completed items of work, as paid by the contractor were to be reimbursed. On a plain reading of the aforesaid relevant terms of the contract, it is clear that while the contractor cannot claim any payment towards the taxes/duties/royalties etc. on the goods/materials purchased by it for performance of the contract but that does not disentitle the contractor from claiming reimbursement of the sales tax levied upon it by the employer, of course after proof of payment/assessment. It is also pertinent to mention that the respondent No.1 only claimed reimbursement of the sales tax paid by it on the turnover of the works contract and not of any tax or duty or royalty paid by it on the material procured for the purpose of execution of the works contract. On a comprehensive reading of the Circular dated 04.11.1986, it is evident that the State Government was fully conscious of its obligation towards reimbursement under the existing terms of contracts and hence, issued directions for due discharge of such obligation with necessary safeguards and, at the same time, provided that henceforth, neither such a clause be inserted in the contract documents nor any tender containing such a clause or condition be accepted. Evidently, the doubts at the later stage, as indicated in the Circular dated 27.01.2000, and converse decision against the obligation of reimbursement, as stated in the Circular dated 07.11.2001, had only been of unwarranted attempts to wriggle out of the contractual obligations with rather perverse construction of the plain terms of the existing contracts - appeal dismissed.

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• Indian Laws

• 2020 (6) TMI 178
  Recovery of Death-cum-Retirement Gratuity of the petitioner - HELD THAT:- The petitioner while serving as a Commercial Tax Officer has failed to verify the effect of corresponding taxable sales / transit sales of the dealers Tvl Uco Agency, merely because under Charge No.3, there was no loss for the Government, it is paramount duty of the petitioner, while he was serving as a Commercial Tax Officer, who ought to have verified by holding detailed enquiry about the turnover of a particular company, but the act of the petitioner who failed to verify such effects and corresponding sales / transit sales was only to aid and help the particular agency which is not warranted from the petitioner, who was working as a Commercial Tax Officer. Our Country is run only by the tax paid by the assesses made by the individual or from the companies. The duty is cast upon the tax officers, who execute their duties diligently, however, the petitioner s attitude, while he was serving as a Commercial Tax Officer, is not acceptable. Likewise, charge Nos.4 and 5 are also serious as charge No.3 when the petitioner while finalizing the assessment of the particular agency failed to mention in the assessment order how the purchase worth of Rs. 1,50,06,565/- made by issuing Form C have been sold by the particular agency - On perusing the impugned order passed by the first respondent, this Court does not find any reason to interfere with the order, because there is no loss, as alleged by the petitioner, to the Government. Furthermore, the petitioner who ought to have been vigilant against all agencies has derelicted himself from the duty cast upon him to aid a particular agency, escaping from making the assessment. Therefore, the order passed by the first respondent, based on the findings of the enquiry officer, cannot be interfered with. Petition dismissed.

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