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TMI Tax Updates - e-Newsletter
July 11, 2020
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Mapping Services provided to various Municipal Corporation & Councils - The Services are provided by the applicant are the relation to Urban planning including town planning and Planning of land-use and construction of buildings in as much as all the said activities help the local authorities to do Planning, Urban Planning & Control the Land use by the general. The Services supplied by them are covered under Article 243W of the Constitution, as functions entrusted to Municipality. - Being pure service, eligible for exemption from GST.
Income Tax
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Penalty u/s 271B - Determination of turnover of the assessee for Tax Audit u/s 44AB - turnover in respect of the speculative transactions shall be positive and negative differences of the transactions and not volume of the speculative transactions. Accordingly in view of the consist view taken by this Tribunal the turnover of the assessee would not exceed the limit as provide d U/s 44AB, the penalty levied U/s 271B is deleted
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Rejection of books of accounts u/s 145(3) - trading addition - Once the books of accounts are rejected, the AO is required to estimate the gross profit in the hands of the assessee and for the purposes, the prior history of the assessee in his own case or contemporaneous third party data has been held as a reliable basis for estimation of profits.
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Deduction u/s 80IB by excluding job work from the turnover - The assessee has satisfied all the conditions for claiming deduction u/s 80IB and proportionate disallowance of job work for the purpose of computing deduction u/s 80IB is unwarranted and uncalled for.
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Correct head of income - lease rent received by the assessee - Business of assessee taken over by the another Company as was running as JV - assessed under the head `income from business’ or `income from other sources’ - rehabilitation scheme - the income should fall under the head ‘profits and gains of business’ and not from ‘income from other sources’.
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Addition u/s 68 - peak credit addition - GP estimation - Since the AO failed to bring on record any material to show that the assessee was doing any other business other than the grocery business, the inference that can be drawn is that the assessee was doing undisclosed transaction in respect of grocery from grey market without any bills etc.. - trade profit of the regular business i.e. G.P rate of 8.81% would be justified.
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Addition on account of house rent - Income from house property - The AO failed to appreciate such estimation of annual letable value as per provision of Section 23(1 )(a) was called for only in case of vacant property and not where the property was actually let out since in the case of let out property, the assessee was not entitled to anything over and above the agreed rent. The said action of the AO has resulted in taxing notional income in the hands of the assessee, which never accrued and hence cannot be brought to tax.
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Unable to claim refund of the unclaimed excess TDS amount as the online TRACES portal - seeking a direction to the respondents to remove technical glitches and enable the TRACES portal so that petitioner can file its refund application for the excess Tax Deduction at Source (TDS) deposited by it - Petitioner directed to follow the procedure.
IBC
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Initiation of CIRP - Section 7 (5) of the Code uses the term "may", which gives this Adjudicating Authority the option to weigh the pros and cons of initiating a CIRP against the Corporate Debtor. In the circumstances stated above, it is not considered justifiable to send the Respondent into CIRP, as that would have serious socio-economic repercussions on an Export oriented Company with huge foreign funding, and of the stature mentioned above, especially on the hundreds of employees and other stakeholders and customers, and that too when the Respondent Company is undergoing a temporary funding lull and expects to recover soon.
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Initiation of CIRP - If the CIRP is initiated against one of the Corporate Debtors, after such initiation the Financial Creditor cannot trigger CIRP against the other Corporate Debtor/ Corporate Guarantor for the same claim amount.
Case Laws:
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GST
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2020 (7) TMI 227
Mapping Services provided to various Municipal Corporation Councils - Whether the services provided by the Applicant are covered under Clause 1 2 of Twelfth Schedule of Article 243W? - HELD THAT:- From the detailed submissions made by the applicant pertaining to supply rendered by them to various Municipal Corporation Councils, it is found that their supply does not envisage supply of goods. In other words, there is rendering of pure services in the subject case. The next step would be to find out whether services rendered by them are in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The Services are provided by the applicant are the relation to Urban planning including town planning and Planning of land-use and construction of buildings in as much as all the said activities help the local authorities to do Planning, Urban Planning Control the Land use by the general. The Services supplied by them are covered under Article 243W of the Constitution, as functions entrusted to Municipality. Hence the provisions as per Sl.No. 3 of the Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 as amended applies in their case and therefore, the Subject Services being Pure Services, provided by the applicant to the various Municipal Corporations and Councils are in relation afore said functions entrusted to the said local authority and exempt from GST - the services provided by the applicant to the various Municipal Corporation Councils are actually aiding and helping the said Municipal Corporation Councils to perform the functions entrusted to them under Article 243W of the Constitution - the applicant is rendering Pure Services to various Municipal Corporation Councils and the said Pure Services are rendered in relation to the functions entrusted to the said Municipal Corporation Councils under Article 243W of the Constitution. Whether the services provided by the applicant fall under the Exemption Notification No. 12/2017 dated 28 th June, 2017 (Entry No. 3 of Exemption Notification) as amended from time to time as the services are in the nature of pure labour services? - HELD THAT:- In the subject case the applicant is providing pure services (without the supply of goods), to the various Municipal Corporation Councils. The said services are in relation to any functions entrusted to a Municipality under article 243W of the Constitution. Hence, the applicant is entitled to the benefit of Notification No. 12/2007-CT-(Rate) dated 28.06.2017.
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2020 (7) TMI 226
Maintainability of Advance Ruling application - Proportionate reversal of Input Tax Credit - reduction in the value of supply - HELD THAT:- The question with regard to reversal of input tax credit, raised by the applicant is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. This question may be raised only by the concerned dealer and not by the applicant. Hence in view of the provisions of Section 95 of the GST Act, this authority is not allowed to answer the question raised by the applicant, being out of the purview of Sec. 95 of CGST Act. Whether commercial credit note can be issued to its dealers for post sale discounts without charging GST? - HELD THAT:- In the instant case, the question which has been raised by the applicant is not pertaining to any of the matters mentioned in Section 97 (2) of the GST Act. In fact the question raised is with respect to procedure which the applicant wants to follow. Section 97(2), which encompasses the questions, for the ruling by this Authority does not deal with the issue of whether the applicant can issue commercial credit note to its dealers for post-sale discounts without charging GST. Hence, it is held that this authority does not have jurisdiction to pass any ruling on such matters. The questions posed does not pertain to matters in respect of which an Advance Ruling can be sought under the GST Act. In view thereof, we find that the impugned application is not maintainable. No proceeding of Advance Ruling under the GST Act lies in the instant case.
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2020 (7) TMI 225
Levy of GST - civil and interior work done of M/s Oil Natural Gas Corporation Ltd. - proposed reimbursement from M/s Oil Natural Gas Corporation Ltd., toward operational site expenses and claim toward rectification of water damages, pertaining to original civil interior work contract awarded by M/s. Oil Natural Gas Corporation Ltd. - rate of GST applicable. Levy of GST - Civil and interior work done of M/s Oil Natural Gas Corporation Ltd. under provision CGST Act - applicable rate of GST - HELD THAT:- Section 142(10) allows the levy tax on goods or services under GST Act, that are supplied only after appointed day i.e. 01/07/2017: In respect of RA Bill No. 22, (issue in the first two questions raised by the applicant), the applicant has carried out and completed the total work before the appointed day and only billing is done after the appointed day and that too after a two year period. The applicant relies on the provisions of time of supply under Section 13 of GST Act. However, even as per the provisions under Section 13 (2) (b) of GST Act, time of supply will be date of provision of service, if the invoice is not issued within the prescribed period. So this is not the activity being undertaken or proposed to be undertaken after the appointee day - there is no upward revision of any prices, as claimed by applicant. The contention of applicant is therefore not accepted - questions posed by applicant are non-maintainable under the provision or Section 95 of the GST Act. The second question raised by the applicant is to clarify the rate of GST if the ruling on question no. 1 is in the affirmative - Since the question no.1 is out of the purview of this Authority, we do not take up the second question for discussion at all and would not answer the same. Levy of GST - Proposed reimbursement of ₹ 1,92,50,247/- from M/s Oil Natural Gas Corporation Ltd., toward operational site expenses and claim toward rectification of water damages, pertaining to original civil interior work contract awarded by M/s. Oil Natural Gas Corporation Ltd. - Applicable rate of GST - HELD THAT:- Even in the subject case where the invoice is not issued by the applicant, the work was already undertaken and completed well before the GST regime. Hence even in this case the activities undertaken by the applicant, does not pertain to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant as per the provisions of Section 95 of the GST Act. Hence, this authority cannot answer the question.
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Income Tax
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2020 (7) TMI 224
Addition u/s 14A r/w Rule 8D - no investment is made by the assessee in shares and securities (Mutual funds) out of interest bearing funds - HELD THAT:- Petitioner, on instructions, issued by the Department of Revenue, Ministry of Finance vide F. No. 390/Misc./116/2017-JC dated 22-8-2019, seeks permission to withdraw this Special Leave Petition along with pending applications therein due to low tax effect. Permission granted, subject to just exceptions. Special leave petition and pending applications dismissed as withdrawn, leaving question of law open.
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2020 (7) TMI 223
Unable to claim refund of the unclaimed excess TDS amount as the online TRACES portal - seeking a direction to the respondents to remove technical glitches and enable the TRACES portal so that petitioner can file its refund application for the excess Tax Deduction at Source (TDS) deposited by it - HELD THAT:- On the last date of hearing, learned counsel for respondents had stated that in cases like the present, scrutiny and verification of the TDS amount utilised has to be manually done according to the established procedure. Along with the status report, learned counsel for respondents has now placed on record the established procedure. Consequently, petitioner is directed to follow the aforesaid procedure forthwith. At this stage, learned counsel for the petitioner states that the petitioner would follow the aforesaid procedure within two days. In the event, the petitioner follows the aforesaid procedure within two days, the respondents are directed to decide the petitioner s request within four weeks thereafter. With the aforesaid directions and observations, present writ petition and application stand disposed of.
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2020 (7) TMI 222
Disallowance u/s 14A - disallow the expenditure incurred in relation to earning an income which is exempt from payment of tax - substantial question fo law or not? - as per tribunal since the assessee has only invested in private limited, un-listed companies and one of the companies in which the assessee has made investment is its own group concern addition made by the CIT (Appeals) is on the higher side and addition of Rs.Two Lakhs is just and reasonable amount towards disallowance u/s.14A - HELD THAT:- No substantial question of law in the present appeal under Section 260A of the Act. The extent of expenditure to be disallowed under Section 14A of the Act would naturally depend upon the income earned by the Assessee and spending that income and extent of exemption they have drawn. Since the Tribunal has discussed the relevant facts in paragraph 6 quoted above, we do not find any perversity in the order passed by the Tribunal and the disallowance made under Section 14A of the Act appears to be just and reasonable and therefore, we do not find any substantial question of law in the present appeal by the Revenue, which requires our further consideration under Section 260A of the Act. Accordingly, the present appeal is liable to be dismissed
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2020 (7) TMI 221
Capital gain - scheme of merger - benefit of set off of carry forward losses in respect of the said capital gains both under the normal and MAT provision - HELD THAT:- Conclusion of the ld. CIT(A) that the merger in question, approved by the Hon'ble High Court is a colourful device, is illegal and without any factual or legal base. Invoking GAAR provisions, when they are not applicable for the impugned assessment year is also bad in law. The dichotomy in the order of the ld. CIT(A) is clear from the fact, that he chooses to tax capital gains in question, in the hands of the assessee company, though he holds that the merger is a sham transaction. We are unable to approve this finding in view of the binding order of the Hon'ble High Court on the merger. Thus, we direct the AO to grant benefit of set off of carry forward losses in respect of the said capital gains both under the normal and MAT provisions. DR had argued that, for the purpose of indexation, the fact that the assessee had leasehold rights from the year 1966 and that these leasehold rights were converted into free hold rights w.e.f. 26.11.2010 by payment of ₹2.39 crores as cost of conversion has to be taken into consideration and hence the entire gain cannot be held as long term capital gain for the purpose of indexation. For this the ld. Counsel for the assessee submitted that no indexation has been clained by the assessee on this amount of ₹2.39 crores paid towards cost of conversion of leasehold property into free hold property. In the result, ground No. 1 of the assessee is allowed. Addition on account of house rent - Income from house property - HELD THAT:- This issue is covered in favour of the assessee and against the Revenue by order of the Hon'ble Calcutta High Court in the case of CIT vs. Kishanlal and Sons [ 2002 (10) TMI 62 - CALCUTTA HIGH COURT] rental is the rental received by the assessee from 1962 onwards, and also during the assessment years in question, as the genuine return on the assessee's property, as a genuine deed of lease entered into by the parties at arms length - Also in OBEROI HOTELS PVT. LTD. [ 2016 (1) TMI 169 - ITAT KOLKATA] even as per the deeming provision of Section 23(l)(a), in the case of let out property, only the actual rent received was required to be considered as annual value of property. The AO failed to appreciate such estimation of annual letable value as per provision of Section 23(1 )(a) was called for only in case of vacant property and not where the property was actually let out since in the case of let out property, the assessee was not entitled to anything over and above the agreed rent. The said action of the AO has resulted in taxing notional income in the hands of the assessee, which never accrued and hence cannot be brought to tax. Accordingly, we are of the view that the CIT(A) has rightly deleted the addition . Capital gain from transfer of capital asset - LTCG or STCG - HELD THAT:- Legislature has used the expression held as against owned . Therefore, the contention of the AO that ownership is relevant is not in accordance with the provision of the Act. The above view finds support from the recent judgement of Kolkata ITAT in the case of Stewarts Lloyds of India Ltd. vs. CIT [ 2016 (3) TMI 178 - ITAT KOLKATA] where it was held that in computing capital gain ownership of the property not to be considered, in computing the capital gain from the date of asset held by the assessee is to be considered. Disallowance u/s 14A - as per CIT-A no interest expenses can be attributed while working out disallowance u/s 14A 'r.w.r 8D and disallowance under clause (iii) of Rule 8D has been rightly worked out by the AO - HELD THAT:- This decision is in line with the proposition of law laid down by the Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] and PCIT vs. Caraf Builders Constructions (P.) Ltd. [ 2018 (12) TMI 410 - DELHI HIGH COURT]. The propositions of law laid down in these case laws that, when they are interest free funds available to the assessee then the presumption is that such interest free funds have been utilised for non-interest bearing investments. Thus, we uphold this finding of the ld. CIT(A). Disallowance of premium payable on redemption of FCCB - HELD THAT:- Liability is not a contingent liability. Deduction is liable on yearly basis as the liability accrues on time basis. The Hon ble Calcutta High Court in the case of National Engg. Industries Ltd. v. Commissioner of Income-tax [ 1998 (9) TMI 65 - CALCUTTA HIGH COURT] is relied in this regard. The Hon ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. [ 1997 (4) TMI 5 - SUPREME COURT] laid down the principle that, deduction should be allowed on pro-rata basis over the terms of the bond. Employees contribution to PF ESIC to be decided in favour of assessee.
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2020 (7) TMI 220
Addition u/s 68 - peak credit addition - GP estimation - HELD THAT:- As combined peak credit of both bank accounts need to be taken to work out the element of undisclosed investments made by the assessee for the undisclosed transactions. From the opening balances in both the banks, it is understood that this is not the initial year, wherein, the assessee has made the undisclosed transaction. Since, this is the assessment year in which the fact of undisclosed bank accounts were discovered, the undisclosed investment needs to be taxed separately. Combined peak credit in respect of both the banks need to be taken to find out the undisclosed investments made by the assessee for the undisclosed transaction in both banks which is ₹ 2,06,690/-, which needs to be added in the hands of the assessee. Since the AO failed to bring on record any material to show that the assessee was doing any other business other than the grocery business, the inference that can be drawn is that the assessee was doing undisclosed transaction in respect of grocery from grey market without any bills etc.. Therefore, assessee was engaged in the business of grocery through these undisclosed bank accounts. Next, coming to the trade profit, which the assessee could have made from the undisclosed transaction, I note that the assessee had disclosed Gross Profit oft 8.81% and Net Profit of 4.65% of the turnover from the regular grocery business. Therefore, trade profit of the regular business i.e. G.P rate of 8.81% would be justified. In the light of the aforesaid discussion, the entire addition made by AO/Ld. CIT(A) of the total amount deposited in the two undisclosed bank accounts to the tune of ₹ 21,92,100/- is erroneous. Direct the AO to restrict the addition to two items (i) combined peak credit of two bank accounts, which would take care of the undisclosed investment of the assessee, which is ₹ 2,06,690/- and (ii) trading profit from the undisclosed transaction needs to be added in the hands of the assessee.
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2020 (7) TMI 219
Denying claim of deduction u/s 80P(2)(a)(i) - assessee are co-operative societies registered under the Kerala Co-operative Societies Act, 1969 - denial of claim assessee were essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule - HELD THAT:- AO s concluded that the assessee are not entitled to deduction u/s 80P(2) of the I.T.Act. AO after perusing the narration of the loan extracts for the financial periods under consideration, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O s had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O s. Further, the A.O s has not examined to what extent loans, if any, has been disbursed to non-members. There is a passing statement in the assessment orders that there have been disbursement of loans to non-members as well. In the light of the dictum laid down by the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. The A.O. shall list out the instances where loans have disbursed to nonmembers of assessee-societies, for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) of the I.T.Act. For the above said purpose, the issue raised in these appeals is restored to the files of the Assessing Officer.
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2020 (7) TMI 218
Denying exemption u/s 54 - long term capital gains arising on transfer of residential house - HELD THAT:- Assessee has purchased two residential flats at Andheri bearing flat A-401 and flat B-401, 4th Floor, Brighton Tower Cooperative Housing Society Ltd., Plot No.356, Cross Road No.2, Lokhanwala Complex, Andheri (West), Mumbai and assessee modified both the flats and converted two units as one residential unit. This fact is also mentioned in statement of facts and by the A.O. in the assessment order. The assessee has further sold both the flats through two separate sale deeds. It is an admitted fact that assessee has purchased residential flat at Noida within the permitted time period from the sale of the residential flats. See DCIT vs., Shri Ranjit Vithaldas [2012 (7) TMI 586 - ITAT MUMBAI] - Thus assessee is entitled for exemption under section 54 - Decided in favour of assessee.
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2020 (7) TMI 217
Accrual of income - Income earned from the stated project - gains would be chargeable to tax as Business Profits OR capital gain - as per AO assessee transferred his right of development during the year under consideration and possession has also been handed over and has received part consideration - As per CIT-A entire consideration is not taxable during the year - deduction u/s 40A(3) - CIT(A) has held that the provisions of Sec.2(47)(v) defining the term transfer would not be applicable since the income was assessed as Business Income - HELD THAT:- CIT(A) has clinched the issue in correct perspective. The assessee was engaged as civil contractor and the income earned from the stated project was assessed as Business Income. Therefore, the term transfer as defined in Sec.2(47)(v), would not apply since the same is applicable only in case of capital assets held by the assessee. The development rights were held as business assets. Proceeding further, it is evident from the terms of the Joint Venture Agreement that only part income accrued to the assessee on execution of the project agreement. The balance consideration was conditional receipt and was to accrue only in the event of assessee performing certain obligations under the agreement. Another pertinent fact to be noted is that the payments received in subsequent years have already been offered to tax. The same was in line with assessee s arguments that the balance receipts were conditional receipts. The response by M/s Shivalik also confirmed the same. Therefore, no fault could be found in the impugned order in estimating the income @10% of gross receipts. Once the income is estimated, no further disallowance u/s 40A(3) would be warranted. 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 (7) TMI 216
Correct head of income - lease rent received by the assessee - Business of assessee taken over by the another Company as was running as JV - assessed under the head `income from business or `income from other sources - rehabilitation scheme - HELD THAT:- Appellant commenced the business but on account of poor financial viability the appellant company incurred losses and, eroded the entire net worth and was declared sick company under the Sick Industrial Companies Act, 1956. A rehabilitation scheme was prepared and sanctioned by Board for Industrial and Financial Reconstruction. Scheme envisaged joint operation of the plant on an irrecoverable lease of eight years in consideration of lease rentals; which has been extended from time to time. There was thus no intention of letting out the plant, building, machinery and licence to anyone. The set up of the business for carrying on the business. Further, when appellant entered the arrangement with Apollo, the intention was not to lease. The intention was to exploit the commercial assets through its expertise and derive income. There is no sale of assets or retrenchment of employees or even surrender of any licenses, registration etc. As per the agreement, it was the responsibility of the assessee to recruit labour for running the plant and meet all the labour law requirement in respect thereof, to purchase fuel and power required for running the plant, ensure the plant is properly insured, maintain the plant in working condition, undertake its repair and maintenance etc. The expenses so incurred by the appellant for the said responsibilities, were reimbursed by Apollo to it on actual basis. The production now by the appellant is in the name of Apollo and that too, to retain commercial viability in the operations and augment the financial position and at the same time bring about modernization and expansion in the plant. In view of section 56(2)(ii) coupled with the judgments of the VIKRAM COTTON MILLS LIMITED [ 1987 (12) TMI 1 - SUPREME COURT] the income should fall under the head profits and gains of business and not from income from other sources . Accordingly, the ground raised by the assessee is allowed.
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2020 (7) TMI 215
Reopening of assessment - AO recomputed deduction u/s 80IB by excluding job work from the turnover and proportionately allowing the claim of deduction - CIT(A) held the process of outsourcing / job work was an integral part of the processing and manufacture undertaken by the assessee, hence was entitled to entire claim the deduction u/s 80IB - HELD THAT:- Section 80IB of the I.T.Act is with regard to deduction of profits and gains from certain industrial undertakings. In the instant case the job work / process of outsourcing is nothing but stitching of footwear and is done under the direct supervision of the assessee. It is an integral part of the whole process of manufacture of footwear undertaken by the assessee. A.O. while completing the reassessment, admits that the assessee is eligible for deduction, but granted proportionate deduction by excluding job work estimated at 25% of the gross total income. The assessee has satisfied all the conditions for claiming deduction u/s 80IB and proportionate disallowance of job work for the purpose of computing deduction u/s 80IB is unwarranted and uncalled for. Therefore CIT(A) was correct in directing the A.O. to grant deduction u/s 80IB of the I.T.Act as claimed by the assessee. Delhi Bench of the Tribunal in the case of Rajiv Bhatnagar v. DCIT [ 2012 (12) TMI 1104 - ITAT DELHI ] held that when all the conditions to qualify for deduction u/s 80IB(2) of the I.T.Act has been satisfied, necessarily, deduction u/s 80IB of the I.T.Act has to be granted in full. - Decided against revenue.
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2020 (7) TMI 214
Rectification of mistake u/s 154 - denying deduction claimed by the assessee u/s 54B - mistake which is apparent from the record - whether issue of allowance of benefit under section 54B was investigated by the Ld. Assessing Officer during the course of original assessment proceedings and has wrongly held that it is a mistake apparent form the record? - HELD THAT:- As per the provisions of the Income Tax Act, the assessee inter alia can be an individual or an 'HUF' also. As per amended provisions deduction is available to the assessee if the land is used for agricultural purposes by the assessee himself or by his parent or an 'HUF'. What is noted is that amendment has been carried out in respect of user of the land not in respect of the claimant / assessee whose income is assessed. In the land record maintained by the Land Revenue Department, ownership of property is entered in the name of an individual and not in the name of 'HUF' and that the 'HUF' claim of ownership over such a property by virtue of the property being ancestral and put into the common hotchpotch of the family. Under the circumstances, the issue being highly debatable and requires lengthy arguments. It is a settled law that powers of the AO to rectify an order u/s 154 are very limited and can be exercised only in a case where the AO finds that a mistake apparent on record had occurred - in the case of a debatable issue or where the lengthy arguments are needed to decide the issue, powers u/s 154 of the Act can not be exercised to amend an already passed order - powers u/s 154 of the Act cannot be exercised on change of opinion by the Assessing Officer on an issue relating to any admissibility of a claim. AO thus, in our view was, not justified in passing the impugned order u/s 154 of the Act with limited jurisdiction of rectification of order in the case of a mistake apparent on record in the order. Rectification order cannot be held to be justified. - Decided in favour of assessee.
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2020 (7) TMI 213
Rejection of books of accounts u/s 145(3) - trading addition - assessee is a liquor contractor and doing the business at a very remote area - HELD THAT:- Assessee was asked to submit his books of accounts and he has admitted to have not maintained any day to day stock register, sales vouchers, expenses vouchers and as a result, the AO has held that the sales and other expenses are not verifiable and the books of accounts maintained by the assessee were held not reliable and were rejected by the Assessing Officer by invoking the provisions of section 145(3) of the Act. Nothing has been brought on record which substantiate the price at which the sales has been made during the year, what price the individual goods have been purchased, their MRP and actual sale price. Further, maintenance of stock register is essential not just for determining the opening and closing stock but for establishing the necessary linkage with the goods purchased and sold during the year. The assessee may plead for non-maintenance of sale bills being involved in retail sale of liquor however, at the same time, the assessee cannot plead non-maintenance of stock register. Being the first year of operation cannot be a ground for non-maintenance of proper books of accounts. Therefore, in the entirety of facts and circumstances of the case, we uphold the rejection of books of accounts under section 145(3) of the Act and the ground of appeal so taken is rejected. Once the books of accounts are rejected, the AO is required to estimate the gross profit in the hands of the assessee and for the purposes, the prior history of the assessee in his own case or contemporaneous third party data has been held as a reliable basis for estimation of profits. In the instant case, this being the first year of operation, one has to consider the comparable third party data of assessee engaged in similar line of business pertaining to year under consideration. In absence of any contemporaneous data available on record, we decline to interfere in the findings of the ld CIT(A) where he has already reduced the trading addition to ₹ 2,59,620/- from ₹ 5,18,728/- made by the AO and the fact that the Revenue is not in appeal against the said findings and the ld DR has supported the said findings. Assessee appeal is dismissed.
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2020 (7) TMI 212
Penalty u/s 271B - Determination of turnover of the assessee for Tax Audit u/s 44AB - turnover in case of speculative transactions - HELD THAT:- As decided in SHRI RAJJAK AHMED KHAN VERSUS THE INCOME TAX OFFICER, WARD 4 (4) , JAIPUR. [ 2020 (3) TMI 136 - ITAT JAIPUR] as considered the guidance note of ICAI in respect of the tax audit U/s 44AB of the Act wherein the turnover or gross receipt in respect of speculative transactions has been considered as some total of positive and negative outcome of the speculative transactions. This Tribunal in a subsequent decision dated 17.02.2020 in case of Shri Sanjay Prakash vs. ITO [ 2020 (3) TMI 171 - ITAT JAIPUR] has again considered the said this issue and by following the earlier decision accepted the contention of the assessee that turnover in respect of the speculative transactions shall be positive and negative differences of the transactions and not volume of the speculative transactions. Accordingly in view of the consist view taken by this Tribunal the turnover of the assessee would not exceed the limit as provide d U/s 44AB, the penalty levied U/s 271B is deleted.- Decided in favour of assessee.
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2020 (7) TMI 211
Rectification of mistake u/s 154 - Disallowance u/s 14A r.w.r. 8D - Debatable issue or not? - disallowance made by an Assessee in not accordance with Rule-8D(2)(iii) - Addition of expenditure incurred in earning exempt income - HELD THAT:- Even in a case where the AO rejects the claim of the Assessee regarding expenses incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis. It is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. Rule 8D(2) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income. The satisfaction contemplated u/.s 14A (2) of the Act is not merely restricted to rejecting the claim made by the Assessee and the disallowance to be made u/s 14A of the Act but also includes substituting the claim made by the Assessee on any other reasonable basis as the AO deems it fit. In such circumstances the correctness of the AO s judgment can be reviewed but it cannot be said that the AO had no jurisdiction to do so and AO ought to resort only to the provision of Rule 8D of the Rules. In other words Rule 8D is not automatic and can be resorted to by the AO only as a measure of last resort. In view of the aforesaid legal position with regard to disallowance u/s 14A of the Act, we are of the view that the issue before the AO was debatable and therefore, resort to proceedings u/s 154 of the Act was not appropriate. Appeal of the Assessee is allowed.
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2020 (7) TMI 210
Penalty u/s 271(1)(c) - defective notice - non specification of charge - Disallowance u/s 14A read with Rule 8D - HELD THAT:- On perusal of assessment order, it is observed that Ld. AO initiated penalty under section 271(1)(c) of the Act, without specifying, whether there is concealment of income or filing of inaccurate particulars. Penalty was initiated on both limbs. Impugned notice initiating penalty proceedings under section 274 read with 271 is also on both limbs, as there is no strike off of irrelevant limbs. Ld. AO while discussing independent additions in assessment order, did not specify any of the limbs for which penalty is initiated. Order passed by Ld.AO under section 271(1)(c) is for concealment of income by filing inaccurate particulars of income. In assessment order, we note that, Ld.AO did not initiate penalty under any particular limb, vis-a-vis disallowances made. Thus it is clear that assessing officer intended to levy penalty for concealment, which either specified in notice nor in assessment order. Entire penalty proceedings is without application of mind. - Decided in favour of assessee.
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2020 (7) TMI 209
Maintainability of appeal - low tax effect - Tax effect of Revenue s appeal not exceeding the monetary limit - reference to monetary limits prescribed by CBDT Circular No. 03 of 2018 dated 20-03-2018 - Unexplained cash credit u/s 68 - Finding of the A.O. is based on the information received from the Investigation Wing of the Department - treating the profit from commodity transactions as unexplained cash credit as well as the addition on account of commission paid for availing such accommodation entries from the brokers - HELD THAT:- As relying on M/S. A.P. GEMS [ 2020 (3) TMI 1241 - ITAT JAIPUR] Information received from Investigation Wing of the Department does not fall in the category of the information received from external source being law enforcement agencies such as CBI/ED/DRI/SFIO/DGGI etc. as provided in the exception clause (e) of para 10 of the Circular No. 3/2018. Accordingly, the appeal of the revenue is not maintainable being the monetary limit is not exceeding as prescribed in the Circular No. 3/2018. - Decided against revenue.
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2020 (7) TMI 208
Taxation of turnover - Undisclosed income on account of booking of bogus expenses - AO took the profit @10% of the gross receipt - HELD THAT:- Where one turnover can be taxed in the hands of two different assessee one being partnership firm M/s. Satyam Builders and another being proprietary concern of the assessee namely satyam Builders. Our answer is emphatically No. Therefore, the ld AO is directed to delete the addition in the hands of the assessee to the extent of the turnover considered in case of Ms/. Satyam Builder a partnership firm. Therefore, the ld AO will reduce the addition in the hands of the assessee on the turnover which has already been taxed in the hands of M/s. Satyam Builders as a firm. What should be the percentage of the gross receipt to be taken as net income from the suppressed turnover? - In case of M/s. Satyam builders, partnership firm, in the assessment proceeding u/s 143(3) read with section 147 of the Act for Ay 2008-09, the ld AO himself accepted it @8%. There is no change in the business model of the partnership firm as well as the business of the assessee. Therefore, we direct the ld AO to adopt the profit ratio of 8% as net profit on the gross receipts. Accordingly, ground Nos. 4 and 5 of the appeal are allowed.
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Insolvency & Bankruptcy
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2020 (7) TMI 207
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- It is incumbent upon the Financial Creditor while filing this Application to place on record before this Authority, the 'Financial Contract' and demonstrate without any ambiguity from the financial contract, the amount disbursed as per the loan/debt, the tenure of the loan/debt, the interest payable and the conditions of repayment - In the present case, it is evident that the Financial Creditor has not placed on record any Financial Contract or any Financial Agreement, in pursuance of which the loan was disbursed to the Corporate Debtor. As to the aspect of whether any default being committed by the Corporate Debtor, the Financial Creditor contended that in view of the amount being disbursed which is reflected in the books of the Corporate Debtor, the same becomes repayable on demand with interest and the said amount not being paid by the Corporate Debtor, a default has arisen as contemplated under section 3(12) of the I B Code, 2016. In the absence of any 'Financial Contract' between the parties, this Authority is not able to ascertain the default on the part of the Corporate Debtor - Application dismissed.
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2020 (7) TMI 206
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is evident that the Corporate Debtor has admitted and acknowledged the debt, by way of its e-mails annexed as A4 and A8, wherein the Corporate Debtor has confirmed the Balance outstanding due towards the Applicant - the Corporate Debtor has failed to reply to the Demand Notice issued under section 8 of the I B Code and has not raised any dispute before the filing of Reply to the present Application. It is also evident from the letter dated 29-4-2018 that the Corporate Debtor have agreed to pay the outstanding amount along with interest and late payment fee and agreed to pay the court fee if any default occurred in payment of the said outstanding amount - the contentions raised by the counsel for the Corporate Debtor are frivolous and not tenable and hence rejected. The Application is complete and has been filed under the proper form - Applicant, having supplied goods to the Corporate Debtor for which the Corporate Debtor has failed to make payments, is an Operational Creditor as per the provisions of the I B Code, 2016. The Corporate Debtor has not raised any dispute in respect of the goods and the amount to be paid to the Applicant until its reply to Application. The application made by the Operational Creditor is complete in all respects as required under section 9 Sub-Section 5, Sub clause (i) of I B Code, 2016. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition - Petition admitted - moratorium declared.
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2020 (7) TMI 205
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Where an Application U/ s. 7 of the Code as filed by the 'Financial Creditor' is already admitted against the 'Principal Borrower', whether another Application under Section 7 of the Code, by the same Financial Creditor can be admitted against the Corporate Guarantor for the same set of claims and default or not? - HELD THAT:- It is pertinent to note here that under the provisions of IBC 2016, there is no bar against filing an application u/ s. 7 either against the Principal Borrower or the Corporate Guarantor. It is also not necessary that an application U/ s. 7 must be filed by the Financial Creditor against the Principal Borrower first, and an application u/ s. 7 against the Corporate Guarantor must be filed after exhausting the rights against the Principal Borrower, as the Financial Creditor is also the Financial Creditor qua the Corporate Guarantor. Hon'ble NCLAT have categorically laid down in the case of DR. VISHNU KUMAR AGARWAL VERSUS M/S. PIRAMAL ENTERPRISES LTD. [ 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] that since a Financial Creditor cannot make a claim for the same set of debt in two separate CIRP processes, he cannot be allowed to pursue two separate Sec. 7 applications for the same claim. If the CIRP is initiated against one of the Corporate Debtors, after such initiation the Financial Creditor cannot trigger CIRP against the other Corporate Debtor/ Corporate Guarantor for the same claim amount. This Adjudicating Authority is not inclined to admit the instant application, which is filed on the same set of facts, claim and default in respect of which a CIRP is already under progress and wherein the claim of the applicant herein is already admitted. Application dismissed.
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2020 (7) TMI 204
Maintainability of application - initiation of CIRP - Dishonor of Cheque - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - main objection raised by the respondent is that the said Consent Terms could not be acted upon by respondent because the applicant intentionally suppressed the fact that it had already initiated complaints under section 138 of N.I. Act - HELD THAT:- The requirement of sub-section 5(a) of Section 7 of the code stands satisfied as default has occurred, the present application filed under Section 7 is complete, and as no disciplinary proceeding against the proposed IRP is pending - It is pertinent to mention here that the Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the credit facilities and has committed default in repayment of the outstanding loan amount. The present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt - Application admitted - moratorium declared.
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2020 (7) TMI 203
Approval of Resolution Plan - CIRP process - withdrawal of EOI after the issue of provisional list - HELD THAT:- As approved by a 100% vote by' the COC, this Adjudicating Authority holds that the Resolution Plan of M/s Sabrang Steel Pvt. Ltd, as submitted by the RP is in conformity with the purposes and objects of the IBC, and all Rules and Regulations and the same meets the requirements of provisions of Section 30 of the Code of 2016 and Regulation 37 and 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Plan not only appears to be viable but also takes care of all the stakeholders, notably the financial creditors, Operational creditors, Workmen and employees, Other Current Liabilities and Contingent Liabilities. It appears from clause 11.3 Of the Resolution Plan that a Monitoring Committee shall be formed comprising of the Resolution Professional, Members Of Financial Creditors/ Banks and representatives of the successful Resolution Applicant to monitor the progress and implementation of the plan at regular intervals, till the creditors are paid their dues as envisaged under the Resolution Plan. Cost or expenses of the monitoring committee including fees of Resolution Professional post approval of Resolution Plan by the NCLT shall be borne by the successful Resolution Applicant with a capping of ₹ 2 lakh only - the Adjudicating Authority records its satisfaction for granting approval to the final Resolution Plan. It also believes that it would be in the best interest of the FCS, its employees, OC, and all stake holders to accept the final Resolution Plan. Resolution Plan is approved - Approved Final Resolution Plan shall come into force with immediate effect - moratorium Order passed under Section 14 shall cease to have effect.
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2020 (7) TMI 202
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Proceedings under the Code are summary proceedings, where even if there was a debt, the same should be undisputed and the default, as defined under section 3(12) of the Code should be clearly established. While the amounts had been given in December 2016 and January 2017, and became due by June 2017, the demand notice (under section 9 and not under section 7 of the Code) was sent by the Petitioner only on 26.09.2018, that is, after a lapse of more than a year. In the intervening period, when she wielded full powers, took all the decisions and signed all the minutes of the Meetings, there were disputes that led to financial due diligence being undertaken by the Company through an independent Malaysian Financial Consultant, at the behest of the investing Company/foreign Directors, which led ultimately to the resignation of the Petitioner in July 2017 from the Company, as it threw up issues of misrepresentation and misappropriation, fabrication of documents and accounts etc. It is a settled position of law that the provisions of the Code cannot be invoked for recovery of outstanding amount but can be invoked to initiate CIRP for justified reasons as per the Code. The Hon'ble Supreme Court in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT] , has inter alia, held that Code, 2016 is not intended to be a substitute to a recovery forum and cannot be used to jeopardize the financial health of an otherwise solvent company by pushing it into insolvency. Section 7 (5) of the Code uses the term may , which gives this Adjudicating Authority the option to weigh the pros and cons of initiating a CIRP against the Corporate Debtor. In the circumstances stated above, it is not considered justifiable to send the Respondent into CIRP, as that would have serious socio-economic repercussions on an Export oriented Company with huge foreign funding, and of the stature mentioned above, especially on the hundreds of employees and other stakeholders and customers, and that too when the Respondent Company is undergoing a temporary funding lull and expects to recover soon. The dismissal of this Petition will not come in the way of the Petitioner to settle its dispute, if any, with the Respondent/Corporate Debtor and seek refund of any amount due to it, by approaching any other forum or under any other Law - Petition dismissed.
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Central Excise
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2020 (7) TMI 201
100% EOU - Benefit of N/N. 22/2003-CE dt.31.3.2003 and Para 3(e) of Notification No.52/2003-Cus dt.31.3.2003 - clearance of waste and scrap of HDPE drum, MS GI, Polymer, Paper, BOPP Tapes materials and other non-usable scraps, to DTA without payment of duty - Rule 9(b), 13, 14 192 of erstwhile Central Excise Rules, 1944 - HELD THAT:- Admittedly, as per the show cause notices, the items cleared by the appellant are waste and scrap of HDPE drums, MS GI, Polymer, Paper, BOPP Tapes materials and other non-usable scraps. All these items are cleared as waste and scrap. In these circumstances, the appellant has rightly claimed the benefit of exemption notification No.52/2003-Cus dt.31.3.2003 Clause 4(c) and Notification No.22/2003-CE dt.31.3.2003 Clause 8(ii). The appellant has also relied on the decision of this Tribunal in the case of SUN PHARMACEUTICALS INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE ST, PUDUCHERRY [ 2018 (4) TMI 968 - CESTAT CHENNAI] . On going through the facts of the said case, it is found that this Tribunal has allowed benefit to the appellant for clearance of empty drums which were usable by the buyer and allowed benefit of exemption notification. The case of the appellant in the present case is on better footing than that on Sun Pharmaceuticals Industries Ltd. The appellant has rightly claimed the benefit of the exemption notifications - no duty is payable by the appellant - demand of duty along with interest and also set aside penalties imposed on the appellant is also set aside - appeal allowed - decided in favor of appellant.
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