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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter July 17, 2024 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST E-way bills & GSTR 3B disparity for 2018-21. Non-taxable supplies caused mismatch. Remit â‚¹3.5cr, submit docs for reconsideration. Visit to Get Source Missed 30-day deadline to file returns after best judgment assessment order u/s 62 CGST/SGST Act led to registration cancellation. Opportunity to nullify assessment by filing returns not availed. Visit to Get Source GST on mineral mining royalty in limbo. Petitioner to reply in 4 weeks. Respondent to keep order on hold pending SC verdict as per Division Bench. Visit to Get Source Income Tax STI, Samsung's Indian subsidiary, ruled an independent manufacturer, not a contract manufacturer for Samsung Korea. Received tech know-how & paid royalties. Price differences justified. Visit to Get Source Exemption u/s 10(46) valid for non-profit developmental activities, loans, investments per assigned role - not commercial profit motive. Visit to Get Source Salary earned by non-resident on foreign ship in EEZ exempt u/s 9(1)(ii). Fresh notice u/s 143(2) not mandatory for successor AO. Visit to Get Source TPO's adjustment inappropriate, CUP method reliable. Product certification expenses not taxable in India. Royalty provision allowable. Visit to Get Source Reopening invalid: AO didn't verify facts, just repeated info on unexplained credits sans evidence. Lacked independent analysis. Visit to Get Source Jurisdiction not challenged, addition u/s 68 unsustainable. Verify receipts. Notice u/s 143(2) valid despite 143(1) delay. Visit to Get Source Donations rejected sans evidence. Donors identified, some confirmed. Denied chance to produce donors. Not anonymous. Onus discharged. Improper invocation. Visit to Get Source Assessee withdrew LTCG exemption claim, offered amount as income from "Other sources" to avoid litigation; no concealment found. Penalty u/s 271(1)(c) quashed. Visit to Get Source Interest income disallowance partly allowed. Provisions & interest reapportioned based on business activity. Disallowance for tax-free bonds deleted. Non-compete fees held as capital receipts. Visit to Get Source Directors not liable u/s 179. Company can be proceeded against if struck off. Gift from NRI grandson not unexplained u/s 69A. Double addition avoided. Visit to Get Source Expenses disallowed for lack of evidence. Valuation issue dismissed. Losses disallowed, evidence required. Addition deleted. Depreciation allowed for slump sale. Liability receipt held capital. Visit to Get Source Software license fees deductible. No disallowance for own funds > tax-free investments. Recompute disallowance on tax-free income only. Visit to Get Source Order imposing 270A penalty appealable before CIT(A) u/s 246A. CIT(A) erred in dismissing appeal. ITAT set aside order to rehear appeal. Visit to Get Source Assessee surrendered unaccounted professional receipts during survey. AO accepted it as taxable income, PCIT's revision unsustainable. Visit to Get Source Indian Laws IBC bars fresh proceedings against guarantor's debt, not security interest. Banks can't proceed under SARFAESI once IBC initiated. Guarantor can approach DRT. Visit to Get Source Service Tax Authority can't review order post estimate u/s 127. Rejected application contrary to scheme. HC allowed petition to pay amount+9% interest. Visit to Get Source VAT AAC blocks wrongly classified under residuary entry instead of proposed entry. Show cause notice mandatory. Order deviating from notice without hearing assessee violates natural justice. Visit to Get Source Articles The Role of Permanent Establishment in Preventing Tax Evasion Practical aspects: challenging notice for reassessment of escaped income. ‘IPO’ JOURNEY OF ‘LIC’ OF INDIA Notifications Central Excise 18/2024 - dated 15-7-2024 - CE Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to increase the Special Additional Excise Duty on production of Petroleum Crude. Companies Law S.O. 2751(E). - dated 15-7-2024 - Co. Law Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Amendment Order, 2024 F. No. 1/1/2018 CL-V - G.S.R. 404 (E) - dated 15-7-2024 - Co. Law Companies (Significant Beneficial Owners) Amendment Rules, 2024 F. No. 01/34/2013 CL-V (Pt-ll) - G.S.R. 403 (E) - dated 15-7-2024 - Co. Law Companies (Management and Administration) Amendment Rules, 2024. Customs 49/2024 - dated 15-7-2024 - Cus (NT) Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver Income Tax 53/2024 - dated 15-7-2024 - IT Exemption from specified income U/s 10(46) of IT Act 1961 – ‘Uttaranchal Board of Technical Education, Roorkee’ SEBI SEBI/LAD-NRO/GN/2024/192 - dated 9-7-2024 - SEBI Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2024 SEZ S.O. 2770(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 4.9026 hectares, thereby making resultant area as 19.1991 hectares at Villages Rachenahalli, Nagavara and Tanisandra, District Bangalore, in the State of Karnataka S.O. 2769(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 12.809 hectare at above special economic zone, thereby making the resultant notified area as 14.625 hectares at “Global Village”, Pattenagere/Mylsandra Villages, Off-Mysore Road, RVCE Post, Bangalore District in the State of Karnataka S.O. 2768(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 3.22 hectares, thereby making resultant area as 80.88 hectares at Village Mamidipally, District Ranga Reddy in the State of Telangana S.O. 2767(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 0.66 hectares, thereby making resultant area as 11.32 hectares at Magarpatta City, Village Hadapsar, District Pune, in the State of Maharashtra S.O. 2756(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 5.0609 hectares, thereby making resultant area as 2.43 hectares at Muringur and Thekkumuri Villages, Chalakudy Taluk, Koratty Panchayat, Thrissur, Kerala S.O. 2755(E) - dated 15-7-2024 - SEZ Central Government de-notifies an area of 1.78 hectares, thereby making resultant area as 9.09 hectares at Sadaramangala/Pattandur Agrahara, International Tech Park, Whitefield Road, Bangalore, Karnataka S.O. 2723(E) - dated 12-7-2024 - SEZ Central Government de-notifies an area of 10.10 hectares, thereby making resultant notified area as 50.61 hectares at SIPCOT Industrial Growth Centre, Bargur, Uthangarai and Pochampali Taluk, Krishnagiri District in the State of Tamil Nadu Circulars / Instructions / Orders GST - 228/22/2024 - dated 15-7-2024 Clarifications regarding applicability of GST on certain services GST - 229/23/2024 - dated 15-7-2024 Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 53rd meeting held on 22nd June, 2024, at New Delhi DGFT - 14/2024-25 - dated 16-7-2024 Amendment in Para 4.49 (b) of the Handbook of Procedures, 2023 News Commerce and Industry Minister Piyush Goyal to visit Reggio Calabria, Italy for G7 Trade Ministers' Meeting (Outreach Session) India’s total exports estimated to grow at 5.40% in June 2024; Cumulative overall exports during April-June 2024 estimated to grow at 8.60% Commerce Minister Piyush Goyal meets DG, WTO, Indian diaspora and potential investors on first day of Zurich visit Draft Procedure for export of sesame seeds to the United States of America (USA) Report of India’s G20 Task Force on Digital Public Infrastructure released Case Laws: GST 2024 (7) TMI 857 Seeking grant of regular bail - illegal availment of ITC - Section 132(1)(c) of the Central Goods and Services Act, 2017 - It was held by High Court that ' Considering the nature of allegations made in the FIR and without discussing the evidence in details as well as without going into details, prima-facie, this Court is of the opinion that this is a fit case to exercise the discretion to enlarge the applicant on bail.' - HELD THAT:- It is not required to interfere with the impugned judgment and, hence, the special leave petition is dismissed. SLP dismissed. 2024 (7) TMI 856 Demand with regard to the disparity between the e-way bills reflected in the e-way bill portal and the petitioner's GSTR 3B returns - assessment periods running from 2018-19 to 2020-21 - HELD THAT:- The petitioner was called upon to show cause with regard to the disparity between the data reflected in the e-way bills portal and the outward supply value reflected in the petitioner's GSTR 3B returns. By reply dated 27.02.2024, the petitioner stated that such disparity is on account of the non-taxable supplies reflected in the e-way bills portal. It also appears that supporting documents were not annexed to the reply dated 27.02.2024 - In the show cause notice, the respondent did not refer to the returns filed by the petitioner in Form ITC -04, whereas, such returns were the basis for confirming the tax proposal to the extent specified therein. Since the petitioner was put on notice with regard to larger issue of mismatch, the petitioner could have provided a comprehensive explanation. Therefore, it is necessary to put the petitioner on terms. The impugned order dated 28.03.2024 is set aside on condition that the petitioner remits a sum of Rs. 3,50,00,000/-towards the disputed tax demand within six weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the show cause notice along with all relevant documents during the said period - Petition disposed off. 2024 (7) TMI 855 Challenge to best judgment assessment order passed by the assessing authority under Section 62 of the CGST/SGST Act - cancellation of registration - failure to submit returns for more than six months - HELD THAT:- The non filing of returns by the appellant, even after receipt of Ext.P4 assessment order, and within thirty days thereafter, is fatal to the case of the appellant. While it may be true that the respondents did not issue a formal notice as required under Section 62(1) of the Act before completing the assessment on best judgment basis under the said provision, the fact remains that the appellant could have obtained a nullification of the said assessment order, if he had filed the return at least within thirty days of the receipt of the assessment order. It is not in dispute that the appellant received the assessment order. It is also not in dispute that within thirty days thereafter, he did not file his returns. The appellant has only itself to blame for the predicament that it finds itself in, since the statutory provisions grant sufficient opportunities to an assessee to ensure that an assessment is completed, as far as possible, based on the returns filed by the assessee. There are no reason to interfere with the impugned judgment of the learned Single Judge - appeal dismissed. 2024 (7) TMI 854 Levy of GST on the royalty payable by the petitioner to the Government for mining of minerals - HELD THAT:- Reliance placed on the decision of the Division Bench of this Court rendered in Tvl.A.Venkatachalam vs. The Assistant Commissioner (ST), Palladam II Assessment Circle, Palladam [ 2024 (2) TMI 488 - MADRAS HIGH COURT] , wherein the Division Bench of this Court, taking note of the questions framed by Constitution Bench of the Hon'ble Supreme Court, has held that ' It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision.' The petitioner is directed to file a reply/objection within a period of four weeks from the date of receipt of a copy of this order. The respondent shall thereafter adjudicate the case on merits, but however, shall keep the implementation of the order in abeyance pending further orders from the Hon'ble Supreme Court as ordered by the Division Bench of this Court. Petition disposed off. Income Tax 2024 (7) TMI 853 Delay filling SLP - Validity of reopening of assessment u/s 147 - Notice beyond the period of 4 years - HC [ 2023 (1) TMI 1391 - GUJARAT HIGH COURT] decided reasons recorded for reopening were based on the same facts already scrutinized, indicating a mere change of opinion by the Assessing Officer - HELD THAT:- There is a delay of 400 days in the filing of the present special leave petition. Even on merits, we are not inclined to interfere with the impugned judgment. Recording the aforesaid, the application for condonation of delay and, consequently, the special leave petition are dismissed. 2024 (7) TMI 852 Validity of assessment u/s 153A - allegation of non application of mind by the ACIT Tax in granting approval u/s 153D - As decided in HC [ 2023 (7) TMI 1214 - DELHI HIGH COURT] approval was granted without examining the assessment record or the search material. Tribunal was right that there was absence of application of mind by the ACIT in granting approval un/s 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to Section 292B, issue decided against revenue. HELD THAT:- Having regard to peculiar facts of these cases, we are not inclined to interfere in the matters. Hence, the Special Leave Petitions are dismissed. Pending applications shall stand disposed of. 2024 (7) TMI 851 Maintainability of appeal before Supreme court - low tax effect - TDS u/s 201(1) - TDS u/s 195 - assessment order in the hands of the non-resident payee - payment for purchase of subscription as taxable as per the provisions of Article 7 read with Article 5 of the India Singapore Double Taxation Avoidance Agreement ( DTAA ) As decide by HC [ 2023 (9) TMI 555 - BOMBAY HIGH COURT] in order to treat the payer as an assessee-in-default, it is of utmost importance that income so paid or credited to the account of payee is capable of being brought within the purview of tax net and such assessment can be lawfully made on the payee - As assessment should be lawfully made by AO on the payee/recipient, since that has not been done, the order of AO under Section 201(1) read with Section 201(1A) of the Act was unsustainable. HELD THAT:- In view of the statement made, the special leave petition is dismissed on account of low tax effect. However, the question of law is left open. 2024 (7) TMI 850 Depreciation on revalued assets instead of WDV - conversation of firm to a company - depreciation on tangible assets or intangible assets allowable to the predecessor and the successor in the case of succession - As decided by HC [ 2023 (6) TMI 823 - BOMBAY HIGH COURT] assessee as per Section 32 r/w Rule 5 of the Act quoted above, will be entitled to claim depreciation in respect of any assets on the actual cost of the said assets. The actual cost of the said assets will be the actual cost which the assessee paid to the predecessor after revaluing the assets and certainly in our view assessee will be entitled to claim depreciation for the subsequent years on the basis of the actual cost paid. HELD THAT:- Delay condoned. We find no error in the impugned order. The Special Leave Petition is accordingly dismissed. 2024 (7) TMI 849 TP adjustments - payment of royalty - payments made by STI[India] to Samsung Korea - Samsung Telecommunications India [STI], the respondent-assessee, was incorporated as a wholly owned subsidiary of Samsung Electronics Co. Ltd., Korea [Samsung Korea] Sale of goods manufactured by STI to its AEs - DRP concluded that STI was acting as a contract manufacturer because it had not been remunerated as if it were an independent manufacturer that utilized intangibles in the form of technical know-how in its own right to independently manufacture goods which would eventually be sold to group entities - ITAT deleted addition HELD THAT:- STI was operating as a contract manufacturer on behalf of Samsung Korea for the following reasons. A perusal of the facts on the record reveals that STI was a wholly owned subsidiary of Samsung Korea and which was engaged in the manufacture and sale of mobile handsets under the brand name of Samsung in the Indian and overseas market and which would invariably involve sale of the said goods to its AEs as well. The transfer of technical know-how and licensing of technology was essential to enable STI to undertake its activities independently. Neither the TPO nor the DRP engaged in a recharacterization of the transaction entered into between the parties nor was there any material existing on the record to demonstrate that the transaction entered into between STI and its AEs was distinguishable from those which would have been entered into by independent enterprises behaving in a commercially rational manner. Neither the TPO nor the DRP rested their opinion on any material or evidence which may have tended to indicate that the transactions undertaken by STI would not satisfy the test of commercial expediency or prudence. Neither the production of the goods in question nor the supply thereof was shown to be motivated or based upon directives of Samsung Korea. Those transactions clearly appear to have been guided and informed by STI s business and commercial interests. The mere factum of STI being a wholly owned subsidiary of Samsung Korea does not necessarily entail that it was engaged in the manufacture and sale of mobile handsets solely at the behest and directives of Samsung Korea or having undertaken that exercise as a contract manufacturer. Samsung Korea, during A.Y. 2008-09, was stated to have been in receipt of a technical assistance fee and royalty from STI necessary for the latter to engage in its manufacturing activities. There was no material placed on the record to show that the manufacture and sale of the aforenoted goods by STI was dependent on directives issued by Samsung Korea or even that STI was contractually obliged to manufacture goods on behalf of Samsung Korea. STI does not fall under the ambit of a contract manufacturer either in terms of the OECD Guidelines, 1995 or for that matter the OECD Guidelines, 2022. There has been no material adduced on the record to demonstrate that STI receives any extensive instructions about what to produce, in what quantity and of what quality or that it is performing any low risk service for Samsung Korea or any of the AEs . Unable to agree the entire transaction between STI and its AEs was meant to operate as a profit shifting mechanism, merely because independent entities were charged a higher price in comparison with the AEs of STI. In our view, it would be erroneous to conclude that the sale of goods manufactured by STI to its AEs was done with a view to shift profits across jurisdictions, even if the price of royalty was embedded in the sale price of the goods sold to its AEs. STI was engaged in the manufacture of goods as per its own volition and not as per the directives of Samsung Korea and undertook decisions related to the manufacture and sale of goods independent of Samsung Korea. As a result, Samsung Korea cannot be deprived of the right to obtain an arms length return on the utilization of its patented or proprietary technology and know-how. This in light of the undisputed fact that the latter could not have engaged in the manufacture and sale of goods without the technological know-how provided by Samsung Korea. In our considered opinion, the observations rendered by the DRP with regard to the contrast between the gross profit earned by STI on export sales to AEs and to other independent entities ought to be appreciated while bearing in mind the distinguishable characteristics underlying those sale transactions and which would have in turn been dependent upon the nature of the products, features of the mobile phones, the individual value of the mobile handsets and other distinguishing factors. In the absence of specific data pertaining to the said transactions or of any evidence suggesting that Samsung Korea was in control of the overseas sales by STI to AEs or unrelated parties, we find ourselves unable to conclude that the AEs of STI had not been charged for the cost of technological know-how obtained or that STI had not been renumerated as an independent manufacturer by its AEs . TPO as well as the DRP clearly appear to have misconstrued the agreement in terms of which know-how and expertise stood licensed to STI. Decided against revenue. 2024 (7) TMI 848 Denial of exemption u/s 10(46) - NOIDA was systematically indulging in activities which were commercial in character and undertaken with the view to earning profits - NOIDA having extended loans to various entities, thus activities undertaken otherwise than for the benefit of the general public - Also NOIDA had made huge investments in bonds, shares of various entities and created interest yielding fixed deposits which again could not be said to have had any direct, immediate and fundamental connection with the role assigned to it under the UPID Act and thus being in contravention of Section 20 (2) thereof. HELD THAT:- Indisputably, NOIDA, the petitioner herein, has been constituted under the UPID Act with the avowed objective of undertaking developmental activities in an industrial development area. It is in that sense acting as an arm and an adjunct of the State charged with undertaking planned development in the industrial development area. In that connection, the petitioner undertakes planning and development of the area, acquires land and property, engages in construction of housing units or industrial units. In order to fulfil the aforesaid objectives, it is provided funds by the State Government and additionally creates a corpus from the revenue and receipts generated and received in the course of its operations. It is manifest from a reading of the various provisions of the UPID Act that the petitioner acts primarily as an agent of the Government obligated to undertake planned development of areas placed under its control. It cannot possibly be viewed as being a corporation intended to have been incorporated for a profit or commercial motive. The provisions of the UPID Act as well as the material placed before us clearly dispels any notion of the petitioner being a hardcore trading corporation as some precedents have chosen to describe commercial enterprises. As the Constitution Bench in Shri Ramtanu Coop. Housing Society aptly observed, bodies like the petitioner, are intended to act as an architectural agent of development and growth. The respondents have clearly erred in holding that the loans and advances extended by the petitioner would fall within the ambit of commercial activity. The aforesaid conclusion not only fails to bear in consideration the directives of the State Government which prompted and facilitated the said action, the grant of those loans has also not been established to have been motivated with a view to profiteer. As was noticed hereinabove, past precedents rendered in the context of Sections 2 (15) and 10 (46) guide us in this regard to apply the test of activities undertaken with a profit motive and intent. That clearly does not appear to be the case which obtains here. Some of those loans came to be extended to finance activities supportive and supplemental to the development activity that was liable to be undertaken by the petitioner. The finding in the impugned order that the petitioner had advanced loans to private entities such as M/s Amarpali Silicon City has been found to be factually incorrect. Equally destructive of any assumption of commercial activity are the details appearing in the financial statement that has been placed on the record and which establishes that the nominal margin in percentage terms between the income and expenditure of the petitioner has primarily remained in the negative during the period FY 2011-12 to FY 2022-23 [barring a few years]. Thus, we allow the instant writ petition and quash the order - respondents are consequently directed to process the application for exemption made by the petitioner u/s 10 (46) of the Act bearing in mind the observations made hereinabove. 2024 (7) TMI 847 Validity reassessment order - order passed in violation of the principle 'he who decides must hear' - order not passed by the Officer who heard the petitioner -HELD THAT:- The doctrine 'he who heard must decide / he who decides must hear' applies to statutory authorities. Section 148A of the Act provides for opportunity of being heard to the assessee. If the officer who hears does not render the decision, it would amount to violation of the principles of natural justice. Since Ext.P6 order is not passed by the Officer who heard the petitioner, Ext.P6 order is set aside. Consequently Ext.P7 notice under Section 148 is also set aside. AO shall pass fresh orders pursuant to Ext.P3 show cause notice after affording an opportunity of hearing to the petitioner, as expeditiously as possible. 2024 (7) TMI 846 Reopening of assessment - petitioner has not filed return under the PAN [new alloted] - assessee addressed to the Income Tax Officer, Ward-5, Nadiad, requested to take note of the new PAN being AAPAS3755G and continue the usage of old PAN AAVFS6160N till the pending proceedings under the Act are completed as stated in the said letter. HELD THAT:- It is clear that the AO was made aware that the petitioner filed return for A.Y. 2017-18 under the old PAN. Thus, the AO has misdirected himself by ignoring the fact that petitioner has filed return for the A.Y. 2017-18 under PAN AAVFS6160N and only on the ground that the petitioner did not file return in PAN AAPAS3755G which was not in existence during the A.Y. 2017-18, has passed the impugned order. Apparently, the aforesaid impugned order is contrary to the facts and accordingly the same is quashed and set aside. 2024 (7) TMI 845 TDS u/s 194H - reference to the discount allowed to the distributors in respect of pre-paid sim cards and pre-paid vouchers/recharge coupons - Whether the appellant can be deemed to be an assessee in default under section 201 for noncompliance with section 194H and any tax or interest can be demanded from it? HELD THAT:- Both the learned Counsel for the parties jointly state that the controversy is covered by the judgment of Bharti Cellular Limited(Now Bharti Airtel Limited) [ 2024 (3) TMI 41 - SUPREME COURT ] wherein held assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case. Thus, in view thereof, both the substantial questions of law deserve to be answered in favour of the assessee and against the revenue. 2024 (7) TMI 844 Maintainability of appeal on low tax effect before ITAT - Entitlement of Co-operative society to claim deduction u/s 80P(2)(d) on interest income - HELD THAT:- AO has not disputed the fact that the tax effect for these two appeals are only Rs. 3,23,712/- and Rs. 3,13,567/- for the Assessment Year 2014-15 and 2015-16 respectively. Thus the tax effect in these two appeals are below the monetary limit prescribed in the Circular No.3/2018 as well as Circular No.17/2019 which is Rs. 50 lakh for filing appeal before the Tribunal. A.O in the report dated 02.07.2024 has taken a stand that though the tax effect is below the prescribed monetary limit provided in the above said circulars of CBDT but these cases fall under exception provided in para no.10(c) of Circular No.3/2018 being case of audit objections. As per CBDT latest circular No.5/2024 dated 15.03.2024 there is no exception to the monetary limit regarding any audit objection. It is settled position that the CBDT circulars prescribing monetary limits for filing the appeals by the Department before the Tribunal/Hon ble High Court/Hon ble Supreme Court are also applicable on the pending appeals on the date of circular. Accordingly in view of the judgment of Hon ble Bombay High Court in case of CIT V/s Madhukar K Inamdar HUF [ 2009 (7) TMI 145 - BOMBAY HIGH COURT ] the CBDT Circular No.5/2024 is applicable in the present appeals filed on 27.2.2024 and consequently due to low tax effect the appeals of the revenue are not maintainable and liable to be dismissed. Since the appeals of the department are dismissed due to low tax effect therefore, we do not proposed to go into the merits of the issue of allowability of deduction u/s 80P(2)(a)(i) of the Act. Appeals of the revenue are dismissed. 2024 (7) TMI 843 Validity of the assessment orders u/s 153C - period of limitation - identifying the relevant assessment year for the purposes of computing the ten year block - HELD THAT:- Additions made in the impugned order dated 26.12.2022 for assessment year 2011-12 and 2012-13 in pursuance to satisfaction note dated 24.9.2021 are barred by time. The impugned orders are beyond jurisdiction and illegal, also for the reason that such addition could not have been made since no incriminating material has been found as a result of search. Appeals of the assessee are allowed. 2024 (7) TMI 842 Correct head of income - Gain on sale of shares - capital gain or business income - principal of consistency - assessee has submitted that assessees National Stock Exchange ticket was surrendered in May 2001 and Assessee has shown shares in investment and valued these on cost at the end of the year - HELD THAT:- The objective of the assessee of the investment was to drive income by way of dividend yield capital gain and not the business profit. When the assessee has filed the return of income from the business for the AY 2004-05 the AO assessed the income from capital gain, similarly for the AY 2008-09 2010-11 assessee has filed the return of income from the capital gain, the AO has treated income from business and the CIT(A) allowing the appeal, has accepted the version of the assessee and treated the income from capital gain which became final. There was no change in circumstances or method of accounting. Assessee had held the shares for the period ranging from 5 months to 12 months. The investor may buy or sell the shares everyday but that will not be considered such frequent as to lead to the inference of trading thus the motive of investment of the assessee was to derive income by way of dividend. The principal of consistency was not adopted by the AO. The revenue itself accepted the income of the assessee from the purchase of shares as capital gain for the A.Y 2004-05, 2005-06, 2007-08, 2008-09 2010-11 thus adopting the principal of consistency the income of the assessee should have been accepted as income from capital gain, so the addition made by AO treating as business income and confirmed by CIT(A), to be taxed under the head of capital gain. Appeal of the assessee is liable to be allowed. 2024 (7) TMI 841 Validity of assessment order passed beyond the time limit prescribed u/s 153 - HELD THAT:- We concur with the Ld.CIT(A)'s observation that the assessment order dated 22/10/2021 was issued within the statutory time limit as prescribed by Section 144C(4) of the Act. The provision of draft assessment order u/s 144C of the Act is intended to benefit the assessee by allowing an opportunity to resolve contentious issues before the final order is passed. Further it is noted from the submission by the assessee before Ld.CIT(A) that the Continuous Discharge Certificate (CDC) and passport entries are sufficient evidence to prove that the assessee was non-resident during the financial year under consideration and the same was verified by the AO. Passing the Assessment Order by the successor AO without issuing fresh notice u/s. 143(2) of the Act up on change - Issuance of a fresh notice u/s 143(2) of the Act by each successor AO is not mandated by law. The procedural compliance of issuing the initial notice was adhered to, and the appellant was afforded an adequate opportunity to be heard. Consequently, this ground of appeal is dismissed. Income deemed to accrue or arise in India - Addition of salary income in the hands of assessee being earned from the activity within India - assessee contented that the assessee is in employment with Singapore based company, and place of duty is on ship engaged in underwater inspection of platforms, appurtenances, and pipelines in the KG-06 Oil Fields in the Bay of Bengal, specifically within international waters - whether the salary income earned by the assessee is exempt under the Income Tax Act, 1961, given the nature and location of the employment? - HELD THAT:- As per Section 2(25A) of the Income Tax Act, 'India' includes its territorial waters, the seabed and subsoil underlying such waters, the continental shelf, the Exclusive Economic Zone (EEZ), and other maritime zones as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. Operations on a foreign ship within the EEZ, especially those not involving direct interaction with the seabed or subsoil, are not automatically considered as services rendered within 'India' for tax purposes. Notification No. GSR 304(E) specifically extends the Act ONLY in respect of income derived from specified activities. CIT(A) has failed to consider the fact that sub-section 9 of section 7 of The Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 gives freedom of navigation to foreign ships and therefore employees working on such ships who are not carrying out activities as specified by the said notification are not deemed to be working in India. Section 9(1)(ii) of the Income Tax Act, 1961 states that income earned from services rendered in India is taxable. Since the assessee's duties, which are not covered by Notification No. GSR 304(E), are performed on a foreign ship operating beyond the territorial waters (though within the EEZ) it can be concluded that the services are not rendered in India. Given the facts and relevant legal provisions if the assessee qualifies as an NRI under Section 6 of the Income Tax Act, the salary income earned from services performed outside the territorial waters of India is exempt under the Act. Since AO has passed his order u/s. 143(3) r.w.s. 144C(3) of the Act and that he has verified the CDC of the assessee, it is concluded that AO has confirmed the residential status as Non-resident. Therefore, as a result of the discussion made hereinabove, the salary income earned by the assessee is exempt income . Thus, this ground of assessee s appeal is allowed and the addition is hereby deleted. 2024 (7) TMI 840 TP Adjustment - upward adjustment on account interest charged to the Associated Enterprise (AE) - CIT(A) deleted addition - HELD THAT:- TPO s reliance on loan data from the US and Europe for benchmarking is inappropriate given the distinct economic environments and sovereign risks associated with Bahrain. That, the Prime Lending Rate of the Central Bank of Bahrain already incorporates regional economic factors and risks, aligning with the financial context of the Assessee's AE. Adding spreads for country and foreign exchange risks, as proposed by the TPO, constitutes duplicative adjustments, considering these factors are inherently reflected in the Prime Lending Rate adopted by the Assessee. CUP method, as per Rule 10B, necessitates adjustments only if they have a material impact on the price. The Prime Lending Rate's comprehensiveness negates the necessity for further adjustments. Assessee s method of calculating interest has been consistently applied in previous and subsequent financial years without challenge, underscoring its reliability and appropriateness. CIT(A) has thoroughly addressed and resolved the issues raised, aligning with the principles of fair benchmarking and appropriate risk adjustments - we uphold the Ld.CIT(A)'s order, thereby dismissing the TPO s adjustment - Decided in favour of assessee. Non-deduction of withholding tax u/s 195 - disallowance of Product Certification Expenses paid to non-resident - non-genuineness of the expenditure - HELD THAT:- We conclude that the services rendered for product certification, which include evaluating technical quality and issuing certificates, do not fall under the definition of Fees for Technical Services as per Section 9(1)(vii) of the Act. This view is consistent with the CIT(A) s findings and supported by the judgments cited by the AR, particularly the Hon ble Supreme Court decision in CIT Vs. Kotak Securities Ltd.[ 2016 (3) TMI 1026 - SUPREME COURT] which clarified that routine services not involving technical knowledge do not constitute technical services and it is mere in the nature of facility offered or available. Under the DTAA provisions, the payments for certification services rendered by entities in the USA, UK, Korea, and China are not taxable in India in the absence of a fixed place of business in India. Hence, the payments are not liable for withholding tax under Section 195 - As decided in TUV Bayern (India) Ltd. [ 2012 (7) TMI 220 - ITAT MUMBAI] that certification services are not fees for technical services under the Act or the DTAA. Thus, concluded that the services rendered to the assessee for product certification, which include evaluating technical quality and issuing certificates, do not fall under the definition of Fees for Technical Services as per Section 9(1)(vii) of the Act.The assessee provided sufficient evidence, including certificates, invoices, and agreements, to establish the genuineness and business necessity of the expenses. The AO's contention on the non-genuineness of the expenditure is not substantiated by any contradictory evidence. - Decided in favour of assessee. TDS u/s 195 - disallowance of provision for royalty expenses - HELD THAT:- The provision for royalty expenses made by the assessee was appropriate given the business practice of recording sales and subsequently making provisions for royalty expenses due upon activation by the end user. The royalty becomes payable only when the end user activates the software, creating a legitimate time gap between the recording of sales and the actual payment. We agree with the Ld.CIT(A) that the withholding tax liability under Section 195(2) of the Act does not arise until the royalty payment is actually due and payable. The income embedded in the payment must be taxable under the Act for the withholding tax provisions to apply. In this case, since the royalty is not immediately payable, the withholding tax liability does not get triggered. We acknowledge the relevance of the judicial pronouncements relied upon by the Ld.CIT(A) and the assessee. The principles laid down in the cases of Saira Asia Interior Private Limited [ 2017 (4) TMI 242 - ITAT AHMEDABAD] and Sophos Technologies Pvt. Ltd.[ 2018 (12) TMI 1556 - ITAT AHMEDABAD] support the view that the withholding - uphold the CIT(A)'s decision to delete the disallowance of the provision for royalty expense u/s 40(a)(i) - Decided against revenue. 2024 (7) TMI 839 LTCG - Exemption u/s 54F - investment made in purchase of residential house in Ontario in Canada - assessee is a non-resident Indian during the relevant financial year - AO sought to disallow the claim of exemption on the ground that the property had not been purchased/constructed in India and that the amendment in section 54F introducing the words constructed one house in India w.e.f. AY 2015-16 was clarificatory in nature and hence applicable retrospectively. HELD THAT:- There are several decisions including that of the Jurisdictional High Court wherein it has been held that the exemption u/s 54F would be available on property purchased outside India in the period prior to 01.04.2015 as the amendment is prospective in nature and cannot be applied to the transactions prior to 01.04.2015. As relying on Hemant Dinkar Kandlur [ 2023 (9) TMI 950 - BOMBAY HIGH COURT] we hold that for the year under consideration the words in India cannot be read into the provisions of section 54F and hence, the assessee is entitled to claim exemption u/s 54F in respect of the investment made in the residential property in Ontario, Canada. Appeal filed by the assessee is allowed. 2024 (7) TMI 838 Validity of reopening of assessment - approval granted by competent authority not in accordance with the provisions of section 151 - Reason to believe - borrowed satisfaction or independent application of mind - addition of unexplained credit u/s 68 - AO had recorded such reasons with his conviction that the assessee had received certain amounts as commission, in the form of accommodation entries HELD THAT:- On perusal of the bank statement of M/s Arion Commosales Pvt. Ltd. for the relevant period, from whom the assessee company had received the commission income, which was alleged by the revenue as receipts in the form of accommodation entry, however, it is observed that there was no receipt in the bank account of the M/s Arion Commosales Pvt Ltd. from M/s Evergrow Suppliers Pvt. Ltd. or M/s Gitanjali Book Depot. Thus, in view of such facts the reasons recorded by the Ld. AO are found to be without any basis, merely the repetition of information received from investigation wing, dehors any independent inquiry or application of mind, much less the claim of the Ld. AO that it has been noticed by the undersigned that huge chunk of cash was deposited in the bank account of M/s Gitanjali Book Depot was found to be a bald statement as the relevant information was not with him and further on perusal of the bank statement such conviction of the Ld. AO is found to be militating against the corroborative evidence. Since the Ld. AO was hunting for the evidence / information even after 09 months from the date of recording of the reasons, therefore, the reasons recorded can be construed as formation of belief under borrowed satisfaction and obviously without application of mind as the information which was to be looked into was not available with the Ld. AO. Further since the facts are found to be incorrect, which was the basis for reopening assessment, therefore, on that ground also the reopening assessment u/s 147 cannot sustained. AO had formed the reason to believe without application of mind to the material/information which was though claimed to be noticed but eventually was not available with him. Thus, the proceedings invoked u/s 147 by issuing the notice u/s 148 for reopening of the case of the assessee by merely referring to the information that was received by him from the investigation wing are found to be invalid in the eyes of law. AO had merely acted in a mechanical manner on the information that was received by him from the ADIT(Inv.), without applying his mind to the information/material which was supposed to be verified but the same was not available with him, therefore, AO had reopened the present case of the assessee on the basis of a borrowed satisfaction/ without application of mind - Assessee appeal allowed. 2024 (7) TMI 837 Jurisdiction assumed by the A.O, i.e. DCIT, Circle-2(1), Bilaspur for framing of the assessment - Addition u/s 68 - receipt/payment account of the assessee trust revealed, viz. Ramayan a/c., Gujrati samaj a/c. and Kayam Punya Tithi fund - HELD THAT:- On a perusal of the record, it transpires that the assessee after receiving notice u/s. 143(2) of the Act dated 23.09.2011 from the ITO, Ward-1(2), Bilaspur had failed to call in question his jurisdiction within the stipulated time period, i.e. one month from the date of service of the aforesaid notice. As the assessee trust had not objected to the notice issued by the ITO-1(2), Bilaspur dated 23.09.2011 (received on 28.09.2011) within the stipulated time period of 30 days as contemplated in Section 124(3) of the Act, therefore, it cannot be permitted to have questioned the validity of the jurisdiction in the course of the present proceedings now. Addition u/s 68 - A perusal of the summary of receipts as had been placed before me reveals the names of the donors a/w. their respective addresses/ telephone numbers wherein they had categorically stated that the contributions were being made by them with specific directions, i.e. lifelong bhandara on specific dates etc. As the complete details of the persons who had made contributions a/w. their respective addresses/telephone numbers is discernible from the summary of the receipts as had been filed before me, therefore, unable to concur with the view taken by the lower authorities that the amounts so received were in the nature of unexplained cash credit u/s. 68 - also we cannot remain oblivion of the fact that the aforesaid documents as were filed before me for the first time as additional evidence were not there before the lower authorities - restore the matter to the file of the A.O with a direction to verify the authenticity of the summary receipts, i.e. details of the contributors/donors and the copies of the copies of the receipts issued by the assessee trust. Validity of the notice issued u/s. 143(2) for the reason that the same was done prior to the intimation issued u/s. 143(1) - No substance in the same. The Hon'ble Apex Court in the case of CIT Vs. Gujarat Electricity Board, [ 2002 (10) TMI 5 - SUPREME COURT] had held that an intimation issued u/s. 143(1) of the Act after issuance of notice u/s. 143(2) of the Act would be invalid. However, in a case where the processing of the return u/s. 143(1) of the Act is carried out subsequent to the notice issued u/s. 143(2) of the Act, then the same would not render the notice so issued as invalid. Accordingly, finding no infirmity in the view taken by the CIT(A) on the aforesaid issue, uphold the same. 2024 (7) TMI 836 Assessment of trust - addition made u/s. 115BBC as anonymous donations - addition made doubting the genuineness of the donors - onus to prove - AO brought on record defects in maintaining records as per the provision of said section - CIT(A) deleted addition - CIT(A) held that the Assessee trust is existing solely for the purpose of education - assessee submitted complete details of donors from whom the assessee trust has received the donation along with their name, complete address, PAN Card details of the donors, Aadhar Card of the donors with respect of identification proof of donors - HELD THAT:- The assessee has discharged the onus casted upon it and, therefore, if at all the AO is having any doubt, he should have been brought the evidence on record that the donations are not genuine. Once the assessee has filed all the details of the donors and enquiry made by the AO cannot doubt the donors. We also find that some of the donors appeared before the AO and stated that they had paid the donations. Some of them had filed confirmation stating that they paid donation to the assessee trust. A few of them did not appear before the AO. AO without giving opportunity to the assessee to produce the donors before the Assessing Officer, simply doubted the entire donation received by the assessee as not genuine. In our opinion, the AO was not correct in doubting the entire donations as not genuine. Anonymous donations - Assessee maintained the record of the identity and address of the persons who are making contribution and other particulars and, therefore, provisions of section 115BBC of the Act are not applicable. In the present case, the assessee has maintained identity of the donors i.e., complete details such as name, address, PAN card details, Aadhar details and, hence, provisions of section 115BBC of the Act are not applicable to the assessee Trust. We find that the assessee has given all the details of the donors including names, address, PAN card details, Aadhar details, etc. Thus, the assessee discharged onus casted upon it by producing all the details before the Assessing Officer. AO without following the procedure and without providing proper opportunity to the assessee, doubted the genuineness of the donations and invoked the provisions of section 115BBC of the Act, which is not correct. CIT(A) correctly deleted the addition. Assessee appeal allowed. 2024 (7) TMI 835 Assessment of business income - assessee has determined sales figures of Rs. 19.05 Lacs whereas Ld. AO has taken the same at Rs. 41.53 Lacs - HELD THAT:- The assessee has determined sales figures of Rs. 19.05 Lacs whereas Ld. AO has taken the same at Rs. 41.53 Lacs. The reconciliation, in this regard, has been placed on the assessee. The assessee has submitted that withdrawal of Rs. 6.80 Lacs on 19.05.2017 represent amount returned to M/s Sana Trading Co. out of money lent by them to the assessee. The assessee also submits that amount credited on 23.05.2017 for Rs. 14.33 Lacs and Rs. 4.22 Lacs credited on 30.05.2017 has not been considered by Ld. AO. However, we find that no supporting evidences could be adduced by the assessee, in that regard. In such a case, the determination of business income, in our considered opinion, could not be faulted with. However, at the same time, it could be noted that the aggregate credit of Rs. 18.55 Lacs represent business transaction which has already been considered while estimating the business income of the assessee. Even otherwise the business income has been computed on the presumption that entire purchases were sold during the year. Therefore, separate addition of Rs. 18.55 Lacs stand deleted whereas the estimation of additional income for Rs. 1.66 Lacs stand confirmed. Separate addition of opening stock for Rs. 2.42 Lacs is not warranted. The same stand deleted. The business income so computed by Ld. AO would be subjected to normal rate of taxes. Addition of cash deposits and unexplained investments - Cash deposits represent deposit made by the assessee on 11.05.2017 12.05.2017 respectively. The assessee has explained that he was engaged in arbitrage activity on peer-to-peer trading platform for cash with a minimum price margin of 1- 3%. On 11.05.2017, trade was made with multiple member of Lbtc Portal and cash was consolidated and deposited in the bank account using the handler nbkarthi (userid). The list of user handlers / buyers with trade reference Id was also submitted. AO rejected the aforesaid claim in the absence of supporting documents and trading receipts. Once this fact is accepted that the receipts arose out of arbitrage activities, the full addition thereof would not be justified. Therefore, we direct Ld. AO to estimate profit rate of 3% on cash deposit of Rs. 15.63 Lacs. The same would be assessable as business income which would be subjected to tax at normal rates. The addition of Rs. 1 Lacs stand deleted since there are prior withdrawals which is evident from bank statement of the assessee as placed on record. 2024 (7) TMI 834 Addition u/s 69A - Cash deposit during demonetization period - to support source of cash deposited the assessee has produced the details of cash sales, cash book, etc. that the amount of cash deposited in the bank account on four different occasions is out of the sale proceeds which are disclosed as sales in the trading account - HELD THAT:- When the sales invoices on cash sales, the books of account are available with the AO, he should have made an enquiry to disprove the cash sales prior to demonetization. This exercise has not been done. It is also true that cash sales are also part of the trading result offered for taxation by the assessee which is not disputed. The mere allegation that books of account are manipulated without its rejection or without bringing on record any positive evidence, the addition could not have been made on account of cash deposit. Mere cash deposit or cash sales, without pointing out any latent, patent and glaring defect in books of accounts, books of accounts cannot be rejected. AO has to show that cash sales is not coupled with delivery of goods, or on that assessee did not have stock to sale. The allegation of the AO that after deposit of the cash, part of the money has been transferred to the sisters concern i.e. M/s Satawat Textile and part of the money to the assessee s own account does not help the case of the Revenue in proving that the cash sales recorded by the assessee is bogus. We reverse the orders of the lower authorities and allow ground directing the AO to delete the addition - Decided in favour of assessee. 2024 (7) TMI 833 Penalty u/s 271(1)(c) - exemption u/s 10(38) withdrawn - Bogus LTCG on Penny stock purchases - claim for exemption u/s 10(38) of the Long Term Capital Gain (LTCG) on sale of shares withdrawn and offered the corresponding amount as his income from Other sources in its return of income filed in response to notice u/s. 148 - HELD THAT:- AO had failed to dislodge the bonafide of the assessee's explanation based on which it had withdrawn its claim of exemption u/s 10(38) of LTCG on sale of shares of CCL International Ltd. , and had offered the corresponding amount as his income from Other sources in its return of income filed in response to notice u/s. 148 of the Act, therefore, we are of the view that there was no justification on his part to have imposed penalty u/s. 271(1)(c) of the Act. Although, Explanation 3 to Section 271(1)(c) of the Act takes within its sweep the income disclosed by the assessee in its return of income filed u/s. 148 of the Act as deemed concealed income of the assessee, but the same is only concerning specific circumstances therein provided, i.e. where the assessee had failed to file his return of income within the period specified in sub-section (1) of Section 153 of the Act and until expiry of period aforesaid, no notice was issued to him under Clause (i) to sub-section (1) of Section 142 or 148, which, however, is not the case of the assessee before us. No such facts that reveal the furnishing of inaccurate particulars of income or concealment of income by the assessee, but this is a case, where a claim for exemption of LTCG u/s. 10(38) of the Act in the original return of income was withdrawn initially vide letter filed with the department to buy peace of mind and to avoid protracted litigation, which, thereafter, was followed by offering of the said amount as income in the return of income filed in response to notice u/s. 148 of the Act We, thus, are of the view that as the penalty proceedings u/s. 271(1)(c) of the Act as held in the case of M/s Hindustan Steel Ltd. [ 1969 (8) TMI 31 - SUPREME COURT] are quasi-criminal proceedings, therefore, the assessee in absence of any material which would conclusively prove that it had raised a false claim of LTCG on purchase/sale of shares of CCL International Ltd. a penny stock, which was claimed as exempt u/s. 10(38) of the Act, thus, could not have been saddled with penalty u/s. 271(1)(c) of the Act - Decided in favour of assessee. 2024 (7) TMI 832 Deduction claimed u/s. 36(1)(viii) - interest income from housing finance for non-residential purposes - excluding the amounts in computing the profits eligible for deduction u/s 36(1) (viii) - HELD THAT:- As following the appellate order for AY 1998-99 in assessee s own case [ 2024 (1) TMI 1300 - ITAT MUMBAI] it is held that for Assessment Year 1999-2000, there being no material change in facts and applicable law, the disallowance made by the AO is to be allowed after recomputing the income eligible for deduction u/s. 36(1)(viii) afresh in accordance with the directions noted in the aforesaid appellate order for Assessment Year 1998-99 and allow the deduction accordingly. Thus, ground no.2 is partly allowed. Allocation of provisions for contingencies and interest on foreign currency borrowings - As we direct AO to apportion part of the cost towards the income which has been held to be not eligible for claiming deduction u/s. 36(1)(viii), since interest income from housing finance for non-residential purpose has been held to be not eligible for deduction u/s. 36(1)(viii). Also, in respect of other expenses we set aside the allocation done by the ld. AO on ad-hoc basis in the ratio of 80:20 towards income from housing finance and income other than from housing finance and adopt the recomputed ratio in terms of our directon. Considering our observations and findings, certain income has been recharacterized as income from eligible business and those from ineligible business activities. Accordingly, ld. Assessing Officer is directed to reallocate such cost in the ratio as finally determined consequent to the findings given herein on re-characterisation of income into eligible and ineligible business. Ground No.2.4 is partly allowed. Disallowance of expenses towards earning of exempt income u/s. 10(33) - allocation of other expenses, as expenditure incurred in relation to earning the dividend income - HELD THAT:- As per assessee own case [ 2024 (1) TMI 1300 - ITAT MUMBAI] AY 1998-99 we also hold that no interest cost need to be adjusted against the dividend income for the purpose of exemption u/s. 10(33). Also, with regard to allocation of other expenses, we direct the AY to reallocate the same based on actual ratio of the investments yielding exempt income to the total average assets for the relevant financial year and consider the same for the purpose of exemption u/s. 10(33). Accordingly, ground no.3 is partly allowed. Disallowance u/s. 14(A) in respect to income-tax free bonds and section 10(23) bonds - HELD THAT:- It is an admitted position that the assessee is having own funds more than the amount invested in the tax free bonds. Further the impugned investments as per the submissions of the assessee are resulting in both exempt as well as taxable income. We place reliance on the decision of the coordinate bench in the case of Prakash K. Shah Shares Securities Pvt. Ltd [ 2016 (12) TMI 47 - ITAT MUMBAI] to hold that no disallowance is warranted u/s. 14A. The disallowance made in this regard is deleted. Accordingly, ground no.4 is allowed. Nature of receipt - addition made on account of receipt of non-compete fees treated as revenue receipt - HELD THAT:- As in the present case, the amount received by the assessee as non-compete fee under a negative covalent is a capital receipt. We are in agreement with the ld. Counsel for the submissions made by him before us which are narrated in the above paragraphs. Further, in this respect, we have perused the relevant clause of the non-compete agreement which is extracted above. We also note that it is only w.e.f. 01.04.2003 vide Finance Act, 2002 that the said capital receipt is brought to tax through section 28(va). The said section is held to be prospective since it is mandatory and not clarificatory in nature. We have also taken note of the exception 1 to section 27 of the Indian Contract Act, 1872, in respect of agreement in restraint of trade which otherwise is to be treated as void. In the present case, the agreement is in respect of transfer of business requiring certain pre-conditions to be fulfilled subject to which a restrain is put on the assessee in the form of negative covenant. The restriction in the agreement is with regard to restricted business which also has been defined in the said agreement. Assessee has received the amount for undertaking the restraining obligation and therefore it cannot be treated as business income in the year under consideration which is much prior to the amendment brought in by the Finance Act, 2002. Thus, we hold that noncompete fee received by the assessee under the negative covenant is in the nature of capital receipt not exigible to tax since it relates to Assessment Year 1999-2000. Accordingly, ground no.5 taken by the assessee is allowed. Disallowance made towards discount amortised in the accounts towards stock options granted to its employees by holding the same as capital in nature - HELD THAT:- Considering the facts on record and the judicial precedents discussed above, we find that the issue is covered by the aforesaid judicial precedents in the case of Biocon ltd. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] and PVR ltd. [ 2022 (8) TMI 1234 - DELHI HIGH COURT] in favour of the assessee. Respectfully following the same, the ground taken by the assessee in this respect is allowed. 2024 (7) TMI 831 Reopening of assessment - client code modification and commission paid - information received from DIT (1 CI), Mumbai which contained details of the manner in which fictitious losses and profits were created by some brokers by misusing the client code modification facility in the future and options (F O) segment on NSE - case of the assessee specific information was that the client code had been modified in 54 trades as a result of which the profit accruing to these trades was transformed into loss HELD THAT:- In the case of the appellant all the modifications were done on three days only i.e. 22.03.2010, 23.03.2010 and 25.03.2010 and there was no modification either on previous dates or later dates during the period of 01.04.2009 to 31.03.2010. The client codes of other clients are entirely different from client code of the appellant Sh. Naveen Gaba and all the modifications have resulted in losses. All these facts creates suspicion about the transaction carried out by the appellant and it does not appear the bonafide client code modification transaction. Further it is proved by way of investigation carried out by the DIT(I CI) that CCM was misused for obtaining fictitious losses / profits and brokers received commission @ 0.5% to 2% on the amount of losses/profits for transferring such losses/ profits to their clients. Thus AO has added commission @ 1.25% on the loss claimed by the appellant by CCM correctly. The assessee failed to put fort any argument in support of the grounds of Appeal. On the other hand as observed above, the Ld. CIT(A) has decided the issues involved in the Appeal against the assessee after deliberating all the issues in detail, in the absence of any material on record to prove contrary to the observations of the Ld. CIT(A), we find no merit in the Grounds of Appeal of the assessee, accordingly, the Grounds of Appeal of the assessee are dismissed. 2024 (7) TMI 830 Addition of cash deposit in the bank account of the company in the hands of the director and treated the company as dissolved/ non-existence entity - addition of one third amount credited in the bank account of company during the year as income of the appellant/directors of company - HELD THAT:- As we agree with the contention advanced by the ld AR that the action against the directors cannot directly be taken under section 179 of the Act and even where the name of the company has been struck off the Register of companies, the action can still be taken against the company in the manner so provided under law. We therefore set-aside the impugned order and the addition so made in the hands of the assessee, being the director of the company. The Revenue is at liberty to take appropriate action against the Company as per law. See MANJULA D. RITA [ 2023 (6) TMI 1138 - BOMBAY HIGH COURT] Addition of gift received from her Grandson who was an NRI during the period - income from unexplained sources u/s 69A - HELD THAT:- This money is either to be considered as loan or gift but is not income and the ld. AO has not invoked the provision of section 56 but invoked provision of section 69A of the Act which considering the facts of the case is not applicable and in fact provision of section 68 is not applicable based on the finding recorded here in above. Unexplained amount added in the hands of Grandson os assessee/Sh. Manan Lodha is not required to be added in the hands of assessee as it will amount to double addition of the same amount. We are in agreement with the alternative contention of the ld. AR of the assessee that even if the addition is to be sustained in the hands of the assessee u/s 68 the assessee is supposed to prove the identity genuineness and capacity of the assessee which considering the fact of the case in the case of Sh. Manan Lodha from where the assessee has received a sum is already considered as income and from that source of the money follows from the bank account to the assessee. Whether the assessee has filed any gift deed or not and even if the transaction is considered as loan or gift, the same is not required to be taxed u/s 68 of the Act and 69A of the Act based on the observations and finding given herein above the additionis directed to be deleted - Decided in favour of assessee. 2024 (7) TMI 829 Disallowance of commission expenses paid to different parties by the Appellant - non allowable business expenses - AO held adequate evidence was not furnished by the Appellant to prove the services rendered by the recipients of commission - HELD THAT:- We find that the identical issue stands decided against the Appellant by the Tribunal in Appellant s own case pertaining to Assessment Years 1990-1991 to 2002-03, inter alia, on the ground that the Appellant had failed to explain the nature of services and substantiate the claim for deduction for commission expenses. As decided in Assessment Year 1994-95 no such explanations or details have come from the side of the assessee company. Without knowing the exact nature of the services rendered by those parties, it is not possible for us to decide whether the commission payable by the assessee company was a legitimate expenditure permitted by law, and therefore, to be allowed. If such detail: are not coming, such payments made in respect of contracts awarded by Public Sector Companies we have to be held as expenses were incurred against public policy, and therefore, not entitled to be deducted in the light o the proviso to Sect 37 - Decided against assessee. Value of Construction Work-In-Progress adopted by the AO - AO held method of valuation followed by the Appellant in respect of construction jobs was not correct and concluded that the valuation of closing Construction Work-In- Progress as on 31/03/2004 was incorrectly reduced the Appellant - HELD THAT:- CIT(A) was right in dismissing the issue as being academic in nature since no addition was made by the Assessing Officer on account of adopting higher value of the Construction Work-In-Progress. We do not find any infirmity in the order passed by the CIT(A). Accordingly, Ground No. 2 raised by the Appellant in the present appeal is dismissed. Disallowance of provision for foreseeable loss - Appellant submitted that the provision for foreseeable losses is an allowable deduction - HELD THAT:- A claim otherwise not allowable as per the provisions of the Act cannot be allowed merely on the ground of non-materiality of the quantum involved. However, having concluded as aforesaid, we find some merit in the alternative contention of the Appellant. It was submitted that since the Appellant is following project completion method and the projects have been completed, the entire Revenue from the project would have been offered to tax and therefore, in absence of any impact on revenue the settled position should not be disturbed. Even this contention that claim of foreseeable losses made by the Appellant merely resulted in timing difference as by the end of the project entire/actual profits of the project were offered to tax cannot be accepted in absence of any material on record supporting the same. Accordingly, we direct the Appellant to file relevant documents/details before the AO to show that all the 30 projects have been completed and entire revenues from the 30 projects under consideration have been offered to tax leading to no leakage of revenue pertaining to the projects on overall basis. We direct the AO to verify the details/documents submitted by the AO and if satisfied, restrict the disallowance on account of unforeseeable losses pertaining to (a) the projects (mentioned in the list of 30 projects) which have not been completed till date, and (b) the projects which have been completed but entire Revenue has not been offered to tax till date. In terms of the aforesaid, Ground No. 3 raised by the Appellant is partly allowed. Addition u/s 40A(9) - Appellant paid sum to Utmal Employees Welfare Fund to provide for recreational activities for employees at Kansbahal Works, formerly known as Utkal Machinery Limited' in pursuance of a settlement u/s 18 of the Industrial Disputes Act, 1947 - contention of the Appellant was that the payment falls under the exception provided under Section 40A(9) of the Act as the same was made under the law for the time being in force - HELD THAT:- As referring to the relevant extract of the decision of the Tribunal in the case of the Appellant for the Assessment Year 1999-2000 [ 2018 (4) TMI 385 - ITAT MUMBAI] directed to delete the addition made. Disallowance of depreciation - slump sale transaction - HELD THAT:- Both the sides agreed that vide common order [ 2016 (7) TMI 1696 - ITAT MUMBAI] dated 27/07/2016, passed in the cross-appeals for the Assessment Year 1998-99 [ 2016 (7) TMI 1696 - ITAT MUMBAI] , the Tribunal has held that the sale of the Undertaking was a transaction of slump sale and not a case of itemized sale as held by the Assessing Officer. Therefore, the very basis on which the WDV and depreciation was re-computed by the Assessing Officer does not survive. Taking note of the aforesaid facts, the Tribunal had decided identical issue in favour of the Appellant and directed the Assessing Officer to accept depreciation as calculated by the Appellant and thereby deleted the addition made on account of reduction of depreciation claimed by the Assessing Officer vide common order passed in a batch of appeals including the appeal preferred by the Appellant for the Assessment Year 2001-02 and 2002-03 [ 2022 (5) TMI 104 - ITAT MUMBAI] . Disallowance of interest and other expenses made u/s 14A - as in return of income the Appellant had claimed exemption in respect of dividend and interest income from equity shares/Units of mutual funds and tax free bonds - HELD THAT:- While arriving at the enhanced amount of disallowance the CIT(A) has borrowed the computation mechanism prescribed in Rule 8D of the Rules as a reasonable basis even though the aforesaid Rule 8D did not apply to the Assessment Year 2004-05. It is admitted position that the own funds of the Appellant were much more than the investments. Therefore, as per the judgment of HDFC Bank Ltd. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] no disallowance can be made under Section 14A of the Act (by applying the provisions contained in Rule 8D of the Income Tax Rules). Therefore, the basis on which the CIT(A) has computed the disallowance cannot be regarded as reasonable. While making the disallowance the AO has observed that the burden was on the Appellant to show that the investment were made from own funds. The reasoning given by the CIT(A) is contrary to the judgment of the Hon ble Supreme Court in the case of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] given the facts of the present case noted hereinabove, it would be presumed that investments were made out of own funds and therefore, proportionate disallowance of interest expenses under Section 14A of the Act was not warranted on the ground that separate accounts were not maintained by Appellant for investments and other expenditure incurred for earning tax-free income - Disallowance u/s 14A deleted. Nature of receipt - extinguishment of sales tax deferred loan liability - capital or revenue receipt - HELD THAT:- Respectfully following the above decision of the Tribunal in the case of the Appellant [ 2022 (5) TMI 104 - ITAT MUMBAI] we delete the addition made by the Assessing Officer on account of extinguishment of debt being sales tax deferred loan liability inclined to set aside the order of CIT(A) on this issue by holding that receipts is a capital in nature. TP Adjustment - determination of ALP of the transaction of reimbursement of project cost overrun expenses by the Appellant - HELD THAT:- Approval granted by the RBI and other authority to the Appellant for making the remittance of project cost overrun expenses was not based upon a threshold rate accepted or determined by RBI/such authority which could have been regarded as an independently determined price for benchmarking the remittances. In any case going by the relevant transfer provisions contained in the Act and rules made thereunder, the Appellant is required to independently benchmark its international transaction to arrive at arm's length price. We note that the Appellant has claimed that the remittance was purely in the nature of reimbursement of cost and therefore, the same should be considered as at arm s length as per Cost Plus Method. However, in effect, the Appellant had remitted 100% of the project cost overrun expenses which can be considered as Appellant s share of project cost overrun expenses of 80% along with markup of 20%. On the other hand, TPO was also required to determine the arm s length price by following one of the method prescribed. Accordingly, we remand this issue back to the file of the TPO/Assessing Officer for determination of ALP of the transaction of reimbursement of project cost overrun expenses by the Appellant to L T Ceylinco and recompute transfer pricing adjustment, if any. In terms of the aforesaid, Ground No. 8 raised by the Appellant is allowed for statistical purposes. Contract executed prior to the introduction of transfer pricing provisions - The actual computation of income and income tax would be made as per the law prevailing on 1st April of the relevant Assessment year. In the case before us, there is no dispute as to the nature/character of the international transaction. Further, the Assessing Officer has applied the transfer pricing provisions as applicable on 01/04/2004, which only affect the computation of income. Further, we note that even the provisions contained in Section 92 of the Act as on the date of the execution of the agreements under consideration provided for determination of arm s length price in case of International Transaction between Associated Enterprises with respect to arrangement for allocation or apportionment of cost or expenses. In view of the aforesaid, we reject the contention of the Appellant that the transfer pricing provision would not apply to the International Transaction reported by the Appellant during the relevant previous year for the reason the same arise out of a contract executed prior to the introduction of transfer pricing provisions. Computation of deduction u/s 80HHC 80HHE - As relying on own case 2000-2001, 2001-02 and 2002- 03 direct the AO to reduce net profits from profits of the business for the purpose of computing deduction under Section 80HHC/80HHE of the Act. Whereas, issues raised relating to reduction of profit of business by 90% of the Miscellaneous income and exclusion of profits of projects eligible for deduction under Section 80HHB of the Act from the profits of the business are concerned, we remit the aforesaid issues back to the file of the Assessing Officer for fresh adjudication in terms of the order passed by the Tribunal in the above said preceding assessment years. Accordingly, Grounds allowed for statistical purposes. Disallowance u/s 14A for the purpose of computing book profit u/s 115JB - HELD THAT:- As we have deleted the addition made u/s 14A for the purpose of computing income under the normal provisions of the Act. Therefore, the addition made while computing books profits u/s 115JB does not survive. Accordingly, addition made by the AO while computing the Book Profits under Section 115JB of the Act is deleted. 2024 (7) TMI 828 Nature of expenses - Expenditure on software - Revenue or capital expenditure - HELD THAT:- In assessee's case out of the total software expenses, the assessee has incurred substantial portion of the expenditure towards license fee which are to be paid periodically. Therefore it cannot be said that the payment is resulting in a benefit of enduring nature. Accordingly following the above decision of Amway India Enterprises [ 2008 (2) TMI 454 - ITAT DELHI-C] which is affirmed by the Hon'ble Delhi High Court [ 2011 (11) TMI 4 - DELHI HIGH COURT] , we hold that the expenses incurred towards payment of software license fees is revenue in nature and should allowed as a deduction. This ground of the assessee is allowed. Disallowance u/s.14A r.w.r.8D - AO re-computed the disallowance by invoking rule 8D, wherein he has disallowed a sum towards interest under rule 8D(2)(ii) and a sum under rule 8D(2)(iii). The CIT(A) upheld the disallowances - HELD THAT:- It is a settled position now that when own funds are more than the investments earning exempt income, no disallowance under rule 8D(2)(ii) towards interest is warranted. Similar is the position that for the purpose of disallowance under rule 8D(2)(iii), only the those investment that earn tax free income should be considered. On perusal of records we notice that the assessee is having sufficient own funds which is more than the tax free investments and therefore we hold that no disallowance under rule 8D(2)(ii) can be made and the disallowance made by the assessing officer is hereby deleted. Disallowance made u/r 8D(2)(iii) we direct the AO to recomputed the disallowance by considering only those investment that earn tax free income and exclude investments in growth funds. AO is further directed to consider the suo moto disallowance made by the assessee while re-computing the disallowance under rule 8D(2)(iii). Needless to say that the assessee be given a proper opportunity of being heard. It is ordered accordingly. Addition of unutilized Modvat Credit - Assessee follows 'exclusive' method of accounting for MODVAT / CENVAT credit with regard to inventory, purchases and consumption - HELD THAT:- We notice that the coordinate while considering the similar issue for AY 2007-08 [ 2019 (6) TMI 31 - ITAT MUMBAI] , discussed the amended provisions of section 145A (which is relevant for the year under consideration) wherein matter restored back to the file of the AO for denovo determination of the issue. TP Adjustment - notional interest for counter guarantee given to AE - international transaction or not? - HELD THAT:- As in assessee's own case for AY 2007-08 hold that providing counter guarantee to AE is an international transaction within the meaning of section 92B of the Act and that ALP on the shall be calculated at 0.5%. The TPO is directed to recompute the ALP accordingly. Notional Interest for delayed payment from AEs - since the assessee was the tested party, the TPO adopted the interest rate which the assessee would have earned by advancing such loan to an unrelated party in India - TPO held that as unsecured loan is like an unrated bond and the risk is very high in such circumstances and considered the least rating and determined at a rate of 15,68% and calculated notional interest on delay in receipt of service fees and export proceeds which has led to proposing disallowance - HELD THAT:- It is settled positions that delay in receipt of receivables from AE is an international transaction. The Hon'ble Bombay High Court in the case of Tecnimont (P.) Ltd. [ 2018 (7) TMI 490 - BOMBAY HIGH COURT] has held that the delay in receivables is in substance amounts to granting of loan to an AE so as to enjoy the funds, which the AE would otherwise have to repay and that interest needs to be charged based LIBOR rates as the rate prevailing in country where the loan is received/consumed by the AE. We therefore direct the assessing officer to charge interest at the rate of LIBOT +100 basis points after considering a credit period of 60 days. This ground of the assessee is partly allowed. Disallowance of provision for warranty - business of the assessee consists of two kinds of products, viz. decorative and industrial. The said claim was made in respect of expected future claims on performance warranty up to 7 years, given by the assessee on its exterior decorative paints and expected claims from industrial customers on account of quality issues - HELD THAT:- Assessee has incurred actual expenditure during FY 2008-09 and therefore there is merit in the submission that the provision is resulting in actual expenditure in subsequent years. As noticed that the assessing officer has not taken cognizance of the actual expenditure incurred in the later years and also it is not clear how the expenditure is allowed in subsequent year i.e. whether actual amount incurred is allowed as a deduction. In case the amount is allowed in the year in which actually incurred then allowing the provision in the current year would amount to double deduction. We therefore remit the issue back to the assessing officer with a direction to examine the basis of provision, the actual expenditure incurred and allow the claim in accordance law with after giving a reasonable opportunity of being heard to the assessee. Allowability of amalgamation expenses of which 1/5th had been claimed under sec. 35DD - as per DR as per the provisions contained in Sec. 35DD only 1/5 deduction in each of 5 successive previous years can be claimed beginning with the year in which amalgamation took place and there is no such provision to change the quantum of deduction from 1/5th to 1/4th as claimed by the assessee - HELD THAT:- In assessee's case it is an undisputed fact that the amalgamation took place in the previous year 2006-07 and therefore 1/5th of the expenses incurred towards amalgamation has to be claimed from the said year for 5 years. The claim of the assessee is that the expenses incurred in the subsequent year i.e. 2007-08 need to be allowed in 4 installments since the assessee cannot claim the expenditure beyond 5 years from the year of amalgamation. We are unable to appreciate this contention of the assessee for the reason that there is no provision under section 35DD to claim 1/4th of the expenditure incurred towards amalgamation and that the assessee could claim only 1/5th of the expenditure from AY 2007-08 for 5 years. Therefore we see no reason to interfere with the decision of the CIT(A). This ground of the assessee is rejected. TDS u/s 194H - non deduction of TDS on commission payable to the Managing Director - as per assessee, the allowability of commission in the subsequent year has not been questioned by the department and that since the provision has been reversed credited to the P L A/c disallowance in the year under consideration would amount to double taxation - HELD THAT:- As the submissions of the assessee with regard to provision made, subsequent reversal and tax deduction on actual payment etc., needs to be factually verified in order to decide the allowability of the claim. Therefore we deem it fit to remit the issue back to the assessing officer for a de- novo verification of the issue by calling for the relevant details as may be required in this regard. The assessee is directed to submit the details and cooperate with the proceedings. It is ordered accordingly. Delayed payment of ESIC u/s 36(1)(va) - whether the assessee is entitled for deduction claimed towards contribution of sum to provident fund on behalf of the employees deposited after due date prescribed under the Act but before the date of filing the return? - HELD THAT:- By following the decision rendered by Hon ble Supreme Court in case of Checkmate Services P. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] we are of the considered view that Ld. CIT(A) has rightly decided the issue against the assessee as the employees contribution on account of ESI lying deposited with the employers has to be deposited before the due date prescribed under the Act. Since the assessee has failed to comply with the condition precedent for depositing the employees contribution on account of PF ESI before the due date prescribed under the Act he is not entitled for any deduction. Treaty rate to be applied for dividend distributed instead of rate prescribed in sec 115O - HELD THAT:- Issue is covered by the decision of the Special Bench decision in the case of Total Oil (P) Ltd. [ 2023 (4) TMI 988 - ITAT MUMBAI (SB)] against the assessee. Respectfully following the decision of special bench we dismiss the additional ground raised by the assessee. Depreciation on UPS - 15% OR 60% - AO has calculated depreciation on UPS by applying general rate of 15% for plant and machinery whereas 60% claimed by assessee - HELD THAT:- It is noticed, in the case of PCIT vs Goa Tourism Development Ltd. [ 2019 (3) TMI 287 - BOMBAY HIGH COURT] has held that UPS being a part/accessory of computer is eligible for depreciation at 60%. The same view has been expressed in case of CIT vs Orient Ceramics and Industries Ltd. [ 2011 (1) TMI 26 - DELHI HIGH COURT] In view of the ratio laid down in the judicial precedents referred to above, we allow assessee s claim of depreciation on UPS @ 60%. This ground is allowed. Adjustment towards sale of goods to AE - Selection of MAM - TPO rejected the bench marking and applied CUP to make an additional TP adjustment assessee exported manufactured water based paints name Acrylic CED Shd-40 Black Resin Emulsion to its AE in Philippines - HELD THAT:- In assessee's case we notice that the TPO has made a direct comparison without making any adjustments to the domestic price charged for the similar product in a non-AE transaction. Applying the ratio laid down in Dow Chemicals International [ 2020 (10) TMI 1240 - ITAT MUMBAI] in our considered view the TPO is not correct in applying CUP which requires strict comparability and given that the geographical location would have an impact on the pricing the bench marking done by the TPO is not tenable. Accordingly we see no infirmity in the decision of CIT(A) and uphold the decision of the CIT(A). This ground of the revenue is dismissed. 2024 (7) TMI 827 Exemption u/s 11 - claim denied as Assessee had filed Form 10 beyond the due date and had sought accumulation of income u/s 11(2) which was in contravention of section 13(9) of the Act - HELD THAT:- From 10 and Form 10B have been filed belatedly by the assessee. However, the delay in filing Form 10 and Form 10B has been condoned by the CIT(E). There is a delay in filing the return of income and assessee has filed application for condonation, which is pending consideration. The limited prayer of the AR is to remand this matter to the AO and direct him to take a decision in matter after PCCIT(E), Delhi, had disposed off the assessee s application for condonation of delay in filing the return of income. On identical situation, the Chennai Bench of the Tribunal in the case of Ms/. Papathiyammal Pitchai Education Trust [ 2023 (10) TMI 1404 - ITAT CHENNAI] had restored the matter to AO and directed the AO to take a decision after the outcome of the condonation petition filed by the assessee. Appeal filed by the assessee is allowed for statistical purposes. 2024 (7) TMI 826 Orders appealable before the CIT(Appeals) u/s. 246A against Penalty u/s 270A - As is discernible from the order of the CIT(Appeals), the appeal filed by the assessee was dismissed for the reason that he held a conviction that the same did not fall within the realm of the orders which were appealable before him. HELD THAT:- As an order imposing penalty u/s. 270A of the Act, which in turn finds place in Chapter XXI of the Act, is in clear and unequivocal terms an order appealable before the CIT(Appeals), therefore, a view to the contrary taken by the CIT(Appeals) in the present case before us cannot be sustained and is liable to be vacated. Also, on a careful perusal of the order of the CIT(Appeals), it transpires that he had while concluding as hereinabove wrongly referred to provisions of Section 246(1) of the Act, which we may herein observe are no more applicable after 01.06.2000. We are of the considered view that as the penalty imposed by the A.O vide his order passed u/s.270A of the Act dated 01.04.2022 clearly falls within the realm of the orders appealable before the CIT(Appeals) u/s 246A of the Act, therefore, the dismissal of the appeal of the present assessee company by taking a view to the contrary by the CIT(Appeals) cannot be sustained. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and restore the matter to his file with a direction to him to dispose off the appeal afresh. CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee appellant. 2024 (7) TMI 825 Reduced rate of tax provided u/s 115BBA - Claim denied on non-submission of Form No.10-IC - income of the assessee has been taxed @ 30% instead of @ 22% Technical issue preventing access for filing Form 10IC - delay in filing Form 10IC has been condoned by the ld. Pr. CIT - HELD THAT:- Delay in filing Form 10IC has been condoned and, therefore, the assessee deserves benefit of reduced rate of taxation i.e., 22% in place of 30% levied. We also notice that Form 10IC was not filed by the assessee on account of technical problem faced on the income tax portal and vide CBDT Circular No. 6/2022 [F.No.173/32/2022 ITA -1] dated 17/03/2022, the time limit to file the form was extended to 30/06/2022. Further, even if the delay in filing Form 10IC is condoned but as claimed by the assessee, it is still no having the access for filing the Form 10IC. This being a technical aspect, needs to be taken care of by the revenue authorities and the income of the assessee needs to be taxed @ 22% as against 30% levied by the CPC. Accordingly, Ground Nos. 1, 2, 3, 4 5 raised by the assessee are hereby allowed. 2024 (7) TMI 824 Revision u/s 263 - income surrendered in survey action u/s 133A - Addition u/s 68 made by CIT - assessee being in medical practice, had made such surrender and returned the same as his professional receipts, taxed at the normal rate i.e. 30% plus surcharge at 12% - As per CIT AO not charged the undisclosed income with wrong application of law HELD THAT:- Assessee had surrendered income in the statement recorded during survey as pertaining to his unaccounted professional receipts. Department had not come across any assets or expenditure, which could be termed as incriminating in nature, on confronting which the assessee had made impugned surrender. The statement reveals that the surrender was voluntarily made by the assessee in response to the query as to what is to be its income for the year. In the absence of any material found during survey provoking surrender by the assessee, and in light of the fact that the assessee had voluntarily surrendered its professional receipt, disclosed the same in its financial statements, which was duly audited, the acceptance of the same by the AO as professional receipts evidently was in accordance with judicial pronouncements and therefore justified. PCIT, has ignored all the above facts as well as legal propositions which were very much part of record before him, and went on to hold that no inquiry was conducted by the AO on the issue of surrender of income during survey by the assessee. DR was unable to controvert the above facts pointed out for the assessee before us. PCIT s finding of non inquiry vis-a-vis the documents and statements recorded during survey, is not based on any hard facts. In fact, the facts on record reveal AO having conducted due inquiry on the issue of surrender made by the assessee and considering the statement of the assessee during survey making voluntary surrender of professional unaccounted receipts, his acceptance of the surrender as business income is in accordance with law. PCIT has merely stated no inquiry conducted by the AO on the records of survey before him, but not pointed out how and on what basis he arrived at this finding.Merely stating that the AO has not examined the records/documents pertaining to the survey cannot be basis for finding the assessment order erroneous. The documents pertaining to the survey form part of the record which was there before the PCIT also and was required to be examined by him for finding error in the assessment order. He was duty bound to go through these records, and point out how the documents pertaining to the survey revealed the acceptance of Rs.15 lakhs surrender made by the assessee as business income, to be an error on the part of the AO. CIT could have arrived at a valid finding of error on the basis of his own examination of records including document or statement recorded of the assessee during survey action undertaken by him u/s 133A. He has not pointed out as to how the documents pertaining to survey could not have lead to a reasonable belief as entertained by the AO that the income surrendered pertained to his professional receipts. We therefore hold that there is no basis for the finding of error by the PCIT of no inquiry by AO in the assessment framed in the present case and the facts on record reveal otherwise. The order passed u/s.263 of the Act is therefore held to be without valid jurisdiction and is therefore not sustainable in law. 2024 (7) TMI 823 Assessment u/s 153A - Period of limitation - assumption of jurisdiction by the Ld. AO for the AY 2008-09 - yardstick for the computation of six years and computation of Ten years - HELD THAT:- In the case on hand search operation u/s 132 of the Act was conducted on 15/ 09/ 2017, falling in the AY 2018-19. On the computation of ten years AO has assumed jurisdiction for the AY 2008-09, which is beyond the period of limitation prescribed by statute. We are of the considered view and we deem it fit to quash the assessment order passed by the AO since the AO has no jurisdiction over the impugned assessment year. It is ordered accordingly. The decisions relied on by the Ld. DR are with respect to reopening of unabated assessment without any incriminating material therefore the case laws are of no help to the Revenue in the instant case. Customs 2024 (7) TMI 822 Challenge the issuance of N/N. 20/2023 - exporters precluded from exporting Non-Basmati White Rice - entered into contracts with foreign entities prior to issuance of the notification - it was held by High Court that 'it is directed that the respondents shall permit the petitioners to export Non-Basmati White Rice that was stored by the petitioners at the concerned warehouses prior to 20.07.2023. This arrangement would be subject to outcome of the writ petition.' HELD THAT:- The Special Leave Petitions are dismissed as having been rendered infructuous. 2024 (7) TMI 821 Permission to re-export the goods - absolute confiscation - penalty - HELD THAT:- This Bench in PRABHJYOT SINGH VERSUS COMMISSIONER OF CUSTOMS, LUDHIANA AND M/S STAR SPICES VERSUS COMMISSIONER OF CUSTOMS, LUDHIANA [ 2024 (6) TMI 351 - CESTAT CHANDIGARH] in respect of appeal filed by M/s Star Spices, decided the case involving the same set of facts and from the same impugned orders. The said order of the Bench has not been stayed by any Competent Court and therefore, there are no reason to deviate from the decision taken in the above case. Absolute confiscation is set aside and the appellants are allowed to re-export the impugned goods on payment of a fine, in lieu of confiscation, of Rs.12 Lakhs. Penalty imposed on the appellants under Section 112 of the Customs Act, 1962 is reduced to Rs.5 Lakhs - impugned goods are permitted to be re-exported subject to the compliance of the impugned order subject to the above modifications - petition allowed in part. Insolvency & Bankruptcy 2024 (7) TMI 820 Seeking for substitution of Resolution Applicant with another entity, which has been rejected by the Adjudicating Authority - Asset Reconstruction Companies - Resolution Applicant or not - it was held by NCLAT that 'When plan of the Appellant as Resolution Applicant was approved, the Adjudicating Authority rightly refused to substitute another Resolution Applicant, in which order no infirmity is found.' HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed. 2024 (7) TMI 819 Admission of Section 95 application for initiation of proceeding against the Personal Guarantor - Jurisdiction of NCLT, New Delhi - time limitation - it was held by NCLAT that ' There are no merit in the submissions raised by learned counsel for the Appellant challenging the order of admission passed by the Adjudicating Authority under Section 100 of the I B Code' - HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed. 2024 (7) TMI 818 Application filed by Resolution Professional (RP) for approval of Resolution Plan - waterfall mechanism - it was held by NCLAT that 'The Resolution Plan, which has been approved by the CoC with 90.45% vote share and through which Resolution Plan the completion of unfinished project is helping in resolution of the CIRP of the Corporate Debtor and in which 97% vote share are being held by the Flat Buyers themselves, the Resolution Plan cannot be set aside at the instance of Appellant, who is being paid the amount as per Section 30, sub-section (2)' - HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed. PMLA 2024 (7) TMI 817 Money Laundering - Criminal conspiracy - petitioner was convicted for the predicate offences under Sections 120B, 409 r/w 109 of the IPC - it was held by High Court that 'Since the respondent has no jurisdiction to invoke the provisions of PMLA, as there are no proceeds of crime relating to any scheduled offence, the proceedings impugned in the Writ Petition is also liable to be set aside.' - HELD THAT:- There are no reason to interfere with the impugned judgment and, hence, the special leave petitions are dismissed. Service Tax 2024 (7) TMI 816 Service or manufacture? - The customers supplied the drawing for preparation of moulds, which are required to be used for the manufacture of forging - whether taxable under the category of design services or not? - it was held by CESTAT that 'The activity undertaken by the appellant is nothing but the manufacture of moulds and hence levy of service tax on such amount under the category of design services under Section 65(105)(zzzzd) of the Finance Act, 1994, is not justified.' HELD THAT:- It is not required to interfere with the impugned judgment passed by the High Court - SLP dismissed. 2024 (7) TMI 815 Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - time limitation - request rejected on the ground that the time limit for payment has expired on 31.05.2020 - HELD THAT:- The designated authority cannot review its own order once an estimate is issued under Section 127 of the Act. Therefore, the order dated 06.05.2020 passed by the designated committee rejecting the application of the petitioner is contrary to the scheme of the SVLDRS. The petitioner by letter dated 26.06.2020 requested the designated committee to showing the willingness to pay the amount of Rs. 77,80,000/- as stated in Form SVLDRS-2. However, the designated committee by the order dated 30.06.2020 and 10.08.2020 rejected the request made by the petitioner to make the payment of Rs. 77,80,000/- on the ground that there is no facility to amend the Form SVLDRS-2 after 31.05.2020 as extended by the CBIC in view of the COVID-19 pandemic. This Court has also considered similar issue of permitting the assessee to grant the benefit of SVLDRS by directing the respondent authority to permit the petitioner to make the payment as per the Form SVLDRS-2 along with interest at the rate of 9% per annum in case of M/ S L.G. Chaudhari [ 2022 (10) TMI 631 - GUJARAT HIGH COURT ]. The respondent authority is directed to permit the petitioner to make the payment of Rs. 77,80,000/- with interest at the rate of 9% from the due date of payment till the actual payment - Petition allowed. Central Excise 2024 (7) TMI 814 Rejection of appeal of the department by not appreciating the provision of Rule 8(3A) of the Central Excise Rule, 2002 - requirement to hear the appeal on merits - Section 130 of the Customs Act, 1962 - HELD THAT:- The decision of this Court in Goyal MG Gases [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT ] appears to have been rendered taking note of the decision of the High Court of Gujarat in the case of Indsur Global [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ]. When similar appeal came up before this Court on earlier occasion, the Court has set aside the order of the learned Tribunal and remanded the matter back to the Tribunal to be kept pending before the Tribunal to be taken up for decision after the judgment is rendered by the Hon ble Supreme Court. The order passed by the learned Tribunal is set aside and the appeal is restored to the file of the learned Tribunal and the matter shall be kept pending - substantial questions of law which have been raised are left open. CST, VAT & Sales Tax 2024 (7) TMI 813 Classification of goods - Rejection of petition - writ petitions by relegating the appellant to avail the statutory remedy by way of appeal before the Appellate Assistant Commissioner under Section 51 of the Tamil Nadu Value Added Tax Act, 2006 - challenge to assessment order - violation of principles of natural justice. Whether the Autoclaved Aerated Concrete block known as (AAC Blocks) would fall under Entry 22 of part B of First Schedule to the TNVAT Act as claimed by the appellant or under Entry 15 of Part C of the First Schedule of the TNVAT as proposed by the revenue? - HELD THAT:- There is merit in the submission of the appellant that the impugned order suffers from violation of principles of natural justice inasmuch as the impugned order has been passed confirming the levy under residuary entry viz., Entry 69 of Part C of the First Schedule to the TNVAT Act, an entry different from that which was proposed in the notice dated 17.04.2023 - the assessment orders insofar as they classify the AAC Blocks sold by the appellant under the residuary entry viz, Entry 69 of Part C of First Schedule to the TNVAT Act marks a departure from the Show cause notice. Notice is not an empty formality but a mandatory requirement intended to put the assessee on notice of the reason on the basis of which the revenue intends to assess. It is trite law that a notice must contain the reasons to which the noticee is required to respond - it is essential to disclose the reasons to enable the noticee to give a reply/ response, for it is rudimentary that the noticee should be made aware of all that which influence the decision maker and which he has to meet. If the reasons which are set out in the notice to which the noticee is required to respond and the reasons contained in the order are different, the issuance of the notice would fail to serve its purpose and would be reduced to an empty formality. That means, it would neither qualify as a notice nor serve the object of issuance of notice. Thus, an order made in departure of the show cause notice without putting the assessee on notice cannot be sustained as the same is in violation of principles of natural justice and thus cannot be sustained - the impugned orders of assessment suffer from the above vice and thus cannot be sustained - appeal disposed off. Indian Laws 2024 (7) TMI 812 Steps initiated by the respondent no.1-IDBI Bank, New Delhi, under the provisions of SARFAESI Act, for the loan facilities granted by respondent no.2-IDBI, Dubai to respondent no.3-company - respondent no.3-company defaulted on the debt or not - HELD THAT:- From perusal of Section 96(1)(b) of IBC, 2016, it is evident that the interim moratorium only restrains any ongoing or fresh legal action or proceeding in respect of any debt pertaining to personal guarantor, and not any security interest created by the personal guarantor - there is no moratorium imposed on the respondent-bank from dealing with its security interest. Further, there is no restriction on the personal guarantor, i.e., the petitioner herein from approaching any appropriate forum to protect or preserve its assets. The appropriate forum in the present case is the DRT. Section 96(1) provides that when an application is filed under Section 95, interim moratorium shall commence on the date of the application in relation to all the debts. Section 96(1)(b) provides that during the interim moratorium period, any legal action or proceedings pending in respect of any debt, shall be deemed to have been stayed - in terms of the law of the land, any legal action or proceeding pending in respect of any debt of the petitioner, shall be deemed to have been stayed, upon commencement of the interim moratorium in terms of Section 96 of IBC, 2016. In the present case, after taking possession of the property in question, sale of the said property has still not taken place and the process under the SARFAESI Act, is still not complete. Therefore, in terms of Section 238 of the IBC, 2016, which has overriding effect over any other law, any further action by the bank, under the SARFAESI Act, is prohibited. Thus, the respondent-bank cannot continue the proceedings under the SARFAESI Act, once proceedings under the IBC, 2016, have commenced - In the present case, no sale process has commenced with respect to the property that had been mortgaged by the petitioner with the respondent-bank, as a personal guarantor. It is no longer res integra that where a remedy is available under Section 17 of the SARFAESI Act, this Court ought not to entertain writ petitions under Article 226 of the Constitution of India. The respondent-bank cannot proceed further under the SARFAESI Act, in view of the interim moratorium, operating on account of the Insolvency Proceedings pending against the petitioner, the personal guarantor. 31.2 As and when the interim moratorium is lifted, and the respondent-bank proceeds under the SARFAESI Act, the petitioner shall be at liberty to approach the learned DRT and raise all issues, including issue regarding authority and jurisdiction of the respondent-bank to proceed under the SARFAESI Act, in view of the loan having been sanctioned and disbursed in Dubai, by the respondent no.-2 bank, which is also situated in Dubai. Petition disposed off. 2024 (7) TMI 811 Review jurisdiction - consideration of review petitioners as persons aggrieved, on the basis of the pleadings in the RPs - liberty to any party to seek a review of Pune Municipal Corporation [ 2014 (1) TMI 1643 - SUPREME COURT] - survival of liberty after the decision in Manoharlal [ 2020 (3) TMI 1310 - SUPREME COURT] - Explanation in Rule 1 of Order XLVII, CPC. Whether the last sentence of paragraph 217 of Shailendra [3-Judge] grants liberty to any party to seek a review of Pune Municipal Corporation? - If the answer to the question is in the affirmative, did such liberty survive after the decision in Manoharlal? - HELD THAT:- The first reason is that the submission of a liberty being granted by Shailendra [3-Judge] makes it abundantly clear that but for such liberty , the review petitioners would not have even thought of applying for review since the law on the point was no longer res integra. It is, therefore, an admission on their part that the judgments and orders under review, as on the dates they were delivered/made, were neither erroneous (which is a possible ground for appeal, if an appeal were allowed by law) nor suffering from any error apparent on the face of the record (a possible ground for review). Therefore, merely based on Shailendra [3-Judge], a subsequent event, the review jurisdiction of this Court which is a limited jurisdiction could not have been invoked. In paragraph 365 of Manoharlal [5-Judge, lapse] itself, it has been held by the Constitution Bench that Shailendra [3-Judge] did not have the occasion to consider certain aspects for which that decision cannot prevail. Learned senior counsel for the respondents, based on such statement, contended that Shailendra [3-Judge] stands overruled. This submission has been disputed by learned senior counsel for the review petitioners. According to them, Shailendra [3-Judge] has not been expressly overruled; only because of aspects referred to in paragraph 365 and the discussion preceding, it ceases to be a precedent. Can the RPs be held to be maintainable, giving due regard to the Explanation in Rule 1 of Order XLVII, CPC vis- -vis Manoharlal? - HELD THAT:- No review is available upon a change or reversal of a proposition of law by a superior court or by a larger Bench of this Court overruling its earlier exposition of law whereon the judgment/order under review was based. Notwithstanding the fact that Pune Municipal Corporation has since been wiped out of existence, the said decision being the law of the land when the Civil Appeals/Special Leave Petitions were finally decided, the subsequent overruling of such decision and even its recall, for that matter, would not afford a ground for review within the parameters of Order XLVII of the CPC. Can the review petitioners, on the basis of the pleadings in the RPs, be considered persons aggrieved? - HELD THAT:- The review petitioners have raised GROUNDS without even averring what was pleaded in their counter affidavits filed before the High Court and what were the defences raised which, because of non-consideration by this Court, could be said to amount to an error apparent on the face of the record. The RPs are silent as to on which specific ground referrable to Rule 1 of Order XLVII the review has been asked for. Even then, having considered such GROUNDS , we are of the considered opinion that the judgments/orders under review do not suffer from any error apparent on the face of the record - the question answered against the review petitioners. Reference disposed off.
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TMI Tax Updates - e-Newsletter July 17, 2024

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GST

E-way bills & GSTR 3B disparity for 2018-21. Non-taxable supplies caused mismatch. Remit â‚¹3.5cr, submit docs for reconsideration.

Missed 30-day deadline to file returns after best judgment assessment order u/s 62 CGST/SGST Act led to registration cancellation. Opportunity to nullify assessment by filing returns not availed.

GST on mineral mining royalty in limbo. Petitioner to reply in 4 weeks. Respondent to keep order on hold pending SC verdict as per Division Bench.

Income Tax

STI, Samsung's Indian subsidiary, ruled an independent manufacturer, not a contract manufacturer for Samsung Korea. Received tech know-how & paid royalties. Price differences justified.

Exemption u/s 10(46) valid for non-profit developmental activities, loans, investments per assigned role - not commercial profit motive.

Salary earned by non-resident on foreign ship in EEZ exempt u/s 9(1)(ii). Fresh notice u/s 143(2) not mandatory for successor AO.

TPO's adjustment inappropriate, CUP method reliable. Product certification expenses not taxable in India. Royalty provision allowable.

Reopening invalid: AO didn't verify facts, just repeated info on unexplained credits sans evidence. Lacked independent analysis.

Jurisdiction not challenged, addition u/s 68 unsustainable. Verify receipts. Notice u/s 143(2) valid despite 143(1) delay.

Donations rejected sans evidence. Donors identified, some confirmed. Denied chance to produce donors. Not anonymous. Onus discharged. Improper invocation.

Assessee withdrew LTCG exemption claim, offered amount as income from "Other sources" to avoid litigation; no concealment found. Penalty u/s 271(1)(c) quashed.

Interest income disallowance partly allowed. Provisions & interest reapportioned based on business activity. Disallowance for tax-free bonds deleted. Non-compete fees held as capital receipts.

Directors not liable u/s 179. Company can be proceeded against if struck off. Gift from NRI grandson not unexplained u/s 69A. Double addition avoided.

Expenses disallowed for lack of evidence. Valuation issue dismissed. Losses disallowed, evidence required. Addition deleted. Depreciation allowed for slump sale. Liability receipt held capital.

Software license fees deductible. No disallowance for own funds > tax-free investments. Recompute disallowance on tax-free income only.

Order imposing 270A penalty appealable before CIT(A) u/s 246A. CIT(A) erred in dismissing appeal. ITAT set aside order to rehear appeal.

Assessee surrendered unaccounted professional receipts during survey. AO accepted it as taxable income, PCIT's revision unsustainable.

Indian Laws

IBC bars fresh proceedings against guarantor's debt, not security interest. Banks can't proceed under SARFAESI once IBC initiated. Guarantor can approach DRT.

Service Tax

Authority can't review order post estimate u/s 127. Rejected application contrary to scheme. HC allowed petition to pay amount+9% interest.

VAT

AAC blocks wrongly classified under residuary entry instead of proposed entry. Show cause notice mandatory. Order deviating from notice without hearing assessee violates natural justice.

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TMI Tax Updates - e-Newsletter
July 17, 2024